10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2007

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from                      to                     

Commission File Number 0-23272

NPS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	87-0439579
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
550 Hills Drive, Bedminster, New Jersey	07921
(Address of Principal Executive Offices)	(Zip Code)

(908) 450-5300

(Registrant’s Telephone Number, Including Area Code)

383 Colorow Drive, Salt Lake City, Utah 84108

(former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ¨                Accelerated Filer  x            Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  ¨    NO  x

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date is as follows:

Class	Outstanding at November 7, 2007
Common Stock $.001 par value	46,469,043

TABLE OF CONTENTS

		Page No.
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 6.	Exhibits	34
SIGNATURES		35

2

PART 1

FINANCIAL INFORMATION

Item 1. Financial Statements.

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	September 30, 2007			December 31, 2006
Assets
Current assets:
Cash and cash equivalents	$	206,278		$	36,244
Marketable investment securities		95,951			109,908
Restricted cash and cash equivalents		16,246			21,921
Accounts receivable		16,927			15,534
Inventory		994			363
Other current assets		3,043			5,719
Total current assets		339,439			189,689
Plant and equipment:
Building		—			15,010
Equipment		573			16,567
Leasehold improvements		—			3,029
		573			34,606
Less: accumulated depreciation and amortization		236			14,757
Net plant and equipment		337			19,849
Goodwill		10,965			9,333
Debt issuance costs, net of accumulated amortization		8,248			5,569
Other assets		2,500			300
	$	361,489		$	224,740
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	22,768		$	24,665
Deferred revenue		6,120			758
Current installments of notes payable, lease financing and capital lease obligations		191,304			19,044
Total current liabilities		220,192			44,467
Notes payable, less current portion		337,269			346,690
Lease financing and capital lease obligations, less current portion		110			18,843
Deferred revenue, less current portion		10,000			5,045
Other liabilities		3,616			2,939
Total liabilities		571,187			417,984
Stockholders’ deficit:
Common stock		46			46
Additional paid-in capital		681,490			677,474
Accumulated other comprehensive loss:
Net unrealized loss on marketable investment securities		(59	)		(326	)
Foreign currency translation		(441	)		(1,566	)
Accumulated deficit		(890,734	)		(868,872	)
Total stockholders’ deficit		(209,698	)		(193,244	)
	$	361,489		$	224,740

See accompanying notes to condensed consolidated financial statements.

3

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenues:
Product sales	$	12,357		$	839		$	14,939		$	1,889
Royalties, milestones, and license fees		16,804			9,232			37,328			22,547
Total revenues		29,161			10,071			52,267			24,436
Operating expenses:
Cost of goods sold		823			536			2,875			902
Cost of royalties		1,228			796			3,363			1,954
Research and development		5,400			13,692			28,121			55,078
Selling, general and administrative		5,744			7,482			17,667			42,405
Restructuring charges		1,013			2,228			12,252			8,240
Gain on sale of fixed assets		(6,459	)		—			(6,459	)		—
Gain on sale of assets held for sale		—			—			(1,826	)		—
Total operating expenses		7,749			24,734			55,993			108,579
Operating income (loss)		21,412			(14,663	)		(3,726	)		(84,143	)
Other income (expense):
Interest income		3,225			2,155			6,697			7,091
Interest expense		(10,813	)		(8,478	)		(24,411	)		(21,845	)
Loss on extinguishment of lease financing obligation		—			—			(970	)		—
Gain on extinguishment of debt		604			—			604			—
Gain on sale of marketable investment securities		(36	)		(143	)		(35	)		(143	)
Foreign currency transaction (gain) loss		(303	)		28			(19	)		234
Other		—			22			(2	)		123
Total other expense, net		(7,323	)		(6,416	)		(18,136	)		(14,540	)
Income (loss) before income tax expense (benefit)		14,089			(21,079	)		(21,862	)		(98,683	)
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	14,089		$	(21,079	)	$	(21,862	)	$	(98,683	)
Net income (loss) per common and potential common share
Basic	$	0.30		$	(0.45	)	$	(0.47	)	$	(2.13	)
Diluted	$	0.28		$	(0.45	)	$	(0.47	)	$	(2.13	)
Weighted average common and potential common shares outstanding
Basic		46,841			46,435			46,729			46,329
Diluted		52,396			46,435			46,729			46,329

See accompanying notes to condensed consolidated financial statements.

4

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net loss	$	(21,862	)	$	(98,683	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,490			4,703
Realized gain on disposition of assets held for sale		(1,826	)		—
Realized (gain) loss on disposition of equipment		(6,489	)		2
Realized loss on extinguishment of notes payable and lease financing obligation		366			—
Realized loss on sale of marketable investment securities		35			143
Compensation expense on deferred stock units, restricted stock units and restricted stock		1,176			1,254
Compensation expense on stock options and stock appreciation rights		2,392			11,431
(Increase) decrease in operating assets:
Accounts receivable		(1,100	)		(6,225	)
Other current assets and other assets		820			(1,126	)
Inventories		(510	)		—
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(5,147	)		(12,812	)
Deferred revenue		9,373			3,466
Other liabilities		701			(619	)
Net cash used in operating activities		(18,581	)		(98,466	)
Cash flows from investing activities:
Sales and maturities of marketable investment securities		340,201			135,519
Purchases of marketable investment securities		(325,996	)		(64,931	)
Acquisitions of equipment and leasehold improvements		(42	)		(1,241	)
Proceeds from sale of assets held for sale		4,372			—
Proceeds from sale of fixed assets		24,555			6
Net cash provided by investing activities		43,090			69,353
Cash flows from financing activities:
Principal payments on notes payable and lease financing obligation		(58,775	)		(1,371	)
Proceeds from issuance of notes payable		202,282			—
Payment of debt issuance costs		(4,769	)		—
Proceeds from issuance of common stock		423			1,091
Decrease in restricted cash and cash equivalents		5,675			(1,846	)
Net cash provided by (used in) financing activities		144,836			(2,126	)
Effect of exchange rate changes on cash		689			348
Net decrease in cash and cash equivalents		170,034			(30,891	)
Cash and cash equivalents at beginning of period		36,244			98,712
Cash and cash equivalents, at end of period	$	206,278		$	67,821
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	22,503		$	11,700
Supplemental Schedule of Noncash Investing and Financing Activities:
Unrealized gains (losses) on marketable investment securities		267			432

See accompanying notes to condensed consolidated financial statements.

5

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared by NPS Pharmaceuticals, Inc. (NPS) in accordance with the rules and regulations of the United States Securities and Exchange Commission (SEC). The condensed consolidated financial statements are comprised of the financial statements of NPS and all its subsidiaries in which it owns a majority voting interest including a variable interest entity in which the Company is the primary beneficiary, collectively referred to as the Company. In management’s opinion, the interim financial data presented includes all adjustments (consisting solely of normal recurring items) necessary for fair presentation. All intercompany accounts and transactions have been eliminated. All monetary amounts are reported in U.S. dollars unless specified otherwise. Certain information required by accounting principles generally accepted in the United States of America has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the three and nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for any future period or the year ending December 31, 2007.

These condensed consolidated financial statements should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk” sections of this Quarterly Report and the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2006, included in the Company’s 2006 Annual Report on Form 10-K filed with the SEC.

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions relating to reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. Certain prior year amounts have been reclassified to conform with the current year presentation.

(2) Income (Loss) Per Common Share

	Three Months Ended September 30, 2007
EPS Numerator – Basic:
Net income	$	14,089
EPS Denominator – Basic:
Weighted-average number of shares of common stock outstanding		46,841
EPS Numerator – Diluted:
Net income	$	14,089
Adjustment for interest		436
Net income, adjusted	$	14,525
EPS Denominator – Diluted:
Weighted-average number of shares of common stock outstanding		46,841
Effect of dilutive securities:
Stock options		1
Restricted stock units		59
5.75% Convertible debt		5,495
Dilutive potential common shares		5,555
Weighted-average common shares and dilutive potential common shares		52,396
Basic income per common share	$	0.30
Diluted income per common share	$	0.28

6

Basic income (loss) per common share is the amount of income (loss) for the period applicable to the weighted average shares of common stock outstanding during the reporting period. Diluted income (loss) per common share is the amount of income (loss) for the period applicable plus interest expense to weighted average shares of common stock outstanding during the reporting period and to weighted average shares that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares.

For the three and nine months ended September 30, 2007, potentially diluted common shares applicable to the 3% and 5.75% convertible notes that were deemed to be issued during the period have been weighted and included for the period the convertible securities were outstanding. Potential common shares of approximately 10.1 million during the three months ended September 30, 2007, 15.6 million during the nine months ended September 30, 2007 and 11.4 million during the three and nine months ended September 30, 2006, that could potentially dilute basic earnings per share in the future were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented. Potential dilutive common shares related to convertible debentures were approximately 5.1 million and 10.6 million common shares, respectively for the three and nine months ended September 30, 2007 and were 5.2 million common shares for the three and nine months ended September 30, 2006. Additionally potential dilutive common shares related to stock options, stock appreciation rights, and restricted stock units were 5.0 million and 6.2 million common shares, respectively.

(3) Operating Segments

The Company is engaged in the discovery, development, and commercialization of pharmaceutical products, and in its current state of development, considers its operations to be a single reportable segment. Financial results of this reportable segment are presented in the accompanying condensed consolidated financial statements. The Company’s subsidiaries operating outside of the United States of America had long-lived assets, including goodwill, of approximately $11.6 million and $9.3 million, respectively, as of September 30, 2007 and December 31, 2006. The Company recognized non-United States revenue of $14.8 million and $1.2 million, respectively, during the three months ended September 30, 2007 and 2006 and the Company recognized non-United States revenue of $18.7 million and $4.4 million, during the nine months ended September 30, 2007 and 2006. Substantially all of the Company’s revenues for the three and nine months ended September 30, 2007 and 2006 were from two and three licensees, respectively, of the Company. As of September 30, 2007 and December 31, 2006, the majority of the Company’s accounts receivable balances were from two licensees and four licensees, respectively.

(4) Comprehensive Income (Loss)

The components of the Company’s comprehensive income (loss) are as follows, in thousands:

	Three months ended September 30, 2007			Three months ended September 30, 2006			Nine months ended September 30, 2007			Nine months ended September 30, 2006
Other comprehensive income (loss):
Gross unrealized gain on marketable investment securities	$	181		$	652		$	302		$	575
Reclassification for realized gain on marketable investment securities		(36	)		(143	)		(35	)		(143	)
Net unrealized gain on marketable investment securities		145			509			267			432
Foreign currency translation gain (loss)		1,118			(129	)		1,125			273
Net income (loss)		14,089			(21,079	)		(21,862	)		(98,683	)
Comprehensive income (loss)	$	15,352		$	(20,699	)	$	(20,470	)	$	(97,978	)

(5) Long-term Debt Obligations

The following table reflects the carrying value of our long-term debt obligations under our various financing arrangements as of September 30, 2007 and December 31, 2006 (in thousands):

	September 30, 2007		December 31, 2006
Convertible notes payable	$	221,800	$	192,000
Secured notes payable		306,734		173,734
Capital lease		149		—
Lease financing obligation		—		18,843
Total borrowings		528,683		384,577
Less: current position		191,304		19,044
Total long-term debt obligations	$	337,379	$	365,533

7

(a) Convertible Notes Payable

In July 2003, the Company completed a private placement of $192.0 million 3% Convertible Notes due June 15, 2008 (3% Convertible Notes). The Company received net proceeds from the 3% Convertible Notes of approximately $185.9 million, after deducting costs associated with the offering. The 3% Convertible Notes accrue interest at an annual rate of 3.0% payable semiannually in arrears on June 15 and December 15 of each year, beginning December 15, 2003. Accrued interest on the 3% Convertible Notes was approximately $1,543,000 as of September 30, 2007. The holders may convert all or a portion of the 3% Convertible Notes into common stock at any time on or before June 15, 2008. The 3% Convertible Notes are convertible into common stock at a conversion price of $36.59 per share, subject to adjustment in certain events. The 3% Convertible Notes are unsecured debt obligations and rank equally in right of payment with all existing and future unsecured indebtedness. On or after June 20, 2006, the Company may redeem any or all of the 3% Convertible Notes at redemption prices of 100% of their principal amount, plus accrued and unpaid interest through the day preceding the redemption date. Upon the occurrence of a “fundamental change,” as defined in the indenture governing the 3% Convertible Notes, holders of the 3% Convertible Notes may require the Company to redeem all or a part of the 3% Convertible Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any. The Company has filed a registration statement with the United States Securities and Exchange Commission covering the resale of the 3% Convertible Notes and common stock issuable upon conversion of the 3% Convertible Notes. The Company incurred debt issuance costs of $6.1 million, which are being amortized over a five-year period. The effective interest rate on the 3% Convertible Notes, including debt issuance costs, is 3.6%.

In August 2007 the Company repurchased $20.2 million par value of outstanding 3% Convertible Notes in the open market at a price of $19.5 million plus accrued interest. These 3% Convertible Notes were subsequently retired in September 2007. As of September 30, 2007, the Company had $171.8 million of the 3% Convertible Notes outstanding. The repurchase and subsequent retirement of the 3% Convertible Notes is considered an early extinguishment of debt. The amount paid to repurchase the 3% Convertible Notes was less than the carrying value of the 3% Convertible Notes. Accordingly, the Company recorded a gain of $604,000, which is net of the write-off of $103,000 of deferred financing costs, during the three and nine months ended September 30, 2007 on such extinguishment in accordance with the provisions of Accounting Principles Board Opinion No. 26, Early Extinguishment of Debt (APB No. 26). Additionally on October 17, 2007, the Company closed a tender offer in which $171.2 million in 3% Convertible Notes were tendered to the Company for $169.1 million plus accrued interest. After acquiring these 3% Convertible Notes the Company retired them in October 2007. As of November 8, 2007, $598,000 in 3% Convertible Notes remain outstanding.

Under the Registration Rights Agreement for the 3% Convertible Notes, the Company could be subject to liquidated damages if the effectiveness of the registration statement covering the 3% Convertible Notes is not maintained, or if the Company fails to perform certain other registration related performance obligations, at any time prior to the redemption of the 3% Convertible Notes, the repayment of the 3% Convertible Notes or certain corporate events as defined in the 3% Convertible Notes agreement. The Company believes the likelihood of such an event occurring is remote and, in accordance with FSP Issues No. 00-19-2, as such, the Company has not recorded a liability as of September 30, 2007. In the unlikely event that it becomes probable that the Company would have to pay liquidated damages under the Registration Rights Agreement until a shelf registration statement, post effective amendment thereto, or prospectus supplement covering the 3% Convertible Notes is again effective, or filed in the case of a prospectus supplement, the potential liquidated damages would be 0.5% of the aggregate principal amount of such 3% Convertible Notes or 0.5% of the conversion price for common stock that has been issued upon conversion of a 3% Convertible Note. Such liquidated damages would accrue from the date the Company was required to file such registration statement or prospectus supplement until the date the registration statement or prospectus supplement was actually filed.

In August 2007, the Company completed a private placement of $50.0 million in 5.75% Convertible Notes due August 7, 2014 (5.75% Convertible Notes). The Company received net proceeds from the 5.75% Convertible Notes of approximately $49.4 million, after deducting costs associated with the offering. The 5.75% Convertible Notes accrue interest at an annual rate of 5.75%

8

payable quarterly in arrears on the first day of the succeeding calendar quarter commencing January 1, 2008. Accrued interest on the 5.75% Convertible Notes was approximately $423,000 as of September 30, 2007. The holders may convert all or a portion of the 5.75% Convertible Notes into common stock at any time, subject to certain milestones, on or before August 7, 2014. The 5.75% Convertible Notes are convertible into common stock at a conversion price of $5.44 per share, subject to adjustments in certain events. The 5.75% Convertible Notes are unsecured debt obligations and rank equally in right of payment with all existing and future unsecured senior indebtedness. On or after August 7, 2012, the Company may redeem any or all of the 5.75% Convertible Notes at a redemption price of 100% of their principal amount, plus accrued and unpaid interest to the day preceding the redemption date. The 5.75% Convertible Notes provide for certain events of default, including payment defaults, breaches of covenants and certain events of bankruptcy, insolvency and reorganization. The 5.75 % Convertible Notes also provide that if there shall occur a fundamental change, as defined, at any time prior to the maturity of the Note, then the holder shall have the right, at the Holder’s option, to require the Company to redeem the notes, or any portion thereof plus accrued interest and liquidated damages, if any. If a change of control, as defined, occurs and if the holder converts notes in connection with any such transaction, the Company will pay a make whole premium by increasing the conversion rate applicable to the notes. If any event of default occurs and is continuing, the principal amount of the 5.75% Convertible Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable. The Company has filed a registration statement with the SEC covering the common stock issuable upon conversion of the 5.75% Convertible Notes. However, the registration statement is not yet effective. The Company incurred debt issuance costs of approximately $600,000, which are being amortized over a seven-year period. The effective interest rate on the 5.75% Convertible Notes, including debt issuance costs, is 5.9%.

Pursuant to the Registration Rights Agreement, the Company has filed a shelf registration statement with the SEC, covering resales of the common stock issuable upon conversion of the 5.75% Convertible Notes. The registration statement has been declared effective. The Company agreed to use its reasonable best efforts to keep the registration statement effective until the earlier of (i) the date as of which holders may sell all of the securities covered by the registration statement without restriction pursuant to Rule 144(k) promulgated under the Securities Act of 1933 or (ii) the date on which holders shall have sold all of the securities covered by the registration statement. If the Company fails to comply with these covenants or suspends use of the registration statement for periods of time that exceed what is permitted under the Registration Rights Agreement, the Company is required to pay liquidated damages in an amount equivalent to 1% per annum of (a) the principal amount of the notes outstanding, or (b) the conversion price of each underlying share of common stock that has been issued upon conversion of a note, in each case, until the Company is in compliance with these covenants The Company believes the likelihood of such an event occurring is remote and, in accordance with FSP EITF Issue No. 00-19-2, as such, the Company has not recorded a liability as of September 30, 2007.

(b) Secured Notes Payable

In December 2004, the Company completed a private placement of $175.0 million in Secured 8.0% Notes due March 30, 2017 (Class A Notes). The Company received net proceeds from the issuance of the 8% Secured Notes of approximately $169.3 million, after deducting costs associated with the offering. The Class A Notes accrue interest at an annual rate of 8.0% payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (Payment Date). The Class A Notes are secured by certain royalty and related rights of the Company under its agreement with Amgen. Additionally, the only source for interest payments and principal repayment of the Class A Notes is limited to royalty and milestone payments received from Amgen plus any amounts available in the restricted cash reserve account and earnings thereon as described later. The Class A Notes are non-recourse to NPS Pharmaceuticals, Inc. Payments of principal will be made on March 30 of each year commencing March 30, 2006, to the extent there is sufficient revenue available for such principal payment. As of September 30, 2007, the outstanding principal balance on the Class A Notes was $154.5 million. In connection with the issuance of the Class A Notes, the Company was required to place $14.2 million of the Class A Notes proceeds into a restricted cash reserve account to pay any shortfall of interest payments through December 30, 2006. The remaining amount in the restricted cash reserve account after December 30, 2006 was used to repay principal on March 30, 2007. In the event the Company receives royalty and milestone payments under its agreement with Amgen above certain specified amounts, a redemption premium on principal repayment will be owed. The redemption premium ranges from 0% to 41.5% of principal payments, depending on the annual net sales of Sensipar by Amgen. As of September 30, 2007, the Company classified $19.5 million of the Class A Notes as current based on royalty payments accrued during the nine months ended September 30, 2007 less estimated redemption premiums. The Company may repurchase, in whole but not in part, the Class A Notes on any Payment Date at a premium ranging from 0% to 41.5% of outstanding principal, depending on the preceding four quarters’ sales of Sensipar by Amgen. The Company is accruing the estimated redemption premiums over the estimated life of the debt of six years using the “effective interest-rate” method. Accrued interest on the notes was $5.7 million as of September 30, 2007 which represents the Company’s estimate of the redemption premium of $2.6 million and the Company’s quarterly interest payment of $3.1 million paid in October 2007. The Company incurred debt issuance costs of $5.7 million, which are also being amortized using the “effective interest-rate” method. The effective interest rate on the Class A Notes, including debt issuance costs and estimated redemption premiums, is approximately 11.4%.

9

In July 2007, the Company entered into an Agreement for the Sale and Assignment of Rights (DRC Agreement) with Drug Royalty L.P.3 (Drug Royalty) in which the Company sold to Drug Royalty its right to receive future royalty payments arising from sales of PREOTACT under its license agreement with Nycomed Danmark ApS (Nycomed). Under the DRC Agreement, Drug Royalty paid the company an up-front purchase price of $50.0 million. An additional $25.0 million will be due to the Company in 2010 if certain PREOTACT sales thresholds are achieved. If and when Drug Royalty receives two and a half times the principal advanced, the DRC Agreement will terminate and the remainder of the royalties, if any, will revert back to the Company. After evaluating the DRC Agreement under Emerging Issues Task Force Issue No. 88-18, Sales of Future Revenues, the Company has determined that it should classify the initial up-front purchase price as debt and amortize using the effective interest rate method over a estimated life of 11 years. The repayment of the $50.0 million is secured solely by future royalty payments arising from sales of PREOTACT by Nycomed. The effective interest rate under the DRC Agreement, including issuance costs, is 18.2%.

In August 2007, the Company completed a private placement of $100.0 million in Secured 15.5% Notes due March 30, 2017 (Class B Notes). The Company received net proceeds from the issuance of the Class B Notes of approximately $97.0 million, after deducting costs associated with the offering. The Class B Notes accrue interest at an annual rate of 15.5% payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (Payment Date). The Class B Notes are secured by certain royalty and related rights of the Company under its agreement with Amgen. Additionally, the only source for interest payments and principal repayment of the Class B Notes is limited to royalty and milestone payments received from Amgen and only after the Class A Notes are paid in full. Prior to repayment in full of the Class A Notes, interest on the Class B Notes will be paid in kind through the issuance of notes (the PIK Notes) which will be part of the same class and have the same terms and rights as the Class B Notes, except that interest on the PIK Notes will begin to accrue from the date that such PIK Notes are issued. The Class B Notes are non-recourse to NPS Pharmaceuticals, Inc. The Company may repurchase, in whole but not in part, the Class B Notes at a calculated Redemption Price based on the timing of repurchase and the source of proceeds for the repurchase. The Redemption Price varies between 100.0% and 107.75% depending on these variables. PIK Notes were issued on September 30, 2007 in the amount of $2.3 million. The Company incurred debt issuance costs of $3.6 million, which are being amortized using the “effective interest-rate” method. The effective interest rate on the Class B Notes, including debt issuance costs, is approximately 21.6%.

(c) Lease Financing Obligations

In December 2005, the Company completed a sale-leaseback transaction with BioMed Realty, L.P., or BioMed Realty, a Maryland limited partnership, in which the Company sold its 93,000 square foot laboratory and office building located in Salt Lake City, Utah for $19.0 million and leased back the property under a 15-year lease. Net proceeds from the sale were $19.0 million. Because the lease agreement in the sale-leaseback transaction contained a purchase option by the Company, SFAS No. 98, Accounting for Leases, required the Company to account for the transaction as a financing, deferring the gain on the sale of $4.3 million.

In May 2007, the Company closed an Agreement of Purchase and Sale to repurchase from BioMed Realty its 93,000 square foot laboratory and office building for $20.0 million. Under the terms of the agreement, the Company’s 15-year lease obligation was extinguished. The repurchase of the laboratory and office building is considered an early extinguishment of debt. The amount paid to repurchase the laboratory and office building was in excess of the carrying value of the lease financing obligation. Accordingly, the Company recorded a loss of zero and $1.0 million during the three and nine months ended September 30, 2007 on such extinguishment in accordance with the provisions of APB No. 26. See Note 12, Sale of Building and Termination of Ground Lease.

(6) Restructuring Charges

On June 12, 2006 as a result of the uncertainty with respect to the regulatory approval of PREOS^®, the Company announced an initiative to restructure operations (the 2006 Restructuring Plan). Under the 2006 Restructuring Plan, NPS reduced its worldwide workforce, including employees and contractors, by approximately 250 positions, eliminated all commercial sales and related field

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based activities, terminated its agreement with Allergan Inc. to promote Restasis^® Ophthalmic Emulsion to rheumatologists and closed and planned to sell the Company’s technical operations facility in Mississauga, Ontario, Canada. The reduction in workforce involved all functional disciplines including selling, general and administrative employees as well as research and development personnel.

The charge related to the 2006 Restructuring Plan during the three months ended September 30, 2007 and 2006 was a credit of $17,000 and a charge of $2.2 million, respectively. The charge related to the 2006 Restructuring Plan during the nine months ended September 30, 2007 and 2006 was $476,000 and $8.2 million, respectively. Associated severance payments related to the 2006 Restructuring Plan were paid primarily in the second and third quarters of 2006 for severed United States employees and are anticipated to be paid by January 31, 2008 for severed Canadian employees. The cumulative restructuring charges through September 30, 2007 related to the 2006 Restructuring Plan were $8.7 million.

On March 14, 2007, the Company announced an initiative to restructure operations and to reduce its work force from 196 employees to approximately 35 employees by the end of 2007 (the 2007 Restructuring Plan). Under the 2007 Restructuring Plan, the Company closed its operations in Toronto, Canada and Salt Lake City, Utah. These steps are part of the Company’s strategy to transition to an organization that will rely primarily on outsourcing research, development and clinical trial activities and manufacturing operations, as well as other functions critical to its business. The Company believes this approach enhances its ability to focus on late stage product opportunities, preserve cash, allocate resources rapidly to different projects and reallocate internal resources more effectively.

The charge related to the 2007 Restructuring Plan during the three and nine months ended September 30, 2007 was $1.0 million and $11.8 million, respectively. The charge during the nine months ended September 30, 2007 was comprised of $9.0 million in severance related cash expenses, $1.0 million for accelerated vesting of options under existing employee severance agreements and retirement plan, $1.3 million for accelerated vesting of restricted stock units under employee retention plans and $485,000 for stock awards under employee severance enhancement agreements. Associated severance payments are anticipated to be paid by December 31, 2007 for severed United States employees and are anticipated to be paid by December 31, 2008 for severed Canadian employees. The cumulative restructuring charges to date related to the 2007 Restructuring Plan were $11.8 million. Total anticipated restructuring charges as a result of the 2007 Restructuring Plan are estimated to be between $13.0 and $15.0 million.

A summary of accrued restructuring costs is as follows (in thousands):

	December 31, 2006		Charges		Cash			Non-Cash			September 30, 2007
2006 Restructuring Plan:
Severance	$	607	$	476	$	(1,036	)	$	—		$	47
2007 Restructuring Plan:
Severance		—		11,786		(6,616	)		(1,040	)		4,130
	$	607	$	12,262	$	(7,652	)	$	(1,040	)	$	4,177

(7) Income Taxes

In July 2006, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48. FIN No. 48 is an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN No. 48 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN No. 48 provides guidance on derecognition, classification, interest and penalties, and accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. The Company is subject to the provisions of FIN No. 48 as of January 1, 2007. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN No. 48. In addition, the Company did not record a cumulative effect adjustment related to the adoption of FIN No. 48.

The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. Penalties and interest paid or received are recorded in interest expense or interest income, respectively. During the three and nine months ended September 30, 2007 and 2006, the Company did not record any interest income or interest expense and penalties related to the settlement of audits for prior periods.

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Tax years 2003 through 2006 are subject to examination by the United States Federal and Canadian Federal authorities.

(8) Commitments and Contingencies

The Company has agreed to indemnify, under certain circumstances, certain manufacturers and service providers from and against any and all losses, claims, damages or liabilities arising from services provided by such manufacturers and service providers or from any use, including clinical trials, or sale by the Company or any Company agent of any product supplied by the manufacturers. The Company has entered into long-term agreements with various third-party contract manufacturers for the production and packaging of drug product and vials. Under the terms of these various contracts, the Company is required to purchase certain minimum quantities of drug product each year.

(9) Legal Proceedings

A consolidated shareholders’ securities class action lawsuit is currently pending against the Company and certain of its present and former officers and directors in the United States District Court for the District of Utah, Central Division. The consolidated complaint asserts that, during the class period, the Company and the individual defendants made false and misleading statements to the investing public concerning PREOS. The consolidated complaint alleges that false and misleading statements were made during the class period concerning the efficacy of PREOS as a treatment for postmenopausal osteoporosis, the potential market for PREOS, the dangers of hypercalcemic toxicity as a side effect of injectable PREOS, and the prospects of FDA approval of the Company’s New Drug Application for injectable PREOS. The consolidated complaint also alleges claims of option back dating and insider trading of NPS stock during the class period. The consolidated complaint seeks compensatory damages in an unspecified amount, unspecified equitable or injunctive relief, and an award of an unspecified amount for plaintiff’s costs and attorneys fees. On March 20, 2007, the Company filed a motion to dismiss the securities class action, which was denied by the court on July 3, 2007. The Company will now proceed with the litigation and is in the beginning phase of the discovery process.

On August 22, 2006, a shareholder of NPS filed a shareholder derivative action against certain of the Company’s present and former officers and directors. This action, which names the Company as a nominal defendant but is asserted on the Company’s behalf, is pending in the Third Judicial District Court of Salt Lake County, State of Utah. The derivative complaint asserts allegations similar to those asserted in the securities class action described above. The derivative complaint also seeks compensatory damages in an unspecified amount, unspecified equitable or injunctive relief and an award of an unspecified amount for plaintiff’s costs and attorneys fees. The Company filed a motion to dismiss or, in the alternative, stay the shareholder derivative action pending the outcome of the securities action. On July 9, 2007, the motion to dismiss was granted by the court with leave to amend and re-file the complaint.

During the quarter ended September 30, 2007, three additional shareholder derivative suits were filed against certain officers, directors, and former directors of the Company in the United States District Court for the District of Utah. These lawsuits also assert allegations similar to those asserted in the securities class action described above and also allege that the defendant directors and officers violated their fiduciary duties by making the allegedly false and misleading statements to the investing public concerning PREOS^®. The lawsuits seek a determination that they are appropriate derivative actions, compensatory damages in unspecified amounts, and exemplary damages in unspecified amounts. The deadline for defendants to respond to these shareholder derivative suits filed in Utah federal court has not been set. The Company believes that the claims in each of the foregoing lawsuits are without merit and intends to vigorously defend itself and the related defendants in each of these actions. The Company maintains insurance for actions of this nature, which it believes is adequate.

(10) Sale of Assets Held For Sale

In June 2007, the Company sold its land and 85,795 square foot laboratory and office building, including certain equipment and furnishings, located in Mississauga, Ontario, Canada to Transglobe Property Management Services Ltd. in Trust for $4.4 million. The Company recognized a gain on sale of assets held for sale during the three and nine months ended September 30, 2007 of zero and $1.8 million, respectively, on this transaction.

(11) Lease Termination Agreement

In July 2007, the Company entered into a Lease Termination Agreement with the Mars Discovery District (MaRs) in which the Company’s operating lease for the office and laboratory space in Toronto, Canada was terminated. Pursuant to the Lease Termination Agreement, the Company sold its Tenant Improvements to a third party for $2.4 million. In August 2007, the Company auctioned off the remaining Toronto facility equipment for $1.1 million. The Company recognized a gain on sale of fixed assets during the three and nine months ended September 30, 2007 of $3.2 million on these transactions.

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(12) Sale of Building and Termination of Ground Lease

In July 2007, the Company closed on an agreement to sell its 93,000 square foot laboratory and office building including certain laboratory and office equipment and furnishings located in Salt Lake City, Utah for $21.0 million to the University of Utah. As part of the sale, the University of Utah agreed to release the Company from all obligations under a 40 year ground lease for land upon which the building is located. The Company recognized a gain on sale of fixed assets during the three and nine months ended September 30, 2007 of $3.3 million on this transaction.

(13) New Collaborative and License Agreements

In July 2007, the Company entered into a new License Agreement with Nycomed to allow Nycomed to commercialize PREOTACT in all non-U.S. territories, excluding Japan and Israel, and amend certain rights and obligations of NPS and Nycomed under the 2004 license and distribution agreement. Under the new license agreement, Nycomed is required to pay the Company royalties on product sales only in the European Union, the Common Wealth of Independent States and Turkey. The agreement provides for the assumption as of January 1, 2008 by Nycomed of NPS’ manufacturing and supply obligations to Nycomed and patent prosecution and maintenance obligations under the 2004 License Agreement. As part of the manufacturing and supply transfer, Nycomed paid NPS $11.0 million for a significant portion of NPS’ existing bulk drug inventory. Under the terms of the 2004 and 2007 agreements, the Company recognized $14.8 million and $18.7 million, respectively, in product sales, royalty, and milestone revenue during the three and nine months ended September 30, 2007 and $940,000 and $2.1 million for the three and nine months ended September 30, 2006.

In September 2007 the Company entered into a license agreement with Nycomed in which the Company granted Nycomed the right to develop and commercialize GATTEX(TM), or teduglutide, outside the United States, Canada and Mexico for the treatment of gastrointestinal disorders. The Company will receive $35.0 million in up-front fees under the agreement. Nycomed paid the Company $10.0 million upon signing the license agreement and will pay the Company an additional $25.0 million in up-front license fees. Nycomed had the right to forgo payment of the $25 million license fee if, within a certain period of time following the Company’s announcement of topline results from its Phase III study of GATTEX in patients with short bowel syndrome (SBS), Nycomed notified the Company of its intent to end the collaboration. However, Nycomed has notified the Company of its intention to proceed with the collaboration and pay the $25.0 million license fee. Under the terms of the agreement, the Company has the potential to earn up to $190.0 million in development and sales milestone payments plus royalties on product sales. The Company did not recognize any research and licensing revenue during the three and nine months ended September 30, 2007 and 2006 under this agreement. Under the terms of the agreement, the Company is responsible to complete the on-going GATTEX clinical trials in SBS and Nycomed will share future development costs 50:50 with NPS to advance and broaden the indications for GATTEX. Under a previously existing licensing agreement with a third party, the Company is required to make a $2.5 million payment to the licensor as of September 30, 2007 as a result of its $10.0 million nonrefundable license fee from Nycomed and will be required to make future payments based on GATTEX royalty revenue and milestone fees including a payment to the licensor as a result of the $25.0 million payment received in the fourth quarter of 2007.

(14) Subsequent Events

On October 9, 2007, the Company entered into an Asset Purchase Agreement with Astra Zeneca (AZ) in which the Company agreed to sell its rights, including intellectual property, in drugs targeting metabotropic glutamate receptors (mGluRs) to AZ for $30.0 million. Additionally, the Company and AZ agreed to terminate the collaborative research and development agreement related to drugs targeting mGluRs that was entered into in 2001. As a result of this termination, the Company is no longer required to provide research FTE support or pay for an equal share of external discovery costs, including patent related costs.

On October 17, 2007, the Company closed a tender offer in which $171.2 million in 3% Convertible Notes were tendered to the Company for $169.1 million plus accrued interest. After acquiring these 3% Convertible Notes the Company retired them in October 2007. As of November 8, 2007, $598,000 in 3% Convertible Notes remain outstanding.

On October 25, 2007, the Company announced that it had earned a $2.0 million milestone payment from Kirin Pharma Company Ltd. for the approval of Kirin’s NDA application for Cinacalcet HCl in Japan.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward-Looking Statements

The following discussion should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related notes appearing elsewhere in this report. This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “plan,” “expect,” “anticipate,” “estimate,” “predict,” “intend,” “potential” or “continue” or the negative of these terms or other words of similar import, although some forward-looking statements are expressed differently. All statements other than statements of historical fact included in this report and the documents incorporated by reference into this report regarding our financial position, business strategy and plans or objectives for future operations are forward-looking statements. Without limiting the broader description of forward-looking statements above, we specifically note that statements regarding potential drug candidates, their potential therapeutic effect, the possibility of obtaining regulatory approval, our ability or the ability of our collaborators to manufacture and sell any products, market acceptance, or our ability to earn a profit from sales or licenses of any drug candidate are all forward-looking in nature. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including:

• Our ability to outsource activities critical to the advancement of our product candidates and manage those companies to whom such activities are outsourced;

• our ability to secure additional funds;

• the successful continuation of our strategic collaborations, our and our collaborators’ ability to successfully complete clinical trials, commercialize products and receive required regulatory approvals and the length, time and cost of obtaining such regulatory approvals;

• competitive factors;

• our ability to maintain the level of our expenses consistent with our internal budgets and forecasts;

• the ability of our contract manufacturers to successfully produce adequate supplies of our product candidates and drug delivery devices to meet clinical trial and commercial launch requirements for us and our partners;

• changes in our relationships with our collaborators;

• variability of our royalty, license and other revenues;

• our ability to enter into and maintain agreements with current and future collaborators on commercially reasonable terms;

• the demand for securities of pharmaceutical and biotechnology companies in general and our common stock in particular;

• uncertainty regarding our patents and patent rights;

• compliance with current or prospective governmental regulation;

• technological change; and

• general economic and market conditions.

You should also consider carefully the statements set forth in Item 1A of this Quarterly Report entitled “Risk Factors” as well as the statements set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year-ended December 31, 2006, entitled “Risk Factors,” which address these and additional factors that could cause results or events to differ materially from those set forth in the forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We have no plans to update these forward-looking statements.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to all such reports are available, free of charge, on our Internet website under “Investor Relations—SEC Filings,” as soon as reasonably practicable after we file electronically such reports with, or furnish such reports to, the SEC. Our Internet website address is http://www.npsp.com. Information on our website does not constitute a part of this Quarterly Report on Form 10-Q.

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Overview

We are a biopharmaceutical company focused on the development and commercialization of small molecule drugs and recombinant proteins. Our current portfolio of approved drugs and product candidates are primarily for the treatment of bone and mineral disorders, gastrointestinal disorders and central nervous system disorders. Our product portfolio consists of one U.S. Food and Drug Administration, or FDA, approved product, another product candidate that has been granted marketing approval in Europe and is the subject of an approvable letter from the FDA in response to a new drug application we filed in May 2005, a product candidate for which we have recently completed a pivotal Phase III clinical study, and released top-line results, and other product candidates in various stages of clinical development and preclinical development. Though we independently develop product candidates, we have entered into collaboration agreements for several of our programs.

We have incurred cumulative losses from inception through September 30, 2007 of approximately $890.7 million, and recognized cumulative revenues from research and license agreements of approximately $213.4 million. We expect to continue to incur significant operating losses over at least the next several years as we continue our current and anticipated development projects. Activities that will increase our operating losses include: seeking approval to market PREOS^® in the U.S. from the FDA; the conduct of current and future clinical trials with GATTEX, or teduglutide, and potentially PREOS^®; and, clinical and commercial manufacturing for GATTEX, PREOS^®, and PREOTACT^®.

Approved Products and Product Candidates Undergoing Regulatory Review

Our FDA approved product, cinacalcet HCl, is being marketed in the U.S. and the European Union for the treatment of secondary hyperparathyroidism in chronic kidney disease patients on dialysis and for the treatment of elevated calcium levels in patients with parathyroid carcinoma. We have licensed to Amgen worldwide rights to cinacalcet HCl, with the exception of Japan, China, North and South Korea, Hong Kong and Taiwan, where we have licensed such rights to Kirin Pharma Company, Ltd., or Kirin. Amgen developed and is marketing cinacalcet HCl in the U.S. under the brand name Sensipar^® and in Europe under the brand name Mimpara^®. On October 19, 2007 Kirin received approval from the Japanese Pharmaceuticals and Medical Devices Agency to market cinacalcet HCl in Japan for the treatment of patients with secondary hyperparathyroidism during maintenance dialysis. We earned a $2.0 million milestone payment from Kirin for this approval. We expect Kirin to launch marketing activities relating to cinacalcet HCl, pending pricing approval, in 2008. Both Amgen and Kirin have contractually committed to pay us royalties on their sales of cinacalcet HCl.

The European Commission has granted marketing authorization for PREOS^® for the treatment of postmenopausal women with osteoporosis at high risk for fracture. The marketing authorization is valid in all 25 member states of the European Union, or EU. We have granted to Nycomed Danmark ApS, or Nycomed, the exclusive right to market and sell PREOS^® in all non-U.S. territories, excluding Japan and Israel. Nycomed is marketing PREOS^® in Europe under the brand name PREOTACT^®. Nycomed has launched PREOTACT^® in Denmark, Germany, the United Kingdom, Italy, Spain, Greece, Netherlands and Austria.

In July 2007, we entered into an Agreement for the Sale and Assignment of Rights, with Drug Royalty L.P.3, or Drug Royalty, pursuant to which we sold to Drug Royalty our right to receive future royalty payments arising from sales of PREOTACT^® under our license agreement with Nycomed. Under the agreement, Drug Royalty paid us an up-front purchase price of $50.0 million. An additional $25.0 million will be due to us in 2010 if certain PREOTACT^® sales thresholds are achieved. If and when Drug Royalty receives two and a half times the principal advanced, the agreement will terminate and the remainder of the royalties, if any, will revert back to us.

In May 2005, we filed an NDA for PREOS^® with the FDA seeking approval to market PREOS^® in the U.S. On March 9, 2006, we received notification from the FDA that the PREOS^® NDA is approvable. Additional information regarding the approvable letter and our proposed path forward for PREOS^® is provided below under the caption “Major Research and Development Projects.”

Major Research and Development Projects

Our major research and development projects involve GATTEX, and PREOS^®. We and our corporate licensees also have other significant ongoing research and development activities with our proprietary compounds, including, the development of calcilytic compounds by GlaxoSmithKline and other proprietary pre-clinical research programs.

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GATTEX. GATTEX is an analog of glucagon-like peptide 2, a naturally occurring hormone that regulates proliferation of the cells lining the small intestine. We are independently investigating GATTEX as a potential treatment for short bowel syndrome, or SBS, and other indications, including Crohn’s disease, chemotherapy-induced enteritis, necrotizing enterocolitis and various other gastrointestinal diseases.

We have completed a pivotal Phase III clinical study in patients with SBS to measure the ability of GATTEX to reduce a patient’s dependency on total parenteral nutrition, or TPN. The Phase III clinical study was a double-blind, randomized, placebo-controlled trial with a study duration of six months and included two dose groups in which 83 patients with SBS received either a low dose of GATTEX, (0.05 milligrams/kilogram/day), a higher dose (0.10 mg/kg/day) or placebo. The original primary endpoint for the study was a twenty percent (20%) or greater reduction in TPN for study subjects at weeks 20 to 24 of the study compared to baseline. During the finalization of the Phase III study’s statistical analysis plan, the primary endpoint for the Phase III trial was expanded to incorporate several data points that were originally included as secondary endpoints in the protocol. The expanded endpoint was designed to account for the degree of effect and duration of a patient’s response to GATTEX. Accordingly, the expanded endpoint of the study called for a reduction in TPN of at least twenty percent 20% comparing baseline to weeks 16 to 24, measured as a graded response to capture reductions up to 100%. We announced top-line data results from this study in October 2007. In an intent-to-treat analysis, forty-six percent (46%) of patients receiving the lower dose of GATTEX (N=35) responded and achieved a highly statistically significant reduction in TPN compared to placebo (p=0.007), with two patients gaining independence from and discontinuing TPN by week 20 and a third patient discontinuing TPN at the end of treatment. Twenty-five percent (25%) of patients receiving the higher dose of GATTEX responded and showed a trend in the difference between the treatment group and placebo, but this did not reach statistical significance (p=0.161). The study’s criteria for conducting the statistical analysis of the primary endpoint required that the results of the high-dose group show statistical significance before the results of the low-dose group could be considered. However, given GATTEX’s orphan drug designation for SBS and the statistically strong and clinically meaningful findings in the low-dose group, we intend to meet with the FDA to discuss the path to regulatory approval for GATTEX. Once a careful review of the top-line results is completed and after meeting with the FDA, we will determine when we will submit an NDA to the FDA for approval to market GATTEX for the treatment of SBS.

Patients who completed the pivotal Phase III clinical study are able to receive additional treatment with GATTEX under our extension study. Patients who received GATTEX in the pivotal Phase III clinical study may receive an additional 28 weeks of GATTEX for a total of 52 weeks of treatment. The objective of this extension study is to evaluate the long-term safety and efficacy of daily dosing of GATTEX as well as impact on reductions in TPN.

A Phase IIa proof-of-concept clinical study to evaluate the possible utility of GATTEX in the treatment of patients with Crohn’s disease has been completed. Additionally, we have completed a safety study and a dose escalation study with GATTEX as part of our clinical development plan for this drug candidate.

We have reviewed encouraging findings from preclinical studies with GATTEX demonstrating the drug’s potential to prevent necrotizing enterocolitis and chemotherapy-induced enteritis. We believe both indications represent serious unmet medical needs that may be addressed by GATTEX therapy, and are exploring the conduct of clinical studies in each of these indications.

In September 2007 we signed a license agreement with Nycomed in which we granted Nycomed the right to develop and commercialize GATTEX outside the United States, Canada and Mexico for the treatment of gastrointestinal disorders. We will receive $35.0 million in up-front fees under the agreement. Nycomed paid us $10.0 million upon signing the license agreement and will pay us an additional $25.0 million in up-front license fees. Nycomed had the right to forgo payment of the $25 million license fee if, within a certain period of time following our announcement of topline results from our Phase III study of GATTEX in patients with SBS, Nycomed notified us of its intent to end the collaboration. However, Nycomed has notified us of its intention to proceed with the collaboration and pay the $25.0 million license fee. Under the terms of the agreement, we have the potential to earn up to $190.0 million in development and sales milestone payments plus royalties on product sales. Under the terms of the agreement, we are responsible to complete the on-going GATTEX clinical trials in SBS and Nycomed will share future joint development costs 50:50 with us to advance and broaden the indications for GATTEX. Under a previously existing licensing agreement with a third party, we were required to make a $2.5 million payment as of September 30, 2007, to the licensor as a result of our $10.0 million nonrefundable license fee from Nycomed including a payment to the licensor as a result of the $25.0 million payment received in the fourth quarter of 2007.

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During the three months ended September 30, 2007 and 2006, we incurred $4.0 million and $3.4 million, respectively, in the research and development of this product candidate, including costs associated with the manufacture of clinical supplies of GATTEX. During the nine months ended September 30, 2007 and 2006, we incurred $13.6 million and $12.4 million, respectively, in the development of this product candidate. We have incurred costs of approximately $124.5 million since we assumed development obligations of this product candidate under our acquisition of Allelix Biopharmaceuticals Inc., or Allelix, in December 1999.

Our development administration overhead costs are included in total research and development expense for each period, but are not allocated among our various projects.

The goal of our GATTEX development program is to obtain marketing approval from the FDA and assist Nycomed in obtaining marketing approvals from analogous international agencies. We will consider the project substantially complete if such marketing approvals are obtained even though subsequent to that time we might incur additional expenses in conducting additional clinical trials and follow-up studies. Before the requisite marketing approvals can be obtained pivotal clinical trials must be completed with satisfactory results and marketing approvals must be submitted to applicable regulatory agencies. We are unable to estimate the costs to completion or the completion date for the GATTEX program because of the on-going work resulting from the results of our pivotal Phase III trial in adults with SBS, the early stage of the clinical trials for other indications such as Crohn’s disease, necrotizing enterocolitis and chemotherapy-induced enteritis, the risks associated with the clinical trial process, including the risks that patient enrollment in the clinical trials may be slow, that we may repeat, revise or expand the scope of future trials or conduct additional clinical trials not presently planned to secure marketing approvals, and the additional risks identified herein. We cannot predict when material cash inflows from our GATTEX program will commence, if ever, because of the many risks and uncertainties relating to the results of our Phase III clinical trial with SBS patients, completion of clinical trials, receipt of marketing approval from the applicable regulatory agency, acceptance in the marketplace, and the availability of sufficient funds to complete development of the product. To date, we have not received any revenues from product sales of GATTEX. The risks and uncertainties associated with completing the development of GATTEX on schedule, or at all, include but are not limited to the following:

• GATTEX may not be shown to be safe and efficacious in the pivotal and on-going clinical trials;

• We may be unable to obtain regulatory approval of the drug on a timely basis, or at all;

• We may be unable to secure adequate clinical and commercial supplies of GATTEX in order to complete preclinical studies, clinical trials and initiate commercial launch upon approval; and

• We may not have adequate funds to complete the development of GATTEX, and may not be successful in securing a corporate partner to share in the costs associated with the development and commercialization of this drug candidate.

A failure to obtain marketing approval for GATTEX or to timely complete development and obtain regulatory approval would likely have the following results on our operations, financial position and liquidity:

• We would not earn any sales revenue from GATTEX, which would increase the likelihood that we would need to obtain additional financing for our other development efforts;

• Our reputation among investors might be harmed, which might make it more difficult for us to obtain equity capital on attractive terms or at all; and

• Our profitability would be delayed and our business and stock price may be aversely affected.

PREOS^®. PREOS^® is our brand name for recombinant, full length, human parathyroid hormone that we are developing as a potential treatment for post-menopausal osteoporosis. During the three months ended September 30, 2007 and 2006, we incurred $1.3 million and $2.2 million, respectively, in the research and development of this product candidate, including costs associated with the manufacture of clinical and commercial supplies of PREOS^® but exclusive of commercial supply costs of PREOTACT^®. During the nine months ended September 30, 2007 and 2006, we incurred $4.8 million and $12.7 million, respectively, in the research and development of this product candidate. We have incurred costs of approximately $346.5 million since we assumed development obligations for this product candidate under our acquisition of Allelix in December 1999.

Our development administration overhead costs are included in total research and development expense for each period, but are not allocated among our various projects.

The goal of our PREOS^® development program is to obtain marketing approval from the FDA and assist Nycomed in obtaining marketing approval from analogous international agencies. We will consider the project substantially complete if we obtain those approvals even though subsequent to that time we might incur additional expenses in conducting additional clinical trials and follow-up studies. The European Commission has granted marketing authorization for PREOS^® in Europe. The marketing authorization is valid in all 25 member states of the EU. We have granted to Nycomed the exclusive right to market and sell PREOS^® in all non-U.S. territories, excluding Japan and Israel. Nycomed is marketing PREOS^® in Europe under the brand name PREOTACT^®. Nycomed has launched PREOTACT^® in Denmark, Germany, the United Kingdom, Italy, Spain, Greece, Netherlands and Austria.

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In July 2007, we entered into a new license agreement with Nycomed, which we refer to as the 2007 license agreement. Under the 2007 license agreement, we granted to Nycomed the right to commercialize PREOTACT in all non-U.S. territories, excluding Japan and Israel. Nycomed’s licensed rights in Canada and Mexico, however, will revert back to us or our licensee for commercialization if and when PREOS receives regulatory approval in the U.S. The 2007 license agreement contains milestone and royalty payment obligations which are similar to those under our 2004 license agreement with Nycomed. Nycomed is required to pay us royalties on sales of PREOTACT only in the European Union, the Common Wealth of Independent States and Turkey. The 2007 license agreement provides for the assumption by Nycomed of NPS’ manufacturing and supply obligations and patent prosecution and maintenance obligations under the 2004 license and distribution agreement, as of January 1, 2008. As part of the manufacturing and supply transfer, Nycomed paid us $11.0 million for a significant portion of our existing bulk drug inventory.

In July 2007, we entered into an Agreement for Sale and Assignment of Rights, or sales agreement, with Drug Royalty L.P.3, or Drug Royalty, pursuant to which we sold to Drug Royalty our right to receive future royalty payments arising from sales of PREOTACT under our license agreement with Nycomed. Under the agreement, Drug Royalty paid us an up-front purchase price of $50.0 million for the royalty rights. An additional $25.0 million will be due in 2010 if certain PREOTACT sales thresholds are achieved. If and when Drug Royalty receives two and a half times the amount of principal advanced, the Agreement will terminate and the remainder of the royalties, if any, will revert back to us. In connection with the sales agreement, we granted Drug Royalty a security interest in our license agreement with Nycomed and certain of our patents and other intellectual property underlying our license agreement with Nycomed. In the event of a default by us under the sales agreement, Drug Royalty would be entitled to enforce its security interest against us and the property described above.

We submitted an NDA for PREOS^® to the FDA in May 2005. In March 2006, we received notification from the FDA that the PREOS^® NDA is approvable. In the approvable letter, the FDA indicated that our pivotal Phase III study with PREOS^® demonstrated significant fracture risk reductions in post menopausal women with osteoporosis, but noted a higher incidence of hypercalcemia with PREOS^® compared to placebo. The FDA expressed concern regarding hypercalcemia associated with the proposed daily dose of PREOS^® and requested additional clinical information. The FDA also requested additional information regarding the reliability and use of the injection device for delivery of PREOS^®. Since receiving the approvable letter from the FDA, we have had further communications with the FDA including an in person meeting in May 2006 with senior staff from the FDA’s Division of Endocrine and Metabolism Drug Products. During the meeting, the FDA proposed that we generate additional clinical data through the conduct of a new clinical trial in order to adequately address the hypercalcemia issue raised in the approvable letter. Since receiving the approvable letter we have been carefully evaluating the regulatory path forward for PREOS^®. We have submitted a new clinical trial protocol for PREOS^® to the FDA to support U.S. registration. After multiple communications with the FDA we believe the protocol design is now finalized. The clinical study under the protocol is a 12-month bone-mineral density bridging study designed to evaluate the relative efficacy and safety of PREOS^® as compared to placebo in women with post-menopausal osteoporosis. We believe that as a result of recent fundraising activities and sales of non-core assets and the GATTEX partnership with Nycomed, we now have the financial resources to fund the continued U.S. development of PREOS in a variety of indications, including hypoparathyroidism and osteoporosis. We are committed to advancing the development of PREOS in hypoparathyroidism. We are currently reviewing our development and commercialization options for PREOS in osteoporosis and expect to make a decision regarding this indication in the first quarter of 2008. There is no assurance that we will secure additional partner funding on acceptable terms or at all.

We are currently supporting an investigator led study to explore the use of PREOS^® as a hormone replacement therapy to treat hypoparathyroidism. This is a condition in which patients do not produce adequate levels of parathyroid hormone, resulting in lower than normal levels of calcium in the blood. Hypoparathyroidism can result in hypocalcemia, vitamin D deficiency, hypercalciuria and brittle bones of poor quality. In September 2007, the FDA granted orphan drug status for PREOS^® as a treatment for hypoparathyroidism.

Because of the on-going work with respect to the PREOS^® program, the FDA review process, the risks associated with the drug approval process, including the risk that we may have to repeat, revise or expand the scope of clinical trials or conduct additional clinical trials not presently planned to secure marketing approvals and the initiation of commercial manufacturing activities, and the additional risks identified herein, we are unable to estimate the costs to completion or the completion date for the PREOS^® program. Material cash inflows relating to our PREOS^® development program will not commence until after marketing approvals in the United States are obtained, and then only if PREOS^® finds acceptance in the marketplace. Because of the many risks and uncertainties relating to the receipt of marketing approval from the applicable regulatory agencies and acceptance in the marketplace and the availability of sufficient funds to complete development of the product, we cannot predict when material cash inflows from our PREOS^® program will commence, if ever.

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During the three months ended September 30, 2007 and 2006, we recognized product sale revenues to Nycomed of $12.4 million and $839,000, respectively, royalty income from PREOTACT^® sales by Nycomed of $949,000 and $22,000, respectively, and milestone revenue of $1.5 million and $81,000, respectively. During the nine months ended September 30, 2007 and 2006, we recognized product sales revenues to Nycomed of $14.9 million and $1.9 million, respectively, royalty income from PREOTACT^® sales by Nycomed of $2.0 million and $22,000, respectively, and milestone revenue of $1.7 million and $250,000, respectively. The risks and uncertainties associated with completing the development of PREOS^® on a timely basis, or at all, and successfully commercializing PREOS^® include but are not limited to the following:

• We may be unable to obtain regulatory approval of the drug in the United States on a timely basis or at all;

• We may be unable to secure adequate commercial supplies of PREOS^® and the injection delivery device in order to initiate commercial launch when and if PREOS^® is approved; and

• We may not have adequate funds to complete the development and prepare for the commercial launch of PREOS^® when and if approved in the United States, and may not be successful in securing a corporate or financing partner to share in the costs associated with the development and commercialization of this drug candidate.

A failure to obtain marketing approval for PREOS^®, secure adequate commercial supplies of PREOS^®, or secure adequate funds to complete development and prepare for commercial launch would likely have the following results on our operations, financial position and liquidity:

• We would not earn any U.S. sales revenue from PREOS^®, which would increase the likelihood that we would need to obtain additional financing for our other development efforts;

• Our reputation among investors might be harmed, which might make it more difficult for us to obtain equity capital on attractive terms or at all; and

• Our profitability would be delayed and our business and stock price may be adversely affected.

Other Research and Development Programs

Most of the remaining research and development expenses for the three and nine months ended September 30, 2007 and 2006, were generated by various early clinical stage programs, pre-clinical studies and drug discovery programs, including those described below.

Metabotropic Glutamate Receptor Program. Since 1996, we have been working to find compounds that act on targets in the central nervous system called metabotropic glutamate receptors, or mGluRs. We have discovered a number of compounds that activate or inhibit mGluRs and that are highly selective for specific subtypes of mGluRs. Our animal studies with a number of these compounds have demonstrated their potential as drug candidates for the treatment of central nervous system disorders such as chronic pain. Additionally, animal studies with a number of these compounds have demonstrated their potential as drug candidates for the treatment of gastrointestinal disorders such as gastroesophageal reflux disease, or GERD.

In March 2001, we entered into an agreement with AstraZeneca, or AZ, under which we collaborate exclusively in an extensive program around a number of mGluR subtypes. We granted AstraZeneca exclusive rights to commercialize mGluR subtype-selective compounds. Under the agreement, we are required to co-direct the research and pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel, through March 2009.

On October 9, 2007, we entered into an Asset Purchase Agreement with AZ in which we agreed to sell our rights, including intellectual property, in drugs targeting mGluRs to AZ for $30.0 million. Additionally, NPS and AZ agreed to terminate the collaborative research and development agreement related to drugs targeting mGluRs that was entered into in 2001. As a result of this termination, we are no longer required to provide research FTE support or pay for an equal share of external discovery costs, including patent related costs.

During the three months ended September 30, 2007 and 2006, we incurred $191,000 and $1.3 million, respectively, in research and development expenses under our collaboration with AstraZeneca. During the nine months ended September 30, 2007 and 2006, we incurred $2.1 million and $3.8 million, respectively, in research and development expenses under our collaboration with AstraZeneca.

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Our development, administration and overhead costs are included in total research and development expenses for each period, but are not allocated among our various projects.

Calcilytic Compounds. We are pursuing a treatment for osteoporosis that focuses on the discovery and development of orally administered drugs called calcilytic compounds. Calcilytic compounds are small molecule antagonists of the calcium receptors that temporarily increase the secretion of the body’s own parathyroid hormone, which may result in the formulation of new bone. In animal studies, we determined that intermittent increases in circulating levels of parathyroid hormone can be obtained through use of calcilytics.

In 1993, we collaborated with GlaxoSmithKline for research, development and commercialization of calcium receptor active compounds from treatment of osteoporosis and other bone metabolism disorders. We are not expending any significant resources in the program. In May 2007, GlaxoSmithKline initiated a Phase II dose-range finding study with a compound identified under the collaboration in post-menopausal women with osteoporosis.

GlaxoSmithKline has paid us a total of $38.7 million for license fees, research support, milestone payments and equity purchases as part of our collaboration. We will receive additional payments of up to an aggregate of $32.0 million, which includes additional milestones under the December 2006 amendment noted below, if certain clinical milestones are achieved. We will also receive royalties on sales of any commercialized products based on compounds identified in the collaboration. In addition to the milestone and royalty payments, we have a limited right to co-promote any products that are developed through our collaboration and to receive co-promotion revenue, if any.

In December 2006 we entered into an amendment to our agreement with GlaxoSmithKline under which we provided GlaxoSmithKline rights to additional compounds discovered by us. In connection with such amendment GlaxoSmithKline paid us a one time licensing fee of $3.0 million and agreed to pay us additional milestones payments for the achievement of certain clinical milestones with such compounds as well as royalties on sales of such compounds should GlaxoSmithKline commercialize any of such compounds.

Glycine Reuptake Inhibitors. We collaborated with Janssen on glycine reuptake inhibitors to identify prospective drug candidates for schizophrenia and dementia. Janssen has now assumed full responsibility for the development of product candidates identified under the collaboration. We are not expending any significant resources in the program. Janssen has informed us that they plan to seek a third party to share in the future development costs and risks of the program. In the event Janssen enters into a collaborative agreement with a third party or sublicenses the program, we will continue to be eligible to receive additional milestone payments of up to $20.5 million from Janssen or a licensee, if certain milestones are met and royalties on sales of any drugs developed or sold by Janssen or a licensee under this collaboration agreement.

Summary of other programs. The goal of our other programs is to synthesize, develop and obtain marketing approval for product candidates. Material cash inflows will not commence until after marketing approvals are obtained, and then only if the product finds acceptance in the marketplace. Currently all compounds are in pre-clinical stages or early clinical stages. In order to obtain marketing approval, we or our corporate licensees, as the case may be, will need to initiate and complete all current and planned clinical trials with satisfactory results and submit an NDA to the FDA. Because of this, and the many risks and uncertainties relating to the completion of clinical trials, receipt of marketing approvals and acceptance in the marketplace, we cannot predict when material cash inflows from these programs will commence, if ever.

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Results of Operations

Three Months Ended September 30, 2007 and 2006

The following table summarizes selected operating statement data for the three months ended September 30, 2007 and 2006 (amounts in thousands):

	Three months ended September 30,
	2007			2006
Revenues:
Product sales	$	12,357		$	839
Royalties, milestones and license fees	$	16,804		$	9,232
Operating expenses:
Cost of goods sold	$	823		$	536
% of product sales		7	%		64	%
Cost of royalties	$	1,228		$	796
% of royalties, milestones and license fees		7	%		9	%
Research and development	$	5,400		$	13,692
% of total revenue		19	%		136	%
Selling, general and administrative	$	5,744		$	7,482
% of total revenue		20	%		74	%
Restructuring charges	$	1,013		$	2,228
Gain on sale of fixed assets	$	(6,459	)	$	—
Gain on sale of assets held for sale	$	—		$	—

Revenues. Substantially all our revenues have come from license fees, research and development support payments, milestone payments, product sales and royalty payments from our licensees and collaborators. These revenues fluctuate from quarter to quarter. Our revenues were $29.2 million for the quarter ended September 30, 2007 compared to $10.1 million for the quarter ended September 30, 2006. We recognized revenue under our research and license agreements during the three months ended September 30, 2007 and 2006, primarily as follows:

• Under our agreement with Amgen, we recognized revenue of $14.3 million and $8.9 million; and

• Under our agreement with Nycomed, we recognized revenue of $14.8 million and $940,000.

The increase in royalty revenue earned from Amgen is due to an increase in sales of cinacalcet HCl since launching in March 2004 and due to an increase in royalty rates on net sales of cinacalcet HCl due to Amgen’s achievement of certain annual cumulative sales thresholds. The increase in product sales, milestone income and royalty income earned from Nycomed is due primarily to PREOTACT^® not being approved in the EU until April 2006 and the sale of $11.0 million in bulk drug inventory to Nycomed in August 2007 under our 2007 license agreement with Nycomed. During the three months ended September 30, 2007, we recognized PREOTACT^® product sales revenue of $12.4 million, royalty revenue of $949,000 and milestone revenue of $1.5 million from Nycomed. During the three months ended September 30, 2006, we recognized PREOTACT^® product sales revenue of $839,000, royalty revenue of $22,000 and milestone revenue of $81,000 from Nycomed.

Cost of Goods Sold. Our cost of goods sold consists of the cost of inventory, subsequent to the April 2006 approval of PREOTACT^® in the EU, for product sales to Nycomed. Costs associated with inventory build that were incurred prior to the EU approval of PREOTACT^® have been previously expensed as research and development expense, creating an initial FIFO inventory layer with a carrying value of zero. As inventory is expensed under the FIFO methodology, cost of goods sold as a percentage of product revenue will continue to increase in future periods until the initial zero costed FIFO layer is consumed. We recorded cost of goods sold of $823,000 and $536,000, respectively, during the three months ended September 30, 2007 and 2006. The increase in cost of goods sold is due to increased product sales to Nycomed and the previous use of zero costed inventory layers. When Nycomed assumes manufacturing responsibility for PREOTACT in 2008, we expect cost of goods will be zero unless our other product candidates receive approval before then.

Cost of Royalties. Our cost of royalties consists of royalties owed under our agreement with the Brigham and Women’s Hospital on sales of cinacalcet HCl. We recorded cost of royalties of $1.2 million and $796,000, respectively, during the three months ended September 30, 2007 and 2006. The increase in cost of royalties is due to increased sales of cinacalcet HCl by Amgen.

Research and Development. Our research and development expenses arise primarily from compensation and other related costs of our personnel who are dedicated to research and development activities and from the fees paid and costs reimbursed to outside professionals to conduct research, pre-clinical and clinical trials, and to manufacture drug compounds and related supplies prior to

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FDA approval. Our research and development expenses decreased to $5.4 million for the three months ended September 30, 2007 from $13.7 million for the comparative period in 2006. The decrease is principally due to a $3.3 million decrease in personnel costs due to the 2007 and 2006 Restructuring Plans, as we describe below, a $1.3 million decrease in stock-based compensation, a $604,000 decrease in the development costs of advancing our mGluR program and overall decreases in our research and development overhead, including facility costs, information technology costs and depreciation, offset by a $104,000 increase in the costs of advancing our PREOS^® clinical program, a $89,000 increase in costs associated with the manufacture of clinical and commercial supplies of GATTEX.

Selling, General and Administrative. Our selling, general and administrative expenses consist primarily of the costs of our management and administrative staff, business insurance, property taxes, professional fees and market research and promotion activities, including the cost of our sales force through June 2006, for our marketed products and product candidates. Our selling, general and administrative expenses decreased to $5.7 million for the three months ended September 30, 2007 from $7.5 million for the comparative period in 2006. The decrease is due primarily to a $1.3 million decrease in personnel cost due to the 2007 and 2006 Restructuring Plans, as we describe below, a $558,000 decrease in pre-launch commercial support, educational and commercial activities, excluding personnel costs, associated with PREOS^® and terminating our sales promotional activities around Kineret^® and Restasis^® in 2006, a $180,000 decrease in compensation cost related to stock-based compensation and overall decreases in our selling, general and administrative overhead, including facility costs, information technology costs and depreciation, for efforts outlined in the execution of our 2006 and 2007 Restructuring Plans offset by a $397,000 increase in outside services due to a change in our business model to the use of more outsourcing.

Restructuring Charges. Our restructuring charges relate to our initiatives to restructure operations which were announced in March 2007, referred to as our 2007 Restructuring Plan, and in June 2006, referred to as our 2006 Restructuring Plan. Under the 2007 Restructuring Plan, we announced that our worldwide workforce would be reduced from 196 employees to approximately 35 employees by the end of 2007. We also announced the closure of our operations in Toronto, Canada and Salt Lake City, Utah. The charge related to the 2007 Restructuring Plan during the three months ended September 30, 2007 and 2006, was $1.0 million and zero, respectively, and was comprised primarily of severance related expenses. Under the 2006 Restructuring Plan, we reduced our worldwide workforce, including employees and contractors, by approximately 250 positions, eliminated all commercial sales and related field based activities, terminated our agreement with Allergan Inc. to promote Restasis^® Ophthalmic Emulsion to rheumatologists and closed our technical operations facility in Mississauga, Ontario, Canada. The charge related to the 2006 Restructuring Plan during the three months ended September 30, 2007 and 2006, was a credit of $17,000 and a charge of $2.2 million, respectively. The charge during the three months ended September 30, 2006 was comprised primarily of severance related expenses.

Gain on Sale of Fixed Assets. Our gain on sale of fixed asses relates primarily to the gain recorded on the sale of our laboratory and administrative office building, including equipment, located in Salt Lake City, Utah in July 2007 and the gain recorded on the sale of our leasehold improvements and equipment at a MaRs laboratory facility in Toronto Canada in August 2007. Our gain on sale of fixed during the three months ended September 30, 2007 and 2006 was $6.5 million and zero, respectively.

Total Other Expense, Net. Our total other expense, net, increased to $7.3 million for the three months ended September 30, 2007 from $6.4 million for the comparable period in 2006. The increase in total other expense, net, for the three months ended September 30, 2007 compared to the same period in the prior year is due primarily to a $2.3 million increase in interest expense primarily related to our new transactions entered into in the third quarter of 2007, including the Class B Notes issued in August 2007, the 5.75% Convertible Notes issued in August 2007 and the Drug Royalty PREOTACT royalty purchase in July 2007, and a $303,000 foreign currency loss due to a stronger Canadian Dollar partially offset by an increase in interest income of $1.1 million due to higher average cash, cash equivalent and marketable security balances in the third quarter of 2007 compared with the third quarter of 2006, as well as higher interest rates earned in 2007 and a $604,000 gain related to our retirement of a portion of our outstanding 3% Convertible Notes which were purchased in the open market at a discount in August 2007.

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Nine Months Ended September 30, 2007 and 2006

The following table summarizes selected operating statement data for the nine months ended September 30, 2007 and 2006 (amounts in thousands):

	Nine months ended September 30,
	2007			2006
Revenues:
Product sales	$	14,939		$	1,889
Royalties, milestones and license fees	$	37,328		$	22,547
Operating expenses:
Cost of goods sold	$	2,875		$	902
% of product sales		19	%		48	%
Cost of royalties	$	3,363		$	1,954
% of royalties, milestones and license fees		9	%		9	%
Research and development	$	28,121		$	55,078
% of total revenue		54	%		225	%
Selling, general and administrative	$	17,667		$	42,405
% of total revenue		34	%		174	%
Restructuring charges	$	12,252		$	8,240
Gain on sale of fixed assets	$	(6,459	)	$	—
Gain on sale of assets held for sale	$	(1,826	)	$	—

Revenues. Our revenues were $52.3 million for the nine months ended September 30, 2007 compared to $24.4 million for the nine months ended September 30, 2006. We recognized revenue under our research and license agreements during the nine months ended September 30, 2007 and 2006 primarily as follows:

• Under our agreement with Amgen, we recognized revenue of $33.4 million and $20.0 million;

• Under our agreement with Kirin, we recognized revenue of zero and $2.0 million; and

• Under our agreement with Nycomed, we recognized revenue of $18.7 million and $2.1 million.

The increase in royalty revenue earned from Amgen is due to an increase in sales of cinacalcet HCl since launching in March 2004 and due to an increase in royalty rates on sales of cinacalcet HCl due to Amgen’s achievement of certain annual cumulative sales thresholds. The increase in product sales, milestone income and royalty income earned from Nycomed is due primarily to PREOTACT^® not being approved in the EU until April 2006 and the sale of $11.0 million in bulk drug inventory to Nycomed in August 2007 under the 2007 License Agreement. During the nine months ended September 30, 2007, we recognized PREOTACT^® product sales revenue of $14.9 million, royalty revenue of $2.0 million and milestone revenue of $1.7 million from Nycomed. During the nine months ended September 30, 2006, we recognized PREOTACT^® product sales revenue of $1.9 million, royalty revenue of $22,000 and milestone revenue of $250,000 from Nycomed. Additionally, during the nine months ended September 30, 2006, we recognized milestone revenue of $2.0 million from Kirin for the filing of a new drug application with the Japanese Pharmaceuticals and Medical Devices Agency in February 2006 for cinacalcet HCl.

Cost of Goods Sold. We recorded cost of goods sold of $2.9 million and $902,000, respectively, during the nine months ended September 30, 2007 and 2006. The increase in cost of goods sold is due to increased product sales to Nycomed and the previous utilization of zero costed inventory layers.

Cost of Royalties. We recorded cost of royalties of $3.4 million and $2.0 million, respectively, during the nine months ended September 30, 2007 and 2006. The increase in cost of royalties is due to increased sales of cinacalcet HCl by Amgen.

Research and Development. Our research and development expenses decreased to $28.1 million for the nine months ended September 30, 2007 from $55.1 million for the comparable period in 2006. The decrease is principally due to a $12.4 million decrease in personnel costs due to the 2007 and 2006 Restructuring Plans, a $5.7 million decrease in stock-based compensation, a $3.1 million decrease due to a reduction in facilities costs relating to the closure of the Canadian office buildings, a $2.9 million decrease in the costs of advancing our PREOS^® clinical program, a $836,000 decrease in the development costs of advancing our mGluR program and overall decreases in our research and development overhead; offset by a $957,000 increase in the development costs of advancing our GATTEX clinical program.

Selling, General and Administrative. Our selling, general and administrative expenses decreased to $17.7 million for the nine months ended September 30, 2007 from $42.4 million for the comparable period in 2006. The decrease is due primarily to a $11.3 million decrease in pre-launch commercial support, educational and commercial activities, excluding personnel costs, associated

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with PREOS^® and terminating our sales promotional activities around Kineret^® and Restasis^® in 2006, a $10.9 million decrease in personnel costs due to the 2007 and 2006 Restructuring Plans, a $1.0 million decrease in compensation cost related to stock-based compensation and overall decreases in our selling, general and administrative overhead, including facility costs, information technology costs and depreciation, for efforts in the execution of our 2007 and 2006 Restructuring Plans.

Restructuring Charges. The charge related to the 2007 Restructuring Plan during the nine months ended September 30, 2007 and 2006, was $11.8 million and zero, respectively, and was comprised primarily of severance related expenses. The charge related to the 2006 Restructuring Plan during the nine months ended September 30, 2007 and 2006 was $476,000 and $8.2 million, respectively. The charge during the nine months ended September 30, 2006 was comprised primarily of $7.7 million in severance related expenses and $583,000 in contract terminations costs.

Gain on Sale of Fixed Assets. Our gain on sale of fixed assets relates primarily to the gain recorded on the sale of our laboratory and administrative office building, including equipment, located in Salt Lake City, Utah in July 2007 and the gain recorded on the sale of our leasehold improvements and equipment at a MaRs laboratory facility in Toronto Canada in August 2007. Our gain on sale of fixed during the nine months ended September 30, 2007 and 2006 was $6.5 million and zero, respectively.

Gain on Sale of Assets Held for Sale. Our gain on sale of assets held for sale relates to the sale of our laboratory and administrative office building, including equipment, located in Mississauga, Ontario, Canada in June 2007. Our gain on sale of assets held for sale during the nine months ended September 30, 2007 and 2006 was $1.8 million and zero, respectively.

Total Other Expense, Net. Our total other expense, net, increased to $18.1 million for the nine months ended September 30, 2007 from $14.5 million for the comparable period in 2006. The increase in total other expense, net, for the nine months ended September 30, 2007 compared to the same period in the prior year is due primarily to a $2.6 million increase in interest expense on new transactions entered into in 2007, including the Class B Notes, the 5.75% Convertible Notes and the Drug Royalty PREOTACT royalty purchase partially offset by a reduction in interest expense related to the $19.3 million principal payment on the Class A notes in April 2007, a $970,000 charge related to the early extinguishment of our lease financing obligation, a $394,000 decrease in interest income due to lower average cash, cash equivalent and marketable security balances in 2007 compared with 2006, and a $253,000 decrease in foreign currency transaction gain, offset by a $604,000 gain related to our retirement of a portion of our outstanding 3% Convertible Notes which were purchased in the open market at a discount in August 2007.

Liquidity and Capital Resources

The following table summarizes selected financial data (amounts in the thousands):

	September 30, 2007			December 31, 2006
Cash, cash equivalents, and marketable securities	$	302,229		$	146,152
Total assets		361,489			224,740
Current debt		191,304			19,044
Non-current debt		337,269			365,533
Stockholders’ deficit	$	(209,698	)	$	(193,244	)

We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments and to service our debt. We have financed operations since inception primarily through payments received under collaborative research and license agreements, the private and public issuance and sale of equity securities, and the issuance and sale of secured debt and convertible debt. As of September 30, 2007, we had recognized $213.4 million of cumulative revenues from payments for research support, license fees, product sales, milestone and royalty payments, $563 million from the sale of equity securities for cash, and $555.2 million from the sale of secured debt and convertible debt for cash.

The primary objectives for our marketable investment security portfolio are liquidity and safety of principal. Investments are intended to achieve the highest rate of return to us, consistent with these two objectives. Our investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. Our principal sources of liquidity are cash, cash equivalents, and marketable investment securities, which totaled $302.2 million at September 30, 2007.

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On October 17, 2007, we closed a tender offer in which $171.2 million in 3% Convertible Notes were tendered to the Company for $169.1 million plus accrued interest. After acquiring these 3% Convertible Notes, we retired them in October 2007. Additionally in August 2007, we purchased and subsequently retired $20.2 million of our 3% Convertible Notes for $19.5 million. As of November 8, 2007, $598,000 in 3% Convertible Notes remain outstanding.

On October 9, 2007, we entered into an Asset Purchase Agreement with AZ in which we agreed to sell our rights, including intellectual property, in drugs targeting mGluRs to AZ for $30.0 million. Additionally, NPS and AZ agreed to terminate the collaborative research and development agreement related to drugs targeting mGluRs that was entered into in 2001. As a result of this termination, we are no longer required to provide research FTE support or pay for an equal share of external discovery costs, including patent related costs.

In September 2007, we signed a license agreement with Nycomed in which we granted Nycomed the right to develop and commercialize GATTEX outside the United States, Canada and Mexico for the treatment of gastrointestinal disorders. We will receive $35.0 million in up-front fees under the agreement. Nycomed paid us $10.0 million upon signing the agreement and will pay us an additional $25.0 million in up-front license fees. Nycomed had the right to forgo payment of the $25 million license fee if, within a certain period of time following our announcement of topline results from its Phase III study of GATTEX in patients with SBS, Nycomed notified us of its intent to end the collaboration. However, Nycomed has notified us of its intention to proceed with the collaboration and pay the $25.0 million license fee. Under the terms of the agreement, we have the potential to earn up to $190.0 million in development and sales milestone payments plus royalties on product sales. We did not recognize any research and licensing revenue during the three and nine months ended September 30, 2007 and 2006 under this agreement. Under the terms of the agreement, we are responsible to complete the on-going GATTEX clinical trials in SBS and Nycomed will share future joint development costs 50:50 with NPS to advance and broaden the indications for GATTEX. Additionally, under a previously existing licensing agreement with a third party, we were required to make a $2.5 million payment to the licensor as a result of our $10.0 million nonrefundable license fee from Nycomed including a payment to the licensor as a result of the $25.0 million payment received in the fourth quarter of 2007.

In August 2007, we completed a private placement of $50.0 million of our 5.75% Convertible Notes, or 5.75% Convertible Notes, due August 7, 2014. Interest on the 5.75% Convertible Notes is payable quarterly in arrears on the first day of the succeeding calendar quarter commencing January 1, 2008. The holders may convert all or a portion of the 5.75% Notes into common stock at any time, subject to certain milestones, on or before August 7, 2014. The 5.75% Convertible Notes are convertible into our common stock at a conversion rate equal to approximately $5.44 per share, subject to adjustment in certain events. On or after August 7, 2012, we may redeem any or all of the 5.75% Convertible Notes at a redemption price of 100% of their principal amount, plus accrued and unpaid interest to the day preceding the redemption date. The 5.75% Convertible Notes are unsecured senior debt obligations and rank equally in right of payment with all existing and future unsecured indebtedness. Neither we nor any of our subsidiaries are restricted under the indenture from paying dividends, incurring debt, or issuing or repurchasing our securities.

In August 2007, our wholly owned subsidiary, Cinacalcet Royalty Sub LLC, closed a private placement of $100.0 million of its Pharmaceutical Royalty Monetization Asset^SM (PhaRMA^SM) Secured 15.5% Class B Notes due 2017, or Class B Notes. We received net proceeds from the issuance of the Class B Notes of approximately $97.0 million, after deducting costs associated with the offering. The Class B Notes are secured by certain royalty and related rights under our agreement with Amgen and are non-recourse to NPS Pharmaceuticals, Inc. The only source for interest payments and principal repayment of the Class B Notes is limited to royalty and milestone payments received from Amgen and only after the Class A Notes, described elsewhere in this report, are paid in full. Accrued interest on the Class B Notes was $2.3 million as of September 30, 2007. We incurred debt issuance costs of $3.6 million, which are being amortized using the “effective interest-rate” method. The effective interest rate on the Class B Notes, including debt issuance costs, is approximately 21.6%.

In July 2007, we entered into a Lease Termination Agreement with the Mars Discovery District, or MaRs, under which our operating lease for the office and laboratory space in Toronto, Canada was terminated. Pursuant to the Lease Termination Agreement, we sold our leasehold tenant improvements to a third party for $2.4 million. The termination of our operating lease and sale of our leasehold tenant improvements is part of our restructuring initiatives, which includes a plan to close our Mississauga and Toronto facilities and discontinue all operations in Canada.

In July 2007, we entered into an Agreement for the Sale and Assignment of Rights with Drug Royalty L.P.3, or Drug Royalty, pursuant to which we sold to Drug Royalty our right to receive future royalty payments arising from sales of PREOTACT under our license agreement with Nycomed. Under the agreement, Drug Royalty paid us an up-front purchase price of $50.0 million. An additional $25.0 million will be due to us in 2010 if certain PREOTACT sales thresholds are achieved. If and when Drug Royalty receives two and a half times the amount of principal advanced, the agreement will terminate and the remainder of the royalties, if any, will revert back to us.

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In July 2007, we entered into a new License Agreement with Nycomed to allow Nycomed to commercialize PREOTACT in all non-U.S. territories, excluding Japan and Israel, and amend certain rights and obligations of NPS and Nycomed under the 2004 license agreement. The agreement provides for the assumption by Nycomed of our manufacturing and supply obligations to Nycomed and patent prosecution and maintenance obligations under the 2004 License and Distribution Agreement, as of January 1, 2008. As part of the manufacturing and supply transfer, Nycomed paid NPS $11.0 million for a significant portion of our existing bulk drug inventory.

In June 2007, we entered into an Agreement of Purchase and Sale with the University of Utah to sell our 93,000 square foot laboratory and office building, including certain laboratory and office equipment and furnishings, located in Salt Lake City, Utah for $21.0 million. We closed the transaction under this agreement in July 2007. The sale of this facility is part of our restructuring initiative which includes a plan to close our Salt Lake City facility and to discontinue all Salt Lake City operations.

In June 2007, we closed on our Agreement of Purchase and Sale with Transglobe Property Management Services Ltd. in Trust to sell our land and 85,795 square foot laboratory and office building located in Mississauga, Ontario, Canada for $4.4 million. The sale of this facility is part of our restructuring initiatives, which includes a plan to close our Mississauga and Toronto facilities and discontinue all operations in Canada.

In March 2007, we announced that we were restructuring the company and reducing our work force from 196 employees to approximately 35 employees by the end of 2007. As of October 31, 2007, we have 48 employees. In conjunction with the reduction in force we are also closing our operations in Toronto, Canada and Salt Lake City, Utah. We believe the restructuring will enhance our ability to focus on our late stage product opportunities, including additional indications with our lead product candidates, preserve cash, allocate resources rapidly to different programs, and reallocate internal resources more effectively.

In May 2007, we closed on an Agreement of Purchase and Sale to repurchase from BioMed Realty our 93,000 square foot laboratory and office building located in Salt Lake City, Utah, for $20.0 million. Under the terms of the Agreement of Purchase and Sale, our 15-year lease obligation to BMR was extinguished. The repurchase of the laboratory and office building is considered an early extinguishment of debt. The amount paid to repurchase the building was in excess of the carrying value of the lease financing obligation. Accordingly, we recorded a loss of $1.0 million during the three and six months ended June 30, 2007 on such extinguishment. As discussed above, in July 2007 we closed our transaction with the University of Utah and sold the building along with certain equipment and furnishings for $21.0 million.

The following table summarizes our cash flow activity for the nine months ended September 30, 2007 and 2006 (amounts in thousands):

	Nine months ended September 30,
	2007			2006
Net cash used in operating activities	$	(18,581	)	$	(98,466	)
Net cash provided by investing activities	$	43,090		$	69,353
Net cash provided by (used in) financing activities	$	144,836		$	(2,126	)

Net cash used in operating activities was $18.6 million for the nine months ended September 30, 2007 compared to $98.5 million for the nine months ended September 30, 2006. The decrease in cash used in operating activities during the nine months ended September 30, 2007 compared to same period in the prior year is primarily a result of a decreased net loss in the nine months ended September 30, 2007, compared with the same period in the prior year due to the 2006 and 2007 Restructuring Plans. The net loss decreased $76.8 million due primarily to increased revenues recognized under license agreements and decreases in research and development expenses, selling, general and administrative expenses and restructuring charges. Additionally, cash used for accounts payable and accrued expenses decreased $7.7 million, cash provided by accounts receivable increased $5.1 million and we recorded $9.1 million less in non-cash compensation expense in 2007 compared to 2006. We also realized gains on the disposition of assets held for sale and equipment of $8.3 million and had a $9.4 million net increase in deferred revenue primarily due to the Nycomed GATTEX agreement.

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Net cash provided by investing activities was $43.1 million for the nine months ended September 30, 2007 compared to $69.4 million for the nine months ended September 30, 2006. Net cash provided by investing activities during the nine months ended September 30, 2007 and 2006 was primarily the result of selling marketable investment securities to fund current operations. Additionally, we received $24.6 million in proceeds on the sale of our Mississauga and Salt Lake City facilities and leasehold tenant improvement at MaRs in 2007. Capital expenditures for the nine months ended September 30, 2007 and 2006 were $42,000 and $1.2 million, respectively.

Net cash provided by financing activities was $144.8 million for the nine months ended September 30, 2007 compared to net cash used in financing activities of $2.1 million for the nine months ended September 30, 2006. Cash provided by financing activities during the nine months ended September 30, 2007 primarily relates to the issuance of $100.0 million Class B Notes and subsequent issuance of $2.3 million in PIK Notes, the $50.0 million issuance in 5.75% Convertible Notes and the $50.0 million sale of PREOTACT royalties to Nycomed and the $5.7 million decrease in our restricted cash balances related to our Class A Notes. Cash provided by financing activities was partially offset by the purchase of our Salt Lake City administrative and office building and related retirement of our lease financing obligations for $20.0 million in May 2007, the repurchase and retirement of a portion of our 3% Convertible Notes for $19.5 million, principal payments of $19.3 million on our Class A Notes and the payment of $4.8 million in debt issuance costs. During the nine months ended September 30, 2006, cash was used in financing activities to make principal payments $1.4 million on our Class A Notes and decreases in our restricted cash balances of $1.8 million related to our Class A Notes. Additionally, we received cash from the exercise of employee stock options and proceeds from the sale of stock by us pursuant to the employee stock purchase plan. Employee stock option exercises and proceeds from the sale of stock by us pursuant to the employee stock purchase plan provided approximately $423,000 and $1.1 million, respectively, of cash during the nine months ended September 30, 2007 and 2006. Proceeds from the exercise of employee stock options vary from period to period based upon, among other factors, fluctuations in the market value of NPS’s stock relative to the exercise price of such options.

We could receive future milestone payments from all our agreements of up to $309.5 million in the aggregate if each of our current licensees accomplishes the specified research and/or development milestones provided in the respective agreements. We earned $2.0 million in October 2007 from Kirin. We have excluded potential milestone payments due under the AZ licensing agreement due to termination of the license agreement in October 2007. In addition, all of the agreements require the licensees to make royalty payments to us if they sell products covered by the terms of our license agreements. However, we do not control the subject matter, timing or resources applied by our licensees to their development programs. Thus, potential receipt of milestone and royalty payments from these licensees is largely beyond our control. Each of these agreements may be terminated before its scheduled expiration date by the respective licensee either for any reason or under certain conditions.

We have entered into certain research and license agreements that require us to make research support payments to academic or research institutions when the research is performed. Additional payments may be required upon the accomplishment of research milestones by the institutions or as license fees or royalties to maintain the licenses. As of September 30, 2007, we have a total commitment of up to $1.5 million for future research support and milestone payments. Further, depending on the commercial success of certain of our products, we may be required to pay license fees or royalties. For example, we are required to make royalty payments to certain licensors on GATTEX net sales and cinacalcet HCl royalty revenues. We expect to enter into additional sponsored research and license agreements in the future.

We have entered into long-term agreements with certain manufacturers and suppliers that require us to make contractual payment to these organizations. We expect to enter into collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require up-front payments and long-term commitments of cash.

We expect that our existing capital resources including interest earned thereon, will be sufficient to allow us to maintain our current and planned operations through at least the next 12 months. However, our actual needs will depend on numerous factors, including the success of our restructuring and outsourcing initiative, the progress and scope of our internally funded development and commercialization activities; our ability to maintain existing collaborations; our decision to seek additional collaborators; the success of our collaborators in developing and marketing products under their respective collaborations with us; our success in producing clinical and commercial supplies of our product candidates on a timely basis sufficient to meet the needs of our clinical trials and commercial launch; the costs we incur in obtaining and enforcing patent and other proprietary rights or gaining the freedom to operate under the patents of others; and our success in acquiring and integrating complementary products, technologies or businesses. Our clinical trials may be modified or terminated for several reasons including the risk that our product candidates will demonstrate safety concerns; the risk that regulatory authorities may not approve our product candidates for further development or may require additional or expanded clinical trials to be performed; and the risk that our manufacturers may not be able to supply sufficient quantities of our drug candidates to support our clinical trials or commercial launch, which could lead to a disruption or cessation of the clinical trials or commercial activities. We may also be required to conduct unanticipated clinical trials to obtain regulatory approval of our product candidates. In particular, the FDA proposed that we conduct a new clinical trial for PREOS^® in order to

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provide a complete response to the March 9, 2006 approvable letter. If any of the events that pose these risks comes to fruition, our actual capital needs may substantially exceed our anticipated capital needs and we may have to substantially modify or terminate current and planned clinical trials or postpone conducting future clinical trials. As a result, our business may be materially harmed, our stock price may be adversely affected, and our ability to raise additional capital may be impaired.

We will need to raise substantial additional funds to support our long-term product development and commercialization programs. We regularly consider various fund raising alternatives, including, for example, partnering of existing programs, monetizing of potential revenue streams, debt or equity financing and merger and acquisition alternatives. We may also seek additional funding through strategic alliances, collaborations, or license agreements and other financing mechanisms. There can be no assurance that additional financing will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research and development programs, or to obtain funds through arrangements with licensees or others that may require us to relinquish rights to certain of our technologies or product candidates that we may otherwise seek to develop or commercialize on our own.

Critical Accounting Policies and Estimates

Our discussion and analysis of our consolidated financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue and research and development costs. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the significant judgments and estimates used in the preparation of our consolidated financial statements:

• revenue recognition;

• accrual of research and development expenses;

• share based payments; and

• valuation of long-lived and intangible assets and goodwill.

Revenue Recognition. We earn our revenue from research and development support payments, product sales, license fees, milestone payments and royalty payments. As described below, significant management judgment and estimates must be made and used in connection with the revenue recognized in any accounting period. Material differences may result in the amount and timing of our revenue for any period if our management made different judgments or utilized different estimates.

We apply the provisions of Staff Accounting Bulletin No. 104, Revenue Recognition, or SAB No. 104, to all of our revenue transactions and Emerging Issues Task Force, or EITF, Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, to all revenue transactions entered into in fiscal periods beginning after June 15, 2003. We recognize revenue from our research and development support agreements as related research and development costs are incurred and the services are performed. The terms and conditions of our research and development support agreements are such that revenues are earned as the related costs are incurred. The principal costs under these agreements are for personnel employed to conduct research and development under these agreements. We recognize revenue from product sales when persuasive evidence of an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collection from the customer is reasonably assured and we have no further performance obligations. All revenues from product sales are recorded net of the applicable provision for returns in the same period the related sales are recorded. We recognize revenue from milestone payments as agreed upon events representing the achievement of substantive steps in the development process are achieved and where the amount of the milestone payment approximates the value of achieving the milestone. We recognize revenue from up-front nonrefundable license fees on a straight-line basis over the period we have continuing involvement in the research and development project. Royalties from licensees are based on third-party sales of licensed products and are recorded in accordance with the contract terms when third-party results are reliably measurable and collectability is reasonably assured. Cash received in advance of the performance of the related research and development support and for nonrefundable license fees when we have continuing involvement is recorded as deferred income. Where questions arise about contract interpretation, contract performance, or possible breach, we continue to recognize revenue unless we determine that such circumstances are material and/or that payment is not probable.

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We analyze our arrangements entered into after June 15, 2003 to determine whether the elements can be separated and accounted for individually or as a single unit of accounting. Allocation of revenue to individual elements which qualify for separate accounting is based on the estimated fair value of the respective elements.

Accrual of Research and Development Expenses. Research and development costs are expensed as incurred and include salaries and benefits; costs paid to third-party contractors to perform research, conduct clinical trials, develop and manufacture drug materials and delivery devices; and associated overhead expenses and facilities costs. Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with third-party contractor activities based on our estimate of management fees, site management and monitoring costs and data management costs. Differences between actual clinical trial costs from estimated clinical trial costs have not been material and are adjusted for in the period in which they become known.

Share-Based Payments. We grant options to purchase our common stock to our employees and directors under our stock option plans. Eligible employees can also purchase shares of our common stock at 85% of the lower of the fair market value on the first or the last day of each six-month offering period under our employee stock purchase plan. Share-based compensation expense recognized during the three months ended September 30, 2007 and 2006 was $318,000 and $2.1 million respectively. Share-based compensation expense recognized during the nine months ended September 30, 2007 and 2006 was $2.4 million and $9.0 million, respectively. At September 30, 2007, total unrecognized estimated compensation expense related to non-vested stock options, stock appreciation rights, restricted stock and restricted stock units was $13.7 million, which is expected to be recognized over a weighted-average period of 1.82 years.

We determine the value of stock option awards on the date of grant using a Black-Scholes pricing model (Black-Scholes model). The determination of the fair value of share-based payment awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. If factors change and we employ different assumptions in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period.

Estimates of share-based compensation expenses are significant to our financial statements, but these expenses are based on option valuation models and will never result in the payment of cash by us. The application of these principles may be subject to further interpretation and refinement over time. There are significant differences among valuation models, and there is a possibility that we will adopt different valuation models in the future. This may result in a lack of consistency in future periods and materially affect the fair value estimate of share-based payments. It may also result in a lack of comparability with other companies that use different models, methods and assumptions.

For purposes of estimating the fair value of stock options granted during the three months ended September 30, 2007 and 2006 using the Black-Scholes model, we have made an estimate regarding our stock price volatility (weighted-average of 59.7% and 63.4%, respectively). We used a combination of historical volatility and the implied volatility of market-traded options in our stock for the expected volatility assumption input to the Black-Scholes model. In calculating the estimated volatility for the three months ended September 30, 2007 and 2006, we weighted implied volatility at zero percent and historical volatility at 100 percent. The risk-free interest rate is based on the yield curve of U.S. Treasury strip securities for a period consistent with the expected life of the option in effect at the time of grant (weighted-average of 4.9% and 5.1%, respectively, for the three months ended September 30, 2007 and 2006). We do not target a specific dividend yield for our dividend payments, but we are required to assume a dividend yield as an input to the Black-Scholes model. The dividend yield assumption is based on our history and expectation of dividend payouts (weighted-average of zero for the three months September 30, 2007 and 2006). The expected term is estimated using historical option exercise information (weighted-average of 3.8 years and 3.6 years, respectively, for the three months ended September 30, 2007 and 2006).

Valuation of Long-lived and Intangible Assets and Goodwill. We assess the impairment of long-lived assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

• significant underperformance relative to expected historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

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• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• our market capitalization relative to net book value.

Our balance sheet reflects net long-lived assets of $22.0 million, including net goodwill of $11.6 million on September 30, 2007.

When we determine that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a probability weighted projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Provision has been made for any impairment losses related to our long-lived assets.

We perform an annual impairment review of goodwill.

We have not determined the existence of any indication of impairment sufficient to require us to adjust our historical measure of the value of such assets as of September 30, 2007.

Use of Estimates. Management of the Company has made estimates and assumptions relating to reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board, or FASB, issued Statement on Financial Accounting Standard No. 157, Fair Value Measurements, or SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, the adoption of SFAS No. 157 will have on our consolidated financial position, results of operations and cash flows.

In February 2007, the FASB issued Statement on Financial Accounting Standard No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115, or SFAS No 159. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for first fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, the adoption of SFAS No. 159 will have on our consolidated financial position, results of operations and cash flows.

In June 2007, the FASB ratified the Emerging Issues Task Force, or EITF, consensus on EITF Issue No. 07-3, Advance Payments for Research and Development Activities, or EITF 07-3. EITF 07-3 requires companies to record non-refundable advance research and development payments to acquire goods and services as an asset if the contracted party has not yet performed the related activities. The amount capitalized is then recognized as expense when the research and development activities are performed. EITF 07-3 is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively for new contractual agreements. We are currently evaluating the impact, if any, the adoption of EITF 07-3 will have on our consolidated financial position, results of operations and cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk. Our interest rate risk exposure results from our investment portfolio, our convertible notes, our secured notes. Our primary objectives in managing our investment portfolio are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. The securities we hold in our investment portfolio are subject to interest rate risk. At any time, sharp changes in interest rates can affect the fair value of the investment portfolio and its interest earnings. After a review of our marketable investment securities, we believe that in the event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair market value of our marketable investment securities would be insignificant to the financial statements. Currently,

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we do not hedge these interest rate exposures. We have established policies and procedures to manage exposure to fluctuations in interest rates. We place our investments with high quality issuers and limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investment portfolio. We invest in highly liquid, investment-grade securities and money market funds of various issues, types and maturities. These securities are classified as available for sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as accumulated other comprehensive income as a separate component in stockholders’ deficit. As of September 30, 2007, our 3.0 % Convertible Notes in the principal amount of $171.8 million due June 15, 2008, our Class A Notes in the principal amount of $154.5 million, our Class B Notes in the principal amount of $102.3 million and our 5.75% Convertible Notes in the principal amount of $50.0 million due August 7, 2014 each have a fixed interest rate. The fair value of the 3% Convertible Notes and 5.75% Convertible Notes are affected by changes in the interest rates and by changes in the price of our common stock. The fair value of the Class A Notes and Class B Notes are affected by changes in the interest rates and by historical rates of royalty revenues from cinacalcet HCl sales.

Foreign Currency Risk. We have limited research and development operations in Canada. Additionally, we have significant clinical and commercial manufacturing agreements which are denominated in Euros. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar and the Canadian dollar or Euro, or by weak economic conditions in Canada or Europe. When the U.S. dollar strengthens against the Canadian dollar or Euros, the cost of expenses in Canada or Europe decreases. When the U.S. dollar weakens against the Canadian dollar or Euro, the cost of expenses in Canada or Europe increases. The monetary assets and liabilities in our foreign subsidiary which are impacted by the foreign currency fluctuations are cash, accounts receivable, accounts payable, and certain accrued liabilities. A hypothetical ten percent increase or decrease in the exchange rate between the U.S. dollar and the Canadian dollar or Euro from the September 30, 2007 rate would cause the fair value of such monetary assets and liabilities in our foreign subsidiary to change by an insignificant amount. We are not currently engaged in any foreign currency hedging activities.

Item 4. Controls and Procedures.

We maintain “disclosure controls and procedures” within the meaning of Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures, or Disclosure Controls, are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our Disclosure Controls, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures. As of September 30, 2007, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, which was done under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Immediately following the Signatures section of this Quarterly Report on Form 10-Q are certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented. Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the date of their evaluation, our disclosure controls and procedures were effective to accomplish their intended purpose.

Change in Internal Control over Financial Reporting. No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, due to the 2007 Restructuring Plan and the subsequent consolidation of offices to New Jersey and reduction in employees, we are in the process of reviewing all of our internal controls over financial reporting in an effort to maximize the value of existing internal controls in a smaller more centralized company. Additionally, we have hired several new accounting personnel in our New Jersey office that will be responsible for internal controls over financial reporting beginning in the third and fourth quarters of 2007.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

Securities Class Action.

A consolidated shareholders’ securities class action lawsuit is currently pending against us and certain of our present and former officers and directors in the United States District Court for the District of Utah, Central Division, as Case No. 2:06cv00570 PGC. Information with respect to this legal proceeding is contained in Item 3, Legal Proceedings, of our Annual Report on Form 10-K for the fiscal year-ended December 31, 2006 and Item 1 of Part 2 of our Quarterly Report on Form 10-Q for the quarter-ended June 30, 2007. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to this legal proceeding.

Derivative Actions.

On August 22, 2006, an NPS shareholder filed a shareholder derivative action against certain of our present and former officers and directors. Information with respect to this proceeding is contained in Item 3, Legal Proceedings, of our Annual Report on Form 10-K for the fiscal year-ended December 31, 2006 and Item 1 of Part 2 of our Quarterly Report on Form 10-Q for the quarter-ended June 30, 2007. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to this legal proceeding.

During the quarter-ended September 30, 2007, three additional shareholder derivative lawsuits were filed against certain officers, directors, and former directors of NPS in the United States District Court for the District of Utah. These lawsuits are titled: Wagner v. Tombros, et. al, filed July 24, 2007; Worrest v. Tombros, et. al, filed August 2, 2007; and Alvarez v. Jackson, et. al, filed August 17, 2007. These lawsuits assert allegations similar to those asserted in the derivative action and securities class action described above and also allege that the defendant directors and officers violated their fiduciary duties by making the allegedly false and misleading statements to the investing public concerning PREOS^®. The lawsuits seek a determination that they are appropriate derivative actions, compensatory damages in unspecified amounts, and exemplary damages in unspecified amounts. The deadline for defendants to respond to these shareholder derivative suits filed in Utah federal court has not been set.

We believe the claims in these additional derivative actions are without merit and intend to vigorously defend against these actions. We maintain insurance for actions of this nature, which we believe is adequate.

Item 1A. Risk Factors.

The following information sets forth material changes from the risk factors we disclosed in our Annual Report on Form 10-K for the year-ended December 31, 2006. The following risks could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report and those we may make from time to time. If any of the following risks actually occur, our business, results of operation, prospects or financial condition could be harmed. These are not the only risks we face. Additional risks including those previously disclosed in our Annual Report on Form 10-K for the year-ended December 31, 2006, those not presently known to us or those that we currently deem immaterial, may also affect our business operations.

If we do not receive regulatory approval to market GATTEX in a timely manner, or at all, or if we obtain regulatory approval to market GATTEX but the approved label is not competitive with then existing competitive products, our business will be materially harmed and our stock price may be adversely affected.

Before we apply for regulatory approval for the commercial sale of GATTEX for adults with short bowel syndrome, or SBS, data from our clinical trials administering GATTEX for SBS must indicate that the drug is safe and effective. We have completed a pivotal Phase III clinical study in patients with SBS to measure the ability of GATTEX to reduce a patient’s dependency on total parenteral nutrition, or TPN. The Phase III study was a double-blind, randomized, placebo-controlled trial with a study duration of six months and included two dose groups in which 83 patients with SBS received either a low dose of GATTEX, (0.05 milligrams/kilogram/day), a higher dose (0.10 mg/kg/day) or placebo. The original primary endpoint for the study was a twenty percent (20%) or greater reduction in TPN for study subjects at weeks 20 to 24 of the study compared to baseline. During the

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finalization of the Phase III study’s statistical analysis plan, the primary endpoint was expanded to incorporate several data points that were originally included as secondary endpoints in the protocol. The expanded endpoint was designed to account for the degree of effect and duration of a patient’s response to GATTEX. Accordingly, the expanded endpoint of the study called for a reduction in TPN of at least twenty percent 20% comparing baseline to weeks 16 to 24, measured as a graded response to capture reductions up to 100%.

On October 11, 2007, we announced top-line data results from our Phase III SBS trial. In an intent-to-treat analysis, forty-six percent (46%) of patients receiving the lower dose of GATTEX (N=35) responded and achieved a highly statistically significant reduction in TPN compared to placebo (p=0.007), with two patients gaining independence from and discontinuing TPN by week 20 and a third patient discontinuing TPN at the end of treatment. Twenty-five (25%) percent of patients receiving the higher dose of GATTEX (N=32) responded and showed a trend in the difference between the treatment group and placebo, but this did not reach statistical significance (p=0.161). The study’s criteria for conducting the statistical analysis of the primary endpoint required that the results of the high-dose group show statistical significance before the results of the low-dose group could be considered. However, given the drug’s orphan designation in SBS and the statistically strong (p=0.007) and clinically meaningful findings in the low-dose group, we intend to meet with the FDA to discuss the path to regulatory approval for GATTEX. It is our intention to utilize a single pivotal Phase III clinical trial to support the filing of an NDA for GATTEX given the precedence already set for a competing product used to treat SBS, the difficulty enrolling patients in SBS clinical trials and the complexity of carrying out such trials. There is no assurance that the results of our Phase III clinical trial will satisfy the FDA requirements for the filing of an NDA for GATTEX. Further, we cannot assure you that the FDA will accept a single Phase III clinical trial for SBS and not require us to conduct another Phase III clinical trial in support of our application for approval. Ordinarily, the FDA guidelines recommend that sponsors conduct two (2) Phase III clinical trials. The FDA has discussed this guidance with us and has indicated that results from the current Phase III registration study must be robust and unambiguous to qualify the trial as a single registration study. After meeting with the FDA, we will determine when we will submit an NDA to the FDA for approval to market GATTEX for the treatment of SBS.

Analysis on a carcinogenicity study for GATTEX has been completed and a final report is being prepared which will be included as part of our NDA, when we file an NDA for GATTEX. Tumors were observed in animals receiving the study drug and those receiving placebo. After reviewing the data from the study, an expert panel of pathologists has concluded that there were no treatment-related malignant tumors in the animals. Nevertheless, the FDA may require a black-box warning be placed on the packaging of the product or may impose other labeling requirements that could substantially restrict revenues from such product when and if it is approved for marketing.

The preparation of an NDA is a time consuming and expensive endeavor and the NDA for GATTEX will be no exception. There can be no assurances that we will be able to prepare an NDA for GATTEX in a timely manner or at all. When we are able to prepare and file an NDA, we can not assure you that the FDA will accept the NDA for review or ultimately approve GATTEX for commercial sale. We understand that biotechnology stock prices, including our stock price, have declined significantly in certain instances where companies have failed to meet expectations with respect to FDA approval or the timing for FDA approval. If we are unable to obtain regulatory approval to commercialize GATTEX in a timely manner, or at all, or if the FDA approved indication, side effect and adverse events profile, and product distribution requirements are not competitive with existing competitor products, our ability to generate revenues to sustain our operations will be substantially impaired, our business will be materially harmed and our stock price may be adversely affected

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Item 6. Exhibits.

(a) Exhibits:

Exhibit Number	Description of Document
10.1	License Agreement, dated July 2, 2007, between NPS Allelix Corp. and Nycomed Danmark ApS*
10.2	Agreement for Sale and Assignment of Rights, dated July 16, 2007, among NPS Pharmaceuticals, Inc., NPS Allelix Corp., and Drug Royalty L.P. 3*
10.3	Distribution and License Agreement, dated September 24, 2007, among NPS Pharmaceuticals, Inc., NPS Allelix Corp., and Nycomed GMBH*
10.4	Amendment Agreement to the Distribution and License Agreement, dated September 24, 2007, among NPS Pharmaceuticals, Inc., NPS Allelix Corp. and Nycomed GMBH*
10.5	License Agreement, dated September 28, 1995, between 1149336 Ontario Inc., Daniel J. Drucker, and Allelix Biopharmaceuticals Inc.*
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32	Section 1350 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer

* Confidential information has been omitted from this exhibit pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NPS PHARMACEUTICALS, INC.
Date: November 9, 2007	By:	/s/ N. ANTHONY COLES
		N. Anthony Coles, President and Chief Executive Officer (Principal Executive Officer)
Date: November 9, 2007	By:	/s/ GERARD J. MICHEL
		Gerard J. Michel, Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description of Document
10.1	License Agreement, dated July 2, 2007, between NPS Allelix Corp. and Nycomed Danmark ApS*
10.2	Agreement for Sale and Assignment of Rights, dated July 16, 2007, among NPS Pharmaceuticals, Inc., NPS Allelix Corp. and Drug Royalty L.P. 3*
10.3	Distribution and License Agreement, dated September 24, 2007, among NPS Pharmaceuticals, Inc., NPS Allelix Corp. and Nycomed GmbH*
10.4	Amendment Agreement to the Distribution and License Agreement, dated September 24, 2007, among NPS Pharmaceuticals, Inc., NPS Allelix Corp. and Nycomed GMBH*
10.5	License Agreement, dated September 28, 1995, between 1149336 Ontario Inc., Daniel J. Drucker, and Allelix Biopharmaceuticals Inc.*
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32	Section 1350 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer

* Confidential information has been omitted from this exhibit pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission

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EX-10.1

Exhibit 10.1

NOTE: CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND REPLACED BY “[*]”. A COMPLETE COPY OF THIS DOCUMENT INCLUDING THE CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (the “Agreement”) is made and entered into as of July 2, 2007 (the “Effective Date”), by and between NPS ALLELIX CORP. (“NPS”), with a business address of MaRS Centre, 101 College Street, South Tower, Suite 800, Toronto, ON MSG 1L8 Canada, and Nycomed Danmark ApS (“Nycomed”), company registration number CVR 16406899, located at Langebjerg 1, 4000 Roskilde, Denmark. NPS and Nycomed are referred to in this Agreement individually as a “Party” and collectively as “Parties.”

WHEREAS, NPS and Nycomed on April 20, 2004 entered into that certain Distribution and License Agreement (as amended on July 1, 2004 and on June 5, 2007, “Distribution Agreement”) and on February 24, 2005 entered into that certain Supply Agreement (as amended on July 29, 2005, “Supply Agreement”);

WHEREAS, the Parties desire to enter into this Agreement to provide for the assumption by Nycomed of obligations relating to the supply of Product and the release of NPS from such supply obligations, in exchange for Nycomed receiving the right to market the Product in additional countries as set forth herein; and

WHEREAS, the Parties desire to have performance under the Distribution Agreement excused during the term of this Agreement as set forth herein.

NOW THEREFORE, in consideration of the mutual covenants and conditions herein contained, and intending to be legally bound hereby, the parties mutually agree as follows:

1. DEFINITIONS

1.1 “Actual True Cost of Goods” means with respect to the Product, the costs actually incurred by NPS, in accordance with generally accepted accounting principles, for supply and manufacture of Drug Substance, Product or Devices, as the case may be, including costs for testing and release of such items.

1.2 “Affiliate” means a corporation or other business entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with a Party. For purposes of this definition only, “control” and, with corresponding meanings, the terms “controlled by” and “under common control with” means (a) the possession, directly or indirectly, of the power to direct the management or policies of a legal entity, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) the ownership, directly or indirectly, of more than 50% of the voting

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securities or other ownership interest of a legal entity; provided, however, that if local law restricts foreign ownership, control will be established by direct or indirect ownership of the maximum ownership percentage that may, under such local law, be owned by foreign interests.

1.3 “Approvals” means any approvals of any national or local regulatory agency, department, bureau or other governmental entity, necessary for the manufacture, use, storage, importation, export, transport, distribution or sale of a Product or Device except for the Marketing Authorization.

1.4 “Control” or “Controlled by” means, with respect to a Party, any Patent, Know-How, other intellectual property right, or Marketing Authorization, (a) that such Party owns or has a license to use such Patent, Know-How, intellectual property right or Marketing Authorization, and (b) has the ability to grant the other Party access, a license or a sublicense (as applicable) or right to use such Patent, Know-How, or intellectual property right, or the right to reference such Marketing Authorization during the Term without violating the rights of any Third Party and without obligation to make any payments to a Third Party as a result of such grant of access, license or sublicense, or right of reference, or the exercise thereof by the other Party. For purposes of information that a Party is obligated to transfer under this Agreement, “Control” or “Controlled by” means such information that is reasonably available to such Party.

1.5 “Device” means the drug delivery device described in Schedule 1.5 hereto and any future Improvements hereof.

1.6 “Drug Master File” or “DMF” shall mean a submission to the FDA or other regulatory agency used to provide confidential detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of human drugs, as more particularly described in United States Code of Federal Regulations, 21 CFR 314-420.

1.7 “Drug Substance” means shall mean the parathyroid hormone drug substance to be used for the Product.

1.8 “EU” means the member states from time to time of the European Union.

1.9 “Future Partner” means a Third Party to whom NPS grants rights to commercialize or distribute the Product in the US.

1.10 “Improvement” means any invention, discovery, derivative or Know-How, whether or not patentable, relating to the Product, the Device or Drug Substance (including in other formulations and indications). Any general patent or patent application which relates both to the Product, Device or Drug Substance as well as to other active substances shall be included in the definition of Improvement.

1.11 “Know-How” means information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, including without limitation, Technical Information, databases, practices, methods, techniques, specifications, formulations, formulae, knowledge, know-how, skill, experience, test data including pharmacological, medicinal chemistry, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data, stability data, studies and procedures, and manufacturing process and development information, results and data relating to the Product, Device or Drug Substance.

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1.12 “Licensed Technology” means the NPS Know-How, NPS Patents, and any Improvements relating to the Product, Device or Drug Substance.

1.13 “MAA” means a Marketing Authorization application submitted to the appropriate regulatory body in a country of the Territory for the purposes of obtaining Approval for the marketing of a pharmaceutical product in such country.

1.14 “Marketing Authorization” means any approvals (including, but not limited to, price and reimbursement approvals) and any master files, DMFs, establishment licenses, registrations or authorizations (including the approval of an MAA) issued under Directive 2001/83/EC or local legislation deriving thereof (as amended by Directive 2004/27) or local legislation deriving thereof, Council Regulation 2309/93 and any amendments or replacements hereof or any national equivalents (whether inside or outside the Territory) in relation to the Product and any CE Marking or approval by local authorities of the Device.

1.15 “Master Cell Bank” means NPS’ master cell bank containing the host cell (with the plasmid incorporated therein) for fermentation of the recombinant parathyroid hormone. The Master Cell Bank is used to generate the Working Cell Bank.

1.16 “Net Sales” means the gross amount invoiced by Nycomed or its Affiliates or sublicensees for sale or other commercial disposition of a Product to a Third Party in the Original Territory, as described in Section 7.3, less the following deductions:

(a) Discounts and allowances allowed and taken for returns or rejections (provided such amounts have been formally designated as such in accordance with the internal accounting procedures, consistently applied, of Nycomed and its Affiliates), and wholesaler charge backs allowed and taken in amounts normal and customary in the trade;

(b) Import, export, excise, sales or use taxes, value added taxes, and other taxes, tariffs or duties levied, absorbed or directly imposed and properly allocable to particular sales of Products to the extent such items are included in the gross amount invoiced (in any event excluding taxes on the income of Nycomed and its Affiliates);

(c) Freight, postage, shipping, insurance, and packaging costs and other outbound transportation charges prepaid or allowed to the extent included as part of the invoiced amount;

(d) Amounts allowed or credited for retroactive price reductions or rebates;

(e) The amounts of trade and cash discounts actually allowed on account of the purchase of Products;

(f) Allowances, adjustments, reimbursements, discounts and rebates made with respect to sales paid for by Third Parties, including, but not limited to, rebates given to health care organizations or other Third Parties who bought or paid for a Product; and

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(g) Any amounts actually written off or specifically identified as uncollectible, in accordance with consistently applied accounting policies of Nycomed and except to the extent Nycomed recovers payment of any such written off amounts; provided however, that no such deduction shall be made for the Actual True Cost of Goods of such Product.

(h) Notwithstanding the foregoing, if: (i) a Product is sold together with other goods, whether with a separate price for such Product (unless such separate price is the same as the price for such Product when not sold together with other goods) or without a separate price for such Product, (ii) the consideration exchanged for a Product includes any non-cash consideration, or (iii) a Product is transferred for purposes of resale, in any manner other than as an invoiced sale, then, in each case the Net Sales applicable to the quantity of such Product included in any such transaction will be deemed to be the average Net Sales for such quantity of such Product for all transactions of such Product (other than those described in the preceding Sections (i)-(iii), inclusive) made in the relevant country during the last full calendar quarter prior to such transaction (or, if the Product was not commercially available during the last full calendar quarter preceding such transaction, during the current quarter).

(i) In the event that Products are sold or otherwise disposed of to a Third Party other than on arm’s length terms and are subsequently sold or otherwise disposed of by such Third Party on arm’s length terms, then Net Sales will be calculated based upon the first such arm’s length sale or disposition. “Net Sales” excludes (a) the transfer of reasonable and customary quantities of free samples of Product to physicians for professional use, other than for subsequent resale, (b) the transfer of Product as clinical trial materials, other than for subsequent resale, and (c) the transfer of Product to any regulatory agency in a country in the Territory for use by such agency in connection with securing Marketing Authorization for such Product in such country.

(j) In the event that Product is sold through sublicensees, distributors etc. appointed by Nycomed any costs, margins etc. payable by Nycomed to any such sublicensee, distributor etc. shall be borne solely and entirely by Nycomed and no such amount(s) shall be deducted when determining Net sales pursuant to this definition.

1.17 “New Territory” means all countries of the Territory which are not the Original Territory.

1.18 “NPS Know-How” means (a) any non-public or confidential sections of any MAA relating to any Product, and (b) any other non-public or confidential Know-How Controlled by NPS during the Term that is necessary or useful for the performance of pre-clinical or clinical development, for the filing of Marketing Authorizations in the Territory, or the commercialization, marketing or manufacture of a Product.

1.19 “NPS Patents” means the Patents listed in Schedule 1.19, as well as any Patents that NPS and its Affiliates own, have under license, have a right to acquire or Control, that are necessary or useful for, or otherwise, related to the exercise of the licenses granted in Section 2, such Patents to be added to Schedule 1.19 by NPS from time-to-time, with Nycomed’s approval.

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1.20 “Original Territory” means all the countries of the EU, European countries outside EU, the Commonwealth of Independent States (formerly the USSR) and Turkey.

1.21 “Patent” means patents, letters patent, applications for patents, provisional applications for patents, and any patents issuing therefrom (including any divisions, continuations, continued prosecution applications and continuations-in-part thereof), reexamination certificates, reissue patents, patent extensions, patent term restorations, supplementary protection certificates issued under directive Council Regulation 1768/92 and any amendments and replacements hereof and any equivalents, substitutions, confirmations, registrations, revalidations, additions, continuations in part and divisions thereof.

1.22 “Product” means any pharmaceutical formulation dosing and administration form of the Drug Substance recombinant human parathyroid hormone 1-84, as currently set out in EMEA/H/C/659 as well as any Improvements thereto.

1.23 “Product Trademarks” means any trademarks, trade dress, logos, slogans, and designs, whether or not registered in the Territory, used to identify or promote a Product in the Territory including the trademarks listed in Schedule 2.2.

1.24 “Technical Information” means all information in physical form be it written, electromagnetic or photographic in relation to the Product, Drug Substance or Device including, without limiting the generality of the foregoing, results of pre-clinical studies and clinical trials, formulae, raw-data from product development, data, drawings and designs, toxicological, pharmacological, analytical and quality control data and testing data Controlled by NPS or Nycomed or their Affiliates and of which such entity is free to dispose, which is necessary or useful to the manufacture, development or other exploitation of Drug Substance, Products and Devices in accordance with this Agreement. Technical Information as defined in this Agreement shall be considered “Know-how” and include information relating to Master Cell Bank and Working Cell Bank as well as all research and development related information on the pharmaceutical technical aspects concerning the formulation and manufacturing of the Product and the Drug Substance.

1.25 “Term” means the period from Effective Date and until the earlier of termination or expiry as set out in Section 16.

1.26 “Territory” means all the countries of the world, except for US, Japan and Israel.

1.27 “Third Party” means any individual or entity other than NPS, Nycomed and their respective Affiliates including, but not limited to any national or local governments, hospitals, drug wholesalers, pharmacies and other third party customers.

1.28 “Working Cell Bank” means NPS’ working cell banks containing the host cell (with the plasmid incorporated therein) for fermentation of the recombinant parathyroid hormone. The Working Cell Bank is generated from the Master Cell Bank.

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2. LICENSE GRANT

2.1 Licensed Technology. NPS hereby grants to Nycomed the exclusive right and license, with a right to sublicense, under the Licensed Technology to market, use, import, export, distribute and sell the Product and Devices in the Territory in accordance with the terms of this Agreement; provided, however, that with respect to any sublicense relating to the Original Territory, such sublicense shall require NPS’ prior written consent, such consent not to be unreasonably withheld.

2.2 Trademarks. NPS hereby sells, assigns and transfers to Nycomed the entire right, title and interest in and to the PREOTACT trademarks in the Territory as identified on Schedule 2.2, together with the trademark registrations and trademark applications identified on Schedule 2.2 and any accompanying goodwill pertaining thereto, together with all claims, demands and causes of action for the past infringement of any or all of the trademarks or for unfair competition in business in connection therewith, the same to be held and enjoyed by Nycomed, its successors, assigns or other legal representatives as fully and entirely as the same would or could have been held and enjoyed by NPS had this assignment not been made. NPS hereby grants to Nycomed an exclusive and royalty free license to use the Product Trademarks other than the PREOTACT trademarks in the Territory under the terms of this Agreement in connection with marketing, sale, use, import and distribution, and/or sublicensing with NPS’ prior consent, which shall not be unreasonably withheld, of the Product and Device. Product Trademarks shall be solely for display, advertising, labeling and packaging purposes in connection with marketing, selling and distributing Product and Devices in accordance with this Agreement. Nycomed shall not at any time do or permit any act to be done which may in any way impair the rights of NPS in Product Trademarks.

2.3 Limitation Relating to Canada and Mexico. Notwithstanding Sections 2.1 and 2.2, the license granted hereunder with respect to Canada and Mexico shall be limited as set out in Section 8.

2.4 Manufacture. NPS hereby grants to Nycomed the non-exclusive royalty-free right under the Licensed Technology to develop, have developed, manufacture and have manufactured Product, Drug Substance and the Devices for its own use, or use of its sublicensees or for supply of Products, Drug Substance or Devices to NPS and any Future Partner in the Territory.

2.5 Technical Information. NPS further grants to Nycomed the exclusive royalty-free right and license, with a right to sublicense (in respect of rights relating to the Original Territory with NPS’ prior written consent which shall not be unreasonably withheld), to use the Technical Information of NPS to develop Product, Drug Substance or Device and to submit for approval for or amendment of Marketing Authorization for the Product. The license granted pursuant to this Section 2.5 does not impose on NPS an obligation to actually engage in or support any application for a Marketing Authorization in the Territory.

2.6 Nycomed Grant to NPS. Nycomed grants to NPS the exclusive royalty-free right and license, with a right to sublicense or subcontract distribution to a partner with Nycomed’s prior written consent on terms to be reasonably negotiated, to use the Technical Information of Nycomed to development Product, Drug Substance or Device and to submit for approval for or amendment of Marketing Authorization for the Product. The license granted pursuant to this Section 2.6 does not impose on Nycomed an obligation to actively engage in or support any application for a Marketing Authorization outside the Territory. In addition, Nycomed hereby grants to NPS the exclusive right and license, with a right to sublicense or

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subcontract distribution to a partner with Nycomed’s prior written consent on terms to be reasonably negotiated, under Nycomed’s Improvements to develop, make, have made, use, import, sell and have sold the Product and Devices outside the Territory. The licenses granted under this Section 2.6 shall not limit Nycomed’s rights under Section 2.7 to enter into negotiations with, or grant rights to, a Future Partner.

2.7 Improvements. Nycomed undertakes upon request by a Future Partner to discuss in good faith exploitation of Improvements outside the Territory with any Future Partner. NPS undertakes to use reasonable efforts to insert in any agreement with a Future Partner an equivalent obligation on a Future Partner to discuss in good faith exploitation of Improvements conceived by the Future Partner inside the Territory.

2.8 Clinical Study Data. NPS hereby grants to Nycomed the exclusive rights in the Territory, to the extent of NPS’ rights, to exploit all data emerging from the clinical study entitled “The Effects of PTH on the Skeleton in Hypoparathyroidism.”

2.9 Right of Negotiation. NPS grants to Nycomed the right of negotiation with respect to any of NPS’ pipeline products and or new products, which NPS is offering in a competitive process for license or sale to non-Affiliates in the Territory. Nycomed shall be provided with the same data, documentation, and other information simultaneously as such information is being submitted to any Third Party relating to the right of negotiation in the previous sentence.

2.10 Territorial Restriction. NPS shall ensure, to the extent permitted by applicable law, that its other licensees who distribute the Product outside the Territory will not actively sell the Product in the Territory. Nycomed shall ensure, to the extent permitted by applicable law, that it and its licensees who distribute the Product in the Territory will not actively sell the Product outside of the Territory.

2.11 Distribution Agreement. On the Effective Date, the Parties’ performance and all obligations under the Distribution Agreement shall be excused in all respects until midnight on September 1, 2007, at which time such performance and obligations shall be reinstated in full as of such time (including, without limitation, that NPS shall supply Product at the prices set out in the relevant provisions of the Distribution Agreement and the Supply Agreement); provided, however, that (i) the provisions of Section 19.7.2 of the Distribution Agreement shall not be reinstated but shall be immediately terminated and deemed null and void in all respects; and (ii) upon the earlier delivery of the Release Certificate as set forth in Section 6.8, the Distribution Agreement shall be immediately terminated and deemed null and void in all respects upon the date of such delivery. Notwithstanding the foregoing, until the Supply Agreement is terminated as set forth in Section 6.8 the sections and definitions contained in the Distribution Agreement incorporated by reference into the Supply Agreement shall continue to be so incorporated in the Supply Agreement. In the event that the Release Certificate is not delivered as set forth in Section 6.8, subject to Section 16.8, this Agreement shall be immediately terminated and deemed null and void in all respects (provided, however, that any amounts due and payable hereunder but not paid as of such termination date shall be due and payable in accordance with the terms of this Agreement). In the event that the Release Certificate is not delivered as set forth in Section 6.8, except as expressly contemplated in the provisions specified in Section 16.8, each of the Parties shall use reasonable efforts to put the other Party in the position it was in before entering into this Agreement, including, without limitation, the return of the information of relevant Third Parties, the return of Technical Information and the return of any registered rights relating exclusively to the New Territory (except for Brazil, which rights shall not be returned).

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3. DEVELOPMENT

3.1 Development. Nycomed shall have the right to develop the Product, Drug Substance and the Device including the development hereof for new administration forms and indications. Nycomed shall inform NPS or a Future Partner designated by NPS about its ongoing development projects on a quarterly basis. NPS or such Future Partner shall treat any such information as confidential in accordance with Section 13. Subject to Section 2.7, Nycomed shall have exclusive ownership to all Improvements conceived solely by Nycomed.

4. COMMERCIALIZATION

4.1 Commercialization. Nycomed will be solely responsible for the commercialization of the Product in the Territory at Nycomed’s expense. Nycomed shall have the right to commercialize through sublicensees. Nycomed shall launch, market and sell the Product in the countries of the Territory in which Nycomed at its sole discretion finds the marketing financially feasible. If Nycomed determines that launching the Product in a country in the Original Territory, Canada or Mexico would not be commercially viable or would substantially limit the commercial potential of the Product in other countries of the Territory, then Nycomed will provide NPS with written notice of such determination and with copies of or access to all evidence considered by Nycomed in making such determination. Such evidence will be updated annually on request by NPS for as long as Nycomed does not launch Product in any country of the Original Territory, Canada or Mexico. In relation to the New Territory, other than Canada or Mexico, Nycomed shall have no reporting obligations.

4.2 Marketing Plan. Nycomed will commercialize the Product in the Territory pursuant to an annually updated marketing plan (“Marketing Plan”). Nycomed will prepare the Marketing Plan according to Nycomed’s marketing planning process and will include at a minimum in each Marketing Plan, medical education and communication, publications, congress and symposia, patient education, life cycle management, brand strategy, pan-EU brand positioning, key messages, Phase IV program, public relations, sales and distribution strategies. Each Marketing Plan will identify commercial milestones and describe the Product’s positioning and specify the target physician and patient populations and distribution channels to which Nycomed will devote its promotional efforts, the personnel and other resources by or on behalf of Nycomed as well as market and sales forecasts for the Product in the Territory.

4.3 Review and Comment on Marketing Plan. Nycomed will submit the final draft of the initial and updated Marketing Plan to NPS for review and comment. NPS will have twenty (20) business days to provide comments on such draft to Nycomed, and Nycomed will reasonably consider and address such comments prior to finalization and implementation of such plan. NPS shall review the Marketing Plan with a view to optimize the value of the Product and maintain brand consistency for the Product in the Territory that is not in conflict with NPS’ global commercialization strategy.

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4.4 Launch Diligence Obligations. Subject to Section 4.1, Nycomed undertakes to launch the Product through its own sales and marketing organization in Germany, UK, France, Italy, Spain, Greece, Austria, Switzerland, Belgium, Netherlands, Sweden, Norway, Denmark, Finland, Estonia, Latvia, Lithuania, Poland and the Commonwealth of Independent States (formerly the USSR) and to maintain the necessary personnel to perform sales and marketing activities towards relevant target groups of hospital and office based specialists. Furthermore, Nycomed will launch the Product in each country in the Original Territory as soon as reasonably possible after receipt of Marketing Authorization, pricing and reimbursement approval, for the Product and Device in such country, but in no event later than four (4) months after such receipt; provided, however, that such 4-month period will be tolled during such time as commercial supply of such Product is not available to Nycomed other than as a result of any act or omission by Nycomed. Schedule 4.4 contains a description of Nycomed’s initial sales and marketing personnel commitment to the Original Territory during the first five years from launch. Such allocation shall be fully in place twelve (12) months from launch and shall not be decreased by more than thirty-five percent (35%) in a country or more than twenty-five percent (25%) in the aggregate in the Original Territory without prior consultation and approval by NPS. Should Nycomed, to an unreasonable extent, delay or postpone the launch of the Product in any of the markets as set forth in this Section 4.4 for reasons within Nycomed’s or Nycomed’s sublicensees control (or any other markets in the Original Territory), NPS or its sublicensee shall be entitled but not obliged to “march-in” to ensure the launch of the Product in any such country, and Nycomed’s rights with respect to any such countries may be terminated.

4.5 General Diligence Obligations. Nycomed will use commercially reasonable efforts to perform the activities set forth under each Marketing Plan. Nycomed will promote, market, sell and distribute the Product in the Territory by applying efforts and resources as reasonably required to capture the commercial potential of the Product throughout the Original Territory and at least equal to the efforts and resources normally used by a similarly situated pharmaceutical company for a product owned by it which has a similar market potential and is at a similar stage in its product life cycle as the Product. All efforts of Nycomed’s Affiliates, sublicensees or distributors will be considered efforts of Nycomed for the purpose of determining Nycomed’s compliance with its obligations under this Section 4.5.

4.6 Nycomed Diligence Concerning Shipment of Product Outside the Territory. Nycomed may not deliver or tender (or cause to be delivered or tendered) any Product outside of the Territory. If Nycomed receives any order from a prospective purchaser located outside the Territory, Nycomed shall immediately refer that order to NPS. Nycomed shall not accept any such orders. Notwithstanding anything in this Section 4.6 to the contrary, if Nycomed receives an unsolicited order for Product from a prospective purchaser located outside the Territory, and such purchaser is committed to resell the Product back into the New Territory and not the Original Territory (as evidenced by a written agreement by such purchaser), then Nycomed may accept such order; provided, however, that if any such Product is sold back into the Original Territory and Nycomed knew or had reason to know such fact when selling such Product to such purchaser, then such sale shall be included in Net Sales for purposes of Section 7.5. In addition, with respect to sales invoiced in the New Territory but that were re-sold or imported for resale into the Original Territory, see Section 7.3.

4.7 Right of Reference. Subject to the terms and conditions set forth in this Agreement, (i) NPS hereby grants to Nycomed a fully paid, exclusive right and license to reference any Marketing Authorizations Controlled by NPS for Product outside the Territory for

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the purpose of obtaining Marketing Authorization of the Product in one or more countries in the Territory and (ii) Nycomed hereby grants to NPS and its sublicensees a fully paid, exclusive right and license to reference any Marketing Authorizations Controlled by Nycomed for Product inside the Territory for the purpose of obtaining Marketing Authorization of the Product in one or more countries outside the Territory. The license granted pursuant to this Section 4.7 does not impose on any of the Parties an obligation to actively engage in or support any application for a Marketing Authorization in the territory of that other Party.

5. MARKETING AUTHORIZATION

5.1 Filing of Marketing Authorizations. Subject to Section 4.4, Nycomed shall have the right to, and shall at its sole discretion file the MAAs in order to obtain Marketing Authorizations or to have amended the existing MAA in any country of the Territory.

5.2 Ownership and Maintenance of Marketing Authorizations. Nycomed shall be the Marketing Authorization holder and owner in respect of all Products in each part of the Territory and shall assume all responsibilities towards the regulatory authorities. Nycomed shall maintain the Marketing Authorizations at its costs in the Territory for the Term. NPS will, throughout the Term, at its own costs, provide technical and scientific support to the extent such support is reasonably possible to NPS, taking into consideration its operations at the time of Nycomed’s request or to the extent the request relates to data available to NPS but not to Nycomed.

5.3 Meetings and Correspondence. The provisions of this Section shall not apply to adverse events reporting, which shall be governed by Section 5.4. To the extent either Party receives any written or oral communications relating to a Product from any regulatory authority in the Territory, such Party will promptly inform the other Party and the Future Partner, if any, thereof (including by providing a copy of any written communication or a written account of any oral communication), but in no event later than five (5) business days after receipt of such communication. Each Party will promptly notify the other Party and the Future Partner, if any, and provide such other Party and Future Partner, if any, with a copy, of any correspondence or other reports or complaints submitted to or received by the first Party from any regulatory authority in the Territory or from any other Third Party claiming that any Product promotional materials are inconsistent with a Product’s labeling or are otherwise in violation of applicable law or regulation. Each Party will provide the other Party and the Future Partner, if any, with a copy of any documents or reports filed with or received from any regulatory authority in the Territory with respect to a Product. In addition, NPS shall require that the Future Partner, if any, provide Nycomed with a copy of any documents or reports filed with or received from any regulatory authority in the U.S. with respect to a Product.

5.4 Adverse Events Reporting. Nycomed will provide NPS and the Future Partner, if any, with prompt written notice of any serious adverse drug event or reaction reports received by Nycomed with respect to Products in the Territory, including copies of any such written reports where available. NPS will provide Nycomed with prompt written notice of any serious adverse drug event or reaction reports received by NPS with respect to Products in any jurisdiction outside the Territory where NPS is, at such time, developing or marketing Products, including copies of any such written reports where available. NPS Shall require that the Future Partner, if any, provide Nycomed with prompt written notice of any serious adverse drug event

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or reaction reports received by the Future Partner with respect to Products in any jurisdiction outside the Territory where the Future Partner is, at such time, developing or marketing Products, including copies of any such written reports where available. Nycomed will be responsible for complying with adverse drug event reporting requirements in the Territory with respect to Products and will copy NPS on all correspondence with regulatory authorities in the Territory regarding the same. NPS will be responsible for complying with adverse drug event reporting requirements in jurisdictions outside the Territory where NPS is, at such time, developing or marketing Products and will copy Nycomed on all correspondence between NPS and the regulatory authorities in such jurisdictions regarding serious adverse drug events or reactions. NPS will have the right to redact such correspondence to remove information proprietary to NPS as applicable.

6. TRANSFER OF MANUFACTURE AND SUPPLY

6.1 License of Know-How. NPS and Nycomed agree to license the Know-How as set out in this Section 6.1 on a non-exclusive basis (it being understood that this Section 6.1 shall not limit any exclusive licenses granted pursuant to Section 2). The common aim of this Section 6 shall be to enable Nycomed to take over responsibilities relating to the manufacture of the Product, Drug Substance and Device and to develop and improve the Product, Drug Substance and Device and the manufacturing process. Both Parties undertake to use commercially reasonable efforts to achieve that overall purpose when executing this Section 6.

6.2 Assumption of Manufacture. Subject to Section 6.8, Nycomed shall use reasonable efforts to ensure supply of Products through itself or Third Parties, including, without limitation, the negotiation of supply and manufacturing obligations and amendment of Marketing Authorizations to permit such changed supply chain.

6.3 Contributions of NPS. NPS shall make available to Nycomed all of the Technical Information (including any manufacturing information) in its Control in the form reasonably available to NPS according to the lists and timeplans set out in Schedules 6.3(a) and 6.3(b). To the extent practicable, NPS shall accommodate Nycomed on any reasonable request to convert such Technical Information into another form that is required or requested by a Regulatory Authority. NPS shall use reasonable efforts to perform and undertake the activities listed in Schedules 6.3(a) and 6.3(b) of the Agreement. NPS hereby expressly grants to Nycomed all rights to conclude the undertaking set out in Section 6, including without limiting the entering into of agreements with Third Party suppliers and approaching the authorities for amendment of Marketing Authorizations and Approvals. Any Technical Information not contemplated by Schedules 6.3(a) and 6.3(b) and that has not already been provided by NPS to Nycomed shall be made available to Nycomed upon Nycomed’s reasonable request to the extent reasonably available to NPS. NPS shall continue current efforts through [*] to undertake the actions and to resolve current problems relating to the supply chain of Products described in Schedules 6.3(a) and 6.3(b).

6.4 Subsequent Technical Information. Any Technical Information which comes under the Control of NPS or its Affiliates after the transfer according to Section 6.3 and during the Term shall be submitted to Nycomed as soon as reasonably practicable after it becomes available to NPS. NPS shall use reasonable efforts to not, and use reasonable efforts to cause its Affiliates to not, enter into any agreement with any entity which prevents Technical

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Information obtained as a result of such agreement being made available to Nycomed. Any Technical Information which comes under the Control of Nycomed or its Affiliates after the transfer according to Section 6.3 and during the Term shall be submitted to NPS as soon as reasonably practicable after it becomes available to Nycomed. Nycomed shall use reasonable efforts to not, and use reasonable efforts to cause its Affiliates to not, enter into any agreement with any entity which prevents Technical Information obtained as a result of such agreement being made available to NPS.

6.5 Nycomed Technical Information. Any Technical Information which is developed or acquired by Nycomed or its Affiliates or its sublicensees during the term of this Agreement shall be the property of Nycomed. Any Technical Information which is developed or acquired by NPS or its Affiliates or its sublicensees during the term of this Agreement shall be the property of NPS. To the extent that the Technical Information is an Improvement Sections 2.7 and 3.1 shall apply.

6.6 Master Cell Bank and Working Cell Bank. NPS is currently a party to a certain Laboratory Services and Confidentiality Agreement, dated as of [*], by and between NPS and [*], under which [*] performs certain contract research duties for NPS. As promptly as practicable after the Effective Date, NPS shall transfer to [*] or ATCC Patent Depository, which is in the business of maintaining legal compliant storage of materials for patent purposes (“ATCC”), or another Third Party appointed by NPS and approved by Nycomed, such approval not to be unreasonably withheld or delayed, the Master Cell Bank and Working Cell Bank and the technology related thereto under a trust agreement allowing royalty free access to Nycomed, NPS and the Future Partner in such a manner as to prevent either party from depleting these materials such that harm is caused to the other party. As part of such trust agreement, a mechanism for storage fees, withdrawals and manufacture of additional Working Cell Banks will be defined. Nycomed and NPS (or their respective assignee or sublicense) shall each cover fifty percent (50%) of the total costs and expenses of the activities required to maintain such trust. Until the trust agreement is in place, NPS shall deliver to Nycomed Master Cell Banks or Working Cell Banks or Drug Substance as needed by Nycomed for purposes of performing its obligations hereunder.

6.7 Parent Strain [*]. As promptly as practicable after the Effective Date, NPS shall transfer to [*] or ATCC or another a Third Party appointed by NPS and approved by Nycomed, such approval not to be unreasonably withheld or delayed, the parent strain [*] of the Master Cell Bank and the technology related thereto under a trust agreement allowing royalty free access to both Nycomed and the Future Partner in such a manner as to prevent either Party from depleting these materials such that harm is caused to the other Party. As part of such trust agreement, a mechanism for storage fees, withdrawals and manufacture of additional Master Cell Banks will be defined. Nycomed shall cover its portion of the activities required to maintain such trust.

6.8 Release from Manufacturing Obligations. Nycomed shall have the option, in its sole discretion, to assume the supply obligations relating to the Products as set forth in this Section 6.8. Nycomed shall so elect to release NPS from the supply obligations relating to the Products by executing and delivering to NPS the Release Certificate substantially in the form set out in Schedule 6.8 no later than midnight on September 1, 2007. Upon delivery of the executed Release Certificate by midnight on September 1, 2007, the grant of rights to the New Territories shall become permanent. In the event Nycomed delivers the executed Release Certificate as set forth above, the Distribution Agreement shall be terminated in accordance with

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Section 2.11 and the Supply Agreement shall be terminated no later than [*] and NPS shall be released of its supply obligations under the Distribution Agreement and Supply Agreement following such termination of the Supply Agreement except as specifically provided for in this Agreement. In that event, Nycomed shall purchase the Products at a rate corresponding to [*]. To the extent that the activities due to be performed by NPS on or before September 1, 2007 in Schedule 6.3(a) have not been fulfilled in all material respects by September 1, 2007, Nycomed’s right and obligation to execute and deliver the Release Certificate shall be postponed until such activities have been fulfilled in all material respects and all references to September 1, 2007 in Section 2.11 shall be deemed to refer to the date at which such postponement ends.

6.9 Information of Third Parties. Subject to Section 6.13, no later than seven (7) days from Effective Date NPS shall inform relevant Third Parties (including Vetter, Ypsomed and Boehringer Ingelheim) that Nycomed is intended to take over manufacturing responsibilities in relation to the Product, Drug Substance and Device for the Territory and shall permit each such relevant Third Party to have direct contact with Nycomed and disclose confidential information to Nycomed.

6.10 Accessibility of Employees. NPS shall use commercially reasonable efforts to ensure that the persons set out in Schedule 6.10 shall be at Nycomed’s reasonable disposal in the period of time from Effective Date until [*] and that the same persons shall at reasonable notice be at Nycomed’s reasonable disposal from [*] until [*].

6.11 No Adverse Third Party Agreements. NPS shall ensure that no contractual agreements entered into by or on behalf of NPS shall prevent Nycomed from entering into agreements with Third Parties relating to the supply of Products, Drug Substance or Devices. Nycomed shall ensure that no contractual agreements entered into by or on behalf of Nycomed shall prevent NPS or the Future Partner from entering into agreements with Third Parties relating to the supply of Products, Drug Substance or Devices.

6.12 Stock. Nycomed shall be obligated to purchase the Drug Substance inventory stock owned by NPS and set forth on Schedule 6.12. The prices for Drug Substance shall be as set out in Schedule 6.12.

The supply terms of the Supply Agreement shall apply to such purchase of inventory stock with the following modification:

Some batches are marked “In test” or “Passed, awaiting validation of test methods” on Schedule 6.12. To decide whether the listed batches comply with the product warranty, these batches are undergoing further analytical testing, investigation and evaluation. The methods of testing and the results are currently being discussed and evaluated by the Parties and the Third Party supplier Vetter GmbH. Nycomed shall purchase only batches which are declared by the quality assurance departments of each of Nycomed, NPS and Vetter GmbH to be in compliance with the product warranty in Section 6 of the Supply Agreement based on an evaluation made in good faith, and have a remaining shelf life of at least 18 months. In connection with such evaluation, Nycomed shall provide to Vetter GmbH any information in its Control which Vetter GmbH reasonably needs in order to so evaluate.

6.13 Third Party Manufacturers. Nycomed shall not enter into any agreement with any Third Party in exercise of the license granted to Nycomed pursuant to Section 2.4 without prior notification to and consultation with NPS and without providing NPS

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reasonable opportunity to be present and participate in any discussions or negotiations with any such Third Party. Until September 1, 2007, any such agreement with any Third Party that is then a supplier to NPS shall be negotiated in coordination between Nycomed and NPS with a view toward achieving contractual cost and other performance benefits for both Nycomed and NPS. Nycomed shall use reasonable efforts to ensure that any such agreement with any Third Party shall not adversely affect NPS during the term thereof or in the event of termination of this Agreement in accordance with Section 2.11. Notwithstanding the foregoing, Nycomed has no obligation to provide for the supply of Products, Drug Substance or Devices to the U.S. in such negotiations with Third Parties.

6.14 Third Party Credits. In the event that Nycomed enters into any contractual relationship with a Third Party manufacturer and/or supplier with which NPS had a pre-existing manufacturing relationship (including, but not limited to, Vetter, Ypsomed and Boehringer Ingelheim), Nycomed shall reimburse NPS for any credits which NPS had with respect to such Third Party manufacturer and/or supplier to the extent that Nycomed uses or otherwise receives the benefit from such credits. For purposes of clarity, the reimbursements and credits referenced in this Section 6.14 shall not impact Net Sales under this Agreement.

7. COMPENSATION

7.1 Compensation Generally. As compensation for NPS’ obligations hereunder, Nycomed agrees to pay NPS the remuneration set forth in this Section 7.

7.2 Fees. Nycomed agrees to pay to NPS the following fees (in addition to the royalties payable under Section 7.5):

(a) € [*] upon receipt of approval for reimbursement in France;

(b) € [*] upon reaching cumulative Net Sales of € [*] of Product in the Original Territory; and

(c) € [*] when the aggregated Net Sales of Product in the Original Territory for a calendar year first reach € [*].

The above payments are due and payable no later than 30 days from the date of the event triggering the payment of the applicable fee described above.

7.3 Net Sales. Net Sales shall only be counted from sales invoiced in the Original Territory. Sales invoiced in the New Territory shall not be counted when calculating the Net Sales. However, in the event that a Product or Device that was sold in the New Territory was re-sold or imported for resale into a country of the Original Territory, and Nycomed knew or had reason to know that it would be re-sold in the Original Territory when selling that Product or Device, then the revenue from such sale by Nycomed in the New Territory shall be deemed to be Net Sales subject to the royalty provisions of this Agreement. In addition, with respect to sales invoiced outside the Territory but then sold back into the Original Territory, see Section 4.6.

7.4 Payments for Sale of Product Outside the Territory. In the event that Product sold by a Party is discovered in the territory of the other Party then the non-selling Party shall be entitled to recover from the exporting Party the gross profits earned by the exporting Party on the sale of such Product.

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7.5 Royalty. Nycomed shall make the following payments to NPS based on Net Sales of Products in the Original Territory (calculated as described in Section 7.3 above):

(a) [*] of Net Sales for that portion of Net Sales of Product in such calendar year that is less than € [*];

(b) [*] of Net Sales for that portion of Net Sales of Product in such calendar year that equals or exceeds € [*] but is less than or equals € [*]; and

(c) [*] of Net Sales for that portion of Net Sales of Product in such calendar year that exceeds € [*].

7.6 Royalty Payments. Nycomed will provide NPS within twenty (20) business days after the end of each calendar quarter, with a report stating the volume of Product sold in each country of the Original Territory, invoiced sales and Net Sales and the amount of royalties due on such Net Sales. Within forty-five (45) days after the end of each calendar quarter, Nycomed will transfer, by wire, the amount of royalties due to NPS to such bank account as NPS may indicate from time to time or as NPS may otherwise direct in writing. Payment of all royalties hereunder will be made in USD.

7.7 Withholding Taxes. Nycomed and NPS have determined that Nycomed does not have an obligation to withhold taxes on payments from Nycomed to NPS hereunder. Nevertheless, in the event a tax authority in the Territory concludes that Nycomed is, by law or income tax treaty, required to withhold such taxes, and after Nycomed has exhausted all remedies reasonably available to avoid such withholding obligation, then Nycomed may withhold such taxes and pay over such withheld amounts to the applicable tax authority. Nycomed shall furnish NPS with proof of such payments. Any such tax required to be paid or withheld shall be an expense borne by NPS. Nycomed shall promptly provide NPS with a certificate or other documentary evidence to enable NPS to support a claim for a refund or foreign tax credit with respect to any such tax so withheld or deducted by Nycomed. At NPS’ request, Nycomed shall reasonably cooperate to support any claim by NPS for such a refund or credit.

7.8 Audit Rights; Adjustments.

7.8.1 Nycomed will permit an independent certified public accountant designated by NPS or a Third Party recipient of royalties under this Agreement and reasonably acceptable to Nycomed (the “Auditor”), to have access to Nycomed’s records and books during regular business hours for the sole purpose of determining the accuracy of the amounts reported and actually paid or otherwise payable to NPS under the terms of this Agreement (the “Audit”). Any Audit will cover a period not to exceed three (3) years immediately preceding such audit. NPS will bear all costs and expenses in connection with the Audit; provided, however, that if any Audit reveals an understatement of Net Sales greater than five percent (5%) of the stated amount, then Nycomed will bear all costs and expenses in connection with such Audit. Any Audit will be performed, upon at least thirty (30) calendar days’ prior written notice, during regular business hours, and not more than once in each calendar year during the term of this Agreement and during any calendar year in the three (3) year period following expiration or termination of this Agreement.

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7.8.2 The Auditor will execute a written confidentiality agreement with Nycomed and will disclose to NPS only the amount and accuracy of payments reported and actually paid or otherwise payable under this Agreement. The Auditor will send a copy of the report to Nycomed at the same time it is sent to NPS. The report sent to Nycomed will also include the methodology and calculations used to determine the results.

7.8.3 If the Audit results in a determination that Net Sales have been overstated, then NPS will repay the amount of any resulting overpayment to Nycomed within thirty (30) days after receipt of the Auditor’s report.

7.8.4 If the Audit results in a determination that Net Sales have been understated, then any resulting underpayment will be paid to NPS within thirty (30) days after receipt of the Auditor’s report.

7.9 Interest on Late Payments. Any payment not received within the period set forth in Sections 7.2, 7.5, 7.8.3 and 7.8.4 above, shall accrue interest at the rate of 18% per annum until paid in full.

7.10 No Right to Set-off. Neither Party shall have any right to set-off, deduct, counterclaim or offset against amounts owed by it to the other Party.

8. INTERIM TERRITORY

8.1 Canada and Mexico. After Marketing Authorization for the Product in the U.S. has been granted, Nycomed shall upon NPS’ request assign any Marketing Authorization and Approvals, if any, for the Product in Canada and Mexico to NPS or the Future Partner.

8.2 Amendment of Territory. Following such assignment, this Agreement shall automatically be amended so that “Territory” shall no longer include Canada and Mexico.

8.3 Supply. After assigning Marketing Authorizations and Approvals, Nycomed will upon request from NPS or the Future Partner supply NPS or the Future Partner with the Product and Device for use in Mexico and/or Canada for a period not exceeding [*] from the grant of the Marketing Authorization in the US.

8.4 Supply Terms. The terms for supply of Products and Devices to NPS or the Future Partner shall be negotiated in good faith with NPS or the Future Partner, as applicable, and be on terms customary to the industry. Nycomed will supply Product and Device to NPS or the Future Partner corresponding to the specifications for the Product in the Territory. Nycomed explicitly undertakes that it will not provide Product corresponding to requirements of the US or Japan market. Nycomed shall not give warranties relating to intellectual property rights. The supply price shall be negotiated in good faith and at least correspond to [*].

8.5 Nycomed Acting as Sales Force for Future Partner. In the event that there is a Future Partner, NPS shall ensure that the Future Partner contractually accepts the obligation to use Nycomed’s sales organization(s) in Canada and Mexico for a period of not less than [*] from grant of the Marketing Authorization in the US on terms to be negotiated in good faith and at contract sales organization rates customary to the industry.

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8.6 Cooperation. Nycomed undertakes to discuss in good faith development and marketing strategy with NPS or a Future Partner in order to optimize the global value of the Product. This includes good faith discussion of granting mutual license rights to any Improvements of the Product. Nycomed undertakes to co-ordinate any actions relating to regulatory or intellectual property rights in a way that will not materially impair the rights of NPS or the Future Partner and will optimize Net Sales in the Original Territory. NPS undertakes to contractually impose equivalent undertakings towards Nycomed on NPS or a Future Partner.

9. INTELLECTUAL PROPERTY

9.1 Ownership of Intellectual Property. NPS shall retain all of its rights, title and interest in and to Licensed Technology, subject to the licenses granted in this Agreement. Other than as provided above, Nycomed has no right, title or interest in any Licensed Technology relating to the Product and Devices and shall not sell, distribute, market, use, import or export the Product and Devices otherwise than in accordance with the terms of this Agreement.

9.2 Patent and Trademark Registration. Nycomed shall have the right to be registered with all applicable patent or trademark departments of the Territory in relation to the NPS Patents and Product Trademarks as the exclusive licensee empowered to act in relation hereto as common representative for both Parties. NPS shall execute and deliver all documents reasonably requested by Nycomed in completion of the above mentioned registration process and enabling Nycomed to undertake the acts set out in subsection 9.3.

9.3 Prosecution and Maintenance of NPS Patents. Nycomed shall at its own costs be responsible for patent prosecution, filing and maintenance of NPS Patents in the Original Territory, including, without limitation, prosecution, renewal, the filing of supplementary protection certificates and other fees necessary to maintain the NPS Patents in full force and effect until the earlier of their expiration or the termination or expiration of this Agreement. Nycomed’s efforts under this Section 9 shall be subject to Nycomed’s decision to launch in the applicable country as set out in Section 4.1.

To enable Nycomed to prosecute, file, maintain and defend the NPS Patents in the Territory, on the request of Nycomed, NPS shall grant to Nycomed all necessary rights, in Nycomed’s sole discretion (provided such rights do not include any ownership interest in the NPS Patents), to enable Nycomed to direct any outside patent or legal counsel (in the following “Nycomed IP law firms”). Nycomed shall have the sole and exclusive right to handle all matters related to patent prosecution, filing, maintenance and defense of NPS Patents in the Territory with the Nycomed IP law firms. Nycomed or the Nycomed IP law firms will inform NPS on a regular basis as outlined in Section 9.4. below.

In relation to the Original Territory, NPS shall provide reasonable technical support for Nycomed’s activities, including but not limited to providing access to NPS inventors, key experts and consultants, establishing and providing declarations of the NPS inventors, key experts and consultants and to providing experimental data available at NPS to support the patent prosecution, filing, maintenance and defense of NPS Patents in the Territory. Nycomed’s responsibilities shall include, in Nycomed’s sole discretion, oppositions and appeals against third party IP rights with the applicable patent authorities.

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In the event Nycomed intends to allow any NPS Patent in the Territory to lapse or become abandoned, as soon as reasonably practical after Nycomed’s decision to allow such NPS Patent to lapse or become abandoned, then NPS may, but shall not be required to, assume further responsibility for the prosecution, maintenance, and defense of such Nycomed Patents. In such event, NPS or its designee shall act in NPS’ name and at NPS’ or its designee’s expense. Nycomed shall cooperate with NPS or its designee as reasonably requested at NPS’ or its designee’s expense. Notwithstanding the foregoing, it is expressly understood and agreed that Nycomed may not allow any NPS Patent to lapse or become abandoned that would be necessary and/or advantageous for NPS to fulfill its obligations under the Agreement with regard to the Original Territory.

9.4 Periodic Information. The Parties shall on a regular basis or upon reasonable request and in no event less than on a quarterly basis inform each other of any changes or updates relating to the Licensed Technology.

9.5 Use, Prosecution and Maintenance of Product Trademarks.

9.5.1 Use of Product Trademarks. Nycomed shall use the Product trademark PREOTACT^® where possible. To the extent that PREOTACT^® can not be used for commercial, regulatory or other reasons, Nycomed shall have the right to use Product Trademarks other than PREOTACT^® including PREOS^® for use on or in connection with the Product and Device, subject to NPS’ prior approval not to be unreasonably withheld. In the event Nycomed uses the PREOS^® trademark for use on or in connection with the Product and Device, all goods sold by Nycomed under the PREOS^® trademark and all related advertising, promotional and other related uses of the PREOS^® trademark by Nycomed shall conform to all standards that may be set from time to time by NPS and shall otherwise be of a high standard in the respective trade and of such style, appearance and quality as to be adequate and suited to their exploitation to the best advantage and to the protection and enhancement of the PREOS^® trademarks and the good will pertaining thereto. Nycomed agrees to cooperate with NPS in facilitating NPS’ control of such nature and quality, to permit reasonable inspection of Nycomed’s operation, and to supply NPS with specimens of all uses of the PREOS^® trademark upon request.

9.5.2 Prosecution, Maintenance and Ownership of Product Trademarks. Nycomed shall be responsible for filing, prosecution, maintenance and defense of all registrations of the Product Trademarks and will be responsible for the payment of any costs relating to filing, prosecution, maintenance and defense of the Product Trademarks in the Territory. Except as provided in Section 2.2, NPS will be the sole owner of the Product Trademarks.

9.6 Third Party Patent Infringement.

9.6.1 Potential Infringement. In the event either Nycomed or NPS learns of any Third Party Patents which may cover the distribution, marketing or sale of Product or Device in the Territory, as carried out by NPS in accordance with its rights under this Agreement, such Party will notify the other. The Parties agree to confer in good faith regarding such potential infringement risk and to explore reasonable alternatives for avoiding such risk.

9.6.2 Defense by Nycomed. If a Third Party files a claim, suit or action against Nycomed claiming that a Patent or other intellectual property right owned by such Third Party is infringed or misappropriated by the distribution, marketing or sale or even manufacture,

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as the case may be, of Product or Device in the Territory, and such claim, suit or action arises out of Nycomed’s permissible exercise of its rights under this Agreement, the Parties shall confer in good faith regarding such alleged infringement or misappropriation. Nycomed shall at its discretion, and at its own costs defend any such claims, suits or actions. NPS will assist in the defense of any such claim, suit or action as reasonably requested by Nycomed. Nycomed shall not settle any such claim, suit or action if such settlement would impose on NPS the obligation to pay any damages (including royalties under a license) without the prior express written consent of NPS, which shall not be unreasonably withheld or delayed. If Nycomed chooses not to defend any such claim, suit or action, it shall promptly notify NPS of such decision and NPS may, but shall not be required to, assume such defense in it its own name at its own cost and expense. In such an event, Nycomed shall cooperate with NPS as reasonably requested at NPS’ request.

9.7 Infringement of Licensed Technology.

9.7.1 Notice of Infringement. In the event Nycomed or NPS becomes aware of any actual or threatened infringement or misappropriation of any Licensed Technology, the Party first having knowledge of such infringement shall promptly notify the other, and the Parties shall thereupon consult together as to the action to be taken.

9.7.2 Prosecution by Nycomed. Nycomed may, but shall not be obligated to commence an infringement action against any person or entity infringing, including infringement or misappropriating the Licensed Technology directly or contributorily. NPS shall cooperate with Nycomed as reasonably requested. The costs of such enforcement shall be shared equally on a country-by-country basis. Any and all amounts recovered with respect to such an action shall be applied first to reimburse the Parties for their out-of-pocket expenses (including reasonable attorneys’ fees) in prosecuting such infringement or misappropriation. The remainder shall be deemed Net Sales under this Agreement and be treated accordingly.

9.7.3 Prosecution by NPS. In the event Nycomed is unable to or elects not to commence action against the person or entity responsible for the alleged infringement or misappropriation within ninety (90) days of the date of Nycomed’s becoming aware of such infringement, then NPS may, but shall not be required to, prosecute the alleged infringement or threatened infringement. In such event, NPS shall act in its own name and at its own expense. Nycomed shall cooperate with NPS as reasonably requested including being named as a Party if necessary, at NPS’ expense. If Nycomed so desires, it may actively participate in such action at a later date, at its own expense. Any amounts recovered with respect to such an action shall be applied first to reimburse the Parties for their out-of-pocket expenses (including reasonable attorneys’ fees in the prosecution of such infringement). The remainder shall be deemed Net Sales under this Agreement and be treated accordingly.

9.7.4 Enforcing Party. If a Party elects not to bear an equal share of the costs of such an action, such party may opt out of such costs by providing the other Party with adequate notice, which shall be given before initiation of the trial, of its intention not to participate in the costs of the enforcement action. In such event, the Party opting out of the enforcement costs will continue to cooperate with the enforcing Party at the enforcing Party’s expense, and the enforcing Party will retain the full amount of any damage awards resulting from such enforcement action.

9.7.5 Current Opposition Claim. NPS currently is a party to an opposition appeal no. [*] concerning the patent [*] before the Board of Appeal of the European Patent

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Office. NPS shall provide Nycomed with a copy of all correspondence with the Board of Appeal of the European Patent Office and with the counterparty in relation to the appeal and shall consult with Nycomed and duly consider any feedback in relation to all activities concerning the proceedings. NPS hereby authorizes Nycomed to approach the counterparty directly in order to settle the appeal case. NPS shall consent to the settlement and if so requested by Nycomed withdraw the claim, provided, however, that NPS shall not be required to give such consent and withdraw the claim to the extent it would be detrimental to NPS’ rights.

9.8 Third Party Trademark Infringement.

9.8.1 Prosecution by Nycomed. Nycomed shall be primarily responsible for any legal proceedings against any infringement of Product Trademarks. NPS shall cooperate with Nycomed as reasonably requested. The costs of such proceedings shall be borne by Nycomed. Any and all amounts recovered with respect to such action shall be applied first to reimburse Nycomed for such costs of such proceedings (including reasonable attorneys’ fees). The remainder shall be deemed Net Sales under this Agreement and be treated accordingly. In the event Nycomed shall not be willing to take legal proceedings against any infringer, NPS may take such proceedings at its own cost, and in such case any damages recovered shall belong solely to NPS.

9.8.2 Infringement by Nycomed. Nycomed shall indemnify and hold NPS harmless from any claims and liability from a Third Party arising out of Nycomed’s infringement of a Third Party’s trademark rights in the Territory by exercising its rights to the Product Trademarks under this Agreement.

9.8.3 Withdrawal Due to Alleged Infringement. In the event Nycomed receives notice from a Third Party alleging that the manufacture, use or sale of the Product in the Territory infringes such Third Party’s intellectual property rights in the New Territory, Nycomed shall provide NPS with written notice thereof and the Parties shall consult with each other in good faith regarding such allegation. Nycomed shall consider NPS’ suggestions and comments regarding such alleged infringement; provided, however, that Nycomed shall have the right after such consultation with NPS, at its own discretion, to withdraw the Product from the market of such country in the New Territory and keep it off the market in such country in the New Territory until the issue is resolved through acknowledgment of non-infringement by the Third Party or through court ruling in the relevant territory. Such withdrawal shall not constitute a breach of any of Nycomed’s obligations set out in this Agreement.

10. REPRESENTATIONS AND WARRANTIES

10.1 Mutual Representations and Warranties. Each of the Parties hereby represents and warrants to the other Party as of the date hereof that:

10.1.1 such Party is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated;

10.1.2 this Agreement is a legal and valid obligation binding upon such Party and enforceable against such Party in accordance with its terms;

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10.1.3 the execution, delivery and performance of this Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it is bound;

10.1.4 the execution, delivery and performance of this Agreement by such Party does not violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over such Party;

10.1.5 it has the full power and authority to enter into this Agreement and to carry out the obligations contemplated hereby;

10.1.6 such Party has not, and during the Term will not, grant any right to any Third Party relating to its respective Patents and Know-How which would conflict with the rights granted or obligated to be granted;

10.1.7 to the best of such Party’s knowledge, it has not engaged, nor will it engage, services of employees, officers, subcontractors or consultants to perform development on the Product or the Device, that i) have been debarred or convicted of a crime for which an entity or person could be debarred under 21 U.S.C. Section 335a, or ii) is under indictment for a crime for which an entity or person could be debarred under 21 U.S.C. Section 335a; and

10.1.8 such Party has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement.

10.2 Distribution Agreement Representations and Warranties. NPS hereby represents and warrants to Nycomed as of the date hereof that each of the representations and warranties that NPS made in Section 9.2 of the Distribution Agreement were true and accurate as of the date such representations and warranties were made thereunder.

10.3 Territory. Except as previously disclosed to Nycomed, NPS is not aware of any facts that would cause the sale or manufacture of the Product (in its current form as of the Effective Date) in the Territory to infringe any Patents of any Third Party, it being understood that NPS has not made any independent investigation with respect thereto.

11. LIMITATION OF WARRANTY

EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT NEITHER PARTY MAKES ANY WARRANTY OR REPRESENTATION, AND EACH PARTY EXPRESSLY DISCLAIMS TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

12. INDEMNIFICATION

12.1 Indemnification by Nycomed. Nycomed shall indemnify, defend and hold harmless NPS and its directors, officers, employees, agents and Affiliates from and against

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any liabilities, damages, fees, costs or expenses, including reasonable attorneys’ fees (collectively, “Losses”), which arise out of, relate to or result from the breach by Nycomed of any of its representations, warranties or obligations contained within this Agreement. Notwithstanding the foregoing, Nycomed shall not indemnify NPS for any Losses to the extent that Nycomed is entitled to seek indemnification from NPS for such Losses under Section 12.2 of this Agreement.

12.2 Indemnification by NPS. NPS shall indemnify, defend and hold harmless Nycomed and its directors, officers, employees, agents, Affiliates and sublicensees from and against any Losses which arise out of, relate to or result from: (a) the breach by NPS of any of its representations, warranties or obligations contained within this Agreement; or (b) any claim, lawsuit or other action by a Third Party arising from or relating to the Product or any use thereof, including but not limited to any claim or obligation, whether pursuant to a settlement or not, to pay royalties, which term shall be broadly defined to include any payments made in connection with any license required during the Term of this Agreement from a Third Party, to a Third Party in order for Nycomed to enjoy the rights and fulfill its obligations under this Agreement in the Original Territory. Notwithstanding the foregoing, NPS will not indemnify Nycomed for: (i) in relation to product liability claims, for claims caused through the Product or Device not corresponding to its specifications to the extent such Product or Device was supplied to Nycomed from a third party supplier acting under a supply agreement with Nycomed; or (ii) any Losses to the extent that NPS is entitled to seek indemnification from Nycomed for such Losses under Section 12.1 of this Agreement.

12.3 Indemnification Procedures. Sections 12.4, 12.5 and 12.6 shall not apply to disputes concerning a potential Patent infringement, which shall exclusively be governed by Sections 9.3, 9.6 and 9.7. A Party that intends to claim indemnification under Section 12.1 or 12.2 of this Agreement (the “Indemnitee”) will promptly notify the other Party (the “Indemnitor”) in writing of any claim, lawsuit or other action in respect of which the Indemnitee or any of its directors, officers, employees, and/or Affiliates intend to claim such indemnification within a reasonable period of time after the assertion of such claim; provided, however, that the failure to provide written notice of such claim within a reasonable period of time will not relieve the Indemnitor of any of its obligations hereunder, except to the extent that the Indemnitor is prejudiced by such failure to provide prompt notice. The Indemnitor will have the right to assume the complete control of the defense, compromise or settlement of any such claim with the prior written consent of such Indemnitee, such consent not to be unreasonably withheld; provided, however, that Indemnitee will have the right to withhold such consent in its sole discretion if such defense, compromise or settlement includes any admission of wrongdoing on the part of Indemnitee, or limits the scope of any claims in or enforceability of any Patents owned by or licensed to the Indemnitee. The Indemnitor may at its own expense, employ legal counsel to defend the claim at issue. At any time after Indemnitor has assumed defense of a claim, the Indemnitor may exercise, on behalf of the Indemnitee, any rights which may mitigate the extent or amount of such claim; provided, however, the Indemnitee:

12.3.1 may, in its sole discretion and at its own expense, employ legal counsel to represent it (in addition to the legal counsel employed by the Indemnitor) in any such matter, and in such event legal counsel selected by the Indemnitee will be required to confer and cooperate with such counsel of the Indemnitor in such defense, compromise or settlement for the purpose of informing and sharing information with the Indemnitor;

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12.3.2 will, at its own expense, make available to Indemnitor those employees, officers and directors of Indemnitee whose assistance, testimony or presence is necessary, useful or appropriate, to assist the Indemnitor in evaluating and in defending any such claim; provided, however, that any such access will be conducted in such a manner as not to interfere unreasonably with the operations of the businesses of Indemnitee; and

12.3.3 will otherwise fully cooperate with the Indemnitor and its legal counsel in the investigation and defense of such claim. The rights and remedies provided pursuant to this Section 12 are the sole and exclusive remedies of the Parties hereto with respect to Losses.

EXCEPT FOR THE OBLIGATIONS TO INDEMNIFY DESCRIBED IN SECTION 12 ABOVE, NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY FOR INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING, BUT NOT LIMITED TO, ANY CLAIM FOR DAMAGES BASED UPON LOST PROFITS,

13. CONFIDENTIALITY

13.1 Confidential Information. Any information or materials communicated by one Party to the other Party pursuant to this Agreement or the Distribution Agreement or the Confidential Disclosure Agreement between the Parties dated February 11, 2004 will be deemed “Confidential Information” of the disclosing Party if marked “confidential” or with a similar legend, or if disclosed orally or visually, if identified as being confidential at the time of such oral or visual disclosure or which information or materials would, due to the nature thereof or the circumstances surrounding disclosure, appear to a reasonable person to be confidential or proprietary. Notwithstanding the preceding sentence, “Confidential Information” will not be deemed to include information that the receiving Party can demonstrate, by competent written proof:

(a) at the time of disclosure is published or is publicly known or otherwise in the public domain, other than through any breach by the receiving Party;

(b) was already known to the receiving Party, other than under an obligation of confidentiality or non-use, prior to the time of disclosure;

(c) is disclosed to the receiving Party in good faith, without an obligation of confidentiality, by a Third Party, whom the receiving Party has no reason to believe is under any obligation of confidence with respect to such information; or

(d) is independently developed by the receiving Party without use of or reference to the disclosing Party’s Confidential Information.

13.2 Treatment of Confidential Information. The Parties agree that during the term of this Agreement and for seven (7) years after its expiration or termination for any reason whatsoever, a Party receiving Confidential Information of the other Party will: (a) treat any such Confidential Information disclosed to it by the other Party as strictly confidential; (b) except as necessary in the performance of this Agreement, not disclose such Confidential

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Information to Third Parties without the prior written consent of the other Party, other than to its Affiliates, sublicensees, collaborators or any consultants, provided that such disclosure be subject to confidentiality obligations comparable to those contained in this Agreement; (c) not use such Confidential Information for purposes other than those authorized expressly herein; and (d) use reasonable efforts to prevent inadvertent disclosure of such Confidential Information.

13.3 Access. Access to Confidential Information will be limited to those employees or consultants of the Party receiving such information or of such Party’s Affiliates who reasonably require such information in order to carry out activities authorized pursuant to this Agreement. Such employees or consultants will be advised of the confidential nature of the Confidential Information and the related confidentiality undertaking.

13.4 Permitted Disclosures. Notwithstanding any other provision in this Agreement, a receiving Party may disclose Confidential Information of the disclosing Party to the extent such disclosure is required by law or court order, provided that the receiving Party gives the disclosing Party prompt written notice of the requirement to disclose and reasonably cooperates with the disclosing Party to seek a protective order or other restrictions on the disclosure of such Confidential Information of the disclosing Party. Any such required disclosure will be limited only to that Confidential Information that is required to be disclosed and such disclosed Confidential Information will remain Confidential Information hereunder despite the required disclosure. Notwithstanding any other provision in this Agreement, either Party may disclose this Agreement (and prior to signing the draft versions hereof) and any and all Schedules and other Attachments hereto and financial calculations to be derived from this Agreement to existing or potential investors or potential buyers of the Parties hereto whom are subject to Confidentiality Agreements with terms similar to those contained herein.

13.5 Return of Confidential Information. Upon termination (and not expiration) of this Agreement, each Party hereto and its Affiliates will return all Confidential Information of the other Party in its possession to the other Party; provided, however, that each Party may retain:

(a) a single archival copy of the Confidential Information of the other Party solely for the purpose of determining the extent of disclosure of Confidential Information hereunder and assuring compliance with the surviving provisions of this Agreement;

(b) any portion of the Confidential Information of the other Party which is contained in laboratory notebooks; and

(c) any portion of the Confidential Information of the other Party that a Party is required by mandatory applicable law to retain.

13.6 Confidentiality of the Agreement Terms. Neither Party will disclose the terms of this Agreement to any Third Party without the prior written consent of the other Party; provided, however, that either Party may disclose the terms of this Agreement to actual or prospective investors and corporate partners (including sublicensees), to a Party’s accountants, attorneys and other professional advisors, and as required by applicable laws and regulations of the U.S. Securities and Exchange Commission and any stock exchange on which a Party’s stock or other instruments are or may be traded.

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14. ASSIGNMENT

14.1 Affiliates. The Parties recognize that each Party may perform some or all of its obligations under this Agreement through Affiliates, provided, however, that each Party will remain responsible for the performance by its Affiliates and will cause its Affiliates to comply with the provisions of this Agreement in connection with such performance and any act or omission committed by an Affiliate shall be deemed to have been conducted by the Party itself. Each Party hereby expressly waives any requirement that the other Party exhaust any right, power or remedy, or proceeds against an Affiliate, for any obligation or performance hereunder prior to proceeding directly against such Party.

14.2 Assignment. Neither Party will assign its rights or obligations under this Agreement to any Third Party without the prior written consent of the other Party; except that either Party may assign such rights and obligations to an Affiliate of the respective Party or to the surviving entity pursuant to a merger, acquisition or consolidation, or to a Third Party acquiring all or substantially all assets of a Party. All permitted assignments by either Party of any of its rights under this Agreement will be subject to all of the terms and conditions of this Agreement. All successors, permitted assignees of either Party will be subject to, and will be bound by, all the terms and conditions of this Agreement. Any purported assignment not permitted under the terms of this Agreement will be null, void, and of no effect.

14.3 Consent. Notwithstanding the foregoing, the Parties acknowledge that they entered into that certain Consent to Assignment, dated as of June 8, 2007 (the “Assignment Consent”), whereby Nycomed agreed that NPS may assign to one or more Third Parties its rights and obligations to receive royalties under Section 15.2 of the Distribution Agreement on Net Sales made on or after April 1, 2007, as well as all related rights incident thereto, including certain enumerated other sections of the Distribution Agreement. Furthermore, the Parties acknowledge that this License Agreement is replacing the Distribution Agreement and therefore, such consent to assignment shall apply to the assignment of such corresponding rights in this Agreement, and such Parties agree that such corresponding sections in this Agreement shall include Sections 7.4, 7.5, 7.6, 7.8, 7.9, 9.4, 9.6.1, 9.6.2, 9.7.1, 9.7.2, 9.7.3, 9.8.1 and 9.8.3; provided, however, that in the event that this Agreement is terminated pursuant to Section 2.11, the Assignment Consent shall revert back to its original form as of June 8, 2007 and shall reference the sections of the Distribution Agreement as in effect at that time. Nycomed hereby consents to NPS’ granting a security interest in all or any of the Licensed Technology and in this Agreement to any Third Party, subject to the licenses granted under this Agreement.

15. JOINT PUBLICITY

15.1 Public Disclosures. If either Party wishes to make significant public disclosure exclusive of correspondence and written communication in the ordinary course of business, concerning this Agreement or the relationship established hereunder and such disclosure mentions the other Party by name or description, such other Party shall be provided in advance with a copy of the disclosure and shall have five (5) business days within which to approve or disapprove of such use of its name or description (including the mentioning of the name of the Product and/or reference to a description of the terms of this Agreement or to any of the exhibits to this Agreement that are incorporated by reference hereto). Neither party shall unreasonably withhold such approval. Failure to respond within said time shall be deemed to

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constitute an approval. Absent approval, no public disclosure shall use the name of or otherwise describe such Party except to the extent as may be required by law in the reasonable judgment of the respective Party’s counsel, or to the extent that the description of the other Party is limited to public information about the availability of the Product.

15.2 Scientific Publications. At least thirty (30) days prior to submission of any material related to the research or development activities hereunder for publication or presentation to Third Parties, the submitting Party shall provide to the other Party a draft of such material for its review and comment. The receiving Party shall provide any comments to the submitting Party within fifteen (15) days of receipt of such materials. No publication or presentation with respect to the research or development activities hereunder shall be made unless and until the other Party’s comments on the proposed publication or presentation have been addressed and changes have been agreed upon and any information determined by the other Party to be its Confidential Information has been removed. If requested in writing by the other Party, the submitting Party shall withhold material from submission for publication or presentation for the time reasonably required for the filing and until expiry of the priority year relating a patent application or the taking of such measures to establish and preserve proprietary rights in the information in the material being submitted for publication or presentation.

16. TERM, TERMINATION AND CONCEQUENCES OF TERMINATION

16.1 Term of the Agreement. This Agreement shall commence on the Effective Date and, unless terminated earlier pursuant to this Section 16, remain in force on a country by country basis for the longer of fifteen (15) years from the first commercial sale of the Product in the respective country and the expiration date in such country of the last to expire of any issued NPS Patent. The Agreement on a country basis shall cease upon such expiry date(s) (the “Term”).

16.2 Termination for Commercial Reasons. In the event that Licensee can demonstrate that Licensee, as a result of circumstances in one or more markets in the Original Territory, including competition, is not making a reasonable profit and that Licensee, in its reasonable opinion, has no prospects of making a reasonable profit during the remainder of the Term, the Parties shall meet and renegotiate the key commercial terms of this Agreement. Should the Parties not be able to reach agreement on such new terms within six (6) weeks, the matter shall be referred to the Chief Executive Officers of the Parties. Should the Chief Executive Officers not be able to reach agreement within two (2) weeks, Licensee shall be entitled to terminate the Agreement giving NPS six (6) months written notice

16.3 Termination for Material Breach. In the event of a material breach of this Agreement by either Party, which is not cured within sixty (60) days following receipt of written notice of such breach from the non-breaching Party, the non-breaching Party will have the right to terminate this Agreement by written notification to the other Party, effective immediately upon receipt.

16.4 Termination for Bankruptcy. Either Party may immediately terminate this Agreement upon the occurrence of either of the following: (a) the entry of a decree or order for relief by a court having jurisdiction over the other Party in an involuntary case under any applicable national, federal, provincial or state insolvency or other similar law, and the

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continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days; or (b) the filing by the other Party of a petition for relief under any applicable national, federal, or state insolvency or other similar law. All rights and licenses granted under or pursuant to this Agreement, including amendments hereto, by each Party to the other Party are, for all purposes of II U.S.c. Section 365(n), licenses of rights to intellectual property as defined in Title II.

16.5 General. No termination of this Agreement will relieve any Party hereto from any liability which, at the time of such termination, has already accrued to the other Party or which is attributable to a period prior to such termination, nor preclude either Party from pursuing any rights and remedies it may have under this Agreement or at law or in equity which have accrued or are based upon any event occurring prior to such termination.

16.6 Effects of Termination for Commercial Reasons. In the event of termination by Nycomed of the entire Agreement under Section 16.2, Nycomed shall forthwith as at the effective date of termination:

(a) deliver to NPS the dossier, all product data and any other documents, materials, data or information within its possession or control containing or evidencing any Licensed Technology of NPS and all Confidential Information of NPS;

(b) cease all exploitation and marketing of Product and Device provided always that Nycomed shall be entitled to continue to sell Product and Device for a period of six calendar months thereafter in order to fulfill existing orders only (subject always to the payment terms under this Agreement) and provided that Nycomed shall not sell such stock in a manner detrimental to the market for Product in the Territory;

(c) give or procure for NPS access to all data filed in connection with the Marketing Authorizations for the Product in the Territory;

(d) allow NPS to cross-reference any MA relating to the Product with each relevant Regulatory Authority, for the purpose of transferring the MAs for the Product in the Territory to NPS or as it may nominate at NPS’ cost;

(e) subject to Nycomed’s right to sell its stock of Product pursuant to Section 16.6.2, transfer the adverse event data base for the Product relating to the Territory to NPS;

(f) Nycomed acknowledges that in the event of such termination it shall not be entitled to any reimbursement or repayment of any sums paid to NPS under the terms of this Agreement prior to the effective date of termination; and

(g) Sell, assign and transfer to NPS the entire right, title and interest in and to the PREOTACT trademarks in the Territory and related items that were transferred by NPS to Nycomed pursuant to Section 2.2.

16.7 Licenses Upon Expiration. Upon expiration of this Agreement pursuant to Section 16.1 of this Agreement with respect to a country in the Territory, Nycomed will have a non-exclusive, fully paid, perpetual, royalty-free right and license under the Licensed Technology to develop, have developed, make, have made, use, offer to sell, sell, and import Product and Device in the Territory.

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16.8 Survival. In the event of expiration or termination of this Agreement pursuant to this Agreement, the following sections will survive, together with the definitions of any defined terms used therein: Sections 2.11, 4.7, 5.4, 11, 12, 13, 14.3, 15, 16, 18, 20, 21, 22, 23, 24 and 25. All other provisions, including all rights and obligations thereunder, will terminate and be of no further force and effect.

17. FORCE MAJEURE

17.1 Force Majeure. No Party (the “Affected Party”) shall be considered to be in breach of any of its obligations under this Agreement where failure to perform or delay in performing any obligation is due, wholly or in material part, directly or indirectly, to the occurrence of any act of God, act of public enemy, act of a governmental body or agency, foreign or domestic, sabotage, riot, fire, flood, typhoon, explosion or other catastrophe, epidemic or quarantine restriction, accident, freight embargo, or because of any other similar event (a “Force Majeure Event”), for the period of time occasioned by any such occurrence, so long as the event is beyond the reasonable control of, does not result from the fault of, and cannot be overcome by the exercise of reasonable due diligence by the Affected Party, and provided that:

(a) the Affected Party forthwith gives the other Party written notice of the Force Majeure Event, which notice shall include an estimate of the duration and the likely impact of the Force Majeure Event;

(b) the suspension or delay of performance shall be of no greater scope and of no longer duration than is reasonably required by the Force Majeure Event;

(c) the Affected Party will use its reasonable best efforts to correct, cure or overcome the Force Majeure Event; and

(d) then the Affected Party will for a period of up to three (3) months be excused from the obligations or conditions as a result of the Force Majeure Event to the extent and for the time so affected and provided that if a Force Majeure Event continues thereafter, the other Party (who is not the Affected Party) shall be entitled to terminate this Agreement upon ten (10) business days written notice to the Affected Party.

18. LAW AND VENUE

18.1 Governing Law. This Agreement will be governed by, and construed and interpreted in accordance with the laws of New York without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the laws of New York to the rights and obligations of the Parties.

18.2 Construction. Unless used in combination with the word “either,” the word “or” is used throughout this Agreement in the inclusive sense (and/or). The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit

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the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term “including” as used herein will mean including, without limiting the generality of any description preceding such term. No rule of strict construction will be applied against either Party hereto. Unless expressly provided herein to the contrary, all time limits, notice periods, deadlines or the like described herein will be governed by the follow parameters: (i) for all time periods that are five (5) days in length or less, such periods will be deemed to be business days, and (ii) for all time periods greater than five (5) days in length will be deemed to be calendar days.

18.3 Disputes. The Parties will try to settle their differences amicably between themselves with respect to any provision of this Agreement or the performance or alleged non-performance of a Party with respect to any of its obligations under this Agreement (“Dispute”). In the event of any controversy or claim arising out of or relating to this Agreement, the complaining Party shall notify the other Party in writing of such Dispute. If the Parties are unable to resolve the Dispute within twenty (20) days of receipt of the written notice by the other Party, such Dispute will be referred to the Chief Executive Officers of each of the Parties (or their respective designees) who will meet or hold a phone conference within fifteen (15) days and use their good faith efforts to have the Dispute resolved within fifteen (15) days after such meeting.

18.4 Arbitration. Any dispute that is not resolved amicably in accordance with the above, whether before or after termination of this Agreement, will be resolved by arbitration pursuant to the London Court of International Arbitration (LCIA) Rules, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be three. Each Party shall appoint one arbitrator and the two arbitrators appointed by the Parties shall then agree on the appointment of the third. The place of arbitration shall be Geneva, Switzerland. The language to be used in the arbitral proceedings shall be English.

19. AMENDMENTS

The Parties hereto may amend, modify or alter any of the provisions of this Agreement, but such amendment, modification or alteration will be valid and binding on either Party only if made by a written instrument that explicitly refers to this Agreement and that is signed by a duly authorized representative of each Party.

20. ENTIRE AGREEMENT

This Agreement, together with the schedules and exhibits hereto, and the Distribution Agreement (in the form attached as Exhibit 20(a)) and Supply Agreement (in the form attached as Exhibit 20(b)), comprise the entire understanding of the Parties with respect to the subject matter hereof.

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21. THE PARTIES LEGAL RELATIONSHIP.

The Parties hereto are independent contractors. Nothing contained herein will constitute either Party the agent of the other Party for any purpose whatsoever, or constitute the Parties as partners or joint venturers. Employees of each Party remain employees of said Party and will be considered at no time agents of or owing a fiduciary duty to the other Party. Neither Party hereto will have any implied right or authority to assume or create any obligations on behalf of, or in the name of, the other Party or to bind the other Party to any other contract, agreement or undertaking with any Third Party.

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22. SEVERABILITY

In the event that any provision in this Agreement is held to be unlawful or invalid in any jurisdiction, the meaning of such provision will be construed to the greatest extent possible so as relevant to render it enforceable. If no such construction can render such provision enforceable, it will be severed. The remainder of this Agreement will remain in full force and effect, and the Parties will negotiate in good faith a reasonable substitute provision that is valid and enforceable in such jurisdiction. If the Parties are unable to agree on a substitute provision, and if the unlawful or invalid provision was an essential element of this Agreement without which one of the Parties would not have entered into this Agreement, as evidenced by this Agreement as a whole, then such Party may terminate this Agreement by written notice to the other Party effective upon receipt, and the Parties, in such case, shall agree on terms that will, to the extent practicably possible, put each Party in the position it would have been had the Agreement not been entered into.

23. WAIVER

The failure of either Party to enforce any provision of this Agreement at any time will not be construed as a present or future waiver of such or any other provision of this Agreement. The express waiver by either Party of any provision or requirement hereunder will not operate as a future waiver of such or any other provision or requirement and will be effective only if set forth in a written instrument signed by a duly authorized representative of the Party waiving such provision or requirement.

24. HEADINGS

The headings in this Agreement are for convenience only and shall not be applied when interpreting the content of this Agreement.

25. MISCELLANEOUS

25.1 Notice. All notices hereunder must be given in writing and will be deemed given if delivered personally or by facsimile transmission (receipt confirmed), mailed by registered or certified mail (return receipt requested) with postage prepaid, or sent by express courier service (FedEx or other reputable, internationally recognized courier service), to the Parties at the following addresses (or at such other address for a Party as will be specified by like notice; provided that notices of a change of address will be effective only upon receipt thereof).

If to NPS:	NPS Allelix Corp.
	MaRS Centre
	101 College Street, South Tower
	Suite 800
	Toronto, ON MSG 1L8
	Canada
	Attention: General Counsel
	Facsimile: (973) 316-6463

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With copies to:	NPS Pharmaceuticals, Inc
	Morris Corporate Center 1
	4th Floor, Building B
	300 Interpace Parkway
	Parsippany, New Jersey 07054
	United States of America
	Attention: Vice President, Corporate Development
	Facsimile: (973) 316-6463
and:	NPS Pharmaceuticals, Inc
	Morris Corporate Center 1
	4th Floor, Building B
	300 Interpace Parkway
	Parsippany, New Jersey 07054
	United States of America
	Attention: General Counsel
	Facsimile: (973) 316-6463
If to Nycomed:	Nycomed Danmark ApS Langebjerg I
	DK-4000 Roskilde Denmark
	Attention: Managing Director
	Facsimile: +4546756968
With a copy to:	Nycomed Group
	c/o Nycomed Germany Holding GmbH
	Byk-Gulden-Str. 2
	78467 Konstanz
	Germany
	Attention: General Counsel
	Facsimile: +497531842982

25.2 Counterparts. This Agreement may be executed by the Parties in one or more identical counterparts, all of which together will constitute this Agreement. If this Agreement is executed in counterparts, no signatory hereto will be bound until both Parties have duly executed a counterpart of this Agreement.

32

The Parties have caused this Agreement to be executed as of the Effective Date by signature of their duly authorized representatives.

NPS ALLELIX CORP.

By:

Title:

NYCOMED DANMARK APS

By:

Title:

By:

Title:

[Signature Page to License Agreement]

SCHEDULE 1.5

DEVICE

[*]

SCHEDULE 1.19

NPS PATENTS

[*]

SCHEDULE 2.2

PRODUCT TRADEMARKS

[*]

SCHEDULE 6.3

TRANSFER PROTOCOL

[*]

SCHEDULE 6.8

RELEASE CERTIFICATE

[*]

SCHEDULE 6.10

EMPLOYEES

[*]

SCHEDULE 6.12

INVENTORY STOCK FOR SALE

[*]

EXHIBIT 20(a)

DISTRIBUTION AGREEMENT

A copy of the Distribution Agreement has been attached to our Form 10-Q for the quarter-ended June 30, 2004.

EXHIBIT 20(b)

SUPPLY AGREEMENT

[*]

EX-10.2

Exhibit 10.2

NOTE: CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND REPLACED BY “[*]”. A COMPLETE COPY OF THIS DOCUMENT INCLUDING THE CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

AGREEMENT FOR SALE AND ASSIGNMENT OF RIGHTS

NPS PHARMACEUTICALS, INC.,

NPS ALLELIX CORP.

- and -

DRUG ROYALTY L.P. 3

Dated as of July 16, 2007

TABLE OF CONTENTS

ARTICLE 1
INTERPRETATION
1.1	Definitions	2
1.2	Interpretation	7
1.3	Currency	7
1.4	Distribution and License Agreement	7
ARTICLE 2
SALE AND ASSIGNMENT
2.1	Sale and Assignment	8
2.2	Purchase Price	8
2.3	Payment of Purchase Price	8
2.4	No Obligations Transferred	8
ARTICLE 3
THE CLOSING
3.1	Closing	9
3.2	Closing Deliveries	9
3.3	Closing Deliveries by the Purchaser	10
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
4.1	Organization, Standing and Power	10
4.2	Authority, Execution and Delivery; Enforceability	11
4.3	No Conflicts	11
4.4	No Consent	12
4.5	Ownership of Assigned Rights	12
4.6	License, Supply and other Agreements	12
4.7	Patents and Other Intellectual Property	13
4.8	Litigation	14
4.9	Royalties	15
4.10	Reports	15
4.11	Expenses	15
4.12	Disclosure	15
4.13	Business Activities	15
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1	Organization	16
5.2	Authorization	16
5.3	No Conflicts	16
5.4	No Consent	17

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5.5	Expenses	17
5.6	Litigation	17
5.7	Availability of Funds	17
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
6.1	Organization, Standing and Power	17
6.2	Authority, Execution and Delivery; Enforceability	18
6.3	No Conflicts	18
6.4	No Consent	18
6.5	Litigation	18
ARTICLE 7
COVENANTS
7.1	Remittance of Royalties	19
7.2	Maintenance of License, Supply and other Agreements	19
7.3	Reports; Other Information	20
7.4	Patent Obligations	21
7.5	Termination of License Agreement	23
7.6	Confidentiality	24
7.7	Books and Records	25
7.8	Purchaser May Perform	25
7.9	Grant of Security Interest	25
7.10	Costs and Expenses	26
7.11	No Contravention of Vendor’s Residual Rights; End of Term	26
7.12	Certain Factual Representations of the Vendor	26
7.13	Cure Period	26
ARTICLE 8
TERMINATION; SURVIVAL
8.1	Termination	26
8.2	Survival	27
ARTICLE 9
INDEMNITY
9.1	Indemnification by the Vendor and the Parent	27
9.2	Indemnification by the Purchaser	28
9.3	Procedure for Claims	28
9.4	Tax Matters	29
ARTICLE 10
GUARANTEE OF VENDOR'S OBLIGATIONS
10.1	Guarantee	29
10.2	Guarantee Binding	29

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10.3	Costs and Expenses	30
10.4	Subrogation	30
10.5	Enforcement	30
ARTICLE 11
MISCELLANEOUS
11.1	Further Assurances	30
11.2	Specific Performance	30
11.3	Notices	31
11.4	Successors and Assigns	32
11.5	No Partnership	32
11.6	Entire Agreement	33
11.7	True Sale Security Agreement	33
11.8	Amendments, Supplements, Waivers	34
11.9	Severability	34
11.10	Governing Law	34
11.11	Waiver of Jury Trial	34
11.12	Time	34
11.13	Counterparts	35

Schedule 1.4	-	Table of Concordance of License Agreement Provisions
Schedule 4.5	-	Gautvik and Asahi Agreements
Schedule 4.7	-	Patents
Schedule 4.7(a)		Opinions of Counsel
Schedule 4.8	-	Litigation
Schedule 7.6(d)	-	Form of Press Release

- iii -

THIS AGREEMENT FOR SALE AND ASSIGNMENT OF RIGHTS is made as of the 16^th day of July, 2007.

BETWEEN:

NPS ALLELIX CORP.,

a corporation existing under the laws of the Province of Ontario

(collectively with its successors and permitted assigns, the “Vendor”)

- and -

NPS PHARMACEUTICALS, INC.,

a corporation existing under the laws of the State of Delaware

(collectively with its successors and permitted assigns, the “Parent”)

- and -

DRUG ROYALTY L.P. 3,

a Cayman Islands limited partnership

(collectively with its successors and permitted assigns, the “Purchaser”)

WHEREAS capitalized terms used and not otherwise defined in the following recitals have the meanings specified in Section 1.1;

AND WHEREAS pursuant to the License Agreement, the Vendor granted to Nycomed an exclusive license under the Licensed Technology, including a right of sublicense, to market, sell, offer for sale, use, import and distribute Products and Devices within the Original Territory;

AND WHEREAS the Vendor has agreed to sell, assign, transfer, convey and deliver to the Purchaser the Assigned Rights in consideration of the payment by the Purchaser to the Vendor of the Purchase Price on the terms and subject to the conditions specified herein, and the Purchaser and the Vendor wish to enter into this Agreement to effect the sale, assignment, transfer, conveyance and delivery to the Purchaser of the Assigned Rights on the terms and subject to the conditions specified herein;

- 1 -

NOW THEREFORE, in consideration of the recitals and mutual covenants specified herein, and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

For the purposes of this Agreement, subject to Section 1.4, the following terms shall have the respective meanings set out below, and grammatical variations of such terms shall have corresponding meanings:

“Affiliate”, in respect of any Person, means any other Person which, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the subject Person, and a Person which has an entity which is an Affiliate under the foregoing shall also be deemed to be an Affiliate of such entity;

“Agreement” means this agreement of sale and assignment of rights and includes all exhibits, appendices and schedules hereto as an integral part hereof, as any of the foregoing or this Agreement are amended, modified, supplemented, restated or replaced from time to time;

“Asahi” means Asahi Kasei Pharma Corporation;

“Asahi Agreement” means the [*];

“Assigned Rights” means all of the Vendor’s right, title and interest in, to and under the following rights under the License Agreement and the Distribution Agreement:

(a) the right to receive the Purchaser Royalty Interest;

(b) the right to receive Reports during the Term; and

(c) the right to inspect and audit the books and records of Nycomed under Section 7.8 of the License Agreement and under Section 15.11 of the Distribution Agreement, as applicable, in respect of Royalties received during the Term (including, for certainty, the right to select the auditor or independent certified public accountant in connection therewith) and the right to receive a copy of the auditor’s report under Section 7.8.2 of the License Agreement and under Section 15.11.2 of the Distribution Agreement, as applicable;

“Bill of Sale” means the bill of sale dated the date hereof delivered by the Vendor to the Purchaser at the Closing evidencing the sale, assignment, transfer, conveyance and delivery of the Assigned Rights to the Purchaser;

“Business Day” means any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in Toronto, Ontario or New York, New York;

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“CIS” means the Commonwealth of Independent States, comprising as of the Effective Date of the License Agreement, Russia, Ukraine, Belarus, Kazakstan, Kyrgystan, Tajikistan, Turkmenistan, Uzbekistan, Armenia, Azerbaijan, Georgia and Moldovia;

“Closing” has the meaning specified in Section 3.1;

“Closing Document” means any document, instrument, undertaking or agreement required under this Agreement to be delivered by the Vendor or the Purchaser at the Closing;

“Damages” means any damage, loss, claim, cost, liability, demand or expense (including reasonable out-of-pocket expenses of investigation and reasonable legal fees and expenses in connection with any action, suit or proceeding), but excluding punitive and consequential damages;

“Device” has the meaning specified in the License Agreement;

“Distribution Agreement” means the distribution and license agreement dated April 20, 2004 between the Vendor and Nycomed, as amended on July 1, 2004 and as further amended on June 5, 2007, in the form that is attached to the License Agreement as Exhibit 20(a);

“Encumbrance” means any lien, charge, security interest, mortgage, option, privilege, pledge, trust or deemed trust (whether contractual, statutory or otherwise arising) or any other encumbrance, right or claim of any other Person of any kind whatsoever whether choate or inchoate, or any agreement (whether written or oral) to create any of the foregoing;

“EU” means the member states from time to time of the European Union;

“First Payment” has the meaning specified in Section 2.3;

“Gautvik Agreement” means [*];

“Gautvik Patents” means those patents purchased by the Vendor pursuant to the Gautvik Agreement;

“Governmental Authority” means any government, regulatory or administrative agency or commission, governmental department, ministry, bureau, commission or agency, court, tribunal, governmental arbitrator or arbitration board or other similar body, or other governmental authority or instrumentality, whether federal, provincial, state or municipal (domestic or foreign);

“Improvement” has the meaning specified in the License Agreement;

“indemnified party” has the meaning specified in Section 9.3(a);

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“Infringement Payments” means all collections, recoveries, damages, awards, settlement payments or any other payments, compensation or consideration of any kind which are received by the Vendor and are intended as compensation for deemed Net Sales under Sections 9.7.2, 9.7.3 and 9.8.1 of the License Agreement and under Sections 8.6.2 and 8.6.3 of the Distribution Agreement, as applicable, in either case as a result of any litigation, arbitration or other legal proceeding to enforce the License Agreement or the Distribution Agreement, as applicable, the Licensed Technology or the NPS Trademarks to the extent such litigation, arbitration or other legal proceeding results in payments arising from infringement of any of the Licensed Technology or the NPS Trademarks;

“Infringement Sales” means the sales or deemed sales that give rise to an Infringement Payment;

“Knowledge of the Vendor” means the actual knowledge of the Vendor after due inquiry;

“License Agreement” means the license agreement dated as of July 2, 2007 between NPS Allelix Corp. and Nycomed, including all schedules and exhibits thereto;

“Licensed Technology” has the meaning specified in the License Agreement;

“Material Adverse Effect” means a material adverse effect on: (a) the ability of the Vendor to perform its obligations under this Agreement, (b) the validity or enforceability of this Agreement or the rights or remedies of the Purchaser hereunder, (c) the timing, amount or duration of the Royalties, (d) the Assigned Rights, or (e) the Products;

“Net Sales” has the meaning specified in the License Agreement and further includes Infringement Sales;

“New Arrangement” has the meaning specified in Section 7.5;

“New License Agreement” has the meaning specified in Section 7.5;

“New Royalty Interest” has the meaning specified in Section 7.5;

“NPS Know-How” has the meaning specified in the License Agreement;

“NPS Trademarks” has the meaning specified in the License Agreement;

“Nycomed” means Nycomed Danmark APS, a corporation existing under the laws of the Kingdom of Denmark and its successors or assigns;

“Nycomed Consent” means the consent to assignment agreement dated June 8, 2007 between Nycomed and the Vendor;

- 4 -

“Nycomed Direction” means the written direction of the Vendor to Nycomed dated as of the date hereof to pay the Purchaser Royalty Interest to the Purchaser Account and to deliver the Reports to the Purchaser;

“Original Territory” means the EU, European countries outside EU, CIS and Turkey;

“Parent” has the meaning specified on the first page of this Agreement;

“Patent 151 License” means the [*];

“Patents” means the NPS Patents (as such term is defined in the License Agreement) other than [*];

“Person” means an individual, firm, corporation, company, limited liability company or other body corporate (with or without share capital), partnership, trust, joint venture, association, executor, administrator or other legal representative, Governmental Authority or other entity or organization howsoever formed;

“PPSA” means the Personal Property Security Act (Ontario) and any successor statute, as in effect from time to time;

“Product” has the meaning specified in the License Agreement;

“Purchase Price” has the meaning specified in Section 2.2;

“Purchaser” has the meaning specified on the first page of this Agreement;

“Purchaser Account” means the following account:

[*]

“Purchaser Royalty Interest” means, in respect of any calendar year or part thereof occurring during the Term, the right to receive 100% of the Royalties on Net Sales;

“Reports” means the Royalty Reports and the reports or notices under Sections 7.6, 7.8, 9.4, 9.6.1, 9.6.2, 9.7.1, 9.7.2, 9.7.3, 9.8.1 and 9.8.3 of the License Agreement and under Sections 8.5.1, 8.6.1, 8.6.2, 8.6.3, 8.6.4, 8.7.1, 15.9.1 and 15.11 of the Distribution Agreement, as applicable;

“Royalties” means the following payments the Vendor is entitled to receive pursuant to the License Agreement and the Distribution Agreement, as applicable:

(a) all of the royalties payable by Nycomed in respect of the Net Sales of Products sold by Nycomed, its Affiliates or Sublicensees anywhere in the Original Territory (as calculated in accordance with the License Agreement or the Distribution Agreement, as applicable) arising during the Term, including under Section 7.5 of the License Agreement and under Section 15.2 of the Distribution Agreement, as applicable;

- 5 -

(b) any payments in respect of sales that, pursuant to Section 4.6 of the License Agreement, are to be included in Net Sales for purposes of Section 7.5 of the License Agreement, or that are deemed to be Net Sales pursuant to Section 7.3 of the License Agreement, and any gross profits recovered pursuant to Section 7.4 of the License Agreement;

(c) any interest on amounts referred to in clauses (a) and (b) above payable to the Vendor pursuant to the License Agreement, including under Section 7.9 of the License Agreement and under Section 15.9.4 of the Distribution Agreement, as applicable; and

(d) any Infringement Payments,

but does not include any payments that the Vendor is entitled to receive pursuant to Section 7.2 of the License Agreement or Section 15.1 of the Distribution Agreement, as applicable. In addition, notwithstanding any of the foregoing to the contrary, the aggregate amount of the Royalties included within the Assigned Rights (and conveyed to the Purchaser hereunder) shall not exceed the amount that is 2.5 times the amount of the Purchase Price actually paid by the Purchaser to the Vendor under Section 2.3, provided that for purposes of this calculation the First Payment shall be deemed to be $50,000,000;

“Royalty Reports” means the reports Nycomed is required to furnish to the Vendor pursuant to Section 7.6 of the License Agreement and Section 15.9.1 of the Distribution Agreement, as applicable;

“Security Agreement” means the security agreement dated as of the date hereof between the Vendor and the Purchaser;

“Sublicensee” means a sublicensee of Nycomed, including any distributor or subdistributor, as contemplated in the License Agreement;

“Supply Agreement” means the agreement dated February 24, 2005 between the Vendor and Nycomed with respect to the supply of Products and Devices by the Vendor to Nycomed, as amended on October 13, 2005;

“Term” means the period from and including April 1, 2007 up to and including the Termination Date;

“Termination Date” has the meaning specified in Section 8.1;

“Third Party Claim” has the meaning specified in Section 9.3;

“Vendor” has the meaning specified on the first page of this Agreement; and

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“Vendor Account” means the following account:

[*]

1.2 Interpretation

(a) When a reference is made in this Agreement to an “Article”, “Section”, “Schedule” or “Exhibit”, such reference shall be to an Article, Section, Schedule or Exhibit to this Agreement unless otherwise indicated.

(b) The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation” and shall not be construed to limit any general statement which it follows to the specific or similar items or matters immediately following it.

(c) None of the parties hereto shall be or be deemed to be the drafter of this Agreement for the purposes of construing this Agreement against another party.

(d) All uses of the words “hereto”, “herein”, “hereof”, “hereby” and “hereunder” and similar expressions refer to this Agreement.

(e) Unless otherwise specified in this Agreement, words in the singular include the plural and vice versa and words importing one gender include all genders.

(f) The headings and captions in this Agreement are for convenience and reference purposes only and shall not be considered a part of, or affect the construction or interpretation of, any provision of this Agreement.

1.3 Currency

Unless specified otherwise, all references to monetary amounts in this Agreement are to references to the lawful currency of the United States of America.

1.4 Distribution and License Agreement

If the License Agreement is terminated in accordance with Section 2.11 thereof such that the Distribution Agreement is in effect, then: (a) all references in this Agreement to the License Agreement (other than the definition of License Agreement in Section 1.1) shall thereafter be deemed to be references to the Distribution Agreement, (b) the defined terms specified in Part 1 of Schedule 1.4 shall thereafter replace the corresponding terms in Section 1.1, and (c) references to specific provisions of the License Agreement in this Agreement shall be deemed to be references to the corresponding provisions in the Distribution Agreement, including as more particularly set out in Part 2 of Schedule 1.4.

- 7 -

ARTICLE 2

SALE AND ASSIGNMENT

2.1 Sale and Assignment

(a) On the terms and subject to the conditions of this Agreement, the Vendor hereby sells, assigns, transfers, conveys and delivers to the Purchaser, and the Purchaser hereby purchases from the Vendor, all right, title and interest of the Vendor in and to the Assigned Rights free and clear of all Encumbrances.

(b) For purposes of clarification, the Vendor is entitled to receive, and the Purchaser shall have no interest in, any accrued but unpaid Royalties based on Net Sales arising prior to April 1, 2007.

(c) Notwithstanding Section 2.1(a), the Nycomed Direction will provide that both the Purchaser and the Vendor are entitled to receive copies of all Reports.

2.2 Purchase Price

The aggregate purchase price for the Assigned Rights is up to $75,000,000 (the “Purchase Price”) and will be paid by the Purchaser to the Vendor as specified in Section 2.3.

2.3 Payment of Purchase Price

(a) The sum of $50,000,000 less the amount of all Royalties received by the Vendor relating to Net Sales from April 1, 2007 to, but not including, the date hereof (the “First Payment”) will be paid by the Purchaser to the Vendor upon Closing by delivery by or on behalf of the Purchaser of immediately available funds in the requisite amount to the Vendor Account.

(b) $25,000,000 will be paid by the Purchaser to the Vendor within 30 days of (i) the Purchaser receiving the Royalty Report for the fourth quarter of 2009 if such report confirms that annual Net Sales in the Original Territory for the calendar year 2009 are equal to or greater than €[*] (the “2009 Threshold”; or (ii) if the 2009 Threshold is not achieved, the Purchaser receiving the relevant Royalty Reports that confirm that cumulative Net Sales in the Original Territory for the calendar years 2007, 2008 and 2009 are equal to or greater than €[*].

(c) All payments will be made as and when due by delivery by or on behalf of the Purchaser of immediately available funds in the requisite amount to the Vendor Account without any deductions or set-offs (except as specifically provided for in Section 2.3(a)).

2.4 No Obligations Transferred

Notwithstanding any provision of this Agreement:

(a) the sale, assignment, transfer, conveyance and delivery to the Purchaser of the Assigned Rights pursuant to this Agreement shall not in any way subject the Purchaser to, or transfer, affect or modify, any obligation or liability of the Vendor under the License Agreement, including the responsibility thereunder (if any) to prosecute or maintain the Patents; and

- 8 -

(b) the Purchaser expressly does not assume or agree to become responsible for any obligation or liability of the Vendor of any kind whatsoever, whether presently in existence or arising or asserted hereafter, whether under the License Agreement or otherwise, except for actions taken by the Purchaser in exercising its rights under the License Agreement that are part of the Assigned Rights. All such obligations and liabilities (for certainty, including any and all existing and/or potential obligations under each of the Asahi Agreement, the Gautvik Agreement and the Patent 151 License, including royalty or milestone payments payable thereunder) are, and from and after the Closing shall be retained by and remain obligations and liabilities of, the Vendor.

ARTICLE 3

THE CLOSING

3.1 Closing

The closing of the transactions contemplated by this Agreement, including the transfer to the Purchaser of all of the Vendor’s right, title and interest in and to the Assigned Rights, shall take place on the date hereof (the “Closing”) at the offices of the Purchaser’s counsel, Davies Ward Phillips & Vineberg LLP, in Toronto, Ontario.

3.2 Closing Deliveries

The Purchaser acknowledges that, at the Closing, the Vendor has delivered or has caused to be delivered to the Purchaser:

(a) a current Certificate of Status from the Ontario Ministry of Consumer and Business Services;

(b) a current certificate of Good Standing for the Parent;

(c) the Nycomed Consent, duly executed and delivered by Nycomed;

(d) the Nycomed Direction, duly executed and delivered by the Vendor;

(e) the Bill of Sale, duly executed and delivered by the Vendor;

(f) the Security Agreement, duly executed and delivered by the Vendor;

(g) the conditional assignment agreements and additional documentation relating to the registration of the conditional assignment of the Patents in each of the United Kingdom, France, Germany, Spain, Italy, The Netherlands, Austria and Greece, duly executed and delivered by the Vendor;

- 9 -

(h) a certified copy of each of the Asahi Agreement, the Gautvik Agreement, the Patent 151 License and the License Agreement (including the Distribution Agreement and the Supply Agreement, which are attached as exhibits thereto);

(i) standard corporate existence and authority opinions and enforceability opinions on this Agreement, the Bill of Sale, the Security Agreement, the conditional assignment agreements (including any related mortgages and pledges) referred to in Section 3.2(g), the Distribution Agreement and the License Agreement, a perfection and registration opinion with respect to the Security Agreement, a no conflict with laws opinion on this Agreement and the License Agreement and a true sale opinion from counsel to the Vendor; and

(j) standard corporate existence and authority opinions and an enforceability opinion on this Agreement from counsel to the Parent;

(k) PPSA financing statements to (x) perfect the sale of the Assigned Rights to the Purchaser, to the extent the Assigned Rights are “accounts” as defined in the PPSA, (y) to create, evidence and perfect the precautionary Encumbrance granted pursuant to the provisions of Section 7.9 and (z) to perfect the security interest granted in the Security Agreement.

3.3 Closing Deliveries by the Purchaser

The Vendor acknowledges that, at the Closing, the Purchaser has delivered or has caused to be delivered to the Vendor:

(a) payment by a wire transfer of immediately available funds to the Vendor Account, in the amount equal to the First Payment; and

(b) the Nycomed Direction, duly executed and delivered by the Purchaser.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE VENDOR

The Vendor hereby represents and warrants to the Purchaser as of the date hereof as follows and acknowledges that the Purchaser is relying on such representations and warranties in entering into this Agreement.

4.1 Organization, Standing and Power

(a) The Vendor is a corporation duly incorporated, validly existing and in good standing under the laws of the Province of Ontario and has full corporate power and authority and possesses all governmental franchises, licences, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to carry on its business as presently conducted.

(b) The Vendor is not insolvent and no proceedings have been taken or authorized by the Vendor, or to the Knowledge of the Vendor been taken or threatened by any other Person,

- 10 -

with respect to the bankruptcy, insolvency, liquidation, dissolution or winding up of the Vendor. The Vendor will not become insolvent or be put in insolvent circumstances or become unable to meet its obligations as they become due, in each case within the meaning of applicable bankruptcy, insolvency and similar laws to which the Vendor is subject, by or as a result of entering into this Agreement or immediately after the Closing. The Vendor is not entering into this Agreement for the purpose of injuring, obstructing, impeding, defeating, hindering, delaying, defrauding or oppressing the rights and claims of creditors or others against the Vendor.

4.2 Authority, Execution and Delivery; Enforceability

The Vendor has full power and authority to execute and deliver the Closing Documents and to sell, assign, transfer, convey and deliver the Assigned Rights to the Purchaser and to perform all of the obligations to be performed by the Vendor hereunder and under the Closing Documents. The execution and delivery of this Agreement and the Closing Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action of the Vendor. This Agreement has been and each Closing Document has been or will be duly executed and delivered by the Vendor and constitute the Vendor’s legal, valid and binding obligations, enforceable against the Vendor in accordance with its respective terms, subject to creditors’ rights and general principles of equity.

4.3 No Conflicts

(a) The execution and delivery of this Agreement and the Closing Documents by the Vendor do not and will not, and the consummation of the transactions contemplated hereby and thereby and the compliance by the Vendor with the terms hereof and thereof will not:

(i) conflict with, result in a breach or violation of, constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a benefit under, any provision of (i) any applicable statute, law, ordinance, rule or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any court or any Governmental Authority to which the Vendor or its properties or assets may be subject, (ii) any agreement (whether written or oral), commitment or instrument to which the Vendor is a party or by which the Vendor or any of its assets is bound (including any agreement to which the Vendor is a party relating to the Assigned Rights, or the Licensed Technology or the Licensor Trademarks), except that the Vendor has not obtained Nycomed’s consent to the grant of a security interest in the Distribution Agreement, or (iii) the bylaws of the Vendor;

(ii) result in the creation or imposition of any Encumbrance on the License Agreement, the Assigned Rights, the Licensed Technology or the Licensor Trademarks except as contemplated in Section 7.9 and the Security Agreement in favour of the Purchaser; or

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(iii) relieve any party (or their respective Affiliates) to the License Agreement or the Asahi Agreement of any of its obligations or enable it to terminate or suspend its obligations thereunder.

(b) The sale of the Assigned Rights by the Vendor does not constitute a “sale in bulk” by the Vendor for purposes of the Bulk Sales Act (Ontario).

4.4 No Consent

No consent (other than the Nycomed Consent), approval, license, permit, order or authorization of, or registration, declaration or filing with, any Person is required to be obtained or made by the Vendor in connection with the execution and delivery by the Vendor of this Agreement or any Closing Document, the performance by the Vendor of its obligations under this Agreement or any Closing Document or the consummation of any of the transactions contemplated hereby or thereby, including, for certainty, the consent of any Affiliate or Sublicensee, to assign the Vendor’s rights to the Assigned Rights, except that the Vendor has not obtained Nycomed’s consent to the grant of a security interest in the Distribution Agreement.

4.5 Ownership of Assigned Rights

(a) The Vendor is the sole and exclusive owner of all legal and equitable title to the Assigned Rights and has good and valid title to the Assigned Rights free and clear of (i) all Encumbrances and (ii) any right of deduction, set-off, counterclaim or offset for any reason. Upon completion of the Closing and filing of the applicable PPSA financing statements to perfect the sale, if the Assigned Rights are “accounts” as defined in the PPSA, the Purchaser will have acquired good and valid title to the Assigned Rights, free and clear of (i) any and all Encumbrances of any kind whatsoever and (ii) any right of deduction, set-off, counterclaim or offset for any reason, except for the Encumbrances in favour of the Purchaser contemplated herein. The Vendor has not assigned, and has not in any other way conveyed, transferred or granted any Encumbrance to any Person in respect of, all or any portion of its right, title and interest in or to the Assigned Rights or agreed or committed to do any of the foregoing.

(b) There are no other contracts, arrangements or understandings (whether written or oral) to which the Vendor is a party relating to the Assigned Rights, other than pursuant to the Gautvik Agreement and the Asahi Agreement as more particularly described on Schedule 4.5.

(c) Other than the Purchaser under this Agreement, no Person has any entitlement to receive, in whole or in part, any of the Royalties, other than pursuant to the Gautvik Agreement and the Asahi Agreement as more particularly described on Schedule 4.5.

4.6 License, Supply and other Agreements

(a) Each of the License Agreement, the Distribution Agreement, the Supply Agreement, the Patent 151 License and the Asahi Agreement is the legal, valid and binding obligation of the Vendor and, to the Knowledge of the Vendor, of each other party thereto, enforceable in accordance with its terms (subject to laws affecting the rights of creditors generally and principles of equity) and is in full force and effect, except that the Vendor’s and Nycomed’s performance and all obligations under the Distribution Agreement have been excused in all respects until midnight on September 1, 2007 in accordance with, and subject to, Section 2.11 of the License Agreement.

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(b) There is no breach or default, or event which, either individually or in aggregate, with other events, upon notice or passage of time, or both, would reasonably be expected to give rise to any breach or default in the performance of any of the License Agreement, the Distribution Agreement, the Supply Agreement or the Asahi Agreement by the Vendor or, to the Knowledge of the Vendor, by any counterparty thereto.

(c) The Vendor has not waived any rights or defaults under the License Agreement, the Distribution Agreement, the Asahi Agreement or the Supply Agreement and has not released any counterparty thereto, in whole or in part, and has not itself been released from any of its obligations under the License Agreement, the Distribution Agreement, the Asahi Agreement or the Supply Agreement that would reasonably be expected to adversely affect the Assigned Rights.

(d) A true, correct and complete certified copy of each of the Asahi Agreement, the Gautvik Agreement, the Patent 151 License and the License Agreement (including the Supply Agreement and the Distribution Agreement, which are attached as exhibits thereto) has been delivered to the Purchaser concurrent with the delivery of this Agreement. None of the Asahi Agreement, the Supply Agreement, the Distribution Agreement, the Patent 151 License or the License Agreement has been cancelled, terminated, subordinated or rescinded, in whole or in part, except as specified in Section 2.11 of the License Agreement. The Vendor has not received, and has no reasonable belief that the Vendor may receive, any notice of a counterparty’s intention to terminate or request any amendment or consent to assignment of the License Agreement, the Distribution Agreement, the Supply Agreement or the Patent 151 License. To the Knowledge of the Vendor, no Person that is a party to such agreement has made any claim challenging the enforceability of any of the Asahi Agreement, the Distribution Agreement, the Supply Agreement, the Patent 151 License, the License Agreement (or any part thereof) or the Vendor’s rights in or to the Assigned Rights.

(e) The Vendor has the benefit of the freedom to operate provisions of the Asahi Agreement.

(f) The Vendor has not assigned any of its rights under the License Agreement, the Patent 151 License or the Asahi Agreement, and each of the License Agreement and the Asahi Agreement is free and clear of all Encumbrances.

(g) To the Knowledge of the Vendor, Nycomed has not granted a sublicense pursuant to Section 2.1 of the License Agreement.

4.7 Patents and Other Intellectual Property

(a) Schedule 4.7 sets forth a complete list, including status, of all patent applications and issued patents which comprise the Patents that are applicable in the Original Territory as of the date hereof. The Vendor is the exclusive owner of the entire right, title and interest in and to the Patents free and clear of any Encumbrances other than the encumbrances in respect of the Licensed Technology that are specifically created under or by the Asahi Agreement. The

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Vendor is the owner of the entire right, title and interest in and to any patent applications which are included in the Patents, free and clear of any Encumbrances. The Vendor has not received written notice that any Person has challenged the validity or enforceability of the Patents. To the Knowledge of the Vendor, there is no infringement of the Patents by any Person. The Vendor has not received any demand or claim by any Person that such Person has any ownership interest in any of the Patents, or that any of the Patents are, or may be, invalid or unenforceable or that any Product infringes upon or may infringe upon any patent, copyright, trademark, trade secret or other intellectual property right of any third party. All appropriate patent fees required to be paid with respect to the applications listed on Schedule 4.7 have been paid. To the Knowledge of the Vendor, the sale of the existing Product in the Original Territory as currently sold by Nycomed does not infringe any issued patent of any third party or infringes any other trademarks or trade secrets of any third party. Except as set forth in Schedule 4.7(a), the Vendor has not requested any written opinions of counsel relating to any third party patent or published patent application which may be considered to relate to any Product or Device.

(b) To the Knowledge of the Vendor, no third party has a claim or has claimed any ownership rights or received any demand or claim by any Person that any of the Licensed Technology or Licensor Trademarks is infringing or may infringe upon any patent, copyright, trademark, trade secret or any other intellectual property rights of any third party.

(c) Except as set forth in Schedule 4.7(c) other than pursuant to the License Agreement, the Vendor has not entered into any contract, agreement, commitment or undertaking granting to any Person the right within the Original Territory (i) under the Patents or (ii) to use the Licensed Technology, in either case, to market or sell Products or any other product.

(d) The Vendor has not granted to any Governmental Authority a license relating to the Licensed Technology and, to the Knowledge of the Vendor, there is no reason to believe that the Vendor is or will be required to grant any such license to any Governmental Authority.

(e) The manufacture, use and sale of the existing Product as currently being manufactured, used or sold by Nycomed does not fall within the claims of the Gautvik Patents within the Original Territory.

(f) The Vendor does not have any actual knowledge that the Product currently sold by Nycomed in the Original Territory at the time of manufacturing does not fall within the scope of [*].

4.8 Litigation

Except as set out on Schedule 4.8, there is no: (a) action, suit, claim or proceeding pending or, to the Knowledge of the Vendor, threatened against the Vendor, at law or in equity, (b) arbitration proceeding to which the Vendor is a party, or (c) any inquiry by any Governmental Authority pending or, to the Knowledge of the Vendor, threatened against the Vendor, which, if adversely determined, would question the validity or enforceability of the Licensed Technology, the Licensor Trademarks, the License Agreement or the Assigned Rights, or prevent the consummation of the transactions contemplated by this Agreement or otherwise

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adversely affect the Assigned Rights or the rights granted or licensed by the Vendor to Nycomed under the License Agreement. There is no action or suit by the Vendor pending or threatened in writing against others relating to the Licensed Technology, the Licensor Trademarks, the License Agreement, the Assigned Rights or the Products or Devices. None of the Patents is subject to any outstanding decree, order, judgment, or stipulation restricting in any manner the use or licensing thereof by the Vendor or, to the Knowledge of the Vendor, Nycomed. Schedule 4.7 sets forth a list of all patent office proceedings, including oppositions, interferences or re-examinations, relating to the Patents.

4.9 Royalties

All Royalties required to be paid by Nycomed pursuant to the License Agreement for any period ending on or prior to April 1, 2007 have been paid in full as and when due. No Royalties have been received by the Vendor from Nycomed for the period from April 1, 2007 to the date hereof.

4.10 Reports

The Vendor has provided to the Purchaser true, correct and complete copies of all Royalty Reports received by the Vendor from Nycomed as of the date hereof.

4.11 Expenses

The Purchaser will not be liable for any brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement because of any action taken by, or agreement or understanding reached by, the Vendor.

4.12 Disclosure

No representation or warranty made by the Vendor in this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make any such representation or warranty not misleading to a prospective buyer of the Assigned Rights.

4.13 Business Activities

(a) Neither the Vendor nor, to the Knowledge of the Vendor, Nycomed participates (directly or through an agent) within the United States in soliciting the order, negotiating the contract of sale, or performing any other services necessary for the consummation of sales of Products or Devices (both as defined in the License Agreement) by Nycomed, its affiliates, distributors, subdistributors or sublicensees.

(b) Neither the Vendor nor, to the Knowledge of the Vendor, Nycomed participates (directly or through an agent) from the United States in soliciting, negotiating, or performing any other activities or services required to arrange or incident to the sublicense, subdistribution, or any subsequent sale or exchange of intellectual property underlying the License Agreement. This representation shall not apply to any activities associated with the execution of the License Agreement (including any solicitation, negotiation or other activities related to the entering into of the License Agreement).

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(c) Neither the Vendor nor, to the Knowledge of the Vendor, Nycomed holds out any person or place within the United States as a point to which sales orders of Products or Devices should be sent.

(d) Any Product or Device sold in the Original Territory that gives rise to payments under the License Agreement is not manufactured, held in, or physically distributed from any location within the United States.

(e) No marketing activity with respect to the Products or Devices, including the display, promotion, or sale of samples, is carried out (directly or through an agent) from within the United States by the Vendor or, to the Knowledge of the Vendor, Nycomed.

(f) The Vendor reasonably believes that Products and Devices sold outside the United States are for use, consumption, or disposition outside the United States.

(g) All sales of Products or Devices which generate royalties under the License Agreement or the Distribution Agreement are made to Persons that are not Affiliates of either Nycomed or the Vendor.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Vendor as of the date hereof as follows and acknowledges that the Vendor is relying on such representations in entering into this Agreement:

5.1 Organization

The Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of the Cayman Islands and has full organizational power and authority and possesses all governmental franchises, licences, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to carry on its business as presently conducted.

5.2 Authorization

The Purchaser has full power and authority to execute and deliver this Agreement and to perform all of the obligations to be performed by the Purchaser hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary partnership action of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes the Purchaser’s legal, valid and binding obligation, enforceable against the Purchaser in accordance with its terms.

5.3 No Conflicts

The execution and delivery of this Agreement by the Purchaser do not, and the consummation of the transactions contemplated hereby and the compliance by the Purchaser with the terms hereof will not conflict with, result in a breach or violation of, constitute a default

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(with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, any provision of: (a) any applicable statute, law, ordinance, rule or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any court or any Governmental Authority to which the Purchaser or its properties or assets may be subject, (b) any material contract, commitment or instrument to which the Purchaser is a party or by which the Purchaser or any of its assets is bound, or (c) the governing documents of the Purchaser.

5.4 No Consent

No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any Person is required to be obtained or made by the Purchaser in connection with the execution and delivery by the Purchaser of this Agreement, the performance by the Purchaser of its obligations under this Agreement or the consummation of any of the transactions contemplated hereby.

5.5 Expenses

The Vendor will not be liable for any brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement because of any action taken by, or agreement or understanding reached by, the Purchaser.

5.6 Litigation

There is no: (a) action, suit, claim or proceeding pending or, to the knowledge of the Purchaser, threatened against the Purchaser, at law or in equity, (b) arbitration proceeding to which the Purchaser is a party, or (c) any inquiry by any Governmental Authority pending or, to the knowledge of the Purchaser, threatened against the Purchaser, which, if adversely determined, would prevent the consummation of the transactions contemplated by this Agreement.

5.7 Availability of Funds

The Purchaser has or has access to sufficient funds to enable the Purchaser to consummate the transactions contemplated in this Agreement.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF PARENT

The Parent hereby represents and warrants to the Purchaser as of the date hereof as follows and acknowledges that the Purchaser is relying on such representations and warranties in entering into this Agreement.

6.1 Organization, Standing and Power

(a) The Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority and possesses all governmental franchises, licences, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to carry on its business as presently conducted.

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(b) The Parent is not insolvent and no proceedings have been taken or authorized by the Parent, or to the Knowledge of the Parent been taken or threatened by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding up of the Parent. The Parent will not become insolvent or be put in insolvent circumstances or become unable to meet its obligations as they become due, in each case within the meaning of applicable bankruptcy, insolvency and similar laws to which the Parent is subject, by or as a result of entering into this Agreement or immediately after the Closing.

6.2 Authority, Execution and Delivery; Enforceability

The Parent has full power and authority to execute and deliver this Agreement and to perform all of the obligations to be performed by the Parent hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action of the Parent. This Agreement has been duly executed and delivered by the Parent and constitutes the Parent’s legal, valid and binding obligation, enforceable against the Parent in accordance with its terms, subject to creditors’ rights and general principles of equity.

6.3 No Conflicts

The execution and delivery of this Agreement by the Parent do not and will not, and the consummation of the transactions contemplated hereby and the compliance by the Parent with the terms hereof will not, conflict with, result in a breach or violation of, constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a benefit under, any provision of (i) any applicable statute, law, ordinance, rule or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any court or any Governmental Authority to which the Parent or its properties or assets may be subject, (ii) any agreement (whether written or oral), commitment or instrument to which the Parent is a party or by which the Parent or any of its assets is bound, or (iii) the bylaws of the Parent.

6.4 No Consent

No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any Person is required to be obtained or made by the Parent in connection with the execution and delivery by the Parent of this Agreement, the performance by the Parent of its obligations under this Agreement or the consummation of any of the transactions contemplated hereby.

6.5 Litigation

Except as set out on Schedule 4.8, there is no: (a) action, suit, claim or proceeding pending or, to the knowledge of the Parent, threatened against the Parent, at law or in equity, (b) arbitration proceeding to which the Parent is a party, or (c) any inquiry by any Governmental Authority pending or, to the knowledge of the Parent, threatened against the Parent, which, if adversely determined, would prevent the consummation of the transactions contemplated by this Agreement.

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ARTICLE 7

COVENANTS

7.1 Remittance of Royalties

(a) The Vendor shall direct Nycomed pursuant to the Nycomed Direction to, during the Term, make payments of the Royalties directly to the Purchaser Account, but otherwise in the manner provided in the License Agreement.

(b) If, notwithstanding the terms of the Nycomed Direction, Nycomed or any Sublicensee, Affiliate of Nycomed or any other Person makes any payment on account of the Purchaser Royalty Interest to the Vendor, then the Vendor shall be deemed to be holding such funds in trust for the Purchaser and shall promptly, and in any event no later than three Business Days following the receipt by the Vendor of such payment, remit the entire amount of such payment to the Purchaser without deduction, set-off, claim, counterclaim or offset (except to the extent of Royalties received by the Vendor and deducted by the Purchaser from the First Payment); provided, however, that if the Purchaser notifies the Vendor in writing that any amount required to be remitted to the Purchaser by Nycomed or any Sublicensee or Affiliate was not remitted to the Purchaser, and the Purchaser has confirmed with Nycomed or such Sublicense or Affiliate that such amount was instead remitted to the Vendor, then the Vendor shall promptly remit such amounts to the Purchaser and, in any event, within one Business Day of receipt of such notice from the Purchaser.

(c) All payments referred to in Section 7.1(a) and (b) shall be made, unless otherwise agreed in writing by the parties, by wire transfer of immediately available funds to the Purchaser Account.

(d) If at any time the Purchaser receives or has received any payment or other money relating to the Licensed Technology that is not in respect of the Assigned Rights or that the Purchaser is not otherwise entitled to under this Agreement or a Closing Document, the Purchaser shall be deemed to be holding such funds in trust for the Vendor and shall forthwith upon receipt of such funds and, in any event, within five Business Days thereof, deliver the same to the Vendor Account without deduction, set-off, claim, counter-claim or offset.

7.2 Maintenance of License, Supply and other Agreements

(a) Subject to Section 7.4(b)(ii), at all times and from time to time during the Term, the Vendor shall (i) comply fully with all of its obligations under the License Agreement, the Distribution Agreement, the Supply Agreement, the Patent 151 License and the Asahi Agreement, and (ii) immediately notify the Purchaser in writing in the event the Vendor receives notice from or on behalf of a counterparty to any of the License Agreement, the Distribution Agreement, the Supply Agreement, the Patent 151 License or the Asahi Agreement that the Vendor is in default thereunder or that a party thereto has terminated or intends to terminate the License Agreement, the Distribution Agreement, the Supply Agreement, the Patent 151 License or the Asahi Agreement.

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(b) During the Term, the Vendor shall not, without prior written consent of the Purchaser: (i) sell, assign, transfer, convey, deliver, create any Encumbrance on or otherwise dispose of any right, interest or obligation in, to or under the License Agreement, the Distribution Agreement or the Patent 151 License; (ii) forgive, release or compromise any Royalties owed by or to become owing to the Vendor pursuant to the License Agreement or the Distribution Agreement; (iii) amend, modify, supplement, restate or otherwise alter any of the License Agreement, the Distribution Agreement or the Asahi Agreement in a manner which, either individually or in the aggregate, could reasonably be expected to adversely affect the Assigned Rights; (iv) terminate the Asahi Agreement, the License Agreement or the Distribution Agreement; (v) amend or modify the Supply Agreement in a manner which, either individually or in the aggregate, could reasonably be expected to adversely affect the Assigned Rights, (vi) terminate the Supply Agreement, except pursuant to a written agreement pursuant to which Nycomed or any of its successors or assigns agrees to manufacture, or have a third party manufacture, the Product, or (vii) consent to any of the foregoing. Notwithstanding the foregoing, the Vendor shall be permitted to assign the License Agreement, the Distribution Agreement and the Supply Agreement to an Affiliate to which the Patents, the Patent 151 License and this Agreement are also assigned in accordance with Sections 7.4(e) and 11.4, respectively, without the Purchaser’s consent; provided, however, that prior to such assignment of the License Agreement and the Distribution Agreement, such assignee shall grant to the Purchaser a valid perfected first priority security interest therein on the same terms as the security interest granted to the Purchaser under the Security Agreement. The Purchaser acknowledges that, pursuant to Section 2.11 of the License Agreement: (i) upon the delivery of the Release Certificate (as defined in the License Agreement) by Nycomed to the Vendor as set forth in Section 6.8 of the License Agreement, the Distribution Agreement shall be immediately terminated and deemed null and void in all respects upon the date of such delivery; and (ii) in the event that the Release Certificate is not delivered as set forth in Section 6.8 of the License Agreement, subject to Section 16.8 of the License Agreement, the License Agreement shall be immediately terminated and deemed null and void in all respects.

7.3 Reports; Other Information

(a) If, notwithstanding the terms of the Nycomed Direction, any Report required by this Agreement to be delivered to the Purchaser is delivered to, or otherwise received by or on behalf of the Vendor, the Vendor shall promptly, and in any event no later than three Business Days following the receipt thereof by or on behalf of the Vendor, deliver such Report to the Purchaser in accordance with Section 11.3 (without the necessity of delivering a copy to the Purchaser’s counsel) by overnight courier service.

(b) The Vendor shall provide to the Purchaser, as promptly as practicable, but in any event within five Business Days of receipt by the Vendor: (i) copies of any notice, report or other written communication with, from or on behalf of Nycomed or any other Person directly relating to the License Agreement, the Asahi Agreement, the Nycomed Direction or the Assigned Rights, in each case to the extent the foregoing could, individually or in the aggregate, reasonably be expected to result in an adverse effect to the Assigned Rights, (ii) copies of any notice, report or other written communication with, from or on behalf of Nycomed or any other Person relating to any of, the Asahi Agreement, the Gautvik Agreement, the Licensed Technology, any sublicense agreement with any Sublicensee or Affiliate, any Product, the total

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amounts invoiced in respect of the Net Sales of Products sold by Nycomed, its Affiliates or Sublicensees, the Royalties or any other matters reasonably related thereto, in each case, to the extent the foregoing relates to any Assigned Rights or would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect, (iii) notice (in writing in reasonable detail) of any oral communication with, from or on behalf of Nycomed which would reasonably be understood to be a material development with respect to any of the Asahi Agreement, the Gautvik Agreement, the Assigned Rights or Products, (iv) notice of any actions, suits, claims, investigations or proceedings commenced or threatened in writing against, relating to or involving or otherwise affecting the Asahi Agreement, the Gautvik Agreement Licensed Technology, the License Agreement, any sublicense agreement with any Sublicensee or Affiliate, any Product, the total amounts invoiced in respect of the Net Sales of Products sold by Nycomed, its Affiliates or Sublicensees, the Royalties or any other matters reasonably related thereto to the extent the foregoing relates to any Assigned Right or would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect, and (v) a copy of each report, notice or other written communication referred to in Sections 6.8, 9.7.4, 9.7.5, 16 and 17 of the License Agreement and Sections 19 and 20 of the Distribution Agreement, as applicable.

7.4 Patent Obligations

(a) For so long as the License Agreement remains in effect:

(i) the Vendor shall provide or cause to be provided to the Purchaser copies of all correspondence received from Nycomed pursuant to Section 9.4 of the License Agreement;

(ii) subject to the terms of the License Agreement, the Vendor shall procure that Nycomed shall prosecute and maintain the Patents in the Original Territory that could be necessary or advantageous for the Vendor to fulfill its obligations under the License Agreement; and

(iii) subject to the terms of the License Agreement, in the event Nycomed intends to allow any Patent in the Original Territory to lapse or become abandoned, the Vendor shall consult with the Purchaser to determine whether such Patent is necessary for or advantageous to the Vendor’s fulfillment of its obligations under the License Agreement, and the Vendor shall have the right (but not the obligation) to assume further responsibility for the prosecution, maintenance and defence of such Patent at the Vendor’s expense. If the Vendor intends to allow any such Patent to lapse or become abandoned, the Purchaser shall have the right (but not the obligation) to assume further responsibility for the prosecution, maintenance and defence of such Patent at the Purchaser’s expense.

(b) At any time that the Distribution Agreement is in effect:

(i) the Vendor shall, subject to the rights of Nycomed under the Distribution Agreement: (A) to the full extent allowed by law, prosecute and maintain in

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full force and effect each pending patent application included in the Patents in the Original Territory, and (B) maintain and keep in full force and effect any issued Patents in the Original Territory. The Vendor shall provide or cause to be provided to the Purchaser copies of all correspondence with any patent office or counsel’s analysis in writing, including drafts of responses with sufficient time to provide the Purchaser time to review and comment on such response; and

(ii) subject to the terms of the Distribution Agreement, the Vendor shall pursue and prosecute any claim under any Patent applicable within the Original Territory that could reasonably be necessary or advantageous for the Vendor to fulfill its obligations under the License Agreement and in respect of which the Vendor is advised by Purchaser’s patent counsel has a reasonable legal basis for allowance. The Vendor will not abandon prosecution of any pending claim under a Patent without the prior written consent of the Purchaser acting reasonably. In addition, prior to issuance of a patent from a pending patent application included in Patents or abandonment of a patent application included in Patents, the Vendor shall file, or if Nycomed is primarily responsible for the prosecution and maintenance of the Patents, shall procure that Nycomed shall file, to the extent permitted by law, a continuation or divisional application of the patent application unless: (A) the Vendor has prior written consent from the Purchaser not to file such a continuation or divisional application, or (B) as of the date of such issuance or abandonment, the term of all Patents has expired.

(c) If the Vendor or Nycomed proposes not to pay or to continue to pay all required maintenance or other government fees as are necessary or desirable to diligently maintain any issued patent included in the Patents within the Original Territory, the Vendor shall promptly notify the Purchaser of such proposal prior to making any decision in respect thereof. The Purchaser shall have the right (but not the obligation) to assume responsibility for maintenance of such Patent in such countries at the Purchaser’s expense, provided that, if the Purchaser chooses to exercise such right, the Purchaser shall notify the Vendor thereof in writing within a reasonable period of time.

(d) If the Vendor shall have received written notice of infringement of any Patent and none of the Vendor, Nycomed or any other Person has initiated legal proceedings against such infringer as permitted pursuant to the License Agreement, then, subject to the terms of the License Agreement, if requested by the Purchaser, the Vendor shall initiate legal proceedings against such infringer with counsel selected by the Purchaser and at the Purchaser’s expense, and the Purchaser will have the right to control such legal action. The Vendor will cooperate fully with the Purchaser in any such legal action.

(e) The Vendor may not sell or otherwise transfer (save in respect of the License Agreement and the Distribution Agreement) any Patent to any Person without the prior written consent of the Purchaser, such consent to be at the Purchaser’s sole discretion. Notwithstanding the foregoing, the Vendor may transfer the Patents to an Affiliate to which the License Agreement, the Distribution Agreement, the Patent 151 License and this Agreement are also

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assigned in accordance with Sections 7.2(b) and 11.4, respectively, without the Purchaser’s prior written consent; provided, however, that prior to such transfer, such assignee shall grant to the Purchaser a valid perfected first priority security interest in such transferred Patents on the same terms as the security interest granted to the Purchaser under the Security Agreement and the documentation referred to in Section 3.2(g).

7.5 Termination of License Agreement

(a) If the License Agreement is terminated by Nycomed or, subject to Section 7.2, by the Vendor, and at such time the Licensed Technology remains economically valuable (as determined by the Purchaser in its sole discretion acting reasonably), then the Vendor shall thereafter use commercially reasonable efforts to enforce its rights under Sections 16.5 and 16.6 of the License Agreement and for a period of 12 months following the effective date of any such termination use its commercially reasonable efforts: (a) to negotiate, execute and deliver (i) a new license agreement (the “New License Agreement”) for the license of the Licensed Technology, on terms that are substantially similar (when taken as a whole) as those contained in the License Agreement and that do not adversely affect the Assigned Rights, or (ii) any other arrangement for the exploitation of the Licensed Technology, in each case providing for the payment of royalties or other consideration to the same extent and for the same period of time that Royalties are currently payable to the Vendor pursuant to the License Agreement or the economic equivalent thereof on terms that are reasonably satisfactory to the Purchaser and the Vendor (collectively, the “New Arrangement”); and (b) to obtain all approvals and consents which are necessary in connection therewith.

(b) The Vendor shall obtain the Purchaser’s written consent in accordance with Section 7.2 prior to entering into any New Arrangement and shall keep the Purchaser reasonably informed as to the status of negotiations with respect to and completion of the New Arrangement. Promptly upon the Vendor entering into the New Arrangement, the Vendor shall provide the Purchaser with a certified true, correct and complete copy of the agreement or contract relating to the New Arrangement and the Purchaser shall be entitled to all Royalties under such New Arrangement to the same extent and under the same terms as set forth in the definition of the Purchaser Royalty Interest herein (the “New Royalty Interest”).

(c) If the Vendor does not complete such negotiation, execution and delivery and obtain such approvals and consents within 12 months of its commencing the process of obtaining a New License Agreement, then the Vendor shall provide reasonable assistance to and cooperate with the Purchaser, at the Purchaser’s cost and expense, and the Purchaser shall be authorized in the name of the Vendor for the benefit of the Purchaser, at the Purchaser’s sole discretion, cost and expense (including the Purchaser’s payment of the Vendor’s reasonable attorney fees in connection therewith, if any), to negotiate, execute and deliver a New License Agreement for the license of the Licensed Technology on terms that are no more extensive (when taken as a whole), without the Vendor’s permission, than the terms contained in the License Agreement, but in any event, with respect to the following matters, the New License Agreement shall include provisions at least as favourable to the Vendor as those contained in the License Agreement: disclaimers of the Vendor’s liability, intellectual property ownership and control, commercialization diligence and indemnification of the Vendor. In the event the Vendor enters into a New Arrangement, the Vendor agrees to comply with the provisions of this Agreement in

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connection with the New License Agreement and references herein to the Purchaser Royalty Interest, the License Agreement and the Assigned Rights shall be deemed to be references to the New Purchaser Royalty Interest, the New License Agreement, and all of the right, title and interest (but none of the obligations) of the Vendor in and to the New License Agreement, respectively, and references to Nycomed shall be deemed to be references to the other party to the New License Agreement and that other party’s Affiliates.

7.6 Confidentiality

(a) All information furnished by the Purchaser to the Vendor or by the Vendor to the Purchaser in connection with this Agreement and the transactions contemplated hereby, as well as the terms, conditions and provisions of this Agreement and any other agreement delivered pursuant hereto, shall be kept confidential by the Vendor, the Purchaser and the Parent and shall be used by the Vendor, the Purchaser and the Parent only in connection with this Agreement and the transactions contemplated hereby, except in connection with the enforcement of rights under this Agreement and except to the extent that such information: (i) is already known by the party to whom the information is disclosed or in the public domain at the time the information is disclosed, (ii) thereafter becomes lawfully obtainable from other sources other than as a result of a breach of an obligation of confidentiality, (iii) is required to be disclosed in any document to be filed with any Governmental Authority, or (iv) is required to be disclosed under securities laws or regulations applicable to the Vendor, the Purchaser or their respective Affiliates, or by court or administrative order. Notwithstanding the foregoing, the Purchaser may disclose such information to its manager and partners and each of its and their respective Affiliates, directors, officers, investors, bankers, financing sources, ratings agencies, advisors, trustees and representatives and the Vendor and the Parent may disclose such information to its Affiliates, directors, officers, bankers, advisors, investors, financing sources, strategic partners and representatives, provided that such Persons shall be informed of the confidential nature of such information and shall be obligated to keep such information confidential pursuant to the terms of this Section 7.6.

(b) The parties shall use reasonable efforts, acting in good faith, to cooperate with each other with respect to the scope and substance of all disclosures regarding this Agreement to or as required by any Governmental Authority, including the United States Securities and Exchange Commission. In addition, the parties will coordinate in advance with each other in connection with the redaction of certain provisions of this Agreement with respect to any SEC filings of this Agreement, and each party shall use reasonable efforts to seek confidential treatment for such terms if so requested by the other party. Notwithstanding the foregoing, each party shall ultimately retain control over the scope of information to be disclosed to any Governmental Authority for purposes of complying with any applicable law.

(c) The parties shall be free to publicly disclose information contained in any materials that have previously been approved for public disclosure by the other party, without further approvals from the other party hereunder, to the extent there have been no material additions or changes thereto.

(d) The Vendor and the Parent acknowledge that each party will, after Closing, make a public announcement of the transactions contemplated by this Agreement in the form of the

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press release set out in Schedule 7.6(d). Except as set forth in this Section 7.6, no announcement or other disclosure, public or otherwise, concerning the financial or other terms of this Agreement shall be made, either directly or indirectly, by any party hereto without first obtaining the written approval of the other party and agreement upon the nature and text of such announcement or disclosure, such approval and agreement not to be unreasonably withheld or delayed.

7.7 Books and Records

Each of the parties will treat the sale and assignment to the Purchaser of the Assigned Rights pursuant to Section 2.1 as a sale and assignment on its books and records.

7.8 Purchaser May Perform

If the Vendor fails to observe or perform any covenant, condition or agreement contained in this Agreement, and such failure shall continue unremedied for a period of 30 days after notice thereof from the Purchaser to the Vendor, the Purchaser may (but shall not be obliged to) perform, or cause performance of, such covenant, condition or agreement, provided that the Purchaser shall in any event first have given the Vendor written notice of its intent to do the same.

7.9 Grant of Security Interest

(a) The Vendor shall enter into and perform its obligations under the Security Agreement, including, as general and continuing security for the due payment and performance of all of the Vendor’s obligations under this Agreement, the grant to the Purchaser of a legal, valid and enforceable first priority security interest in and to the Licensed Technology, the License Agreement and the Distribution Agreement, on the terms of and subject to the conditions contained in the Security Agreement.

(b) After the Closing, from time to time, as and when requested by the Purchaser, the Vendor shall use its commercially reasonable efforts to procure the cooperation of Asahi as reasonably deemed necessary by the Purchaser in connection with the registration of the Asahi Agreement with the relevant Government Authorities in the Original Territory by the Purchaser or its designee.

(c) As soon as possible following the Closing and, in any case, within 60 days from the date hereof, the Vendor shall take such actions as are required to perfect the registers (for certainty, including, as required, ensuring that the Vendor’s name and address are correctly referenced therein) in the patent offices in which the Patents are registered in each of the jurisdictions listed in Section 3.2(g) in order to, or in order to enable the Purchaser to, within such 60-day period, record on such patent registers each of the documents referred to in Section 3.2(g).

(d) As soon as possible following the Closing and, in any case, within 15 days from the date hereof, the Vendor shall obtain the written consent of Nycomed to the grant of a security interest in the Distribution Agreement by the Vendor as contemplated in the Security Agreement.

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7.10 Costs and Expenses

Subject to the provisions of the next paragraph, each party shall be responsible for and bear all of its own costs and expenses (including attorney fees and any brokers, finders or investment banking fees or prior commitment in respect thereof) incurred in connection with this Agreement and the Closing.

7.11 No Contravention of Vendor’s Residual Rights; End of Term

(a) The Purchaser shall not take any action or omit to take any action that would materially impair the Vendor’s: (i) residual rights in, to or under the License Agreement; or (ii) rights to payments under Section 2.3(b).

(b) At the end of the Term, the Purchaser shall take such actions, and execute such documents, certificates and instruments, as reasonably requested by the Vendor or the Parent to terminate the security interests granted by the Vendor and the Parent hereunder and pursuant to the Security Agreement and to direct Nycomed to thereafter pay the royalties under the License Agreement and the Distribution Agreement and deliver the Reports to the Vendor or to such other Person as the Vendor may determine in its sole discretion.

7.12 Certain Factual Representations of the Vendor

The Vendor shall use reasonable efforts to ensure that each of the factual representations and warranties set out in Section 4.13 relating solely to any activities of the Vendor or its Affiliates which activities are directly or indirectly in its control shall remain true and accurate at all times during the Term. During the Term, the Vendor shall notify the Purchaser as soon as practical in the event that the Vendor becomes aware that any aspect of such representations and warranties becomes wholly or partially inaccurate.

7.13 Cure Period

The Vendor or the Purchaser, as applicable, shall have 60 days after receiving notice from the other party to cure the breach of any covenant contained in this Agreement or in any Closing Document.

ARTICLE 8

TERMINATION; SURVIVAL

8.1 Termination

This Agreement shall terminate on the earlier of: (i) the date (the “Termination Date”) that the aggregate amount of the payments received by the Purchaser in respect of the Purchaser Royalty Interest is equal to the amount that is 2.5 times the amount of the Purchase Price actually paid by the Purchaser to the Vendor under Section 2.3, provided that for purposes of this calculation the First Payment shall be deemed to be $50,000,000; (ii) the expiration or termination of the License Agreement pursuant to Section 16.1 or 16.2 thereof; or (iii) the termination of the License Agreement by Nycomed and the failure by the Vendor or the Purchaser to enter into a New License Agreement within 12 months after such termination in accordance with Section 7.5.

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8.2 Survival

(a) The representations and warranties in Sections 4.1, 4.2, 4.5, 4.6(a), 4.6(d), 4.6(e), 4.6(f), 4.7(a), 4.7(b), 4.7(d), 5.1, 5.2, 6.1 and 6.2 shall survive the Closing until the Termination Date. The other representations and warranties in Article 4, Article 5 and Article 6 shall survive the Closing until the second anniversary of the date hereof. No claim for any breach of a representation or warranty or any claim for indemnification based on a breach of representation or warranty shall be made following the date when the applicable representation or warranty expires.

(b) To the extent not performed, covenants shall survive the Closing until the Termination Date.

ARTICLE 9

INDEMNITY

9.1 Indemnification by the Vendor and the Parent

The Vendor and the Parent shall jointly and severally indemnify the Purchaser, and its officers, directors, managers, partners, trust beneficiaries, agents and representatives against, and hold each of them harmless from, any Damages suffered or incurred by any such Person arising from, relating to or otherwise in respect of:

(a) any breach of any representation or warranty of the Vendor or the Parent contained in this Agreement or any Closing Document;

(b) any breach of any covenant of the Vendor or the Parent contained in this Agreement or any Closing Document;

(c) any liability or obligation of the Vendor arising under the Asahi Agreement or the Gautvik Agreement;

(d) any deduction, set-off, claim, counterclaim or offset made by Nycomed, any Sublicensee or Affiliate on account of any payment the Purchaser is entitled to receive pursuant to this Agreement in respect of the Assigned Rights if such deduction, set-off, claim, counterclaim or offset is made to satisfy any obligation or amount owing or alleged to be owing for any withholding taxes on payments from Nycomed to the Vendor under the License Agreement for any period prior to the commencement of the Term, as contemplated in Section 7.7 of the License Agreement; and

(e) any liability suffered or incurred by the Purchaser as a result of or arising from the failure of the Vendor to comply with the requirements of any applicable bulk sales legislation in respect of the purchase and sale of the Assigned Rights under this Agreement.

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9.2 Indemnification by the Purchaser

The Purchaser shall indemnify the Vendor, its directors, officers, shareholders and representatives against, and hold them harmless from, any Damages suffered or incurred by any such Person arising from, relating to or otherwise in respect of:

(a) any breach of any representation or warranty of the Purchaser contained in this Agreement; and

(b) any breach of any covenant of the Purchaser contained in this Agreement.

9.3 Procedure for Claims

(a) Third Party Claims. In order for a person (the “indemnified party”) to be entitled to any indemnification provided for under Section 9.1 or 9.2 in respect of, arising out of or involving a claim made by any Person against the indemnified party (a “Third Party Claim”), such indemnified party must notify the indemnifying party in writing (and in reasonable detail) of the Third Party Claim within ten Business Days after receipt by such indemnified party of notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually and materially prejudiced as a result of such failure. Thereafter, the indemnified party shall deliver to the indemnifying party, within five Business Days after the indemnified party’s receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim.

(b) Assumption. If a Third Party Claim is made against an indemnified party, the indemnifying party shall be entitled to participate in the defence thereof and, if it so chooses, to assume the defence thereof with counsel selected by the indemnifying party; provided, however, that such counsel is not reasonably objected to by the indemnified party. Should the indemnifying party so elect to assume the defence of a Third Party Claim, the indemnifying party shall not be liable to the indemnified party for any legal expenses subsequently incurred by the indemnified party in connection with the defence thereof. If the indemnifying party assumes such defence, the indemnified party shall have the right to participate in the defence thereof and to employ counsel, at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defence. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the defence thereof. If the indemnifying party chooses to defend or prosecute a Third Party Claim, all the indemnified parties shall cooperate in the defence or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party’s request) the provision to the indemnifying party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the indemnifying party assumes the defence of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the indemnifying party’s prior written consent (which consent shall not be unreasonably withheld). If the indemnifying party assumes the defence of a Third Party Claim, the

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indemnified party shall agree to any settlement, compromise or discharge of a Third Party Claim that the indemnifying party may recommend and that by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Third Party Claim, which releases the indemnified party completely in connection with such Third Party Claim and that would not otherwise adversely affect the indemnified party.

(c) Other Claims. In the event any indemnified party should have a claim against any indemnifying party under Section 9.1 or 9.2 that does not involve a Third Party Claim being asserted against or sought to be collected from such indemnified party, the indemnified party shall deliver notice of such claim with reasonable promptness to the indemnifying party. The failure by any indemnified party so to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to such indemnified party under Section 9.1 or 9.2, except to the extent that the indemnifying party demonstrates that it has been materially prejudiced by such failure.

9.4 Tax Matters

The Purchaser acknowledges that neither the Vendor nor the Parent or any of their respective employees or Affiliates has rendered any tax advice related to the receipt by the Purchaser of payments pursuant to the Purchase Agreement and that neither the Vendor nor the Parent or any of their respective employees or Affiliates has provided any representation regarding the application of the tax law of any jurisdiction to the Purchaser in connection with the receipt of such payments. Neither the Vendor nor the Parent or any of their respective employees or Affiliates shall be liable or otherwise incur an obligation to the Purchaser or its Affiliates as a result of any tax liabilities (including any penalties or fines) incurred by the Purchaser or its Affiliates arising out of, or resulting from, the Purchaser’s tax planning in connection with the consummation of the transaction contemplated herein; provided, however, that the foregoing shall not relieve the Vendor and the Parent of any obligation arising under Section 9.1(a).

ARTICLE 10

GUARANTEE OF VENDOR’S OBLIGATIONS

10.1 Guarantee

The Parent hereby absolutely, unconditionally and irrevocably guarantees to the Purchaser, during the Term, the punctual and complete fulfillment and performance when due of all of the Vendor’s (including its successors and permitted assignees) obligations under this Agreement and the Security Agreement, including any obligations that accrued after the filing of a bankruptcy petition or the commencement of a bankruptcy proceeding, notwithstanding any automatic stays or other laws that limit the accrual of obligations post-filing or post-commencement (for purposes of this Article 10, the “Guarantee”).

10.2 Guarantee Binding

The liability of the Parent under the Guarantee shall be binding upon the Parent and its successors and permitted assigns, shall not be subject to any counterclaim, set-off, deduction or defence based upon any claim that the Parent may have against the Purchaser under

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this Agreement or otherwise and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not the Parent shall have any knowledge or notice thereof) that might otherwise constitute a legal or equitable discharge or defence of a guarantor (including the insolvency or bankruptcy of the Vendor); provided, however, that any claim of the Purchaser under this Guarantee against the Parent shall be subject to, and the Parent shall have available to it in defence of any such claim, any and all of the Vendor’s rights and defences, whether arising under this Agreement, the other Closing Documents or otherwise, in respect of any such claim, other than those defences in respect of good standing, valid existence, corporate capacity, due authorization, due execution or delivery and, as noted above, financial condition of the Vendor.

10.3 Costs and Expenses

To the extent Vendor is unable to financially satisfy any claims determined to be due and owing to Purchaser, the Parent shall pay all costs and expenses (including legal fees and expenses) reasonably incurred by or on behalf of the Purchaser in enforcing the obligations of the Parent under this Guarantee.

10.4 Subrogation

To the extent of any payment by the Parent to the Purchaser under this Guarantee, the Parent shall succeed to all corresponding claims that the Purchaser may have and otherwise shall be subrogated to the rights of the Purchaser against the Vendor in respect thereof.

10.5 Enforcement

The Purchaser shall first seek to enforce the Obligations against the Vendor before seeking to enforce this Guarantee, but the Purchaser shall not be required to exhaust all of its remedies against the Vendor before enforcing this Guarantee.

ARTICLE 11

MISCELLANEOUS

11.1 Further Assurances

After the Closing, from time to time, as and when requested by any party, each party shall execute and deliver, or cause to be executed and delivered, all such documents, certificates and instruments, and shall take, or cause to be taken, all such further or other actions, as such other party may deem reasonably necessary, desirable or appropriate to carry out all of the provisions of this Agreement and to consummate all of the transactions contemplated by this Agreement.

11.2 Specific Performance

Each of the parties hereto acknowledges that the other party may have no adequate remedy at law if it fails to perform any of its obligations under this Agreement. In such event, each of the parties agrees that the other party shall have the right, in addition to any other rights it may have (whether at law or in equity), to pursue equitable remedies such as injunction and specific performance of this Agreement.

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11.3 Notices

All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent electronically, by facsimile or e-mail (with proof of electronic transmission), or sent, postage prepaid, by registered, certified or express mail or overnight courier service and shall be deemed given when so delivered by hand, facsimile or e-mail, or if mailed, three Business Days after mailing (one Business Day in the case of express mail or overnight service), as follows:

(a) if to the Purchaser:

Drug Royalty L.P. 3

c/o Drug Royalty Corporation Inc.

Suite 3120, Royal Bank Plaza

Toronto, ON

Canada M5J 2J3

Attention of:	Behzad Khosrowshahi
Fax No.:	(416) 863-5161
E-mail:	bk@drugroyalty.com

with a copy (which shall not constitute notice) to:

Davies Ward Phillips & Vineberg LLP

P.O. Box 63

Suite 4400, 1 First Canadian Place

Toronto, ON

Canada M5X 1B1

Attention of:	Gillian R. Stacey
Fax No.:	(416) 863-0871
E-Mail:	gstacey@dwpv.com

(b) if to the Vendor:

NPS Allelix Corp.

c/o Blake, Cassels & Graydon LLP

199 Bay Street

Suite 2800, Commerce Court West

Toronto ON M5L 1A9

Canada

Attention of:	Chris Hale
Fax No.:	(416) 863-2653

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with a copy to the Parent

(c) if to the Parent:

NPS Pharmaceuticals Inc.

Morris Corporate Center 1

4^th Floor, Building B

300 Interpace Parkway

Parsippany, New Jersey 07054

United States of America

Attention of:	Vice-President, Corporate Development
Fax No.:	(973) 316-6463

with a copy to (at the above-noted address):

Attention of:	General Counsel
Fax No.:	(973) 316-6463

or to such other address or addresses as any party may from time to time designate by notice as provided herein.

11.4 Successors and Assigns

This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto. This Agreement may not be assigned in whole or in part by any party without the prior written consent of the other parties; provided, however, that: (a) the Purchaser may assign this Agreement in whole or in part without the prior written consent of the Vendor or the Parent: (i) by way of security to a financial institution or other lender, (ii) to any Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Purchaser, (iii) to a special purpose vehicle created to be bankruptcy remote or for financing purposes or (iv) as part of a sale of a material part of the Purchaser, in any case whether by way of reorganization or otherwise, provided only that any such assignee shall have, or have access to, funding sufficient to permit it to meet its obligations hereunder, and the Purchaser shall give prompt notice of any such assignment to the Vendor and the Parent within 10 Business Days after the occurrence thereof; and (b) the Vendor may assign this Agreement in whole or in part without the prior written consent of the Purchaser to any Affiliate that is organized under the laws of Canada, any province of Canada or any state in the United States of America to which the License Agreement, the Distribution Agreement, the Patent 151 License and the Patents are also assigned in accordance with Sections 7.2(b) and 7.4(e), respectively, provided that such assignment could not reasonably be expected to result in or give rise to a material adverse effect on the validity or enforceability of this Agreement or the rights or remedies of the Purchaser hereunder.

11.5 No Partnership

Nothing in this Agreement shall be deemed in any way or for any purpose to constitute either party as a partner of the other party in the conduct of any business. For all

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purposes of this Agreement, the parties are independent contractors. Except to the limited extent expressly provided in this Agreement, neither party shall have the authority to bind, obligate or represent the other party.

11.6 Entire Agreement

This Agreement, the Nycomed Direction, the Nycomed Consent, the Bill of Sale and the Security Agreements, including the Schedules and Exhibits hereto and thereto, together constitute the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter (including, for certainty, the letter of intent dated April 26, 2007).

11.7 True Sale Security Agreement

(a) The Vendor and the Purchaser intend and agree that the sale, assignment, transfer, conveyance and delivery of the Assigned Rights at the Closing be and is a true sale by the Vendor to the Purchaser that is absolute and irrevocable and that provides the Purchaser with the full benefits of ownership of the Assigned Rights from and after the Closing, and neither the Vendor nor the Purchaser intends the transactions contemplated hereunder to be, or for any purpose to be characterized as, a loan from the Purchaser to the Vendor. The Vendor waives any right to contest or otherwise assert that this Agreement is other than a true sale by the Vendor to the Purchaser under applicable law, which waiver shall be enforceable against the Vendor in any bankruptcy or insolvency proceeding relating to the Vendor. If, notwithstanding the intention of the parties hereto, the sale by the Vendor of the Assigned Rights shall be characterized as a loan and not a sale, or such sale shall for any reason be ineffective or unenforceable, then this Agreement shall be deemed to constitute a security agreement under the PPSA and applicable law. The Vendor consents to the Purchaser filing any PPSA financing statements that in the Purchaser’s determination may be necessary to evidence the Purchaser’s ownership of the Assigned Rights.

(b) Solely as a precaution, in the event a court of competent jurisdiction should hold for any reason that the sale, assignment, transfer, conveyance and delivery to the Purchaser of the Assigned Rights at the Closing is not a “true sale” at law and that the Purchaser only has a security interest in the Assigned Rights, the Vendor hereby grants as continuing security for the due and timely payment and performance by the Vendor of all of its indebtedness, liabilities and obligations (whether direct, indirect, absolute, contingent or otherwise) to the Purchaser arising pursuant to this Agreement or any other Closing Document, a security interest in the Assigned Rights, and this Agreement shall constitute a security agreement for purposes of the PPSA. In furtherance of the foregoing, the Vendor hereby authorizes the Purchaser to authenticate in the name of the Vendor and file one or more PPSA financing statements (or similar documents) with respect to the Assigned Rights to evidence the granting of such security interest, provided that the Purchaser shall provide the Vendor with a reasonable opportunity to review any such PPSA financing statements or similar documents prior to filing. For greater certainty, the Purchaser shall not file this Agreement in connection with the filing of any such PPSA financing statements or similar documents.

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11.8 Amendments, Supplements, Waivers

This Agreement may be amended or supplemented only by a written agreement signed by the Purchaser, the Vendor and the Parent. Any waiver of, or consent to depart from, the requirements of any provision of this Agreement shall be effective only if it is in writing and signed by the party giving it, and only in the specific instance and for the specific purpose for which it has been given. No failure on the part of any party to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right. No single or partial exercise of any such right shall preclude any other or further exercise of such right or the exercise of any other right.

11.9 Severability

If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall nevertheless be given full force and effect.

11.10 Governing Law

(a) This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof except as set forth in Sections 5-1401 of the New York General Obligations Law.

(b) Each party hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of the State of New York located in New York County, New York and the U.S. federal district courts in the Southern District of the State of New York.

11.11 Waiver of Jury Trial

Each party hereby waives to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any claim, demand, action or cause of action directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby, and each party hereby agrees and consents that any such claim, demand, action or cause of action shall be decided by court trial without a jury, and that either party hereto may file an original counterpart or a copy of this Section 11.11 with any court as written evidence of the consent of the signatories hereto to the waiver of their right to trial by jury. Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other party hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 11.11.

11.12 Time

Time is of the essence of this Agreement and each of its provisions.

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11.13 Counterparts

This Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement. This Agreement may be delivered by either party by facsimile or by electronic delivery and, if so executed and delivered, shall be legally valid and binding on the party executing in such manner.

SIGNING PAGE TO IMMEDIATELY FOLLOW THIS PAGE

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IN WITNESS WHEREOF, the parties have executed this Agreement.

NPS ALLELIX CORP.
by
	Name:
	Title:
NPS PHARMACEUTICALS, INC. (solely for purposes of Article 6, Article 9 and Article 10)
by
	Name:
	Title:
DRUG ROYALTY L.P. 3, by its General Partner, DRC MANAGEMENT LLC 3
by
	Name: Behzad Khosrowshahi
	Title: Manager

[Agreement of Purchase and Sale – Signature Page]

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SCHEDULE 1.4

TABLE OF CONCORDANCE OF LICENSE AGREEMENT PROVISIONS

Part 1 – Defined Terms

“Licensed Technology” has the meaning specified in the Distribution Agreement, as such definition is supplemented by the SPCs;

“NPS Know-How” means the Know-How (as such term is defined in the Distribution Agreement);

“NPS Trademarks” means the Licensor Trademarks (as such term is defined in the Distribution Agreement);

“Patents” means the Licensor Patents (as such term is defined in the Distribution Agreement), as such definition is supplemented by the SPCs;

“Reports” means the Royalty Reports and the reports or notices under Sections 8.5.1, 8.6.2, 8.6.3, 8.6.4, 8.7.1, 15.9.1, 15.11, 19 and 20 of the Distribution Agreement;

“SPCs” means the supplementary protection certificates listed under the heading “SPC Summary” in Schedule 4.7;

Part 2 – Table of Concordance

Section of License Agreement	Corresponding Section of Distribution Agreement
2.1	2.1
2.11	N/A
4.6	N/A
7.2	15.1
7.3	N/A
7.5	15.2
7.7	15.10
7.8	15.11
7.8.2	15.11.2
7.9	15.9.4
9.7.2, 9.7.3 and 9.8.1 (definition of “Infringement Payment”)	8.6.2, 8.6.3
9.4	N/A
16.1	19.1
16.2	19.2
16.5	19.5
16.6	19.6

SCHEDULE 4.5

GAUTVIK AND ASAHI AGREEMENTS

[*]

SCHEDULE 4.7

PATENTS

[*]

SCHEDULE 4.7(A)

OPINIONS OF COUNSEL

[*]

SCHEDULE 4.8

LITIGATION

[*]

SCHEDULE 7.6(d)

FORM OF PRESS RELEASE

(attached)

EX-10.3

Exhibit 10.3

NOTE: CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND REPLACED BY “[*]”. A COMPLETE COPY OF THIS DOCUMENT INCLUDING THE CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

DISTRIBUTION AND LICENSE AGREEMENT

BY AND BETWEEN

NPS ALLELIX CORP.

NPS PHARMACEUTICALS, INC.

AND

NYCOMED GmbH

DATED

SEPTEMBER 24, 2007

Table of Contents

		Page
ARTICLE 1	DEFINITIONS	1
ARTICLE 2	MANAGEMENT OF COLLABORATIVE ACTIVITIES	11
2.1	Management Committee	11
2.2	Joint Development Committee	13
2.3	Additional Committees	14
2.4	Minutes of Committee Meetings	15
2.5	Independent Action	15
2.6	Compliance with Law	15
ARTICLE 3	LICENSE GRANTS AND ASSIGNMENTS	15
3.1	NPS Grants and Assignments	15
3.2	Sublicenses	16
3.3	Nycomed Grants	16
3.4	NPS Retained Rights; Transfer of Rights	16
3.5	Nycomed Right of First Negotiation	16
3.6	Licenses under Existing Third Party Agreements	17
ARTICLE 4	DEVELOPMENT	18
4.1	Development Rights	18
4.2	Development Responsibilities	18
4.3	Development Efforts; Manner of Performance; Reports	20
4.4	Right to Audit	21
4.5	Regulatory Submissions and Regulatory Approvals	21
ARTICLE 5	COMMERCIALIZATION	23
5.1	Commercialization in the Territory	23
5.2	Advertising and Promotional Materials	24
5.3	Sales and Distribution	24
5.4	Complaints	24
5.5	Adverse Event Reporting Procedures	24
5.6	Recalls, Market Withdrawals or Corrective Actions	25
ARTICLE 6	MANUFACTURE AND SUPPLY	25
6.1	General	25
6.2	Manufacture and Supply for the Territory	25
6.3	Transfer of Responsibility and Technology	26

Table of Contents

		Page
6.4	Subsequent Information	26
6.5	[*] Process	26
6.6	Master Cell Bank and Working Cell Banks	27
6.7	Other Ongoing Rights and Responsibilities	27
ARTICLE 7	FINANCIAL PROVISIONS	27
7.1	Signing Fee	27
7.2	First Milestone Payment	27
7.3	Milestone Payments	28
7.4	Payment of Royalties on Net Sales	29
7.5	Existing Third Party Agreement Payments	30
7.6	Audits	30
7.7	Tax Matters	30
7.8	United States Dollars	31
7.9	Currency Exchange	31
7.10	Blocked Payments	31
7.11	Late Payments	31
7.12	Shared Development Costs	31
ARTICLE 8	INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS	32
8.1	Ownership of Inventions	32
8.2	Prosecution and Maintenance of Patent Rights	32
8.3	Third Party Infringement	34
8.4	Patent Invalidity Claim	35
8.5	Claimed Infringement	36
8.6	Patent Term Extensions	36
8.7	Patent Marking	36
8.8	Trademarks	36
ARTICLE 9	CONFIDENTIALITY AND PUBLICITY	38
9.1	Confidential Information	38
9.2	Employee, Consultant and Advisor Obligations	39
9.3	Publicity	39
9.4	Publications	39

ii

Table of Contents

		Page
ARTICLE 10	REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS; INDEMNIFICATION	40
10.1	Exclusivity Covenant	40
10.2	Mutual Representations and Warranties	40
10.3	Additional NPS Representations and Warranties	41
10.4	Existing Third Party Agreements	42
10.5	Disclaimer of Warranties	42
10.6	Indemnification	42
10.7	Procedure for Indemnification	43
10.8	Assumption of Defense	44
ARTICLE 11	TERM AND TERMINATION	44
11.1	Term	44
11.2	Termination	44
11.3	Effects of Termination	45
11.4	Continuation of Agreement if NPS Becomes Insolvent	49
11.5	License Grant Effective Upon Expiration of Term	50
11.6	Survival	50
ARTICLE 12	FINAL DECISION-MAKING; DISPUTE RESOLUTION	50
12.1	Arbitration	50
ARTICLE 13	MISCELLANEOUS	51
13.1	Choice of Law	51
13.2	Notices	51
13.3	Severability	52
13.4	Captions	52
13.5	Integration	52
13.6	Independent Contractors; No Agency	52
13.7	Assignment; Successors	53
13.8	Expenses	53
13.9	Execution in Counterparts; Facsimile Signatures	53
13.10	No Consequential or Punitive Damages	53
13.11	Non-Solicitation	53
13.12	Transfer of NPS Intellectual Property; NPS Allelix No Longer a Party	53

iii

DISTRIBUTION AND LICENSE AGREEMENT

This Distribution and License Agreement (this “Agreement”) is made and effective as of the 24th day of September, 2007 (the “Effective Date”) by and between NPS Allelix Corp., a Canadian corporation (“NPS Allelix”), having offices at MaRS Centre, 101 College Street, South Tower, Suite 800, Toronto, ON MSG 1L8 Canada, NPS Pharmaceuticals, Inc., a Delaware corporation (“NPS US”, and, together with NPS Allelix, collectively, “NPS”), having offices at Morris Corporate Center 1, 4th Floor, Building B, 300 Interpace Parkway, Parsippany, NJ 07054, and Nycomed GmbH, a German corporation with company registration number Hrb Nr 701257 (“Nycomed”), having offices at Byk Gulden Str. 2, 78467 Konstanz.

INTRODUCTION

1. NPS Controls certain patents, know-how and other rights related to the Product;

2. Nycomed has considerable knowledge and experience in developing, promoting and marketing pharmaceutical products throughout the Territory;

3. NPS and Nycomed believe that a distribution and license arrangement regarding the Product in the Territory would be desirable; and

4. On the terms and subject to the conditions set forth herein, NPS and Nycomed therefore desire to provide for the development, manufacture and commercialization of Product as described herein.

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, NPS and Nycomed, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS

As used in this Agreement, the following terms, whether used in the singular or plural, shall have the meanings set forth below:

1.1 “Additional Indication” shall mean any indication for Product other than the Primary Indication.

1.2 “Affiliate” shall mean with respect to any Party, any Person controlling, controlled by or under common control with such Party. For purposes of this Section 1.2, “control” shall mean (a) in the case of a Person that is a corporate entity, direct or indirect ownership of fifty percent (50%) or more of the stock or shares having the right to vote (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) for the election of directors of such Person and (b) in the case of a Person that is an entity, but is not a corporate entity, the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

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1.3 “API” shall mean the drug substance/active pharmaceutical ingredient of the Compound.

1.4 “Calendar Quarter” shall mean for each Calendar Year, each of the three (3) month periods ending March 31, June 30, September 30 and December 31; provided, however, that the first calendar quarter for the first Calendar Year shall extend from the Effective Date to the end of the first complete calendar quarter thereafter.

1.5 “Calendar Year” shall mean, for the first calendar year, the period commencing on the Effective Date and ending on December 31 of the calendar year during which the Effective Date occurs, and each successive period beginning on January 1 and ending twelve (12) consecutive calendar months later on December 31.

1.6 “CIGIM” shall mean chemotherapy-induced gastrointestinal mucositis.

1.7 “Claims” shall mean all charges, complaints, actions, suits, proceedings, hearings, investigations, claims and demands.

1.8 “CMO” shall mean a contract manufacturing organization.

1.9 “Commercialization” or “Commercialize” shall mean any and all activities directed to obtaining marketing, pricing and reimbursement approvals, marketing, promoting, Detailing, distributing, importing, exporting, offering for sale or selling a product. Commercialization shall not include any activities related to Development or Manufacturing.

1.10 “Compound” shall mean the compound known as teduglutide, as further described in Schedule 1.10, and any analogues, fragments, derivatives, receptors and compositions thereof.

1.11 “Control” or “Controlled” shall mean, with respect to any intellectual property right or other intangible property, the possession (whether by license or ownership, or by control over an Affiliate having possession by license or ownership) by a Party of the ability to grant to the other Party access and/or a license or sublicense as provided herein without violating the terms of any agreement with any Third Party.

1.12 “Co-Owned Patent Rights” shall mean the NPS Patent Rights, to the extent that such NPS Patent Rights were solely owned by NPS prior to the assignment in Section 3.1(b) hereof.

1.13 “Country” shall mean any generally recognized sovereign entity.

1.14 “Cover”, “Covering” or “Covered” shall mean, with respect to Product or Compound, or with respect to technology, that, in the absence of a license granted under a Valid Claim, the Manufacture, use, Commercialization, Development or importation of Product or the practice of such technology would infringe such Valid Claim.

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1.15 “CPI” shall mean the Consumer Price Index – Urban Wage Earners Clerical Workers, U.S. City Average, All Items, 1982-84 = 100, published by the United States Department of Labor, Bureau of Statistics (or its successor equivalent index).

1.16 “Development” or “Develop” shall mean non-clinical and clinical research and drug development activities associated with development of Product for Regulatory Approval as a drug product, including without limitation toxicology, test method development and stability testing, process development, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, clinical studies (including pre- and post-approval studies and Investigator Sponsored Clinical Studies), regulatory affairs, and product approval and clinical study regulatory activities (excluding regulatory activities directed to obtaining pricing and reimbursement approvals).

1.17 “Development Costs” shall mean costs incurred by the Parties after the Effective Date and specifically attributable to Developing the Compound or a Product, and may include without limitation:

(a) the out-of-pocket costs and expenses incurred to the extent not covered by (b) through (d);

(b) the costs of internal scientific, medical, technical or managerial personnel engaged in such efforts, which costs shall be determined based on the applicable FTE Rate, unless another basis is otherwise agreed by the Parties in writing;

(c) the costs and expenses of clinical supplies for such efforts, including without limitation, (i) direct costs and expenses incurred to purchase and/or package comparator or combination drugs or devices, and (ii) direct costs and expenses of disposal of clinical samples; and

(d) the direct costs and expenses incurred in connection with manufacturing process development and validation, manufacturing scale-up and improvements, stability testing and quality assurance/quality control development, and qualification and validation of Third Party contract manufacturers.

1.18 “Development Plan” shall mean the plan for the Development of the Compound or a Product for any Indication including, without limitation, the budget and nature, number and schedule of Development activities.

1.19 “Device” shall mean the drug delivery device described in Schedule 1.19 hereto and any future Improvements or replacements thereof.

1.20 “Diligent Efforts” shall mean, with respect to Product, the carrying out of obligations in a diligent and sustained manner using efforts not less than the efforts a Party devotes to a product of similar market potential, profit potential or strategic value resulting from its own research efforts, but excluding consideration of any obligation to the other Party under this Agreement.

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1.21 “Drucker License Agreement” shall mean the License Agreement, dated September 28, 1995, by and among 1149336 Ontario Inc., Daniel J. Drucker, M.D. and Allelix Biopharmaceuticals Inc.

1.22 “EMEA” shall mean the European Medicines Agency or any successor agency thereto.

1.23 “Equivalent Product” shall mean any pharmaceutical product (other than any branded non-generic versions but Equivalent Product specifically includes any added-value generic versions) containing a glucagon-like peptide-2 (GLP-2) or any analog, homologue (including, but not limited to, teduglutide), or derivative or fragment thereof, including compositions thereof.

1.24 “European Union” or “EU” shall mean the Countries of the European Union, as it is constituted as of the Effective Date and as it may be expanded from time to time.

1.25 “Executive Officers” shall mean the Chief Executive Officer of NPS (or a senior executive officer of NPS designated by NPS’ Chief Executive Officer) and Nycomed’s Chief Executive Officer (or a senior executive officer of Nycomed designated by Nycomed’s Chief Executive Officer).

1.26 “Existing Third Party Agreements” shall mean the Drucker License Agreement, [*], the UTAUS License Agreement and the Restoragen License Agreement.

1.27 “FDA” shall mean the United States Food and Drug Administration or any successor agency thereto.

1.28 “Field” shall mean the treatment and diagnosis of all Indications in humans and animals.

1.29 “First Commercial Sale” shall mean, with respect to Product in a Country, the first commercial sale of Product in such Country.

1.30 “FTE” shall mean a full-time equivalent person year (consisting of a total of 1,750 hours) of work.

1.31 “FTE Rate” shall mean [*], increased or decreased by the percentage increase or decrease in the CPI as of the then most recent December 31 over the level of the CPI on December 31, 2006.

1.32 “Future Partner” shall mean a Third Party to whom NPS grants rights to Commercialize or distribute Product in North America.

1.33 “GAAP” shall mean United States generally accepted accounting principles.

1.34 “Governmental Authority” shall mean any court, tribunal, arbitrator, agency, legislative body, commission, official or other instrumentality of (a) any government of any Country, (b) a federal, state, province, county, city or other political subdivision thereof or (c) any supranational body.

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1.35 “[*] Process” shall mean the process for manufacturing Compound currently being Developed by NPS which, for the avoidance of doubt, is a different process than the secreted process.

1.36 “Indications” shall mean the Primary Indication and the Additional Indications.

1.37 “Investigator Sponsored Clinical Study” shall mean a human clinical study of Product that is sponsored and conducted by a Third Party under an agreement with a Party pursuant to which such Party provides clinical supplies of Product and/or funding for such clinical study.

1.38 “Joint Intellectual Property” shall mean Joint Know-How and Joint Patent Rights, collectively.

1.39 “Joint Know-How” shall mean any Know-How that is developed or acquired jointly by the Parties or their Affiliates or sublicensees in connection with their collaborative activities pursuant to this Agreement during the Term including Joint Inventions.

1.40 “Joint Patent Rights” shall mean Patent Rights that Cover Joint Inventions or Joint Know-How.

1.41 “Know-How” shall mean any information and materials, whether proprietary or not and whether patentable or not, including without limitation ideas, concepts, formulas, methods, procedures, designs, compositions, plans, documents, data, inventions, discoveries, trade secrets, works of authorship, compounds and biological materials, solely to the extent such know-how is directly related to the research, Development, Manufacture or Commercialization of Compound or Product in the Field.

1.42 “Losses” shall mean any and all damages (including all incidental, consequential, statutory and treble damages), awards, deficiencies, settlement amounts, defaults, assessments, fines, dues, penalties, costs, fees, liabilities, obligations, taxes, liens, losses, lost profits and expenses (including without limitation court costs, interest and reasonable fees of attorneys, accountants and other experts) incurred by or awarded to Third Parties and required to be paid to Third Parties with respect to a Claim by reason of any judgment, order, decree, stipulation or injunction, or any settlement entered into in accordance with the provisions of this Agreement, together with all documented out-of-pocket costs and expenses incurred in complying with any judgments, orders, decrees, stipulations and injunctions that arise from or relate to a Claim of a Third Party.

1.43 “Major EU Country” shall mean the United Kingdom, Germany, France, Italy and Spain.

1.44 “Manufacturing” or “Manufacture” shall mean activities directed to producing, manufacturing and processing Product.

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1.45 “Master Cell Bank” means NPS’ master cell banks containing the host cells (with the plasmid incorporated therein) used in the fermentation process for the production of recombinant glycine2-human glucagon-like peptide-2(ALX-600(Teduglutide)) as a secreted material in the fermentation culture broth and as a fusion peptide for the inclusion bodies in the host cell. The Master Cell Bank for the secreted process is designated [*] and is used to generate the Working Cell Bank for such process. The Master Cell Bank for the [*] Process is designated [*] and is used to generate the Working Cell Bank designated [*].

1.46 “NDA” shall mean a new drug application or supplemental new drug application or any amendments thereto submitted to the FDA in the United States.

1.47 “NEC” means necrotizing enterocolitis.

1.48 “Net Sales” shall mean, with respect to Product, the gross invoiced commercial sales of Product by Nycomed, its Affiliates and sublicensees to Third Parties in the Territory (and for the purposes of Section 4.5 only, sales of Product by NPS, its Affiliates or Future Partners, in Canada and/or Mexico, as applicable), less the following deductions to the extent included in the gross invoiced sales price for Product or otherwise directly paid, allowed, accrued, or incurred by Nycomed, its Affiliates or sublicensees with respect to the sale of Product:

(a) quantity or cash discounts, credits, retroactive price reductions, rebates, allowances and adjustments granted, to the extent usual and customary in the pharmaceutical industry and consistent with Nycomed’s usual course of dealing for its products other than Product (including, without limitation, government mandated and managed healthcare negotiated rebates);

(b) amounts repaid, credited or written off by reason of rejections, recalls, billing errors and returns;

(c) sales, excise, turnover, inventory, value-added, and similar taxes assessed on the sale of Product (other than income taxes of Nycomed, its Affiliates or sublicensees), and import and customs duties; and

(d) transportation, importation, shipping insurance and other handling expenses.

Notwithstanding the foregoing, in any case where Product is sold or otherwise disposed of in a transaction that is not an arm’s length sale of Product exclusively for cash that is separate from any sale or disposition of other products or of services, Net Sales shall mean the greatest of:

(x) the Net Sales amount for Product sold in such transaction determined as provided above, with any non-cash consideration attributable to such transaction valued at fair market value;

(y) if there has been any arm’s length sale of Product separate from any sale or disposition of other products or of services to a non-sublicensee Third Party, the Net Sales amount, determined as provided above, for the most contemporaneous such sale; or

6

(z) if there has been no such arm’s length sale, the fraction of the overall value of such transaction reasonably attributed to Product sold in such transaction, with any non-cash consideration attributable to such transaction valued at fair market value.

For sake of clarity, sales by Nycomed, its Affiliates or sublicensees to distributors and wholesalers shall be considered sales to Third Parties.

1.49 “North America” shall mean the United States, Mexico and Canada.

1.50 [*].

1.51 “NPS Intellectual Property” shall mean NPS Know-How and NPS Patent Rights.

1.52 “NPS Know-How” shall mean any Know-How that is Controlled by NPS on the Effective Date, but shall not include Joint Know-How.

1.53 “NPS Patent Rights” shall mean Patent Rights, to the extent that they (a) Cover NPS Know-How or are directly related to the Manufacture, use, Commercialization or Development of Compound or Product in the Field, and (b) are Controlled by NPS, but shall not include Joint Patent Rights.

1.54 “NPS Royalty Term” shall mean the NPS Initial Royalty Term and the NPS Secondary Royalty Term.

1.55 “NPS Initial Royalty Term” shall mean the period commencing on the Effective Date and ending on the later of, on a Country-by-Country and Product-by-Product basis, (a) ten (10) years from First Commercial Sale of Product in such Country and (b) the expiration or termination of the last to expire Valid Claim of a Patent Right listed on Schedule 1.55 Covering such Product in such Country.

1.56 “NPS Secondary Royalty Term” shall mean the period commencing at the end of the NPS Initial Royalty Term, on a Country-by-Country and Product-by-Product basis, and ending twenty (20) years from First Commercial Sale of Product, on a Country-by-Country and Product-by-Product basis.

1.57 “Nycomed Intellectual Property” shall mean Nycomed Know-How and Nycomed Patent Rights.

1.58 “Nycomed Know-How” shall mean any Know-How that either (a) is Controlled by Nycomed on the Effective Date or (b) comes within Nycomed’s Control during the Term, including Nycomed Sole Inventions, but shall not include Joint Know-How.

1.59 “Nycomed Patent Rights” shall mean Patent Rights, to the extent that they (a) Cover Nycomed Know-How or are directly related to the Manufacture, use, Commercialization or Development of Compound or Product in the Field, and (b) are Controlled by Nycomed, but shall not include Joint Patent Rights.

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1.60 “Nycomed Royalty Term” shall mean the Nycomed Initial Royalty Term and the Nycomed Secondary Royalty Term.

1.61 “Nycomed Initial Royalty Term” shall mean the period commencing on the Effective Date and ending, on the later of, on a Country-by-Country and Product-by-Product basis, (a) ten (10) years from First Commercial Sale of such Product in such Country on a Country-by-Country and Product-by-Product basis and (b) the expiration or termination of the last to expire Valid Claim of a Patent Right Covering such Product in such Country.

1.62 “Nycomed Secondary Royalty Term” shall mean the period commencing at the end of the Nycomed Initial Royalty Term, on a Country-by-Country and Product-by-Product basis, and ending twenty (20) years from First Commercial Sale of Product, on a Country-by-Country and Product-by-Product basis.

1.63 “Ongoing Studies” shall mean the following clinical studies: (a) CL0600-004 entitled “A Study of the Efficacy of Teduglutide in Subjects with Parenteral Nutrition-Dependent Short Bowel Syndrome”, (b) CL0600-005 entitled “A Study of the Efficacy of Teduglutide in Subjects with Parenteral Nutrition-Dependent Short Bowel Syndrome Who Completed Protocol CL0600-004”, and (c) CL0600-017 entitled “Pharmacokinetics of 20mg Teduglutide in Subjects with Moderately Impaired Hepatic Function Compared to Healthy Subjects with Normal Hepatic Function”.

1.64 “Parties” shall mean NPS and Nycomed.

1.65 “Party” shall mean either NPS or Nycomed.

1.66 “Patent Rights” shall mean patents and patent applications and all substitutions, divisions, continuations, continuations-in-part, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplemental protection certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all counterparts thereof in any Country.

1.67 “Person” shall mean any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government, or any agency or political subdivisions thereof.

1.68 “Phase III Clinical Study” shall mean a clinical study of Product in human subjects to confirm with statistical significance the efficacy and safety of Product performed to obtain Regulatory Approval for Product in any Country, which shall be deemed commenced when the first patient in such study has received his or her initial dose of Product.

1.69 “Phase IV Clinical Study” shall mean a clinical study initiated after Product has been granted Regulatory Approval in any Country, and which is aimed at strengthening the clinical evidence for Product to be used in the Commercialization of Product.

1.70 “Primary Indication” shall mean SBS.

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1.71 “Product” shall mean any pharmaceutical formulation, dosing and administration form containing the Compound as an active ingredient.

1.72 “Regulatory Approval” shall mean, with respect to a particular Indication for Product, any approval (including price approvals), registration, license or authorization from any Governmental Authority required for the Manufacture, Development, Commercialization, distribution, sale, storage or transport of Product for such Indication in any Country of the Territory, and shall include, without limitation, an approval, registration, license or authorization granted in connection with any Regulatory Approval Application.

1.73 “Regulatory Approval Application” shall mean, with respect to a particular Indication for Product, the submission to the relevant Governmental Authority of an appropriate application seeking any Regulatory Approval, and shall include, without limitation, a marketing authorization application, supplementary application or variation thereof, NDA or any equivalent applications in any Country of the Territory.

1.74 “Regulatory Authority” shall mean any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the marketing and sale of a pharmaceutical product in a Country, including without limitation FDA in the United States and EMEA in the EU.

1.75 “Restoragen License Agreement” shall mean the Exclusive License Agreement, dated November 21, 2002, by and between Restoragen, Inc. and NPS Pharmaceuticals, Inc.

1.76 “SBS” shall mean short bowel syndrome.

1.77 “SBS Clinical Supply Cost” shall mean, with respect to Product or the Device, as applicable, for Development for the Primary Indication, [*].

1.78 “Successful Proof of Concept Study” shall mean proof of efficacy in a particular Indication in the form of a clinical study that generates, confirms or otherwise provides an adequate benefit-risk for Product through statistically meaningful endpoints, which may be derived from one or more doses in accordance with the statistical analysis plan described in a Development Plan and which is used as the basis for a decision to move forward with a Regulatory Approval strategy for an Indication or a label change for a previous Indication for Product.

1.79 “Territory” shall mean the entire world and all Countries, territories and possessions therein, except for North America.

1.80 “Third Party” shall mean any Person other than a Party or any of its Affiliates.

1.81 “United States” shall mean the United States of America and its territories and possessions.

1.82 “UTAUS License Agreement” shall mean the Non-Exclusive Patent License Agreement, UTAUS Agreement No. 02-073, dated May 15, 2004, by and between the Board of Regents of the University of Texas System and NPS Allelix Corp.

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1.83 “Validation Batch” shall mean any one of each of three (3) consecutive batches of API or dosage form which conform to the critical parameters described in the process and which are Manufactured according to the Manufacturing process.

1.84 “Valid Claim” shall mean, with respect to any Country, a Claim of an issued and unexpired patent or a Claim included in a pending patent application within the NPS Intellectual Property, Nycomed Intellectual Property or Joint Intellectual Property in such Country Covering the Compound or Product which has not been held unenforceable, unpatentable or invalid by a decision of a court or other Governmental Authority of a competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.

1.85 “Working Cell Banks” means NPS’ working cell banks containing the host cells (with the plasmid incorporated therein) used in the fermentation process for the production of recombinant glycine2-human glucagon-like peptide-2(ALX-0600(Teduglutide)) as a secreted material in the fermentation culture broth and as a fusion peptide for the inclusion bodies in the host cell. The Working Cell Banks for the secreted process are designated [*] and are generated from the Master Cell Bank for such process. The Working Cell Bank for the [*] Process is designated [*] and is generated from the Master Cell Bank designated [*].

1.86 Additional Definitions. Each of the following definitions is set forth in the Section of this Agreement indicated below:

Definition	Section
1974 Convention	13.1
Active Party	4.2(g)
Additional Committees	2.3
Agreement	Preamble
ATCC	6.6
Breaching Party	11.2(c)
[*]	6.6
CIGIM Proposal	4.2(e)
Code	11.3(c)
Competing Product	10.1
Confidential Information	9.1
Controlling Party	6.4
Developing Party	6.5(b)
Effective Date	Preamble
Improvement	8.1(c)
IND	4.2(e)
Indemnified Party	10.7(a)
Indemnifying Party	10.7(a)
Initial Development Plan	4.2(c)
Initial Enforcement Rights Party	8.3(c)
Invalidity Claim	8.4

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Definition	Section
Joint Development Committee	2.2(a)
Joint Inventions	8.1(b)
Joint Development Plans	2.2(b)(v)
Litigation Condition	10.7(b)
Management Committee	2.1(a)
Milestone Data	4.5(b)(i)
Negotiation Period	3.5
Non-Breaching Party	11.2(c)
NPS	Preamble
NPS Allelix	Preamble
NPS US	Preamble
NPS Sole Inventions	8.1(a)
Nycomed	Preamble
Nycomed Offer	3.5
Nycomed Royalty Term	4.5(b)(i)
Nycomed Sole Inventions	8.1(a)
Offer Period	3.5
Passive Party	4.2(g)
Primary Indication Announcement	4.5(b)(i)
Product Trademarks	8.8(a)
Promotional Materials	5.2(a)
Product Trademark Infringement Claim	8.8(e)(i)
Secondary Enforcement Rights Party	8.3(c)
Severed Clause	13.3
Shared Development Costs	7.12(a)
Sole Inventions	8.1(a)
Term	11.1
Termination Notice	7.2
Termination Period	7.2
Third Party Claim	10.7(a)
Trademark Infringement Notice	8.8(e)(ii)

ARTICLE 2

MANAGEMENT OF COLLABORATIVE ACTIVITIES

2.1 Management Committee.

(a) Composition and Responsibilities. The management committee (the “Management Committee”) shall consist of two (2) members, one of which shall be an Executive Officer of NPS and one of which shall be an Executive Officer of Nycomed. Upon reasonable prior written notice to the other Party, a Party may designate a substitute to temporarily attend and perform the functions of such Party’s designee at any meeting of the Management Committee. NPS and Nycomed each may, on advance written notice to the other

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Party, invite non-member representatives of such Party to attend meetings of the Management Committee. The Management Committee shall perform the following functions:

(i) Manage and oversee the Development and Commercialization of each Indication for Product in the Territory pursuant to the terms of this Agreement;

(ii) Review and approve the Development Plan for any Indications of Product in the Territory and any material amendments to such Development Plan;

(iii) Approve any Development Plan and budget for the Primary Indication or any Additional Indication for both the Territory and North America where the Parties mutually agree to share Development Costs;

(iv) Review and approve the Promotional Materials;

(v) Review and approve the progress of the other committees;

(vi) In accordance with the procedures established in Section 2.1(c) resolve disputes, disagreements and deadlocks unresolved by the other committees; and

(vii) Have such other responsibilities as may be assigned to the Management Committee pursuant to this Agreement or as may be mutually agreed upon by the Parties from time to time.

(b) Meetings. The Management Committee shall meet in person at least once during every Calendar Year, and more frequently as NPS and Nycomed deem appropriate or as required to resolve disputes, disagreements or deadlocks in the other committees, on such dates, and at such places and times, as the Parties shall agree; provided that the Parties shall endeavor to have the first meeting of the Management Committee within thirty (30) days after the Effective Date. The Management Committee shall arrange to meet in person or convene otherwise to assess and approve any Development Plan submitted to the Management Committee in each Calendar Year so that such plans will be reviewed and approved within thirty (30) days following submission to the Management Committee. To the extent any such Development Plan is not approved and needs to be reformulated by the Joint Development Committee, such plans shall be reviewed by the Management Committee as soon as reasonably practicable after resubmission of same. Meetings of the Management Committee that are held in person shall alternate between offices of NPS and Nycomed, or such other place as such Parties may agree. The members of the Management Committee also may convene or be polled or consulted from time to time by means of telecommunications, video conferences, electronic mail or correspondence, as deemed necessary or appropriate.

(c) Decision-Making. The Management Committee may make decisions with respect to any subject matter that is subject to the Management Committee’s decision-making authority and functions as set forth in Section 2.1(a). With respect to any issue relating to the Development or Commercialization of Product, if the Executive Officers cannot resolve such issue after good faith negotiations within ten (10) business days after the matter has been brought to the Management Committee’s attention, then such matter shall be decided by the Executive Officer of Nycomed; provided that, to the extent such issue relates to a Development

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Plan for both the Territory and North America where the Parties mutually agree to share Development Costs, any such decision may not change or otherwise affect in any material respect the key parameters of such Development Plan, including, without limitation, the resources to be provided by NPS, the expenditures to be incurred by NPS and the design and expected outcomes to achieve regulatory approval in North America.

2.2 Joint Development Committee.

(a) Establishment and Composition. Within thirty (30) days after the Effective Date, the Parties shall establish a joint development committee (the “Joint Development Committee”), and NPS and Nycomed shall designate an equal number of representatives, up to a maximum total of six (6) members on such Joint Development Committee. Each of NPS and Nycomed may replace any or all of its representatives on the Joint Development Committee at any time upon written notice to the other Party. Such representatives shall include individuals who have clinical trial and regulatory experience and expertise in pharmaceutical drug development. A Party may designate a substitute to temporarily attend and perform the functions of such Party’s designee at any meeting of the Joint Development Committee. NPS and Nycomed each may, on advance written notice to the other Party, invite non-member representatives of such Party to attend meetings of the Joint Development Committee. The Joint Development Committee shall be chaired by a representative appointed by Nycomed. The chairperson shall appoint a secretary of the Joint Development Committee.

(b) Responsibilities. The Joint Development Committee shall perform the following functions:

(i) Prepare and implement the Development Plans, including the budget, in the Territory for each Indication;

(ii) As early as necessary in each year beginning with the first full Calendar Year after the Effective Date, update and amend the Initial Development Plan and prepare the Development Plans for the Primary Indication and for any Additional Indications in the Territory for the following Calendar Year so that it can submit such proposed Development Plans to the Management Committee no later than September 30 of such year for review and approval;

(iii) Prepare the Development strategy and develop protocols for clinical studies for Indications for Commercialization;

(iv) Review and recommend to the Management Committee any material amendments or modifications to the Development Plans;

(v) Prepare any Development Plans for the Primary Indication or any Additional Indication for both the Territory and North America where the Parties mutually agree to share Development Costs, including any Development Plans relating to the [*] Process (the “Joint Development Plans”);

(vi) Coordinate use of Product Trademarks on a Country-by-Country and global basis;

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(vii) Coordinate and monitor regulatory strategy and activities for Product; and

(viii) Have such other responsibilities as may be assigned to the Joint Development Committee pursuant to this Agreement or as may be mutually agreed upon by the Parties from time to time.

(c) Meetings. The Joint Development Committee shall meet in person at least two (2) times during every Calendar Quarter, and more frequently as NPS and Nycomed deem appropriate or as reasonably requested by either such Party, on such dates, and at such places and times, as such Parties shall agree; provided that the Parties shall endeavor to have the first meeting of the Joint Development Committee within thirty (30) days after the establishment of the Joint Development Committee. Meetings of the Joint Development Committee that are held in person shall alternate between the offices of NPS and Nycomed, or such other place as the Parties may agree. The members of the Joint Development Committee also may convene or be polled or consulted from time to time by means of telecommunications, video conferences, electronic mail or correspondence, as deemed necessary or appropriate.

(d) Decision-Making. The Joint Development Committee may make decisions with respect to any subject matter that is subject to the Joint Development Committee’s decision-making authority and functions as set forth in Section 2.2(b). All decisions of the Joint Development Committee shall be made by unanimous vote or written consent, with NPS and Nycomed each having collectively, among its respective members, one vote in all decisions. If the Joint Development Committee cannot reach consensus within ten (10) business days after it has first met and attempted to reach such consensus, then such issue shall be decided by Nycomed’s representatives in the Joint Development Committee; provided, however, that any issue relating to material changes in budgets, Development Plans or other material matters shall be referred on the eleventh (11th) business day to the Management Committee for resolution.

2.3 Additional Committees. The Parties may mutually agree to establish additional committees (“Additional Committees”) at any time after the Effective Date, including but not limited to (a) a joint commercialization committee to oversee the Commercialization of Product in the Territory and (b) a joint manufacturing committee to develop strategies for dosage forms and strength, presentation and commercial sourcing of Product and to identify and implement, whether through Nycomed or a Third Party, any additional Development studies with respect to Product that may be required to support any filings for Regulatory Approval in the Territory. Each Party shall designate an equal number of representatives, up to a maximum to be agreed by the Parties. Such representatives shall include individuals who have experience and expertise in pharmaceutical product marketing, sales and regulatory matters. All such Additional Committees may make decisions with respect to any subject matter that is subject to their decision-making authority and functions as mutually agreed between the Parties. All decisions of any Additional Committees shall be made by unanimous vote or written consent, with NPS and Nycomed each having collectively, among its respective members, one vote in all decisions. If any Additional Committee cannot reach consensus within ten (10) business days after it has first met and attempted to reach such consensus, such issue shall be decided by Nycomed’s representatives in any Additional Committee; provided, however, that any issue relating to material changes in budgets, commercialization or manufacturing plans or other material matters shall be referred on the eleventh (11th) business day to the Management Committee for resolution.

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2.4 Minutes of Committee Meetings. Definitive minutes of all committee meetings shall be finalized by Nycomed’s representatives in the applicable Committee no later than thirty (30) days after the meeting to which the minutes pertain as follows:

(a) Distribution of Minutes. Within ten (10) days after a committee meeting, the secretary of such committee shall prepare and distribute to all members of such committee draft minutes of the meeting. Such minutes shall provide a list of any issues already resolved and yet to be resolved, either within such committee or through the relevant resolution process.

(b) Review of Minutes. The Party members of each committee shall have ten (10) days after receiving such draft minutes to collect comments thereon and provide them to the secretary of such committee. If no comments are provided the minutes shall deemed to be approved by both Parties.

(c) Discussion of Comments. Upon the expiration of such second ten (10) day period, the Parties shall have an additional ten (10) days to discuss each other’s comments and finalize the minutes. The secretary and chairperson(s) of such committee shall each sign and date the final minutes. The signature of such chairperson(s) and secretary upon the final minutes shall indicate each Party’s assent to the minutes.

(d) Expenses. Each Party shall be responsible for all travel and related costs and expenses for its members and other representatives to attend meetings of, and otherwise participate on, a committee.

2.5 Independent Action. Subject to the terms of this Agreement, the activities and resources of each Party shall be managed by such Party, acting independently and in its individual capacity.

2.6 Compliance with Law. Each Party hereby covenants and agrees to comply in all material respects with all laws and regulations applicable to its activities in connection with the Development, Manufacture and Commercialization of Product.

ARTICLE 3

LICENSE GRANTS AND ASSIGNMENTS

3.1 NPS Grants and Assignments.

(a) Exclusive License to Develop and Commercialize. Upon the terms and subject to the conditions of this Agreement and the Existing Third Party Agreements, NPS hereby grants to Nycomed an exclusive, royalty-bearing right and license, with the right to grant sublicenses solely as set forth in Section 3.2, under the NPS Intellectual Property and NPS’ rights in the Joint Intellectual Property to the extent necessary or useful to Develop and Commercialize the Compound and Product in the Field in the Territory.

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(b) Assignment of Co-Owned Patent Rights. Upon the terms and subject to the conditions of this Agreement, NPS hereby assigns to Nycomed, and Nycomed accepts from NPS, an undivided fifty percent (50%) interest in the Co-Owned Patent Rights, solely to the extent and for the purpose of prosecuting and maintaining such Co-Owned Patent Rights in the EU during the Term. Upon Nycomed’s request, NPS shall execute an assignment of such Co-Owned Patent Rights for the purpose of filing such assignment with the relevant patent offices.

(c) Manufacturing License. Upon the terms and subject to the conditions of this Agreement and the Existing Third Party Agreements, NPS hereby grants to Nycomed a co-exclusive right and license, with the right to grant sublicenses solely as set forth in Section 3.2, under the NPS Intellectual Property and NPS’ rights in the Joint Intellectual Property to the extent necessary or useful to Manufacture the Compound and Product in the Field in the Territory for Development and Commercialization by Nycomed in the Territory.

3.2 Sublicenses. Under the rights granted in Section 3.1, Nycomed shall (i) be entitled to sublicense to its Affiliates, and (ii) subject to the following sentence, be entitled to grant sublicenses to Third Parties, solely for purposes relating to the Development, Manufacture or Commercialization of Compound or Product in the Field in the Territory in accordance with this Agreement. To the extent Nycomed sublicenses Development and Commercialization rights to a country of the European Union, such sublicense shall be subject to NPS consent, which shall not be unreasonably withheld. Nycomed shall ensure that each of its Affiliates and permitted sublicensees or subcontractors accepts and complies with all of the terms and conditions of this Agreement as if such Affiliates or permitted sublicensees or subcontractors were a party to this Agreement and Nycomed shall guarantee its Affiliates’ and permitted sublicensees’ or subcontractors’ performance under this Agreement.

3.3 Nycomed Grants.

(a) License to Manufacture and Develop. Upon the terms and subject to the conditions of this Agreement, Nycomed hereby grants to NPS a co-exclusive, non-royalty-bearing right and license, with the right to grant sublicenses to its Affiliates, under the Nycomed Intellectual Property, the Co-Owned Patent Rights and Nycomed’s rights in the Joint Intellectual Property, to Manufacture and Develop the Compound or Product in the Field.

(b) Grant-Back License to Commercialize. Upon the terms and subject to the conditions of this Agreement, Nycomed hereby grants to NPS a co-exclusive, non-royalty-bearing right and license, with the right to grant sublicenses, under the Nycomed Intellectual Property, the Co-Owned Patent Rights and Nycomed’s rights in the Joint Intellectual Property, to Commercialize Compound or Product in the Field outside the Territory.

3.4 NPS Retained Rights; Transfer of Rights. Any rights of NPS not expressly granted to Nycomed under the provisions of this Agreement shall be retained by NPS.

3.5 Nycomed Right of First Negotiation. NPS shall have the right to license its rights in the Product outside the Territory to a Future Partner. If NPS decides to license such rights, NPS shall first offer such license to Nycomed by delivering a written notice to Nycomed of its intent to license such rights. Nycomed shall have [*] from its receipt of such notice (the

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“Offer Period”) to submit a written offer (the “Nycomed Offer”) to NPS for such license rights, setting forth the material terms and conditions of the proposed license. If Nycomed submits the Nycomed Offer within the Offer Period, NPS shall have [*] to evaluate the Nycomed Offer and to provide written notice to Nycomed of its acceptance or rejection of the Nycomed Offer. NPS shall consider the Nycomed Offer in good faith. If NPS accepts the Nycomed Offer, the Parties shall negotiate in good faith to enter into a definitive license agreement within [*] from the date of acceptance (the “Negotiation Period”). If (a) the Parties have not entered into a definitive license agreement upon the expiration of the Negotiation Period, (b) NPS rejects the Nycomed Offer or (c) Nycomed does not submit the Nycomed Offer within the Offer Period, then NPS shall have [*] from the end of the Negotiation Period to consummate an agreement with a potential Future Partner on terms at least as favorable to NPS as the Nycomed Offer. Upon consummation of such agreement with a Future Partner and subject to any confidentiality obligations relating thereto, if Nycomed requests, NPS shall disclose the material terms of such agreement to Nycomed (or, in the case of such confidentiality obligations, to an independent auditor selected by Nycomed and reasonably acceptable to NPS).

3.6 Licenses under Existing Third Party Agreements.

(a) Stand-By Licenses. At any time during the Term after the Termination Period, Nycomed may enter into stand-by licenses with any Third Parties to the Existing Third Party Agreements to ensure the survival or substitution of licenses or sublicenses granted to Nycomed under this Agreement. If Nycomed decides to seek to obtain a stand-by license from any such Third Party to an Existing Third Party Agreement, Nycomed shall notify NPS of such decision and shall provide NPS with regular updates regarding such ongoing negotiations. NPS agrees to provide reasonable assistance to Nycomed in obtaining such stand-by licenses and any amendments to the Existing Third Party Agreements required to obtain such stand-by licenses; provided however, that (i) any stand-by license shall provide that such license is effective only upon the termination of the license granted to NPS pursuant to the applicable Existing Third Party Agreement and (ii) NPS shall have no obligation to agree to any amendments to an Existing Third Party Agreement that are substantially less favorable to NPS than the terms existing on the Effective Date. Nycomed shall be solely responsible for making any and all payments owed to Third Parties under such stand-by licenses (other than, for the avoidance of doubt, the existing licenses to NPS under the Existing Third Party Agreements, except as otherwise specified in this Agreement). For clarity, any stand-by licenses obtained pursuant to this Section 3.6(a) shall not be subject to the terms of Section 7.5(b).

(b) Step-In Right. Subject to the provisions of the Existing Third Party Agreements, if NPS fails to take any action under an Existing Third Party Agreement that would be reasonably likely to result in an event of default and subsequent termination of the licenses under such Existing Third Party Agreement, such as a failure to make payments when due, then Nycomed may, in its discretion, provide NPS with written notice of its intent to take such action in the place of NPS. In any event, NPS shall promptly inform Nycomed of any such failure to take action and shall request that each Third Party to an Existing Third Party Agreement send a copy of any notice of material breach or other similar notice required to be sent under such Existing Third Party Agreement simultaneously to NPS and Nycomed upon any such occurrence. If NPS fails to take such action within ten (10) days (or such shorter period if necessary to prevent an event of default) after receipt of such notice, then Nycomed shall have

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the right to take such action that it believes is reasonably required to prevent such event of default and termination under such Existing Third Party Agreement. Any payments made in connection with an Existing Third Party Agreement by Nycomed on behalf of NPS pursuant to this Section 3.6 may be offset against any payments owed by Nycomed to NPS under Sections 7.2 and 7.4(a) hereof. For clarity, the terms of this Section 3.6(b) shall not in any way limit NPS’ obligations under Section 10.4.

ARTICLE 4

DEVELOPMENT

4.1 Development Rights. Either Party shall have the right to Develop the Compound and Product at its discretion, subject to the rights and obligations set forth in this Article 4.

4.2 Development Responsibilities.

(a) Ongoing Studies for the Primary Indication. NPS shall be responsible for completion, at its sole expense, of the Ongoing Studies. If required to obtain Regulatory Approval in the Territory, Nycomed shall be responsible, at its sole expense, for undertaking an additional Phase III Clinical Study for the Primary Indication; provided, however, that to the extent Nycomed conducts any such additional Phase III Clinical Study for the Primary Indication and such data is also required to obtain regulatory approval or approval for label expansion of Product in the United States, then NPS may elect to utilize such data for such purpose and in such case shall reimburse [*] of Nycomed’s expenses for such additional Phase III Clinical Study.

(b) Additional Indications. At any time after the Effective Date, if either Party desires to Develop an Additional Indication, such Party shall submit a proposal for such Additional Indication to the Joint Development Committee for its review and subsequent approval by the Management Committee. Such proposal shall include, at a minimum, (A) any data and other information supporting the rationale for Developing each Additional Indication from a scientific, regulatory and Commercial standpoint, (B) a reasonably detailed outline of the major Developmental activities for such Additional Indication, and (C) an estimate of the timeframe for and cost of such Development. In the event that the Management Committee does not approve any NPS suggestion for the Development of any Additional Indication, NPS or any Future Partner of NPS shall have the right to Develop, at its sole expense, the Compound for such Additional Indication for North America. Notwithstanding the foregoing, if the Joint Development Committee decides to Develop any Indication for Product for the Territory, NPS or any Future Partner of NPS shall not be obligated to Develop such Indication (other than SBS to the extent provided in Section 4.2(a)) for North America.

(c) Initial Development Plan; Annual Review. The initial Development Plan for the Primary Indication in the Territory shall be approved by the Joint Development Committee by February 15, 2008 and attached to this Agreement as Schedule 4.2(c) (the “Initial Development Plan”). The Joint Development Committee shall review any Development Plans no less frequently than annually and shall develop detailed and specific Development updates for each Calendar Year until the completion of the Product Development activities covered by any Development Plans. The Joint Development Committee shall submit all such updates to the

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Management Committee for review and approval no later than September 30 of the prior Calendar Year. The Joint Development Committee may also develop and submit to the Management Committee from time to time other proposed modifications to any Development Plans. The Management Committee shall review such proposed modifications presented by the Joint Development Committee and may approve such proposed modifications and/or any other proposed modifications that the Management Committee may consider from time to time in its discretion and, upon such approval by the Management Committee, any Development Plans shall be amended accordingly.

(d) Joint Development Plans. If the Parties agree to jointly Develop any Indications on a global basis, the Parties shall consider the specific sales potential and regulatory requirements on an Indication-by-Indication and Country-by-Country basis in designing any studies and in selecting the primary investigators, the key opinion leader and the trial centers used to Develop such Indication in such Country; provided that any such Joint Development Plans may not adversely affect the commercial potential of Product outside the Territory. Each Party shall be responsible for fifty percent (50%) of all costs and expenses associated with such joint Development of any Indication. If Nycomed desires to change any Joint Development Plan previously agreed by the Parties and NPS does not agree to such change, then NPS may elect not to participate in such Joint Development Plan and shall not be obligated to pay any costs or expenses associated with such Joint Development Plan; provided, however, that any such changes to a Joint Development Plan may not adversely affect the commercial potential of Product outside the Territory. In the event of such an election not to participate by NPS, NPS may subsequently opt-in to such Development Plan in accordance with Section 4.2(g).

(e) Development of CIGIM. Notwithstanding anything herein to the contrary, if NPS desires to conduct clinical Development of the Compound for CIGIM prior to having a meeting with the FDA regarding an Investigational New Drug (an “IND”) application for clinical studies for CIGIM to the FDA, NPS shall submit a proposed clinical plan (the “CIGIM Proposal”) to Nycomed for its review. Such CIGIM Proposal shall include, at a minimum, (A) any data and other information supporting the rationale for Developing CIGIM from a scientific, regulatory and Commercial standpoint, (B) a reasonably detailed outline of the major clinical Developmental activities for CIGIM, and (C) an estimate of the timeframe for and cost of such clinical Development. Nycomed shall have [*] from its receipt of the CIGIM Proposal to evaluate the CIGIM Proposal and shall provide written notice to NPS of its approval or disapproval of the CIGIM Proposal within such [*] period. Nycomed shall consider the CIGIM Proposal in good faith. During such period, NPS shall use commercially reasonable efforts to respond in a timely manner to Nycomed’s reasonable requests for further information regarding the CIGIM Proposal. NPS shall consider Nycomed’s comments to the CIGIM Proposal in good faith and shall take into consideration the potential results of any clinical studies conducted for CIGIM on the approvals of Product for other Indications. If Nycomed does not give written notice of its approval or disapproval to NPS within the [*] period, then Nycomed shall be deemed to have approved of the CIGIM Proposal. Notwithstanding the foregoing, NPS agrees not to perform any clinical studies in humans prior to having an effective IND for clinical studies pursuant to 21 CFR 312.40(b). For the avoidance of doubt, after an IND for clinical studies becomes effective, Nycomed shall no longer have a right of approval as set forth in this Section 4.2(e).

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(f) Phase IV Clinical Studies. Nycomed shall be responsible for conducting any Phase IV Clinical Studies in the Territory and shall be responsible for all costs related to such Phase IV Clinical Studies. NPS shall be responsible for conducting any Phase IV Clinical Studies outside the Territory and shall be responsible for all costs related to such Phase IV Clinical Studies.

(g) Buy-In Rights for Clinical Studies. In the event that a Party (the “Active Party”) is conducting or has completed Phase III Clinical Studies for any Additional Indication without the sharing of costs from the other Party (the “Passive Party”), the Passive Party shall be offered the rights to utilize the results from such studies for such Additional Indication in the Passive Party’s territory by reimbursing the Active Party an amount equal to [*] of the Active Party’s costs incurred after the Effective Date for all such studies conducted by the Active Party after the Effective Date for such Additional Indication plus interest on such amount equal to an annual compound rate of [*] of such amount beginning on the date the Active Party began incurring costs for such studies up to the date of payment. The Active Party shall submit such offer promptly after the publishing of data by the Active Party from such Phase III Clinical Study. The Passive Party shall have no other rights to such results. For the avoidance of doubt, any reimbursements made pursuant to this Section 4.2(g) are in addition to any milestone payments due pursuant to Section 7.2 for events occurring prior to the exercise of such buy-in which, in the case of Nycomed exercising such buy-in right, shall be paid together with such buy-in reimbursement.

(h) Clinical Site Management. In the case of Joint Development Plans, the intention of the Parties is that each Party shall manage clinical trials under such Joint Development Plan that are conducted in its respective territory.

(i) Investigator-Initiated Trials. If any clinical trials are initiated by a Third Party in connection with an Investigator Sponsored Clinical Study involving a Party, then such Party shall promptly notify the other Party of such clinical trial and shall provide the other Party with such information about such clinical trial as the other Party shall reasonably request.

4.3 Development Efforts; Manner of Performance; Reports.

(a) Efforts. Each of NPS and Nycomed shall use Diligent Efforts to execute and to perform, or cause to be performed, the Development activities assigned to it herein and to cooperate with the other in carrying out such Development activities, in each case in good scientific manner and in compliance with all applicable laws and regulations and good clinical and laboratory practice.

(b) Progress Reports. Within thirty (30) days after the end of each Calendar Quarter in which Development activities are performed, each Party will provide to the Joint Development Committee a written progress report, which will describe the Development activities such Party has performed or caused to be performed during such Calendar Quarter, evaluate the work performed in relation to the goals of such Development activities, and provide such other information as may be reasonably requested by the Joint Development Committee with respect to such Development activities.

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(c) Termination of Development. Subject to Section 4.2(a), Nycomed shall have the sole discretion with respect to Development of Product in the Territory, including the right to decide whether to develop the Product in a particular Indication and whether to continue such Development. If at any time prior to First Commercial Sale Nycomed ceases all activities in connection with Development or Commercialization of Compound or Product in the Territory for a period of at least two (2) years for reasons within Nycomed’s reasonable control, then NPS may deem a constructive termination at will pursuant to Section 11.2(a) to have occurred and all effects of termination in Section 11.3(a) shall apply. For the purposes of this Section 4.3(c), acts of government, Regulatory Authorities or price reimbursement bodies, measures taken for reasons of patient safety or reasonable expected risk of infringement of Third Party intellectual property shall not be deemed within Nycomed’s control.

4.4 Right to Audit. Each Party shall use Diligent Efforts to ensure that the other Party’s authorized representatives, and shall ensure that Regulatory Authorities, in both cases to the extent permitted by applicable law, may, during regular business hours, (a) examine and inspect its facilities or, subject to any Third Party confidentiality restrictions or obligations, the facilities of any subcontractor or any investigator site used by it in the performance of Development of Product, and (b) subject to applicable law and any Third Party confidentiality restrictions or obligations, inspect and copy all data, documentation and work products relating to the activities performed by it, the subcontractor or investigator site, including, without limitation, the medical records of any patient participating in any clinical study. This right to inspect and copy all data, documentation, and work products relating to Product may be exercised at any time during the Term (subject to each Party’s record retention policies then in effect), or such longer period as shall be required by applicable law.

4.5 Regulatory Submissions and Regulatory Approvals.

(a) Ownership of Regulatory Submissions.

(i) North America. NPS shall own all regulatory submissions, including all regulatory approval applications, for regulatory approvals in North America and shall be solely responsible for seeking and obtaining all regulatory approvals for Product in North America.

(ii) Territory. Nycomed shall own all regulatory submissions, including all Regulatory Approval Applications, for Regulatory Approvals in the Territory and shall be solely responsible for seeking and obtaining all Regulatory Approvals in the Territory.

(b) Access to Data.

(i) Delivery of Milestone Data. Upon NPS’ public announcement of the results of the Phase III Clinical Study relating to the Primary Indication (the “Primary Indication Announcement”), NPS shall deliver to Nycomed all available quality-controlled safety data as well as quality-controlled efficacy data supporting the primary endpoints and selected secondary endpoints available to NPS relating to such study at the time of the Primary Indication Announcement, including without limitation any tables, listings, figures and analysis (the “Milestone Data”).

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(ii) Each Party shall have access to data contained or referenced in submissions or applications for Regulatory Approvals as may be reasonably necessary to enable either Party to fulfill its obligations under this Agreement to Develop, Manufacture, and/or Commercialize Product in the Field in the Territory but only to the extent that (A) such access is required to maintain Regulatory Approvals already obtained for Product and (B) the Party requesting access has funded Development Costs for Product. Each Party shall provide appropriate notification to applicable Regulatory Authorities of any right of reference so granted to the other Party. Notwithstanding the foregoing, NPS shall have a right of reference to all data contained or referenced in submissions or applications for Regulatory Approval as may be reasonably necessary to enable NPS to Develop, Manufacture and/or Commercialize Product in Canada and Mexico; provided, however, that in the case where such data being referenced for Canada and/or Mexico was not the subject of cost-sharing by NPS pursuant to Section 4.2(a), Section 4.2(g) or a Joint Development Plan, NPS shall pay, and, if applicable, shall ensure that any Future Partner shall pay, Nycomed royalty payments based on Net Sales of Product in Canada and/or Mexico, as applicable, for the particular Indication for which regulatory approval is being sought in Canada and/or Mexico, as applicable, at the rate of (A) [*] during the Nycomed Initial Royalty Term and (ii) [*] during the Nycomed Secondary Royalty Term. At any time during the Nycomed Royalty Term, if the aggregate sales of an Equivalent Product in Canada and/or Mexico, as applicable, reach [*] of the aggregate sales of Product in such Indication in such Country, then the royalty described in this Section 4.5(b)(i) payable in such Country shall be reduced to zero for such Product for such Indication in such Country.

(iii) Each Party shall provide the other Party with access to all CMC, preclinical and clinical data Controlled by such Party that is required or useful in order to prepare Regulatory Approval Applications, but only to the extent that the Party requesting access has funded Development Costs for Product under a Joint Development Plan or pursuant to a buy-in right under this Agreement. In addition to the foregoing, NPS shall provide all such data to Nycomed that (I) relates to Product or Compound and exists as of the date hereof, (II) relates to the Ongoing Studies or (III) relates to the technology that is the subject of Schedules 4.5(b)(iii) and 6.3 which sets forth a list of data that may be accessed by Nycomed, subject to the terms and conditions of this Section 4.5(b)(iii).

(c) Participation in Meetings in the Territory. NPS will have the right to participate as an observer in all material meetings and other contact with Regulatory Authorities pertaining to a Regulatory Approval Application or Regulatory Approval in the Territory for Product. Nycomed shall provide NPS with reasonable advance notice of all such meetings and other contact and advance copies of all related documents and other relevant information relating to such meetings or other contact. Nycomed shall also promptly provide to NPS all material correspondence and written conversation summaries between it and any Regulatory Authority in the Territory.

(d) Regulatory Correspondence.

(i) Nycomed shall provide NPS with reasonable advance notice of all material meetings (whether face-to-face or teleconference) and advance copies of all related documents and other relevant information relating to such meetings or other contact. Nycomed shall provide NPS with drafts of any material documents or other material correspondence

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pertaining to Regulatory Approval Applications in the Territory to be submitted by Nycomed to Regulatory Authorities, including without limitation, any proposed labeling, when feasible sufficiently in advance of submission so that NPS may review and comment upon such documents and other correspondence and have a reasonable opportunity to influence the substance of such submissions. Nycomed shall promptly provide to NPS copies of any material documents or other material correspondence pertaining to Product registration, including without limitation all proposed labeling received from Regulatory Authorities in the Territory. Nycomed shall promptly provide NPS with copies of all other material documents and correspondence pertaining to Product after they have been submitted to, or received from, Regulatory Authorities in the Territory. Nycomed shall provide NPS with any English translations of such documents and correspondence that Nycomed has produced for its own use.

(ii) NPS shall provide Nycomed with reasonable advance notice of all material meetings (whether face-to-face or teleconference). NPS shall provide Nycomed with drafts of any material documents or other material correspondence pertaining to regulatory approval applications outside the Territory to be submitted by NPS to Regulatory Authorities, including without limitation, any proposed labelling, when feasible sufficiently in advance of submission so that Nycomed may review and comment upon such documents and other correspondence. NPS shall promptly provide to Nycomed copies of any material documents or other material correspondence pertaining to Product registration, including without limitation all proposed labelling received from Regulatory Authorities outside the Territory. NPS shall promptly provide Nycomed with copies of all other material documents and correspondence pertaining to Product after they have been submitted to, or received from, Regulatory Authorities outside the Territory.

ARTICLE 5

COMMERCIALIZATION

5.1 Commercialization in the Territory.

(a) Nycomed’s Responsibilities. Nycomed shall be solely responsible for Commercializing Product in the Territory. Nycomed shall use Diligent Efforts to Commercialize Product in the Territory and to carry out its obligations under this Agreement in all Countries in the Territory where Regulatory Approvals have been obtained.

(b) Coordination; Semi-Annual Reports. The Parties shall coordinate the Commercialization of Product in the Territory with the Commercialization of Product in North America with the objective of coordination of global product positioning and sharing of best practices and strategies. Nycomed shall provide NPS reports semi-annually with respect to its Commercialization activities for the past six (6) month period and its plans for the subsequent six (6) month period. Such reports shall set forth in summary form the results of Nycomed’s Commercialization activities performed during such semi-annual period, the actual budget for the past six (6) month period and the forecasted budget for the subsequent six (6) month period.

(c) Decisions with Respect to Product in the Territory. Nycomed shall have the sole discretion with respect to Commercialization decisions for Product in the Territory,

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including the right to decide whether to launch and market the Product in a Country of the Territory, and whether to seek Regulatory Approval for Product in a Country of the Territory.

(d) Exports. Nycomed shall use Diligent Efforts to prevent Product distributed for sale in the Territory from being exported to a Country in North America for sale. NPS shall use Diligent Efforts to prevent Product distributed for sale in a Country in North America from being exported to a Country in the Territory for sale.

5.2 Advertising and Promotional Materials.

(a) Nycomed shall develop written sales, promotional and advertising materials relating to Product and its Indications (the “Promotional Materials”) for use in the Territory. Such Promotional Materials shall be compliant with all applicable laws and regulations. All such Promotional Materials and all documentary information and oral presentations (where practicable) regarding the marketing and promotion of Product in Countries of the Territory shall acknowledge the Parties’ distribution and license arrangement and shall display the Nycomed and NPS names and logos with equal prominence, subject to any limitations imposed by applicable law.

(b) Nycomed shall provide to NPS copies of all Promotional Materials used by Nycomed for the Territory (translated into English where applicable). Nycomed will submit any core Promotional Materials to NPS for review and shall give NPS an opportunity to comment on such Promotional Materials. Nycomed agrees to consider in good faith any comments NPS may have with respect to such Promotional Materials.

(c) Promotional Materials for use in all Countries of the Territory will be reviewed and approved by Nycomed in accordance with Nycomed’s standard operating procedures. Copies of all Promotional Materials used in the Territory will be archived by Nycomed in accordance with applicable laws and regulations.

5.3 Sales and Distribution. Nycomed shall be responsible for booking sales and shall warehouse and distribute Product in the Territory.

5.4 Complaints. Each Party will maintain a record of any and all complaints it receives with respect to Product. Each Party will notify the other Party in reasonable detail of any complaint received by the Party with respect to Product manufactured, used or sold within forty-eight (48) hours after the event, and in any event, in sufficient time to allow the other Party and its Affiliates and sublicensees to comply with any and all regulatory and other requirements imposed upon them in any jurisdiction in which Product is being marketed or tested in clinical studies.

5.5 Adverse Event Reporting Procedures. Each Party will (a) provide the other Party with safety data from clinical studies in its control and post-marketing reports necessary or desirable for the other Party to comply with all applicable laws and regulations with respect to Product and (b) report and provide such information to the other Party in such a manner and time so as to enable the other Party to comply with all applicable laws and regulations. Nycomed shall maintain a global safety database for Product and shall generate adverse event reports for NPS’ use in North America. NPS shall have access to all data in the global safety database. Nycomed

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shall be responsible for submitting such adverse events reports to the applicable Regulatory Authorities in the Territory. Details on procedures and responsibilities shall be negotiated by the pharmacovigilance personnel of the Parties and set forth in a Pharmacovigilance Agreement to be entered into by the Parties within ninety (90) days after the Effective Date.

5.6 Recalls, Market Withdrawals or Corrective Actions.

(a) In the event that any Regulatory Authority issues or requests a recall or takes a similar action in connection with Product in the Territory, or in the event either Party determines that an event, incident or circumstance has occurred that may result in the need for a recall or market withdrawal in the Territory, the Party notified of such recall or similar action, or the Party that desires such recall or similar action, shall within twenty-four (24) hours, advise the other Party thereof by telephone or facsimile. Nycomed, in consultation with NPS, shall decide whether to conduct a recall in the Territory (except in the case of a government mandated recall, when Nycomed may act without such advance notice but shall notify NPS as soon as possible) and the manner in which any such recall shall be conducted. NPS will make available to Nycomed, upon request, all of NPS’ pertinent records that Nycomed may reasonably request to assist Nycomed in effecting any recall. Nycomed shall bear the expense of any such recall in the Territory.

(b) In the event that any Regulatory Authority issues or requests a recall or takes a similar action in connection with Product in any Country of North America, or in the event either Party determines that an event, incident or circumstance has occurred that may result in the need for a recall or market withdrawal in any Country in North America, the Party notified of such recall or similar action, or the Party that desires such recall or similar action, shall within twenty-four (24) hours, advise the other Party thereof by telephone or facsimile. NPS, in consultation with Nycomed, shall decide whether to conduct a recall in such Country in North America (except in the case of a government mandated recall, when NPS may act without such advance notice but, shall notify Nycomed as soon as possible) and the manner in which any such recall shall be conducted. Nycomed will make available to NPS, upon request, all of Nycomed’s pertinent records that NPS may reasonably request to assist NPS in effecting any recall. NPS shall bear the expense of any such recall in North America.

ARTICLE 6

MANUFACTURE AND SUPPLY

6.1 General. The purpose of this Article 6 shall be to enable Nycomed to take over responsibilities relating to the manufacture and supply of the Compound, Product and Device for the Territory. In addition, the Parties will source clinical trial materials for the Primary Indication from and after the completion of the Ongoing Studies from the existing Third Party manufacturers listed on Schedule 6.1, unless otherwise mutually agreed by the Parties.

6.2 Manufacture and Supply for the Territory. After the Effective Date, Nycomed shall be responsible for Manufacturing and supply of the Compound and Product for the Territory. Nycomed shall use Diligent Efforts to ensure supply of Product through itself or Third Parties, including, without limitation, the negotiation of Manufacturing and supply obligations and amendment of Regulatory Approvals to permit such supply chain.

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6.3 Transfer of Responsibility and Technology. Subject to Section 6.7, NPS shall transfer the process technology to support such activities for the current process within [*] after the Effective Date and for the [*] Process within [*] after the Effective Date in accordance with the technology transfer schedule attached hereto as Schedule 6.3. Nycomed may not utilize any of the technology transferred hereunder relating to the [*] Process for any purpose other than the Development and Manufacturing of the Compound and Product. Nycomed shall reimburse NPS for [*] of its costs of internal scientific, medical, technical or managerial personnel engaged in transferring the current process and for [*] of its costs of internal scientific, medical, technical or managerial personnel engaged in transferring the [*] Process, which costs in each case shall be determined based on the applicable FTE Rate. NPS shall not be obligated to devote, and Nycomed shall not be obligated to reimburse for, more than [*] of a FTE for the purpose of transferring the current process or more than [*] of a FTE for the purpose of transferring the [*] Process. To the extent practicable, NPS shall accommodate Nycomed on any reasonable request to convert such information into another form that is required or requested by a Regulatory Authority.

6.4 Subsequent Information. Information relating to the process technology for the current process which comes under the Control of either Party (the “Controlling Party”) or its Affiliates during the Term after the transfer in Section 6.3 shall be transferred to the other Party as soon as reasonably practicable after it becomes available to the Controlling Party. The Controlling Party shall use reasonable efforts not to, and to cause its Affiliates not to, enter into any agreement with any entity which prevents such information obtained as a result of such agreement being made available to the other Party.

6.5 [*] Process.

(a) CMO Activities. NPS shall be responsible for overseeing the research and development of the [*] Process with the CMOs currently in progress. NPS and Nycomed shall cooperate to transfer the responsibility for such oversight in the Territory to Nycomed within a reasonable timeframe.

(b) Joint Development Plans. Nycomed shall be responsible for implementing and overseeing any Joint Development Plans prepared by the Joint Development Committee relating to the [*] Process and the Parties shall each be responsible for fifty percent (50%) of the costs and expenses of implementing any such Joint Development Plans. If NPS does not agree to any such Joint Development Plans, then NPS may elect not to participate and shall not be obligated to pay any costs or expenses associated with such Joint Development Plan. In the event of such an election not to participate by NPS, each Party may pursue its own Development relating to the [*] Process and shall be responsible for its own costs and expenses incurred in connection therewith. Thereafter, if either Party desires to utilize any Improvements Developed solely by the other Party (the “Developing Party”) relating to the [*] Process, such Party shall be offered the rights to such Improvements by reimbursing the Developing Party an amount equal to [*] of the Developing Party’s costs incurred after the Effective Date to Develop such Improvements plus interest on such amount equal to an annual compound rate of [*] of such amount beginning on the date the Developing Party began incurring costs for such Developing such Improvements up to the date of payment.

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6.6 Master Cell Bank and Working Cell Banks. NPS is currently a party to a certain Laboratory Services and Confidentiality Agreement, dated as of [*], by and between NPS and [*], as amended on January 1, 2006, under which [*] performs certain contract research duties for NPS. As promptly as practicable after the Effective Date, NPS shall transfer to [*] or ATCC Patent Depository, which is in the business of maintaining legal compliant storage of materials for patent purposes (“ATCC”), or another Third Party appointed by NPS and approved by Nycomed, such approval not to be unreasonably withheld or delayed, the Master Cell Bank and Working Cell Banks and the technology related thereto under a trust agreement allowing royalty free access to Nycomed, NPS and any Future Partner in such a manner as to prevent either party from depleting these materials such that harm is caused to the other party. As part of such trust agreement, a mechanism for storage fees, withdrawals and manufacture of additional Working Cell Banks will be defined. Nycomed and NPS (or their respective assignee or sublicense) shall each cover fifty percent (50%) of the total costs and expenses of the activities required to maintain such trust. Until the trust agreement is in place, NPS shall deliver to Nycomed Master Cell Banks or Working Cell Banks as needed by Nycomed for purposes of performing its obligations hereunder.

6.7 Other Ongoing Rights and Responsibilities.

(a) Common Technical Document. NPS shall be responsible for the initial preparation of the CMC sections of the common technical document for the processes relating to Manufacture of Product, and shall provide a copy of such section to Nycomed for preparation of its Regulatory Approval Application with the applicable Regulatory Authorities in the Territory.

(b) Validation Batches. NPS shall retain the ongoing Validation Batches for Product and shall be responsible for finalizing the validation summary reports prepared in connection with the Validation Batches.

(c) CMO Activities. Nycomed shall inform NPS of any activities by Nycomed and any CMOs to prepare Product for approval for filing with the Regulatory Authorities and for First Commercial Sale in the Territory.

ARTICLE 7

FINANCIAL PROVISIONS

7.1 Signing Fee. No later than five (5) days after the Effective Date, Nycomed shall pay to NPS the amount of ten million dollars ($10,000,000) for the rights granted in this Agreement. For the avoidance of doubt, NPS shall retain such ten million dollar ($10,000,000) signing fee even in the event of a termination of this Agreement by Nycomed pursuant to Section 11.2(a).

7.2 First Milestone Payment. No later than fourteen (14) days after the later of (a) the Primary Indication Announcement and (b) the transfer by NPS to Nycomed of the Milestone Data (the “Termination Period”), Nycomed shall pay to NPS the amount of twenty-five million dollars ($25,000,000) for the rights granted in this Agreement, provided, that if Nycomed has delivered to NPS a written notice of termination (a “Termination Notice”) before the end of the Termination Period, Nycomed shall have no obligation to pay the amount set forth in this Section 7.2.

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7.3 Milestone Payments.

(a) Primary Indication Milestones. Nycomed shall make the non-refundable, non-creditable payments to NPS set forth below not later than ten (10) business days after the date of the corresponding milestone event set forth below relating to the Primary Indication has been achieved:

Milestone Event	Payment
Acceptance for filing of Regulatory Approval Application by the EMEA	$	[	*]
Approval by the (a) EMEA or (b) the first Major EU Country*	$	[	*]
Launch of Product in the first Major EU Country	$	[	*]

* Only payable if approval occurs on or before [*]; provided that approval shall be deemed to have occurred notwithstanding any post-approval conditions.

(b) Additional Indication Milestones. To the extent the Parties agree to develop Additional Indications (of which examples of potential indications are mentioned below) as set out in Section 4.2(b) above:

(i) NEC Milestones. Nycomed shall make the non-refundable, non-creditable payments to NPS set forth below not later than ten (10) business days after the date of the corresponding milestone event set forth below relating to the NEC has been achieved:

Milestone Event	Payment
Successful Proof of Concept Study	$	[	*]
Acceptance for filing of Regulatory Approval Application by the EMEA	$	[	*]
Launch of Product in the first Major EU Country	$	[	*]

(ii) CIGIM Milestones. Nycomed shall make the non-refundable, non-creditable payments to NPS set forth below not later than ten (10) business days after the date of the corresponding milestone event set forth below relating to CIGIM has been achieved:

Milestone Event	Payment
Successful Proof of Concept Study	$	[	*]
Acceptance for filing of Regulatory Approval Application by the EMEA	$	[	*]
Launch of Product in the first Major EU Country	$	[	*]

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(iii) Crohn’s Milestones. Nycomed shall make the non-refundable, non-creditable payments to NPS set forth below not later than ten (10) business days after the date of the corresponding milestone event set forth below relating to Crohn’s related indications has been achieved:

Milestone Event	Payment
Successful Proof of Concept Study	$	[	*]
Acceptance for filing of Regulatory Approval Application by the EMEA	$	[	*]
Launch of Product in the first Major EU Country	$	[	*]

(iv) Other Additional Indications. Nycomed shall make the non-refundable, non-creditable payments to NPS set forth below not later than ten (10) business days after the date of the corresponding milestone event set forth below relating to any Additional Indication not specified in (i) through (iii) above has been achieved:

Regulatory Milestone Event	Payment
Successful Proof of Concept Study	$	[	*]
Acceptance for filing of Regulatory Approval Application by the EMEA	$	[	*]
Launch of Product in the first Major EU Country	$	[	*]

(c) Commercialization Milestone. In addition to all other amounts payable under this Agreement, Nycomed shall make a non-refundable, non-creditable, one-time milestone payment to NPS related to the marketing and sale of Product in the Territory in the amount of [*] for the first Calendar Year period that commences after the 2007 Calendar Year during which aggregate Net Sales of Product in the Territory equal or exceed [*].

7.4 Payment of Royalties on Net Sales.

(a) Royalty Rates. Subject to adjustment pursuant to Section 7.4(b), Nycomed shall pay NPS royalty payments based on Net Sales of Products in the Territory at the rate of (i) [*] percent [*] during the NPS Initial Royalty Term and (ii) [*] percent [*] during the NPS Secondary Royalty Term.

(b) Reduction of Royalty. At any time after the Effective Date during the NPS Royalty Term, if the aggregate sales of an Equivalent Product in a Country reach [*] percent [*] of the aggregate sales of Product in the Indications for which Product is then sold in such Country, then the royalty payable in such Country shall be reduced to zero for such Product for such Indications in such Country.

(c) Royalty Payment Schedules; Reports. Royalty payments due pursuant to Section 7.4(a) are due and payable within thirty (30) days of the end of each Calendar Quarter during the NPS Royalty Term during which there were Net Sales of Product in the Territory. Nycomed shall accompany each payment of royalties under this Agreement with a report setting forth, on a Country-by-Country basis in the Territory, the amount of gross sales of Product in

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such Country, a calculation of Net Sales, the currency conversion rate used and the United States Dollar-equivalent of such Net Sales, and a calculation of the amount of royalty payment due on such Net Sales.

7.5 Existing Third Party Agreement Payments.

(a) Nycomed shall be responsible for paying all royalties that are payable by NPS to Third Parties under the [*] as a result of the Development, Manufacture or Commercialization of Product in the Territory pursuant to this Agreement. Nycomed shall pay all such royalties directly to [*] at the times and in the manner required by the [*]. Subject to Section 3.6(b), NPS shall be responsible for all amounts due and payable to Third Parties under the Existing Third Party Agreements other than the [*] as set forth above.

(b) In the event that Nycomed determines that it must acquire rights to any intellectual property owned by a Third Party in order to Develop, Manufacture or Commercialize Product, Nycomed shall have the right to acquire such rights through a license or otherwise. Nycomed shall be solely responsible for making any and all payments owed to Third Parties under such licenses; provided, however, that if at any time within four (4) months after the Effective Date Nycomed makes a determination that it must acquire any such licenses, then Nycomed may offset any royalty payments owed under such licenses against any royalty payments owed by Nycomed to NPS under Sections 7.4(a) hereof. During the four (4) month period described in the preceding sentence, NPS shall have the right to take the lead in any negotiations to acquire such rights to Third Party intellectual property hereunder and thereafter shall take the lead only if Nycomed so requests.

7.6 Audits. Each Party shall keep complete and accurate records of the underlying Development Costs, Cost of Goods and Net Sales relating to the reports and payments required under this Agreement. Each Party will have the right twice annually at its own expense to have an independent, certified public accountant, selected by such Party and reasonably acceptable to the other Party, review any such records of the other Party in the location(s) where such records are maintained by the other Party upon reasonable notice and during regular business hours and under obligations of confidence, for the sole purpose of verifying the basis and accuracy of payments made under this Agreement within the prior thirty-six (36) month period. If the review of such records reveals that the other Party has failed to accurately report information pursuant to this Agreement, then the other Party shall promptly pay to the auditing Party any resulting amounts due, together with interest calculated in the manner provided in Section 7.11. If any such under payments are greater than five percent (5%) of the amounts actually due for a Calendar Quarter, the other Party shall pay all of the costs of such review.

7.7 Tax Matters. The Parties shall use all reasonable and legal efforts to reduce tax withholding on payments made to NPS hereunder. Notwithstanding such efforts, if Nycomed concludes, after consultation with NPS, that tax withholdings under the laws of any Country are required with respect to payments to NPS, Nycomed shall deduct and withhold the required amount and pay it to the appropriate Governmental Authority. In such a case, Nycomed will promptly provide NPS with original receipts or other evidence reasonably desirable and sufficient to allow NPS to document such tax withholdings adequately for purposes of claiming foreign tax credits and similar benefits.

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7.8 United States Dollars. All dollar ($) amounts specified in this Agreement are United States dollar amounts.

7.9 Currency Exchange. With respect to Net Sales invoiced or expenses incurred in United States dollars, the Net Sales or expense amounts and the amounts due to the receiving Party hereunder shall be expressed in United States dollars. With respect to Net Sales invoiced or expenses incurred in a currency other than United States dollars, the Net Sales or expense shall be expressed in the currency in which such Net Sales were invoiced or such expense was incurred together with the United States dollar equivalent, calculated using the average of the spot rate on the first and last business days of the Calendar Quarter in which the Net Sales were made or the expense was incurred. The 12:00 Noon Buying Rates, as certified by the NY Federal Reserve Bank (currently and historical rates can be found on their website at www.ny.frb.org), shall be used as the source of spot rates. All payments shall be made in United States dollars.

7.10 Blocked Payments. In the event that, by reason of applicable laws or regulations in any Country, it becomes impossible or illegal for Nycomed or an Affiliate or sublicensee of Nycomed, to transfer, or have transferred on its behalf, distribution fees or other payments to NPS, Nycomed shall promptly notify NPS of the conditions preventing such transfer and such distribution fees or other payments shall be deposited in local currency in the relevant Country to the credit of NPS in a recognized banking institution designated by NPS or, if none is designated by NPS within a period of thirty (30) days, in a recognized banking institution selected by Nycomed or its Affiliate or sublicensee, as the case may be, and identified in a notice given to NPS.

7.11 Late Payments. The paying Party shall pay interest to the receiving Party on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate of prime plus three (3) points per annum or the highest rate permitted by applicable law, calculated on the number of days such payments are paid after the date such payments are due and compounded monthly.

7.12 Shared Development Costs.

(a) Shared Development Costs. Unless otherwise specified herein, the Development Costs for any Indications that the Parties jointly agree to pursue under a Joint Development Plan (the “Shared Development Costs”) shall be shared such that each Party pays fifty percent (50%) of such Shared Development Costs.

(b) Reporting of Shared Development Costs. Within fifteen (15) days after the end of each of the first three (3) Calendar Quarters of each Calendar Year during the Term, each Party shall submit to the other Party a reasonably detailed report of all Shared Development Costs incurred by such Party during the prior Calendar Quarter. Within sixty (60) days after the end of each Calendar Year during the Term, each Party shall submit to the other Party a reasonably detailed report of all Shared Development Costs incurred by such Party during the prior Calendar Year, reflecting any year-end reconciliations and adjustments applicable to the previous three (3) Calendar Quarters’ reported results.

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(c) Payment of Shared Development Costs. Within thirty (30) days after the delivery of the quarterly and year-end reports described in Section 7.12(b), the Parties shall make payments to each other to the extent necessary to effect the division of the Shared Development Costs described in Section 7.12(a).

ARTICLE 8

INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED

MATTERS

8.1 Ownership of Inventions.

(a) Sole Inventions. Subject to Section 8.1(c), each Party shall exclusively own all inventions made during the Term solely by such Party, its employees, agents and consultants (“Sole Inventions”). Sole Inventions of Nycomed, its employees, agents and consultants are referred to herein as “Nycomed Sole Inventions”. Any Patent Rights filed Covering Nycomed Sole Inventions shall be Nycomed Patent Rights Sole Inventions of NPS, its employees, agents and consultants are referred to herein as “NPS Sole Inventions”. Any Patent Rights filed Covering NPS Sole Inventions shall be NPS Patent Rights.

(b) Joint Inventions. Subject to Section 8.1(c), the Parties shall jointly own all inventions made during the Term jointly by employees, agents and consultants of Nycomed and employees, agents and consultants of NPS, on the basis of each Party having an undivided interest in the whole (“Joint Inventions”). Any Patent Rights filed Covering Joint Inventions shall be Joint Patent Rights.

(c) Assigned Improvements. Notwithstanding Section 8.1(a) or 8.1(b), in the event a Nycomed Sole Invention or Joint Invention is a discovery, invention, improvement or new use related to the Compound or Product (an “Improvement”), such Improvement (a) shall be jointly owned by NPS and Nycomed in the EU and shall be designated a Co-Owned Patent Right in the EU hereunder and (b) shall be the sole and exclusive property of NPS in all Countries other than any Country of the EU and Nycomed agrees to assign and hereby does assign its entire right, title and interest in and to such Improvements to NPS in all Countries other than any Country of the EU. Thereafter, all such assigned Inventions shall be part of the NPS Intellectual Property.

(d) Inventorship. For purposes of determining whether an invention is a Nycomed Sole Invention, a NPS Sole Invention or a Joint Invention, questions of inventorship shall be resolved in accordance with United States patent laws.

8.2 Prosecution and Maintenance of Patent Rights.

(a) Registration as Co-Owner. Upon the terms and subject to the conditions of the Existing Third Party Agreements, Nycomed shall have the right to register as a co-owner of the Co-Owned Patent Rights with all applicable patent or trademark offices in the Territory, and to act as a representative in prosecuting and maintaining such Co-Owned Patent Rights for both Parties in the Territory.

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(b) NPS-Controlled Patent Rights.

(i) Nycomed shall have the first right to take the lead in the filing, prosecution and maintenance of the NPS Patent Rights in the Territory. If Nycomed elects not to undertake (or, after commencement of such filing, prosecution and/or maintenance, desires to cease the prosecution or the maintenance of any such NPS Patent Rights), then Nycomed shall notify NPS of such election and NPS, subject to the terms of the Existing Third Party Agreements, shall be entitled to file, prosecute and/or maintain such NPS Patent Rights.

(ii) NPS shall have the right to take the lead in the filing, prosecution and maintenance of the NPS Patent Rights outside the Territory. If NPS elects not to undertake (or, after commencement of such filing, prosecution and/or maintenance, desires to cease the prosecution or the maintenance of any such NPS Patent Rights), then NPS shall notify Nycomed of such election and Nycomed, subject to the terms of the Existing Third Party Agreements, shall be entitled to file, prosecute and/or maintain such NPS Patent Rights.

(c) Nycomed-Controlled Patent Rights. Nycomed shall have the first right to take the lead in the filing, prosecution and maintenance of the Nycomed Patent Rights. If Nycomed elects not to undertake (or, after commencement of such filing, prosecution and/or maintenance, desires to cease the prosecution or the maintenance of any Nycomed Patent Rights), then Nycomed shall notify NPS of such election and NPS, subject to the terms of the Existing Third Party Agreements, shall be entitled to file, prosecute and/or maintain such Nycomed Patent Rights. NPS shall have the right to review and comment on Nycomed’ prosecution and/or maintenance of any Nycomed Patent Rights.

(d) Joint Patent Rights. Upon the terms and subject to the conditions of the Existing Third Party Agreements, Nycomed shall have the first right to take the lead in the filing, prosecution and maintenance of Joint Patent Rights. If Nycomed elects not to undertake (or, after commencement of such filing, prosecution and/or maintenance, desires to cease the prosecution or the maintenance of any Joint Patent Rights), then Nycomed shall notify NPS of such election and NPS shall be entitled to file, prosecute and/or maintain such Joint Patent Rights. The non-prosecuting Party shall have the right to review and comment on the prosecuting Party’s prosecution and/or maintenance of any Joint Patent Rights.

(e) Costs and Expenses. Nycomed shall reimburse NPS for reasonable costs and expenses incurred by NPS, including without limitation costs of reasonable time spent by NPS personnel on patent preparation and prosecution calculated at the applicable FTE Rate, in preparing, filing, prosecuting and/or maintaining the NPS Patent Rights and the Joint Patent Rights Covering Product in the Territory. Nycomed shall bear its own costs and expenses incurred by Nycomed in preparing, filing, prosecuting and/or maintaining NPS Patent Rights or the Joint Patent Rights. NPS shall invoice Nycomed for all costs and expenses reimbursable by Nycomed pursuant to this Section 8.2(e) and Nycomed shall pay such invoices within thirty (30) days after receipt thereof.

(f) Cooperation. Each Party agrees to cooperate with the other Party with respect to the preparation, filing, prosecution and maintenance of patents and patent applications pursuant to this Section 8.2. The Party responsible for preparing, filing, prosecuting and/or maintaining Patent Rights Covering Product in the Territory or Joint Patent Rights shall provide the other Party with advance copies (which may be in draft form) of all material filings as well as

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copies of all material correspondence from the relevant patent office, in each case relating to such Patent Rights, and shall consider in good faith all comments from such other Party relating to such filings and correspondence. In addition, each Party shall on a regular basis or upon reasonable request, and in no event less than on a quarterly basis, inform the other Party of any changes or updates relating to the prosecution of Patent Rights Covering the Product, including but not limited to prior art (including but not limited to prior art cited by patent authorities), bars to patentability brought up by national patent offices and strategies to overcome said bars and shall use Diligent Efforts to harmonize the prosecution of said Patent Rights.

(g) NPS shall provide to Nycomed access to all data, documentation, or personnel (including but not limited to inventors) controlled by NPS that are required or useful in order to establish a freedom-to-operate opinion for the use, Development, Manufacture or Commercialization of the Compound, Product or Compound and to maintain, file, prosecute or defend the any Patent Rights Covering the Product or Compound.

8.3 Third Party Infringement.

(a) Notice. Each Party shall promptly report in writing to the other Party during the Term any known or suspected (i) infringement of any of the NPS Patent Rights or Nycomed Patent Rights or Joint Patent Rights or (ii) unauthorized use of any of the NPS Know-How, Nycomed Know-How or Joint Know-How of which such Party becomes aware, and shall provide the other Party with all available evidence supporting such known or suspected infringement or unauthorized use.

(b) Initial Right to Enforce. Subject to Section 8.3(c) below and the provisions of any Third Party license agreement under which NPS’ rights in NPS Patent Rights or Nycomed’s rights in Nycomed Patent Rights are granted, (i) NPS shall have the first right to initiate a suit or take other appropriate action that it believes is reasonably required to protect (i.e., prevent or abate actual or threatened infringement or misappropriation of) or otherwise enforce the Patent Rights outside the Territory and (ii) Nycomed shall have the first right to initiate a suit or take other appropriate action that it believes is reasonably required to protect (i.e., prevent or abate actual or threatened infringement or misappropriation of) or otherwise enforce the Patent Rights in the Territory.

(c) Step-In Right. Subject to the provisions of any Third Party license agreement under which NPS’ rights in NPS Patent Rights are granted or Nycomed’s rights in Nycomed Patent Rights are granted, if the Party with the first right to enforce (the “Initial Enforcement Rights Party”) the NPS Intellectual Property or the Nycomed Intellectual Property fails to initiate a suit or take other appropriate action that it has the initial right to initiate or take pursuant to Section 8.3(b) within ninety (90) days after becoming aware of the basis for such suit or action, then the other Party (the “Secondary Enforcement Rights Party”) may, in its discretion, provide the Initial Enforcement Rights Party with written notice of such Secondary Enforcement Rights Party’s intent to initiate a suit or take other appropriate action with respect to such infringement in the Territory. If the Secondary Enforcement Rights Party provides such notice and the Initial Enforcement Rights Party fails to initiate a suit or take such other appropriate action within thirty (30) days after receipt of such notice from the Secondary Enforcement Rights Party, then the Secondary Enforcement Rights Party shall have the right to

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initiate a suit or take other appropriate action that it believes is reasonably required to protect the NPS Intellectual Property or the Nycomed Intellectual Property from such infringement in the Territory.

(d) Conduct of Certain Actions; Costs. The Party initiating suit shall have the sole and exclusive right to select counsel for any suit initiated by it pursuant to Section 8.3(b) or 8.3(c). If required under applicable law in order for the initiating Party to initiate and/or maintain such suit, the other Party shall join as a party to the suit. Such other Party shall offer reasonable assistance to the initiating Party in connection therewith at no charge to the initiating Party except for reimbursement of reasonable out-of-pocket expenses incurred in rendering such assistance. The initiating Party shall assume and pay all of its own out-of-pocket costs incurred in connection with any litigation or proceedings initiated by it pursuant to Sections 8.3(b) and 8.3(c), including without limitation the fees and expenses of the counsel selected by it. The other Party shall have the right to participate and be represented in any such suit by its own counsel at its own expense.

(e) Recoveries. With respect to any suit or action referred to in Sections 8.3(b) and 8.3(c) in the Territory, any recovery obtained as a result of any such proceeding, by settlement or otherwise, shall be applied in the following order of priority:

(i) first, the Parties shall be reimbursed for all costs incurred in connection with such proceeding paid by the Parties and not otherwise recovered; and

(ii) second, any remainder shall be treated as Net Sales under the Agreement.

8.4 Patent Invalidity Claim. If a Third Party at any time asserts a Claim that any NPS Patent Rights, Nycomed Patent Rights or Joint Patent Rights are invalid or otherwise unenforceable (an “Invalidity Claim”), control of the response to such Claim in the Territory shall, as between the Parties, be determined in the same manner as enforcement rights with respect to such NPS Patent Rights, Nycomed Patent Rights or Joint Patent Rights are determined pursuant to Sections 8.3(b) and 8.3(c), with the time periods set forth in Section 8.3(c) shortened where necessary to provide the Secondary Enforcement Rights Party sufficient time to respond without a loss of rights, and the non-controlling Party shall cooperate with the controlling Party in the preparation and formulation of such response, and in taking other steps reasonably necessary to respond, to such Invalidity Claim. Neither Party shall settle or compromise any Invalidity Claim without the consent of the other Party, which consent shall not be unreasonably withheld or delayed. If an Invalidity Claim arises in connection with a suit or action referred to in Section 8.3(b) or 8.3(c), the Parties shall confer with one another regarding the appropriateness of having the Party that is controlling such suit or action in accordance with Section 8.3(b) or Section 8.3(c) continue to control such suit or action and the sharing of cost and expenses with respect to such suit or action; provided that in the absence of any agreement by the Parties to the contrary, control of the Invalidity Claim shall remain with the same Party, and the costs and expenses of responding to the Invalidity Claim shall be borne by the Parties in accordance with the provisions of Section 8.3. If the Invalidity Claim does not arise in connection with a suit or action referred to in Section 8.3(b) or 8.3(c), the costs and expenses of responding to the Invalidity Claim shall be treated as Development Costs and borne by the Parties accordingly.

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8.5 Claimed Infringement. In the event that a Party becomes aware of any Claim that the Development, Manufacture or Commercialization of Product infringes the intellectual property rights of any Third Party, such Party shall promptly notify the other Party. In any such instance, the Parties shall cooperate and shall mutually agree upon an appropriate course of action. Each Party shall provide to the other Party copies of any notices it receives from Third Parties regarding any patent nullity actions, any declaratory judgment actions and any alleged infringement or misappropriation of Third Party intellectual property relating to the Development, Manufacture or Commercialization of Product. Such notices shall be provided promptly, but in no event after more than fifteen (15) days following receipt thereof.

8.6 Patent Term Extensions. Nycomed shall have the first right to file for patent term extension wherever applicable to Patent Rights in the Territory Controlled by either Party that Cover Product to the extent such extension is allowed by applicable law in a particular Country. If Nycomed chooses not to file (or, after commencement of such filing, desires to cease pursuing any such extension) for patent term extension Covering the Compound or Product or choose to file only for such Patent Rights that are non-royalty-bearing, then Nycomed shall notify NPS and NPS shall have right to file for patent term extension for Patent Rights that are royalty-bearing. Each Party, upon request by the other Party, shall provide reasonable assistance to the other Party in executing the necessary documents for any such extensions. The Parties shall, if necessary and appropriate, use reasonable efforts to agree upon a joint strategy relating to patent term extensions. All filings for such extensions shall be made upon request by the Party having the right to decide on the filing in accordance with this Section 8.6 or, in the case of Joint Patent Rights and Co-Owned Patent Rights, by the Party responsible for filing, prosecuting and maintaining such Patent Rights in accordance with Section 8.2(a).

8.7 Patent Marking. Nycomed agrees to comply with the patent marking statutes in each Country in the Territory in which Product is sold by Nycomed, its Affiliates and/or its sublicensees.

8.8 Trademarks.

(a) General. The Products shall be Commercialized under trademarks and trade dress selected by mutual agreement of the Parties (the “Product Trademarks”). Nycomed may select a Product Trademark for use in connection with the Product in the Territory. NPS may select a Product Trademark for use in connection with the Product in North America. The Parties shall coordinate the use of the Product Trademarks on a global basis and on a Country-by-County basis, including by mutual agreement through the Joint Development Committee.

(b) Non-Use of Similar Marks. Notwithstanding any other provision in this Agreement, during the Term, neither Party nor any of its Affiliates shall market, promote, sell and/or distribute any product (other than Product) under the Product Trademarks or any substantially similar trade names or trademarks.

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(c) Trademark Filing and Expenses. Nycomed shall be solely responsible for the filing and maintenance of the Product Trademarks in the Territory and all costs and expenses related thereto. NPS shall be solely responsible for the filing and maintenance of the Product Trademarks in North America and all costs and expenses related thereto.

(d) Marking of Promotional Materials. To the extent permitted by local law, Nycomed shall include NPS’ name with prominence equal to that of Nycomed (or Nycomed’s local Affiliate, if such local Affiliate is the Nycomed entity most prominently included), or as close thereto as permitted by local law, on all Product packaging and other materials related to Product.

(e) Trademark Infringement.

(i) With respect to any and all Claims instituted by Third Parties against Nycomed or NPS or any of their respective Affiliates for trademark infringement involving the use, sale, license or marketing of the Products (each, a “Product Trademark Infringement Claim”), Nycomed shall be solely responsible for any and all Losses arising out of or resulting from such Product Trademark Infringement Claims in the Territory and NPS shall be solely responsible for any and all Losses arising out of or resulting from such Product Trademark Infringement Claims in North America. The Parties shall cooperate with each other in the defense and settlement of any Product Trademark Infringement Claims.

(ii) In the event that a Party becomes aware of actual or threatened infringement of the Product Trademark, that Party shall promptly notify the other Party in writing (a “Trademark Infringement Notice”). Nycomed shall have the right but not the obligation to bring an action with respect to such infringement against any Third Party for infringement of a Product Trademark in the Territory and NPS shall have the right but not the obligation to bring an action with respect to such infringement against any Third Party for infringement of a Product Trademark in North America. A Party shall exercise this first right by providing the other Party written notice of its intention to initiate and prosecute the action or proceeding within sixty (60) days after giving or receiving a Trademark Infringement Notice. During the Term, in the event that either Party does not undertake such an infringement action with respect to a Product Trademark, the other Party shall be permitted to do so. If either Party is not recognized by the applicable court or other relevant body as having the requisite standing to pursue such action, then the other Party may join such Party as party-plaintiff. If a Party elects to pursue such infringement action, the other Party may (i) elect to participate in such action, in which case such Party shall bear one-half of the out-of-pocket costs and expenses of the action (including, without limitation, court costs, reasonable fees of attorneys, accountants and other experts and other expenses of litigation or proceedings) and shall share any recovery in proportion to their actual damages, or (ii) elect not to participate in such action, in which case such Party shall have no obligation to pay for any of the costs or expenses of the action and shall not receive any portion of any recoveries and the other Party shall bear all costs and expenses of the action and retain all recoveries. For the purposes of this Section 8.8(e)(ii), the Party that brings suit to enforce a given trademark shall also have the right to control settlement of such Claim.

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ARTICLE 9

CONFIDENTIALITY AND PUBLICITY

9.1 Confidential Information. During the Term and for a period of five (5) years after any termination or expiration hereof, each Party agrees to keep in confidence and not to disclose to any Third Party, or use for any purpose, except pursuant to, and in order to carry out, the terms and objectives of this Agreement, any Confidential Information of the other Party. As used herein, “Confidential Information” shall mean all trade secrets or confidential or proprietary information designated as such in writing by the disclosing Party, whether by letter or by the use of an appropriate stamp or legend, prior to or at the time any such trade secret or confidential or proprietary information is disclosed by the disclosing Party to the receiving Party. Notwithstanding the foregoing, information which is orally or visually disclosed to the receiving Party by the disclosing Party, or is disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information if (a) it would be apparent to a reasonable person, familiar with the disclosing Party’s business and the industry in which it operates, that such information is of a confidential or proprietary nature, the maintenance of which is important to the disclosing Party, or if (b) the disclosing Party, within thirty (30) days after such disclosure, delivers to the receiving Party a written document or documents describing such information and referencing the place and date of such oral, visual or written disclosure and the names of the employees or officers of the receiving Party to whom such disclosure was made and indicating such information should be deemed Confidential Information. The restrictions on the disclosure and use of Confidential Information set forth in the first sentence of this Section 9.1 shall not apply to any Confidential Information that:

(a) was known by the receiving Party prior to disclosure by the disclosing Party hereunder (as evidenced by the receiving Party’s written records);

(b) is or becomes part of the public domain through no fault of the receiving Party;

(c) is disclosed to the receiving Party by a Third Party having a legal right to make such a disclosure without violating any confidentiality or non-use obligation that such Third Party has to the disclosing Party; or

(d) is independently developed by the receiving Party (as evidenced by the receiving Party’s written records).

The Receiving Party shall have the right to disclose any Confidential Information provided hereunder if, in the reasonable opinion of the Receiving Party’s legal counsel, such disclosure is necessary to comply with the terms of this Agreement, or the requirements of any law. Where possible, the Receiving Party shall notify the Disclosing Party of the Receiving Party’s intent to make such disclosure of Confidential Information pursuant to the provision of the preceding sentence sufficiently prior to making such disclosure so as to allow the Disclosing Party adequate time to take whatever action the Disclosing Party may deem to be appropriate to protect the confidentiality of the information.

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9.2 Employee, Consultant and Advisor Obligations. Each Party agrees that it and its Affiliates shall provide or permit access to Confidential Information received from the other Party only to the receiving Party’s employees, consultants, advisors and permitted subcontractors, sublicensees and sub-distributors, and to the employees, consultants, advisors and permitted subcontractors, sublicensees and sub-distributors of the receiving Party’s Affiliates, who have a need to know such Confidential Information to assist the receiving Party with the activities contemplated by this Agreement and who are subject to obligations of confidentiality and non-use with respect to such Confidential Information similar to the obligations of confidentiality and non-use of the receiving Party pursuant to Section 9.1; provided that NPS and Nycomed shall each remain responsible for any failure by its Affiliates, and its and its Affiliates’ respective employees, consultants, advisors and permitted subcontractors, sublicensees and sub-distributors, to treat such Confidential Information as required under Section 9.1 (as if such Affiliates, employees, consultants, advisors and permitted subcontractors, sublicensees and sub-distributors were Parties directly bound to the requirements of Section 9.1).

9.3 Publicity. Upon the execution of this Agreement, the Parties shall jointly issue a press release regarding the subject matter of this Agreement, the form of which shall be agreed between the Parties prior to execution. After such initial press release, neither Party shall issue a press release or public announcement or other disclosure relating to Product or this Agreement without the prior written approval of the other Party, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, a Party may make such disclosures as may be required by applicable law, provided that, whenever possible, at least ten (10) days prior to any such disclosure, the disclosing Party shall notify the nondisclosing Party sufficiently prior to making such disclosure, and shall provide the nondisclosing Party with a written copy thereof, so as to allow the nondisclosing Party adequate time to provide comment (which comments shall be given due consideration by the disclosing Party) and take whatever other action it may deem to be appropriate to protect the confidentiality of the information being disclosed. Each Party agrees that it shall cooperate fully with the other with respect to all disclosures regarding this Agreement to the United States Securities and Exchange Commission and any other Governmental Authority, including requests for confidential treatment of proprietary information of either Party included in any such disclosure.

9.4 Publications. Subject to the restrictions provided below, either Party may publish or present the results of Development carried out on Product, subject to the prior review by the other Party for patentability and protection of such other Party’s Confidential Information. Each Party shall provide to the other Party the opportunity to review and approve any proposed abstracts, manuscripts or summaries of presentations that cover the results of Development of Product. Each Party shall designate a Person or Persons who shall be responsible for approving such publications. Such designated person shall respond in writing promptly and in no event later than fifteen (15) days after receipt of the proposed material with either approval of the proposed material or a specific statement of concern, based upon either the need to seek patent protection or concern regarding competitive disadvantage arising from the proposal. No reply shall be deemed as an approval of the submitted application. In the event of concern, the submitting Party agrees not to submit such publication or to make such presentation that contains such information until the other Party is given a reasonable period of time (not to exceed ninety (90) days) to seek patent protection for any material in such publication or presentation that it

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believes is patentable or to resolve any other issues, and the submitting Party shall remove from such proposed publication any Confidential Information of the other Party as requested by such other Party. With respect to any proposed abstracts, manuscripts or summaries of presentations by investigators or other Third Parties, such materials shall be subject to review under this Section 9.4 to the extent that NPS or Nycomed, as the case may be, has the right to do so.

ARTICLE 10

REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS;

INDEMNIFICATION

10.1 Exclusivity Covenant. During the Term, neither NPS, Nycomed nor any of their respective Affiliates shall directly or indirectly market, sell or offer for sale, or otherwise Commercialize, any compounds or products (other than the Compound and Product) in the Territory containing a glucagon-like peptide-2 or any analog or derivative thereof (each, a “Competing Product”); provided, however, that if either Party obtains such a Competing Product through the acquisition of or merger with a Third Party or any other circumstances under which a Third Party becomes an Affiliate of such Party, such Party shall have a period of one (1) year from the date of consummation of such acquisition or merger or other triggering event, to divest of or otherwise dispose of any ongoing economic interest in such Competing Product in all Countries.

10.2 Mutual Representations and Warranties. NPS and Nycomed each represents and warrants to the other Party that, as of the Effective Date:

(a) it has full corporate right, power and authority to enter into this Agreement and to perform its respective obligations under this Agreement and that it has the right to grant to the other the licenses and sublicenses granted pursuant to this Agreement;

(b) except for any Regulatory Approvals, manufacturing approvals, antitrust approvals and/or similar approvals necessary for the Development, Manufacture or Commercialization of Product, all necessary consents, approvals and authorizations of all Governmental Authorities and other persons required to be obtained by it as of the Effective Date in connection with the execution, delivery and performance of this Agreement have been obtained;

(c) notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement by such Party, the performance of such Party’s obligations hereunder and the licenses and sublicenses to be granted by such Party pursuant to this Agreement (a) do not conflict with or violate any requirement of applicable laws or regulations existing as of the Effective Date and applicable to such Party and (b) do not conflict with, violate, breach or constitute a default under, and are not prohibited or materially restricted by, any contractual obligations of such Party or any of its Affiliates existing as of the Effective Date;

(d) such Party is duly authorized, by all requisite corporate action, to execute and deliver this Agreement and the execution, delivery and performance of this Agreement by such Party does not require any shareholder action or approval or the approval or consent of any

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Third Party, and the Person executing this Agreement on behalf of such Party is duly authorized to do so by all requisite corporate action; and

(e) this Agreement is a legal and valid obligation binding upon it and is enforceable against it in accordance with its terms.

10.3 Additional NPS Representations and Warranties. NPS additionally represents and warrants to Nycomed as of the Effective Date that:

(a) To NPS’ knowledge, there are no intellectual property rights of a Third Party that are not licensed to Nycomed hereunder that could prevent the Manufacture, use or sale of Product in the Territory within the Field;

(b) (i) except as otherwise set forth in an Existing Third Party Agreement, NPS solely and exclusively Controls the NPS Intellectual Property and owns good title to the NPS Patents Rights, and, to NPS’ knowledge, no Third Party has any right, title or interest (including without limitation all liens, security interests, charges and other encumbrances of any kind) in the NPS Intellectual Property, and, (ii) to NPS’ knowledge, the NPS Intellectual Property has not been developed or obtained by NPS or its Affiliates in violation of any contractual obligation to any Third Party or by misappropriation from any Third Party;

(c) there are no pending Claims, judgments or settlements against or owed by NPS pending with respect to the NPS Intellectual Property, and, to NPS’ knowledge, NPS has not received written notice of any threatened Claims or litigation seeking to invalidate any NPS Patent Rights;

(d) there are no investigations, inquiries or other proceedings pending before or threatened by any Governmental Authority with respect to the NPS Intellectual Property;

(e) the development of Product has been conducted by NPS and its Affiliates and, to the knowledge of NPS, its subcontractors in compliance in all material respects with all applicable laws, rules and regulations, including all public health and safety provisions of state law and regulations, permits, governmental licenses, registrations, approvals, concessions, franchises, authorizations, orders, injunctions and decrees and applicable laws, rules and regulations;

(f) no publications or disclosure has been made by NPS or, to NPS’ knowledge, any Third Parties relating to Compound or Product that may invalidate or otherwise harm the Nycomed Patent Rights or NPS Patent Rights;

(g) no officer of NPS involved in the negotiation or preparation of this Agreement is aware of any adverse events having occurred in any study or other safety issue involving Product or Compound which is reasonably likely to prevent the further successful Development of Compound or Product; and

(h) the NPS Drug Safety Monitoring Board has been made aware of all adverse events during the Development of Compound or Product and has not expressed concerns about the safety of Compound or Product nor has it recommended the termination of the further Development of Product or Compound.

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10.4 Existing Third Party Agreements. NPS additionally represents, warrants and covenants to Nycomed that NPS has provided Nycomed with complete and correct copies of the Existing Third Party Agreements and the Existing Third Party Agreements are in full force and effect as of the Effective Date. NPS will use all reasonable efforts to maintain in full force and effect and to fully perform its obligations thereunder in good faith and to keep Nycomed fully informed of any material development pertaining thereto. NPS shall not, without the prior written approval of Nycomed (i) amend any Existing Third Party Agreements or (ii) make any election or exercise any right or option to terminate in whole or in part any Existing Third Party Agreement that in either case materially and adversely affect Nycomed’s rights under this Agreement. The Existing Third Party Agreements are the only agreements as of the Effective Date between NPS and any Third Party that impose an obligation to pay royalties or any other amounts to a Third Party based on the Development, Manufacture or Commercialization of Product.

10.5 Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, TO THE OTHER PARTY, AND EACH PARTY HEREBY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, MANUFACTURE OR COMMERCIALIZATION OF PRODUCT PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL.

10.6 Indemnification.

(a) By Nycomed. Nycomed shall defend, indemnify and hold harmless NPS and its Affiliates and each of their officers, directors, shareholders, employees, successors and assigns from and against all Claims of Third Parties, and all associated Losses, to the extent arising out of (i) Nycomed’s negligence or willful misconduct in performing any of its obligations under this Agreement, (ii) a breach by Nycomed of any of its representations, warranties, covenants or agreements under this Agreement, or (iii) the Manufacture, use or Commercialization of Products in the Territory; provided, however, that in all cases referred to in this Section 10.6(a), Nycomed shall not be liable to indemnify NPS for any Losses of NPS to the extent that such Losses of NPS were caused by: (x) the negligence or willful misconduct or wrongdoing of NPS; (y) any breach by NPS of its representations, warranties, covenants or agreements hereunder or (z) a claim based on infringement of Third Party Intellectual Property Rights by the Product as it exists on the Effective Date.

(b) By NPS. NPS shall defend, indemnify and hold harmless Nycomed and its Affiliates and each of their officers, directors, shareholders, employees, successors and assigns from and against all Claims of Third Parties, and all associated Losses, to the extent arising out of (a) NPS’ negligence or willful misconduct in performing any of its obligations under this Agreement or (b) a breach by NPS of any of its representations, warranties, covenants

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or agreements under this Agreement; provided, however, that in all cases referred to in this Section 10.6(b), NPS shall not be liable to indemnify Nycomed for any Losses of Nycomed to the extent that such Losses of Nycomed were caused by: (x) the negligence or willful misconduct or wrongdoing of Nycomed or (y) any breach by Nycomed of its representations, warranties, covenants or agreements hereunder.

10.7 Procedure for Indemnification.

(a) Notice. Each Party will notify promptly the other if it becomes aware of a Claim (actual or potential) by any Third Party (a “Third Party Claim”) for which indemnification may be sought by that Party and will give such information with respect thereto as the other Party shall reasonably request. If any proceeding (including any governmental investigation) is instituted involving any Party for which such Party may seek an indemnity under Section 10.6 (the “Indemnified Party”), the Indemnified Party shall not make any admission or statement concerning such Third Party Claim, but shall promptly notify the other Party (the “Indemnifying Party”) orally and in writing and the Indemnifying Party and Indemnified Party shall meet to discuss how to respond to any Third Party Claims that are the subject matter of such proceeding. The Indemnifying Party shall not be obligated to indemnify the Indemnified Party to the extent any admission or statement made by the Indemnified Party or any failure by such Party to notify the Indemnifying Party of the Claim materially prejudices the defense of such Claim.

(b) Defense of Claim. If the Indemnifying Party elects to defend or, if local procedural rules or laws do not permit the same, elects to control the defense of a Third Party Claim, it shall be entitled to do so provided it gives notice to the Indemnified Party of its intention to do so within forty-five (45) days after the receipt of the written notice from the Indemnified Party of the potentially indemnifiable Third Party Claim (the “Litigation Condition”); provided that the Indemnifying Party expressly agrees the Indemnifying Party shall be responsible for satisfying and discharging any award made to the Third Party as a result of such proceedings or settlement amount agreed with the Third Party in respect of the Third Party Claim without prejudice to any provision in this Agreement or right at law which will allow the Indemnifying Party subsequently to recover any amount from the Indemnified Party to the extent the liability under such settlement or award was attributable to the Indemnified Party. Subject to compliance with the Litigation Condition, the Indemnifying Party shall retain counsel reasonably acceptable to the Indemnified Party (such acceptance not to be unreasonably withheld, refused, conditioned or delayed) to represent the Indemnified Party and shall pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, the Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party. The Indemnified Party shall not settle any Claim for which it is seeking indemnification without the prior consent of the Indemnifying Party which consent shall not be unreasonably withheld, refused, conditioned or delayed. The Indemnified Party shall, if requested by the Indemnifying Party, cooperate in all reasonable respects in the defense of such Claim that is being managed and/or controlled by the Indemnifying Party. The Indemnifying Party shall not, without the written consent of the Indemnified Party (which consent shall not be unreasonably withheld, refused, conditioned or delayed), effect any settlement of any pending or threatened proceeding in which the Indemnified Party is, or based on the same set of facts could have been, a party and indemnity could have been sought

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hereunder by the Indemnified Party, unless such settlement includes an unconditional release of the Indemnified Party from all liability on Claims that are the subject matter of such proceeding. If the Litigation Condition is not met, then neither Party shall have the right to control the defense of such Third Party Claim and the Parties shall cooperate in and be consulted on the material aspects of such defense at the each Party’s own expense; provided that if the Indemnifying Party does not satisfy the Litigation Condition, the Indemnifying Party may at any subsequent time during the pendency of the relevant Third Party Claim irrevocably elect, if permitted by local procedural rules or laws, to defend and/or to control the defense of the relevant Third Party Claim so long as the Indemnifying Party also agrees to pay the reasonable fees and costs incurred by the Indemnified Party in relation to the defense of such Third Party Claim from the inception of the Third Party Claim until the date the Indemnifying Party assumes the defense or control thereof.

10.8 Assumption of Defense. Notwithstanding anything to the contrary contained herein, an Indemnified Party shall be entitled to assume the defense of any Third Party Claim with respect to the Indemnified Party, upon written notice to the Indemnifying Party pursuant to this Section 10.8, in which case the Indemnifying Party shall be relieved of liability under Section 10.6(a) or 10.6(b), as applicable, solely for such Third Party Claim and related Losses.

ARTICLE 11

TERM AND TERMINATION

11.1 Term. Unless terminated earlier in accordance with this Article 11, this Agreement shall remain in force for the period commencing on the Effective Date and ending on the later of, on a Country-by-Country and Product-by-Product basis, (a) twenty (20) years from First Commercial Sale of such Product in such Country and (b) the expiration or termination of the last to expire Valid Claim of a Patent Right Covering such Product in such Country (the “Term”).

11.2 Termination.

(a) Termination During Termination Period. At any time during the Termination Period, Nycomed may terminate this Agreement immediately by providing a Termination Notice to NPS.

(b) Termination at Will. Prior to the First Commercial Sale of Product in the Territory, Nycomed may terminate this Agreement by providing one hundred eighty (180) days’ written notice to NPS. After the First Commercial Sale of Product in the Territory, Nycomed may terminate this Agreement by providing three hundred sixty-five (365) days’ written notice to NPS. At any time after receipt of a termination notice from Nycomed pursuant to this Section 11.2(a), NPS may elect to terminate this Agreement anytime prior to the requisite time period and, upon such election, the effects of termination set forth in Section 11.3(a) shall apply.

(c) Termination For Material Breach. Upon any material breach of this Agreement by a Party (the “Breaching Party”), the other Party (the “Non-Breaching Party”) may terminate this Agreement by providing thirty (30) days’ written notice to the Breaching Party in the case of a breach of a payment obligation and sixty (60) days’ written notice to the

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Breaching Party in the case of any other material breach. The termination shall become effective at the end of the notice period unless the Breaching Party cures such breach during such notice period; provided that the Non-Breaching Party may, by notice to the Breaching Party, designate a later date for such termination in order to facilitate an orderly transition of activities relating to Product. Notwithstanding the foregoing, (i) if such breach, by its nature, is incurable, the Non-Breaching Party may terminate this Agreement immediately upon written notice to the Breaching Party and (ii) if such breach (other than a payment breach), by its nature, is curable, but not within the forgoing cure period, then such cure period shall be extended if the Breaching Party provides a written plan for curing such breach to the Non-Breaching Party and uses Diligent Efforts to cure such breach in accordance with such written plan; provided that no such extension shall exceed ninety (90) days without the consent of the Non-Breaching Party.

(d) Termination For Insolvency. To the extent permitted by applicable law, if either Party shall become insolvent, or shall make or seek to make or arrange an assignment for the benefit of creditors, or if proceedings in voluntary or involuntary bankruptcy shall be initiated by, on behalf of or against such Party (and, in the case of any such involuntary proceeding, not dismissed within ninety (90) days), or if a receive or trustee of such Party’s property shall be appointed and not discharged within ninety (90) days, the other Party may terminate this Agreement by providing thirty (30) days’ written notice to the other Party. The termination shall become effective at the end of the notice period.

11.3 Effects of Termination.

(a) Certain Rights and Obligations Upon Termination At Will, if Nycomed is the Breaching Party or if Nycomed Becomes Insolvent. If Nycomed terminates this Agreement in accordance with Section 11.2(b) or if NPS terminates this Agreement in accordance with Section 11.2(c) or 11.2(d), then:

(i) Licenses. The licenses granted to Nycomed in Section 3.1 shall terminate;

(ii) Assignments. All of Nycomed’s rights and interests in the Co-Owned Patent Rights shall revert to NPS and Nycomed shall have no further ownership interest in the Co-Owned Patent Rights. Nycomed shall execute any assignments or other documentation necessary or desirable to transfer such Co-Owned Patent Rights to NPS.

(iii) Return of Materials. Nycomed shall as promptly as commercially practicable transfer to NPS or NPS’ designee at Nycomed’s expense (A) all of Nycomed’s right, title and interest in and to any Product Trademarks (including any goodwill associated therewith), any registrations and design patents for any of the foregoing and any internet domain name registrations for such Product Trademarks and slogans; (B) possession and ownership of all governmental or regulatory correspondence, conversation logs, filings and approvals (including all Regulatory Approvals) relating to the Development, Manufacture or Commercialization of Product in Nycomed’s possession or control, (C) copies of all data, reports, records and materials in Nycomed’ possession or control relating to the Development, Manufacture or Commercialization of Product, including all non-clinical and clinical data relating to Product, and (D) all records and materials in Nycomed’s possession or control

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containing Confidential Information of NPS (provided that Nycomed may keep one copy of such materials for archival purposes only); provided that in the case of clauses (C) and (D) above, such materials are only required to be transferred to the extent containing information for which NPS has funded Development Costs under a Joint Development Plan or pursuant to a buy-in right under this Agreement;

(iv) Manufacturing Activities. Nycomed shall (A) supply NPS or its designee with clinical and commercial quantities of Product for the Territory for the shorter of (1) [*] and (2) [*] from the effective date of such termination; provided, however, that NPS shall reimburse Nycomed for Nycomed’s [*] with respect to Product; and (B) transfer or cause to be transferred the completed Manufacturing process (together with any unique mold or tooling used solely in connection therewith) for Product to NPS or NPS’ designee upon NPS’ request, and at NPS’ cost and expense, and shall cooperate with NPS to effect the transition of such Manufacturing responsibilities;

(v) Exclusivity Obligation. Nycomed’s obligation under Section 10.1 shall continue for a period of three (3) years after the effective date of such termination, but NPS’ obligation shall terminate;

(vi) Appointment as Distributor. Following termination and to the extent allowable by applicable law, Nycomed shall appoint NPS as its exclusive distributor of Product in the Territory, grant NPS the right to appoint sub-distributors and thereafter, at NPS’ option, to supply Product to NPS in the Territory on terms no less favorable than those on which Nycomed supplied Product prior to such termination to its most favored distributor in each Country of the Territory, until such time as all Regulatory Approvals in the Territory have been transferred to NPS, NPS has obtained all necessary Manufacturing approvals and NPS has procured or developed its own source of Product supply, provided that NPS shall indemnify, defend and hold Nycomed and its Affiliates harmless from all Claims, damages, and liabilities arising out of NPS’ use or sale of Product in the Territory thereafter, unless attributable to Nycomed’s failure to Manufacture Product (where and to the extent performed by Nycomed) in accordance with applicable specifications;

(vii) Third Party Agreements. If NPS reasonably requests, and to the extent within Nycomed’s control, Nycomed shall transfer to NPS any Third Party agreements relating to the Development, Manufacture or Commercialization of Product to which Nycomed is a party, provided that NPS agrees to assume and perform all obligations arising under such agreements after the date of such assignment;

(viii) Disclosure and Delivery. Subject to Section 11.3(a)(iii) above, Nycomed shall transfer to NPS any Nycomed Know-How, to the extent then used in connection with the Manufacture, Commercialization or Development of Product. Such transfer shall be effected by the delivery of documents, to the extent such Know-How is not embodied in documents, and to the extent that such Know-How is not fully embodied in documents, Nycomed shall make its employees and agents who have knowledge of such Know-How in addition to that embodied in documents available to NPS for interviews, demonstrations and training to effect such transfer in a manner sufficient to enable NPS to practice such Know-How as theretofore practiced by Nycomed;

46

(ix) Sublicensees. Each of Nycomed’s sublicensees with respect to Product shall continue to have the rights and license set forth in their sublicense agreements, subject to the continued performance of the obligations thereunder; provided, however that such sublicensee agrees in writing that NPS is entitled to enforce all relevant terms and conditions of such sublicense agreement directly against such sublicensee; and provided, further that such sublicensee is not then in breach of its sublicense agreement;

(x) Disposition of Inventory. NPS shall have the option, exercisable within thirty (30) days following the effective date of such termination, to purchase any inventory of Product affected by such termination at Nycomed’s [*] therefor. NPS may exercise such option by written notice to Nycomed during such thirty (30) day period. Upon such exercise, the Parties will establish mutually agreeable payment and delivery terms for the sale of such inventory. If NPS does not exercise such option during such thirty (30) day period, of if NPS provides Nycomed with its intention not to exercise such option, then Nycomed and its Affiliates and sublicensees will be entitled, during the period ending on the last day of the sixth (6th) full month following the effective date of such termination, to sell any inventory of Product affected by such termination that remain on hand as of the effective date of such termination, so long as Nycomed pays to NPS the then-applicable portion of the Product Marketing Contribution or royalties on Net Sales, as applicable, in accordance with the terms and conditions set forth in this Agreement;

(xi) Development Costs. Nycomed shall continue to fund its share of all budgeted Development Costs for six (6) months following provision by NPS of such notice of termination (inclusive of any cure period), at which point its obligations with respect thereto shall cease; and

(xii) Cooperation. Nycomed shall execute all documents and take all such further actions as may be reasonably requested by NPS in order to give effect to the foregoing clauses (i) through (x).

(b) Certain Rights and Obligations Upon Termination if NPS is the Breaching Party or Becomes Insolvent. Without limiting any other legal or equitable remedies that Nycomed may have, if Nycomed terminates this Agreement in accordance with Section 11.2(c) or 11.2(d), then:

(i) Return of Materials. Nycomed shall as promptly as commercially practicable transfer to NPS or NPS’ designee at NPS’ expense (A) all of Nycomed’ right, title and interest in and to any Product Trademarks (including any goodwill associated therewith), any registrations and design patents for any of the foregoing and any internet domain name registrations for such Product Trademarks and slogans; (B) possession and ownership of all governmental or regulatory correspondence, conversation logs, filings and approvals (including all Regulatory Approvals) relating to the Development, Manufacture or Commercialization of Product in Nycomed’s possession or control, (C) copies of all data, reports, records and materials in Nycomed’s possession or control relating to the Development, Manufacture or Commercialization of Product, including all non-clinical and clinical data relating to Product, and (D) all records and materials in Nycomed’s possession or control containing Confidential Information of NPS (provided that Nycomed may keep one copy of such

47

materials for archival purposes only); provided that in the case of clauses (C) and (D) above, such materials are only required to be transferred to the extent containing information for which NPS has funded Development Costs under a Joint Development Plan or pursuant to a buy-in right under this Agreement;

(ii) Manufacturing Activities. Nycomed shall (A) supply NPS with clinical and commercial quantities of Product for the Territory for the shorter of (1) the period until NPS or NPS’ designee has established and validated a Manufacturing process for Product and is approved to Manufacture clinical trial and commercial supplies of Product and (2) twenty-four (24) months from the effective date of such termination; provided, however, that NPS shall reimburse Nycomed for [*] percent [*] of Nycomed’s [*] with respect to Product; and (B) transfer or cause to be transferred the completed Manufacturing process (together with any unique mold or tooling used solely in connection therewith) for Product to NPS or NPS’ designee upon NPS’ request, and at NPS’ cost and expense, and shall cooperate with NPS to effect the transition of such Manufacturing responsibilities;

(iii) Exclusivity Obligation. NPS’ obligation under Section 10.1 shall continue for a period of three (3) years after the effective date of such termination, but Nycomed’s obligation shall terminate;

(iv) Appointment as Distributor. Following termination and to the extent allowable by applicable law, Nycomed shall appoint NPS as its exclusive distributor of Product in the Territory, grant NPS the right to appoint sub-distributors and thereafter, at NPS’ option, to supply Product to NPS in the Territory and shall cooperate to transfer all Regulatory Approvals in the Territory to NPS at NPS’ expense, provided that NPS shall indemnify, defend and hold Nycomed and its Affiliates harmless from all Claims, damages, and liabilities arising out of NPS’ use or sale of Product in the Territory thereafter, unless attributable to Nycomed’s failure to Manufacture Product (where and to the extent performed by Nycomed) in accordance with applicable specifications;

(v) Third Party Agreements. If NPS reasonably requests, and to the extent within Nycomed’s control, Nycomed shall transfer to NPS any Third Party agreements relating to the Development, Manufacture or Commercialization of Product to which Nycomed is a party, provided that NPS agrees to assume and perform all obligations arising under such agreements after the date of such assignment;

(vi) Disclosure and Delivery. Subject to Section 11.3(b)(i) above, Nycomed shall transfer to NPS any Nycomed Know-How, to the extent then used in connection with the Manufacture, Commercialization or Development of Product. Such transfer shall be effected by the delivery of documents, to the extent such Know-How is not embodied in documents, and to the extent that such Know-How is not fully embodied in documents, Nycomed shall make its employees and agents who have knowledge of such Know-How in addition to that embodied in documents available to NPS for interviews, demonstrations and training to effect such transfer in a manner sufficient to enable NPS to practice such Know-How as theretofore practiced by Nycomed;

48

(vii) Sublicensees. Each of Nycomed’s sublicensees with respect to Product shall continue to have the rights and license set forth in their sublicense agreements, subject to the continued performance of the obligations thereunder; provided, however that such sublicensee agrees in writing that NPS is entitled to enforce all relevant terms and conditions of such sublicense agreement directly against such sublicensee; and provided, further that such sublicensee is not then in breach of its sublicense agreement;

(viii) Disposition of Inventory. NPS shall within thirty (30) days following the effective date of such termination purchase any inventory of Product affected by such termination at [*] percent [*] of [*] therefor;

(ix) Development Costs. Nycomed shall have no obligation to continue to fund what would have been its share of all budgeted Development Costs following delivery of notice of termination; provided, however, that Nycomed shall be responsible to NPS for all costs of appropriately closing any ongoing clinical studies for which Nycomed is the sponsor or, at NPS’ or any Future Partner’s election, transferring such clinical studies to NPS or its Future Partner, as the case may be;

(x) Termination Costs. NPS shall upon Nycomed’s reasonably documented requested reimburse Nycomed for all reasonable out-of-pocket costs incurred in returning the materials and deliverables to NPS pursuant to subsections (i), (vi) and (vii) above; and

(xi) Cooperation. Nycomed shall execute all documents and take all such further actions at NPS’ expense as may be reasonably requested by NPS in order to give effect to the foregoing clauses (i) through (x).

(c) Certain Rights and Obligations Upon Termination by Nycomed during the Termination Period. If Nycomed terminates this Agreement during the Termination Period in accordance with Section 11.2(a), then all rights and obligations between the Parties shall terminate as of the date NPS receives a Termination Notice hereunder; provided, however, that, notwithstanding the foregoing, Nycomed shall continue to be obligated to pay to NPS the signing fee in Section 7.1 and the terms of Sections 11.3(b)(b)(i) and 11.3(b)(b)(vi) shall apply. The Parties further agree to execute all documents and take all such further actions as may be reasonably required in order to give effect to the continuing obligations under this Section 11.3(c).

11.4 Continuation of Agreement if NPS Becomes Insolvent. In lieu of termination by Nycomed under Section 11.2(d) with the effects set forth in Section 11.3(b), Nycomed shall have the option to continue this Agreement in full force and effect. Any licenses or rights granted under or pursuant to this Agreement by NPS to Nycomed are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, US Code (the “Code”), licenses of rights to “intellectual property” as defined under Section 101(35A) o the Code. The Parties agree that during the Term, Nycomed, as licensee of rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Code, subject to the continued performance of its obligations under this Agreement.

49

11.5 License Grant Effective Upon Expiration of Term. Solely upon the expiration of the Term, and not including any earlier termination permitted hereunder, Nycomed shall have a non-exclusive, fully paid, royalty-free right and license to Manufacture, Commercialize and import Compound, Product and the Device in the Territory in the Field.

11.6 Survival. In the event of any expiration or termination of this Agreement, all financial obligations under Article 7 owed as of the effective date of such expiration or termination shall remain in effect, and (b) the provisions set forth in Article 9 and Article 13 and in Sections, 10.1, 10.5, 10.6, 11.2, and 11.3, and all other provisions contained in this Agreement that by their terms survive expiration or termination of this Agreement, shall survive. In addition, in the event of an expiration of this Agreement (but not in the event of any termination of this Agreement pursuant to Section 11.2), the licenses granted in Section 3.1 shall survive as perpetual, fully paid-up, non-royalty-bearing, nonexclusive licenses.

ARTICLE 12

FINAL DECISION-MAKING; DISPUTE RESOLUTION

12.1 Arbitration. Any dispute arising out of or relating to this Agreement that is not resolved by the Management Committee, including without limitation the interpretation of this Agreement and any breach or alleged breach of this Agreement, shall be resolved through binding arbitration as follows:

(a) A Party may submit such dispute to arbitration by notifying the other Party, in writing, of such dispute. Within thirty (30) days after receipt of such notice, the Parties shall designate in writing a single arbitrator to resolve the dispute; provided, however, that if the Parties cannot agree on an arbitrator within such thirty (30)-day period, the arbitrator shall be selected by the office of the American Arbitration Association (the “AAA”). The arbitrator shall be a lawyer knowledgeable and experienced in the law concerning the subject matter of the dispute, and shall not be an Affiliate, employee, consultant, officer, director or stockholder of either Party or of an Affiliate of either Party.

(b) Within thirty (30) days after the designation of the arbitrator, the arbitrator and the Parties shall meet, at which time the Parties shall be required to set forth in writing all disputed issues and a proposed ruling on the merits of each such issue.

(c) The arbitrator shall set a date for a hearing, which shall be no later than forty-five (45) days after the submission of written proposals pursuant to Section 12.1(b), to discuss each of the issues identified by the Parties. The Parties shall have the right to be represented by counsel. Except as provided herein, the arbitration shall be governed by the Commercial Arbitration Rules of the AAA; provided, however, that the Federal Rules of Evidence shall apply with regard to the admissibility of evidence and the arbitration shall be conducted by a single arbitrator.

(d) The arbitrator shall use his or her best efforts to rule on each disputed issue within thirty (30) days after the completion of the hearings described in this Section 12.1. The determination of the arbitrator as to the resolution of any dispute shall be binding and conclusive upon all Parties. All rulings of the arbitrator shall be in writing and shall be delivered to the Parties.

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(e) The (i) attorneys’ fees of the Parties in any arbitration, (ii) fees of the arbitrator and (iii) costs and expenses of the arbitration shall be borne by the Parties as determined by the arbitrator.

(f) Any arbitration pursuant to this Section 12.1 shall be conducted in New York, New York.

(g) Nothing in this Section 12.1 shall be construed as limiting in any way the right of a Party to seek injunctive relief with respect to any actual or threatened breach of this Agreement from, or to bring an action in aid of arbitration in, a court of law.

ARTICLE 13

MISCELLANEOUS

13.1 Choice of Law. This Agreement shall be governed by and interpreted under, the laws of the State of New York excluding: (a) its conflicts of laws principles; (b) the United Nations Conventions on Contracts for the International Sale of Goods; (c) the 1974 Convention on the Limitation Period in the International Sale of Goods (the “1974 Convention”); and (d) the Protocol amending the 1974 Convention, done at Vienna April 11, 1980.

13.2 Notices. Any notice or report required or permitted to be given or made under this Agreement by one of the Parties to the other shall be in writing and shall be deemed to have been delivered upon personal delivery or (a) in the case of notices provided between Parties in the continental United States, four days after deposit in the mail or the business day next following deposit with a reputable overnight courier and (b) in the case of notices provided by telecopy (which notice shall be followed immediately by an additional notice pursuant to clause (a) above if the notice is of a default hereunder), upon completion of transmissions to the addressee’s telecopier, as follows (or at such other addresses or facsimile numbers as may have been furnished in writing by one of the Parties to the other as provided in this Section 13.2):

If to NPS: NPS Allelix Corp. c/o NPS Pharmaceuticals, Inc. Morris Corporate Center 4th Floor, Building B 300 Interpace Parkway Parsippany, NJ 07054 United States of America Facsimile No.: 973.316.6463   Attention: Chief Executive Officer

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With a copy to:	NPS Pharmaceuticals, Inc. Office of General Counsel Morris Corporate Center 1 4th Floor, Building B 300 Interpace Parkway Parsippany, NJ 07054 United States of America Attention: General Counsel Facsimile No.: 973.316.6463
And with a copy to:	Morgan, Lewis & Bockius LLP 502 Carnegie Center Princeton, New Jersey 08540 Attention: Randall B. Sunberg Facsimile No.: 609.919.6701
If to Nycomed:	Nycomed GmbH Byk Gulden Str. 2 78467 Konstanz Attention: General Counsel Facsimile No.: +497531842982

13.3 Severability. If, under applicable law or regulation, any provision of this Agreement is invalid or unenforceable, or otherwise directly or indirectly affects the validity of any other material provision(s) of this Agreement (such invalid or unenforceable provision, a “Severed Clause”), it is mutually agreed that this Agreement shall endure except for the Severed Clause. The Parties shall consult one another and use their best efforts to agree upon a valid and enforceable provision that is a reasonable substitute for the Severed Clause in view of the intent of this Agreement.

13.4 Captions. All captions herein are for convenience only and shall not be interpreted as having any substantive meaning.

13.5 Integration. This Agreement constitutes the entire agreement between the Parties hereto with respect to the within subject matter and supersedes all previous agreements, whether written or oral. This Agreement may be amended only in writing signed by properly authorized representatives of each of NPS and Nycomed.

13.6 Independent Contractors; No Agency. Neither Party shall have any responsibility for the hiring, firing or compensation of the other Party’s employees or for any employee benefits. No employee or representative of a Party shall have any authority to bind or obligate the other Party to this Agreement for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said Party’s written approval. For all purposes, and notwithstanding any other provision of this Agreement to the contrary, Nycomed’ legal relationship under this Agreement to NPS shall be that of independent contractor.

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13.7 Assignment; Successors. Neither NPS nor Nycomed may assign this Agreement in whole or in part, nor any rights hereunder, without the prior written consent of the other Party; provided that (a) either Party may assign this Agreement to an Affiliate, (b) this Agreement may be assigned by a Party to a Third Party in connection with a sale or transfer of all or substantially all of such Party’s business or assets to which this Agreement relates and (c) NPS may assign its rights to receive the royalty payments under Section 7.4 to a Third Party. Any assignment made other than in accordance with the immediately preceding sentence shall be wholly void and invalid, and the assignee in any such assignment shall acquire no rights whatsoever, and the non-assigning Party shall not recognize, nor shall it be required to recognize, such assignment. This Section 13.7 limits both the right and the power to assign this Agreement and/or rights under this Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, all permitted successors and assigns.

13.8 Expenses. Each Party shall pay its own expenses (including legal and accounting fees) incurred in connection with the negotiation and execution of this Agreement and any related documentation.

13.9 Execution in Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and both of which counterparts, taken together, shall constitute one and the same instrument even if both Parties have not executed the same counterpart. Signatures provided by facsimile transmission shall be deemed to be original signatures.

13.10 No Consequential or Punitive Damages. NEITHER PARTY HERETO WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE OR MULTIPLE DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, OR FOR LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 13.10 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY WITH RESPECT TO THIRD PARTY CLAIMS.

13.11 Non-Solicitation. During the Term, and for a period of one (1) year thereafter, neither Party shall either directly or indirectly solicit, recruit, induce, encourage or attempt to induce or encourage any employee of the other Party or any independent contractor primarily dedicated to the Development, Manufacture or Commercialization of Product to terminate his or her employment with such other Party and become employed by or consult for such other Party whether or not such employee is a full-time employee of such other Party, and whether or not such employment is pursuant to a written agreement or is at-will.

13.12 Transfer of NPS Intellectual Property; NPS Allelix No Longer a Party. NPS Allelix and NPS US shall each be Party to this Agreement for so long as either NPS Allelix or NPS US Controls any rights in or to the NPS Intellectual Property. At such time as NPS Allelix transfers all of its rights in the NPS Intellectual Property to NPS US, NPS Allelix shall no longer be a Party hereunder and all references to NPS contained in this Agreement shall refer solely to NPS US; provided, however, that NPS Allelix shall not be excused from any of its obligations under this Agreement to the extent that NPS Allelix is required for the fulfillment of any such obligations hereunder.

[Signature Page Follows]

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IN WITNESS WHEREOF, NPS and Nycomed have caused this Agreement to be duly executed by their authorized representatives under seal, in duplicate on the Effective Date.

NPS ALLELIX CORP.
By:
	Name:	N. Anthony Coles
	Title:	Chief Executive Officer

NPS PHARMACEUTICALS, INC.
By:
	Name:	N. Anthony Coles
	Title:	Chief Executive Officer

NYCOMED GmbH
By:
	Name:
	Title:
By:
	Name:
	Title:

[SIGNATURE PAGE TO DISTRIBUTION AND LICENSE AGREEMENT]

SCHEDULE 1.10

Compound Description

STATEMENT ON A NONPROPRIETARY NAME ADOPTED BY THE USAN COUNCIL:

USAN	TEDUGLUTIDE
PRONUNCIATION	te due’ gloo tide
THERAPEUTIC CLAIM	treatment of intestinal diseases characterized by chemical or surgical damage of the intestinal epithelium such as Short Bowel Syndrome (SBS) or damage to the intestinal epithelium due to disease (glucagon-like peptide-2 (GLP-2) analog)

CHEMICAL NAMES

1.) ALX 0600 ( 2-glycine-1-33-glucagon-like peptide II (human) )

2.) [2-glycine]-1-33-glucagon-like peptide II (human)

STRUCTURAL FORMULA

MOLECULAR FORMULA	C164H252N44O55S
MOLECULAR WEIGHT	3752
TRADEMARK	Unknown as yet
MANUFACTURER	NPS Pharmaceuticals
CODE DESIGNATION	ALX 0600
CAS REGISTRY NUMBER	287714-30-1

SCHEDULE 1.55

Royalty-Bearing Patents

[*]

SCHEDULE 4.2(c)

Initial Development Plan

[*]

SCHEDULE 4.5(b)(iii)

Access to Data for Regulatory Approval Applications

[*]

SCHEDULE 6.1

Third Party Manufacturers

[*]

SCHEDULE 6.3

Technology Transfer

[*]

EX-10.4

Exhibit 10.4

NOTE: CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND REPLACED BY “[*]”. A COMPLETE COPY OF THIS DOCUMENT INCLUDING THE CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

AMENDMENT AGREEMENT TO

DISTRIBUTION AND LICENSE AGREEMENT DATED SEPTEMBER 24, 2007

BY AND BETWEEN

NPS ALLELIX CORP.

NPS PHARMACEUTICALS, INC.

AND

NYCOMED GMBH

DATED

OCTOBER 29, 2007

THIS AMENDMENT AGREEMENT is made the 29^th day of October 2007

BETWEEN:

1. NPS Allelix Corp., a Canadian corporation (“NPS Allelix”), having offices at MaRS Centre, 101 College Street, South Tower, Suite 800, Toronto, ON MSG 1L8 Canada, NPS Pharmaceuticals, Inc., a Delaware corporation (“NPS US”), and, together with NPS Allelix, collectively, “NPS”), having offices at Morris Corporate Center 1, 4th Floor, Building B, 300 Interpace Parkway, Parsippany, NJ 07054”; and

2. NYCOMED GmbH, a German corporation with company registration number Hrb Nr 701257 (“Nycomed”), having offices at Byk Gulden Str. 2, 78467 Konstanz;

WHEREAS

A. By an agreement dated September 24, 2007, NPS granted to Nycomed the right to develop, manufacture, market, distribute and sell the pharmaceutical product developed under the name Teduglutide (“the Licence Agreement”).

B. The parties have re-negotiated certain terms of the Licence Agreement and agreed to amend the Licence Agreement upon the terms contained in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1. DEFINITIONS

In this Agreement, unless the context otherwise requires, words and phrases defined in Article 1 of the Licence Agreement shall bear the same meanings and the provisions of Article 1 of the Licence Agreement shall apply in all respects to the terms of this Agreement.

2. AMENDMENTS

2.1 NPS and Nycomed have agreed certain amendments to the Licence Agreement to the effect that:

2.1.1 The following reference shall be inserted in the “Additional Definitions” table in Section 1.86 of the License Agreement:

Definition	Section
Launch in Primary Indication	7.3	(a)

2.1.2 The Milestone payments set out in Section 7.3. (a) of the License Agreement shall be replaced with the milestone scheme set out below:

Milestone Event	Payment
Acceptance for filing of Regulatory Approval Application by the EMEA	$ [*]
Approval by the (a) EMEA or (b) the first Major EU Country*	$ [*]
Launch of Product in the first Major EU Country** (size of milestone depend on date of launch, as set out below).	$ [*]
	or $ [*]

* Only payable if approval occurs on or before [*]; provided that approval shall be deemed to have occurred notwithstanding any post-approval conditions.

** If Launch in Primary Indication occurs on or prior to [*] the payable milestone shall be $[*]. If the Launch of Product in the Primary Indication occurs after that date, the payable milestone shall be reduced to $ [*]; provided, however, that such reduction in milestone amount shall be applicable only if such delay in such Launch is due to causes beyond the reasonable control of Nycomed. “Launch in Primary Indication” shall mean first sale of the Product to end customers, hospitals or wholesalers in a market of the EU with a regulatory labeling permitting the sale of the Product for the Primary Indication.

2.1.3 The Notices set out in Section 13.2 of the License Agreement shall be replaced by the following notices:

	NPS Allelix Corp.
	c/o NPS Pharmaceuticals Inc.
	550 Hills Drive, 3rd Floor
	Bedminster NJ 07921
	Att.: Chief Executive Officer
	Facsimile 908.450.5344
With a copy to	General Counsel
	NPS Pharmaceuticals Inc.
	550 Hills Drive, 3rd Floor
	Bedminster, NJ 07921
	Facsimile 908.450.5344

2.2 NPS and Nycomed agree that for all purposes, with effect from the date hereof, the Licence Agreement shall be amended in the manner shown in the form of Licence Agreement attached hereto.

2.3 It is confirmed and acknowledged that save for Sections 1.86, 7.3. (a) and 13.2, no amendments have been made to the Licence Agreement.

2.4 Save as expressly provided by this Agreement and as shown on the form of Licence Agreement attached hereto, the Licence Agreement shall continue in full force and effect in accordance with its terms in all respects.

3. GENERAL

3.1 For the avoidance of doubt, this Amendment Agreement constitutes an amendment to the Licence Agreement in accordance with the Section 13.5 of the Licence Agreement and for all purposes with effect from the date hereof, the Licence Agreement shall be in the form attached hereto.

3.2 Insofar as may be required to give effect to the terms of this Amendment Agreement the provisions of Sections 13.2 of the Licence Agreement shall apply to the terms of this Amendment Agreement as is expressly repeated herein.

IN WITNESS WHEREOF the Parties hereto have executed this Amendment Agreement on the date above written.

Signed by

duly authorised for and on behalf of

NPS Allelix Corp

duly authorised for and on behalf of

NPS Pharmaceuticals Inc

Signed by

duly authorised for and on behalf of

Nycomed GmbH

EX-10.5

Exhibit 10.5

NOTE: CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND REPLACED BY “[*]”. A COMPLETE COPY OF THIS DOCUMENT INCLUDING THE CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

LICENSE AGREEMENT

THIS AGREEMENT, effective September 28, 1995, is entered into

- BY -

1149336 ONTARIO INC.,

a corporation incorporated under the laws of the

Province of Ontario, having its registered office at

19 Fernwood Road, Toronto, Ontario M6B 3G3

(herein called “DRUCKER LTD.”)

- AND -

DANIEL J. DRUCKER, M.D.

an individual residing at

19 Fernwood Road, Toronto, Ontario M6B 3G3

(herein called “DR. DRUCKER”)

- AND -

ALLELIX BIOPHARMACEUTICALS INC.,

a corporation incorporated under the laws of Canada,

having its principal place of business at

6850 Goreway Drive, Mississauga, Ontario L4V IV7

(herein called “ALLELIX”).

I. Background of Agreement

1.0 DR. DRUCKER is a clinician and medical researcher operating out of the Toronto Hospital and the University of Toronto and has been, and continues to be, engaged in research aimed at the elucidation of a gastrointestinal growth factor.

1.1 ALLELIX is a biopharmaceuticals research and development company, and has sponsored DR. DRUCKER’s research in the gastrointestinal growth factor field, through cash payments; through in kind provisions of reagents and services; and by the supporting of DR. DRUCKER’s research under the Industrially Oriented Research (IOR) Grant Program. During the course of the research program, ALLELIX has provided advice and suggestions as to the conduct of the research and the potential utility of the gastrointestinal growth factor.

1.2 Under this research program, DR. DRUCKER has invented (1) a peptide to treat various medical conditions including conditions resulting from the impaired growth or loss of tissue, (2) a pharmaceutical composition including such a peptide, (3) a salt of such peptide, and (4) a method of medical treatment including the use of such pharmaceutical composition, and ALLELIX has arranged at its expense for the filing of a priority patent application therefor in the name of DR. DRUCKER.

1.3 DR. DRUCKER has assigned the results of his research and the aforementioned patent application to DRUCKER LTD.

1.4 ALLELIX, DRUCKER LTD. and DR. DRUCKER now wish to set forth the terms and conditions of a license under which ALLELIX shall be entitled to commercialize certain rights to the results of DR. DRUCKER’s research as assigned to DRUCKER LTD.

NOW THEREFORE, in consideration of the foregoing premises, the mutual covenants and obligations hereinafter contained, and other good and valuable consideration, DRUCKER LTD., DR. DRUCKER and ALLELIX agree as follows:

II. Definitions

As used herein, the following terms shall have the meanings set forth below:

2.1 AFFILIATE means any COMPANY that is controlled directly or indirectly by a party hereto, or any COMPANY that directly or indirectly controls a party hereto, or any COMPANY that is directly or indirectly controlled by a COMPANY which also directly or indirectly controls a party hereto, so that AFFILIATE shall include any parent or subsidiary of a party hereto, or any directly or indirectly held subsidiary of a party hereto.

2.2 BASIC PATENTS means (1) the United States patent application filed April 14, 1995 entitled “Glucagon-Like Peptide-2 and Its Therapeutic Use” and includes (2) patents to be issued pursuant to (1) and all divisions, continuations in whole and in part, reissues, re-examinations, substitutes, extensions and foreign counterparts thereof.

2.3 COMPANY includes a corporation, firm, partnership or other entity.

2.4 CONFIDENTIAL INFORMATION shall mean all disclosures of know-how, inventions and other intellectual property under this Agreement, and any other information about the businesses or affairs of the other, but excluding information which:

(a) was already known to the receiving party at the time of its disclosure by the disclosing party;

(b) has been published or is otherwise within the public knowledge or is generally known to the public;

- 2 -

(c) has come into the public domain without any breach of this Agreement;

(d) became known or available to the receiving party from a source having the right to make such disclosure to the receiving party and without restriction on such disclosure to the receiving party;

(e) is disclosed to the public and is generally available to the public as a result of compliance with any applicable law or regulation; or

(f) is disclosed as the result of any applications for, or publication of, the PATENT RIGHTS.

2.5 CONTROL means the ownership, directly or indirectly, of more than 50% of voting rights attached to the issued voting shares or comparable interests in a COMPANY.

2.6 EFFECTIVE DATE shall be September 28, 1995.

2.7 EXPENDITURES means expenditures in cash and equivalent-to-cash value of expenditures in kind that ALLELIX has made on (1) research, development and exploitation of the PRODUCT, including expenditures made pursuant to the product development obligations specified in Article V hereof and expenditures under the SPONSORED RESEARCH AGREEMENT; and (2) expenditures on patent preparation, patent prosecution and patent maintenance pursuant to Article VIII hereof.

2.8 FIELD means, and is limited to, veterinary and human therapeutic and diagnostic products and the manufacture, use and sale thereof.

2.9 GROSS SALES shall mean the total sales price of PRODUCT sold by ALLELIX, its AFFILIATES and permitted assigns in final dosage form. Sales by ALLELIX to its SUB-LICENSEES shall not be included in GROSS SALES, but shall be included in any calculation of SUPPLY PROFIT.

2.10 IMPROVEMENT PATENTS means (1) patent applications for those inventions that (a) arise from research that is sponsored by ALLELIX and performed by or on behalf of DR. DRUCKER or DRUCKER LTD. and (b) relates to PRODUCT or to a method of making, using or selling PRODUCT, and all divisions, continuations in whole and in part, reissues, re-examinations, substitutes, extensions and foreign counterparts thereof.

2.11 NET SALES shall mean the total NET SALES PRICE of PRODUCT sold by ALLELIX, its AFFILIATES and permitted assigns in final dosage form. Sales by ALLELIX to its SUB-LICENSEES shall not be included in NET SALES, but shall be included in any calculation of SUPPLY PROFTT.

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2.12 NET SALES PRICE shall mean the total of net invoice prices for all PRODUCT sold in arm’s length sales by ALLELIX, its AFFILIATES and permitted assigns, for any given period of time during the term of this Agreement, less wholesaler’s or distributor’s commissions, discounts rebates, samples and freight charges, and taxes separately listed on such invoices, and less the amount of any credits or refunds actually given by ALLELIX for defective or returned PRODUCT.

2.13 PATENT RIGHTS includes BASIC PATENTS and IMPROVEMENT PATENTS.

2.14 PRODUCT means all products which are Glucagon-Like Peptide-2 (GLP-2), and all analogues, fragments, derivatives, receptors and compositions thereof whether developed by ALLELIX and/or DR. DRUCKER pursuant to the SPONSORED RESEARCH AGREEMENT or otherwise.

2.15 SPONSORED RESEARCH AGREEMENT has the meaning attributed thereto in Section 4.6.

2.16 SUB-LICENSEE means a person to whom ALLELIX has sub-licensed or assigned all or part of the rights granted to ALLELIX by DRUCKER LTD. by this Agreement.

2.17 SUBLICENSEE REVENUE shall mean (1) SUPPLY PROFIT and (2) payments in cash and equivalent-to-cash value in-kind payments whether in the form of up front payments, royalties or in any other form actually received by ALLELIX from the sublicensing and assignment of the rights granted to ALLELIX under this Agreement, but shall exclude payments received by ALLELIX in consideration for the issuance of any debt or equity interest in ALLELIX within the definition of “security” in the Securities Act (Ontario) required for bona fide financing of ALLELIX.

2.18 SUPPLY PROFIT means the invoiced price of PRODUCT sold by ALLELIX to a SUB-LICENSEE, less 120% of the direct cost of manufacturing the supplied PRODUCT and less the amount of any credits or refunds actually given by ALLELIX for defective or returned PRODUCT.

2.19 TERRITORY means all countries of the world.

2.20 TOXICOLOGY REPORT has the meaning attributed thereto in Section 5.0(a).

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2.21 TRADE SECRETS means all information, expertise, technical assistance and other trade secrets developed by or for DR. DRUCKER or DRUCKER LTD. relating to the manufacture, use or sale of PRODUCT and which constitute CONFIDENTIAL INFORMATION and which he discloses in writing to ALLELIX.

III. License Grant

3.0 DRUCKER LTD. hereby grants to ALLELIX in the FIELD and TERRITORY, a license under PATENT RIGHTS and TRADE SECRETS to develop and to make, have made, use, sell, have sold and otherwise dispose of PRODUCT.

3.1 The license granted pursuant to Section 3.0 hereof shall be exclusive. Subject only to DRUCKER LTD.’s consent which shall not be unreasonably withheld or delayed having regard to the rights and obligations of ALLELIX under this Agreement, ALLELIX shall have the right to grant sublicenses of its rights set out in Section 3.0 which may, in ALLELIX’S discretion, convey to SUBLICENSEES the right to grant further sublicenses.

3.2 Section 3.1 notwithstanding, DRUCKER LTD. reserves a royalty-free license for the University of Toronto, the Toronto Hospital or any other like institution employing DR. DRUCKER under PATENT RIGHTS and TRADE SECRETS for purposes of research and teaching at the University of Toronto, the Toronto Hospital or like institution.

IV. Licensing Consideration

4.0 In consideration of the rights granted by DRUCKER LTD. to ALLELIX under this Agreement, ALLELIX shall pay DRUCKER LTD. the consideration set out in this Article.

4.1 On the execution of this agreement by DRUCKER LTD., DR. DRUCKER and ALLELIX, ALLELIX shall pay DRUCKER LTD. the non-refundable sum of [*] Cdn.

4.2 On April 1, l996 and annually thereafter, ALLELIX shall pay DRUCKER LTD. an annual non-refundable license maintenance fee of [*] Cdn.

4.3 On sales by ALLELIX, its AFFILIATES and permitted assigns of PRODUCT, ALLELIX shall pay DRUCKER LTD. a royalty which is equal to the greater of [*] of NET SALES and [*] of GROSS SALES. These royalty payments shall be made in accordance with Article VII of this Agreement. There shall be no minimum annual royalty payments payable by ALLELIX to DRUCKER LTD. for the rights set out in this Agreement.

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4.4 To maintain its exclusive rights under this Agreement, ALLELIX shall make the following guaranteed non-refundable payments to DRUCKER LTD. At the following milestones. SUBLICENSING REVENUE paid under Section 4.5 shall apply to reduce guaranteed payments due under this Section 4.4 and guaranteed payments made under this Section 4.4 shall apply to reduce the SUBLICENSING REVENUE due under Section 4.5. For greater certainty, ALLELIX shall pay DRUCKER LTD. the greater of the payments set out in Section 4.5 or in this Section 4.4, but shall not make payments under both Sections.

• [*] Cdn. upon grant of the first BASIC PATENT by the United States Patent Office.

• [*] Cdn. upon grant of approval to proceed with the first clinical trial of the PRODUCT in any country in the TERRITORY.

• [*] Cdn. upon the initiation of the first phase III clinical trial of the PRODUCT in one of the United States, Japan, the United Kingdom, France or Germany.

• [*] Cdn. upon the acceptance of the first new drug application (NDA) to market a PRODUCT in one of the United States, Japan, the United Kingdom, France or Germany.

4.5 ALLELIX shall provide DUCKER LTD. with a percentage of SUBLICENSING REVENUE actually received by ALLELIX, determined having regard to the EXPENDITURES made before the date ALLELIX receives the SUBLICENSING REVENUE as follows:

EXPENDITURE	Percentage of Sublicensing Revenue
less than [*] Cdn.	[*]
between [*] and less than [*]	[*]
between [*] and less than [*]	[*]
[*] or more	[*]

4.6 DR. DRUCKER and ALLELIX shall execute on the date of execution of this Agreement, a sponsored research agreement the “SPONSORED RESEARCH AGREEMENT”) effective September 1, 1995 regarding further research and development by DR. DRUCKER.

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V. Commercialization and Further Research

5.0 Upon execution of this Agreement ALLELIX, on its own or through a SUB-LICENSEE, shall ensure that reasonable commercial efforts are used, in relation to PRODUCT, to:

(a) perform in a timely fashion pre-clinical testing and evaluation, which shall include an assessment of toxicology based on results from both acute and chronic studies in two different mammalian species, the results of all of which shall be reported to DRUCKER LTD. as a toxicology report (the “TOXICOLOGY REPORT”) promptly after results of the final toxicology study are obtained; and

(b) seek governmental approvals required to produce, manufacture, distribute and market PRODUCT in the TERRITORY, including

1) commencing Phase II clinical trials in a first country in the TERRITORY within [*] from the date of the TOXICOLOGY REPORT; and

2) commencing Phase III clinical trials in a first country in the TERRITORY within [*] from the date of the TOXICOLOGY REPORT; and

3) filing a new drug application within [*] of the date on which the Phase III clinical trial is completed; and

(c) market PRODUCT in those countries within the TERRITORY where governmental approvals are obtained.

5.1 DRUCKER LTD. shall disclose to ALLELIX, and ALLELIX shall be entitled to use all information relating to the PRODUCT, including PATENT RIGHTS and all TRADE SECRETS, to enable ALLELIX or its SUB-LICENSEES to perform its obligations and enjoy the rights granted under this Agreement. DR. DRUCKER shall continue to conduct research in accordance with the SPONSORED RESEARCH AGREEMENT.

5.2 All know-how, inventions and all other intellectual property, whether or not protectable, generated solely by ALLELIX or its employees during the term of this Agreement and relating to the PRODUCT shall belong solely to ALLELIX but any PRODUCT derived therefrom shall be subject to the Licensing Consideration set out in Sections 4.3, 4.4 and 4.5. Determination of inventorship, for this Section 5.2 and for Sections 5.3 and 5.4, shall be made in accordance with United States patent law. Allelix shall disclose this intellectual property to DRUCKER LTD.

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5.3 All know-how, inventions and all other intellectual property, whether or not protectable, generated solely by DR. DRUCKER and/or DRUCKER LTD. or by persons working with DR. DRUCKER in his laboratory, and relating to the PRODUCT shall belong solely to DR. DRUCKER. DR. DRUCKER shall disclose this intellectual property to ALLELIX. To the extent that such intellectual property relates to PRODUCT, such intellectual property shall be within the grant of rights from DRUCKER LTD. to ALLELIX as set out in Article III of this Agreement, subject to the agreement assigning rights of original property effected between Dr. Drucker and The Toronto Hospital and University of Toronto. To the extent such intellectual property does not relate to PRODUCT and it arises out of the SPONSORED RESEARCH AGREEMENT, DR. DRUCKER shall first offer in writing to ALLELIX the terms of an exclusive license to exploit such property. ALLELIX shall respond to the written offer within thirty (30) days of receiving it. If ALLELIX rejects the terms of that offer, DR. DRUCKER shall then have the right to offer those same terms to another person. If DR. DRUCKER proposes any new terms of an exclusive license to exploit such property, DR. DRUCKER shall first offer in writing to ALLELIX those new terms and ALLELIX shall respond to those new terms within ten (10) days of receiving them. If ALLELIX rejects the new terms, DR. DRUCKER shall then have the right to offer those new terms to another person.

5.4 All know-how, inventions and all other intellectual property, whether or not protectable, generated jointly by DR. DRUCKER and by ALLELIX or its employees and relating to the PRODUCT shall belong jointly to DR. DRUCKER and ALLELIX. DR. DRUCKER’s share of any jointly owned intellectual property shall, to the extent such relates to PRODUCT, be within the grant of rights from DRUCKER LTD. to ALLELIX as set out in Article III of this Agreement, subject to the agreement assigning rights of original property effected between Dr. Drucker and The Toronto Hospital and University of Toronto. To the extent such intellectual property does not relate to PRODUCT, and it arises out of the SPONSORED RESEARCH AGREEMENT, DR. DRUCKER shall first offer in writing to ALLELIX the terms of an exclusive license to exploit his rights to such property. ALLELIX shall respond to the written offer within thirty (30) days of receiving it. If ALLELIX rejects the terms of that offer, DR. DRUCKER shall then have the right to offer those same terms to another person. If DR. DRUCKER proposes any new terms of an exclusive license of his rights to exploit such property, DR. DRUCKER shall first offer in writing to ALLELIX those new terms and ALLELIX shall respond to those new terms within ten (10) days of receiving them. If ALLELIX rejects the new terms, DR. DRUCKER shall then have the right to offer those new terms to another person.

5.5 DRUCKER LTD., DR. DRUCKER and ALLELIX shall receive and maintain all disclosures of CONFIDENTIAL INFORMATION in confidence and shall not at any time disclose any such received information to persons other than their AFFILIATES, officers, employees and advisers. The disclosure of such information by ALLELIX to a SUBLICENSEE or prospective SUBLICENSEE who has agreed to keep such information confidential is permitted by this Agreement. Each party shall take all reasonable steps to ensure that their respective AFFILIATES, officers, employees, and advisers maintain the obligations of confidence imposed on DRUCKER LTD., DR. DRUCKER and ALLELIX.

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5.6 Before publishing any information relating to the PRODUCT, each party shall give to the other at least 30 days prior written notice of the proposed publication and during that 30 days, such first mentioned party shall remove from the proposed publication all information which the other party considers to be confidential. If such first mentioned party requires more time to protect the information contained in the proposed publication, the other party shall withhold the publication for a further 60 days. Further delays in release of the proposed publication shall be by mutual written agreement. DR. DRUCKER shall acknowledge ALLELIX in all publications relating to the PRODUCT. ALLELIX shall acknowledge DR. DRUCKER in all publications relating to the PRODUCT.

VI. Sublicensing and Assignment

6.0 Subject only to DRUCKER LTD.’s written consent which shall not be delayed or withheld unreasonably having regard to the rights and obligations of ALLELIX under this Agreement, ALLELIX has the right to sublicense any or all of the rights granted under this Agreement to any other person. Such sublicenses may, at ALLELIX’s sole election, be either exclusive or non-exclusive licensees. At all times ALLELIX shall protect to the fullest extent possible its obligations to, and the rights of DRUCKER LTD. and DR. DRUCKER as set forth in this Agreement. ALLELIX contemplates that it may manufacture bulk PRODUCT for supply to SUB-LICENSEES or assignees of the rights under this Agreement. ALLELIX shall provide DRUCKER LTD. with a copy of each sublicense agreement, each assignment of rights agreement and each supply agreement within thirty (30) days of their execution.

6.1 ALLELIX shall pay to DRUCKER LTD. a share of all SUB-LICENSING REVENUE received by ALLELIX as set out in Section 4.5.

VII. Payments

7.0 Not later than the last day of each September, December, March and June, ALLELIX shall furnish to DRUCKER LTD. a written statement of all NET SALES, GROSS SALES and SUBLICENSING REVENUE, if any, due for the quarterly periods ended the last days of the preceding August, November, February and May, respectively, and shall pay to DRUCKER LTD. all amounts due to DRUCKER LTD. Such amounts are due at the dates the statements are due. If no amount is accrued during any quarterly period, a written statement to that effect shall be furnished.

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7.1 Payments provided for in this Agreement, when overdue, shall bear interest at a rate per annum equal to one percent (1%) in excess of the “Prime Rate” published by the Canadian Imperial Bank of Commerce as its prime commercial lending rate of interest (expressed as an annual rate) for loans in Canadian funds, from the due date until such payment is made.

7.2 If this Agreement is for any reason terminated before all of the payments herein provided for have been made, ALLELIX shall immediately submit a terminal report and pay to DRUCKER LTD. any remaining unpaid balance which has accrued even though the due date as provided in Section 7.0 has not been reached.

VIII. Patent Rights and Patent Infringement

8.0 The acquisition and maintenance of PATENT RIGHTS shall be managed by a patent professional acceptable to the parties who shall be instructed by the parties to diligently pursue prosecution of the PATENT RIGHTS. It shall be the responsibility of this patent professional to advise the parties of the status of the PATENT RIGHTS, and to involve the parties in all portfolio management decisions. ALLELIX shall pay all fees and expenses of any preparation, filing, prosecution and maintenance of PATENT RIGHTS. In the event ALLELIX elects not to file, prosecute or maintain the PATENT RIGHTS in a country, ALLELIX shall have no rights under the PATENT RIGHTS or under this Agreement in the country so elected, it shall so advise DRUCKER LTD. on a timely basis so it can pursue such rights and DRUCKER LTD. shall have the exclusive right to file, prosecute, maintain, and exploit the PATENT RIGHTS in that country at its expense.

8.1 Each party shall be entitled to receive for comment copies of all patent applications relating to the PATENT RIGHTS and correspondence, including status reports, relating to the prosecution, maintenance, issue, re-issue, re-examination or division of these patent applications.

8.2 If any of ALLELIX, DRUCKER LTD. or DR. DRUCKER is sued by a third party for patent infringement because of its exercise of the license granted herein, ALLELIX shall defend the suit at its own expense, but DRUCKER LTD. and DR. DRUCKER shall cooperate to the fullest, at ALLELIX’s expense, in the conduct of the defense. If the parties to the suit reach a tentative settlement, DRUCKER LTD., acting reasonably, must consent to same.

8.3 In the event that any infringement of any of the PATENT RIGHTS comes to the attention of either party hereto, such party shall promptly notify the other party thereof. At DRUCKER LTD.’s request, ALLELIX shall, if it is commercially reasonable to do so, undertake an infringement suit that is reasonably required and in the best interest of both parties. In the event that ALLELIX undertakes such suit, it shall do so at its own expense in the name of DRUCKER LTD. or ALLELIX or both. In such event, DRUCKER LTD. and DR. DRUCKER shall

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cooperate fully with ALLELIX, at ALLELIX’s expense. ALLELIX shall not settle any such suit without obtaining the consent of DRUCKER LTD., such consent not to be unreasonably withheld. Any recovery obtained by ALLELIX as the result of such proceeding, by settlement or otherwise, shall be applied for the following purposes and in the following order: (1) against legal and other expenses of the suit, (2) against liabilities of ALLELIX, DRUCKER LTD. or DR. DRUCKER resulting from the suit, and (3) to DRUCKER LTD. in accordance with Section 4.5.

IX. Representations and Warranties

9.0 DRUCKER LTD. and DR. DRUCKER represent and warrant to their knowledge:

• that DR. DRUCKER is the sole inventor of the inventions described and claimed in the United States patent application filed April 14, 1995 constituting part of the BASIC PATENTS and he has assigned such invention to DRUCKER LTD.

• that neither of them has entered into any agreement, whether in writing or verbally, with any other person that is inconsistent with the terms of this Agreement.

• that the University of Toronto, The Toronto Hospital and the agencies which have funded the inventions described and claimed in the BASIC PATENTS have no ownership rights to the BASIC PATENTS except as have been provided for.

9.1 None of DRUCKER LTD., DR. DRUCKER, the University of Toronto and The Toronto Hospital shall have any liability whatsoever to ALLELIX or any other person for or on account of any injury, loss, or damage, or any kind of nature, sustained by, or any damage assessed or asserted against, or any other liability incurred by or imposed upon ALLELIX or any other person, arising out of or in connection with or resulting from (1) the manufacture, use, or sale of any PRODUCT; or (2) any advertising or other promotional activities with respect to any of the foregoing, and ALLELIX shall hold DRUCKER LTD., DR. DRUCKER, the University of Toronto and The Toronto Hospital harmless and indemnify them if any one of them is held liable.

9.2 ALLELIX, at its own expense and at all times during the term of this Agreement, will carry and maintain in full force and effect comprehensive general liability insurance, including product liability provisions, in a form and with a carrier acceptable in the pharmaceutical industry. The limits of such policy shall be sufficient at all times for ALLELIX’s then current activities under this Agreement, and customary for ALLELIX’s business within the industry. The University of Toronto, The Toronto Hospital, DRUCKER LTD., and DR. DRUCKER shall be named as additional insureds on such insurance and the carrier shall agree not to cancel same without providing 60 days prior written notice of cancellation.

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X. Termination

10.0 This Agreement shall continue in effect until terminated pursuant to one of Sections 10.1 to 10.3 inclusive.

10.1 (a) ALLELIX may terminate this Agreement at any time upon sixty (60) days written notice in advance to DRUCKER LTD.

(b) Upon termination of this Agreement by ALLELIX pursuant to Section 10.1 (a), or by DR. DRUCKER or DRUCKER LTD. pursuant to Section 10.2(a) or 10.3, all rights to, know- how, inventions, patents and all other intellectual property relating to the PRODUCT, whether then owned by ALLELIX or by ALLELIX and DR. DRUCKER, shall belong solely to DRUCKER LTD. and ALLELIX shall take all reasonable steps to assign title to this know-how, inventions, patents and other intellectual property to DRUCKER LTD.

10.2 (a) If ALLELIX defaults in any of its material obligations under this Agreement and such default is not remedied within thirty (30) days of the date of written notice of default from DRUCKER LTD. to ALLELIX, DRUCKER LTD. may terminate this Agreement by sending written notice to ALLELIX. This termination shall be effective thirty (30) days after written notice.

(b) If DR. DRUCKER or DRUCKER LTD. defaults in any of its material obligations under this Agreement and such default is not remedied within thirty (30) days of the date of written notice of default from ALLELIX to DRUCKER LTD. or to DR. DRUCKER, ALLELIX may terminate this Agreement by sending written notice to DRUCKER LTD. and to DR. DRUCKER. This termination shall be effective thirty (30) days after written notice.

10.3 If either ALLELIX or DRUCKER LTD. is adjudged bankrupt, or become insolvent, makes an assignment for the benefit of creditors, or is placed in the hands of a receiver or a trustee in bankruptcy, the other party may terminate this Agreement by giving sixty (60) days’ notice by registered mail to the other party, specifying the basis for termination. If within sixty (60) days after the receipt of such notice, the party receiving notice remedies the condition forming the basis for termination, such notice shall cease to be operative, and this Agreement shall continue in full force. Either party may within sixty (60) days of the notice of termination dispute the allegation of insolvency and if so the termination shall not be effective until the dispute is resolved finally in accordance with the terms of this Agreement in the terminating party’s favour. If DRUCKER LTD. terminates this Agreement because ALLELIX has been adjudged bankrupt, has become insolvent, has made an assignment for the benefit of its creditors, or has been placed in the hands of a receiver or trustee in bankruptcy, DRUCKER LTD. shall enter into agreements with any sublicensees of ALLELIX to grant these sublicenses granted by ALLELIX under any sublicense agreement.

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10.4 This Section and the following rights and obligations shall survive any termination of this Agreement to the degree necessary to permit their complete fulfilment or discharge:

(a) ALLELIX’s obligation to supply a terminal report as specified in Section 7.2 of this Agreement.

(b) DRUCKER LTD.’s right to receive or recover and ALLELIX’s obligation to pay amounts accrued at the date of termination under Article IV of this Agreement.

(c) ALLELIX’s obligation to maintain records and make them available under Section 11.0 of this Agreement.

(d) The covenants, representations, warranties and indemnities under Section 8.2 and Article IX of this Agreement.

(e) The obligations of confidentiality as provided in Sections 5.5 and 5.6 of this Agreement.

(f) DR. DRUCKER’s obligation to enter into agreements with Sublicensees under Section 10.3 of this Agreement.

(g) ALLELIX’s obligations under Section 10.1(b) of this Agreement.

10.5 On termination of this Agreement pursuant to any one of Sections 10.1(a), 10.2(a) or 10.3, neither ALLELIX or its Affiliates shall, directly or indirectly, develop, make, have made, use, sell, have sold or otherwise dispose of PRODUCT for a term of 15 years from the date of termination of this Agreement anywhere in the Territory.

10.6 ALLELIX acknowledges and agrees that the agreements and covenants in Section 10.5 are essential to protect the business and goodwill of DRUCKER LTD. and that a breach by ALLELIX of the covenants in Section 10.5 hereof could result in irreparable loss to DRUCKER LTD. which could not be adequately compensated for in damages and that DRUCKER LTD. may have no adequate remedy at law if ALLELIX breaches such provisions. Consequently, if ALLELIX breaches any of such provisions, DRUCKER LTD. shall have in addition to and not in lieu of, any other rights and remedies available to it under any law or in equity, the right to obtain injunctive relief to restrain any breach or threatened breach thereof and to have such provisions specifically enforced by any court of competent jurisdiction.

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10.7 The parties acknowledge that the provisions of Section 10.5 hereof (the “Restrictive Covenants”) are reasonable and valid in geographic and temporal scope and all other respects. If any court of competent jurisdiction determines that any of the Restrictive Covenants or any part thereof, is or are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full affect, without regard to invalid portions. If any court of competent jurisdiction determines that any of the Restrictive Covenants or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable. ALLELIX acknowledges that DRUCKER LTD.’s business is world wide and that the pharmaceutical business is world wide and that the geographic scope of the covenants contained herein is reasonable.

XI. Records

11.0 ALLELIX shall keep accurate records relating to all matters relevant to this Agreement (including payments due hereunder) and shall permit DRUCKER LTD. or its duly authorized independent accountant to inspect all such records and to make copies of or extracts from such records during regular business hours and on reasonable notice throughout the term of this Agreement and for a period of three (3) years thereafter. If any such inspection discloses any underpayment of SUBLICENSING REVENUE, ALLELIX shall promptly pay to DRUCKER LTD. the amount of any shortfall at the rate determined in accordance with Section 7.1 hereof from the date such payment was due until the date that ALLELIX pays this shortfall to DRUCKER LTD.

XII. Assignability

12.0 Subject to Article VI, ALLELIX shall have the right to assign this Agreement together with all rights and obligations herein to any other person. This Agreement is not assignable by DRUCKER LTD. without the prior written consent of ALLELIX, such consent not to be unreasonably withheld or delayed, except that DRUCKER LTD. may assign the Agreement to DR. DRUCKER or an AFFILIATE without consent.

XIII. Severability

13.0 The parties agree that if any part, term, or provision of this Agreement shall be found illegal or in conflict with any valid controlling law, the validity of the remaining provisions shall not be affected thereby.

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XIV. Use of Licensor’s Name

14.0 In publicising anything made, used, or sold under this Agreement, ALLELIX agrees:

(a) to give recognition where practicable to DR. DRUCKER; and

(b) to obtain prior written approval from DRUCKER LTD., DR. DRUCKER, The Toronto Hospital and the University of Toronto before using any of their names in any publications.

XV. Waiver, Integration, Alteration

15.0 The waiver of a breach hereunder may be effected only by a written document signed by the waiving party and shall not constitute a waiver of any other breach.

15.1 This Agreement represents the entire understanding between the parties, and supersedes all other agreements, express or implied, between the parties concerning PATENT RIGHTS.

15.2 A provision of this Agreement may be altered only by a written document signed by the parties, except as provided in Article XIII or Section 10.7.

XVI. Dispute Resolution

16.0 If the parries are unable to resolve any dispute arising under this Agreement, such matter shall be determined by arbitration to be held in Toronto, Ontario, in accordance with the then prevailing rules for commercial arbitration of the Arbitration Act of Ontario (AAO). Unless the parties agree to the appointment of a single arbitrator, the matter of differences shall be referred to three (3) arbitrators, one to be appointed by each party, and a third being nominated by the two so selected by the parties, or if they cannot agree on a third, by an appointment in a manner specified in the AAO rules. In the event that either party shall not have appointed its arbitrator within one (1) month after receiving notice of commencement of arbitration proceedings, such arbitrator shall be appointed in a manner specified in the AAO rules. The determination resulting from such arbitration shall be final and binding on both parties.

XVII. Applicable Law

17.0 This Agreement shall be construed in accordance with the substantive laws of the Province of Ontario and applicable laws of Canada.

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XVIII. Notices Under the Agreement

18.0 All written communications and notices between the parties shall be delivered or sent by prepaid mail, registered mail or facsimile transmission to the attention of the party at the addresses first written above, or any other addresses of which either party shall notify the other party in writing. Notices sent by prepaid or registered mail shall be effective on the date delivered and notices sent by facsimile shall be effective on the date transmitted.

XIX. Extended Meaning

19.0 The use of the singular in this Agreement shall include the plural and vice versa.

XX. Force Majeure

20.0 If an event beyond the control of either of the parties to this Agreement prevents a party from performing its obligations under this Agreement for the duration of the event, then such party shall not be in breach of this Agreement while such event is ongoing. An event beyond a party’s control includes a strike, labour dispute, action of a government and an act of God.

XXI. Currency

21.0 All amounts due under this Agreement shall be paid in Canadian currency and shall be calculated into Canadian currency using the exchange rate published in the Wall Street Journal on the date that the payment is due.

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IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized officers on the respective dates and at the respective places hereinafter set forth.

For the Licensee

Allelix Biopharmaceuticals Inc.
/s/ Graham Strachan
By:	Graham Strachan
Title:	President and Chief Executive Officer
At:	Mississauga, Ontario

1149336 ONTARIO INC.
/s/ Daniel J. Drucker
By:	Daniel J. Drucker, M.D.
Title:	President
At:	Toronto, Ontario

Acknowledged and Accepted by:

/s/ Daniel J. Drucker

Daniel J. Drucker, M.D.

Acknowledged and Accepted by the University of Toronto
/s/ Peter B. Munsche
By:	Peter B. Munsche
Title:	Assistant Vice - President
At:	Technology Transfer University of Toronto Toronto, Ontario

Acknowledged and Accepted by The Toronto Hospital
/s/ Donald S. Layne
By:	Donald S. Layne, PH.D.
Title:	Senior Vice President, Research
At:	The Toronto Hospital

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EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, N. Anthony Coles, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NPS Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007	/s/ N. ANTHONY COLES
	N. Anthony Coles,
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Gerard J. Michel, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NPS Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007	/s/ GERARD J. MICHEL
	Gerard J. Michel,
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we the undersigned Chief Executive Officer and Chief Financial Officer of NPS Pharmaceuticals, Inc. certify that, to our knowledge, the Quarterly Report of NPS Pharmaceuticals, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2007 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects, the financial condition and results of operations of NPS Pharmaceuticals, Inc.

Date: November 9, 2007	/s/ N. ANTHONY COLES
	N. Anthony Coles,
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: November 9, 2007	/s/ GERARD J. MICHEL
	Gerard J. Michel,
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to NPS Pharmaceuticals, Inc. and will be retained by NPS Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.