Re: Employment Terms

Exhibit 10.20

June 3, 2005

John C. Hodgman

Re:     Employment Terms

Dear John:

Aerogen, Inc. (the “Company”) is pleased to offer you the position of President and Chief Executive Officer on the following terms.

You will be responsible for overall management of the Company, reporting to the Company’s Board of Directors (“Board”).  The Company shall use its best efforts to elect you to the Board for so long as you hold the position of President and Chief Executive Officer of the Company.  You agree to serve as a director if elected by the shareholders and the Board, as the case may be.  The current Chairman of the Board, Dr. Jane Shaw, shall resign her positions as Chairman and as a Director of the Company, effective June 30, 2005.

You will work at the Company’s headquarters located in Mountain View, California.  The Company may change your work location from time to time in its discretion.

Your base salary will be $300,000 per year, less payroll withholding and all required deductions, paid semi-monthly.

You will be eligible to participate in the Management Incentive Plan, whereby you would earn an amount equal to forty percent (40%) of your then base salary, subject to payroll withholding, if you are actively employed as the Company’s President and Chief Executive Officer upon the earliest to occur of the following:  1) completion of a strategic alternative, such as an acquisition of the Company by merger, stock purchase, or a sale of the Company or substantially all of its assets, either in a single transaction or in a series of transactions;  2) liquidation of the Company on or before December 5, 2005; or 3) March 31, 2006.

In addition, you will be eligible to participate in the Executive Severance Change of Control Program, the detailed terms of which are currently being formulated and documented.  Although the Program will contain a specific and detailed definition of “Change of Control”, the Company agrees that as the Program will apply to you, a Change of Control will be deemed to have occurred if fifty-one percent (51%) or more of the Company’s equity is acquired by a new owner.  In addition, a Change of Control while you are President and Chief Executive Officer will constitute a material or substantial change in your responsibilities, for purposes of the Program.  Your severance available under the Program will be equivalent to one (1) year of base salary, subject to payroll withholding.

In the event that the Company files for, or has filed against it, a bankruptcy proceeding in the United States Bankruptcy Court, leading to the liquidation of the Company after December 5,