SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

EXHIBIT 10.20

EXECUTION COPY

S ETTLEMENT A GREEMENT AND M UTUAL G ENERAL R ELEASE

This Settlement Agreement and Mutual General Release (“Agreement”) is made and entered into as of the 14 ^th day of February, 2006 (the “Effective Date”), by Raymond F. Schinazi, Ph.D. (“Dr. Schinazi”), and RFS Partners, L.P., a Georgia limited partnership (the “Partnership”), and Raymond F. Schinazi 2005 Qualified Annuity Trust, a Georgia trust (the “Trust”), and RFS Pharma LLC, a Georgia limited liability company (“RFS Pharma”), each having an address at 2881 Peachtree Road, N.E., Unit 2204, Atlanta, Georgia 30305, USA (collectively, the “Schinazi Parties”) and Pharmasset, Inc., a Delaware corporation having its principal address at 303-A College Road East, Princeton, NJ 08540, USA, and formerly known as Pharmasset, Ltd., a Barbados corporation (the “Company”) and the stockholders of the Company listed on Exhibit A hereto (collectively, the “Investors,” and together with the Company, the “Company Parties”). The Schinazi Parties and the Company Parties are each sometimes hereinafter referred to as a “Party,” and collectively, as the “Parties.”

R ECITALS

WHEREAS, Dr. Schinazi and the Investors are stockholders of the Company, and are parties to a Second Amended and Restated Stockholders’ Agreement dated as of August 4, 2004, as amended (the “Stockholders’ Agreement”);

WHEREAS, Dr. Schinazi has served as a director of the Company from 1998 until June 2005, and as an executive director of the Company from 1998 until June 2004;

WHEREAS, Dr. Schinazi is currently the controlling member and majority equity owner of RFS Pharma;

WHEREAS, Dr. Schinazi and the Company entered into a Scientific Advisor Agreement dated, as of July 15, 1998 (the “Advisor Agreement”);

WHEREAS, RFS Pharma is currently party to a license agreement with Emory University and the University of Georgia Research Foundation, Inc. (collectively, the “Universities”) with respect to Amdoxovir (“DAPD”) and Dioxolane Thymine (“DOT”), and their derivatives (the “University License Agreement”); and

WHEREAS, disputes have arisen between the Parties concerning DAPD, DOT and other matters, and the Parties desire to resolve such disputes (the “Disputes”) on the terms and subject to the conditions stated herein.

NOW, THEREFORE, for and in consideration of the mutual promises, covenants, representations, warranties and agreements contained herein, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties agree as follows:

T ERMS AND C ONDITIONS

1.1 On the Effective Date, the parties signatory thereto will deliver executed copies of the following agreements:

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1.2 On the Effective Date, Dr. Schinazi will surrender the Company share certificate no. C 8 in his name, for the purpose of reissuing share certificates in accordance with Section 1.3.

1.3 On the Effective Date, the Company will deliver to Dr. Schinazi share certificates in the following names and amounts: (a) Raymond F. Schinazi — 1,564,556 common shares; (b) RFS Partners, L.P. — 1,000,000 common shares; and (c) Raymond F. Schinazi 2005 Qualified Annuity Trust — 1,000,000 common shares.

1.4 On the Effective Date, the Company will deliver by wire or bank check in immediately available funds to (i) CS Family, LLC, the amount of $1,398,000, pursuant to the Mutual Termination of Lease Agreement and (ii) RFS Pharma LLC the amount of $400,000, pursuant to the License Agreement.

1.5 The Company agrees to reimburse Dr. Schinazi for up to $100,000 of reasonably documented legal fees incurred by Dr. Schinazi in connection with the negotiation of the transactions contemplated by this Agreement, by wire or bank check in immediately available funds to Dr. Schinazi promptly upon receipt of reasonably detailed documentation supporting such legal fees, on or after the Effective Date.

1.6 Dr. Schinazi agrees to use reasonable efforts to assist the Company, as requested, to effectuate any future financings, including the Company’s proposed initial public offering. Such efforts shall be limited to executing, filing, or completing any customary documents or instruments that the Company reasonably determines it requires Dr. Schinazi to

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deliver, or as may be reasonably requested by the managing underwriter of any public offering, including without limitation any filings required under the Securities Exchange Act of 1934, as amended, and any stockholder or NASD questionnaires, but specifically excluding any requirement to deliver a lock-up agreement other than (x) the lock-up agreement in the form attached hereto as Exhibit G in connection with the Company’s initial public offering and (y) as may be required by Sections 2.2(c) and 2.12 of the Stockholders’ Agreement. The Parties acknowledge and agree that this Section 1.5 shall not (i) require Dr. Schinazi to relinquish any rights provided under this Agreement or any other agreement to which the Company and Dr. Schinazi are parties or (ii) require Dr. Schinazi to make false or misleading statements or statements that are injurious to Dr. Schinazi’s interests or reputation.

1.7 The Company agrees to deliver to Dr. Schinazi any disclosure related to the Schinazi Parties and the Confidential Matters (as defined below) that the Company intends to include in its registration statement on Form S-1, including any exhibits that relate to Confidential Matters, within a reasonable period of time prior to the Effective Date of this Agreement. Additionally, the Company agrees to deliver to Dr. Schinazi drafts of any amendments to such registration statement that include changes to such disclosure, including any exhibits that relate to Confidential Matters which have not otherwise been provided, prior to filing such amendments with the Securities and Exchange Commission (the “SEC”); provided , however , that Dr. Schinazi acknowledges and agrees that the Company may make any such amended filing with the SEC at any time without the prior approval of Dr. Schinazi being required.

1.8 The Company and the Schinazi Parties agree that, as of the Effective Date, the Assignment and Non-Disclosure Agreement and the Standstill and Tolling Agreement by and

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between the parties thereto, both dated as of July 29, 2005, shall be terminated and of no further force or effect. The Company and the Schinazi Parties also acknowledge and agree that the Advisor Agreement has terminated. The Company and the Schinazi Parties have no further obligations under any of the agreements referenced in this Section 1.8, and such agreements are superseded by this Agreement.

2.1 The Schinazi Parties’ Release The Schinazi Parties, and each of them, on their own behalf and on behalf of their current and former employees, representatives, companies, corporations, business entities, officers, directors, shareholders, partners, joint venturers, insurers, trustees, executors, creditors, agents, attorneys, heirs, dependents, predecessors, successors, assigns, parents, subsidiaries, affiliates, related companies, and controlling persons, past and present, and each of them, hereby release and forever discharge the Company Parties, and all of the Company Parties’ respective former, current and future owners, members, partners, shareholders, officers, directors, employees, agents, representatives, attorneys, companies, corporations, business entities, joint venturers, insurers, trustees, executors, creditors, heirs, dependents, predecessors, successors, assigns, parents, subsidiaries, affiliates, related companies, and controlling persons, and each of them (collectively, the “Company Released Parties”), of and from all claims, liabilities, demands, damages, actions, and causes of action, at law or in equity, of every kind and nature, including claims for attorneys’ fees or costs, whether known or unknown, fixed or contingent, existing, claimed to exist or which may hereafter arise from the beginning of time until the Effective Date of this Release, except in each case for the Reserved Claims (as defined below) (collectively, “Released Claims”).

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2.2 The Company Parties’ Release The Company Parties, and each of them, on their own behalf and on behalf of their current and former employees, representatives, companies, corporations, business entities, officers, directors, shareholders, partners, joint venturers, insurers, trustees, executors, creditors, agents, attorneys, heirs, dependents, predecessors, successors, assigns, parents, subsidiaries, affiliates, related companies, and controlling persons, past and present, and each of them, hereby release and forever discharge the Schinazi Parties, and all of the Schinazi Parties’ respective former, current and future owners, members, partners, shareholders, officers, directors, employees, agents, representatives, attorneys, companies, corporations, business entities, joint venturers, insurers, trustees, executors, creditors, heirs, dependents, predecessors, successors, assigns, parents, subsidiaries, affiliates, related companies, and controlling persons, and each of them (collectively, the “Schinazi Released Parties”), of and from all claims, liabilities, demands, damages, actions, and causes of action, at law or in equity, of every kind and nature, including claims for attorneys’ fees or costs, whether known or unknown, fixed or contingent, existing, claimed to exist or which may hereafter arise from the beginning of time until the Effective Date of this Release, except in each case for the Reserved Claims (as defined below) (collectively, “Released Claims”).

2.3 Reserved Claims The Parties do not release, and hereby expressly reserve, the following claims that each may have against the other (the “Reserved Claims”):

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The Parties acknowledge that claims or facts in addition to or different from those which are now known or believed to exist may later be discovered with respect to any claim, liability, demand, damage, action or cause of action that they, or any of them, may possess against each other, or their respective current and former employees, representatives, companies, corporations, business entities, officers, directors, shareholders, partners, joint venturers, insurers, trustees, executors, creditors, agents, attorneys, heirs, predecessors, successors, assigns, parents, subsidiaries, affiliates, related companies, and controlling persons, past and present, and each of them, but each Party nevertheless intends this release to be effective as a full, general release.

The Parties each agree not to encourage, induce or assist any person or entity to threaten, file or prosecute any Third Party Claims or even suggest that they do so, except as required by law or court order. The Parties agree to make reasonable efforts to assist each other in defending against Third Party Claims.

Except as provided in Section 1.5 hereof, each of the Parties shall bear and be responsible for his or its own attorneys’ fees and costs incurred through the Effective Date.

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5.1 Each Party denies any liability to any other Party, or any other individual or entity, concerning the Disputes. Each Party acknowledges that each other Party continues to deny liability, disclaim responsibility, and dispute allegations asserted by any other Party.

6.1 Each of the Parties respectively represents and warrants that, other than to the extent reflected in any of the agreements attached hereto as Exhibits B through I, no other person or entity has claimed or now claims any interest in the subject of this Agreement (including any of the agreements incorporated hereto as Exhibits B through I), and that no right, claim, liability, demand, damage, action or cause of action, or any part thereof, of any kind or nature covered by this Agreement, has been sold, assigned, granted or otherwise transferred to any other person or entity.

6.2 Each of the Parties represents and warrants that each has read and understands this Agreement, and that no promise, inducement, representation or agreement not expressly set forth herein has been made to them in connection with this Agreement. The Parties agree that, prior to the execution of this Agreement, they have apprised themselves of sufficient relevant data, through resources of their own selection, and have consulted with their respective counsel, in order that they might intelligently exercise their judgment in deciding whether to execute this Agreement. The Parties agree that this Agreement is executed voluntarily and without duress or undue influence of any nature whatsoever.

6.3 Each Schinazi Party represents and warrants to the Company, jointly and severally, and each of the Company Parties represents and warrants to each Schinazi Party, that: (i) such representing Party has the proper power and authority to enter into and perform this

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Agreement and, as relevant, any of the incorporated agreements; (ii) that such person signing this Agreement and the incorporated agreements on its behalf has been duly authorized and directed to do so; (iii) this Agreement has been duly executed and delivered by such Party and is, and each incorporated agreement to which such Party will be a party as of the Effective Date will be, duly executed and delivered by such Party and will be, the legal, valid and binding obligation of such Party, enforceable against it in accordance with its terms, except to the extent that enforcement may be limited by applicable bankruptcy law and other laws of general applicability affecting creditors’ rights and by general principles of equity; and (iv) neither the execution and delivery of this Agreement or any of the incorporated agreements to which it is or will be a party as of the Effective Date, nor the performance of any of the transactions contemplated hereby or thereby, nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will (x) violate any provision of its certificate of incorporation, articles of organization, bylaws or other charter documents, or (y) violate, require consent of any person or entity pursuant to, or constitute a default under any law, ruling, regulation or other restriction of the Universities or any governmental body, or (z) constitute a breach or default under any contract or agreement to which it is a party.

It is specifically understood and agreed that this Agreement may be pleaded as a full and complete defense to and may be used as the basis for an injunction against any action, arbitration, suit or other proceeding that may be instituted, prosecuted or attempted in breach of this Agreement. In the event that litigation is necessary to enforce a provision or provisions of this Agreement, all costs and attorneys’ fees shall be paid by the non-prevailing Party or Parties to the prevailing Party or Parties.

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8.1 Except as set forth in Section 8.2 and Section 8.3, the terms and provisions, and the existence, of this Agreement (including the agreements incorporated hereby), and the disputes as between the Company Parties and the Schinazi Parties (the “Confidential Matters”), shall be kept confidential by the Parties; provided , however , that information shall no longer be a “Confidential Matter” once it has been disclosed publicly either by (1) by any Party hereto pursuant to Section 8.3 or (2) by any third party provided that such information was not obtained from any Party hereto in violation of this Section 8.

Notwithstanding the foregoing, nothing in this Section shall prevent the Parties or any other person from making any truthful statement responding to incorrect