AMENDED AND RESTATED STRATEGIC ALLIANCE AGREEMENT

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                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.

                               AMENDMENT AGREEMENT

     This amendment (this "2007 Amendment") to the Amended and Restated
Strategic Alliance Agreement dated as of April 2, 2002 (the "2002 Agreement") by
and between PENWEST PHARMACEUTICALS CO., a corporation organized and existing
under the laws of the State of Washington, with its principal place of business
at 39 Old Ridgebury Road, Danbury, Connecticut 06810 ("Penwest"), and ENDO
PHARMACEUTICALS INC., a corporation organized and existing under the laws of the
State of Delaware, with its principal place of business at 100 Painters Drive,
Chadds Ford, Pennsylvania 19317 ("Endo"), is entered into by and between Penwest
and Endo this 7th day of January, 2007.

     WHEREAS, pursuant to the 2002 Agreement, Penwest and Endo have developed
and commercialized the Product, (as defined in the 2002 Agreement);

     WHEREAS, under the terms of the 2002 Agreement, Endo is required to pay
Royalties (as defined in the 2002 Agreement) to Penwest with respect to the
Product based on Net Realization (as defined in the 2002 Agreement) and other
factors set forth in the 2002 Agreement;

     WHEREAS, certain disagreements have arisen between Penwest and Endo
regarding the calculation of Royalties and other matters relating to the
parties' respective rights and obligations under the 2002 Agreement; and

     WHEREAS, in order to resolve their differences and for other reasons, the
parties desire to modify the 2002 Agreement to provide that Royalties be
calculated based on net sales of the Product in the United States and to change
certain related provisions of the 2002 Agreement;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and conditions herein set forth, the receipt and sufficiency of which
consideration are hereby acknowledged, the parties agree as follows:

1.    DEFINITIONS

     Capitalized terms used in this 2007 Amendment and not defined in this 2007
Amendment shall have the meanings ascribed to them in the 2002 Agreement.

2.    NET SALES DEFINITION

     The Definitions Exhibit to the 2002 Agreement is hereby amended by
inserting immediately following Section 1.44 of the Definitions Exhibit to the
2002 Agreement the following:

     "1.45 "U.S. Product Net Sales" shall mean the gross amount invoiced by Endo
          and its Affiliates and sublicensees for the sale or other disposition
          of the Product to independent third parties in the United States less
          the following amounts, in each


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          case determined in accordance with generally accepted accounting
          principles as consistently applied to all products of Endo: (i)
          discounts, including cash discounts, discounts to managed care or
          similar organizations or government organizations, rebates paid,
          credited, accrued or actually taken, including government rebates such
          as Medicaid chargebacks or rebates, and retroactive price reductions
          or allowances actually allowed or granted from the invoiced amount,
          and commercially reasonable and customary fees paid to distributors;
          (ii) credits or allowances actually granted upon claims, rejections or
          returns of such sales of Product, including recalls, regardless of the
          party requesting the claim, rejection, or return; and (iii) provisions
          for actual uncollectible accounts.

     1.46 "2007 Amendment" shall mean that certain Amendment Agreement dated as
          of January 7, 2007 by and between Penwest and Endo.

     1.47 "2007 Amendment Effective Date" shall mean January 7, 2007."

3.    CERTIFICATION EXCESS

     3.1 The 2002 Agreement is hereby amended by deleting Section 3.5.3 of the
2002 Agreement in its entirety and inserting the following new Section 3.5.3 in
its place:

     "3.5.3 In view of Penwest having elected, as of March 18, 2003, not to
          participate further in the U.S. Certification Period, Section 6.7
          shall apply and the other provisions of this Agreement shall remain in
          effect in accordance with their terms and the terms of Section 6.7;
          provided, however, that, as the U.S. Certification Period ended prior
           to the 2007 Amendment Effective Date and the parties have agreed that
          the Certification Excess arising from the U.S. Certification Period
          shall be deemed to be $28,000,000 and shall not be subject to further
          adjustment, audit or dispute between the parties, and Endo shall have
          the right to recoup such Certification Excess solely through the
          Royalty reduction mechanism set forth in the immediately following
          sentence. Commencing at such time as cumulative Royalties otherwise
          (i.e., without giving effect to Section 4.5.2) payable to Penwest
          pursuant to Section 4.5.1 exceed $41,000,000, Endo shall pay Penwest
          fifty percent (50%) of the Royalties otherwise due under Section 4.5.1
          until Endo has thereby recouped the $28,000,000 total Certification
          Excess."

     3.2 The parties hereby agree that the Certification Excess with respect to
the Product and the Certification Period for the Product in the United States
shall equal $28,000,000; that such amount shall not be subject to further
adjustment, audit or dispute between the parties; that neither of the parties
shall have any obligation under Section 3.7 of the 2002 Agreement, including
without limitation, no obligation on the part of Endo to issue invoices under
Section 3.7; and that Penwest's sole and exclusive liability with respect to the
Certification Excess with respect to the U.S. Certification Period and the
expenditures, costs and other resources devoted by the parties to U.S.
Certification Tasks during the Certification Period is the reduction in
Royalties payable by Endo to Penwest set forth in Section 3.5.3 of the 2002
Agreement, as


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amended by this 2007 Amendment; provided, however, that, for the sake of
clarity, the parties further acknowledge and agree that all amounts previously
borne or paid by Penwest with respect to the U.S. Certification Period shall not
be remitted to or otherwise recoupable by Penwest.

4.    ROYALTIES AND OTHER PAYMENTS

     4.1 The 2002 Agreement is hereby amended by deleting Section 4.5 in its
entirety and inserting the following new Section 4.5 in its place:

     "4.5 Royalties; Recoupment of Certification Excess.

          4.5.1 U.S. Product Net Sales. With respect to Product sold or
               otherwise disposed of in the United States in a calendar year,
               Endo hereby agrees to pay to Penwest Royalties equal to the
               following percentages of such calendar year U.S. Product Net
               Sales:

<TABLE>
<CAPTION>
               Calendar Year                             Royalty Rate (as a percentage
               U.S. Product Net Sales                    of U.S. Product Net Sales)
               ----------------------                    -----------------------------
<S>                                                      <C>
               Amounts less than $150,000,000            22%

               Amounts greater than or equal to          25%
               $150,000,000 and less than $[**]

               Amounts greater than or equal to $[**]    [**]%
               and less than $[**]

               Amounts greater than or equal to $[**]    [**]%
               and less than $[**]

               Amounts greater than or equal to $[**]    [**]%
               and less than $1,000,000,000

               Amounts greater than or equal to          30%
               $1,000,000,000
</TABLE>

          4.5.2 Notwithstanding Section 4.5.1, the first $41,000,000 in
               cumulative Royalties otherwise payable by Endo to Penwest
               pursuant to Section 4.5.1 (including, for purposes of clarity,
               Royalties on all U.S. Product Net Sales commencing with the
                commercial launch of the Product in 2006) shall not be payable
               and the corresponding U.S. Product Net Sales shall be excluded
               from Endo's Royalty obligations under Section 4.5.1; provided,
               however, that such corresponding U.S. Product Net Sales shall not
               be excluded from the calculation of Calendar Year U.S. Product
               Net Sales for purposes of calculating the Royalty rate under
               Section 4.5.1 or of Calendar Year U.S. Product Net Sales for
               purposes of Section 4.10. Any


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               exclusion pursuant to this Section 4.5.2 shall be reflected in
               the statements provided for in Section 4.7.

          4.5.3 With respect to Product sold or otherwise disposed of in the
               Territory outside the United States, Endo hereby agrees to pay to
               Penwest Royalties equal to the Applicable Percentage of the
                relevant Net Realization from all units of the Product sold by
               Endo and its distributors and licensees in the Territory outside
               the United States; provided that unless otherwise agreed by the
               parties, development and commercialization of the Product in the
               Territory outside the United States shall be subject to Section
               5.1(c) of the 2007 Amendment.

          4.5.4 Bundling; Certain Other Sales. Endo, its Affiliates and
                sublicensees shall be permitted to bundle the Product together
               with any other product(s) in any sale or transfer of the Product;
               provided however that the revenues from such product bundles
               shall be equitably allocated and none of Endo, its Affiliates or
               sublicensees shall disproportionately discount the Product
               compared to the other product(s) in the bundle. None of Endo, its
               Affiliates or sublicensees shall make commercial sales of the
               Product to independent third parties except in arm's-length
               transactions for monetary consideration.

     4.2 The 2002 Agreement is hereby amended by deleti