TRANSITION SERVICES AGREEMENT

Exhibit 10.2

EXECUTION COPY

TRANSITION SERVICES AGREEMENT

     THIS TRANSITION SERVICES AGREEMENT (this “ Agreement ”), is entered into as of June 30, 2004 (the “ Effective Date ”) by and between Advancis Pharmaceutical Corporation (“ Advancis ”), a corporation organized and existing under the laws of the State of Delaware with offices located at 20425 Seneca Meadows Parkway, Germantown, Maryland 20876, and Eli Lilly and Company (“ Lilly ”), a corporation organized and existing under the laws of the State of Indiana with offices located at Lilly Corporate Center, Indianapolis, Indiana 46285. Advancis and Lilly are sometimes referred to herein individually as a “ Party ” and collectively as “ Parties ”.

     WITNESSETH:

     WHEREAS, Lilly and Advancis have entered into an Asset Purchase Agreement of even date herewith (the “ Purchase Agreement ”) and a Manufacturing Agreement of even date herewith (the “ Manufacturing Agreement ”);

     WHEREAS, pursuant to the Purchase Agreement, Lilly has agreed, among other things, to sell to Advancis the Purchased Assets and Advancis has agreed to purchase the Purchased Assets, including the Marketed Product;

     WHEREAS, the Parties wish to provide for the warehousing, distribution, medical inquiries, complaint management and other transition services to be provided by Lilly and its Affiliates (collectively, “ Service Provider ”) to Advancis, including sales and accounts receivable, during the [***] after the Effective Date;

     WHEREAS, it is a condition to the consummation of the transactions contemplated by the Purchase Agreement and the Manufacturing Agreement that Lilly and Advancis enter into this Agreement; and

     WHEREAS, the Service Provider is willing to provide certain transitional services to Advancis upon the terms and conditions set forth below.

     NOW THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the Parties agree as follows:

     1.  Definitions . As used in this Agreement, the following terms shall have the meanings set forth below and capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement and Manufacturing Agreement.

          (a) " Advancis Sale ” has the meaning specified in Section 5.

          (b) " Business Day ” means any day that is not a Saturday, Sunday or other day on which banks are authorized or required to close in the state of New York.

          (c) " Distribution Fee ” has the meaning specified in Section 4.

          (d) " Independent Accounting Firm ” has the meaning specified in Annex A.

          (e) " Order ” has the meaning specified in Section 5.

          (f) " Order Purchase Price ” has the meaning specified in Section 5.

          (g) " Parties ” has the meaning specified in the Introduction.

          (h) " Services ” has the meaning specified in Section 2.

          (i) " Service Provider ” has the meaning specified in the recitals.

          (j) " Service Period ” has the meaning specified in Section 3.

          (k) " Settlement Calculation ” has the meaning specified in Annex A.

          (l) " Settlement Calculation Objection Notice ” has the meaning specified in Annex A.

          (m) " Settlement Calculation Resolution Period ” has the meaning specified in Annex A.

          (n) " Transferred Inventory ” has the meaning specified in Section 6.

          (o) " Inventory Transfer Notice ” has the meaning specified in Section 6.

     2.  Services to be Provided .

          (a) During the Service Period, the Service Provider shall provide to Advancis or its Affiliates the following services described on Annex A attached hereto solely with respect to the sale of the Marketed Product in the United States (collectively, the “ Services ”):

               (i) Inventory, Warehousing and Management Services;

               (ii) Medical Inquires and Complaint Management Services;

               (iii) Distribution Services; and

               (iv) Accounting and Reconciliation Services.

          (b) Advancis hereby grants to the Service Provider, for no additional consideration, a non-exclusive license to use the Trademarks solely in connection with

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the Services. The foregoing license shall terminate automatically, simultaneously with the expiration or termination of this Agreement.

          (c) The Service Provider shall render the Services in accordance with the standards and guidelines described in Annex A . The Services shall be of the same nature and of the same or higher quality as such similar services provided by the Service Provider, Lilly and/or its Affiliates in connection with the sale of the Marketed Product in the United States immediately prior to the Effective Date. Any Marketed Product that is manufactured, sold or distributed by the Service Provider pursuant to this Agreement shall be in compliance with the Quality Control and Assurance provisions set forth in Section 3.3 of the Manufacturing Agreement and the MRD/Quality Agreement (as defined therein). All Marketed Product shall be labeled, prepared and packaged in accordance with Section 5.1 of the Manufacturing Agreement and the MRD/Quality Agreement.

          (d) During the Service Period and subject to the requirements of Section 8.4 of the Asset Purchase Agreement, Lilly shall provide pharmacovigilance reporting in according with its standard procedures until such time as the Pharmacovigilance Agreement is completed and entered by the Parties. At such time, all such matters shall be handled in accordance with the Pharmacovigilance Agreement.

     3.  Term; Termination .

          (a) The “ Service Period ” shall commence on the Effective Date and shall expire on [***], with respect to Medical Inquiries and Complaint Management Services, and [***], with respect to all other Services, unless sooner terminated in accordance with the provisions of this Section 3 (such period during which any of the Services are provided, the “ Service Period ”).

          (b) In the event that either Party materially fails to perform any of its duties or obligations pursuant to this Agreement and such failure is not cured within ten (10) Business Days after notice to such Party specifying the nature of such material failure, the other Party may terminate this Agreement upon further notice to the defaulting Party.

          (c) Advancis may terminate this Agreement upon ten (10) Business Days’ prior written notice to the Service Provider. Advancis will be relieved of any obligation to pay for terminated Services from and after the effective date of such termination; provided, however, that Advancis will continue to pay for any reasonable noncancellable commitments reasonably made by the Service Provider in anticipation of providing the Services as required herein.

          (d) The expiration or termination of this Agreement, for any reason, will not release either Party from any liability which at said time it has already incurred to the other Party, nor affect in any way the survival of any rights, duties or obligations of either Party that are expressly stated elsewhere in this Agreement to survive said expiration or prior termination. Nothing in the immediately preceding sentence will

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affect the right of the Party aggrieved by any breach of this Agreement to be compensated for any injury or damage resulting therefrom that is incurred before or after such expiration or termination.

          (e) Upon expiration or termination of this Agreement, other than fees related to rebates, returns or chargebacks, all fees and payments owed by either Party to the other Party hereunder as of the date of such expiration or termination will be paid within thirty (30) days of the date of such expiration or termination.

          (f) Promptly after the expiration or termination of this Agreement, Service Provider will deliver to Advancis a report which will contain the same categories of information as the Semi-Monthly Reports (as defined herein), together with any other information that Advancis shall reasonably request and can reasonably be provided by Service Provider relating to the sale of Marketed Products.

     4.  Distribution Fee . For providing the Services during the Service Period, Service Provider will be entitled to the fees (the “ Distribution Fees ”) listed on Exhibit A for each of the Marketed Products. The Distribution Fees will be equal to [***] of each of the Marketed Products listed on Exhibit A and invoiced by Service Provider during the Service Period.

     5.  Sale of Inventory and Distribution Services . Commencing on July 1, 2004, Service Provider shall be responsible for receiving purchase orders for the sale of Marketed Product, which orders are received (each, an “ Order ”) directly from wholesalers with which Lilly has established wholesaler relationships. Within one (1) Business Day after receipt by Service Provider of an Order (or on such later date as the wholesaler requests shipment of Marketed Product), Service Provider shall sell the same quantity and type of Marketed Product specified in the Order to Advancis at the applicable Purchase Price set forth on Schedule 2.2A of the Manufacturing Agreement (the " Order Purchase Price ”). Immediately after such sale and purchase, Advancis shall sell to Service Provider (the “ Advancis Sale ”) the same amount and type of Marketed Product sold to Advancis by Service Provider as specified in the Order at the Order Purchase Price. Within one (1) Business Day of the Advancis Sale, Service Provider will distribute the same quantity and type of Marketed Product specified in the Order. Service Provider will distribute Marketed Products sold pursuant to this Section 5 in accordance with Annex A .

     6.  Delivery of Inventory . During the Service Period, from time to time, Service Provider shall ship the quantity and amount of Inventory (the " Transferred Inventory ”) to a warehouse location specified by Advancis in a written notice from Advancis (the “ Inventory Transfer Notice ”). The Transferred Inventory shall be shipped by Service Provider FOB Advancis’ carrier within three (3) Business Days following delivery of the Inventory Transfer Notice from Advancis to Service Provider.

     7.  Notification to Customers, Wholesalers and Distributors . At a time mutually agreed upon by Service Provider and Advancis, Service Provider shall notify all customers, wholesalers and distributors of the Marketed Product in the United States of

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the transfer of the Marketed Product and Inventory to Advancis and the change in the distribution of the Marketed Product.

     8.  Confidentiality Obligations . The Parties acknowledge that the information provided to them and their representatives in connection with this Agreement is subject to, and