METABASIS THERAPEUTICS, INC. AND SANKYO CO., LTD. SIGN OPTION AGREEMENT FOR DISCOVERY AND DEVELOPMENT OF SECOND-GENERATION GLUCONEOGENESIS INHIBITOR FOR THE TREATMENT OF DIABETES

SAN DIEGO, CA - October 29, 2002 -- Metabasis Therapeutics, Inc. announced today that it has granted an exclusive option to Sankyo Co., Ltd to enter into an agreement with Metabasis for the discovery and development of a second-generation gluconeogenesis inhibitor for the treatment of type II diabetes. As a result of signing the option agreement, Sankyo will make a non-refundable payment to Metabasis totaling over 8 million dollars. Sankyo is currently working with Metabasis to develop CS-917 (formerly MB6322), a first-generation gluconeogenesis inhibitor that Sankyo licensed under a previous agreement with Metabasis. The exclusive option agreement also gives Sankyo access to a potential backup compound for CS-917 should one be required.

CS-917, which is currently being tested in Europe and the US, is the first specific gluconeogenesis inhibitor to reach the clinic. Metabasis discovered CS-917 as part of a research, development and license agreement between Metabasis and Sankyo that was executed in 1997. The drug entered human clinical development in August 2001 and Phase II testing in patients is currently proceeding in the US. While Metabasis and Sankyo continue to collaborate on the ongoing development of CS-917, the discovery portion of the 1997 agreement concluded in May of this year.

Under the option agreement announced today, Sankyo was granted an exclusive right to enter into a new research, development and license agreement with Metabasis focused on the discovery of a second-generation gluconeogenesis inhibitor for the treatment of diabetes. The timing for exercise of this option is tied to a clinical study on CS-917 that is currently underway. Should Sankyo exercise the right to enter the new agreement, it would be structured similarly to the previous agreement including a substantial initiation fee, research funding, milestone payments, payment of all development costs and a royalty based on net-sales. However, the total potential value of the various payments and royalties would be higher than similar payments required by the 1997 agreement. In addition, as before, Metabasis would retain the right to co-promote any resulting product in North America. Finally, the option agreement gives Sankyo the right to license a new compound - discovered by Metabasis since May or during the option term - for use as a backup to CS-917 should one be required.

Dr. Paul Laikind, Chairman, President and CEO of Metabasis stated, "We are pleased to take this next step in our business relationship with Sankyo. We look forward to continuing what has been an excellent and fruitful collaboration with them. Over the past five years, with Sankyo's help, we have taken a promising idea for a new approach to treating diabetes, proved its value in preclinical testing, selected the first drug of this new class and moved it rapidly into clinical trials. To date we have made excellent progress on CS-917 and Sankyo's decision to obtain certain rights to the second-generation product certainly suggests a vote of confidence in the project."

"This is a very exciting time for Metabasis. By early 2003 we expect to have three products at various stages of clinical development. In addition to CS-917, Metabasis expects Hepavir B (formally MB6866), which entered the clinic earlier this year, to begin testing in patients in early 2003. Hepavir B is a HepDirectTM prodrug for the treatment of hepatitis B. The third product, MB7133, is a HepDirect prodrug targeting primary liver cancer that is scheduled to reach the clinic in early 2003. In addition Metabasis has several earlier stage projects that should allow us to continue to make good on our goal of recommending one new drug for clinical development each year."

Dr. Mark Erion, Executive Vice President of Research and Development at Metabasis said, "CS-917 is the result of a great deal of creative thinking, good science and hard work by the Metabasis team. Over the past few years, we have worked closely with our colleagues at Sankyo to select, evaluate and complete pre-clinical development of CS-917. Sankyo is now leading the way on the clinical program. The new agreement will give us an opportunity to build upon our strong relationship with Sankyo and find a second-generation gluconeogenesis inhibitor that expands on the expected success of CS-917."

Metabasis Therapeutics, Inc. (www.mbasis.com) is a privately held, biopharmaceutical company that develops proprietary products for the treatment of human disease with a current focus on liver and liver-related diseases. The Company employs various resources for discovering and perfecting new products, is a leader in the field of nucleoside/nucleotide chemistry and metabolism, and has proprietary expertise in liver biology and liver-specific drug delivery. Metabasis has discovered and developed a new class of drugs for treating diabetes that act to lower liver glucose production in diabetic patients. The first drug from this program, CS-917, is being developed in collaboration with Sankyo Co., Ltd. and is currently undergoing clinical testing. The Company has also developed the HepDirect Prodrug Technology that allows liver-specific delivery of new and existing drugs. Two drugs derived from the HepDirect Technology are in development; a drug for hepatitis B called Hepavir B and a drug for primary liver cancer called MB7133. Hepavir B is the subject of a partnership with Ribapharm, Inc. and is currently being evaluated in Phase I clinical trials. The drug for primary liver cancer is expected to enter the clinic during the first quarter of 2003. The Company has approximately 80 employees and occupies state-of-the-art research facilities in San Diego, California.