Chief Operating Officer

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

Exhibit 10.23

Dr. Shawn Lee, Ph.D.
Chief Operating Officer
American Peptide Company
777 Evelyn Avenue
Sunnyvale, CA 94086

Re: Letter Agreement (the "Letter Agreement") between Affymax, Inc., with registered offices at 4001 Miranda Avenue, Palo Alto, CA, 94304, USA, ("Affymax"), and American Peptide Company, Inc., a California corporation with registered offices at 777 Evelyn Avenue, Sunnyvale, California ("APC").

9 October, 2003

Dear Dr. Lee:

As you know, Affymax and APC have agreed to negotiate with respect to a process development and supply agreement in which APC will manufacture and supply Affymax with Affymax's requirements for Affymax's proprietary peptide product Hematide through phase II clinical trials (the "Development and Supply Agreement"). To meet the tight timelines required for APC to deliver the first samples of such peptide drug substance to Affymax, APC will need to complete the initial feasibility and process development work before the parties expect to complete negotiating the defmitive Development and Supply Agreement; however, nothing in this Letter Agreement shall obligate either party to agree and enter into a definitive Development and Supply Agreement. Thus, to allow APC to begin process development work and deliver certain amounts of peptide Drug Substance while the parties negotiate the definitive Development and Supply Agreement, we have prepared this Letter Agreement, which confirms our recent discussions and understandings. We agree as follows:

1. Definitions. Capitalized terms used in this Letter Agreement (other than the headings of the Paragraphs), whether used in the singular or plural, shall have the meaning set forth below, or, if not listed below, the meaning as designated in the text of this Letter Agreement.

"cGMP" shall mean then-current good manufacturing practices required by: (i) by the provisions of 21 C.F.R., parts 210 and 211 and all applicable rules, regulations, orders and guidances (as the same may from time to time be amended); and (ii) the provisions of Chapter II of EC Commission Directive 91356EEC together with ICH Guideline UCH Q7A (Good Manufacturing Practice for Active Pharmaceutical Ingredients, November 16, 2000).

"CMC Documentation" shall mean the documentation of analytical methods and validation procedures related to the manufacture of the Drug Substance that is prepared in accordance with the Guidelines for Industry, Analytical Methods and Validation Procedures (Chemistry, Manufacturing and Controls documentation), as published by the Center for Drug Evaluation and


Research and the Center for Biologics Evaluation and Research in August 2000, and any finalized or successor guidelines thereto.

"Drug Substance" shall mean Affymax's EPO mimetic drug Drug Substance identified as Hematide and further defined in the specifications as [*] ( [*] )."Drug Master File" or "DMF" shall mean appropriate DMF's, as defined by FDA's Guideline for Drug Master Files, September 1989 (http://www.fda.gov/cder/guidance/dmfhtm) and EMEA (http://www.emea.eu.int/pdfs/human/qwp/013402.pdf) appropriate to support Affymax's Investigational New Drug Application ("IND") for Drug Substance.

"Control" or "Controlled" shall mean with respect to any intellectual property, that a party owns or has a license to such intellectual property and has the ability to grant to the other party access, a license or a sublicense (as applicable) to such intellectual property as provided for herein without violating the terms of any agreement or other arrangements with any third party existing at the time such party would be first required hereunder to grant the other party such access, license or sublicense.

"Development Phase" shall have the meaning set forth in Paragraph 2.

"Effective Date" shall mean the date on which this Letter Agreement is signed by the representative of APC below.

"Feasibility Phase" shall have the meaning set forth in Paragraph 2.

"Interim Specifications" shall mean the specifications for Drug Substance as described in the quotation provided by APC in a letter of 17 July 2003 identified as Quotation Number 031707-G2 and attached as Exhibit A.

"Know-How" shall mean all technical, scientific and other know-how, information, trade secrets, knowledge, ideas, inventions, concepts, formulae, procedures, methods, processes, protocols, techniques, materials and results of experimentation and testing, including without limitation, samples, data, and results (whether or not patentable), in each case that are developed or made by a party, either solely or jointly with the other party, in the course of performance of its obligations under this Letter Agreement. Know-How expressly excludes any Patents.

"Patents" shall mean: (i) all U.S. and non-U.S. patent applications; (ii) all provisionals, converted provisionals, divisionals, continuations and continuations-in-part thereto; and (iii) all patents, issuing from the foregoing in (i) and (ii), including without limitation all extensions, re-examinations, reissues, substitutions and inventors certificates; in each case that are conceived, reduced to practice, made or developed by a party, either solely or jointly with the other party, in the course of performance of its obligations under this Letter Agreement.

2. Project; Committed Resources; Schedule. Affymax and APC are entering into a development and manufacturing relationship (the "Project") in which APC shall produce and provide Affymax's requirements for initial clinical supplies of Drug Substance in full compliance with certain specifications to be determined by the parties in the course of the Project and as shown in Exhibit B, pages 1 and 2 (the "Clinical Specifications") and cGMP, all as further described below. APC shall commit to the Project appropriate personnel, including without

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


limitation experts in technical development, manufacturing, operations, quality control, quality assurance and regulatory affairs. Affymax shall commit such of its personnel or its agents with appropriate expertise to provide reasonable monitoring and technical consultation for the Project, as appropriate and agreed upon in writing by the parties. APC recognizes the importance of timely execution of the Project and accordingly shall give priority to the Project, assign adequate staffing and other resources and use all diligent, commercially reasonable efforts to maximize the potential of achieving successful completion of the Project according to the following schedule:

APC shall complete the set-up of the process for the production of at least one hundred (100) grams of cGMP-grade Drug Substance that is suitable for human clinical use and meeting the Clinical Specifications (the "Early-Stage Clinical Drug Substance"). The Early-Stage Clinical Drug Substance shall be delivered to Affymax or Affymax's designee(s) according to instructions from Affymax. APC shall ship to Affymax or Affymax's designee approximately [*] as soon as possible following synthesis of the [*] and prior to release of Early Stage Clinical Drug Substance. APC shall release at least seventy-five (75) grams and any excess up to one hundred (100) grams total and ship approximately thirty (30) grams (or as otherwise specified by Affymax) of the first batch or lot of Early-Stage Clinical Drug Substance by November 28, 2003 and retain the remainder under GMP conditions suitable for subsequent shipment(s) for clinical use in humans. APC shall ship subsequent portions of the initial batch of Early-Stage Clinical Drug Substance within five (5) business days following receipt of written instructions from Affymax; if a shipment is delayed in excess of five (5) business days, APC shall pay to Affymax [*] U.S. Dollars for each additional business day of delay unless such delay can be shown to Affymax's satisfaction to be due to a valid and reasonable cause. Upon APC's release and delivery of the first batch of Early-Stage Clinical Drug Substance to Affymax and at Affymax's request, APC shall also provide to Affymax at such time a report describing the preparation of scale up, analytical methods, stability testing, validation and CMC Documentation (the "Development Phase Report"). The Development Phase Report shall be delivered to Affymax within 10 days of shipment of the first batch of Early-Stage Clinical Drug Substance.

APC shall prepare and deliver to Affymax within the time frame set forth on Exhibit B, and if requested by Affymax, submit to the appropriate US and foreign regulatory authorities, a drug master file ("DMF") for APC's manufacture of Drug Substance within 90 days of the initial release and shipment of Early Stage Clinical Drug Substance. APC shall also provide Affymax with a letter of access allowing Affymax and its sublicencee(s) to reference the DMF in Affymax's regulatory filings. The DMF shall be in compliance with requirements for drug master file submissions to the United States Food and Drug Administration (the "FDA"). The parties acknowledge that the stability data used or included in the DMF submission shall cover only such period as is available to APC at the time it is prepared. The parties shall consult and co-operate closely with each other in relation to the preparation of the DMF and any subsequent regulatory filings and inspections related thereto. A copy of any subsequent regulatory filings shall be provided to Affymax at the time of submission to the regulatory authorities.

3. Cost. The cost to Affymax shall be as specified in Section (A) of Quotation 031707-G2 attached as Appendix A for [*] . APC will QC release an entire one hundred (100) gram single batch of Early-Stage Drug Substance, of which approximately 30 grams or portion thereof (as will be specified by Affymax) shall be delivered to Affymax or Affymax's designee and the

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


remainder of the batch retained by APC and delivered according to Affymax's subsequent instructions. The total cost of the Development Phase to Affymax shall be payable as follows: Affymax shall pay APC [*] U.S. Dollars within thirty (30) days after the release of the initial one hundred (100) gram batch and Affymax's receipt of the initial approximately thirty (30) gram shipment of Early-Stage Clinical Drug Substance-conforming to specifications, however, the net initial payment shall be a net sum of [*] U.S. Dollars in view of the non-refundable pre-payment of [*] U.S. Dollars paid by Affymax to APC pursuant to the letter agreement between the parties dated July 29, 2003 and additional non-refundable pre-payment of [*] U.S. Dollars pursuant to the letter memorandum of September 15, 2003, and which pre-payments shall be credited against the payment due; APC may invoice Affymax upon release and shipment of at least approximately thirty (30) grams of an at least one hundred (100) gram batch or lot of Early-Stage Clinical Drug Substance conforming to specifications, including receipt of all relevant documentation and Certificate(s) of Analysis. APC will deliver and invoice the Development Phase Report including the CMC Documentation and a copy of the DMF and related information and, upon receipt and acceptance by Affymax, Affymax shall pay [*] U.S. Dollars for said Development Phase Report and [*] U.S. Dollars for said DMF, which APC may invoice upon submission of the DMF to the Food and Drug Administration and, if so instructed by Affymax, APC shall also submit or cause to be filed a DMF with the EMEA (European Medicines Evaluation Agency) and may invoice Affymax for an additional [*] U.S. Dollars upon submission. If requested by Affymax, APC shall reasonably undertake to file DMF or similarly required documentation in other foreign regulatory authority offices and shall be reimbursed for reasonable costs plus an amount to be determined by the parties according to industry standards and not to exceed [*] per submission. Failure of APC to deliver the CMC Documentation and file the DMF with the US Food and Drug Administration within 90 days following the initial shipment of Early-Stage Clinical Drug Substance shall result in the payment due from Affymax to APC being reduced by [*] per business day for each day of delay commencing upon the 91st day following the date of initial shipment of the batch of Early-Stage Clinical Drug Substance. At Affymax's discretion and with the proviso that an analytical testing method will be identified by Affymax and acquired and implemented by APC prio ...