SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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(as permitted by Rule 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

ZONAGEN, INC.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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ZONAGEN, INC.
2408 TIMBERLOCH PLACE, SUITE B-4
THE WOODLANDS, TEXAS 77380

May 8, 1998

TO OUR STOCKHOLDERS:

You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Zonagen, Inc. to be held on Thursday, June 25, 1998, at 1:00 p.m., local
time, at The Houstonian Hotel, 111 North Post Oak Lane, Houston, Texas. A Notice
of the Annual Meeting, Proxy Statement and form of proxy are enclosed with this
letter.

We encourage you to read the Notice of the Annual Meeting and Proxy Statement
so that you may be informed about the business to come before the meeting. Your
participation in the Company's business is important, regardless of the number
of shares that you hold. To ensure your representation at the meeting, please
promptly sign and return the accompanying proxy card in the postage-paid
envelope.

We look forward to seeing you on June 25, 1998.

Sincerely,

Joseph S. Podolski
President and Chief Executive Officer

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 1998

To the Stockholders of Zonagen, Inc.:

The Annual Meeting of Stockholders (the "Annual Meeting") of Zonagen, Inc.
(the "Company") will be held on Thursday, June 25, 1998, at 1:00 p.m., local
time, at The Houstonian Hotel, 111 North Post Oak Lane, Houston, Texas, for the
following purposes:

1. To elect a board of six directors of the Company, each to serve
until the Company's next Annual Meeting of Stockholders or until their
respective successors have been duly elected and qualified;

2. To ratify and approve the appointment of Arthur Andersen LLP as
the Company's independent public accountants for its fiscal year ending
December 31, 1998; and

3. To act on such other business as may properly come before the
Annual Meeting or any adjournments thereof.

Only stockholders of record at the close of business on April 28, 1998 will
be entitled to notice of and to vote at the Annual Meeting.

It is important that your shares be represented at the Annual Meeting
regardless of whether you plan to attend. THEREFORE, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE AS
PROMPTLY AS POSSIBLE. If you are present at the Annual Meeting, and wish to do
so, you may revoke the proxy and vote in person.

By Order of the Board of Directors,

Louis Ploth, Jr.
Secretary

The Woodlands, Texas
May 8, 1998

ZONAGEN, INC.
2408 TIMBERLOCH PLACE, SUITE B-4
THE WOODLANDS, TEXAS 77380

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD JUNE 25, 1998

SOLICITATION AND REVOCABILITY OF PROXIES

The accompanying Proxy is solicited by the Board of Directors of Zonagen,
Inc. (the "Company"), to be voted at the Annual Meeting of Stockholders of the
Company to be held on Thursday, June 25, 1998 (the "Annual Meeting"), at 1:00
p.m., local time, at The Houstonian Hotel, 111 North Post Oak Lane, Houston,
Texas, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders, and at any adjournment(s) of the Annual Meeting. If the
accompanying Proxy is properly executed and returned, the shares it represents
will be voted at the Annual Meeting in accordance with the directions noted
thereon or, if no direction is indicated, it will be voted in favor of the
proposals described in this Proxy Statement. In addition, the Proxy confers
discretionary authority to the persons named in the Proxy authorizing those
persons to vote, in their discretion, on any other matters properly presented at
the Annual Meeting. The Board of Directors is not currently aware of any such
other matters.

Each stockholder of the Company has the unconditional right to revoke his
Proxy at any time prior to its exercise, either in person at the Annual Meeting
or by written notice to the Company addressed to Secretary, Zonagen, Inc., 2408
Timberloch Place, Suite B-4, The Woodlands, Texas 77380. No revocation by
written notice will be effective unless such notice has been received by the
Secretary of the Company prior to the day of the Annual Meeting or by the
inspector of election at the Annual Meeting.

The principal executive offices of the Company are located at 2408
Timberloch Place, Suite B-4, The Woodlands, Texas 77380. This Proxy Statement
and the accompanying Notice of Annual Meeting of Stockholders and Proxy are
being mailed to the Company's stockholders on or about May 8, 1998.

In addition to the solicitation of proxies by use of this Proxy Statement,
directors, officers and employees of the Company may solicit the return of
proxies by mail, personal interview, telephone or telegraph. Officers and
employees of the Company will not receive additional compensation for their
solicitation efforts, but they will be reimbursed for any out-of-pocket expenses
incurred. Brokerage houses and other custodians, nominees and fiduciaries will
be requested, in connection with the stock registered in their names, to forward
solicitation materials to the beneficial owners of such stock.

All costs of preparing, printing, assembling and mailing the Notice of
Annual Meeting of Stockholders, this Proxy Statement, the enclosed form of Proxy
and any additional materials, as well as the cost of forwarding solicitation
materials to the beneficial owners of stock and all other costs of solicitation,
will be borne by the Company.

PURPOSES OF THE MEETING

At the Annual Meeting, the Company's stockholders will be asked to consider
and act on the following matters:

1. The election of a board of six directors of the Company, each to
serve until the Company's next Annual Meeting of Stockholders or until
their respective successors have been duly elected and qualified;

2. A proposal to ratify and approve the appointment of Arthur
Andersen LLP as the Company's independent public accountants for its fiscal
year ending December 31, 1998; and

3. Such other business as may properly come before the Annual Meeting
or any adjournments thereof.

QUORUM AND VOTING

The close of business on April 28, 1998 has been fixed as the record date
(the "Record Date") for the determination of stockholders entitled to vote at
the Annual Meeting and any adjournment(s) thereof. As of the Record Date, the
Company had issued and outstanding 11,304,737 shares of the Company's common
stock, par value $.001 share (the "Common Stock").

Each stockholder of record of Common Stock will be entitled to one vote per
share on each matter that is called to vote at the Annual Meeting. Shares of
Common Stock may not be voted cumulatively.

The presence, either in person or by proxy, of holders of shares
representing a majority of the Common Stock entitled to be cast at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes are counted for purposes of determining whether a quorum is
present. A plurality vote is required for the election of directors.
Accordingly, if a quorum is present at the Annual Meeting, the six persons
receiving the greatest number of votes will be elected to serve as directors.
Withholding authority to vote for a director nominee and broker non-votes in the
election of directors will not affect the outcome of the election of directors.
All other matters to be voted on will be decided by the vote of the holders of
shares representing a majority of the votes present or represented at the Annual
Meeting and entitled to vote on such matter. On any such matter, an abstention
will have the same effect as a negative vote but, because shares held by brokers
will not be considered entitled to vote on matters as to which the brokers
withhold authority, a broker non-vote will have no effect on such vote.

All Proxies that are properly completed, signed and returned prior to the
Annual Meeting will be voted. Any Proxy given by a stockholder may be revoked
at any time before it is exercised by the stockholder (i) filing with the
Secretary of the Company an instrument revoking it, (ii) executing and returning
a Proxy bearing a later date or (iii) attending the Annual Meeting and
expressing a desire to vote his shares of Common Stock in person. Votes will be
counted by Harris Trust & Savings Bank, the Company's transfer agent and
registrar.

PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS

The Board of Directors has nominated and urges you to vote for the election
of the six nominees identified below, who have been nominated to serve as
directors until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. Each of the nominees listed below is
a member of the Company's present Board of Directors. Proxies solicited hereby
will be voted for all nominees unless stockholders specify otherwise in their
Proxies.

If, at the time of or prior to the Annual Meeting, any of the nominees
should be unable or decline to serve, the discretionary authority provided in
the Proxy may be used to vote for a substitute or substitutes designated by the
Board of Directors. The Board of Directors has no reason to believe that any
substitute nominee or nominees will be required.

NOMINEES FOR ELECTION AS DIRECTORS

The names of the nominees for election as directors, and certain additional
information with respect to each of them, are set forth below.

YEAR
FIRST
BECAME
NAME AGE POSITION WITH THE COMPANY DIRECTOR
- ---- --- ----------------------------------- ----------

Martin P. Sutter 43 Chairman of the Board 1987
Joseph S. Podolski 50 President, Chief Executive Officer, 1992
and Director
Steven Blasnik 40 Director 1990
Jeffrey M. Jonas, M.D. 45 Director 1998
Timothy McInerney 37 Director 1996
David B. McWilliams 55 Director 1989

Martin P. Sutter. Mr. Sutter, a co-founder of the Company, has served as
Chairman of the Board of Directors since December 1987. Since July 1988, Mr.
Sutter has been the Managing General Partner of The Woodlands Venture Partners,
L.P., a venture capital firm based in The Woodlands, Texas, and the General
Partner of The Woodlands Venture Fund, L.P., one of the Company's principal
stockholders. In addition, Mr. Sutter has been a General Partner of Essex
Woodlands Health Ventures, L.P. since September 1994. From January 1985 to July
1988, he served as President of The Woodlands Venture Capital Company. Mr.
Sutter is a director of Aronex Pharmaceuticals, Inc., a biotechnology company
based in The Woodlands, Texas, and a director of Targeted Genetics Corporation,
a Seattle-based biotechnology company. He has a B.S. degree from Louisiana
State University and an M.B.A. from the University of Houston.

Joseph S. Podolski. Mr. Podolski joined the Company in 1989 and has served
as President and Chief Executive Officer of the Company and as a Director since
July 1992. From 1977 to 1989, Mr. Podolski held several engineering, product
development and manufacturing positions with Monsanto Company, serving most
recently as Director of Manufacturing for a significant product line. Before
Monsanto, Mr. Podolski spent eight years at Abbott Laboratories, Dearborn
Chemical Company and Baxter Pharmaceuticals in manufacturing, engineering,
quality control and development of fine chemicals, antibiotics, pharmaceuticals
and hospital products. Mr. Podolski has a B.S. in chemistry and a M.S. in
chemical engineering from Illinois Institute of Technology.

Steven Blasnik. Mr. Blasnik has served as a Director of the Company since
April 1990. Since 1987, Mr. Blasnik has been employed by the Perot Group and is
currently President of Perot Investments, Inc., an investment firm owned by Ross
Perot. He is also a director of Perot Systems Corporation. From 1983 to 1987,
Mr. Blasnik was an attorney at Hughes & Luce in Dallas, Texas. Mr. Blasnik has
a B.S.E. from Princeton University and a J.D. from Harvard Law School.

Jeffrey M. Jonas, M.D. Dr. Jonas has served as a Director of the Company
since April 1998. Dr. Jonas has served as the President and Chief Executive
Officer of Avax Technologies, Inc., a biotechnology company based in Kansas
City, Missouri, since June 1996. From 1991 through 1996, Dr. Jonas served in
various capacities with The Upjohn Company, a major pharmaceuticals company
based in Kalamazoo, Michigan, serving most recently as Vice President --
Clinical Development and Chief Medical Officer. Dr. Jonas has a B.A. from
Amherst College and an M.D. from Harvard Medical School.

Timothy McInerney, R.Ph. Mr. McInerney has served as a Director of the
Company since December 1996. Since 1992, Mr. McInerney has been a Managing
Director of Paramount Capital, Inc. where he oversees the overall

distribution of Paramount's private equity product. Prior to 1992, Mr. McInerney
was a research analyst focusing on the biotechnology industry at Ladenburg,
Thalman & Co., and he held equity sales positions at Bear, Stearns & Co. and
Shearson Lehman Brothers, Inc. Mr. McInerney also has worked in sales and
marketing for Bristol-Myers Squibb. He received his B.S. in pharmacy from St.
John's University at New York. He also completed a post-graduate residency at
the New York University Medical Center in drug information systems.

David B. McWilliams. Mr. McWilliams has served as a Director of the
Company since June 1989 and served as President of the Company from that time
until July 1992. Since July 1992, Mr. McWilliams has been the President and a
Director of Texas Biotechnology Corporation, a biotechnology company
headquartered in Houston, Texas. Before joining the Company, Mr. McWilliams was
President and Chief Executive Officer of Kallestad Diagnostics, Inc., an
international immuno-diagnostics company. Before that, Mr. McWilliams was
President of Harleco Diagnostics and Executive Vice President of E.M. Science,
with responsibility for E. Merck's domestic diagnostic business. He also held
international general management positions with Abbott Laboratories and was with
McKinsey & Co. for four years as a general management consultant. Mr.
McWilliams has a B.A. in chemistry from Washington and Jefferson College and a
M.B.A. from the University of Chicago.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE ABOVE-NAMED NOMINEES.

DIRECTORS' MEETINGS AND COMPENSATION

The Company's operations are managed under the broad supervision of the
Board of Directors, which has ultimate responsibility for the establishment and
implementation of the Company's general operating philosophy, objectives, goals
and policies. During 1997, the Board of Directors convened on five regularly
scheduled and four specially scheduled occasions, and took certain additional
actions by unanimous written consent in lieu of meetings. Except for David W.
Ortlieb, each director attended at least 75% of the meetings held by the Board
and any committee of the Board on which he served during his tenure in 1997.

Employee directors do not receive additional compensation for service on
the Board of Directors or its committees. The Company reimburses each
nonemployee director for travel expenses incurred in connection with attendance
at Board meetings. Employee directors are eligible to participate in the
Company's 1994 Employee and Consultant Stock Option Plan and the Amended and
Restated 1993 Employee and Consultant Stock Option Plan (the "Incentive Plans").
Nonemployee directors are entitled to participate in the Company's 1993 Non-
employee Director Stock Option Plan (the "1993 Director Plan") and the 1996
Nonemployee Directors' Stock Option Plan (the "1996 Director Plan").

The 1993 Director Plan entitles each newly-elected nonemployee director to
receive an option to purchase 5,000 shares of Common Stock on the date of his
election, at an exercise price equal to the market price at the close of
business on the date of grant. In addition, the 1993 Director Plan grants each
existing nonemployee director an option to purchase 2,500 shares of Common Stock
on each occasion that such director is re-elected. The Company did not grant
further options under the 1993 Director Plan during 1997. Under the 1996
Director Plan, (i) each nonemployee director who is first elected to the Board
is entitled to receive an option to purchase 25,000 shares of Common Stock on
the date on which he first becomes a nonemployee director, and (ii) each
nonemployee director in office on the date of the Company's annual meeting of
stockholders will receive an option to purchase 2,500 shares of Common Stock
effective on such date. Each nonemployee director in office on the date of the
adoption of the 1996 Director Plan was granted an option to purchase 25,000
shares of Common Stock on such date. In 1997, the Company granted options to
acquire an aggregate of 17,500 shares of Common Stock to nonemployee directors
under the 1996 Director Plan.

In 1997, the Company entered into a consulting agreement with Mr. Sutter
pursuant to which Mr. Sutter was paid $75,000 and was granted 5,000 shares of
restricted Common Stock in consideration for consulting services rendered in
connection with the Company's 1997 public offering, its agreement with Schering-
Plough Corporation for the licensing of Vasomax and certain other matters.

BOARD COMMITTEES

Pursuant to delegated authority, various Board functions are discharged by
the standing committees of the Board. The Board of Directors has appointed four
principal standing committees: the Executive Committee, the Option Committee,
the Compensation Committee and the Audit Committee. The Board does not have a
nominating committee. The Executive Committee, currently comprised of Messrs.
Sutter and Podolski, is authorized to exercise, to the extent permitted by law,
the power of the full Board of Directors when a meeting of the full Board is not
practicable or necessary. The Executive Committee met once in 1997. The Option
Committee, currently comprised of Messrs. Blasnik and McInerney, selects the
employees to whom stock options are to be granted and determines the conditions
covered by each option. The Compensation Committee, currently comprised of
Messrs. Blasnik and McInerney, reviews and recommends to the Board of Directors
the amount of compensation to be paid to all employees. The Option and
Compensation Committees convened on four occasions in 1997, and took certain
additional actions by unanimous written consent in lieu of meetings. The Audit
Committee, currently comprised of Messrs. McWilliams and McInerney, provides
assistance to the Board of Directors in fulfilling its responsibilities relating
to corporate accounting and reporting practices, recommends to the Board of
Directors the engagement by the Company of its independent public accountants,
approves services performed by the Company's independent public accountants,
including fee arrangements and the range of audit and non-audit services,
maintains a direct line of communication between the Board of Directors and the
Company's independent public accountants and performs such other functions as
may be prescribed with respect to audit committees under applicable rules,
regulations and policies of The Nasdaq Stock Market, Inc. The Audit Committee
convened on one occasion in 1997 and on one occasion in January 1998.

PROPOSAL NUMBER 2:
RATIFICATION AND APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has appointed the firm of Arthur Andersen LLP as the
Company's independent public accountants to make an examination of the accounts
of the Company for the fiscal year ending December 31, 1998, subject to
ratification by the Company's stockholders. Representatives of Arthur Andersen
LLP will be present at the Annual Meeting and will have an opportunity to make a
statement, if they desire to do so. They will also be available to respond to
appropriate questions from stockholders attending the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
AND APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, AND
PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation and Option Committees of the Board of Directors of the
Company currently consist of Steven Blasnik and Timothy McInerney, neither of
whom is an officer or employee of the Company. The Compensation Committee is
responsible for evaluating the performance of management and determining the
compensation for certain executive officers of the Company, and the Option
Committee is responsible for administering the Company's Incentive Plans under
which grants may be made to employees of the Company. The Compensation
Committee (the "Committee") has furnished the following report on executive
compensation for 1997:

Under the supervision of the Committee, the Company has developed a
compensation policy which is designated to attract and retain key executives
responsible for the success of the Company and motivate management to enhance
long-term stockholder value. The annual compensation package for executive
officers primarily consists of (i) a cash salary which reflects the
responsibilities relating to the position and individual performance, (ii)
variable performance awards payable in cash or stock and tied to the achievement
of certain personal and corporate goals or milestones and (iii) long-term stock-
based incentive awards which strengthen the mutuality of interests between the
executive officers and the Company's stockholders.

In determining the level and composition of compensation of each of the
Company's executive officers, the Committee takes into account various
qualitative and quantitative indicators of corporate and individual performance.
Although no specific target has been established, the Committee generally seeks
to set salaries comparable to those of peer group companies. In setting such
salaries, the Committee considers its peer group to be certain companies in the
biotechnology industries with market capitalizations similar to that of the
Company. Such competitive group does not necessarily include the companies
comprising the indexes reflected in the performance graph in this Proxy
Statement. Because the Company is still in the development stage, the use of
certain traditional performance standards (e.g., profitability and return on
equity) is not currently appropriate in evaluating the performance of the
Company's executive officers. Consequently, in evaluating the performance of
management the Committee takes into consideration such factors as the Company's
achieving specified milestones or goals in its clinical development programs.
In addition, the Committee recognizes performance and achievements that are more
difficult to quantify, such as the successful supervision of major corporate
projects and demonstrated leadership ability. For 1997, the Committee included
in its evaluation the significant progress made by the Company, including the
continuing advancement of the Company's clinical development of its products.

Base compensation is established through negotiation between the Company
and the executive officer at the time the executive is hired, and then
subsequently adjusted when such officer's base compensation is subject to review
or reconsideration. While the Company has entered into employment agreements
with certain of its executive officers, such agreements provide that base
salaries after the initial year will be determined by the Committee after
review. When establishing or reviewing base compensation levels for each
executive officer, the Committee, in accordance with its general compensation
policy, considers numerous factors, including the responsibilities relating to
the position, the qualifications of the executive and the relevant experience
the individual brings to the Company, strategic goals for which the executive
has responsibility, and compensation levels of companies at a comparable stage
of development who compete with the Company for business, scientific, and
executive talents. As stated above, such comparable companies are generally
those with similar market capitalizations and are not necessarily among the
companies comprising the industry or broad market indexes reflected in the
performance graph in this Proxy Statement. No pre-determined weights are given
to any one of such factors. The base salaries for the executive officers
generally, and the Chief Executive Officer specifically, for fiscal 1997 were
comparable to the Company's peer group companies.

In addition to each executive officer's base compensation, the Committee
may award cash bonuses and the Option Committee may grant awards under the
Company's Incentive Plans to chosen executive officers depending on the extent
to which certain defined personal and corporate performance goals are achieved.
Such corporate performance goals are the same as discussed above.

All employees of the Company, including its executive officers, are
eligible to receive long-term stock-based incentive awards under the Company's
Incentive Plans as a means of providing such individuals with a continuing

proprietary interest in the Company. Such grants further the mutuality of
interest between the Company's employees and its stockholders by providing
significant incentives for such employees to achieve and maintain high levels of
performance. The Company's Incentive Plans enhance the Company's ability to
attract and retain the services of qualified individuals. Factors considered in
determining whether such awards are granted to an executive officer of the
Company include the executive's position in the Company, his or her performance
and responsibilities, the amount of stock options, if any, currently held by the
officer, the vesting schedules of any such options and the executive officer's
other compensation. While the Committee does not adhere to any firmly
established formulas or schedules for the issuance of awards such as options or
restricted stock, the Committee will generally tailor the terms of any such
grant to achieve its goal as a long-term incentive award by providing for a
vesting schedule encompassing several years or tying the vesting dates to
particular corporate or personal milestones.

Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), added by the Revenue Reconciliation Act of 1993, places a $1.0 million
cap on the deductible compensation that can be paid to certain executives of
publicly-traded corporations. Amounts that qualify as "performance based"
compensation under Section 162(m)(4)(c) of the Code are exempt from the cap and
do not count toward the $1.0 million limit. Generally, stock options will
qualify as performance based compensation. The Committee has discussed and
considered and will continue to evaluate the potential impact of Section 162(m)
on the Company in making compensation determinations, but has not established a
set policy with respect to future compensation determinations.

COMPENSATION OF CHIEF EXECUTIVE OFFICER

The annual base salary of Joseph S. Podolski, the Company's President and
Chief Executive Officer, was increased from $150,000 to $200,000 for 1997. The
Committee had not increased Mr. Podolski's annual base salary since 1995. In
increasing Mr. Podolski's annual base salary for 1997, the Committee evaluated a
number of factors, including Mr. Podolski's responsibilities, his general
background and qualifications, his achievement of various corporate and personal
milestones set by the Committee from time to time, and compensation levels for
executives in Mr. Podolski's position and with his background at peer group
companies. The Committee has not attached any particular relative weighting to
the foregoing factors (or any other factors which the Committee may also
consider in reaching compensation decisions for the Company's executive
officers).

Mr. Podolski was granted an incentive bonus of $135,000 for 1997. Of this
amount, $35,000 related to the standard incentive bonus awards to the Company's
executive officers and was based on the achievement of certain personal and
corporate milestones by Mr. Podolski for 1997. In October 1997, the Committee
agreed to award Mr. Podolski an additional incentive bonus in the years ended
December 31, 1997, 1998 and 1999, which additional bonus will be equal to 1% of
the net license fees, milestone payments and royalties received by the Company
pursuant to a License Agreement with Schering Plough Corporation and its
affiliates during that calendar year. These bonus payments are contingent on Mr.
Podolski's continued employment with the Company at the time of payment. The
Committee will retain discretion to determine the amount of any future incentive
bonus awards to be paid to Mr. Podolski under its general plan of incentive
bonus awards for the Company's executive officers, and the Committee expects
that it will evaluate a number of factors in reaching this decision, including
the Company's strategic goals for which Mr. Podolski has responsibility, his
other responsibilities, his initiatives and contributions to the Company's
achievement of various corporate and strategic goals, and his own achievement of
certain personal milestones as determined by the Committee from time to time.

Mr. Podolski was not granted any stock options under the Company's
Incentive Plans during 1997. Mr. Podolski participates in the Company's
Incentive Plans on the same general terms as other participants in the Plan,
although the amount of shares underlying option grants to Mr. Podolski have
historically been larger than for other employees as a result of his position.

The foregoing report is given by the following members of the Compensation
Committee:

Steven Blasnik
Timothy McInerney

The report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.

EXECUTIVE COMPENSATION

EXECUTIVE OFFICERS

Set forth below is certain information concerning the executive officers of
the Company, including the business experience of each during the past five
years.

NAME AGE POSITION
- ---- --- --------

Joseph S. Podolski 50 President, Chief Executive Officer and Director
Louis Ploth, Jr. 44 Vice President of Business Development and Chief
Financial Officer
David B. Bowman 42 Vice President of Operations
Tommy L. Lee 47 Vice President of Corporate Development
Jean Anne Mire 47 Vice President of Investor Relations

Information regarding the business experience of Mr. Podolski is set forth
above under the heading "Nominees for Election as Directors."

Louis Ploth, Jr. Mr. Ploth has served as the Company's Vice President of
Business Development and Chief Financial Officer since October 1993. From
February 1991 to April 1993, Mr. Ploth served as the Chief Financial Officer of
Unisyn Technologies and served as its Vice President of Finance and
Administration from July 1992 to April 1993. Mr. Ploth served as the Corporate
Controller of Synbiotics Corporation (a biotechnology company) from January 1986
to February 1991. Mr. Ploth has a B.S. degree from Montclair State College.

David B. Bowman. Mr. Bowman joined the Company in 1990 and has served as a
Laboratory Manager, Director, and currently Vice President of Operations. Mr.
Bowman's prior experience at Monsanto, Inc. included positions in product
development, technical support, and manufacturing facilities start-up. Mr.
Bowman has a M.S. degree in Toxicology and Infectious Diseases from the
University of Michigan.

Tommy L. Lee. Mr. Lee joined the Company in February 1996 as Vice
President of Corporate Development. Mr. Lee also serves as the general manager
of Fertility Technologies, Inc. From 1994 to January 1996, Mr. Lee served as
Vice President of Marketing of Positron Corporation. Mr. Lee served as Vice
President of Marketing of Optex Biomedical, Inc. from 1989 to 1994. During
1988, Mr. Lee held the position of Director of Corporate Accounts with
Kardiother, Inc. Mr. Lee has also held various sales and marketing positions
with Mallinckrodt, Inc. and with A. H. Robbins Pharmaceutical Company. Mr. Lee
has a B.A. degree from The University of Texas.

Jean Anne Mire. Ms. Mire has served as the Company's Vice President of
Investor Relations since November 1997. From November 1996 to October 1997, Ms.
Mire was a Senior Vice President in the Corporate Finance Department of Harris
Webb & Garrison, an investment banking firm ("HWG"), and served as the Senior
Vice President of HWG's Equity Research Department from September 1994 to
November 1996. Ms. Mire was Senior Vice President in Equity Research for Kemper
Securities, Inc. from December 1990 to June 1994. Ms. Mire has an M.B.A. from
Tulane University and a B.S. in pharmacy from Northeast Louisiana University.

COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table

The following table provides certain summary information concerning
compensation paid or accrued during the last three years to the Company's
President and Chief Executive Officer and to each of the other executive
officers of the Company, determined as of the end of the last fiscal year, whose
annual compensation exceeded $100,000 (the "Named Executive Officers"):

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- ------------------------
RESTRICTED
STOCK SECURITIES
AWARDS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ($) OPTIONS/(#)/ COMPENSATION/(1)/
- --------------------------- ---- --------- --------- ---------- ------------ -----------------

Joseph S. Podolski 1997 $200,000 $135,000 -- -- $ 6,000/(2)/
President and Chief Executive 1996 $150,000 -- -- 100,000 $ 6,000/(2)/
Officer 1995 $150,000 $ 35,000 -- 100,000 $16,000/(2)/

Louis Ploth, Jr. 1997 $100,228 $ 35,000 -- 20,000 --
Vice President of Business 1996 $ 98,832 -- -- 13,000 --
Development and Chief 1995 $ 98,832 -- -- 10,000 --
Financial Officer

David B. Bowman/(3)/ 1997 $ 79,875 $ 35,000 -- 20,000 --
Vice President of Operations 1996 $ 69,659 -- -- 13,000 --
1995 $ 67,200 -- -- 10,000 --

Tommy L. Lee 1997 $110,316 -- -- -- --
Vice President of Corporate 1996 $105,420 -- -- 25,000 --
Development 1995 -- -- -- -- --

- --------------------
/(1)/ During the periods indicated, perquisites for each individual named in the
Summary Compensation Table aggregated less than 10% of the total annual
salary and bonus reported for such individual in the Summary Compensation
Table. Accordingly, no such amounts are included in the Summary
Compensation Table.
/(2)/ Represents car allowance.
/(3)/ Mr. Bowman was elected as the Company's Vice President of Operations in
December 1997, having served as Director of Operations of the Company
since 1996.

Option Grants in 1997

The following table provides certain information with respect to options
granted to the President and Chief Executive Officer and to each of the Named
Executive Officers during the fiscal year ended December 31, 1997 under the
Company's Incentive Plans:

POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
------------------------------------------------------- --------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS MARKET
SECURITIES GRANTED TO PRICE
UNDERLYING EMPLOYEES ON DATE
OPTIONS IN FISCAL EXERCISE OF EXPIRATION
NAME GRANTED/(#)/ YEAR PRICE GRANT DATE 0% 5% 10%
- ---- ------------ ---------- -------- ------ ---------- ------- -------- ----------

Joseph S. Podolski -- -- -- -- -- -- -- --
Louis Ploth, Jr. 20,000 18.6% $30.00 $33.25 10/21/07 $65,000 $483,215 $1,124,839
David B. Bowman 20,000 18.6% $30.00 $33.25 10/21/07 $65,000 $483,215 $1,124,839
Tommy L. Lee -- -- -- -- -- -- -- --

- --------------
/(1)/ The Securities and Exchange Commission (the "SEC") requires disclosure of
the potential realizable value or present value of each grant. The
disclosure assumes the options will be held for the full ten-year term
prior to exercise. Such options may be exercised prior to the end of such
ten-year term. The actual value, if any, an executive officer may realize
will depend on the excess of the stock price over the exercise price on
the date the option is exercised. There can be no assurance that the stock
price will appreciate at the rates shown in the table.

Option Exercises and Holdings

The following table sets forth information concerning option exercises and
the value of unexercised options held by the President and Chief Executive
Officer and each of the Named Executive Officers of the Company named in the
Summary Compensation Table as of the end of the last fiscal year:

AGGREGATED OPTION EXERCISES IN 1997
AND OPTION VALUES AT DECEMBER 31, 1997

NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS HELD AT OPTIONS HELD AT
ON VALUE DECEMBER 31, 1997 (#) DECEMBER 31, 1997(1)
EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- --------- -------- ----------- ------------- ----------- -------------

Joseph S. Podolski -- -- 134,570 132,000 $1,926,439 $1,379,740
Louis Ploth, Jr. -- -- 25,300 42,700 $ 310,069 $ 267,181
David B. Bowman 500 15,566 19,969 37,531 $ 296,690 $ 200,812
Tommy L. Lee -- -- 13,000 12,000 $ 141,538 $ 130,650

- ------------------
/(1)/ Computed based on the difference between aggregate fair market value and
aggregate exercise price. The fair market value of the Company's Common
Stock on December 31, 1997 was $18.1875, based on the closing sales price
on the Nasdaq Stock Market on December 31, 1997.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Messrs. Podolski,
Ploth and Lee which provide for current annual salaries of $200,000, $110,000
and $112,500, respectively. The agreements provide that the Company will pay
Messrs. Podolski, Ploth, and Lee an annual incentive bonus as may be approved by
the Board of Directors and that Messrs. Podolski, Ploth and Lee are entitled to
participate in all employee benefit plans sponsored by the Company. Mr.
Podolski's employment agreement provides for a primary term expiring in January
1998, with automatic annual renewals unless terminated by either party. If
terminated for reasons other than cause, Mr. Podolski is entitled to receive his
annual base salary and certain employment benefits for one year following
termination. The employment agreements for Messrs. Ploth and Lee expire in
September 1997 and January 1998, respectively, with automatic annual renewals
unless otherwise terminated by either party. If terminated for reasons other
than cause, Messrs. Ploth and Lee are entitled to salary and certain employment
benefits for six months following termination.

PERFORMANCE GRAPH

The following performance graph compares the performance of the Company's
Common Stock to the Nasdaq Combined Composite Index and to the Nasdaq Index of
Pharmaceutical Companies. The graph covers the period from March 25, 1993 (the
date on which the Company's Common Stock was registered under Section 12(g) of
the Exchange Act) to December 31, 1997. The graph assumes that the value of
the investment in the Company's Common Stock and each index was $100 at March
25, 1993 and that all dividends were reinvested.

COMPARISON OF CUMULATIVE RETURN
AMONG ZONAGEN, INC.,
NASDAQ COMBINED COMPOSITE INDEX AND
NASDAQ PHARMACEUTICAL COMPANIES INDEX

[GRAPH APPEARS HERE]

3/25/93 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------------------------
Zonagen, Inc. 100 160.87 126.09 189.13 163.04 316.30
- --------------------------------------------------------------------------------------------------
Nasdaq Combined Composite Index 100 113.19 109.78 154.18 188.80 230.96
- --------------------------------------------------------------------------------------------------
Nasdaq Pharmaceutical Companies Index 100 123.82 93.19 170.49 170.98 176.69
- --------------------------------------------------------------------------------------------------

The foregoing stock price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Exchange Act, except to the extent that the Company
specifically incorporates this graph by reference, and shall not otherwise be
deemed filed under such acts.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors of the Company
currently consists of Messrs. Blasnik and McInerney. Mr. McInerney is the
Equity Sales Manager of Paramount Capital, Inc., an investment banking firm
which acted as the placement agent for the Company's 1995 and 1996 private
placements of preferred stock. In

connection with Paramount's services relating to the 1996 private placement, the
Company entered into a two-year financial advisory agreement with Paramount,
pursuant to which the Company has agreed to pay Paramount a retainer fee of
$4,000 per month and additional fees with respect to certain transactions for
which Paramount provides advisory services.

During fiscal 1997, no executive officer of the Company served as (i) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
on the Compensation Committee of the Board of Directors, (ii) a director of
another entity, one of whose executive officers served on the Compensation
Committee of the Board of Directors of the Company or (iii) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Company.

CERTAIN TRANSACTIONS

The Company enters into transactions with related parties only with the
approval of a majority of the independent and disinterested directors and only
on terms the Company believes to be comparable to or better than those that
would be available from unaffiliated parties. In the Company's view, all of the
transactions described herein satisfy such criteria.

In connection with the Company's acquisition of Fertility Technologies,
Inc. ("FTI"), currently a wholly-owned subsidiary of the Company, the Company
agreed to pay a deferred purchase price and to assume certain obligations to J.
Tyler Dean, the former sole shareholder of FTI. On January 31, 1997, the
Company issued an aggregate of 324,947 shares of Common Stock to J. Tyler Dean
in satisfaction of such obligations.

Certain other transactions and relationships are described under
"Proposal Number 1: Election of Directors -- Directors' Meetings and
Compensation," "Executive Compensation -- Compensation Committee Interlocks and
Insider Participation" and "-- Employment Agreements."

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1998 by (i) each person
who is known by the Company to own beneficially more than five percent of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii) the
Company's chief executive officer and each of the other Named Executive Officers
and (iv) all directors and executive officers as a group. Except as described
below, each of the persons listed in the table has sole voting and investment
power with respect to the shares listed.

AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENTAGE
NAME OF BENEFICIAL OWNER COMMON STOCK/(1)/ OF CLASS /(2)/
- -------------------------------------- ------------------ --------------

T. Rowe Price Associates, Inc. 1,069,900 8.99%
100 E. Pratt Street
Baltimore, MD 21202
Capital Research & Management 932,000 7.83%
333 South Hope Street
Los Angeles, CA 90071
Franklin Advisers, Inc. 803,000 6.75%
777 Mariners Island Blvd.
San Mateo, CA 94404
Petrus Fund, L.P. 755,793 6.35%
12377 Merit Dr., Suite 1700
Dallas, TX 75251
Martin P. Sutter 303,939 /(3)/ 2.55%
Joseph S. Podolski 143,070 /(4)/ 1.20%
David Bowman 21,169 /(5)/ *
Steven Blasnik 775,168 /(6)/ 6.51%
Tommy L. Lee 13,000 /(7)/ *
Timothy McInerney 90,810 /(8)/ *
David B. McWilliams 45,549 /(9)/ *
Louis Ploth 27,700 /(10)/ *
All directors and executive officers 1,420,405 /(3)-(10)/ 11.93%
as a group (8 persons)

- --------------------
* Does not exceed one percent.
/(1)/ Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by such persons.
/(2)/ In accordance with the rules of the Securities and Exchange Commission,
each beneficial owner's percentage ownership assumes the exercise or
conversion of all options, warrants and other convertible securities held
by such person and that are exercisable or convertible within 60 days
after March 31, 1998.
/(3)/ Includes (i) 1,037 shares of Common Stock which are held by certain of Mr.
Sutter's family members, (ii) 144,146 shares of Common Stock which may be
deemed to be beneficially owned by Mr. Sutter by virtue of his affiliation
with The Woodlands Venture Fund, L.P., (iii) 105,029 shares of Common
Stock which may be deemed to be beneficially owned by Mr. Sutter by virtue
of his affiliation with Essex Woodlands Health Ventures, L.P., and (iv)
16,875 shares of Common Stock issuable upon the exercise of options. Mr.
Sutter disclaims beneficial ownership of the shares owned by his family
members and those shares owned by The Woodlands Venture Fund, L.P. and
Essex Woodlands Health Ventures, L.P.
/(4)/ Includes (i) 300 shares of Common Stock which are held by certain of Mr.
Podolski's family members and (ii) 134,570 shares of Common Stock issuable
on the exercise of options. Mr. Podolski disclaims beneficial ownership of
the shares owned by his family members.

/(5)/ Includes (i) 200 shares which are held by certain of Mr. Bowman's family
members and (ii) 19,969 shares of Common Stock issuable upon the exercise
of options.
/(6)/ Includes (i) 755,793 shares of Common Stock which may be deemed to be
beneficially owned by Mr. Blasnik by virtue of his affiliation with Petrus
Fund, L.P. and (ii) 19,375 shares of Common Stock issuable upon the
exercise of options. Mr. Blasnik disclaims beneficial ownership of the
shares owned by Petrus Fund, L.P.
/(7)/ Represents shares of Common Stock issuable upon the exercise of options.
/(8)/ Includes (i) 77,934 shares of Common Stock issuable upon the exercise of
warrants, and (ii) 6,875 shares of Common Stock issuable upon the exercise
of options.
/(9)/ Includes 19,375 shares of Common Stock issuable upon the exercise of
options.
/(10)/ Includes (i) 100 shares which are held by certain of Mr. Ploth's family
members and (ii) 25,300 shares of Common Stock issuable upon the exercise
of options.

COMPLIANCE WITH SECTION 16(A)

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of the
Common Stock, to file initial reports of ownership and reports of changes in
ownership (Forms 3, 4, and 5) of Common Stock with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all such
forms that they file.

To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and on written representations by
certain reporting persons that no reports on Form 5 were required, the Company
believes that during the fiscal year ended December 31, 1997, all Section 16(a)
filing requirements applicable to its officers, directors and 10% stockholders
were complied with in a timely manner, with the exception of a filing on Form 5
by Mr. Sutter, which reported one stock option grant and five transactions by a
partnership of which Mr. Sutter is a general partner, a late filing on Form 3 by
Mr. Bowman, and two late filings on Form 4 by Mr. McWilliams. The five
transactions by the partnership of which Mr. Sutter is a general partner
referenced above included one acquisition and four pro rata distributions to the
partners.

PROPOSAL OF STOCKHOLDERS

Any proposal of a stockholder intended to be presented at the next annual
meeting must be received at the Company's principal executive offices no later
than January 1, 1999 if the proposal is to be considered for inclusion in the
Company's Proxy Statement relating to such meeting.

FINANCIAL INFORMATION

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING ANY FINANCIAL
STATEMENTS AND SCHEDULES AND EXHIBITS THERETO, MAY BE OBTAINED WITHOUT CHARGE BY
WRITTEN REQUEST TO SECRETARY, ZONAGEN, INC., 2408 TIMBERLOCH PLACE, SUITE B-4,
THE WOODLANDS, TEXAS 77380.

By Order of the Board of Directors

Louis Ploth, Jr.
Secretary

May 8, 1998
The Woodlands, Texas

ZONAGEN, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS

This Proxy is Solicited on behalf of the Board of Directors

The undersigned hereby appoints Joseph S. Podolski and Louis Ploth, Jr. as
proxies to represent the undersigned at the Annual Meeting of Stockholders to
be held at The Houstonian Hotel, 111 North Post Oak Lane, Houston, Texas, June
25, 1998, at 1:00 p.m., Central Daylight Savings Time, and any adjournments
thereof, and to vote the shares of stock the undersigned would be entitled to
vote if personally present, as indicated below.

1. ELECTION OF DIRECTORS [_] FOR all nominees listed below
(except as marked to the contrary below)

[_] WITHHOLD AUTHORITY to
vote for all nominees listed below

Martin P. Sutter, Joseph S. Podolski, Steven Blasnik, Jeffery M. Jonas,
Timothy McInerney, and David B. McWilliams

INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided:

- --------------------------------------------------------------------------------

2. Ratify the election of Arthur Andersen LLP as independent accountants
of the Company for the fiscal year ended December 31, 1998.

[_] FOR [_] AGAINST [_] ABSTAIN

3. In their discretion, the proxies are authorized to vote on such other
business as may properly come before the meeting.

(continued and to be signed on reverse side)

The shares of stock represented by this proxy will be voted as directed. If no
contrary instruction is given, the shares will be voted FOR the election of the
nominees for FOR ratification of the selection of Arthur Andersen LLP as the
Company's independent accountants for the fiscal year ended December 31, 1998.

DATED:
-----------------------------

-----------------------------------
(Signature)

-----------------------------------
(Signature if held jointly)

Please date, sign as name appears
at the left, and return promptly.
If the Shares are registered in the
names of two or more persons, each
should sign. When signing as
Corporate Officer, President,
Executor, Administrator, Trustee or
Guardian, please give full title.
Please note any changes in your
address alongside the address as
it appears in the proxy.