AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------

APOLLO BIOPHARMACEUTICS, INC.

(Name of Small Business Issuer in its Charter)

DELAWARE 2834 04-3160456
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)

ONE KENDALL SQUARE, BUILDING 200, SUITE 2200, CAMBRIDGE, MASSACHUSETTS 02139

(Address, Including zip code, and telephone number, including area code, of
registrant's principal executive offices)

KATHERINE GORDON, PH.D.

PRESIDENT AND CHIEF EXECUTIVE OFFICER

Apollo BioPharmaceutics, Inc.

One Kendall Square, Building 200, Suite 2200

Cambridge, Massachusetts 02139

(617) 621-7154

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------

COPIES TO:

MICHAEL LYTTON, ESQ. JOHN G. HERBERT, ESQ.
Palmer & Dodge LLP JOHN G. HERBERT, P.C.
One Beacon Street 310 Plaza Level
Boston, Massachusetts 1675 Larimer Street
02108-3190 Denver, Colorado 80202-1521
(617) 573-0100 (303) 534-0522

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the effective date of this Registration Statement.
------------------------

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /

CALCULATION OF REGISTRATION FEE

PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE FEE(5)

Units, each consisting of two shares of Common
Stock, $.02 par value per share, and a Warrant
to purchase one share of Common Stock.......... 575,000 $10.25(2) $5,893,750(1)(2) $1,785.99
Warrants to purchase Units....................... 50,000 $0.002 $100 $0.03
Units, each consisting of two shares of Common
Stock, $.02 par value per share, and a Warrant
to purchase one share of Common Stock.......... 50,000 $12.30(2) $615,000(2) $186.37
Warrants to purchase Common Stock................ 625,000 (3) -- --
Common Stock, $.02 par value per share(4)........ 625,000 $6.50(2) $4,062,500(2) $1,231.06
Common Stock, $.02 par value per share........... 1,250,000 (3) -- --

(1) Includes 75,000 Units which the Underwriters may purchase to cover
over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.

(3) The offering price attributable to these securities is included in the
offering price of the Units in the above calculation.

(4) Represents shares of Common Stock issuable upon exercise of warrants.

(5) A registration fee of $5,654.90 was previously paid in connection with the
original filing of the applicant's Registration Statement on Form SB-2 (Reg.
No. 333-18769) on December 24, 1996. Pursuant to Rule 429(b), no additional
registration fee is being paid herewith.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

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APOLLO BIOPHARMACEUTICS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM SB-2

FORM SB-2 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------

1. Front of the Registration Statement and Outside Front
Cover Page of Prospectus............................ Forepart of the Registration Statement and Outside
Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages

3. Summary Information and Risk Factors................. Prospectus Summary; Risk Factors

4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds

5. Determination of Offering Price...................... Underwriting

6. Dilution............................................. Risk Factors; Dilution

7. Selling Security Holders............................. Not Applicable

8. Plan of Distribution................................. Outside Front Cover Page; Underwriting

9. Legal Proceedings.................................... Business

10. Directors, Executive Officers, Promoters and Control
Persons............................................. Management; Principal Stockholders; Certain
Transactions

11. Security Ownership of Certain Beneficial Owners and
Management.......................................... Management; Principal Stockholders

12. Description of Securities............................ Outside Front Cover Page; Description of Securities

13. Interests of Named Experts and Counsel............... Not Applicable

14. Disclosure of Commission Position on Indemnification
For Securities Act Liabilities...................... Management

15. Organization Within Last Five Years.................. Certain Transactions

16. Description of Business.............................. Prospectus Summary; Capitalization; Selected
Financial Data; Business; Management; Certain
Transactions; Principal Stockholders; Financial
Statements

17. Management's Discussion and Analysis or Plan of
Operation........................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations

18. Description of Property.............................. Business

19. Certain Relationships and Related Transactions....... Certain Transactions

20. Market for Common Equity and Related Stockholder
Matters............................................. Inside Front Cover Page; Risk Factors; Description of
Securities; Underwriting

21. Executive Compensation............................... Management

22. Financial Statements................................. Financial Statements

23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. Not Applicable

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

Filed Pursuant to Rule 424(b)(1)
Registration No. 333-18769

SUBJECT TO COMPLETION, DATED APRIL 29, 1997.

500,000 UNITS

[LOGO]

EACH UNIT CONSISTING OF TWO SHARES OF COMMON STOCK
AND ONE COMMON STOCK PURCHASE WARRANT
--------------------------

Apollo BioPharmaceutics, Inc. (the "Company") is hereby offering 500,000
units ("Units"), each Unit consisting of two shares of the Company's common
stock, $0.02 par value per share (the "Common Stock"), and one redeemable
warrant (each, a "Warrant" and collectively, the "Warrants") to purchase one
share of Common Stock of the Company. Each Warrant entitles the registered
holder thereof to purchase, at any time until the fifth anniversary of the date
of this Prospectus (the "Expiration Date"), one share of Common Stock at an
exercise price of $6.50 per share, subject to adjustment under certain
circumstances. Neither the Common Stock nor the Warrants may be separately
traded or transferred until 12 months after the date of this Prospectus or such
earlier date as may be determined by Neidiger/Tucker/Bruner, Inc. and Westport
Resources Investment Services, Inc. (the "Representatives") as Representatives
of the participating underwriters (the "Underwriters"). See "Description of
Securities". The Warrants are redeemable by the Company, in whole or in part, at
a redemption price of $0.25 per Warrant, upon at least 30 days' prior written
notice, commencing one year from the date of this Prospectus, if the average of
the closing sale prices of the Common Stock shall equal or exceed $10.00 per
share for 20 consecutive business days ending within 10 business days of the
date on which notice of redemption is given. See "Description of Securities --
The Warrants Offered." Prior to this offering, there has been no public market
for any securities of the Company. The Common Stock and the Warrants have been
approved for quotation on the Nasdaq SmallCap-SM- Market under the symbols
"ABPI" and "ABPIW," respectively. The Company intends to apply for listing of
the Common Stock and the Warrants on the Boston Stock Exchange under the symbols
"ABPI" and "ABPIW", respectively. The Company also intends to apply for listing
of the Units on the Nasdaq Small Cap-SM- Market and the Boston Stock Exchange
under the symbol "ABPIU".
--------------------------

THE UNITS OFFERED HEREBY ARE -SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.

SEE "RISK FACTORS" ON PAGES 6-17.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)

Per Unit................................................. $10.25 $1.025 $9.225
Total(3)................................................. $5,125,000 $512,500 $4,612,500

(1) Does not reflect additional compensation to be received by the
Representatives in the form of (i) a non-accountable expense allowance equal
to 3% of the gross proceeds of this offering, (ii) five-year warrants (the
"Representatives' Warrants") entitling the Representatives to purchase up to
an aggregate of 50,000 Units at an exercise price of $12.30 per Unit, (iii)
a commission equal to 5% of the exercise price of Warrants exercised after
one year from the date of this Prospectus, and (iv) a three-year consulting
agreement with the Company providing for a total fee of $70,000. In
addition, the Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $590,000,
including the Representatives' non-accountable expense allowance.

(3) The Company has granted the Underwriters a 45-day option to purchase up to
an additional 75,000 Units solely to cover over-allotments, if any. If this
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Company will be $5,893,750,
$589,375, and $5,304,375, respectively. See "Underwriting."
--------------------------

The Units are offered by the several Underwriters named herein on a firm
commitment basis subject to prior sale, when, as and if accepted by them and
subject to certain conditions. The Underwriters reserve the right to withdraw,
cancel or modify this offer and to reject orders in whole or in part. It is
expected that delivery of the certificates representing the Units will be made
against payment on or about May , 1997.

NEIDIGER/TUCKER/BRUNER, INC. WESTPORT RESOURCES INVESTMENT
SERVICES, INC.

The date of this Prospectus is April , 1997

FOR CALIFORNIA RESIDENTS ONLY

WITH RESPECT TO SALES OF THE SECURITIES BEING OFFERED HEREBY TO CALIFORNIA
RESIDENTS, SUCH SECURITIES MAY BE SOLD ONLY TO (1) "ACCREDITED INVESTORS" WITHIN
THE MEANING OF RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (2) BANKS, SAVINGS AND LOAN ASSOCIATIONS, TRUST COMPANIES, INSURANCE
COMPANIES, INVESTMENT COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY ACT OF
1940, PENSION AND PROFIT SHARING TRUSTS, ANY CORPORATIONS OR OTHER ENTITIES,
WHICH, TOGETHER WITH SUCH CORPORATION'S OR OTHER ENTITY'S AFFILIATES, HAVE A NET
WORTH ON A CONSOLIDATED BASIS ACCORDING TO THEIR MOST RECENT REGULARLY PREPARED
FINANCIAL STATEMENTS (WHICH SHALL HAVE BEEN REVIEWED BUT NOT NECESSARILY
AUDITED, BY OUTSIDE ACCOUNTANTS) OF NOT LESS THAN $14,000,000 AND SUBSIDIARIES
OF THE FOREGOING, (3) ANY CORPORATION, PARTNERSHIP OR ORGANIZATION (OTHER THAN A
CORPORATION, PARTNERSHIP OR ORGANIZATION FORMED FOR THE SOLE PURPOSE OF
PURCHASING THE SECURITIES BEING OFFERED HEREBY) WHO PURCHASES AT LEAST
$1,000,000 AGGREGATE AMOUNT OF THE SECURITIES OFFERED HEREBY, OR (4) ANY NATURAL
PERSON WHO (A) HAS INCOME OF $65,000 AND A NET WORTH OF $250,000 OR (B) HAS A
NET WORTH OF $500,000 (IN EACH CASE, EXCLUDING HOME, HOME FURNISHINGS AND
PERSONAL AUTOMOBILES). EACH CALIFORNIA RESIDENT PURCHASING THE SECURITIES
OFFERED HEREBY WILL NOT SELL OR OTHERWISE TRANSFER SUCH SECURITY TO A CALIFORNIA
RESIDENT UNLESS THE TRANSFEREE COMES WITHIN ONE OF THE AFOREMENTIONED CATEGORIES
AND WILL ADVISE THE TRANSFEREE OF THIS CONDITION WHICH TRANSFEREE, BY BECOMING
SUCH, WILL BE DEEMED TO BE BOUND BY THE SAME RESTRICTIONS ON RESALE.

FOR UNITED KINGDOM RESIDENTS ONLY

THE SECURITIES REFERRED TO IN THIS DOCUMENT MAY NOT BE OFFERED OR SOLD TO
PERSONS IN THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES
INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS
PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR OTHERWISE IN
CIRCUMSTANCES WHICH HAVE NOT RESULTED AND WILL NOT RESULT IN AN OFFER TO THE
PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF THE PUBLIC OFFERS OF
SECURITIES REGULATIONS 1995. THIS DOCUMENT MAY ONLY BE ISSUED OR PASSED ON IN
THE UNITED KINGDOM BY A PERSON WHO IS NOT AUTHORIZED FOR THE PURPOSES OF THE
FINANCIAL SERVICES ACT 1986 (AND PROVIDED THEN ONLY IF THAT UNAUTHORIZED PERSON
IS NOT UNLAWFULLY CARRYING ON INVESTMENT BUSINESS IN THE UNITED KINGDOM) TO A
PERSON WHO IS OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT
1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1996 OR IS A PERSON TO WHOM

SUCH DOCUMENT MAY OTHERWISE BE LAWFULLY ISSUED OR PASSED ON.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

NEUROCALC-TM- is a trademark of the Company.
NEURESTROL-Registered Trademark- is a registered trademark of Endocon, Inc.

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS. THE UNITS OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE
HEADING "RISK FACTORS." EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS (I) HAS BEEN ADJUSTED TO REFLECT A 3 1/3-FOR-1 REVERSE STOCK SPLIT OF
THE OUTSTANDING COMMON STOCK WHICH WAS COMPLETED ON DECEMBER 20, 1996 AND A
1.55-FOR-ONE REVERSE STOCK SPLIT OF THE COMPANY TO BE EFFECTED ON OR BEFORE THE
EFFECTIVE DATE OF THIS PROSPECTUS AND (II) ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE "UNDERWRITING."

THE COMPANY

Apollo BioPharmaceutics, Inc. ("Apollo" or the "Company") is a
development-stage company which is engaged in the development, through
agreements with research institutions and pharmaceutical companies, of
proprietary drugs that protect brain cells from damage caused by disease, injury
and aging. The Company's target applications include the treatment of
Alzheimer's disease, Parkinson's disease, brain damage resulting from stroke and
other age-related diseases and conditions. The Company's lead product candidates
are based on naturally-occurring hormones that have been demonstrated by
Company-sponsored research to protect brain cells from damage caused by disease,
trauma and aging. The Company's major product initiatives are based on estrogen
compounds, calcitriol or vitamin D-related compounds and other types of
neurosteroids.

ABPI-124 and NEURESTROL-REGISTERED TRADEMARK-, two of the Company's lead
product candidates, are in development by the Company and its partners for the
prevention of neurodegeneration in Alzheimer's disease. ABPI-124 is a type of
estrogen that the Company's management believes will be useful in preventing
brain cell death without inducing feminizing side effects (e.g. breast
enlargement) and therefore could be used to treat men as well as women.
NEURESTROL is an estrogen-based, subcutaneous implant in development for the
long-term, controlled delivery of estrogen in a single dose for the treatment of
Alzheimer's disease. NEURESTROL is the subject of an Investigational New Drug
Application for Phase I testing in humans. An additional product candidate,
NEUROCALC-TM-, a derivative of vitamin D, is currently being evaluated in a
small number of patients with Alzheimer's disease in a trial funded by the
National Institutes of Health at the University of Kentucky Medical School. The
Company continues to sponsor testing of these as well as other potentially
neuroprotective compounds for efficacy in the treatment of other
neurodegenerative conditions such as Parkinson's disease, Age-Related Memory
Impairment and brain-cell death from stroke. In addition to its pharmaceutical
product candidates, the Company is also currently evaluating a Hormone
Responsiveness Diagnostic test that may predict responsiveness to hormone
therapy.

Development of the Company's products to date has been based, in large
part, on intellectual property it has licensed from, and research it has
sponsored at, the medical schools of two universities. The Company intends to
continue to acquire licenses to intellectual property that could advance the
Company's product development efforts. Two patents licensed exclusively to the
Company have recently been issued in the United States. The first patent covers
the use of estrogen compounds for neuroprotection in the treatment of certain
diseases, including Alzheimer's disease, and the second patent covers the
Company's Hormone Responsiveness Diagnostic test.

The Company's commercialization strategy is to enter into strategic
alliances with biotechnology and pharmaceutical companies for the development
and marketing of its product candidates. The Company currently has a strategic
alliance with Athena Neurosciences, Inc. ("Athena"), for the development of
estrogen products for chronic neurodegenerative diseases, and with Endocon, Inc.
("Endocon"), for the joint development of NEURESTROL. Mr. Robert J. Leonard, a
member of the Board of Directors, Vice President and shareholder of the Company,
is the acting Chief Executive Officer of Endocon. The Company plans to seek
additional strategic partners for the development of its product candidates.

The Company is a Delaware corporation that was incorporated on July 20,
1992 as Apollo Genetics, Inc. and subsequently changed its name to Apollo
BioPharmaceutics, Inc. in December 1996. The Company's offices are located at
One Kendall Square, Building 200, Suite 2200, Cambridge, Massachusetts 02139.
The Company's telephone number is (617) 621-7154.

THE OFFERING

Securities Offered by Company..... 500,000 Units, each Unit consisting of two shares of
Common Stock and a Warrant to purchase one share of
Common Stock at an offering price of $10.25 per Unit.
Neither the Common Stock nor the Warrants may be
separately traded or transferred until 12 months after
the date of this Prospectus or such earlier date as may
be determined by the Representatives. See "Description
of Securities."

Terms of Warrants................. Each Warrant entitles the holder to purchase one share
of Common Stock, for an exercise price of $6.50, at any
time until the fifth anniversary of the date of this
Prospectus (the "Expiration Date"), subject, in certain
circumstances, to earlier redemption by the Company. The
exercise price and number of shares issuable upon the
exercise of the Warrants are subject to adjustment in
certain circumstances. See "Description of
Securities--The Warrants Offered."

Shares of Capital Stock
Outstanding Common Stock:

Prior to this Offering.......... 2,719,985 shares(1)

After this Offering............. 3,719,985 shares(1)

Use of Proceeds................... The Company intends to utilize the net proceeds of this
offering to fund product development activities, hire
additional personnel and establish a small laboratory
facility and for general working capital purposes and
operating expenses. See "Use of Proceeds."

Risk Factors...................... Investment in these securities is speculative and
involves a high degree of risk and immediate and
substantial dilution. See "Risk Factors" and "Dilution."

Proposed Nasdaq SmallCap-SM-
Market and Boston Stock Exchange
Symbols(2)...................... ABPIU; ABPI; ABPIW.

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

(1) Does not include the possible issuance of (i) 387,096 shares of Common Stock
reserved for issuance upon the exercise of options granted or available for
grant under the Company's 1993 Incentive and Non-Qualified Stock Option
Plan; (ii) 58,064 shares reserved for issuance upon the exercise of options
granted or available for grant under the Company's 1996 Director Stock
Option Plan; (iii) 232,256 shares of Common Stock reserved for issuance upon
exercise of certain warrants previously issued by the Company; (iv) 101,381
shares issuable upon exercise of a convertible right to receive royalties;
(v) 500,000 shares of Common Stock reserved for issuance upon exercise of
the Warrants to be issued in this offering; (vi) 75,000 Units reserved for
issuance upon exercise of the Underwriters' over-allotment option; and (vii)
50,000 Units reserved for issuance upon exercise of the Representatives'
Warrants. See "Management;" "Certain Transactions;" "Description of
Securities;" and "Underwriting." Also excludes 27,649 shares repurchased by
the Company in March 1997. See Note H of Notes to Financial Statements.

(2) No assurance can be given that a trading market will develop for any of the
Company's securities. See "Risk Factors--Possible Delisting of Securities."

SUMMARY FINANCIAL DATA

YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------

STATEMENT OF OPERATIONS DATA:
Revenue.................................................................. $ 3,954 $ 2,535 $ 191,032
Expenses................................................................. 526,961 419,684 594,423
Net loss................................................................. $ (523,007) $ (417,149) $ (403,391)
----------- ----------- -----------
----------- ----------- -----------
Net loss per share....................................................... $ (.22) $ (.17) $ (.15)
Weighted Average number of shares outstanding............................ 2,361,621 2,441,692 2,700,358

DECEMBER 31, 1996
--------------------------
AS
ACTUAL ADJUSTED(1)
------------ ------------

BALANCE SHEET DATA:
Cash and cash equivalents........................................................... $ 1,254,250 $ 5,495,915
Working capital..................................................................... 955,071 5,196,736
Total assets........................................................................ 1,477,763 5,500,263
Stockholders' equity 998,584 5,021,084

(1) Adjusted to reflect the sale by the Company of the 500,000 Units offered
hereby at a public offering price of $10.25 per Unit. See "Use of Proceeds,"
"Capitalization" and "Underwriting."

RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE
SECURITIES OFFERED BY THIS PROSPECTUS.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS OF OPERATIONS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK
FACTORS AND ELSEWHERE IN THIS PROSPECTUS.

HISTORY OF OPERATING LOSSES; FUTURE PROFITABILITY UNCERTAIN

The Company is a development-stage biotechnology company. Since its
inception in 1992, the Company has incurred losses and had an accumulated
deficit of approximately $1.8 million at December 31, 1996, substantially all of
which consisted of product development and general and administrative expenses.
Although the Company has generated fees from options and licenses pursuant to
the terms of certain licensing agreements it maintains with third parties, it
has not generated any revenues from product sales to date, and there can be no
assurance that revenues from product sales will ever be achieved. Moreover, even
if the Company eventually generates revenues from product sales, the Company
nevertheless expects to incur significant operating losses over the next several
years. The Company's ability to achieve profitable operations in the future will
depend in large part upon completing development of its products, obtaining
regulatory approvals for these products and bringing several of these products
to market. The likelihood of the long-term success of the Company must be
considered in light of the expenses, difficulties and delays frequently
encountered in the development and commercialization of new pharmaceutical
products, competitive factors in the marketplace, as well as the regulatory
environment in which the Company operates. There can be no assurance that the
Company will ever achieve substantial revenues or profitable operations. See
"Summary Financial Data;" "Selected Financial Data;" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

TECHNOLOGICAL UNCERTAINTY; EARLY STATE OF PRODUCT DEVELOPMENT; NO ASSURANCE OF
REGULATORY APPROVALS

The Company's proposed products will require significant further
research, development, clinical testing and regulatory clearance. The Company
has no products available for sale and does not expect to have any products
resulting from its research efforts commercially available for at least several
years. With the exception of limited clinical testing of NEUROCALC, none of the
Company's proposed pharmaceutical products has been tested in humans. The
Company has filed an Investigational New Drug Application (an "IND") with the
United States Food and Drug Administration (the "FDA") to begin a
pharmacokinetic evaluation of NEURESTROL; however, there can be no assurance
that this product or any product the Company has developed or may develop in the
future will prove to be safe to use or effective in humans. The Company's
proposed products are subject to the risk of failure inherent in the development
of products based on innovative technologies. These risks include the
possibilities that some or all of the proposed products could be found to be
ineffective or toxic or otherwise fail to receive necessary regulatory
clearances; that effective products will be uneconomical to manufacture or
market; that third parties may now or in the future hold proprietary rights that
preclude the Company from marketing such products; or that third parties will
market a superior or equivalent product. Accordingly, the Company is unable to
predict whether its product development activities will result in any
commercially viable products or applications. Furthermore, due to the extended
testing and regulatory review process required before marketing clearance can be
obtained, the Company does not expect to be able to commercialize any
therapeutic drug for at least several years, either directly or through any
existing and potential corporate partners or licensees. There can be no
assurance that the Company's proposed products will prove to be safe or
effective in humans or will receive the regulatory approvals that are required
for commercial sale. See "Business."

NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL

The Company will require substantial funds for further development and
clinical testing of its potential products and to commercialize any products
that may be developed. The Company's capital requirements will depend on
numerous factors, including the progress of its product development programs,
the progress of pre-clinical and clinical testing, the time and cost involved in
obtaining regulatory approvals, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights, competing
technological and market developments and the ability of the Company to
establish strategic alliances. The Company has no current sources of significant
funding beyond the proceeds from this offering. The Company believes that its
existing capital resources, including the estimated net proceeds of this
offering and interest thereon, will be sufficient to satisfy its operations for
at least 24 months from the date of this Prospectus. The Company anticipates
that after 24 months, it will require substantial additional capital. Moreover,
if the Company experiences unanticipated cash requirements during the next 24
months, the Company will require additional capital to fund its operations, to
continue product development programs, including the pre-clinical and clinical
testing of its potential products, and to commercialize any products that may be
developed. The Company may seek additional funding through public or private
sales of equity securities or collaborative or other arrangements with third
parties. There can be no assurance that additional funds will be available on
acceptable terms, if at all. If additional funds are raised by issuing equity
securities, further substantial dilution to existing stockholders, including
purchasers of the Units offered hereby, may result. If adequate funds are not
available, the Company may be required to delay, scale back or eliminate one or
more of its development programs, or to obtain funds by entering into
arrangements with collaborative partners or others that may require the Company
to relinquish rights to certain of its products or technologies that the Company
would not otherwise relinquish. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

DEPENDENCE ON STRATEGIC ALLIANCES

The Company has established strategic alliances with Athena and Endocon
with respect to the development and commercialization of certain of the
Company's products. The Company is dependent upon its strategic partners to
conduct preclinical tests and human trials, to obtain required regulatory
approvals for product candidates and, in the case of Athena, to provide adequate
funding for product testing. In addition, the Company is dependent on the
cooperation of these partners in selecting compounds for subsequent development
as product candidates, conducting preclinical testing and clinical trials and
obtaining required regulatory approvals for the Company's drug candidates.
Failure of these partners to undertake reasonable efforts toward product
development would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's strategy for
development and commercialization of its products is dependent upon entering
into additional arrangements with research collaborators, corporate partners and
others, and upon the subsequent success of these third parties in performing
their obligations. There can be no assurance that the Company will be able to
enter into additional strategic alliances on terms favorable to the Company, if
at all. Failure of the Company to enter into additional strategic alliances
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Strategic Alliances and
Licenses."

The Company cannot control the amount and timing of resources which its
corporate partners devote to the Company's programs or potential products. If
any of the Company's corporate partners breach or terminate their respective
agreements with the Company or otherwise fail to conduct their development
activities in a timely manner, the preclinical testing, clinical development or
commercialization of product candidates will be delayed, and the Company will be
required to devote additional resources to product development and
commercialization, terminate certain development programs or seek new corporate
partners. The Company's strategic alliances with Athena and Endocon are subject
to

termination by each of them. There can be no assurance that Athena or Endocon
will not elect to terminate their strategic alliances with the Company prior to
their respective scheduled expiration dates. The Company and Endocon are
currently in discussions regarding the execution of a sublicense agreement for
NEURESTROL which will supercede the Company's existing agreement with Endocon.
There can be no assurance that the Company will be able to enter into any such
new sublicense agreement on terms favorable to the Company, if at all. In
addition, if the Company's corporate partners effect a merger with a third
party, there can be no assurance that the strategic alliances will not be
terminated or otherwise materially adversely affected. The termination of any
current or future strategic alliances could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company's corporate partners may develop, either alone or with others, products
that compete with the development and marketing of the Company's potential
products. Competing products, either developed by the Company's corporate
partners or to which the corporate partners have rights, may result in their
withdrawal of support with respect to all or a portion of the Company's
technology, which would have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that disputes will not arise in the future with respect to the
ownership of rights to any products or technology developed with corporate
partners. These and other possible disagreements between corporate partners and
the Company could lead to delays in the collaborative research, development or
commercialization of certain product candidates or could require or result in
litigation or arbitration, which would be time-consuming and expensive, and
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Strategic Alliances and
Licenses."

UNCERTAIN ABILITY TO PROTECT PROPRIETARY TECHNOLOGY

The Company's success, competitive position and potential future income
will depend, in part, on its ability to obtain patent protection, in various
jurisdictions, relating to the technologies, processes and products it is
developing and may develop in the future. The Company has licensed rights to
certain proprietary technologies from the University of Kentucky Research
Foundation and the University of Florida Research Foundation, Inc. To date, two
patents have been issued relating to these technologies and several related
patent applications are pending in major markets of the developed world.
Additional applications have been filed in certain other countries. The Company
plans to seek additional patents in the future and to file patent applications
in other countries and to license additional rights to certain unpatented and
patented proprietary technology from research institutions. See
"Business--Strategic Alliances and Licenses;" and "Business--Intellectual
Property Rights."

The patent positions of pharmaceutical, biotechnology and drug delivery
companies, including the patent rights licensed by the Company, are uncertain
and involve complex legal and factual issues. Additionally, the coverage claimed
in a patent application can be significantly reduced if and when a patent is
issued. As a consequence, the Company does not know whether its pending patent
applications will result in the issuance of patents. Since patent applications
in the United States are maintained in secrecy until patents issue, and since
publication of discoveries in the scientific or patent literature often lag
behind actual discoveries, the Company cannot be certain that the inventions
described in its patent applications are not subject to prior art, that the
inventors of inventions covered in the pending patent applications were the
first inventors or that the patent applications for these inventions were the
first to be filed. Moreover, the Company may have to participate in any
interference proceedings which may be declared by the United States Patent and
Trademark Office to determine the priority of any inventions covered by its
patent applications, which could result in substantial cost to the Company,
whether or not the eventual outcome is favorable to the Company.

There can be no assurance that the Company will develop additional
proprietary products that are patentable, that any patents issued to, or
licensed by, the Company will be valid or enforceable, or that patents issued
to, or licensed by, the Company will afford protection against competitors with
similar

technology. An adverse outcome could subject the Company to significant
liabilities to third parties, require disputed rights to be licensed from or to
third parties or require the Company to cease using the technology in dispute.
In addition, there can be no assurance that others will not independently
develop substantially equivalent proprietary information or otherwise obtain
access to the Company's know-how or that others will not be issued patents that
prevent the sale of the Company's products or require licensing and the payment
of significant fees or royalties by the Company for the pursuit of its business.
Moreover, there can be no assurance that the Company's technology does not
infringe upon any valid claims of patents owned by others. If the Company was
found by a court to be infringing on a patent held by another, the Company would
have to discontinue all activities related to that patented technology or seek a
license to use that patented technology.

If a legal action claiming patent infringement were to be brought
against the Company or its licensees, the Company could incur substantial costs
in defending itself, and there can be no assurance that an action of this sort
would be resolved in the Company's favor. If such a dispute were to be resolved
against the Company, in addition to incurring potential damages, the Company's
continued testing, manufacture or sale of one or more of its technologies or
proposed products, if developed, could be enjoined. Defense of any lawsuit or
failure to obtain any required license could, depending on the circumstances,
have a material adverse effect on the Company.

Some of the intellectual property and prospective products that the
Company has licensed or invented may involve naturally occurring or synthetic
molecules, the patentability of which is uncertain and involves complex legal
and factual questions. Legal standards surrounding the viability of
biotechnology patents are in transition, and no assurance can be given as to
whether patents will be issued, the degree of protection that any patents will
afford or the Company's ability to avoid violating or infringing upon patents
issued to others.

All of the Company's licenses from universities involve programs that
were originally funded by the United States Government and, as a result, the
United States Government commonly retains certain statutory rights, including a
non-exclusive, royalty-free license to use the licensed inventions, and to
manufacture and distribute products based thereon, for Government use only.

Several of the patents and patent applications licensed to the Company
are so-called "use patents" and describe novel uses rather than the specific
composition of matter of certain compounds. In these cases, another company
could, without infringing on the Company's intellectual property, market these
compounds for unrelated disease indications to the extent that those companies
already have FDA approval. Marketing of an existing or new compound described by
the Company's use patents for the described indication requires that the
marketer secure a license from the Company or one of its sublicensees. If a
company were to market a product which is the subject of one of the Company's
patents, the Company or its sublicensees might have to file suit in order to
stop the infringement and report such activities to the FDA.

Despite the issuance of patents and the underlying commercial protection
afforded by the Company's intellectual property, products produced by third
parties may compete "off label" with the Company's products. For example, once
prescribed, patients may take commercially available estrogen products for
indications other than those that are approved by the FDA. According to current
law, companies may not market for off-label indications.

The Company relies on certain technologies that are not patentable or
proprietary and are therefore available to the Company's competitors. The
Company also relies on certain proprietary trade secrets and know-how that are
not patentable. Although the Company has taken steps to protect its unpatented
trade secrets and know-how, in part through the use of confidentiality
agreements with its employees, consultants, and certain of its collaborators,
there can be no assurance that (i) these agreements will not be breached; (ii)
the Company would have adequate remedies for any breach; or (iii) the

Company's trade secrets will not otherwise become known or be independently
developed or discovered by its competitors. See "Business--Intellectual Property
Rights."

COMPETITION

Factors affecting competition in the pharmaceutical industry vary,
depending on the extent to which a competitor is able to achieve a competitive
advantage based on its proprietary technology. If the Company is able to
establish and maintain a significant proprietary position with respect to its
products, competition will likely depend primarily on the effectiveness of the
product and the number and severity of its unwanted side effects as compared to
alternative products.

The industry in which the Company competes is characterized by extensive
research and development efforts and rapid technological progress. Although the
Company believes that its proprietary position may give it a competitive
advantage with respect to its proposed drugs, new developments are expected to
continue and there can be no assurance that discoveries by others will not
render the Company's potential products noncompetitive. The Company's
competitive position also depends on its ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products,
implement development and marketing plans, obtain patent protection and secure
adequate capital resources. There can be no assurance that the Company will be
able to successfully achieve all of the foregoing objectives. See
"Business--Competition."

DEPENDENCE ON THIRD PARTIES FOR CLINICAL TESTING, MANUFACTURING AND MARKETING

Presently, the Company does not intend to conduct clinical trials or
manufacture or market any of its proposed products without the involvement of
strategic partners. The Company intends to continue to seek to enter into
arrangements with third parties to conduct these activities for its products.
There can be no assurance that any third-party arrangements can be successfully
negotiated or that desired arrangements will be on commercially reasonable
terms. To the extent that the Company arranges with any third parties to conduct
clinical trials, or to manufacture or market its products, the success of
clinical trials and/ or the manufacture or marketing of the Company's products
will depend on the efforts of these third parties. There can be no assurance
that either the Company or its third-party collaborators can successfully
introduce the Company's proposed products, that they will achieve acceptance by
patients, health care providers and insurance companies, or that they can be
manufactured and marketed at prices that would permit the Company to operate
profitably. See "Business--Marketing and Sales Strategy."

LACK OF OPERATING EXPERIENCE

To date, the Company has engaged in the development of pharmaceutical
technologies and products through the sponsorship of research programs in
universities. Although members of the Company's management have substantial
experience in biotechnology company operations, the Company has no experience in
conducting research, manufacturing, procuring products in commercial quantities,
or the

marketing and sales of pharmaceutical products. In addition, management of the
Company has only limited experience in negotiating and maintaining strategic
relationships, conducting clinical trials and other later-stage phases of the
regulatory approval process and the commercialization of pharmaceutical
products. There can be no assurance that the Company will be able to
successfully engage in any of these activities with respect to any of its
products. In the event the Company decides to establish a commercial-scale
manufacturing facility for its products, the Company will require substantial
additional funds and personnel and will be required to comply with extensive
regulations applicable to this type of facility. There can be no assurance that
the Company will be able to secure funds on acceptable terms, if at all, or will
successfully manufacture or market any product it may develop, either
independently or pursuant to manufacturing or marketing arrangements, if any,
with third parties. See "Business--Manufacturing Plans" and "--Marketing and
Sales Strategy."

DEPENDENCE ON QUALIFIED PERSONNEL

Because of the specialized scientific nature of the Company's business,
the Company will be highly dependent upon its ability to attract and retain
qualified scientific and technical personnel. There is intense competition for
qualified personnel in the areas of the Company's activities, and there can be
no assurance that the Company will be able to attract and retain qualified
personnel necessary for the development of its business.

The Company is highly dependent upon the principal members of its
scientific and management staff, including, in particular, Dr. Katherine Gordon.
The loss of Dr. Gordon or other key scientific and technical personnel could be
harmful to the Company. The Company maintains key person insurance on the life
of Dr. Gordon in the amount of $1.0 million. The Company's employment agreement
with Dr. Gordon extends until October 31, 1998 and will thereafter be extended
for additional two-year terms unless either party provides notice of its intent
not to renew. However, there can be no assurance that the Company will be
successful in retaining Dr. Gordon. See "Management--Employment Agreements,
Executive Compensation and Agreements With Directors." The Company plans to
recruit additional management and scientific personnel, which may require the
Company to offer competitive compensation packages, including stock options. Its
failure to recruit personnel could have a material adverse effect on the
Company's business and results of operations.

All of the Company's scientific and clinical advisors and consultants
are employed on a full-time basis by academic or medical institutions.
Accordingly, the Company's advisors and consultants will only be able to devote
a small portion of their time to the Company. In addition, in certain
circumstances, inventions or processes discovered by the Company's advisors and
consultants independently of the Company's sponsored research programs may
remain the property of their full-time employers or of other companies and
institutions for which they now consult. See "Management--Scientific and
Clinical Advisors."

Certain agreements for research funded by the Company provide the
principal investigators conducting research on the Company's behalf with full
discretionary authority over the conduct of the research activities at their
laboratories, and further provide for payment on a chronological, rather than
performance, basis. There can be no assurance that the interests and motivations
of the Company's academic partners will remain consistent with those of the
Company. Moreover, there can be no assurance that the Company will be able to
successfully negotiate license rights to the intellectual property that may
result from these sponsored research programs or that such licenses will be on
commercially acceptable terms.

DEVELOPMENT OF NEW TECHNOLOGIES AND PRODUCTS

The Company is engaged in the biopharmaceutical field, which is
characterized by extensive research efforts and rapid technological progress.
New developments in molecular cell biology, molecular

pharmacology, recombinant DNA technology and other areas are expected to
continue at a rapid pace in both industry and academia. There can be no
assurance that research and discoveries by others will not render some or all of
the Company's programs or products noncompetitive or obsolete.

Some of the Company's projects involve the attempt to develop new
technologies or to apply existing technologies, several of which are
experimental, to the development of new products. This type of experimentation
is costly, time consuming and prone to produce unsatisfactory results. No
assurance can be given that unforeseen problems will not develop with these
technologies or applications or that commercially feasible products will
ultimately be developed by the Company. Moreover, even when a new technology or
product is successfully developed, the refinement of the new technology or
product and the definition of the clinical applications and limitations of the
new technology or product may take years and require the expenditure of large
sums of money or may prove to be commercially unfeasible.

NO ASSURANCE OF UNITED STATES OR FOREIGN REGULATORY APPROVAL; GOVERNMENT
REGULATION

Human therapeutic and diagnostic products such as the Company's proposed
products are subject to premarket approval by the FDA and comparable agencies in
foreign countries. The process of obtaining these approvals involves several
years of laboratory and clinical testing and other costly and time consuming
procedures. The Company cannot predict with certainty when it might submit
products, if any, for FDA or other regulatory approval. Government regulation
also controls the manufacture and marketing of these types of products.

The process of obtaining FDA and other required regulatory approvals is
lengthy, expensive, and uncertain. Moreover, regulatory approvals, if granted,
may include significant limitations on the indicated uses for which a product
may be marketed. The FDA actively enforces the provisions of the Federal Food,
Drug and Cosmetic Act (the "FDC Act") and associated regulations, including
certain regulations which prohibit the marketing of products for uses not
indicated in the labeling of products, and conducts periodic inspections to
determine compliance with certain "current Good Manufacturing Practices"
("cGMPs") as described in the applicable regulations. Failure to comply with
applicable regulatory requirements can result in, among other things, fines,
suspensions of approvals, seizures or recalls of products, operating
restrictions, and criminal prosecutions. Furthermore, changes in existing
regulations or adoption of new regulations could prevent the Company from
obtaining, or affect the timing and cost of, future regulatory approvals. The
extent of potentially adverse government regulation which might arise from
future legislation or administrative action cannot be predicted. See
"Business--Government Regulations." The regulatory process may delay marketing
of the Company's products. Government regulation may also impose costly
procedures upon the Company's activities and effectively furnish a competitive
advantage to larger companies that compete with the Company. There can be no
assurance that any approvals will be granted on a timely basis, if at all. Any
delay in obtaining or any failure to obtain these approvals would adversely
affect the marketing of the Company's products and the ability to generate
product revenue.

Clinical testing of a pharmaceutical product is itself subject to
approval by various government regulatory authorities, including approval of an
IND with the FDA. No assurance can be given that the Company will be permitted
by regulatory authorities in the United States or elsewhere to carry out further
testing, or that, if permitted, additional clinical testing will prove that the
Company's products are safe and efficacious to the extent necessary to permit
the Company to continue product testing or obtain marketing approvals for these
products from regulatory authorities. The failure to adequately demonstrate the
safety and efficacy of a therapeutic product under development could delay or
prevent regulatory approval of the product and would have a materially adverse
effect on the Company. Delays in obtaining United States or foreign approvals
could adversely affect the marketing of the Company's products and diminish any
competitive advantage the Company may attain. In addition, delays in regulatory
approvals that may be encountered by corporate collaborators or other licensees
of the Company, if any, could adversely affect the Company's ability to receive
royalties. There can be no assurance that, if clinical trials are completed, the
Company will be able to submit a New Drug Application ("NDA") as scheduled or
that the Company's

NDA will be reviewed and approved by the FDA or foreign regulatory agencies in a
timely manner, or at all. See "Business--Marketing and Sales Strategy" and
"Business--Government Regulations."

While the Company and certain of the Company's collaborators have
performed initial testing of some of the Company's products, further testing,
including clinical testing, will be required before the Company can obtain
marketing approval from regulatory authorities. The results of initial
preclinical and clinical testing are not necessarily predictive of results that
will be obtained from subsequent or more extensive preclinical and clinical
testing, and there can be no assurance that further trials will be successful.

The proceeds from this offering will not be sufficient to finance the
laboratory and clinical trials and other costs associated with the FDA
application and approval process for any products that the Company may develop.
Therefore, the future ability of the Company to market its products will depend
in part upon its ability to obtain additional funding or to enter into licensing
or joint venture arrangements with other companies to finance the FDA
application and approval process.

BROAD DISCRETION OF MANAGEMENT TO ALLOCATE OFFERING PROCEEDS

The Company expects that the proceeds of this offering will be used for
product development, establishment of a small laboratory facility, the hiring
and retention of administrative and scientific personnel and for working capital
and general corporate purposes. The Company is not currently able to estimate
precisely the allocation of the proceeds among these uses, and the timing and
amount of expenditures will vary depending upon numerous factors. The Company's
management will have broad discretion to allocate the proceeds of this offering
and to determine the timing of expenditures. See "Use of Proceeds."

UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT

The Company's business may be materially adversely affected by the
continuing efforts of government and third-party payors to contain or reduce the
costs of health care through various means. For example, in certain foreign
markets, pricing or profitability of prescription pharmaceuticals are subject to
government control. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement similar government control in those jurisdictions. In addition, an
increasing emphasis on managed care in the United States has put, and will
continue to put, pressure on pharmaceutical pricing. These proposals and trends
could decrease the price that the Company receives for any products it may
develop and thereby have a material adverse effect on the Company's business,
financial condition and results of operations. Further, to the extent that these
proposals or initiatives have a material adverse effect on other pharmaceutical
companies that are corporate partners or prospective corporate partners for
certain of the Company's potential products, the Company's ability to
commercialize its potential products may be materially adversely affected.

The Company's ability to commercialize pharmaceutical products may
depend in part on the extent to which reimbursement for the costs of these
products and related treatments will be available from government
health-administration authorities, private health insurers and other third-party
payors. Significant uncertainty exists as to the reimbursement status of newly
approved health care products, and third-party payors are increasingly
challenging the prices charged for medical products and services. There can be
no assurance that any third-party insurance coverage will be available to
patients for any products developed by the Company. Government and other
third-party payors are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement for new therapeutic
products, and by refusing, in some cases, to provide coverage for uses of
approved products for disease indications for which the FDA has not granted
marketing approval. If adequate coverage and reimbursement levels are not
provided by government and third-party payors for the Company's products, the
market acceptance of these products would be materially adversely affected.

PRODUCT LIABILITY; RISK OF NO INSURANCE

The use of the Company's products in clinical trials and the marketing
of the Company's products may expose the Company to product liability claims.
Although the Company will attempt to obtain product liability insurance and/or
be included as an additional insured party under the respective insurance
policies of the Company's collaborators prior to the marketing of any of its
proposed products, there can be no assurance that the Company will be able to
obtain insurance or additional coverage, or, if obtainable, that the insurance
and/or coverage can be acquired at a reasonable cost or will be sufficient to
cover all possible liabilities. In the event of a successful suit against the
Company, lack or insufficiency of insurance coverage could have a material
adverse effect on the Company. Further, certain distributors of pharmaceutical
and biological products require a minimum level of product liability insurance
coverage as a condition precedent to purchasing or accepting products for
distribution. Failure to satisfy insurance requirements could impede the ability
of the Company to achieve broad distribution of its proposed products, which
would have a material adverse effect on the business and financial condition of
the Company.

CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers will, in the aggregate,
beneficially own approximately 20.2% of the Company's outstanding Common Stock
following the completion of this offering, assuming no exercise of the Warrants,
the Underwriters' over-allotment option or the Representatives' Warrant. These
stockholders, if acting together, would have a significant impact on all matters
requiring approval by the stockholders of the Company, including the election of
directors and the approval of mergers or other business combination
transactions. This concentration of ownership could discourage or prevent a
change in control of the Company. See "Principal Stockholders."

POSSIBLE VOLATILITY OF STOCK PRICE

The stock market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock and/or the Warrants. In addition, the
market price of the Common Stock and/or the Warrants is likely to be highly
volatile. Factors such as fluctuations in the Company's results of operations,
timing and announcements of technological innovations or new products by the
Company or its competitors, FDA and foreign regulatory actions, developments
with respect to patents and proprietary rights, public concern as to the safety
of products developed by the Company or others, changes in health care policy in
the United States and in foreign countries, changes in stock market analyst
recommendations regarding the Company, the pharmaceutical industry generally and
general market conditions each may have a significant adverse effect on the
market price of the Common Stock and/or the Warrants. In addition, it is likely
that, during at least some future financial reporting periods, the Company's
results of operations will fail to meet the expectations of stock market
analysts and investors and, in that event, the market price of the Company's
Common Stock and/or the Warrants could be materially and adversely affected.

NO PUBLIC TRADING MARKET; DETERMINATION OF OFFERING PRICE

Prior to this offering, there has been no public market for the Units,
the Common Stock or the Warrants. There can be no assurance that an active
trading market will develop for the Units or, if one does develop, that it will
be maintained. Neither the Common Stock nor the Warrants may be separately
traded or transferred until 12 months after the date of this Prospectus or such
earlier date as may be determined by the Representatives. There can be no
assurance that an active trading market will develop with respect to the Common
Stock or the Warrants at such time or, if one does develop, that it will be
maintained. The initial public offering price of the Units and the exercise
price of the Warrants were established by negotiations between the Company and
the Representatives and may not be indicative of prices that will prevail in the
public trading market. See "Underwriting."

EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and By-laws may have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. These provisions could limit the price that
certain investors might be willing to pay in the future for shares of Common
Stock. These provisions may also make it more difficult for stockholders to take
certain corporate actions and could have the effect of delaying or preventing a
change in control of the Company. See "Management" and "Description of
Securities."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of Common Stock (including Common Stock issued upon the exercise
of outstanding options and warrants) in the public market after this offering
could materially adversely affect the market price of the Common Stock. These
sales also might make it more difficult for the Company to sell equity
securities or equity-related securities in the future at a time and price that
the Company's management deems acceptable, or at all. Upon the completion of
this offering, the Company will have 3,719,985 shares of Common Stock
outstanding, assuming no exercise of options or warrants after April , 1997
and assuming no exercise of the Underwriters' over-allotment option. Of these
outstanding shares of Common Stock, the 1,000,000 shares sold in this offering
as part of the Units will not be separately tradeable until 12 months after the
date of this Prospectus or such earlier date as may be determined by the
Representatives. The remaining shares of Common Stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act and were issued and sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act. These
shares may be resold in the public market only if registered or pursuant to an
exemption from registration, such as Rule 144 or Rule 701 under the Securities
Act. All officers, directors and certain holders of Common Stock owning, in the
aggregate, shares of Common Stock have agreed, pursuant to certain
lock-up agreements, that they will not publicly offer, sell, contract to sell,
or otherwise dispose of, directly or indirectly, any shares of Common Stock
owned by them, or that could be purchased by them through the exercise of
options or warrants to purchase Common Stock of the Company, for a period of 13
months after the date of this Prospectus without the prior written consent of
the Representatives. Upon expiration of the lock-up agreements, all shares of
Common Stock currently outstanding will be immediately eligible for resale,
subject to the requirements of Rule 144. As of April , 1997, shares were
subject to outstanding options, warrants and conversion rights, all of which are
subject to the lock-up agreements described above. Immediately following the
completion of this offering, of the outstanding shares will be
entitled to certain registration rights. The number of shares sold in the public
market could increase if registration rights are exercised. See "Description of
Securities--Registration Rights" and "Shares Eligible for Future Sale."

CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS; ADVERSE
EFFECT OF POSSIBLE REDEMPTION OF WARRANTS

Purchasers of the Units will be able to exercise the Warrants included
therein only if a current prospectus relating to the securities underlying the
Warrants is then in effect under the Securities Act and if the securities are
qualified for sale or exempt from qualification under the applicable securities
or "blue sky" laws of the states in which the various holders of the Warrants
then reside. The value of the Warrants may be greatly reduced if a current
prospectus covering the securities issuable upon the exercise of the Warrants is
not kept effective or if the securities are not qualified or exempt from
qualification in the states in which the holders of the Warrants then reside.
There can be no assurance that the Company will be able to keep effective any
prospectus or obtain any qualifications or exemptions. See "Description of
Securities--The Warrants Offered."

In addition, the Warrants are subject to redemption by the Company at
$0.25 per Warrant, commencing one year from the date of this Prospectus, on at
least 30 days' prior written notice if the average of the closing sale prices of
the Common Stock for 20 consecutive business days ending within 10 business days
of the date on which the notice of redemption is given equals or exceeds $10.00
per share. If the Warrants are redeemed, holders of Warrants will lose their
right to exercise the Warrants, except during the 30-day notice of redemption
period. Upon the receipt of a notice of redemption of the Warrants, the holders
thereof would be required to: exercise the Warrants and pay the exercise price
at a time when it may be disadvantageous for them to do so; sell the Warrants at
the then market price, if any, when they might otherwise wish to hold the
Warrants; or accept the redemption price, which is likely to be substantially
less than the market value of the Warrants at the time of redemption. See
"Description of Securities--The Warrants Offered."

DILUTION

Investors acquiring shares of Common Stock included within the Units
offered hereby will incur immediate and substantial net tangible book value
dilution of $3.78. To the extent that currently outstanding options and warrants
to purchase the Company's securities are exercised, there will be further
dilution. See "Dilution."

POSSIBLE DELISTING OF SECURITIES

The Company expects that the Units offered hereby will be qualified for
initial listing on both the Nasdaq SmallCap-SM- Market and the Boston Stock
Exchange. There can be no assurance, however, that the Company will be able to
meet the criteria for continued listing by these organizations in the future.
Such criteria, which are subject to change from time to time, currently include
certain corporate governance standards, minimum share value requirements and
minimum net tangible asset valuation requirements, among others. If the Company
became unable to meet the continued listing criteria of the Nasdaq SmallCap-SM-
Market and the Boston Stock Exchange because of continued operating losses or
otherwise and became delisted therefrom, trading, if any, in the Units, or,
after they begin to trade separately, the Common Stock and the Warrants, would
thereafter be conducted in the over-the-counter market in the so-called "pink
sheets" of the NASD's "Electronic Bulletin Board." As a result, an investor may
find it more difficult to dispose of the Company's securities.

RISK OF LOW-PRICE; "PENNY STOCK" REGULATIONS

If the Company's securities are delisted from the Nasdaq SmallCap-SM-
Market, they may become subject to Rule 15g-9 under the Securities Exchange Act
of 1934 (the "Exchange Act"), which imposes additional sales practice
requirements on broker-dealers that sell these securities, except in
transactions exempted by Rule 15g-9, including transactions meeting the
requirements of Rules 505 or 506 or Regulation D under the Securities Act, and
transactions in which the purchaser is an institutional accredited investor (as
defined) or an established customer (as defined) of the broker/dealer. For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, the rule may
affect the ability and/or willingness of broker-dealers to sell the Company's
securities and may consequently affect the ability of purchasers in this
offering to sell any of the securities acquired in this offering in the
secondary market.

The Commission has also adopted regulations which define a "penny stock"
to be any equity security that has a market price (as therein defined) of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. Unless exempt, the rules require the delivery,
prior to any transactions in a penny stock, of a disclosure schedule prepared by
the Commission relating to the penny stock market. Disclosure also has to be
made about commissions payable to both the broker-dealer and the registered
representative and about current quotations for the securities. Finally, monthly

statements have to be sent, disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
The foregoing penny stock restrictions will not apply to the Company's
securities if those securities are listed on the Nasdaq SmallCap-SM- Market and
have certain price and volume information provided on a current and continuing
basis or if the Company meets certain minimum net tangible assets or average
revenue criteria. There can be no assurance that the Company's securities will
qualify for exemption from these restrictions. In any event, even if the Company
were exempt from these restrictions, it would remain subject to Section 15(b)(6)
of the Exchange Act, which gives the Commission the authority to prohibit any
person that is engaged in unlawful conduct while participating in a distribution
of penny stock from associating with a broker-dealer or participating in a
distribution of penny stock, if the Commission finds that a restriction would be
in the public interest. If the Company's securities were subject to the rules on
penny stocks, the prices of and market liquidity for the Company's securities
would be severely adversely affected.

ABSENCE OF DIVIDENDS

The Company has never paid cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. See "Dividend
Policy."

USE OF PROCEEDS

The net proceeds from the sale of the Units offered hereby are estimated
to be $4,022,500 ($4,691,313 if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $10.25 per
Unit, after deducting the estimated underwriting discounts and commissions and
estimated offering expenses and assuming no exercise of the Warrants.

The Company's management expects to use approximately $2.4 million of
the net proceeds of this offering to fund future development of products, of
which approximately $1.5 million will be used for sponsored research,
approximately $700,000 will be used to establish a small laboratory facility and
approximately $230,000 will be used to hire and retain scientific personnel for
approximately the next 24 months. The balance of the net proceeds of this
offering will be used for working capital and general corporate purposes. Where
the Company's management believes appropriate, proceeds of this offering may
also be used to acquire products or technologies that complement the Company's
existing business, although there are no present understandings, agreements or
commitments with respect to any acquisitions. The amount and the timing of the
expenditures will depend on numerous factors, including the progress of the
Company's research and development programs. The amounts actually expended on
any particular project may vary significantly from the Company's current plans,
particularly given the Company's early stage of development and the uncertainty
of the drug development process.

Pending the uses described above, the net proceeds will be invested in
short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

The Company has never paid dividends on its capital stock. The Company
currently intends to retain earnings, if any, and does not anticipate paying
cash dividends in the foreseeable future. Future cash dividends, if any, will be
determined by the Board of Directors.

CAPITALIZATION

The following table sets forth, as of December 31, 1996, (i) the actual
capitalization of the Company and (ii) capitalization of the Company, as
adjusted to reflect the sale of the 500,000 Units offered hereby, after
deducting the underwriting discount and offering expenses, at an initial public
offering price of $10.25 per Unit. This table should be read in conjunction with
the financial statements, related notes and other financial information included
herein.

DECEMBER 31, 1996
-----------------------------
ACTUAL AS ADJUSTED(1)
------------- --------------

Stockholders' equity:
Preferred Stock--$0.01 par value; 1,000,000 shares authorized, no shares issued
and outstanding................................................................ -- --
Common Stock--$0.02 par value; 20,000,000 shares authorized, 2,719,985 shares
issued, actual; 3,719,985 shares issued, as adjusted........................... 54,400 74,400
Additional paid-in capital....................................................... 2,720,036 6,722,536
Deficit accumulated during the development stage................................. (1,775,852) (1,775,852)
------------- --------------
Total stockholders' equity....................................................... 998,584 5,021,084
------------- --------------
Total capitalization............................................................. $ 998,584 $ 5,021,084
------------- --------------
------------- --------------

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

(1) Does not include (a) Units issuable upon the exercise of the Underwriters'
over-allotment option, (b) Units issuable upon exercise of the
Representatives' Warrants, or (c) 573,631 shares reserved for issuance upon
the exercise of conversion rights, options and warrants outstanding as of
December 31, 1996 having a weighted average exercise price of $2.67 per
share. See "Management--Stock Option Plans"; "Description of
Securities--Other Warrants and Convertible Notes."

DILUTION

The net tangible book value of the Company as of December 31, 1996 was
$778,807 or approximately $0.29 per share. Net tangible book value per share
represents the total tangible assets of the Company, less total liabilities,
divided by 2,719,985 shares of Common Stock outstanding before the completion of
this offering. Assuming the receipt by the Company of the net proceeds from the
sale of 500,000 Units offered hereby at a public offering price of $10.25 per
Unit, the net tangible book value of the Company as of December 31, 1996 would
have been $5,020,472, or $1.35 per share. This represents an immediate increase
in the net tangible book value of $1.06 per share to existing stockholders of
the Company and an immediate dilution of $3.78 per share to new investors
purchasing Units in this offering. The following table illustrates the per share
dilution to be incurred by new investors as of December 31, 1996:

Assumed initial public offering price.................................... $ 5.13
Net tangible book value per share at December 31, 1996........ 0.29
Increase per share attributable to new investors.............. 1.06
---------
Net tangible book value per share after the offering..................... 1.35
---------
Dilution per share to new investors...................................... $ 3.78
---------
---------

The following table sets forth, as of December 31, 1996, the difference
between the existing stockholders and the new investors with respect to the
number of shares of Common Stock acquired from the Company, the total
consideration paid and the average price per share.

SHARES PURCHASED CASH CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------ ----------- ---------------

Existing Stockholders............................. 2,719,985 73.1% $ 2,811,000 35.4% $ 1.03
New Investors..................................... 1,000,000 26.9 5,125,000 64.6 5.13
---------- ----- ------------ -----
Total......................................... 3,719,985 100.0% $ 7,936,000 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----

The above information excludes (a) Units issuable upon the exercise of
the Underwriters' over-allotment option, (b) shares of Common Stock issuable
upon exercise of the Representatives' Warrants and (c) an aggregate of 573,631
shares of Common Stock issuable upon the exercise of conversion rights, options
and warrants outstanding as of December 31, 1996 with a weighted average
exercise price of $2.67 per share. To the extent that rights to acquire Common
Stock of the Company are exercised, there will be further dilution to new
investors. See "Management--Stock Option Plans," "Description of Securities--
The Warrants Offered," "--Other Warrants and Convertible Notes," and Note E of
Notes to Financial Statements.

SELECTED FINANCIAL DATA

The data set forth below with respect to the balance sheets as of
December 31, 1995 and 1996 and the related statement of operations for the three
years ended December 31, 1994, 1995 and 1996 have been derived from the
Company's audited financial statements. The data should be read in conjunction
with the Financial Statements and the notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this Prospectus. The historical results are not necessarily
indicative of the results of operations to be expected in the future.

YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------

STATEMENT OF OPERATIONS DATA:
Revenue:
Licensing and option revenue........................................... $ -- $ -- $ 180,000
Interest income........................................................ 3,954 2,535 11,032
----------- ----------- -----------
Total revenue........................................................ 3,954 2,535 191,032
Expenses:
Research and development............................................... 199,654 131,842 199,516
General and administrative............................................. 323,613 255,592 358,833
Amortization expense................................................... 1,049 1,049 2,964
Interest expense....................................................... 2,645 31,201 33,110
----------- ----------- -----------
Total expenses....................................................... 526,961 419,684 594,423
----------- ----------- -----------
Net loss............................................................... $ (523,007) $ (417,149) $ (403,391)
----------- ----------- -----------
----------- ----------- -----------
Net loss per share (1)................................................. $ (.22) $ (.17) $ (.15)
Weighed average number of shares outstanding (1)....................... 2,361,621 2,441,692 2,700,358

DECEMBER 31, 1996
DECEMBER 31, ----------------------------
1995 ACTUAL AS ADJUSTED(2)
------------ ------------ --------------

BALANCE SHEET DATA:
Cash, cash equivalents.............................................. $ 246,721 $ 1,254,250 $ 5,495,915
Working capital.................................................... 34,798 955,071 5,196,736
Total assets....................................................... 248,382 1,477,763 5,500,263
Notes payable...................................................... 204,400 -- --
Deferred credit.................................................... -- 180,000 180,000
Total stockholders' equity (deficit)............................... $ (167,941) $ 998,584 $ 5,021,084

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

(1) In each case, gives effect to a 3 1/3 to 1 reverse stock split effective
December 20, 1996 and a 1.55 to 1 reverse stock split to be effective on or
before the date of the closing of this offering.

(2) Gives effect to the sale of 500,000 Units offered by the Company hereby at
an initial public offering price of $10.25 per Unit, after deducting the
underwriting discount and offering expenses.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S FUTURE RESULTS MAY DIFFER
CONSIDERABLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Since its founding in July 1992, the Company has been engaged in the
development, through agreements with research institutions and pharmaceutical
companies, of pharmaceutical and diagnostic products for age-related
neurodegenerative diseases. To date, the Company has not had any revenue from
the sale of products and does not expect to generate any revenue from product
sales in the foreseeable future. The Company's accumulated deficit was
$1,775,852 as of December 31, 1996.

The Company has financed its operations through the sale of Common Stock
and Convertible Notes and from option and license fees received from Athena
Neurosciences ("Athena") and Cephalon, Inc. ("Cephalon"). The Company has raised
a total of $1,665,000 from the sale of Common Stock in three private placement
offerings resulting in gross proceeds as follows: $640,000 in 1992, $475,000 in
1995 and $550,000 in 1996. The Company issued Convertible Notes in 1994 and
1995, which provided gross proceeds to the Company of $210,000. In 1996, the
Company recognized $180,000 in revenue under its option and license arangements.
As of December 31, 1996, the Company had incurred a cumulative net loss of
$1,775,852 and expects to incur substantial additional operational losses in the
future.

In February 1996, the Company entered into a letter of intent with
Cephalon in conjunction with which the Company received a one-time payment of
$20,000 in exchange for a license option.

In April 1996, the Company entered into an exclusive License and
Collaboration Agreement with Athena, which became a wholly-owned subsidiary of
Elan Corporation plc ("Elan") as of July 1, 1996, for the development of certain
estrogen compounds for chronic neurodegenerative diseases, such as Alzheimer's
disease. During the term of the Athena agreement, Athena is obligated to pay the
Company yearly license fees. In addition, Athena is obligated to pay the Company
royalties based on future sales of products covered by the agreement. Athena is
also obligated to pay certain research and development expenses and costs
associated with performing clinical trials.

In October 1996, the Company entered into an agreement with Cephalon on
a non-exclusive basis for the license of intellectual property related to
vitamin-D compounds for the treatment of neurodegenerative diseases. Cephalon is
obligated to pay the Company yearly license fees that increase if the patent
covering this technology is issued. The yearly maintenance fee also increases if
Cephalon files for regulatory approval for one or more products covered by this
technology. Cephalon is also obligated to pay the Company royalties based on
future product sales.

In June 1994, the Company entered into an agreement with Endocon (the
"Endocon Agreement") to co-develop certain estrogens within subcutaneous drug
delivery vehicles. As currently in effect, the Endocon Agreement focuses on the
development of 17b-estradiol in a subcutaneous drug delivery vehicle for the
treatment of Alzheimer's disease (NEURESTROL). Neither the Company nor Endocon
is obligated to pay the other for any rights to intellectual property underlying
their agreement or for development of the product. The Company and Endocon are
currently in discussions regarding the execution of a license agreement for
NEURESTROL which will supersede the Endocon Agreement, but which the Company
expects will have no material effect on the results of operations or liquidity
of the Company.

Robert J. Leonard, a member of the Board of Directors, Vice President
and shareholder of the Company, is the acting Chief Executive Officer of
Endocon. Mr. Leonard will be excluded from acting on behalf of the Company in
the negotiation and approval of any new license agreement with Endocon.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

The Company had licensing and option revenues of $180,000 in 1996 as a
result of the Company's agreement with Athena and payments from Cephalon vs. no
revenues during the corresponding period for 1995. Total expenses were $594,423
in 1996, compared to $419,684 for 1995. The increase in operating expenses was
principally due to an increase in general and administrative expenses of
$103,241 or 40.4%, resulting primarily from increases in patent prosecution
expenses associated with the filing of several patent applications and increased
consulting and payroll costs.

Research and development expenses in 1996 were $199,516 compared to
$131,842 in 1995. The increase in research and development expenses of $67,674,
or 51.3%, was attributable to increased spending on sponsored research.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

There were no licensing and option revenues in the years ended December
31, 1995 and 1994. Total expenses were $419,684 in 1995, compared to $526,961 in
1994. Total expenses decreased $107,277 or 20.4%, primarily due to a decrease in
general and administrative expenses of $68,021 or 21.0% associated with a
decrease in legal and patent expenses of approximately $56,000 due to reduced
activity. Research and development expenses decreased by $67,812 or 34.0%,
primarily due to a decrease in sponsored research expenses of approximately
$56,000.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations since inception primarily through
private placements of Common Stock and Convertible Notes. From its inception
through December 31, 1996, the Company raised approximately $1,875,000 in total
proceeds from these private placements.

In December 1996, Neuroscience Partners Limited Partnership ("NPLP"), a
limited partnership of which MDS Associes--Neuroscience Inc. ("MDS") is the
general partner, purchased 138,249 shares of the Company's Common Stock,
representing approximately 5.1% of the Company's outstanding Common Stock at
December 31, 1996, for $500,000.

Also in December 1996, the Company entered into a Royalty Purchase
Agreement with NPLP pursuant to which NPLP paid the Company an additional
$500,000 in exchange for the issuance by the Company of warrants to purchase
Common Stock, a stock conversion privilege and the agreement by the Company to
pay NPLP royalties based upon a certain percentage of the revenues earned from
sales of, and license fees and other revenues received by the Company in
connection with, estrogen products in certain applications. The value assigned
to the warrants and the stock conversion privilege was $320,000 and was
recognized as an addition to stockholders' equity. The value of the right to
receive a certain percentage of future royalties was recorded as a deferred
credit.

In connection with foregoing transactions, Michael J. Callaghan, a
principal of MDS, became a member of the Board of Directors of the Company.

At the time of the foregoing transactions with NPLP, all of the
Company's outstanding Convertible Notes, in the aggregate amount of $75,000,
were converted into an aggregate of 48,387 shares of Common Stock.

On December 31, 1996, the Company's cash and cash equivalents totaled
$1,254,250.

The Company's future cash requirements will depend on many factors,
including the speed and progress of the Company's product development programs,
the scope and results of clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patents, competing technological and market developments and the cost
of product commercialization. For the foreseeable future, the Company's cash
requirements will exceed its revenues. The Company intends to seek additional
funding through agreements with suitable corporate collaborators and through
public or private financing. There are no assurances that strategic alliances,
or any public or private financing, will be available on acceptable terms, if at
all. If adequate funds are not available, the Company may be required to delay,
reduce the scope of, or eliminate one or more of its product development
programs.

The Company estimates that its existing capital resources, including the
net proceeds of this offering and interest thereon will be sufficient to fund
its current and planned operations through approximately April 1999. There can
be no assurance, however, that changes in the Company's product development
plans or other changes affecting the Company's operating expenses will not
result in the expenditure of these resources before such time.

BUSINESS

THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
CONSIDERABLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

ABPI-124 and NEURESTROL-REGISTERED TRADEMARK-, two of the Company's lead
product candidates, are in development by the Company and its partners for the
prevention of neurodegeneration in Alzheimer's disease. ABPI-124 is a type of
estrogen that the Company's management believes will be useful in preventing
brain cell death without inducing feminizing side effects (e.g. breast
enlargement) and therefore could be used to treat men as well as women.
NEURESTROL is an estrogen-based, subcutaneous implant in development for the
long-term, controlled delivery of estrogen in a single dose for the treatment of
Alzheimer's diesease. NEURESTROL is the subject of an Investigational New Drug
Application for Phase I testing in humans. An additional product candidate,
NEUROCALC-TM-, a derivative of vitamin D, is currently being evaluated in a
small number of patients with Alzheimer's disease in a trial funded by the
National Institutes of Health at the University of Kentucky Medical School. The
Company continues to sponsor testing of these as well as other potentially
neuroprotective compounds for efficacy in the treatment of other
neurodegenerative conditions such as Parkinson's disease, Age-Related Memory
Impairment and brain-cell death from stroke. In addition to its pharmaceutical
product candidates, the Company is also currently evaluating a Hormone
Responsiveness Diagnostic test that may predict responsiveness to hormone
therapy.

The Company's commercialization strategy is to enter into strategic
alliances with biotechnology and pharmaceutical companies for the development
and marketing of its product candidates. The Company currently has strategic
alliances with Athena Neurosciences, Inc. ("Athena"), for the development of
estrogen products for chronic neurodegenerative diseases, and with Endocon, Inc.
("Endocon"), for the joint development of NEURESTROL. Mr. Robert J. Leonard, a
member of the Board of Directors, Vice President and shareholder of the Company,
is the acting Chief Executive Officer of Endocon. The Company plans to seek
additional strategic partners for the development of its product candidates.

BACKGROUND

INTRODUCTION

The human brain contains some 10 billion cells known as neurons, each of
which has connections with many other neurons. Sensory, motor and cognitive
activities are all governed by this complex network of brain cells each member
of which communicates with other neurons across junctions known as synapses.
Communication between neurons involves chemical "messengers" known as
neurotransmitters, which are released by the sending neuron and bind to
corresponding receptors on the receiving neuron after crossing a synapse. In
many neurodegenerative diseases like Alzheimer's and Parkinson's, this
communication malfunctions, largely as a result of brain cell death.

The treatment of many diseases is facilitated by cell regeneration, a
natural component of human healing. However, in the highly complex realm of
neurological diseases, treatment is more difficult because brain cells do not
naturally regenerate. Currently available drugs for the treatment of some
neurological disorders act by increasing or replacing supplies of some
neurotransmitters. The benefits realized from these drugs are limited, however,
because the eventual loss of brain cells, without regeneration, means there are
fewer brain cells for neurotransmitters to activate. The Company's proposed
products are intended to prevent the deterioration and death of these brain
cells.

BRAIN CELL LOSS DURING AGING

Neurons do not multiply after birth. As adults age, the number of brain
cells decreases as cells die and are not regenerated, even in the absence of
disease. The rate of brain cell loss varies from individual to individual. The
genetic or environmental causes that determine the rate of brain cell loss
during aging are unknown. The progressive and cumulative effect of brain cell
loss over a prolonged period results in many physiological changes and
short-term memory loss.

There is evidence suggesting that almost everyone who lives long enough
is subject to some form of age-related disease, such as Alzheimer's or
Parkinson's, each of which is generally associated with brain cell loss in
different regions of the brain. The prevalence of many neurodegenerative
diseases increases with aging. Scientific studies have shown that, although less
than 5% of individuals below age 65 have Alzheimer's disease, this prevalence
increases almost exponentially over age 65, with the result that as many as 50%
of individuals over 85 years of age may have Alzheimer's disease to some extent.
Thus, aging itself is a major risk factor for many types of neurodegenerative
diseases.

The following table summarizes physiological changes in various parts of
the brain in both normal and disease-related situations.

BRAIN CELL LOSS AND OTHER DEGENERATIVE CHANGES
THAT OCCUR IN AGING AND CERTAIN DISEASES

NORMAL CHANGES DURING
BRAIN REGION AGING ALZHEIMER'S DISEASE PARKINSON'S DISEASE
- ---------------- -------------------------- -------------------------- --------------------------

Hippocampus and -Loss of neurons in -Extensive neuron
Amygdala subiculum degeneration/death
-Some other loss neuron or -Extensive amyloid plaques
shrinkage and neurofibrillary
-Few amyloid plaques tangles
-Few neurofibrillary
tangles

Cerebral Cortex -Large neurons shrink or -Neurons die -Lewy bodies
die -Extensive amyloid
-Few amyloid plaques plaques
-Few neurofibrillary -Extensive neurofibrillary
tangles tangles

Basal Forebrain -Shrinkage of neurons -Loss of cholinergic -Some loss of cholinergic
-Decline in acetylcholine neurons neurons
content -Extensive loss of acetyl-
choline

Substantia Nigra -Gradual loss of dopamine -Extensive loss of DA
and Basal (DA) neurons in the neurons in substantia
Ganglia substantia nigra nigra
-Gradual decline of DA -Lewy bodies
receptors in basal ganglia

Locus Coeruleus -Significant but gradual -Loss of neurons in some -Loss of neurons
loss of neurons with cases -Lewy bodies
aging
Note: See glossary for technical definitions.

HORMONAL CHANGES DURING AGING

The brain controls the output of certain hormones, including estrogen,
which in turn controls the function of many different organs in the human body.
Many neuroendocrine hormones (e.g., growth hormone, estrogen and progesterone)
undergo age-related declines which can lead to deterioration of tissues and
organs and the malfunctioning of major organ systems. These include the thymus,
kidneys, cardiovascular system, muscle and bone. Recent studies have shown that
hormone replacement therapy can be used to bypass, and even reverse, the
degenerative effects of these dwindling hormones. For example, estrogen
administered to postmenopausal women has been shown to protect against
osteoporosis and cardiovascular disease.

ESTROGEN AND PREVENTION OF ALZHEIMER'S DISEASE

Several clinical studies have shown that women undergoing estrogen
replacement therapy tend to be diagnosed with Alzheimer's disease about half as
frequently as women who are not taking estrogen supplements. In one study in
which the post-mortem records of 2,519 women were analyzed, there was a
significant difference in the apparent incidence of Alzheimer's disease among
women who had taken estrogen as compared to women who did not take estrogen. The
National Institutes of Health is currently sponsoring a study to evaluate the
effectiveness of a certain commercially-marketed estrogen product in
post-menopausal women with Alzheimer's disease.

A separate clinical study, published in 1996 in the medical journal THE
LANCET, analyzed a group of 1,124 women over a five-year period. In each year of
the study, approximately 3% of the women who took estrogen supplements developed
Alzheimer's disease, while approximately 8% of the women who did not take the
hormone developed the disease. Furthermore, the women who took estrogen and did
develop Alzheimer's disease developed it later than women who did not take
estrogen. The graph below, excerpted from the article in THE LANCET, shows the
significant difference in the age of onset of Alzheimer's disease between women
taking estrogen compared to women who did not take estrogen. Among 90 year olds,
for example, approximately 50% of the women who never took estrogen had some
form of Alzheimer's disease whereas only approximately 10% of women using
estrogen for more than one year had Alzheimer's disease. The researchers
concluded that estrogen use leads to a reduction in the incidence and a delay in
the onset of Alzheimer's disease. Management expects that the Company's
estrogen-based products will also reduce the incidence and delay the onset of
Alzheimer's disease.

[Graph showing the relative effects of estrogen at differing durations of use by
elderly women in delaying the onset of Alzheimer's disease.]

(Excerpted with permission. Graph reprinted from M-X Tang, D. Jacobs, Y. Stern,
et al., "Effect of oestrogen during menopause on risk and age at onset of
Alzheimer's disease," vol. 348, no. 9025, pp. 429-32. -C- by THE LANCET, 1996.)

BUSINESS STRATEGY

STRATEGIC FOCUS ON HORMONES AND NEUROPROTECTION

The Company's overall business strategy is to identify and develop
neuroprotective products that are based on substances produced by the human
body. The Company's lead product candidates are based on hormones such as
estrogens which have been demonstrated by the Company's sponsored research to
protect brain cells from the damage caused by disease, trauma or aging. The
Company is developing and evaluating a number of products for the treatment of
Alzheimer's disease, Parkinson's disease and brain damage resulting from stroke.
By understanding the mechanisms by which these substances protect brain cells
from death and damage, the Company intends to design new products which have
improved properties and which will be useful for treating a wide range of
neurodegenerative diseases. The Company's lead product candidates are currently
in various stages of development.

ACQUISITION AND LICENSING OF INTELLECTUAL PROPERTY

The Company has acquired and plans to continue to acquire proprietary
rights to intellectual property and technologies which have been developed at
universities and other research institutions. In exchange for exclusive
licenses, the Company has sponsored several research programs at the University
of Florida School of Medicine and the University of Kentucky School of Medicine.
See "--Intellectual Property Rights." To date, all of the Company's basic
research has been conducted in academic laboratories through sponsored research
programs. The Company has also outsourced most of its regulatory and clinical
development activities. The Company's strategy has been to use outside resources
for research and development activities in order to minimize fixed costs and
preserve capital. Although the Company plans to lease a small laboratory
facility in the future, it intends to continue this outsourcing strategy in
order to preserve its capital. See "Use of Proceeds."

PRODUCT COMMERCIALIZATION THROUGH STRATEGIC ALLIANCES

The Company does not intend to become a fully-integrated pharmaceutical
company combining marketing, sales, manufacturing and regulatory capabilities.
Rather, the Company's strategy is to enter into strategic alliances with
biotechnology and pharmaceutical companies that have the technological
resources, operational expertise or financial resources that will aid in the
development and sale of the Company's products. The Company has entered into two
strategic alliances to date: (i) Athena, for the development of certain estrogen
compounds for chronic neurodegenerative diseases; and (ii) Endocon, for the co-
development of NEURESTROL. There can be no assurance that either of these
alliances will result in the development of any products. See "--Strategic
Alliances and Licenses."

PRODUCTS IN DEVELOPMENT

The Company's lead product candidates, which are based on hormones such
as estrogen, are designed to protect brain cells from the damage caused by
disease, trauma or aging. The predominant circulating form of estrogen in the
body is 17b-estradiol, which is produced primarily by the ovaries. Only small
amounts of 17b-estradiol are produced in women after menopause. Men of all ages
have small amounts of circulating estrogen produced by the conversion of male
hormones. Estrogen is used by many women following the menopause in hormone
replacement therapy to treat hot flashes, and to protect against osteoporosis
and cardiovascular disease. In the United States, an estrogen product known as
Premarin, produced from the urine of horses, is widely used. Several clinical
studies have indicated that estrogen use may reduce the incidence and delay the
onset of Alzheimer's disease. Even though none of the Company's estrogen-based
product candidates has been tested in humans with respect to neuroprotection,
management believes that the potential effectiveness of the Company's products
is supported by reported results of research conducted by others on similar
compounds. See "--Estrogen and the Prevention of Alzheimer's Disease."

The following table summarizes the Company's most advanced product
candidates currently in development, along with the disease targets, strategic
partners and commercial rights associated with each product candidate. In the
future, the Company may choose to evaluate these product candidates for the
treatment of other diseases or for prophylaxis of certain neurodegenerative
diseases. All information presented in this table is qualified by more detailed
descriptions presented elsewhere in this Prospectus.

APOLLO BIOPHARMACEUTICS, INC.
PRODUCTS UNDER DEVELOPMENT

STRATEGIC PARTNERSHIP
PROGRAM/LEAD ------------------------------------
COMPOUND(1) DISEASE TARGET DEVELOPMENT STATUS(2) COMMERCIAL RIGHTS RELATIONSHIP
- ----------------------- --------------------- ------------------ -------------------

ESTROGEN COMPOUNDS

ABPI-124 -Alzheimer's disease Lead candidate(3) Athena Exclusive license
-Parkinson's disease Planning(4) Athena Exclusive license
-Other chronic Planning(4) Athena Exclusive license
neurodegenerative
diseases
-Stroke and other acute Research(5) Athena Right of first
neurodegenerative refusal for
diseases exclusive license

NEURESTROL -Alzheimer's disease IND filed(6) Apollo/Endocon Co-development
-Parkinson's disease IND filed Apollo/Endocon Co-development
-Age-Associated Memory IND filed Apollo/Endocon Co-development
Impairment

CALCITRIOL-RELATED
COMPOUNDS

NEUROCALC -Alzheimer's disease Physician's Phase Apollo(9) (10)
I(7)

OTHER VITAMIN D -Alzheimer's disease Research Apollo(9) (10)
COMPOUNDS
-Other chronic Planning Apollo(9) (10)
neurodegenerative
diseases

OTHER NEUROSTEROIDS -Chronic neuro- Research Apollo (10)
degenerative diseases
-Acute neuro-
degenerative diseases

HORMONE RESPONSIVENESS -Determination of Clinical testing(8) Apollo (10)
DIAGNOSTIC responsiveness

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

(1) Patent applications have been filed in the United States and in various
countries with respect to each Program/Lead Compound. Patents have been
issued on the use of estrogen compounds, the Endocon drug delivery
technology used in Neurestrol, and the Hormone Responsiveness Diagnostic.
See "Intellectual Property Rights."

(2) Each of the Company's lead compounds which is a new drug must undergo
several steps in order to receive the regulatory approval necessary for it
to be manufactured and marketed. Such steps generally include, in
chronological order (i) the conducting of preclinical laboratory and animal
tests with the lead compound; (ii) submission to the FDA of an IND covering
the lead compound (which IND must be approved by the FDA before human
clinical trials may start); (iii) performance of human clinical trials on
the lead compound (typically, human clinical trials are conducted in three
steps: Phase I (the testing of the lead compound in a small number of
healthy human subjects); Phase II (testing of the lead compound with groups
of patients afflicted with a specific disease or condition); and Phase III
(large-scale, multi-center comparative trials); and (iv) submission to FDA
of an NDA covering the lead compound, which NDA must contain the results of
the preclinical and clinical trials as well as information on product
composition and manufacturing processes. The NDA must be approved by the FDA
before commercial marketing of the lead compound may begin.

(3) "Lead candidate" means that a particular compound (or compounds) has been
selected for further preclinical study, based on positive results from one
or more IN VITRO or IN VIVO disease models.

(4) "Planning" means that the disease target is being assessed by the Company
for potential future research and clinical activities.

(5) "Research" means that research is underway by the Company to synthesize
and/or select compounds for further development.

(6) "IND filed" means that an Investigational New Drug Application has been
submitted to the FDA to initiate human testing. This IND was co-sponsored by
Endocon and the Company. Phase I dosing studies on female volunteers is to
be conducted at the National Institutes of Health (NIH).

(7) "Physician's Phase I" means that a Phase I human trial is being conducted
based on a Physician's IND. In the case of NEUROCALC, the Physician's IND
was filed by an independent physician and a small NIH-funded study is
underway in humans at the University of Kentucky School of Medicine.

(8) "Clinical testing" means that, in the case of the Company's diagnostic
initiative, the Hormone Responsiveness Diagnostic test has been, and
continues to be, evaluated using blood samples from human volunteers.

(9) The Company has sublicensed to Cephalon, on a non-exclusive basis, certain
of the Company's rights to its intellectual property in the vitamin-D area
for neuroprotection. See "--Strategic Alliances and Licenses."

(10) The Company will evaluate the potential for sublicensing these potential
products and programs to corporate partners in the future, as appropriate.

The Company's product candidates are hormones or compounds similar in
structure to known hormones, including estrogen, as well as compounds based on
vitamin D, which are able to penetrate the blood-brain barrier due to their
physical characteristics. The blood-brain barrier is a physical structure formed
by a tight network of cells which separates the brain from the circulatory
system and which restricts the passage of most molecules into the brain.
Normally, access to the brain occurs only through the circulation of blood.
Large proteins, such as nerve growth factor and other neurotrophic factors,
cannot gain access through the blood-brain barrier on their own. While the
blood-brain barrier serves to protect the brain from being exposed to
potentially harmful compounds, it makes delivery of pharmaceutical drugs
extremely difficult, requiring either a short-term breakdown of the barrier, the
physical placement of a shunt through the skull for the direct delivery of drugs
or the use of a chemical carrier system. These procedures are difficult to
implement and can be risky or invasive. Inaccessibility of the brain due to the
blood-brain barrier has greatly limited drug development for the treatment of
diseases of the central nervous system. The Company's product candidates are
expected to diffuse to the brain through the blood-brain barrier.

ESTROGEN COMPOUNDS

Estrogens are believed to act directly on brain cells to reduce the
incidence and to delay the onset of Alzheimer's disease. Estrogens readily enter
the brain and interact with brain cells to provide neuroprotection. Estrogens
have been shown to be highly neuroprotective in situations where brain cell
viability is compromised by trauma, or by glucose or oxygen deprivation.
Activation of estrogen receptors at other sites in the body causes cell growth
in the breast, the uterus and the endometrium. Currently, the use of estrogen
therapy is not recommended for men due to its feminizing side effects (e.g.
breast enlargement), or for certain women because of a history of breast cancer
or because of some women's intolerance to the hormonal side effects of
estrogens. Discoveries resulting from the Company's sponsored research indicate
that it is possible for estrogens to act on brain cells through a novel
mechanism that does not require the estrogen to bind to its normal receptor.
Management believes that this mechanism would result in fewer hormonal side
effects. This novel approach should enable the Company to design and evaluate a
variety of estrogens that lack sex hormone activity and therefore will be useful
in the treatment of men, as well as women.

The Company's lead product candidates in this area are ABPI-124 and
NEURESTROL. Both products are in development primarily to treat
neurodegeneration associated with Alzheimer's disease. ABPI-124 is a trademark
of the Company representing certain novel estrogens for use in the prevention of
neurodegeneration. ABPI-124 is being developed by the Company together with
Athena for the treatment of Alzheimer's disease. See "--Strategic Alliances and
Licenses." ABPI-124 has been shown by the Company's sponsored research to
protect brain cells, while it is not known to interact with other tissues.
Management believes that ABPI-124 and related products will have specificity for
the central nervous system and therefore will have fewer side effects than
compounds which are active as sex hormones. The Company and Athena are currently
evaluating ABPI-124 and other compounds in Athena's proprietary animal model for
Alzheimer's disease. The Company is the exclusive licensee of a broad patent
recently issued in the United States covering the use of estrogen in the
prevention of neurodegeneration, including the treatment of Alzheimer's disease.

NEURESTROL is the brand name for 17b-estradiol formulated within
Endocon's bioerodible implant for the treatment of women with neurodegenerative
diseases, such as Alzheimer's. NEURESTROL is delivered in the form of a small
pellet, inserted into the underside of a patients' forearm, which is capable of
the sustained release of an active drug for in excess of one year. Because the
pellet is fully bioerodible, there is no need for its retrieval. This type of
formulation is expected to greatly increase patient compliance and will relieve
a burden currently placed on caregivers of patients undergoing long-term
therapy. The Company and Endocon have agreed to co-develop NEURESTROL. See
"--Strategic Alliances and Licenses." The Company and Endocon have submitted an
IND for NEURESTROL to the FDA in order to begin Phase I

dosing studies on female volunteers at the National Institutes of Health.
NEURESTROL is the subject of intellectual property licensed to the Company on
the use of estrogens for neuroprotection and numerous Endocon patents related to
the proprietary delivery system. See "--Intellectual Property Rights."

CALCITRIOL-RELATED COMPOUNDS

As people age, develop neurodegenerative disease or are subjected to
injury, their brain cells tend to accumulate calcium in greater quantities than
brain cells of young, healthy people. This is due, in part, to the inability of
aged, diseased or injured brain cells to extrude calcium efficiently. Calcium
accumulation in brain cells, especially over long periods of time, can make
brain cells increasingly vulnerable to certain environmental factors and can
lead to brain cell death. Levels of calcium in the body are regulated by complex
interactions of a number of "calcitropic" hormones, including calcitriol. In
aging and neurodegenerative diseases, such as Alzheimer's, these hormones can
become inappropriately regulated. Several studies have indicated that
Alzheimer's patients have low vitamin-D levels. Low serum calcium and
phosphorous levels (which are indicative of low vitamin-D activity) are believed
to precede the onset of Alzheimer's disease symptoms. Calcitriol, the active
metabolite of vitamin D, is an extremely potent hormone that regulates calcium
and phosphorous levels. NEUROCALC is the Company's brand name for calcitriol.
The Company's academic partners have demonstrated that animals treated with
calcitriol for 8-12 months show significant neuroprotection and a greater
density of brain cells than animals without calcitriol administration.

A small-scale human trial sponsored by the National Institutes of Health
is underway at the University of Kentucky School of Medicine to evaluate the
therapeutic effectiveness of NEUROCALC in deterring the long-term progression of
Alzheimer's disease.

The Company has plans to produce its own and/or license from other
companies or research institutions certain novel vitamin-D compounds and
evaluate these compounds for efficacy in the treatment of neurodegenerative
disorders. If any of these compounds are identified, the Company may further
test these compounds in humans. In addition, the Company has entered into a
non-exclusive license relationship with Cephalon pursuant to which the Company
has licensed to Cephalon certain of its intellectual property in this area. See
"--Strategic Alliances and Licenses." The Company may choose to issue additional
licenses to its intellectual property in this field.

ADDITIONAL COMPOUNDS IN DEVELOPMENT

Neurosteroids are a class of steroidal compounds located in the central
nervous system that have a wide range of effects on brain cells. The Company has
sponsored research to design and produce a number of additional neurosteroid
compounds in order to test their ability to protect against brain cell death. A
library of approximately 40 compounds has been synthesized in connection with
the Company's sponsored research. These include certain compounds derived from
adrenal steroids such as dehydroepiandrosterone (DHEA) (which has been shown in
animal studies to have memory-enhancing effects) and dehydroepiandrosterone
sulfate (DHEAS). Research sponsored by the Company indicates that certain
structural properties of a number of other neurosteroids can predict their
neuroprotective activity, which could assist the Company in the design of
additional compounds and new product candidates. The Company and the University
of Florida School of Medicine have two patents pending in this area.

HORMONE RESPONSIVENESS DIAGNOSTIC

Estrogen replacement therapy is currently being used by millions of
women worldwide for the treatment of menopausal symptoms, including hot flashes,
and to protect against osteoporosis and cardiovascular disease. Despite its
widespread use, estrogen replacement therapy is currently prescribed without
information as to whether the treatment will be effective and as to the optimal
dosages for individual patients. There is a need for tools which can better
determine appropriate treatment guidelines.

The Company is developing a Hormone Responsiveness Diagnostic test, a
proprietary diagnostic blood test that predicts how well patients will respond
to hormone therapy. To date, clinical evaluation of the test has been conducted
with approximately thirty people of both sexes and of various ages. The Company
plans to expand this testing significantly. A United States patent has recently
been issued on this diagnostic test and has been licensed to the Company on an
exclusive basis. Management expects that information derived from this
diagnostic test will aid clinicians in designing rational long-term hormonal
treatment protocols.

STRATEGIC ALLIANCES AND LICENSES

ATHENA NEUROSCIENCES, INC.

In April 1996, the Company entered into a License and Collaboration
Agreement with Athena (the "Athena Agreement") in which the Company granted to
Athena an exclusive, worldwide license (with the right to sublicense), under
certain of the Company's patent rights, to develop and commercialize certain
estrogen compounds for the treatment of chronic neurodegenerative diseases
(i.e., those with a treatment duration of six months or more), including
Alzheimer's disease. Athena also has the first right to fund any proposal of the
Company for acute indications in exchange for an exclusive license. These rights
are exercisable on a case-by-case basis. Under the Athena Agreement, research
and product development is managed by a joint committee with two representatives
from each company.

The Athena Agreement provides for the payment by Athena of an annual
maintenance fee until an NDA is approved for a product incorporating a licensed
compound, after which Athena will pay a royalty based on Athena's direct net
sales. The Company would also receive a portion of any income Athena receives
from fees and sales of licensed products by Athena's sublicensees. Athena has
the responsibility to fund all research and clinical expenses approved by the
joint committee and to undertake reasonable efforts to develop estrogen products
under its license, and will receive a credit against royalties for its research
and development expenses. Athena may terminate the agreement at any time, in its
sole discretion, upon 90 days' written notice.

ENDOCON, INC.

In June 1994, the Company entered into an agreement with Endocon (the
"Endocon Agreement") to co-develop certain estrogens within subcutaneous drug
delivery vehicles. As currently in effect, the Endocon Agreement focuses on the
development of 17b-estradiol within a subcutaneous drug delivery vehicle for the
treatment of Alzheimer's disease (NEURESTROL). Neither the Company nor Endocon
is obligated to pay the other for any rights to intellectual property underlying
the Endocon Agreement or for development of the product. The Company and Endocon
each have the right to terminate the agreement upon 60 days' notice to the other
party, provided that the terminating party will grant an exclusive, fully-paid
license to the non-terminating party to continue to develop and market
NEURESTROL independently.

Certain of the drug delivery technology licensed to the Company by
Endocon includes patents licensed by Endocon from Aberlyn Capital Management
under the terms of an agreement executed by Endocon in 1994. The Company and
Endocon are currently in discussions regarding the execution of a sublicense
agreement for NEURESTROL which will supercede the Endocon Agreement.

Robert J. Leonard, a member of the Board of Directors, Vice President
and shareholder of the Company, is the acting Chief Executive Officer of
Endocon. Mr. Leonard will be excluded from acting on behalf of the Company in
the negotiation or approval of any new license agreement with Endocon.

CEPHALON, INC.

In November 1996, the Company entered into a Nonexclusive Sublicense
Agreement with Cephalon (the "Cephalon Agreement") in which certain rights to
its intellectual property in the vitamin-D

area (see "--Calcitriol-Related Products") for neuroprotection were licensed on
a non-exclusive basis to Cephalon. Under the Cephalon Agreement, the Company
will receive annual maintenance payments, which escalate upon the achievement of
certain milestones, and a royalty based on product sales including a minimum
royalty.

THERAPEUTIC TARGET MARKETS

THE AGING POPULATION AND DISEASE MANAGEMENT

During the national debate on the reform of the health care system in
the United States, major pharmaceutical companies studied outcomes data on
non-pharmaceutical interventions, i.e. hospitalization, earliest possible
release dates, readmittances and long-term care (nursing homes and
rehabilitation facilities). These studies showed that an integrated approach to
broad areas of disease management would result in both superior outcomes as well
as greater profitability than earlier industry paradigms. Accordingly,
pharmaceutical companies have sought to develop and license a range of
diagnostic and pharmaceutical interventions that could result in shorter
hospital stays and reduced reliance on long-term in-patient care of the aging
population. Cognitive problems and the incidence of Alzheimer's disease increase
with age and thereby put the patient at considerable risk of mismedication,
falls and generally poor attention to personal health matters--all resulting in
increased hospital admittances and protracted long-term in-patient care.

Management believes that the Company's therapeutic and diagnostic
product candidates could become significant tools in neurodegenerative disease
management and address significant market opportunities. As the population ages
and baby boomers reach retirement age the number of people with one or more
neurodegenerative disease is expected to increase exponentially.

ALZHEIMER'S DISEASE

Alzheimer's disease is a complex neurodegenerative disease characterized
by brain atrophy. The progression of the disease always leads to memory loss and
dementia. The course of Alzheimer's disease typically runs eight or more years
and results in death. The earliest sign of the disease is an impairment in
short-term memory and intellectual ability. Over the course of the disease,
memory loss becomes severe, ability to reason deteriorates, and patients become
depressed, agitated, irritable and restless. In the final stages of the disease,
patients become unable to care for themselves and frequently require long-term
care in nursing homes.

Alzheimer's disease is directly correlated to aging. Less than 5% of
persons between the ages of 60 and 65 have the disease, while approximately 50%
of persons over the age of 85 have the disease. According to the National
Alzheimer's Association, over four million Americans currently suffer from
Alzheimer's disease and the direct costs associated with their diagnosis,
treatment and care is approximately $100 billion per year. The prevalence of
this disease is expected to increase to 14 million persons in the United States
by the year 2050. There is no treatment currently available to slow the
progression of the disease.

PARKINSON'S DISEASE

Parkinson's disease is associated with trembling of the arms and legs,
stiffness and rigidity of muscles and slowness of movement. These symptoms are
caused by a chemical imbalance in the brain caused by the loss of key brain
cells. Parkinson's disease is characterized by neuron loss in the substantia
nigra and the locus coeruleus regions of the brain. Parkinson's disease can
cause depletion of 70% or more of the cells in these regions.

Approximately 10% of patients with Parkinson's disease also experience
dementia. The American Academy of Neurology estimates that there are
approximately 1,000,000 persons afflicted with Parkinson's

disease in the United States. The total direct health care costs in the United
States have been estimated to be $340 million annually. Although there are a
number of pharmaceuticals in use today to treat Parkinson's disease, their
effects are only temporary and none can treat the underlying neurodegeneration
associated with the disease.

STROKE

Most strokes are caused by blockage of critical blood vessels leading to
the brain. This causes a reduction in blood flow to the brain and results in
deprivation of oxygen in the affected regions ("ischemia"). Ischemia, in turn,
leads to the death of brain cells. Brain cell death following stroke is the
major cause of stroke-related disability, including paralysis, impaired
cognition and loss of sensation.

Stroke is a leading cause of morbidity and mortality in the United
States. According to the American Heart Association (the "AHA"), approximately
500,000 persons in the United States have new or recurrent strokes each year.
While 30% of stroke victims die within a year, the AHA estimates that there are
3,820,000 stroke survivors in the United States today. Many stroke survivors
suffer stroke-related crippling disabilities and require long-term care at
enormous cost. The American Academy of Neurology estimates that $30 billion is
spent annually in the United States on stroke-related hospital, physician and
rehabilitation expenses. Currently, there are no products available that
minimize stroke-related brain damage.

ACUTE NEUROLOGICAL INJURY

Acute neurological injury can result from decreased blood flow to the
brain during cardiac surgery as well as from hypoglycemia (brain glucose
deficiency) and trauma (injury). In each case, the injury can lead to damage or
to the death of brain cells. The death of brain cells is largely due to the
deprivation of oxygen, as in stroke.

Between 400,000 and 500,000 people in the United States undergo coronary
bypass operations each year. Approximately 10% of coronary by-pass patients
suffer neurological side effects due to occlusion (blockage) of small blood
vessels leading to the brain and brain damage ranging from minor cognitive
deficits to debilitation. Trauma due to brain or spinal injury is also a major
cause of morbidity in the United States, afflicting over 500,000 persons
annually. Brain cell death and brain damage caused by recurrent and untreated
hypoglycemia is less well characterized but is estimated to occur in about
100,000 persons annually in the United States. Currently, there are no
therapeutic products on the market to prevent, treat or limit damage in acute
neurological injury.

AGE-ASSOCIATED MEMORY IMPAIRMENT

Age-Associated Memory Impairment (AAMI) is an age-associated disorder
that is characterized by memory loss in otherwise healthy, elderly individuals.
Persons with AAMI experience a gradual decline in the ability to perform the
tasks of daily life dependent on memory, as compared to the overall population
of same-aged individuals. Age-related memory loss is frequently described as
"normal." Presently the causes of AAMI are not well understood. However, brain
cell death with aging has been reported to occur in certain regions of the brain
implicated in memory. Currently, there is no pharmacological treatment for AAMI.
Although several classes of experimental drugs have been proposed in the
scientific literature to treat AAMI, none has proved efficacious to date in
humans.

INTELLECTUAL PROPERTY RIGHTS

The Company is the exclusive licensee of two patents issued in the
United States, as well as a number of patent applications that are currently
pending in various countries. The Company is also the co-owner of two patent
applications which are pending. In addition, the Endocon drug delivery
technology used in NEURESTROL and licensed to the Company is the subject of 14
patents and one pending application.

The Company also has exclusive options to acquire additional licenses from the
University of Florida School of Medicine and the University of Kentucky School
of Medicine related to research programs which have been sponsored by the
Company. The Company has filed and will continue to file patent applications in
the United States and in foreign countries throughout the world in order to
protect intellectual property of its own and intellectual property which it has
licensed. The Company intends to maintain an aggressive strategy for filing,
maintaining and prosecuting its intellectual property. The Company's success in
large part will depend on its ability to obtain patent protection in various
jurisdictions relating to the technologies, processes and products it is
developing and may develop in the future. The Company also intends to rely on
trade secrets to protect certain other technologies (e.g., animal models for
aging) which may be used in discovering and evaluating new drugs which could
become marketable products. To protect its inventions, trade secrets and other
proprietary information, the Company has confidentiality agreements in place
with its staff, consultants and scientific and clinical advisors. See "Risk
Factors."

ESTROGEN COMPOUNDS

In December 1993, the Company was granted an exclusive worldwide license
from the University of Florida Research Foundation, Inc. (the "UFRFI") to
certain technology developed at the University of Florida School of Medicine
related to a method of protection against brain-cell loss using estrogen
compounds. The agreement was amended in October 1996. In consideration of the
grant of the license, the Company has funded certain research programs at the
University of Florida School of Medicine and agreed to pay a royalty based on
product sales. The Company extended its research contract through the end of
1997. A U.S. patent on this technology that has been licensed to the Company was
issued in September of 1996 and covers the use of estrogen compounds for the
treatment of neuron loss in a subject, including a subject with Alzheimer's
disease. Corresponding patent applications are pending in the United States and
several other countries throughout the world. The Company entered into an
agreement with Athena in April 1996 for the clinical development and marketing
of estrogen products for chronic neurodegenerative diseases. See "--Strategic
Alliances and Licenses."

CALCITRIOL-RELATED COMPOUNDS

In April 1993, the Company was granted an exclusive worldwide license
from the University of Kentucky Research Foundation to certain technology
developed at the University of Kentucky School of Medicine related to a method
of protection against brain-cell loss using vitamin-D derivatives and compounds
which bind the vitamin-D receptor. In consideration of the grant of the license,
the Company funded certain research programs at the University of Kentucky
School of Medicine and agreed to pay a royalty based on product sales. Patent
applications in the U.S. and foreign jurisdictions are currently pending. The
Company entered into a non-exclusive license agreement with Cephalon in November
1996 covering certain of the Company's rights in the vitamin-D area for
neuroprotection. See "--Strategic Alliances and Licenses."

HORMONE RESPONSIVENESS DIAGNOSTIC

In September 1994, the Company was granted an exclusive worldwide
license from the UFRFI to certain technology developed at the University of
Florida School of Medicine related to a method of diagnosing hormonal
responsiveness using an IN VITRO sample. In consideration of the grant of the
license, the Company has committed to pay a royalty based on product sales. A
U.S. patent was issued on this technology in August 1996 and claims a method of
diagnosis as well as the diagnostic kit itself. Corresponding patent
applications are pending in the United States and several other countries
throughout the world.

COMPETITION

Competition in the area of pharmaceutical products is intense. There are
many companies, both public and private, including well-known pharmaceutical
companies, that are engaged in the development of products for certain of the
applications being pursued by the Company. The Company's larger competitors
include Amgen, Inc., Warner-Lambert Co., Bristol-Meyers Squibb Company, Glaxo
Wellcome plc, Regeneron Pharmaceuticals, Inc., Hoechst Marion Roussel Ltd. and
Pfizer, Inc., as well as Athena. There are other public and private companies
that are also developing products to treat neurodegenerative diseases. There may
be other companies of which the Company is not aware with product development
programs similar to those of the Company. Many of the Company's competitors have
substantially greater financial, research and development, manufacturing and
marketing experience and resources than the Company and represent substantial
long-term competition for the Company. These companies may succeed in developing
pharmaceutical products that are more effective and/or less costly than any
products that may be developed by the Company or its strategic partners. The
Company is aware of two products currently being marketed for the treatment of
cognitive deficits in Alzheimer's disease, COGNEX and ARICEPT, neither of which
slows the progression of the disease or protects brain cells. Both products are
acetylcholinesterase inhibitors and act by increasing levels of a deficient
neurotransmitter.

MANUFACTURING PLANS

The Company has no experience in manufacturing products for commercial
purposes and has no manufacturing facilities of its own for production of either
the bulk biological compounds or the final dosage form of its product
candidates. The Company relies, and intends to continue to rely, upon its
corporate partners and third party subcontractors for the production of
products, for research, preclinical and clinical studies. The Company may be
unable to contract with suitable third-party manufacturers at commercially
feasible prices which would have the impact of adversely affecting the Company's
ability to commercialize its products.

At this time, the Company does not intend to build a fully-integrated
manufacturing operation to support production of the Company's products. In
manufacturing pharmaceutical products a company must comply with cGMPs that are
promulgated and enforced by the U.S. Food and Drug Administration as set forth
under Title 25 of the Code of Federal Regulations. The investment that would be
required to develop and validate a commercial manufacturing operation for a new
drug would be significant. The Company may consider, however, retaining the
rights to certain key proprietary processes used in the production of precursor
molecules which would be indispensable to the manufacturing of the final
formulation. In that case, a manufacturing revenue stream may be achievable
without requiring the

magnitude of capital investment described above. There can be no assurance that
the Company will be able to develop necessary key processes or that the practice
of key processes would be cost effective.

MARKETING AND SALES STRATEGY

The Company has no experience in marketing or selling products and does
not intend to build up a marketing operation that would compete with those of
existing multinational pharmaceutical companies, but rather intends to work with
other organizations for the marketing of the Company's products. The Company has
entered into strategic alliances, and will continue to attempt to do so, with
larger pharmaceutical companies which have their own marketing, sales and
distribution staffs and expertise. There can be no assurance that the Company
will establish productive strategic alliances or that any of its strategic
alliances will be in place long enough so that the Company recognizes any
significant profits.

GOVERNMENT REGULATIONS

The manufacturing and marketing of the Company's potential products are
subject to comprehensive regulation by numerous governmental authorities in the
United States and other countries. In the United States, products that the
Company anticipates developing are subject to rigorous regulation under the
Federal Food, Drug and Cosmetic Act, the Public Health Service Act and other
federal and state statutes and regulations which govern, among other things, the
testing, approval, manufacture, labelling, storage, record keeping, advertising
and promotion of these products. Human therapeutic products require rigorous
testing, both preclinical and clinical, and approval by the FDA or other
appropriate foreign regulatory agencies for marketing in foreign countries.
Other statutory provisions and regulations govern testing, manufacturing,
labeling, storage and record keeping related to product development and
marketing of products. The process of applying for and obtaining regulatory
approval in compliance with the relevant statutes and regulations requires the
expenditure of substantial time and financial resources. Failure by the Company
or its licensees to comply with relevant statutes could result in, among other
things, fines, suspension of approvals, seizures, recalls of products, or
criminal prosecutions, and could delay regulatory approval, which in turn could
adversely impact the Company's plans for product introduction.

The Company believes that certain of its planned products may be
classified, for purposes of FDA regulation, as biological products, while others
may be classified as drugs. New drugs or biological products require several
steps in order to receive regulatory approval, including: (i) preclinical
laboratory and animal tests; (ii) submission to the FDA of an Investigational
New Drug Application ("IND"), which must become effective before human clinical
trials may start; (iii) the performance of well-controlled clinical trials; and
(iv) submission to the FDA of a New Drug Application ("NDA") for a new drug or a
Product License Application ("PLA") for a biologic. The NDA or PLA contains the
results of preclinical tests and clinical trials as well as required information
on product composition and manufacturing processes. In addition, for a
biological product, an Establishment License Application ("ELA") covering the
manufacturing facilities for the product must be submitted to the FDA. If the
Company does not manufacture the product that is the subject of the PLA,
contractual issues may complicate the ELA/PLA application and approval process
as a result of the FDA's rules pertaining to manufacturing of biological
products. The NDA or PLA/ELA must be approved by the FDA before commercial
marketing of the product may begin.

Prior to testing products in humans, a rigorous series of preclinical
studies must be performed on animals in order to assess the safety of potential
products. After testing on animals, an IND must be filed with the FDA to obtain
authorization for human testing. Unless the FDA objects, the IND becomes
effective 30 days after submission. Extensive clinical testing must then be
undertaken to demonstrate optimal use, safety and efficacy of each product in
humans. Human clinical trials are typically conducted in a three-step process.
In Phase I clinical trials, the potential product is tested on a small number of
healthy human subjects to determine the safety, dosage tolerance, pattern of
drug distribution, pharmacokinetic

properties and metabolism. In Phase II, clinical trials are conducted with
groups of patients afflicted with a specific disease or condition in order to
determine preliminary efficacy and optimal dosages and to identify potential
adverse effects. In Phase III, large-scale, multi-center, comparative trials are
conducted in order to provide controlled and adequate demonstration of safety
and efficacy. The FDA reviews the clinical plans and the results of trials, and
can discontinue the trials at any time for any of a number of reasons. Each
clinical trial is conducted under the auspices of an Institutional Review Board
("IRB"). The IRB considers, among other things, ethical factors, the safety and
welfare of human subjects, and the adequacy of the informed consent form. When
completed, results from the preclinical and clinical trials are submitted to the
FDA as a NDA for approval to commence commercial sales. The approval process is
affected by several factors, including the severity of the disease, the
availability of alternative treatments, and the risks and benefits demonstrated
in clinical trials. Following an extensive review, the FDA may grant product
marketing approval, request additional information (including additional
studies) or deny the application if the FDA deems that it does not satisfy the
regulatory approval criteria. There can be no assurance that approvals will be
granted on a timely basis, if at all. Similar procedures are in place in
countries outside the United States for product approvals in those countries.
Even if new drugs are approved in a foreign country, they may not be exported
for commercial sale until either FDA approval for sale in the United States or
FDA approval of an export application has been obtained.

The Company is also subject to regulations and recommendations related
to work place conditions, use and disposal of radioactive compounds and other
potentially hazardous materials, use of recombinant genetically engineered
organisms and potentially pathogenic organisms. Specifically, the Company will
be subject to government regulation under the Occupational Safety and Health
Act, the Environmental Protection Act, the Atomic Energy Act, the Clean Air Act,
the Clean Water Act, the National Environmental Policy Act, the Toxic Substance
Control Act, and the Resource Conservation and Recovery Act, and other national,
state, or local regulations. This list of regulations and recommendations is not
an exclusive list nor is it static. The extent of regulations from future
legislation or mandates cannot be predicted with certainty.

FACILITIES

The Company's executive offices are located at One Kendall Square,
Building 200, Suite 2200, Cambridge, Massachusetts. Its offices include office
space and conference rooms which are shared with other companies. The Company
believes its facilities are adequate for its current operations. In the future,
the Company plans to establish a small laboratory.

EMPLOYEES

As of April , 1997, the Company had three employees. Dr. Katherine
Gordon is employed by the Company as President and Chief Executive Officer.
Robert J. Leonard is employed by the Company as Vice President of Business
Development. John J. Curry is Vice President of Finance and Chief Financial
Officer. Each of the Company's employees has entered into confidentiality
agreements with the Company. See "Risk Factors--Uncertain Ability to Protect
Proprietary Technology."

LEGAL PROCEEDINGS

On April 2, 1997, the Company filed suit against First United Equities
Corporation ("FUE") and certain other underwriting firms in the Middlesex
Superior Court of the Commonwealth of Massachusetts, alleging that FUE breached
the terms of an underwriting agreement between FUE, for itself as lead
underwriter and for certain other underwriters, and the Company in connection
with a public offering of the Company's securities. The complaint seeks specific
performance of the Underwriting Agreement, as well as treble damages, attorneys'
fees and costs. On April 25, 1997, the Company filed a stipulation of dismissal
which dismissed Neidiger/Tucker/Bruner, Inc. with prejudice from the action and
expects to reach similar agreements with all of the other underwriting firms,
other than FUE, in the near future. No further actions have been taken with
respect to this suit. The Company does not believe that the resolution of this
matter will have a material adverse effect on its business, financial condition
or results of operations.

Except as set forth above, the Company is not a party to any legal
proceedings.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The names and ages of the directors and executive officers of the Company
are as follows:

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

Katherine Gordon, Ph.D. .............. 42 President and Chief Executive Officer; Director

Robert J. Leonard..................... 45 Vice President of Business Development; Secretary; Director

John J. Curry......................... 42 Vice President of Finance, Chief Financial Officer and Treasurer

Michael J. Callaghan.................. 44 Director

Theodore J. Gordon.................... 65 Director

Donald L. Weise....................... 62 Director

George W. Masters..................... 56 Director

Messrs. Gordon and Weise have been designated Class I directors, to
serve until the Company's 1997 Annual Meeting of Stockholders; Dr. Gordon and
Mr. Masters have been designated Class II directors, to serve until the
Company's 1998 Annual Meeting of Stockholders; and Mr. Leonard has been
designated a Class III director, to serve until the Company's 1999 Annual
Meeting of Stockholders.

KATHERINE GORDON, PH.D. has served as the President, Chief Executive
Officer and a director of the Company since its inception. Prior to founding the
Company in 1992, Dr. Gordon was an Associate Director at Genzyme Corporation. At
Genzyme, Dr. Gordon launched a business unit which derives therapeutic proteins
from the milk of transgenic animals (animals infused with imported genes). In
1993, this department was spun off from Genzyme as a free-standing company known
as Genzyme Transgenics Corporation (listed on the Nasdaq National Market as
GZTC). Dr. Gordon was at Integrated Genetics (acquired by Genzyme) and Genzyme
from 1984 to 1991. She has over 15 years of research experience in mammalian
genetics/molecular biology and has had numerous publications, patent
applications and speaking engagements. Dr. Gordon is the daughter of Theodore
Gordon, a director of the Company.

ROBERT J. LEONARD has served as Vice President of Business Development
since June 1996 and as a director of the Company since September 1995. Mr.
Leonard is also the acting CEO of Endocon, Inc., a company that he founded in
1981 for the commercialization of controlled release drug delivery systems for
therapeutic use in humans and animals and has been CEO of Endocon since that
time. From 1975 through 1979 Mr. Leonard was founder and President of Robert J.
Leonard & Company, Inc., a small, privately-held corporation specializing in
medical and health care marketing services.

JOHN J. CURRY has served as the Vice President of Finance, Chief
Financial Officer and Treasurer of the Company since November 1996. Prior to
joining the Company, Mr. Curry was self-employed as a consultant from July 1994
until November 1996. From 1986 until July 1994, Mr. Curry served in various
capacities at Seragen, Inc., most recently as Director of Finance and
Administration. Seragen is a publicly-traded biotechnology company focused on
the development of therapeutic biological products for cancer and autoimmune
diseases. Prior to joining Seragen, Mr. Curry held various financial positions
with W.R. Grace & Co. and The B.F. Goodrich Company from 1980 until 1984 and
from 1979 to 1980, respectively.

THEODORE J. GORDON, a director of the Company, was President and CEO of
The Futures Group, Glastonbury, Connecticut, from the time he founded that
company in 1971 until 1990. He continues to serve as a director and Senior
Advisor for The Futures Group, which performs contract research studies for
private corporations and government agencies on future-oriented topics which
range from the frontiers of technology to specific changes in consumer markets.
Since 1990, Mr. Gordon has also worked as a

consultant to several corporations, providing strategic planning services to
management. He is also a member of the Board of Directors of the Institute for
Global Ethics and Registry Magic, Inc. Mr. Gordon is the father of Katherine
Gordon, the President, Chief Executive Officer and a director of the Company.

DONALD L. WEISE is a Director of the Company. Since March 1994, Mr.
Weise has been an independent business consultant with international expertise
in licensing, acquisitions, strategic alliances and marketing in the fields of
pharmaceuticals, biotechnology, drug delivery and medical devices. He has 37
years of management experience in the health care industry. Prior to beginning
his consulting business, Mr. Weise was Director of Licensing and Acquisition of
the Ortho-McNeil Pharmaceutical Division of Johnson & Johnson, a position he
held from 1982 until March 1994.

GEORGE W. MASTERS, a director of the Company, retired as Vice Chairman,
President and Chief Executive Officer of Seragen, Inc., a position he had held
since April 1994, in November 1996. Prior to joining Seragen, Mr. Masters served
as the President and CEO of Verax, Inc. from 1991 until April 1994. Mr. Masters
has been a board member of approximately 15 medically oriented companies and
currently serves as a member of the Board of Directors of CME Telemetrix,
Hemosol, Inc., ImmuCell Corporation, PharmX Inc., ProScript Inc., CompuCyte,
Inc., the Marshalton Group and Intelligent Medical Imaging.

MICHAEL J. CALLAGHAN, a director of the Company, has served as
Vice-President of MDS Health Ventures Capital Corp., a leading health care
venture capital investment operation, since September 1991, and as Senior Vice
President since March 1996. In this capacity, he has been involved in the
financing of more than 30 emerging companies in Canada, the United States and
Europe, in various segments of the health care industry, including
biotechnology, pharmaceuticals, drug delivery, information services and medical
devices.

SCIENTIFIC AND CLINICAL ADVISORS

DR. JEFFREY FREED is currently a surgeon and an Associate Clinical
Professor at Mt. Sinai Medical Center. Dr. Freed also has a joint appointment as
Section Chief of Surgery at the Bronx Veterans Hospital. Dr. Freed specializes
in colo-rectal surgery. Dr. Freed is active in the home health care field and is
currently the Chairman of BioTime, Inc.'s scientific advisory board. Dr. Freed
received his M.D. degree Cum Laude from the State University of New York,
Brooklyn in 1970. Dr. Freed has recently been appointed Vice
President--Strategic Planning for NuGene Technologies, Inc., a company doing
research in gene therapy delivery systems.

DR. MITCHELL HARMAN is Chief of the Endocrinology Section at the
National Institute on Aging and Associate Professor of Medicine at Johns Hopkins
University. Dr. Harman's major research interests relate to the therapeutic uses
of hormone replacement therapy for treatment of geriatric patients. He has been
very active in designing and implementing clinical therapeutic protocols for
hormone replacement therapy and is currently involved in a major study
evaluating long-term interactive effects of growth hormore and sex steroid
(estrogen and progesterone) replacement on bone and muscle in the elderly. Dr.
Harman received his M.D. and Ph.D. degrees from the State University of New
York.

DR. PHILIP LANDFIELD is Professor and Chair of Pharmacology at the
University of Kentucky School of Medicine. Dr. Landfield's research programs are
in the areas of brain aging and memory and the pharmacological/biological
mechanisms of neuropathology. His research group is investigating hippocampal
synaptic structure and physiology during aging, biomarkers of brain aging and
the mechanism(s) of glucocorticoid interaction in brain aging. Dr. Landfield
received a Ph.D. degree in Psychobiology from the University of California at
Irvine in 1971, had a post-doctoral appointment at the University of North
Carolina from 1972-1974, was Assistant Professor at the University of California
until 1978, Assistant/ Associate Professor at Wake Forest University,
Winston-Salem, North Carolina, from 1979-1991 and has been at the University of
Kentucky School of Medicine since that time.

DR. JAMES SIMPKINS is Professor of Pharmacodynamics and Co-Director of
the Center for the Neurobiology of Aging at the University of Florida Health
Science Center. In 1996, he was named the Frank A. Duckworth Professor of Drug
Discovery in the College of Pharmacy, University of Florida. Dr. Simpkins' major
research interests relate to the regulation of pituitary hormone secretion
during aging, the neuroprotective effect of steroid-like compounds, and the
pharmacology of brain-specific drug delivery systems. His group has recently
initiated a major extramurally-funded program, sponsored by the National
Institutes of Health, for the discovery of novel drugs for Alzheimer's disease.
Dr. Simpkins received a Ph.D. degree in physiology from Michigan State
University in 1977 and has been at the University of Florida since that time. He
is also a professor of pharmacology and therapeutics in the College of Medicine,
University of Florida.

Each of the Company's scientific and clinical advisors is employed by
another entity. Certain advisors also have consulting agreements with businesses
other than the Company. These advisors are expected to devote only a limited
portion of their time to the Company and are not expected to participate
actively in the day-to-day affairs of the Company.

EMPLOYMENT AGREEMENTS, EXECUTIVE COMPENSATION AND AGREEMENTS WITH DIRECTORS

The Company has entered into an employment agreement with Dr. Katherine
Gordon under which the Company has agreed to employ Dr. Gordon as the Company's
President and Chief Executive Officer through a term ending in November 1998.
The agreement provides for automatic renewal for additional two-year periods
thereafter unless either party gives 90 days' notice of its intent not to renew.
The Board of Directors determines Dr. Gordon's annual salary, currently
$130,000, and Dr. Gordon is also eligible for an annual bonus at the Board's
discretion, based upon achievement of established performance criteria. If Dr.
Gordon is terminated by the Company without cause, she will be entitled to
continue to receive her salary and health and other insurance benefits for a
period of 12 additional months. The agreement also provides that, if Dr.
Gordon's employment is terminated by the Company prior to a scheduled
termination date, or if she terminates the agreement without cause, then Dr.
Gordon may not compete with the Company for a period of two years thereafter.

During each of the years 1993 through 1996, Dr. Katherine Gordon agreed
to defer payment of portions of her accrued salary and bonus in the aggregate
amount of $104,000. In December 1996, the Company and Dr. Gordon entered into an
agreement relating to a portion of these past deferred amounts whereby the
Company agreed to pay Dr. Gordon an aggregate of $80,000 in deferred salary and
bonus, together with interest calculated at a rate of 9% per annum, in equal
cash payments over the 24 months beginning January 1997. To date, Dr. Gordon and
the Company have not established a schedule for the payment of the remaining
$24,000 of Dr. Gordon's deferred compensation.

The Company has a group medical plan and management plans to offer,
disability and life insurance coverage to all full-time employees. Health, group
disability and life insurance benefits are currently provided only to Dr.
Gordon.

The Company pays each of its independent directors annual fees of $5,000
for service on the full board and annual fees of $500 for service on each of its
Audit and Compensation Committees.

BOARD COMMITTEES

The Company has standing Audit and Compensation Committees of the Board
of Directors, but does not have a Nominating Committee. The Audit Committee,
currently consisting of Messrs. Masters and Weise, was created in November 1996.
The primary function of the Audit Committee is to assist the Board of Directors
in the discharge of its duties by providing the Board with an independent review
of the financial health of the Company and of the reliability of the Company's
financial controls and financial reporting systems. The Audit Committee will
review the scope of the Company's annual audit, the fees charged by the
Company's independent accountants and other matters relating to internal control
systems.

The Compensation Committee of the Board of Directors determines the
compensation to be paid to all executive officers of the Company, including the
Chief Executive Officer. The Compensation Committee also administers the
Company's 1993 Incentive and Non-Qualified Stock Option Plan, including the
grant of stock options under the Plan. The Compensation Committee is currently
composed of Messrs. Masters and Weise.

1993 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN

In June 1994, the Company's stockholders approved the Company's 1993
Incentive and Non-Qualified Stock Option Plan (the "1993 Option Plan"). The 1993
Option Plan currently permits the granting of options to purchase an aggregate
of 387,096 shares of the Company's Common Stock to key employees, consultants
and directors of the Company or any parent or subsidiary of the Company. Options
granted under the 1993 Option Plan may be either incentive stock options
("ISOs") or non-qualified stock options ("NSOs"). ISOs may only be granted to
management and key employees.

The 1993 Option Plan is administered by the Compensation Committee.
Subject to the provisions of the 1993 Option Plan, the Committee has the
authority to determine the individuals to whom stock options will be granted,
the number of shares to be covered by each option, the option price, the type of
option, the option period, the vesting restrictions, if any, with respect to the
exercise of the option, the terms for the payment of the option price and other
terms and conditions. Payment for shares acquired upon exercise of an option may
be made in cash or shares of Common Stock.

The exercise price for shares covered by an ISO may not be less than
100% of the fair market value of the Common Stock on the date of grant (110% in
the case of a grant to an employee who owns more than 10% of the combined total
voting power of all classes of stock of the Company or any subsidiary (a "10%
Stockholder") and not less than the par value thereof. The exercise price for
shares covered by NSOs may not be less than the greater of 50% of the fair
market value and the par value of the Common Stock at the date of grant. Options
may be exercised as determined by the Committee, provided that all options
expire no later than ten years (five years in the case of an ISO granted to a
10% Stockholder) from the date of grant. If the employment of an optionee
terminates other than for reasons of death or retirement, any options held by
that optionee will expire three months after the termination of the optionee's
service with the Company and any of its subsidiaries. No individual may be
granted ISOs that become exercisable for the first time in any calendar year for
Common Stock having a fair market value at the time of grant in excess of
$100,000.

Options granted under the 1993 Option Plan are generally exercisable
during the lifetime of the optionee only by the optionee. Options may not be
transferred except as provided by the Committee or by will or the laws of
descent and distribution. Subject to certain limitations set forth in the 1993
Option Plan and applicable law, the Board of Directors may amend or terminate
the 1993 Option Plan. By its own terms, the 1993 Option Plan will terminate on
December 17, 2003.

In the case of certain events, including certain dividends,
recapitalizations and reorganizations, the Committee will equitably adjust (1)
the number of shares available under the 1993 Option Plan, (2) the number of
shares subject to outstanding options, or (3) the exercise price of outstanding
options. The 1993 Option Plan also empowers the Board of Directors and the
Committee to take other actions to protect outstanding options if the Company
is, among other things, merged or consolidated with another company or
liquidated.

1996 DIRECTOR STOCK OPTION PLAN

All of the directors who are not employees of the Company (the "Eligible
Directors"), except Mr. Michael J. Callaghan, are currently eligible to
participate in the Company's 1996 Director Stock Option Plan (the "Director
Plan"). The Director Plan currently permits the granting of options to purchase
an aggregate of 58,064 shares of the Company's Common Stock. Under the Director
Plan, options to purchase 5,805 shares of Common Stock are automatically granted
to each participating Eligible Director

on the date of the annual meeting of the stockholders of the Company in every
third year (a "Grant Year"). In addition, participating Eligible Directors that
are initially elected to the Board other than at an annual meeting in a Grant
Year are automatically granted options to purchase 1,935 shares of Common Stock
for each year, or portion thereof, between the date of such Eligible Director's
election and the date of the next annual meeting in a Grant Year. Options become
exercisable with respect to 1,935 shares on the date of grant and on the date of
each annual meeting of stockholders thereafter, so long as the optionee is then
a director of the Company. The options have a term of ten years and currently
have an exercise price, payable in cash or shares of Common Stock, equal to the
fair market value of the Common Stock, as determined by the Board of Directors.
After completion of the offering, the last sale price for the Common Stock on
the business day immediately preceding the date of grant, as reported by Nasdaq,
shall be the exercise price.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

The following table shows, for the fiscal years ended December 31, 1995 and
1996, certain compensation paid by the Company, including salary, bonuses, stock
options, and certain other compensation, to the Chief Executive Officer.

LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SHARES
--------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- ------------------------------------------------------ ------------- ------------ ------------- -------------

Katherine Gordon, Ph.D. 1995 $ 115,000(1) $ 25,000(2) 48,387 --
President and Chief Executive Officer 1996 $ 115,000 $ 25,000(2) 19,354 --

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

(1) A portion of Dr. Gordon's salary in the amount of $65,000 was accrued and
not paid in 1995, with the agreement of Dr. Gordon.

(2) The entire portion of Dr. Gordon's bonuses was accrued and not paid with the
agreement of Dr. Gordon.

OPTION GRANTS

The following table sets forth certain information regarding options
granted during the twelve months ended December 31, 1995 and 1996 by the Company
to the Chief Executive Officer:

POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
SHARES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(3)
OPTIONS TO EMPLOYEES IN EXERCISE OR EXPIRATION ---------------------
NAME GRANTED FISCAL 1995 BASE PRICE DATE 5% 10%
- ------------------------------------------ ----------- --------------- ----------- ----------- --------- ----------

Katherine Gordon, Ph.D. 1995 48,387 45.5% $ 1.29 11/29/05 $ 39,255 $ 99,480
1996 19,354 66.7 4.14 11/1/06 50,390 127,699

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

(3) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of the grant until the expiration of the ten-year option term.
These numbers are calculated based on the requirements promulgated by the
Commission and do not reflect the Company's estimate of future stock price
growth.

OPTION EXERCISES AND FISCAL YEAR-END VALUES.

There were no option exercises during the fiscal year ended December 31,
1996.

CERTAIN TRANSACTIONS

TRANSACTION WITH NPLP

In December 1996, Neuroscience Partners Limited Partnership ("NPLP"), a
limited partnership of which MDS Associes--Neuroscience Inc. ("MDS") is the
general partner, invested $500,000 in the Company in exchange for 138,249 shares
of Common Stock on the same terms as the other purchasers of Common Stock in the
Company's most recent private placement financing.

Also in December 1996, the Company entered into a Royalty Purchase
Agreement with NPLP, pursuant to which NPLP agreed to provide an additional
$500,000 (the "NPLP Development Financing") to the Company. In exchange for the
NPLP Development Financing, the Company is obligated to pay NPLP royalties based
upon a certain percentage of revenues earned from sales of, and license fees and
other revenues received by the Company in connection with, any products that
relate to the use of estrogen in the treatment of chronic neurodegenerative
diseases. The Company's obligations to pay royalties cease when royalty payments
reach certain aggregate amounts. In connection with the NPLP Development
Financing, NPLP received (i) warrants to purchase 67,741 shares of Common Stock
at an exercise price of $3.61 per share and (ii) warrants to purchase 29,032
shares of Common Stock at an exercise price of $4.52 per share. All or any
portion (not less than $150,000) of the Company's future obligation to pay
royalties may be converted at any time at the option of MDS into shares of
Common Stock at a conversion price equal to (i) with respect to that portion of
such royalties as is equal to up to 50% of the amount of the NPLP Development
Financing, the lesser of (a) $4.52 and (b) the price per share of the Common
Stock reflected in the Company's most recent financing prior to any conversion
and (ii) with respect to that portion of such royalties as is equal to the
remaining 50% of the amount of the NPLP Development Financing, the lesser of (a)
$5.42 and (b) the price per share of the Common Stock reflected in the Company's
most recent financing prior to any conversion. If NPLP were to exercise its
warrants and its conversion rights in full, NPLP would beneficially own 336,403
shares of the Company's Common Stock (or approximately 8.6% of the Common Stock
outstanding). See "Principal Stockholders."

In connection with the NPLP Development Financing, Michael J. Callaghan,
a principal of MDS, became a member of the Board of Directors of the Company.

AGREEMENT WITH ENDOCON

In June 1994, the Company entered into an agreement with Endocon (the
"Endocon Agreement") to co-develop certain estrogens within subcutaneous drug
delivery vehicles. As currently in effect, the Endocon Agreement focuses on the
development of 17b-estradiol within a subcutaneous drug delivery vehicle for the
treatment of Alzheimer's disease (NEURESTROL). Neither the Company nor Endocon
is obligated to pay the other for any rights to intellectual property underlying
the Endocon Agreement or for development of the product. The Company and Endocon
are currently in discussions regarding the execution of a license agreement for
NEURESTROL which will supercede the Endocon Agreement.

Robert J. Leonard, the acting CEO and a member of the board of directors
of Endocon, became the Secretary and a Director of the Company in 1995 and its
Vice President of Business Development in June 1996. Mr. Leonard will be
excluded from acting on behalf of the Company in the negotiation and approval of
any new license agreement with Endocon.

The Company believes that the foregoing transactions were in its best
interests. It is the Company's current policy that all transactions by the
Company with officers, directors, 5% stockholders and their affiliates will be
entered into only if those transactions are approved by a majority of the
disinterested independent directors, are on terms no less favorable to the
Company than could be obtained from unaffiliated parties and are reasonably
expected to benefit the Company.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the
ownership of the Common Stock as of April , 1997 (i) by each person known by
the Company to own beneficially five percent or more of its Common Stock, (ii)
by each director of the Company, (iii) by the Chief Executive Officer of the
Company and (iv) by all directors and executive officers of the Company as a
group:

SHARES BENEFICIALLY
SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING OWNED AFTER OFFERING
----------------------- -----------------------
BENEFICIAL OWNER(2) NUMBER(1) PERCENT NUMBER(1) PERCENT
- --------------------------------------------------------------------- ---------- ----------- ---------- -----------

Neuroscience Partners
Limited Partnership(3) .............................................. 336,403 11.6% 336,403 8.6%
c/o MDS Associes--Neuroscience Inc.
100 International Boulevard
Etobicoke, Ontario

Alan Gelband(4) ..................................................... 338,709 12.5 338,709 9.1
c/o Gelband Capital
575 Madison Avenue--8th Floor
New York, New York

Katherine Gordon, Ph.D.(5) .......................................... 308,901 11.1 308,901 8.2

Donna B. Cohen ...................................................... 231,870 8.6 231,870 6.3
3311 N.E. 26th Avenue
Lighthouse Point, Florida

Michael J. Callaghan(6).............................................. 336,403 11.6 336,403 8.6

Theodore J. Gordon(7)................................................ 108,386 4.0 108,386 2.9

Robert J. Leonard(8)................................................. 58,064 2.1 58,064 1.5

George W. Masters(9)................................................. 1,935 * 1,935 *

Donald L. Weise(9)................................................... 1,935 * 1,935 *

All directors and executive officers as a group (7 persons)(10)...... 820,462 26.8% 820,462 20.2%

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

* Indicates less than one percent

(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of Common Stock subject to stock options and
warrants currently exercisable or exercisable within 60 days are deemed to
be outstanding for computing the percentage ownership of the person
holding the options and the percentage ownership of any group of which the
holder is a member, but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown beneficially owned by them.

(2) Except as otherwise indicated the address of each stockholder identified
is c/o the Company, One Kendall Square, Building 200, Suite 2200,
Cambridge, Massachusetts 02139.

(3) Includes (i) 96,773 shares subject to warrants currently exercisable or
exercisable within the 60-day period following April , 1997, and (ii)
101,381 shares issuable upon conversion of a right to receive future
royalty payments. MDS Associes-Neuroscience Inc. is the sole general
partner of Neuroscience Partners Limited Partnership. Michael J.
Callaghan, a principal of MDS, is a director of the Company.

(4) Includes (i) 9,677 shares and 9,677 additional shares subject to warrants
currently exercisable or exercisable within the 60-day period following
April , 1997, each held of record by the Alden Foundation, and (ii)
29,032 shares of Common Stock owned by the Alan Gelband Company Defined
Contribution Pension Plan & Trust.

(5) Includes 77,418 shares subject to stock options and 9,677 shares subject
to warrants, each currently exercisable or exercisable within the 60-day
period following April , 1997. Dr. Gordon disclaims beneficial ownership
of shares beneficially owned by her father, Mr. Theodore J. Gordon.

(6) Consists of shares owned of record by or subject to purchase rights of
Neuroscience Partners Limited Partnership.

(7) Includes 1,935 shares subject to stock options and 9,677 shares subject to
warrants, each currently exercisable or exercisable within the 60-day
period following April , 1997. Mr. Gordon disclaims beneficial ownership
of shares beneficially owned by his daughter, Dr. Katherine Gordon.

(8) Consists of 58,064 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April , 1997.

(9) Consists of 1,935 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April , 1997.

(10) Includes (i) 136,451 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April , 1997, (ii)
116,129 shares subject to warrants currently exercisable or exercisable
within 60-day period following April , 1997, and (iii) 101,381 shares
currently issuable upon conversion of a right to receive future royalty
payments.

DESCRIPTION OF SECURITIES

Upon the closing of this offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, $0.02 par value per
share, and 1,000,000 shares of Preferred Stock, $0.01 par value per share. As of
the date of this Prospectus, the Company had approximately 70 stockholders. Upon
the closing of this offering, the Company will have 3,719,985 shares of Common
Stock outstanding.

While the following description of the Warrants, Common Stock and
Preferred Stock includes a description of all material provisions relating to
these securities, it does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Amended and
Restated Certificate of Incorporation, the form of which is included as an
exhibit to the Registration Statement, and by the provisions of applicable law.

UNITS

Each Unit offered hereby consists of two shares of Common Stock and one
Warrant. Each Warrant entitles the holder thereof to purchase one share of
Common Stock.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on matters to
be voted upon by the stockholders. There are no cumulative voting rights.
Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. Upon
the liquidation, dissolution or winding up of the Company, holders of Common
Stock would share ratably in the assets of the Company available for
distribution to its stockholders, subject to the preferential rights of any then
outstanding shares of Preferred Stock. The Common Stock outstanding upon the
effective date of the Registration Statement, and the Units offered by the
Company hereby, upon issuance and sale, will be fully paid and nonassessable.

PREFERRED STOCK

The Company's Board of Directors has the authority to issue up to
1,000,000 shares of Preferred Stock, in one or more series, and to fix the
relative rights, preferences, privileges, qualifications, limitations and
restrictions thereof, including dividends rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of any series, without further vote or action by the stockholders. The Board of
Directors could, without the approval of the stockholders, issue Preferred Stock
having voting or conversion rights that could adversely effect the voting power
of the holders of Common Stock and the issuance of Preferred Stock could be
used, under certain circumstances, to render more difficult or discourage a
hostile takeover of the Company. No shares of Preferred Stock will be
outstanding immediately following the closing of the offering and the Company
has no present plans to issue any shares of Preferred Stock.

THE WARRANTS OFFERED

The following discussion of the terms and provisions of the Warrants is
qualified in its entirety by reference to that certain warrant agreement (the
"Warrant Agreement") between the Company and American Stock Transfer and Trust
Company as the warrant agent (the "Warrant Agent"). The Warrants will be
evidenced by warrant certificates in registered form.

As of the close of this offering, the Company will have 500,000 Warrants
outstanding as part of the Units, assuming that the Underwriters' over-allotment
option is not exercised and assuming that none of the Warrants is exercised.

The holder of each Warrant is entitled to purchase one share of Common
Stock at an exercise price of $6.50. The Warrants are exercisable at any time
after issuance until the fifth anniversary of the date of this Prospectus,
provided that at that time, a current prospectus under the Securities Act
relating to the Common Stock is then in effect and the Common Stock is qualified
for sale or exempt from qualification under applicable state securities laws.
The Warrants are subject to redemption, as described below.

Commencing one year from the date of this Prospectus, the Warrants are
subject to redemption by the Company, on not less than 30 days' prior written
notice, at a price of $0.25 per Warrant, if the average of the closing sale
prices of the Common Stock for any period of 20 consecutive business days ending
within 10 business days of the date on which the notice of redemption is given
shall have exceeded $10.00 per share (subject to adjustment). For these
purposes, the closing sale price of the Common Stock shall be determined by the
closing sale price, as reported by Nasdaq, so long as the Common Stock is quoted
on the Nasdaq SmallCap-SM- Market or if the Common Stock is a Nasdaq National
Market ("NNM") security or listed on a securities exchange, shall be determined
by the last reported sales price. The Company's redemption rights will be in
effect only if the Common Stock is either quoted on Nasdaq or listed on a
securities exchange. Holders of Warrants will automatically forfeit their rights
to purchase the shares of Common Stock issuable upon exercise of their Warrants
unless the Warrants are exercised before they are redeemed. A notice of
redemption will be mailed to each of the registered holders of the Warrants no
later than 30 days before the date fixed for redemption. The notice of
redemption shall specify the redemption price, the date fixed for redemption,
the place where the Warrant certificates shall be delivered and the date of
expiration of the right to exercise the Warrants.

The Warrants may be exercised upon surrender of the certificate therefor
on or prior to the expiration or redemption date (as explained above) at the
offices of the Company's Warrant Agent with the form of "Election to Purchase"
on the reverse side of the certificate filled out and executed as indicated,
accompanied by payment (in the form of a certified or cashier's check payable to
the order of the Company) of the full exercise price for the number of Warrants
being exercised.

Upon exercise of the Warrants, at any time after the first anniversary
of the date of this Prospectus, the Representatives shall be entitled to receive
five percent of the exercise price of such Warrants; provided, however, that
such payment shall not be made to the Representatives with respect to the
exercise of any Warrant (i) that has an exercise price greater than the current
market value of the Common Stock on the date of exercise, (ii) that is held in a
discretionary account at the time of exercise and for which specific, prior
approval for exercise has not been received from the registered holder thereof,
or (iii) the exercise of which was not solicited by the Representatives.

The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price and the number of shares issuable
upon exercise in certain events, like stock dividends, stock splits, mergers or
consolidations and other unusual events.

The Company is not required to issue fractional shares and, in lieu
thereof, will make a cash payment based upon the then current market value of
any fractional shares. The holder of a Warrant will not have any rights as a
stockholder of the Company unless and until the Warrant is exercised.

OTHER WARRANTS AND CONVERSION RIGHTS

issued (i) an aggregate of $75,000 in principal amount of Convertible Promissory
Notes (the "1995 Notes") which were due on the earlier of April 30, 1997 or the
closing by the Company of a private placement financing yielding gross proceeds
of not less than $1,000,000 and (ii) warrants to purchase an aggregate of 48,387
shares of the Company's Common Stock exercisable at $1.55 per share. In
September 1996, the 1994 Notes were converted into 87,096 shares of Common Stock
and, in December 1996, the 1995 Notes were converted into 48,387 shares of
Common Stock.

In December 1996, the Company consummated the NPLP Development
Financing. In exchange for the NPLP Development Financing, the Company is
obligated to pay NPLP royalties based upon a certain percentage of revenues
earned from sales of, and license fees and other revenues received by the
Company in connection with, any products developed that relate to the use of
estrogen in the treatment of chronic, neurodegenerative diseases. The Company's
obligations to pay royalties cease when royalty payments reach certain aggregate
amounts. In connection with the NPLP Development Financing, NPLP received (i)
warrants to purchase 67,741 shares of Common Stock at an exercise price of $3.61
per share and (ii) warrants to purchase 29,032 shares of Common Stock at an
exercise price of $4.52 per share. All or any portion (not less than $150,000)
of the Company's future obligations to pay royalties may be converted at any
time at the option of MDS into shares of Common Stock at a conversion price
equal to (i) with respect to that portion of such royalties as is equal to up to
50% of the amount of the NPLP Development Financing, the lesser of (a) $4.52 and
(b) the price per share of the Common Stock reflected in the Company's most
recent financing prior to any conversion and (ii) with respect to that portion
of such royalties as is equal to the remaining 50% of the amount of the NPLP
Development Financing, the lesser of (a) $5.42 and (b) the price per share of
the Common Stock reflected in the Company's most recent equity financing prior
to any conversion. If NPLP were to exercise its warrants and conversion rights
in full, NPLP would beneficially own 336,403 shares of the Company's Common
Stock (or approximately 8.6% of the Company Stock outstanding). See "Principal
Stockholders."

At the time of the NPLP Development Financing, Michael J. Callaghan, a
principal of MDS, became a member of the Board of Directors of the Company.

STOCK OPTIONS

The Company has reserved 387,096 shares of Common Stock for issuance
under the 1993 Option Plan, of which 222,575 shares are subject to outstanding
options, and 58,064 shares of Common Stock for issuance under the Director Plan,
of which 17,419 shares are subject to outstanding options. To date, no options
granted under the Company's stock option plans have been exercised.

ANTI-TAKEOVER MEASURES

In addition to the Board of Directors' ability to issue shares of
Preferred Stock, the charter and the By-laws of the Company contain several
other provisions that are commonly considered to discourage unsolicited takeover
bids. The charter includes provisions classifying the Board of Directors into
three classes and staggered three-year terms and prohibiting stockholder action
by written consent. The Board of Directors may also enlarge the size of the
Board and fill any vacancies on the Board. The By-laws provide that nominations
for directors may not be made by stockholders at any annual or special meeting
unless the stockholder intending to make a nomination notifies the Company of
its intention a specified period in advance and furnishes certain information.
The By-laws also provide that special meetings of the Company' stockholders may
be called only by the President or the Board of Directors and require advance
notice of business to be brought by a stockholder before the annual meeting.

In February 1988, a law regulating corporate takeovers (the
"Anti-Takeover Law") took effect in Delaware. In certain circumstances, the
Anti-Takeover Law prevents certain Delaware corporations, including those whose
securities are listed on the Nasdaq SmallCap-SM- Market, from engaging in a
"business combination" (which includes a merger or sale of more than 10% of the
corporation's assets) with an

"interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date on
which that stockholder became an "interested stockholder" subject to certain
exceptions, unless the transaction is approved by the board of directors and the
holders of at least 66 2/3% of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder). The statutory ban does
not apply if, upon consummation of the transaction in which any person becomes
an interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock of the corporation (excluding shares held by persons
who are both directors and officers or by certain employee stock plans). A
Delaware corporation subject to the Anti-Takeover Law may "opt out" of the
Anti-Takeover Law with an express provision either in its certificate of
incorporation or by-laws resulting from a stockholders' amendment approved by at
least a majority of the outstanding voting shares. This type of amendment is
effective following expiration of twelve months from adoption. The Company is a
Delaware corporation that is subject to the Anti-Takeover Law and has not "opted
out" of its provisions.

The foregoing provisions of Delaware law and the Restated Certificate
and By-laws could have the effect of discouraging others from attempting a
hostile takeover of the Company and, as a consequence, they may also inhibit
temporary fluctuations in the market price of the Common Stock that might result
from actual or rumored hostile takeover attempts. These provisions may also have
the effect of preventing changes in the management of the Company. It is
possible that these provisions could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.

REGISTRATION RIGHTS

NPLP, which is the holder of 138,249 shares of Common Stock, warrants to
purchase 96,773 shares of Common Stock and rights to convert the NPLP
Development Financing into shares of Common Stock (collectively, the
"Registrable Shares"), is entitled to certain rights with respect to
registration under the Securities Act of the Registrable Shares. If the Company
proposes to register any of its securities under the Securities Act at any time
after the consummation of this offering, either for its own account or for the
account of other security holders, NPLP is entitled to notice of any such
registration and is entitled to include Registrable Shares in the registration.
The rights are subject to certain conditions and limitations, among them, the
right of the underwriters of a registered offering to limit the number of shares
included in the registration. NPLP may also require the Company to file at its
expense a registration statement under the Securities Act with respect to
138,249 of the Registrable Shares at any time commencing 13 months from the
consummation of this offering and with respect to all Registrable Shares at any
time commencing 25 months from the consummation of this offering and, subject to
certain conditions and limitations, the Company is required to effect a
registration. Furthermore, NPLP may, subject to certain conditions and
limitations, require the Company to file additional registration statements on
Form S-3 with respect to the Registrable Shares.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 3,719,985 shares
of Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option or of any other outstanding options. Of these shares, the
1,000,000 shares sold in this offering as part of the Units may not be
separately traded or transferred until 12 months after the date of this
Prospectus or such earlier date as may be determined by the Representatives.

The remaining 2,719,985 shares held by officers, directors, employees,
consultants and other stockholders of the Company were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act
and are "restricted" securities within the meaning of Rule 144 under the
Securities Act (the "Restricted Shares"). These may not be resold, except
pursuant to an effective registration statement or an applicable exemption from
registration. Of these remaining shares, approximately shares will be
eligible for sale under Rule 144 on the Effective Date. Stockholders of the
Company holding the remaining shares of Common Stock have agreed not to
offer, sell, pledge, hypothecate or otherwise dispose of any shares of the
Company's Common Stock for a period of 13 months after the effective date of the
Registration Statement of which this prospectus is a part (the "Effective Date")
without the prior written consent of the Representatives. As a result of these
contractual restrictions (the "Lock-Up Agreements"), notwithstanding possible
earlier eligibility for sale under the provisions of Rules 144 and 701, shares
subject to Lock-Up Agreements will not be saleable until the agreements expire.
Upon the expiration of the 13-month Lock-Up Agreements, shares subject to
vested options, warrants (other than the Warrants offered hereby and the
Representatives' Warrant) and conversion rights will also become available for
sale, subject to the provisions of Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least one year is entitled to sell, within any three-month period
commencing 90 days after the Effective Date, a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock
( shares immediately after this offering) or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding the
sale, subject to the filing of a Form 144 with respect to the sale and certain
other limitations and restrictions. In addition, a person, other than an
affiliate or an individual who was an affiliate within 90 days of the proposed
sale, who has beneficially owned the shares proposed to be sold for at least
three years, would be entitled to sell those shares under Rule 144(k) without
regard to the requirements described above.

Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding period restrictions, in each case commencing 90
days after the Effective Date. However, all officers and directors and certain
other stockholders have agreed, in the Lock-Up Agreements, not to sell or
otherwise dispose of Common Stock or the Company for the 13-month period after
the Effective Date without the prior written consent of the Representatives. See
"Underwriting."

The Company intends to file S-8 registration statements under the
Securities Act to register all shares of Common Stock issuable under the 1993
Option Plan and the Director Plan. Shares covered by this kind of registration
statement will be eligible for sale in the public market immediately upon filing
of the registration statement, subject to Rule 144 limitations applicable to
affiliates and the expiration of the Lock-Up Agreements, if applicable.

Prior to this offering, there has been no public market for the
securities of the Company and no prediction can be made as to the effect, if
any, that market sales or the availability of securities for sale will have on
the market prices of the Company's securities. Nevertheless, sales of
substantial amounts of the Company's securities in the public market may have an
adverse impact on the market price of such securities and could impair the
Company's ability to raise capital through future sales of its equity
securities.

UNDERWRITING

The Underwriters named below, acting through Neidiger/Tucker/Bruner,
Inc. and Westport Resources Investment Services, Inc. (the "Representatives"),
have jointly and severally agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company the respective number of
Units set forth opposite their names below at the initial public offering price
less the underwriting discount set forth on the cover page of this Prospectus.

UNDERWRITER NUMBER OF UNITS
- --------------------------------------------------------------------------------------- ---------------

Neidiger/Tucker/Bruner, Inc............................................................
Westport Resources Investment Services, Inc............................................
---------------
Total............................................................................ 500,000
---------------
---------------

The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Units offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to purchase 500,000 Units, if
any are purchased.

The Underwriters propose to offer part of the Units offered hereby
directly to the public at the offering price and part of such Units to certain
dealers at a price that represents a concession within the discretion of the
Representatives. The Underwriters do not intend to confirm sales to accounts
over which they exercise discretionary authority. The Underwriters may allow,
and such dealers may re-allow, a concession within the discretion of the
Representatives. After the initial offering, the offering price and the selling
terms may be changed by the Underwriters.

The Units offered by the Underwriters are subject to prior sale. The
Underwriters reserve the right to withdraw, cancel or modify such offer (which
may be done only by filing an amendment to the Registration Statement) and to
reject orders in whole or in part for the purchase of the Units and to cancel
any sale even after the purchase price has been paid if such sale, in the
opinion of the Underwriters, would violate federal or state securities laws or a
rule or policy of the NASD.

The Company and the Underwriters have agreed to indemnify each other and
related persons against certain liabilities, including liabilities under the
Securities Act, and, if such indemnifications are unavailable or are
insufficient, the Company and the Underwriters have agreed to damage
contribution arrangements between them based upon the relative benefits received
from the offering and the relative fault resulting in such damages. Such
relative benefits and relative fault would be determined in legal actions among
the parties.

Except for the outstanding securities described herein and except upon
the exercise of the options and warrants described herein, the Company has
agreed not to sell any additional securities for 12 months after the date of
this Prospectus without the Representatives' prior written consent. Each of the
Company's directors and officers and certain other employees and security
holders have entered into agreements which provide that such persons, who own an
aggregate of shares of Common Stock, may not publicly offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock during a
13-month period after the date of this Prospectus without the Representatives'
prior written consent. See "Shares Eligible for Future Sale."

The Company has granted to the Underwriters an option exercisable for 45
days from the date of this Prospectus to purchase up to 75,000 additional Units
from the Company at the same price per Unit that the Underwriters pay for the
500,000 Units. The Underwriters may exercise their option only for the purpose
of covering over-allotments made in the sale of the 500,000 Units offered
hereby. In addition, the Company has agreed to pay to the Representatives at the
closing of the offering, a non-accountable expense allowance of 3% of the
aggregate initial public offering price of the Units to cover expenses

incurred by the Representatives in connection with the offering, reduced by
amounts previously advanced by the Company.

The Company has agreed to issue for a nominal consideration, warrants to
the Representatives (the "Representatives' Warrants") and their designees to
purchase 50,000 Units. The Warrants are exercisable at any time during the
four-year period commencing 12 months after the date of this Prospectus at
$12.30 per Unit. The Representatives' Warrants are not transferable except (i)
to an Underwriter or a partner or officer of an Underwriter or (ii) by will or
operation of law. Any profit realized on the sale of the Representatives'
Warrants or the underlying securities may be deemed additional underwriting
compensation. Commencing one year and ending five years from the date hereof,
holders of the Representatives' Warrants and the securities underlying the
Representatives' Warrants will have a one-time right to demand registration of
the securities underlying the Representatives' Warrants at the Company's expense
in order to effect a public offering thereof, and "piggyback" rights to require
registration of the securities underlying the Representatives' Warrants in
certain registration statements filed by the Company with the Securities and
Exchange Commission. Such registration rights may be transferred to any
subsequent holder of the Representatives' Warrants and the underlying
securities. The Representatives' Warrants and the underlying securities have
been registered under the Securities Act by means of the Registration Statement
of which this Prospectus is a part.

Prior to this offering there has been no public market for the Company's
securities. The initial public offering price of the Units has been determined
by negotiations between the Company and the Representatives. Among the factors
considered in determining the initial public offering price of the Units, in
addition to prevailing market conditions, has been the Company's historical
performance, estimates of the business potential and earnings potential of the
Company, an assessment of the Company's management and the consideration of such
factors in relation to market valuation of companies in related businesses. The
offering price of the Units bears no relationship to the assets, net worth, book
value, sales price of securities issued to shareholders of the Company, or any
other criteria of value.

The Company has agreed that for a period of three years after the date
of this Prospectus, Neidiger/Tucker/Bruner, Inc. shall have the right to
designate one person as an advisor to the Company's Board of Directors. That
person will be reimbursed for his or her expenses in attending meetings of the
Board but will have no power to vote as a director. The person will be
indemnified by the Company against any claim arising out of his or her
attendance at meetings of the Board or advice to the Board to the maximum extent
permitted by law. During the three-year period, the Company has agreed with the
Representatives to hold meetings of its Board at least once each calendar
quarter. In the event the Company maintains a liability insurance policy with
coverage of acts of its officers and directors, the Company has agreed that, if
possible, it will include the advisor designee as an insured under the policy.
Any advisor designated by the Representatives shall be acceptable to the
Company, which acceptance shall not be unreasonably withheld.

Neidiger/Tucker/Bruner, Inc. agreed to provide investment banking
services to the Company upon completion of this offering for a period of three
years for an aggregate fee of $70,000, payable at the closing of this offering.
The consulting arrangement will not require the Representatives to devote a
specific amount of time to the performance of its duties thereunder.

The Company has agreed that, upon exercise of the Redeemable Warrants at
any time after the first anniversary date of this Prospectus, the
Representatives shall be entitled to receive 5% of the exercise price of such
Warrants; provided, however, that such payment shall not be made to the
Representatives with respect to the exercise of any warrant (i) that has an
exercise price greater than the current market value of the Common Stock on the
date of exercise (ii) that is held in a discretionary account at the time of
exercise and for which specific, prior approval for exercise has not been
received from the registered holder thereof, or (iii) the exercise of which was
not solicited by the Representatives.

The foregoing is a summary of the principal terms of the Underwriting
Agreement and the other agreements referenced and does not purport to be
complete. Reference is made to copies of each such agreement which are filed as
exhibits to the Registration Statement of which this Prospectus is a part. See
"Additional Information."

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for
the Company by Palmer & Dodge LLP, Boston, Massachusetts. Certain legal matters
relating to the offering will be passed upon for the Underwriters by John G.
Herbert, P.C., Denver, Colorado.

EXPERTS

The financial statements of the Company at December 31, 1996 and for
each of the years in the two-year period then ended, appearing in this
Prospectus and the Registration Statement have been audited by Richard A. Eisner
& Company, LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
herein in reliance upon that report given upon the authority of that firm as
experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form SB-2 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act relating to the Units offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement,
and the exhibits and schedules thereto, which may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of the
contract or other document filed as an Exhibit to the Registration Statement,
each statement being qualified in all respects by that reference. Copies of
these materials may be obtained upon written request from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates, or may be accessed electronically through the Commission's
home page on the Internet at http://www.sec.gov.

The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and will
make available copies of quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.

GLOSSARY OF TECHNICAL TERMS

Acetylcholine A neurotransmitter.

Alzheimer's disease A disease of presenile dementia which is characterized by
loss of memory and cortical atrophy in frontal and temporal
lobes of the brain.

Amyloid plaques Degenerating neuron components surrounding a core of
("Plaques") B-amyloid.

Animal model An animal which can be used to study a human disease or
condition due to resemblance to disease or condition.

Cholinergic neurons Neurons that use acetylcholine as a neurotransmitter.

Dehydroepiandrosterone A steroid hormone which is a product of cholesterol and is a
(DHEA) precursor to androgens and estrogen.

Dehydroepiandrosterone A sulfated form of DHEA.
sulfate (DHEAS)

Dementia Deterioration or loss of intellectual faculties, reasoning
power and memory due to organic brain disease.

Dopamine A neurotransmitter.

Dopaminergic neurons Neurons that use dopamine as a neurotransmitter.

Endocrine A gland or system responsible for secretion of hormones
directly into the bloodstream.

Estrogen A hormone, produced principally by the ovaries, which
stimulates the accessory sex structures.

Growth factor A substance, either genetic or extrinsic, which affects
growth.

Growth hormone A hormone that promotes growth and also has direct influence
on metabolism of carbohydrates, fats and proteins.

Hippocampus A region of the brain involved in cognitive function and
memory.

Hormone A chemical product of an organ which has a specific
regulatory effect on cells remote from its origin.

Hormone replacement therapy Replacement or supplementation of hormones which are
deficient in the body.

IN VITRO Refers to studies and/or phenomena that take place outside
the body (e.g., in test tubes).

IN VIVO Refers to studies and/or phenomena that take place inside
the body of animals or humans.

IND Investigational New Drug application. A formal notice
submitted to the FDA for review and approval prior to
beginning clinical trials to evaluate a new drug.

Lewy bodies Characteristic masses found within cells of degenerating
neurons in certain brain regions.

NEURESTOL A registered trademark of Endocon representing 17b-estradial
within a subcutaneous delivery system for use in the
prevention of neurodegeneration.

NEUROCALC A trademark of the Company representing calcitriol for use
in the prevention of neurodegeneration.

Neurodegeneration Refers to degeneration or death of cells in the nervous
system.

Neuroendocrine Pertaining to the nervous and endocrine systems in anatomic
or functional relationship.

Neuroendocrine aging Refers to age-related changes in the neuroendocrine system.

Neurofibrillary tangles Refers to thick, twisted bands of fibrous material which
("Tangles") deposits irregularly in the cytoplasm in degenerating
neurons.

ABPI-124 The Company's working name for certain novel estrogens for
use in the prevention of neurodegeneration.

Neurotransmitter A chemical messenger responsible for transmitting signals
from sending to receiving neurons.

Osteoporosis A condition in which bone tissue is decreased, resulting in
enlargement of marrow and decreased thickness of bone
cortex.

Parkinson's disease A disease characterized by tremor and rigidity caused by
damage to pigmented brainstem nuclei.

Progesterone A steroid hormone secreted by the ovary which is essential
for maintenance of pregnancy.

Prophylaxis A method of maintaining health or preventing disease.

Receptor A specific structure on a cell's surface to which a hormone
or other interactive molecule binds to affect cellular
function in a specific way.

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
- I N D E X -

PAGE
NUMBER
-----------

REPORT OF INDEPENDENT AUDITORS.......................................................................... F-2

BALANCE SHEETS.......................................................................................... F-3

STATEMENTS OF OPERATIONS................................................................................ F-4

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)................................................. F-5

STATEMENTS OF CASH FLOWS................................................................................ F-6

NOTES TO FINANCIAL STATEMENTS........................................................................... F-7

F-1

REPORT OF INDEPENDENT AUDITORS

After the amendment to the Certificate of Incorporation of Apollo
BioPharmaceutics, Inc. to effect the reverse stock split discussed in Note A to
the financial statements, we expect to be in a position to render the following
audit report.

/s/ Richard A. Eisner & Company, LLP

Cambridge, Massachusetts
April 28, 1997

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Apollo BioPharmaceutics, Inc.
Cambridge, Massachusetts

We have audited the accompanying balance sheet of Apollo
BioPharmaceutics, Inc. (a development stage company) as at December 31, 1996 and
December 31, 1995, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for each of the years in the
two-year period ended December 31, 1996, and for the period from July 9, 1992
(inception) through December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of Apollo
BioPharmaceutics, Inc. at December 31, 1996 and December 31, 1995, and the
results of its operations and its cash flows for each of the years in the
two-year period ended December 31, 1996, and for the period from July 9, 1992
(inception) through December 31, 1996 in conformity with generally accepted
accounting principles.

/s/ Richard A. Eisner & Company, LLP

Cambridge, Massachusetts
February 4, 1997
As to Note H,
March 26, 1997

F-2

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS

DECEMBER 31,
----------------------------
1995 1996
------------- -------------

ASSETS

Current assets:
Cash and cash equivalents................................................... $ 246,721 $ 1,254,250
Equipment, net of accumulated depreciation of $415 at
December 31, 1996........................................................... 3,736

Organization costs, net of accumulated amortization of $3,584 and $4,633 at
December 31, 1995 and 1996, respectively (Note B)........................... 1,661 612
Deferred public offering costs................................................ 219,165
------------- -------------
TOTAL................................................................... $ 248,382 $ 1,477,763
------------- -------------
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses....................................... $ 211,923 $ 299,179
Notes payable (Note C)........................................................ 204,400
Deferred credit (Note E)...................................................... 180,000

Commitments (Note E)

Stockholders' equity (deficit) (Notes D and H):
Preferred stock--$.01 par value; 1,000,000 shares authorized, none issued
Common stock--$.02 par value; 20,000,000 shares authorized, 2,278,017 and
2,719,985 shares issued at December 31, 1995 and 1996, respectively....... 45,560 54,400
Additional paid-in capital.................................................. 1,158,960 2,720,036
Deficit accumulated during the development stage............................ (1,372,461) (1,775,852)
------------- -------------
Total stockholders' equity (deficit).................................... (167,941) 998,584
------------- -------------
TOTAL................................................................... $ 248,382 $ 1,477,763
------------- -------------
------------- -------------

Attention is directed to the accompanying notes to financial statements.

F-3

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS

JULY 9, 1992
YEAR ENDED (INCEPTION)
DECEMBER 31, 1996 THROUGH
------------------------ DECEMBER 31,
1995 1996 1996
----------- ----------- -------------

Revenue:
Licensing and option revenue (Note B[1])............................... $ -- $ 180,000 $ 180,000
Interest income........................................................ 2,535 11,032 23,103
----------- ----------- -------------
Total revenue...................................................... 2,535 191,032 203,103
----------- ----------- -------------

Expenses:
Research and development............................................... 131,842 199,516 666,354
General and administrative............................................. 255,592 358,833 1,241,742
Depreciation and amortization expense.................................. 1,049 2,964 6,548
Interest expense....................................................... 31,201 33,110 64,311
----------- ----------- -------------
Total expenses..................................................... 419,684 594,423 1,978,955
----------- ----------- -------------

NET LOSS................................................................. $ (417,149) $ (403,391) $ (1,775,852)
----------- ----------- -------------
----------- ----------- -------------

Net loss per share....................................................... $ (.17) $ (.15)
----------- -----------
----------- -----------

Weighted average number of shares outstanding............................ 2,441,692 2,700,358

Attention is directed to the accompanying notes to financial statements.

F-4

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

DEFICIT
COMMON STOCK ACCUMULATED
$.02 PAR VALUE ADDITIONAL DURING
--------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- --------- ------------ ------------- -----------

Sale of common stock at $.10 per share from inception
through December 31, 1992............................. 396,765 $ 7,935 $ 33,065 $ 41,000
Issuance of common stock for services at $.10 per share
from inception through December 31, 1992.............. 38,709 774 3,226 4,000
Net loss for the year ended December 31, 1992........... $ (77,972) (77,972)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1992.............................. 435,474 8,709 36,291 (77,972) (32,972)
Additional shares sold at $.10 per share................ 774,178 15,484 64,516 80,000
Shares issued for services at $.10
per share............................................. 104,514 2,090 8,710 10,800
Sale of common stock in connection with private
placement of stock at $1.03 per share................. 619,342 12,387 627,613 640,000
Costs related to private placement...................... (36,530) (36,530)
Shares issued for services at $1.03 per share........... 5,806 116 5,884 6,000
Net loss for the year ended
December 31, 1993..................................... (354,333) (354,333)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1993.............................. 1,939,314 38,786 706,484 (432,305) 312,965
Repurchase of common stock by the Company and
cancellation of shares................................ (9,677) (194) (806) (1,000)
Common stock warrants issued in connection with notes
payable............................................... 6,750 6,750
Net loss for the year ended December 31, 1994........... (523,007) (523,007)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1994.............................. 1,929,637 38,592 712,428 (955,312) (204,292)
Sale of common stock at $1.29 per share................. 348,380 6,968 443,032 450,000
Costs of raising capital................................ (12,250) (12,250)
Purchase (for $8,000) and resale
(for $20,000) of 38,709 shares of common stock........ 12,000 12,000
Common stock warrants issued in connection with notes
payable............................................... 3,750 3,750
Net loss for the year ended December 31, 1995........... (417,149) (417,149)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1995.............................. 2,278,017 45,560 1,158,960 (1,372,461) (167,941)
Shares issued for services at $1.55 per share........... 16,170 323 24,743 25,066
Conversion of debt into common stock.................... 135,481 2,710 203,190 205,900
Sale of common stock in connection with private
placement of stock at $3.61 per share................. 152,068 3,042 546,958 550,000
Sale of common stock in connection with an agreement at
$3.61 per share (Note E).............................. 138,249 2,765 497,235 500,000
Common stock warrants issued (Note E)................... 190,000 190,000
Amount allocated to conversion privilege (Note E)....... 130,000 130,000
Costs allocated to stock issued (Note E)................ (31,050) (31,050)
Net loss for the year ended December 31, 1996........... (403,391) (403,391)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1996.............................. 2,719,985 $ 54,400 $ 2,720,036 $ (1,775,852) $ 998,584
---------- --------- ------------ ------------- -----------
---------- --------- ------------ ------------- -----------

Attention is directed to the accompanying notes to financial statements.

F-5

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS

YEAR ENDED JULY 9, 1992
DECEMBER 31, 1996 (INCEPTION)
------------------------- THROUGH
1995 1996 DECEMBER 31,
----------- ------------ -------------

Cash flows from operating activities:
Net loss.............................................................. $ (417,149) $ (403,391) $(1,775,852)
Adjustments to reconcile net loss to net cash (used in) operating
activities:
Depreciation and amortization....................................... 1,049 2,964 8,110
Common stock issued for services rendered........................... 25,066 45,866
Organization costs.................................................. (5,245)
Increase in accounts payable and accrued expenses................... 163,071 66,256 306,517
----------- ------------ -------------
Net cash (used in) operating activities........................... (253,029) (309,105) (1,420,604)
----------- ------------ -------------
Cash flows from investing activities:
Purchase of equipment................................................. (4,151) (4,151)
----------- ------------ -------------
Cash flows from financing activities:
Sale of common stock.................................................. 445,000 1,050,000 2,256,000
Stock offering costs.................................................. (12,250) (31,050) (79,830)
Repurchase of common stock............................................ (8,000) (9,000)
Proceeds from notes payable........................................... 75,000 210,000
Proceeds from royalty purchase agreement (Note E)..................... 500,000 500,000
Deferred public offering costs........................................ (198,165) (198,165)
----------- ------------ -------------
Net cash provided by financing activities......................... 499,750 1,320,785 2,679,005
----------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... 246,721 1,007,529 1,254,250

Cash and cash equivalents at beginning of period........................ 246,721
----------- ------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............................. $ 246,721 $ 1,254,250 $ 1,254,250
----------- ------------ -------------
----------- ------------ -------------
Supplemental disclosures of cash flow information:
Interest paid......................................................... 15,000 $ 49,311 64,311
Accounts payable converted into stock................................. 25,000 25,000
Notes payable converted to common stock............................... 210,000 210,000

Attention is directed to the accompanying notes to financial statements.

F-6

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(NOTE A)--THE COMPANY:

Apollo BioPharmaceutics, Inc. (formerly Apollo Genetics, Inc.) (the
"Company"), was incorporated on July 9, 1992. The Company's objective is to
develop biopharmaceutical products for deterring aspects of human aging.

The Company is in the development stage and its efforts through December
31, 1996 have been principally devoted to organizational activities, raising
capital and initial research and development activities. It does not expect
commercial operations in the foreseeable future. The Company anticipates that it
will need substantial additional financing to complete its research and to
develop commercial products. The Company is endeavoring to obtain additional
financing for the next phase of its research activities; however, there is no
assurance that such financing can be obtained or that the Company's research
will be successful.

In 1996 the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission for the initial public
offering of shares of the Company's common stock and the Company amended its
Certificate of Incorporation whereby, among other things, the following changes
were effected:

[1] The name of the Company was changed from Apollo Genetics, Inc. to Apollo
BioPharmaceutics, Inc.

[2] A reverse stock split of 1 for 3 1/3 shares of common stock and all
securities of the Company convertible into common stock was made.

[3] The number of authorized shares of the Company's preferred stock was
reduced from 4,000,000 to 1,000,000 shares.

In April 1997, the Company's Board of Directors proposed a further
amendment of the Company's Certificate of Incorporation whereby an additional
reverse stock split of 1 for 1.55 shares of common stock and all securities of
the Company convertible into common stock would be made.

All references to preferred stock, common stock, options, warrants and
per share data have been restated to give effect to the above amendments to the
Certificate of Incorporation.

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

[1] REVENUE RECOGNITION:

Licensing and option fees are recognized when they are earned in
accordance with the performance requirements and contractual terms of the
underlying agreements. Licensing revenue represents amounts paid by companies
for the use of or access to the Company's proprietary technology. Option revenue
represents payments for the right to negotiate with the Company which may or may
not result in a licensing or collaborative development agreement.

[2] ORGANIZATION COSTS:

The Company has capitalized certain costs, primarily legal expenses,
related to its organization. These costs are being amortized by the
straight-line method over five years.

F-7

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
[3] PATENT AND LICENSING COSTS:

As a result of research and development efforts conducted by the
Company, it has received and applied for, and is in the process of applying for,
a number of patents to protect proprietary inventions and licenses to use
certain intellectual property. Costs incurred in connection with patent
applications and licenses have been expensed as incurred and are reflected as
general and administrative expenses.

[4] USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

[5] CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments with a maturity of
three months or less, when acquired, to be cash equivalents.

[6] LOSS PER SHARE:

Loss per share is calculated based on the weighted average number of
shares of common stock outstanding during the period. Pursuant to the
requirements of the Securities and Exchange Commission, common shares, or other
potentially dilutive instruments issued by the Company during the twelve months
immediately preceding the expected initial filing of the registration statement
for the Company's proposed initial public offering at prices below the expected
public offering price have been included in the calculation as if they were
outstanding for all periods presented.

Assuming the conversion of the notes discussed in Note C as of January
1, 1995, there would have been no effect on the supplementary loss per share for
any period presented.

[7] RECENT PRONOUNCEMENT:

The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company has adopted the disclosure requirements
of SFAS 123 during the Company's fiscal year ended December 31, 1996, but will
account for its employee stock option plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted under
SFAS 123.

(NOTE C)--NOTES PAYABLE:

During 1994 and 1995, the Company issued $135,000 and $75,000 of 10%
convertible notes payable, respectively. The conversion price of $1.55 per share
was no less than the fair market value of the underlying stock at the time of
the Company's issuance of the notes. The principal amount of the notes
outstanding was $210,000 at December 31, 1995. During 1996, all $210,000 of the
notes were converted into 135,481 shares of common stock. In conjunction with
these notes, the Company issued warrants for the purchase of 135,481 shares of
its common stock. The value assigned to the warrants, amounting to $10,500, has
been accounted for as debt discount and was amortized over the period of time
the notes were

F-8

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE C)--NOTES PAYABLE: (CONTINUED)
outstanding. The effective interest rate on the notes, including the debt
discount, was approximately 12%. The warrants are more fully discussed in Note
D[3].

(NOTE D)--COMMON STOCK, OPTIONS AND WARRANTS:

[1] COMMON STOCK:

Through December 31, 1996, the Company has been financed primarily
through the sale of common stock. Through December 31, 1996, of the 2,719,985
shares issued since inception, 2,554,784 were sold for cash and the remaining
165,201 shares were issued for payment of services rendered to the Company.

[2] OPTION PLAN:

The Company has a stock option plan that provides for the issuance of
both incentive and nonqualified stock options. This plan provides for the
granting of options to purchase not more than 387,096 shares of common stock. In
1996, the Company's Board of Directors also authorized the establishment of the
1996 Directors Stock Option Plan, and reserved 58,064 shares of the Company's
common stock for issuance under the Plan. The exercise price of the incentive
options cannot be less than the fair market value on the date of the grant,
while the exercise price for the nonqualified and Directors plan options is
determined by the option committee.

Option activity for all plans through December 31, 1996 has been as
follows:

WEIGHTED
AVERAGE
NUMBER OF OPTION PRICE
SHARES PER SHARE
----------- ------------

Balance--December 31, 1992.......................................... -0- $-0-
Granted............................................................. 38,710 $1.03
-----------
Balance--December 31, 1993.......................................... 38,710 $1.03
Granted............................................................. 96,774 $1.35
-----------
Balance--December 31, 1994.......................................... 135,484 $1.26
Cancelled........................................................... (58,065) $1.13
Granted............................................................. 116,125 $1.29
-----------
Balance--December 31, 1995.......................................... 193,544 $1.32
Granted............................................................. 46,450 $4.14
-----------
Balance--December 31, 1996.......................................... 239,994 $1.86
-----------
-----------

At December 31, 1996, options to purchase 189,677 shares were
exercisable at an average exercise price of $1.50 per share at prices ranging
from $1.03 to $4.14 per share. The weighted-average contractual life is
approximately 9 years.

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting Principles
Board Opinion No. 25 and related

F-9

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE D)--COMMON STOCK, OPTIONS AND WARRANTS: (CONTINUED)
interpretations in accounting for its plans. There was no compensation expense
recognized in 1995 or 1996. If the Company had elected to recognize compensation
cost for the plans based on the fair value at the grant date for awards under
the plans, consistent with the method prescribed by SFAS No. 123, net loss per
share would have been changed to the pro forma amounts indicated below:

YEAR ENDED DECEMBER 31,
1995 1996
----------- -----------

Net loss As reported $ (417,149) $ (403,391)
Pro forma $ (445,999) $ (449,762)
Net loss per share As reported $ (.17) $ (.15)
Pro forma $ (.18) $ (.17)

The fair value of the Company's stock options used to compute pro forma
net loss and net loss per share disclosures is the estimated present value at
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1995 and 1996: no dividend yield; expected
volatility of 30%; a risk free interest rate of 7.5%; and an expected holding
period of five years.

The weighted-average grant date fair value of options granted was $1.69
per share and $.64 per share for the years ended December 31, 1995 and 1996,
respectively.

[3] WARRANTS:

In conjunction with the notes described in Note C, the Company issued
warrants for the purchase of 135,481 shares of the Company's common stock. The
warrants are exercisable until September 17, 1999 with respect to 87,096
warrants and until April 30, 2000 with respect to 48,387 warrants, all at the
lower of $1.55 per share or the price per share of the common stock at the
closing of the next offering of common stock with aggregate gross proceeds of at
least $1,000,000. The number of shares which may be purchased upon the exercise
of these warrants are subject to adjustment as provided in the warrant agreement
for such events as stock splits and stock dividends.

In conjunction with the Royalty Purchase Agreement described in Note E,
the Company issued warrants for the purchase of 96,774 shares of the Company's
common stock. The warrants are exercisable until November, 2003 at an exercise
price of $3.61 per share with respect to 67,741 shares of Common Stock and an
exercise price of $4.52 per share with respect to 29,032 shares of Common Stock.
The value assigned to the warrants, amounting to $190,000, has been credited to
additional paid-in capital. the number of shares which may be purchased upon the
exercise of these warrants are subject to adjustment as provided in the warrant
agreement for such events as stock splits and stock dividends.

(NOTE E)--COMMITMENTS:

[1] LEASE:

The Company is subleasing its facilities under a tenant-at-will
agreement. Rent expense for the year ended December 31, 1995 and December 31,
1996 amounted to $5,850 and $12,430, respectively.

F-10

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE E)--COMMITMENTS: (CONTINUED)
[2] COLLABORATIVE AGREEMENTS:

The Company has entered into various research, license, royalty and
consulting agreements to support its research and development activities. These
agreements generally expire over several future years. Amounts charged to
operations in connection with these agreements for the year ended December 31,
1995 and 1996 amounted to approximately $55,000 and $106,000, respectively. The
Company expects to increase its research and development expenses in future
years.

In 1996, Neuroscience Partners Limited Partnership ("NPLP"), a limited
partnership of which MDS Associes-NeuroscienceInc. ("MDS") is the general
partner, invested $500,000 in the Company in exchange for 138,249 shares of
Common Stock on the same terms as the other purchasers of Common Stock in the
Company's most recent private placement financing.

Also in 1996, the Company entered into a Royalty Purchase Agreement with
NPLP, pursuant to which NPLP agreed to provide an additional $500,000 (the "NPLP
Development Financing") to the Company. In exchange for the NPLP Development
Financing, the Company is obligated to pay NPLP royalties on sales of, and
license fees and other revenues received by the Company in connection with, any
products developed that relate to the use of estrogen in the treatment of
chronic, neurodegenerative diseases. The Company's obligations to pay royalties
cease when royalty payments reach certain aggregate amounts. In connection with
the NPLP Development Financing, NPLP received warrants to purchase 96,774 shares
of Common Stock. The warrants are more fully discussed in Note D[3]. All or any
portion (not less than $150,000) of the aggregate amount of the NPLP Development
Financing may be converted at any time at the option of MDS into shares of
Common Stock at a conversion price equal to (i)with respect to 50% of the amount
of the NPLP Development Financing, the lesser of (a) $4.52 and (b) the price per
share of Common Stock reflected in the Company's most recent financing prior to
any conversion and (ii) with respect to the remaining 50% of the amount of the
NPLP Development Financing, the lesser of (a) $5.42 and (b) the price per share
of the Common Stock reflected in the Company's most recent equity financing
prior to any conversion. The value assigned to the conversion privilege,
amounting to $130,000, has been credited to additional paid-in capital. The
Royalty Purchase Agreement will continue until the later of (i) ten years from
the date of first commercial sale of any product covered by the Agreement and
(ii) the expiration of the last relevant patent right covered by the
Agreement.The $500,000 received under the royalty purchase agreement was
allocated as follows:

Royalty obligation................. $180,000
Warrants........................... 190,000
Conversion privilege............... 130,000
--------
Total.......................... $500,000
--------
--------

The amount allocated to the royalty obligation will be amortized into
income over the period that the Company is obligated to pay such amounts under
the agreement.

[3] EMPLOYMENT AGREEMENT:

The Company has entered into an employment agreement, which expires in
November 1998, with its president which provides for a current annual salary of
$130,000 and twelve months of severance pay.

F-11

APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE E)--COMMITMENTS: (CONTINUED)
The agreement will automatically extend for additional two-year periods unless
terminated by either party to the agreement.

(NOTE F)--INCOME TAXES:

Through January 1996, pursuant to the provisions of the Internal Revenue
Code, the Company had been deferring all start-up costs because operations, as
defined by the Code, had not commenced. In addition, the Company has elected to
defer all research and development costs and amortize them over a five year
period beginning with the commencement of business. Effective February 1996, the
Company began generating revenue and commenced operations for tax purposes.
Accordingly, for tax purposes, the Company is amortizing all start-up and
research and development costs incurred through January, 1996 over 60 months and
from February 1996 forward will expense operating costs as incurred while
continuing to capitalize and amortize research and development costs incurred.

At December 31, 1996, the Company had no current or deferred tax
liability. It had deferred tax assets due to temporary differences and net
operating loss carryforwards totaling approximately $650,000, all of which has
been fully reserved since the likelihood of the realization of the benefits
cannot be established. The temporary differences relate primarily to the
deferral of the start-up costs and research and development costs noted above.

The Internal Revenue Code contains provisions which may limit the net
operating loss carryovers and built-in losses available for use in any given
year if significant changes in ownership interest of the Company occur.

(NOTE G)--RELATED PARTY TRANSACTION:

The Company has entered into a research and development agreement with a
corporation in which the acting CEO of the corporation is also a Director of the
Company and its Vice President of Business Development.

(NOTE H)--SUBSEQUENT EVENT:

In connection with the Company's proposed initial public offering, on
March 26, 1997, the Company agreed to purchase 27,649 shares of its common stock
for an aggregate purchase price of $100,000, less the return of a placement fee
of $5,000 previously paid in connection with the sale of such shares.

F-12

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

PAGE
----

Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Selected Financial Data................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 21
Business.................................................................. 24
Management................................................................ 40
Certain Transactions...................................................... 45
Principal Stockholders.................................................... 46
Description of Securities................................................. 48
Shares Eligible for Future Sale........................................... 52
Underwriting.............................................................. 54
Legal Matters............................................................. 56
Experts................................................................... 56
Additional Information.................................................... 56
Glossary of Technical Terms............................................... 57
Index to Financial Statements............................................. F-1

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

UNTIL MAY , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

500,000 UNITS

[LOGO]

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

PROSPECTUS
APRIL , 1997
---------------------

NEIDIGER/TUCKER/BRUNER, INC.

WESTPORT RESOURCES INVESTMENT
SERVICES, INC.

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

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law grants the Company the
power to indemnify each person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgements, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful, provided,
however, no indemnification shall be made in connection with any proceeding
brought by or in the right of the Company where the person involved is adjudged
to be liable to the Company, except to the extent approved by a court. Article V
of the Company's By-laws provides that the Company shall, to extent legally
permitted, indemnify each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he or she is or was, or has agreed to become, a
director or officer of the Company, or is or was serving, or has agreed to
serve, at the request of the Company, as a director, officer or trustee of, or
in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise. The indemnification provided for in Article V is
expressly not exclusive of any other rights to which those seeking
indemnification may be entitled under any law, agreement or vote of stockholders
or disinterested directors or otherwise, and shall inure to the benefit of the
heirs, executors and administrators of such persons. Article V also provides
that the Company shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company, as a director,
officer or trustee of, or in a similar capacity with, another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against and incurred by such person in any such capacity.

Pursuant to Section 102(b)(7) of the Delaware General Corporation Laws,
Articles SEVENTH and NINTH of the Company's Amended and Restated Certificate of
Incorporation eliminates a director's personal liability for monetary damages to
the Company and its stockholders for breaches of fiduciary duty as a director,
except in circumstances involving a breach of a director's duty of loyalty to
the Company or its stockholders, acts or omissions not in good faith,
intentional misconduct, knowing violations of the law, self-dealing or the
unlawful payment of dividends or repurchase of stock.

The Company has also entered into Indemnification Agreements with each
of its directors whereby the Company has agreed to indemnify them against
certain liabilities that they may incur as a result of their services to the
Company.

II-1

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses to be borne by the Company in connection with this offering
are as follows:

SEC registration fee.............................................. $ 5,655
Nasdaq listing fee................................................ $ 7,880
NASD filing fee................................................... $ 2,366
Blue Sky fees and expenses........................................ $ 15,000
Printing and engraving expenses................................... $ 147,250
Accounting fees and expenses...................................... $ 40,000
Legal fees and expenses........................................... $ 200,000
Transfer agent and registrar fees................................. $ 10,000
Representatives' expenses......................................... $ 153,750
Miscellaneous expenses............................................ $ 8,099
---------
Total......................................................... $ 590,000

All of the above figures, except the SEC registration fee and NASD
filing fee, are estimates.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

Since July 1992, the Company has issued and sold the following
securities, in each case in reliance on an exemption from required registration
pursuant to Section 4(2) of the Securities Act:

In September 1992, the Company sold an aggregate of 396,765 shares of
Common Stock to 14 accredited investors for an aggregate purchase price of
$41,000.

In order to fund its continuing operations, the Company completed two
bridge financings, one in September 1994 (the "1994 Bridge Financing") and one
in April 1995 (the "1995 Bridge Financing"). In connection with the 1994 Bridge
Financing, the Company issued (i) an aggregate of $135,000 in principal amount
of Convertible Promissory Notes (the "1994 Notes") which were due on the earlier
of September 19, 1996 or the closing by the Company of a private placement
financing yielding gross proceeds of not less than $1,000,000 and (ii) warrants
to purchase an aggregate of 87,096 shares of the Company's Common Stock
exercisable at $1.55 per share. In connection with the 1995 Bridge Financing,
the Company issued (i) an aggregate of $75,000 in principal amount of
Convertible Promissory Notes (the "1995 Notes") which were due on the earlier of
April 30, 1997 or the closing by the Company of a private placement financing
yielding gross proceeds of not less than $1,000,000 and (ii) warrants to
purchase an aggregate of 48,387 shares of the Company's Common Stock exercisable
at $1.55 per share. In September 1996, the 1994 Notes were converted into 87,096
shares of Common Stock and, in December 1996, the 1995 Notes were converted into
48,387 shares of Common Stock.

In May 1995, the Company sold an aggregate of 348,380 shares of Common
Stock to 8 accredited investors for an aggregate purchase price of $475,000.

In June 1996, the Company sold an aggregate of 152,068 shares of Common
Stock to 9 accredited investors for an aggregate purchase price of $550,000. The
Managing Underwriter acted as placement agent for this 1996 financing and in
consideration thereof received a fee of $25,000.

Also in December 1996, the Company entered into a Royalty Purchase
Agreement with NPLP, pursuant to which NPLP agreed to provide an additional
$500,000 (the "NPLP Development Financing") in the Company to fund the continued
research and development of the Company's programs related to the use of
estrogen in the treatment of certain chronic neurodegenerative diseases,
including Alzheimer's

II-2

disease. In exchange for the NPLP Development Financing, the Company is
obligated to pay NPLP royalties based upon a certain percentage of revenues
earned from sales of, and license fees and other revenues received by the
Company in connection with, any products developed in these programs. The
Company has the right to terminate its obligation to make such royalty payments
to NPLP upon written notice to NPLP on or before November 30 in any of the
calendar years specified in the Royalty Purchase Agreement and by paying NPLP a
lump-sum payment equal to the maximum royalties payable in such calendar year.
In connection with the NPLP Development Financing, NPLP received (i) warrants to
purchase 67,741 shares of Common Stock at an exercise price of $3.62 per share
and (ii) warrants to purchase 29,032 shares of Common Stock at an exercise price
of $4.52 per share. All or any portion (not less than $150,000) of the Company's
future obligations to pay royalties may be converted at any time at the option
of MDS into shares of Common Stock at a conversion price equal to (i) with
respect to that portion of such royalties as is equal to up to 50% of the amount
of the NPLP Development Financing, the lesser of (a) $4.52 and (b) the price per
share of the Common Stock reflected in the Company's most recent financing prior
to any conversion and (ii) with respect to that portion of such royalties as is
equal to the remaining 50% of the amount of the NPLP Development Financing, the
lesser of (a) $5.42 and (b) the price per share of the Common Stock reflected in
the Company's most recent equity financing prior to any conversion. If NPLP were
to exercise its warrants and conversion rights in full, NPLP would beneficially
own 336,403 shares of the Company's Common Stock (or approximately 8.6% of the
common stock outstanding). See "Principal Stockholders."

II-3

ITEM 27. EXHIBITS

EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------

1 Form of Underwriting Agreement. Filed herewith.
3.1 Amended and Restated Certificate of Incorporation. Filed on December 24, 1996 as Exhibit 3.1 to the
Company's Registration Statement on Form SB-2 (Reg. No. 333-18769) (the "1996 SB-2") and incorporated
herein by reference.
3.2 By-laws of the Company. Filed on December 24, 1996 as Exhibit 3.2 to the 1996 SB-2 and incorporated
herein by reference.
3.3 Registration Rights Agreement, dated December 18, 1996, between the Company and Neuroscience Partners
Limited Partnership. Filed on December 24, 1996 as Exhibit 3.3 to the 1996 SB-2 and incorporated
herein by reference.
3.4 Warrant to purchase Common Stock of the Company granted to Neuroscience Partners Limited Partnership
dated December 18, 1996. Filed on December 24, 1996 as Exhibit 3.4 to the 1996 SB-2 and incorporated
herein by reference.
4.1 Specimen Common Stock Certificate. Filed on February 6, 1997 as Exhibit 4.1 to the 1996 SB-2 and
incorporated herein by reference.
4.2 Specimen Common Stock Purchase Warrant. Filed herewith.
4.3 Specimen Unit Certificate. Filed herewith.
5 Opinion of Palmer & Dodge LLP as to the legality of the securities being registered. Filed herewith.
10.1* Amended and Restated 1993 Incentive and Non-Qualified Stock Option Plan. Filed on December 24, 1996
as Exhibit 10.1 to the 1996 SB-2 and incorporated herein by reference.
10.2* 1996 Director Stock Option Plan. Filed on December 24, 1996 as Exhibit 10.2 to the 1996 SB-2 and
incorporated herein by reference.
10.3 Form of Indemnification Agreement between the Company and its directors. Filed on December 24, 1996
as Exhibit 10.3 to the 1996 SB-2 and incorporated herein by reference. Such agreements are materially
different only as to the signing directors and the dates of execution.
10.4+ Royalty Purchase Agreement dated December 18, 1996 between the Company and Neuroscience Partners
Limited Partnership. Filed on March 17, 1997 as Exhibit 10.4 to the 1996 SB-2 and incorporated
herein by reference.
10.5 License, Research and Collaboration Agreement, dated as of December 13, 1996, between the Company and
Endocon, Inc. Filed on March 17, 1997 as Exhibit 10.5 to the 1996 SB-2 and incorporated herein by
reference.
10.6+ Nonexclusive Sublicense Agreement, dated as of November 5, 1996, between the Company and Cephalon,
Inc. Filed on December 24, 1996 as Exhibit 10.6 to the 1996 SB-2 and incorporated herein by
reference.
10.7+ License and Collaboration Agreement, dated as of April 16, 1996, between the Company and Athena
Neurosciences, Inc. Filed on March 17, 1997 as Exhibit 10.7 to the 1996 SB-2 and incorporated herein
by reference.
10.8+ Neuron Loss Protection Technology License Agreement, dated April 13, 1993, between the Company and
the University of Kentucky Research Foundation. Filed on March 17, 1997 as Exhibit 10.8 to the 1996
SB-2 and incorporated herein by reference.
10.9+ Patent License Agreement with Research Component, dated December 15, 1993, restated October 15, 1996,
between the Company and the University of Florida Research Foundation, Inc. Filed on March 17, 1997
as Exhibit 10.9 to the 1996 SB-2 and incorporated herein by reference.
10.10+ Corporate Research Agreement to Accompany License Agreement, dated December 15, 1993, between the
Company and the University of Florida. Filed on March 17, 1997 as Exhibit 10.10 to the 1996 SB-2 and
incorporated herein by reference.

II-4

EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------

10.11+ Patent License Agreement, dated September 8, 1994, between the Company and the University of Florida
Research Foundation, Inc. Filed on March 17, 1997 as Exhibit 10.11 to the 1996 SB-2 and incorporated
herein by reference.
10.12* Employment Agreement effective as of November 1, 1993, between the Company and Dr. Katherine
Gordon. Filed on December 24, 1996 as Exhibit 10.12 to the 1996 SB-2 and incorporated herein by
reference.
10.13* Letter Agreement dated as of November 10, 1996 between the Company and John J. Curry. Filed on March
17, 1997 as Exhibit 10.13 to the 1996 SB-2 and incorporated herein by reference.
10.14* Letter Agreement dated as of May 15, 1996 between the Company and Robert J. Leonard. Filed on March
17, 1997 as Exhibit 10.14 to the 1996 SB-2 and incorporated herein by reference.
10.15 Form of Warrant Agreement between the Company and American Stock Transfer and Trust Company. Filed
herewith.
10.16 Form of Representative's Warrant Agreement among the Company, Neidiger/Tucker/Bruner, Inc. and
Westport Resources Investment Services, Inc. Filed herewith.
10.17 Form of Financial Advisory Agreement between the Company and Neidiger/Tucker/Bruner, Inc. Filed
herewith.
11 Statement re: Computation of loss per share. Filed on March 17, 1997 as Exhibit 11 to the 1996 SB-2
and incorporated herein by reference.
23.1 Consent of Richard A. Eisner & Company, LLP. Filed herewith.
23.2 Consent of Palmer & Dodge LLP. Included in the opinion filed as Exhibit 5 hereto.
24 Power of attorney. Included on the signature page hereto.
27 Financial Data Schedule. Filed on February 24, 1997 as Exhibit 27 to the 1996 SB-2 and incorporated
herein by reference.

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

* Indicates a management contract or compensatory plan.

+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to
Rule 406 of the Securities Act.

ITEM 28. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under "Item
24--Indemnification of Directors and Officers" above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

II-5

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(c) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cambridge, Commonwealth of Massachusetts, on
April 28, 1997.

APOLLO BIOPHARMACEUTICS, INC.

BY: /S/ KATHERINE GORDON
-----------------------------------------
Katherine Gordon
PRESIDENT AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

We, the undersigned officers and directors of Apollo BioPharmaceutics,
Inc., hereby severally constitute and appoint Katherine Gordon, John J. Curry
and Michael Lytton, and each of them singly, our true and lawful
attorneys-in-fact, with full power to them in any and all capacities, to sign
any amendments to this Registration Statement, and any related Rule 462(b)
registration statement or amendment thereto, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ KATHERINE GORDON Officer and Director
- ------------------------------ (Principal Executive April 28, 1997
Katherine Gordon Officer)
Vice President--Finance,
Chief Financial Officer
/s/ JOHN J. CURRY* and Treasurer (Principal
- ------------------------------ Financial Officer and April 28, 1997
John J. Curry Principal Accounting
Officer)
/s/ ROBERT J. LEONARD* Vice President--Business
- ------------------------------ Development, Director April 28, 1997
Robert J. Leonard
/s/ THEODORE GORDON* Director
- ------------------------------ April 28, 1997
Theodore Gordon
/s/ DONALD WEISE* Director
- ------------------------------ April 28, 1997
Donald Weise
/s/ GEORGE MASTERS* Director
- ------------------------------ April 28, 1997
George Masters
/s/ MICHAEL CALLAGHAN Director
- ------------------------------ April 28, 1997
Michael Callaghan

* /s/ KATHERINE GORDON
----------------------------------------
Katherine Gordon
ATTORNEY-IN-FACT

II-7

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------

1 Form of Underwriting Agreement. Filed herewith.
3.1 Amended and Restated Certificate of Incorporation. Filed on December 24, 1996 as Exhibit 3.1
to the Company's Registration Statement on Form SB-2 (Reg. No. 333-18769) (the "1996 SB-2")
and incorporated herein by reference.
3.2 By-laws of the Company. Filed on December 24, 1996 as Exhibit 3.2 to the 1996 SB-2 and
incorporated herein by reference.
3.3 Registration Rights Agreement, dated December 18, 1996, between the Company and Neuroscience
Partners Limited Partnership. Filed on December 24, 1996 as Exhibit 3.3 to the 1996 SB-2 and
incorporated herein by reference.
3.4 Warrant to purchase Common Stock of the Company granted to Neuroscience Partners Limited
Partnership dated December 18, 1996. Filed on December 24, 1996 as Exhibit 3.4 to the 1996
SB-2 and incorporated herein by reference.
4.1 Specimen Common Stock Certificate. Filed on February 6, 1997 as Exhibit 4.1 to the 1996 SB-2
and incorporated herein by reference.
4.2 Specimen Common Stock Purchase Warrant. Filed herewith.
4.3 Specimen Unit Certificate. Filed herewith.
5 Opinion of Palmer & Dodge LLP as to the legality of the securities being registered. Filed
herewith.
10.1* Amended and Restated 1993 Incentive and Non-Qualified Stock Option Plan. Filed on December
24, 1996 as Exhibit 10.1 to the 1996 SB-2 and incorporated herein by reference.
10.2* 1996 Director Stock Option Plan. Filed on December 24, 1996 as Exhibit 10.2 to the 1996 SB-2
and incorporated herein by reference.
10.3 Form of Indemnification Agreement between the Company and its directors. Filed on December
24, 1996 as Exhibit 10.3 to the 1996 SB-2 and incorporated herein by reference. Such
agreements are materially different only as to the signing directors and the dates of
execution.
10.4+ Royalty Purchase Agreement dated December 18, 1996 between the Company and Neuroscience
Partners Limited Partnership. Filed on March 17, 1997 as Exhibit 10.4 to the 1996 SB-2 and
incorporated herein by reference.
10.5 License, Research and Collaboration Agreement, dated as of December 13, 1996, between the
Company and Endocon, Inc. Filed on March 17, 1997 as Exhibit 10.5 to the 1996 SB-2 and
incorporated herein by reference.
10.6+ Nonexclusive Sublicense Agreement, dated as of November 5, 1996, between the Company and
Cephalon, Inc. Filed on December 24, 1996 as Exhibit 10.6 to the 1996 SB-2 and incorporated
herein by reference.
10.7+ License and Collaboration Agreement, dated as of April 16, 1996, between the Company and
Athena Neurosciences, Inc. Filed on March 17, 1997 as Exhibit 10.7 to the 1996 SB-2 and
incorporated herein by reference.
10.8+ Neuron Loss Protection Technology License Agreement, dated April 13, 1993, between the Company
and the University of Kentucky Research Foundation. Filed on March 17, 1997 as Exhibit 10.8
to the 1996 SB-2 and incorporated herein by reference.
10.9+ Patent License Agreement with Research Component, dated December 15, 1993, restated October
15, 1996, between the Company and the University of Florida Research Foundation, Inc. Filed
on March 17, 1997 as Exhibit 10.9 to the 1996 SB-2 and incorporated herein by reference.
10.10+ Corporate Research Agreement to Accompany License Agreement, dated December 15, 1993, between
the Company and the University of Florida. Filed on March 17, 1997 as Exhibit 10.10 to the
1996 SB-2 and incorporated herein by reference.

EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------

10.11+ Patent License Agreement, dated September 8, 1994, between the Company and the University of
Florida Research Foundation, Inc. Filed on March 17, 1997 as Exhibit 10.11 to the 1996 SB-2
and incorporated herein by reference.
10.12* Employment Agreement effective as of November 1, 1993, between the Company and Dr. Katherine
Gordon. Filed on December 24, 1996 as Exhibit 10.12 to the 1996 SB-2 and incorporated herein
by reference.
10.13* Letter Agreement dated as of November 10, 1996 between the Company and John J. Curry. Filed on
March 17, 1997 as Exhibit 10.13 to the 1996 SB-2 and incorporated herein by reference.
10.14* Letter Agreement dated as of May 15, 1996 between the Company and Robert J. Leonard. Filed on
March 17, 1997 as Exhibit 10.14 to the 1996 SB-2 and incorporated herein by reference.
10.15 Form of Warrant Agreement between the Company and American Stock Transfer and Trust Company.
Filed herewith.
10.16 Form of Representative's Warrant Agreement among the Company, Neidiger/Tucker/ Bruner, Inc.
and Westport Resources Investment Services, Inc. Filed herewith.
10.17 Form of Financial Advisory Agreement between the Company and Neidiger/Tucker/ Bruner, Inc.
Filed herewith.
11 Statement re: Computation of loss per share. Filed on March 17, 1997 as Exhibit 11 to the
1996 SB-2 and incorporated herein by reference.
23.1 Consent of Richard A. Eisner & Company, LLP. Filed herewith.
23.2 Consent of Palmer & Dodge LLP. Included in the opinion filed as Exhibit 5 hereto.
24 Power of attorney. Included on the signature page hereto.
27 Financial Data Schedule. Filed on February 24, 1997 as Exhibit 27 to the 1996 SB-2 and
incorporated herein by reference.

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

* Indicates a management contract or compensatory plan.

+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to
Rule 406 of the Securities Act.