SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant |X|
Filed by a party other than the Registrant |_|

Interneuron Pharmaceuticals, Inc.
(Name of Registrant as Specified in Its Charter)

Interneuron Pharmaceuticals, Inc.
(Name of Person(s) Filing Proxy Statement)

Payment of filing fee (Check the appropriate box):
|X| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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|_| Fee paid previously with preliminary materials.

|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing of which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

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(2) Form, schedule or registration statement no.:

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(3) Filing party:

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(4) Date filed:

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1 Set forth the amount on which the filing fee is calculated and state how it
was determined.

INTERNEURON PHARMACEUTICALS, INC.
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held February 21, 1996

To the Stockholders:

Notice is hereby given that the Annual Meeting of the Stockholders of
Interneuron Pharmaceuticals, Inc. (the "Company") will be held on February 21,
1996, at 10:00 a.m. local time at The Westin Hotel, First Floor, Eden Vale
Ballroom C, 70 Third Avenue, Waltham, Massachusetts 02154. The meeting is called
for the following purposes:

1. To elect a board of ten directors;

2. To approve and ratify the appointment of Coopers & Lybrand
L.L.P. as the independent accountants of the Company; and

3. To consider and take action upon such other matters as may
properly come before the meeting or any adjournment or
adjournments thereof.

The close of business on January 23, 1996 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the meeting. The stock transfer books of the Company will not be closed.

All stockholders are cordially invited to attend the meeting. Whether
or not you expect to attend, you are respectfully requested by the Board of
Directors to sign, date and return the enclosed proxy promptly. Stockholders who
execute proxies retain the right to revoke them at any time prior to the voting
thereof. A return envelope which requires no postage if mailed in the United
States is enclosed for your convenience.

By Order of the Board of Directors,

Glenn L. Cooper, M.D.,
President and Chief Executive Officer

Dated: January 26, 1996

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INTERNEURON PHARMACEUTICALS, INC.
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
(617) 861-8444

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PROXY STATEMENT

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ANNUAL MEETING OF STOCKHOLDERS

This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Interneuron Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), for the Annual Meeting of Stockholders to
be held at The Westin Hotel, First Floor, Eden Vale Ballroom C, 70 Third Avenue,
Waltham, Massachusetts 02154 on February 21, 1996, at 10:00 a.m. and for any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. Any stockholder giving
such a proxy has the power to revoke it at any time before it is voted. Written
notice of such revocation should be forwarded directly to the Director of
Corporate Communications of the Company, at the above stated address. Attendance
at the meeting will not have the effect of revoking the proxy unless such
written notice is given or the stockholder votes by ballot at the meeting.

If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the directions thereon and
otherwise in accordance with the judgment of the persons designated as proxies.
Any proxy on which no direction is specified will be voted in favor of the
actions described in this Proxy Statement, including the election of the
nominees set forth under the caption "Election of Directors" and the approval
and ratification of the appointment of Coopers & Lybrand L.L.P. as the
independent accountants of the Company.

The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be mailed or given to the Company's stockholders is
January 29, 1996.

Your vote is important. Accordingly, you are urged to sign and return
the accompanying proxy card whether or not you plan to attend the meeting. If
you do attend, you may vote by ballot at the meeting, thereby cancelling any
proxy previously given.

VOTING SECURITIES

Holders of shares of Common Stock, par value $.001 per share (the
"Shares"), and holders of shares of Series B and Series C Convertible Preferred
Stock, par value $.001 per share (the "Preferred Shares") of record as of the
close of business on January 23, 1996, are entitled to notice of and to vote at
the meeting on all matters except that the holders of the Preferred Shares are
not entitled to vote for the election of directors. For purposes of voting at
the Annual Meeting on all matters except the election of directors, the
Preferred Shares are treated as converted into Shares. Accordingly, on the
record date

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there were issued and outstanding (i) 34,494,243 Shares entitled to vote for the
election of directors, and (ii) an aggregate of 35,116,464 Shares, including
622,221 Shares issuable upon conversion of the 244,425 Series B and Series C
Preferred Shares, voting as one class, entitled to vote on all other matters.
Each outstanding Share is entitled to one vote upon all matters to be acted upon
at the meeting. A majority of the outstanding Shares entitled to vote on any
matter and represented at the meeting in person or by proxy shall constitute a
quorum. Assuming a quorum is present, the affirmative vote of a plurality of the
34,494,243 Shares so represented and entitled to vote is necessary to elect the
directors, and the affirmative vote of a majority of the 35,116,464 Shares so
represented and entitled to vote, excluding broker non-votes, is necessary to
approve and ratify the appointment of Coopers & Lybrand L.L.P. as the
independent accountants of the Company. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. If a stockholder, present in person or by proxy,
abstains on any matter, the stockholder's Shares will not be voted on such
matter. Thus, an abstention from voting on any matter has the same legal effect
as a vote "against" the matter, even though the stockholder may interpret such
action differently. Except for determining the presence or absence of a quorum
for the transaction of business, broker non-votes are not counted for any
purpose in determining whether a matter has been approved.

PRINCIPAL STOCKHOLDERS

Set forth below is information concerning stock ownership of all
persons known by the Company to own beneficially 5% or more of the Shares or
Preferred Shares, each director, each executive officer named under "Executive
Compensation" and all directors and executive officers of the Company as a group
based upon the number of outstanding Shares and Preferred Shares as of January
23, 1996. For the purposes of this Proxy Statement, beneficial ownership is
defined in accordance with the rules of the Securities and Exchange Commission
("S.E.C.") and generally means the power to vote and/or to dispose of the
securities regardless of any economic interest therein.

Name and Address Amount & Nature of
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS (17)
- - ------------------- -------------------- ---------------------
Lindsay Rosenwald, M.D. 2,670,720 (1)(2) 7.7%
375 Park Avenue
New York, N.Y. 10152

Glenn L. Cooper, M.D. 604,551 (2)(3) 1.7%

Harry J. Gray 25,250 (4)(5) *

Alexander M. Haig, Jr. 202,750 (5)(6) *

Peter Barton Hutt 25,250 (4)(5) *

Malcolm Morville, Ph.D. 37,750 (5)(7) *

Robert K. Mueller 37,750 (5)(7) *

Lee J. Schroeder 50,250 (5)(8) *

David B. Sharrock 25,000 (5)(9) *

Richard Wurtman, M.D. 1,027,651 (5)(10) 3.0%

Mark S. Butler, Esq. 208,922 (2)(11) *

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Thomas F. Farb 84,268 (2)(12) *

Bobby W. Sandage, Jr., Ph.D. 163,046 (2)(13) *

D.H. Blair Investment Banking Corp. 11,039,758 (14) 31.7%
44 Wall Street
New York, N.Y. 10005

American Home Products Corp. 244,425 (15) 100%
Five Giralda Farms
Madison, New Jersey 07940

All directors and executive officers as
a group (13 persons) 5,163,158 (1)(3)(10)(16) 14.4%

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* Less than 1%

(1) Includes 172,671 Shares issuable upon exercise of outstanding warrants,
including 165,000 Shares issuable upon exercise of Class B Warrants, but
excludes (i) 658,481 Shares owned by Dr. Rosenwald's wife and (ii) 37,800
Shares owned by two limited partnerships, the limited partners of which
include Dr. Rosenwald's wife and children, as to which Shares Dr.
Rosenwald disclaims beneficial ownership. Dr. Rosenwald has granted
options to purchase an aggregate of 108,000 of his Shares to two
non-affiliated individuals. See "Certain Transactions."

(2) Excludes 60,000 Shares issuable upon exercise of options granted in
connection with a subsidiary incentive plan, which are not exercisable
within 60 days, but will become immediately exercisable in the event that
Intercardia, Inc. ("Intercardia"), a subsidiary of the Company, completes
an initial public offering (the "Intercardia IPO") on the terms proposed
in a registration statement relating to such offering filed with the
S.E.C. in December 1995.

(3) Includes (i) 4,551 Shares and (ii) 600,000 Shares issuable upon exercise
of options exercisable within 60 days, but excludes (i) 360,000 Shares
issuable upon exercise of options which are not exercisable within 60
days and (ii) 35,000 Shares issuable upon exercise of options which are
not exercisable within 60 days owned by Dr. Cooper's wife, as to which
Shares Dr. Cooper disclaims beneficial ownership.

(4) Represents Shares issuable upon exercise of options exercisable within 60
days, but excludes 25,750 Shares issuable upon exercise of options which
are not exercisable within 60 days.

(5) Excludes 1,000 Shares issuable upon exercise of options to be granted on
February 22, 1996 as an automatic option grant under the Company's 1994
Long-Term Incentive Plan (the "1994 Plan"), which options are not
exercisable within 60 days.

(6) Includes (i) 202,500 Shares and (ii) 250 Shares issuable upon exercise of
options exercisable within 60 days, but excludes 750 Shares issuable upon
exercise of options which are not exercisable within 60 days.

(7) Represents Shares issuable upon exercise of options exercisable within 60
days, but excludes 13,250 Shares issuable upon exercise of options which
are not exercisable within 60 days.

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(8) Represents Shares issuable upon exercise of options exercisable within 60
days, but excludes 750 Shares issuable upon exercise of options which are
not exercisable within 60 days.

(9) Represents Shares issuable upon exercise of options exercisable within 60
days, but excludes 75,000 Shares issuable upon exercise of options which
are not exercisable within 60 days.

(10) Includes (i) 931,059 Shares owned by Dr. Wurtman, (ii) 1,342 Shares owned
by Dr. Wurtman's adult son, who has granted Dr. Wurtman an irrevocable
proxy to vote such Shares and (iii) 95,250 Shares issuable upon exercise
of options exercisable within 60 days, but excludes (i) 750 Shares
issuable upon exercise of options which are not exercisable within 60
days and (ii) 83,818 Shares owned by Judith Wurtman, Dr. Wurtman's wife,
as to which Dr. Wurtman disclaims beneficial ownership.

(11) Includes (i) 5,922 Shares, (ii) 3,000 Shares owned by Mr. Butler's
children, and (iii) 200,000 Shares issuable upon exercise of options
exercisable within 60 days, but excludes 310,000 Shares issuable upon
exercise of options which are not exercisable within 60 days.

(12) Includes (i) 935 Shares and (ii) 83,333 Shares issuable upon exercise of
options exercisable within 60 days, but excludes 351,667 Shares issuable
upon exercise of options which are not exercisable within 60 days.

(13) Includes (i) 546 Shares and (ii) 162,500 Shares issuable upon exercise of
options exercisable within 60 days, but excludes (i) 222,500 Shares
issuable upon exercise of options which are not exercisable within 60
days.

(14) Includes (i) 9,528,193 Shares and (ii) 288,300 Shares issuable upon
exercise of outstanding Class B Warrants owned by D.H. Blair Investment
Banking Corp. ("Blair Banking"). J. Morton Davis is the sole stockholder
of the parent of Blair Banking. Also includes (i) 321,500 Shares owned by
Mr. Davis' wife, (ii) 634,865 Shares and 23,000 Shares issuable upon
exercise of Class B Warrants owned by Rivkalex Corp., the sole
stockholder of which is Mr. Davis' wife, and (iii) 243,900 Shares owned
by Engex, Inc., a closed-end investment company of which Mr. Davis is the
Chairman of the Board and Blair Banking is the largest stockholder, as to
all of which Shares Blair Banking and Mr. Davis disclaim beneficial
ownership.

Excludes (i) an aggregate of 2,655,424 Shares and 10,000 Shares issuable
upon exercise of Class B Warrants owned by the four adult children
(including the wife of Dr. Rosenwald) of Mr. Davis, (ii) an aggregate of
165,187 Shares issuable upon exercise of warrants, including 158,499
Shares issuable upon exercise of Class B Warrants, owned by sons-in-law
of Mr. Davis, who are officers of D.H. Blair & Co., Inc. ("Blair"), a
company substantially owned by family members (including the wife of Dr.
Rosenwald) of Mr. Davis, (iii) 75,000 Shares issuable upon exercise of
Class B Warrants owned jointly by an adult child of Mr. Davis and her
spouse, who is an officer of Blair, (iv) 37,800 Shares owned by two
limited partnerships, the limited partners of which are family members of
Mr. Davis (including the wife and children of Dr. Rosenwald), and (v)
567,736 Shares and 209,561 Shares issuable upon exercise of Class B
Warrants owned by The Morton Foundation, a charitable foundation of which
Mr. Davis' wife and two of their adult children are the trustees and for
which a proxy to vote and dispose of such Shares is held by a third
party, as to all of which shares Blair Banking and Mr. Davis disclaim
beneficial ownership. See "Certain Transactions."

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(15) The Preferred Shares owned by American Home Products Corp. ("AHP") are
convertible into 622,221 Shares and entitled to one vote per share, on a
converted basis, on all matters except the election of directors.

(16) Includes (i) 1,342,583 Shares issuable upon exercise of options
exercisable within 60 days and (ii) 172,671 Shares issuable upon exercise
of outstanding warrants, including 165,000 Shares issuable upon exercise
of Class B Warrants, but excludes 1,742,417 Shares issuable upon exercise
of options which are not exercisable within 60 days, including (i) an
aggregate of 300,000 Shares issuable upon exercise of options granted to
certain officers of the Company in connection with a subsidiary incentive
plan, which will become immediately exercisable in the event of the
Intercardia IPO and (ii) an aggregate of 8,000 Shares issuable upon
exercise of options to be granted to certain directors of the Company on
February 22, 1996 as an automatic option grant under the 1994 Plan.

(17) All holders own Shares, with the exception of AHP which owns Preferred
Shares. The numbers in this column reflect:

(a) for holders of Shares the percent of class is calculated on
the basis of 34,494,243 Shares outstanding, excluding 622,221
Shares issuable upon conversion of the Preferred Shares and
entitled to one vote per share, on an as converted basis, on
all matters except the election of directors, except that
Shares underlying options or warrants exercisable within 60
days are deemed to be outstanding for purposes of calculating
the beneficial ownership of securities owned by the holder of
such options or warrants.

(b) for holders of Preferred Shares, the percent of class is
calculated on the basis of 244,425 Preferred Shares
outstanding.

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ELECTION OF DIRECTORS

At the meeting, ten directors will be elected by the stockholders to
serve until the next Annual Meeting of Stockholders or until their successors
are elected and shall qualify. Each of the nominees is currently a director of
the Company. Management recommends that the persons named below be elected as
directors of the Company and it is intended that the accompanying proxy will be
voted for the election as directors of the ten persons named below, unless the
proxy contains contrary instructions. The Company has no reason to believe that
any of the nominees will not be a candidate or will be unable to serve. However,
in the event that any of the nominees should become unable or unwilling to serve
as a director, the persons named in the proxy have advised that they will vote
for the election of such person or persons as shall be designated by management.

The following sets forth the names and ages of the ten nominees for
election to the Board of Directors, their respective principal occupations or
employments during the past five years and the period during which each has
served as a director of the Company.

Lindsay Rosenwald, M.D. (40) was a co-founder of the Company and since
February 1989, he has been the Chairman of the Board of Directors. Dr. Rosenwald
has been the Chairman and President of The Castle Group, Ltd., a New York
medical venture capital firm ("Castle"), since October 1991, and the Chairman
and President of Paramount Capital, Inc., an investment banking firm, since
February 1992. Prior thereto, Dr. Rosenwald was a Managing Director, Corporate
Finance at D.H. Blair & Co., Inc. ("Blair"), an investment banking firm. Prior
to joining Blair, from September 1986 to June 1987 he was a Senior Analyst at
Ladenburg Thalmann & Co., an investment banking firm. Dr. Rosenwald received his
M.D. from Temple University School of Medicine and his B.A. in Finance from
Pennsylvania State University. Dr. Rosenwald is also Chairman of the Board of
Transcell Technologies, Inc. ("Transcell") and a director of Progenitor, Inc.
("Progenitor"), majority-owned subsidiaries of the Company. Dr. Rosenwald also
is a director of BioCryst Pharmaceuticals, Inc., Sparta Pharmaceuticals, Inc.,
Ansan, Inc., Atlantic Pharmaceuticals, Inc., Xenometrix, Inc. and Titan
Pharmaceuticals, Inc. and is Chairman of the Board or a director of a number of
privately held companies founded by Castle in the biotechnology or
pharmaceutical fields.

Glenn L. Cooper, M.D. (43) has been President, Chief Executive Officer
and a director of the Company since May 1993. Dr. Cooper was also Progenitor's
President and Chief Executive Officer from September 1992 to June 1994. Dr.
Cooper is Chairman of the Board of each of Progenitor and Intercardia and is a
director of Transcell and InterNutria, Inc. ("InterNutria"), subsidiaries of the
Company. Prior to joining Progenitor, Dr. Cooper served as Executive Vice
President and Chief Operating Officer of Sphinx Pharmaceuticals Corporation from
August 1990. Dr. Cooper had been associated with Eli Lilly & Co. since 1985,
most recently, from June 1987 to July 1990, as Director, Clinical Research,
Europe of Lilly Research Center Limited; from October 1986 to May 1987, as
International Medical Advisor, International Research Coordination of Lilly
Research Laboratories; and from June 1985 to September 1986, as Medical Advisor,
Regulatory Affairs, Chemotherapy Division at Lilly Research Laboratories. Dr.
Cooper received his M.D. from Tufts University School of Medicine, performed his
postdoctoral training in Internal Medicine and Infectious Diseases at the New
England Deaconness Hospital and Massachusetts General Hospital and received his
B.A. from Harvard College.

Harry J. Gray (76) has been a director of the Company since May 1993.
Mr. Gray was associated with United Technologies Corp. for 17 years and was its
President from 1971 until 1972 when he became

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its Chairman and Chief Executive Officer until his retirement in 1986. Mr. Gray
is currently Chairman and Chief Executive Officer of Harry Gray Associates of
Florida, a private investment firm, Chairman and Chief Executive Officer of Mott
Corporation and Chairman and Chief Executive Officer of Worldwide Fulfillment
and Distribution, Inc.

Alexander M. Haig, Jr. (71) has been a director of the Company since
January 1990. Since August 1982, General Haig has been Chairman and President of
Worldwide Associates, Inc., a business adviser to both U.S. and foreign
companies in connection with international marketing and sales activities. From
January 1981 until July 1982, General Haig served as Secretary of State of the
United States. From November 1979 until January 1981, General Haig was President
and Chief Operating Officer of United Technologies Corp. and is currently a
senior consultant to such corporation. From 1974 through 1979, General Haig was
the Supreme Allied Commander of NATO. Prior to that, he was White House Chief of
Staff under the Nixon and Ford Administrations. General Haig currently serves on
the Board of Directors of MGM Grand, Inc. and America Online, Inc. and is also a
director of Progenitor.

Peter Barton Hutt (61) has been a director of the Company since April
1994. Mr. Hutt has been a partner of Covington & Burling, a Washington, D.C. law
firm since 1975 and from 1968 through 1971, and has been associated with the
firm since 1960. He has also served as Chief Counsel of the Food and Drug
Administration ("FDA") from 1971 to 1975. He currently serves on the Boards of
several developmental stage pharmaceutical companies, including Cell Genesys,
Inc., Sparta Pharmaceuticals, Inc., IDEC Pharmaceuticals Corp. and Emisphere
Technologies, Inc. Mr. Hutt received a B.A. from Yale University, an L.L.B. from
Harvard University and an L.L.M. from New York University.

Malcolm Morville, Ph.D. (50) has been a director of the Company since
February 1993. Since February 1993, Dr. Morville has been President and Chief
Executive Officer and a director of Phytera, Inc., a plant biotechnology
company. From June 1988 through January 1993, Dr. Morville held various
positions with ImmuLogic Pharmaceutical Corporation, including Division Vice
President, Allergic Diseases Strategic Business Unit and Senior Vice President,
Development and Preclinical Research. From 1970 to June 1988, Dr. Morville held
various positions with Pfizer Central Research, including Director, Immunology
and Infectious Diseases and Assistant Director, Metabolic Diseases and General
Pharmacology. Dr. Morville received his Ph.D. and his B.Sc. in Biochemistry at
the University of Manchester Institute of Science and Technology (U.K.).

Robert K. Mueller (82) has been a director of the Company since
February 1993. Mr. Mueller was Chairman of the Board of Arthur D. Little, Inc.
from 1977 until his retirement in 1989 and currently serves as a consultant to
such entity and a director of its U.K. subsidiary, Arthur D. Little, Ltd.
(U.K.). From 1935 to 1968, when he joined Arthur D. Little, Inc., Mr. Mueller
held various positions with Monsanto Company, including director, member of the
executive committee and vice president positions. Mr. Mueller is the author of
numerous books and articles on management and corporate governance, and received
his M.S. in Chemistry from the University of Michigan, his B.S. in Chemical
Engineering from Washington University and completed the Advanced Management
Program at Harvard University.

Lee J. Schroeder (67) has been a director of the Company since August
1991. Since 1985, Mr. Schroeder has been the President of Lee Schroeder &
Associates, Inc., a pharmaceutical consulting firm. Mr. Schroeder was President
and Chief Operating Officer of FoxMeyer Lincoln Drug Co., a wholesale drug
company, from February 1983 to March 1985 and was the Executive Vice President,
responsible for United States pharmaceutical operations, and a member of the
Executive Committee of

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Sandoz, Inc. from April 1981 to February 1983, and was Vice President and
General Manager of Dorsey Laboratories, a division of Sandoz, Inc., from
November 1974 to April 1981. Mr. Schroeder is also a director of Firstier Bank,
Lincoln, N.A., Celgene Corporation and MGI Pharma Inc.

David B. Sharrock (59) has been a director of the Company since
February 1995. Mr. Sharrock was associated with Marion Merrell Dow Inc. and its
predecessor companies for over thirty-five years until his retirement in
December 1993. Most recently, since December 1989, he served as Executive Vice
President and Chief Operating Officer and a Director, and in 1988, he was named
President and Chief Operating Officer of Merrell Dow Pharmaceuticals Inc. Mr.
Sharrock has been a consultant to the Company since February 1994 and is also a
director of Progenitor and Intercardia and of Marion Merrell Dow Inc., Unitog
Co. and Cincinnati Bell Inc.

Richard Wurtman, M.D. (59) was a co-founder of the Company and has been
a director of the Company and Chairman of the Scientific Advisors since the
Company's inception in October 1988. Dr. Wurtman is the Cecil H. Green
Distinguished Professor in the Department of Brain and Cognitive Sciences at the
Massachusetts Institute of Technology ("MIT") where he has been a full-time
Professor of Neuroendocrine Regulation since 1967 and a Professor of
Neuropharmacology at the Whitaker College of Health Sciences, Technology and
Management at MIT. Since July 1985, he has been the Director of the Clinical
Research Center at MIT. Since 1978, he has been a part-time Professor of
Neuroendocrine Regulation at Harvard University. Dr. Wurtman received his M.D.
from Harvard University and his B.A. from the University of Pennsylvania. Dr.
Wurtman is a consultant to the Company and devotes only a portion of his time
(limited to a maximum of five days per month) to the Company and also is a
consultant to other pharmaceutical entities, including Les Laboratoires Servier
("Servier") and Grupo Ferrer ("Ferrer").

Directors are elected by the Company's stockholders at each annual
meeting or, in the case of a vacancy, are appointed by the directors then in
office, to serve until the next annual meeting or until their successors are
elected and qualified. Officers are appointed by and serve at the discretion of
the Board of Directors.

The Board of Directors of the Company held seven meetings during the
fiscal year ended September 30, 1995. Each of the directors attended at least
75% of the meetings of the Board of Directors and the committees thereof on
which such director served, held during the term of his directorship, except
that Mr. Gray did not attend at least 75% of the meetings of the Board of
Directors and the committees thereof on which he served, and General Haig did
not attend at least 75% of the meetings of the Board of Directors.

The Audit Committee consists of General Haig, Mr. Mueller and Mr.
Schroeder. The Audit Committee is authorized by the Board of Directors to
review, with the Company's independent accountants, the annual financial
statements of the Company and to make annual recommendations to the Board for
the appointment of independent public accountants for the ensuing year. The
Audit Committee also reviews the effectiveness of the financial and accounting
functions, organization, operations and management of the Company. The Audit
Committee met once during the fiscal year ended September 30, 1995.

From September 23, 1994 until May 24, 1995, the Company had a
Compensation Committee and a Stock Option Committee. Each of the Compensation
and Stock Option Committees met once during

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the fiscal year ended September 30, 1995. On May 24, 1995, the Company combined
the two committees into one committee, the Compensation Committee, which
consists of Mr. Gray, General Haig, Dr. Morville and Mr. Sharrock. The
Compensation Committee reviews and recommends to the Board of Directors the
compensation and benefits of all officers of the Company, reviews general policy
matters relating to compensation and benefits of employees of the Company,
administers the issuance of stock options to the Company's officers, employees,
consultants and scientific advisors and also has authority to grant options to
directors who are not employees of the Company. The newly-constituted
Compensation Committee met separately one time during the fiscal year ended
September 30, 1995 and met once during a meeting of the Board of Directors. The
Company does not have a nominating committee.

DIRECTOR COMPENSATION

With the exception of General Haig, who receives a $10,000 fee per
meeting attended, non-employee directors (except Drs. Rosenwald and Wurtman) of
the Company receive a fee of $2,000 per meeting attended and are reimbursed for
expenses actually incurred in attending meetings. The Company has a Consulting
and Non-Competition Agreement with each of Dr. Wurtman and Mr. Sharrock and a
Management Agreement with Dr. Rosenwald. During the fiscal year ended September
30, 1995, the Company paid Drs. Wurtman and Rosenwald, and Mr. Sharrock fees of
$99,000, $30,000 and $36,000, respectively, pursuant to such agreements.

Mr. Sharrock also serves as a director of Progenitor and, since October
1995, of Intercardia. During the fiscal year ended September 30, 1995,
Progenitor paid $6,000 in directors' fees and accrued an additional $2,000 in
directors' fees payable to Mr. Sharrock. In the event of the Intercardia IPO,
Mr. Sharrock will receive from Intercardia $2,000 in directors' fees per meeting
attended, options to purchase 10,000 shares of common stock of Intercardia and
an annual fee of $1,000.

During the fiscal year ended September 30, 1995, the Company granted to
Mr. Sharrock ten year options to purchase 50,000 Shares, exercisable in equal
annual installments commencing one year from the date of grant. In addition,
pursuant to a subsidiary incentive plan, the Company granted to each of Dr.
Cooper and Dr. Rosenwald, seven year options to purchase 120,000 and 60,000
Shares, respectively, exercisable commencing six years from the date of grant,
provided that the exercisability of such options will accelerate in the event of
certain transactions, including an initial public offering, involving certain
subsidiaries of the Company. On February 22, 1996, each of the following
directors will receive automatic grants of options to purchase 1,000 Shares
under the 1994 Plan: Mr. Gray, General Haig, Mr. Hutt, Dr. Morville, Mr.
Mueller, Mr. Schroeder, Mr. Sharrock and Dr. Wurtman.

-9-

EXECUTIVE COMPENSATION

The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to the Chief Executive Officer and
to executive officers whose annual compensation exceeded $100,000 for the fiscal
year ended September 30, 1995 (collectively, the "named executive officers") for
services during the fiscal years ended September 30, 1995, 1994 and 1993:

Summary Compensation Table

LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- ------------------
OTHER
ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY(2) BONUS(3) COMPENSATION(4) UNDERLYING OPTIONS(5) COMPENSATION(6)
- - -------------------------------------- ---- --------- -------- --------------- -------------------- --------------

Glenn L. Cooper, M.D. 1995 $250,000 $75,000 $22,774 420,000 $4,083
President and Chief 1994 $259,615 $37,500 -- 17,000 $4,098
Executive Officer 1993 $211,155 $75,000 -- 600,000 $122,264

Mark S. Butler, Esq. 1995 $215,000 $64,500 $30,645 120,000 $33,227
Executive Vice President, Chief 1994 $177,789 $32,250 -- 300,000 $33,972
Administrative Officer and
General Counsel

Thomas F. Farb 1995 $200,000 $60,000 $14,854 120,000 $28,526
Executive Vice President, Finance, 1994 $99,231 $30,000 -- 250,000 $16,848
Chief Financial Officer
and Treasurer

Bobby W. Sandage, Jr., Ph.D. 1995 $186,566 $55,755 -- 220,000 $1,633
Executive Vice President, Research 1994 $189,807 $27,750 -- -- $1,711
and Development, Chief 1993 $155,508 -- -- 125,000 $2,146
Scientific Officer
- - ---------------------------

(1) Dr. Cooper became President and Chief Executive Officer of the Company
in May 1993. Dr. Cooper served as President and Chief Executive Officer
of Progenitor, from September 1992 to June 1994. Progenitor is not a
reporting company under the Securities Exchange Act of 1934, as amended
(the "1934 Act"). Mr. Butler became Senior Vice President, Chief
Administrative Officer and General Counsel of the Company in December
1993 and was appointed Executive Vice President, Chief Administrative
Officer and General Counsel in December 1995. Mr. Farb became Senior
Vice President, Finance, Chief Financial Officer and Treasurer of the
Company in April 1994 and was appointed Executive Vice President,
Finance, Chief Financial Officer and Treasurer of the Company in
December 1995. Dr. Sandage was appointed Executive Vice President,
Research and Development, Chief Scientific Officer of the Company in
December 1995.

(2) The salaries listed for fiscal 1994 include a 7.5% voluntary deferral
of salary by the named executive officer from August 1994 through March
1995, which were accrued in fiscal 1994 and paid in fiscal 1995 in the
following amounts: $2,163 for Dr. Cooper; $1,861 for Mr. Butler; $1,731
for Mr. Farb, and $1,601 for Dr. Sandage. Dr. Cooper's salary for
fiscal 1993 represents $86,538 paid by the Company and $124,617 paid by
Progenitor. The salaries listed include contributions made by the named
executive officers to the Company's 401(k) Plan in the

-10-

following amounts: (i) for fiscal 1995, $4,700 for Dr. Cooper, $9,241
for Mr. Butler and $9,678 for Dr. Sandage and (ii) for fiscal 1994,
$2,400 for Dr. Cooper, $4,975 for Mr. Butler and $10,875 for Dr.
Sandage.

(3) Amounts shown in this column consist of the following: (i) for fiscal
1995, bonuses which were accrued in fiscal 1995 and paid in fiscal
1996, (ii) for fiscal 1994, bonuses, portions of which were voluntarily
deferred by the named executive officers, and which were accrued in
fiscal 1994 and paid in fiscal 1995 in the following amounts: $37,500
for Dr. Cooper, $32,250 for Mr. Butler, $12,500 for Mr. Farb, and
$27,750 for Dr. Sandage, and (iii) for fiscal 1993, for Dr. Cooper, a
bonus which was accrued in fiscal 1993 and was payable by Progenitor to
Dr. Cooper in fiscal 1994 if certain conditions were met. Such
conditions were not met, and, accordingly, such bonus was not paid.

(4) Amounts shown in this column consist of reimbursements during fiscal
1995, for the payment of taxes incurred, in connection with benefits
received.

(5) Amounts shown in this column consist of the following: (i) for fiscal
1995, options granted under the Company's 1994 Plan and (ii) for fiscal
1994 and fiscal 1993, options granted under the Company's 1989 Stock
Option Plan (the "1989 Plan"), except for Dr. Cooper for fiscal 1994,
which consist of options granted by Progenitor under Progenitor's 1992
Stock Option Plan.

(6) Amounts shown in this column include the following:

(a) disability insurance premiums on behalf of the named executive
officers, in the following amounts: (i) for fiscal 1995,
$1,350 for Dr. Cooper, $1,161 for Mr. Butler, $6,162 for Mr.
Farb and $1,003 for Dr. Sandage, (ii) for fiscal 1994, $1,463
for Dr. Cooper, $968 for Mr. Butler, $2,616 for Mr. Farb and
$1,067 for Dr. Sandage and (iii) for fiscal 1993, $1,875 for
Dr. Cooper and $1,381 for Dr. Sandage.

(b) group term life insurance premiums on behalf of the named
executive officers, in the following amounts: (i) for fiscal
1995, $765 for Dr. Cooper, $1,244 for Mr. Butler, $364 for Mr.
Farb and $630 for Dr. Sandage, (ii) for fiscal 1994, $867 for
Dr. Cooper, $992 for Mr. Butler, $232 for Mr. Farb and $644
for Dr. Sandage and (iii) for fiscal 1993, $846 for Dr. Cooper
and $765 for Dr. Sandage. The Company has also made term life
insurance premium payments on behalf of Dr. Cooper in the
following amounts: (i) for fiscal 1995, $1,968, (ii) for
fiscal 1994, $1,768 and (iii) for fiscal 1993, $1,848.

(c) moving and relocation expenses in the following amounts: (i)
for fiscal 1995, for Mr. Butler, $30,822 of temporary living
expenses and for Mr. Farb, $22,000 of temporary living
expenses; (ii) for fiscal 1994, for Mr. Butler, $32,012 of
temporary living expenses and for Mr. Farb, $14,000 of
temporary living expenses; and (iii) for fiscal 1993, for Dr.
Cooper, $78,889 of moving and relocation expenses, and $38,806
for equity lost by Dr. Cooper on the sale of his residence,
which amount was paid in fiscal 1994.

-11-

The following table sets forth certain information with respect to
individual grants of stock options made during the fiscal year ended September
30, 1995 to each of the named executive officers:

Option Grants in Last Fiscal Year

Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(4)
--------------------------------------------------------------- ---------------------------

No. of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price Date 5% 10%
- - -------------------------------------------------------------------------------------------------------------------------

Glenn L. Cooper, M.D. 300,000(1) 26.9% $7.875 5/24/05 $1,485,764 $3,765,216
60,000(2) 5.4% $6.00 3/22/02 $ 226,402 $ 573,747
60,000(2) 5.4% $5.00 3/22/02 $ 188,668 $ 478,123

Mark S. Butler, Esq. 60,000(2) 5.4% $6.00 3/22/02 $ 226,402 $ 573,747
60,000(2) 5.4% $5.00 3/22/02 $ 188,668 $ 478,123

Thomas F. Farb 60,000(2) 5.4% $6.00 3/22/02 $ 226,402 $ 573,747
60,000(2) 5.4% $5.00 3/22/02 $ 188,668 $ 478,123

Bobby W. Sandage, 100,000(3) 9.0% $9.875 7/21/05 $ 621,033 $1,573,821
Jr., Ph.D. 60,000(2) 5.4% $6.00 3/22/02 $ 226,402 $ 573,747
60,000(2) 5.4% $5.00 3/22/02 $ 188,668 $ 478,123

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

(1) These options are exercisable in equal installments cumulatively over
three years commencing one year from the date of grant, with all options
becoming immediately exercisable in the event of a Change in Control, as
defined in the Company's 1994 Plan.

(2) These options were granted pursuant to a subsidiary incentive plan and
are exercisable commencing six years from the date of grant, provided
that the exercisability of such options will accelerate in the event of
(i) an initial public offering (the "Subsidiary IPO") of the subsidiary
to which the options relate (the "Subsidiary") or (ii) a merger, sale of
all or substantially all of the assets or similar corporate transaction
of the Subsidiary (a "Subsidiary Transaction") such that the number of
options listed opposite the respective valuations set forth below shall
become exercisable in full commencing on the earlier of (i) the effective
date of the registration statement relating to the Subsidiary IPO or (ii)
the closing date of the Subsidiary Transaction, through the expiration
date of such option and the remaining portion, if any, shall continue to
be exercisable commencing six years from the date of grant:

VALUATION* OF DESIGNATED SUBSIDIARY NUMBER OF OPTIONS EXERCISABLE
- - ----------------------------------- -----------------------------
Less than $30,000,000 25,000 shares (or such higher
number as the Board of Director
determines)
At least $30,000,000 but less than $45,000,000 40,000 shares
At least $45,000,000 but less than $60,000,000 50,000 shares
At least $60,000,000 60,000 shares

-12-

- - ----------
* Based on a number of shares outstanding on fully diluted basis. Refers to
post-IPO valuation in the event of a Subsidiary IPO and the valuation of
the consideration received in connection with a Subsidiary Transaction.

Of these Options, 60,000 granted to each of the named executive officers at
$5.00 per share relate to Intercardia, which filed a registration statement
with the S.E.C. in December 1995 relating to an initial public offering. If
such Subsidiary IPO is completed on the terms proposed, all of such options
will become immediately exercisable.

(3) These options are subject to an accelerated vesting provision which
provides that in the event that dexfenfluramine is approved by the FDA, 50%
of the options shall be exercisable on the one year anniversary of such
approval and the remaining 50% of the options shall be exercisable on the
two year anniversary of such approval.

(4) Amounts for the named executive officers shown under the "Potential
Realizable Value" columns above have been calculated by multiplying the
exercise price by the annual appreciation rate shown (compounded for the
term of the options), subtracting the exercise price per share and
multiplying the gain per share by the number of shares covered by the
options.

-13-

The following table sets forth certain information with respect to each exercise
of stock options during the fiscal year ended September 30, 1995 by each of the
named executive officers and the number and value of unexercised options held by
such named executive officers as of September 30, 1995:

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values

Number of Securities Value
Underlying Unexercised of Unexercised in-the-
Shares Options at Fiscal Money Options at
Acquired Value Year-End Exercisable/ Fiscal Year-End
Name on Exercise Realized Unexercisable Exercisable/Unexercisable*
- - ---------------------------------------------------------------------------------------------------------------------------------

Glenn L. Cooper, M.D. -- -- 403,809/616,191 $1,110,476/$2,347,024
Mark S. Butler, Esq. -- -- 100,000/320,000 $175,000/$1,070,000
Thomas F. Farb -- -- 83,333/286,667 $281,250/$1,282,500
Bobby W. Sandage, Jr., Ph.D. -- -- 137,500/307,500 $510,938/$1,130,938

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

* Amounts for the named executive officers shown under the "Value of
Unexercised in-the-Money Options at Fiscal Year-End" column above have
been calculated by multiplying the number of unexercised options
outstanding by the difference between the fair market value of the
Common Stock at September 30, 1995 ($11.50) and the option exercise
price.

-14-

STOCK PRICE PERFORMANCE PRESENTATION

The following chart compares the cumulative total stockholder return on the
Company's Shares with the cumulative total stockholder return of (i) the Nasdaq
Market Index and (ii) a peer group index consisting of companies reporting under
the Standard Industrial Classification Code 2834 (Pharmaceutical Preparations):

COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG INTERNEURON PHARMACEUTICALS, INC. ("IPI"),
NASDAQ MARKET INDEX AND PEER GROUP INDEX ("SIC") (1)

(in dollars)

------------------------------------------------FISCAL YEAR ENDING-----------------------------------------------
1990 1991 1992 1993 1994 1995

INTERNEURON PHARMACEUTICALS, INC. 100 400.00 421.43 464.29 353.57 657.14
PEER GROUP INDEX 100 150.68 152.06 129.10 145.20 209.90
NASDAQ MARKET INDEX 100 134.19 131.96 171.62 181.61 220.50

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

(1) Assumes $100 invested on September 30, 1990 and assumes dividends
reinvested. Measurement points are at the last trading day of the
fiscal years ended September 30, 1990, 1991, 1992, 1993, 1994 and 1995.
The material in this chart is not soliciting material, is not deemed
filed with the S.E.C. and is not incorporated by reference in any
filing of the Company under the Securities Act of 1993, as amended,
(the "1933 Act") or the 1934 Act, whether made before or after the date
of this proxy statement and irrespective of any general incorporation
language in such filing.

-15-

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS

In May 1993, the Company entered into an employment agreement, as
amended (the "Cooper Agreement"), with Glenn L. Cooper, M.D., to serve as
President, Chief Executive Officer and Director of the Company for a term of
three years. At the same time, Dr. Cooper's employment agreement with Progenitor
terminated, except for certain provisions set forth below. The Cooper Agreement
provides for Dr. Cooper to receive a base salary of $250,000, which was
increased to $300,000 per annum in December 1995, plus bonuses based on the
achievement of milestones to be agreed upon between the Company and Dr. Cooper.
Pursuant to the Cooper Agreement, in May 1993, Dr. Cooper was granted options to
purchase 600,000 Shares at an exercise price of $8.75 per share. In addition,
the Company provides Dr. Cooper with a $1,000,000 life insurance policy payable
to the beneficiary of his choice. The Company also agreed to reimburse Dr.
Cooper for relocation expenses and to pay the carrying costs of houses owned by
Dr. Cooper in North Carolina and Ohio (the locations of his previous employment)
under certain conditions. See "Executive Compensation".

The Cooper Agreement also provided for the Company to loan Dr. Cooper
up to $250,000, of which $150,000 was to be used to repay a loan of such amount
made to Dr. Cooper by Progenitor (the "Progenitor Loan") and the balance was to
be used by Dr. Cooper for housing costs. The Cooper Agreement provided that the
loan would bear interest at the prime rate and that a portion of the loan would
be forgiven by the Company upon the achievement of specified milestones. In
October 1993, Dr. Cooper repaid $10,000 of the Progenitor Loan and the Company
loaned Dr. Cooper $140,000 (the "Company Loan") which was used to repay the
balance of the Progenitor Loan. The Company Loan, which becomes payable in
October 1997, is evidenced by a promissory note providing for repayment as
follows: (a) $30,000, plus accrued interest, shall be repaid upon, and out of
the proceeds of, the sale by Dr. Cooper of any securities of the Company or of
the sale of Dr. Cooper's Massachusetts house and (b) $110,000, plus accrued
interest, shall be forgiven by the Company, in installments of 25% of such
amount, upon the achievement of specified milestones. During the first quarter
of fiscal 1996, 25% or $31,914 of the Company Loan was forgiven based upon the
achievement of one milestone.

The Cooper Agreement provides that Dr. Cooper may not, during the term
of the agreement and for two years from the date of termination of employment,
engage in any business competitive with the Company or its research activities.
If Dr. Cooper is terminated for reasons other than cause, he is entitled to
receive his base salary plus pro-rated average bonuses, subject to set-off from
other employment, for a six-month period. The Cooper Agreement also provided for
the termination of the employment agreement between Dr. Cooper and Progenitor,
except that Progenitor repurchased from Dr. Cooper 148,535 shares of
Progenitor's common stock owned by Dr. Cooper at $.01 per share (Dr. Cooper's
purchase price), resulting in Dr. Cooper owning 118,828 shares of Progenitor's
common stock, although Progenitor was entitled to purchase 29,707 additional
shares of such common stock from Dr. Cooper pursuant to the terms of Dr.
Cooper's employment agreement with Progenitor.

Effective November 1991, the Company entered into a letter agreement
with Bobby W. Sandage, Jr., Ph.D. The agreement provides for a base annual
salary, which was increased to $210,000 in December 1995, to be reviewed
annually, and for options to purchase 100,000 of the Company's Shares at an
exercise price of $6.25. If Dr. Sandage is terminated for reason other than
cause, he is entitled to salary and benefits coverage for the earlier of up to
six months or until he finds a new position. Dr. Sandage may continue to consult
with third parties in fields unrelated to Company business during non-working
hours.

-16-

Effective December 1993, the Company entered into a letter agreement
with Mark S. Butler, Esq., providing for Mr. Butler to serve as Senior Vice
President, Chief Administrative Officer and General Counsel of the Company. The
agreement provides for a base salary, which was increased to $225,000 in
December 1995, to be reviewed annually, and provided that Mr. Butler was
eligible to participate in the Company's Management Bonus Plan for fiscal 1994.
Additionally, pursuant to the agreement, Mr. Butler received options to purchase
300,000 Shares at an exercise price of $9.75 per Share. If Mr. Butler is
terminated for reason other than cause or if Mr. Butler elects to terminate for
just cause, Mr. Butler is entitled to receive salary for a period of nine months
following such termination, subject to set-off from other employment.

In April 1994, the Company entered into a letter agreement with Thomas
F. Farb, providing for Mr. Farb to serve as Senior Vice President-Finance, Chief
Financial Officer, and Treasurer of the Company. The agreement provides for a
base salary, which was increased to $210,000 in December 1995, to be reviewed
annually, and provided that Mr. Farb was eligible to participate in the
Company's Management Bonus Plan for fiscal 1994. Additionally, pursuant to the
agreement, Mr. Farb received options to purchase 250,000 Shares at an exercise
price of $8.125 per Share. If Mr. Farb is terminated for reason other than cause
or if Mr. Farb elects to terminate for just cause, Mr. Farb is entitled to
receive salary for a period of nine months following such termination, subject
to set-off from other employment. In addition, Mr. Farb received $17,500 of his
fiscal 1994 bonus in advance.

In the event of a Change in Control as defined under the Company's 1989
Plan and 1994 Plan, options to purchase Shares held by all executive officers of
the Company will become immediately exercisable.

COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the 1934 Act, requires the Company's executive
officers, directors and persons who beneficially own more than 10% of a
registered class of the Company's equity securities to file with the S.E.C.
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Such executive officers, directors,
and greater than 10% beneficial owners are required by S.E.C. regulation to
furnish the Company with copies of all Section 16(a) forms filed by such
reporting persons.

Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and greater than 10% beneficial owners were complied with.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Sharrock, who serves as the Chairman of the Company's Compensation
Committee, is a consultant to the Company and a director of Progenitor and
Intercardia. During the fiscal year ended September 30, 1995, pursuant to the
terms of the 1994 Plan, the Company granted Mr. Sharrock options to purchase
50,000 Shares, and, pursuant to a Consulting and Non-Competition Agreement, the
Company paid him fees of $36,000. During the fiscal year ended September 30,
1995, Progenitor paid $6,000 in directors' fees and accrued an additional $2,000
in directors' fees payable to Mr. Sharrock. In the event of the Intercardia IPO,
Mr. Sharrock will receive from Intercardia $2,000 in directors' fees per meeting

-17-

attended, options to purchase 10,000 shares of common stock of Intercardia and
an annual fee of $1,000. See "Certain Transactions."

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION (1)

The Compensation Committee's informal executive compensation philosophy
(which applies generally to all Company management, including the President and
Chief Executive Officer, Glenn L. Cooper, M.D.) considers a number of factors,
which may include: providing levels of compensation competitive with companies
at a comparable stage of development and in the Company's geographic area,
integrating management's pay with the achievement of performance goals,
rewarding above average corporate performance, recognizing and providing
incentive for individual initiative and achievement, and assisting the Company
in attracting and retaining qualified management. Senior management's
compensation is weighted in part toward compensation contingent upon the Company
achieving certain business and financial objectives. The Compensation Committee
also endorses the position that equity ownership by management is beneficial in
aligning management's and stockholders' interest in the enhancement of
stockholder value by providing management with longer-term incentives.
Accordingly, compensation structures for management generally include a
combination of salary, bonuses and stock options.

In accordance with this compensation philosophy, the Compensation
Committee adopted a Management Bonus Plan for fiscal 1995 for executive officers
of the Company including a CEO Bonus Plan for Dr. Cooper. The Committee
recognized that a significant short-term goal of the Corporation was to increase
its cash position during fiscal 1995 in order to be in a position to pursue
future growth. To incentivize management to achieve this goal, the Management
Bonus Plan entitled the named executive officers to a bonus equal to varying
percentages of base salary if specified levels of funds were received by the
Company during fiscal 1995, from public or private equity financing, private
financings of subsidiaries, or corporate partner or grant revenues, but
excluding any cash received from warrant exercises. The Committee determined the
varying percentages to be earned based on the desirability and valuation of the
particular financing. Under the Management Bonus Plan, Dr. Cooper received a
bonus of $75,000, and Messrs. Butler and Farb and Dr. Sandage received bonuses
of $64,500, $60,000, and $55,755, respectively, as a result of private
placements of securities of the Company and its subsidiaries and corporate
partner transactions involving subsidiaries of the Company during fiscal 1995.

In granting stock options to executive officers, the Compensation
Committee's general practice is to (i) provide for vesting over a three year
period commencing one year from the date of grant and, (ii) prior to the period
in which the final installment of the original option becomes exercisable, grant
a new option to purchase 50% of the number of shares issuable upon exercise of
the original option. As a result, during fiscal 1995, Dr. Cooper was granted
options to purchase 300,000 shares, representing 50% of the number of options
originally granted to Dr. Cooper which are now fully vested.

The compensation received during fiscal 1995 by Dr. Cooper was governed
in part by the Cooper Agreement, as entered into by the Company and Dr. Cooper
in May 1993. The terms of the Cooper Agreement were arrived at after the Company
considered a number of factors, including the following: (i) Dr. Cooper was then
employed as President and Chief Executive Officer of Progenitor, a
majority-owned subsidiary of the Company and, accordingly, the Company had been
able to evaluate Dr. Cooper's performance, (ii) a review of the compensation
received by chief executive officers of comparable biotechnology and
pharmaceutical companies in the Boston, Massachusetts area and (iii) a desire to
provide Dr. Cooper with long-term incentives to maximize stockholder value and
to provide Dr. Cooper

-18-

with an equity interest in the Company comparable to that of chief executive
officers of comparable biotechnology and pharmaceutical companies. In addition,
the Compensation Committee adopted the CEO Bonus Plan, within the Management
Bonus Plan, as described above.

David B. Sharrock, Chairman
General Alexander M. Haig, Jr.
Harry J. Gray
Malcolm Morville, Ph.D.
- - -----------

(1) The material in this report is not soliciting material, is not deemed
filed with the S.E.C. and is not incorporated by reference in any
filing of the Company under the 1933 Act or the 1934 Act, whether made
before or after the date of this proxy statement and irrespective of
any general incorporation language in such filing.

CERTAIN TRANSACTIONS

The Company had a Consulting and Non-Competition Agreement (the
"Wurtman Consulting Agreement") with Richard Wurtman, M.D., a director of the
Company, and his wife, Judith Wurtman, Ph.D., which automatically renewed on
January 1 for consecutive periods of one year, unless either party otherwise
gave notice to terminate sixty days prior to expiration of the then current
term. For the fiscal year ended September 30, 1995, Drs. Richard Wurtman and
Judith Wurtman received $99,000 and $20,000, respectively, pursuant to the
Wurtman Consulting Agreement. In November 1995, the Wurtman Consulting Agreement
was superseded by a Consultant and Non-Competition Agreement between the Company
and Dr. Richard Wurtman and, effective as of April 5, 1995, a Consultant and
Non-Competition Agreement between InterNutria and Dr. Judith Wurtman. The new
agreement entitles Dr. Richard Wurtman to an annual consulting fee of $150,000,
subject to increases, and to a bonus of $50,000 upon the approval of
dexfenfluramine by the FDA. The new agreement entitles Dr. Judith Wurtman to an
annual consulting fee of $70,000, subject to increases, and options to purchase
5% of the common stock of InterNutria. During the fiscal year ended September
30, 1995, Dr. Judith Wurtman received $25,000 pursuant to the new agreement.

Drs. Richard Wurtman and Judith Wurtman have advised the Company that
in accordance with MIT policy, they are entitled to receive from MIT a
percentage of any royalties received by MIT in connection with MIT's license of
dexfenfluramine to Servier and citicoline to Ferrer. They have further advised
that in accordance with such policy, they are not entitled to share in royalties
derived by MIT from any licensee in which they have an equity interest (such as
the Company).

In November 1995, the Company and InterNutria entered into an Asset
Purchase Agreement with Walden Laboratories, Inc. ("Walden"), pursuant to which
InterNutria purchased substantially all of the assets of Walden, including a
product intended for the treatment of pre-menstrual syndrome and related
intellectual property, for consideration payable in Shares with a fair market
value at the date of payment equal to $2,400,000, to be paid in two equal annual
installments on the first and second anniversary of the closing date.
InterNutria was organized by the Company in April 1995 to develop commercial
applications of nutritional products. Dr. Richard Wurtman is a stockholder of
Walden, Dr. Rosenwald is a principal stockholder and director of Walden and Dr.
Judith Wurtman served as an executive officer, director and principal
stockholder of Walden until April 1995. None of such individuals will receive
any of the Shares constituting the purchase price for the Walden assets.

-19-

In fiscal 1995, the Company made contributions of $147,000 to The
Center for Brain Science and Metabolism Charitable Trust, of which Dr. Richard
Wurtman is the Scientific Director. This trust provides grants and fellowships
to not-for-profit institutions, including MIT, and post-doctoral fellows for
research in brain behavior, nutrition and pharmacology and has supported
research on citicoline and melatonin.

Lindsay Rosenwald, M.D., a principal stockholder and the Chairman of
the Board of the Company, receives a management fee, which includes his
out-of-pocket expenses incurred in providing services to the Company, of $2,500
per month under a management agreement with the Company. For the fiscal year
ended September 30, 1995, the Company paid $30,000 to Dr. Rosenwald pursuant to
this agreement.

Dr. Rosenwald is the Chairman and President of Castle, a venture
capital and investment banking firm engaged in locating, investigating and
funding scientific inventions or technologies which are perceived to have
potential commercial application in the pharmaceutical or health care
industries, generally with the goal of forming a new company to exploit such
inventions or technologies. Castle has presented certain of such opportunities
to the Company, as well as to other companies, and may in the future continue to
do so, although neither Dr. Rosenwald nor Castle has any agreement to do so and
there can be no assurance that any inventions, technologies or companies
discovered or funded by Castle will be presented to the Company. The Board of
Directors of the Company adopted a policy for compensating Castle or the Castle
employee (excluding Dr. Rosenwald) responsible for the introduction (the "Castle
Finder") for any arrangement entered into by the Company as a result of Castle's
introduction. No compensation was paid to Castle Finders during fiscal 1995.

During fiscal 1995, Paramount Capital, Inc. ("Paramount"), an
investment banking firm of which Dr. Rosenwald is the Chairman of the Board of
Directors, Chief Executive Officer and sole stockholder, acted as placement
agent for private placements of securities by Progenitor and Transcell (the
"Progenitor/Transcell Offering") and by Intercardia (the "Intercardia
Offering"). D.H. Blair & Co., Inc. ("Blair") was a selected dealer in both
private placements. Blair is substantially owned by the family members of J.
Morton Davis (including the wife of Dr. Rosenwald), who is the sole stockholder
of the parent of D.H. Blair Investment Banking Corp., a principal stockholder of
the Company. During fiscal 1995 Paramount and Blair received cash commissions
aggregating $623,423 and $125,587, respectively, from these private placements.
In addition, designees of Paramount received warrants to purchase an aggregate
of (i) 44,402 shares of preferred stock of Progenitor, (ii) 44,402 shares of
preferred stock of Transcell, (iii) 46,767 shares of preferred stock of
Intercardia and (iv) 13,875 Shares. Of these warrants, 12,274, 12,274, 30,092
and 7,671, respectively, were received by Dr. Rosenwald. Designees of Blair
received warrants to purchase an aggregate of (i) 25,400 shares of preferred
stock of Progenitor, (ii) 25,400 shares of preferred stock of Transcell, (iii)
4,266 shares of preferred stock of Intercardia and (iv) 7,938 Shares. Of these
warrants, 10,700, 10,700, 2,266 and 6,688, respectively, were received by
sons-in-law of Mr. Davis who are officers of Blair.

In connection with the these private placements, the Company converted
an aggregate of $12,628,105, $9,127,427 and $1,367,221 of indebtedness,
including accrued interest, owed to it by Progenitor, Transcell and Intercardia,
respectively, into 2,020,496, 1,460,388 and 182,296 shares of convertible
preferred stock of Progenitor, Transcell and Intercardia, respectively.

The warrants issued to Paramount and Blair in connection with both the
Progenitor/Transcell Offering and the Intercardia Offering are exercisable at
any time until the earlier of ten years from the Final Closing Date (as defined
in the offering documents) or five years from the closing of an initial

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public offering of the securities of either Progenitor, Transcell or
Intercardia, as applicable and, pursuant to a cashless exercise provision, may
be exercised without the need to pay any cash. Each of Progenitor, Transcell and
Intercardia agreed to indemnify Paramount and Blair against certain liabilities,
including liabilities under the 1933 Act. In addition to Dr. Rosenwald, certain
other officers of Paramount are stockholders of the Company and of Progenitor. A
designee of Paramount also received warrants to purchase 25,000 shares in
connection with such private placements.

During fiscal 1995, the Company entered into a consulting agreement
with Paramount pursuant to which it paid a fee to Paramount of $5,000 a month
until February 1995, for an aggregate of $15,000, and granted a designee of
Paramount warrants to purchase 25,000 Shares.

During fiscal 1995, in connection with a private placement of the
Company's securities to Reliance Insurance Company for which Paramount acted as
placement agent, the Company paid Paramount cash compensation of $300,000 and
granted to a designee of Paramount warrants to purchase an aggregate of 50,000
Shares.

In January 1995, Dr. Rosenwald agreed to provide the Company, or its
then current subsidiaries, $1.2 million, net of expenses (the "Guaranteed
Financing Amount"), in the event that the Company failed to raise $1.2 million
of new financing after the date of the Agreement (the "New Financing") by August
15, 1995. The Guaranteed Financing Amount was to either be in the form of debt
or equity, and would have been reduced on a dollar for dollar basis by any New
Financing. The agreement expired in fiscal 1995 upon the Company raising $1.2
million of New Financing.

In fiscal 1995, the Company granted options to each of the named
executive officers and each of the Company's directors. See "Executive
Compensation". In October and December 1995, the Company granted options to
purchase 150,000 Shares and 125,000 Shares, to Mr. Butler and Mr. Farb,
respectively. Also in fiscal 1995 the Company paid $36,000 in consulting fees to
David Sharrock and Progenitor paid $6,000 in directors' fees and accrued an
additional $2,000 in directors' fees payable to David Sharrock, a director of
and consultant to the Company who also serves as a director of Progenitor and,
since October 1995, of Intercardia. In the event of the Intercardia IPO, Mr.
Sharrock will receive from Intercardia $2,000 in directors' fees per meeting
attended, options to purchase 10,000 shares of common stock of Intercardia and
an annual consulting fee of $1,000. See "Director Compensation".

In September 1992, Progenitor loaned Glenn Cooper, M.D. the Company's
President and Chief Executive Officer and a director of the Company, $150,000
(the "Progenitor Loan") to assist him in purchasing a new house in Ohio. In
October 1993, Dr. Cooper repaid $10,000 of the Progenitor Loan and the Company
loaned Dr. Cooper $140,000 (the "Company Loan"), which was used by Dr. Cooper to
repay the balance of the Progenitor Loan. The Company Loan, which reaches
maturity and becomes payable in October 1997, provides that it shall be repaid
as follows: (a) $30,000, plus accrued interest, shall be repaid upon and out of
the proceeds of the sale by Dr. Cooper of any securities of the Company or of
the sale of Dr. Cooper's Massachusetts house and (b) $110,000, plus accrued
interest, shall be forgiven by the Company, in installments of 25% of such
amount, upon the achievement of specified milestones. During the first quarter
of fiscal 1996, 25% or $31,914 of the Company Loan was forgiven based upon the
achievement of one specified milestone. See "Executive Compensation." Dr. Cooper
owns 118,828 shares of Progenitor's common stock. In June 1994, Progenitor
granted Dr. Cooper options to purchase 17,000 shares of Progenitor's common
stock. Dr. Cooper's wife, who currently serves as the Company's Vice President
of Human Resources, and who previously held a similar position at Progenitor,
was granted options in February 1993 to purchase 4,000 Shares of Progenitor's
common stock and in December 1995, was granted options to purchase 35,000
Shares.

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APPROVAL AND RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT ACCOUNTANTS

The Management of the Company recommends a vote for the approval and
ratification of the appointment of Coopers & Lybrand L.L.P., Certified Public
Accountants, as the Company's independent accountants for the fiscal year ending
September 30, 1996. Coopers & Lybrand L.L.P. has been the Company's accountants
for the past fiscal year and has no direct or indirect financial interest in the
Company. A representative of Coopers & Lybrand L.L.P. is expected to be present
at the Annual Meeting of Stockholders with the opportunity to make a statement
if he or she desires to do so, and shall be available to respond to appropriate
questions.

GENERAL

The Management of the Company does not know of any matters other than
those stated in this Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, it is
intended that proxies in the accompanying form will be voted on any such other
matters in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such matters is conferred by such proxies
upon the persons voting them.

The Company will bear the cost of preparing, printing, assembling and
mailing the proxy, Proxy Statement and other material which may be sent to
stockholders in connection with this solicitation. It is contemplated that
brokerage houses will forward the proxy materials to beneficial owners at the
request of the Company. In addition to the solicitation of proxies by use of the
mails, officers and regular employees of the Company may solicit by telephone
proxies without additional compensation. The Company does not expect to pay any
compensation for the solicitation of proxies.

The Company will provide without charge to each person being solicited
by this Proxy Statement, on the written request of any such person, a copy of
the Annual Report of the Company on Form 10-K for the fiscal year ended
September 30, 1995 (as filed with the S.E.C.) including the financial statements
thereto. All such requests should be directed to Mr. William Boni, Director of
Corporate Communications, Interneuron Pharmaceuticals, Inc., One Ledgemont
Center, 99 Hayden Avenue, Lexington, Massachusetts 02173.

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STOCKHOLDER PROPOSALS

The Annual Meeting of Stockholders for the fiscal year ending September
30, 1996 is expected to be held in February 1997. All proposals intended to be
presented at the Company's next Annual Meeting of Stockholders must be received
at the Company's executive office no later than September 30, 1996, for
inclusion in the Proxy Statement and form of proxy related to that meeting.

By Order of the Board of Directors,

Glenn L. Cooper, M.D.
President and Chief Executive Officer

Dated: January 26, 1996

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PROXY

INTERNEURON PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Glenn L. Cooper, M.D. or Lindsay
Rosenwald, M.D. as proxy to represent the undersigned at the Annual Meeting of
Stockholders to be held at The Westin Hotel, First Floor, Eden Vale Ballroom C,
70 Third Avenue, Waltham, Massachusetts 02154 on February 21, 1996 at 10:00 a.m.
and at any adjournment thereof, and to vote the shares of Common Stock the
undersigned would be entitled to vote if personally present, as indicated below.

1. Election of Directors

FOR all nominees listed below |_| WITHHOLDING AUTHORITY |_|
(except as marked to the to vote for all nominees
contrary below) listed below

Lindsay Rosenwald, M.D., Glenn L. Cooper, M.D., Harry J. Gray,
Alexander M. Haig, Jr., Peter Barton Hutt, Malcolm Morville, Ph.D.,
Robert K. Mueller, Lee J. Schroeder, David Sharrock, Richard Wurtman, M.D.

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

- - ------------------------------------------------------------------------------
2. Approval and ratification of the appointment of Coopers & Lybrand
L.L.P. as independent accountants.

FOR |_| AGAINST |_| ABSTAIN |_|

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

The Shares represented by this proxy will be voted as directed. If no
contrary instruction is given, the Shares will be voted FOR the election of the
nominees and FOR the approval and ratification of the appointment of Coopers &
Lybrand L.L.P. as the independent accountants of the Company.

DATED:______________________, 1996

----------------------------------
Signature
----------------------------------
Signature if held jointly.

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

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