ATLANTIC PHARMACEUTICALS INC, S-3/A, 1997-10-29

ATLANTIC PHARMACEUTICALS INC
S-3/A, 1997-10-29
PHARMACEUTICAL PREPARATIONS

Previous: CARING PRODUCTS INTERNATIONAL INC, SB-2/A, 1997-10-29

Next: AMERICAN ARTISTS FILM CORP/MO/, NT 10-K, 1997-10-29

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997

REGISTRATION NO. 333-35079

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
--------------------------

ATLANTIC PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

<TABLE>
<S> <C>
DELAWARE 36-3898269
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>

1017 MAIN CAMPUS DRIVE, SUITE 3900
RALEIGH, NORTH CAROLINA 27606
(919) 513-7020

(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices

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

JON D. LINDJORD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATLANTIC PHARMACEUTICALS, INC.
1017 MAIN CAMPUS DRIVE, SUITE 3900
RALEIGH, NORTH CAROLINA 27606
(919) 513-7020

(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
--------------------------

COPIES TO:

J. STEPHAN DOLEZALEK, ESQ.
BROBECK, PHLEGER & HARRISON LLP
TWO EMBARCADERO PLACE
2200 GENG ROAD
PALO ALTO, CALIFORNIA 94303
(415) 424-0160

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

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

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /

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, as amended, check the following box: /X/

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED(1) REGISTERED(2) PER SHARE(3) PRICE(3) FEE(4)
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per share
("Common Stock").......................... 3,805,654 $9.5625 $36,391,567 $9,063
</TABLE>

FOOTNOTES ON FOLLOWING PAGE

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(1) Pursuant to Rule 429 of the Securities Act of 1933, as amended (the
"Securities Act"), the following securities are being carried forward in the
Prospectus contained herein: (a) redeemable warrants to purchase 1,500,000
shares of Common Stock issued to certain Selling Securityholders in
connection with the Company's bridge financing (the "Warrants") and (b)
3,702,750 shares of Common Stock, consisting of (i) 1,500,000 shares
underlying the Warrants, (ii) 1,872,750 shares underlying redeemable
warrants included in the units (the "Units") offered pursuant to the initial
public offering of the Company's securities (the "Unit Offering"), (iii)
165,000 shares included in the Units underlying warrants issued to the
underwriter of the Unit Offering (the "Underwriter's Warrants"), and (iv)
165,000 shares underlying the redeemable warrants included in the Units
underlying the Underwriter's Warrants. A registration fee in the amount of
$6,740.82 was paid in connection with the registration of such securities
pursuant to the 1995 Registration Statement, as hereinafter defined.

(2) Includes 2,530,637 shares of Common Stock previously registered.

(3) Estimated solely for the purpose of calculating the registration fee. Fee
calculated upon the basis of the average of the high and low sales prices of
the Company's Common Stock as reported on The Nasdaq SmallCap Market on
October 27, 1997 of $9.5625, which date is within five business days prior
to the date of the filing of this Registration Statement.

(4) Calculated pursuant to Rule 457(c) of the Securities Act based on an
estimate of the maximum offering price for the additional securities being
registered. The Company has previously paid $5,368 in registration fees to
cover the 2,530,637 shares of Common Stock previously registered.

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

This Registration Statement is being filed pursuant to and in reliance on
Rule 429(a) under the Securities Act. Pursuant to Rule 429 under the Securities
Act, the Prospectus contained herein also relates to the Company's Registration
Statement on Form SB-2, File No. 33-98478, as filed with the Securities and
Exchange Commission (the "Commission") on October 24, 1995, as amended by
Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4 and Amendment
No. 5 thereto, as filed with the Commission on November 9, 1995, December 5,
1995, December 12, 1995, December 13, 1995, and December 14, 1995, respectively
(collectively, the "1995 Registration Statement").

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

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

DATED OCTOBER 29, 1997

ATLANTIC PHARMACEUTICALS, INC.

1,500,000 PREVIOUSLY REGISTERED REDEEMABLE WARRANTS, EACH
EXERCISABLE FOR ONE SHARE OF COMMON STOCK, OFFERED BY CERTAIN SELLING
SECURITYHOLDERS

3,702,750 PREVIOUSLY REGISTERED SHARES OF COMMON STOCK

3,805,654 SHARES OF COMMON STOCK,
OFFERED BY CERTAIN SELLING SECURITYHOLDERS

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

This prospectus (the "Prospectus") relates to the public offering, which is
not being underwritten, of 1,500,000 previously registered redeemable warrants
(the "Warrants"), each of which is exercisable for one previously registered
share of Common Stock, par value $0.001 per share (the "Common Stock"), of
Atlantic Pharmaceuticals, Inc., a Delaware corporation ("Atlantic" or the
"Company"). This Prospectus also relates to the public offering, which is not
being underwritten, of 3,702,750 previously registered shares of Common Stock
(collectively, the "Unit Offering Shares"), consisting of (i) 1,500,000 shares
underlying the Warrants, (ii) 1,872,750 shares underlying redeemable warrants
(the "IPO Warrants") included in the units (the "Units") offered pursuant to the
initial public offering of the Company's securities (the "Unit Offering"), (iii)
165,000 shares included in the Units underlying warrants issued to the
underwriter of the Unit Offering (the "Underwriter's Warrants"), and (iv)
165,000 shares underlying the redeemable warrants (the "Underwriter's Redeemable
Warrants") included in the Units underlying the Underwriter's Warrants. The
Warrants, the IPO Warrants and the Underwriter's Redeemable Warrants are herein
referred to as the "Redeemable Warrants." This Prospectus also relates to the
public offering, which is not being underwritten, of an aggregate of 3,805,654
shares of Common Stock (collectively, the "New Shares"), consisting of (i)
2,622,827 shares (collectively with the shares set forth under (ii) below, the
"Placement Shares") issuable upon conversion of 1,237,200 shares of the
Company's Series A Convertible Preferred Stock, par value $0.001 per share (the
"Series A Preferred"), (ii) 262,119 shares issuable upon conversion of 123,720
shares of Series A Preferred underlying warrants to purchase such shares of
Series A Preferred, (iii) 103,200 shares (the "Channel Shares") issued in
connection with the Company's acquisition of the minority interest in Channel
Therapeutics, Inc., (iv) 5,000 shares transferred to certain Selling
Securityholders (as defined below) by a certain other securityholder in
connection with a settlement agreement, (v) 23,557 shares underlying a stock
option granted to a former officer of the Company and (vi) 788,951 shares issued
to an affiliate of the Company in private placement transactions of the Company
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act"). See "Risk Factors--Risks
Associated With Litigation." The New Shares, the Warrants and the Unit Offering
Shares are collectively referred to as the "Securities." The Securities are held
by certain warrantholders or stockholders of the Company or by pledgees, donees,
transferees or other successors in interest that receive such Securities as a
gift, partnership distribution or other non-sale related transfer (the "Selling
Securityholders"). The Placement Shares were received by certain Selling
Securityholders in private placement transactions of the Company and were issued
pursuant to an exemption from the registration requirements of the Securities
Act, provided by Section 4(2) thereof. The Placement Shares are being registered
by the Company pursuant to a registration rights agreement with certain Selling
Securityholders. See "Description of Securities" and "Plan of Distribution."

(CONTINUED ON FOLLOWING PAGE)
--------------------------

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
---------------------
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.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
DISCOUNTS AND SELLING
PRICE TO PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
<S> <C> <C> <C>
Per Share................................................ $9.25 $0 $9.25
Total.................................................... $35,202,300 $0 $35,202,300
</TABLE>

(1) Does not give effect to ordinary brokerage commissions or other costs of
sale that will be borne solely by the Selling Securityholders.

(2) Represents the anticipated sale by the Selling Securityholders at $9.25 per
share, the last reported sales price reported on The Nasdaq SmallCap Market
on October 27, 1997. There can be no assurances, however, that the Selling
Securityholders will be able to sell their shares at this price, or that a
liquid market will exist for the Company's securities. The Company will not
receive any proceeds upon the sale of shares of Common Stock by the Selling
Securityholders, but will receive proceeds resulting from the exercise of
the Redeemable Warrants and the Underwriter's Warrants. Does not (i) include
expenses to be paid by the Company on behalf of the Selling Securityholders
or (ii) incorporate the expenses of preparing the Registration Statement of
which this Prospectus is a part, which will be borne by the Company.

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

THE DATE OF THIS PROSPECTUS IS , 1997.

--------------------------
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)

The Securities may be offered by the Company or the Selling Securityholders
from time to time in transactions on The Nasdaq SmallCap Market ("Nasdaq"), in
privately negotiated transactions, or by a combination of such methods of sale,
at fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Securities may be sold by one or more of the following: (a) a block
trade in which the broker or dealer so engaged will attempt to sell the
Securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction, (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus and (c) ordinary brokerage transactions and transactions in which the
broker solicits purchases. The Selling Securityholders may effect such
transactions by selling the Securities to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders or the purchasers of the Securities
for whom such broker-dealers may act as agent or to whom they sell as principal
or both (which compensation to a particular broker-dealer might be in excess of
customary commissions). In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144
promulgated under the Securities Act rather than pursuant to this Prospectus.
The Company will not receive any of the proceeds from the sale of the New Shares
or the Unit Offering Shares by the Selling Securityholders, although the Company
will receive proceeds from the exercise of the Redeemable Warrants and the
Underwriter's Warrant. The Company has agreed to bear certain expenses in
connection with the registration and sale of the Securities being offered by
certain of the Selling Securityholders and to indemnify certain Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act. See "Plan of Distribution."

The Units, Common Stock and Redeemable Warrants of the Company are traded on
The Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the symbols
"ATLCU," "ATLC" and "ATLCW," respectively. On September 3, 1997, the last sale
prices for the Units, Common Stock and Redeemable Warrants as quoted on Nasdaq
were $9.625, $7.00 and $2.125, respectively, per security.

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

The Selling Securityholders and any broker-dealers or agents that
participate with the Selling Securityholders in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any commissions received by them and any profit
on the resale of the Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.

2
<PAGE>
TO NEW JERSEY RESIDENTS ONLY:

The Securities may only be offered and sold to any person who comes within
any of the following categories, or whom the seller thereof reasonably believes
comes within any of the following categories, at the time of the sale of the
Securities to that person:

(1) Any bank as defined in section 3(a)(2) of the Securities Act of 1933
(the "Securities Act"), or any savings and loan association or other
institution as defined in section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
any insurance company as defined in section 2(13) of the Securities Act; any
investment company registered under the Investment Company Act of 1940 or a
business development company as defined in section 2(a)(48) of that Act;
Small Business Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small Business Investment
Act of 1958; any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan has total assets
in excess of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in section 3(21) of such Act, which
is either a bank, savings and loan association, insurance company, or
registered investment adviser, or if the employee benefit plan has total
assets in excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;

(2) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;

(3) Any organization described in Section 501(C)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;

(4) Any director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive officers or
general partner of a general partner of that issuer;

(5) Any natural person whose individual net worth, or joint net worth
with that persons's spouse, at the time of his purchase exceeds $1,000,000;

(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current
year;

(7) Any trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the
Securities Act; and

(8) Any entity in which all of the equity owners are accredited
investors.
------------------------

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, by any Selling
Securityholder or by any other person. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities other than the
shares of Common Stock and the Warrants offered hereby, nor does it constitute
an offer to sell or a solicitation of an offer to buy any of the shares offered
hereby to any person in any jurisdiction in which such offer or solicitation
would be unlawful. Neither the delivery of

3
<PAGE>
this Prospectus nor any sale made hereunder shall under any circumstances create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof.
------------------------

AVAILABLE INFORMATION

Atlantic was incorporated in the State of Delaware on May 18, 1993 and
commenced operations on July 13, 1993. As used in this Prospectus, unless the
context requires otherwise, the "Company" means Atlantic Pharmaceuticals, Inc.
and its subsidiaries. The Company's principal executive offices are located at
1017 Main Campus Drive, Suite 3900, Raleigh, North Carolina 27606. The Company's
telephone number at that address is (919) 513-7020. The Company's Units, Common
Stock, and Redeemable Warrants are quoted on Nasdaq under the respective symbols
"ATLCU," "ATLC" and "ATLCW."

Atlantic is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, is required to file periodic reports, proxy materials and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information can 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, or at its
regional offices located at Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661 and at 7 World Trade Center, Suite 1300,
New York, New York 10048. Copies of such materials may also be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
DC 20549, at prescribed rates. In addition, the Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding issuers, including the Company, that file electronically
with the Commission. Such Web site can be found at http://www.sec.gov. The
materials described above may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, DC 20006.

This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act. Atlantic filed with the Commission a Registration Statement
on Form SB-2 on October 24, 1995, as amended by Amendment No. 1, Amendment No.
2, Amendment No. 3, Amendment No. 4 and Amendment No. 5, as filed with the
Commission on November 9, 1995, December 5, 1995, December 12, 1995, December
13, 1995 and December 14, 1995, respectively (collectively, the "1995
Registration Statement"), pursuant to the Securities Act with respect to the
Warrants and the Unit Offering Shares offered hereby. This Prospectus omits
certain of the information set forth in the Registration Statement and the 1995
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Securities offered hereby,
reference is made to the Registration Statement and the 1995 Registration
Statement and the exhibits and schedules filed as a part thereof. Statements
contained in this Prospectus concerning the contents of any contract or any
other document referred to are not necessarily complete; reference is made in
each instance to the copy of such contract or document filed as an exhibit to
the Registration Statement and the 1995 Registration Statement. Each such
statement is qualified in all respects by such reference to such exhibit. Each
of the Registration Statement and the 1995 Registration Statement, including all
exhibits and schedules thereto, may be inspected without charge at the
Commission's principal office in Washington, D.C., and copies of all or any part
thereof may be obtained from such office after payment of fees prescribed by the
Commission.

4
<PAGE>
INFORMATION INCORPORATED BY REFERENCE

The following documents filed by the Company with the Commission (File No.
0-19750) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:

1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, Quarterly Report on Form 10-QSB for the fiscal quarter
ended March 31, 1997, Current Report on Form 8-K filed with the
Commission on June 9, 1997, and Quarterly Report on Form 10-QSB for the
fiscal quarter ended June 30, 1997;

2. The Company's definitive Proxy Statement dated May 8, 1997 filed in
connection with the Company's 1997 Annual Meeting of Stockholders;

3. The description of the Company's securities contained in the Company's
Registration Statement on Form 8-A filed under the Exchange Act on
November 27, 1995, including any amendment or report filed for the
purpose of updating such description.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus but prior to
the termination of the offering to which this Prospectus relates shall be deemed
to be incorporated by reference in this Prospectus and to be part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, in its unmodified form, to constitute a part of this
Prospectus.

Upon written or oral request, the Company will provide without charge to
each person to whom a copy of the Prospectus is delivered a copy of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
therein). Requests should be submitted in writing or by telephone at (919)
513-7020 to Director of Investor Relations, Atlantic Pharmaceuticals, Inc., at
the principal executive offices of the Company, 1017 Main Campus Drive, Suite
3900, Raleigh, North Carolina 27606.

5
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE IN NATURE,
INVOLVES A HIGH DEGREE OF RISK AND SHOULD NOT BE MADE BY AN INVESTOR WHO CANNOT
AFFORD THE LOSS OF HIS ENTIRE INVESTMENT. THE FOLLOWING RISK FACTORS SHOULD BE
CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE PURCHASING THE SECURITIES
OFFERED HEREBY (THE "SECURITIES"). IN ADDITION TO THE HISTORICAL INFORMATION
CONTAINED HEREIN, THE DISCUSSION IN THIS PROSPECTUS CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 27E OF THE EXCHANGE ACT, THAT INVOLVE RISKS AND UNCERTAINTIES,
SUCH AS STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ AS
BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR
IN THIS PROSPECTUS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AS WELL AS THOSE CAUTIONARY STATEMENTS
AND OTHER FACTORS SET FORTH ELSEWHERE HEREIN.

DEVELOPMENT STAGE COMPANIES; HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT;
UNCERTAINTY OF FUTURE PROFITABILITY

The technologies and products under development by the Company are in the
research and development stage and no operating revenue, outside of grant
revenues, have been generated to date. The Company does not expect to generate
any revenues in the near future. As a result, the Company must be evaluated in
light of the problems, delays, uncertainties and complications encountered in
connection with newly established businesses. The Company has incurred operating
losses since its inception. As of June 30, 1997, the Company's working capital
and accumulated deficit were $1,988,899 and $11,276,353, respectively. Operating
losses have resulted principally from costs incurred in identifying and
acquiring the technologies under development, research and development
activities and from general and administrative costs. The Company expects to
incur significant operating losses over the next several years, primarily due to
continuation and expansion of its research and development programs, including
preclinical studies and clinical trials for its pharmaceutical products under
development. The Company's ability to achieve profitability depends upon its
ability to develop pharmaceutical and medical device products, obtain regulatory
approval for its proposed products and enter into agreements for product
development, manufacturing and commercialization. There can be no assurance that
the Company will ever achieve significant revenues or profitable operations from
the sale of its proposed products.

AUDITOR'S OPINION

The Company's independent accountants have included an explanatory paragraph
in their report on the Company's financial statements at December 31, 1996,
included in the Company's 1996 Annual Report on Form 10-KSB, which states that
the Company has suffered recurring losses from operations and has limited
capital resources, both of which raise substantial doubt about the Company's
ability to continue as a going concern.

NEED FOR ADDITIONAL FINANCING; ISSUANCE OF SECURITIES BY THE COMPANY AND ITS
SUBSIDIARIES;
FUTURE DILUTION

The Company will require, and is constantly considering potential sources
for, substantial additional financing to continue its research, to complete its
product development and to manufacture and market any products that may be
developed. Based solely upon its currently existing consulting, license,
sponsored research and employment agreements, the Company currently anticipates
that it will spend all of its current cash reserves by late 1999. There can be
no assurance, however, that the Company's current cash reserves will not be
expended prior to that time. The Company anticipates that further funds may be
raised at any time through additional public or private debt or equity
financings conducted either by the Company or by one or more of its
subsidiaries, or through collaborative ventures entered into between the Company
or one or more of its subsidiaries and a corporate partner. There can be no
assurance that the

6
<PAGE>
Company will be able to obtain additional financing or that such financing, if
available, can be obtained on terms acceptable to the Company. If additional
financing is not otherwise available, the Company will be required to modify its
business development plans or reduce or cease certain or all of its operations.
In such event, holders of securities of the Company will, in all likelihood,
lose their entire investment.

Although the Company and each of its subsidiaries will seek to enter into
collaborative ventures with corporate sponsors to fund some or all of such
activities, as well as to manufacture or market the products which may be
successfully developed, neither the Company nor any of its subsidiaries
currently has any such arrangements with corporate sponsors, and there can be no
assurance that the Company or any of its subsidiaries will be able to enter into
such ventures on favorable terms, if at all. In addition, no assurance can be
given that the Company or any of its subsidiaries will be able to complete a
subsequent private placement or public offering of their securities. Failure by
the Company or any of its subsidiaries to enter into such collaborative ventures
or to receive additional funding to complete its proposed product development
programs either through a public offering or a private placement would have a
material adverse effect on the Company.

In the event that the Company obtains any additional funding, such
financings may have a dilutive effect on the holders of the Company's
securities. In addition, if one or more of the Company's subsidiaries raises
additional funds through the issuance and sale of its equity securities, the
interest of the Company and its stockholders in such subsidiary or subsidiaries,
as the case may be, could be diluted and there can be no assurance that the
Company will be able to maintain its majority interest in any or all of its
current subsidiaries. In addition, the interest of the Company and its
stockholders in each subsidiary will be diluted or subject to dilution to the
extent any such subsidiary issues shares or options to purchase shares of its
capital stock to employees, directors, consultants and others. In the event that
the Company's voting interest in any of its current subsidiaries falls below
50%, the Company may not be able to exercise an adequate degree of control over
the affairs and policies of such subsidiary as currently being exercised. In
addition, the Company has outstanding currently exercisable Redeemable Warrants
and options to purchase 3,826,750 and 699,155 shares of its Common Stock,
respectively, at exercise prices ranging from $5.50 to $10.00, and $0.75 to
$7.50, respectively, and the exercise price for most of such Redeemable Warrants
and options is below the per share price of the Common Stock as currently quoted
on Nasdaq. The Company also has outstanding 1,237,200 shares of its Series A
Preferred Stock and warrants to purchase 123,720 shares of Series A Preferred
Stock, all of which are convertible into shares of the Company's Common Stock.
The exercise of such warrants and options or the conversion of the Series A
Preferred Stock, if any, may dilute the value of the Common Stock.

NO DEVELOPED OR APPROVED PRODUCTS

To achieve profitable operations, the Company, alone or with others, must
successfully develop, obtain regulatory approval for, introduce and market its
products under development. The great majority of the preclinical and clinical
development work for the products under development of the Company remains to be
completed. The Company has not generated, nor is it expected to generate in the
near future, any operating revenues. In addition, the Company has no
manufacturing or marketing facilities nor any contracts with any commercial
manufacturing or marketing entities. No assurance can be given that any of its
product development efforts will be successfully completed, that required
regulatory approvals will be obtained, or that any such products, if developed
and introduced, will be successfully marketed or achieve market acceptance.

TECHNOLOGICAL UNCERTAINTY AND EARLY STAGE OF PRODUCT DEVELOPMENT

The technologies and products which the Company intends to develop are in
the early stages of development, require significant further research,
development and testing and are subject to the risks of failure inherent in the
development of products based on innovative or novel technologies. These risks
include the possibility that any or all of the Company's proposed technologies
and products will be found

7
<PAGE>
to be ineffective or unsafe, that such technologies and products once developed,
although effective, are uneconomical to market, that third parties hold
proprietary rights that preclude the Company from marketing such technologies
and products or that third parties market superior or equivalent technologies
and products.

The Company's agreements with licensors do not contain any representations
by the licensors as to the safety or efficacy of the inventions or discoveries
covered thereby. The Company is unable to predict whether the research and
development activities it is funding will result in any commercially viable
products or applications. Further, due to the extended testing required before
marketing clearance can be obtained from the United States Food and Drug
Administration (the "FDA") or other similar agencies, the Company is not able to
predict with any certainty, when, if ever, the Company will be able to
commercialize any of its proposed technologies or products.

GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL

The Company's proposed products and technologies are in very early stages of
development. The research, preclinical development, clinical trials, product
manufacturing and marketing to be conducted by the Company is subject to
regulation by the FDA and similar health authorities in foreign countries. FDA
approval of the Company's products, as well as the manufacturing processes and
facilities, if any, used to produce such products will be required before such
products may be marketed in the U.S. The process of obtaining approvals from the
FDA is costly, time consuming and often subject to unanticipated delays. There
can be no assurance that approvals of the Company's proposed products, processes
or facilities will be granted on a timely basis, or at all. In addition, new
government regulations may be established that could delay or prevent regulatory
approval of the Company's products under development. Any future failure to
obtain or delay in obtaining any such approval will materially and adversely
affect the ability of the Company to market its proposed products and the
business, financial condition and results of operations of the Company.

Even if regulatory approval of the Company's proposed products is granted,
such approval may include significant limitations on indicated uses for which
any such products could be marketed. Further, even if such regulatory approvals
are obtained, a marketed drug or device and its manufacturer are subject to
continued review, and later discovery of previously unknown problems may result
in restrictions on such product or manufacturer, including withdrawal of the
product from the market. Failure of the Company to obtain and maintain
regulatory approval of its proposed products, processes or facilities would have
a material adverse effect on the business, financial condition and results of
operations of the Company.

The Company's proposed products and technologies may also be subject to
certain other federal, state and local government regulations, including, but
not limited to, the Federal Food, Drug and Cosmetic Act, the Environmental
Protection Act, the Occupational Safety and Health Act and state, local and
foreign counterparts to certain of such acts. The Company intends to develop its
business to strategically address regulatory needs. However, the Company cannot
predict the extent of the adverse effect on its business or the financial and
other costs that might result from any government regulations arising out of
future legislative, administrative or judicial action.

SECURITIES LAW RESTRICTIONS ON THE EXERCISE OF REDEEMABLE WARRANTS

A holder of Redeemable Warrants will have the right to exercise such
Redeemable Warrants for the purchase of shares of Common Stock only if the
Company has filed with the Securities and Exchange Commission a current
prospectus meeting the requirements of the Securities Act covering the issuance
of such shares of Common Stock issuable upon exercise of the Redeemable Warrants
and only if the issuance of such shares has been registered or qualified, or is
deemed to be exempt from registration or qualification under, the securities
laws of the state of residence of the holder of the Redeemable Warrant. The
Company has undertaken and intends to file and keep effective and current a
prospectus which will

8
<PAGE>
permit the purchase and sale of the Common Stock underlying the Redeemable
Warrants, but there can be no assurance that the Company will be able to do so.
Although the Company intends to seek to qualify for sale the shares of Common
Stock underlying the Redeemable Warrants in those states in which the securities
are to be offered, no assurance can be given that such qualification will occur.
The Redeemable Warrants may be deprived of any value if a prospectus covering
the shares issuable upon the exercise thereof is not kept effective and current
or if such underlying shares are not, or cannot be, registered in the applicable
states. See "Description of Securities--Redeemable Warrants."

DEPENDENCE ON LICENSE AND SPONSORED RESEARCH AGREEMENTS

The Company depends on license agreements that form the basis of its
proprietary technology, and, with the exception of its majority-owned
subsidiary, Optex Opthalmologics, Inc., a Delaware corporation ("Optex"), the
Company relies on sponsored research agreements for its research and development
efforts. The license agreements that have been entered into by the Company
typically require the use of due diligence in developing and bringing products
to market and the payment of certain milestone amounts that in some instances
may be substantial. With the exception of Optex, the Company is also obligated
to make royalty payments on the sales, if any, of products resulting from such
licensed technology and, is responsible for the costs of filing and prosecuting
patent applications and maintaining issued patents. With the exception of Optex,
the Company does not currently have laboratory facilities, and, accordingly,
certain research and development activities of the Company is intended to be
conducted by universities or other institutions pursuant to sponsored research
agreements. The sponsored research agreements entered into and contemplated to
be entered into by the Company generally require periodic payments on an annual,
quarterly or monthly basis.

If the Company does not meet its financial, development or other obligations
under either its license agreements or its sponsored research agreements in a
timely manner, the Company could lose the rights to its proprietary technology
or the right to have the applicable university or institution conduct its
research and development efforts. If the rights of the Company under its license
or sponsored research agreements are terminated, such termination could have a
material adverse effect on the business and research and development efforts of
the Company.

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS

The success of the Company will depend in large part on its or its
licensors' ability to obtain patents, defend their patents, maintain trade
secrets and operate without infringing upon the proprietary rights of others,
both in the United States and in foreign countries. The patent position of firms
relying upon biotechnology is highly uncertain and involves complex legal and
factual questions. To date there has emerged no consistent policy regarding the
breadth of claims allowed in biotechnology patents or the degree of protection
afforded under such patents. The Company relies on certain United States patents
and pending United States and foreign patent applications relating to various
aspects of its products and processes. All of these patents and patent
applications are owned by third parties and are licensed or sublicensed to the
Company. The patent application and issuance process can be expected to take
several years and entail considerable expense to the Company, as it is
responsible for such costs under the terms of such license agreements. There can
be no assurance that patents will issue as a result of any such pending
applications or that the existing patents and any patents resulting from such
applications will be sufficiently broad to afford protection against competitors
with similar technology. In addition, there can be no assurance that such
patents will not be challenged, invalidated, or circumvented, or that the rights
granted thereunder will provide competitive advantages to the Company. The
commercial success of the Company will also depend upon avoiding infringement of
patents issued to competitors. A United States patent application is maintained
under conditions of confidentiality while the application is pending, so the
Company cannot determine the inventions being claimed in pending patent
applications filed by its competitors. Litigation may be necessary to defend or
enforce the Company's patent and license rights or

9
<PAGE>
to determine the scope and validity of others' proprietary rights. Defense and
enforcement of patent claims can be expensive and time consuming, even, in those
instances in which the outcome is favorable to the Company, and can result in
the diversion of substantial resources from the Company's other activities. An
adverse outcome could subject the Company to significant liabilities to third
parties, require the Company to obtain licenses from third parties, or require
the Company to alter its products or processes, or cease altogether any related
research and development activities or product sales, any of which may have a
material adverse effect on the Company's business, results of operations and
financial condition.

The Company has certain licenses from third parties and in the future may
require additional licenses from other parties to develop, manufacture and
market commercially viable products effectively. The Company's commercial
success will depend in part on obtaining and maintaining such licenses. There
can be no assurance that such licenses can be obtained or maintained on
commercially reasonable terms, if at all, that the patents underlying such
licenses will be valid and enforceable or that the proprietary nature of the
patented technology underlying such licenses will remain proprietary.

The Company relies substantially on certain technologies that are not
patentable or proprietary and are therefore available to its 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 contractors, there can be no
assurance that these agreements will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently developed or discovered by
competitors.

The success of the Company is also dependent upon the skills, knowledge and
experience of its scientific and technical personnel. The management and
scientific personnel of the Company has been recruited primarily from other
scientific companies, pharmaceutical companies and academic institutions. In
some cases, these individuals may be continuing research in the same areas with
which they were involved prior to joining the Company. Although the Company has
not received any notice of any claims and knows of no basis for any claims, it
could be subject to allegations of violation of trade secrets and similar claims
which could, regardless of merit, be time consuming, expensive to defend, and
have a material adverse effect on the Company's business, results of operations
and financial condition.

UNCERTAINTY OF PRODUCT PRICING AND REIMBURSEMENT; HEALTH CARE REFORM AND RELATED
MEASURES

The levels of revenues and profitability of pharmaceutical and/or
biotechnology products and companies may be affected by the continuing efforts
of governmental and third party payors to contain or reduce the costs of health
care through various means and the initiatives of third party payors with
respect to the availability of reimbursement. For example, in certain foreign
markets, pricing or profitability of prescription pharmaceuticals is 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 governmental control. Although the Company cannot predict
what legislative reforms may be proposed or adopted or what impact actions taken
by federal, state or private payors for health care goods and services in
response to any health care reform proposals or legislation may have on its
business, the existence and pendency of such proposals could have a material
adverse effect on the Company in general. In addition, the Company's ability to
commercialize potential pharmaceutical and/or biotechnology products may be
adversely affected to the extent that such proposals have a material adverse
effect on other companies that are prospective collaborators with respect to any
of the Company's product candidates.

In addition, in both the United States and elsewhere, sales of medical
products and services are dependent in part on the availability of reimbursement
to the consumer from third party payors, such as government and private
insurance plans. Third party payors are increasingly challenging the prices
charged for medical products and services. If the Company succeeds in bringing
one or more products to the

10
<PAGE>
market, there can be no assurance that these products will be considered cost
effective and that reimbursement to the consumer will be available or will be
sufficient to allow the Company to sell its products on a competitive basis.

DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS

The Company is highly dependent upon its officers and directors, as well as
its Scientific Advisory Board members, consultants and collaborating scientists.
Atlantic and its subsidiaries have an aggregate of only eight full-time
employees, four of whom are officers of Atlantic, and the loss of any of these
individuals would have a material adverse effect on the Company. Although
Atlantic has entered into employment agreements with each of its officers, such
employment agreements do not contain provisions which would prevent such
employees from resigning their positions with Atlantic at any time. The Company
does not maintain key-man life insurance policies on any of such key personnel.
Each of the Company's non-employee directors, advisors and consultants devotes
only a portion of his or her time to the Company's business. The loss of certain
of these individuals could have a material adverse effect on the Company.

The Company may seek to hire additional personnel. Competition for qualified
employees among pharmaceutical and biotechnology companies is intense, and the
loss of any of such persons, or the inability to attract, retain and motivate
any additional highly skilled employees required for the expansion of the
Company's activities could have a material adverse effect on the Company. There
can be no assurance that the Company will be able to retain its existing
personnel or to attract additional qualified employees.

The Company's scientific advisors are employed on a full time basis by
unrelated employers and some have one or more consulting or other advisory
arrangements with other entities which may conflict or compete with their
obligations to the Company. Inventions or processes discovered by such persons,
other than those to which the licenses may relate, those to which the Company is
able to acquire licenses for or those which were invented while performing
consulting services on behalf of the Company pursuant to a proprietary
information agreement or utilizing the Company's facilities, will not become the
property of the Company, but will remain the property of such persons or of such
persons' full-time employers. Failure to obtain needed patents, licenses or
proprietary information held by others could have a material adverse effect on
the Company.

COMPETITION

The Company's business is characterized by intensive research efforts and
intense competition. Many companies, research institutes, hospitals and
universities are working to develop products and technologies in the Company's
fields of research. Most of these entities have substantially greater financial,
technical, manufacturing, marketing, distribution and other resources than the
Company. Certain of such companies have experience in undertaking testing and
clinical trials of new or improved products similar in nature to that which the
Company is developing. In addition, certain competitors have already begun
testing of similar compounds or processes and may introduce such products or
processes before the Company. Accordingly, other companies may succeed in
developing products earlier than the Company or that are more effective than
those proposed to be developed by the Company. Further, it is expected that
competition in the Company's fields will intensify. There can be no assurance
that the Company will be able to compete successfully in the future.

DEPENDENCE ON OTHERS FOR CLINICAL DEVELOPMENT OF, REGULATORY APPROVALS FOR AND
MARKETING OF PHARMACEUTICAL PRODUCTS

The Company currently does not have the resources to directly manufacture,
market or sell any of the Company's proposed products and the Company has no
current plans to acquire such resources. The

11
<PAGE>
Company anticipates that it will, in the future, enter into collaborative
agreements with pharmaceutical and/or biotechnology companies for the
development of, clinical testing of, seeking of regulatory approval for,
manufacturing of, marketing of and commercialization of certain of its proposed
products. The Company may in the future grant to its collaborative partners
rights to license and commercialize any products developed under these
collaborative agreements, and such rights would limit the Company's flexibility
in considering alternatives for the commercialization of such products. Under
such agreements, the Company may rely on its respective collaborative partners
to conduct research efforts and clinical trials on, obtain regulatory approvals
for and manufacture, market and commercialize certain of its products. The
Company expects that the amount and timing of resources devoted to these
activities generally will be controlled by each such individual partner. The
inability of the Company to acquire such third party manufacturing,
distribution, marketing and selling arrangements for such anticipated products
would have a material adverse effect on the Company's business. There can be no
assurance that the Company will be able to enter into any arrangements for the
manufacturing, marketing and selling of its products, or that, if such
arrangements are entered into, such future partners will be successful in
commercializing products or that the Company will derive any revenues from such
arrangements.

RISK OF PRODUCT LIABILITY; NO INSURANCE

Should the Company develop and market any products, the marketing of such
products, through third-party arrangements or otherwise, may expose the Company
to product liability claims. The Company presently does not carry product
liability insurance. Upon clinical testing or commercialization of the Company's
proposed products, certain of the licensors require that the Company obtain
product liability insurance. There can be no assurance that the Company will be
able to obtain such insurance or, if obtained, that such insurance can be
acquired in sufficient amounts to protect the Company against such liability or
at a reasonable cost. The Company is required to indemnify the Company's
licensors against any product liability claims incurred by them as a result of
the products developed by the Company. None of the Company's licensors has made,
and are not expected to make, any representations as to the safety or efficacy
of the inventions covered by the licenses or as to any products which may be
made or used under rights granted therein or thereunder.

CONTROL BY EXISTING STOCKHOLDERS

Two principal stockholders of the Company beneficially own approximately 27%
of the outstanding shares of Common Stock. Accordingly, such holders, if acting
together, may have the ability to exert significant influence over the election
of the Company's Board of Directors and other matters submitted to the Company's
stockholders for approval. The voting power of these holders may discourage or
prevent any proposed takeover of the Company.

NO ASSURANCE OF IDENTIFICATION OF ADDITIONAL PROJECTS

The Company is engaged in the development and commercialization of
biomedical and pharmaceutical products and technologies. From time to time, if
the Company's resources allow, the Company may explore the acquisition and
subsequent development and commercialization of additional biomedical and
pharmaceutical products and technologies. However, there can be no assurance
that the Company will be able to identify any additional products or
technologies and, even if suitable products or technologies are identified, the
Company does not expect to have sufficient resources to pursue any such products
or technologies in the foreseeable future.

CERTAIN INTERLOCKING RELATIONSHIPS; POTENTIAL CONFLICTS OF INTEREST

Two of the four members of the Board of Directors and one of the officers of
the Company are full-time or part-time officers of Paramount Capital
Investments, LLC a New York-based merchant banking and venture capital firm
specializing in biotechnology companies ("Investments"). In the regular course
of

12
<PAGE>
its business, Investments identifies, evaluates and pursues investment
opportunities in biomedical and pharmaceutical products, technologies and
companies. Generally, Delaware corporate law requires that any transactions
between the Company and any of its affiliates be on terms that, when taken as a
whole, are substantially as favorable to the Company as those then reasonably
obtainable from a person who is not an affiliate in an arms-length transaction.
Nevertheless, neither Investments nor any such directors are obligated pursuant
to any agreement or understanding with the Company to make any additional
products or technologies available to the Company, nor can there be any
assurance, and the Company does not expect and security holders should not
expect, that any biomedical or pharmaceutical product or technology identified
by Investments or any such directors in the future will be made available to the
Company. In addition, certain of the officers and directors of the Company may
from time to time serve as officers or directors of other biopharmaceutical or
biotechnology companies. There can be no assurance that such other companies
will not, in the future, have interests in conflict with those of the Company.

The Company has entered into several agreements with Investments pursuant to
which Investments provides financial advisory services to the Company.

Michael S. Weiss, the Company's Secretary, is a Senior Managing Director of
Paramount Capital, Inc. the placement agent for the Company's private placement
of its Series A Preferred Stock (The "Placement Agent"). Lindsay A. Rosenwald,
M.D., a principal stockholder of the Company, is the President and sole
stockholder of the Placement Agent and of Investments. VentureTek, L.P., a
principal stockholder of the Company, is a limited partnership, the limited
partners of which include Dr. Rosenwald's wife, children, sisters of Dr.
Rosenwald's wife, and their husbands and children. See "Recent Developments."

RISKS ASSOCIATED WITH LITIGATION

In November 1996 and February 1997, related complaints alleging claims under
the Securities Exchange Act of 1934, as amended, and common law causes of action
were filed against the Company in the United States District Court for the
District of Delaware and the Delaware Chancery Court, respectively. The parties
have reached a settlement with respect to such complaints, pursuant to which an
existing stockholder of the Company owning greater than five percent of the
Company's capital stock transferred to plaintiff an aggregate of 5,000 shares of
the Company's Common Stock.

POTENTIAL ADVERSE EFFECT OF REDEMPTION OF REDEEMABLE WARRANTS

The Redeemable Warrants are subject to redemption commencing December 14,
1996 by the Company under certain conditions. Redemption of the Redeemable
Warrants could encourage holders to exercise the Redeemable Warrants and pay the
exercise price at a time when it may be disadvantageous for the holders to do
so, to sell the Redeemable Warrants at the current market price when they might
otherwise wish to hold the Redeemable Warrants, or to accept the redemption
price, which may be substantially less than the market value of the Redeemable
Warrants at the time of redemption. The holders of the Redeemable Warrants will
automatically forfeit their rights to purchase the shares of Common Stock
issuable upon exercise of such Redeemable Warrants unless the Redeemable
Warrants are exercised before they are redeemed. The holders of Redeemable
Warrants will not possess any rights as stockholders of the Company unless and
until such Redeemable Warrants are exercised. See "Description of
Securities--Redeemable Warrants."

NO DIVIDENDS

The Company has not paid any cash dividends on its Common Stock since its
formation and does not anticipate paying any cash dividends in the foreseeable
future. Management anticipates that all earnings and other resources of the
Company, if any, will be retained by the Company for investment in its business.

13
<PAGE>
POSSIBLE DELISTING FROM NASDAQ AND MARKET ILLIQUIDITY

Although the Common Stock is quoted on Nasdaq, continued inclusion of such
securities on Nasdaq will require that (i) the Company maintain at least
$2,000,000 in total assets and $1,000,000 in capital and surplus, (ii) the
minimum bid price for the Common Stock be at least $1.00 per share, (iii) the
public float consist of at least 100,000 shares of Common Stock, valued in the
aggregate at more than $200,000, (iv) the Common Stock have at least two active
market makers and (v) the Common Stock be held by at least 300 holders. If the
Company is unable to satisfy such maintenance requirements, the Company's
securities may be delisted from Nasdaq. In such event, trading, if any, in the
Common Stock would thereafter be conducted in the over-the-counter market in the
"pink sheets" or the National Association of Securities Dealers' "Electronic
Bulletin Board." Consequently, the liquidity of the Company's securities could
be materially impaired, not only in the number of securities that can be bought
and sold at a given price, but also through delays in the timing of transactions
and reduction in security analysts' and the media's coverage of the Company,
which could result in lower prices for the Company's securities than might
otherwise be attained and could also result in a larger spread between the bid
and asked prices for the Company's securities.

In addition, if the Common Stock is delisted from trading on Nasdaq and the
trading price of the Common Stock is less than $5.00 per share, trading in the
Common Stock would also be subject to the requirements of Rule 15g-9 promulgated
under the Exchange Act. Under such rule, broker/dealers who recommended such
low-priced securities to persons other than established customers and accredited
investors must satisfy special sales practice requirements, including a
requirement that they make an individualized written suitability determination
for the purchaser and receive the purchaser's written consent prior to the
transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of
1990 also requires additional disclosure in connection with any trades involving
a stock defined as a penny stock (generally, according to recent regulations
adopted by the Commission, any equity security not traded on an exchange or
quoted on Nasdaq that has a market price of less than $5.00 per share, subject
to certain exceptions), including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith. Such requirements could severely limit the market
liquidity of the Common Stock. There can be no assurance that the Common Stock
will not be delisted or treated as penny stock.

LIQUIDITY OF INVESTMENT

The Company's securities are traded on Nasdaq, and the Company's securities
lack the liquidity of securities traded on the principal trading markets.
Accordingly, an investor may be unable to promptly liquidate an investment in
the Common Stock.

POSSIBLE VOLATILITY OF STOCK PRICE

The market price of the Company's securities, like the stock prices of many
publicly traded biotechnology and smaller pharmaceutical companies, has been and
may continue to be highly volatile.

ENVIRONMENTAL REGULATION

In connection with its research and development activities, the Company is
subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, effluent
discharge, handling and disposal of certain materials and wastes. Although the
Company believes that it has complied with these laws and regulations in all
material respects and has not been required to take any action to correct any
noncompliance, there can be no assurance that the Company will not be required
to incur significant costs to comply with environmental and health and safety
regulations in the future.

14
<PAGE>
POSSIBLE ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE

Future sales by existing stockholders could adversely affect the prevailing
market price of the Company's Common Stock. The outstanding shares of the
Company's Common Stock are all freely tradeable, subject to volume and other
restrictions imposed by Rule 144 under the Securities Act with respect to sales
by affiliates of the Company. An 18-month restriction on transfer applicable to
the shares of Common Stock now owned or hereafter acquired by the Company's
officers, directors and certain stockholders expired on June 14, 1997. Sales of
substantial amounts of Common Stock may have an adverse effect on the market
price of the Company's Common Stock.

In connection with the Unit Offering, the Company granted to Joseph Stevens
& Company, L.P., the underwriter that managed the Company's initial public
offering (the "Underwriter"), warrants to purchase from the Company 165,000
units, each consisting of one share of Common Stock and one redeemable warrant
to purchase one share of Common Stock at an initial exercise price of $6.60 per
unit. Such warrants are exercisable during the four year period commenced
December 13, 1996. The redeemable warrants issuable upon exercise of these
warrants have an exercise price of $6.05 per share. As long as the warrants
remain unexercised, the terms under which the Company could obtain additional
capital may be adversely affected. The Company granted to holders of the
warrants issued to such Underwriter the right on two occasions (one at the
expense of the Company) to file a registration statement under the Securities
Act covering the securities underlying such warrants and the additional right to
include such securities in any registration filed by the Company under the
Securities Act.

No prediction can be made as to the effect, if any, that sales of Units,
Redeemable Warrants and/or Common Stock or the availability of such securities
for sale will have on the market prices prevailing from time to time for the
Units, the Redeemable Warrants and/or the Common Stock. Nevertheless, the
possibility that substantial amounts of such securities may be sold in the
public market may adversely affect prevailing market prices for the Company's
equity securities and could impair the Company's ability to raise capital in the
future through the sale of equity securities.

ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
DELAWARE LAW

Atlantic's Certificate of Incorporation authorizes the issuance of shares of
"blank check" Preferred Stock. The Board of Directors has the authority to issue
the Preferred Stock in one or more series and to fix the relative rights,
preferences and privileges and restrictions thereof, including dividend 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 such series. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the stockholders of the Company. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of the Common Stock, including the loss
of voting control to others.

The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by such entity or person. The foregoing
provisions could have the effect of discouraging others from making tender
offers for the Company's shares and, as a consequence, they also may inhibit
fluctuations in the market price of the Company's shares that could result from
actual or rumored takeover attempts. Such provisions also may have, the effect
of preventing changes in the management of the Company.

15
<PAGE>
RECENT DEVELOPMENTS

On May 22, 1997 and August 7, 1997, the Company completed private placements
(the "Private Placement") of an aggregate of 123.72 units, each unit consisting
of 10,000 shares of the Company's Series A Convertible Preferred Stock (the
"Series A Preferred"), for gross proceeds of approximately $12,372,000.
Paramount Capital, Inc., a New York-based merchant and investment banking firm
specializing in the biotechnology industry ("Paramount" or the "Placement
Agent"), acted as placement agent for the Private Placement. Michael S. Weiss,
the Company's Secretary, is a Senior Managing Director of the Placement Agent,
and Lindsay A. Rosenwald, M.D., a principal stockholder of the Company, is the
President and sole stockholder of the Placement Agent.

In connection with the Private Placement, the Company paid to the Placement
Agent compensation in the form of cash commissions and a non-accountable expense
allowance equal to nine percent and four percent, respectively, of the gross
proceeds received by the Company from the sale of the units. In addition, the
Company agreed to sell to Paramount or its designees, for $0.001 per share,
warrants (the "Placement Warrants") to purchase an aggregate of 123,720 shares
of Series A Preferred. For a description of the terms of the Series A Preferred
issued in the Private Placement and of the Placement Warrants, see "Description
of Securities--Preferred Stock--Series A Convertible Preferred Stock" and
"Description of Securities--Placement Warrants."

Also in connection with the Private Placement, the Company and the Placement
Agent agreed to enter into a financial advisory agreement (the "Agreement")
pursuant to which the Placement Agent will act as the Company's non-exclusive
financial advisor. Such engagement will provide that the Placement Agent receive
(i) a monthly retainer of $4,000 commencing on the first of the month following
the date of the Agreement (with a minimum engagement of 24 months), (ii)
out-of-pocket expenses incurred in connection with services performed under the
Agreement and (iii) standard success fees in the event the Placement Agent
assists the Company in connection with certain financing and strategic
transactions.

16
<PAGE>
SELLING SECURITYHOLDERS

The following tables set forth certain information, as of the date hereof,
with respect to the number of Redeemable Warrants and shares of Common Stock
beneficially owned by certain of the Selling Securityholders. Beneficial
ownership of the securities held by such Selling Securityholders after this
offering will depend on the number of securities sold by each Selling
Securityholder in this offering. The Securities are being registered to permit
public secondary trading of the Securities, and the Selling Securityholders may
offer the Securities for resale from time to time. Except as indicated in this
Prospectus, none of the Selling Securityholders has had a material relationship
with the Company within the past three years other than as a result of the
ownership of the Shares or other securities of the Company. See "Plan of
Distribution."

Pursuant to Rule 429 of the Securities Act, the Form S-3 Registration
Statement of which this Prospectus is a part also updates and amends the
Company's 1995 Registration Statement. SELLING SECURITYHOLDERS MAY HAVE SOLD ALL
OR A PART OF THE SECURITIES ATTRIBUTED TO THEM SUBSEQUENT TO THE EFFECTIVE DATES
OF EARLIER REGISTRATION STATEMENTS.

THE FOLLOWING TABLE MAY NOT ACCURATELY REFLECT THE SECURITYHOLDINGS OF THOSE
SELLING SECURITYHOLDERS WHO ARE NOT AFFILIATED WITH THE COMPANY AND WITH RESPECT
TO WHOM CURRENT SHARE OWNERSHIP INFORMATION IS NOT AVAILABLE.

The Securities offered by this Prospectus may be offered from time to time
by the Selling Securityholders named below:

<TABLE>
<CAPTION>
REDEEMABLE WARRANTS COMMON STOCK(1)
----------------------- -----------------------
NUMBER NUMBER NUMBER NUMBER
BENEFICIALLY OFFERED BENEFICIALLY OFFERED
NAME AND POSITION OF SELLING SECURITYHOLDER OWNED HEREBY OWNED HEREBY
- ------------------------------------------------------------------------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
William Anthony, M.D........................................................... 25,000 25,000 25,000 25,000
Norman & Gail Antin............................................................ 50,000 50,000 50,000 50,000
Stanley S. Arkin............................................................... 50,000 50,000 50,000 50,000
Daniel & Adele Bivona.......................................................... 50,000 50,000 50,000 50,000
Nathan Eiseh................................................................... 25,000 25,000 25,000 25,000
Howard Gelber.................................................................. 25,000 25,000 25,000 25,000
Celeste C. Grynberg............................................................ 75,000 75,000 75,000 75,000
Robert S. Haggerty............................................................. 25,000 25,000 25,000 25,000
Richard Hawk................................................................... 100,000 100,000 100,000 100,000
Lawrence & Rosellen Hofman..................................................... 50,000 50,000 50,000 50,000
HT Partners.................................................................... 50,000 50,000 50,000 50,000
Ery W. Kehaya.................................................................. 100,000 100,000 100,000 100,000
Frank Leonard Laport........................................................... 100,000 100,000 100,000 100,000
Richard Lev.................................................................... 50,000 50,000 50,000 50,000
Dr. Scott Leist................................................................ 75,000 75,000 75,000 75,000
S.A. Lisenby................................................................... 50,000 50,000 50,000 50,000
Jon Marks...................................................................... 50,000 50,000 50,000 50,000
Dr. Stephan Nicholas........................................................... 25,000 25,000 25,000 25,000
Outrageous Productions, Inc.................................................... 50,000 50,000 50,000 50,000
Arthur A. Pava................................................................. 50,000 50,000 50,000 50,000
Narendra Punjabi............................................................... 25,000 25,000 25,000 25,000
Romajo Partners................................................................ 100,000 100,000 100,000 100,000
Mav-Britt Rosenbaum, M.D....................................................... 50,000 50,000 50,000 50,000
Barry A. Saunders.............................................................. 25,000 25,000 25,000 25,000
Leonard M. Schiller............................................................ 25,000 25,000 25,000 25,000
Suzanne Schiller............................................................... 25,000 25,000 25,000 25,000
Nathaniel Silon, RLT........................................................... 50,000 50,000 50,000 50,000
Joel A. Stone.................................................................. 25,000 25,000 25,000 25,000
Henry G. Warner................................................................ 25,000 25,000 25,000 25,000
Kal Zeff....................................................................... 75,000 75,000 75,000 75,000
----------- ---------- ----------- ----------
TOTAL........................................................................ 1,500,000 1,500,000 1,500,000 1,500,000
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
</TABLE>

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

(1) Reflects shares issuable from time to time upon exercise of the Redeemable
Warrants held by such Selling Securityholders. Any Selling Securityholder
may have exercised all, or a portion of, the Redeemable Warrants held by
such Selling Securityholder. In any such case, the holdings attributed to
such Selling Securityholder may not accurately reflect the actual
securityholdings thereof.

17
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK
----------------------
NUMBER NUMBER
BENEFICIALLY OFFERED
NAME AND POSITION OF SELLING SECURITYHOLDER OWNED HEREBY
- ---------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Joseph Stevens & Company, L.P. (2)........................................................................ 330,000 330,000
Channel Minority Stockholders............................................................................. 103,200 103,200
Roanald J. DiCamillo...................................................................................... 3,000 3,000
John Elges................................................................................................ 1,000 1,000
Grant & Eisenhofer, P.A................................................................................... 1,000 1,000
Lindsay A. Rosenwald, M.D.(3)............................................................................. 788,951 788,951
Dr. Lawrence Shaw(4)...................................................................................... 23,557 23,557
----------- ---------
TOTAL................................................................................................... 438,200 438,200
----------- ---------
----------- ---------
</TABLE>

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

(2) Represents shares of Common Stock underlying the Underwriter's Warrants and
the Underwriter's Redeemable Warrants, which are fully exercisable as of
the date hereof. Joseph Stevens & Company, L.P. acted as the underwriter of
the Unit Offering and is a greater than five percent stockholder of the
Company.

(3) Lindsay A. Rosenwald, M.D., a principal stockholder of the Company, is the
President and sole stockholder of the Placement Agent and of VentureTek,
L.P., a principal stockholder of the Company.

(4) Represents shares of Common Stock issuable upon exercise of an option
granted to Dr. Shaw. All of such shares were exercisable as of September 30,
1997.

18
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK(5)
-----------------------
NUMBER NUMBER
BENEFICIALLY OFFERED
NAME AND POSITION OF SELLING SECURITYHOLDER OWNED HEREBY
- --------------------------------------------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Cowen & Co., Custodian for Ronald M. Lazar IRA........................................................... 2,650 2,650
Archibald Cox, Jr........................................................................................ 42,400 42,400
Credit Suisse Private Banking Geneva..................................................................... 106,000 106,000
Thomas H. Cruikshank..................................................................................... 10,600 10,600
Alfred C. D'Alessandro................................................................................... 5,300 5,300
Michael and Mary Darling JTWROS.......................................................................... 10,600 10,600
Andrew Davilman & Nancy Davilman, JTWROS................................................................. 5,300 5,300
Tommy Lee Davis.......................................................................................... 21,200 21,200
Elke R. de Ramirez....................................................................................... 2,120 2,120
Delaware Charter FBO R. Craig Fetz....................................................................... 42,400 42,400
Chris P. Dialynas, as Trustee of the Chris and Sheri Dialynas Living Trust, Dated January 30, 1997....... 10,600 10,600
D.N.B. Fund Partners, L.P................................................................................ 53,000 53,000
Domaco Venture Capital Fund.............................................................................. 5,300 5,300
J. William Doyle......................................................................................... 10,600 10,600
Dorothy Dulman........................................................................................... 10,600 10,600
David Dworetzky.......................................................................................... 5,300 5,300
Edward Dworetzky......................................................................................... 21,200 21,200
Lorraine C. Ecker I.R.A.................................................................................. 5,300 5,300
Robert & Evelyn Elliott Trust............................................................................ 5,300 5,300
S. Edmond Farber......................................................................................... 5,300 5,300
Elliot Fatoullah I.R.A., Cowen & Co. Custodian........................................................... 2,650 2,650
Ronald Fatoullah, KEOGH Plan, Cowen & Co. Custodian...................................................... 2,650 2,650
Joseph & Hilary Feshbach................................................................................. 10,600 10,600
Richard C. & Mary Ann Fick Community Property............................................................ 5,300 5,300
Denis Fortin............................................................................................. 5,300 5,300
Lloyd A. Fox............................................................................................. 10,600 10,600
Brian D. Frenzel......................................................................................... 5,300 5,300
Benjamin & Sharyn Friedman............................................................................... 5,300 5,300
Merrit Brad Friedman..................................................................................... 5,300 5,300
Craig S. Frolich......................................................................................... 5,300 5,300
Gerald Frolich & Gloria A. Frolich JT Ten................................................................ 5,300 5,300
Robert J. Gall........................................................................................... 5,300 5,300
A. Mark Gambee, M.D. and Karen D. Todd, M.D. J.T.-W.R.O.S................................................ 5,300 5,300
Ofelia Anton G........................................................................................... 3,392 3,392
Shelley Garfinkel........................................................................................ 10,600 10,600
Barry & Barbara Goldin, JT/WROS.......................................................................... 5,300 5,300
Bruce Gomberg............................................................................................ 2,650 2,650
Michael J. Gordon........................................................................................ 2,650 2,650
Robert P. Gordon......................................................................................... 5,300 5,300
Philip Granowitz......................................................................................... 5,300 5,300
Joan Grillo.............................................................................................. 2,650 2,650
John Gross I.R.A., Cowen & Co. Custodian................................................................. 5,300 5,300
Andrew Grossman I.R.A., Cowen & Co. Custodian............................................................ 2,650 2,650
Grossman Family Trust.................................................................................... 5,300 5,300
Leonard Grunstein........................................................................................ 5,300 5,300
Allison Gushe Molkenthin................................................................................. 10,282 10,282
Alan and Paula Halperin.................................................................................. 5,300 5,300
Fridolf Hanson........................................................................................... 4,240 4,240
Chaya & Sherri Harari, JT/WROS........................................................................... 2,650 2,650
Harrigan Family Trust.................................................................................... 5,300 5,300
Thomas Scott Haydon & Thomas Welch Haydon................................................................ 5,300 5,300
Julian Herskowitz........................................................................................ 5,300 5,300
Norton F. Hight.......................................................................................... 5,300 5,300
Randall W. Hight......................................................................................... 5,300 5,300
Austin E. Hills.......................................................................................... 5,300 5,300
HM Singer & Co Employee Pension Trust, Howard M. Singer TTEE U/A/D/ 1/1/95............................... 5,300 5,300
Harry Huang and Adrienne Masters, Tenants by the Entirety................................................ 8,480 8,480
Hull Overseas, Ltd....................................................................................... 42,400 42,400
Peter L. Jensen.......................................................................................... 5,300 5,300
Gerald Johnston.......................................................................................... 10,600 10,600
Charles Jurgensmeyer..................................................................................... 10,600 10,600
Joe Jurgensmeyer......................................................................................... 10,600 10,600
Robert Jurgensmeyer...................................................................................... 10,600 10,600
Virgil Jurgensmeyer...................................................................................... 10,600 10,600
Patrick M. Kane.......................................................................................... 10,600 10,600
Amram Kass P.C. Defined Benefit Pension Plan............................................................. 10,600 10,600
Stanley Katz............................................................................................. 10,600 10,600
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK(5)
-----------------------
NUMBER NUMBER
BENEFICIALLY OFFERED
NAME AND POSITION OF SELLING SECURITYHOLDER OWNED HEREBY
- --------------------------------------------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Ery W. & Helga L. Kehaya, JTWROS......................................................................... 21,200 21,200
Kenbar Group, LP......................................................................................... 31,780 31,780
Donald R. Kendall, Jr.................................................................................... 10,600 10,600
John R. Kennedy.......................................................................................... 5,300 5,300
Shirley F. Kerbel........................................................................................ 5,300 5,300
Keys Foundation.......................................................................................... 106,000 106,000
Robert Knox.............................................................................................. 5,300 5,300
Gwen S. Korovin, M.D..................................................................................... 5,300 5,300
Larkstone Inc............................................................................................ 21,200 21,200
Joseph Larosa............................................................................................ 5,300 5,300
Ronald and Barbara Lazar, JTWROS......................................................................... 2,650 2,650
Stephen H. Lebovitz...................................................................................... 10,600 10,600
Jerry Levine............................................................................................. 5,300 5,300
Theodore Levine.......................................................................................... 5,300 5,300
Hyman Lezell Revocable Trust............................................................................. 21,200 21,200
L.G. Foley Inc. Profit Sharing Plan...................................................................... 10,600 10,600
Donna Lipman and Lawrence Lipman, Tenants in Common...................................................... 5,300 5,300
Alfredo Livas............................................................................................ 3,180 3,180
Lowrie Management Ltd.................................................................................... 10,600 10,600
Harris R.L. Lydon, Jr.................................................................................... 5,300 5,300
M&S Andrade Rev. Tr. For Comm. & Sep. Property UA Dtd 10/19/78, as Amended............................... 5,300 5,300
Selwyn Malisoff & Barbara Malisoff....................................................................... 5,300 5,300
Jon S. Marks............................................................................................. 5,300 5,300
Roger Marks KEOGH Profit Sharing Plan, Cowen Cust. Plan of Roger R. Marks................................ 2,650 2,650
William M. Marks......................................................................................... 5,300 5,300
Masada I Limited Ptnrs................................................................................... 7,420 7,420
William G. McCahey and Lisa Krivacka..................................................................... 5,300 5,300
Kevin T. McManus, MD..................................................................................... 5,300 5,300
Lindsay A. McManus....................................................................................... 5,300 5,300
Mega International Corporation........................................................................... 5,300 5,300
William H. Metzger MD Inc. Retirement Trust.............................................................. 5,300 5,300
Maurice Meyer III........................................................................................ 5,300 5,300
Michael C. Miles......................................................................................... 5,300 5,300
Mike & Terry Miller...................................................................................... 5,300 5,300
Paul M. Millman.......................................................................................... 2,650 2,650
Wolfe Model I.R.A., Cowen & Co. Custodian................................................................ 2,650 2,650
Moonlight International Ltd.............................................................................. 25,424 25,424
W. Kym Murphy............................................................................................ 5,300 5,300
Arthur J. Nagle.......................................................................................... 5,300 5,300
Mechie Nebenzahl......................................................................................... 8,480 8,480
Drew Netter & Carin Netter, JT/WROS...................................................................... 5,300 5,300
John S. Osterweis, Trustee For The Osterweis Revocable Trust U/A Dated 09/13/93.......................... 5,300 5,300
Palmetto Partners, Ltd................................................................................... 42,400 42,400
Bruce H. Paul............................................................................................ 10,600 10,600
Alan Paulenoff........................................................................................... 5,300 5,300
Gregory P. & Christine K. Pellizzon...................................................................... 5,300 5,300
Peter & Pamela Pellizzon................................................................................. 5,300 5,300
Nita E. Pepper and James G. Pepper, Co Trustees, Trust F/B/O Nita E. Pepper U/A Dtd 1/9/90............... 21,200 21,200
William and Catherine Peterson, JTWROS................................................................... 5,300 5,300
Anthony G. Polak (S)..................................................................................... 5,300 5,300
Anthony G. Polak IRA, Cowen & Co. Custodian.............................................................. 5,300 5,300
Jack Polak KEOGH Plan, Cowen & Co. Custodian............................................................. 5,300 5,300
Dr. Tis Prager........................................................................................... 15,900 15,900
Profutures Special Equities Fund, LP..................................................................... 42,400 42,400
Alois Putre Jr........................................................................................... 5,300 5,300
Charles Re-KEOGH Def. Contrib. Profit Sharing Plan, Cowen & Co. Custodian................................ 2,650 2,650
Shulamit Reinharz........................................................................................ 2,650 2,650
RL Capital Partners...................................................................................... 15,900 15,900
Raimundo J. Rodriguez P. and Anelies H. Huter de R....................................................... 5,300 5,300
Marion Roffer............................................................................................ 10,600 10,600
Robert W. Rohrlich....................................................................................... 5,300 5,300
Romajo Partners Limited Partnership...................................................................... 5,300 5,300
Michael Rosenbaum........................................................................................ 10,600 10,600
Jonathan Rothschild...................................................................................... 5,300 5,300
RSA Trust (DTD) 3/7/95 (Ralph E. Adams Jr. and Shirlee Yvonne Adams, Trustees for RSA Trust)............. 5,300 5,300
Alan T. Rubin............................................................................................ 21,200 21,200
David W. Ruttenberg...................................................................................... 5,300 5,300
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK(5)
-----------------------
NUMBER NUMBER
BENEFICIALLY OFFERED
NAME AND POSITION OF SELLING SECURITYHOLDER OWNED HEREBY
- --------------------------------------------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Sagres Group Ltd......................................................................................... 21,200 21,200
Wayne Saker.............................................................................................. 10,600 10,600
Gordon S. Salter......................................................................................... 5,300 5,300
Kaya K. Sarier........................................................................................... 2,650 2,650
Barry A. Saunders........................................................................................ 10,600 10,600
Jan A. Saunders.......................................................................................... 5,300 5,300
Robert Schlotterbeck..................................................................................... 5,300 5,300
Robert L. Schuessler..................................................................................... 5,300 5,300
Carl F. Schwartz......................................................................................... 7,950 7,950
Roberto Segovia.......................................................................................... 5,300 5,300
Uri R. Shabto M.D., P.C.................................................................................. 5,300 5,300
Robert & Sandra Shapiro, JTWROS.......................................................................... 2,650 2,650
J.F. Shea Co., Inc. as Nominee 1997-18................................................................... 63,600 63,600
Gerald Shepps............................................................................................ 5,300 5,300
Andrew J. Siegel......................................................................................... 5,300 5,300
Melvin Silon............................................................................................. 5,300 5,300
Nathaniel Silon Revocable Living Trust Dtd 6/2/93........................................................ 21,200 21,200
William & Elinor Silver.................................................................................. 5,300 5,300
Ronald Simon............................................................................................. 2,650 2,650
Harvey Slevin, TTEE...................................................................................... 2,650 2,650
Hollis R. and Lucille B. Smith........................................................................... 5,300 5,300
Smithson Ventures Money Purchase Pension Plan, DLJ Custodian............................................. 10,600 10,600
Philip Solomon........................................................................................... 5,300 5,300
Sovereign Partners L.P................................................................................... 42,400 42,400
Robert L. Spint Trustee For Robert L. Spint Trust UAD 10/19/89........................................... 5,300 5,300
Murray and Clare Stadtmauer.............................................................................. 5,300 5,300
Stern Joint Venture, L.P................................................................................. 21,200 21,200
Andrew Strassman......................................................................................... 5,300 5,300
Joseph & Barbara Strassman............................................................................... 21,200 21,200
Richard Strassman........................................................................................ 5,300 5,300
Robert Strassman......................................................................................... 5,300 5,300
Burton M. Strauss, Jr.................................................................................... 5,300 5,300
Michael and Pamela Sulewski.............................................................................. 2,650 2,650
Sidney Sutter............................................................................................ 5,300 5,300
Michele L. Tarica........................................................................................ 5,300 5,300
The 1992 Houston Partnership, L.P........................................................................ 10,600 10,600
Tokenhouse Trading Company Limited....................................................................... 21,200 21,200
Alyce P. Twomey.......................................................................................... 2,650 2,650
UFH Endowment Ltd........................................................................................ 42,400 42,400
Union D'Etudes et D'Investissements...................................................................... 106,000 106,000
Valori Associates, Inc................................................................................... 10,600 10,600
Donald E. and Virginia V. Vinson Trust................................................................... 21,200 21,200
J. Vitols................................................................................................ 21,200 21,200
Mark & Sallie Lynn Walko................................................................................. 10,600 10,600
Saul Waring.............................................................................................. 5,300 5,300
L.E. Warner.............................................................................................. 10,600 10,600
Paul H. Warren........................................................................................... 10,600 10,600
John Randall Wear........................................................................................ 10,600 10,600
Robert J. Whetten........................................................................................ 15,900 15,900
Allen Whipple............................................................................................ 31,800 31,800
John R. Wiencek.......................................................................................... 2,120 2,120
B. R. Williamson Jr...................................................................................... 10,600 10,600
Robert B. Wolford IRA.................................................................................... 5,300 5,300
Charles C. Young......................................................................................... 5,300 5,300
Alfred C. Zuck........................................................................................... 5,300 5,300
Lindsay A. Rosenwald, M.D. (6)(7)........................................................................ 100,004 100,004
Scott A. Katzmann (6)(8)................................................................................. 35,529 35,529
Michael S. Weiss (6)(9).................................................................................. 14,885 14,885
Wayne L. Rubin (6)(8).................................................................................... 14,885 14,885
Bernard Gross (6)(8)..................................................................................... 13,824 13,824
Credit Agricole (6)(11).................................................................................. 10,593 10,593
A. Joseph Rudick, Jr., M.D. (6)(10)...................................................................... 10,540 10,540
Tim McInerney (6)(8)..................................................................................... 9,484 9,484
Martin S. Kratchman (6)(8)............................................................................... 9,121 9,121
Richard Strassman (6)(8)................................................................................. 8,501 8,501
Karl Ruggeberg (6)(8).................................................................................... 8,102 8,102
David R. Walner (6)(8)................................................................................... 5,000 5,000
</TABLE>

<PAGE>

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

(5) Represents shares of Common Stock into which the shares of Series A
Preferred owned by such Selling Securityholder are convertible.

(6) Represents shares of Common Stock issuable upon conversion of Series A
Preferred issuable upon exercise of the Placement Warrants.

(7) Lindsay A. Rosenwald, M.D., a principal stockholder of the Company, is the
President and sole stockholder of Paramount Capital, Inc. ("Paramount").
VentureTek, L.P., a principal stockholder of the Company, is a limited
partnership, the limited partners of which include Dr. Rosenwald's wife,
children, sisters of Dr. Rosenwald's wife, and their husbands and children.

(8) Securityholder is agent of Paramount.

(9) Michael S. Weiss, the Company's Secretary, is a Senior Managing Director of
Paramount.

(10) Dr. Rudick, an associate of the Placement Agent and Paramount Capital
Investments, LLC, is a director of each of Channel Therapeutics, Inc. and
Optex Ophthalmologics, Inc., each a wholly owned subsidiary of the Company.

(11) Securityholder acted as a Selected Dealer in the Private Placement.

22
<PAGE>
PLAN OF DISTRIBUTION

The Securities offered by the Selling Securityholders are not being
underwritten. The holders of the Redeemable Warrants who are Selling
Securityholders may sell the Common Stock underlying such Redeemable Warrants at
any time on or after the date hereof, provided prior consent is given by Joseph
Stevens & Company, L.P. ("JSLP" or the "Underwriter"). In addition, the holders
of the Redeemable Warrants who are Selling Securityholders have agreed with the
Company that, during the period ending on December 13, 1997, the holders of the
Redeemable Warrants who are Selling Securityholders will not sell such
securities other than through JSLP, and that the holders of the Redeemable
Warrants who are Selling Securityholders shall compensate JSLP in accordance
with its customary compensation practices. Subject to these restrictions, the
Securities offered hereby may be sold by the Selling Securityholders from time
to time in transactions (which may include block transactions ) in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the Securities directly
to purchasers or through broker-dealers that may act as agents or principals.
Such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers of the Securities for whom such broker-dealers may act as agents or
to whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).

JSLP, a Selling Securityholder, is the beneficial owner of approximately 11%
of the Company's outstanding capital stock and therefore may be deemed an
affiliate of the Company. Lindsay A. Rosenwald, M.D., a Selling Securityholder
and principal stockholder of the Company, is the President and sole stockholder
of the Placement Agent, certain agents of which are Selling Securityholders.
VentureTek, L.P., a principal stockholder of the Company, is a limited
partnership, the limited partners of which include Dr. Rosenwald's wife,
children, sisters of Dr. Rosenwald's wife, and their husbands and children.
Michael Weiss, the Company's Secretary, is a Senior Managing Director of the
Placement Agent, and Steven Kanzer and John K.A. Prendergast, M.D., each a
director of the Company, are officers of Investments, a company wholly owned by
Dr. Rosenwald. See "Risk Factors--Certain Interlocking Relationships; Potential
Conflicts of Interest." Other than the foregoing, there are no material
relationships between any of the Selling Securityholders and the Company or any
of its predecessors or affiliates.

The Selling Securityholders and any broker-dealers that act in connection
with the sale of the Securities as principals may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act and any commission
received by them and any profit on the resale of such securities as principals
might be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Securityholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of
such securities against certain liabilities, including liabilities arising under
the Securities Act. The Company will not receive any proceeds from the sales of
the New Shares or the Unit Offering Shares by the Selling Securityholders,
although the Company will receive proceeds from the exercise of the Redeemable
Warrants and the Underwriter's Warrants. Sales of the Securities by the Selling
Securityholders, or even the potential of such sales, would likely have an
adverse effect on the market price of the Company's outstanding Units, Common
Stock and Redeemable Warrants.

At the time a particular offer of Securities is made, except as herein
contemplated, by or on behalf of the Selling Securityholder or the Company upon
exercise of warrants, to the extent required, a prospectus will be distributed
which will set forth the number of Securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for Securities purchased from
the Selling Securityholder and any discounts, commissions or concessions allowed
or reallowed or paid to dealers.

In order to comply with the securities laws of certain states, if
applicable, the Securities will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Securities may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.

23
<PAGE>

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities may not simultaneously engage in
market making activities with respect to the securities of the Company for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Securityholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, the Rules promulgated
under Regulation M, which provisions may limit the timing of purchases and sales
of shares of the Company's securities by the Selling Securityholders.

The Placement Shares were originally issued to certain Selling
Securityholders pursuant to an exemption from the registration requirements of
the Securities Act provided by Section 4(2) thereof. The Company agreed to
register the Placement Shares under the Securities Act and to indemnify and hold
such Selling Securityholders harmless against certain liabilities under the
Securities Act that could arise in connection with the sale by such Selling
Securityholders of the Placement Shares. The Company has agreed to pay all
reasonable fees and expenses incident to the preparation and filing of this
Prospectus and the Registration Statement on Form S-3 of which it is a part.

DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of 80,000,000 shares of
Common Stock and 50,000,000 shares of Preferred Stock.

UNITS

As of June 30, 1997, there were 1,872,750 Units outstanding. Each Unit
consists of one share of Common Stock and one Redeemable Warrant. The securities
included in each Unit trade separately.

COMMON STOCK

As of June 30, 1997, there were 3,016,920 shares of Common Stock
outstanding, which include the shares of Common Stock composing the Units. In
addition, as of June 30, 1997, there were outstanding options to purchase
699,155 shares of Common Stock at exercise prices ranging from $0.001 to $7.50
per share. Such options expire on various dates through August 15, 2006.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Company's Board of Directors out of funds legally available
therefor. In the event of the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock are fully paid and nonassessable, and the shares of Common Stock
to be issued upon completion of the Offering will be fully paid and
nonassessable.

PREFERRED STOCK

The Company's Certificate of Incorporation authorizes 50,000,000 shares of
Preferred Stock. The Company's Board of Directors has the authority to issue
Preferred Stock in one or more series and to fix the relative rights,
preferences and privileges and restrictions thereof, including dividend 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 such series. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the stockholders of the Company. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of the Common Stock, including the
loss of voting control to others. See "Risk Factors--Need for Additional
Financing; Issuance of Securities by the Operating Companies; Future Dilution"
and "--Antitakeover Effects of Provisions of the Certificate of Incorporation
and Delaware Law."

24
<PAGE>
SERIES A CONVERTIBLE PREFERRED STOCK

The Company has designated 1,375,000 shares of Preferred Stock as "Series A
Convertible Preferred Stock" (the "Series A Preferred"). As of August 15, 1997,
there were outstanding 1,237,200 shares of Series A Preferred and warrants to
purchase 123,720 shares of Series A Preferred. The following is a brief summary
of the rights, preferences and privileges of the Series A Preferred. A complete
description of the rights, preferences and privileges of the Series A Preferred
is set forth in the Company's Certificate of Designation with respect thereto.

DIVIDENDS. Holders of Series A Preferred will be entitled to receive
dividends as, when and if declared by the Board of Directors. Commencing on
August 7, 1998, holders of Series A Preferred will be entitled to a cumulative
payment-in-kind dividend (the "PIK Dividend") payable in additional shares of
Series A Preferred at the rate of 10% per annum of the Dividend Base Amount,
payable semi-annually, unless their shares of Series A Preferred have previously
been converted into Common Stock. The Dividend Base Amount shall be $13.00 plus
accrued and unpaid dividends (subject to antidilution adjustment), and
represents a premium to the holders of Series A Preferred of 30% over the $10.00
per share purchase price. The Company shall not declare any dividend or
distribution on any other capital stock of the Company unless and until a
special dividend or distribution of $13.00 per share (subject to appropriate
adjustment to reflect any stock split, combination, reclassification or
reorganization of the Series A Preferred) has been declared and paid on the
Series A Preferred. No dividend or distribution, as the case may be, shall be
declared or paid on any junior stock unless the same dividend is paid to holders
of Series A Preferred. The Company does not intend to pay cash dividends on the
Series A Preferred or the underlying Common Stock for the foreseeable future.

CONVERSION. Each share of Series A Preferred is convertible at the option
of the holder thereof, at any time after the issuance thereof, into shares of
Common Stock initially at a conversion price equal to $4.72. The conversion
price is subject to adjustment upon the occurrence of certain events, including
the issuance of Common Stock at a per share price less than the conversion
price, or the occurrence of a merger reorganization, consolidation,
reclassification, stock dividend or stock split which will result in an increase
or decrease in the number of shares of Common Stock outstanding. Unless
converted earlier, the Company may, at any time on or after August 7, 1998, at
its option, cause the conversion of the Series A Preferred, in whole or in part,
on a PRO RATA basis, into shares of Common Stock at the conversion price in
effect at that time if the closing bid price of the Common Stock has exceeded
200% of the then applicable conversion price for at least 20 trading days in any
30 consecutive trading day period ending three days prior to the date of notice
of conversion.

LIQUIDATION PREFERENCE. Upon (i) a liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary, (ii) a sale or other
disposition of all or substantially all of the assets of the Company or (iii)
any consolidation, merger, combination, reorganization or other transaction in
which the Company is not the surviving entity or in which the shares of Common
Stock constituting in excess of 50% of the voting power of the Company are
exchanged for or changed into other stock or securities, cash and/ or any other
property, after payment or provision for payment of the debts and other
liabilities of the Company, the holders of the Series A Preferred then
outstanding will first be entitled to receive, PRO RATA (on the basis of the
number of shares of the Series A Preferred then outstanding), and in preference
to the holders of the Common Stock and any capital stock of the Company, an
amount per share equal to $13.00 plus accrued but unpaid dividends, if any,
which in certain circumstances may be paid in securities of another corporation.

VOTING RIGHTS. The holders of shares of Series A Preferred have the right
at all meetings of stockholders of the Company to that number of votes equal to
the number of shares of Common Stock issuable upon conversion of the Series A
Preferred at the record date for determination of the stockholders entitled to
vote on such matters or, if no such record date is established, at the date such
vote is taken. So long as at least 50% of the shares of Series A Preferred
remain outstanding, the affirmative vote or consent of the holders of 66.67% of
the shares of Series A Preferred shall be necessary to permit, effect or
validate any one or more of the following: (i) the amendment of the Certificate
of Incorporation or Bylaws

25
<PAGE>
of the Company if it adversely affects the relative rights of the holders of the
Series A Preferred, (ii) the declaration or payment of a dividend on any
securities of the Company other than the Series A Preferred or the authorization
of the repurchase of any securities of the Company, (iii) the issuance of any
security ranking senior to or on a parity with the Series A Preferred with
respect to (A) a liquidation event, (B) the payment of dividends or (C) voting
rights (except class voting rights required by law), (iv) any liquidation,
dissolution or sale of substantially all of the assets of the Company, (v) the
incorporation of any subsidiary company and (vi) the issuance of any debt
securities or incurrence of indebtedness for borrowed money in excess of
$1,000,000, PROVIDED, HOWEVER, that any issuance of debt securities or
incurrence of indebtedness for borrowed money in excess of $500,000 shall be
approved by a supermajority of the Board of Directors of the Company.

REDEEMABLE WARRANTS

The Redeemable Warrants were issued pursuant to a warrant agreement (the
"Redeemable Warrant Agreement") among JSLP, the Company and Continental Stock
Transfer & Trust Company (the "Warrant Agent"), and are evidenced by warrant
certificates in registered form. The following summary is qualified in its
entirety by the text of the Redeemable Warrant Agreement, a copy of which has
been filed as an exhibit to the 1995 Registration Statement.

Each Redeemable Warrant entitles the registered holder thereof to purchase
one share of Common Stock at a price of $5.50 per share, subject to adjustment,
commencing on the date of issuance. The Redeemable Warrants expire on December
13, 2000 (the "Expiration Date"). As of December 14, 1996 the Redeemable
Warrants are subject to redemption by the Company at a redemption price of $0.05
per Redeemable Warrant on 30 days' prior written notice, provided that the
average closing bid price (or last sales price) of the Common Stock as reported
on Nasdaq (or on such exchange on which the Common Stock is then traded) equals
or exceeds $8.25 per share, subject to adjustment, for any 20 trading days
within a period of 30 consecutive trading days ending on the fifth trading day
prior to the date of notice of redemption. The holder of a Redeemable Warrant
will lose his right to purchase if such right is not exercised prior to
redemption by the Company on the date for redemption specified in the Company's
notice of redemption or any later date specified in a subsequent notice. Notice
of redemption by the Company shall be given by first class mail to the holders
of the Redeemable Warrants at their addresses set forth in the Company's
records.

The exercise price of the Redeemable Warrants and the number and kind of
shares of Common Stock or other securities and property to be obtained upon
exercise of the Redeemable Warrants are subject to adjustment in certain
circumstances including a stock split of, or stock division, combination or
recapitalization of, the Common Stock. Additionally, an adjustment would be made
upon the consolidation of the Company with or the merger of the Company with or
into another corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Common Stock) so as
to enable Redeemable Warrant holders to purchase the kind and number of shares
of stock or other securities or property (including cash) receivable in such
event by a holder of the number of shares of Common Stock that might otherwise
have been purchased upon exercise of such Redeemable Warrant. No adjustment for
cash dividends, if any, will be made upon exercise of the Redeemable Warrants.

The exercise price of the Redeemable Warrants bears no relation to any
objective criteria of value and should not be regarded as an indication of the
future market price of the securities offered hereby. The Redeemable Warrants do
not confer upon the holder any voting or any other rights of a stockholder of
the Company. Upon notice to the Redeemable Warrant holders, the Company has the
right to reduce the exercise price or extend the expiration date of the
Redeemable Warrants.

The Redeemable Warrants may be exercised upon surrender of the Redeemable
Warrant certificate on or prior to the expiration date (or earlier redemption
date) of such Redeemable Warrant at the offices of the Warrant Agent, with the
form of "Election to Purchase" on the reverse side of the Redeemable Warrant
certificate completed and executed as indicated, accompanied by payment of the
full exercise price (by cashier's or certified check payable to the order of the
Warrant Agent) for the number of

26
<PAGE>
Redeemable Warrants being exercised. The Redeemable Warrants will become void
and of no value upon the Expiration Date. A holder may sell the Redeemable
Warrants instead of exercising them. There can be no assurance, however, that a
market for the Redeemable Warrants will continue. If a prospectus covering the
shares of Common Stock issuable upon the exercise of Redeemable Warrants is not
kept effective and current or if such shares are not qualified for sale in
certain states, holders of Redeemable Warrants desiring to exercise the
Redeemable Warrants will have no choice but either to sell such Redeemable
Warrants or let them expire. See "Risk Factors--Securities Law Restrictions on
the Exercise of Redeemable Warrants."

The Redeemable Warrant Agreement provides that it may be amended at any time
with the written consent of registered holders representing at least 66 2/3% of
the Redeemable Warrants then outstanding.

UNDERWRITER'S WARRANTS

In connection with the Unit Offering, the Company sold to the Underwriter,
for nominal consideration, Underwriter's Warrants to purchase from the Company
165,000 Units. The Underwriter's Warrants are initially exercisable at a price
equal to $6.60 and may be exercised at any time during the four year period
commenced December 14, 1996. The shares of Common Stock and Redeemable Warrants
issuable upon exercise of the Underwriter's Warrants are identical to those
offered to the public pursuant to the Unit Offering, except that the Redeemable
Warrants issuable upon exercise of the Underwriter's Warrants have an exercise
price of $6.05 per share and such Redeemable Warrants have not been approved for
quotation on Nasdaq. The Underwriter's Warrants contain anti-dilution provisions
providing for adjustment of the number of warrants and exercise price under
certain circumstances. The Underwriter's Warrants grant to the holders thereof
certain rights of registration of the securities issuable upon exercise of the
Underwriter's Warrants.

PLACEMENT WARRANTS

In connection with the Private Placement, the Company sold to the Placement
Agent, for nominal consideration, Placement Warrants to purchase from the
Company 123,720 shares of Series A Preferred. The Placement Warrants are
initially exercisable at a price equal to $11.00 per share and may be exercised
at any time during the 10-year period commencing February 7, 1998. The rights,
preferences and privileges of the shares of Series A Preferred issuable upon
exercise of the Placement Warrants are identical to those offered to the
participants in the Private Placement. The Placement Warrants contain
anti-dilution provisions providing for adjustment of the number of securities
underlying the Series A Preferred issuable upon exercise of the Placement
Warrants and the exercise price of the Placement Warrants under certain
circumstances. The Placement Warrants are not redeemable and will remain
outstanding, to the extent not exercised, notwithstanding any mandatory
redemption or conversion of the Series A Preferred underlying the Placement
Warrants. The Placement Warrants grant to the holders thereof certain rights of
registration for the securities issuable upon exercise of the Placement
Warrants. See "--Registration Rights."

REGISTRATION RIGHTS

In connection with the Private Placement, the Company has agreed to use its
best efforts to (i) on or prior to September 8, 1997, file with the Commission a
registration statement with respect to the Common Stock issuable upon conversion
of the Series A Preferred, including the Series A Preferred issuable upon
exercise of the Placement Warrants, and (ii) cause such registration statement
to remain effective until the date the holders of the Series A Preferred have
completed the distribution of such securities or until such earlier time as such
shares are no longer, by reason of Rule 144(k) promulgated under the Securities
Act, required to be registered for the sale thereof by such holders.

In addition to the Series A Preferred issued in the Private Placement, this
registration statement includes (i) up to an additional 788,951 shares of Common
Stock covered by piggyback registration rights granted by the Company to Lindsay
A. Rosenwald, M.D., a principal stockholder of the Company and the President and
sole stockholder of the Placement Agent and of VentureTek, L.P., a principal
stockholder of

27
<PAGE>

the Company and (ii) 23,557 shares included in an option granted to Dr. Lawrence
Shaw, the Company's former President.

ANTITAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

TRANSFER AGENT, REGISTRAR AND WARRANT AGENT

The Transfer Agent and Registrar for the Units, Common Stock and Redeemable
Warrants is Continental Stock Transfer & Trust Company ("CST&T"), 2 Broadway,
New York, New York 10004. CST&T can be reached at (212) 509-4000. CST&T is also
the Warrant Agent for the Redeemable Warrants.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Securities offered
hereby are being passed upon for the Company by Brobeck, Phleger & Harrison LLP,
Palo Alto, California.

EXPERTS

The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996, for
each of the years in the three-year period ended December 31, 1996, and for the
period from July 13, 1993 (inception) to December 31, 1996, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP ("KPMG"), independent certified public accountants, and upon the
authority of such firm as experts in accounting and auditing. The report of KPMG
covering the consolidated financial statements referred to above contains an
explanatory paragraph that states that the Company has suffered recurring losses
from operations and has limited capital resources which raise substantial doubt
about its ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
that uncertainty.

28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY 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. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION FOR AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

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

TABLE OF CONTENTS

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 4
Information Incorporated by Reference..................................... 5
Risk Factors.............................................................. 6
Recent Developments....................................................... 16
Selling Securityholders................................................... 17
Plan of Distribution...................................................... 22
Description of Securities................................................. 23
Legal Matters............................................................. 27
Experts................................................................... 27
</TABLE>

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

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

ATLANTIC
PHARMACEUTICALS, INC.

1,500,000
REDEEMABLE WARRANTS

7,508,424 SHARES
COMMON STOCK

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

PROSPECTUS

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

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

All expenses incurred in connection with the issuance and distribution of
the securities being registered will be paid by the Registrant. The following is
an itemized statement of these expenses. All amounts are estimates except the
Securities and Exchange Commission registration fee and the Nasdaq listing fee.

<TABLE>
<S> <C>
SEC Registration fee............................................... $ 9,063
Nasdaq listing fee................................................. 17,500
Printing and Engraving............................................. 10,000
Legal fees and expenses of the Registrant.......................... 15,000
Accounting fees and expenses....................................... 5,000
Miscellaneous...................................................... 3,437
---------
Total............................................................ $ 60,000
---------
---------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("Section 145")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. Article
Tenth of the Registrant's Certificate of Incorporation provides for mandatory
indemnification by the Registrant of all persons the Registrant may indemnify
under Section 145 to the maximum extent permitted by the Delaware General
Corporation Law. Article Ninth of the Registrant's Certificate of Incorporation
provides that the liability of its directors is eliminated to the fullest extent
permitted by the Delaware General Corporation Law. These provisions in the
Certificate of Incorporation do not eliminate the directors' fiduciary duty, and
in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. Reference is made to Articles Ninth and
Tenth of the Registrant's Certificate of Incorporation and Article VII of the
Registrant's Bylaws, indemnifying the Registrant's directors and officers
against certain liabilities, and Section 1.10 of the Investors' Rights Agreement
dated July, 1995, among the Registrant, Dr. Lindsay A. Rosenwald and VentureTek,
L.P., indemnifying certain of the Registrant's stockholders against certain
liabilities. The Registrant has obtained liability insurance for its directors
and officers. At the Registrant's 1997 Annual Meeting of Stockholders, the
stockholders of the Registrant approved a form of indemnification agreement to
be entered into by and between the Registrant and its directors and officers,
which agreements grant indemnification under certain circumstances to such
officers and directors for liabilities (including reimbursement for expenses
incurred) arising out of their duties as officers and directors of the
Registrant.

In addition, the Registrant has entered into financial advisory and other
agreements with Paramount Capital, Inc. ("Paramount"), a merchant banking and
venture capital firm specializing in biotechnology companies that is wholly
owned by a greater than five percent stockholder of the Registrant, pursuant to
which the Registrant will indemnify Paramount and its affiliates against
liabilities (including reimbursement for expenses incurred) arising out of its
provision of services to the Registrant.

II-1
<PAGE>
ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ ----------------------------------------------------------------------
<C> <S>
3.1(1) Certificate of Incorporation of the Registrant, as amended to date.
3.2(1) Bylaws of the Registrant, as amended to date.
3.3(5) Certificate of Designations of Series A Convertible Preferred Stock.
3.4(6) Certificate of Increase of Series A Convertible Preferred Stock.
4.2(1) Form of Unit certificate.
4.3(1) Specimen Common Stock certificate.
4.4(1) Form of Redeemable Warrant certificate.
4.5(1) Form of Redeemable Warrant Agreement, by and between the Registrant
and Continental Stock Transfer & Trust Company.
4.6(1) Form of Underwriter's Warrant certificate.
4.7(1) Form of Underwriter's Warrant Agreement by and between the Registrant
and Joseph Stevens & Company, L.P
4.8(1) Form of Subscription Agreement, by and between the Registrant and the
Selling Securityholders.
4.9(1) Form of Bridge Note.
4.10(1) Form of Bridge Warrant.
4.11(2) Investors' Rights Agreement by and among the Registrant, Dreyfus
Growth and Value Funds, Inc. and Premier Strategic Growth Fund.
4.12(2) Common Stock Purchase Agreement by and among the Registrant, Dreyfus
Growth and Value Funds, Inc. and Premier Strategic Growth Fund
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1(1) The Registrant's 1995 Stock Option Plan.
10.2(1) Employment Agreement, dated July 7, 1995, between the Registrant and
Jon D. Lindjord.
10.3(1) Employment Agreement, dated September 21, 1995, between the Registrant
and Dr. Stephen R. Miller.
10.4(1) Employment Agreement, dated September 21, 1995, between the Registrant
and Margaret A. Schalk.
10.5(1) Letter Agreement, dated August 31, 1995, between the Registrant and
Dr. H. Lawrence Shaw.
10.6(1) Consulting Agreement, dated January 1, 1994, between the Registrant
and John K.A. Prendergast.
10.7(1) (Reserved)
10.8(1) Investors' Rights Agreement, dated July, 1995, between the Registrant,
Dr. Lindsay A. Rosenwald and VentureTek, L.P.
10.9(1) License and Assignment Agreement, dated March 25, 1994, between Optex
Ophthalmologics, Inc., certain inventors and NeoMedix Corporation,
as amended.
10.10(1) License Agreement, dated May 5, 1994, between Gemini Gene Therapies,
Inc. and The Cleveland Clinic Foundation.
10.11(1)+ License Agreement, dated June 16, 1994, between Channel Therapeutics,
Inc., the University of Pennsylvania and certain inventors, as
amended.
10.12(1)+ License Agreement, dated March 28, 1994, between Channel Therapeutics,
Inc. and Dr. Sumner Burstein.
10.13(1) Form of Financial Advisory and Consulting Agreement by and between the
Registrant and Joseph Stevens & Company, L.P.
10.14(1) Employment Agreement, dated November 3, 1995, between the Registrant
and Shimshon Mizrachi.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ ----------------------------------------------------------------------
<C> <S>
10.15(3) Financial agreement between the Registrant and Paramount dated
September 4, 1996 (effective date of April 15, 1996).
10.16(3) Financial agreement between the Registrant, Paramount and UI USA dated
June 23, 1996.
10.17(3) Consultancy agreement between the Registrant and Dr. Yuichi Iwaki
dated July 31, 1996.
10.18(3) 1995 Stock Option Plan, as amended.
10.19(3) Warrant to purchase 25,000 shares of Common Stock issued to Paramount
Capital, Inc.
10.20(3) Warrant to purchase 25,000 shares of Common Stock issued to Paramount
Capital, Inc.
10.21(3) Warrant to purchase 12,500 shares of Common Stock issued to Paramount
Capital, Inc.
10.22(4) Letter of Agreement between the Registrant and Paramount Capital, Inc.
dated February 26, 1997.
10.23(4) Agreement and Plan of Reorganization by and among Atlantic
Pharmaceuticals, Inc., Channel Therapeutics, Inc. and New Channel,
Inc. dated February 20, 1997.
10.24(4) Warrant issued to John Prendergast to purchase 37,500 shares of the
Registrant's Common Stock.
10.25(4) Warrant issued to Dian Griesel to purchase 24,000 shares of the
Registrant's Common Stock.
21.1(1) Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5.1).
24.1* Power of Attorney (included in Part II of this Registration Statement
under the caption "Signatures").
27.1* Financial Data Schedule.
</TABLE>

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

* Previously filed.

(1) Incorporated by reference to exhibits of the Registrant's Registration
Statement on Form SB-2, No. 33-98478, as filed with the Securities and
Exchange Commission (the "Commission") on October 24, 1995, and as amended
by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4 and
Amendment No. 5, as filed with the Commission on November 9, 1995, December
5, 1995, December 12, 1995, December 13, 1995 and December 14, 1995,
respectively.

(2) Incorporated by reference to exhibits of the Registrant's Current Report on
Form 8-KSB, as filed with the Commission on August 30, 1996.

(3) Incorporated by reference to exhibits of the Registrant's Quarterly Report
on Form 10-QSB for the period ended September 30, 1996.

(4) Incorporated by reference to exhibits of the Registrant's Quarterly Report
on Form 10-QSB for the period ended March 31, 1997.

(5) Incorporated by reference to exhibits of the Registrant's Report on Form
8-KSB, as filed with the Commission on June 9, 1997.

(6) Incorporated by reference to exhibits of the Registrant's Registration
Statement on Form S-3 (Registration No. 333-34379), as filed with the
Commission on August 26, 1997, and as amended by Amendment No. 1, as filed
with the Commission on August 28, 1997.

+ Confidential treatment has been granted with respect to certain portions of
this Exhibit.

II-3
<PAGE>
ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes that it will:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and

(iii) Include any additional or changed material information on the plan
of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of such securities at that time to be the initial BONA
FIDE offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

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 Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Registrant, 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 hereunder, 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

The Registrant hereby undertakes that:

(1) For determining liability under the Securities Act, treat 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 the Commission declared it effective.

(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial BONA FIDE
offering of those securities.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Raleigh, State of North Carolina, on this 27th day of
October, 1997.

ATLANTIC PHARMACEUTICALS, INC.

By: /s/ JON D. LINDJORD
-----------------------------------------
Jon D. Lindjord
PRESIDENT AND CHIEF EXECUTIVE OFFICER

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the persons whose signatures appear
below, which persons have signed such Registration Statement in the capacities
and on the dates indicated:

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President and Chief
/s/ JON D. LINDJORD Executive Officer
- ------------------------------ (Principal Executive October 27, 1997
Jon D. Lindjord Officer) and a Director

* Controller (Principal
- ------------------------------ Financial and Accounting October 27, 1997
Shimshon Mizrachi Officer)

*
- ------------------------------ Director October 27, 1997
John K.A. Prendergast, Ph.D.

*
- ------------------------------ Director October 27, 1997
Steve H. Kanzer

- ------------------------------ Director October , 1997
Yuichi Iwaki, M.D.

*By: /s/ JON D. LINDJORD
-------------------------
Jon D. Lindjord
(ATTORNEY-IN-FACT)

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NUMBER
- ------ ---------------------------------------------------------------------- ------------
<C> <S> <C>
3.1(1) Certificate of Incorporation of the Registrant, as amended to date.
3.2(1) Bylaws of the Registrant, as amended to date.
3.3(5) Certificate of Designations of Series A Convertible Preferred Stock.
3.4(6) Certificate of Increase of Series A Convertible Preferred Stock.
4.2(1) Form of Unit certificate.
4.3(1) Specimen Common Stock certificate.
4.4(1) Form of Redeemable Warrant certificate.
4.5(1) Form of Redeemable Warrant Agreement, by and between the Registrant
and Continental Stock Transfer & Trust Company.
4.6(1) Form of Underwriter's Warrant certificate.
4.7(1) Form of Underwriter's Warrant Agreement by and between the Registrant
and Joseph Stevens & Company, L.P
4.8(1) Form of Subscription Agreement, by and between the Registrant and the
Selling Securityholders.
4.9(1) Form of Bridge Note.
4.10(1) Form of Bridge Warrant.
4.11(2) Investors' Rights Agreement by and among the Registrant, Dreyfus
Growth and Value Funds, Inc. and Premier Strategic Growth Fund.
4.12(2) Common Stock Purchase Agreement by and among the Registrant, Dreyfus
Growth and Value Funds, Inc. and Premier Strategic Growth Fund
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1(1) The Registrant's 1995 Stock Option Plan.
10.2(1) Employment Agreement, dated July 7, 1995, between the Registrant and
Jon D. Lindjord.
10.3(1) Employment Agreement, dated September 21, 1995, between the Registrant
and Dr. Stephen R. Miller.
10.4(1) Employment Agreement, dated September 21, 1995, between the Registrant
and Margaret A. Schalk.
10.5(1) Letter Agreement, dated August 31, 1995, between the Registrant and
Dr. H. Lawrence Shaw.
10.6(1) Consulting Agreement, dated January 1, 1994, between the Registrant
and John K.A. Prendergast.
10.7(1) (Reserved)
10.8(1) Investors' Rights Agreement, dated July, 1995, between the Registrant,
Dr. Lindsay A. Rosenwald and VentureTek, L.P.
10.9(1) License and Assignment Agreement, dated March 25, 1994, between Optex
Ophthalmologics, Inc., certain inventors and NeoMedix Corporation,
as amended.
10.10(1) License Agreement, dated May 5, 1994, between Gemini Gene Therapies,
Inc. and The Cleveland Clinic Foundation.
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NUMBER
- ------ ---------------------------------------------------------------------- ------------
<C> <S> <C>
10.11(1)+ License Agreement, dated June 16, 1994, between Channel Therapeutics,
Inc., the University of Pennsylvania and certain inventors, as
amended.
10.12(1)+ License Agreement, dated March 28, 1994, between Channel Therapeutics,
Inc. and Dr. Sumner Burstein.
10.13(1) Form of Financial Advisory and Consulting Agreement by and between the
Registrant and Joseph Stevens & Company, L.P.
10.14(1) Employment Agreement, dated November 3, 1995, between the Registrant
and Shimshon Mizrachi.
10.15(3) Financial agreement between the Registrant and Paramount dated
September 4, 1996 (effective date of April 15, 1996).
10.16(3) Financial agreement between the Registrant, Paramount and UI USA dated
June 23, 1996.
10.17(3) Consultancy agreement between the Registrant and Dr. Yuichi Iwaki
dated July 31, 1996.
10.18(3) 1995 Stock Option Plan, as amended.
10.19(3) Warrant to purchase 25,000 shares of Common Stock issued to Paramount
Capital, Inc.
10.20(3) Warrant to purchase 25,000 shares of Common Stock issued to Paramount
Capital, Inc.
10.21(3) Warrant to purchase 12,500 shares of Common Stock issued to Paramount
Capital, Inc.
10.22(4) Letter of Agreement between the Registrant and Paramount Capital, Inc.
dated February 26, 1997.
10.23(4) Agreement and Plan of Reorganization by and among Atlantic
Pharmaceuticals, Inc., Channel Therapeutics, Inc. and New Channel,
Inc. dated February 20, 1997.
10.24(4) Warrant issued to John Prendergast to purchase 37,500 shares of the
Registrant's Common Stock.
10.25(4) Warrant issued to Dian Griesel to purchase 24,000 shares of the
Registrant's Common Stock.
21.1(1) Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5.1).
24.1* Power of Attorney (included in Part II of this Registration Statement
under the caption "Signatures").
27.1* Financial Data Schedule.
</TABLE>

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

* Previously filed.

II-7
<PAGE>
(2) Incorporated by reference to exhibits of the Registrant's Current Report on
Form 8-KSB, as filed with the Commission on August 30, 1996.

(3) Incorporated by reference to exhibits of the Registrant's Quarterly Report
on Form 10-QSB for the period ended September 30, 1996.

(4) Incorporated by reference to exhibits of the Registrant's Quarterly Report
on Form 10-QSB for the period ended March 31, 1997.

(5) Incorporated by reference to exhibits of the Registrant's Report on Form
8-KSB, as filed with the Commission on June 9, 1997.

+ Confidential treatment has been granted with respect to certain portions of
this Exhibit.

II-8

<PAGE>

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Atlantic Pharmaceuticals, Inc.:

We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.

Our report dated March 11, 1997, contains an explanatory paragraph that
states that the Company has suffered recurring losses from operations and has
limited capital resources, which raise substantial doubt about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of that uncertainty.

/s/ KPMG PEAT MARWICK LLP

Raleigh, North Carolina
October 24, 1997