APOLLO BIOPHARMACEUTICS INC, SB-2/A, 1997-02-06

APOLLO BIOPHARMACEUTICS INC
SB-2/A, 1997-02-06
PHARMACEUTICAL PREPARATIONS

Previous: CLARK MATERIAL HANDLING CO, S-4/A, 1997-02-06

Next: GS FINANCIAL CORP, SB-2/A, 1997-02-06

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 1997

REGISTRATION NO. 333-18769

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

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1

FORM SB-2

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

APOLLO BIOPHARMACEUTICS, INC.

(Name of Small Business Issuer in its Charter)

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

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

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

KATHERINE GORDON, PH.D.

PRESIDENT AND CHIEF EXECUTIVE OFFICER

Apollo BioPharmaceutics, Inc.

One Kendall Square, Building 200, Suite 2200

Cambridge, Massachusetts 02139

(617) 621-7154

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

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

COPIES TO:

<TABLE>
<S> <C>
MICHAEL LYTTON, ESQ. HAROLD E. BERRITT, ESQ.
Palmer & Dodge LLP Rubin Baum Levin Constant Friedman &
One Beacon Street Bilzin
Boston, Massachusetts 2500 First Union Financial Center
02108-3190 Miami, Florida 33131-2336
(617) 573-0100 (305) 374-7580
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

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

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Units, each consisting of one share of Common
Stock, $.02 par value per share, and a Warrant
to purchase one share of Common Stock.......... 1,380,000 $5.75(2) $7,935,000(1)(2) $2,404.54
Warrants to purchase Common Stock................ 120,000 $0.01 $1,200 $0.36
Warrants to purchase Common Stock................ 1,380,000 (3) -- --
Common Stock, $.02 par value per share(4)........ 1,500,000 $7.15(2) $10,725,000(2) $3,250.00
Common Stock, $.02 par value per share........... 1,380,000 (3) -- --
</TABLE>

(1) Includes 180,000 Units which the Underwriters may purchase to cover
over-allotments, if any.

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

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

(4) Represents shares of Common Stock issuable upon exercise of the Warrants and
120,000 shares of Common Stock to be issued to the Underwriters upon
exercise of certain other warrants.

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

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

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

<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of the Registration Statement and Outside Front
Cover Page of Prospectus............................ Forepart of the Registration Statement and Outside
Front Cover Page

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. Not Applicable
</TABLE>
<PAGE>

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

<PAGE>

SUBJECT TO COMPLETION, DATED FEBRUARY , 1997

1,200,000 UNITS
[APOLLO LOGO]
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE COMMON STOCK PURCHASE WARRANT
--------------------------

Apollo BioPharmaceutics, Inc. (the "Company") is hereby offering
1,200,000 units ("Units"), each Unit consisting of one share of the Company's
common stock, $0.02 par value per share (the "Common Stock"), and one redeemable
warrant (each, a "Warrant" and collectively, the "Warrants") to purchase one
share of Common Stock of the Company. Each Warrant entitles the registered
holder thereof to purchase, at any time until the fifth anniversary of the date
of this Prospectus (the "Expiration Date"), one share of Common Stock at an
exercise price of $ per share [130% of the initial public offering price of the
Common Stock], subject to adjustment under certain circumstances. The components
of the Units are separately transferable immediately upon issuance. The Warrants
are redeemable by the Company, in whole or in part, at a redemption price of
$0.25 per Warrant, upon at least 30 days' prior written notice, commencing one
year from the date of this Prospectus, if the average of the closing bid prices
of the Common Stock shall equal or exceed $ per share [200% of the initial
public offering price of the Common Stock] for 20 consecutive business days
ending within 10 business days of the date on which notice of redemption is
given. See "Description of Securities -- The Warrants Offered." Prior to this
offering, there has been no public market for any securities of the Company. It
is currently anticipated that the initial public offering price of the Units
will be between $4.75 and $5.75 per Unit. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering price.
Application has been made for quotation of the Common Stock and the Warrants on
the Nasdaq SmallCap-SM- Market under the symbols "ABPI" and "ABPIW,"
respectively.

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

THE UNITS OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.

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

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Unit................................................. $ $ $
Total(3)................................................. $ $ $
</TABLE>

(1) Does not reflect additional compensation to be received by the Underwriters
in the form of (i) a non-accountable expense allowance equal to 3% of the
gross proceeds of this offering, payable to the managing underwriter of the
several underwriters (the "Managing Underwriter"), (ii) five-year warrants
(the "Managing Underwriter's Warrants") entitling the Managing Underwriter
to purchase up to 120,000 shares of Common Stock at an exercise price of
$ per share [130% of the initial offering price of the Common Stock],
(iii) a commission, based upon the exercise price of the Warrants, equal to
5% of the exercise price of the Warrants and (iv) a three-year consulting
agreement with the Company providing for an annual fee of $36,000. In
addition, the Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). See "Underwriting."

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

(3) The Company has granted the Underwriters a 45-day option to purchase up to
an additional 180,000 Units solely to cover over-allotments, if any. If this
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Company will be $ ,
$ , and $ , respectively. See "Underwriting."

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

The Units are offered by the several Underwriters named herein on a firm
commitment basis subject to prior sale, when, as and if accepted by them and
subject to certain conditions. The Underwriters reserve the right to withdraw,
cancel or modify this offer and to reject orders in whole or in part. It is
expected that delivery of the Units will be made at the offices of First United
Equities Corporation, 200 Garden City Plaza, Suite 518, Garden City, New York
11530 on or about , 1997.

2
<PAGE>
FIRST UNITED EQUITIES CORPORATION

The date of this Prospectus is , 1997

3
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

NEUROCALC-TM- and ABPI-124 are trademarks of the Company.
Neurestrol-Registered Trademark- is a registered trademark of Endocon, Inc.

4
<PAGE>
PROSPECTUS SUMMARY

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

THE COMPANY

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

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

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

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

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

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Securities Offered by Company..... 1,200,000 Units, each Unit consisting of one share of
Common Stock and a Warrant to purchase one share of
Common Stock. The Common Stock and the Warrants will be
separately transferable immediately following the
offering. See "Description of Securities."

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

Shares of Capital Stock
Outstanding Common Stock:

Prior to this Offering.......... 4,194,635 shares(1)

After this Offering............. 5,394,635 shares(1)

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

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

Proposed Nasdaq SmallCap-SM-
Market Symbols(2)............... ABPI; ABPIW.
</TABLE>

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

(1) Does not include the possible issuance of (i) 600,000 shares of Common Stock
reserved for issuance upon the exercise of options granted or available for
grant under the Company's 1993 Incentive and Non-Qualified Stock Option
Plan; (ii) 90,000 shares reserved for issuance upon the exercise of options
granted or available for grant under the Company's 1996 Director Stock
Option Plan; (iii) 360,000 shares of Common Stock reserved for issuance upon
exercise of certain warrants previously issued by the Company; (iv) 164,464
shares issuable upon exercise of a convertible right to receive royalties;
(v) 1,200,000 shares of Common Stock reserved for issuance upon exercise of
the Warrants to be issued in this offering; (vi) 180,000 Units reserved for
issuance upon exercise of the Underwriters' over-allotment option; and (vii)
120,000 shares of Common Stock reserved for issuance upon exercise of the
Managing Underwriter's Warrants. See "Management;" "Certain Transactions;"
"Description of Securities;" and "Underwriting."

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

4
<PAGE>
SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------
AS
ACTUAL ADJUSTED(1)
---------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 373,645 $ 5,458,645
Working capital....................................................................... 259,739 5,344,739
Total assets.......................................................................... 492,019 5,572,019
Stockholders' equity 265,613 5,345,613
</TABLE>

(1) Adjusted to reflect the sale by the Company of the 1,200,000 Units offered
hereby at an assumed public offering price of $5.25 per Unit. See "Use of
Proceeds," "Capitalization" and "Underwriting."

5
<PAGE>
RISK FACTORS

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

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

HISTORY OF OPERATING LOSSES; FUTURE PROFITABILITY UNCERTAIN

The Company is a development-stage biotechnology company. From its
inception in 1992 through September 30, 1996, the Company incurred losses of
approximately $1.6 million, substantially all of which consisted of product
development and general and administrative expenses. Although the Company has
generated fees from options and licenses pursuant to the terms of certain
licensing agreements it maintains with third parties, it has not generated any
revenues from product sales to date, and there can be no assurance that revenues
from product sales will ever be achieved. Moreover, even if the Company
eventually generates revenues from product sales, the Company nevertheless
expects to incur significant operating losses over the next several years. The
Company's ability to achieve profitable operations in the future will depend in
large part upon completing development of its products, obtaining regulatory
approvals for these products and bringing several of these products to market.
The likelihood of the long-term success of the Company must be considered in
light of the expenses, difficulties and delays frequently encountered in the
development and commercialization of new pharmaceutical products, competitive
factors in the marketplace, as well as the regulatory environment in which the
Company operates. There can be no assurance that the Company will ever achieve
substantial revenues or profitable operations. See "Summary Financial Data;"
"Selected Financial Data;" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

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

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

6
<PAGE>
NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL

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

DEPENDENCE ON STRATEGIC ALLIANCES

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

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

7
<PAGE>

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

UNCERTAIN ABILITY TO PROTECT PROPRIETARY TECHNOLOGY

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

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

There can be no assurance that the Company will develop additional
proprietary products that are patentable, that any patents issued to, or
licensed by, the Company will be valid or enforceable, or that patents issued
to, or licensed by, the Company will afford protection against competitors with
similar technology. An adverse outcome could subject the Company to significant
liabilities to third parties, require disputed rights to be licensed from or to
third parties or require the Company to cease using the technology in dispute.
In addition, there can be no assurance that others will not independently
develop substantially equivalent proprietary information or otherwise obtain
access to the Company's know-how or

8
<PAGE>

that others will not be issued patents that prevent the sale of the Company's
products or require licensing and the payment of significant fees or royalties
by the Company for the pursuit of its business. Moreover, there can be no
assurance that the Company's technology does not infringe upon any valid claims
of patents owned by others. If the Company was found by a court to be infringing
on a patent held by another, the Company would have to discontinue all
activities related to that patented technology or seek a license to use that
patented technology.

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

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

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

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

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

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

9
<PAGE>
COMPETITION

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

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

DEPENDENCE ON THIRD PARTIES FOR CLINICAL TESTING, MANUFACTURING AND MARKETING

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

LACK OF OPERATING EXPERIENCE

To date, the Company has engaged in the development of pharmaceutical
technologies and products through the sponsorship of research programs in
universities. Although members of the Company's management have substantial
experience in biotechnology company operations, the Company has no experience in
conducting research, manufacturing, procuring products in commercial quantities,
or the marketing and sales of pharmaceutical products. In addition, management
of the Company has only limited experience in negotiating and maintaining
strategic relationships, conducting clinical trials and other later-stage phases
of the regulatory approval process and the commercialization of pharmaceutical

10
<PAGE>
products. There can be no assurance that the Company will be able to
successfully engage in any of these activities with respect to any of its
products. In the event the Company decides to establish a commercial-scale
manufacturing facility for its products, the Company will require substantial
additional funds and personnel and will be required to comply with extensive
regulations applicable to this type of facility. There can be no assurance that
the Company will be able to secure funds on acceptable terms, if at all, or will
successfully manufacture or market any product it may develop, either
independently or pursuant to manufacturing or marketing arrangements, if any,
with third parties. See "Business--Manufacturing Plans" and "--Marketing and
Sales Strategy."

DEPENDENCE ON QUALIFIED PERSONNEL

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

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

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

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

DEVELOPMENT OF NEW TECHNOLOGIES AND PRODUCTS

The Company is engaged in the biopharmaceutical field, which is
characterized by extensive research efforts and rapid technological progress.
New developments in molecular cell biology, molecular pharmacology, recombinant
DNA technology and other areas are expected to continue at a rapid pace in both
industry and academia. There can be no assurance that research and discoveries
by others will not render some or all of the Company's programs or products
noncompetitive or obsolete.

11
<PAGE>
Some of the Company's projects involve the attempt to develop new
technologies or to apply existing technologies, several of which are
experimental, to the development of new products. This type of experimentation
is costly, time consuming and prone to produce unsatisfactory results. No
assurance can be given that unforeseen problems will not develop with these
technologies or applications or that commercially feasible products will
ultimately be developed by the Company. Moreover, even when a new technology or
product is successfully developed, the refinement of the new technology or
product and the definition of the clinical applications and limitations of the
new technology or product may take years and require the expenditure of large
sums of money or may prove to be commercially unfeasible.

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

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

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

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

12
<PAGE>
While the Company and certain of the Company's collaborators have
performed initial testing of some of the Company's products, further testing,
including clinical testing, will be required before the Company can obtain
marketing approval from regulatory authorities. The results of initial
preclinical and clinical testing are not necessarily predictive of results that
will be obtained from subsequent or more extensive preclinical and clinical
testing, and there can be no assurance that further trials will be successful.

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

BROAD DISCRETION OF MANAGEMENT TO ALLOCATE OFFERING PROCEEDS

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

UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT

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

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

13
<PAGE>
PRODUCT LIABILITY; RISK OF NO INSURANCE

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

CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers will, in the aggregate,
beneficially own approximately 22.3% of the Company's outstanding Common Stock
following the completion of this offering, assuming no exercise of the Warrants,
the Underwriters' over-allotment option or the Managing Underwriter's Warrant.
These stockholders, if acting together, would have a significant impact on all
matters requiring approval by the stockholders of the Company, including the
election of directors and the approval of mergers or other business combination
transactions. This concentration of ownership could discourage or prevent a
change in control of the Company. See "Principal Stockholders."

POSSIBLE VOLATILITY OF STOCK PRICE

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

NO PUBLIC TRADING MARKET

Prior to this offering, there has been no public market for the Common
Stock and no public market for the Warrants. There can be no assurance that an
active trading market will develop or, if one does develop, that it will be
maintained. The initial public offering price of the Units and the exercise
price of the Warrants were established by negotiations between the Company and
the Managing Underwriter and may not be indicative of prices that will prevail
in the public trading market. See "Underwriting."

14
<PAGE>
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS

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

SHARES ELIGIBLE FOR FUTURE SALE

Sales of Common Stock (including Common Stock issued upon the exercise
of outstanding options and warrants) in the public market after this offering
could materially adversely affect the market price of the Common Stock. These
sales also might make it more difficult for the Company to sell equity
securities or equity-related securities in the future at a time and price that
the Company's management deems acceptable, or at all. Upon the completion of
this offering, the Company will have 5,105,348 shares of Common Stock
outstanding, assuming no exercise of options or warrants after December 19, 1996
and assuming no exercise of the Underwriters' over-allotment option. Of these
outstanding shares of Common Stock, the 1,200,000 shares sold in this offering
as part of the Units will be freely tradeable, without restriction under the
Securities Act, unless purchased by "affiliates" of the Company, as that term is
defined in Rule 144 under the Securities Act. The remaining 3,905,348 shares of
Common Stock held by existing stockholders are "restricted securities" as that
term is defined in Rule 144 under the Securities Act and were issued and sold by
the Company in reliance on exemptions from the registration requirements of the
Securities Act. These shares may be resold in the public market only if
registered or pursuant to an exemption from registration, such as Rule 144 or
Rule 701 under the Securities Act. All officers, directors and certain holders
of Common Stock owning, in the aggregate, shares of Common Stock
have agreed, pursuant to certain lock-up agreements, that they will not offer,
sell, contract to sell, grant any option to sell, pledge, hypothecate or
otherwise dispose of, directly or indirectly, any shares of Common Stock owned
by them, or that could be purchased by them through the exercise of options or
warrants to purchase Common Stock of the Company, for a period of 13 months
after the date of this Prospectus without the prior written consent of the
Managing Underwriter. Upon expiration of the lock-up agreements, approximately
shares of Common Stock held by existing stockholders will be
immediately eligible for resale pursuant to Rule 144, and approximately
shares will be eligible for resale under Rule 144 from time to time
thereafter. The remaining shares held by existing stockholders will
become eligible for resale pursuant to Rule 144 upon the expiration of their
respective two-year holding periods. As of December 19, 1996, shares
were subject to outstanding options and warrants, of which shares
are subject to the lock-up agreements described above. Immediately following the
completion of this offering, 214,285 of the outstanding shares will be entitled
to certain registration rights. The number of shares sold in the public market
could increase if registration rights are exercised. See "Description of
Securities--Registration Rights" and "Shares Eligible for Future Sale."

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

Purchasers of the Units will be able to exercise the Warrants included
therein only if a current prospectus relating to the securities underlying the
Warrants is then in effect under the Securities Act and if the securities are
qualified for sale or exempt from qualification under the applicable securities
or "blue sky" laws of the states in which the various holders of the Warrants
then reside. The value of the Warrants may be greatly reduced if a current
prospectus covering the securities issuable upon the exercise of the Warrants is
not kept effective or if the securities are not qualified or exempt from
qualification in the states

15
<PAGE>
in which the holders of the Warrants then reside. There can be no assurance that
the Company will be able to keep effective any prospectus or obtain any
qualifications or exemptions. See "Description of Securities--The Warrants
Offered."

In addition, the Warrants are subject to redemption by the Company at
$0.25 per Warrant, commencing one year from the date of this Prospectus, on at
least 30 days' prior written notice if the average of the closing bid prices of
the Common Stock for 20 consecutive business days ending within 10 business days
of the date on which the notice of redemption is given equals or exceeds $
per share [200% of the initial public offering price of the Common Stock]. If
the Warrants are redeemed, holders of Warrants will lose their right to exercise
the Warrants, except during the 30-day notice of redemption period. Upon the
receipt of a notice of redemption of the Warrants, the holders thereof would be
required to: exercise the Warrants and pay the exercise price at a time when it
may be disadvantageous for them to do so; sell the Warrants at the then market
price, if any, when they might otherwise wish to hold the Warrants; or accept
the redemption price, which is likely to be substantially less than the market
value of the Warrants at the time of redemption. See "Description of
Securities--The Warrants Offered."

DILUTION

Investors acquiring shares of Common Stock included within the Units
offered hereby will incur immediate and substantial net tangible book value
dilution of $4.20. To the extent that currently outstanding options and warrants
to purchase the Company's securities are exercised, there will be further
dilution. See "Dilution."

POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ STOCK MARKET

In order to qualify for initial listing on the Nasdaq SmallCap-SM-
Market, a company must, among other requirements, have at least $4,000,000 in
total assets and a minimum bid price for its common stock of $3.00 per share.
While it is presently expected that the Company's Common Stock and Warrants will
be eligible for initial listing on the Nasdaq SmallCap-SM- Market upon the
completion of this offering, there can be no assurance that this will actually
occur. In addition, even if the Company qualifies for initial listing on the
Nasdaq SmallCap-SM- Market, there can be no assurance that the Company will meet
the criteria for continued listing of securities on the Nasdaq SmallCap-SM-
Market adopted by the Securities and Exchange Commission (the "Commission"). As
currently in effect, these continued listing criteria include a minimum of
$2,000,000 in total assets and a minimum bid price of $1.00 per share of common
stock. If an issuer does not meet the $1.00 minimum bid price standard, it may,
however, remain on the Nasdaq SmallCap-SM- Market if the market value of its
public float is at least $1,000,000 and the issuer has capital surplus of at
least $2,000,000. The Nasdaq Stock Market has adopted heightened standards for
continued listing on the Nasdaq SmallCap-SM- Market which, if approved by the
Commission, might make continued listing of the Company's Common Stock more
difficult. If the Company became unable to meet the continued listing criteria
of the Nasdaq SmallCap-SM- Market because of continued operating losses or
otherwise and became delisted therefrom, trading, if any, in the Common Stock
and the Warrants would thereafter be conducted in the over-the-counter market in
the so-called "pink sheets" of the NASD's "Electronic Bulletin Board." As a
result, an investor may find it more difficult to dispose of the Company's
securities.

RISK OF LOW-PRICE; "PENNY STOCK" REGULATIONS

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

16
<PAGE>
purchaser and have received the purchaser's written consent to the transaction
prior to sale. Consequently, the rule may affect the ability and/or willingness
of broker-dealers to sell the Company's securities and may consequently affect
the ability of purchasers in this offering to sell any of the securities
acquired in this offering in the secondary market.

The Commission has also adopted regulations which define a "penny stock"
to be any equity security that has a market price (as therein defined) of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. Unless exempt, the rules require the delivery,
prior to any transactions in a penny stock, of a disclosure schedule prepared by
the Commission relating to the penny stock market. Disclosure also has to be
made about commissions payable to both the broker-dealer and the registered
representative and about current quotations for the securities. Finally, monthly
statements have to be sent, disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
The foregoing penny stock restrictions will not apply to the Company's
securities if those securities are listed on the Nasdaq SmallCap-SM- Market and
have certain price and volume information provided on a current and continuing
basis or if the Company meets certain minimum net tangible assets or average
revenue criteria. There can be no assurance that the Company's securities will
qualify for exemption from these restrictions. In any event, even if the Company
were exempt from these restrictions, it would remain subject to Section 15(b)(6)
of the Exchange Act, which gives the Commission the authority to prohibit any
person that is engaged in unlawful conduct while participating in a distribution
of penny stock from associating with a broker-dealer or participating in a
distribution of penny stock, if the Commission finds that a restriction would be
in the public interest. If the Company's securities were subject to the rules on
penny stocks, the prices of and market liquidity for the Company's securities
would be severely adversely affected.

ABSENCE OF DIVIDENDS

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

INEXPERIENCE OF MANAGING UNDERWRITER

The Managing Underwriter, which commenced operations in 1994, has acted
as a managing underwriter in only two public offerings of securities. The
Managing Underwriter's lack of experience may have an adverse impact on its
ability to market the Common Stock offered hereby as well as the development and
maintenance of a trading market for the Company's Common Stock following this
offering. The Managing Underwriter intends to make a market in the Company's
Common Stock. The Managing Underwriter's inexperience may result in the
potential inability of the Managing Underwriter to utilize correctly
over-allotment, stabilization and market maintenance strategies that more
experienced underwriters employ to assist in maintaining orderly trading
markets. This may adversely affect the proposed public offering of the Units and
the ability of purchasers in the offering to resell any Units and/or any
component thereof. See "Underwriting."

17
<PAGE>
USE OF PROCEEDS

The net proceeds from the sale of the Units offered hereby are estimated
to be $5,080,000 ($5,902,150 if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $5.25 per Unit,
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses and assuming no exercise of the Warrants.

The Company's management expects to use approximately $3.1 million of
the net proceeds of this offering to fund future development of products, of
which approximately $1.9 million will be used for sponsored research,
approximately $900,000 will be used to establish a small laboratory facility and
approximately $300,000 will be used to hire and retain scientific personnel for
approximately the next 24 months. The balance of the net proceeds of this
offering will be used for working capital and general corporate purposes. Where
the Company's management believes appropriate, proceeds of this offering may
also be used to acquire products or technologies that complement the Company's
existing business, although there are no present understandings, agreements or
commitments with respect to any acquisitions. The amount and the timing of the
expenditures will depend on numerous factors, including the progress of the
Company's research and development programs. The amounts actually expended on
any particular project may vary significantly from the Company's current plans,
particularly given the Company's early stage of development and the uncertainty
of the drug development process.

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

DIVIDEND POLICY

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

18
<PAGE>
CAPITALIZATION

The following table sets forth, as of September 30, 1996, (i) the actual
capitalization of the Company and (ii) capitalization of the Company, as
adjusted to reflect the sale of the 1,200,000 Units offered hereby, after
deducting the underwriting discount and offering expenses, at an assumed initial
public offering price of $5.25 per Unit. This table should be read in
conjunction with the financial statements, related notes and other financial
information included herein.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------
ACTUAL AS ADJUSTED(1)
------------- --------------
<S> <C> <C>
Notes payable...................................................................... $ 73,425 $ 73,425
Stockholders' equity:
Preferred Stock - $0.01 par value; 1,000,000 shares authorized, no shares issued
and outstanding................................................................ -- --
Common Stock - $0.02 par value; 20,000,000 shares authorized, 3,905,348 shares
issued, actual; 5,105,348 shares issued, as adjusted........................... 78,107 102,107
Additional paid-in capital....................................................... 1,782,879 6,838,879
Deficit accumulated during the development stage................................... (1,595,373) (1,595,373)
------------- --------------
Total stockholders' equity....................................................... 265,613 5,345,613
------------- --------------
Total capitalization............................................................. $ 339,038 $ 5,419,038
------------- --------------
------------- --------------
</TABLE>

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

(1) Does not include (a) Units issuable upon the exercise of the Underwriters'
over-allotment option, (b) shares issuable upon exercise of the Managing
Underwriter's Warrants, or (c) 570,000 shares reserved for issuance upon the
exercise of options and warrants outstanding as of September 30, 1996 having
a weighted average exercise price of $0.96 per share. See "Management--Stock
Option Plans"; "Description of Securities--Other Warrants and Convertible
Notes."

19
<PAGE>
DILUTION

The net tangible book value of the Company as of September 30, 1996 was
$259,739 or approximately $0.07 per share. Net tangible book value per share
represents the total tangible assets of the Company, less total liabilities,
divided by 3,905,348 shares of Common Stock outstanding before the completion of
this offering. Assuming the receipt by the Company of the net proceeds from the
sale of 1,200,000 Units offered hereby at an assumed initial public offering
price of $5.25 per Unit, the net tangible book value of the Company as of
September 30, 1996 would have been $5,344,739, or $1.05 per share. This
represents an immediate increase in the net tangible book value of $0.98 per
share to existing stockholders of the Company and an immediate dilution of $4.20
per share to new investors purchasing Units in this offering. The following
table illustrates the per share dilution to be incurred by new investors as of
September 30, 1996:

<TABLE>
<S> <C> <C>
Assumed initial public offering price.................................... $ 5.25
Net tangible book value per share at September 30, 1996....... 0.07
Increase per share attributable to new investors.............. 0.98
---------
Net tangible book value per share after the offering..................... 1.05
---------
Dilution per share to new investors...................................... $ 4.20
---------
---------
</TABLE>

The following table sets forth, as of September 30, 1996, the difference
between the existing stockholders and the new investors with respect to the
number of shares of Common Stock acquired from the Company, the total
consideration paid and the average price per share, assuming an initial public
offering price of $5.25 per Unit:

<TABLE>
<CAPTION>
SHARES PURCHASED CASH CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders............................. 3,905,348 76.5% $ 1,841,000 22.6% $ .47
New Investors..................................... 1,200,000 23.5 6,300,000 77.4 5.25
---------- ----- ------------ -----
Total......................................... 5,105,348 100.0% $ 8,141,000 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>

The above information assumes that $0.25 of the Unit price is
attributable to the Warrant and excludes (a) Units issuable upon the exercise of
the Underwriters' over-allotment option, (b) shares of Common Stock issuable
upon exercise of the Managing Underwriter's Warrants and (c) an aggregate of
570,000 shares of Common Stock issuable upon the conversion of convertible notes
and the exercise of options and warrants outstanding as of September 30, 1996
with a weighted average conversion/exercise price of $0.96 per share. To the
extent that rights to acquire Common Stock of the Company are exercised, there
will be further dilution to new investors. See "Management--Stock Option Plans,"
"Description of Securities--The Warrants Offered," "--Other Warrants and
Convertible Notes," and Note E of Notes to Financial Statements.

20
<PAGE>
SELECTED FINANCIAL DATA

The data set forth below with respect to the balance sheet as of
December 31, 1995 and the related statement of operations for the two years
ended December 31, 1995 have been derived from the Company's audited financial
statements. The selected data presented below at September 30, 1996 and for the
nine months ended September 30, 1994 and 1995 have been derived from, and are
qualified by reference to, the Company's unaudited financial statements also
appearing herein. The unaudited financial statements, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim period. Operating results for the nine months ended September 30, 1996
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1996. The data should be read in conjunction
with the Financial Statements and the notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this Prospectus. The historical results are not necessarily
indicative of the results of operations to be expected in the future.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------------
1995 1994 1996 1995
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Licensing and option revenue............................. $ -- $ -- $ 170,000 $ --
Interest income.......................................... 2,535 3,954 7,301 --
----------- ----------- ----------- -----------
Total revenue.......................................... 2,535 3,954 177,301 --
Expenses:
Research and development................................. 131,842 199,654 100,716 94,966
General and administrative............................... 255,592 323,613 268,819 187,462
Amortization expense..................................... 1,049 1,049 787 787
Interest expense......................................... 31,201 2,645 29,891 22,691
----------- ----------- ----------- -----------
Total expenses......................................... 419,684 526,961 400,213 305,906
----------- ----------- ----------- -----------
Net loss................................................. $ (417,149) $ (523,007) $ (222,912) $ (305,906)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net loss per share (1)................................... $ (.11) $ (.14) $ (.05) $ (.08)
Weighed average number of shares
outstanding (1)........................................ 3,784,623 3,660,514 4,185,555 3,649,496
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
DECEMBER 31, --------------------------
1995 ACTUAL AS ADJUSTED(2)
------------ ---------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents................................................ $ 246,721 $ 373,645 $ 5,458,645
Working capital...................................................... 34,798 259,739 5,344,739
Total assets......................................................... 248,382 492,019 5,572,019
Notes payable........................................................ 204,400 73,425 73,425
Total stockholders' equity (deficit)................................. $ (167,941) $ 265,613 $ 5,345,613
</TABLE>

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

(1) In each case, gives effect to a 3 1/3 to 1 reverse stock split effective
December 20, 1996.

(2) Gives effect to the sale of 1,200,000 Units offered by the Company hereby,
after deducting the underwriting discount and offering expenses, at an
assumed initial public offering price of $5.25 per Unit.

21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

OVERVIEW

Since its founding in July 1992, the Company has been engaged in the
development of pharmaceutical and diagnostic products for age-related
neurodegenerative diseases. To date, the Company has not had any revenue from
the sale of products and does not expect to generate any revenue from product
sales in the foreseeable future. The Company's accumulated deficit was
$1,595,373 as of September 30, 1996.

The Company has financed its operations through the sale of Common Stock
and Convertible Notes and from option and license fees received from Athena
Neurosciences ("Athena") and Cephalon, Inc. ("Cephalon"). The Company has raised
a total of $1,615,000 from the sale of Common Stock in three private placement
offerings resulting in gross proceeds as follows: $640,000 in 1992, $475,000 in
1995 and $500,000 through the first nine months of 1996. The Company issued
Convertible Notes in 1994 and 1995, which provided gross proceeds to the Company
of $210,000. Through September 30, 1996, certain of the Company's strategic
partners made aggregate payments to the Company totaling $170,000 under option
and license arrangements. All such revenues recorded are non-refundable and are
not contingent upon future performance or other contractual terms. As of
September 30, 1996, the Company had incurred a cumulative net loss of $1,595,373
and expects to incur substantial additional operational losses in the future.

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

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

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

In June 1994, the Company entered into an agreement with Endocon to
co-develop certain estrogens within subcutaneous drug delivery vehicles. As
currently in effect, the Endocon agreement focuses on the development of
17b-estradiol in a subcutaneous drug delivery vehicle for the treatment of
Alzheimer's disease (NEURESTROL). Neither the Company nor Endocon is obligated
to pay the other for any rights to intellectual property underlying their
agreement or for development of the product. The parties intend to seek a
strategic partner for the commercialization and development of NEURESTROL. Any
future proceeds to the parties relating to NEURESTROL will be allocated 60% to
the Company and 40% to Endocon. Robert J. Leonard, a member of the Board of
Directors, Vice President and shareholder of the Company, is the acting Chief
Executive Officer of Endocon.

22
<PAGE>
RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995

The Company had licensing and option revenues of $170,000 in the nine
months ended September 30, 1996 as a result of the Company's agreement with
Athena and a payment from Cephalon and no revenues during the corresponding
period for 1995. Total expenses were $400,213 in the nine months ended September
30, 1996, compared to $305,906 for the nine months ended September 30, 1995. The
increase in operating expenses was principally due to an increase in general and
administrative expenses of $81,357 or 43.4%, resulting primarily from increases
in patent prosecution expenses associated with the filing of several patent
applications and increased consulting costs.

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

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

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations since inception primarily through
private placements of Common Stock and Convertible Notes. From its inception
through September 30, 1996, the Company raised approximately $1,825,000 in total
proceeds from these private placements.

On September 30, 1996, the Company's cash and cash equivalents totaled
$373,645. This excludes an additional $1.0 million received by the Company in
December 1996 in connection with the transactions described below.

In December 1996, Neuroscience Partners Limited Partnership ("NPLP"), a
limited partnership of which MDS Associes--Neuroscience Inc. ("MDS") is the
general partner, purchased 214,287 shares of the Company's Common Stock,
representing approximately 5.1% of the Company's outstanding Common Stock at
December 31, 1996, for $500,000.

Also in December 1996, the Company entered into a Royalty Purchase
Agreement with NPLP pursuant to which NPLP paid the Company an additional
$500,000 in exchange for the issuance by the Company of warrants to purchase
Common Stock and the agreement by the Company to pay NPLP royalties based upon a
certain percentage of the revenues earned from sales of, and license fees and
other revenues received by the Company in connection with, estrogen products in
certain applications.

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

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

The Company's future cash requirements will depend on many factors,
including the speed and progress of the Company's product development programs,
the scope and results of clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patents, competing technological and market developments and the cost
of product commercialization. For the foreseeable future, the Company's cash
requirements will exceed its revenues. The Company intends to seek additional
funding through agreements with suitable corporate collaborators and through
public or private financing. There are no assurances that strategic alliances,
or any public or private financing, will be

23
<PAGE>
available on acceptable terms, if at all. If adequate funds are not available,
the Company may be required to delay, reduce the scope of, or eliminate one or
more of its product development programs.

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

24
<PAGE>
BUSINESS

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

OVERVIEW

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

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

25
<PAGE>
BACKGROUND

INTRODUCTION

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

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

BRAIN CELL LOSS DURING AGING

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

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

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

26
<PAGE>
BRAIN CELL LOSS AND OTHER DEGENERATIVE CHANGES
THAT OCCUR IN AGING AND CERTAIN DISEASES

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PARKINSON'S
BRAIN REGION NORMAL CHANGES DURING AGING ALZHEIMER'S DISEASE DISEASE
- --------------- ------------------------------------------ -------------------- ----------------
Hippocampus and -Loss of neurons in subiculum; -Extensive neuron
Amygdala -Some other loss neuron or shrinkage; degeneration/death;
-Few amyloid plaques; -Extensive plaques
-Few neurofibrillary tangles; and tangles;

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

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

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

Locus Coeruleus -Significant but gradual loss of neurons -Loss of neurons in -Loss of
with some cases neurons;
aging -Lewy bodies

Note: See glossary for technical definitions.
</TABLE>

HORMONAL CHANGES DURING AGING

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

ESTROGEN AND PREVENTION OF ALZHEIMER'S DISEASE

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

A separate clinical study, published in 1996 in the medical journal THE
LANCET, analyzed a group of 1,124 women over a five-year period. In each year of
the study, approximately 3% of the women who

27
<PAGE>
took estrogen supplements developed Alzheimer's disease, while approximately 8%
of the women who did not take the hormone developed the disease. Furthermore,
the women who took estrogen and did develop Alzheimer's disease developed it
later than women who did not take estrogen. The graph below, excerpted from the
article in THE LANCET, shows the significant difference in the age of onset of
Alzheimer's disease between women taking estrogen compared to women who did not
take estrogen. Among 90 year olds, for example, approximately 50% of the women
who never took estrogen had some form of Alzheimer's disease whereas only
approximately 10% of women using estrogen for more than one year had Alzheimer's
disease. The researchers concluded that estrogen use leads to a reduction in the
incidence and a delay in the onset of Alzheimer's disease. Management expects
that the Company's estrogen-based products will also reduce the incidence and
delay the onset of Alzheimer's disease.

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

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

BUSINESS STRATEGY

STRATEGIC FOCUS ON HORMONES AND NEUROPROTECTION

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

28
<PAGE>
ACQUISITION AND LICENSING OF INTELLECTUAL PROPERTY

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

PRODUCT COMMERCIALIZATION THROUGH STRATEGIC ALLIANCES

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

PRODUCTS IN DEVELOPMENT

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

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

29
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
PRODUCTS UNDER DEVELOPMENT

<TABLE>
<CAPTION>
STRATEGIC PARTNERSHIP
PROGRAM/LEAD(1) ------------------------------------------------
COMPOUND DISEASE TARGET DEVELOPMENT STATUS(2) RIGHT TO COMMERCIALIZE RELATIONSHIP
- ----------------------- ------------------ ---------------------- ------------------------ ----------------------

<S> <C> <C> <C> <C>
ESTROGEN COMPOUNDS

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

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

CALCITRIOL-RELATED
COMPOUNDS

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

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

OTHER NEUROSTEROIDS -Chronic Research Apollo To be determined(10)
neurodegenerative
diseases
-Acute
neurodegenerative
diseases

HORMONE RESPONSIVENESS -Determination of Clinical testing(8) Apollo To be determined(10)
DIAGNOSTIC responsiveness
</TABLE>

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

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

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

30
<PAGE>

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

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

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

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

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

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

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

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

31
<PAGE>
The Company's product candidates are hormones or compounds similar in
structure to known hormones, including estrogen, as well as compounds based on
vitamin D, which are able to penetrate the blood-brain barrier due to their
physical characteristics. The blood-brain barrier is a physical structure formed
by a tight network of cells which separates the brain from the circulatory
system and which restricts the passage of most molecules into the brain.
Normally, access to the brain occurs only through the circulation of blood.
Large proteins, such as nerve growth factor and other neurotrophic factors,
cannot gain access through the blood-brain barrier on their own. While the
blood-brain barrier serves to protect the brain from being exposed to
potentially harmful compounds, it makes delivery of pharmaceutical drugs
extremely difficult, requiring either a short-term breakdown of the barrier, the
physical placement of a shunt through the skull for the direct delivery of drugs
or the use of a chemical carrier system. These procedures are difficult to
implement and can be risky or invasive. Inaccessibility of the brain due to the
blood-brain barrier has greatly limited drug development for the treatment of
diseases of the central nervous system. The Company's product candidates are
expected to diffuse to the brain through the blood-brain barrier.

ESTROGEN COMPOUNDS

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

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

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

32
<PAGE>
dosing studies on female volunteers at the National Institutes of Health.
NEURESTROL is the subject of intellectual property licensed to the Company on
the use of estrogens for neuroprotection and numerous Endocon patents related to
the proprietary delivery system. See "--Intellectual Property Rights."

CALCITRIOL-RELATED COMPOUNDS

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

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

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

ADDITIONAL COMPOUNDS IN DEVELOPMENT

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

HORMONE RESPONSIVENESS DIAGNOSTIC

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

33
<PAGE>
The Company is developing a Hormone Responsiveness Diagnostic test, a
proprietary diagnostic blood test that predicts how well patients will respond
to hormone therapy. To date, clinical evaluation of the test has been conducted
with approximately thirty people of both sexes and of various ages. The Company
plans to expand this testing significantly. A United States patent has recently
been issued on this diagnostic test and has been licensed to the Company on an
exclusive basis. Management expects that information derived from this
diagnostic test will aid clinicians in designing rational long-term hormonal
treatment protocols.

STRATEGIC ALLIANCES AND LICENSES

ATHENA NEUROSCIENCES, INC.

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

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

Athena has previously granted to Eli Lilly and Company ("Lilly") an
option to acquire exclusive, worldwide licenses from Athena to certain compounds
which are the subject of their research collaboration. Certain of the compounds
licensed to Athena under the Athena Agreement may fall within this definition.
Although the Athena-Lilly collaboration expired as of January 17, 1997, Lilly's
option rights will continue until April 1998.

ENDOCON, INC.

In June 1994, the Company entered into an agreement with Endocon to
co-develop certain estrogens within subcutaneous drug delivery vehicles. As
currently in effect, the Endocon agreement focuses on the development of
17b-estradiol within a subcutaneous drug delivery vehicle for the treatment of
Alzheimer's disease (NEURESTROL). Neither the Company nor Endocon is obligated
to pay the other for any rights to intellectual property underlying their
agreement or for development of the product. The parties intend to seek a
strategic partner for the commercialization and development of NEURESTROL. All
proceeds to the parties relating to NEURESTROL will be allocated 60% to the
Company and 40% to Endocon.

The Company and Endocon each have the right to terminate the agreement
upon 60 days' notice to the other party, provided that the terminating party
will grant an exclusive, fully-paid license to the non-terminating party to
continue to develop and market NEURESTROL independently.

Robert J. Leonard, a member of the Board of Directors, Vice President
and shareholder of the Company, is the acting Chief Executive Officer of
Endocon.

34
<PAGE>
CEPHALON, INC.

In November 1996, the Company entered into a Nonexclusive Sublicense
Agreement with Cephalon (the "Cephalon Agreement") in which certain rights to
its intellectual property in the vitamin-D area (see "--Calcitriol-Related
Products") for neuroprotection were licensed on a non-exclusive basis to
Cephalon. Under the Cephalon Agreement, the Company will receive annual
maintenance payments, which escalate upon the achievement of certain milestones,
and a royalty based on product sales including a minimum royalty.

THERAPEUTIC TARGET MARKETS

THE AGING POPULATION AND DISEASE MANAGEMENT

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

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

ALZHEIMER'S DISEASE

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

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

PARKINSON'S DISEASE

Parkinson's disease is associated with trembling of the arms and legs,
stiffness and rigidity of muscles and slowness of movement. These symptoms are
caused by a chemical imbalance in the brain caused by the loss of key brain
cells. Parkinson's disease is characterized by neuron loss in the substantia

35
<PAGE>
nigra and the locus coeruleus regions of the brain. Parkinson's disease can
cause depletion of 70% or more of the cells in these regions.

Approximately 10% of patients with Parkinson's disease also experience
dementia. The American Academy of Neurology estimates that there are
approximately 1,000,000 persons afflicted with Parkinson's disease in the United
States. The total direct health care costs in the United States have been
estimated to be $340 million annually. Although there are a number of
pharmaceuticals in use today to treat Parkinson's disease, their effects are
only temporary and none can treat the underlying neurodegeneration associated
with the disease.

STROKE

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

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

ACUTE NEUROLOGICAL INJURY

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

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

AGE-ASSOCIATED MEMORY IMPAIRMENT

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

36
<PAGE>
INTELLECTUAL PROPERTY RIGHTS

The Company is the exclusive licensee of two patents issued in the
United States, as well as a number of patent applications that are currently
pending in various countries. The Company is also the co-owner of two patent
applications which are pending. In addition, the Endocon drug delivery
technology used in NEURESTROL and licensed to the Company is the subject of 12
patents and one pending application. The Company also has exclusive options to
acquire additional licenses from the University of Florida School of Medicine
and the University of Kentucky School of Medicine related to research programs
which have been sponsored by the Company. The Company has filed and will
continue to file patent applications in the United States and in foreign
countries throughout the world in order to protect intellectual property of its
own and intellectual property which it has licensed. The Company intends to
maintain an aggressive strategy for filing, maintaining and prosecuting its
intellectual property. The Company's success in large part will depend on its
ability to obtain patent protection in various jurisdictions relating to the
technologies, processes and products it is developing and may develop in the
future. The Company also intends to rely on trade secrets to protect certain
other technologies (e.g., animal models for aging) which may be used in
discovering and evaluating new drugs which could become marketable products. To
protect its inventions, trade secrets and other proprietary information, the
Company has confidentiality agreements in place with its staff, consultants and
scientific and clinical advisors. See "Risk Factors."

ESTROGEN COMPOUNDS

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

CALCITRIOL-RELATED COMPOUNDS

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

HORMONE RESPONSIVENESS DIAGNOSTIC

In September 1994, the Company was granted an exclusive worldwide
license from the UFRFI to certain technology developed at the University of
Florida School of Medicine related to a method of diagnosing hormonal
responsiveness using an IN VITRO sample. In consideration of the grant of the
license, the Company has committed to pay a royalty based on product sales. A
U.S. patent was issued on this

37
<PAGE>
technology in August 1996 and claims a method of diagnosis as well as the
diagnostic kit itself. Corresponding patent applications are pending in the
United States and several other countries throughout the world.

COMPETITION

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

MANUFACTURING PLANS

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

At this time, the Company does not intend to build a fully-integrated
manufacturing operation to support production of the Company's products. In
manufacturing pharmaceutical products a company must comply with cGMPs that are
promulgated and enforced by the U.S. Food and Drug Administration as set forth
under Title 25 of the Code of Federal Regulations. The investment that would be
required to develop and validate a commercial manufacturing operation for a new
drug would be significant. The

38
<PAGE>
Company may consider, however, retaining the rights to certain key proprietary
processes used in the production of precursor molecules which would be
indispensable to the manufacturing of the final formulation. In that case, a
manufacturing revenue stream may be achievable without requiring the magnitude
of capital investment described above. There can be no assurance that the
Company will be able to develop necessary key processes or that the practice of
key processes would be cost effective.

MARKETING AND SALES STRATEGY

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

GOVERNMENT REGULATIONS

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

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

Prior to testing products in humans, a rigorous series of preclinical
studies must be performed on animals in order to assess the safety of potential
products. After testing on animals, an IND must be filed with the FDA to obtain
authorization for human testing. Unless the FDA objects, the IND becomes
effective 30 days after submission. Extensive clinical testing must then be
undertaken to demonstrate

39
<PAGE>
optimal use, safety and efficacy of each product in humans. Human clinical
trials are typically conducted in a three-step process. In Phase I clinical
trials, the potential product is tested on a small number of healthy human
subjects to determine the safety, dosage tolerance, pattern of drug
distribution, pharmacokinetic properties and metabolism. In Phase II, clinical
trials are conducted with groups of patients afflicted with a specific disease
or condition in order to determine preliminary efficacy and optimal dosages and
to identify potential adverse effects. In Phase III, large-scale, multi-center,
comparative trials are conducted in order to provide controlled and adequate
demonstration of safety and efficacy. The FDA reviews the clinical plans and the
results of trials, and can discontinue the trials at any time for any of a
number of reasons. Each clinical trial is conducted under the auspices of an
Institutional Review Board ("IRB"). The IRB considers, among other things,
ethical factors, the safety and welfare of human subjects, and the adequacy of
the informed consent form. When completed, results from the preclinical and
clinical trials are submitted to the FDA as a NDA for approval to commence
commercial sales. The approval process is affected by several factors, including
the severity of the disease, the availability of alternative treatments, and the
risks and benefits demonstrated in clinical trials. Following an extensive
review, the FDA may grant product marketing approval, request additional
information (including additional studies) or deny the application if the FDA
deems that it does not satisfy the regulatory approval criteria. There can be no
assurance that approvals will be granted on a timely basis, if at all. Similar
procedures are in place in countries outside the United States for product
approvals in those countries. Even if new drugs are approved in a foreign
country, they may not be exported for commercial sale until either FDA approval
for sale in the United States or FDA approval of an export application has been
obtained.

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

FACILITIES

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

EMPLOYEES

As of December 19, 1996, the Company had three employees. Dr. Katherine
Gordon is employed by the Company as President and Chief Executive Officer.
Robert J. Leonard is employed by the Company as Vice President of Business
Development. John J. Curry is Vice President of Finance and Chief Financial
Officer. Each of the Company's employees has entered into confidentiality
agreements with the Company. See "Risk Factors--Uncertain Ability to Protect
Proprietary Technology."

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings.

40
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

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

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- --------------------------------------------------------------------
<S> <C> <C>
Katherine Gordon, Ph.D. .............. 42 President and Chief Executive Officer; Director

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

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

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

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

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

George W. Masters..................... 56 Director
</TABLE>

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

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

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

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

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

41
<PAGE>

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

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

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

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

SCIENTIFIC AND CLINICAL ADVISORS

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

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

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

42
<PAGE>
Florida since that time. He is also a professor of pharmacology and therapeutics
in the College of Medicine, University of Florida.

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

EMPLOYMENT AGREEMENTS, EXECUTIVE COMPENSATION AND AGREEMENTS WITH DIRECTORS

The Company has entered into an employment agreement with Dr. Katherine
Gordon under which the Company has agreed to employ Dr. Gordon as the Company's
President and Chief Executive Officer through a term ending in November 1998.
The agreement provides for automatic renewal for additional two-year periods
thereafter until unless party gives 90 days' notice of its intent not to renew.
The Board of Directors determines Dr. Gordon's annual salary, currently
$115,000, and Dr. Gordon is also eligible for an annual bonus at the Board's
discretion, based upon achievement of established performance criteria. If Dr.
Gordon is terminated by the Company without cause, she will be entitled to
continue to receive her salary and health and other insurance benefits for a
period of 12 additional months.

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

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

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

BOARD COMMITTEES

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

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

1993 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN

In June 1994, the Company's stockholders approved the Company's 1993
Incentive and Non-Qualified Stock Option Plan (the "1993 Option Plan"). The 1993
Option Plan currently permits the granting of options to purchase an aggregate
of 600,000 shares of the Company's Common Stock to key

43
<PAGE>
employees, consultants and directors of the Company or any parent or subsidiary
of the Company. Options granted under the 1993 Option Plan may be either
incentive stock options ("ISOs") or non-qualified stock options ("NSOs"). ISOs
may only be granted to management and key employees.

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

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

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

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

1996 DIRECTOR STOCK OPTION PLAN

All of the directors who are not employees of the Company (the "Eligible
Directors"), except Mr. Michael J. Callaghan, are currently eligible to
participate in the Company's 1996 Director Stock Option Plan (the "Director
Plan"). The Director Plan currently permits the granting of options to purchase
an aggregate of 90,000 shares of the Company's Common Stock. Under the Director
Plan, options to purchase 9,000 shares of Common Stock are automatically granted
to each participating Eligible Director on the date of the annual meeting of the
stockholders of the Company in every third year (a "Grant Year"). In addition,
participating Eligible Directors that are initially elected to the Board other
than at an annual meeting in a Grant Year are automatically granted options to
purchase 3,000 shares of Common Stock for each year, or portion thereof, between
the date of such Eligible Director's election and the date of the next annual
meeting in a Grant Year. Options become exercisable with respect to 3,000 shares
on the date of grant and on the date of each annual meeting of stockholders
thereafter, so long as the optionee is then a director of the Company. The
options have a term of ten years and currently have an exercise price, payable
in cash or shares of Common Stock, equal to the fair market value of the Common
Stock, as determined by the Board of Directors. After completion of the
offering, the last sale price for the

44
<PAGE>
Common Stock on the business day immediately preceding the date of grant, as
reported by Nasdaq, shall be the exercise price.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

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

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SHARES
--------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- ------------------------------------------------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Katherine Gordon, Ph.D. ............................. $ 115,000(1) $ 25,000(2) 135,000 --
President and Chief Executive Officer
</TABLE>

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

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

(2) The entire portion of Dr. Gordon's bonus was accrued and not paid in 1995
with the agreement of Dr. Gordon.

OPTION GRANTS

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

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
SHARES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM(3)
OPTIONS TO EMPLOYEES IN EXERCISE OR EXPIRATION --------------------
NAME GRANTED FISCAL 1995 BASE PRICE DATE 5% 10%
- ------------------------------------------- ----------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Katherine Gordon, Ph.D. ................... 75,000 45.5% $ 0.83 11/29/05 $ 39,149 $ 99,210
</TABLE>

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

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

OPTION EXERCISES AND FISCAL YEAR-END VALUES.

There were no option exercises during the fiscal year ended December 31,
1995.

45
<PAGE>
CERTAIN TRANSACTIONS

TRANSACTION WITH NPLP

In December 1996, Neuroscience Partners Limited Partnership ("NPLP"), a
limited partnership of which MDS Associes--Neuroscience Inc. ("MDS") is the
general partner, invested $500,000 in the Company in exchange for 214,287 shares
of Common Stock on the same terms as the other purchasers of Common Stock in the
Company's most recent private placement financing.

Also in December 1996, the Company entered into a Royalty Purchase
Agreement with NPLP, pursuant to which NPLP agreed to provide an additional
$500,000 (the "NPLP Development Financing") to the Company. In exchange for the
NPLP Development Financing, the Company is obligated to pay NPLP royalties based
upon a certain percentage of revenues earned from sales of, and license fees and
other revenues received by the Company in connection with, any products that
relate to the use of estrogen in the treatment of chronic neurodegenerative
diseases. The Company's obligations to pay royalties cease when royalty payments
reach certain aggregate amounts. In connection with the NPLP Development
Financing, NPLP received (i) warrants to purchase 105,000 shares of Common Stock
at an exercise price of $2.33 per share and (ii) warrants to purchase 45,000
shares of Common Stock at an exercise price of $2.92 per share. All or any
portion (not less than $150,000) of the Company's future obligation to pay
royalties may be converted at any time at the option of MDS into shares of
Common Stock at a conversion price equal to (i) with respect to that portion of
such royalties as is equal to up to 50% of the amount of the NPLP Development
Financing, the lesser of (a) $2.92 and (b) the price per share of the Common
Stock reflected in the Company's most recent financing prior to any conversion
and (ii) with respect to that portion of such royalties as is equal to up to 50%
of the amount of the NPLP Development Financing, the lesser of (a) $3.50 and (b)
the price per share of the Common Stock reflected in the Company's most recent
financing prior to any conversion. If NPLP were to exercise its conversion right
in full, NPLP would beneficially own 378,751 shares of the Company's Common
Stock (or approximately 9.8% of the Common Stock outstanding). See "Principal
Stockholders."

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

AGREEMENT WITH ENDOCON

In June 1994, the Company entered into an agreement with Endocon to
co-develop certain estrogens within subcutaneous drug delivery vehicles. As
currently in effect, the Endocon agreement focuses on the development of
17b-estradiol within a subcutaneous drug delivery vehicle for the treatment of
Alzheimer's disease (NEURESTROL). Neither the Company nor Endocon is obligated
to pay the other for any rights to intellectual property underlying their
agreement or for development of the product. The parties intend to seek a
strategic partner for the commercialization and development of NEURESTROL. All
proceeds to the parties relating to NEURESTROL will be allocated 60% to the
Company and 40% to Endocon.

Robert J. Leonard, the acting CEO and a member of the board of directors
of Endocon, became the Secretary and a Director of the Company in 1995 and its
Vice President of Business Development in June 1996.

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

46
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the
ownership of the Common Stock as of December 19, 1996 (i) by each person known
by the Company to own beneficially five percent or more of its Common Stock,
(ii) by each director of the Company, (iii) by the Chief Executive Officer of
the Company and (iv) by all directors and executive officers of the Company as a
group:

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING OWNED AFTER OFFERING
----------------------- -----------------------
BENEFICIAL OWNER(2) NUMBER(1) PERCENT NUMBER(1) PERCENT
- --------------------------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Neuroscience Partners
Limited Partnership(3) .............................................. 528,751 12.5% 528,751 9.8%
c/o MDS Associes--Neuroscience Inc.
100 International Boulevard
Etobicoke, Ontario

Alan Gelband(4) ..................................................... 540,000 13.3 540,000 10.2
c/o Gelband Capital
575 Madison Avenue--8th Floor
New York, New York

Katherine Gordon, Ph.D.(5) .......................................... 465,675 11.6 465,675 8.9

Donna B. Cohen ...................................................... 359,400 9.2 359,400 7.0
3311 N.E. 26th Avenue
Lighthouse Point, Florida

Michael J. Callaghan(6).............................................. 528,751 12.5 528,751 9.8

Theodore J. Gordon(7)................................................ 168,000 4.3 168,000 3.3

Robert J. Leonard(8)................................................. 90,000 2.3 90,000 1.7

George W. Masters(9)................................................. 3,000 * 3,000 *

Donald L. Weise(9)................................................... 3,000 * 3,000 *

All directors and executive officers as a group (7 persons)(10)...... 1,264,051 28.3% 1,264,201 22.3%
</TABLE>

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

* Indicates less than one percent

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

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

(3) Includes (i) 150,000 shares subject to warrants currently exercisable or
exercisable within the 60-day period following February 1, 1997, and (ii)
164,464 shares issuable upon conversion of a right to receive future
royalty payments. MDS Associes-Neuroscience Inc. is the sole general
partner of Neuroscience Partners Limited Partnership.

47
<PAGE>

(4) Includes (i) 15,000 shares and 15,000 additional shares subject to
warrants currently exercisable or exercisable within the 60-day period
following February 1, 1997, each held of record by the Alden Foundation,
and (ii) 45,000 shares of Common Stock owned by the Alan Gelband Company
Defined Contribution Pension Plan & Trust.

(5) Includes 106,875 shares subject to stock options and 15,000 shares subject
to warrants, each currently exercisable or exercisable within the 60-day
period following February 1, 1997. Dr. Gordon disclaims beneficial
ownership of shares beneficially owned by her father, Mr. Theodore J.
Gordon.

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

(7) Includes 3,000 shares subject to stock options and 15,000 shares subject
to warrants, each currently exercisable or exercisable within the 60-day
period following February 1, 1997. Mr. Gordon disclaims beneficial
ownership of shares beneficially owned by his daughter, Dr. Katherine
Gordon.

(8) Consists of 90,000 shares subject to stock options currently exercisable
or exercisable within the 60-day period following February 1, 1997.

(9) Consists of 3,000 shares subject to stock options currently exercisable or
exercisable within the 60-day period following February 1, 1997.

(10) Includes (i) 211,500 shares subject to stock options currently exercisable
or exercisable within the 60-day period following February 1, 1997, (ii)
180,000 shares subject to warrants currently exercisable or exercisable
within 60-day period following February 1, 1997, and (iii) 164,464 shares
currently issuable upon conversion of a right to receive future royalty
payments.

48
<PAGE>
DESCRIPTION OF SECURITIES

Upon the closing of this offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, $0.02 par value per
share, and 1,000,000 shares of Preferred Stock, $0.01 par value per share. As of
the date of this Prospectus, the Company had 67 stockholders. Upon the closing
of this offering, the Company will have 5,105,348 shares of Common Stock
outstanding.

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

UNITS

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

COMMON STOCK

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

PREFERRED STOCK

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

THE WARRANTS OFFERED

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

As of the close of this offering, the Company will have 1,200,000
Warrants outstanding, assuming that the Underwriters' over-allotment option is
not exercised and assuming that none of the Warrants is exercised.

The holder of each Warrant is entitled to purchase one share of Common
Stock at an exercise price of $ . The Warrants are exercisable at any time
after issuance until the fifth anniversary of the

49
<PAGE>
date of this Prospectus, provided that at that time, a current prospectus under
the Securities Act relating to the Common Stock is then in effect and the Common
Stock is qualified for sale or exempt from qualification under applicable state
securities laws. The Warrants included in the Units offered hereby are
immediately transferable separately from the Common Stock. The Warrants are
subject to redemption, as described below.

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

The Warrants may be exercised upon surrender of the certificate therefor
on or prior to the expiration or redemption date (as explained above) at the
offices of the Company's Warrant Agent with the form of "Election to Purchase"
on the reverse side of the certificate filled out and executed as indicated,
accompanied by payment (in the form of a certified or cashier's check payable to
the order of the Company) of the full exercise price for the number of Warrants
being exercised. The Company, in its discretion, has the right to reduce the
exercise price of either or both classes of Warrants subject to compliance with
Rule 13e-4 promulgated under the Exchange Act, if applicable.

The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price and rate in certain events, like
stock dividends, stock splits or combinations, mergers, sales of all or
substantially all of the Company's assets at less than market value, sales of
stock at below market price and other unusual events.

The Company is not required to issue fractional shares and, in lieu
thereof, will make a cash payment based upon the current market value of any
fractional shares (determined as the mean between the last reported bid and
asked prices reported or, if the Common Stock is an NNM security or traded on a
securities exchange, the last reported sales price, in each case as of the last
business day prior to the date of exercise). The holder of a Warrant will not
have any rights as a stockholder of the Company unless and until the Warrant is
exercised.

OTHER WARRANTS AND CONVERSION RIGHTS

In order to fund its continuing operations, the Company completed two
bridge financings, one in September 1994 (the "1994 Bridge Financing") and one
in April 1995 (the "1995 Bridge Financing"). In connection with the 1994 Bridge
Financing, the Company issued (i) an aggregate of $135,000 in principal amount
of Convertible Promissory Notes (the "1994 Notes") which were due on the earlier
of September 19, 1996 or the closing by the Company of a private placement
financing yielding gross proceeds of not less than $1,000,000 and (ii) warrants
to purchase an aggregate of 135,000 shares of the Company's Common Stock
exercisable at $1.00 per share. In connection with the 1995 Bridge Financing,
the Company issued (i) an aggregate of $75,000 in principal amount of
Convertible Promissory Notes (the "1995 Notes") which are due on the earlier of
April 30, 1997 or the closing by the Company of a private placement

50
<PAGE>

financing yielding gross proceeds of not less than $1,000,000 and (ii) warrants
to purchase an aggregate of 75,000 shares of the Company's Common Stock
exercisable at $1.00 per share. In September 1996, the 1994 Notes were converted
into 135,000 shares of Common Stock and, in December 1996, the 1995 Notes were
converted into 75,000 shares of Common Stock.

In December 1996, the Company consummated the NPLP Development
Financing. In exchange for the NPLP Development Financing, the Company is
obligated to pay NPLP royalties based upon a certain percentage of revenues
earned from sales of, and license fees and other revenues received by the
Company in connection with, any products developed that relate to the use of
estrogen in the treatment of chronic, neurodegenerative diseases. The Company's
obligations to pay royalties cease when royalty payments reach certain aggregate
amounts. In connection with the NPLP Development Financing, NPLP received (i)
warrants to purchase 105,000 shares of Common Stock at an exercise price of
$2.33 per share and (ii) warrants to purchase 45,000 shares of Common Stock at
an exercise price of $2.92 per share. All or any portion (not less than
$150,000) of the Company's future obligations to pay royalties may be converted
at any time at the option of MDS into shares of Common Stock at a conversion
price equal to (i) with respect to that portion of such royalties as is equal to
up to 50% of the amount of the NPLP Development Financing, the lesser of (a)
$2.92 and (b) the price per share of the Common Stock reflected in the Company's
most recent financing prior to any conversion and (ii) with respect to that
portion of such royalties as is equal to up to 50% of the amount of the NPLP
Development Financing, the lesser of (a) $3.50 and (b) the price per share of
the Common Stock reflected in the Company's most recent equity financing prior
to any conversion. If NPLP were to exercise its conversion right in full, NPLP
would beneficially own 378,751 shares of the Company's Common Stock (or
approximately 9.8% of the Company Stock outstanding). See "Principal
Stockholders."

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

STOCK OPTIONS

The Company has reserved 600,000 shares of Common Stock for issuance
under the 1993 Option Plan, of which 345,000 shares are subject to outstanding
options, and 90,000 shares of Common Stock for issuance under the Director Plan,
of which 27,000 shares are subject to outstanding options. To date, no options
granted under the Company's stock option plans have been exercised.

ANTI-TAKEOVER MEASURES

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

In February 1988, a law regulating corporate takeovers (the
"Anti-Takeover Law") took effect in Delaware. In certain circumstances, the
Anti-Takeover Law prevents certain Delaware corporations, including those whose
securities are listed on the Nasdaq SmallCap-SM- Market, from engaging in a
"business combination" (which includes a merger or sale of more than 10% of the
corporation's assets) with an "interested stockholder" (a stockholder who owns
15% or more of the corporation's outstanding voting stock) for three years
following the date on which that stockholder became an "interested stockholder"

51
<PAGE>
subject to certain exceptions, unless the transaction is approved by the board
of directors and the holders of at least 66 2/3% of the outstanding voting stock
of the corporation (excluding shares held by the interested stockholder). The
statutory ban does not apply if, upon consummation of the transaction in which
any person becomes an interested stockholder, the interested stockholder owns at
least 85% of the outstanding voting stock of the corporation (excluding shares
held by persons who are both directors and officers or by certain employee stock
plans). A Delaware corporation subject to the Anti-Takeover Law may "opt out" of
the Anti-Takeover Law with an express provision either in its certificate of
incorporation or by-laws resulting from a stockholders' amendment approved by at
least a majority of the outstanding voting shares. This type of amendment is
effective following expiration of twelve months from adoption. The Company is a
Delaware corporation that is subject to the Anti-Takeover Law and has not "opted
out" of its provisions.

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

REGISTRATION RIGHTS

NPLP, which is the holder of 214,287 shares of Common Stock, warrants to
purchase 150,000 shares of Common Stock and rights to convert the NPLP
Development Financing into shares of Common Stock (collectively, the
"Registrable Shares"), is entitled to certain rights with respect to
registration under the Securities Act of the Registrable Shares. If the Company
proposes to register any of its securities under the Securities Act at any time
after the consummation of this offering, either for its own account or for the
account of other security holders, NPLP is entitled to notice of any such
registration and is entitled to include Registrable Shares in the registration.
The rights are subject to certain conditions and limitations, among them, the
right of the underwriters of a registered offering to limit the number of shares
included in the registration. NPLP may also require the Company to file at its
expense a registration statement under the Securities Act with respect to
214,287 of the Registrable Shares at any time commencing 13 months from the
consummation of this offering and with respect to all Registrable Shares at any
time commencing 25 months from the consummation of this offering and, subject to
certain conditions and limitations, the Company is required to effect a
registration. Furthermore, NPLP may, subject to certain conditions and
limitations, require the Company to file additional registration statements on
Form S-3 with respect to the Registrable Shares.

TRANSFER AGENT

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

52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 5,105,348 shares
of Common Stock outstanding. Of these shares, the 1,200,000 shares sold in this
offering, assuming no exercise of the Underwriters' over-allotment option, will
be freely tradeable without restriction under the Securities Act, unless they
are held by "affiliates" of the Company as that term is used under the
Securities Act and the regulations promulgated thereunder.

The remaining 3,905,348 shares held by officers, directors, employees,
consultants and other stockholders of the Company were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act
and are "restricted" securities within the meaning of Rule 144 under the
Securities Act (the "Restricted Shares"). The Company and [all] holders of
Common Stock have agreed not to offer, sell, pledge, hypothecate or otherwise
dispose of any shares of the Company's Common Stock for a period of 13 months
after the effective date of the Registration Statement of which this prospectus
is a part (the "Effective Date") without the prior written consent of the
Managing Underwriter. As a result of these contractual restrictions (the
"Lock-Up Agreements"), notwithstanding possible earlier eligibility for sale
under the provisions of Rules 144 and 701, shares subject to Lock-Up Agreements
will not be saleable until the agreements expire. Beginning 180 days after the
Effective Date, of the Restricted Shares will become eligible for
sale in reliance on Rule 144 or Rule 701 and Rule 144 upon the expiration of the
Lock-Up Agreements, subject, in some cases, to certain volume and other
limitations. The approximately remaining Restricted Shares will become
eligible from time to time upon the lapse of the two-year holding period
pursuant to Rule 144. In addition, beginning 90 days after the Effective Date,
holders of then vested options to purchase shares will be entitled to
exercise their options and sell the underlying shares, and beginning 13 months
after the Effective Date, an additional shares subject to vested
options will be available for sale upon the expiration of the Lock-Up
Agreements, and subject, in the case of directors and officers of the Company,
to the provisions of Rule 144.

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

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

The Company intends to file S-8 registration statements under the
Securities Act to register all shares of Common Stock issuable under the 1993
Option Plan and the Director Plan. Shares covered by this kind of registration
statement will be eligible for sale in the public market immediately upon filing
of

53
<PAGE>
the registration statement, subject to Rule 144 limitations applicable to
affiliates and the expiration of the Lock-Up Agreements, if applicable.

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

54
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the underwriters named below (the
"Underwriters"), and each of the Underwriters, for whom the Managing Underwriter
is acting as representative, has agreed severally to purchase from the Company,
the respective number of Units set forth opposite its name below. The
Underwriters are committed to purchase and pay for all Units if any Units are
purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF UNITS
- --------------------------------------------------------------------------------------- ---------------
<S> <C>
First United Equities Corporation......................................................

---------------
Total............................................................................ 1,200,000
---------------
---------------
</TABLE>

The Managing Underwriter has advised the Company that the Underwriters
propose to offer the Units to the public at the initial public offering price
set forth on the cover page of this Prospectus and to certain dealers at the
same price, less a concession of not in excess of $ per share, of which $
may be reallocated to other dealers. After the initial public offering, the
public offering price, concession and reallowance to dealers may be reduced by
the Managing Underwriter. No reduction of this sort shall change the amount of
proceeds to be received by the Company as set forth on the cover page of this
Prospectus.

The Company has granted the Underwriters an option for 45 days after the
date of this Prospectus to purchase, at the initial public offering price, less
the underwriting discounts and commissions as set forth on the cover page of
this Prospectus, up to 180,000 additional Units at the same price per share as
the Company received for the 1,200,000 Units offered hereby, solely to cover
over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of Units
to be purchased by each of them, as shown in the foregoing table, bears to the
1,200,000 Units offered hereby. The Underwriters may exercise their option only
to cover the over-allotments in connection with the sale of the 1,200,000 Units.

The Company has also agreed to pay the Managing Underwriter a
nonaccountable expense allowance of 3% of the offering proceeds, including
proceeds from the over-allotment option, if exercised, of which $ has
been paid to the Managing Underwriter to date. The Managing Underwriter's
expenses in excess of the nonaccountable expense allowance, including its legal
expenses, will be borne by the Managing Underwriter. To the extent that the
expenses of the Managing Underwriter are less than the nonaccountable expense
allowance, the excess will be deemed to be compensation to the Managing
Underwriter.

The Underwriting Agreement provides that, for a period of three years
after the completion of this offering, the Managing Underwriter shall have the
right, subject to reasonable approval by the Company, to nominate one person to
attend the Company's Board of Directors meetings. The Managing Underwriter has
not yet designated its nominee.

The Managing Underwriter has agreed to provide investment banking
services to the Company upon completion of this offering for a period of three
years for an aggregate fee of $108,000, payable at the closing (the "Closing")
of this offering. The consulting arrangement will not require the Managing
Underwriter to devote a specific amount of time to the performance of its duties
thereunder.

55
<PAGE>
The Company has also agreed that, for a period of five years from the
date of the Underwriting Agreement, it will (i) not negotiate with or enter into
an agreement with respect to the public offering or private placement of equity
securities or securities convertible into equity securities of the Company
without first attempting to negotiate the transaction with the Managing
Underwriter, and (ii) use its best efforts to induce any other underwriter to
include the Managing Underwriter in the underwriting syndicate, with respect to
any public offerings by the Company during the five-year period following the
Closing.

The Company has agreed to sell to the Managing Underwriter, for nominal
consideration, the Managing Underwriter's Warrant to purchase up to 120,000
shares of Common Stock at an exercise price equal to $ per share. The
Managing Underwriter's Warrant will be exercisable during the six-year period
commencing the date of the closing of the offering and are not transferable for
a period of one year from the date of this Prospectus, except to officers of the
Managing Underwriter or to members of the Managing Underwriter's selling group.

Each of the Company's directors and officers and certain other employees
and securityholders of the Company has agreed not to offer, sell, contract to
sell or otherwise dispose of Common Stock or securities convertible into or
exchangeable for, or any rights to purchase or acquire, Common Stock for a
period of 13 months following the Effective Date, without the prior written
consent of the Managing Underwriter. The Company has also agreed not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable for, or any rights to purchase or
acquire, Common Stock for a period of 13 months following the date of this
Prospectus without the prior written consent of the Managing Underwriter, except
for the granting of options or the sale of stock pursuant to the Company's
existing option plans. The Managing Underwriter, in its discretion, may waive
the foregoing restrictions, in whole or in part, with or without a public
announcement to that effect.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price of the Units will be determined by
negotiations among the Company and the Managing Underwriter. Among the factors
considered in determining the initial public offering price of the Units, in
addition to prevailing market conditions, will be the Company's historical
performance, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to market valuations of companies in related
businesses.

The Company has agreed to indemnify the Underwriters against certain
liabilities that may be incurred in connection with this offering, including
liabilities under the Securities Act, or to contribute payments that the
Underwriters may be required to make in respect thereof.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for
the Company by Palmer & Dodge LLP, Boston, Massachusetts. Certain legal matters
relating to the offering will be passed upon for the Underwriters by Rubin Baum
Levin Constant Friedman & Bilzin, Miami, Florida.

EXPERTS

The financial statements of the Company at December 31, 1995 and for
each of the years in the two-year period then ended, appearing in this
Prospectus and the Registration Statement have been audited by Richard A. Eisner
& Company, LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
herein in reliance upon that report given upon the authority of that firm as
experts in accounting and auditing.

56
<PAGE>
ADDITIONAL INFORMATION

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

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

57
<PAGE>
GLOSSARY OF TECHNICAL TERMS

<TABLE>
<S> <C>
Acetylcholine A neurotransmitter.

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

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

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

Cholinergic neurons Neurons that use acetylcholine as a neurotransmitter.

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

Dehydroepiandrosterone A sulfated form of DHEA.
sulfate (DHEAS)

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

Dopamine A neurotransmitter.

Dopaminergic neurons Neurons that use dopamine as a neurotransmitter.

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

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

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

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

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

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

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

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

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

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

Lewy bodies Characteristic masses found within cells of degenerating
neurons in certain brain regions.
</TABLE>

58
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

Prophylaxis A method of maintaining health or preventing disease.

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

59
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
- I N D E X -

<TABLE>
<CAPTION>
PAGE
NUMBER
-----------

<S> <C>
REPORT OF INDEPENDENT AUDITORS.......................................................................... F-2

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

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

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

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

NOTES TO FINANCIAL STATEMENTS........................................................................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

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

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

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

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

/s/ Richard A. Eisner & Company, LLP

Cambridge, Massachusetts
July 15, 1996

With respect to Note A
December 20, 1996

F-2
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------- SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents......................................................... $ 246,721 $ 373,645
Stock subscriptions receivable (Note C)........................................... 112,500
------------- -------------
Total current assets.......................................................... 246,721 486,145

Organization costs, net of accumulated amortization of $3,584 at December 31, 1995
and $4,371 at September 30, 1996 (Note B)......................................... 1,661 874
Deferred public offering costs...................................................... 5,000
------------- -------------
TOTAL......................................................................... $ 248,382 $ 492,019
------------- -------------
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses............................................. $ 211,923 $ 152,981
Notes payable (Note D)............................................................ 73,425
------------- -------------
Total current liabilities..................................................... 211,923 226,406
------------- -------------
Notes payable (Note D).............................................................. 204,400
-------------

Commitments (Note F)

Stockholders' equity (deficit) (Note E):
Preferred stock--$.01 par value; 1,000,000 shares authorized, none issued
Common stock--$.02 par value; 20,000,000 shares authorized, 3,531,000 shares
issued at December 31, 1995 and 3,905,348 shares issued at September 30, 1996... 70,620 78,107
Additional paid-in capital........................................................ 1,133,900 1,782,879
Deficit accumulated during the development stage.................................. (1,372,461) (1,595,373)
------------- -------------
Total stockholders' equity (deficit).......................................... (167,941) 265,613
------------- -------------
TOTAL......................................................................... $ 248,382 $ 492,019
------------- -------------
------------- -------------
</TABLE>

Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.

F-3
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS

Expenses:
Research and development.... 131,842 199,654 466,838 100,716 $ 94,966 567,554
General and
administrative............ 255,592 323,613 882,909 268,819 187,462 1,151,728
Amortization expense........ 1,049 1,049 3,584 787 787 4,371
Interest expense............ 31,201 2,645 31,201 29,891 22,691 61,092
----------- ----------- ------------- ----------- ----------- -------------
Total expenses.......... 419,684 526,961 1,384,532 400,213 305,906 1,784,745
----------- ----------- ------------- ----------- ----------- -------------

NET LOSS...................... $ (417,149) $ (523,007) $ (1,372,461) $(222,912) $ (305,906) $(1,595,373)
----------- ----------- ------------- ----------- ----------- -------------
----------- ----------- ------------- ----------- ----------- -------------

Net loss per share............ $ (.11) $ (.14) $ (.05) $ (.08)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Weighted average number of
shares outstanding.......... 3,784,623 3,660,514 4,185,555 3,649,496
</TABLE>

Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.

F-4
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
$.02 PAR VALUE ADDITIONAL DURING
--------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- --------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Sale of common stock at $.07 per share from inception
through December 31, 1992............................. 615,000 $ 12,300 $ 28,700 $ 41,000
Issuance of common stock for services at $.07 per share
from inception through December 31, 1992.............. 60,000 1,200 2,800 4,000
Net loss for the year ended December 31, 1992........... $ (77,972) (77,972)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1992.............................. 675,000 13,500 31,500 (77,972) (32,972)
Additional shares sold at $.07 per share................ 1,200,000 24,000 56,000 80,000
Shares issued for services at $.07
per share............................................. 162,000 3,240 7,560 10,800
Sale of common stock in connection with private
placement of stock at $.67 per share.................. 960,000 19,200 620,800 640,000
Costs related to private placement...................... (36,530) (36,530)
Shares issued for services at $.67 per share............ 9,000 180 5,820 6,000
Net loss for the year ended
December 31, 1993..................................... (354,333) (354,333)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1993.............................. 3,006,000 60,120 685,150 (432,305) 312,965
Repurchase of common stock by the Company and
cancellation of shares................................ (15,000) (300) (700) (1,000)
Common stock warrants issued in connection with notes
payable............................................... 6,750 6,750
Net loss for the year ended December 31, 1994........... (523,007) (523,007)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1994.............................. 2,991,000 59,820 691,200 (955,312) (204,292)
Sale of common stock at $.83 per share.................. 540,000 10,800 439,200 450,000
Costs of raising capital................................ (12,250) (12,250)
Purchase (for $8,000) and resale
(for $20,000) of 60,000 shares of common stock........ 12,000 12,000
Common stock warrants issued in connection with notes
payable............................................... 3,750 3,750
Net loss for the year ended December 31, 1995........... (417,149) (417,149)
---------- --------- ------------ ------------- -----------
Balance--December 31, 1995.............................. 3,531,000 70,620 1,133,900 (1,372,461) (167,941)
Shares issued for services at $1.00 per share........... 25,066 501 24,565 25,066
Conversion of debt into common stock.................... 135,000 2,700 128,700 131,400
Sale of common stock in connection with private
placement of stock at $2.33 per share................. 214,282 4,286 495,714 500,000
Net loss for the nine months ended September 30, 1996... (222,912) (222,912)
---------- --------- ------------ ------------- -----------
BALANCE--SEPTEMBER 30, 1996 (UNAUDITED)................. 3,905,348 $ 78,107 $ 1,782,879 $ (1,595,373) $ 265,613
---------- --------- ------------ ------------- -----------
---------- --------- ------------ ------------- -----------
</TABLE>

Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.

F-5
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
JULY 9, 1992 JULY 9, 1992
YEAR ENDED (INCEPTION) NINE MONTHS ENDED (INCEPTION)
DECEMBER 31, THROUGH SEPTEMBER 30, THROUGH
------------------------ DECEMBER 31, ------------------------ SEPTEMBER 30,
1995 1994 1995 1996 1995 1996
----------- ----------- ------------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................... $ (417,149) $ (523,007) $ (1,372,461) $(222,912) $ (305,906) $(1,595,373)
Adjustments to reconcile net loss to
net cash (used in) operating
activities:
Amortization......................... 1,049 1,399 3,934 1,212 786 5,146
Common stock issued for services
rendered........................... 20,800 25,066 45,866
Organization costs................... (5,245) (5,245)
Increase (decrease) in accounts
payable and accrued expenses....... 163,071 56,643 241,473 (58,942) 130,697 182,531
----------- ----------- ------------- ----------- ----------- -------------
Net cash (used in) operating
activities....................... (253,029) (464,965) (1,111,499) (255,576) (174,423) (1,367,075)
----------- ----------- ------------- ----------- ----------- -------------
Cash flows from financing activities:
Sale of common stock................... 445,000 1,206,000 387,500 121,000 1,593,500
Stock offering costs................... (12,250) (48,780) (48,780)
Repurchase of common stock............. (8,000) (1,000) (9,000) (9,000)
Proceeds from notes payable (Note C)... 75,000 135,000 210,000 75,000 210,000
Deferred public offering costs......... (5,000) (5,000)
----------- ----------- ------------- ----------- ----------- -------------
Net cash provided by financing
activities....................... 499,750 134,000 1,358,220 382,500 196,000 1,740,720
----------- ----------- ------------- ----------- ----------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 246,721 (330,965) 246,721 126,924 21,577 373,645

Cash and cash equivalents at beginning of
period................................. -0- 330,965 -0- 246,721 -0- -0-
----------- ----------- ------------- ----------- ----------- -------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................. $ 246,721 $ -0- $ 246,721 $ 373,645 $ 21,577 $ 373,645
----------- ----------- ------------- ----------- ----------- -------------
----------- ----------- ------------- ----------- ----------- -------------
Supplemental disclosures of cash flow
information:
Interest paid.......................... $ 15,000 $ 15,000 $ 25,000 $ 32,000
Accounts payable converted into
stock................................ 25,000 25,000 25,000
Notes payable converted to common
stock................................ 135,000 135,000
</TABLE>

Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.

F-6
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)

(NOTE A)--THE COMPANY:

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

The Company is in the development stage and its efforts through December
31, 1995 have been principally devoted to organizational activities, raising
capital and initial research and development activities. It does not expect
commercial operations in the foreseeable future. The Company anticipates that it
will need substantial additional financing to complete its research and to
develop commercial products. The Company is endeavoring to obtain additional
financing for the next phase of its research activities; however, there is no
assurance that such financing can be obtained or that the Company's research
will be successful.

On November 6, 1996 the Board of Directors of the Company authorized the
filing of a registration statement with the Securities and Exchange Commission
for the initial public offering of shares of the Company's common stock.

In December 1996, Neuroscience Partners Limited Partnership ("NPLP"), a
limited partnership of which MDS Associes-Neuroscience Inc. ("MDS") is the
general partner, invested $500,000 in the Company in exchange for 214,285 shares
of Common Stock on the same terms as the other purchasers of Common Stock in the
Company's most recent private placement financing.

Also in December 1996, the Company entered into a Royalty Purchase
Agreement with NPLP, pursuant to which NPLP agreed to provide an additional
$500,000 (the "NPLP Development Financing") to the Company. The Company has no
obligation to repay this amount. In exchange for the NPLP Development Financing,
the Company is obligated to pay NPLP royalties on sales of, and license fees and
other revenues received by the Company in connection with, any products
developed that relate to the use of estrogen in the treatment of chronic,
neurodegenerative diseases. The Company's obligations to pay royalties cease
when royalty payments reach certain aggregate amounts. In connection with the
NPLP Development Financing, NPLP received (i) warrants to purchase 105,000
shares of Common Stock at an exercise price of $2.33 per share and (ii) warrants
to purchase 145,000 shares of Common Stock at an exercise price of $2.92 per
share. All or any portion (not less than $150,000) of the aggregate amount of
the NPLP Development Financing may be converted at any time at the option of MDS
into shares of Common Stock at a conversion price equal to (i) with respect to
50% of the amount of the NPLP Development Financing, the lesser of (a) $2.92 and
(b) the price per share of Common Stock reflected in the Company's most recent
financing prior to any conversion and (ii) with respect to the remaining 50% of
the amount of the NPLP Development Financing, the lesser of (a) $3.50 and (b)
the price per share of the Common Stock reflected in the Company's most recent
equity financing prior to any conversion. The Royalty Purchase Agreement will
continue until the later of (i) ten years from the date of first commercial sale
of any product covered by the Agreement and (ii) the expiration of the last
relevant patent right covered by the Agreement.

In December, 1996 the Company amended its Certificate of Incorporation
whereby, among other things, the following changes were effected:

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

F-7
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)

(NOTE A)--THE COMPANY: (CONTINUED)
[2] A reverse stock split of 1 for 3 1/3 shares of common stock and all
securities of the Company convertible into common stock was made.

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

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

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

[1] REVENUE RECOGNITION:

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

[2] ORGANIZATION COSTS:

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

[3] PATENT AND LICENSING COSTS:

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

[4] USE OF ESTIMATES:

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

[5] CASH AND CASH EQUIVALENTS:

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

[6] LOSS PER SHARE:

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

F-8
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Assuming the conversion of the notes discussed in the last sentence of
Note D as of January 1, 1995, there would have been no effect on the
supplementary loss per share for any period presented.

[7] INTERIM CONDENSED FINANCIAL STATEMENTS:

The condensed financial statements as of September 30, 1996 and for the
nine months ended September 30, 1996 and September 30, 1995 are unaudited. In
management's opinion, the unaudited financial statements as of September 30,
1996 and for the nine months ended September 30, 1996 and September 30, 1995,
include all adjustments necessary for a fair presentation. Such adjustments were
of a recurring nature.

[8] RECENT PRONOUNCEMENT:

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

(NOTE C)--STOCK SUBSCRIPTIONS RECEIVABLE:

All stock subscriptions receivable were paid in full in October 1996.

(NOTE D)--NOTES PAYABLE:

During 1994 and 1995, the Company issued $135,000 and $75,000 of 10%
convertible notes payable, respectively. The 1994 and 1995 notes were due in
full in April 1996 and September 1997, respectively, or upon the closing of the
next offering of common stock of the Company with aggregate gross proceeds to
the Company of not less than $1,000,000. Interest is payable annually. The notes
may be redeemed at the option of the Company at a price equal to 110% of the
principal amount plus any accrued and unpaid interest. The notes may be
converted into common stock of the Company at any time prior to the redemption
or maturity date. Through September 30, 1996 a total of $135,000 of the notes,
all of which were issued in 1994, were converted into 135,000 shares of common
stock. The conversion price of $1.00 per share was no less than the fair market
value of the underlying stock at the time of the Company's issuance of the
notes. The principal amount of the notes outstanding is $75,000 and $210,000 at
September 30, 1996 and December 31, 1995, respectively, and the remaining
$75,000 principal note amount was converted into 75,000 shares of Common Stock
in December 1996. In conjunction with these notes, the Company issued warrants
for the purchase of 210,000 shares of its common stock. The value assigned to
the warrants, amounting to $10,500, has been accounted for as debt discount and
is being amortized over the period of time the notes are expected to be
outstanding. The effective interest rate on the notes, including the debt
discount, is approximately 12%. The warrants are more fully discussed in Note
E[3].

F-9
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)

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

[1] COMMON STOCK:

Through December 31, 1995, the Company has been financed primarily
through the sale of common stock. Through December 31, 1995, of the 3,531,000
shares issued since inception, 3,300,000 were sold for cash and the remaining
231,000 shares were issued for payment of services rendered to the Company.
Through September 30, 1996, of the 3,905,348 shares issued since inception,
3,649,282 were sold for cash and the remaining 256,066 shares were issued for
payment of services rendered to the Company.

[2] OPTION PLAN:

The Company has a stock option plan that provides for the issuance of
both incentive and nonqualified stock options. This plan provides for the
granting of options to purchase not more than 600,000 shares of common stock.
The exercise price of the incentive options cannot be less than the fair market
value on the date of the grant, while the exercise price for the nonqualified
options is determined by the option committee.

Option activity through September 30, 1996 has been as follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
----------- -------------

<S> <C> <C>
Balance--December 31, 1992......................................... -0- $-0-
Granted............................................................ 60,000 $.67
-----------
Balance--December 31, 1993......................................... 60,000 $.67
Granted............................................................ 150,000 $.67 - $1.00
-----------
Balance--December 31, 1994......................................... 210,000 $.67 - $1.00
Cancelled.......................................................... (90,000) $.67 - $1.00
Granted............................................................ 180,000 $.83
-----------
Balance--December 31, 1995 and September 30, 1996.................. 300,000 $.67 - $1.00
-----------
-----------
</TABLE>

At September 30, 1996, options to purchase 195,000 shares were
exercisable at an average exercise price of $.87 per share.

In November of 1996, the Company's Board of Directors authorized an
increase of the number of shares of the Company's common stock issuable under
the plan by 300,000 shares.

Also in November of 1996, the Company's Board of Directors authorized
the establishment of the 1996 Directors Stock Option Plan, and reserved 90,000
shares of the Company's common stock for issuance under the Plan.

[3] WARRANTS:

In conjunction with the notes described in Note D, the Company issued
warrants for the purchase of 210,000 shares of the Company's common stock. The
warrants are exercisable until September 17, 1999 with respect to 135,000
warrants and until April 30, 2000 with respect to 75,000 warrants, all at the
lower of $1.00 per share or the price per share of the common stock at the
closing of the next offering of common stock with aggregate gross proceeds of at
least $1,000,000. The number of shares which may be purchased

F-10
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)

(NOTE E)--COMMON STOCK, OPTIONS AND WARRANTS: (CONTINUED)

upon the exercise of these warrants are subject to adjustment as provided in the
warrant agreement for such events as stock splits and stock dividends.

(NOTE F)--COMMITMENTS:

[1] LEASE:

Through December 31, 1995, the Company was subleasing its facilities
under a tenant-at-will agreement. Rent expense for the year ended December 31,
1995 amounted to $5,850 and the rent paid since inception is $21,100.

[2] RESEARCH, LICENSE AND CONSULTING AGREEMENTS:

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

Some of the above agreements contain provisions for future royalties to
be paid by and/or to the Company on the sale of products developed under the
agreements.

[3] EMPLOYMENT AGREEMENT:

The Company has entered into an employment agreement, which expires in
November 1998, with its president which provides for an annual salary of
$115,000 and twelve months of severance pay. The agreement will automatically
extend for additional two-year periods unless terminated by either party to the
agreement.

At September 30, 1996, the Company owed its President approximately
$104,000 of salary and bonus.

(NOTE G)--INCOME TAXES:

Pursuant to provisions of the Internal Revenue Code, for tax purposes
the Company is deferring all start-up costs until operations, as defined by the
Internal Revenue Code, commence and is deferring research and development costs
until revenue is generated. Accordingly, through December 31, 1995 only interest
income and expense have entered into the determination of taxable income.

At December 31, 1995, the Company had no current tax liability or
deferred tax liability. It had deferred tax assets due to temporary differences
and research and development tax credits of approximately $480,000, all of which
has been fully reserved since the likelihood of the realization of the benefits
cannot be established. The temporary differences relate primarily to the
deferral of start-up costs and research and development costs noted above.

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

F-11
<PAGE>
APOLLO BIOPHARMACEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)

(NOTE H)--RELATED PARTY TRANSACTION:

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

F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Financial Data................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 22
Business.................................................................. 24
Management................................................................ 40
Certain Transactions...................................................... 45
Principal Stockholders.................................................... 46
Description of Securities................................................. 48
Shares Eligible for Future Sale........................................... 52
Underwriting.............................................................. 54
Legal Matters............................................................. 55
Experts................................................................... 55
Additional Information.................................................... 56
Glossary of Technical Terms............................................... 57
Index to Financial Statements............................................. F-1
</TABLE>

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

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

1,200,000 UNITS

[APOLLO LOGO]

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

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

FIRST UNITED EQUITIES CORPORATION

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

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

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

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

II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 5,655
Nasdaq listing fee................................................ $ 7,880
NASD filing fee................................................... $ 2,366
Blue Sky fees and expenses........................................ $ 15,000
Printing and engraving expenses................................... $ 112,000
Accounting fees and expenses...................................... $ 40,000
Legal fees and expenses........................................... $ 200,000
Transfer agent and registrar fees................................. $ 10,000
Managing Underwriter's expenses................................... $ 189,000
Miscellaneous expenses............................................ $ 8,099
---------
Total......................................................... $ 590,000
</TABLE>

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

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

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

In September 1992, the Company sold an aggregate of 615,000 shares of
Common Stock to 14 accredited investors for an aggregate purchase price of
$41,000.

In order to fund its continuing operations, the Company completed two
bridge financings, one in September 1994 (the "1994 Bridge Financing") and one
in April 1995 (the "1995 Bridge Financing"). In connection with the 1994 Bridge
Financing, the Company issued (i) an aggregate of $135,000 in principal amount
of Convertible Promissory Notes (the "1994 Notes") which were due on the earlier
of September 19, 1996 or the closing by the Company of a private placement
financing yielding gross proceeds of not less than $1,000,000 and (ii) warrants
to purchase an aggregate of 135,000 shares of the Company's Common Stock
exercisable at $1.00 per share. In connection with the 1995 Bridge Financing,
the Company issued (i) an aggregate of $75,000 in principal amount of
Convertible Promissory Notes (the "1995 Notes") which were due on the earlier of
April 30, 1997 or the closing by the Company of a private placement financing
yielding gross proceeds of not less than $1,000,000 and (ii) warrants to
purchase an aggregate of 75,000 shares of the Company's Common Stock exercisable
at $1.00 per share. In September 1996, the 1994 Notes were converted into
135,000 shares of Common Stock and, in December 1996, the 1995 Notes were
converted into 75,000 shares of Common Stock.

In May 1995, the Company sold an aggregate of 540,000 shares of Common
Stock to 8 accredited investors for an aggregate purchase price of $475,000.

In June 1996, the Company sold an aggregate of 214,282 shares of Common
Stock to 9 accredited investors for an aggregate purchase price of $500,000. The
Managing Underwriter acted as placement agent for this 1996 financing and in
consideration thereof received a fee of $25,000.

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

II-2
<PAGE>

disease. In exchange for the NPLP Development Financing, the Company is
obligated to pay NPLP royalties based upon a certain percentage of revenues
earned from sales of, and license fees and other revenues received by the
Company in connection with, any products developed in these programs. The
Company has the right to terminate its obligation to make such royalty payments
to NPLP upon written notice to NPLP on or before November 30 in any of the
calendar years specified in the Royalty Purchase Agreement and by paying NPLP a
lump-sum payment equal to the maximum royalties payable in such calendar year.
In connection with the NPLP Development Financing, NPLP received (i) warrants to
purchase 105,000 shares of Common Stock at an exercise price of $2.33 per share
and (ii) warrants to purchase 45,000 shares of Common Stock at an exercise price
of $2.92 per share. All or any portion (not less than $150,000) of the Company's
future obligations to pay royalties may be converted at any time at the option
of MDS into shares of Common Stock at a conversion price equal to (i) with
respect to that portion of such royalties as is equal to up to 50% of the amount
of the NPLP Development Financing, the lesser of (a) $2.92 and (b) the price per
share of the Common Stock reflected in the Company's most recent financing prior
to any conversion and (ii) with respect to that portion of such royalties as is
equal to up to 50% of the remaining amount of the NPLP Development Financing,
the lesser of (a) $3.50 and (b) the price per share of the Common Stock
reflected in the Company's most recent equity financing prior to any conversion.
If NPLP were to exercise its conversion right in full, NPLP would beneficially
own 378,751 shares of the Company's Common Stock (or approximately 9.8% of the
common stock outstanding). See "Principal Stockholders."

II-3
<PAGE>
ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement. To be filed by amendment.
3.1 Amended and Restated Certificate of Incorporation. Filed on December 24, 1996 as Exhibit 3.1 to this
Registration Statement.
3.2 By-laws of the Company. Filed on December 24, 1996 as Exhibit 3.2 to this Registration Statement.
3.3 Registration Rights Agreement, dated December 18, 1996, between the Company and Neuroscience Partners
Limited Partnership. Filed on December 24, 1996 as Exhibit 3.3 to this Registration Statement.
3.4 Warrant to purchase Common Stock of the Company granted to Neuroscience Partners Limited Partnership
dated December 18, 1996. Filed on December 24, 1996 as Exhibit 3.4 to this Registration Statement.
4.1 Specimen Common Stock Certificate. Filed herewith.
4.2 Specimen Common Stock Purchase Warrant. Filed herewith.
5 Opinion of Palmer & Dodge LLP as to the legality of the shares being registered. Filed on December
24, 1996 as Exhibit 5 to this Registration Statement.
10.1* Amended and Restated 1993 Incentive and Non-Qualified Stock Option Plan. Filed on December 24, 1996
as Exhibit 10.1 to this Registration Statement.
10.2* 1996 Director Stock Option Plan. Filed on December 24, 1996 as Exhibit 10.2 to this Registration
Statement.
10.3 Form of Indemnification Agreement between the Company and its directors. Filed on December 24, 1996
as Exhibit 10.3 to this Registration Statement. Such agreements are materially different only as to
the signing directors and the dates of execution.
10.4+ Royalty Purchase Agreement dated December 18, 1996 between the Company and Neuroscience Partners
Limited Partnership. Filed on December 24, 1996 as Exhibit 10.4 to this Registration Statement.
10.5 Research and Collaboration Agreement, dated as of December 13, 1996, between the Company and Endocon,
Inc. To be filed by amendment.
10.6+ Nonexclusive Sublicense Agreement, dated as of November 5, 1996, between the Company and Cephalon,
Inc. Filed on December 24, 1996 as Exhibit 10.6 to this Registration Statement.
10.7+ License and Collaboration Agreement, dated as of April 16, 1996, between the Company and Athena
Neurosciences, Inc. Filed on December 24, 1996 as Exhibit 10.7 to this Registration Statement.
10.8+ Neuron Loss Protection Technology License Agreement, dated April 13, 1993, between the Company and
the University of Kentucky Research Foundation. Filed on December 24, 1996 as Exhibit 10.8 to this
Registration Statement.
10.9+ Patent License Agreement with Research Component, dated December 15, 1993, restated October 15, 1996,
between the Company and the University of Florida Research Foundation, Inc. Filed on December 24,
1996 as Exhibit 10.9 to this Registration Statement.
10.10+ Corporate Research Agreement to Accompany License Agreement, dated December 15, 1993, between the
Company and the University of Florida. Filed on December 24, 1996 as Exhibit 10.10 to this
Registration Statement.
10.11+ Patent License Agreement, dated September 8, 1994, between the Company and the University of Florida
Research Foundation, Inc. Filed on December 24, 1996 as Exhibit 10.11 to this Registration
Statement.
10.12* Employment Agreement effective as of November 1, 1993, between the Company and Dr. Katherine
Gordon. Filed on December 24, 1996 as Exhibit 10.12 to this Registration Statement.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
11 Statement re: Computation of loss per share. Filed on December 24, 1996 as Exhibit 11 to this
Registration Statement.
23.1 Consent of Richard A. Eisner & Company, LLP. Filed herewith.
23.2 Consent of Palmer & Dodge LLP. Included in the opinion filed as Exhibit 5 hereto.
24 Power of attorney. Included on the signature page hereto on December 24, 1996.
27 Financial Data Schedule. Filed on December 24, 1996 as Exhibit 27 to this Registration Statement.
</TABLE>

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

* Indicates a management contract or compensatory plan.

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

ITEM 28. UNDERTAKINGS

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

(b) The undersigned Registrant hereby undertakes that:

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

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

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

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cambridge, Commonwealth of Massachusetts, on
February 4, 1997.

APOLLO BIOPHARMACEUTICS, INC.

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

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

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

President, Chief Executive
/s/ KATHERINE GORDON Officer and Director
- ------------------------------ (Principal Executive February 4, 1997
Katherine Gordon Officer)

Vice President--Finance,
Chief Financial Officer
JOHN J. CURRY* and Treasurer (Principal
- ------------------------------ Financial Officer and February 4, 1997
John J. Curry Principal Accounting
Officer)

ROBERT J. LEONARD* Vice President--Business
- ------------------------------ Development, Director February 4, 1997
Robert J. Leonard

THEODORE GORDON* Director
- ------------------------------ February 4, 1997
Theodore Gordon

DONALD WEISE* Director
- ------------------------------ February 4, 1997
Donald Weise

GEORGE MASTERS* Director
- ------------------------------ February 4, 1997
George Masters

<TABLE>
<S> <C>
* /s/ KATHERINE GORDON
----------------------------------------
Katherine Gordon
ATTORNEY-IN-FACT
</TABLE>

II-6
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
- ----------- -----
<C> <S> <C>
1 Form of Underwriting Agreement. To be filed by amendment.....................................
3.1 Amended and Restated Certificate of Incorporation. Filed on December 24, 1996 as Exhibit 3.1
to this Registration Statement................................................................
3.2 By-laws of the Company. Filed on December 24, 1996 as Exhibit 3.2 to this Registration
Statement.....................................................................................
3.3 Registration Rights Agreement, dated December 18, 1996, between the Company and Neuroscience
Partners Limited Partnership. Filed on December 24, 1996 as Exhibit 3.3 to this Registration
Statement.....................................................................................
3.4 Warrant to purchase Common Stock of the Company granted to Neuroscience Partners Limited
Partnership dated December 18, 1996. Filed on December 24, 1996 as Exhibit 3.4 to this
Registration Statement........................................................................
4.1 Specimen Common Stock Certificate. Filed herewith............................................
4.2 Specimen Common Stock Purchase Warrant. File herewith........................................
5 Opinion of Palmer & Dodge LLP as to the legality of the shares being registered. Filed on
December 24, 1996 as Exhibit 5 to this Registration Statement.................................
10.1* Amended and Restated 1993 Incentive and Non-Qualified Stock Option Plan. Filed on December
24, 1996 as Exhibit 10.1 to this Registration Statement.......................................
10.2* 1996 Director Stock Option Plan. Filed on December 24, 1996 as Exhibit 10.2 to this
Registration Statement........................................................................
10.3 Form of Indemnification Agreement between the Company and its directors. Filed on December
24, 1996 as Exhibit 10.3 to this Registration Statement. Such agreements are materially
different only as to the signing directors and the dates of execution.........................
10.4+ Royalty Purchase Agreement dated December 18, 1996 between the Company and Neuroscience
Partners Limited Partnership. Filed on December 24, 1996 as Exhibit 10.4 to this Registration
Statement.....................................................................................
10.5 Research and Collaboration Agreement, dated as of December 13, 1996, between the Company and
Endocon, Inc. To be filed by amendment.......................................................
10.6+ Nonexclusive Sublicense Agreement, dated as of November 5, 1996, between the Company and
Cephalon, Inc. Filed on December 24, 1996 as Exhibit 10.6 to this Registration Statement.....
10.7+ License and Collaboration Agreement, dated as of April 16, 1996, between the Company and
Athena Neurosciences, Inc. Filed on December 24, 1996 as Exhibit 10.7 to this Registration
Statement.....................................................................................
10.8+ Neuron Loss Protection Technology License Agreement, dated April 13, 1993, between the Company
and the University of Kentucky Research Foundation. Filed on December 24, 1996 as Exhibit
10.8 to this Registration Statement...........................................................
10.9+ Patent License Agreement with Research Component, dated December 15, 1993, restated October
15, 1996, between the Company and the University of Florida Research Foundation, Inc. Filed
on December 24, 1996 as Exhibit 10.9 to this Registration Statement...........................
10.10+ Corporate Research Agreement to Accompany License Agreement, dated December 15, 1993, between
the Company and the University of Florida. Filed on December 24, 1996 as Exhibit 10.10 to
this Registration Statement...................................................................
10.11+ Patent License Agreement, dated September 8, 1994, between the Company and the University of
Florida Research Foundation, Inc. Filed on December 24, 1996 as Exhibit 10.11 to this
Registration Statement........................................................................
10.12* Employment Agreement effective as of November 1, 1993, between the Company and Dr. Katherine
Gordon. Filed on December 24, 1996 as Exhibit 10.12 to this Registration Statement...........
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
- ----------- -----
<C> <S> <C>
11 Statement re: Computation of loss per share. Filed on December 24, 1996 as Exhibit 11 to this
Registration Statement........................................................................
23.1 Consent of Richard A. Eisner & Company, LLP. Filed herewith..................................
23.2 Consent of Palmer & Dodge LLP. Included in the opinion filed as Exhibit 5 hereto..............
24 Power of attorney. Included on the signature page hereto on December 24, 1996.................
27 Financial Data Schedule. Filed on December 24, 1996 as Exhibit 27 to this Registration
Statement.....................................................................................
</TABLE>

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

* Indicates a management contract or compensatory plan.

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

<PAGE>

EXHIBIT 4.1

APOLLO BIOPHARMACEUTICS, INC.

INCORPORATED UNDER THE LAWS OF THE
STATE OF DELAWARE

NUMBER SHARES

COMMON STOCK COMMON STOCK

THIS CERTIFIES THAT

is the owner of

FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF APOLLO
BIOPHARMACEUTICS, INC. (herein called the "Company") transferable upon the
books of the Company in person or by attorney upon surrender of this
certificate duly endorsed or assigned. This certificate and the shares
represented hereby are subject to the laws of The State of Delaware and to
the Certificate of Incorporation of the Company as now or hereafter amended,
as to all of which the older of this certificate assents by acceptance hereof.

This certificate is not valid unless countersigned by the Transfer Agent
and registered by the Registrar.

IN WITNESS WHEREOF, APOLLO BIOPHARMACEUTICS, INC. has caused its
facsimile corporate seal and the facsimile signatures of its duly authorized
officers to be hereunto affixed.

Dated:

[SEAL] /s/ John J. Curry /s/ Katherine Gordon
-------------------- --------------------------
Treasurer President

COUNTERSIGNED AND REGISTERED:

- -----------------------------
AUTHORIZED SIGNATURE

<PAGE>

APOLLO BIOPHARMACEUTICS, INC.

THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES OF
STOCK. A COPY OF THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF EACH
CLASS AND SERIES WILL BE FURNISHED BY THE CORPORATION UPON WRITTEN REQUEST
AND WITHOUT CHARGE.

The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>

<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT-- _______ Custodian _______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ______________________
(State)

Additional abbreviations may also be used though not in the above list.

For value received, ______________________________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________________
(Please Print or Typewrite Name and Address Including Postal Zip Code of Assignee)
</TABLE>

of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint__________________________________
____________________________________________________________________

Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.

Dated, _____________________________

____________________________________________________
Notice: THE SIGNATURES TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed: ______________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

NOTICE: The signature to this agreement must correspond with the name as
written upon the face of the Certificate, in every particular, without
alternation or enlargement, or any change whatever.

<PAGE>

EXHIBIT 4.2

APOLLO BIOPHARMACEUTICS, INC.

CUSIP 03759Y 11 0

THIS CERTIFIES THAT, for valued received,

or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. One Warrant initially
entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$.02 par value, of Apollo BioPharmaceutics, Inc., a Delaware corporation (the
"Company") at any time from ______________, 1997 and prior to the Time of
Expiry (as hereinafter defined) upon the presentation and surrender of this
Warrant Certificate with the Election to Purchase Form on the reverse hereof
duly executed, at the corporate office of American Stock Transfer & Trust
Company, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $__________, subject to adjustment (the "Purchase
Price"), in lawful money of the United States of America in cash or by check
made payable to the Warrant Agent for the account of the Company.

This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement") dated
_______________ among the Company, First United Equities Corporation and the
Warrant Agent.

In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.

Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case
of the exercise of less than all the Warrants represented hereby, the Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.

The term "Time of Expiry" shall mean 5:00 p.m. (New York time) on
___________. If such date shall in the Sate of New York be a Saturday,
Sunday or a civic or statutory holiday, then the Time of Expiry shall mean
5:00 p.m. (New York time) the next following day which in the State of New
York is not a Saturday, Sunday or a civic or statutory holiday.

The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such
securities is effective or an exemption thereunder is available. The Company
has covenanted and agreed that it will file a registration statement under
the Federal securities laws, use its best efforts to cause the same to become
effective, to keep such registration statement current, if required under the
Act, while any of the Warrants are outstanding, and deliver a prospectus
which complies with Section 10(a)(3) of the Act to the Registered Holder
exercising this Warrant.

This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment and payment of
any tax or other charge imposed in connection therewith or incident thereto,
for registration of transfer of this Warrant Certificate at such office, a
new Warrant Certificate representing an equal aggregate number of Warrants
will be issued to the transferee in exchange therefor, subject to limitations
provided in the Warrant Agreement.

Subject to the provisions of the Warrant Agreement and commencing
[one year from the date of the Prospectus], this Warrant is subject to
redemption by the Company, on not less than 30 days' prior written notice, at
a price of $0.25 per Warrant, if the average of the closing bid prices of the
Common Stock for any period of 20 consecutive business days ending within 10
business days of the date on which the notice of redemption is given shall
have exceeded $_________ per share (subject to adjustment). For these
purposes, the closing bid price of the Common Stock shall be determined by
the closing bid price, as reported by the Nasdaq Stock Market ("Nasdaq"), so
long as the Company's Common Stock is quoted thereon or, if the Company's
Common Stock is listed on a securities exchange, by the last reported sales
price. The Company's redemption rights will be in effect only if the Common
Stock is wither quoted on Nasdaq or listed on a securities exchange. The
Holder of this Warrant will automatically forfeit the Holder's right to
purchase the shares of Common Stock issuable upon exercise of this Warrant
unless the Warrant is exercised before it is redeemed. A notice of

<PAGE>

redemption will be mailed no later than 30 days before the date fixed for
redemption. The notice of redemption shall specify the redemption price, the
date fixed for redemption, the place where the Warrant certificate shall be
delivered and the date of expiration of the right to exercise the Warrant.

Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in
the Warrant Agreement.

The Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to its conflict
of law principles.

This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.

IN WITNESS WHEREOF, the Company has duly executed this Warrant Certificate
manually or in facsimile by two of its officers thereunto duly authorized and
a facsimile of its corporate seal to be imprinted hereon.

By: /s/ John J. Curry By: /s/ Katherine Gordon
-------------------------- --------------------------

<PAGE>

ELECTION TO PURCHASE

To Be Executed by the Registered Holder in Order to Exercise Warrants

The undersigned Registered Holder hereby irrevocably elects to exercise
________________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
[please print or type name and address]

and be delivered to

and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such warrants be registered in the name of, and delivered to, the Registered
Holder at the address stated below.

<PAGE>

The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below.

(Name of NASD Member)

Dated:____________ X______________________________________
_______________________________________
_______________________________________
Address

_______________________________________
Taxpayer Identification Number

_______________________________________
Signature Guaranteed

<PAGE>

ASSIGNMENT

To Be Executed by the Registered Holder in Order to Assign Warrants

FOR VALUE RECEIVED, ________________________________ hereby sells, assigns
and transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

_______________________________________________________________________________
of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints _________________________________
Attorney to transfer this Warrant Certificate on the books of the Company,
with full power of substitution in the premises.

Dated:____________ X______________________________________
Signature Guaranteed:

THE SIGNATURE TO THE ASSIGNMENT OR THE ELECTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF
THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE
OR MIDWEST STOCK EXCHANGE. IF THE ASSIGNMENT OF THE FORM IS SIGNED PURSUANT
TO A POWER OF ATTORNEY, SUCH POWER OF ATTORNEY MUST BE ATTACHED HERETO.

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to inclusion in this Registration Statement on Form SB-2 of
our report dated July 15, 1996 (with respect to Note A December 20, 1996). We
also consent to the reference to our firm under the caption "Experts" in the
Prospectus.

RICHARD A. EISNER & COMPANY, LLP

Cambridge, Massachusetts
February 4, 1997