CURAGEN CORP, S-1/A, 1998-03-02

CURAGEN CORP
S-1/A, 1998-03-02
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1998

REGISTRATION NO. 333-38051
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 6

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

CURAGEN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 8731 06-1331400
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)

(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

555 LONG WHARF DRIVE, 11TH FLOOR
NEW HAVEN, CONNECTICUT 06511
(203) 401-3330
(203) 401-3333 FACSIMILE
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

JONATHAN M. ROTHBERG, PH.D.
CHIEF EXECUTIVE OFFICER, PRESIDENT AND
CHAIRMAN OF THE BOARD
CURAGEN CORPORATION
555 LONG WHARF DRIVE, 11TH FLOOR
NEW HAVEN, CONNECTICUT 06511
(203) 401-3330
(203) 401-3333 FACSIMILE
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

COPIES TO:

JONATHAN L. KRAVETZ, ESQ. KEITH F. HIGGINS, ESQ.
STANFORD N. GOLDMAN, JR., ESQ. ROPES & GRAY
MINTZ, LEVIN, COHN, FERRIS, ONE INTERNATIONAL PLACE
GLOVSKY AND POPEO, P.C. BOSTON, MASSACHUSETTS 02110
ONE FINANCIAL CENTER (617) 951-7000
BOSTON, MASSACHUSETTS 02111 (617) 951-7050 FACSIMILE
(617) 542-6000
(617) 542-2241 FACSIMILE

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

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

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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

<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)

Issued March 2, 1998

2,750,000 Shares

LOGO
CuraGen Corporation

COMMON STOCK

----------

ALL OF THE 2,750,000 SHARES OF COMMON STOCK ARE BEING SOLD BY CURAGEN
CORPORATION (THE "COMPANY"). PRIOR TO THIS OFFERING, THERE HAS BEEN NO
PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE
BETWEEN $10.00 AND $12.00. SEE "UNDERWRITERS" FOR A DISCUSSION
OF THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.

BIOGEN, INC. ("BIOGEN") AND GENENTECH, INC. ("GENENTECH"), TWO OF THE
COMPANY'S COLLABORATIVE PARTNERS AND EXISTING STOCKHOLDERS, HAVE AGREED
TO PURCHASE AN AGGREGATE OF $10,000,000 OF THE COMPANY'S COMMON
STOCK IN PRIVATE PLACEMENTS CONCURRENT WITH THIS OFFERING AT A
PRICE PER SHARE EQUAL TO THE PRICE TO PUBLIC BELOW. THE
SALE OF SUCH SHARES OF COMMON STOCK WILL NOT BE
REGISTERED IN THIS OFFERING. SEE "BUSINESS--
RESEARCH COLLABORATIONS."

----------

THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ

NATIONAL MARKET UNDER THE TRADING SYMBOL "CRGN."

----------

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 8 OF THIS PROSPECTUS.

----------

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.

----------

PRICE $ A SHARE

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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share................................... $ $ $
Total(3).................................... $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $1,100,000.
(3) The Company has granted to the Underwriters an option, exercisable within
30 days of the date hereof, to purchase up to an aggregate of 412,500
additional Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ and $ , respectively. See "Underwriters."

----------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Ropes & Gray, counsel for the Underwriters. It is expected that delivery of
the Shares will be made on or about , 1998 at the office of Morgan Stanley
& Co. Incorporated, New York, N.Y., against payment therefor in immediately
available funds.

----------

MORGAN STANLEY DEAN WITTER

LEHMAN BROTHERS

BEAR, STEARNS & CO. INC.

, 1998
<PAGE>

[GRAPHICAL DEPICTION OF THE COMPANY'S GENOMICS TECHNOLOGY PLATFORM]

THE COMPANY'S TECHNOLOGIES AND DATABASES ARE STILL IN EARLY STAGES OF DEVELOP-
MENT. THE COMPANY HAS RECENTLY BEGUN TO GENERATE REVENUE FROM ITS
GENECALLING(TM) AND PATHCALLING(TM) TECHNOLOGIES. THE HITCALLING(TM) TECHNOL-
OGY IS NOT EXPECTED TO BE AVAILABLE FOR COMMERCIALIZATION UNTIL LATER IN 1998
AND HAS NOT BEGUN TO GENERATE REVENUE. THERE CAN BE NO ASSURANCE THAT THE COM-
PANY WILL SUCCEED IN COMMERCIALIZING ITS TECHNOLOGIES, PROCESSES AND INFORMA-
TION SYSTEMS.
<PAGE>

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREBY
SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

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

UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 4
Risk Factors........................ 8
Use of Proceeds..................... 21
Dividend Policy..................... 21
Capitalization...................... 22
Dilution............................ 23
Selected Financial Data............. 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 25
Business............................ 30
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management.......................... 53
Certain Transactions................ 61
Principal Stockholders.............. 63
Description of Capital Stock........ 65
Shares Eligible for Future Sale..... 69
Underwriters........................ 71
Legal Matters....................... 72
Experts............................. 72
Additional Information.............. 73
Glossary............................ 74
Index to Financial Statements....... F-1
</TABLE>

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

The Company intends to furnish to its stockholders annual reports containing
audited financial statements and an opinion thereon expressed by independent
accountants and quarterly reports for the first three quarters of each fiscal
year containing interim financial information.

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THIS OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

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

In this Prospectus, the terms the "Company" or "CuraGen" shall mean CuraGen
Corporation. The Company's corporate headquarters are located at 555 Long
Wharf Drive, New Haven, Connecticut 06511, and its telephone number is (203)
401-3330.

GeneScape(R) and OGI(R) are trademarks of the Company which have been
registered with the United States Patent and Trademark Office.
GeneCalling(TM), PathCalling(TM), HitCalling(TM), CuraTools(TM), CuraShop(TM),
QEA(TM), MIM(TM), CombiGen(TM), Niagara(TM), (Greek Mu)Niagara(TM),
MicroNiagara(TM) and NanoNiagara(TM) are trademarks or service marks of the
Company for which registration applications have been filed with the United
States Patent and Trademark Office. All other trademarks or trade names
referred to in this Prospectus are the property of their respective owners.

3
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth
under "Risk Factors" and elsewhere in this Prospectus. A Glossary of technical
terms used in this Prospectus appears at page 74 of this Prospectus.

THE COMPANY

CuraGen Corporation ("CuraGen" or the "Company") is pioneering the systematic
application of genomics to accelerate the discovery and development of
therapeutic and agricultural products. CuraGen's fully-integrated genomics
technologies, processes and information systems are designed to generate
rapidly comprehensive information about gene expression, biological pathways
and the potential drugs that affect these pathways, each on a scale not
previously undertaken. The Company believes that it can overcome the
limitations of competing technologies, processes and databases and can condense
key steps in gene-based drug discovery and development.

The Company's drug discovery platform has three primary systems: the
GeneCalling system for comprehensive gene expression analysis and gene
discovery; the PathCalling system for discovery of the roles of genes and the
proteins they encode in biological pathways; and the HitCalling system for
identification of small molecule drug candidates. The GeneCalling, PathCalling
and HitCalling systems are designed to use proprietary technologies to overcome
current limitations of gene-based drug discovery. In contrast to other gene
expression methods used to identify disease-related genes that may not detect
previously undiscovered genes or genes expressed at low levels, GeneCalling has
been designed to measure 95% of the genes expressed in any cell, including
novel genes and those expressed at the level of a single copy per cell.
GeneCalling generates multiple fragments per gene for enhanced reproducibility,
precision and fault-tolerance. In order to validate proteins as drug targets,
the Company has designed PathCalling to replace cumbersome protein-by-protein
research methods with a process that tests simultaneously for interactions
between billions of combinations of proteins. PathCalling assembles these
interactions into a database of biological pathways to link a disease-related
protein with its biological role. HitCalling is being designed to screen
thousands of these proteins simultaneously against hundreds of thousands of
potential drugs, building a database of targets and drug candidates to
accelerate drug discovery. The Company has unified its GeneCalling and
PathCalling technologies, processes and databases under its GeneScape
bioinformatics operating system to integrate all aspects of process management,
data analysis and visualization. GeneScape provides an easy-to-use, web-based
interface to the Company's technology platform. Customers can access the
GeneScape interface via the internet, using any standard web-browser, such as
Netscape Navigator or Microsoft Internet Explorer. GeneScape's architecture
allows researchers interactive, remote access to the Company's genomics
databases and technologies to meet their individual discovery and development
needs. GeneScape also includes CuraTools, a full-featured bioinformatics
software suite for further gene and protein characterization.

CuraGen believes its technology platform will facilitate the discovery and
development of highly specific and effective drugs aimed at a variety of
complex diseases such as cardiovascular disease, stroke, cancer and metabolic
disorders. In addition, the Company believes its GeneCalling and PathCalling
systems are well-positioned to predict the efficacy and safety of drug
candidates currently in pharmaceutical development pipelines and to review the
performance and side effects of drugs already on the market. This
pharmacogenomics approach can aid in the development of more effective, safer
drugs and identify more appropriate patient populations.

4
<PAGE>

the information generated. The GeneCalling and PathCalling systems are
currently operational, and the Company has already begun to populate the
GeneCalling and PathCalling databases from internal research programs and
research collaborations, as well as from publicly available databases. The
HitCalling system is expected to be operational later in 1998 and incorporated
into the Company's GeneScape operating system at that time. This database is
expected to be available as a commercial product in 1999. The Company has
designed the three systems as an integrated platform to enable gene discovery,
drug target validation and high-throughput screening of drug candidates in a
highly efficient and cost-effective manner.

CuraGen's goal is to establish its fully-integrated technologies and
GeneScape operating system as the preferred platform for genomics and to
pursue, both internally and through collaborations, a broad portfolio of
research programs for drug discovery, drug development and pharmacogenomics.
During the next five years, the Company intends to analyze systematically the
genetic basis of many common diseases in order to identify potential
therapeutic proteins, targets and small molecule drug candidates. CuraGen is
marketing its genomics technology and information to pharmaceutical,
biotechnology and agricultural companies through research collaborations and
database subscriptions. Research collaborations will generally involve the
application of CuraGen's technologies to a collaborator's projects and will
include support services required to characterize gene and target discoveries.
Other research collaborations may provide access to complementary technologies.
Database subscriptions will provide subscribers with access to CuraGen's
GeneCalling, PathCalling and HitCalling databases. The Company believes these
collaborations and subscription arrangements will establish milestone and
royalty-based revenues from products emerging from the drug development
programs of multiple partners, as well as additional product development
opportunities. The Company's databases are in early stages of development,
however, and there can be no assurance that the Company will succeed in
commercializing its databases or that collaborators or subscription partners
will be successful in using the Company's technologies and information to
develop and commercialize new drugs.

To date, CuraGen has entered into agreements with Pioneer Hi-Bred
International, Inc. ("Pioneer Hi-Bred"), Biogen, Genentech and ArQule, Inc.
("ArQule"). In May 1997, CuraGen and Pioneer Hi-Bred established a research
collaboration agreement. Pioneer Hi-Bred made a $7.5 million investment in the
Company and, subject to certain conditions, may fund up to $18.5 million in
research at the Company to use GeneCalling to identify genes responsible for
agricultural seed product performance. In October 1997, CuraGen and Biogen
established a research collaboration and database subscription arrangement to
discover novel genes and therapeutics. Biogen agreed to purchase $5 million of
Common Stock (the "Biogen Shares") in a private placement at the initial public
offering price and to provide a $10 million loan facility, convertible at
CuraGen's option into Common Stock. Biogen may, subject to certain conditions,
provide up to $18.5 million in research funding and subscription payments under
the agreement. Biogen will provide milestone payments of up to $18.5 million
for each therapeutic product that attains certain development and
commercialization milestones and will pay royalties based on future product
sales. In November 1997, CuraGen and Genentech established a research
collaboration and database subscription arrangement to discover novel genes and
therapeutics. Genentech agreed to purchase $5 million of Common Stock (the
"Genentech Shares") in a private placement at the initial public offering price
and, subject to certain conditions, may provide up to $26 million in the form
of a loan facility, convertible at CuraGen's option into CuraGen Non-Voting
Common Stock (subject to certain limitations). Genentech may provide up to $24
million in research funding and subscription payments under the agreement.
Genentech will provide milestone payments for each product that is developed
under a license and attains development and commercialization milestones and
will pay royalties based on future product sales. In addition, in January 1998,
the Company and ArQule entered into a research collaboration for the discovery
of novel therapeutics. Under the collaborative agreement, ArQule's libraries of
diverse, small organic, compounds will be screened against protein targets
using CuraGen's CombiGen technology to identify hits and to populate the
HitCalling database.

CuraGen has also used its GeneCalling and PathCalling systems in its internal
programs in areas including cardiovascular disease, stroke, cancer and
metabolic disorders, has discovered thirteen disease-related genes and has
filed five patent applications relating to these discoveries.

5
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company...... 2,750,000 shares
Common Stock to be outstanding after this
offering................................ 12,621,986 shares(1)
Use of Proceeds.......................... The Company plans to use approxi-
mately $10 million of the net pro-
ceeds for capital expenditures and
$1,750,000 (plus dividends of ap-
proximately $200,000) to redeem all
of the Series B Preferred Stock. The
balance of the net proceeds will be
used for research and development,
including internal discovery pro-
grams, the further development of
the Company's GeneCalling,
PathCalling and HitCalling data-
bases, and working capital and gen-
eral corporate purposes. See "Use of
Proceeds."
Nasdaq National Market Symbol............ CRGN
</TABLE>

- --------
(1) Based on 8,871,987 shares of Common Stock outstanding on December 31, 1997
and assuming the issuance of the 454,545 Biogen Shares, the 454,545
Genentech Shares and 90,909 shares of Common Stock to be issued to the
University of Florida Research Foundation, Inc. (the "University of
Florida Shares") at an assumed initial public offering price of $11.00 per
share. Excludes 1,663,884 and 1,583,866 shares of Common Stock reserved
for issuance upon the exercise of stock options and warrants,
respectively, outstanding on December 31, 1997, at weighted average
exercise prices of $4.18 and $4.12 per share, respectively. Also excludes
an aggregate of 20,000 shares of Common Stock issuable upon the exercise
of stock options granted to non-employee directors after December 31,
1997, at the initial public offering price.

Unless otherwise indicated, all share and per share data in this Prospectus
have been adjusted to reflect: (i) the amendment and restatement of the
Company's Certificate of Incorporation (as amended and restated, the "Restated
Certificate"), to be filed and effective upon the closing of this offering, to,
among other things, (a) increase the number of authorized shares of Common
Stock from 25,000,000 shares to 50,000,000 shares, (b) decrease the number of
authorized shares of Preferred Stock from 7,500,000 to 5,000,000 shares and
(c) authorize 3,000,000 shares of Non-Voting Common Stock; (ii) the conversion
upon the closing of this offering of all outstanding shares of the Company's
Series A Convertible Preferred Stock, Series C Convertible Preferred Stock,
Series D Convertible Preferred Stock and Series E Convertible Preferred Stock
into an aggregate of 3,418,635 shares of Common Stock (the "Automatic
Conversion"); (iii) the redemption upon the closing of this offering of all of
the 175,000 outstanding shares of the Company's Series B Redeemable Preferred
Stock (the "Series B Preferred Stock"); (iv) the termination upon the closing
of this offering of certain redemption rights relating to 291,875 shares of
Redeemable Common Stock (the "Redeemable Common Stock") described in Note 6 of
Notes to Financial Statements; and (v) the issuance in private placements of
the 454,545 Biogen Shares, the 454,545 Genentech Shares and the 90,909
University of Florida Shares at an assumed initial public offering price of
$11.00 per share. Except as otherwise indicated, the information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option. The
number of shares of Common Stock issuable upon the Automatic Conversion is
subject to a de minimis increase under certain circumstances. See "Description
of Capital Stock--Preferred Stock." As used in this Prospectus, references to
"Biogen" include Biogen, Inc. and its wholly-owned subsidiary, Biotech
Manufacturing Limited.

6
<PAGE>

SUMMARY FINANCIAL DATA

The summary financial data set forth below should be read in conjunction
with, and are qualified by reference to, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's audited
Financial Statements and related notes appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1996(1) 1997
----------- ---------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................. $ 1,581,175 $4,422,947 $ 5,896,543
Operating expenses:
Grant research........................ 1,122,158 3,065,140 4,615,886
Collaborative research and
development.......................... 344,217 450,895 5,126,660
General and administrative............ 961,815 1,140,325 3,481,251
----------- ---------- -----------
Total operating expenses............ 2,428,190 4,656,360 13,223,797
----------- ---------- -----------
Loss from operations.................... (847,015) (233,413) (7,327,254)
Other income (expenses), net............ (241,590) (355,722) 105,244
----------- ---------- -----------
Net loss................................ (1,088,605) (589,135) (7,222,010)
Preferred dividends..................... -- (17,106) (68,424)
----------- ---------- -----------
Net loss attributable to common stock-
holders................................ $(1,088,605) $ (606,241) $(7,290,434)
=========== ========== ===========
Net loss per share attributable to com-
mon stockholders....................... $ (0.22) $ (0.12) $ (0.92)
=========== ========== ===========
Weighted average number of common shares
outstanding(2)......................... 4,915,087 5,097,073 7,888,383
=========== ========== ===========
Pro forma net loss per share
attributable to common
stockholders(2)........................ $ (0.12)
==========
Pro forma weighted average number of
common shares outstanding(2)........... 5,099,598
==========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------
ACTUAL AS ADJUSTED(3)
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 17,417,161 $ 53,530,219
Total assets....................................... 26,519,029 61,548,836
Total long-term liabilities........................ 4,375,125 4,375,125
Redeemable Common Stock............................ 3,940,312 --
Series B Preferred Stock........................... 1,459,196 --
Accumulated deficit................................ (10,511,023) (10,511,023)
Stockholder's equity............................... 13,682,175 53,277,294
</TABLE>

- --------
(1) During the year ended December 31, 1996, the Company completed its
development stage activities with the signing of its first collaborative
research agreement and commenced its planned principal operations.
(2) For an explanation of the calculation of weighted average number of common
shares outstanding and pro forma weighted average number of common shares
outstanding, see Note 1 of Notes to Financial Statements.
(3) As adjusted to reflect the pro forma capitalization of the Company, giving
effect to the redemption of the 175,000 outstanding shares of Series B
Preferred Stock, the termination of certain redemption rights relating to
291,875 shares of Redeemable Common Stock and the sale of the 2,750,000
shares of Common Stock offered by the Company hereby, the Biogen Shares,
the Genentech Shares and the University of Florida Shares at an assumed
initial public offering price of $11.00 per share and the receipt of the
estimated net proceeds therefrom.

7
<PAGE>

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. The following factors, in addition to the other information
contained in this Prospectus, should be carefully considered in evaluating the
Company and its business before purchasing the shares of Common Stock offered
hereby. This Prospectus contains forward-looking statements. For this purpose,
any statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the foregoing,
the words "believes," "anticipates," "plans," "expects," "intends" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth below and elsewhere
in this Prospectus.

EARLY STAGE OF DEVELOPMENT; HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE
PROFITS

The Company has had a limited operating history and is at an early stage of
development. For the years ended December 31, 1997, 1996 and 1995, the Company
had net losses attributable to common stockholders of $7,290,434, $606,241 and
$1,088,605 respectively, and as of December 31, 1997, the Company had an
accumulated deficit of $10,511,023. To date, a significant portion of the
Company's revenue has come from United States government grants. The
development of the Company's technologies, including the Company's expansion
of its GeneCalling and PathCalling database development efforts, together with
the development of its HitCalling database, will require substantial increases
in expenditures over the next several years. In addition, the Company expects
to incur substantial increases in expenditures in connection with its internal
research programs. As a result, the Company currently expects to incur
operating losses at least through 2000 and the Company may never achieve
significant revenues or profitability. The Company's ability to achieve
significant revenues or profitability will depend upon its ability to obtain
research collaborators and subscribers for its GeneCalling, PathCalling and
HitCalling databases and related products and services. The Company currently
has four research collaborations, two of which include database subscription
arrangements, and there can be no assurance that the Company will be able to
obtain any additional research collaborations or enter into any additional
subscription arrangements for such databases and related products and
services.

The Company's technologies and databases are still in the early stages of
development and the HitCalling technology is not expected to be available for
commercialization until later in 1998. There can be no assurance that the
Company's technologies will continue to be successfully developed or
commercialized or that any therapeutic, agricultural or diagnostic products
discovered or developed through the utilization of such technologies will
prove to be commercially useful, meet applicable regulatory standards in a
timely manner or at all, successfully compete with other technologies and
products, avoid infringing the proprietary rights of others, be manufactured
in sufficient quantities or at reasonable costs or be marketed successfully.
The Company expects that it will be a number of years, if ever, before the
Company will recognize revenue from therapeutic, agricultural or diagnostic
product sales or royalties.

TECHNOLOGICAL UNCERTAINTY AND PRODUCT DEVELOPMENT RISK

The Company has developed and intends to continue to develop its
GeneCalling, PathCalling and HitCalling databases and related technology for
the identification of novel genes, biological pathways and drug candidates
useful for the discovery and development of therapeutic, agricultural and
diagnostic products. These technologies involve new and unproven approaches.
Failure to identify genes, biological pathways and drug candidates useful for
the discovery and development of therapeutic, agricultural and diagnostic
products could have a material adverse effect on the Company. The Company's
technology and development focus is primarily directed toward complex diseases
as well as agronomic traits. There is limited scientific understanding
generally relating to the role of genes in these diseases and traits, and few
products based on gene discoveries have been developed and commercialized.
Accordingly, even if the Company is successful in identifying genes,
biological pathways or drug candidates associated with specific diseases or in
identifying genes associated with certain agronomic traits,

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there can be no assurance that these discoveries will lead to the development
of therapeutic, agricultural or diagnostic products. To date, the Company has
not developed or commercialized any such products based on its technological
methods.

In addition, the success of the Company's GeneCalling, PathCalling and
HitCalling databases and its related products and services will depend upon
the Company's ability to generate data concerning gene expression, biological
pathways and drug candidates using software tools. The Company's database
products are complex and sophisticated and could contain design defects or
software errors that are difficult to detect. There can be no assurance that
errors will not be found in the Company's current and future products, if any.

The Company's strategy of using a systematic analysis of the genome to
discover and develop novel therapeutic, agricultural and diagnostic products
is unproven. The Company's GeneCalling, PathCalling and HitCalling databases
and related products and services represent a business for which there is
little precedent. There can be no assurance that the Company's methods,
processes and related services will be accepted. To date, the Company has
entered into research collaborations with Pioneer Hi-Bred and ArQule and
research collaboration and database subscription arrangements with Biogen and
Genentech. There can be no assurance that the Company will be able to
establish any additional research collaborations or subscription arrangements.
The Company's ability to achieve and sustain profitability depends on
attracting additional collaborators and subscribers for its databases and
related products and services. In addition, the Company has limited experience
in providing software-based products or services. The specialized nature and
price of the Company's databases and related products and services are such
that there are a limited number of pharmaceutical, biotechnology and
agricultural companies that are potential customers for such products and
services. Additional factors that may affect demand for the Company's products
and services include the extent to which the Company's potential collaborators
and subscribers determine to conduct in-house gene research, the success of
competitors offering similar services at competitive prices, the ability of
the Company to service satisfactorily its collaborators and subscribers, the
extent to which the gene expression analyses, as well as the identification of
biological pathways, drug candidates and related information contained in the
Company's databases, are made public by or are the subject of patents issued
to others, and the emergence of technological innovations that are more
advanced than those used by and available to the Company.

The building of the Company's GeneCalling and PathCalling databases is still
in the early stages. In addition, the Company has not yet completed the
development of its CombiGen technology to enable it to conduct high-throughput
screening of protein targets, and has not yet started to populate its
HitCalling database. There can be no assurance that the Company will be able
to populate its GeneCalling and PathCalling databases in a timely manner or
develop its CombiGen technology or its HitCalling database successfully or
that, if completed or developed successfully, such technology or database will
be accepted by, or useful to, the Company's collaborators or subscribers.

FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING

The Company's comprehensive approach to developing therapeutic products
through the application of genomics has required it to establish a substantial
scientific infrastructure. The Company has used substantial amounts of cash to
date and expects capital and operating expenditures to increase over the next
several years as it expands its infrastructure and its research and
development activities, including the completion of its PathCalling database
and the development of its HitCalling database and CombiGen technology. The
Company's future capital requirements will depend on many factors, including
progress of its research programs, the number and breadth of these programs,
the ability of the Company to attract collaborators for or subscribers to its
products and services, achievement of milestones under certain of the
Company's existing collaborations, the ability of the Company to establish and
maintain additional collaborations, and the progress of the Company's
collaborators. These factors also include the level of the Company's
activities relating to commercialization rights it has retained in its
collaborations, competing technological and market developments, the costs
involved in enforcing patent claims and other intellectual property rights and
the costs and timing of regulatory approvals. The Company expects that it will
require significant additional financing in the future, which it may seek to
raise

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through public or private equity offerings, debt financings or additional
collaborations and licensing arrangements. There can be no assurance that
additional financing will be available when needed, or, if available, that
such financing will be obtained on terms favorable to the Company or its
stockholders. To the extent that the Company raises additional capital by
issuing equity securities, ownership dilution to stockholders will result. To
the extent that the Company raises additional funds through collaborations and
licensing arrangements, the Company may be required to relinquish rights to
certain of its technologies or product candidates, or to grant licenses on
terms that are not favorable to the Company, either of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. In the event that adequate funds are not available, the
Company's business, financial condition and results of operations would be
materially, adversely affected. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

RELIANCE ON RESEARCH COLLABORATIONS

The Company's strategy for development and commercialization of therapeutic,
agricultural and diagnostic products based upon its discoveries depends upon
the formation of various research collaborations and licensing arrangements.
To date, the Company has four research collaborations. The Company and Pioneer
Hi-Bred have entered into a research collaboration, which Pioneer Hi-Bred has
the right to terminate at any time upon a breach by the Company and on three
months' written notice, at any time after May 2000. The Company and Biogen
have entered into a research collaboration that Biogen has the right, at any
time after October 1999, to terminate, at its sole discretion, on six months'
written notice. The Company and Genentech have also entered into a research
collaboration that Genentech has the right to terminate, at its sole
discretion, on one month's prior written notice (i) in May 1999 subject to its
payment of a termination fee or forgiveness of the portion of the loan
facility outstanding on such termination date and (ii) on or after November
2000. The Company and ArQule entered into a research collaboration in January
1998, for an initial term of six months, which will be automatically extended
for successive six-month terms until terminated by either party on at least 30
days' notice prior to the end of a term. There can be no assurance that these
collaborations will not be terminated at such times or earlier upon a material
breach by the Company. Any such termination could have a material adverse
effect on the Company's business, financial condition and results of
operation. There can be no assurance that the Company will be able to maintain
or expand existing collaborations or establish additional research
collaborations or licensing arrangements necessary to develop and
commercialize therapeutic, agricultural or diagnostic products resulting from
the Company's technology, that any such collaborations or licensing
arrangements will be on terms favorable to the Company or that the current or
any future collaborations or licensing arrangements ultimately will be
successful. Under the Company's current strategy, and for the foreseeable
future, the Company does not expect to develop or market therapeutic,
agricultural or diagnostic products on its own. As a result, the Company will
be dependent on collaborators for the preclinical study and clinical
development of therapeutics and for regulatory approval, manufacturing and
marketing of therapeutic, agricultural and diagnostic products resulting from
the application of the Company's technology. The agreements with collaborators
typically will allow them significant discretion in electing whether to pursue
such activities. The Company cannot control the amount and timing of resources
its collaborators devote to the Company's programs or potential products. If
any of the Company's collaborators were to breach or terminate its agreement
with the Company or otherwise fail to conduct collaborative activities
successfully and in a timely manner, the preclinical or clinical development
or commercialization of product candidates or research programs would be
delayed or terminated. Any such delay or termination could have a material
adverse effect on the Company's business, financial condition and results of
operations.

The Company's agreements with its collaborators generally have been
structured and the Company intends to continue to structure such agreements so
that, after a period of initial exclusivity and unless a collaborator elects
to pay for an extended period of exclusivity, the research data developed
during the collaboration will become available for subscribers to the
Company's general databases. There can be no assurance that any additional
collaborators of the Company will agree to such provisions. If the Company is
unable to obtain rights to this data, it may have to change its collaboration
strategy and rely more heavily on its own internal discovery programs to fill
its subscription databases.

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The Company intends to rely on certain of its collaborators for significant
funding in support of its research efforts. If funding from one or more of its
collaborative programs were reduced or terminated, the Company would be
required to devote additional internal resources to product development, scale
back or terminate certain research development programs or seek alternative
collaborators. See "--Future Capital Requirements; Uncertainty of Additional
Funding" and "Business--Research Collaborations." Disputes may arise in the
future with respect to the ownership of rights to any technology developed
with collaborators. These and other possible disagreements between
collaborators and the Company could lead to delays in the collaborative
research, development or commercialization of certain therapeutic,
agricultural or diagnostic products, or could require or result in litigation
or arbitration to resolve. Any such event could have a material adverse effect
on the Company's business, financial condition and results of operations.

COMPETITION

The Company faces, and will continue to face, intense competition from
pharmaceutical, biotechnology and diagnostic companies, as well as academic
and research institutions and government agencies. The Company is subject to
significant competition from organizations that are pursuing technologies and
products that are the same as or similar to the Company's technology and
products. Many of the organizations competing with the Company have greater
capital resources, research and development staffs and facilities and
marketing capabilities than the Company. In addition, research in the field of
genomics generally is highly competitive. Competitors of the Company in the
genomics area include, among others, public companies such as Affymetrix,
Inc., Human Genome Sciences, Inc., Incyte Pharmaceuticals, Inc. and Millennium
Pharmaceuticals, Inc., as well as private companies and major pharmaceutical
companies. Universities and other research institutions, including those
receiving funding from the federally funded Human Genome Project, also compete
with the Company. The Company's future success will depend in large part on
its maintaining a competitive position in the genomics field. Rapid
technological development by the Company or others may result in products or
technologies becoming obsolete before the Company recovers the expenses it
incurs in connection with their development. Products offered by the Company
could be made obsolete by less expensive or more effective technologies. There
can be no assurance that the Company will be able to make the enhancements to
its technology necessary to compete successfully with newly emerging
technologies. See "Business--Competition."

A number of competitors are attempting to rapidly identify and patent genes
and gene fragments sequenced at random, typically without specific knowledge
of the function of such genes or gene fragments. The Company's competitors may
discover or characterize important genes or gene fragments in advance of the
Company, which events could have a material adverse effect on any related
disease research program of the Company. The Company expects competition to
intensify in genomics research as technical advances are made and become more
widely known. See "Business--Background" and "--Technology Platform."

PATENTS AND PROPRIETARY RIGHTS; THIRD PARTY RIGHTS

The Company's business and competitive position are dependent upon its
ability to protect its GeneCalling, PathCalling and HitCalling proprietary
databases, proprietary software and other proprietary methods and technology.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to obtain and use information that the Company regards as
proprietary. The Company relies on patent, trade secret and copyright law and
nondisclosure and other contractual arrangements to protect such proprietary
information. The Company has filed patent applications for its proprietary
methods and devices for gene expression analysis, and for discovery of
biological pathways and for drug screening for pharmaceutical product
development. As of February 15, 1998, the Company had 17 patent applications
pending covering its technology with the United States Patent and Trademark
Office (the "USPTO"), and had filed several corresponding international and
foreign patent applications. To date, no patents have been issued to the
Company with respect to its technology and there can be no assurance that any
patents will issue. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's proprietary information,
that such information will not be disclosed or that the Company can
effectively protect its rights to unpatented trade secrets or other
proprietary information.

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The Company's commercial success will also depend in part on obtaining
patent protection on gene and protein discoveries for which it or its
collaborators or subscribers discover utility and on products, methods and
services based on such discoveries. The Company has applied for patent
protection on novel mutants of known genes and their uses, partial sequences
of novel proteins and their gene sequences and uses, and novel uses for
previously identified genes discovered by third parties. The Company has
sought and intends to continue to seek patent protection for novel uses for
genes and proteins which may have been patented by third parties. In such
cases, the Company would need a license from the holder of the patent with
respect to such gene or protein in order to make, use or sell such gene or
protein for such use. There can be no assurance that the Company will be able
to acquire such licenses on commercially reasonable terms, if at all. The
Company's patent application filings that result from the identification of
genes associated with the cause or effect of a particular disease generally
seek to protect the genes and encoded proteins if these genes and encoded
proteins are, among other things, novel and non-obvious, as well as
therapeutic, diagnostic and drug screening methods and products, and other
subject matter based upon a gene and its indication. Where information is
discovered on the specific biological pathway in which the protein encoded by
the gene participates, the Company also seeks to protect the newly identified
protein complex as well as the methods for identifying intervention
strategies. Each application typically contains multiple genes discovered for
a particular disease system.

The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including the Company, are generally uncertain and involve complex
legal and factual questions. There can be no assurance that any of the
Company's pending patent applications will result in issued patents, that the
Company will develop additional proprietary technologies that are patentable,
that any patents issued to the Company or its collaborative customers will
provide a basis for commercially viable products or will provide the Company
with any competitive advantages or will not be challenged or circumvented or
invalidated by third parties, or that the patents of others will not have an
adverse effect on the ability of the Company to do business. In addition,
patent law relating to the scope of claims in the technology fields in which
the Company operates is still evolving. The degree of future protection for
the Company's proprietary rights is uncertain. Furthermore, there can be no
assurance that others will not independently develop similar or alternative
technologies, duplicate any of the Company's technologies, or, if patents are
issued to the Company, design around the patented technologies developed by
the Company. In addition, the Company could incur substantial costs in
litigation if it is required to defend itself in patent suits brought by third
parties or if it initiates such suits.

There can be no assurance that patents for the Company's products or methods
will be obtained, or that, if issued, such patents will provide substantial
protection or be of commercial benefit to the Company. The issuance of a
patent is not conclusive as to its validity or enforceability, nor does it
provide the patent holder with freedom to operate without infringing the
patent rights of others. A patent could be challenged by litigation and, if
the outcome of such litigation were adverse to the patent holder, competitors
could be free to use the subject matter covered by the patent, or the patent
holder may license the technology to others in settlement of such litigation.
The invalidation of key patents owned by or licensed to the Company or non-
approval of pending patent applications could increase competition, and result
in a material adverse effect on the Company's business, financial condition
and results of operations. In addition, there can be no assurance that any
application or exploitation of the Company's technology will not infringe
patents or proprietary rights of others or that licenses that might be
required as a result of such infringement would be available on commercially
reasonable terms, if at all. A third party has indicated that it believes the
Company may be required to obtain a license in order to perform certain
processes that the Company uses in the conduct of its business. The Company
believes that if required, such license would be available on commercially
reasonable terms. However, there is no assurance that such license could be
obtained on terms acceptable to the Company or at all.

The Company cannot predict whether its or its competitors' patent
applications will result in the issuance of valid patents. Litigation, which
could result in substantial cost to the Company, may also be necessary to
enforce the Company's patent and proprietary rights and/or to determine the
scope and validity of others' proprietary rights. The Company may participate
in interference proceedings that may in the future be declared by the USPTO to
determine priority of invention, which could result in substantial cost to the
Company. There can be

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no assurance that the outcome of any such litigation or interference
proceedings will be favorable to the Company, that the Company will be able to
obtain licenses to technology that it may require or that, if obtainable,
such technology can be licensed at a reasonable cost.

The public availability of expressed sequence tags ("ESTs") or other
sequence information prior to the time the Company applies for patent
protection on a corresponding full-length or partial gene could adversely
affect the Company's ability to obtain patent protection with respect to such
gene or gene sequences. In addition, certain other groups are attempting to
rapidly identify and characterize genes through the use of gene expression
analysis and other technologies. To the extent any patents issue to other
parties on such partial or full-length genes or uses for such genes, the risk
increases that the sale of potential products, including therapeutics, or
processes developed by the Company or its collaborators may give rise to
claims of patent infringement. Others may have filed and in the future are
likely to file patent applications covering genes or gene products that are
similar or identical to those of the Company. No assurance can be given that
any such patent application will not have priority over patent applications
filed by the Company. Any legal action against the Company or its
collaborators claiming damages and seeking to enjoin commercial activities
relating to the affected products and processes could, in addition to
subjecting the Company to potential liability for damages, require the Company
or its collaborators to obtain a license in order to continue to manufacture
or market the affected products and processes or could enjoin the Company from
continuing to manufacture or market the affected products and processes. There
can be no assurance that the Company or its collaborators would prevail in any
such action or that any license required under any such patent would be made
available on commercially acceptable terms, if at all. The Company believes
that there may be significant litigation in the industry regarding patent and
other intellectual property rights. If the Company becomes involved in such
litigation, it could consume a substantial portion of the Company's managerial
and financial resources.

There is substantial uncertainty concerning the extent to which supportive
data will be required for issuance of patents for human therapeutics. If data
additional to that available to the Company is required, the Company's ability
to obtain patent protection could be delayed or otherwise adversely affected.
Although the USPTO issued new utility guidelines in July 1995 that address the
requirements for demonstrating utility for biotechnology inventions,
particularly for inventions relating to human therapeutics, there can be no
assurance that the USPTO examiners will follow such guidelines or that the
USPTO's position will not change with respect to what is required to establish
utility for gene sequences and products and methods based on such sequences.
Furthermore, the enactment of the legislation implementing the General
Agreement on Tariffs and Trade has resulted in certain changes to United
States patent laws that became effective on June 8, 1995. Most notably, the
term of patent protection for patent applications filed on or after June 8,
1995 is no longer a period of seventeen years from the date of grant. The new
term of United States patents will commence on the date of issuance and
terminate twenty years from the earliest filing date in the United States to
which priority is claimed for the application. Because the time from filing to
issuance of biotechnology patent applications is often more than three years,
a twenty-year term from the claimed United States priority date may result in
a substantially shortened term of patent protection, which may adversely
affect the Company's patent position. If this change results in a shorter
period of patent coverage, the Company's business could be adversely affected
to the extent that the duration and level of the royalties it is entitled to
receive from its strategic partners is based on the existence of a valid
patent.

The Company also relies upon trade secret protection for some of its
confidential and proprietary information that is not subject matter for which
patent protection is being sought. The Company believes that it has developed
proprietary technology, processes and information systems for use in gene
expression and biological pathway discovery, as well as in the identification
of molecular targets for pharmaceutical development, including proprietary
biological protocols, instrumentation, robotics and automation, software and
an integrated bioinformatics system. In addition, the Company has developed a
database of proprietary gene expression patterns and biological pathways which
it updates on an ongoing basis and which can be accessed over the Internet.
The Company has taken security measures to protect its proprietary
technologies, processes, information systems and data and continues to explore
ways to enhance such security. There can be no assurance, however, that such
measures will provide adequate protection for the Company's trade secrets or
other proprietary information. While the Company requires employees, academic
collaborators and consultants to enter into confidentiality and/or non-

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disclosure agreements where appropriate, there can be no assurance that
proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets or disclose
such technology, or that the Company can meaningfully protect its trade
secrets. See "Business--Intellectual Property."

UNCERTAINTIES RELATING TO COMMERCIALIZATION RIGHTS

In the Company's research collaborations, the Company will seek to retain
commercialization rights for the development and marketing of certain
pharmaceutical, agricultural and diagnostic products or services. There can be
no assurance that the Company will be successful in retaining such rights and
no such pharmaceutical, agricultural or diagnostic products or services have
been developed to date by the Company. The Company may seek to commercialize
any such retained rights, as well as any products developed in its internal
development programs, directly or through collaborations with others. To date,
the Company has not initiated significant activities with respect to the
exploitation of any of its retained commercialization rights or any products
developed in its internal development programs. The value of these rights and
products, if any, will be largely derived from the Company's gene expression,
biological pathway and drug screening efforts, the success of which is also
uncertain. See "--Technological Uncertainty and Product Development Risk."
Even if the Company identifies and characterizes relevant disease-related
genes, biological pathways and/or drug candidates, the commercialization of
retained rights and products developed internally requires, in addition to
capital resources, technological, product development, manufacturing,
regulatory, marketing and sales resources that the Company does not currently
possess. There can be no assurance that the Company will be able to develop or
obtain such resources. To the extent that the Company is required to rely on
third parties for these resources, failure to establish and maintain such
relationships could have a material adverse effect on the Company's ability to
realize value from its retained commercialization rights and products
developed internally. If the Company seeks to commercialize retained rights
and products developed internally through joint ventures or research
collaborations, it may be required to relinquish material rights on terms that
may not be favorable to the Company. No agreements concerning any such
arrangements currently exist, and there can be no assurance that the Company
will be able to enter into any such agreements on acceptable terms, if at all,
or that the Company will be able to realize any value from any retained
commercialization rights and products developed internally. See "Business--
CuraGen's Strategy" and "--Research Collaborations."

GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL

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upon a new therapeutic approach, such products may be subject to substantial
additional review by various government regulatory authorities and, as a
result, regulatory approvals may be obtained more slowly than for products
using more conventional technologies.

Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may have adverse effects on the Company's business,
financial condition and results of operations, including withdrawal of the
product from the market. Violations of regulatory requirements at any stage,
including preclinical studies and clinical trials, the approval process or
post-approval, may result in various adverse consequences to the Company,
including the FDA's delay in approval or refusal to approve a product,
withdrawal of an approved product from the market or the imposition of
criminal penalties against the manufacturer and NDA or PLA holder. The Company
has not submitted an investigational new drug application ("IND") for any
product candidate, and no product candidate has been approved for
commercialization in the United States or elsewhere. The Company intends to
rely primarily on its collaborators to file INDs and generally direct the
regulatory approval process. No assurance can be given that the Company or any
of its collaborators will be able to conduct clinical testing or obtain the
necessary approvals from the FDA or other regulatory authorities for any
products. Failure to obtain required governmental approvals will delay or
preclude the Company's collaborators from marketing drugs or diagnostic
products developed by the Company or limit the commercial use of such products
and could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company's research and development activities involve the controlled use
of hazardous materials and chemicals. The Company is subject to federal, state
and local laws and regulations governing the use, storage, handling and
disposal of such materials and certain waste products. Although the Company
believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by federal, state and local
laws and regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
liability could exceed the resources of the Company. See "Business--Government
Regulation."

ATTRACTION AND RETENTION OF KEY EMPLOYEES

The Company is highly dependent on the principal members of its management
and scientific staff, including Dr. Jonathan Rothberg, its Chief Executive
Officer, President and Chairman of the Board, Dr. Gregory Went, its Executive
Vice President. The loss of services of any of these personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has not entered into employment agreements
with Dr. Rothberg, Dr. Went or any of the other principal members of its
management and scientific staff that bind any of them to a specific term of
employment. The Company maintains key person life insurance on the lives of
each of Drs. Rothberg and Went in the amount of $2,000,000. The Company's
future success also will depend in part on the continued services of its key
scientific and management personnel and its ability to attract, hire and
retain additional personnel. There is intense competition for such qualified
personnel and there can be no assurance that the Company will be able to
continue to attract and retain such personnel. Failure to attract and retain
key personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management."

EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH

The Company has recently experienced significant growth in the number of its
employees, the extent of its genomics efforts and database development, its
research programs and collaborations and the scope of its operations. This
growth has placed, and may continue to place, a significant strain on the
Company's management and operations. The Company's ability to manage
effectively such growth will depend upon its ability to strengthen its
management team and its ability to attract and retain skilled employees. The
Company's success will also depend on the ability of its officers and key
employees to continue to implement and improve its operational, management
information and financial control systems and to expand, train and manage its
work force. In addition, the Company must continue to take steps to provide
resources to supports its collaborative

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customers and subscribers as their numbers increase. The Company's inability
to manage growth effectively could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Employees" and "--Facilities."

DEPENDENCE UPON LICENSED TECHNOLOGIES; GOVERNMENT RIGHTS TO FUNDED
TECHNOLOGIES

Certain components of the Company's technologies have been acquired or
licensed from third parties. Changes in such third party agreements, or
termination thereof, could materially adversely affect the Company's research
and development activities. There can be no assurance that the Company will be
able to acquire from third parties or develop new technologies, either alone
or with others. Failure to license or otherwise acquire necessary technologies
could have a material adverse effect on the Company's business, financial
condition and results of operation. In addition, certain of such licenses
impose an obligation on the Company to market the licensed technology to third
parties. A breach by the Company of any such license or other failure by the
Company to maintain rights to such technology could have a material adverse
effect on the Company's business, financial condition and results of
operation.

Under the Company's government grants and agreements, the government has a
statutory right to practice or have practiced and, under certain circumstances
(including inaction on the part of the Company or its licensees to achieve
practical application of the invention or a need to alleviate public health or
safety concerns not reasonably satisfied by the Company or its licensees), to
grant to other parties licenses under, any inventions first reduced to
practice under the government grants and agreements.

DEPENDENCE ON ACADEMIC COLLABORATORS AND SCIENTIFIC ADVISORS

The Company has relationships with collaborators and consultants at academic
and other institutions who conduct research at the Company's request. Such
collaborators and consultants are not employees of the Company. Substantially
all of the Company's collaborators and consultants are employed by employers
other than the Company and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to the
Company. As a result, the Company has limited control over their activities
and, except as otherwise required by its collaboration and consulting
agreements, can expect only limited amounts of their time to be dedicated to
the Company's activities. The Company's ability to discover genes and
biological pathways involved in human disease and commercialize products based
on those discoveries may depend in part on continued collaborations with
researchers at academic and other institutions. There can be no assurance that
the Company will be able to negotiate additional acceptable collaborations
with collaborators or consultants at academic and other institutions or that
its existing collaborations will be successful.

The Company's academic collaborators, consultants and scientific advisors
may have relationships with other commercial entities, some of which could
compete with the Company. The academic collaborators, consultants and
scientific advisors sign agreements which provide for confidentiality of the
Company's proprietary information and of the results of studies. There can be
no assurance that the Company will be able to maintain the confidentiality of
its technology and other confidential information in connection with every
academic collaboration or advisory arrangement, and any unauthorized
dissemination of the Company's confidential information could have a material
adverse effect on the Company's business, financial condition and results of
operations. Further, there can be no assurance that any such collaborator,
consultant or advisor may not enter into an employment or consulting
arrangement with a competitor of the Company. See "Business--CuraGen Internal
Programs."

LENGTHY SALES CYCLE

The ability of the Company to obtain collaborators and subscribers for its
products and services depends in significant part upon the perception that
such products and services can help accelerate drug discovery and development
efforts. The sales cycle is typically lengthy due to the education effort that
is required as well as the need to effectively sell the benefits of the
Company's products and services to a variety of constituencies within
potential collaborators and subscribers, including research and development
personnel and key management. In addition, each subscription and collaboration
will involve the negotiation of agreements containing terms that may be unique
to each subscriber or collaborator. The Company may expend substantial funds
and management effort with no assurance that a database subscription or a
collaboration will result.

16
<PAGE>

VARIATION IN QUARTERLY OPERATING RESULTS

The Company's results of operations historically have fluctuated on a
quarterly basis and can be expected to continue to be subject to quarterly
fluctuations. The Company expects that losses will fluctuate from quarter to
quarter and the such fluctuations may be substantial. Quarterly operating
results can fluctuate as a result of a number of factors, including the
commencement, delay, cancellation or completion of contracts; the timing of
option, license and milestone payments under the Company's agreements; the mix
of services provided; the timing of start-up expenses for new services and
facilities; the timing and integration of acquisitions and changes in
regulations related to the products and services of the Company. The Company
believes that quarterly comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of
future performance. In addition, fluctuations in quarterly results could
affect the market price of the Common Stock in a manner unrelated to the
longer term operating performance of the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

RISKS ASSOCIATED WITH COMMERCIALIZATION OF PROPRIETARY PRODUCTS

Although the Company is not currently developing any potential
pharmaceutical products, should the Company choose to do so, any such products
will require significant research and development and preclinical testing, and
will require extensive clinical testing prior to submission of any regulatory
application for commercial use. Such activities, if undertaken without the
collaboration of others, would require the expenditure of significant funds.
Such potential pharmaceutical products will be subject to the risks of failure
inherent in the development of pharmaceutical products based on new
technologies. These risks include the possibilities that such potential
pharmaceutical products will be found to be unsafe or ineffective or otherwise
fail to receive necessary regulatory clearances; that the products, if safe
and effective, will be difficult to manufacture on a large scale or
uneconomical to market; that proprietary rights of third parties will preclude
the Company or its partners from marketing such products; or that third
parties will market superior or equivalent products. As a result, there can be
no assurance that the Company's research and development activities will
result in any commercially viable products. Clinical trials or marketing of
any such potential pharmaceutical products may expose the Company to liability
claims from the use of such pharmaceutical products. There can be no assurance
that the Company will be able to obtain product liability insurance or, if
obtained, that sufficient coverage can be acquired at a reasonable cost. In
addition, should the Company choose to develop pharmaceutical products
internally, it will have to make significant investments in pharmaceutical
product development, marketing, sales and regulatory compliance resources, and
it will have to establish or contract for the manufacture of products under
the Good Manufacturing Practices of the FDA. There can be no assurance that
the Company will be able to develop or commercialize successfully any
potential pharmaceutical products. Any potential products developed by the
Company's licensees will be subject to the same risks. See "Business--
Government Regulation."

UNCERTAINTY OF PHARMACEUTICAL PRICING, REIMBURSEMENT AND RELATED MATTERS

The Company's business, financial condition and results of operations 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. In certain foreign markets, pricing and profitability of
prescription pharmaceuticals are subject to government control. In the United
States, the Company expects that there will continue to be a number of federal
and state proposals to implement similar government control. In addition,
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical and diagnostic products. Cost
control initiatives could decrease the price that the Company or any of its
subscribers and collaborators receives for any products in the future and may
have a material adverse effect on the Company's business, financial condition
and results of operations. Further, to the extent that cost control
initiatives have a material adverse effect on the Company's subscribers or
collaborators, the Company's ability to commercialize its products and to
realize royalties could be adversely affected.

The ability of the Company and any subscriber or collaborative customer to
commercialize pharmaceutical or diagnostic products may depend in part on the
extent to which reimbursement for the products will be available from
government and health administration authorities, private health insurers and
other third party

17
<PAGE>

payors. Significant uncertainty exists as to the reimbursement status of newly
approved health care products. Third party payors, including Medicare,
increasingly are challenging the prices charged for medical products and
services. 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 labeling approval. There can be no assurance
that any third party insurance coverage will be available to patients for any
products discovered and developed by the Company or its subscribers or
collaborators. If adequate coverage and reimbursement levels are not provided
by government and other third party payors for the Company's products, the
market acceptance of these products may be reduced. Any such reduction may
have a material adverse effect on the Company's business, financial condition,
results of operations and cash flows.

RELIANCE ON UNITED STATES GOVERNMENT FUNDING

To date, the Company's primary source of revenue has been payments under
United States government grants. The government's obligation to make payments
under these grants is subject to annual appropriation by the United States
Congress. It is possible that Congress or the government agencies that
administer the Company's grants will determine to curtail or terminate these
programs. As a result of the Company's existing capital resources and the
expected proceeds of this offering, the Company does not anticipate relying to
a significant extent on United States government grants as a future source of
revenue. However, if the Company's strategy of pursuing strategic
collaborations and database subscriptions is unsuccessful, the failure of
Congress or governmental agencies to fund the Company's grants could have a
material adverse effect on the Company's business, financial condition and
results of operations.

CONTROL BY EXISTING STOCKHOLDERS

Following completion of this offering, the Company's directors, executive
officers and principal stockholders and certain of their affiliates will
beneficially own approximately 67% of the Common Stock. Accordingly, they
collectively will have the ability to determine the election of all of the
Company's directors and to determine the outcome of most corporate actions
requiring stockholder approval, including the merger of the Company with or
into another company, a sale of substantially all of the Company's assets and
amendments to the Company's Certificate of Incorporation. See "Principal
Stockholders."

POTENTIAL ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS

The Company's Board of Directors is authorized to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the Company's
stockholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any shares of
Preferred Stock that may be issued in the future. While the Company has no
present intention to issue shares of Preferred Stock, such issuance, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company. In addition, such Preferred Stock may have other rights, including
economic rights senior to the Common Stock, and, as a result, the issuance
thereof could have a material adverse effect on the market value of the Common
Stock. The Restated Certificate provides for a classified Board of Directors
and members of the Board of Directors may be removed only for cause upon the
affirmative vote of holders of at least a majority of the shares of capital
stock of the Company entitled to vote. Furthermore, the Company is subject to
the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law (the "DGCL"), which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which such person first becomes an
"interested stockholder," unless the business combination is approved in a
prescribed manner. The application of these provisions could have the effect
of delaying or preventing a change of control of the Company. Certain other
provisions of the Restated Certificate could also have the effect of delaying
or preventing changes of control or management of the Company, which could
adversely affect the market price of the Company's Common Stock. See
"Description of Capital Stock."

18
<PAGE>

NO PRIOR TRADING MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Company's
Common Stock and there can be no assurance that an active public market for
the Common Stock will develop or be sustained after this offering. The initial
public offering price will be determined by negotiations between the Company
and the representatives of the Underwriters and may not be indicative of
future market prices. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of the Company's Common Stock could be subject to significant fluctuations in
response to announcements of results of research activities, technological
innovations or new commercial products by the Company or its competitors,
changes in government regulations, regulatory actions, changes in patent laws,
developments concerning proprietary rights, quarterly variations in operating
results, litigation or other events. The stock market has from time to time
experienced extreme price and volume fluctuations that have affected
particularly the market prices for biotechnology companies and that often have
been unrelated to the operating performance of such companies. These broad
market fluctuations may adversely affect the market price of the Company's
Common Stock. See "Underwriters."

SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET
PRICE

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 12,621,986 shares of Common Stock
outstanding, assuming no exercise of options or warrants and assuming no
exercise of the Underwriters' over-allotment option. Of these outstanding
shares of Common Stock, the 2,750,000 shares sold in this offering will be
freely tradeable, without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), unless purchased by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act. The
remaining 9,871,986 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 under the Securities Act. All
officers, directors and certain holders of Common Stock beneficially owning,
in the aggregate, 8,053,235 shares of Common Stock and options and warrants to
purchase 1,318,151 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 180 days after the date of this
Prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated. Upon expiration of the lock-up agreements, all shares of Common
Stock currently outstanding will be immediately eligible for resale, subject
to the requirements of Rule 144. Immediately following the completion of this
offering, holders of 4,327,725 shares of Common Stock and warrants to purchase
388,005 shares of Common Stock will be entitled to certain registration
rights. The Company will also have the obligation to promptly register for
resale on Form S-3 any shares issued to Biogen and Genentech pursuant to the
conversion of their loan facilities. However, pursuant to the lock-up
agreements, 4,242,401 of these shares of Common Stock and warrants to purchase
388,005 shares of Common Stock may not be sold for 180 days after the date of
this Prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated. See "Shares Eligible for Future Sale" and "Description of
Capital Stock--Registration Rights." If such holders, by exercising their
demand rights, cause a large number of shares to be registered and sold on the
public market, such sales could have a material adverse effect on the market
price of the Company's Common Stock. The Company intends to file a
registration statement covering the 3,098,884 shares of Common Stock issued or
reserved for issuance under its stock plans and, upon filing, any shares
subsequently issued under such plans will be eligible for sale in the public
market, subject to compliance with Rule 144 in the case of affiliates of the
Company. The Company is unable to predict the effect that sales may have on
the then prevailing market price of the Common Stock. See "Management--Stock
Option Plans," "Description of Capital Stock" and "Shares Eligible for Future
Sale."

19
<PAGE>

DILUTION

Purchasers in this offering will experience immediate and substantial
dilution in the net tangible book value of the Common Stock from the initial
public offering price. Additional dilution is likely to occur upon exercise of
options and warrants granted by the Company. See "Dilution." The Company's
collaboration agreements with both Biogen and Genentech are structured such
that amounts borrowed by the Company from Biogen and Genentech are, at the
Company's option, convertible into shares of Common Stock and Non-Voting
Common Stock, respectively, based upon a formula that approximates the
prevailing market price of the Common Stock at the time of such conversion.
The Non-Voting Common Stock is convertible into Common Stock (i) at any time,
at Genentech's option, or (ii) upon the sale or the transfer of the Non-Voting
Common Stock to a non-affiliated third party. If the Company borrows money
under these agreements and converts or is forced to convert such amounts into
shares of Common Stock or Non-Voting Common Stock at a time when the market
price of the Common Stock is lower than the initial public offering price, the
Company's stockholders could experience substantial dilution. See "Business--
Research Collaborations."

ABSENCE OF DIVIDENDS

The Company has never paid dividends on its Common Stock and does not intend
to pay any cash dividends on its Common Stock for the foreseeable future. See
"Dividend Policy."

20
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,750,000 shares of
Common Stock offered by the Company hereby are estimated to be $27,032,500
($31,252,375 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $11.00 per share (the midpoint of
the range set forth on the cover page of this Prospectus) and after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by the Company.

The Company expects to use approximately $10 million of the net proceeds for
capital expenditures such as the expansion of research facilities, as well as
the purchase of additional laboratory automation equipment, production
equipment and computer equipment; and $1,750,000 (plus dividends of
approximately $200,000) to redeem, upon the closing of this offering, all of
the 175,000 outstanding shares of the Series B Preferred Stock. See
"Description of Capital Stock--Preferred Stock." The Company expects to use
the balance of the net proceeds for research and development, including
internal discovery programs, the further development of its GeneCalling,
PathCalling and HitCalling databases and working capital and general corporate
purposes. The amounts actually expended for each purpose, other than the
amount expended for the redemption of the Series B Preferred Stock, may vary
significantly depending upon numerous factors, including progress of the
Company's internal programs and research and development projects, the number
and breadth of these programs, achievement of milestones under collaborative
arrangements, the ability of the Company to establish and maintain research
collaborations and database subscriptions, and the progress of the development
efforts of the Company's collaborators and subscribers. These factors also
include the level of the Company's activities relating to commercialization of
rights it has retained in its collaborative arrangements, competing
technological and market developments, the costs involved in the defense,
prosecution and enforcement of patent claims and other intellectual property
rights and the costs and timing of regulatory approvals.

From time to time in the ordinary course of business, the Company evaluates
the acquisition of products, businesses and technologies that complement the
Company's business, for which a portion of the net proceeds may be used.
Currently, however, the Company does not have any understandings, commitments
or agreements with respect to any such acquisitions.

Pending use of the net proceeds for the above purposes, the Company intends
to invest such funds in short- term, interest-bearing, investment-grade
securities.

DIVIDEND POLICY

The Company has never paid dividends on its Common Stock and does not plan
to pay any cash dividends on its Common Stock for the foreseeable future. The
Company currently intends to retain earnings, if any, to finance the
development of its business.

21
<PAGE>

CAPITALIZATION

The following table sets forth, as of December 31, 1997, the actual
capitalization of the Company and the capitalization of the Company as
adjusted to reflect (i) the filing of the Restated Certificate, (ii) the
redemption of the 175,000 outstanding shares of Series B Preferred Stock,
(iii) the termination of certain redemption rights relating to 291,875 shares
of Redeemable Common Stock, (iv) the sale by the Company of the Biogen Shares,
the Genentech Shares and the University of Florida Shares, based upon an
assumed initial public offering price of $11.00 per share, and application of
the net proceeds thereof, and (v) the sale by the Company of 2,750,000 shares
of Common Stock offered hereby, based upon an assumed initial public offering
price of $11.00 per share and after deducting underwriting discounts and
commissions and estimated offering expenses, and application of the estimated
net proceeds thereof. This table should be read in conjunction with the
Company's audited financial statements, including the notes thereto, which
appear elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Obligations under capital leases, including current
portion............................................. $ 5,513,049 $ 5,513,049
Other long-term liabilities.......................... 248,972 248,972
----------- -----------
5,762,021 5,762,021
----------- -----------
Redeemable Common Stock(1)........................... 3,940,312 --
----------- -----------
Stockholders' equity(1)(2)(3):
Preferred Stock, $0.01 par value; 7,500,000 shares
authorized, 175,000 shares issued and outstanding
actual; 5,000,000 shares authorized, no shares
issued and outstanding as adjusted................ 1,459,196 --
Common Stock, $0.01 par value; 25,000,000 shares
authorized, 8,580,112 shares issued and
outstanding actual; 50,000,000 shares authorized,
12,621,986 shares issued and outstanding as
adjusted.......................................... 85,801 126,220
Non-Voting Common Stock, $0.01 par value; no shares
authorized or issued and outstanding actual;
3,000,000 shares authorized, no shares issued and
outstanding as adjusted........................... -- --
Additional paid-in capital......................... 23,861,665 64,875,561
Accumulated deficit................................ (10,511,023) (10,511,023)
Unamortized stock-based compensation............... (1,213,464) (1,213,464)
----------- -----------
Total stockholders' equity........................ 13,682,175 53,277,294
----------- -----------
Total capitalization............................. $23,384,508 $59,039,315
=========== ===========
</TABLE>
- --------
(1) See Notes 4 and 6 of Notes to Financial Statements.
(2) See Note 1 of Notes to Financial Statements.
(3) Excludes 1,663,884 and 1,583,866 shares of Common Stock reserved for
issuance upon the exercise of stock options and warrants, respectively,
outstanding on December 31, 1997, at weighted average exercise prices of
$4.18 and $4.12 per share, respectively. Also excludes an aggregate of
20,000 shares of Common Stock issuable upon the exercise of stock options
granted to non-employee directors after December 31, 1997, at the initial
public offering price.

22
<PAGE>

DILUTION

As of December 31, 1997, the pro forma net tangible book value per share of
Common Stock, assuming the redemption of the Series B Preferred Stock and the
termination of certain redemption rights relating to 291,875 shares of
Redeemable Common Stock, was $1.76. After giving effect to the sale by the
Company of (i) the Biogen Shares, the Genentech Shares and the University of
Florida Shares, based upon an assumed initial public offering price of $11.00
per share, and application of the net proceeds thereof, and (ii) 2,750,000
shares of Common Stock offered hereby, based upon an assumed initial public
offering price of $11.00 per share and after deducting underwriting discounts
and commissions and estimated offering expenses, the pro forma net tangible
book value of the Company at December 31, 1997 would have been $53,217,339, or
$4.22 per share, representing an immediate $6.78 dilution per share to new
investors purchasing shares in this offering. The following table illustrates
such per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $11.00
------
Pro forma net tangible book value per share before this
offering(1)................................................. $1.76
Increase per share attributable to new investors............. 2.46
-----
Pro forma net tangible book value per share after this
offering...................................................... 4.22
------
Dilution per share to new investors(2)......................... $ 6.78
======
</TABLE>
- --------
(1) Pro forma net tangible book value per share of Common Stock is determined
by dividing the Company's pro forma net tangible book value at December
31, 1997 of $15,630,969, by the pro forma number of shares of Common Stock
outstanding, in each case assuming the redemption of the Series B
Preferred Stock and the termination of certain redemption rights relating
to 291,875 shares of Redeemable Common Stock.
(2) Dilution per share to new investors is determined by subtracting pro forma
net tangible book value per share after this offering from the assumed
initial public offering price per share.

The following table sets forth on a pro forma basis as of December 31, 1997,
assuming the redemption of the Series B Preferred Stock and the termination of
certain redemption rights relating to 291,875 shares of Redeemable Common
Stock, the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid by existing
stockholders and to be paid by new investors, based on an assumed initial
public offering price of $11.00 per share and before deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
------------------ ------------------- -------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 8,871,987 70.2% $25,309,328 38.0% $ 2.87
New investors.............. 3,749,999 29.8 41,249,989 62.0 $11.00
---------- ----- ----------- -----
Total.................... 12,621,986 100.0% $66,559,317 100.0%
========== ===== =========== =====
</TABLE>

The foregoing tables assume no exercise of any outstanding stock options or
warrants to purchase Common Stock. At December 31, 1997, there were
outstanding options and warrants to purchase 1,663,884 shares and 1,583,866
shares of Common Stock, respectively, at weighted average exercise prices of
$4.18 and $4.12 per share, respectively. The foregoing tables also exclude an
aggregate of 20,000 shares of Common Stock issuable upon the exercise of stock
options granted to non-employee directors after December 31, 1997, at the
initial pubic offering price. To the extent such options and warrants are
exercised, there will be further dilution to the new investors. See
"Capitalization," "Management--Stock Option Plans," "Description of Capital
Stock" and Note 6 of Notes to Financial Statements.

<PAGE>

SELECTED FINANCIAL DATA

The selected financial data set forth below for each of the three years in
the period ended December 31, 1997 are derived from the Company's balance
sheets as of December 31, 1996 and 1997 and the related audited statements of
operations, of stockholders' equity (deficiency) and of cash flows for the
three years ended December 31, 1995, 1996 and 1997 and notes thereto, which
appear elsewhere in this Prospectus, as audited by Deloitte & Touche LLP,
independent auditors. The selected financial data as of December 31, 1995 and
1994 and for the year ended December 31, 1994 have been derived from the
related financial statements of the Company, which have also been audited by
Deloitte & Touche LLP, independent auditors and which have not been included
in this prospectus. The selected financial data as of December 31, 1993 and
for the year ended December 31, 1993 have been derived from the Company's
unaudited financial statements, which have not been included in this
Prospectus. The selected financial data set forth below should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Company's audited financial statements and related notes appearing elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1993 1994 1995 1996(1) 1997
--------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Grant revenue.......... $ 21,903 $ 257,536 $ 1,581,175 $4,047,947 $ 3,079,994
Collaboration revenue.. -- -- -- 375,000 2,816,549
--------- ----------- ----------- ---------- -----------
Total revenue.......... 21,903 257,536 1,581,175 4,422,947 5,896,543
--------- ----------- ----------- ---------- -----------
Operating expenses:
Grant research......... 41,121 170,115 1,122,158 3,065,140 4,615,886
Collaborative research
and development....... 268,230 477,525 344,217 450,895 5,126,660
General and
administrative........ 250,729 525,671 961,815 1,140,325 3,481,251
--------- ----------- ----------- ---------- -----------
Total operating
expenses.............. 560,080 1,173,311 2,428,190 4,656,360 13,223,797
--------- ----------- ----------- ---------- -----------
Loss from operations.... (538,177) (915,775) (847,015) (233,413) (7,327,254)
Other income (expenses):
Interest income........ 2,786 20,544 12,306 20,848 789,781
Interest expense....... (22,484) (146,275) (253,896) (376,570) (684,537)
--------- ----------- ----------- ---------- -----------
Total other income
(expenses)............ (19,698) (125,731) (241,590) (355,722) 105,244
--------- ----------- ----------- ---------- -----------
Net loss................ (557,875) (1,041,506) (1,088,605) (589,135) (7,222,010)
Preferred dividends..... -- -- -- (17,106) (68,424)
--------- ----------- ----------- ---------- -----------
Net loss attributable to
common stockholders.... $(557,875) $(1,041,506) $(1,088,605) $ (606,241) $(7,290,434)
========= =========== =========== ========== ===========
Net loss per share
attributable to common
stockholders........... $ (0.16) $ (0.22) $ (0.22) $ (0.12) $ (0.92)
========= =========== =========== ========== ===========
Weighted average number
of common shares
outstanding(2)......... 3,488,071 4,681,256 4,915,087 5,097,073 7,888,383
========= =========== =========== ========== ===========
Pro forma net loss per
share attributable to
common
stockholders(2)........ $ (0.12)
==========
Pro forma weighted
average number of
common shares
outstanding(2)......... 5,099,598
==========
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
--------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 368,458 $ 276,890 $ 9,129 $3,298,642 $17,417,161
Working capital
(deficiency)........... 231,511 285,386 (625,015) 2,474,038 14,738,672
Total assets............ 722,898 795,161 1,006,816 5,653,391 26,519,029
Total long-term
liabilities............ 74,583 622,591 897,691 1,908,915 4,375,125
Redeemable Common
Stock.................. -- -- -- -- 3,940,312
Series A Preferred
Stock.................. -- -- -- 1,800,000 --
Series B Preferred
Stock.................. -- -- -- 1,390,772 1,459,196
Accumulated deficit..... (569,767) (1,611,272) (2,699,878) (3,289,013) (10,511,023)
Stockholders' equity
(deficiency)........... 528,233 (147,996) (1,091,382) 2,117,801 13,682,175
</TABLE>
- --------
(1) During the year ended December 31, 1996, the Company completed its
development stage activities with the signing of its first collaborative
research agreement and commenced its planned principal operations.
(2) For an explanation of the calculation of weighted average number of common
shares outstanding and pro forma weighted average number of common shares
outstanding, see Note 1 of Notes to Financial Statements.

24
<PAGE>

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

This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under
the caption "Risk Factors," which could cause actual results to differ
materially from those indicated by such forward-looking statements.

OVERVIEW

The Company is a biotechnology company focusing on the application of
genomics to the systematic discovery of genes, biological pathways and drug
candidates in order to accelerate the discovery and development of the next
generation of therapeutic, agricultural and diagnostic products. The Company
was incorporated in November 1991 and, until March 1993, was engaged primarily
in organizational activities, research and development of the Company's
technology, grant preparation and obtaining financing. The Company has
incurred losses since inception, principally as a result of research and
development and general and administrative expenses in support of its
operations. As of December 31, 1997, the Company had an accumulated deficit of
$10,511,023. The Company anticipates incurring additional losses over at least
the next several years as it expands its internal and collaborative gene
discovery efforts, continues development of its technology and expands its
operations. The Company expects that losses will fluctuate from quarter to
quarter and that such fluctuations may be substantial.

In June 1996, the Company entered into a pilot collaborative agreement with
Genentech to evaluate the application of the Company's gene expression
technology to Genentech, pursuant to which the Company recorded $200,000 in
collaboration revenue. Based on its successful pilot, in December 1996, the
Company commenced an additional collaborative agreement to provide research
services to Genentech during 1997. For the year ended December 31, 1997, the
Company recorded revenues from Genentech of $667,000 or 11% of total revenues.
In connection with the execution of the pilot agreement, Genentech made an
equity investment in the Company of $1,800,000. See "Business--Research
Collaborations."

Effective June 1, 1997, the Company entered into a collaborative research
and development agreement with Pioneer Hi-Bred, whereby the Company is to
perform agricultural research that will be funded by Pioneer Hi-Bred. In
conjunction with the execution of this agreement, Pioneer Hi-Bred made an
equity investment of $7,500,000. In addition, Pioneer Hi-Bred agreed to pay
the Company a minimum annual fee of $2,500,000 based on an established number
of CuraGen employees devoted to Pioneer Hi-Bred research, with specified
funding increases after three years in order to avoid the Company's right to
terminate the agreement. For the year ended December 31, 1997, the Company
recorded revenues from Pioneer Hi-Bred of $1,458,333, or 25% of total
revenues. The agreement also includes provisions for payments based on
potential milestones, licensing of discoveries and royalties. See "Business--
Research Collaborations."

In October 1997, CuraGen and Biogen entered into a research collaboration
and database subscription arrangement to discover novel genes and
therapeutics. Under the terms of the agreement, Biogen agreed to invest $5
million in the Company to purchase the Biogen Shares at the initial public
offering price and to provide a $10 million interest-bearing loan facility. At
any time during the term of the agreement, the loan is convertible at the
Company's option into Common Stock based upon a formula that approximates its
prevailing market price. Biogen will additionally provide payments over five
years to support a research collaboration to generate project-specific
GeneCalling and PathCalling databases and for database subscription fees.
Payments could reach $18.5 million if the research collaboration and database
subscription arrangement both continue for the full five-year term. The
agreement also provides for payments based on exclusive licenses for
discoveries, potential milestones and royalties. For the year ended December
31, 1997, the Company recorded revenues related to this agreement

25
<PAGE>

of $375,000, or 6% of total revenues. See "Business--Research Collaborations"
and "Business--Database Subscriptions."

In November 1997, CuraGen and Genentech entered into a research
collaboration and database subscription arrangement to discover novel genes
and therapeutics. Under the terms of the agreement, Genentech has agreed to
purchase $5 million of Common Stock in a private placement at the initial
public offering price. Genentech has also agreed to provide the Company with
an interest-bearing loan facility, which could in the aggregate reach $26
million if the research program continues beyond its initial three year term.
The loan facility contains annual borrowing limits and the outstanding
principal and interest under the loan facility are payable five years from the
date of the agreement. Subject to certain limitations, during the term of the
agreement, and after the end of the first year, the drawn-down portion of the
loan is convertible at the Company's option into Non-Voting Common Stock based
upon a formula that approximates the prevailing market price of the Company's
Common Stock. If issued, the Non-Voting Common Stock is convertible into
Common Stock (i) at any time, at Genentech's option, or (ii) upon the sale or
transfer of the Non-Voting Common Stock to a non-affiliated third party.
Genentech will additionally provide funding of up to $24 million over five
years if the database subscription arrangement is not terminated, the research
collaboration continues for the full five-year term and Genentech elects to
retain licenses to its discoveries. The agreement also provides for payments
based on licenses for discoveries, potential milestones and royalties. See
"Business--Research Collaborations" and "Business--Database Subscriptions."

In November 1997, CuraGen and the University of Florida Research Foundation,
Inc. entered into a stock purchase agreement. Under the terms of the
agreement, the University of Florida Research Foundation, Inc. agreed to
invest $1 million in the Company to purchase the University of Florida Shares
at the initial public offering price. Upon the closing of the offering, after
purchase of the University of Florida Shares, the University of Florida
Research Foundation, Inc. will be the beneficial owner of less than one
percent of the outstanding shares of Common Stock. The Company leases
laboratory space from the University of Florida Research Foundation, Inc.

In January 1998, CuraGen and ArQule entered into a research collaboration,
pursuant to which ArQule's libraries of diverse, small organic, compounds will
be screened against protein targets using the Company's CombiGen technology to
identify hits and to populate the HitCalling database. Under the agreement,
the Company will have the option to negotiate a research collaboration and
license agreement with ArQule to optimize, develop and commercialize leads
identified using CombiGen and HitCalling. The contemplated terms of such
collaborations include equal rights to participate in the development,
preclinical and clinical testing of lead compounds, with equal sharing of
commercialization revenues. See "Business--Research Collaborations."

The Company's revenue to date has primarily consisted of government grants
and ongoing payments for research and development under collaborative
agreements. Grant revenue is recognized as the related costs qualifying under
the terms of the grants are incurred. Under collaborative agreements, any
revenue is recognized based upon work performed or upon the attainment of
certain benchmarks specified in the related agreement. Payments under
collaborative agreements that are received in advance, and are in excess of
amounts earned, are classified as deferred revenue.

The Company anticipates that collaborations will become an increasingly
important element of its business strategy and future revenues. The Company
also expects that in future years government grant revenues will decrease,
both in actual dollar amounts and as a percentage of revenues. Therefore, the
loss of revenues from existing collaborations would have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company's ability to generate revenue growth and become
profitable is dependent, in part, on the ability of the Company to enter into
additional collaborative arrangements, and on the ability of the Company and
its collaborative partners to successfully commercialize products
incorporating, or based on, the Company's technologies. There can be no
assurance that the Company will be able to maintain or expand existing
collaborations, enter into future collaborations to develop applications of
its GeneCalling, PathCalling or HitCalling technologies on terms satisfactory
to the Company, if at all, or that any such collaborative arrangements will be
successful.

26
<PAGE>

Failure of the Company to successfully develop and market additional
products over the next several years, or to realize existing product revenues,
would have a material adverse effect on the Company's business, financial
condition and results of operations. Royalties or other revenue generated from
commercial sales of products developed by using the Company's technologies are
not expected for at least several years, if at all.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1997 AND 1996

Revenue for the year ended December 31, 1997 was $5,896,543, representing an
increase of $1,473,596, or 33%, compared to $4,422,947 in 1996. The increase
was largely due to additional collaboration revenue of $2,441,549 recorded in
1997, primarily under the Company's arrangements with Pioneer Hi-Bred,
Genentech and Biogen. The collaboration revenue increase was offset by a
decrease in grant revenue during 1997 of $967,953 as the Company changed its
revenue focus from federal grants to collaborative research. Interest income
increased from $20,848 in 1996 to $789,781 in 1997, primarily as a result of
interest received on funds from sales of the Company's Preferred Stock and
warrants, and from research collaborations.

Grant research expenses for the year ended December 31, 1997 were
$4,615,886, an increase of $1,550,746, or 51%, compared to 1996. Collaborative
research and development expenses for the year ended December 31, 1997 were
$5,126,660, an increase of $4,675,765, or 1037%, compared to 1996. The
increase in grant research expenses was primarily attributable to increased
personnel costs in support of the Company's obligations under its federal
grants. The increase in collaborative research and development expenses was
primarily attributable to increased personnel expenses as the Company hired
additional research and development personnel, increased purchases of
laboratory supplies, increased equipment depreciation and increased facilities
expenses in connection with the expansion of the Company's internal and
collaborative research efforts. Future collaborative research and development
expenses are expected to increase as additional personnel are hired and
research and development facilities are expanded to accommodate the Company's
strategic collaborations and internal research.

General and administrative expenses for 1997 were $3,481,251, an increase of
$2,340,926 or 205%, compared to $1,140,325 for 1996. The increase was
primarily attributable to the hiring of additional personnel, the expansion of
administration facilities and the incurrence of related depreciation expense
as the Company increased its executive and administrative staffing in
anticipation of future revenue growth. Over the next several years, the
Company anticipates that increases in general and administrative expenses will
become more proportionate to percentage increases in revenue and research and
development expenses. Interest expense for the year ended December 31, 1997 of
$684,537 increased $307,967, or 81%, compared to $376,570 for 1996. This
increase was due to additional capital lease obligations entered into during
the year, which enabled the Company to support research and development
activities primarily through equipment acquisitions. This increase was also
due to the additional interest expense incurred in connection with the CII
Note. See Notes 3, 4 and 6 of Notes to Financial Statements.

As of December 31, 1997, the Company had accumulated losses of $10,511,023
since inception and, therefore, has not paid any federal income taxes.
Realization of deferred tax assets is dependent on future earnings, if any,
the timing and amount of which are uncertain. Accordingly, valuation
allowances in amounts equal to the deferred income tax assets have been
established to reflect these uncertainties in all periods presented. See Note
7 of Notes to Financial Statements.

YEARS ENDED DECEMBER 31, 1996 AND 1995

Revenue for the year ended December 31, 1996 was $4,422,947, an increase of
$2,841,772, or 180%, over 1995. The increase was primarily due to $2,466,772
of increased grant revenue as the Company achieved specific research
objectives under certain federal grants, and $375,000 of collaboration revenue
recorded in 1996 of which $200,000 was associated with the pilot collaborative
agreement with Genentech. Interest income increased

27
<PAGE>

by $8,542 to $20,848, or 69%, in 1996, from $12,306 in 1995, primarily as a
result of interest earned on funds received from private placements of the
Company's preferred stock and warrants and from research collaborations.

Grant research expenses for the year ended December 31, 1996 were
$3,065,140, an increase of $1,942,982, or 173%, over 1995. Collaborative
research and development expenses for the year ended December 31, 1996, were
$450,895, an increase of $106,678, or 31%, over 1995. The increases in both
grant research expenses and collaborative research and development expenses
were primarily attributable to increased personnel expenses as the Company
hired additional research and development personnel, increased purchases of
laboratory supplies, increased equipment depreciation and increased facilities
expenses in connection with the expansion of the Company's grant and
collaborative research efforts.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents totaled $17,417,161 at December 31,
1997. The Company has financed its operations since inception primarily
through private placements of equity securities, government grants,
collaborative research and development agreements and capital leases. As of
December 31, 1997, the Company had recognized $12,180,104 of cumulative
sponsored research revenues from government grants and collaborative research
agreements. The sale by the Company of equity securities has provided the
Company with gross proceeds of approximately $26,500,000, including $7,500,000
from Pioneer Hi-Bred, $1,800,000 from Genentech and $1,000,000 from Biogen. To
date inflation has not had a material effect on the Company's business.

The Company's investing activities, other than purchases and sales of cash
equivalent securities, have consisted entirely of acquisitions of equipment
and expenditures for leasehold improvements. At December 31, 1997, the
Company's gross investment in equipment and leasehold improvements since
inception was $8,656,032. At December 31, 1997 equipment with a gross book
value of $6,593,064 secures the Company's equipment financing facility. The
Company had no material commitments for capital expenditures at December 31,
1997. However, the Company anticipates that the net proceeds from this
offering and its other sources of capital will enable it to increase capital
expenditures over the next several years to expand its facilities and purchase
additional equipment in support of additional collaborations and increased
internal research and development.

Net cash used in operating activities was $2,946,349 for the year ended
December 31, 1997, compared to net cash provided by operating activities of
$13,898 in 1996. The increase of $2,960,247 resulted from an increase in the
Company's net loss, offset by increases in depreciation and amortization, non-
monetary compensation, accounts payable, accrued expenses, deferred revenue
and deferred rent.

As of December 31, 1997, the Company had net operating loss carryforwards of
approximately $9,000,000 to offset federal and state income taxes. If not
utilized, the federal and state net operating loss carryforwards will begin to
expire in 2008 and 1998, respectively. The Company also had research and
development tax credit carryforwards at December 31, 1997, estimated to be
approximately $498,000 and $1,519,000 for federal and state income tax
purposes, respectively. The consummation of this offering will not result in
any additional limitation on the future utilization of these operating loss
and tax credit carryforwards.

The Company expects its cash requirements will increase significantly in
future periods because of planned expansion of its operations and its
technology platform. The planned expansion will be in support of expected
growth in collaborative agreements, database subscriptions and internal
research and development programs. The Company believes that the net proceeds
from this offering, together with existing cash and cash equivalents, and
anticipated cash flows from its current collaboration agreements, will be
sufficient to support the Company's operations through at least 1999. The
Company's belief is based on its current operating plan, which could change in
the future and require additional funding sooner than anticipated. Even if the
Company has sufficient cash for its current operating plan, it may seek to
raise additional capital because of favorable market conditions

28
<PAGE>

or other strategic factors. The Company can offer no assurance that it will be
able to establish additional collaborations or retain existing collaborators,
or that such collaborations will produce sufficient revenues, which together
with cash and cash equivalents will be adequate to fund the Company's cash
requirements. Except for the loan facilities from Biogen and Genentech, the
Company has no credit facility or other sources of committed capital. Each of
these loan facilities was established in conjunction with the research
collaboration and database subscription arrangements entered into by the
Company during the fourth quarter of 1997. See "Business--Research
Collaborations."

The Company's future capital requirements depend on numerous factors,
including: (i) the receipt of payments and the achievement of milestones under
existing and possible future research collaborations; (ii) the availability of
government research grant payments; (iii) the progress of internal research
and development projects; (iv) defense and enforcement of patent claims or
other intellectual property; (v) the purchase of additional capital equipment;
(vi) investments in complementary technologies; (vii) the development of
manufacturing, sales and marketing capabilities; and (viii) competing
technological and market demands.

The Company expects that it will require significant additional financing in
the future, which it may seek to raise, at any time, through public or private
equity offerings, debt financing or additional collaborations and licensing
arrangements. No assurance can be given that additional financing or
collaborations and licensing arrangements will be available when needed, or
that if available, such financing will be obtained on terms favorable to the
Company or its stockholders. If adequate funds are not available when needed,
the Company may have to curtail operations or attempt to raise funds on
unattractive terms. See "Risk Factors--Future Capital Requirements;
Uncertainty of Additional Funding."

RECENTLY ENACTED PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, was issued in June 1997 and is effective for fiscal years beginning
after December 15, 1997. This pronouncement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. The Company will adopt this
pronouncement in 1998 and does not expect its implementation will have a
material effect on the Company's financial statements as currently presented.

Statement of Financial Accounting Standards No. 131, Disclosures About
Segments of an Enterprise and Related Information, was also issued in June
1997 and is effective for fiscal periods beginning after December 15, 1997.
This pronouncement establishes the way in which publicly held business
enterprises report information about operating segments in annual financial
statements and interim reports to stockholders. As the Company operates in a
single business segment the implementation of this standard is not expected to
significantly impact the Company's financial statements as currently
presented.

29
<PAGE>

BUSINESS

CuraGen is pioneering the systematic application of genomics to accelerate
the discovery and development of therapeutic and agricultural products.
CuraGen's fully-integrated genomics technologies, processes and information
systems are designed to rapidly generate comprehensive information about gene
expression, biological pathways and the potential drugs that affect these
pathways, each on a scale not previously undertaken. The Company believes that
it can overcome the limitations of competing technologies, processes and
databases and can condense key steps in gene-based drug discovery and
development. CuraGen believes its technology platform will facilitate the
discovery and development of highly specific and effective drugs aimed at a
variety of complex diseases such as cardiovascular disease, stroke, cancer and
metabolic disorders.

In addition to accelerating the discovery of new drug candidates, the
Company believes its GeneCalling and PathCalling systems are well-positioned
to predict the efficacy and safety of drug candidates currently in
pharmaceutical development pipelines and to review the performance and side
effects of drugs already on the market. This pharmacogenomics approach can aid
in the development of more effective, safer drugs and identify more
appropriate patient populations.

Each of the GeneCalling, PathCalling and HitCalling systems consists of a
proprietary enabling technology, a high-throughput, automated process using
the technology to generate information, and a database containing the
information generated. The GeneCalling and PathCalling systems are currently
operational, and the Company has already begun to populate the GeneCalling and
PathCalling databases from internal research programs and research
collaborations, as well as from publicly available databases. The HitCalling
system is expected to be operational later in 1998 and incorporated into the
Company's Genescape operating system at that time. This database is expected
to be available as a commercial product in 1999. The Company has designed the
three systems as an integrated platform to enable gene discovery, drug target
validation and high-throughput screening of drug candidates in a highly
efficient and cost-effective manner.

BACKGROUND

Successful treatment of disease is often limited by a lack of understanding
of its initiation and progression at the level of genes, proteins and
biological pathways. Technologies and processes that have been used
successfully in the past to discover treatments for diseases with relatively
simple causes have been less effective against complex diseases that arise
through a combination of multiple genetic and environmental factors.
Cardiovascular disease, cancer, stroke and metabolic disorders are examples of
prevalent complex diseases. Treating these complex diseases requires an
understanding of how the body uses its genetic information, how disruptions in
this information can lead to disease and, in turn, how drugs can arrest or
reverse disease progression. As scientific advances improve our understanding
of the genetic basis of disease, the Company believes that the methods the
pharmaceutical industry uses to develop new drugs will undergo a fundamental
transformation. Companies that can anticipate this transformation and develop
and apply new technologies may have a unique opportunity to develop the next
generation of therapeutic products for important complex diseases.

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<PAGE>

In recent years, scientists have begun to analyze large portions of the
genetic information contained within the human genome. This discipline, termed
genomics, employs large-scale efforts catalyzed by the Human Genome Project.
By understanding the role of genes in the control and function of biological
pathways and cellular processes, scientists seek to understand more fully the
genetic basis of disease and develop more effective treatments. To date,
however, neither the pharmaceutical nor the agricultural industries have used
genomics extensively to develop new product opportunities. These industries
have used genomics to a limited extent for three primary reasons: technologies
have been inadequate; inefficient, non-automated discovery processes have
incompletely evaluated the influence of genetic and environmental factors; and
uniform information systems to drive the discovery process have been
unavailable.

Treatment of complex diseases remains a major technical challenge and will
require an integrated set of genomic technologies and processes. CuraGen
believes that knowledge of genes, proteins, biological pathways and their
interplay with the environment, together with information systems to use this
knowledge, will accelerate drug discovery and development. CuraGen has
developed its technologies, processes and information systems to provide this
knowledge and is applying its integrated platform towards the discovery and
development of the next generation of genomics-based therapeutic, diagnostic
and agricultural products.

GENES, PATHWAYS AND DISEASE

The GENOME is the complete set of genetic information within each cell of an
organism. The information in the genome is stored in chromosomes, which are
long molecules of DNA. Sections of DNA contain discrete units of hereditary
information called GENES, each of which contains a set of instructions for the
cell to produce a particular protein. In GENE EXPRESSION, the instructions
encoded in the DNA are used by a cell to make a protein molecule. Initially,
the genetic information in the DNA is copied to a complementary molecule
called messenger RNA (MRNA). The information in the mRNA is then translated
into a PROTEIN with a precise sequence of AMINO ACID building blocks which
determine its structure and function. Although all genes are present in all
cells, each cell normally expresses only those genes it needs for the specific
functions it performs. The level of mRNA expressed for each gene dictates its
activity and the number of protein molecules produced.

Proteins carry out the biological functions of cells through a series of
highly specific, organized cascades of interactions with other proteins, genes
and chemicals. These carefully regulated, complex networks of protein
interactions are termed BIOLOGICAL PATHWAYS. These pathways are generally
classified as metabolic pathways, responsible for cellular metabolism such as
the production of energy from glucose, and SIGNAL TRANSDUCTION PATHWAYS, which
use secreted proteins, cell-surface receptor proteins, and intracellular
proteins to allow cells to communicate, coordinate, and regulate their
activities. The activities of biological pathways have many levels of control
and redundancy, and thus can be affected by many genes within a pathway. In
addition to the effects of inherited genetic differences in the genome, a
biological pathway is also affected by the EXPRESSION LEVELS of its key genes
and proteins. Many of the genes at control points along a biological pathway
are expressed at levels as low as one mRNA molecule in 100,000. Therefore,
very small changes in the expression levels of these genes can produce
substantial changes in the operation of the biological pathways under their
control.

It is now recognized that essentially all stages of disease and its
progression are caused by a sequence of changes in the expression levels of
genes and the activities of specific proteins and pathways in affected cells.
Although some diseases are caused by defects in a single gene, many prevalent
diseases involve multiple genetic factors that either cause disease directly
or predispose an individual to disease in conjunction with environmental
factors. The genes and biological pathways involved in complex diseases,
however, remain largely uncharacterized. This lack of knowledge has limited
the development of drugs to treat these diseases.

GENE-BASED DRUG DISCOVERY AND DEVELOPMENT

Most treatments for disease rely on drugs that modify the activities of
biological pathways by interacting with proteins expressed by genes in the
affected cells and tissues. In the search for safer and more effective drugs

31
<PAGE>

to treat a wider range of diseases, pharmaceutical companies have begun to
explore the application of genomics to gene-based drug discovery and
development.

Modern gene-based drug discovery and development programs typically involve
the following steps: (i) GENE DISCOVERY, finding a disease-related gene; (ii)
TARGET IDENTIFICATION, ascertaining that the protein encoded by a disease-
related gene can potentially serve as a novel drug-discovery target; (iii)
TARGET VALIDATION, confirming that the potential target is at a control point
in a disease-related pathway and that a drug which interacts with the target
is expected to have a beneficial effect; (iv) ASSAY DEVELOPMENT, using the
target in a test that is designed to mimic aspects of the disease process; (v)
HIGH-THROUGHPUT SCREENING, using this assay to screen hundreds of thousands of
small organic compounds to identify compounds, or hits, which interact with
the target protein; and (vi) LEAD SELECTION AND OPTIMIZATION, identifying the
most promising hits as lead drug candidates according to expected efficacy,
safety and bioavailability. Typically, each step involves a laborious, time-
consuming process which must be completed before subsequent steps are
undertaken. In addition, several of the steps currently require highly skilled
personnel to perform non-automated, bench biology experiments on a single gene
or target at a time. Consequently, this has been a very costly and time-
consuming approach to drug discovery and development.

Gene Discovery. Gene discovery involves the identification of a gene related
to disease susceptibility, onset or progression. Although previous attempts to
identify disease-related genes have resulted in a better understanding of
certain diseases, they have discovered only a limited number of disease-
related genes and have led to relatively few new drugs due to limitations of
the technologies employed. The current methods for gene discovery include
genome sequencing, gene mapping, positional cloning and, more recently and
less widely used, gene expression.

GENOME SEQUENCING involves determining the sequence of large portions of
DNA. This technology identifies genes primarily at random, providing little
direct association of genes with disease. GENE MAPPING and POSITIONAL CLONING
are used together to identify disease-related genes. Gene mapping is a
laborious process that requires the extensive collection of tissue samples and
family histories in order to identify regions of the genome whose inheritance
correlates with the occurrence of disease. Positional cloning describes
efforts to find the gene within the region contributing to disease. Positional
cloning can take years to find the correct gene, is particularly difficult for
complex diseases, and has been limited in practice to identifying the genes
responsible for simple genetic disorders. Furthermore, gene mapping and
positional cloning do not directly identify additional proteins that are in
the same biological pathway as the disease-related gene and may be more
suitable targets for drugs.

GENE EXPRESSION methods are based upon comparisons of biological samples,
such as cells from human biopsies over the progression of a disease, to
identify genes whose expression levels correlate with the disease. The most
significant correlations involve genes that are expressed in disease-specific
tissues, change expression levels over the stages of a disease, and are
expressed at low levels consistent with the ability to regulate biological
pathways. In contrast to gene mapping and positional cloning, gene expression
can identify multiple disease-related genes. Even if these genes do not cause
disease directly, they are likely to encode proteins that participate in
disease-related biological pathways and can offer places to intervene in
disease progression. Some disease-related genes, such as secreted proteins,
can even serve directly as protein drugs.

CuraGen believes that gene expression methods will be the most efficient and
broadly applicable approach to identifying genes related to disease. To be
most useful, gene expression methods should be fault tolerant, measure the
expression levels for a majority of the expressed genes, including those
expressed at a single copy per cell, and be applicable to humans, animals,
plants and pathogens. Many current gene expression methods, however, face
significant limitations. Expression methods based on the repetitive sequencing
of small portions of mRNA molecules, termed expressed sequence tags (ESTS),
are inefficient. These methods cannot accurately measure genes expressed at
low levels and often miss genes that control important pathways.
Hybridization-based gene expression methods usually use portions of known
genes as probes to determine the expression levels of those genes in
biological samples. These methods are generally ineffective in discriminating
between genes

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with closely related sequences. Further, their application is limited to the
small set of known genes, often precluding their use for animal models which
are essential to human disease research. Methods such as differential display
generate patterns of fragments from expressed mRNA molecules, attempt to
detect changes in these patterns, and then attempt to identify the genes
responsible for these changes. These methods can be imprecise and inefficient
in measuring gene expression levels, are especially problematic when each gene
generates at most one gene fragment, and can require time-consuming steps to
confirm which genes are responsible for particular changes in the patterns.

Target Identification and Validation. After a disease-related gene has been
identified, the next step is to decide whether the protein it encodes can
serve as a target for a drug. Part of TARGET IDENTIFICATION is determining
whether the protein is related structurally to proteins that have served
successfully as targets, including receptors and other proteins in biological
pathways.

If a protein is not appropriate as a target, potential targets are then
sought among proteins in the same biological pathway as the disease-related
gene. Although other proteins in the same pathway can exhibit correlated
levels of gene expression, this information is often insufficient to sort
proteins into specific pathways or to show how proteins interact within a
pathway. Most research to understand biological pathways relies on non-
automated bench biology techniques able to identify only one protein at a
time. Despite the promise of this protein-by-protein approach, the associated
time, effort and expense have limited its use and, as a result, many
discoveries of disease-related genes have not led to suitable targets.

Once a protein target is identified, it must be validated in order to
provide evidence that it plays an important role in disease and that finding a
chemical compound that is active against it could lead to a drug. Alternative
techniques for TARGET VALIDATION can take months or years to complete because
it is not usually possible to view a given protein in the context of a
disease-related biological pathway.

Assay Development and High-Throughput Screening. Each validated target
usually requires the development of a specific assay or specialized
measurement technique to identify compounds that interact with it. Each assay
often requires months to develop. Potential drugs are identified by testing a
target against a chemical diversity library, usually comprising hundreds of
thousands of different small organic molecules, in HIGH-THROUGHPUT SCREENING.
Although screening a single target can be relatively rapid, screening multiple
targets can be time-consuming because most assays require that each target be
screened in a separate assay. The screening process often produces multiple
hits. To date, little progress has been made towards developing general assays
that do not require customization for each new disease-related gene and
validated target.

Drug Development. Hits that are suitable for development into potential
drugs are chosen for LEAD COMPOUND SELECTION AND OPTIMIZATION. Optimizing a
lead compound entails synthesizing and testing a series of closely related
organic compounds. The most promising leads are selected based on expected
efficacy, safety and bioavailability. This selection process typically does
not use detailed information of a candidate drug's MECHANISM OF ACTION, which
would show how a drug interacts with particular proteins and biological
pathways to achieve its desired therapeutic affect. The lack of information
often results in inaccurate predictions of efficacy and safety.

Following optimization, leads are entered into PRECLINICAL TRIALS to predict
their efficacy and safety based on animal testing. If preclinical trials are
promising, candidate drugs advance to CLINICAL TRIALS to determine their
efficacy and safety in human patients. Drug candidates have a high attrition
rate at this stage due to the lack of understanding of the mechanism of
action, poor predictions of efficacy and unexpected side effects. On average,
only one out of ten candidates that enter clinical trials gains FDA approval.
Failure at the later stages of drug development is especially significant as
it can account for half of the $360 million average cost to attain FDA
approval.

Pharmacogenomics. Even after a drug has been approved and marketed, there is
often limited knowledge of how it works. Consequently, many side effects are
observed only after use by a larger, more diverse population

<PAGE>

of patients who may not have been adequately represented in the original
trials, including patients taking additional medications which can cause
unanticipated adverse effects. The study of the genes that determine the
efficacy, pharmacology and toxicity of a drug is referred to as
PHARMACOGENOMICS. Unfortunately, previous technologies have lacked the ability
to show comprehensively what genes, proteins and biological pathways are
affected by a drug. This lack of information has led to failures and FDA
recalls of widely-prescribed drugs such as thalidomide and dexfenfluramine.

TECHNOLOGY INTEGRATION AND INFORMATION SYSTEMS

Biotechnology companies have attempted to overcome limitations in the gene-
based drug discovery by focusing on single, isolated technologies. Major
pharmaceutical firms have been left with the challenge to integrate these
disparate components into a cohesive discovery and development pipeline. This
has created a great need for sophisticated bioinformatics systems to manage
what is now a disjointed process.

CURAGEN'S APPROACH

CuraGen's integrated genomics technologies, processes and information
systems are designed to overcome significant technological limitations and
condense key steps in gene-based drug discovery and development. The Company
believes that its technology platform has the potential to rapidly generate
comprehensive information about gene expression, biological pathways and the
compounds affecting these pathways, each on a scale not previously undertaken.
CuraGen believes this will permit the comprehensive analysis of many diseases
and enable the discovery of disease-related genes, drug targets and potential
drugs.

[Graph showing the steps involved in both traditional gene-based drug discovery
and using CuraGen's approach to gene-based drug discovery]

CURAGEN'S APPROACH TO GENE-BASED DRUG DISCOVERY

GENE DISCOVERY (QEA AND GENECALLING)

CuraGen has developed its proprietary Quantitative Expression Analysis
("QEA") and GeneCalling technologies to overcome significant limitations of
existing gene discovery methods. QEA and GeneCalling

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enable the rapid, precise measurement of substantially all of the differences
in gene expression levels between biological samples in order to discover
disease-related genes. QEA and GeneCalling are designed to detect genes
expressed at the level of a single mRNA molecule per cell, to measure
comprehensively the expression levels of 95% of the genes expressed in any
species and to be integrated into an efficient, automated, high-throughput
process in order to rapidly generate large databases of gene expression
profiles. These technologies permit the Company to pursue research programs
for many disease systems, process many samples in parallel and potentially
discover and seek patent protection for commercially valuable disease-related
genes.

TARGET IDENTIFICATION AND VALIDATION (MIM AND PATHCALLING)

The Company has developed its proprietary Multiplexed Interaction Method
("MIM") and PathCalling technologies to reduce the time and cost of target
identification and validation. MIM is an automated, high-throughput process
that simultaneously tests for interactions between billions of combinations of
proteins. PathCalling is the Company's proprietary software and database that
assembles the protein-protein interactions discovered by the MIM system into
connected biological pathways. Although the PathCalling database is still at a
relatively early stage, the Company intends to continue to populate the
PathCalling database with as complete a set as possible of the protein-protein
interactions that constitute the pathways in humans and model organisms that
are relevant to disease. By identifying protein-protein interactions with MIM
and comparing them with pathways within the PathCalling database, the role of
these proteins within a given biological pathway can be elucidated and the
database further augmented. PathCalling is designed to permit disease-related
genes to be linked rapidly to specific biological pathways, providing valuable
biological context for gene discoveries and additional targets for therapeutic
intervention. The Company believes that its PathCalling database has the
potential to streamline target identification and validation into a single,
efficient, accelerated process. The Company further believes that the number
of pathway-related protein-protein interactions currently in its proprietary
PathCalling database is greater than the total number of interactions
previously described in the scientific literature.

ASSAY DEVELOPMENT AND HIGH-THROUGHPUT SCREENING (COMBIGEN AND HITCALLING)

The Company is developing its proprietary CombiGen technology and HitCalling
database and information system to accelerate the identification of hits by
screening protein targets in parallel against small molecule diversity
libraries. The Company has designed CombiGen to avoid any need to develop a
specialized assay for each new target. With the ability to screen thousands of
targets simultaneously, the Company believes that its automated, high-
throughput screening assays will have the potential to screen more
combinations of targets and compounds than any competing technology of which
it is aware. The Company believes that when development of the CombiGen
technology is completed this capacity will enable a new approach to drug
discovery. The Company intends to use CombiGen to screen every protein that it
discovers is involved in a protein-protein interaction, including proteins
both in disease-related pathways and in pathways not yet associated with
disease. The HitCalling database will store the identities of proteins and
hits. The Company anticipates that a newly-identified disease-related gene can
be linked into a pathway whose proteins have already been screened. The
identities of proteins and hits can then be retrieved from the HitCalling
database, reducing or eliminating the need for further target identification,
target validation, assay development or high-throughput screening and thereby
potentially accelerating a program by two to three years following the first
identification of a disease-related gene.

DRUG DEVELOPMENT AND PHARMACOGENOMICS (GENECALLING; PATHCALLING)

The Company believes that its GeneCalling and PathCalling technologies can
also be used to predict which drugs are more likely to succeed by analyzing
gene expression changes induced by drug treatment in humans and animal models
in preclinical and clinical trials. For drugs already on the market, the
Company has commenced generating GeneCalling databases with the objective of
selecting appropriate patient populations and accelerating the development of
an improved generation of drugs with fewer side effects. By providing a
precise correlation of gene expression levels and the activities of biological
pathways following treatment with specific

<PAGE>

drugs, the objective of the Company's pharmacogenomics approach is to minimize
the side effects of drugs, to identify appropriate patient populations for
existing drugs and to aid the development of safer, more effective drugs.

TECHNOLOGY INTEGRATION AND INFORMATION SYSTEMS (GENESCAPE)

The Company has integrated its GeneCalling, PathCalling and HitCalling
process and databases under its GeneScape BIOINFORMATICS operating system that
unifies all aspects of process management, data analysis and visualization.
CuraGen's goal is to establish its fully-integrated technology and the
GeneScape operating system as the preferred platform for genomics and to apply
its platform to accelerate drug discovery, drug development and
pharmacogenomics. GeneScape provides a standardized, web-based interface to
its technology platform, thereby allowing researchers remote access and
interactive capabilities from multiple sites to meet their individual
discovery and development needs. Once the HitCalling database is established,
the Company expects that all three databases will be interrelated. Thus,
researchers who discover a disease-related gene through GeneCalling have the
potential to locate the relevant biological pathways in the PathCalling
database and to use the HitCalling database to identify hits active against
proteins in this pathway.

CURAGEN'S STRATEGY

CuraGen's goal is to establish the first fully-integrated genomics business
providing comprehensive characterization of gene expression, biological
pathways and potential drugs for drug discovery and development. The Company
believes that its integrated approach can be the preferred alternative to
competitive methods employed today. In order to achieve this goal, the Company
will have to continue to add new information to its GeneCalling and
PathCalling databases, complete the development of its HitCalling system and
populate the HitCalling database. The key elements of the Company's strategy
are as follows:

Provide fully-integrated, innovative technologies to overcome limitations in
drug discovery and development. The Company believes that its integrated
genomics platform will provide enabling technologies at each of the three
critical levels of the genomics-based pharmaceutical development process:
identification of disease-related genes (gene discovery), elucidation of
biological pathways (target identification and validation) and identification
of compounds that interact with such pathways (assay development, high-
throughput screening, lead selection and optimization). These technologies
have the potential to advance the discovery and development of treatments for
complex diseases. The Company has designed these technologies to be (i)
applicable to a broad range of diseases; (ii) comprehensive in the analysis of
substantially all expressed genes, biological pathways and potential drugs;
(iii) standardized to enable the simultaneous processing of many combinations
of biological samples, proteins and drug candidates; (iv) integrated under a
single information system to facilitate the processing, analysis and use of
information generated from a variety of sources; and (v) readily used in
existing pharmaceutical development pipelines.

Apply its technology for drug discovery, drug development and
pharmacogenomics systematically to major diseases. The Company intends to
apply its technologies to address a wide range of diseases. CuraGen plans to
obtain biological samples from numerous models of disease (human tissue,
animal and cell-based models) in an effort to examine systematically the genes
and biological pathways involved in major diseases and to develop new drugs.
The Company believes that this broad-based approach will maximize its
opportunities to participate in the discovery and development of drugs either
alone or in collaboration with others. Through pharmacogenomics, the Company
believes it can help pharmaceutical companies develop more effective drugs
with fewer side effects by assessing the efficacy and safety of their
currently marketed drugs as well as drug candidates within their product
pipelines.

Generate revenue through research collaborations. The Company intends to
continue to generate revenue through research collaborations with
pharmaceutical, biotechnology and agricultural companies. Under such research
collaborations, pursuant to which the Company expects to receive revenues for
applying its proprietary technologies to a collaborator's own samples, for
providing a period of exclusivity for analyzing the data generated and from
milestone and royalty payments derived from licensed products. Data generated
in

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<PAGE>

collaborations may become part of CuraGen's subscription databases. To date,
the Company has entered into collaborations of this type with Pioneer Hi-Bred,
Biogen and Genentech.

Generate revenue through database subscriptions. The Company believes that
the information in its GeneCalling, PathCalling and HitCalling databases will
be a valuable resource for pharmaceutical and agricultural product
development. The Company intends to generate revenue by providing subscribers
with fee-based, non-exclusive access to its databases for defined periods. The
Company expects that its research collaborators will enter into subscriptions
as they seek to access the additional information available in the Company's
databases. The Company's databases are in early stages of development and
there can be no assurance that the Company will succeed in commercializing its
databases. To date, the Company has entered into database subscription
arrangements with Biogen and Genentech.

Retain product rights to select internal research and drug discovery
programs. The Company intends to devote a substantial portion of its resources
to its internal research programs. The initial programs selected by the
Company are expected to focus on disease systems which, the Company believes,
have the potential to result in the discovery of novel proteins as drug
candidates or targets for drug discovery. The Company also expects that its
internal research programs will be an ongoing source of data for its
GeneCalling, PathCalling and HitCalling databases.

PRODUCTS AND SERVICES

CuraGen is marketing its genomics technology and information to the
pharmaceutical, biotechnology and agricultural industries through two
arrangements: research collaborations and subscriptions. Research
collaborations generally involve the application of CuraGen's GeneCalling and
PathCalling technologies to a collaborator's projects, include those support
services required to characterize gene and target discoveries, and provide
ready integration with a collaborator's existing development pipeline. The
Company anticipates that collaborations will involve HitCalling when it
becomes available. DATABASE SUBSCRIPTIONS will provide subscribers with access
to CuraGen's GeneCalling, PathCalling and HitCalling databases. Both
arrangements will use the GeneScape operating system, the Company's web-based
software that manages the Company's processes, provides access to the
Company's databases and includes CuraTools, a full-featured bioinformatics
software suite.

QEA AND GENECALLING: GENE EXPRESSION SERVICES AND DATABASE

CuraGen developed its proprietary QEA and GeneCalling technology to overcome
significant limitations of competing gene discovery methods. QEA is the
Company's method for generating and analyzing gene expression profiles.
GeneCalling is the Company's information system and database that analyzes and
stores differences in these gene expression profiles to identify disease-
related genes. QEA and GeneCalling permit sensitive detection of genes that
can control biological pathways when expressed at very low levels, and unlike
EST-based methods, do not require repetitive sequencing to measure gene
expression. The Company's technology is comprehensive in detecting genes with
novel sequences and therefore applicable universally to humans, animals,
plants, and pathogens. In comparison, hybridization-based methods are
primarily limited to known genes and do not readily discriminate between many
genes which share related DNA sequences.

QEA and GeneCalling provide the ability to discover disease-related genes by
measuring expression levels and determining gene expression differences
between biological samples, such as diseased and normal human tissues. These
samples are usually processed within a month of receipt, and profiles of gene
expression levels are available immediately for inspection and analysis. The
Company's current capacity is 5,000 biological samples per year. The Company
detects multiple fragments for each gene in a sample and believes that it can
quantify accurately the expression levels of over 150 million gene fragments
per year. The Company believes that this capability exceeds the capacity of
competing technologies, can be up to 6,000 or more times faster than EST-based
methods for comprehensive expression profiling, and can observe a greater
number of genes than methods relying on the detection of a single fragment per
gene. Based upon its current capacity, the Company estimates that it could
conduct approximately 250 projects per year consisting of approximately 20
samples each.

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<PAGE>

The Company believes this is sufficient to support five collaborators while
meeting the needs of the Company's internal programs. See "--CuraGen Internal
Programs." The Company has designed its processes to be modular and scalable
in order to accommodate increases in the number of collaborations.

The Company's GeneCalling database stores data generated by QEA for
exclusive access for collaborations and internal programs. Through GeneScape,
researchers can access their projects and are able to select samples that have
been processed by QEA and use GeneCalling to analyze expression profiles to
identify those genes that are specific to a disease. The Company intends to
structure its collaborations such that, after the period of exclusivity has
ended, data generated from samples using QEA revert to CuraGen's GeneCalling
subscription database which currently contains gene expression data from
normal human and animal tissues.

Using QEA and GeneCalling, CuraGen has developed an innovative approach for
gene discovery for inherited diseases: positional expression cloning. By
combining its gene expression analysis with existing gene mapping techniques,
the Company can rapidly discover genes associated with inherited diseases by
identifying candidate genes that both show altered expression and map to the
chromosomal locations known to contain underlying disease genes. The Company
believes its positional expression cloning approach will be particularly
effective in identifying and characterizing susceptibility and protective
genes in many common complex diseases.

The Company believes that its technology for disease-related gene discovery
has significant advantages over genome sequencing, positional cloning and
competing gene expression technologies. CuraGen's methods permit the Company
to pursue research programs for many disease systems in parallel, with the
potential to identify rapidly a large number of commercially valuable disease-
related genes. As part of its internal programs, the Company seeks patent
protection for newly discovered disease-related genes and proteins, as well as
for novel uses of known genes and the proteins they encode. See "--
Intellectual Property" and "Risk Factors--Patents and Proprietary Rights;
Third-Party Rights."

MIM AND PATHCALLING: PATHWAY ANALYSIS SERVICES AND DATABASE

Once genes involved in a disease have been identified using GeneCalling, it
is important to be able to determine how the proteins they encode interact in
the complex pathways involved in the disease. Although a particular disease-
related protein might not be a potential protein drug or drug discovery
target, knowledge of the other proteins in the same pathway may lead to
promising protein drug or target candidates. CuraGen's MIM technology and
PathCalling database were developed to provide the link between disease-
related proteins and their biological pathways to aid in the identification
and validation of appropriate targets following the discovery of a disease-
related gene.

MIM consists of proprietary automated, high-throughput biological operations
that simultaneously test for interactions between billions of pairs of
proteins. By using MIM, CuraGen can routinely test 100,000 proteins against
100,000 other proteins, potentially identifying all interacting pairs.
PathCalling is the Company's proprietary software and database that assembles
protein-protein interactions discovered by the MIM system into connected
biological pathways, including pathways discovered previously by CuraGen or
previously described in the scientific literature. Although the PathCalling
database is still at a relatively early stage, the Company's objective is to
continue to build this database to contain as complete a set as possible of
the protein-protein interactions that constitute the pathways that are
relevant to disease. The PathCalling database permits the graphical display of
all pathways contained in the database involving any particular protein and
allows these pathways to be queried for information in much the same way gene
sequence databases are queried today. The Company believes that this will
facilitate the rapid linkage of disease-related genes to specific biological
pathways, providing the crucial biological context for gene discoveries, which
may lead to the identification of potential targets for therapeutic
intervention.

The Company seeks patent protection on the utility of specific proteins or
protein-protein interactions as drug targets based on information provided by
MIM and PathCalling, in addition to composition of matter claims based on the
sequences of novel and non-obvious proteins and the genes encoding them. There
can be no

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<PAGE>

assurance, however, that such patents will be granted. See "--Intellectual
Property" and "Risk Factors--Patents and Proprietary Rights; Third-Party
Rights."

COMBIGEN AND HITCALLING: DRUG SCREENING SERVICES AND DATABASE

Traditionally, potential drugs have been screened against one target at a
time. Even with many of the advances in high-throughput screening, this
process remains inefficient, time-consuming and labor intensive. In an effort
to overcome these shortcomings, CuraGen is developing its proprietary CombiGen
technology and HitCalling database to identify simultaneously both novel
targets and hits. These technologies are based upon a combinatorial approach
for screening libraries of potential protein targets against libraries of
potential drugs.

CombiGen is being developed to use a biological assay system that will
permit the parallel processing of hundreds of drug discovery targets in the
form of single proteins or protein-protein interactions in a single high-
throughput screening assay. CombiGen has been designed to work efficiently
with the proteins in biological pathways which were identified by PathCalling.
The Company has designed this technology to avoid any need to develop a
specialized assay for each new target. With the ability to screen targets in
parallel, the Company believes that its automated, high-throughput screening
assays have the potential to screen more combinations of targets and compounds
than any competing technology of which the Company is aware.

When CombiGen is operational, the Company intends to commence screening of
many of the proteins in its PathCalling database, both in disease-related
biological pathways and in pathways not yet associated with disease, to
generate its HitCalling database. In this new approach, the Company believes
that, when a disease-related gene is discovered, the HitCalling database may
accelerate drug discovery by displaying hits against other proteins in that
gene's pathway.

CuraGen expects that it will complete pilot studies of its CombiGen
technology and begin marketing HitCalling later in 1998. The Company intends
to generate a database containing a large collection of hits against many of
the proteins in its PathCalling database. Where appropriate, the Company plans
to file patent applications to protect targets, small organic compounds and
their utilities. There can be no assurance, however, that the Company will
successfully complete the development of CombiGen and HitCalling, that the
Company will discover hits through the use of this technology, that patent
applications will be filed or that patents on such hits will be granted. See
"Risk Factors--New and Uncertain Business" and "--Patents and Proprietary
Rights; Third-Party Rights." In January 1998, the Company and ArQule
established a research collaboration for the discovery of novel therapeutics.
Under the research collaboration agreement, compound libraries of diverse,
small organic compounds provided by ArQule will be screened by CuraGen to
generate a HitCalling database. See "--Research Collaborations--ArQule."

GENESCAPE OPERATING SYSTEM FOR GENOMICS

CuraGen designed its GeneScape bioinformatics software to meet the needs of
researchers for a single operating system which integrates research requests,
project management, database access and data analysis and visualization. The
Company's GeneScape web-based bioinformatics operating system provides the
user with a standardized, internet-enabled interface to its processes and
databases for GeneCalling, PathCalling and HitCalling. GeneScape operates on
any computer platform that supports a standard web browser. GeneScape is
designed to be modular and extendable to incorporate other processes.
GeneScape currently consists of three components: Discovery, Study Management,
and CuraTools.

Discovery. The Discovery component manages queries to the GeneCalling,
PathCalling and HitCalling databases. GeneScape provides data analysis and
visualization through a flexible, easy-to-use point-and-click interface
organized in three sections corresponding to GeneCalling, PathCalling, and
HitCalling. GeneScape provides the answers to queries in visual format,
organized according to preferences set by the end user: differential gene
expression; expression in particular samples, tissues, or disease stages;
participation in metabolic or signal transduction pathways; map position;
functional role; interactions with proteins or small

39
<PAGE>

molecules; or other custom criteria. The Company believes that the ability to
respond to direct queries with the comprehensive analysis of gene expression
and biological pathways may make GeneScape a preferred platform for
discovering disease-related genes and drug discovery targets.

Study Management. CuraGen's collaborators can manage processes and resources
over the Internet to meet their individual research needs. Separate links on
the Study Management page provide direct, up-to-the-minute status reports for
projects, individual processes within projects, and resource allocation among
projects and processes. Study Management automates the operation of every
station in the QEA and MIM process and monitors quality control at each
processing step.

CuraTools. The GeneScape operating system also includes CuraTools, an easy-
to-use, unified bioinformatics software package for DNA and protein sequence
analysis; sequence similarity to known genes, protein drugs and protein
targets; three-dimensional structure prediction; identification of proteins
participating in biological pathways; and custom literature searches.
CuraTools also provides users with access to publicly available sequence,
mapping and expression databases that the Company has imported, assembled, and
annotated for enhanced value. In addition, the Company has assembled
proprietary sequence and mapping databases for portions of the corn, mouse,
rat and human genomes. Collaborators can elect to have CuraGen link their own
proprietary or third-party sequence databases into GeneScape and CuraTools for
their own exclusive use.

CURASHOP

Through its CuraShop, the Company now offers its collaborators services that
will complement its proprietary GeneCalling, PathCalling, and HitCalling
technologies. CuraShop can provide high-throughput, efficient and essential
research services including confirmation of gene expression differences, gene
sequencing, delivery of full-length clones of genes, gene mapping and mutation
detection. These services and materials can all be requested, for a fee,
directly through GeneScape.

RESEARCH COLLABORATIONS

The Company's business strategy includes the establishment of research
collaborations with pharmaceutical, biotechnology and agricultural companies.
The Company anticipates that such collaborations will generally provide
revenues in the form of fees for the generation of gene expression and
biological pathway data from samples provided by a collaborator. The
collaborator will have the ability to control how resources are allocated to
generate GeneCalling and PathCalling databases and to perform additional
research services through CuraShop, including the sequencing of gene fragments
and the generation of full-length clones. Fees will also give each such
partner exclusive access for a defined period of time to the GeneCalling or
PathCalling databases containing the information produced in the
collaboration. The Company expects that collaborators will have the right to
license, for an up-front fee, discoveries arising from a collaboration,
including rights to novel genes, novel uses of previously identified genes,
and protein targets and hits. Collaborations may also include milestone
payments and royalty payments on sales of products developed using discoveries
made through the use of the Company's technology. After the period of
exclusivity expires, rights to genes and portions of the data not licensed by
the collaborator are expected to revert to CuraGen. The Company intends to
include this data in its expanding subscription databases. The Company intends
to seek collaborations that will be non-exclusive with respect to a given
field or disease indication, for example stroke or cardiovascular disease, but
exclusive for a specific period of time for certain disease models, such as a
research project using a mouse model for stroke or cardiovascular disease.

The Company also intends to seek to enter into other research collaborations
that provide the Company access to complementary technologies. To date, the
Company has entered into collaborations with Pioneer Hi-Bred, Biogen,
Genentech and ArQule.

PIONEER HI-BRED

In May 1997, CuraGen and Pioneer Hi-Bred entered into a research
collaboration to identify genes responsible for agricultural seed product
performance, including crop yield, drought resistance and pest resistance

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(the "Pioneer Agreement"). Pioneer Hi-Bred is a leader in the development of
genetically based agricultural crop seed products, with approximately 44% of
the North American corn seed market and a significant share of the market in
other major corn-growing areas of the world. Historically, Pioneer Hi-Bred has
developed new hybrid seed strains with favorable traits using traditional
cross breeding techniques with only limited knowledge of the genes responsible
for such traits. The Company believes that by applying QEA and GeneCalling
technologies, it will discover the genes responsible for these favorable
traits, thereby enabling Pioneer Hi-Bred to develop, faster and more
efficiently, new generations of seed products with superior traits.

Under the terms of the Pioneer Agreement, Pioneer Hi-Bred agreed to fund a
research program for up to five years in certain areas related to agricultural
crop seed research and product development, and the Company agreed not to
collaborate with any other parties within such areas. The agreement provides
for minimum annual research payments of $2.5 million, with specified funding
increases after three years in order to avoid CuraGen's right to terminate the
agreement. If the research program continues for its full five-year term,
total research funding, including such increased research payments, could
reach $18.5 million. In connection with the collaboration, Pioneer Hi-Bred
made a $7.5 million equity investment in the Company.

Pioneer Hi-Bred has the right to terminate the research program at any time
upon a breach by the Company. The Agreement also provided that Pioneer Hi-Bred
could terminate the research program on three months' written notice, at any
time after November 1998, if the Company had not identified at least one gene
associated with a trait of interest selected by Pioneer Hi-Bred. In February
1998, Pioneer Hi-Bred confirmed that the Company had identified such a gene,
and therefore Pioneer Hi-Bred's termination right commencing in 1998 lapsed.
In addition, Pioneer Hi-Bred continues to have the right, at any time after
May 2000, to terminate the research program at its sole discretion on three
months' written notice.

The Pioneer Agreement provides Pioneer Hi-Bred with exclusive, worldwide,
royalty-bearing rights to develop and commercialize products based on gene
discoveries made in the collaboration in certain areas related to seed
products, non-seed plant products and agricultural chemicals. CuraGen will
receive specified royalties on the sale of seed products incorporating trait-
specific genes identified by CuraGen. Royalties with respect to non-seed plant
products and agricultural chemicals are to be negotiated. The Pioneer
Agreement provides the Company with a worldwide right to develop and
commercialize products in the fields of human healthcare, pharmaceuticals,
animal health and microbial applications based upon gene discoveries arising
from the collaboration.

The Company believes that this collaboration offers it significant discovery
benefits because Pioneer Hi-Bred has assembled one of the world's leading
collections of crop genetic materials, which contains a wide range of genes
and pathways responsible for important agricultural traits. Many of the genes
and pathways plant cells use to carry out biological processes have closely
related genes and pathways in human cells. CuraGen has retained all rights to
use the information gained in studies of plant genes for applications to the
Company's programs in human disease.

BIOGEN

In June 1997, CuraGen and Biogen entered into a stock purchase agreement,
pursuant to which Biogen made a $1 million equity investment in the Company in
anticipation of evaluating the application of CuraGen's technology to a
particular program of interest to Biogen.

In October 1997, CuraGen and Biogen entered into a research collaboration
and database subscription arrangement pursuant to a Research and Option
Agreement (the "Biogen Agreement"). Under the Biogen Agreement, CuraGen and
Biogen will collaborate in the discovery of novel therapeutics across a range
of Biogen-specified disease programs. The parties also expect to conduct
pharmacogenomic analysis of selected products and product candidates in
Biogen's portfolio. The collaboration will provide Biogen with access to
CuraGen's proprietary genomics platform, including the GeneScape
bioinformatics operating system in order to

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<PAGE>

generate GeneCalling and PathCalling databases from Biogen-specified disease
systems. Biogen will also gain non-exclusive access to CuraGen's GeneCalling
and PathCalling subscription databases.

Under the terms of the agreement, Biogen agreed to invest $5 million in
CuraGen to purchase Common Stock at the initial public offering price and to
provide a $10 million interest-bearing loan facility. Interest under the loan
facility is payable semi-annually and accrues on the outstanding principal
balance at an annual rate equal to the prime rate plus one percent. The loan
is convertible at any time at CuraGen's option into Common Stock based upon a
formula that approximates its prevailing market price, and the principal is
payable at the earlier of five years or one year after termination by Biogen
of the Biogen Agreement. Biogen will additionally provide payments over five
years to support the research collaboration and to gain non-exclusive access
to CuraGen's GeneCalling and PathCalling subscription databases. Payments
could reach $18.5 million if the research collaboration and database
subscription payments both continue for the full five-year term. Biogen has an
exclusive right during specified periods to evaluate discoveries arising from
the collaboration and to license such discoveries, some of which will require
the payment of an additional fee. During the period of exclusivity, for each
discovery arising from the collaboration, the Company is prohibited from
undertaking substantially similar research projects with third parties. After
the period of exclusivity elapses, rights to genes not licensed to Biogen and
rights to the data will revert to CuraGen. For each therapeutic product which
is developed under an exclusive license and attains certain development and
commercialization milestones, Biogen will provide milestone payments of up to
$18.5 million. Biogen will also pay royalties based on future product sales.

Biogen has the right to terminate the research collaboration upon any breach
by the Company of any material obligation under the Biogen Agreement or at its
sole discretion at any time after October 1999, on six months' written notice.
In addition, Biogen may terminate its subscription to the Company's
GeneCalling and PathCalling databases at any time upon three months' written
notice. Upon the closing of the offering, after purchase of Biogen Shares,
Biogen will be the beneficial owner of 4.4% of the outstanding shares of
Common Stock. Biogen is entitled to certain registration rights with respect
to the shares of Common Stock issued pursuant to the Biogen Agreement. See
"Description of Capital Stock--Registration Rights."

GENENTECH

In June 1996 and December 1996, CuraGen and Genentech entered into
exploratory programs under certain agreements (the "1996 Genentech
Agreements") to evaluate the application of CuraGen's integrated genomics
technologies to selected internal programs at Genentech. The 1996 Genentech
Agreements are limited in scope and duration. Under the terms of the 1996
Genentech Agreements, CuraGen received a $1.8 million equity investment and
Genentech agreed to make research and development payments of $667,000 to
cover three separate exploratory programs. The 1996 Genentech Agreements call
for milestone payments and royalties on therapeutic product sales.

In November 1997, CuraGen and Genentech entered into a research
collaboration and database subscription arrangement pursuant to a Research and
Option Agreement (the "Genentech Agreement"). The Genentech Agreement
supersedes the 1996 Genentech Agreements with respect to project data
generated thereunder. Under the Genentech Agreement, CuraGen and Genentech
will collaborate in the discovery of novel therapeutics across a range of
Genentech-specified disease programs. The collaboration will provide Genentech
with access to CuraGen's genomics platform, including the GeneScape
bioinformatics operating system, in order to generate proprietary GeneCalling
and PathCalling databases. Genentech will also gain non-exclusive access to
CuraGen's GeneCalling and PathCalling databases. Genentech will provide
funding of up to $24 million over five years if the database subscription
arrangement is not terminated, the research collaboration continues for the
full five-year term and Genentech elects to retain licenses to its
discoveries. Genentech has an exclusive right during specified periods to
evaluate discoveries arising from the collaboration and to license such
discoveries, some of which require the payment of an additional fee. During
the period of exclusivity, for each discovery arising from the collaboration,
the Company is prohibited from undertaking substantially similar research
projects with third parties. After the period of exclusivity lapses, rights to
genes not licensed to Genentech and rights to the data

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will revert to CuraGen. Genentech will provide milestone payments for each
product which is developed under a license and attains certain development and
commercialization milestones and will pay royalties based on future product
sales.

Under the terms of the Genentech Agreement, Genentech has agreed to purchase
$5 million of Common Stock in a private placement at the initial public
offering price. Genentech has also agreed to provide CuraGen with an interest-
bearing loan facility which could in the aggregate reach $26 million if the
research program continues beyond its initial three year term. The loan
facility contains annual borrowing limits and the outstanding principal and
interest under the loan facility are payable five years from the date of the
Genentech Agreement. Interest accrues on the outstanding principal balance at
an annual rate equal to the prime rate plus one percent. Genentech may
accelerate the payment of the outstanding principal and interest in certain
circumstances, including Genentech's termination of the Genentech Agreement
due to a breach by CuraGen or if CuraGen's market capitalization is less than
two times the outstanding principal balance of the loan facility. After the
end of the first year, during the term of the Genentech Agreement, the then
outstanding indebtedness under the loan facility is convertible at CuraGen's
option into Non-Voting Common Stock based upon a formula that approximates the
prevailing market price of the Company's Common Stock. The Company's stock
repayment option may be limited under certain circumstances in the event that
Genentech's ownership of the Company's capital stock exceeds certain specified
percentages. In addition, if Genentech's ownership of the Company's capital
stock exceeds 19.8%, then the Company may be required to repurchase shares of
Non-Voting Common Stock previously issued to Genentech based upon a formula
that approximates the prevailing market price of the Company's Common Stock.
If issued, the Non-Voting Common Stock is convertible into Common Stock (i) at
any time, at Genentech's option, or (ii) upon the sale or transfer of the Non-
Voting Common Stock to a non-affiliated third party.

Genentech has the right to terminate the research collaboration, upon a
breach by the Company of any material obligation under the Genentech Agreement
or at its sole discretion, on one month's prior notice (i) in May 1999,
subject to its payment of a termination fee or forgiveness of the portion of
the loan facility outstanding on such termination date and (ii) on or after
November 2000. Upon the closing of the offering, after purchase of the
Genentech Shares, Genentech will be the beneficial owner of 6.0% of the
outstanding shares of Common Stock. Genentech is entitled to certain
registration rights with respect to the shares of Common Stock and Non-Voting
Common Stock issued pursuant to the Genentech Agreement. See "Description of
Capital Stock--Registration Rights."

ARQULE

In January 1998, the Company and ArQule entered into a research
collaboration, pursuant to which ArQule's libraries of diverse, small organic
compounds will be screened against protein targets using CuraGen's CombiGen
technology to identify hits and to provide the HitCalling database. The
agreement is for an initial term of six months and will be automatically
extended for successive six-months terms until terminated by either party on
at least 30 days' notice prior to the end of a term. Under the agreement,
CuraGen will have the option to negotiate a research collaboration and license
agreement with ArQule to optimize, develop and commercialize leads identified
through the screening program. The contemplated terms of such collaborations
include equal rights to participate in the development, preclinical and
clinical testing of lead compounds, with equal sharing of commercialization
revenues.

DATABASE SUBSCRIPTIONS

As part of its business strategy, the Company intends to offer subscriptions
which will provide users with non-exclusive access to its GeneCalling,
PathCalling and HitCalling databases through the GeneScape operating system.
The Company will also provide subscribers access to its CuraTools
bioinformatics software. The Company anticipates updating its databases
regularly with selected data generated from internal programs, as well as data
from collaborations which have reverted to the Company. The Company intends to
structure its arrangements to receive initial fees and periodic maintenance
fees for each subscription. In addition, the

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Company may receive license fees, milestone payments and royalties in
connection with the licensing or use of proprietary information in its
databases for the development of products. Certain subscribers may also seek
to take advantage of the full range of the Company's GeneCalling, PathCalling,
HitCalling and CuraShop services by entering into collaborations with the
Company. The Company's databases are in the early stages of development and
there can be no assurance that the Company will succeed in commercializing its
databases. To date, the Company has entered into a subscription arrangement
with Biogen as part of the Biogen Agreement and with Genentech as part of the
Genentech Agreement. See "--Research Collaborations--Biogen" and "--Research
Collaborations--Genentech."

CURAGEN INTERNAL PROGRAMS

The Company intends to use its integrated genomics technology platform to
pursue a broad portfolio of research programs that encompass drug discovery,
drug development and pharmacogenomics. During the next five years, the
Company's objective is to analyze systematically the genetic basis of many
common diseases as well as the mechanisms of action and adverse side effects
of many commonly prescribed drugs. CuraGen is focusing its efforts on programs
that address unmet medical needs and that the Company believes have the
potential to yield products that can be commercialized in a relatively short
time. In particular, the Company selects human diseases and animal models of
human disease based on their potential to yield protein drugs, to identify
novel targets for common diseases that lack effective treatments or to aid
rational development or marketing of existing drugs. At each stage, the
Company plans to reevaluate the relative merits of continuing such programs
through internal efforts or through research collaborations.

DISCOVERY PROGRAMS

The Company currently has programs in cardiovascular disease, including
hypertension and stroke; endocrine and metabolic disorders, including obesity,
diabetes and osteoporosis; autoimmune disorders including arthritis; cancer;
and infectious diseases. In its internal programs, CuraGen has discovered
thirteen disease-related genes and has filed five patent applications relating
to these discoveries.

Certain of the genetic disease models selected by the Company are designed
to discover variations of genes that protect individuals from disease in
addition to finding mutations in genes that are involved in the
susceptibility, onset or progression of disease. The Company intends to
explore the potential of the proteins encoded by protective genes as protein
drugs. The Company has already identified gene variants that are potentially
protective in stroke. These gene variants were identified from animal models
using QEA and GeneCalling within months of project inception. The Company has
also discovered mutations in genes involved in diabetes and hypertension, one
of which the Company believes may be a suitable target for small molecule drug
development.

Cardiovascular Disease and Stroke. Cardiovascular diseases such as stroke
and atherosclerosis are the leading cause of death in the United States.
Treatments for these diseases have limited efficacy. Using GeneCalling and
PathCalling, CuraGen is analyzing genetic models of hypertension and ischemic
stroke to identify disease-related genes. This strategy has led to the
discovery of a secreted protein variant that appears to protect against stroke
and the discovery of a gene that may contribute to hypertension.

Endocrine and Metabolic Diseases. Within the field of endocrine and
metabolic diseases, CuraGen is analyzing a variety of genetic models including
obesity, type II diabetes, osteoporosis, osteoarthritis and gall stone
disease. The Company believes that its technology platform is well-suited to
identifying the genes and pathways involved in these diseases, which are known
to involve errors in signal transduction and the regulation of metabolic
pathways. To date, the Company has used QEA and GeneCalling to discover over
40 genes associated with these diseases and is using PathCalling in an attempt
to identify disease-related pathways and potential targets for drug discovery.
The Company believes that this information may also lead to the discovery of
protein drugs.

Autoimmunity, Arthritis and Allergy. Although diseases of the immune system,
such as systemic lupus erythematosus and rheumatoid arthritis, are among the
most common and chronic, existing drugs for autoimmune

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diseases have exhibited limited efficacy and debilitating side effects. The
Company has used QEA and GeneCalling in nine different genetic models of
systemic autoimmune disease to identify disease-related genes. CuraGen is
using MIM and PathCalling to identify pathways which incorporate these genes.

Cancer. Cancer encompasses disease processes of almost every organ system
and involves the loss of control of multiple, diverse mechanisms of signal
transduction and pathway regulation. CuraGen is applying GeneCalling and
PathCalling to identify the genes and pathways involved in the early
development of cancer and its step-wise progression to metastatic disease.
CuraGen has analyzed a number of models of cancer and has identified pathways
incorporating proteins common to many of the models.

Infectious Diseases. The Company believes that its program for pathogenic
diseases offers advantages over alternative approaches that primarily aim at
sequencing pathogen genomes with little characterization of the role of
specific pathogen proteins in biological pathways. CuraGen's research,
however, uses MIM and PathCalling to identify protein-protein interactions,
including both pathogen-pathogen and pathogen-host interactions, and
biological pathways to provide this characterization, which is valuable for
target identification and validation. The Company anticipates discovering
novel pathways specific to unique human infectious agents, including viruses,
bacteria and parasites, that are important during resting, vegetative and
pathogenic states of infection. The Company believes its approach may
facilitate the development of diagnostic assays for infectious diseases and
improved vaccines and drugs. The Company has initiated a program for a
specific bacterial pathogen and has discovered novel protein-protein
interactions that tie into known pathways conferring pathogenicity.

DRUG DEVELOPMENT AND PHARMACOGENOMICS

The Company believes that the application of QEA and GeneCalling to identify
genes that are differentially expressed in response to treatment with drug
candidates and marketed drugs represents a significant commercial opportunity.
Using this approach, the tissues targeted by the drug, as well as the organs
that might exhibit side effects, including liver or kidney damage, can be
studied in animal models thought to be indicative of human response. The
Company believes that this information may help pharmaceutical companies
select and optimize drug candidates based on efficacy and reduced side
effects. In addition to reducing the time and cost of developing drugs, the
Company believes that such results may strengthen FDA applications. For drugs
already on the market, an understanding of the mechanism of action through
pharmacogenomics can help identify appropriate patient populations and lead to
an improved generation of drugs.

The Company has begun to analyze drugs whose commercial viability or
clinical indications are threatened either by a lack of understanding of
mechanism of action or by severe side effects. The Company's goal is to
generate GeneCalling databases to provide pharmacology and toxicology
information, to understand the mechanism of drug action, to identify patient
populations that are likely to respond favorably to a particular medication
and, potentially, to identify new indications or more optimal targets.

TECHNOLOGY PLATFORM

CuraGen's integrated genomics technologies, processes and information
systems are designed to rapidly generate extensive and precise information
about gene expression, biological pathways and the chemicals that affect these
pathways, each on a scale not previously undertaken. CuraGen's GeneCalling,
PathCalling and HitCalling and related core technologies have been integrated
under its GeneScape operating system. The Company has 14 patent applications
pending on its proprietary technologies. CuraGen intends to continue to pursue
a broad intellectual property position with respect to its GeneCalling,
PathCalling, HitCalling and related core technologies.

QEA AND GENECALLING: CURAGEN'S TECHNOLOGY FOR GENE DISCOVERY

CuraGen's QEA technology and GeneCalling database, accessed over the
Internet through GeneScape, serve as the basis of the Company's collaborations
with Pioneer Hi-Bred, Biogen and Genentech. The use of these technologies has
led to patent filings relating to over thirteen disease-related genes in
internal programs and research collaborations.

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The QEA process starts with a biological sample from which mRNA molecules
are isolated. The gene expression information contained in the mRNA molecules
is copied back to DNA molecules, which are more chemically stable, to create a
pool of complementary DNA (CDNA). Each of 48 to 96 QEA reactions probes a
separate portion of the original cDNA pool with a unique pair of subsequences,
short stretches of bases. If a cDNA molecule contains both subsequences, it
produces a fluorescently-labeled gene fragment whose length is determined by
the number of bases between the subsequences as they occur in the gene. Each
QEA reaction produces approximately 200 different fragments. The QEA process
typically generates multiple fragments per gene to provide fault tolerance by
minimizing the possibility that a gene will not be detected.

The labeled fragments from each QEA reaction are loaded into individual
lanes of an electrophoresis gel and separated according to length. The
quantity of fragments of each length is determined by optical detection of the
fragment labels. The more copies of a given gene, the more fragments are
produced and the brighter the signal from that gene's fragments. The Company's
proprietary instrumentation and software has the sensitivity to detect
fragments at the level of 1 in 250,000, sufficient to detect a single mRNA
molecule per cell. The detection of 200 fragments in each lane contains
information on both the identities (from the lengths) and expression levels
(from the fluorescence intensities) of approximately 200 genes, as opposed to
alternative EST-sequencing approaches, where a single lane yields information
solely on the identity of a single gene. Analysis of 48 to 96 lanes from
different QEA reactions generates data for approximately 10,000 to 20,000
fluorescently labeled gene fragments. Gene fragment patterns are stored in the
Company's GeneCalling database.

After a sample has been processed by QEA to produce gene fragment patterns,
GeneCalling software uses the subsequence pair in a QEA reaction like an area
code, the fragment length like a phone number, and a database of known genes
like a phone book to identify the gene that generated each fragment. Fragments
which do not have any match in the database of known genes, and which
therefore may represent valuable novel genes, may also be observed. The
Company sequences just these unmatched fragments for inclusion in its
database.

QEA and GeneCalling are designed to be sufficiently sensitive to detect
genes expressed at the level of a single mRNA per cell, comprehensive by
measuring the expression levels of 95% of the genes expressed in a cell, and
efficient in processing samples, generating gene expression profiles, and
identifying genes whose expression levels correlate with disease. The
Company's technology is able to detect genes with novel sequences and
therefore is applicable broadly to humans, animals, plants and pathogens. The
Company believes that QEA and GeneCalling provide advantages over other
technologies that analyze gene fragment patterns but lack fault tolerance,
specificity or the ability to look up gene identity in a database.

MIM AND PATHCALLING: CURAGEN'S TECHNOLOGY FOR TARGET IDENTIFICATION AND
VALIDATION

CuraGen's MIM technology and PathCalling database were developed to provide
a link between disease-related genes and the biological pathways in which the
proteins encoded by such genes interact. The Company believes that these
technologies, accessed over the Internet through GeneScape, will serve as a
significant component of the Company's research collaborations and
subscriptions. The use of these technologies in internal programs has led to
patent filings on twenty-three protein-protein interactions that participate
in disease-related biological pathways.

MIM uses genetically engineered cells to simultaneously test for
interactions between thousands of pairs of proteins. First, two cDNA libraries
are produced from the genes expressed in any biological sample, including
human tissues, animals or pathogens. Next, each cell in the MIM system is
engineered to contain a foreign protein encoded by a gene from one of the two
cDNA libraries. Each of these foreign proteins is connected to one half of an
essential activating protein that has been split in two and cannot function
unless reconstituted. Billions of these engineered cells are then fused,
simultaneously, to test for interactions between the majority of possible
combinations of foreign proteins from each library. If a cell contains two
foreign proteins which interact with each other, the essential activating
protein is reconstituted and permits the cell to live. Those cells that do not
contain interacting proteins die. The identities of the interacting proteins
in the surviving cells are then determined by sequencing the DNA encoding the
foreign proteins.

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The Company believes its automated MIM technology is an advance over
technical approaches in which a single target protein is the same in all the
cells, while the second foreign protein is from a cDNA library. This approach
can identify only those proteins that interact with a single target protein of
interest. The Company has introduced proprietary advances that permit testing
of interactions using two protein libraries simultaneously, which eliminates
the need for a specific target protein and the protein-by-protein approach for
elucidating pathways. The Company believes that its proprietary advances in
biological methods and computer software also allow a significant reduction in
the error rate due to incorrect identification of protein-protein
interactions.

COMBIGEN AND HITCALLING: CURAGEN'S TECHNOLOGY FOR MULTIPLEXED HIGH-
THROUGHPUT SCREENING ASSAYS

The Company is developing its CombiGen technology and HitCalling database to
accelerate high-throughput screening of novel protein targets. The Company's
CombiGen technology is designed to employ cells that have been engineered to
express foreign protein targets. Many of these cells, each potentially
expressing unique targets, are then introduced into each well of an assay
plate. The engineered cells in each well are then exposed to a small molecule
from a chemical diversity library as part of an automated, high-throughput
screen. In most cases, the small molecule does not bind to any of the foreign
proteins and all the cells in a well die. If the small molecule does bind to a
foreign protein target in one of the cells, however, that cell lives. This
selection step allows the assay to be multiplexed for many protein targets in
parallel: thousands or millions of cells, each expressing different targets,
can be introduced at once and assayed against the same small molecule. Growth
in a well implies that the small molecule is active against one or more of the
foreign protein targets. The identity of the targets can then be determined by
sequencing DNA from the surviving cells. The identities of the protein targets
and hits will be stored in the HitCalling database.

CombiGen technology leverages CuraGen's expertise with MIM technology and is
directly applicable to proteins discovered by MIM and PathCalling to
participate in protein-protein interactions. CombiGen also permits screening
of protein targets discovered through methods other than MIM.

Under a research collaboration established with ArQule in January 1998,
ArQule's libraries of diverse, small organic compounds will be screened
against protein targets using Curagen's CombiGen technology to identify hits
and to populate the HitCalling database.

CORE TECHNOLOGY DEVELOPMENT

The Company has historically reduced its reliance on equity financing for
developing its GeneCalling, PathCalling, HitCalling and related core
technologies by competing successfully for federal grants. Granting agencies
have included the National Cancer Institute (NCI) and the National Human
Genome Research Institute (NHGRI) of the National Institutes of Health (NIH)
and the National Institute of Standards and Technology (NIST) of the United
States Department of Commerce through its Advanced Technology Program (ATP).
The Company believes that these multiple awards, in particular the receipt of
three separate ATP awards in a highly competitive selection process, attest to
CuraGen's excellence in developing and applying innovative, commercially
valuable technology.

Bioinformatics. CuraGen's GeneScape operating system provides web-based
access to its technologies, processes and databases; full capabilities for
project management and discovery queries over the Internet or at a client's
site; and use of CuraTools, a full-featured suite of bioinformatics software.
GeneScape uses JAVA and C programs to interact with an underlying Oracle
database. The Company plans to continue development of GeneScape as a modular,
cross-platform system able to serve as a standardized operating system for
multiple genomic-based technologies.

Instrumentation. CuraGen has conducted extensive technology research and
development for the analysis of DNA fragments, which the Company considers to
be an important unit operation for genomics. The Company believes that there
is strategic value in developing in-house, proprietary technology and
instrumentation that offers higher performance than commercially-available DNA
electrophoresis and hybridization platforms.

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The Company has developed its Niagara DNA analysis device to operate in
conjunction with QEA and GeneCalling. The Company believes that Niagara is
faster, more sensitive and flexible, and offers better resolution of closely-
spaced gene fragments than commercially available instruments. In addition,
the Company has developed its proprietary Open Genome Initiative ("OGI")
software for signal processing and data analysis in conjunction with its
Niagara device. OGI software is integrated with the GeneScape operating
system, but is also capable of stand-alone operation or for use with
commercially available DNA analysis instruments.

CuraGen is developing an upgrade path for the Niagara instrument that
includes MicroNiagara, combining features of slab-gel and capillary
electrophoresis, and NanoNiagara, a micromachined separation chip that uses a
non-electrophoretic, liquid-phase mechanism for DNA separation. The Company
believes that these advanced programs will help maintain its competitive
advantage in the separation, detection and analysis of DNA.

COMPETITION

A number of competitors are attempting to identify and patent genes and gene
fragments sequenced at random, typically without specific knowledge of the
function of such genes or gene fragments. The Company's competitors may
discover, characterize or develop important genes or gene fragments in advance
of the Company, which could have a material adverse effect on any related
disease research program of the Company. The Company expects competition to
intensify in genomics research as technical advances are made and become more
widely known. See "Risk Factors--Competition."

INTELLECTUAL PROPERTY

The Company's business and competitive position are dependent upon its
ability to protect its GeneCalling, PathCalling and HitCalling proprietary
technologies, processes, databases and information systems. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to obtain and use information that the Company regards as proprietary.
The Company relies on patent, trade secret and copyright law and nondisclosure
and other contractual arrangements to protect such proprietary information.
The Company has filed patent applications for its proprietary methods and
devices for gene expression analysis, for discovery of biological pathways and
for drug screening for pharmaceutical product development. As of February 15,
1998, the Company had 17 patent applications pending with the United States
Patent and Trademark Office ("USPTO") covering its technology and had filed
several corresponding international and foreign patent applications. To date,
no patents have been issued to the Company with respect to such technology and
there can be no assurance that any patents will issue. There can be no
assurance that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the
Company's proprietary information, that such information will not be disclosed
or that the Company can effectively protect its rights to unpatented trade
secrets or other proprietary information.

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The Company's commercial success will also depend in part on obtaining
patent protection on gene and protein target discoveries for which it or its
collaborators or subscribers discover utility and on products, methods and
services based on such discoveries. The Company has applied for patent
protection for novel mutants of known genes and their uses, partial sequences
of novel proteins and their gene sequences and uses, and novel uses for
previously identified genes discovered by third parties. The Company has
sought and intends to continue to seek patent protection for novel uses for
genes and proteins which may have been patented by third parties. In such
cases, the Company would need a license from the holder of the patent with
respect to such gene or protein in order to make, use or sell such gene or
protein for such use. There can be no assurance that the Company will be able
to acquire such licenses on commercially reasonable terms, if at all. The
Company's patent application filings that result from the identification of
genes associated with the cause or effect of a particular disease generally
seek to protect the genes and encoded proteins if these genes and encoded
proteins are, among other things, novel and non-obvious, as well as
therapeutic, diagnostic and drug screening methods and products, and other
subject matter based upon a gene and its indication. Where information is
discovered on the specific biological pathway in which the protein encoded by
the gene participates, the Company also seeks to protect the newly identified
protein complex as well as the methods for identifying intervention
strategies. Each application typically contains multiple genes discovered for
a particular disease system.

The Company cannot predict whether its or its competitors' patent
applications will result in valid patents being issued. Litigation, which
could result in substantial cost to the Company, may also be necessary to
enforce the Company's patent and proprietary rights and/or to determine the
scope and validity of others' proprietary rights. The Company may participate
in interference proceedings that may in the future be declared by the USPTO to
determine priority of invention, which could result in substantial cost to the
Company. There can be

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no assurance that the outcome of any such litigation or interference
proceedings will be favorable to the Company or that the Company will be able
to obtain licenses to technology that it may require or that, if obtainable,
such technology can be licensed at a reasonable cost.

The public availability of ESTs or other sequence information prior to the
time the Company applies for patent protection on a corresponding full-length
or partial gene could adversely affect the Company's ability to obtain patent
protection with respect to such gene or gene sequences. In addition, certain
other groups are attempting to rapidly identify and characterize genes through
the use of gene expression analysis and other technologies. To the extent any
patents issue to other parties on such partial or full-length genes or uses
for such genes, the risk increases that the sale of potential products,
including therapeutics, or processes developed by the Company or its
collaborators may give rise to claims of patent infringement. Others may have
filed and in the future are likely to file patent applications covering genes
or gene products that are similar or identical to those of the Company. No
assurance can be given that any such patent application will not have priority
over patent applications filed by the Company. Any legal action against the
Company or its collaborators claiming damages and seeking to enjoin commercial
activities relating to the affected products and processes could, in addition
to subjecting the Company to potential liability for damages, require the
Company or its collaborators to obtain a license in order to continue to
manufacture or market the affected products and processes or could enjoin the
Company from continuing to manufacture or market the affected products and
processes. There can be no assurance that the Company or its collaborators
would prevail in any such action or that any license required under any such
patent would be made available on commercially acceptable terms, if at all.
The Company believes that there may be significant litigation in the industry
regarding patent and other intellectual property rights. If the Company
becomes involved in such litigation, it could consume a substantial portion of
the Company's managerial and financial resources. Under the Company's
government grants and contracts, the federal government has a nonexclusive,
nontransferable, paid-up license to practice or have practiced for or on
behalf of the United States, throughout the world and, under certain
circumstances, to grant to other parties licenses under, any inventions
conceived or first actually reduced to practice under the government grants
and contracts.

There is substantial uncertainty concerning the extent to which supportive
data will be required for issuance of patents for human therapeutics. If data
additional to that available to the Company is required, the Company's ability
to obtain patent protection could be delayed or otherwise adversely affected.
Although the USPTO issued new utility guidelines in July 1995 that address the
requirements for demonstrating utility for biotechnology inventions,
particularly for inventions relating to human therapeutics, there can be no
assurance that USPTO examiners will follow such guidelines or that the USPTO's
position will not change with respect to what is required to establish utility
for gene sequences and products and methods based on such sequences.
Furthermore, the enactment of the legislation implementing the General
Agreement on Tariffs and Trade has resulted in certain changes to United
States patent laws that became effective on June 8, 1995. Most notably, the
term of patent protection for patent applications filed on or after June 8,
1995 is no longer a period of seventeen years from the date of grant. The new
term of United States patents will commence on the date of issuance and
terminate twenty years from the earliest filing date in the United States to
which priority is claimed for the application. Because the time from filing to
issuance of biotechnology patent applications is often more than three years,
a twenty-year term from the claimed United States priority date may result in
a substantially shortened term of patent protection, which may adversely
impact the Company's patent position. If this change results in a shorter
period of patent coverage, the Company's business could be adversely affected
to the extent that the duration and level of the royalties it is entitled to
receive from its strategic partners is based on the existence of a valid
patent.

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over the Internet. The Company has taken security measures to protect its
proprietary technologies, processes, information systems and data and
continues to explore ways to enhance such security. There can be no assurance,
however, that such measures will provide adequate protection for the Company's
trade secrets or other proprietary information. While the Company requires
employees, academic collaborators and consultants to enter into
confidentiality and/or non-disclosure agreements where appropriate, there can
be no assurance that proprietary information will not be disclosed, that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or disclose such technology, or that the Company can meaningfully
protect its trade secrets. See "Risk Factors--Patents and Proprietary Rights;
Third Party Rights."

GOVERNMENT REGULATION

Prior to marketing, any new drug developed by the Company or its
collaborative customers must undergo an extensive regulatory approval process
in the United States and other countries. This regulatory process, which
includes preclinical and clinical studies, as well as post-marketing
surveillance to establish a compound's safety and efficacy, can take many
years and require the expenditure of substantial resources. Generally, in
order to gain FDA approval, a company first must conduct preclinical studies
in the laboratory and in animal models to gain preliminary information on a
compound's efficacy and to identify any safety problems. The results of these
studies are submitted as part of an IND that the FDA must review before human
clinical trials of an investigational drug can start. In order to
commercialize any products, the Company or its collaborative customer will be
required to sponsor and file INDs and will be responsible for initiating and
overseeing the clinical studies to demonstrate the safety and efficacy that
are necessary to obtain FDA approval of any such products. Clinical trials are
normally done in three phases and generally take two to five years, but may
take longer to complete. After completion of clinical trials of a new product,
FDA regulatory authority marketing approval must be obtained. If the product
is classified as a new drug, the Company or its collaborative customer will be
required to file an NDA and receive approval before commercial marketing of
the drug. If the product is characterized as a biologic, both a PLA and an
Establishment License Application ("ELA") will be required prior to commercial
marketing. The testing and approval processes require substantial time and
effort and there can be no assurance that any approval will be granted on a
timely basis, if at all. NDAs and PLAs submitted to the FDA can take several
years to obtain approval. For marketing outside the United States, the Company
will also be subject to foreign regulatory requirements governing human
clinical trials and marketing approval for pharmaceutical products. The
requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country. Delays or
rejections may also be encountered based upon changes in FDA policies for drug
approval during the period of product development and FDA regulatory review of
each submitted NDA in the case of new pharmaceutical agents, or PLA in the
case of biologics. Similar delays also may be encountered in the regulatory
approval of any diagnostic product and in obtaining regulatory approvals in
foreign countries. Under current guidelines, proposals to conduct clinical
research involving gene therapy at institutions supported by the NIH must be
approved by the Recombinant DNA Advisory Committee and the NIH. There can be
no assurance that regulatory approval will be obtained for any drugs or
diagnostic products developed by the Company or its collaborative customers.
Furthermore, regulatory approval may impose limitations on the indicated use
of a drug. Because certain of the products likely to result from the Company's
disease research programs involve the application of new technologies and may
be based upon a new therapeutic approach, such products may be subject to
substantial additional review by various government regulatory authorities
and, as a result, regulatory approvals may be obtained more slowly than for
products using more conventional technologies.

51
<PAGE>

for any product candidate, and no product candidate has been approved for
commercialization in the United States or elsewhere. The Company intends to
rely primarily on its collaborators to file INDs and generally direct the
regulatory approval process. No assurance can be given that the Company or any
of its collaborators will be able to conduct clinical testing or obtain the
necessary approvals from the FDA or other regulatory authorities for any
products. Failure to obtain required governmental approvals will delay or
preclude the Company's collaborators from marketing drugs or diagnostic
products developed by the Company or limit the commercial use of such products
and could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company's research and development activities involve the controlled use
of hazardous materials, chemicals and various radioactive materials. The
Company is subject to federal, state and local laws and regulations governing
the use, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for
handling and disposing of such materials comply with the standards prescribed
by federal, state and local laws and regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, the Company could be held liable for any
damages that result and any liability could exceed the resources of the
Company. See "Risk Factors--Government Regulation; No Assurance of Regulatory
Approval."

EMPLOYEES

At December 31, 1997, the Company had 168 full-time equivalent employees, of
whom 72 held Ph.D. or other doctoral degrees and 15 others held masters or
other post-graduate degrees. The employee group includes engineers,
physicians, molecular biologists, chemists and computer scientists. The
Company intends to continue to expand its number of full-time equivalent
employees and affiliates during 1998. The Company believes that its relations
with its employees are good. None of the Company's employees is represented by
a union.

FACILITIES

CuraGen's principal administrative offices are located in New Haven,
Connecticut in a 26,000 square foot leased facility. The Company also leases
an 8,000 square foot technology development laboratory at its original site in
Branford, Connecticut, and a 4,000 square foot facility in Alachua, Florida.
The Company also supports scientists at the University of California at
Berkeley MicroFabrication Laboratory. CuraGen believes that its facilities are
adequate for the Company's operations and that suitable additional space will
be available in New Haven, Branford and Alachua as needed.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings.

52
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, their ages as of
January 1, 1998, and their positions with the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Jonathan M. Rothberg, Ph.D. (3)...... 34 Chief Executive Officer, President
and Chairman of the Board
Gregory T. Went, Ph.D. (2)........... 34 Executive Vice President and
Director
David M. Wurzer, C.P.A............... 39 Executive Vice President, Treasurer
and Chief Financial Officer
Elizabeth A. Whayland, C.P.A......... 37 Director of Financial Management and
Secretary
Peter A. Fuller, Ph.D................ 43 Vice President, Business Development
Stephen F. Kingsmore, M.B., Ch.B..... 37 Vice President, Research
Richard H. Booth, C.P.A., C.L.U.,
Ch.F.C. (3)(4)...................... 50 Director
Vincent T. DeVita, Jr., M.D. (2)(5).. 62 Director
Robert E. Patricelli, J.D. (1)(5).... 58 Director
James L. Vincent (1)(4).............. 58 Director
</TABLE>
- --------
(1)Class I Director
(2)Class II Director
(3)Class III Director
(4)Member of the Compensation Committee
(5)Member of the Audit Committee

Jonathan M. Rothberg, Ph.D. has served as Chief Executive Officer, President
and Chairman of the Board of Directors of the Company since its formation in
1991. From May 1991 to March 1993, he served as a Postdoctoral Fellow at the
Howard Hughes Medical Institute's Boyer Center for Molecular Medicine. Dr.
Rothberg received his B.S. in Chemical Engineering from Carnegie Mellon
University and his M.S., M. Phil. and Ph.D. in Biology from Yale University.

Gregory T. Went, Ph.D. has served as Executive Vice President of the Company
since February 1997 and as a Director of the Company since October 1997. From
September 1994 until February 1997, Dr. Went served as Vice President,
Business Development of the Company. From the Company's formation until
September 1994, Dr. Went served as Director of Structural Biology. Dr. Went
received his B.S. in Chemical Engineering from Carnegie Mellon University and
his Ph.D. in Chemical Engineering from the University of California, Berkeley.

David M. Wurzer, C.P.A. has served as Executive Vice President, Treasurer
and Chief Financial Officer of the Company since September 1997. From January
1991 to September 1997, Mr. Wurzer served as Senior Vice President and Chief
Financial Officer and in other senior managerial positions for Value Health,
Inc., a managed health care provider. Mr. Wurzer received his B.B.A. from the
University of Notre Dame.

Elizabeth A. Whayland, C.P.A. has served as Director of Financial Management
since November 1994 and as Secretary of the Company since September 1997. From
July 1982 to November 1994, Ms. Whayland served as a Senior Manager and in
other staff and management positions with Deloitte & Touche. Ms. Whayland
received her B.A. from Grove City College and her M.S.T. from the University
of Hartford.

53
<PAGE>

Peter A. Fuller, Ph.D. has served as Vice President, Business Development of
the Company since October 1997. From September 1983 to October 1997, Dr.
Fuller served as Director, Technology Identification & Assessment, Director,
Technology Access, Director, Technology Acquisition Group and Soybean Research
Station Manager for Pioneer Hi-Bred, a leading supplier of agricultural
genetics. Dr. Fuller received his B.S. from California State University and
his M.S. and Ph.D. from the University of Nebraska.

Stephen F. Kingsmore, M.B., Ch.B. has served as Vice President, Research of
the Company since October 1997. From July 1994 to October 1997, Dr. Kingsmore
served as Assistant Professor at the University of Florida in its Department
of Medicine, Division of Rheumatology and Clinical Immunology and at its
Center for Mammalian Genetics. He also served as an Affiliate Assistant
Professor at the University of Florida in its Department of Pathology and
Laboratory Medicine from July 1994 to October 1997, and in its Department of
Molecular Genetics and Microbiology from August 1996 to October 1997. From
March 1988 to July 1994, he served in the positions of Postdoctoral Fellow,
Intern, Resident and Fellow, Rheumatology at Duke University. Dr. Kingsmore
received his M.B. and his Ch.B. from Queen's University, Belfast, United
Kingdom.

Richard H. Booth, C.P.A., C.L.U., Ch.F.C. has served as a Director of the
Company since October 1997. Currently, he serves as Executive Vice President,
Corporate Strategic Development of Phoenix Home Life Mutual Insurance Company,
a position he has held since October 1994. He also currently serves as a
director of Phoenix Duff & Phelps Corporation, HSB Group, Inc., Aberdeen Asset
Management, PLC and Mechanics Savings Bank. From August 1994 to September
1994, Mr. Booth served as a consultant for Phoenix Home Life Mutual Insurance
Company. From February 1991 to June 1994, he served as President, Chief
Operating Officer and as a director of The Travelers Corporation, a
diversified financial services company. Mr. Booth received his B.S. and his
M.S.P.A. from the University of Hartford.

Vincent T. DeVita, Jr., M.D. has served as a Director of the Company since
September 1995. Currently, he serves as a director of Imclone Systems, Inc.
and is Director of the Yale University Comprehensive Cancer Center, a position
he has held since July 1993. From September 1988 to July 1993, Dr. DeVita
served as Physician-in-Chief of the Memorial Sloane-Kettering Cancer Center.
From July 1980 to August 1988, he served as Director of the National Cancer
Institute. Dr. DeVita received his B.S. from the College of William and Mary
and his M.D. from the George Washington University School of Medicine.

Robert E. Patricelli, J.D. has served as a Director of the Company since
October 1997. Currently, he serves as the President and Chief Executive
Officer of Women's Health USA, Inc., formerly known as Patient Centered Health
Care, Inc., a women's health services company, a position he has held since
August 1997. He also currently serves as a director of Northeast Utilities,
Inc. and Hartford Life, Inc. From May 1987 to August 1997, he served as
Chairman, President and Chief Executive Officer of Value Health, Inc. Mr.
Patricelli received his B.A. from Wesleyan University and his J.D. from
Harvard Law School.

James L. Vincent has served as a Director of the Company since October 1997.
Currently, he serves as Chairman of the Board of Directors of Biogen, a
position he has held since October 1985. From October 1985 until February
1997, Mr. Vincent served as Chief Executive Officer of Biogen. He also served
as Chief Operating Officer and President of Biogen from April 1988 until
February 1994. Prior to that he served as Group Vice President of Allied
Corporation (now AlliedSignal, Inc.), an advanced technology and manufacturing
company, and as President of Allied Health and Scientific Products Company, a
subsidiary of Allied Corporation, a manufacturer of a variety of products used
in the healthcare industry, from 1982 to 1985. He also served as Executive
Vice President, Chief Operating Officer and as a director of Abbott
Laboratories, Inc., a pharmaceutical company. Mr. Vincent received his B.S.
from Duke University and his M.B.A. from Wharton Graduate Business School,
University of Pennsylvania.

54
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors established a Compensation Committee and an Audit
Committee in October 1997. The Audit Committee oversees the engagement of the
Company's independent accountants, reviews the annual financial statements and
the scope of annual audits and considers matters relating to accounting policy
and internal controls. The Compensation Committee reviews, approves and makes
recommendations to the Board of Directors concerning the Company's
compensation policies, practices and procedures for its executive officers.
The Compensation Committee also administers the Company's 1997 Employee,
Director and Consultant Stock Plan (the "1997 Stock Plan") and the 1993 Stock
Option and Incentive Award Plan (the "1993 Stock Plan"). See "--Stock Option
Plans."

SCIENTIFIC ADVISORY BOARD

In 1995, the Company established a Scientific Advisory Board to assist the
Company in its research and development activities. The Scientific Advisory
Board is comprised of several distinguished scientists from outside the
Company who have significant accomplishments in areas of science and
technology that are important to the Company's future. The following
individuals are the current members of the Scientific Advisory Board:

MEDICAL/MOLECULAR BIOLOGY

Richard P. Lifton, M.D., Ph.D. serves as Chairman of the Company's
Scientific Advisory Board. Dr. Lifton is Professor of Medicine, Genetics,
Molecular Biophysics and Biochemistry at the Yale University School of
Medicine where he also serves as Director of the Programs in Molecular
Genetics and Cardiovascular Genetics. He also serves as Director of the Yale
University Specialized Center of Research in Hypertension and as investigator
of the Howard Hughes Medical Institute. Dr. Lifton received his B.A. from
Dartmouth College and his M.D. and Ph.D. from Stanford University.

Jose Costa, M.D. is Director of Anatomical Pathology and Vice-Chairman of
Pathology at the Yale University School of Medicine, Deputy Director of the
Yale University Comprehensive Cancer Center and Chief of Yale University's
Program for Critical Technologies in Breast Oncology. Dr. Costa received his
B.A. from Lycee Francais College International, Barcelona, Spain and his M.D.
from the University of Barcelona Medical School.

Pietro De Camilli, M.D. is Chairman and Professor of the Department of Cell
Biology at the Yale University School of Medicine where he also serves as a
member of the Executive Committee of the Yale University Diabetes
Endocrinology Research Center. He is an investigator of the Howard Hughes
Medical Institute and is a member of the National Advisory Committee of the
Pew Scholars Program in the BioMedical Sciences. Dr. De Camilli received his
M.D. from the University of Milano, Italy and carried out postdoctoral studies
at the Yale University School of Medicine.

BIOINFORMATICS

Daniel Seligson, Ph.D. has held various senior management positions in the
Technology and Manufacturing Group at Intel Corporation and currently serves
at Intel as Manager of 300mm Process Equipment Development. Dr. Seligson
received his B.S. from the Massachusetts Institute of Technology and his Ph.D.
from the University of California, Berkeley.

Lincoln D. Stein, M.D., Ph.D. has served as a consultant to the Company
since September 1997. From December 1995 to July 1997, Dr. Stein was Director
of Informatics Core at the Massachusetts Institute of Technology Whitehead
Institute. Dr. Stein received his B.A. from The Johns Hopkins University and
his M.D. and Ph.D. from Harvard Medical School.

TECHNOLOGY AND AUTOMATION

Harold G. Craighead, Ph.D. is Professor of Applied and Engineering Physics
at Cornell University. From January 1988 to June 1995, he served as Director
of the Cornell University Nanofabrication Facility. Dr. Craighead received his
B.S. from the University of Maryland and his Ph.D. from Cornell University.

55
<PAGE>

Lynn W. Jelinski, Ph.D. is Director of both the Office of Economic
Development and the Center for Advanced Technology in Biotechnology as well as
a Professor of Engineering at Cornell University. Dr. Jelinski received her
B.S. from Duke University and her Ph.D. from the University of Hawaii.

Each of the Scientific Advisory Board members is employed by an employer
other than the Company or is self-employed and may have commitments to, or
consulting or advisory contracts with, other entities that may conflict or
compete with his or her obligations to the Company. Generally, members of the
Scientific Advisory Board are not expected to devote a substantial portion of
their time to Company matters.

COMPENSATION OF DIRECTORS AND SCIENTIFIC ADVISORS

Non-employee directors are reimbursed for travel costs and other out-of-
pocket expenses incurred in attending each directors' meeting and committee
meeting. Non-employee directors receive no directors' fees but are eligible to
receive automatic grants of non-qualified stock options under the 1997 Stock
Plan. Under the 1997 Stock Plan, each non-employee director, upon first being
elected or appointed to the Board of Directors, receives an option to purchase
20,000 shares of Common Stock, which will vest one-third immediately and one-
third each on the first and second anniversaries of the grant date. Any non-
employee director who joined the Board of Directors prior to the adoption of
the 1997 Stock Plan received an option to purchase 5,000 shares of Common
Stock, which will also vest one-third immediately and one-third each on the
first and second anniversaries of the grant date. Upon joining the Board of
Directors in September 1995, Dr. DeVita was granted an option to purchase
15,000 shares of Common Stock under the 1993 Stock Plan. The 1997 Stock Plan
also provides for an annual grant of an immediately exercisable option to
purchase 5,000 shares of Common Stock to each continuing non-employee director
following each annual meeting of stockholders commencing with the 1998 annual
meeting. All automatic option grants to non-employee directors will have a
term of ten years and an exercise price equal to the fair market value of the
Common Stock on the date of grant. Pursuant to the foregoing provisions of the
1997 Stock Plan, Dr. DeVita and Messrs. Booth, Patricelli and Vincent have
been granted options to purchase 10,000, 25,000, 25,000, and 25,000 shares of
Common Stock, respectively, at the initial public offering price. See "--Stock
Option Plans."

Each member of the Scientific Advisory Board is paid a stipend of $1,000 per
day, plus expenses for each day of service. In addition, members have received
options to purchase shares of the Common Stock. These options were granted at
various exercise prices and are exercisable at various dates through May 2007.
Members of the Scientific Advisory Board may receive additional option grants
from time to time.

In May 1997, the Company entered into a Scientific Advisory Board Agreement
with Richard P. Lifton, M.D., Ph.D. (the "SAB Agreement"). The SAB Agreement
provides for Dr. Lifton to be retained as Chairman of the Company's Scientific
Advisory Board and as a consultant to the Company in the field of genomics.
Dr. Lifton will not be required to spend more than 24 days each year providing
services pursuant to the SAB Agreement. The initial term of the SAB Agreement
is for a period of three years and can be extended for one-year periods.
Either party may, however, terminate the SAB Agreement, with or without cause,
by giving at least 30 days prior written notice to the other party.

During the term of the SAB Agreement, and for a period of six months
following the termination of the SAB Agreement, Dr. Lifton will not directly
or indirectly be a founder of, serve as a member of the scientific board of,
or act as an officer or employee of, or, without written permission of the
Company, consult for any entity that provides biotechnology services or
products or otherwise assists an entity or person in developing, producing,
marketing or selling any biotechnology product or service. Dr. Lifton, may,
however, continue to perform services and research on behalf of the Howard
Hughes Medical Institute or Yale University School of Medicine. If the Company
terminates the SAB Agreement without cause, the foregoing restrictions do not
apply.

Pursuant to the SAB Agreement, Dr. Lifton will receive a consulting fee of
$1,000 for each day of services provided to the Company, as well as
reimbursement for all reasonable and necessary expenses incurred in connection
with his consulting services. Dr. Lifton has also received a stock option to
purchase 86,250 shares of Common Stock at an exercise price of $4.10 per
share.

56
<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation. The following table presents certain information
concerning compensation paid or accrued for services rendered to the Company
in all capacities during (i) the years ended December 31, 1996 and December
31, 1997, for the chief executive officer, and (ii) the year ended December
31, 1997, for the other most highly compensated executive officers of the
Company earning greater than $100,000 in the year ended December 31, 1997
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
AWARDS
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(#)
- --------------------------- ---- ------------ ------------
<S> <C> <C> <C>
Jonathan M. Rothberg, Ph.D. ................. 1997 $125,000 --
Chief Executive Officer 1996 $125,000(1) --
Gregory T. Went, Ph.D. ...................... 1997(2) $119,166 114,000
Executive Vice President
</TABLE>
- --------

(1) From the Company's inception through September 30, 1996, Dr. Rothberg
indefinitely deferred the payment of his salary on an interest-free basis.
Accordingly, $93,750 of Dr. Rothberg's salary for the year ended December
31, 1996 has been deferred and $308,125 of Dr. Rothberg's salary has been
deferred in the aggregate.

(2) Dr. Went's compensation was less than $100,000 in 1996.

Option Grants. The following table sets forth certain information regarding
options granted by the Company to the Named Executive Officers during the year
ended December 31, 1997:

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL
REALIZABLE VALUE
PERCENT AT ASSUMED
OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SHARES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(3)
OPTIONS IN FISCAL PRICE EXPIRATION -------------------
NAME GRANTED(#) YEAR(1) ($/SHARE)(2) DATE 5% ($) 10% ($)
- ---- ---------- ---------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jonathan M. Rothberg,
Ph.D. ................. -- -- -- -- -- --
Gregory T. Went,
Ph.D. ................. 114,000(4) 20.9% $4.10 1/7/2007 $ 293,945 $ 744,915
</TABLE>
- --------
(1) The Company granted options to purchase 546,333 shares of Common Stock to
employees in the year ended December 31, 1997.
(2) All options were granted at fair market value as determined by the Board
of Directors based on all factors available to them on the grant date.
These factors included the history of, and prospects for, the Company and
the industry in which it competes, an assessment of the Company's past and
present operations and financial performance, the prospects for future
earnings of the Company, the present state of the Company's development,
the possibility of an initial public offering by the Company and market
prices of publicly traded common stocks of comparable companies in recent
periods.
(3) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming that the stock price on the date of grant
appreciates at the specified annual rates of appreciation, compounded
annually over the term of the options. These numbers are calculated based
on rules promulgated by the Securities and Exchange Commission. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the time of such exercise and the future performance of the
Company's Common Stock.

57
<PAGE>

(4) The 114,000 options granted to Dr. Went on January 7, 1997, pursuant to
the 1993 Stock Plan, are nonqualified stock options. The options vest 25%
per year over a four-year period. The options are subject to the
employee's continued employment. The options terminate ten years after the
grant date, subject to earlier termination in accordance with the 1993
Stock Plan and the option agreement. See "--Stock Option Plans."

Year-End Option Values. The following table sets forth for each of the Named
Executive Officers certain information concerning stock options held as of
December 31, 1997. No Named Executive Officer exercised stock options during
1997.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END AT FY-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jonathan M. Rothberg, -- -- -- --
Ph.D. ...................
Gregory T. Went, 189,500 220,500 $1,818,320 $1,774,920
Ph.D. (2)................
</TABLE>
- --------
(1) There was no public trading market for the Common Stock as of December 31,
1997. Accordingly, these values have been calculated on the basis of an
initial public offering price of $11.00 per share, less the applicable
exercise price.

(2) Of the 189,500 options which are exercisable as of December 31, 1997,
10,500 options are held by trusts for the benefit of Dr. Went's wife and
children.

EMPLOYMENT ARRANGEMENTS

The Company has entered into letter agreements (collectively, the
"Employment Letters") with the following executive officers: Dr. Went, Mr.
Wurzer, Dr. Fuller and Dr. Kingsmore in February 1997, July 1997, August 1997,
and August 1997, respectively. The Employment Letters do not specify a term of
employment. Pursuant to the Employment Letters, Drs. Went and Kingsmore and
Mr. Wurzer receive base salaries of $125,000 and Dr. Fuller receives a base
salary of $115,000. Each Employment Letter also provides for a bonus, which
the Board of Directors may, in its discretion, award from time to time. The
Company has agreed that, upon the closing of this offering, the Board of
Directors will review Dr. Went's, Mr. Wurzer's, Dr. Fuller's and Dr.
Kingsmore's compensation and provide an enhanced compensation package to each
employee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Booth and Vincent, both non-employee directors, constitute the
Company's Compensation Committee. No executive officer of the Company will
serve as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.

STOCK OPTION PLANS

1997 Stock Plan. The Company's 1997 Stock Plan was approved by the Company's
Board of Directors and stockholders in October 1997. The 1997 Stock Plan
provides for the issuance of stock options and stock grants ("Stock Rights")
to employees, directors and consultants of the Company. A total of 1,500,000
shares of Common Stock have been reserved for issuance under the 1997 Stock
Plan. Options to purchase 85,000 shares of Common Stock have been granted and
are outstanding at January 31, 1998 under the 1997 Stock Plan. The 1997 Stock
Plan is administered by the Compensation Committee of the Board of Directors.
The Compensation Committee has the authority to administer the provisions of
the 1997 Stock Plan and to determine the persons to whom Stock Rights will be
granted, the number of shares to be covered by each Stock Right and the terms
and conditions upon which a Stock Right may be granted.

58
<PAGE>

Stock grants under the 1997 Stock Plan will be subject to such terms and
conditions as the Compensation Committee deems to be appropriate and in the
best interest of the Company. These terms may include conditions relating to
the right of the Company to reacquire the shares subject to the stock grant,
including the time and events upon which such rights shall accrue, and the
purchase price of the shares.

Options granted under the 1997 Stock Plan may be either (i) options intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or (ii) non-qualified stock
options. The exercise price of options granted under the 1997 Stock Plan will
be determined by the Compensation Committee, provided that, in the case of
incentive stock options, the price will not be less than 100% of the fair
market value of the Common Stock on the date of grant, or not less than 110%
of the fair market value of the Common Stock on the date of grant if the
optionee holds 10% or more of the voting stock of the Company. The 1997 Stock
Plan also provides for the automatic grant of non-qualified options to non-
employee directors of the Company. See "--Compensation of Directors and
Scientific Advisors." An incentive stock option granted under the 1997 Stock
Plan may be exercised after the termination of the optionholder's employment
with the Company (other than by reason of death, disability or termination for
"cause" as defined in the 1997 Stock Plan), to the extent exercisable on the
date of termination, at any time prior to the earlier of the option's
specified expiration date or 90 days after such termination. The Compensation
Committee may specify the termination or cancellation provisions applicable to
a non-qualified stock option. In the event of the optionholder's death or
disability, both incentive stock options and non-qualified stock options
generally may be exercised, to the extent exercisable on the date of death or
disability, by the optionholder or the optionholder's survivors at any time
prior to the earlier of the option's specified expiration date or one year
from the date of death or disability. Generally, in the event of the
optionholder's termination for cause, all outstanding and unexercised options
are forfeited.

If the Company is to be consolidated with or acquired by another entity in a
merger, sale of all or substantially all of the Company's assets or otherwise
(an "Acquisition"), the Compensation Committee or the board of directors of
any entity assuming the obligations of the Company under the Plan shall, as to
outstanding options under the plan, either (i) make appropriate provision for
the continuation of such options by substituting, on an equitable basis, for
the shares then subject to such options, the consideration payable with
respect to the outstanding shares of Common Stock in connection with an
Acquisition or securities of the successor or acquiring entity; or (ii) upon
written notice to the optionholders, provide that all options must be
exercised (either to the extent then exercisable or, at the discretion of the
Compensation Committee, all options being made fully exercisable for purposes
of such transaction) within a specified number of days of the date of such
notice, at the end of which period the options shall terminate; or (iii)
terminate all options in exchange for a cash payment equal to the excess of
the fair market value of the shares subject to each such option (either to the
extent then exercisable or, at the discretion of the Compensation Committee,
all options being made fully exercisable for purposes of such transaction)
over the exercise price thereof.

1993 Stock Plan. The Company's 1993 Stock Plan was approved by the Company's
Board of Directors and stockholders in December 1993 and subsequently amended
by the Board of Directors in May 1997. The 1993 Stock Plan provides for the
issuance of stock options and stock awards to employees and consultants of the
Company and members of the Company's Board of Directors and Scientific
Advisory Board. Of the 1,500,000 shares of Common Stock which were reserved
for issuance under the 1993 Stock Plan, options to purchase 1,028,884 shares
have been granted and are outstanding at January 31, 1998. The Company does
not intend to grant any additional options or awards under the 1993 Stock
Plan.

Upon termination of service to the Company (other than by reason of death,
disability or termination for "cause" as defined in the 1993 Stock Plan) an
option granted under the 1993 Stock Plan is generally exercisable, to the
extent exercisable on the date of termination, for up to three months
following termination. In the event of the optionholder's death or disability,
options generally may be exercised, to the extent exercisable on the date of
death or disability, by the optionholder or the optionholder's survivors for
up to one year from the date of death or disability. In the event of the
optionholder's termination for cause, all outstanding and unexercised options
are forfeited.

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<PAGE>

If the Company is to be consolidated with or merged into another entity
(such that the Company is not the surviving entity), or upon a sale of all or
substantially all of the Company's assets or otherwise (a "Change in
Control"), the Compensation Committee or the Board of Directors of any entity
assuming the obligations of the Company under the plan shall, as to
outstanding options, either (i) make appropriate provision for the
continuation of such options by substituting, on an equitable basis, the
shares then subject to such options for the consideration payable with respect
to the outstanding shares of Common Stock in connection with a Change in
Control or securities of the successor or acquiring entity; or (ii) upon
written notice to the optionholders, provide that all options must be
exercised (to the extent then exercisable) within a specified number of days
of the date of such notice, at the end of which period the options shall
terminate; or (iii) terminate all options in exchange for a cash payment equal
to the excess of the fair market value of the shares subject to each such
option (to the extent then exercisable) over the exercise price thereof.

Additional Options. In addition to the options granted under the 1993 Stock
Plan, the Company has granted options to purchase an aggregate of 570,000
shares of Common Stock pursuant to individual agreements with Company
employees and consultants. These options incorporate the provisions of the
1993 Stock Plan to the extent such provisions are not inconsistent with the
terms of those options.

LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION

The DGCL authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The Restated
Certificate limits the liability of directors of the Company to the Company or
its stockholders to the fullest extent permitted by Delaware law. See
"Description of Capital Stock--Delaware Law and Certain Charter and Bylaw
Provisions."

The Restated Certificate provides mandatory indemnification rights to any
officer or director of the Company who, by reason of the fact that he or she
is an officer or director of the Company, is involved in a legal proceeding of
any nature. Such indemnification rights include reimbursement for expenses
incurred by such officer or director in advance of the final disposition of
such proceeding in accordance with the applicable provisions of the DGCL.

There is no pending litigation or proceeding involving a director, officer,
employee or agent of the Company in which indemnification by the Company will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.

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<PAGE>

CERTAIN TRANSACTIONS

Since January 1, 1995, there has not been nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or
is to be a party in which the amount involved exceeded or exceeds $60,000 and
in which any director, executive officer, holder of more than 5% of the Common
Stock of the Company or any member of the immediate family of any of the
foregoing persons had or will have a direct or indirect material interest
other than the transactions described below.

In 1993, seven members of Dr. Rothberg's family, including Henry M. Rothberg
and Lillian R. Rothberg, who are Dr. Rothberg's parents and five percent
beneficial stockholders of the Company, and Michael J. Rothberg who is Dr.
Rothberg's brother and a five percent beneficial stockholder of the Company,
loaned $898,000 to the Company. On December 30, 1993, the notes evidencing
these loans were canceled in exchange for 898,000 shares of Common Stock and
two-year warrants to purchase 1,122,500 shares of Common Stock at an exercise
price of $1.00 per share. In 1995, the Company modified these warrants to
extend their terms from two years to seven years.

In June 1996 and December 1996, the Company and Genentech, a five percent
beneficial stockholder of the Company, entered into exploratory programs to
evaluate the application of Curagen's integrated genomics technologies to
selected internal programs at Genentech. In connection with the December 1996
exploratory program, the Company raised gross proceeds of approximately
$1,800,000 by completing a private placement of 307,167 shares of Series A
Preferred Stock (the "Series A Preferred Stock") with Genentech at a price of
approximately $5.86 per share. In November 1997, the Company and Genentech
entered into the Genentech Agreement. Pursuant to the Agreement, Genentech
agreed to purchase the Genentech Shares and to provide an interest-bearing
loan facility to the Company. See "--Business--Research Collaborations" for a
description of the exploratory programs and the Genentech Agreement.

In September 1996, October 1996 and January 1997, the Company received
subscriptions of $1,600,000, $50,000 and $100,000, respectively, from five
investors. In March 1997, the Company issued 175,000 shares of Series B
Preferred Stock to these five investors at a price of $10.00 per share in a
private placement. In connection with this private placement, the Company
issued five-year warrants to purchase 358,361 shares of Common Stock at an
exercise price of $5.86 per share. Henry and Lillian Rothberg purchased 60,000
shares of such Series B Preferred Stock and were issued warrants to purchase
122,866 shares of Common Stock. Hemroc II Trust, a trust of which Michael J.
Rothberg is a co-trustee, purchased 10,000 shares of Series B Preferred Stock
and was issued warrants to purchase 20,478 shares of Common Stock. Gianpiero
Molinari, the brother-in-law of Dr. Rothberg and Michael J. Rothberg and the
son-in-law of Henry and Lillian Rothberg, purchased 5,000 shares of the Series
B Preferred Stock and was issued warrants to purchase 10,239 shares of Common
Stock.

In March 1997, the Company raised gross proceeds of $11,787,202 by
completing a private placement of 2,011,468 shares of Series C Convertible
Preferred Stock (the "Series C Preferred Stock") with eleven investors at a
price of $5.86 per share. In connection with this private placement, the
Company also issued three-year warrants to purchase 366,894 shares of Common
Stock at an exercise price of $9.00 per share to two investors who purchased
1,706,485 and 127,986 shares of Series C Preferred Stock, respectively. Henry
and Lillian Rothberg purchased 34,130 shares of the Series C Preferred Stock.
Quantum Industrial Partners LDC, a five

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<PAGE>

percent beneficial stockholder of the Company, purchased 1,706,485 shares of
the Series C Preferred Stock and was issued warrants to purchase 341,297
shares of Common Stock.

In May 1997, Pioneer became a five percent beneficial stockholder of the
Company, through the purchase of 1,000,000 shares of Series D Convertible
Preferred Stock (the "Series D Preferred Stock") at a price of $7.50 per
share. The Company and Pioneer also entered into a Collaborative Research and
License Agreement related to the discovery and development of genes associated
with plant growth and development. See "Business--Research Collaborations" for
a description of this Agreement.

In June 1997, the Company raised gross proceeds of approximately $1,000,000
by completing a private placement of 100,000 shares of Series E Convertible
Preferred Stock to Biogen at a price of $10.00 per share. In October 1997, the
Company and Biogen entered into the Biogen Agreement. Pursuant to the Biogen
Agreement, Biogen agreed to purchase the Biogen Shares and to provide a $10
million loan facility to the Company. See "--Business--Research
Collaborations" for a description of the Biogen Agreement. James L. Vincent, a
Director of the Company, currently serves as Chairman of the Board of Biogen.

Upon the closing of this offering, all of the Company's 175,000 outstanding
shares of Series B Preferred Stock will be redeemed by the Company. In
addition, upon the closing of this offering, as part of the Automatic
Conversion, all of the Series A Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock will convert into Common
Stock on a one for one basis. Genentech and Biogen, along with the holders of
the Series C Preferred Stock and the Series D Preferred Stock, have been
granted registration rights. See "Description of Capital Stock--Registration
Rights" for a description of these rights.

From September 1993 to July 1997, Michael J. Rothberg arranged a number of
capital leases and purchases of equipment and supplies on behalf of the
Company. The Company believes that these capital leases and purchases were on
terms at least as favorable as would have been available from a third party.
As compensation for these services, the Company granted stock options to
Michael J. Rothberg as follows: in November 1994, an immediately exercisable
stock option to purchase 15,000 shares of Common Stock at a price of $2.23 per
share; and in March 1996, a stock option to purchase 35,800 shares of Common
Stock at a price of $3.00 per share, which vests over a six-year period from
the date of grant. Both options expire ten years from the date of grant.

Robert Patricelli and James Vincent, both directors of the Company, have
indicated an interest in purchasing an aggregate of 90,909 shares of Common
Stock (at an assumed public offering price of $11.00 per share) pursuant to
the Directed Share Program upon the closing of this offering. See
"Underwriters."

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company
regarding the beneficial ownership of Common Stock as of January 1, 1998, by
(i) each person known to the Company to be the beneficial owner of more than
5% of its outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each executive officer named in the Summary Compensation Table
and (iv) all directors and executive officers of the Company as a group.
Except as otherwise indicated, the persons or entities listed below have sole
voting and investment power with respect to all shares of Common Stock owned
by them.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED(1)(2)
---------------- ------------------ ------------------------
<S> <C> <C>
Jonathan M. Rothberg, Ph.D. (3).. 3,592,000 40.5%
c/o CuraGen Corporation
555 Long Wharf Drive, 11th Floor
New Haven, CT 06511
Quantum Industrial Partners LDC
(4)............................. 2,047,782 22.2%
Kaya Flamboyan
Willemstad, Curacao
Netherlands Antilles
Pioneer Hi-Bred International,
Inc............................. 1,000,000 11.3%
700 Capital Square
400 Locust Street
Des Moines, IA 50309
Henry M. Rothberg (5)............ 944,496 10.3%
c/o Law Offices of Marshal D.
Gibson, P.C.
152 Temple Street
New Haven, CT 06510
Lillian R. Rothberg (6).......... 944,496 10.3%
c/o Law Offices of Marshal D.
Gibson, P.C.
152 Temple Street
New Haven, CT 06510
Genentech, Inc. (7).............. 761,712 8.2%
460 Point San Bruno Blvd.
South San Francisco, CA 94080
Michael J. Rothberg (8).......... 544,388 6.0%
c/o Law Offices of Marshal D.
Gibson, P.C.
152 Temple Street
New Haven, CT 06510
Gregory T. Went, Ph.D. (9)....... 271,250 3.0%
Vincent T. DeVita, Jr., M.D.
(10)............................ 21,666 *
Richard H. Booth, C.P.A., C.L.U.,
Ch.F.C. (11).................... 33,731 *
Robert E. Patricelli, J.D. (12).. 11,666 *
James L. Vincent (13)............ 11,666 *
All directors and executive
officers as a group (10 persons)
(14)............................ 4,011,479 43.3%
</TABLE>
- --------
*Less than 1%.

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<PAGE>

(1) Shares of Common Stock that an individual or group has the right to
acquire within 60 days of January 1, 1998, pursuant to the exercise of
options or warrants or pursuant to stock purchase agreements are deemed
to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person shown
in the table. Excludes an aggregate of 90,909 shares of Common Stock (at
an assumed initial public offering price of $11.00 per share) that
Messrs. Patricelli and Vincent have indicated an interest in purchasing
pursuant to the Directed Share Program upon the closing of this offering.
See "Underwriters"
(2) Percentage of ownership is based on 8,871,987 shares of Common Stock
outstanding on January 1, 1998.
(3) Includes 500,000 shares of Common Stock held by a limited partnership of
which Dr. Rothberg is the sole general partner.
(4) Includes 341,297 shares of Common Stock subject to currently exercisable
warrants. The sole general partner of Quantum Industrial Partners LDC
("QIP") is QIH Management Investor, L.P. ("QIHMI"), the sole general
partner of which is QIH Management, Inc. ("QIH Management"). Mr. George
Soros ("Mr. Soros") is the sole shareholder of QIH Management, and has
entered into an agreement dated as of January 1, 1997 with Soros Fund
Management LLC ("SFM LLC") pursuant to which Mr. Soros has, among other
things, agreed to use his best efforts to cause QIH Management to act at
the direction of SFM LLC. Mr. Soros is also the Chairman of SFM LLC, and
in such capacity may be deemed to have voting and dispositive power over
securities held for the account of QIP. Mr. Stanley F. Druckenmiller, as
Lead Portfolio Manager of SFM LLC, may also be deemed to have voting and
dispositive power over securities held for the account of QIP.
(5) Consists of 634,130 shares of Common Stock and 310,366 shares of Common
Stock subject to currently exercisable warrants, all held by Grand Hemroc
Limited Partnership of which Henry M. Rothberg is a co-general partner
with his wife, Lillian R. Rothberg.
(6) Consists of 634,130 shares of Common Stock and 310,366 shares of Common
Stock subject to currently exercisable warrants described in footnote 5
above, all held by Grand Hemroc Limited Partnership of which Lillian R.
Rothberg is a co-general partner with her husband, Henry M. Rothberg.
(7) Includes the 454,545 Genentech Shares to be purchased by Genentech in a
private placement concurrent with this offering.
(8) Includes (i) 108,750 shares of Common Stock subject to currently
exercisable warrants, (ii) 22,160 shares of Common Stock subject to
currently exercisable options, (iii) 6,000 shares of Common Stock held by
his wife, Judith Rothberg and (iv) 100,000 shares of Common Stock and
145,478 shares of Common Stock subject to currently exercisable warrants,
all held by Hemroc Trust II of which Michael J. Rothberg is a co-trustee
with his sister, Celia Rothberg Meadow. Mr. Rothberg disclaims beneficial
ownership of the shares of Common Stock held by his wife.

(9) Consists of 271,250 shares of Common Stock subject to currently
exercisable options of which 10,500 shares are held by trusts for the
benefit of Dr. Went's wife and children. Dr. Went's wife is a co-trustee
of the trusts, and Dr. Went disclaims beneficial ownership of such 10,500
shares.
(10) Consists of 21,666 shares of Common Stock subject to currently
exercisable options.
(11) Includes 5,000 shares of Common Stock subject to currently exercisable
warrants and 11,666 shares of Common Stock subject to currently
exercisable options.
(12) Consists of 11,666 shares of Common Stock subject to currently
exercisable options.
(13) Consists of 11,666 shares of Common Stock subject to currently
exercisable options.
(14) Includes 10,000 shares of Common Stock subject to currently exercisable
options held by Peter A. Fuller, 20,000 shares of Common Stock subject to
currently exercisable options held by Stephen F. Kingsmore, 19,500 shares
of Common Stock subject to currently exercisable options held by
Elizabeth A. Whayland, and 20,000 shares of Common Stock subject to
currently exercisable options held by David M. Wurzer. See also footnotes
3 and 9 through 13 above.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value of $.01 per share ("Common Stock"), 5,000,000 shares
of Preferred Stock, par value of $.01 per share ("Preferred Stock") and
3,000,000 shares of non-voting Common Stock, par value of $.01 per share (the
"Non-Voting Common Stock"). Upon completion of this offering, there will be
12,621,986 shares of Common Stock and no shares of Preferred Stock or Non-
Voting Common Stock outstanding. As of January 31, 1998, there were 8,871,987
shares of Common Stock outstanding, held of record by 31 stockholders. In
addition, as of January 31, 1998 there were outstanding options to purchase
1,683,884 shares of Common Stock and warrants to purchase 1,583,866 shares of
Common Stock.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to the
rights and preferences of the holders of any outstanding Preferred Stock, the
holders of Common Stock are entitled to receive ratably such dividends as are
declared by the Board of Directors out of funds legally available therefor,
except that (i) no cash dividends shall be declared and paid on the Common
Stock unless at the same time an equal cash dividend is declared and paid, per
share, on the Non-Voting Common Stock, and (ii) no dividend of property
(including capital stock of the Company) shall be declared and paid on the
Common Stock unless a dividend of an equal amount of the same property has
also been declared and paid, per share, on the Non-Voting Common Stock. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock and Non-Voting Common Stock have the
right (together as one class) to a ratable portion of assets remaining after
the payment of all debts and other liabilities, subject to the liquidation
preferences of the holders of any outstanding Preferred Stock. Holders of
Common Stock have neither preemptive rights nor rights to convert their Common
Stock into any other securities and are not subject to future calls or
assessments by the Company. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are,
and the shares offered hereby upon issuance and sale will be, fully paid and
non-assessable. The rights, preferences and privileges of the holders of
Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of Preferred Stock that the Company may designate and
issue in the future.

Upon the closing of this offering, certain redemption rights relating to
291,875 shares of Redeemable Common Stock will terminate. See Note 6 of Notes
to Financial Statements for a description of the Redeemable Common Stock.

PREFERRED STOCK

Upon the closing of this offering, all of the outstanding shares of the
Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), Series C Convertible Preferred Stock (the "Series C Preferred
Stock"), Series D Convertible Preferred Stock (the "Series D Preferred Stock")
and Series E Convertible Preferred Stock (the "Series E Preferred Stock") will
be converted on a one-for-one basis into 3,418,635 shares of Common Stock
pursuant to the Automatic Conversion. Of such Preferred Stock, 100,000 shares
held by Biogen will be converted on a weighted average basis if the Company
sells Common Stock in this offering for less than $10.00 per share. For
example, if the over-allotment option is exercised in full, Biogen would
receive 2,377 shares of Common Stock if the price to public was $9.00 per
share and 5,000 shares if the price to public was $8.00 per share.

All of the outstanding shares of Series B Preferred Stock will be redeemed.
The Preferred Stock so converted and redeemed will be retired and may not be
reissued. See Notes 5 and 6 of Notes to Financial Statements for a description
of the Preferred Stock. The Board of Directors is authorized, subject to
certain limitations prescribed by Delaware law, without further action by the
stockholders, to issue shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series. The Company
believes that

65
<PAGE>

the power to issue Preferred Stock will provide flexibility in connection with
possible corporate transactions. The issuance of Preferred Stock, however,
could adversely affect the voting power of holders of Common Stock and
restrict their rights to receive payments upon liquidation. It could also have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plans to issue any shares of Preferred
Stock.

NON-VOTING COMMON STOCK

Except as provided under the DGCL, the holders of the Non-Voting Common
Stock are not entitled to vote on any matters submitted to a vote of
stockholders. Subject to the rights and preferences of the holders of any
outstanding Preferred Stock, the holders of Non-Voting Common Stock are
entitled to receive ratably such dividends as are declared by the Board of
Directors out of funds legally available therefor, except that (i) no cash
dividends shall be declared and paid on the Non-Voting Common Stock unless at
the same time an equal cash dividend is declared and paid, per share, on the
Common Stock, and (ii) no dividend of property (including capital stock of the
Company) shall be declared and paid on the Non-Voting Common Stock unless a
dividend of an equal amount of the same property has also been declared and
paid, per share, on the Common Stock. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of Non-Voting
Common Stock and Common Stock have the right (together as one class) to a
ratable portion of assets remaining after the payment of all debts and other
liabilities, subject to the liquidation preferences of the holders of any
outstanding Preferred Stock. Holders of Non-Voting Common Stock have the
right, at any time, to convert each share of Non-Voting Common Stock into
shares of Common Stock at the rate of one share of Common Stock for each share
of Non-Voting Common Stock. In addition, upon the transfer of beneficial
ownership of any shares of Non-Voting Common Stock, such shares shall be
automatically converted into shares of Common Stock at the rate of one share
of Common Stock for each share of Non-Voting Common Stock. This automatic
conversion shall not apply if such transfer is made to (i) a majority-owned
subsidiary of Genentech, (ii) a corporation of which Genentech is a wholly
owned subsidiary ("Genentech Parent") or (iii) a wholly owned subsidiary of
Genentech Parent; except that if such transfer is made to a wholly owned
subsidiary of Genentech or Genentech Parent and such wholly owned subsidiary
ceases to be a wholly owned subsidiary of Genentech or Genentech Parent, then
such shares shall be automatically converted into shares of Common Stock at
the rate of one share of Common Stock for each share of Non-Voting Common
Stock. Holders of Non-Voting Common Stock do not have preemptive rights and
are not subject to future calls or assessments by the Company. There are no
redemption or sinking fund provisions applicable to the Non-Voting Common
Stock. The rights, preferences and privileges of the holders of Non-Voting
Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of Preferred Stock that the Company may designate and
issue in the future.

WARRANTS

As of January 31, 1998, there were outstanding warrants to purchase
1,583,866 shares of Common Stock held by 16 investors. Such warrants have
expiration dates ranging from 2000 to 2002 and have exercise prices that range
from $1.00 per share to $10.00 per share with a weighted average exercise
price of $4.12 per share. The number of shares for which the warrants are
exercisable is subject to adjustment for stock splits, combinations or
dividends and reclassifications, exchanges or substitutions.

REGISTRATION RIGHTS

Following this offering, the holders of 3,318,635 shares of Common Stock and
of warrants to purchase a total of 366,894 shares of Common Stock will have
certain rights to cause the Company to register those shares under the
Securities Act at any time after the first anniversary of the closing date of
this offering. These holders formerly held the Series A Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock that was converted into
Common Stock in the Automatic Conversion. After the first anniversary of the
closing date of this offering, the Company may be required to effect up to two
registrations requested by the former holders of the Series A Preferred Stock,
two registrations requested by the persons who formerly held the Series C
Preferred Stock and who hold the warrants to purchase 366,894 shares of Common
Stock and two registrations requested

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<PAGE>

by the former holder of the Series D Preferred Stock. In addition, following
this offering, Biogen and the foregoing holders will have certain rights to
cause the Company to register the 3,685,529 shares, plus an additional
1,009,090 shares, on Form S-3 under the Securities Act at any time after the
first anniversary of the closing date of this offering. There is no limit to
the number of Form S-3 registrations that the Company may be required to
effect. Stockholders with registration rights who are not part of an initial
registration demand are entitled to notice of such registration and are
entitled to include shares of Common Stock therein. These registration rights
are subject to certain conditions and limitations, including (i) the right,
under certain circumstances, of the underwriters of an offering to limit the
number of shares included in such registration and (ii) the right of the
Company to delay the filing of a registration statement for not more than 180
days after receiving the registration demand. The Company will also have the
obligation to register on Form S-3 any shares issued to Biogen and Genentech
pursuant to the conversion of their loan facilities.

In addition, if the Company proposes to register any of its equity
securities under the Securities Act, whether or not for sale for its own
account, other than in connection with a Company employee benefit plan, the
foregoing holders of 4,694,619 shares of Common Stock, along with the holder
of warrants to purchase 21,111 shares of Common Stock, are entitled to notice
of such registration and are entitled to include their Common Stock therein.
These rights are subject to certain conditions and limitations, including the
right of the underwriters of an offering to limit the number of shares
included in such registration under certain circumstances and the right of the
Company to delay or withdraw any such registration.

All expenses incurred in connection with such registrations (other than
underwriters' discounts and commissions and stock transfer fees or expenses)
and the fees and expenses of a single counsel to the selling stockholders will
be borne by the Company. The right of any holder to demand or be included in
any registration terminates on the date on which such holder may sell all
shares of Common Stock held by such holder under Rule 144 of the Securities
Act.

DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

Upon the consummation of this offering made hereby, the Company will be
subject to the provisions of Section 203 of the DGCL, an anti-takeover law. In
general, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is, or the
transaction in which the person became an interested stockholder was, approved
in a prescribed manner or another prescribed exception applies. For purposes
of Section 203, a "business combination" is defined broadly to include a
merger, asset sale or other transaction resulting in a financial benefit to
the interested stockholder, and subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns
(or within three years prior, did own) 15% or more of the corporation's voting
stock.

The Board of Directors of the Company is divided into three classes as
nearly equal in number as possible. Each year the stockholders will elect the
members of one of the three classes to a three year term of office. Messrs.
Patricelli and Vincent serve in the class whose term expires in 1999; Drs.
Went and DeVita serve in the class whose term expires in 2000; and Dr.
Rothberg and Mr. Booth serve in the class whose term expires in 2001. All
directors elected to the Company's classified Board of Directors will serve
until the election and qualification of their successors or their earlier
resignation or removal. The Board of Directors is authorized to create new
directorships and to fill such positions so created and is permitted to
specify the class to which such new position is assigned, and the person
filling such position would serve for the term applicable to that class. The
Board of Directors (or its remaining members, even though less than a quorum)
is also empowered to fill vacancies on the Board of Directors occurring for
any reason for the remainder of the term of the class of Directors in which
the vacancy occurred. Members of the Board of Directors may only be removed
for cause. These provisions are likely to increase the time required for
stockholders to change the composition of the Board of Directors. For example,
in general, at least two annual meetings will be necessary for stockholders to
effect a change in a majority of the members of the Board of Directors.

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<PAGE>

The Company's Amended and Restated Bylaws (the "Restated Bylaws"), provide
that, for nominations to the Board of Directors or for other business to be
properly brought by a stockholder before a meeting of stockholders, the
stockholder must first have given timely notice thereof in writing to the
Secretary of the Company. To be timely, a stockholder's notice generally must
be delivered not less than sixty days nor more than ninety days prior to the
annual meeting. If the meeting is not an annual meeting, the notice must
generally be delivered not more than ninety days prior to the special meeting
and not later than the later of sixty days prior to the special meeting or ten
days following the day on which public announcement of the meeting is first
made by the Company. Only such business shall be conducted at a special
meeting of stockholders as is brought before the meeting pursuant to the
Company's notice of meeting. The notice by a stockholder must contain, among
other things, certain information about the stockholder delivering the notice
and, as applicable, background information about the nominee or a description
of the proposed business to be brought before the meeting.

The Restated Certificate also requires that any action required or permitted
to be taken by stockholders of the Company must be effected at a duly called
annual or special meeting of stockholders and may not be effected by a consent
in writing. Special meetings may be called only by the Board of Directors of
the Company pursuant to a resolution adopted by a majority of the total number
of directors authorized.

The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless the corporation's certificate
of incorporation or bylaws, as the case may be, requires a greater percentage.
The Restated Certificate requires the affirmative vote of the holders of at
least 70% of the outstanding voting stock of the Company to amend or repeal
any of the provisions discussed in this section entitled "Delaware Law and
Certain Charter and Bylaw Provisions" or to reduce the number of authorized
shares of Common Stock and Preferred Stock. Such 70% vote is also required for
any amendment to or repeal of the Restated Bylaws by the stockholders. The
Restated Bylaws may also be amended or repealed by a majority vote of the
Board of Directors. Such 70% stockholder vote would be in addition to any
separate class vote that might in the future be required pursuant to the terms
of any Preferred Stock that might then be outstanding.

The provisions of the Restated Certificate and Restated Bylaws discussed
above could make more difficult or discourage a proxy contest or other change
in the management of the Company or the acquisition or attempted acquisition
of control by a holder of a substantial block of the Company's stock. It is
possible that such provisions could make it more difficult to accomplish, or
could deter, transactions which stockholders may otherwise consider to be in
their best interests.

As permitted by the DGCL, the Restated Certificate provides that Directors
of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of their fiduciary duties as
Directors, except for liability (i) for any breach of their duty of loyalty to
the Company and its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for unlawful payments of dividends or unlawful stock repurchases or
redemptions, as provided in Section 174 or successor provisions of the DGCL or
(iv) for any transaction from which the Director derives an improper personal
benefit.

The Restated Certificate and Restated Bylaws provide that the Company shall
indemnify its Directors and officers to the fullest extent permitted by
Delaware law (except in some circumstances, with respect to suits initiated by
the Director or officer) and advance expenses to such Directors or officers to
defend any action for which rights of indemnification are provided. In
addition, the Restated Certificate and Restated Bylaws also permit the Company
to grant such rights to its employees and agents. The Restated Bylaws also
provide that the Company may enter into indemnification agreements with its
Directors and officers and purchase insurance on behalf of any person whom it
is required or permitted to indemnify. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as Directors, officers and employees.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be American Stock
Transfer & Trust Company. The transfer agent's telephone number is (212) 936-
5100.

68
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering there has been no market for the Common Stock of the
Company. The Company can make no prediction as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock in the public market, or the perception that such sales
may occur, could adversely affect prevailing market prices. See "Risk
Factors--Shares Eligible for Future Sale."

Upon completion of this offering, the Company expects to have 12,621,986
shares of Common Stock outstanding (excluding 1,683,884 and 1,583,866 shares
reserved for issuance upon the exercise of outstanding stock options and
warrants, respectively) (13,034,486 shares of Common Stock outstanding if the
Underwriters' over-allotment option is exercised in full). Of these shares,
the 2,750,000 shares offered hereby will be freely tradable without
restrictions or further registration under the Securities Act, except for any
shares purchased by "affiliates" of the Company, as that term is defined in
Rule 144 under the Securities Act, which will be subject to the resale
limitations imposed by Rule 144, as described below.

All of the remaining 9,871,986 shares of Common Stock outstanding will be
"restricted securities" within the meaning of Rule 144 and may not be resold
in the absence of registration under the Securities Act, or pursuant to
exemptions from such registration including, among others, the exemption
provided by Rule 144 under the Securities Act. Of the restricted securities,
1,121,606 shares are eligible for sale in the public market immediately after
this offering pursuant to Rule 144(k) under the Securities Act. A total of
7,650,381 additional restricted securities will be eligible for sale in the
public market in accordance with Rule 144 under the Securities Act beginning
90 days after the date of this Prospectus. Taking into consideration the
effect of the lock-up agreements described below and the provisions of Rules
144 and 144(k), 50,000 restricted shares will be eligible for sale in the
public market immediately after this offering, 107,997 restricted shares
(excluding 1,683,884 and 1,583,866 shares issuable upon the exercise of
outstanding stock options and warrants, respectively) will be eligible for
sale beginning 90 days after the date of this Prospectus, and the remaining
restricted shares will be eligible for sale upon the expiration of the lock-up
agreements 180 days after the date of this Prospectus, subject to the
provisions of Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are required to
be aggregated) whose restricted securities have been outstanding for at least
one year, including a person who may be deemed an "affiliate" of the Company,
may only sell a number of shares within any three-month period which does not
exceed the greater of (i) one percent of the then outstanding shares of the
Company's Common Stock (approximately 126,220 shares after this offering) or
(ii) the average weekly trading volume in the Company's Common Stock in the
four calendar weeks immediately preceding such sale. Sales under Rule 144 are
also subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. A person who is
not an affiliate of the issuer, has not been an affiliate within three months
prior to the sale and has owned the restricted securities for at least two
years is entitled to sell such shares under Rule 144(k) without regard to any
of the limitations described above.

Beginning 90 days after the date of this Prospectus, certain shares issued
or issuable upon the exercise of options granted by the Company prior to the
date of this Prospectus will also be eligible for sale in the public market
pursuant to Rule 701 under the Securities Act. In general, Rule 701 permits
resales of shares issued pursuant to certain compensatory benefit plans and
contracts, commencing 90 days after the issuer becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, in
reliance upon Rule 144, but without compliance with certain restrictions of
Rule 144, including the holding period requirements. As of January 31, 1998,
the Company has granted options covering 1,683,884 shares of Common Stock
which have not been exercised and which become exercisable at various times in
the future. Any shares of Common Stock issued upon the exercise of these
options will be eligible for sale pursuant to Rule 701.

69
<PAGE>

The executive officers and directors and certain other existing stockholders
of the Company, who beneficially own in the aggregate 8,053,235 shares of
Common Stock and options and warrants to purchase 1,318,151 shares of Common
Stock, have agreed that they will not, without the prior written consent of
Morgan Stanley & Co. Incorporated (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common
Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities,
in cash or otherwise, for a period of 180 days after the date of the
Prospectus.

Upon completion of this offering, the holders of 4,327,725 shares of Common
Stock and warrants to purchase 388,005 shares of Common Stock are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. The Company will also have the obligation to promptly register
for resale on Form S-3 any shares issued to Biogen and Genentech pursuant to
the conversion of their loan facilities. See "Description of Capital Stock--
Registration Rights." Registration of such shares under the Securities Act
would result in such shares becoming freely tradeable without restriction
under the Securities Act (except for shares purchased by affiliates)
immediately upon the effectiveness of such registration. Certain of these
existing stockholders who beneficially own in the aggregate 4,242,401 shares
of Common Stock and warrants to purchase 388,005 shares of Common Stock have
agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated, they will not, for a period of 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security exercisable for
Common Stock.

70
<PAGE>

UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date of this Prospectus (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters"), for whom Morgan Stanley & Co.
Incorporated, Lehman Brothers Inc. and Bear, Stearns & Co. Inc. are serving as
Representatives (the "Representatives"), have severally agreed to purchase,
and the Company has agreed to sell to the Underwriters, severally, the
respective number of shares of Common Stock set forth opposite the names of
such Underwriters below:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...............................
Lehman Brothers Inc. ...........................................
Bear, Stearns & Co. Inc.........................................
---------
Total......................................................... 2,750,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all the shares of Common Stock offered hereby (other than
those covered by the over-allotment option described below) if any such shares
are taken.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price which represents a
concession not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other Underwriters or to certain other dealers.
After the initial offering of the shares of Common Stock, the offering price
and other selling terms may from time to time be varied by the Underwriters.

The Company has granted the Underwriters an option, exercisable for 30 days
from the date of the Prospectus, to purchase up to 412,500 additional shares
of Common Stock at the public offering price set forth on the cover page
hereof, less underwriting discounts and commissions. The Underwriters may
exercise such option to purchase solely for the purpose of covering over-
allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to the
total number of shares of Common Stock offered by the Underwriters hereby.

See "Shares Eligible for Future Sale" for a description of certain
arrangements by which all of the Company's executive officers and directors
and certain other existing stockholders, who beneficially own in the aggregate
8,053,235 shares of Common Stock and options and warrants to purchase
1,318,151 shares of Common Stock, have agreed not to sell or otherwise dispose
of Common Stock or convertible securities of the Company for up to 180 days
after the date of this Prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated. The Company has agreed in the Underwriting
Agreement that it will not, directly or indirectly, without the prior written
consent of Morgan Stanley & Co. Incorporated, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exchangeable for Common Stock, for a period of 180 days after the date of this
Prospectus, except under certain circumstances.

In March 1997, Frederick Frank, Vice Chairman of Lehman Brothers, purchased
100,000 shares of Series B Preferred Stock for a purchase price of $10.00 per
share, or an aggregate of $1,000,000. Upon the closing of this offering, all
of Mr. Frank's 100,000 shares of Series B Preferred Stock will be redeemed by
the Company. In addition, Mr. Frank received a warrant to purchase 204,778
shares of Common Stock at $5.86 per share.

71
<PAGE>

At the request of the Company, the Underwriters have reserved for sale at
the initial public offering price up to 137,500 shares offered hereby for
officers, directors, employees and certain other persons associated with the
Company (the "Directed Share Program"). The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the Underwriters to the general public on the same basis as the other shares
offered hereby.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales in excess of five percent of the total number of
shares of Common Stock offered hereby to accounts over which they exercise
discretionary authority.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the trading symbol "CRGN."

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock
for their own account. In addition, to cover overallotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the Common Stock in the offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may cease any of these activities at any time.

PRICE OF THE OFFERING

Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be determined by
negotiations between the Company and the Representatives of the Underwriters.
Among the factors considered in determining the initial public offering price
will be the future prospects of the Company and its industry in general; net
revenue, earnings and certain other financial and operating information of the
Company in recent periods; and certain ratios, market prices of securities and
certain financial operating information of companies engaged in activities
similar to those of the Company. The estimated initial public offering price
range set forth on the cover page of this Prospectus is subject to change as a
result of market conditions or other factors.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston,
Massachusetts, and for the Underwriters by Ropes & Gray, Boston,
Massachusetts. Members of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
own an aggregate of 20,486 shares of Common Stock and warrants to purchase
15,000 shares of Common Stock.

EXPERTS

The financial statements of CuraGen Corporation included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein. These financial statements have been included
herein in reliance upon the report of said firm given upon their authority as
experts in accounting and auditing.

72
<PAGE>

The statements in this Prospectus under the captions "Risk Factors--Patents
and Proprietary Rights; Third-Party Rights" and "Business--Intellectual
Property" relating to United States patent matters have been passed upon by
Pennie & Edmonds LLP, New York, New York, patent counsel to the Company.
Members of Pennie & Edmonds LLP own an aggregate of 42,673 shares of Common
Stock.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act,
with respect to the Common Stock offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus, which is part of the
Registration Statement, omits certain information, exhibits, schedules and
undertakings set forth in the Registration Statement. For further information
pertaining to the Company and the Common Stock, reference is made to such
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents or provisions of any documents
referred to herein are not necessarily complete, and in each instance where a
copy of the document has been filed as an exhibit to the Registration
Statement, reference is made to the exhibit so filed. The Registration
Statement may be inspected without charge at the office of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the Registration
Statement may be obtained from the Commission at prescribed rates from the
Public Reference Section of the Commission at such address, and at the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. In addition, registration statements and
certain other filings made with the Commission through its Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.

<PAGE>

GLOSSARY

The four chemical building blocks, represented
by the letters A, C, G and T, that compose DNA.

Base
Bioinformatics Computer software to assist in the acquisition
and analysis of information relating to genes,
proteins, biological pathways and drugs.

Chromosome The physical structures in cells containing
large stretches of DNA (hundreds of millions of
bases) and the information for thousands of
genes.

DNA The molecule that encodes genetic information
through the sequence of four constituent bases.

DNA Sequence The precise order of bases for a DNA fragment,
a gene, a chromosome or an entire genome.

Fluorescent Label A molecule attached to a gene fragment that
emits light when stimulated by a laser. The
emitted light is detected to measure the
quantity of labeled gene fragments.

Gel Electrophoresis A laboratory process using a gel matrix and an
electric field to determine the size (in number
of bases) of a DNA molecule.

Gene The fundamental unit of heredity. A gene is a
specific sequence of bases (usually thousands
to tens of thousands of bases) located in a
specific location on a particular chromosome.
Genes are transcribed to produce multiple
molecules of mRNA which are then translated to
produce multiple copies of a specific protein.

Gene Expression The process used by a cell to determine which
proteins to produce. The number of copies of a
particular protein produced by a cell is
determined primarily by the number of copies of
the mRNA which encodes it.

Gene Expression Analysis The process of correlating the expression
levels of individual genes (in terms of the
number of copies of mRNA present for a gene)
with cellular behavior as a cause or result of
disease, in response to drug treatment, or over
time.

Gene Fragment A physical piece of a gene (in a test tube or
electrophoresis gel) containing on the order of
50 to 500 bases.

Gene Mapping Determining the position of a gene (or gene
fragment) on a chromosome.

Genome All the bases in all the genes on all the
chromosomes of a species. The human genome
contains over 3 billion bases.

Genomics
The comprehensive study of all genes and their
function in biological pathways.

74
<PAGE>

Hybridization
Determining the sequence of bases in a gene
fragment by measuring its ability to pair with
trial complementary gene fragments.

mRNA A messenger molecule that serves as the
intermediate between the stretch of DNA that
contains a gene and the final protein that the
gene encodes.

Mutation A change (usually deleterious, but in some
cases protective) in the DNA of a gene.
Mutations can be inherited.

Pathways Networks of protein interactions used to carry
out biological functions including metabolism
and signal transduction.

Pharmacogenomics The study of genes and biological pathways to
predict the efficacy and safety of drug
candidates, review the performance and safety
of marketed drugs and identify appropriate
patient populations.

Protein
A molecule composed of amino acids arranged in
a sequence determined by a gene. The types and
numbers of proteins produced by a cell are
determined by the expression levels of
individual genes. Proteins are required for the
structure, function and regulation of the
body's cells, tissues, and organs. Each protein
has a unique function and can act in biological
pathways.

Quantitative Expression CuraGen's technology that measures the
Analysis expression levels of the different mRNA
molecules present in a cell.

Sequencing The process of determining the identity and
precise order of all the bases in a piece (or
fragment) of DNA.

Signal Transduction
One of the processes through which cells
communicate. In a typical signal transduction
pathway, a signal in the form of a protein is
secreted from one cell and binds to a cell-
surface receptor on another cell. The signal is
transduced by downstream pathways in the second
cell to affect its gene expression and the
activities of its biological pathways.

Subsequence A small number of bases (4 to 8) of fixed
sequence used to tag longer stretches of DNA
that constitute a gene. ATCGATC is an example
of a subsequence of 7 bases.

Subsequence Pair
A pair of subsequences that are used to tag
genes. The existence of both subsequences
within a gene, together with the distance in
bases between the pair, serves in GeneCalling
like an area code plus a phone number to
identify a gene uniquely.

75
<PAGE>

CURAGEN CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. F-2
Balance Sheets, December 31, 1996 and 1997............................... F-3
Statements of Operations for the Years Ended December 31, 1995, 1996 and
1997.................................................................... F-4
Statements of Changes in Stockholders' Equity (Deficiency) for the Years
Ended December 31, 1995, 1996 and 1997.................................. F-5
Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
1997.................................................................... F-6
Notes to Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
of CuraGen Corporation
New Haven, Connecticut

We have audited the accompanying balance sheets of CuraGen Corporation (the
"Company") as of December 31, 1996 and 1997, and the related statements of
operations, changes in stockholders' equity (deficiency) and cash flows for
each of the three years in the period ended December 31, 1997. 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 referred to above present fairly,
in all material respects, the financial position of the Company at December
31, 1996 and 1997, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Hartford, Connecticut
February 13, 1998
(February 20, 1998 as to Note 10)

F-2

<PAGE>

CURAGEN CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 3,298,642 $ 17,417,161
Grants receivable................................. 466,089 421,564
Accounts receivable............................... 200,000 166,750
Stock subscriptions receivable.................... 100,000 --
Other current assets.............................. 13,031 13,883
Prepaid expenses.................................. 22,951 157,480
Stock issuance costs.............................. -- 1,083,251
----------- ------------
Total current assets............................ 4,100,713 19,260,089
----------- ------------
Property and equipment, net......................... 1,471,496 6,920,196
----------- ------------
Other assets:
Notes receivable--related parties................. -- 100,000
Deferred real estate commissions, net............. -- 59,955
Deferred financing costs, net..................... 11,670 --
Organization costs, net........................... 2,000 --
Deposits.......................................... 67,512 178,789
----------- ------------
Total other assets.............................. 81,182 338,744
----------- ------------
Total assets.................................. $ 5,653,391 $ 26,519,029
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 351,997 $ 1,106,134
Accrued payroll--related party.................... 308,125 308,125
Accrued expenses.................................. 574,630 1,345,262
Deferred revenue.................................. -- 375,000
Current portion of obligations under capital
leases........................................... 391,923 1,386,896
----------- ------------
Total current liabilities....................... 1,626,675 4,521,417
----------- ------------
Long-term liabilities:
Deferred rent..................................... -- 227,972
Note payable...................................... 509,425 --
Interest payable.................................. 647,328 21,000
Obligations under capital leases, net of current
portion.......................................... 752,162 4,126,153
----------- ------------
Total long-term liabilities..................... 1,908,915 4,375,125
----------- ------------
Commitments and contingencies
Redeemable Common Stock............................. -- 3,940,312
----------- ------------
Stockholders' equity:
Preferred Stock:
Series A Preferred............................... 1,800,000 --
Series B Preferred............................... 1,390,772 1,459,196
Common Stock; $.01 par value, issued and
outstanding shares 5,121,731 at December 31,
1996, and 8,580,112 at December 31, 1997......... 51,218 85,801
Additional paid-in capital........................ 2,164,824 23,861,665
Accumulated deficit............................... (3,289,013) (10,511,023)
Unamortized stock-based compensation.............. -- (1,213,464)
----------- ------------
Total stockholders' equity...................... 2,117,801 13,682,175
----------- ------------
Total liabilities and stockholders' equity.... $ 5,653,391 $ 26,519,029
=========== ============
</TABLE>

See notes to financial statements.

F-3
<PAGE>

CURAGEN CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
Revenue:
Grant revenue.......................... $ 1,581,175 $4,047,947 $ 3,079,994
Collaboration revenue.................. -- 375,000 2,816,549
----------- ---------- -----------
Total revenue........................ 1,581,175 4,422,947 5,896,543
----------- ---------- -----------
Operating expenses:
Grant research......................... 1,122,158 3,065,140 4,615,886
Collaborative research and
development........................... 344,217 450,895 5,126,660
General and administrative............. 961,815 1,140,325 3,481,251
----------- ---------- -----------
Total operating expenses............. 2,428,190 4,656,360 13,223,797
----------- ---------- -----------
Loss from operations..................... (847,015) (233,413) (7,327,254)
----------- ---------- -----------
Other income (expenses):
Interest income........................ 12,306 20,848 789,781
Interest expense....................... (253,896) (376,570) (684,537)
----------- ---------- -----------
Total other income (expenses)........ (241,590) (355,722) 105,244
----------- ---------- -----------
Net loss................................. (1,088,605) (589,135) (7,222,010)
Preferred dividends...................... -- (17,106) (68,424)
----------- ---------- -----------
Net loss attributable to common
stockholders............................ $(1,088,605) $ (606,241) $(7,290,434)
=========== ========== ===========
Basic and diluted loss per share:
Net loss per share attributable to
common stockholders................... $ (.22) $ (.12) $ (.92)
=========== ========== ===========
Weighted average shares used in
computing basic and diluted net loss
per share attributable to common
stockholders.......................... 4,915,087 5,097,073 7,888,383
=========== ========== ===========
Proforma basic and diluted loss per
share:
Proforma net loss per share
attributable to common stockholders... $ (.12)
==========
Weighted average shares used in
computing proforma basic and diluted
loss per share attributable to common
stockholders.......................... 5,099,598
==========
</TABLE>

See notes to financial statements.

F-4
<PAGE>

CURAGEN CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

<TABLE>
<CAPTION>
COMMON ADDITIONAL UNAMORTIZED
NUMBER STOCK ($.01 NUMBER OF PREFERRED PAID- ACCUMULATED STOCK-BASED
OF SHARES PAR VALUE) SHARES STOCK IN CAPITAL DEFICIT COMPENSATION TOTAL
--------- ----------- ---------- ----------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1995....... 4,902,156 $ 49,022 -- -- $ 1,414,255 $ (1,611,273) -- $ (147,996)
Issuance of Common
Stock................ 19,575 196 -- -- 45,023 -- -- 45,219
Exercise of Common
Stock warrants....... 100,000 1,000 -- -- 99,000 -- -- 100,000
Net loss.............. -- -- -- -- -- (1,088,605) -- (1,088,605)
December 31, 1995..... 5,021,731 50,218 -- -- 1,558,278 (2,699,878) -- (1,091,382)
Exercise of Common
Stock warrants....... 100,000 1,000 -- -- 151,000 -- -- 152,000
Issuance of Preferred
Stock--Series A...... -- -- 307,167 $ 1,800,000 -- -- -- 1,800,000
Issuance of Preferred
Stock with warrants--
Series B............. -- -- 175,000 1,373,666 376,334 -- -- 1,750,000
Issuance of options to
non-employees........ -- -- -- -- 96,318 -- -- 96,318
Preferred Stock
dividends............ -- -- -- 17,106 (17,106) -- -- --
Net loss.............. -- -- -- -- -- (589,135) -- (589,135)
--------- --------- ---------- ----------- ----------- ------------ ----------- ----------
December 31, 1996..... 5,121,731 51,218 482,167 3,190,772 2,164,824 (3,289,013) -- 2,117,801
Issuance of Common
Stock................ 39,746 397 -- -- 162,561 -- -- 162,958
Issuance of Preferred
Stock with warrants--
Series C............. -- -- 2,011,468 11,787,202 -- -- -- 11,787,202
Issuance of Preferred
Stock--Series D...... -- -- 1,000,000 7,500,000 -- -- -- 7,500,000
Issuance of Preferred
Stock--Series E...... -- -- 100,000 1,000,001 -- -- -- 1,000,001
Issuance of options... -- -- -- -- 736,781 -- -- 736,781
Unamortized stock-
based compensation -- -- -- -- 1,213,464 -- $(1,213,464) --
Issuance of warrants--
capital lease
obligations.......... -- -- -- -- 59,520 -- -- 59,520
Amortization of
warrants--capital
lease obligations.... -- -- -- -- (5,410) -- -- (5,410)
Preferred Stock
dividends............ -- -- -- 68,424 (68,424) -- -- --
Adjustment of
Redeemable Common
Stock................ -- -- -- -- (2,454,668) -- -- (2,454,668)
Adjustment to reflect
automatic conversion
of Preferred Stock... 3,418,635 34,186 (3,418,635) (22,087,203) 22,053,017 -- -- --
Net loss.............. -- -- -- -- -- (7,222,010) -- (7,222,010)
--------- --------- ---------- ----------- ----------- ------------ ----------- ----------
December 31, 1997..... 8,580,112 $ 85,801 175,000 $ 1,459,196 $23,861,665 $(10,511,023) $(1,213,464) 13,682,175
========= ========= ========== =========== =========== ============ =========== ==========
</TABLE>

See notes to financial statements.

F-5
<PAGE>

CURAGEN CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $(1,088,605) $ (589,135) $(7,222,010)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization.......... 223,626 366,283 1,226,696
Non-monetary compensation.............. -- 96,318 736,781
Changes in assets and liabilities:
Grants receivable...................... (205,456) (260,633) 44,525
Accounts receivable.................... -- (200,000) 33,250
Other current assets................... (15,086) 2,055 (852)
Prepaid expenses....................... (8,448) (10,468) (134,529)
Payment of deferred real estate
commissions........................... -- -- (68,948)
Deposits............................... (6,082) (56,548) (111,277)
Accounts payable....................... 24,727 311,457 754,137
Accrued payroll--related party......... 105,000 93,750 --
Accrued expenses....................... 300,293 274,337 933,590
Deferred revenue....................... 265,079 (265,079) 375,000
Deferred rent.......................... (37,204) (17,246) 227,972
Interest payable....................... 220,127 268,807 259,316
----------- ---------- -----------
Net cash (used in) provided by
operating activities................ (222,029) 13,898 (2,946,349)
----------- ---------- -----------
Cash flows from investing activities:
Acquisitions of property and equipment.. (170,471) (248,033) (2,486,760)
Loans to related parties................ -- -- (100,000)
----------- ---------- -----------
Net cash used in investing
activities.......................... (170,471) (248,033) (2,586,760)
----------- ---------- -----------
Cash flows from financing activities:
Payments on capital lease obligations... (85,261) (178,352) (879,594)
Proceeds from issuance of loan payable.. -- 175,000 --
Payment of loan payable................. -- (175,000) --
Proceeds from issuance of Common Stock.. 210,000 252,000 --
Proceeds from issuance of Preferred
Stock.................................. -- 3,450,000 20,387,203
Proceeds from sale-leaseback of fixed
assets................................. -- -- 1,227,270
Payments of stock issuance costs........ -- -- (1,083,251)
----------- ---------- -----------
Net cash provided by financing
activities.......................... 124,739 3,523,648 19,651,628
----------- ---------- -----------
Net (decrease) increase in cash and cash
equivalents............................. (267,761) 3,289,513 14,118,519
Cash and cash equivalents, beginning of
year.................................... 276,890 9,129 3,298,642
----------- ---------- -----------
Cash and cash equivalents, end of year... $ 9,129 $3,298,642 $17,417,161
=========== ========== ===========
Supplemental cash flow information:
Interest paid........................... $ 33,770 $ 107,763 $ 423,655
Noncash financing transactions:
Reduction of note and related interest
payable upon exercise of Common Stock
warrants............................... $ -- $ -- $ 1,485,644
Reduction of accrued expenses upon
issuance of Common Stock............... 45,219 -- 162,958
Obligations under capital leases........ 385,314 979,096 5,302,666
Common Stock subscription receivable.... 100,000 -- --
Preferred Stock subscription
receivable............................. -- 100,000 --
Adjustment of Redeemable Common Stock... -- -- 2,454,668
</TABLE>

See notes to financial statements.

F-6
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization--CuraGen Corporation ("CuraGen" or the "Company") is a
biotechnology company focusing on the application of genomics to systematic
discovery of genes, biological pathways and drug candidates in order to
accelerate the discovery and development of the next generation of
therapeutic, diagnostic and agricultural products. The Company was
incorporated in November 1991 and, until March 1993 (inception), was engaged
principally in organizational activities, grant and patent preparation and
obtaining financing. In March 1993, the Company began construction of
approximately 8,000 square feet of custom laboratory and office space in a
leased facility in Branford, Connecticut, and opened its laboratories in July
1993. In March 1997, the Company expanded its custom laboratory and office
space into a 26,000 square foot leased facility in New Haven, Connecticut (see
Note 3).

The Company was in the development stage at December 31, 1995; during the
year ended December 31, 1996, the Company completed its development
activities, with the signing of its first collaborative research agreement,
and commenced its planned principal operations.

Revenue Recognition--The Company has entered into certain collaborative
research agreements which provide for the partial or complete funding of
specified projects in exchange for access to and certain rights in the
resultant data discovered under the related project. Revenue is recognized
based upon work performed or upon the attainment of certain benchmarks
specified in the related agreements (see Note 5). Grant revenue is recognized
as related costs qualifying under the terms of the grants are incurred. Grant
revenue is derived solely from federal and Connecticut agencies (see Note 8).
Deferred revenue arising from payments received from grants and collaborative
agreements is recognized as income when earned.

Cash and Cash Equivalents--The Company considers investments readily
convertible to cash with a maturity of three months or less at the date of
purchase to be cash equivalents.

Property and Equipment--Property and equipment are recorded at cost.
Equipment under capital leases is recorded at the lower of the net present
value of the minimum lease payments required over the term of the lease or the
fair value of the assets at the inception of the lease. Additions, renewals
and betterments that significantly extend the life of an asset are
capitalized. Minor replacements, maintenance and repairs are charged to
operations as incurred. Equipment is depreciated over the estimated useful
lives of the related assets, ranging from three to seven years, using the
straight-line method. Equipment under capital leases is amortized over the
shorter of the estimated useful life or the terms of the lease, using the
straight-line method. Leasehold improvements are amortized over the term of
the lease, using the straight-line method. When assets are retired or
otherwise disposed of, the assets and related accumulated depreciation or
amortization are eliminated from the accounts and any resulting gain or loss
is reflected in income. For income tax purposes, depreciation is computed
using various accelerated methods and, in some cases, different useful lives
than those used for financial reporting purposes.

Deferred Real Estate Commissions--Deferred real estate commissions were paid
in January 1997 in connection with the signing of the operating lease in New
Haven, Connecticut (see Note 3). These costs are amortized over the remaining
life of the lease as of the date of occupancy, sixty-nine months, using the
straight-line method. Accumulated amortization aggregated $8,993 as of
December 31, 1997.

Deferred Financing Costs--Deferred financing costs were amortized over the
life of the CII Note (see Note 4), eighty-four months, using the straight-line
method. Accumulated amortization aggregated $8,330 and $0 as of December 31,
1996 and 1997, respectively. Related amortization expense was $2,856 for 1995
and 1996.

F-7

<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

In April 1997, the CII Warrant was exercised (see Notes 4 and 6) and as a
result the related deferred financing costs were written off. Amortization
expense for the year ended December 31, 1997 was $11,670.

Organization Costs--Organization costs are amortized over sixty months,
using the straight-line method. Accumulated amortization was $8,000 and
$10,000 as of December 31, 1996 and 1997, respectively. Related amortization
expense was $2,000 for 1995, 1996 and 1997.

Patent Application Costs--Costs incurred in filing for patents are charged
to operations, until such time as it is determined that the filing will be
successful. When it becomes evident with reasonable certainty that an
application will be successful, the costs incurred in filing for patents will
begin to be capitalized. Capitalized costs related to successful patent
applications will be amortized over a period not to exceed twenty years or the
remaining life of the patent, whichever is shorter, using the straight-line
method. As of December 31, 1995, 1996, and 1997, all patent application costs
have been charged to operations.

Research and Development Costs--Research and development costs are charged
to operations as incurred. Grant research expenses include all direct research
and development costs incurred related to specific grant awards and programs.
All remaining research and development costs are incurred for the development
and maintenance of current and future research collaboration agreements, and
accordingly, have been classified as collaborative research and development
expenses.

Stock-Based Compensation--In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("SFAS 123"), which was effective
for the Company beginning January 1, 1996. SFAS 123 requires expanded
disclosures of stock-based compensation arrangements with employees and non-
employees and encourages (but does not require) compensation cost to be
measured based on the fair value of the equity instruments awarded to
employees. Companies are permitted to continue to apply Accounting Principles
Board ("APB") No. 25, which recognizes compensation cost based on the
intrinsic value of the equity instruments awarded. The Company will continue
to apply APB No. 25 to its stock-based compensation awards to employees. For
equity instruments awarded to non-employees, the Company records the
transactions based upon the consideration received for such awards or the fair
value of the equity instruments issued, whichever is more reliably measurable.
The Company recorded stock-based compensation expense attributable to non-
employees totaling $96,318 and $277,247 for the years ended December 31, 1996
and 1997, respectively. For options issued to employees, the Company records
the transactions based upon the difference between the option strike price and
the estimated fair market value as of the date of issuance. Stock-based
compensation associated with options granted to employees during 1997 amounted
to $1,672,998 and will be expensed by the Company over the vesting period of
the underlying options. The Company recorded stock-based compensation expense
for options issued to employees of $459,534 for the year ended December 31,
1997.

Income Taxes--Income taxes are provided for as required under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). This Statement requires the use of the asset and liability method in
determining the tax effect on future years of the "temporary differences"
between the tax basis of assets and liabilities and their financial reporting
amounts.

Fair Value of Financial Instruments--Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
("SFAS 107"), requires the disclosure of fair value information for certain
assets and liabilities, whether or not recorded in the balance sheets, for
which it is practicable to estimate that value. The Company has the following
financial instruments: cash, receivables, accounts payable and accrued
expenses, and certain long-term liabilities including a note payable.
Additionally, the Company has Redeemable Common Stock (see Note 6). The
Company considers the carrying amount of these items, excluding the note
payable and the Redeemable Common Stock, to approximate fair value. In
addition, it was not practicable to estimate the fair value of the note
payable due to a lack of availability of similar instruments for comparative
purposes.

F-8
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Basic and Diluted Net Loss Per Share Attributable to Common Stockholders--As
of December 31, 1997, the Company, as required, retroactively adopted
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). As a result, loss per share for all periods presented has been
restated to conform with the provisions of SFAS 128. As of December 31, 1997,
the Company has a total of 1,663,884 stock options outstanding (see Note 6),
which have not been used in the calculation of diluted earnings per share
because to do so would result in anti-dilution. As such, the numerator (net
loss attributable to common stockholders) and the denominator (weighted
average shares), respectively, used in calculating both the amount of basic
and diluted loss per share are equal.

Pro Forma Net Loss Per Share Attributable to Common Stockholders--At
December 31, 1996, pro forma net loss per share attributable to common
stockholders and the pro forma weighted average number of shares of Common
Stock outstanding have been presented in the statement of operations assuming
the Series A Preferred Stock (see Note 6) was converted to Common Stock upon
issuance.

Conversion of Preferred Stock--The accompanying financial statements
retroactively reflect the conversion of all outstanding shares of Series A, C,
D and E Preferred Stock (Convertible Preferred Stock) to Common Stock on a one
for one basis. The above conversion has been presented since the Company
amended its Certificate of Incorporation in December 1997 to provide that the
Series A, C, D and E Preferred Stock will be automatically converted into
shares of Common Stock upon the closing of a firm committment underwritten
public offering of the Common Stock prior to February 28, 1998, regardless of
the offering price and the net proceeds raised. The amendment to the
Certificate of Incorporation eliminated the conditions to conversion described
in Note 6 to the financial statements (see Note 10).

Recently Enacted Pronouncements--Statements of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), and No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS
131"), were issued in June 1997.

SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. It requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as the
other financial statements. Comprehensive income is defined as "the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources." It includes all changes in
equity during a period, except those resulting from investments by owners and
distributions to owners. This statement is effective for fiscal years
beginning after December 15, 1997.

SFAS 131 establishes the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement is effective for
financial statements for periods beginning after December 15, 1997.

As the Company does not have changes in equity other than from investments
by owners and distributions to owners and operates in a single segment the
implementation of both of these standards is not expected to have a material
effect on the Company.

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 amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-9
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
---------- ----------
<S> <C> <C>
Laboratory equipment.................................. $ 351,251 $ 985,654
Leased equipment...................................... 1,432,780 6,593,064
Leasehold improvements................................ 205,998 399,996
Office equipment...................................... 171,501 677,318
---------- ----------
Total property and equipment........................ 2,161,530 8,656,032
Less accumulated depreciation and amortization........ 690,034 1,735,836
---------- ----------
Total property and equipment, net................... $1,471,496 $6,920,196
========== ==========
</TABLE>

3. LEASES

Capital Leases

In April 1997, the Company signed a lease-financing commitment to receive
$4,000,000 to purchase equipment and expand its facilities. The lease
commitment provides for a payment term of 48 months per individual lease
schedule. In addition, the commitment provides for the issuance to the lessor
of two warrants (the "First Warrant" and the "Second Warrant") to purchase
shares of the Common Stock. The First Warrant was issued in April 1997 and
entitles the lessor to purchase 11,111 shares of Common Stock at an exercise
price of $9.00 per share. The Second Warrant was issued when the Company's
aggregate equipment cost under the agreement exceeded $2,000,000. The Second
Warrant entitles the lessor to purchase 10,000 shares of Common Stock at an
exercise price of $10.00 per share. The value ascribed to the warrants was
$59,520.

The Company has also entered into other capital lease agreements to finance
the purchase of equipment. Leased equipment under all such agreements
consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
---------- ----------
<S> <C> <C>
Leased equipment...................................... $1,432,780 $6,593,064
Less accumulated amortization......................... 338,879 1,133,842
---------- ----------
Leased equipment, net................................. $1,093,901 $5,459,222
========== ==========
</TABLE>

The Company financed assets with costs of $385,314, $979,096 and $5,302,666
for the years ended December 31, 1995, 1996 and 1997, respectively. These
arrangements have terms of three to five years with interest rates ranging
primarily from 8% to 22%. At the end of the respective lease terms, the
Company has the right to either return the equipment to the lessor or purchase
the equipment at between $1 and 10% of the fair market value of the equipment.

F-10
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The future minimum lease payments under capital lease obligations were as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Within 1 year................................................... $2,010,945
Within 1 to 2 years............................................. 1,822,954
Within 2 to 3 years............................................. 1,555,744
Within 3 to 4 years............................................. 1,612,132
Within 4 to 5 years............................................. 61,229
----------
Total minimum lease payments.................................... 7,063,004
Less amounts representing interest.............................. 1,549,955
----------
Present value of future minimum lease payments.................. 5,513,049
Less current portion of obligations............................. 1,386,896
----------
Obligations under capital leases, net of current portion........ $4,126,153
==========
</TABLE>

Operating Leases

On December 27, 1996, the Company entered into a six-year lease agreement
for 26,000 square feet to house its principal administrative and research
facilities at 555 Long Wharf Drive, New Haven, Connecticut. The lease allows
for two five-year extensions and an option to lease an additional 26,000
square feet.

The future minimum rental payments for the operating lease are as follows as
of December 31, 1997:

<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998........................................................... $ 469,505
1999........................................................... 538,453
2000........................................................... 538,453
2001........................................................... 538,453
2002........................................................... 538,453
----------
Total.......................................................... $2,623,317
==========
</TABLE>

The Company also leases its research facilities in Branford, Connecticut,
under a lease agreement expiring in May 1998. During 1996, the Company
exercised an option to extend the term of the operating lease for one
additional two-year term expiring in May 1998. In addition, the Company has an
option to extend the term of the operating lease for one subsequent one-year
term. The future minimum rental payments for this operating lease as of
December 31, 1997 is $42,048 due in fiscal year 1998. Total rent expense under
all operating leases for 1995, 1996 and 1997 was approximately $44,000,
$77,200 and $487,300, respectively.

4. NOTE PAYABLE

In February 1994, the Company borrowed $600,000 (the "CII Note") from
Connecticut Innovations, Incorporated ("CII"), a Connecticut state agency. The
CII Note bore interest at the rate of 10% per annum, and was secured by
certain technology and intellectual property of the Company. The principal
balance was payable on January 10, 2001. In connection with the CII Note, the
Company issued 102,156 shares of Common Stock to CII (the "CII Stock") and a
non-detachable stock subscription warrant (the "CII Warrant") to purchase
291,875 shares of Common Stock at an aggregate exercise price equal to the
original principal balance of the CII Note ($600,000) plus unpaid interest.
Prior to the exercise of the CII Warrant, the Put Right described in Note 6
that applies to the 291,875 shares of Common Stock received under the CII
Warrant (the "CII Warrant Shares") applied to the CII Warrant. Accordingly,
the Company accrued interest on the CII Note at a rate pursuant to the

F-11
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

terms of such Put Right. The rate represented the greater of (i) a compounded
annual rate of return of 25% from the date of the CII Note, or (ii) such rate
that would be necessary so that the principal amount of the CII Note plus
accrued interest equaled the fair value of the CII Warrant. The CII Stock was
valued at $155,277 and recorded as original issue discount. Such discount was
being amortized as deferred financing costs over eighty-four months, the term
of the CII Note. In April 1997, the CII Warrant was exercised and CII received
the CII Warrant Shares for consideration of $1,485,644, which represented full
payment of the CII Note totaling $600,000 in principal and $885,644 in accrued
interest. The remaining discount on the CII Stock was fully amortized upon
payment of the CII Note.

5. COLLABORATIONS

Pioneer Hi-Bred International, Inc.

Effective June 1, 1997, the Company entered into a Collaborative Research
and License Agreement with Pioneer Hi-Bred International, Inc. whereby the
Company is to perform research which will be funded by Pioneer Hi-Bred. In
conjunction with the execution of this agreement Pioneer Hi-Bred made an
equity investment of $7,500,000 in the form of 1,000,000 shares of Series D
Convertible Preferred Stock (see Note 6). In addition, Pioneer Hi-Bred will
pay the Company $2.5 million per year, for each of three years, in quarterly
installments due in advance, on or before the first day of each calendar
quarter, with the first and last payments prorated. Pioneer Hi-Bred has the
right to terminate the research program at any time upon a breach by the
Company and on three months' written notice at any time after May 2000. The
Company may terminate the research program after the third anniversary of the
effective date unless Pioneer Hi-Bred increases annual research funding for
the fourth and fifth years to at least $5.0 million per year, plus a
contractually provided inflation adjustment.

The $2.5 million per year fee is based upon an established number of CuraGen
employees whom will be devoted to the Pioneer Hi-Bred research. In accordance
with the Company's revenue recognition policy as described in Note 1, revenue
has been recorded based upon work performed. For the year ended December 31,
1997, the Company has recorded revenue of $1,458,333, which represents 25% of
total revenue, related to this agreement.

Genentech, Inc.

In June 1996, the Company entered into a Pilot Research Services and
Evaluation Agreement with Genentech, Inc. pursuant to which the Company
performed certain research services for a $200,000 fee. The pilot
collaboration was superseded by the Evaluation Agreement, signed and effective
December 27, 1996, pursuant to which the Company is performing additional
research services during 1997 for a research fee of $667,000 payable in four
equal installments of $166,750. The Company completed the research within four
months of the receipt of tissue samples from Genentech as required by the
Evaluation Agreement and recorded $667,000 as revenue, which represented 11%
of total revenues for the year ended December 31, 1997. The entire accounts
receivable balance at December 31, 1996 and 1997 was due from Genentech. In
connection with the execution of the Evaluation Agreement, Genentech made an
equity investment of $1,800,000 in the form of 307,167 shares of Series A
Convertible Preferred Stock (see Note 6).

F-12
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

first year, the drawn-down portion of the loan is convertible at CuraGen's
option into CuraGen Non-Voting Common Stock based upon a formula that
approximates the prevailing market price of the Company's Common Stock. If
issued, the Non-Voting Common Stock is convertible, at Genentech's option,
into Common Stock (i) at any time, at Genentech's option or (ii) upon the sale
or transfer of the Non-Voting Common Stock to a non-affiliated party.
Genentech will additionally provide funding of up to $24 million over five
years if the database subscription arrangement is not terminated, the research
collaboration continues for the full five-year term and Genentech elects to
retain licenses to its discoveries. Genentech has an option to acquire
licenses to certain discoveries arising from the collaboration.

Biogen, Inc.

In October 1997, CuraGen and Biogen, Inc. entered into a research
collaboration and database subscription arrangement to discover novel genes
and therapeutics. Under the terms of the agreement, Biogen agreed to invest $5
million in the Company to purchase Common Stock of the Company at the initial
public offering price and to provide a $10 million interest-bearing loan
facility. At any time during the term of the agreement, the loan is
convertible at the Company's option into Common Stock based upon a formula
that approximates its prevailing market price. Biogen will additionally
provide payments over five years to support a research collaboration to
generate project-specific GeneCalling and PathCalling databases from Biogen-
specified disease systems and to gain non-exclusive access to the Company's
GeneCalling and PathCalling subscription databases. Payments could reach $18.5
million if the research collaboration and database subscription arrangement
both continue for the full five-year term. Biogen has an option to acquire
exclusive licenses to certain discoveries arising from the collaboration.

For the year ended December 31, 1997, the Company has recorded revenue of
$375,000 related to this agreement. In addition, $375,000 has been received
from Biogen for which the related services have not been performed and,
therefore, such amount is recorded as deferred revenue at December 31, 1997.

6. STOCKHOLDERS' EQUITY

Authorized Capital Stock and Stock Split

In December 1993, the Board of Directors of the Company (i) increased the
authorized shares of Common Stock of the Company to 20,000,000 shares, (ii)
authorized a class of 3,000,000 shares of serial Preferred Stock, and (iii)
approved a 34,820 for 1 Common Stock split. In June 1997, the Board of
Directors of the Company, upon stockholder approval, increased the authorized
shares of Common Stock of the Company to 25,000,000 and increased the
authorized number of shares of serial Preferred Stock to 7,500,000.

At December 31, 1996, the Company had reserved 1,329,375 shares of Common
Stock for issuance pursuant to the 1993 Warrants, the Incentive Warrant and
the CII Warrant and 1,500,000 shares of Common Stock for issuance pursuant to
the 1993 Stock Option and Incentive Award Plan (the "1993 Stock Plan")
discussed below. At December 31, 1997, the Company has reserved 1,583,666
shares of Common Stock pursuant to outstanding warrants and 1,500,000 shares
of Common Stock for issuance pursuant to the 1993 Stock Plan.

Common Stock and Warrants to Purchase Common Stock

During 1993, eight persons advanced an aggregate of $1,008,000 (the "1993
Debt") to the Company to fund certain start-up expenses incurred by, and to
provide certain working capital for, the Company. On December 30, 1993, the
Company converted the 1993 Debt into 1,008,000 shares of Common Stock, and
issued warrants (the "1993 Warrants") to such persons to purchase an aggregate
of 1,122,500 shares of Common Stock, at an exercise price of $1.00 per share.
The 1993 Warrants expire on various dates through December 1, 2000. In
December 1994, four 1993 Warrants to purchase an aggregate of 210,000 shares
of Common Stock were exercised for consideration of $210,000. The proceeds
were received in January 1995. In December 1995, two

F-13
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

1993 Warrants to purchase an aggregate of 100,000 shares of Common Stock were
exercised for $100,000. The proceeds were received in January 1996.

In December 1993, the Company entered into an agreement, concluded in March
1994, with a scientific advisor to issue for consideration of $100,000 (i)
100,000 shares of Common Stock, and (ii) a warrant (the "Investor Warrant") to
purchase 125,000 shares of Common Stock, at an exercise price of $1.52 per
share. In March 1996, the Investor Warrant to purchase 100,000 shares of
Common Stock was exercised for consideration of $152,000. The remainder of the
Investor Warrant expired in March 1996.

In February 1994, in connection with the CII Note (see Note 4), the Company
issued 102,156 shares of Common Stock to CII (the "CII Stock") and a non-
detachable stock subscription warrant (the "CII Warrant") to purchase 291,875
shares of Common Stock (the "CII Warrant Shares") at an aggregate exercise
price equal to the original principal balance of the CII Note ($600,000) plus
any unpaid interest. The CII Stock was valued at $155,277. In April 1997, the
CII Warrant was exercised and CII received the CII Warrant Shares for
consideration of $1,485,644, which represented full payment of the CII Note
totaling $600,000 in principal and $885,644 in accrued interest. The Company
has the right to purchase (the "Call Right") the CII Warrant Shares from CII.
Further, CII has the right to sell (the "Put Right") the CII Warrant Shares to
the Company. In October 1997, the Company entered into an agreement with CII
whereby, among other things, the Call Right and Put Right will be terminated
upon the closing of this initial public offering. In the absence of
termination, the Call Right is exercisable by the Company, (i) after June 30,
1996, for the greater of (a) the fair market value of the CII Warrant Shares,
or (b) $600,000 plus a compounded annual rate of return of 30% from the date
of the CII Note, if certain levels of capital are raised, or (ii) after
February 10, 1999, for the greater of (a) the fair market value of the CII
Warrant Shares, or (b) $600,000 plus a compounded annual rate of return of 25%
from the date of the CII Note. In the absence of termination, the Put Right is
exercisable by CII (i) at any time until February 10, 2004, in the event that
the Company fails to maintain a Connecticut presence, for the greater of (a)
the fair market or book value of the CII Warrant Shares, or (b) $600,000 plus
a compounded annual rate of return of 40% from the date of the CII Note, or
(ii) at any time in the event that the Company violates certain covenants or a
default occurs under the CII documents, or at any time after February 10,
1999, for the greater of (a) the fair market value of the CII Warrant Shares,
or (b) $600,000 plus a compounded annual rate of return of 25% from the date
of the CII Note. Given the Put Right, the Company has classified the CII
Warrant Shares as Redeemable Common Stock on the balance sheet. The carrying
value of the Redeemable Common Stock has been adjusted through charges to
additional paid-in capital to amounts approximating the exercise price
pursuant to the Put Right.

In March 1997, the Company also issued 17,073 and 22,673 shares of Common
Stock for a total value of $70,000 and $92,958, respectively, for the
settlement of outstanding accrued expense balances with two separate entities.

Stock Options

In December 1993, the Company adopted the 1993 Stock Plan, which enables the
Company to grant non-qualified and incentive stock options to purchase up to
1,500,000 shares of Common Stock to officers, directors, advisors, employees,
and affiliates of the Company. At December 31, 1996, under the 1993 Stock
Plan, the Company had 541,550 options outstanding and an additional 958,450
available for grant. At December 31, 1997, the Company had 1,028,884 options
outstanding under the 1993 Stock Plan and an additional 471,116 available for
grant. The Company's 1997 Employee, Director and Consultant Stock Plan (the
"1997 Stock Plan") was approved by the Company's Board of Directors and
stockholders in October 1997. The 1997 Stock Plan provides

F-14
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

for the issuance of up to 1,500,000 shares of Common Stock via grants of stock
options to employees, directors and consultants of the Company. At December
31, 1997, the Company had 65,000 options outstanding under the 1997 Stock Plan
and an additional 1,435,000 available for grant. In addition to the stock
options granted under the 1993 Stock Plan and the 1997 Stock Plan, the Company
has granted 456,000 and 570,000 non-qualified stock options at December 31,
1996 and December 31, 1997, respectively, which are not part of a specific
plan. No stock options have been exercised as of December 31, 1997.

A summary of all stock option activity during the years ended December 31,
1995, 1996 and 1997 is as follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding January 1, 1995........................ 321,500 $1.21
Granted.......................................... 452,000 2.03
Canceled or lapsed............................... (32,500) 1.00
---------
Outstanding December 31, 1995...................... 741,000 1.72
Granted.......................................... 269,550 3.16
Canceled or lapsed............................... (13,000) 3.00
---------
Outstanding December 31, 1996...................... 997,550 2.09
Granted.......................................... 697,583 7.12
Canceled or lapsed............................... (31,249) 3.29
---------
Outstanding December 31, 1997...................... 1,663,884 4.18
=========
Exercisable December 31, 1995...................... 282,450 1.30
=========
Exercisable December 31, 1996...................... 427,959 1.64
=========
Exercisable December 31, 1997...................... 718,779 2.68
=========
</TABLE>

The following table summarizes information about stock options at December
31, 1997:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE WEIGHTED
RANGE OF OPTIONS CONTRACTUAL AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE
--------------- ----------- -------------- --------------
<S> <C> <C> <C>
$ 1.00-$ 2.50.................... 727,667 7 years $ 1.73
3.00- 4.10.................... 473,884 9 years 3.62
6.00- 7.50.................... 338,333 9.5 years 7.22
10.00- 13.00.................... 124,000 9.75 years 12.43
--------- ---------- ------
1,663,884 8.25 years $ 4.18
=========
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE PRICE
RANGE OF OPTIONS OF OPTIONS
EXERCISE PRICES EXERCISABLE EXERCISABLE
--------------- ----------- --------------
<S> <C> <C> <C>
$ 1.00-$ 2.50.................... 526,967 $ 1.59
3.00- 4.10.................... 120,144 3.31
6.00- 7.50.................... 50,000 7.50
10.00- 13.00.................... 21,668 13.00
--------- ----------
718,779 $ 2.68
=========
</TABLE>

F-15
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Had compensation cost for the Company's stock option plans been determined
in accordance with the minimum value method for non-public companies as
prescribed under SFAS 123, the Company's net loss attributable to common
stockholders and net loss per share attributable to common stockholders would
have approximated the pro forma amounts shown below for each of the years
ended December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------
1995 1996 1997
------------------------ --------------------- ------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net loss attributable to
common stockholders.... $(1,088,605) $(1,122,100) $(606,241) $(685,816) $(7,290,434) $(7,891,326)
Net loss per share
attributable to common
stockholders........... $ (0.22) $ (0.20) $ (0.12) $ (0.12) $ (.92) $ (1.00)
</TABLE>

The assumptions utilized by the Company in deriving the pro forma amounts
are as follows: 1) 0% dividend yield, 2) .1% expected volatility, 3) risk-free
interest rate of approximately 6%, and 4) expected life of the options of 10
years. The weighted average grant date fair value of options granted during
the years ended December 31, 1995, 1996, and 1997 was approximately $0.58 per
share, $0.81 per share and $6.14 per share, respectively.

Preferred Stock

The Company received aggregate consideration of $1,750,000 from five
investors as subscriptions for the purchase of 175,000 shares of Series B
Preferred Stock. In September 1996, October 1996 and January 1997, the Company
received proceeds of $1,600,000, $50,000 and $100,000, respectively. The
Series B Preferred Stock is non-convertible and accrues dividends at the prime
rate. Dividends are payable when declared by the Board of Directors. Dividends
in arrears at December 31, 1996 and 1997 were $36,094 and $181,563,
respectively. At any time the Company may redeem the Series B Preferred Stock
for an aggregate purchase price of $1,750,000 plus accrued dividends and
dividends in arrears.

If the Company enters into certain qualified equity financings subsequent to
the Series B Preferred Stock issuance, as defined in the agreement, the
Company will be required, if requested by all of the holders of the Series B
Preferred Stock, to redeem such shares at an aggregate redemption price of
$1,750,000 plus accrued dividends and dividends in arrears. Such terms have
not been met at December 31, 1997. In addition, holders of the Series B
Preferred Stock received 5 year warrants to purchase an aggregate of 358,361
shares of Common Stock at $5.86 per share, which warrants expire on March 27,
2002. Such warrants were valued at $376,334. The value of such warrants is
being accreted over the warrant period and such accretion is classified as
preferred dividends. For the year ended December 31, 1996 and 1997 such
accretion amounted to $17,106 and $68,424, respectively. At December 31, 1997,
the Series B Preferred Stock has a liquidation preference of $1,931,563.

In December 1996, in connection with the Genentech Evaluation Agreement (see
Note 5), Genentech, Inc. purchased 307,167 shares of Series A Preferred Stock
for $1,800,000, or $5.86 per share. At any time the holders of such stock may
convert their shares to Common Stock on a 1 for 1 basis. The Series A
Preferred Stock is automatically convertible to Common Stock on a 1 for 1
basis upon the closing of a firm commitment underwritten public offering of
the Common Stock subject to the offering price being at least $12.00 per share
and net proceeds raised of at least $10,000,000. The Series A Preferred Stock
has a liquidation preference of $1,800,000.

F-16
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

In March 1997, the Company issued 2,011,468 shares of convertible Series C
Preferred Stock for an aggregate purchase price of $11,787,202. At any time
the holders of such stock may convert their shares to Common Stock on a 1 for
1 basis. The Series C Preferred Stock is automatically convertible to Common
Stock on a 1 for 1 basis upon the closing of a firm commitment underwritten
public offering of the Common Stock subject to the offering price being at
least $12.00 per share and net proceeds raised of at least $10,000,000. In
addition, three year warrants were issued to certain purchasers of the Series
C Preferred Stock to purchase an aggregate of 366,894 shares of Common Stock
at an exercise price of $9.00 per share. Such warrants were valued at $0 upon
issuance. The Series C Preferred Stock has a liquidation preference of
$11,787,202.

In May 1997, as a result of the Pioneer Hi-Bred Agreement (see Note 5), the
Company issued 1,000,000 shares of Series D Convertible Preferred Stock, for
an aggregate purchase price of $7,500,000. At any time the holders of such
stock may convert their shares to Common Stock on a 1 for 1 basis. The Series
D Preferred Stock is automatically convertible to Common Stock on a 1 for 1
basis upon the closing of a firm commitment underwritten public offering of
the Common Stock subject to the offering price being at least $12.00 per share
and net proceeds raised of at least $10,000,000. The Series D Preferred Stock
has a liquidation preference of $7,500,000.

In June 1997, the Company issued 100,000 shares of Series E Convertible
Preferred Stock for an aggregate purchase price of $1,000,001. At any time the
holders of such stock may convert their shares to Common Stock on a 1 for 1
basis. The Series E Preferred Stock is automatically convertible to Common
Stock on a 1 for 1 basis upon the closing of a firm commitment underwritten
public offering of the Common Stock subject to the offering price being at
least $12.00 per share and net proceeds raised of at least $10,000,000. The
Series E Preferred Stock has a liquidation preference of $1,000,001.

In December 1997, the Company amended its Certificate of Incorporation to
provide that the Series A, C, D and E Preferred Stock will be automatically
converted into shares of Common Stock upon the closing of a firm commitment
underwritten public offering of the Company's Common Stock prior to February
28, 1998, regardless of the offering price and the net proceeds raised.

7. INCOME TAXES

The net deferred income tax assets consisted of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Total deferred income tax assets..................... $1,862,000 $5,930,000
Valuation allowance.................................. (1,862,000) (5,930,000)
---------- ----------
Total.............................................. $ -- $ --
========== ==========
</TABLE>

The deferred income tax assets are primarily a result of the federal and
Connecticut net operating loss and research and development credit
carryforwards and timing differences relating to accrued payroll and
depreciation and amortization. As the Company has no prior earnings history, a
valuation allowance has been established due to the Company's uncertainty in
its ability to benefit from the federal and Connecticut net operating loss
carryforwards. The change in the valuation allowance was $611,000, $538,000
and $4,068,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

F-17
<PAGE>

CURAGEN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

At December 31, 1997, the Company has federal and Connecticut net operating
loss carryforwards for income tax purposes of approximately $8,987,000.
Federal and Connecticut net operating loss carryforwards expire beginning in
2008 and 1998, respectively. The Company also has federal and Connecticut
research and development tax credit carryforwards for income tax purposes of
approximately $498,000 and $1,519,000, respectively at December 31, 1997.

8. GRANTS

The Company has received federal grants for specific purposes that are
subject to review and audit by the grantor agencies. Such audits could lead to
requests for reimbursement by the grantor agency for any expenditures
disallowed under the terms of the grant. Additionally, any noncompliance with
the terms of the grant could lead to loss of current or future awards.

During 1995, the Company received two grants from CII in the amounts of
$450,000 and $237,500. The Company could be required to repay 100% of these
amounts if (i) the Company breaches and fails to cure a material covenant,
(ii) a material representation or warranty of the Company becomes untrue and
is not cured, (iii) the Company becomes bankrupt or insolvent or liquidates
its assets, or (iv) the Company is required to repay the federal grants to
which the CII grants relate. In addition, the Company could be required to
repay up to 200% of the amounts of the CII grants if the Company ceases to
have a "Connecticut presence," prior to December 31, 2004, as defined in the
grants.

9. RELATED PARTIES

The Chief Executive Officer of the Company has elected to defer payment of a
portion of his salary to future periods on an interest free basis. This amount
has been recorded as accrued payroll--related party as of December 31, 1996
and 1997.

In March 1997, the Company loaned one of its officers $50,000. The term of
the note receivable--related party is 4 years and the note bears interest at
8% per annum. The note will automatically be forgiven upon consummation of an
initial public offering if certain net proceed amounts are received by the
Company, as defined in the agreement.

In September 1997, the Company agreed to loan one of its officers $50,000
with a term of 17 months bearing interest at 8% per annum. If this officer
remains an employee through the maturity date, the loan will be extended
contingent upon continued employment. This note will be forgiven if such
officer remains an employee through September 2001.

10. SUBSEQUENT EVENTS

On February 20, 1998, the Company amended its Certificate of Incorporation
for purposes of extending the automatic conversion features of the Series A,
C, D and E Preferred Stock upon the closing of a firm committment underwritten
public offering of the Common Stock prior to July 31, 1998, regardless of the
offering price and the net proceeds raised (see Note 1).

* * * * * * *

F-18
<PAGE>

CURAGEN
CORPORATION

LOGO

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale
of the Common Stock being registered. All amounts are estimated except the
registration fee.

<TABLE>
<S> <C>
Commission Registration Fee................................... $ 12,121
NASD filing fee............................................... 5,000
Nasdaq National Market listing fee............................ 83,500
Printing and engraving expenses............................... 200,000
Legal fees and expenses....................................... 565,000
Accounting fees and expenses.................................. 225,000
Blue sky fees and expenses (including legal fees)............. 5,000
Transfer agent and registrar fees and expenses................ 2,000
Miscellaneous................................................. 2,379
----------
TOTAL....................................................... $1,100,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The amendment and restatement of the Company's Certificate of Incorporation
(the "Restated Certificate") provides that the Company shall indemnify to the
fullest extent authorized by the Delaware General Corporation Law ("DGCL"),
each person who is involved in any litigation or other proceeding because such
person is or was a director or officer of the Company or is or was serving as
an officer or director of another entity at the request of the Company,
against all expense, loss or liability reasonably incurred or suffered in
connection therewith. The Restated Certificate provides that the right to
indemnification includes the right to be paid expenses incurred in defending
any proceeding in advance of its final disposition; provided, however, that
such advance payment will only be made upon delivery to the Company of an
undertaking, by or on behalf of the director or officer, to repay all amounts
so advanced if it is ultimately determined that such director is not entitled
to indemnification. If the Company does not pay a proper claim for
indemnification in full within 60 days after a written claim for such
indemnification is received by the Company, the Restated Certificate and
Restated Bylaws authorize the claimant to bring an action against the Company
and prescribe what constitutes a defense to such action.

Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding brought by reason
of the fact that such person is or was a director or officer of the
corporation, if such person acted in good faith and in a manner that he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he or
she had no reason to believe his or her conduct was unlawful. In a derivative
action, (i.e., one brought by or on behalf of the corporation),
indemnification may be made only for expenses, actually and reasonably
incurred by any director or officer in connection with the defense or
settlement of such an action or suit, if such person acted in good faith and
in a manner that he reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged to be liable to the corporation, unless
and only to the extent that the court in which the action or suit was brought
shall determine that the defendant is fairly and reasonably entitled to
indemnity for such expenses despite such adjudication of liability.

Pursuant to Section 102(b)(7) of the DGCL, Article Tenth of the Restated
Certificate eliminates the liability of a director or the corporation or its
stockholders for monetary damages for such breach of fiduciary duty as a
director, except for liabilities arising (i) from any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) from acts or
omissions not in good faith or which involve intentional misconduct or a
knowing

II-1
<PAGE>

violation of law, (iii) under Section 174 of the DGCL, or (iv) from any
transaction from which the director derived an improper personal benefit.

The Company has obtained primary and excess insurance policies insuring the
directors and officers of the Company against certain liabilities that they
may incur in their capacity as directors and officers. Under such policies,
the insurers, on behalf of the Company, may also pay amounts for which the
Company has granted indemnification to the directors or officers.

Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 hereto, which provides for indemnification by the Underwriters of
the Company, its directors and officers who sign the Registration Statement
and persons who control the Company, under certain circumstances.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In the three years preceding the filing of this Registration Statement, the
Company has sold the following securities that were not registered under the
Securities Act.

(a) Issuances of Capital Stock.

On May 9, 1995, the Company issued an aggregate of 19,575 shares of its
Common Stock to two investors in exchange for financial advisory services
rendered by such investors to the Company having a value of $45,218.75.

On December 29, 1995, the Company sold an aggregate of 100,000 shares of its
Common Stock to two investors at $1.00 per share in exchange for payments of
an aggregate of $100,000 by such investors upon the exercise of warrants to
purchase Common Stock.

On March 30, 1996, the Company sold 100,000 shares of its Common Stock to
one investor at $1.52 per share in exchange for payment of $152,000 by such
investor upon the exercise of a warrant to purchase Common Stock.

On December 27, 1996, the Company sold 307,167 shares of its Series A
Convertible Preferred Stock at a purchase price of $5.86 per share to
Genentech, Inc. in a private placement for $1,800,000.

In March 1997, the Company issued 17,073 and 22,673 shares of its Common
Stock to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Pennie &
Edmonds LLP, respectively, at $4.10 per share in exchange for legal services
rendered on behalf of the Company and having an aggregate value of
$162,958.60.

On March 27, 1997, the Company sold an aggregate of 175,000 shares of its
Series B Redeemable Preferred Stock at a purchase price of $10.00 per share to
five investors in a private placement for $1,750,000 in cash. In connection
with this private placement, the Company issued five-year warrants to purchase
358,361 shares of Common Stock at an exercise price of $5.86 per share.

On March 27, 1997, the Company sold an aggregate of 2,011,468 shares of its
Series C Convertible Preferred Stock at a purchase price of $5.86 per share to
eleven investors in a private placement for $11,787,202.48. In connection with
this private placement, the Company also issued three-year warrants to
purchase 366,894 shares of Common Stock at an exercise price of $9.00 per
share to two investors who each purchased 1,706,485 and 127,986 shares of
Series C Convertible Preferred Stock, respectively.

On April 10, 1997, the Company sold 291,875 shares of its Common Stock to
Connecticut Innovations Incorporated in exchange for the cancellation of a
$600,000 principal amount promissory note (plus accrued interest thereon) upon
the exercise of a warrant to purchase Common Stock.

II-2
<PAGE>

On May 16, 1997, the Company sold 1,000,000 shares of its Series D
Convertible Preferred Stock at a purchase price of $7.50 per share to Pioneer
Hi-Bred International, Inc. in a private placement for $7,500,000.

On June 25, 1997, the Company sold 100,000 shares of its Series E
Convertible Preferred Stock at a purchase price of $10.00 per share to Biogen,
Inc. in a private placement for $1,000,000.

In October 1997, the Company agreed to sell $5,000,000 of its Common Stock
to Biogen, Inc. in a private placement concurrent with this offering at a
price per share equal to the price per share at which the Common Stock is sold
in this Offering.

In November 1997, the Company agreed to sell $5,000,000 of its Common Stock
to Genentech, Inc. in a private placement concurrent with this offering at a
price per share equal to the price per share at which the Common Stock is sold
in this Offering.

In November 1997, the Company agreed to sell $1,000,000 of its Common Stock
to the University of Florida Research Foundation, Inc. in a private placement
concurrent with this offering at a price per share equal to the price per
share at which the Common Stock is sold in this Offering.

(b) Certain Grants and Exercises of Stock Options.

Pursuant to the 1993 Stock Option and Incentive Award Plan (the "1993 Stock
Plan"), as of December 31, 1997, the Company has granted options to purchase
an aggregate of 1,028,884 shares of Common Stock, of which options to purchase
an aggregate of 347,611 shares of Common Stock are exercisable at a weighted
average exercise price of $3.32 per share. As of December 31, 1997, no options
pursuant to the foregoing have been exercised.

Pursuant to the 1997 Employee, Director and Consultant Stock Plan (the "1997
Stock Plan"), as of December 31, 1997, the Company has granted options to
purchase an aggregate of 65,000 shares of Common Stock at a price per share
equal to the initial public offering price, of which options to purchase an
aggregate of 21,668 shares of Common Stock are exercisable. As of December 31,
1997, no options pursuant to the foregoing have been exercised.

In addition to the options granted under the 1993 Stock Plan and the 1997
Stock Plan, as of December 31, 1997, the Company has issued options to
purchase an aggregate of 570,000 shares of Common Stock pursuant to individual
agreements with Company employees and consultants, of which options to
purchase an aggregate of 349,500 shares of Common Stock are exercisable at a
weighted average exercise price of $1.40 per share. As of December 31, 1997,
no options pursuant to the foregoing have been exercised.

No underwriters were involved in the foregoing offers and sales of
securities. Such offers and sales were made in reliance upon an exemption from
the registration provisions of the Securities Act set forth in Section 4(2)
thereof relative to sales by an issuer not involving any public offering or
the rules and regulations thereunder, or, in the case of options to purchase
Common Stock, Rule 701 under the Securities Act. All of the foregoing
securities are deemed restricted securities for purposes of the Securities
Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
@1.1 Form of Underwriting Agreement
@3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Certificate of Amendment of Restated Certificate of Incorporation of
the Registrant and Certificate of Amendment of Certificate of
Designation, Preferences, and Rights of Series E Preferred Stock of
the Registrant.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant
@3.4 Amended and Restated Bylaws of the Registrant
*3.5 Form of Amended and Restated Bylaws of the Registrant
4.1 Article Fourth of the Amended and Restated Certificate of
Incorporation of the Registrant (see Exhibit 3.1)
*4.2 Form of Common Stock Certificate
@5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. with
respect to the legality of the securities being registered
@10.1 Lease Agreement (New Haven), dated December 23, 1996, between the
Registrant and Fusco Harbour Associates, LLC
@10.2 Standard Form of Office Lease, as amended (Branford), dated February
11, 1993 and April 26, 1996, between the Registrant and Branford
Office Venture
@10.3 Sid Martin Biotechnology Development Institute Incubator License
Agreement, dated July 15, 1997, between the Registrant and the
University of Florida Research Foundation, Inc.
*10.4 1997 Employee, Director and Consultant Stock Plan
@10.5 1993 Stock Option and Incentive Award Plan
@10.6 Amendment to 1993 Stock Option and Incentive Plan, dated May 12, 1997
@10.7 Employment Letter, dated February 20, 1997, between the Registrant and
Gregory T. Went, Ph.D.
@10.8 Employment Letter, dated July 18, 1997, between the Registrant and
David M. Wurzer
@10.9 Employment Letter, dated August 21, 1997, between the Registrant and
Peter A. Fuller, Ph.D.
@10.10 Employment Letter, dated August 22, 1997, between the Registrant and
Stephen F. Kingsmore, M.B., Ch.B.
@+10.11 Option and Exclusive License Agreement, dated October 4, 1996, between
the Registrant and Wisconsin Alumni Research Foundation
@+10.12 Standard Non-Exclusive License Agreement--Brumley, dated July 1, 1996,
between the Registrant and Wisconsin Alumni Research Foundation
@+10.13 Collaborative Research and License Agreement, dated May 16, 1997,
between the Registrant and Pioneer Hi-Bred International, Inc.
@+10.14 Research and Option Agreement, dated October 1, 1997, between the
Registrant and Biogen, Inc.
@+10.15 Research and Option Agreement, dated November 20, 1997, between the
Registrant and Genentech, Inc.
@+10.16 Notice of Grant Award and Grant Application to Department of Health
and Human Services for Automated Sequencing System for Human Genome
Project, dated March 25, 1995
@10.17 ATP Agreement for Integrated Microfabricated DNA Analysis Device for
Diagnosis of Complex Genetic Disorders, dated February 1995
@10.18 ATP Agreement for Molecular Recognition Technology for Precise Design
of Protein-Specific Drugs, dated March 2, 1995
@10.19 ATP Agreement for Programmable Nanoscale Engines for Molecular
Separation, dated May 6, 1997
@10.20 Material Transfer and Screening Agreement, dated January 15, 1998,
between the Registrant and ArQule, Inc.
11.1 Schedule of Computation of Net Loss Per Share
@21.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5.1)
23.3 Consent of Pennie & Edmonds LLP
@24.1 Power of Attorney of Messrs. Went, Wurzer and DeVita
@24.2 Power of Attorney of Messrs. Booth, Patricelli and Vincent
27.1 Financial Data Schedule
</TABLE>
- --------
@ Previously filed.
* To be filed by amendment.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.

II-4
<PAGE>

(b) Financial Statement Schedules

All schedules are omitted because they are not required, are not applicable
or the information is included in the financial statements or notes thereto.

ITEM 17. UNDERTAKINGS.

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.

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 foregoing provisions, 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
Securities Act and will be governed by the final adjudication of such issue.

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 purposes 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.

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, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 6 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF BOSTON, MASSACHUSETTS ON THIS 27TH DAY OF FEBRUARY, 1998.

CuraGen Corporation (Registrant)

/s/ Jonathan M. Rothberg
By: __________________________________
JONATHAN M. ROTHBERGCHIEF
EXECUTIVE OFFICER, PRESIDENT
ANDCHAIRMAN OF THE BOARD

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 6 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<S> <C>
SIGNATURE TITLE
DATE

/s/ Jonathan M. Rothberg Chief Executive February 27,
- ------------------------------------ Officer, President 1998
JONATHAN M. ROTHBERG and Chairman of
the Board
(principal
executive officer)

* Executive Vice February 27,
- ------------------------------------ President and a 1998
GREGORY T. WENT Director

* Executive Vice February 27,
- ------------------------------------ President, 1998
DAVID M. WURZER Treasurer and
Chief Financial
Officer (principal
financial and
accounting
officer)

* Director February 27,
- ------------------------------------ 1998
VINCENT T. DEVITA, M.D.

* Director February 27,
- ------------------------------------ 1998
RICHARD H. BOOTH

* Director February 27,
- ------------------------------------ 1998
ROBERT E. PATRICELLI

* Director February 27,
- ------------------------------------ 1998
JAMES L. VINCENT
</TABLE>

II-6
<PAGE>

*By executing his name hereto, Jonathan M. Rothberg is signing this document
on behalf of the persons indicated above pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.

By: /s/ Jonathan M. Rothberg
----------------------------------
JONATHAN M. ROTHBERG
(ATTORNEY-IN-FACT)

II-7

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
@1.1 Form of Underwriting Agreement
@3.1 Amended and Restated Certificate of Incorporation of the
Registrant
3.2 Certificate of Amendment of Restated Certificate of Incorporation
of the Registrant and Certificate of Amendment of Certificate of
Designation, Preferences, and Rights of Series E Preferred Stock
of the Registrant.
*3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant
@3.4 Amended and Restated Bylaws of the Registrant
*3.5 Form of Amended and Restated Bylaws of the Registrant
4.1 Article Fourth of the Amended and Restated Certificate of
Incorporation of the Registrant (see Exhibit 3.1)
*4.2 Form of Common Stock Certificate
@5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
with respect to the legality of the securities being registered
@10.1 Lease Agreement (New Haven), dated December 23, 1996, between the
Registrant and Fusco Harbour Associates, LLC
@10.2 Standard Form of Office Lease, as amended (Branford), dated
February 11, 1993 and April 26, 1996, between the Registrant and
Branford Office Venture
@10.3 Sid Martin Biotechnology Development Institute Incubator License
Agreement, dated July 15, 1997, between the Registrant and the
University of Florida Research Foundation, Inc.
*10.4 1997 Employee, Director and Consultant Stock Plan
@10.5 1993 Stock Option and Incentive Award Plan
@10.6 Amendment to 1993 Stock Option and Incentive Plan, dated May 12,
1997
@10.7 Employment Letter, dated February 20, 1997, between the Registrant
and Gregory T. Went, Ph.D.
@10.8 Employment Letter, dated July 18, 1997, between the Registrant and
David M. Wurzer
@10.9 Employment Letter, dated August 21, 1997, between the Registrant
and Peter A. Fuller, Ph.D.
@10.10 Employment Letter, dated August 22, 1997, between the Registrant
and Stephen F. Kingsmore, M.B., Ch.B.
@+10.11 Option and Exclusive License Agreement, dated October 4, 1996,
between the Registrant and Wisconsin Alumni Research Foundation
@+10.12 Standard Non-Exclusive License Agreement--Brumley, dated July 1,
1996, between the Registrant and Wisconsin Alumni Research
Foundation
@+10.13 Collaborative Research and License Agreement, dated May 16, 1997,
between the Registrant and Pioneer Hi-Bred International, Inc.
@+10.14 Research and Option Agreement, dated October 1, 1997, between the
Registrant and Biogen, Inc.
@+10.15 Research and Option Agreement, dated November 20, 1997, between
the Registrant and Genentech, Inc.
@+10.16 Notice of Grant Award and Grant Application to Department of
Health and Human Services for Automated Sequencing System for
Human Genome Project, dated March 25, 1995
@10.17 ATP Agreement for Integrated Microfabricated DNA Analysis Device
for Diagnosis of Complex Genetic Disorders, dated February 1995
@10.18 ATP Agreement for Molecular Recognition Technology for Precise
Design of Protein-Specific Drugs, dated March 2, 1995
@10.19 ATP Agreement for Programmable Nanoscale Engines for Molecular
Separation, dated May 6, 1997
@10.20 Material Transfer and Screening Agreement, dated January 15, 1998,
between the Registrant and ArQule, Inc.
11.1 Schedule of Computation of Net Loss Per Share
@21.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5.1)
23.3 Consent of Pennie & Edmonds LLP
@24.1 Power of Attorney of Messrs. Went, Wurzer and DeVita
@24.2 Power of Attorney of Messrs. Booth, Patricelli and Vincent
27.1 Financial Data Schedule
</TABLE>
- --------
@ Previously filed.
* To be filed by amendment.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.

<PAGE>

Exhibit 3.2

CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CURAGEN CORPORATION

It is hereby certified that:

1. The name of the corporation (hereinafter called the "Company") is
CuraGen Corporation.

2. The certificate of incorporation of the Company filed with the
Delaware Secretary of State on November 22, 1991 is hereby amended as
follows: (i) Section 5(b) to Exhibit A of the Restated Certificate is
deleted in its entirety and the new Section 5(b), attached hereto as
Exhibit X, is inserted in its place; (ii) Section 5(b) to Exhibit C of
---------
the Restated Certificate is deleted in its entirety and the new
Section 5(b), attached hereto as Exhibit Y, is inserted in its place;
---------
and (iii) Section 5(b) to Exhibit D of the Restated Certificate is
deleted in its entirety and the new Section 5(b), attached hereto as
Exhibit Z, is inserted in its place.
---------

3. The amendment of the certificate of incorporation herein certified was
duly adopted in accordance with the applicable provisions of Sections
242 and 228 of the General Corporation Law of the State of Delaware.
In lieu of a meeting and vote of the stockholders, the holders of the
necessary number of shares of the Corporation's capital stock have
given written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State
of Delaware, and said written consent was filed with the Corporation
and notice thereof has been given to those stockholders who have not
consented in writing.

Signed this 20th day of February, 1998.

CURAGEN CORPORATION

By: /s/ Jonathan M. Rothberg
--------------------------------------
Jonathan M. Rothberg, Ph.D.
Chief Executive Officer, President
and Chairman of the Board
<PAGE>

EXHIBIT X
---------

(b) Automatic Conversion. (i) All outstanding shares of Series A
--------------------
Preferred Stock shall be deemed automatically converted into such number of
shares of Common Stock as are determined in accordance with Section 5(a) hereof
immediately upon the closing of a firm commitment underwritten public offering
of the Common Stock of the Company pursuant to a registration statement filed
with and declared effective on or before July 31, 1998 by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, other than a
registration statement relating solely to a transaction under Rule 145 under
such Act (or any successor thereto), or an employee benefit plan of the Company,
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Company or its
transfer agent.

(ii) All outstanding shares of Series A Preferred Stock shall be deemed
automatically converted into such number of shares of Common Stock as are
determined in accordance with Section 5(a) hereof immediately upon the closing
of a firm commitment underwritten public offering of the Common Stock of the
Company pursuant to a registration statement filed with and declared effective
after July 31, 1998 by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, other than a registration statement relating
solely to a transaction under Rule 145 under such Act (or any successor
thereto), or an employee benefit plan of the Company, at a public offering price
(prior to underwriting discounts and expenses) of $12.00 per share of Common
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares), in which the aggregate proceeds to the Company shall be at
least $10,000,000 (after deductions for underwriting discounts, other related
compensation and expenses relating to issuances, including, without limitation,
fees of the Company's counsel), without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent.

(iii) Upon such conversion, the holders of certificates representing shares
of Series A Preferred Stock shall, upon notice from the Company, surrender such
certificates at the principal office of the Company or its transfer agent for
the Common Stock. As soon as practicable thereafter, there shall be issued and
delivered to such holder a certificate or certificates for the number of shares
of Common Stock into which the shares of Series A Preferred Stock represented by
the certificate so surrendered were converted. The Company shall not be
obligated to issue such certificates unless certificates evidencing the shares
of Series A Preferred Stock so converted are either delivered to the Company or
any such transfer agent, or the holder notifies the Company that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. All rights with respect to the Series A Preferred
Stock so converted (other than the right to receive declared but unpaid
dividends), including, but not limited to, the right to vote shares of Series A
Preferred Stock, will terminate as of the date of their automatic conversion.

2
<PAGE>

EXHIBIT Y
---------

(b) Automatic Conversion. (i) All outstanding shares of Series C
--------------------
Preferred Stock shall be deemed automatically converted into such number of
shares of Common Stock as are determined in accordance with Section 5(a) hereof
immediately upon the closing of a firm commitment underwritten public offering
of the Common Stock of the Company pursuant to a registration statement filed
with and declared effective on or before July 31, 1998 by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, other than a
registration statement relating solely to a transaction under Rule 145 under
such Act (or any successor thereto), or an employee benefit plan of the Company,
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Company or its
transfer agent.

(ii) All outstanding shares of Series C Preferred Stock shall be deemed
automatically converted into such number of shares of Common Stock as are
determined in accordance with Section 5(a) hereof immediately upon the closing
of a firm commitment underwritten public offering of the Common Stock of the
Company pursuant to a registration statement filed with and declared effective
after July 31, 1998 by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, other than a registration statement relating
solely to a transaction under Rule 145 under such Act (or any successor
thereto), or an employee benefit plan of the Company, at a public offering price
(prior to underwriting discounts and expenses) of $12.00 per share of Common
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares), in which the aggregate proceeds to the Company shall be at
least $10,000,000 (after deductions for underwriting discounts, other related
compensation and expenses relating to issuances, including, without limitation,
fees of the Company's counsel), without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent.

(iii) Upon such conversion, the holders of certificates representing
shares of Series C Preferred Stock shall, upon notice from the Company,
surrender such certificates at the principal office of the Company or its
transfer agent for the Common Stock. As soon as practicable thereafter, there
shall be issued and delivered to such holder a certificate or certificates for
the number of shares of Common Stock into which the shares of Series C Preferred
Stock represented by the certificate so surrendered were converted. The Company
shall not be obligated to issue such certificates unless certificates evidencing
the shares of Series C Preferred Stock so converted are either delivered to the
Company or any such transfer agent, or the holder notifies the Company that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. All rights with respect to the Series C Preferred
Stock so converted (other than the right to receive declared but unpaid
dividends), including, but not limited to, the right to vote shares of Series C
Preferred Stock, will terminate as of the date of their automatic conversion.

3
<PAGE>

EXHIBIT Z
---------

(b) Automatic Conversion. (i) All outstanding shares of Series D
--------------------
Preferred Stock shall be deemed automatically converted into such number of
shares of Common Stock as are determined in accordance with Section 5(a) hereof
immediately upon the closing of a firm commitment underwritten public offering
of the Common Stock of the Company pursuant to a registration statement filed
with and declared effective on or before July 31, 1998 by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, other than a
registration statement relating solely to a transaction under Rule 145 under
such Act (or any successor thereto), or an employee benefit plan of the Company,
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Company or its
transfer agent.

(ii) All outstanding shares of Series D Preferred Stock shall be deemed
automatically converted into such number of shares of Common Stock as are
determined in accordance with Section 5(a) hereof immediately upon the closing
of a firm commitment underwritten public offering of the Common Stock of the
Company pursuant to a registration statement filed with and declared effective
after July 31, 1998 by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, other than a registration statement relating
solely to a transaction under Rule 145 under such Act (or any successor
thereto), or an employee benefit plan of the Company, at a public offering price
(prior to underwriting discounts and expenses) of $12.00 per share of Common
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares), in which the aggregate proceeds to the Company shall be at
least $10,000,000 (after deductions for underwriting discounts, other related
compensation and expenses relating to issuances, including, without limitation,
fees of the Company's counsel), without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent.

(iii) Upon such conversion, the holders of certificates representing shares
of Series D Preferred Stock shall, upon notice from the Company, surrender such
certificates at the principal office of the Company or its transfer agent for
the Common Stock. As soon as practicable thereafter, there shall be issued and
delivered to such holder a certificate or certificates for the number of shares
of Common Stock into which the shares of Series D Preferred Stock represented by
the certificate so surrendered were converted. The Company shall not be
obligated to issue such certificates unless certificates evidencing the shares
of Series D Preferred Stock so converted are either delivered to the Company or
any such transfer agent, or the holder notifies the Company that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. All rights with respect to the Series D Preferred
Stock so converted (other than the right to receive declared but unpaid
dividends), including, but not limited to, the right to vote shares of Series D
Preferred Stock, will terminate as of the date of their automatic conversion.

4
<PAGE>

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION, PREFERENCES, AND
RIGHTS OF SERIES E PREFERRED STOCK
OF
CURAGEN CORPORATION

It is hereby certified that:

1. The name of the corporation (hereinafter called the "Company") is
CuraGen Corporation.

2. The Certificate of Designation, Preferences and Rights of Series E
Preferred Stock of the Company, filed with the Delaware Secretary of
State on June 25, 1997, is hereby amended by deleting in its entirety
Section 5(b) thereof and substituting the following new Section 5(b)
in lieu thereof:

"(b) Automatic Conversion. (i) All outstanding shares of
--------------------
Series E Preferred Stock shall be deemed automatically converted into
such number of shares of Common Stock as are determined in accordance
with Section 5(a) hereof immediately upon the closing of a firm
commitment underwritten public offering of the Common Stock of the
Company pursuant to a registration statement filed with and declared
effective on or before July 31, 1998 by the Securities and
Exchange Commission under the Securities Act of 1933, as amended,
other than a registration statement relating solely to a transaction
under Rule 145 under such Act (or any successor thereto), or an
employee benefit plan of the Company, without any further action by
the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its
transfer agent.

(ii) All outstanding shares of Series E Preferred Stock shall be
deemed automatically converted into such number of shares of Common
Stock as are determined in accordance with Section 5(a) hereof
immediately upon the closing of a firm commitment underwritten public
offering of the Common Stock of the Company pursuant to a registration
statement filed with and declared effective after July 31, 1998 by
the Securities and Exchange Commission under the Securities Act of
1933, as amended, other than a registration statement relating solely
to a transaction under Rule 145 under such Act (or any successor
thereto), or an employee benefit plan of the Company, at a public
offering price (prior to underwriting discounts and expenses) of
$12.00 per share of Common Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares), in which the
aggregate proceeds to the Company shall be at least $10,000,000 (after
deductions for underwriting discounts, other related compensation and
expenses relating to issuances, including, without limitation, fees of
the Company's counsel), without any further action by the holders of
such shares and whether or not the certificates representing such
shares are surrendered to the Company or its transfer agent.

(iii) Upon such conversion, the holders of certificates
representing shares of Series E Preferred Stock shall, upon notice
from the Company, surrender such certificates at the principal office
of the Company or its transfer agent for the Common Stock. As soon as
practicable thereafter, there shall be issued and delivered to such
holder a certificate or certificates for the number of shares of
Common Stock into which the shares of Series E Preferred Stock
represented by the
<PAGE>

certificate so surrendered were converted. The Company shall not be
obligated to issue such certificates unless certificates evidencing
the shares of Series E Preferred Stock so converted are either
delivered to the Company or any such transfer agent, or the holder
notifies the Company that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection
therewith. All rights with respect to the Series E Preferred Stock so
converted (other than the right to receive declared but unpaid
dividends), including, but not limited to, the right to vote shares of
Series E Preferred Stock, will terminate as of the date of their
automatic conversion."

3. The Amendment of the Certificate of Designation herein certified was
duly adopted in accordance with the applicable provisions of Sections
242 and 228 of the General Corporation Law of the State of Delaware.
In lieu of a meeting and vote of the stockholders, the holders of the
necessary number of shares of the Corporation's capital stock have
given written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State
of Delaware, and said written consent was filed with the Corporation
and notice thereof has been given to those stockholders who have not
consented in writing.

Signed this 20th day of February, 1998.

CURAGEN CORPORATION

By: /s/ Jonathan M. Rothberg
-----------------------------------
Jonathan M. Rothberg, Ph.D.
Chief Executive Officer, President
and Chairman of the Board

-2-

<PAGE>

EXHIBIT 11.1

SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
Net loss Attributable to
Common Stockholders.................... $(1,088,605) $ (606,241) $(7,290,434)
=========== ========== ===========
Weighted Average Number of Shares
Outstanding During the Period.......... 4,915,087 5,097,073 5,364,505
Assumed Conversion of Series A, C, D & E
Preferred Shares to Common Shares(1)... -- -- 2,523,878
----------- ---------- -----------
4,915,087 5,097,073 7,888,383
=========== ========== ===========
Net Loss Per Share Attributable to
Common Stockholders.................... $ (0.22) $ (0.12) $ (0.92)
=========== ========== ===========
</TABLE>
- --------
(1) In connection with the initial public offering Series A, C, D and E
Preferred Shares will automatically convert to common stock on a one for
one basis. The additive shares reflect such conversion had the conversion

occurred during the year ended December 31, 1997.

<PAGE>

EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 6 to the Registration Statement
of CuraGen Corporation on Form S-1 of our report dated February 13, 1998
(February 20, 1998 as to Note 10), appearing in the Prospectus, which is part
of this Registration Statement. We also consent to the reference to us under
the headings "Experts" and "Selected Financial Data" in such Prospectus.

DELOITTE & TOUCHE LLP

/S/ DELOITTE & TOUCHE LLP

Hartford, Connecticut

February 27, 1998

<PAGE>

EXHIBIT 23.3

CONSENT OF PENNIE & EDMONDS LLP

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-1 and related Prospectus of CuraGen
Corporation.

/s/ Pennie & Edmonds LLP
PENNIE & EDMONDS LLP

New York, New York

February 27, 1998

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CURAGEN
CORPORATION DECEMBER 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 17,417,161
<SECURITIES> 0
<RECEIVABLES> 588,314
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,260,089
<PP&E> 8,656,032
<DEPRECIATION> (1,735,836)
<TOTAL-ASSETS> 26,519,029
<CURRENT-LIABILITIES> 4,521,417
<BONDS> 0
0
1,459,196
<COMMON> 85,801
<OTHER-SE> 12,137,178
<TOTAL-LIABILITY-AND-EQUITY> 26,519,029
<SALES> 0
<TOTAL-REVENUES> 5,896,543
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,742,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 684,537
<INCOME-PRETAX> (7,222,010)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,222,010)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,222,010)
<EPS-PRIMARY> (.92)
<EPS-DILUTED> (.92)

</TABLE>