CYTOGEN CORP, 10-K, 2000-03-28

CYTOGEN CORP
10-K, 2000-03-28
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1999

[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from __________ to __________

Commission file number 333-02015

CYTOGEN CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 22-2322400
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

600 College Road East, CN5308, Princeton, New Jersey 08540-5308
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(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (609) 750-8200.

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value
-----------------------------------
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___.
---

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the registrant's shares of common stock
held by non-affiliates of the registrant on February 14, 2000, based on $13.438
per share, the last reported sale price on the NASDAQ National Market on that
date, was $823 million. The determination of affiliate status for this purpose
is not necessarily a conclusive determination for other purposes.

The number of shares of Common Stock outstanding as of February 14, 2000 was
70,811,959 shares.
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DOCUMENTS INCORPORATED BY REFERENCE

Form 10K
Document Part
-------- --------

Portions of the definitive Proxy Statement with respect to III
the 2000 Annual Meeting of Stockholders (hereinafter
referred to as the "Proxy Statement") to be filed by Cytogen
Corporation with the Commission, but specifically excluding
the sections titled "Compensation Committee Report on
Executive Compensation" and "Performance Graph", which shall
not be deemed to be incorporated by reference herein.

2
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PART I

Item 1. Business

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Business

OVERVIEW

Cytogen is an established biopharmaceutical company with two principal lines of
business, proteomics and oncology. We are extending our expertise in antibodies
and molecular recognition to the development of new products and a proteomics-
driven drug discovery platform. We have established a pipeline of product
candidates based upon our proprietary antibody and prostate specific membrane
antigen, or PSMA, technologies. We are also developing a proprietary protein
pathway database as a drug discovery and development tool for the
pharmaceutical and biotechnology industries.

Our cancer management franchise currently comprises three marketed FDA-approved
products: ProstaScint, used to image the extent and spread of prostate cancer;
OncoScint CR/OV, marketed as a diagnostic imaging agent for colorectal and
ovarian cancer and Quadramet, marketed for the relief of cancer-related bone
pain. We are extending our cancer pipeline by exploiting PSMA, which we
exclusively licensed from Memorial Sloan-Kettering Cancer Center. PSMA is a
unique antigen highly expressed in prostate cancer cells and in the
neovasculature of a variety of other solid tumors, including breast, lung and
colon. We are developing our PSMA technology as part of our approach to
offering a full range of prostate cancer management products and services
throughout the progression of the disease, including gene-based immunotherapy
vaccines, antibody-delivered therapeutic compounds and novel assays for
detection of primary prostate cancer. We also plan to apply our PSMA
technology, including therapeutics and in vitro diagnostics, toward other types
of cancer based upon our experience in prostate cancer. Our in vivo
immunotherapeutic development program is being conducted in collaboration with
Progenics Pharmaceuticals, Inc.

Proteomics is the study of the expression and interaction of proteins. Genomics
is the study and identification of an organism's genetic makeup. While genomics
provides important information regarding genetic makeup, it does not directly
provide information regarding protein functions or protein interactions.
However, genomics data can prove useful in proteomics research as a source of
obtaining complete protein sequences of ligands we have identified. Public
availability of this genomics information allows for effective integration in
our database of public and proprietary information. We recognized in our past
research that the key to understanding or developing the means to intervene in
diseases was primarily based on understanding protein interactions rather than
only through the use or study of genomics. We undertook this approach on our
own initiative and with our own funds. Our proteomics program, under
development by our subsidiary, AxCell Biosciences Corporation, is focused on
the identification of protein interaction and signaling pathways within cells
as relating to disease processes.

We utilize our proprietary proteomics technology to map selective protein-
protein interactions and to develop a database, called the Inter-Functional
Proteomic Database, or IFP Database, which includes data relating to protein
signaling pathways linked to a variety of other bioinformatic data. The IFP
Database is designed to permit customers to integrate existing databases, both
public and proprietary, with our proprietary data to create a "virtual
laboratory' on the computer desktop of researchers involved in drug discovery.
We believe this database has significant potential commercial value to the
pharmaceutical and biotechnology industries as a means of expediting drug
target identification, validation, screen development and lead compound
optimization faster and cheaper than with current methodologies. These
proprietary technologies are designed to provide a platform from which we can
quickly and cost-effectively determine protein-protein interactions and build
pathways of intracellular signaling data. Our IFP Database also offers a
consolidated platform to enable statistical and mathematical modeling of
complex protein pathways.

PROTEOMICS

We are developing a proprietary protein pathway database called the Inter-
Functional Proteomic Database, or IFP Database, as a discovery and development
tool for subscribers in the pharmaceutical and biotechnology industries. Our
bioinformatics platform is designed to identify drug targets for optimization
and development, through the application of our novel, innovative and rapid
techniques for deriving intracellular protein-pathway data. We are designing
the IFP Database, with our partner InforMax, Inc., to permit use of the
Internet to integrate our information with a customer's proprietary data and
other information, including public genomics data.

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Our technology potentially shortens the drug discovery process by providing
efficacy and potential toxicity information while utilizing existing high-
throughput screening instrumentation. We believe that using the IFP Database
may permit pharmaceutical and biotechnology companies to validate protein
targets for drug discovery faster and cheaper than with current methodologies.
In addition, we believe that the development of the database will continue to
lead to the identification of novel proteins that we may develop exclusively or
with partners. We plan to offer customers multi-year subscriptions to the IFP
Database. We also plan to chart increasingly greater portions of the proteome
and add these results to the IFP Database. Additionally, we will price our
subscriptions in relation to the amount and quality of information that the IFP
Database provides, thus allowing us to scale our price structure as the
database grows.

Drug discovery
The traditional drug discovery process involves testing or screening compounds
in disease models. Researchers often engage in the process with little
knowledge of the intracellular processes underlying the disease or the specific
drug target within the cell. Thus, companies must screen a very large number of
arbitrarily selected compounds to obtain a desired change in a disease model.
While this approach sometimes produces drugs successfully, we believe it has
the following limitations:

.inefficiency: it is capital intensive and time consuming in identifying and
validating targets;

.low productivity: it yields relatively few new drug candidates;

.lack of information: it provides little information about the intracellular
processes or targets, to guide target selection and subsequent drug
development; and

.risk of side effects: it often results in drug candidates with a risk of
serious side effects.

In an effort to overcome some of the difficulties associated with traditional
drug discovery, scientists have turned to genomics as a means of better
understanding the roots of disease. Scientists believed that a comprehensive
knowledge of an organism's genetic makeup would lead to more efficient drug
discovery. While useful, DNA sequence analysis alone does not lead efficiently
to new target identification, because one cannot easily infer the functions of
gene products, or proteins, and protein pathways from DNA sequence.

Proteomic technologies offer significant opportunities to improve the drug
discovery process. By focusing on protein activity levels, or expression
levels, researchers are able to learn more about the role proteins play in
causing and treating disease. Proteomics also aids in deciphering the
mechanisms of disease and increasing both the opportunity to develop drugs with
reduced side effects and an increased probability of clinical trial success. We
believe proteomics has the potential to increase substantially the number of
drug targets and thereby the number of new drugs.

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The current environment
The drive to understand basic biological mechanisms has led to two distinct,
yet related, approaches to the study of molecular biology, genomics and
proteomics. Genomics is the study and identification of an organism's genetic
makeup. Proteomics is the study of protein expression and protein interaction
within cells.

[Genomics to Proteomics Flowchart]

As seen above, drug discovery research has undergone a transition from emphasis
on structural genomics, to functional genomics, to structural proteomics and
finally to functional proteomics.

The two main components of genomics research are structural and functional. The
structural effort is comprised of identifying gene sequences and identifying
gene variants. This research has primarily been approached through the use of
DNA sequencing, gene mapping and positional cloning. Identification of gene
sequence does not lead directly to targets for drug discovery but does give
information that is useful to functional genomics and proteomics.
Identification of gene variants can lead to targets for drug discovery, but for
the most part they lead to pathways associated with disease. Some of the
protein components of those pathways are the ultimate targets for drug
discovery.

The functional study of genomics consists primarily of gene expression. The
genes expressed in normal and diseased tissue differ, and gene expression
techniques can comprehensively distinguish between the two. Gene expression has
been studied using gel-based and chip-based technologies. Although the genes
expressed lead to potential targets in the proteins for which they code, there
are several limitations to consider:

.there may be no correlation between gene expression and protein production;

.interactions between proteins cannot be predicted; and

.gene expression cannot account for changes to the protein once the protein has
been created.

Due to these limitations, gene expression cannot give a full explanation of the
biological function of proteins within cells.

Proteomics research efforts can also be categorized as structural and
functional. Structural proteomics, or protein expression, measures the number
and types of proteins existent in normal and diseased cells. Two-dimensional
gel electrophoresis and mass spectrometry are the primary tools used in protein
expression analysis. This approach is useful in defining the structure of
proteins in a cell. Some of these proteins may be targets for drug discovery.
However, the role of the protein in the disease is still not defined.

Functional proteomics is the study of proteins' biological activities. An
important function of proteins is the transmission of signals using intricate
pathways populated by proteins which interact with one another. Understanding
the role proteins play in these signaling pathways allows a better
understanding of their function in cellular behavior. Aberrations in the
interaction of proteins with one another are at the heart of the molecular
basis of many diseases. We believe analysis of protein pathways will identify
those proteins that play a role in causing or preventing disease. Our
proteomics business is focused upon this area.

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The most widely used method for studying protein interactions is the yeast two-
hybrid system. We believe that this method has numerous limitations. We have
developed a different, and proprietary approach to the study of functional
proteomics.

<TABLE>
<S> <C>
The two-hybrid system Our system
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The rate of the throughput of We will be measuring 200,000 interactions
the yeast two-hybrid systems has per month and anticipate charting signaling
been improved; however, the pathways in the human proteome in 2 to 4
methodology does not reach the years.
throughput of our technology.
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The results of the yeast two- Results are passed through a series of
hybrid method may be misleading, bioinformatic filters, such as affinity and
because the interactions tissue expression, to better determine
determined using this method are biologically significant interactions.
not always present in human
cells.
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Researchers must possess Knowledge of a protein's role in a
knowledge about a protein's role signaling pathway is determined through the
in a signaling pathway prior to application of our system.
using this system.
</TABLE>

We believe our approach to detecting protein pathways has the following
distinct advantages compared to the yeast two-hybrid system: simplicity, higher
throughput data generation, direct protein interaction measurement, fewer false
positives, rapid formatting of high-throughput screening assays and
identification of specific ligands, which provide a starting point for rational
drug design.

[Graphic of Drug Discovery and Development Process]

We believe that target identification may be facilitated by the use of the IFP
Database. We anticipate the IFP Database will allow identification of disease-
related alterations in protein pathways by comparing protein pathways in cells
and tissues associated with a disease model with pathways in normal tissue. We
believe that this technology will enable researchers to identify more
efficiently potential targets.

We are developing high-throughput screens for drug development in cases where
targets are proprietary to us. Customers may license these targets and receive
the components necessary for a high-throughput screen.

Finally, we believe that we can accelerate lead compound optimization through
the supply of related protein-component family members, or protein arrays. We
believe that these protein arrays contain the proteins with which a researcher
can test a lead compound for cross-protein interaction. Such cross-protein
interactions may represent the side effects which the lead compound might
invoke. We believe that modifications of the structure of the lead compound
followed by further testing with the target array will lead to more efficient
lead compound optimization.

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Background
Our founding technology was based on an understanding of the principles of the
binding, or molecular recognition, of antibodies to antigens. Through a
sponsored research program at the University of North Carolina at Chapel Hill,
coupled with our internal research, we studied the interactions between peptide
ligands and proteins. This research led to a better understanding of protein-
protein interactions, and ultimately to proprietary methods for identifying and
quantifying such interactions. We have an established portfolio of patents and
patent applications based on inventions generated both internally and at the
University of North Carolina at Chapel Hill, relating to methods for
identification of proteins which interact in cellular pathways, and the
compositions of such proteins. Certain patents and patent applications filed on
behalf of the University of North Carolina at Chapel Hill are the subject of a
worldwide, exclusive license to us. We established AxCell Biosciences
Corporation as a subsidiary to exploit the commercial potential of this
proprietary platform technology in the area of proteomics.

Our technology
We have developed several integrated, high-throughput technologies designed to
determine protein pathways quickly and cost effectively. The identification of
protein pathways is a critical step in drug discovery.

[TECHNOLOGY FLOW CHART]

As part of functional signaling pathways, protein interaction is mediated
through binding of a ligand sequence on one protein and a domain on another -
similar to the relationship between a lock and a key. Domains are functional
portions of proteins where the actual interaction occurs with another protein.
Ligands are the regions of the other proteins that interact with the domains.

As seen in the above illustration, we identify domain-ligand interactions
through the use of proprietary phage display libraries. The process begins with
a domain from a known protein family. A library of peptides, which are short
sequences of amino acids (the building blocks of proteins), is exposed to this
domain to identify those peptides that act as ligands and have binding affinity
to the domain. (Step 1)

We then use these ligands as probes to find other proteins that contain a
domain which exhibits affinity to the ligands. This technique identifies the
complete family of domains that interacts with a set of ligands. (Step 2) Once
a set of ligands and domains are identified, we measure the strength of
affinity between each domain and ligand. (Step 3) These steps are repeated with
all signaling domains and their corresponding ligands. This approach allows us
to create the IFP Database of ligand-domain binding interactions and thus
establish a functional relationship between the set of ligands and domains.
(Step 4)

Using this database and computational methods, or bioinformatics, we define the
rules of interaction between domains and ligands. Using bioinformatic analyses,
each interacting protein can be identified, and through ligand-domain pairing
biological pathways can be constructed. (Step 5)

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Analyses of the aberrations in the interaction of proteins with one another can
then be studied to identify those proteins that play a role in causing or
preventing disease and can be targeted for drug development. (Step 6)

Proprietary algorithm development
Through the use of our platform technologies described above and the data
generated with them, we plan to develop proprietary modeling and
characterization algorithms. Our IFP Database will contain comprehensive
protein interaction and pathway data that we believe will allow the modeling
and characterization of ligands using connections to the corresponding domains.
We also plan to develop pathway models using the data in our IFP Database.
These models will be made available as tools within the IFP Database to our
subscription customers.

Our products
We use our proprietary proteomic technology to offer pharmaceutical companies
the following products and services:

IFP Database
The Inter-Functional Proteomic Database, or IFP Database, is designed to offer
customers the opportunity to evaluate many proteins at once by overlaying
protein pathway data with other bioinformatic information in a user friendly
format. Users will be able to visualize and correlate protein pathway data with
all sequence, expression, tissue distribution, structural and bibliographic
information that exists for that particular protein and pathway. The IFP
Database can also be used to generate protein pathway information according to
a customer's needs or interests. The end result is that companies can evaluate
a large number of targets and rationally select a subset with which they can
advance to experimentation. This database is also designed to allow a
researcher to define the best point for intervention in a protein pathway to
maximize beneficial pharmacological effects while minimizing potential
toxicity.

We established a collaboration with InforMax, Inc., a privately held
bioinformatics provider. InforMax is a leader in the development of
bioinformatics software for accelerated drug discovery and has a proven track
record in software development. We are jointly designing an interface for the
IFP Database that will be integrated with InforMax's GenoMax(TM) product.
GenoMax is a bioinformatics system that offers high-speed analysis of both
public and proprietary genetic databases within the security of a corporate
firewall. This system is designed to allow the subscriber to evaluate data in
the IFP Database, while accessing other public and private databases. We are
also developing an application programming interface for the IFP Database, to
permit integration with other bioinformatics platforms, including those
developed by the customers themselves. By taking advantage of an existing
bioinformatic platform, we plan to concentrate our efforts on the development
of tools specific to protein pathway data. InforMax will also lead in marketing
the IFP Database.

We plan to chart the entire human proteome of intracellular protein signaling
pathways. Our existing robotics systems are designed to permit generation of
approximately 200,000 data points per month. We expect to reach this level of
data generation by mid-year 2000. We believe we can map the signaling pathways
in the entire human proteome in a four-year time period based upon our existing
robotics systems. We also believe that with additional resources, we could
accelerate computation of this project to a two-to-four-year time period. We
intend to sell multi-year subscriptions to pharmaceutical and biotechnology
companies, pricing the product according to the depth and breadth of
information it contains.

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Novel Protein Targets
We view proteins by their modular building blocks or domains. Every signaling
protein can be defined by its domain composition and this composition can be
compared to known proteins to determine if a protein is a novel composition of
matter. The figure below gives an example of a known protein, which consists of
two domain 1s and one domain 2. Also shown are several novel proteins, such as
Novel 2, which is made up of five domain Cs. Since we are measuring domain-
ligand interactions, we not only define the protein but have knowledge of the
protein's function. This method of defining proteins has been used by us in a
successful composition of matter patent around novel WW-domain-containing
proteins.

[Graphic of Modular View of Proteins]

In the course of identifying pathways to create the IFP Database, we are
discovering and, where appropriate, filing patent applications on novel
proteins. We believe that some of these proprietary proteins will be important
biological targets. In these instances, we will offer those targets to our
customers for licensing fees, milestone payments and royalty payments.

Protein Arrays
We plan to sell defined sets of known protein families, or protein arrays, for
use in lead optimization. The signaling proteins in our IFP Database are
organized based on their domains. Domains are interaction modules, or defined
structural regions on proteins, which are the sites of specific interaction
between one protein and another. These domains are the parts of signaling
proteins where a drug may interact and alter a pathway. There are estimated to
be 30 to 60 domain families in signaling pathways. Each family may have 100 to
300 members. Customers who identify potential targets in the IFP Database based
on a specific interaction involving a particular domain will need that physical
protein for screening. They will also need the other family members which have
that domain in common. The relative degrees of binding to these other family
members represent the toxicity and possible side effects of a drug candidate.

Marketing
We intend to market our IFP Database, novel protein targets and protein arrays
to pharmaceutical and biotechnology companies. InforMax will take the lead in
marketing our IFP Database in conjunction with their enterprise bioinformatics
software, GenoMax. InforMax currently has 15,000 licenses at over 850
organizations worldwide for their desktop software and they have used this
desktop software market strength to establish themselves in the bioinformatics
enterprise software market. InforMax has nine current GenoMax installations and
expects to double the number by the end of the calendar year. They have
established relationships with major pharmaceutical and biotechnology companies
as well as with leading universities conducting life science research.

We plan to market the IFP Database as multi-year subscriptions allowing access
to our IFP Database inside the customers' corporate firewall. This subscription
delivery is facilitated using InforMax's GenoMax product. These subscriptions
may include collaborative bioinformatics research projects to analyze specific
pathways as requested by a customer. Such collaborations would typically
provide additional revenues, and could also include milestone payments and
royalty-based revenues from any products emerging from the collaborative
research and developed by our partner.

Initially, we plan to enroll subscribers who are interested in early access to
the database. These early subscribers will have the opportunity to provide
direction on both the disease areas of research and the computational aspects
of the database that are relative to their internal research areas. As the
amount of information in the IFP Database increases, we plan to offer
subscriptions broadly and to increase the price of a subscription.

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Our proteomics patents and proprietary rights position
We will market protein targets under arrangements that we anticipate would
include licensing fees, milestone payments and royalty payments as our
customers develop products based on these targets. We plan to market protein
arrays under a license for use structure and, where possible, obtain
commitments for milestone payments and royalty-based payments if the arrays
contain novel protein targets proprietary to us.

We intend to pursue aggressively patent production for novel synthetic peptides
and novel naturally occurring polypeptides that we identify as binding to
ligands of interest, as well as for products and methods relating to the use of
these polypeptides and their respective genes as possible drug targets in
screening assays. We also intend to seek patent protection for methods and
products relating to our data analysis procedures.

Among our patents are two issued U.S. patents relating to peptides that bind to
certain molecules expressed on cancer cells. We also co-own with the University
of North Carolina at Chapel Hill an issued U.S. patent covering certain
polypeptides that contain a WW domain.

Our strategy
We intend to be a premier provider of proteomic systems and services that
enable our customers to analyze genomic and proteomic data, understand
biochemical pathways and elucidate the mechanisms of disease for optimal drug
selection. Key elements of our proteomics strategy include:

.becoming the leading company to market a comprehensive database of information
relating to the human proteome;

.developing an expansive and proprietary database of signaling pathways within
the human proteome;

.establishing a position as the leading company in providing protein-protein
interaction to the pharmaceutical, and other industries;

.developing a strong intellectual property position with respect to novel
protein targets; and

.developing target arrays to be used for lead optimization.

Competition
We are subject to significant and increasing competition. Many companies
compete in the overall effort to understand the complex flow from gene
sequence, to transcription into messenger riboneucleic acid, to protein
expression and finally to biological activity. In addition, most major
pharmaceutical and biotechnology companies have some level of internal activity
and high interest in these areas.

The technology for analyzing the functions of proteins in the disease setting,
and for mapping interactions between proteins, is relatively new. This
technology is evolving rapidly and developments by competitors, including
potential customers, could make our technology obsolete. A number of companies
compete with our approach to analyzing the proteome, and others compete with
our technology for identification of novel proteins and use of proteins for
possible drug targets.

Of the several approaches used commercially to analyze the proteome, the main
direct competitor with our technology is the yeast two-hybrid system. Two
companies, Myriad Genetics, Inc. and CuraGen Corporation, use this method to
perform large-scale cataloguing of protein-protein interactions.

Strategic alliances

InforMax, Inc.
In September 1999, AxCell and InforMax, Inc. concluded an agreement to market
our IFP Database as part of an enterprise bioinformatics solution to the
pharmaceutical and biotechnology industries. The multi-year agreement provides
for technology development by InforMax to link our database to InforMax's
GenoMax, a new generation of molecular biology and genetics software.

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Compaq Computer Corporation
In December 1999, AxCell entered into a developer partnership with Compaq
Computer Corporation. This development program will be facilitated by Compaq's
proven Alpha architecture, high performance 64-bit systems that deliver speed
and scalability advantages. Under the agreement, Compaq has provided us with
hardware for the development of our proteomics database.

University of North Carolina
We sponsored research at, and are the exclusive licensee of certain patent and
patent applications and technology owned by the University of North Carolina at
Chapel Hill, covering the creation of long peptides that may fold to form
three-dimensional functional structures, and of libraries composed of these
peptides. The technology covered by this collaboration has been utilized, with
other technology we developed, in our proteomics program.

ONCOLOGY

Background
Cancer encompasses a large number of discrete diseases that afflict many
different parts of the human body. The diversity of cancer diseases and their
overall prevalence creates a large need for new and improved treatments. Cancer
is the second leading cause of death in the United States. It is estimated that
one in three Americans will be diagnosed with cancer. The worldwide oncology
drug market was estimated at $16 billion in 1998, representing 15% growth from
1997. This market is not saturated: novel treatments often enjoy premium
pricing and rapid market acceptance. Fundamentals of the oncology market that
are particularly advantageous for us include:

.accelerated approval procedures adopted by the US Food and Drug Administration
to shorten the development process and review time for cancer drugs;

.in-licensing opportunities created by a trend among large pharmaceutical
companies to concentrate on products with larger market potential than most
anticancer drugs;

.favorable pricing and reimbursement for oncology drugs, with some novel agents
commanding $6,000 to $15,000 per course of therapy; and

.a highly concentrated population of oncologists, urologists and technicians
which we believe allows a small sales force to be effective.

We develop, commercialize and market products to improve the diagnosis and
treatment of cancer. We were founded based upon our knowledge of monoclonal
antibodies. Our research efforts in this area led to our marketed products. In
the development of our current products, we also developed expertise in
molecular recognition and in linking radioisotopes to carriers, including
antibodies, for diagnostic and therapeutic purposes. We also developed
expertise with nuclear imaging, including training of technicians and
physicians, utilized for diagnostic purposes. We have applied this knowledge
primarily in the field of prostate cancer, and for imaging/diagnostic agents
for colorectal and ovarian cancers. Our historical knowledge led to research
programs, both internally and in collaborations with academic and scientific
institutions, in which we gained additional knowledge about antibodies,
proteins, identification and synthesis of novel proteins, and antigens located
by those compounds. We plan to apply our experience, coupled with our
proprietary technology rights and developmental expertise, to build an oncology
business utilizing innovative techniques for an integrated approach in
intervention in the progression of disease. We have also established a sales
force, consisting of experienced salespersons and technical representatives. We
intend to use this sales force to sell current products and any products which
we develop or acquire.

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<TABLE>
<CAPTION>
Product Indication Status Development/Marketing
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<S> <C> <C> <C>
ProstaScint Diagnostic imaging Approved and marketed Cytogen (US & Canada)
agent for staging the in US. Regulatory
spread of prostate approval pending in
cancer Canada. European
filing targeted for
mid-2000.
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OncoScint CR/OV Diagnostic imaging Approved for sale in Cytogen (US and
agent for spread of eleven European Canada); CIS
colorectal and countries and Canada. biointernational
ovarian cancer Approved in US (Europe)
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Quadramet Relief of bone pain Approved in US and Berlex (US); Cytogen
from cancer spread to Canada (Canada)
the bone from primary
tumor
Treatment of Evaluating Phase I Berlex (US); Cytogen
Refractory Rheumatoid results has marketing rights
Arthritis in Canada, Europe,
Japan and certain
other countries
Treatment of disease Phase III Berlex (US); Cytogen
progression by use of (Canada)
Quadramet, prior to
onset of pain
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PSMA Development Immunotherapeutic Pre-clinical Developed by
product for cancer development Progenics; Cytogen to
vaccine utilizing market; Profit-
gene-based therapy sharing
Prostate cancer Pre-clinical Developed by
antibody- based development Progenics; Cytogen to
therapy market; Profit-
sharing
In vitro diagnostic Development of a Cytogen to market
tests for prostate trial assay
cancer
Ex vivo dendritic Phase I/II clinical Northwest
cell processing trials Biotherapeutics, Inc.
</TABLE>

Pipeline--PSMA technology
Prostate specific membrane antigen, or PSMA, is a transmembrane protein that
can be used as an important marker associated with prostate cancer. PSMA has
also been found to be present in new blood vessel formation associated with
other major solid tumors. It is overexpressed in primary prostate cancer, but
it is expressed most highly in the more aggressive forms of prostate cancer,
including those that do not express prostate specific antigen, or PSA, and
those that do not respond to hormone therapy. When PSMA was compared to various
PSA tests, the presence of PSMA was a more accurate guide of the extent of
cancer. However, there are currently no commercially available assays for PSMA.
Memorial Sloan-Kettering Cancer Center identified PSMA using a monoclonal
antibody supplied by us. A patent entitled "Prostate Specific Membrane Antigen"
was issued to Sloan-Kettering Institute for Cancer Research, an affiliate of
Memorial Sloan-Kettering Cancer Center, and we have the exclusive worldwide
license covering this technology. Subsequently, the antibody for PSMA was the
basis of our FDA-approved ProstaScint imaging product. We believe that
technology utilizing PSMA can yield novel products for the treatment and
diagnosis of cancer because of the unique characteristics of this antigen.

In 1999, Cytogen entered into a joint venture with Progenics Pharmaceuticals,
Inc. to develop in vivo immunotherapeutic products utilizing PSMA. The first of
these product candidates is a therapeutic prostate cancer vaccine utilizing the
PSMA gene and a vector delivery system as a basis of immune stimulation. Our
current plans are that this approach, if successful in pre-clinical
development, will proceed to human trials by early 2001. We are also developing
through this venture an antibody-based immunotherapy for prostate cancer. We
believe that these product candidates, if successfully developed, could play an
important role in

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the treatment of prostate cancer. We believe there are significant unmet needs
for treatment and monitoring of this disease. In addition, we intend to
evaluate the utility of these therapies, as an anti-angiogenesis approach, in
other cancers where PSMA is expressed.

The joint venture is owned equally by Progenics and us. We have exclusively
licensed to the joint venture certain immunotherapeutic applications of our
PSMA patents and know-how. Progenics will fund up to $3 million of development
costs of the program, which we anticipate will be adequate to fund the project
through the pre-clinical stage. We and Progenics will share costs of the
program in excess of the initial $3 million. Progenics is responsible for pre-
clinical and clinical development of product candidates. We have the exclusive
North American marketing rights to products developed by the venture and
anticipate marketing any products developed. We anticipate marketing these
products with our own sales force and will be reimbursed by the joint venture
for these costs. We will split the revenues minus marketing expenses equally
with Progenics on any products developed by the venture. In connection with the
licensing of the PSMA technology to the joint venture, we will receive $2
million in payments, of which $1 million was received during 1999, and the
balance will be received by the end of 2001. We have exclusively licensed in
vivo immunotherapy rights to PSMA to this joint venture.

We licensed PSMA through our subsidiary, Prostagen, Inc., to Northwest
Biotherapeutics, Inc., for development of in vitro dendritic cell processing
immunotherapy to prostate cancer. That license remains in effect. Prostagen
also licensed exclusive PSMA manufacturing rights for immunotherapy to
Northwest Clinicals, LLC, a corporation formed and co-owned by Northwest
Biotherapeutics and Prostagen. We are currently engaged in a dispute with
Northwest Biotherapeutics as to the extent of these rights and whether
Northwest Clinicals has complied with the terms of the license. If Northwest
Clinicals holds these manufacturing rights, we would be required to purchase
PSMA for immunotherapy products from this co-owned corporation. Certain rights
to exclusive marketing in our Progenics venture could be affected if we do not
obtain the ability to manufacture PSMA independently of Northwest Clinicals.
Our joint venture agreement with Progenics requires that we reacquire our PSMA
manufacturing rights by June 15, 2000, or the following will occur:

.Progenics will acquire co-exclusive marketing rights with us;

.we will be obligated to contribute an additional $500,000 to the joint venture
to fund research and development; and

.Progenics' research and development expense obligation will be reduced to $2.5
million.

In addition, we have agreed to indemnify each party to the joint venture for
all costs relating to our inability to require our PSMA manufacturing rights.
We are in negotiations with Northwest Clinicals to terminate the license,
however we cannot assure you that we will reacquire our PSMA marketing rights
and avoid the provisions described above.

We have also entered into a letter of intent to obtain an exclusive, world-wide
license from Molecular Staging, Inc. for technology to be used in developing in
vitro diagnostic tests using both PSMA and PSA. Molecular Staging's Rolling
Circle Amplification Technology is a novel, patented process that creates new
diagnostic opportunities. Rolling Circle Amplification Technology is a highly
sensitive, quantitative and efficient amplification method that allows the user
to detect the presence of target molecules in a wide array of testing formats.
It offers a practical method that allows solid phase recognition and detection
of target molecules either directly, on a cell or on a biochip. Our initial
goal is to deploy Molecular Staging's technology in a new diagnostic kit for
managing prostate cancer based on detection of PSMA. We anticipate initiating a
clinical trial of the assay this year. We also plan to develop assays for
diagnosis of other tumors where PSMA is found in associated neovasculature.

Market potential

Diagnostic Screening Tests
The measurement of prostate specific antigen, or PSA, levels in the circulation
is the only in vitro test approved for the diagnosis, monitoring and screening
of prostate cancer in the United States. The American Cancer Society, American
College of Radiology and American Urologic Association have recommended PSA for
use in screening of asymptomatic men, in combination with a digital rectal
examination. However, in 1997, the American College of Physicians concluded
that there was no evidence of benefit from routine screening using PSA and
recommended against regular screening using this test. The American Urologic
Association, which supports screening tests for eligible men over 50 years of
age, claims that PSA and digital

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rectal examination screening increases the rate of early cancer diagnosis from
30% to 40% for those not screened to 70% to 85% for those screened with PSA.
Even though a PSA test combined with a digital rectal exam increases the
chances of detection, the method generates a high number of false positives
that often lead to unnecessary biopsies. We believe new tests based on PSMA may
offer higher specificity in diagnosing primary and recurrent prostate cancer.

The US market for PSA tests is estimated to be approximately $170 million. This
estimate is based on the 1997 figures of the government Health Care Finance
Administration, where there were 7.5 million diagnostic tests performed plus
21.4 million screening PSA tests. In addition, approximately one million
biopsies are performed annually in the United States to confirm the presence of
prostate cancer following a screening. While normal ranges for PSA test values
have been established, significant inter-test variability exists and detection
of ultra-low levels of PSA which allows earlier diagnosis is not feasible with
current technology. Furthermore, the correlation of PSA values and prostatic
biopsy results has failed to achieve a level of predictability which avoids
unnecessary biopsies. A serum test for PSMA may provide more relevant
prognostic value and improve the accuracy of evaluating prostate cancer.

Immunotherapy/Vaccines
We are developing as part of our collaboration with Progenics,
immunotherapeutics for treatment of prostate cancer. We believe immunotherapy
is a particularly attractive alternative for the treatment of advanced prostate
cancer and for prevention of recurrent disease by eliminating metastases
because:

.advanced prostate cancer is a slow growing malignancy and, therefore, is not
effectively treated with high-intensity cytotoxic chemotherapy; and

.PSMA has been identified as an antigen linked to prostate cancer that may
serve as an excellent immunotherapy target.

We believe that there are approximately 80,000 to 100,000 men in the United
States who are at risk for recurrent disease or who have advanced prostate
cancer. We estimate that the potential market for a vaccine or antibody-based
treatment is greater than $500 million annually in the United States.

Our approved products
We have three marketed products, each of which have been approved by the FDA:
ProstaScint, used as an imaging agent in the diagnosis of prostate cancer;
OncoScint CR/OV, used as a diagnostic imaging agent of colorectal and ovarian
cancer; and Quadramet, used for relief of bone pain from cancer that has spread
to the bone from the primary tumor.

Cancer diagnostic imaging products
Our cancer diagnostic products, ProstaScint and OncoScint CR/OV, are monoclonal
antibody-based imaging agents for prostate, colorectal and ovarian cancers.
These products utilize our proprietary targeted delivery system, employing
whole monoclonal antibodies, which directs the radioisotope Indium/111/ to
malignant tumor sites. A radioisotope is an element which, because of nuclear
instability, undergoes radioactive decay and emits radiation. The imaging
products are supplied to hospitals, diagnostic imaging centers and
radiopharmacies.

During an imaging procedure, the radiolabeled monoclonal antibody product is
administered intravenously into the patient. The antibody travels through the
bloodstream and binds to specific antigens expressed by the tumors being
studied. The radioactivity from the isotope that has been attached to the
antibody can be detected from outside the body by a gamma camera. Gamma cameras
are universally found in all nuclear medicine departments. The image captured
by the camera identifies the existence, location and extent of the radio-
labelled pharmaceutical thus identifying the sites of tumor. Based on clinical
studies conducted to date by physicians on our behalf, the imaging agents may
provide new and useful information not available from other diagnostic
modalities regarding the existence, location and extent of a specific disease
throughout the body. We believe that this information has the potential to
affect the way physicians manage their patients' individual treatments.

ProstaScint
ProstaScint is a diagnostic monoclonal antibody linked to Indium/111/ which
specifically targets PSMA. Due to the selective expression of PSMA, the
ProstaScint imaging procedure can detect the extent and spread of

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prostate cancer in the body. ProstaScint is approved by the FDA for marketing
in two clinical settings: as a diagnostic imaging agent in newly diagnosed
patients with biopsy-proven prostate cancer thought to be clinically localized
after standard diagnostic evaluation and who are at high risk for spread of
their disease to pelvic lymph nodes and for use in post-prostatectomy patients
in whom there is a high suspicion that the cancer has recurred.

According to the American Cancer Society, about 179,000 American men were
diagnosed with prostate cancer in 1998, of whom approximately 20% are at high
risk for metastatic spread of their disease. In addition, estimates indicate
that in 1999, 40,000 to 60,000 patients previously treated for prostate cancer
developed symptoms of recurrent cancer which had not yet progressed to the
point of skeletal involvement. We believe that there are approximately 75,000
to 100,000 patients with prostate cancer in the United States who are
candidates, based on current indications, to receive a ProstaScint scan each
year. We believe that the potential market for ProstaScint is over $50 million
in the United States.

When deciding on an initial course of therapy for prostate cancer, physicians
must first determine the extent of disease in the patient. The accuracy of this
information is vital in deciding upon an appropriate course of therapy. Prior
to the availability of ProstaScint, determining whether newly diagnosed disease
was limited to the prostate or had spread beyond the gland was based upon
statistical inference from the biopsy appearance of the tumor and the patient's
serum level of PSA. Conventional imaging methods are all relatively insensitive
because they rely on identifying significant changes to normal anatomic
structure to indicate the presence of disease. The ProstaScint disease scan
images are based upon expression of the PSMA molecule and, therefore, can
identify disease not readily detectable with conventional procedures.

In the United States, following initial therapy, prostate cancer patients are
monitored to ascertain changes in the level of PSA. In this setting, a rise in
PSA is evidence of recurrence of the patient's prostate cancer. Knowledge of
the extent and location of disease recurrence is important in choosing the most
appropriate form of treatment. The National Comprehensive Cancer Network, a
consortium of leading cancer hospitals, recently included ProstaScint in its
Practice Guidelines for Prostate Cancer. These guidelines are published to
serve as the practice standard for the oncology community.

We also believe that ProstaScint may be useful for imaging the extent of
prostate cancer within the prostate gland. This information may be useful to
help guide specific treatments such as prostate brachytherapy or highly
targeted external beam radiation. Brachytherapy is a treatment which implants
radiation sources into the site of the tumor; while external beam radiation
utilizes a beam of radiation directed at the cancer from a source outside the
body. We estimate that approximately half of newly diagnosed prostate cancer
patients will undergo a form of radiation treatment. The current generation of
imaging technologies enables physicians to view ProstaScint scans incorporated
with conventional imaging modalities. We believe these technologies will create
greater acceptance of ProstaScint. There are no other agents approved for the
imaging and diagnosis of prostate cancer.

OncoScint CR/OV
OncoScint CR/OV is approved by the FDA for single use with other appropriate,
commercially available diagnostic tests, to locate malignancies outside the
liver in patients with known colorectal or ovarian cancer. OncoScint CR/OV is
also approved for sale in eleven European countries and Canada. To date,
OncoScint CR/OV has not realized substantial sales. We believe this product is
effective in imaging both primary and metastatic colorectal and ovarian tumors.
However, this product has not yet been widely adopted by physicians for
patients with these conditions. We market OncoScint CR/OV in the United States
directly through our own sales force. The market for OncoScint CR/OV for
colorectal cancer diagnosis has been negatively affected by positron emission
tomography, or "PET", scans. The sensitivity of the PET scan in colon cancer
appears to be similar or higher than the OncoScint CR/OV scan. However, PET
studies are very expensive and available only at highly specialized
institutions. We are emphasizing marketing of OncoScint CR/OV for the recurrent
ovarian setting as an aid in determining whether second look surgery, following
initial surgery, is advisable.

Cancer therapeutic product

Quadramet
Quadramet, a proprietary cancer therapeutic agent, is approved by the FDA for
the relief of pain in patients with metastatic bone lesions that image on
conventional bone scan, a routinely performed nuclear medicine

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procedure. Quadramet consists of a radioactive isotope, Samarium/153/, which
emits beta radiation, and a chelating agent, EDTMP, which targets the drug to
sites of new bone formation.

Once tumors have metastasized to the skeleton, they continue to grow and cause
destruction of the adjacent bone. This erosion of bone stimulates new bone
formation which encircles the metastatic tumor. By targeting these areas of
bone formation, Quadramet delivers site-specific radiation which may result in
significant pain reduction.

According to American Cancer Society and National Cancer Institute statistics,
approximately 600,000 new cases of cancer that typically metastasize to bone
occurred in the United States in 1997. We believe that over 200,000 patients
each year will suffer from bone pain that is severe enough to require
intervention. Based on this information, we believe that the market for
Quadramet is $80 million in the United States based on 20% of this patient
population.

Quadramet has many characteristics which we believe are advantageous for the
treatment of cancer bone pain, including early onset of pain relief, lasting up
to four months with a single injection; predictability of recovery from bone
marrow toxicity; ease of administration and length of pain relief. In addition,
due to its pharmacokinetic properties, the radioactive plasma half-life is only
five to six hours. Quadramet is administered as a single intravenous injection
on an outpatient basis and directly targets sites of new bone formation which
include those areas in the skeleton that have been invaded by metastatic
tumors. Quadramet exhibits high and very selective uptake in bone with little
or no detectable accumulation in soft tissue.

Berlex has initiated a Phase III clinical trial to evaluate the extension of
the use of Quadramet to patients whose bone metastases can be visualized on
conventional bone scan, but who are not yet experiencing pain from these
metastases. We believe earlier use in the care of cancer patients could expand
the potential market for Quadramet significantly. Our continuation of these
trials will depend upon their progress and success of the trial, and on
decisions by our marketing partner Berlex to continue to fund the trial. If
this trial is successful, we plan to seek expansion of the FDA approved
indication of Quadramet for this therapeutic use in delaying progression of the
onset of pain.

Current competitive treatments for severe bone cancer pain include narcotic
analgesics, external beam radiation therapy, Metastron and Novantrone.

The first non-cancer use of Quadramet under investigation is the treatment of
patients with refractory rheumatoid arthritis. We believe Quadramet can target
the diseased joints and provide a high but localized dose of radiation to the
area which may relieve the symptoms of refractory rheumatoid arthritis. We are
determining how to proceed with this possible use based upon analyzing the data
from a Phase I dose escalation study.

Our strategy
Our objective is to be a leading oncology drug discovery and development
company. We have and intend to continue to market, co-market or license our
oncology products in the future to become an oncology-focused specialty
biopharmaceutical company.

We believe that we are well positioned to create a strong oncology product
pipeline and we will be seeking, on an opportunistic basis, strategic
acquisitions that will complement our existing products.

The key elements of our oncology strategy are:

.to capitalize on the unique biological characteristics of PSMA for the
diagnosis and treatment of major cancers;

.greater penetration of existing oncology markets by pursuing an integrated
patient approach;

.expansion of product sales into new geographic markets;

.seeking new indications of our existing products;

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.leveraging our oncology and urology sales force by adding complementary
products through in-licensing, acquisitions or other marketing arrangements;
and

.reducing risk by developing a broad portfolio of products.

Oncology product sales, marketing and distribution
We currently employ a 24 person sales and marketing force with a targeted force
of 27 persons. The primary objective of the sales force is to make sales calls
to urologists and, as a secondary audience, to radiation oncologists. We also
employ technical specialists who assist in the training of nuclear medicine
technologists and nuclear medicine physicians, and qualify nuclear imaging
centers to conduct ProstaScint imaging. We depend on our own sales force for
our ProstaScint and OncoScint CR/OV products and on Berlex for US sales,
marketing and distribution of Quadramet. Distribution of ProstaScint and
OncoScint CR/OV is handled by outside contractors and Berlex and DuPont handle
the distribution of Quadramet.

Historically, ProstaScint has been marketed under a co-marketing arrangement
with the urological division of CR Bard, Inc., a marketer of a broad range of
urology products. In 1999, we reached an agreement with Bard to phase out the
co-marketing agreement so that we could undertake direct marketing
responsibility for the product. We took this step because of our view that a
highly trained and dedicated internal sales force will be able to market our
high technology products most effectively and to build a marketing capability
for possible future products. The transition will be complete by mid-year 2000.
In the meantime, Bard will continue to make sales calls for the product and
will assist in transition.

ProstaScint is a technique-dependent product that requires a high degree of
proficiency in nuclear imaging technology in order to interpret the scan. We
have established a network of accredited nuclear medicine imaging centers
through our PIE, or Partners in Excellence, Program. Each PIE site receives
rigorous training, undergoes proficiency testing and is subject to ongoing
quality assurance protocols. As of March 1, 2000, there were over three hundred
PIE sites, including a majority of the National Cancer Institute-designated
Comprehensive Cancer Centers. ProstaScint may only be used at PIE sites. We
plan to add PIE sites on a selective basis in order to ensure that new sites
are adequately qualified and committed to a minimum number of scans for
maintaining a high level of competence. At the present time, we bear partial
expense of qualification of each site.

In 1999, we reacquired rights to our ProstaScint and OncoScint CR/OV products
in Canada, which were to be marketed by Faulding (Canada), Inc. We did not pay
for the return of these rights. OncoScint CR/OV is approved by the Canadian
Health Care Branch and ProstaScint is under expedited review. We believe these
products may be marketed to major cancer centers in Canada and will not require
a significant level of resources. However, we cannot be certain that
ProstaScint will be approved in Canada, that these products will be
reimbursable under the Canadian health care system or reimbursed on favorable
economic terms, or that they will be accepted by physicians.

We plan to file applications for regulatory approval for ProstaScint in Europe
during 2000.

Since May 1994, we have been the sole marketer of OncoScint CR/OV in the US. We
also intend to market OncoScint CR/OV in Canada. In 1996, we entered into a
distribution agreement with CIS biointernational, granting to CIS
biointernational the exclusive right to distribute and sell OncoScint CR/OV
worldwide, except for in the United States and Canada.

In October 1998, we entered into an exclusive agreement with Berlex for the
marketing of Quadramet, after terminating our previous marketing relationship
with the DuPont Merck radiopharmaceutical division. Berlex re-launched
Quadramet in March 1999. Berlex maintains a sales force that targets its sales
efforts on the oncological community. Pursuant to our agreement with Berlex, we
are entitled to royalty payments based on net sales of the Quadramet product
and milestone payments based upon sales levels achieved.

During the first year of launch, Quadramet was marketed principally to the
nuclear medicine community, which administers the treatment to patients.
However, the treatment is more typically prescribed by caregiving physicians,
including medical oncologists, radiation oncologists and urologists. We believe
that successful commercialization of Quadramet will depend upon marketing to
these referring physicians.

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We plan to market Quadramet in Canada. We paid no costs to obtain these
marketing rights. We are evaluating whether to market Quadramet directly in
Canada or through a marketing partner.

We have no significant foreign revenues. Although we plan to sell our products
internationally, we cannot assure you that the products will be accepted by the
foreign medical community or that we will be able to sell at adequate prices.
We will incur expenses if we sell our products in foreign countries, and if our
products do not generate adequate revenues we may not be able to recover these
expenses or a significant return.

Strategic alliances

Progenics Pharmaceuticals, Inc.
In 1999, we entered a joint venture with Progenics Pharmaceuticals, Inc. to
develop products utilizing our proprietary PSMA technology. The first of these
products, currently under development, is a therapeutic prostate cancer vaccine
utilizing a gene-based approach. Our current plans are that this approach, if
successful in pre-clinical development, will proceed to human trials by early
2001. We are also developing through this venture antibody based immunotherapy
for prostate cancer. We believe that these drugs, if successfully developed,
could play an important role in the treatment or prevention of advanced
prostate cancer. We believe there are significant unmet needs for treatment of
this disease.

The Dow Chemical Company
In March 1993, we obtained an exclusive license from The Dow Chemical Company
to North American rights to use Quadramet as a therapeutic radiopharmaceutical
for metabolic bone disease or tumor regression for cancer caused by metastatic
or primary cancer in bone in humans, and for the treatment of disease
characterized by osteoblastic response in humans. In November 1998, Dow also
extended our exclusive rights for use of Quadramet in treating advanced
rheumatoid arthritis to Europe, Japan and other countries in addition to North
America.

Memorial Sloan-Kettering Cancer Center
In 1993, we began a development program with Memorial Sloan-Kettering Cancer
Center involving PSMA and our proprietary monoclonal antibody. In November
1996, we exercised an option for and obtained an exclusive worldwide license to
this technology.

Molecular Staging, Inc.
We have entered into a letter of intent to obtain an exclusive, world-wide
license from privately held Molecular Staging, Inc. for technology to be used
in developing in vitro diagnostic tests utilizing PSMA and PSA. We anticipate
that the novel technology applications in conjunction with our technology, may
allow entry into the domestic market for PSA-based testing.

Elan Corp. plc
We entered into a license agreement granting Elan worldwide rights to a group
of peptides and associated technology for orally administered drugs that are
transported across the gastrointestinal epithelium, as well as rights to other
orally delivered drugs derived from the research program. Elan is responsible
for the further development and commercialization of this technology. We are
entitled to royalties from sales of any product developed and commercialized
based on this technology.

PRODUCT CONTRIBUTION TO REVENUES

Our currently marketed products and other sources of income constitute a single
business segment. ProstaScint and Quadramet account for a significant
percentage of our product-related revenues. For the year ended December 31,
1999, revenues related to ProstaScint and Quadramet accounted for approximately
79% and 13%, respectively, of our product related revenues.

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RESEARCH AND DEVELOPMENT

Our research and development expenditures include projects we conducted and
payments we made to customer sponsored research programs. Our expenses for
research and development activities, including customer sponsored programs,
were:

.1999--$3.8 million

.1998--$10.0 million

.1997--$17.9 million

Research and development expenditures for customer sponsored programs were:

.1999--$0.2 million

.1998--$0.2 million

.1997--$1.1 million

We intend to pursue research and development activities having commercial
potential and to review all of our programs to determine whether possible
market opportunities, near and longer term, provide an adequate return to
justify the commitment of human and economic resources to their initiation or
continuation. We expect a significant increase in our research and development
expenditures during 2000 for development of proteomics technology, for
development of assays utilizing PSMA for diagnostics, and for our share of
expenses for the development with Progenics Pharmaceuticals, Inc. of
immunotherapies for prostate and other cancers.

COMPETITION

The biotechnology and pharmaceutical industries are subject to intense
competition, including competition from large pharmaceutical companies,
biotechnology companies and other companies, universities and research
institutions. Our existing therapeutic products compete with a wide variety of
other firms, including firms that provide products used in more traditional
treatments or therapies, such as external beam radiation, chemotherapy agents
and narcotic analgesics. In addition, our existing and potential competitors
may be able to develop technologies that are as effective as, or more effective
than those offered by us, which would render our products noncompetitive or
obsolete. Moreover, many of our existing and potential competitors have
substantially greater financial, marketing, sales, manufacturing, distribution
and technological resources than we do, which may allow these competitors to
develop new products in advance of us. Our existing and potential competitors
may be in the process of seeking FDA or foreign regulatory approval for their
respective products or may also enjoy substantial advantages over us in terms
of research and development expertise, experience in conducting clinical
trials, experience in regulatory matters, manufacturing efficiency, name
recognition, sales and marketing expertise and distribution channels.

We expect competition to intensify in the fields in which we are involved as
technical advances in such fields are made and become more widely known. We can
not assure you, however, that we or our collaborative partners will be able to
develop our products successfully or that we will obtain patents to provide
protection against competitors. Moreover, we cannot assure you that our
competitors will not succeed in developing therapeutic products that circumvent
our products, that these competitors will not succeed in developing
technologies or products that are more effective than those developed by us. In
addition, many of these companies may have more experience in establishing
third-party reimbursement for their products. Accordingly, we cannot assure you
that we will be able to compete effectively against existing or potential
competitors or that competition will not have a material adverse effect on our
business, financial condition and results of operations.

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MANUFACTURING

ProstaScint and OncoScint CR/OV are manufactured at a current good
manufacturing practices, or cGMP, compliant manufacturing facility in
Princeton, New Jersey which is operated by Bard BioPharma L.P., a subsidiary of
Purdue BioPharma. We have access to the facility for continued manufacture of
these products until January 2002. An Establishment License Application for the
facility was approved by the FDA for the manufacture of ProstaScint in October
1996 and for OncoScint CR/OV in December 1992. Our facility is subject to
routine inspections by the FDA to assure compliance with current Good
Manufacturing Practices. As a result of an inspection held in April through May
of 1999, we received an FDA Warning Letter which identified a number of
deviations from FDA requirements and required their correction. We have adopted
corrective measures for each of the concerns identified and in January 2000 we
received a letter from the FDA informing us that our corrective actions
appeared to be adequate.

We expect that this facility will allow us to meet our projected production
requirements for ProstaScint and OncoScint CR/OV for the foreseeable future. We
do not anticipate that this arrangement will be continued, and are actively
engaged in discussions with other third party manufacturers for these products.
Any new manufacturing arrangement will be subject to FDA oversight, and
qualification of a new manufacturer with the FDA could take a significant
amount of time.

Our products must be manufactured in compliance with regulatory requirements
and at commercially acceptable costs. We believe that our manufacturing
arrangements currently meet our needs.

We believe that outsourcing manufacturing operations currently represents the
most cost effective method of manufacturing our products.

Raw materials and suppliers
The active raw materials used for the manufacture of our products include
antibodies. OncoScint CR/OV, uses a monoclonal antibody which is being supplied
in commercial quantities by a single contract manufacturer, Lonza Biologics. We
anticipate that Lonza Biologics will be able to meet our needs for commercial
quantities of monoclonal antibody.

We currently have arrangements necessary for the production of the monoclonal
antibody for ProstaScint.

Certain components of Quadramet, particularly Samarium/153/ and EDTMP, are
provided to DuPont by sole source suppliers. Due to its radiochemical
properties, Samarium/153/ must be produced on a weekly basis by its supplier in
order to meet DuPont's manufacturing requirements. On one occasion, DuPont was
unable to manufacture Quadramet on a timely basis due to the failure of the
supplier to provide an adequate supply of Samarium/153/. In the event that
DuPont is unable to obtain sufficient quantities of the components on
commercially reasonable terms, or in a timely manner, DuPont would be unable to
manufacture Quadramet on a timely and cost-competitive basis. In addition,
sources for certain of these components may not be readily available. Thus, the
loss by DuPont of its sources for such components could result in an
interruption of supply and could have a material adverse effect on our
business, financial condition and results of operations.

PATENTS AND PROPRIETARY RIGHTS

Consistent with industry practice, we have a policy of using patent and trade
secret protection to preserve our right to exploit the results of our research
and development activities and, to the extent it may be necessary or advisable,
to exclude others from appropriating our proprietary technology.

Our policy is to aggressively protect our proprietary technology by selectively
seeking patent protection in a worldwide program. In addition to the United
States, we file patent applications in Canada, major European countries, Japan
and additional foreign countries on a selective basis to protect inventions
important to the development of our business. We believe that the countries in
which we have obtained and are seeking patent coverage for our proprietary
technology represent the major focus of the pharmaceutical industry in which we
and certain of our licensees will market our respective products.

We hold 38 current US patents and 66 current foreign patents. We have filed and
currently have pending a number of additional US and foreign patent
applications, relating to certain aspects of our technology for

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diagnostic and therapeutic products, and the methods for their production and
use. We intend to file patent applications with respect to subsequent
developments and improvements, when we believe such protection is in our the
best interest.

We are the exclusive licensee of certain patents and patent applications owned
by the University of North Carolina at Chapel Hill, covering parts of the
proteomics technology. These include seven issued US patents relating to our
phage display libraries, methods of using phage display libraries to identify
peptides that bind to a target molecule of interest, as well as peptides that
bind to certain molecules. We hold an exclusive license under certain patents
and patent applications held by the Memorial Sloan-Kettering Institute covering
PSMA. We are the exclusive licensee of certain US patents and applications held
by Dow covering Quadramet.

Among our patents are two issued US patents relating to peptides that bind to
certain molecules expressed on cancer cells. We also co-own with the University
of North Carolina at Chapel Hill an issued US patent covering certain
polypeptides that contain a WW domain.

We may be entitled under certain circumstances to seek extension of the terms
of our patents.

We also rely upon, and intend to continue to rely upon, trade secrets,
unpatented proprietary know-how and continuing technological innovation to
develop and maintain our competitive position. We typically enter into
confidentiality agreements with our licensees and any scientific consultants,
and each of our employees has entered into agreements requiring that they
forbear from disclosing confidential information, and in some cases assign to
us all rights in any inventions made while in our employ. We believe that our
valuable proprietary information is protected to the fullest extent
practicable; however, we cannot assure you that:

.additional patents will be issued to us in any or all appropriate
jurisdictions;

.litigation will not be commenced seeking to challenge our patent protection or
that challenges will not be successful;

.our processes or products do not or will not infringe upon the patents of
third parties; or

.the scope of patents issued will successfully prevent third parties from
developing similar and competitive products.

The technology applicable to our products is developing rapidly. A substantial
number of patents have been issued to other biotechnology companies. In
addition, competitors have filed applications for, or have been issued, patents
and may obtain additional patents and proprietary rights relating to products
or processes that are competitive with ours. In addition, others may have filed
patent applications and may have been issued patents to products and to
technologies potentially useful to us or necessary to commercialize our
products or to achieve our business goals. We cannot assure you that we will be
able to obtain licenses of patents on acceptable terms.

We cannot predict how any patent litigation will affect our efforts to develop,
manufacture or market our products.

We are defendants in litigation filed against us in the United States Federal
Court for the District of New Jersey by M. David Goldenberg and Immunomedics,
Inc. We were served with this lawsuit on March 17, 2000. The litigation claims
that our ProstaScint product infringes a patent purportedly held by the
plaintiffs. We believe that the purported patent sought to be enforced in the
litigation has now expired. As a result, the claim, even if successful, would
not result in a bar of the continued sale of ProstaScint or affect any other of
our products or technology. However, given the uncertainty associated with
litigation, we cannot give any assurance that the litigation could not result
in a material expenditure to us.

GOVERNMENT REGULATION AND PRODUCT TESTING

The development, manufacture and sale of medical products utilizing our
technology are governed by a variety of statutes and regulations in the United
States and by comparable laws and agency regulations in most foreign countries.

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21
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The Food, Drug and Cosmetic Act requires that our products be manufactured in
FDA registered facilities subject to inspection. The manufacturer must be in
compliance with cGMP which imposes certain procedural and documentation
requirements upon us and our manufacturing partners with respect to
manufacturing and quality control activities. Noncompliance with cGMP can
result in, among other things, fines, injunctions, civil penalties, recalls or
seizures of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for drugs,
withdrawal of marketing approvals and criminal prosecution. Any failure by us
or our manufacturing partners to comply with the requirements of cGMP could
have a material adverse effect on our business, financial condition and results
of operations.

Diagnostic and therapeutic products in the United States are regulated by the
Food Drug and Cosmetic Act and the Public Health Service Act, and by FDA rules
and regulations promulgated thereunder. These laws and regulations require
carefully controlled research and testing of products, government notification,
review and/or approval prior to marketing the products, inspection and/or
licensing of manufacturing and production facilities, adherence to Good
Manufacturing Practices, compliance with product specifications, labeling, and
other applicable regulations.

Medical products that we develop or intend to market are subject to substantial
governmental regulation and may be classified as new drugs or biologics under
the Food Drug and Cosmetic Act. The FDA and similar health authorities in most
other countries must approve or license the diagnostic and therapeutic products
before they can be commercially marketed. In order to obtain FDA approval, an
applicant must submit, as relevant for the particular product, proof of safety,
purity, potency and efficacy. In most cases this proof entails extensive pre-
clinical, clinical and laboratory studies. The studies and the preparation and
prosecution of those applications by the FDA is expensive and time consuming,
and may take several years to complete. Difficulties or unanticipated costs may
be encountered by us or our licensees in their respective efforts to secure
necessary governmental approval or licenses, which could delay or preclude us
or our licensees from marketing their products. Limited indications for use or
other conditions could also be placed on any approvals that could restrict the
commercial applications of products. With respect to patented products or
technologies, delays imposed by the government approval process may materially
reduce the period during which we will have the exclusive right to exploit
them, because patent protection lasts only for a limited time, beginning on the
date the patent is first granted in the case of US patent applications filed
prior to June 6, 1995, and when the patent application is first filed in the
case of patent applications filed in the United States after June 6, 1995, and
applications filed in the European Economic Community. We intend to seek to
maximize the useful life of our patents under the Patent Term Restoration Act
of 1984 in the United States and under similar laws if available in other
countries.

The majority of our diagnostic and therapeutic products will likely be
classified as new drugs or biologics and will be evaluated in a series of in
vitro, non-clinical and human clinical testing. Typically, clinical testing is
performed in three phases to further evaluate the safety and efficacy of the
drug. In Phase I, a product is tested in a small number of patients primarily
for safety at one or more dosages. Phase II evaluates, in addition to safety,
the efficacy of the product against particular diseases in a patient population
that is generally somewhat large than Phase I. Clinical trials of certain
diagnostic and cancer therapeutic agents frequently combine Phase I and Phase
II into a single Phase I/II study. In Phase III, the product is evaluated in a
larger patient population sufficient to generate data to support a claim of
safety and efficacy within the meaning of the Food Drug and Cosmetic Act.
Permission by the FDA must be obtained before clinical testing can be initiated
within the United States. This permission is obtained by submission of an
Investigational New Drug application which typically includes the results of in
vitro and non-clinical testing and any previous human testing done elsewhere.
The FDA has 30 days to review the information submitted and makes a final
decision whether to permit clinical testing with the drug or biologic. However,
this process can take longer if the FDA raises questions or asks for additional
information regarding the Investigational New Drug application. A similar
procedure applies to medical device and diagnostic products.

After completion of in vitro, non-clinical and clinical testing, authorization
to market a drug or biologic must be granted by FDA. The FDA grants permission
to market through the review and approval of either a New Drug Application for
drugs or a Biologic License Application for biologics. These applications
provide detailed information on the results of the safety and efficacy of the
drug conducted both in animals and humans. Additionally, information is
submitted describing the facilities and procedures for manufacturing the drug
or biologic.

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The Prescription Drug User Fee Act and subsequently, the Food and Drug
Administration Modernization Act of 1997 have established application review
times for both New Drug Applications and Biologic License Applications. For new
drugs and biologics, FDA is to review and make a recommendation for approval
within 12 months. For drugs and biologics designated as "priority," the review
time is six months. This review process, however, can and frequently does
exceed these targets.

Once a drug or biologic is approved, we are required to maintain approval
status of the products by providing certain safety and efficacy information at
specified intervals. Additionally, we are required to meet other requirements
specified by the Food Drug and Cosmetic Act including but not limited to the
manufacture of products, labeling and promotional materials and the maintenance
of other records and reports. Failure to comply with these requirements or the
occurrence of unanticipated safety effects from the products during commercial
marketing, could lead to the need for product recall, or FDA initiated action,
which could delay further marketing until the products are brought into
compliance. Similar laws and regulations apply in most foreign countries where
these products are likely to be marketed.

Orphan Drug Act
The Orphan Drug Act is intended to provide incentives to manufacturers to
develop and market drugs for rare diseases or conditions affecting fewer than
200,000 persons in the United States at the time of application for orphan drug
designation. A drug that receives orphan drug designation and is the first
product to receive FDA marketing approval for a particular indication is
entitled to orphan drug status, a seven-year exclusive marketing period in the
United States for that indication. Clinical testing requirements for orphan
drugs are the same as those for products that have not received orphan drug
designation. OncoScint CR/OV has received an orphan drug designation for the
detection of ovarian carcinoma. Under the Orphan Drug Act, the FDA cannot
approve any application by another party to market an identical product for
treatment of an identical indication unless the party has a license from the
holder of orphan drug status, or the holder of orphan drug status is unable to
assure an adequate supply of the drug. However, a drug that is considered by
FDA to be different from a particular orphan drug is not barred from sale in
the United States during the seven-year exclusive marketing period even if it
receives marketing approval for the same product claim.

Other regulations
In addition to regulations enforced by FDA, we are also subject to regulation
under the state and local authorities and other federal statutes and agencies
including the Occupational Safety and Health Act, the Environmental Protection
Act, the Toxic Substances Control Act, the Resource Conservation and Recovery
Act and the Nuclear Regulatory Commission.

Foreign regulatory approval
The regulatory approval process in Europe has changed over the past few years.
There are two regulatory approval processes in Europe for products developed by
us. Beginning in 1995, the centralized procedure became mandatory for all
biotechnology products. Under this regulatory scheme, the application is
reviewed by two scientific project leaders referred to as the rapporteur and
co-rapporteur, respectively. Their roles are to prepare assessment reports of
safety and efficacy and for recommending the approval for full European Union
marketing.

The second regulatory scheme, referred to as the Mutual Recognition Procedure,
is a process whereby a product's national registration in one member state
within the European Union may be "mutually recognized" by other member states
within the European Union.

Substantial requirements, comparable in many respects to those imposed under
the Food Drug and Cosmetic Act, will have to be met before commercial sale is
permissible in most countries. There can be no assurance, however, as to
whether or when governmental approvals, other than those already obtained, will
be obtained or as to the terms or scope of those approvals.

HEALTH CARE REIMBURSEMENT

Our business, financial condition and results of operations will continue to be
affected by the efforts of governments and third-party payors to contain or
reduce the costs of healthcare through various means. There have been, and we
expect that there will continue to be, federal and state proposals to implement
government control of pricing and profitability of therapeutic and diagnostic
imaging agents. In addition, an

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23
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increasing emphasis on managed care has and will continue to increase the
pressure on pricing of these products. While we cannot predict whether
legislative or regulatory proposals will be adopted or the effects proposals or
managed care efforts may have on our business, the announcement of proposals
and the adoption of proposals or efforts could have a material adverse effect
on our business, financial condition and results of operations. Further, to the
extent proposals or efforts have a material adverse effect on other companies
that are our prospective corporate partners, our ability to establish strategic
alliances may be materially and adversely affected. In certain foreign markets,
the pricing and profitability of our products generally are subject to
government controls.

Sales of our products depend in part on the availability of reimbursement to
the consumer from third-party payors, including Medicare, Medicaid, and private
health insurance plans. Third-party payors are increasingly challenging the
prices charged for medical products and services. To the extent we succeed in
bringing products to market, we cannot assure you that these products will be
considered cost-effective and that reimbursement to consumers will be available
or sufficient to allow us to sell our products on a competitive basis.
Reimbursement by a third-party payor may depend on a number of factors,
including the payor's determination that our products are clinically useful and
cost-effective, medically necessary and not experimental or investigational.
Since reimbursement approval is required from each payor individually, seeking
approvals can be a time consuming and costly process which could require us to
provide supporting scientific, clinical and cost-effectiveness data for the use
of our products to each payor separately. If we or our collaborators are unable
to secure adequate third party reimbursement for our products, there would be
material adverse effect on its business, financial condition and results of
operations.

CUSTOMERS

During the year ended December 31, 1999, we received 56% of our total product
related, license and contract revenues from four customers: Berlex
Laboratories, Inc., Progenics Pharmaceuticals, Inc. and the radiopharmacy
chains of Medi-Physics and Mallinckrodt Medical, Inc.

EMPLOYEES

As of March 1, 2000, we employed 68 persons full-time, of whom 14 were in our
proteomics subsidiary, seven in operations and manufacturing, 12 in clinical
and regulatory activities, 11 in administration and management, and 24 in
marketing and sales. We believe that we have been successful in attracting
skilled and experienced employees. None of our employees is covered by a
collective bargaining agreement. All of our employees have executed
confidentiality agreements. We consider relations with our employees to be
excellent.

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24
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Important Factors Regarding Forward Looking Statements.

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This report includes forward-looking statements about our business and
results of operations that are subject to risks and uncertainties that could
cause our actual results to vary materially from those reflected in the
forward-looking statements. Words such as "believes," "anticipates," "plans,"
"estimates," "future," "could," "may," "should," "expect," "envision,"
"potentially," variations of such words and similar expressions are intended to
identify such forward-looking statements. Factors that could cause or
contribute to these differences include those discussed previously under the
caption "Risk factors" and elsewhere in this report. Investors are cautioned not
to place undue reliance on these forward-looking statements which speak only as
of the date hereof. We disclaim any intent or obligation to update these
forward-looking statements.

You should not unduly rely on forward-looking statements contained or
incorporated by reference in this report. Actual results or outcomes may
differ materially from those predicted in our forward-looking statements due to
the risks and uncertainties inherent in our business, including among other
items, risks and uncertainties in:

.our ability to successfully execute our business model;

.our ability to compete successfully against direct and indirect competitors;

.our ability to launch our proteomics program successfully;

.market acceptance of and continuing demand for our products;

.our ability to develop new products;

.our ability to protect our intellectual property, including patents and know-
how;

.our ability to obtain additional financing to support our operations;

.the continuation of our corporate collaborations; and

.changing market conditions and other risks detailed below.

You should read and interpret any forward-looking statements together with the
following documents:

.this Annual Report on Form 10-K including the risk factors contained in this
report under the caption "Risk factors"; and

.our other filings with the Securities and Exchange Commission.

Any forward-looking statement speaks only as of the date on which that
statement is made. We will not update any forward-looking statement to reflect
events or circumstances that occur after the date on which such statement is
made.

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25
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Item 2. Properties

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We currently lease approximately 20,000 square feet of administrative space in
Princeton, New Jersey. The lease on this space expires in 2002. We intend to
remain in Princeton, New Jersey for the foreseeable future. In addition, we
have the right to access space located in a facility in Princeton, which was
previously leased by us, for manufacture of our products.

We also lease approximately 9,000 square feet of laboratory and office space in
Newtown, Pennsylvania which is occupied by our AxCell Biosciences subsidiary,
under a lease expiring in 2004.

We own substantially all of the equipment used in the laboratories and offices.
We believe our facilities are adequate for our operations at present.

Item 3. Legal Proceedings

In February 2000, we received information as to litigation filed against us in
the United States Federal Court for the District of New Jersey by M. David
Goldenberg and Immunomedics, Inc. We were served with this lawsuit on March 17,
2000. The litigation claims that our ProstaScint product infringes a patent
purportedly held by the plaintiffs. We believe that it is invalid and
unenforceable and that ProstaScint does not infringe it. In addition, we have
certain rights to indemnification against litigation and litigation expenses
from the inventor of technology used in ProstaScint, which may be obtained by
withholding royalty payments on sales of ProstaScint. We believe, based upon
advice of counsel, that we have valid defenses against the claims in this
litigation, and that if it is pursued we will vigorously defend our position. We
also understand that the purported patent sought to be enforced in the
litigation has now expired; as a result, the claim even if successful would not
result in a bar of the continued sale of ProstaScint or affect any other of our
products or technology. However, given the uncertainty associated with
litigation, we cannot give any assurance that the litigation could not result in
a material expenditure to us.

Item 4. Submission of Matters to a Vote of Security Holders

--None

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26

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Executive Officers of the Registrant
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The executive officers of the Company and their respective ages and positions
with the Company as of March 1, 2000 are as follows:

<TABLE>
<CAPTION>
Name Age Title
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
James A. Grigsby (1)...................... 57 Chairman of the Board
H. Joseph Reiser, Ph.D. ................... 53 Director, President and Chief Executive Officer
Nicholas Borys, M.D. ...................... 40 Vice President, Medical Affairs
Donald F. Crane............................ 49 Vice President, General Counsel and Corporate
Secretary
Richard W. Krawiec, Ph.D. ................. 52 Vice President, Investor Relations and Corporate
Communications
Jane M. Maida.............................. 44 Vice President, Finance and Administration;
Principal Financial and Accounting Officer
John D. Rodwell, Ph.D. .................... 53 Acting President and Chief Technical Officer, AxCell
Biosciences Corporation, a subsidiary
</TABLE>
- ------
All executive officers are elected annually by Board of Directors. There is no
family relationship among any of the executive officers or directors.

James A. Grigsby, Chairman of our Board of Directors, has been our director
since May 1996 and Chairman since June 1998. Since April, 1999, Mr. Grigsby has
been affiliated with the consulting firm of Nachman, Hays & Associates.
Previously, since 1994, Mr. Grigsby was president of Cancer Care Management
LLC, a consulting firm providing consulting services regarding cancer disease
management issues. From 1989 to 1994, Mr. Grigsby was President of CIGNA
Corporation's International Life and Employee Benefits Division, which operated
in over 20 countries worldwide, and during that period also served as the head
of CIGNA's national health care sales force. Prior to that time, since 1978, he
held a number of executive positions with CIGNA Corporation. Mr. Grigsby
received a B.A. in Mathematics from Baylor University and is a Fellow of the
Society of Actuaries.

H. Joseph Reiser, Ph.D., joined us in August 1998 as President and Chief
Executive Officer and as a member of our Board of Directors. Most recently, Dr.
Reiser was Corporate Vice President and General Manager, Pharmaceuticals, for
Berlex Laboratories Inc., the U.S. subsidiary of Schering AG. During his 17
year tenure at Berlex, Dr. Reiser held positions of increasing responsibility,
serving as the first President of Schering Berlin's Venture Corporation, Vice
President, Technology and Industry Relations, and Vice President, Drug
Development and Technology. Dr. Reiser received his Ph.D. in Physiology from
the Indiana University School of Medicine, where he also earned his M.S. in
Physiology and B.S. in Biology.

Nicholas Borys, M.D., joined us as Vice President of Medical Affairs in
January, 2000. Previously, Dr. Borys was Vice President and Medical Director of
Anthra Pharmaceuticals from October, 1998 to January, 2000. From December 1992
to July 1998, he was Director of Medical Affairs at Amersham Healthcare. From
1987 to 1992, he was Director of Medical and Clinical Services at Hoffmann-La
Roche. Dr. Borys received his undergraduate education at Rutgers University and
his M.D. from American University of the Caribbean.

Donald F. Crane joined us in June 1997 as Vice President, General Counsel and
Corporate Secretary. From 1993 until 1997, Mr. Crane was Senior SEC Counsel for
U.S. Surgical Corporation. Previously, Mr. Crane was Assistant Secretary and
Corporate Counsel at BellSouth Corporation in Atlanta, Georgia. Mr. Crane holds
a B.A. in Communications from the University of Georgia and a J.D. from the
University of Georgia School of Law.

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27

<PAGE>

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Richard W. Krawiec, Ph.D., joined us in January 2000 as Vice President,
Investor Relations and Corporate Communications. During 1999, Dr. Krawiec was
Vice President, Investor Relations at La Jolla Pharmaceutical Company, a
publicly held biotechnology company which develops drugs for autoimmune
diseases. From 1994 to 1998, he was Director of Investor Relations at Amylin
Pharmaceuticals, Inc., a publicly held biotechnology company focused on
diabetes and metabolic disorders. Dr. Krawiec holds a B.S. in Biology from
Boston University and a Ph.D. in Biological Sciences from the University of
Rhode Island.

Jane M. Maida currently serves as our Vice President--Finance and
Administration. Ms. Maida joined us in March 1997 as Chief Accounting Officer,
Corporate Controller and Assistant Secretary. Before joining us, Ms. Maida
served as Chief Financial and Information Officer for Mustard Seed, Inc., a
behavioral health care company, from 1995. Prior to that position, she was
Chief Financial Officer of Morphogenesis, Inc., a biotechnology company focused
on cellular immunology. From 1986 to 1994, Ms. Maida was Corporate Controller
and Assistant Secretary for The Liposome Company, Inc., a biotechnology
company. Ms. Maida holds a B.S. in Education from the University of
Pennsylvania and a M.S. in Accounting from the State University of New York at
Albany. She is also a Certified Public Accountant.

Our key AxCell employees are:

John D. Rodwell, Ph.D., acting President and Chief Technical Officer of AxCell
Biosciences Corporation, our subsidiary, joined us in September 1981. He served
as Director, Chemical Research, then as Vice President, Discovery Research from
1984 to 1989, as Vice President, Research and Development from 1989 to July
1996, and as Senior Vice President and Chief Scientific Officer from July 1996
through June 1999, at which time he assumed full time duties as Acting
President and Chief Technical Officer of AxCell. From 1980 to 1981, Dr. Rodwell
was a Research Assistant Professor and, from 1976 to 1980, he was a
postdoctoral fellow, both in the Department of Microbiology at the University
of Pennsylvania School of Medicine, where he currently is an Adjunct Associate
Professor in the Department of Microbiology. He holds a B.A. in Chemistry from
the University of Massachusetts, an M.S. in Organic Chemistry from Lowell
Technological Institute and a Ph.D. in Biochemistry from the University of
California at Los Angeles.

Brian R. Bullard, 36, joined the company in January 1999 as Vice President and
Chief Information Officer of AxCell. Most recently he was with Perkin-Elmer's
life sciences divisions, PE Biosystems, where as Manager, Data Products, he was
in charge of scientific and market evaluation of data in conjunction with
Perkin-Elmer's bioinformatics software platform. Previously, Mr. Bullard was
Director of Bioinformatics, Development at Gene Logic in Maryland, responsible
for the biotechnology firm's information technology. Mr. Bullard has sixteen
years of information technology experience and has held a number of other
information technology positions with firms including Science and Technology
Corporation, OptiMetrics, Inc. and The Physical Sciences Laboratory.

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28
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Risk Factors
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Risk factors

You should carefully consider the risks described below together with all of the
other information included in or incorporated by reference into this Form 10-K
Annual Report before making an investment decision. If any of the following
risks occurs, our business, financial condition or results of operations could
be harmed. In that case, the trading price of our common stock could decline,
and you may lose all or part of your investment.

We have a history of operating losses and accumulated deficit and expect to
incur losses in the future.

We have a history of operating losses since our inception. We had net income of
$729,000 during the year ended December 31, 1999 which included certain non-
operating gains. We had net losses of $13,152,000 during the year ended
December 31, 1998 and $30,712,000 during the year ended December 31, 1997. We
had an accumulated deficit of $301,283,000 as of December 31, 1999. In order to
develop and commercialize our technologies, particularly our proteomics program
and prostate specific membrane antigen, or PSMA, technology, and expand our
oncology products, we expect to incur significant increases in our expenses
over the next several years. As a result, we may continue to report operating
losses for the near future and we may never be profitable or achieve
significant revenues.

Our ability to achieve significant revenues or profitability will depend upon
numerous factors, including:

.successful product development;

.our ability to acquire, develop and commercialize complementary products and
technologies; and

.our ability to achieve increased sales for our existing products and sales for
any new products.

We are in the early stages of development and commercialization of our
technology platforms and may never achieve the goals of our business plan.

Early last year, we completed our restructuring to focus on development of our
prostate specific membrane antigen, or PSMA, and proteomics technologies and
the marketing of our existing products. We may be unable to continue to
successfully develop or commercialize these technologies. Our PSMA and
proteomics technology are still in the early stages of development. We have
only recently begun to incorporate our proteomics technology into
commercialized products.

We began operations in 1980 and have been engaged primarily in research
directed toward the development, commercialization and marketing of products to
improve diagnosis and treatment of cancer and other disease. In December 1992,
we introduced for commercial use our OncoScint imaging agent. In October 1996,
we introduced for commercial use our ProstaScint imaging agent. In March 1997,
we introduced for commercial use our Quadramet therapeutic product. These
products have not yet achieved significant commercial success. In 1998, we
began a restructuring of our company to focus on the development of our PSMA
and proteomics technologies and marketing of these existing products.

Our business is therefore subject to the risks inherent in the development of
an early stage business enterprise, such as the need:

.to obtain sufficient capital to support the expenses of developing our
technology and commercializing our products;

.to ensure that our products are safe and effective;

.to manufacture our products in sufficient quantities and at a reasonable cost;

.to develop a sufficient market for our products; and

.to attract and retain qualified management, sales, technical and scientific
staff.

The problems frequently encountered using new technologies and operating in a
competitive environment also may affect our business. If we fail to properly
address these risks and attain our business objectives, our business, results
of operations and financial condition will suffer.

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29
<PAGE>

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Our proteomics program is at an early stage of development.

We have developed and intend to continue to develop our proteomics program.
This technology involves new approaches and remains commercially unproven. Our
technology and development focus is primarily directed toward offering an
infrastructure to companies for the development of drugs to treat a variety of
complex human diseases. There is limited understanding generally relating to
the role of proteins in diseases, and few products based on protein interaction
discoveries have been developed and commercialized. Even if our proteomics
program was successful in identifying and validating biological targets, there
is no guarantee that our customers will be able to develop or commercialize
products to improve human health.

In addition, the success of our proteomics technology will depend upon our
ability to use software tools to generate data that relates protein signaling
pathways to a variety of other bioinformatic information. Because of the
complexity of this data, we may not be able to detect and remedy any design
defects or software errors in our existing or future technologies, including
databases.

Due to the specialized nature and price of our proteomics technology and
services, there are a limited number of pharmaceutical and biotechnology
companies that are potential customers. Additional reasons why there may not be
a great demand for our proteomics technology and services include:

.our potential customers may determine to conduct in-house research;

.our competitors may offer similar services at competitive prices;

.we may not be able to service satisfactorily the needs of our potential or
actual customers;

.others may publicly disclose or patent proprietary information contained in
our IFP Database (including information related to protein signaling pathways
or target candidates) or relating to prostate antigens or antibodies; and

.technological innovations may be discovered that are more advanced than those
used by or available to us.

Our technology program for proteomics is still in the early stages of
development. We may not be able to populate our IFP Database with information
that is useful to potential customers in a timely manner. Even if we complete
and develop successfully our proteomics technology, the technology may not be
accepted by, or be useful to, our customers.

Our PSMA product development program is novel and, consequently, inherently
risky.

We are subject to the risks of failure inherent in the development of product
candidates based on new technologies, including our PSMA technology. These
risks include the possibility that:

.the technologies we use will not be effective;

.our product candidates will be unsafe or otherwise fail to receive the
necessary regulatory approvals;

.our product candidates will be hard to manufacture on a large scale or will be
uneconomical to market; and

.we will not successfully overcome technological challenges presented by our
products.

Our objectives include developing our PSMA technology into novel cancer
therapeutics, including a cancer vaccine. To our knowledge, no cancer
therapeutic vaccine has been approved for marketing. Our other research and
development programs involve similarly novel approaches to human therapeutics.
Consequently, there is no precedent for the successful commercialization of
therapeutic products based on our PSMA technologies. We cannot assure you that
any of our products will be successfully developed.

We are heavily dependent on market acceptance of ProstaScint and Quadramet for
near-term revenues.

ProstaScint and Quadramet are expected to account for a significant percentage
of our product-related revenues in the near future. For the year ended December
31, 1999, revenues from ProstaScint and Quadramet accounted for approximately
92% of our product related revenues.

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30
<PAGE>

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Because these products contribute the majority of our product-related revenues,
our business, financial condition and results of operations depend on their
acceptance as safe, effective and cost-efficient alternatives to other
available treatment and diagnostic protocols by the medical community,
including:

.health care providers, such as hospitals and physicians; and

.third-party payors, including Medicare, Medicaid, private insurance carriers
and health maintenance organizations.

Our customers, including technologists and physicians, must successfully
complete our Partners in Excellence Program, or PIE Program, a proprietary
training program designed to promote the correct acquisition and interpretation
of ProstaScint images. This approach is, therefore, technique dependent and
requires a learning commitment on the part of users. We cannot assure you that
additional physicians will make this commitment or otherwise accept this
product as part of their treatment practices.

Berlex Laboratories, Inc. markets Quadramet in the United States through an
agreement that we entered into in October 1998. We cannot assure you that
Berlex will be able to successfully market Quadramet or that this agreement
will result in significant revenues for us. We recently obtained marketing
rights to Quadramet in Canada, but have not yet implemented a selling program.
We cannot assure you that Quadramet can be marketed effectively in Canada, or
that it will contribute significantly to our revenues.

We cannot assure you that Quadramet will be approved for additional
indications, due to uncertainty as to efficacy or safety for other purposes, to
regulatory obstacles and to physician preferences for existing or competing
practices.

Accordingly, we cannot assure you that ProstaScint or Quadramet will achieve
market acceptance on a timely basis, or at all. If ProstaScint or Quadramet do
not achieve broad market acceptance, we may not be able to generate sufficient
product revenue to become profitable.

We may need to raise additional capital which may not be available.

We have incurred negative cash flows from operations since inception. We have
expended, and will need to continue to expend, substantial funds to complete
our planned product development efforts, including our proteomics and PSMA
programs. While we believe that the proceeds from this offering will be
sufficient to meet our development and commercialization needs for the
foreseeable future, our future capital requirements and the adequacy of our
available funds depend on many factors, including:

.successful commercialization of our products;

.acquisition of complementary products and technologies;

.magnitude, scope and results of our product development efforts;

.progress of preclinical studies and clinical trials;

.progress of regulatory affairs activities;

.costs of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights;

.competing technological and market developments; and

.expansion of strategic alliances for the sale, marketing and distribution of
our products.

We may raise additional capital through public or private equity offerings,
debt financings or additional collaborations and licensing arrangements.
Additional financing may not be available to us when we need it, or, if
available, we may not be able to obtain financing on terms favorable to us or
our stockholders. If we raise additional capital by issuing equity securities,
the issuance will result in ownership dilution to our stockholders. If we raise
additional funds through collaborations and licensing arrangements, we may be
required to relinquish rights to certain of our technologies or product
candidates or to grant licenses on

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unfavorable terms. If we relinquish rights or grant licenses on unfavorable
terms, we may not be able to develop or market products in a manner that is
profitable to us. If adequate funds are not available, we may not be able to
conduct research activities, preclinical studies, clinical trials or other
activities relating to the successful commercialization of our products.

Competition in our field is intense and likely to increase.

We face, and will continue to face, intense competition from one or more of
the following entities:

.pharmaceutical companies;

.biotechnology companies;

.bioinformatics companies;

.diagnostic companies;

.academic and research institutions; and

.government agencies.

All of our lines of business are subject to significant competition from
organizations that are pursuing technologies and products that are the same as
or similar to our technology and products. Many of the organizations competing
with us have greater capital resources, research and development staffs and
facilities and marketing capabilities.

We believe that our future success will depend in large part on our ability to
maintain a competitive position in proteomics and in the development of
oncology products. Before we recover development expenses for our products and
technologies, the products or technologies may become obsolete as a result of
technological developments by us or others. Our products could also be made
obsolete by new technologies which are less expensive or more effective. We
may not be able to make the enhancements to our technology necessary to
compete successfully with newly emerging technologies.

We have experienced fluctuating results of operations.

Our results of operations have fluctuated on an annual and quarterly basis and
may fluctuate significantly from period to period in the future, due to, among
other factors:

.variations in revenue from sales of and royalties from our products;

.timing of regulatory approvals and other regulatory announcements relating to
our products;

.variations in our marketing, manufacturing and distribution channels;

.timing of the acquisition and successful integration of complementary
products and technologies;

.timing of new product announcements and introductions by us and our
competitors; and

.product obsolescence resulting from new product introductions.

Many of these factors, and others not listed above, are outside our control.
Due to one or more of these factors, our results of operations may fall below
the expectations of securities analysts and investors in one or more future
quarters. If this happens, the market price of our common stock could decline.

We rely heavily on our collaborative partners.

Our success depends in significant part upon the success of our collaborative
partners. We have entered into the following agreements for the sales,
marketing, distribution and manufacture of our products, product candidates
and technologies:

.sub-license and marketing agreement with Berlex Laboratories, Inc. relating
to the Quadramet technology which we licensed from The Dow Chemical Company.
Berlex is responsible for marketing, selling and

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arranging for the manufacture and distribution of Quadramet in the United
States. This agreement expires on the later of October 28, 2018 or upon the
expiration of the patents covering Quadramet;

.agreement for manufacture of Quadramet by The DuPont Pharmaceuticals Company
(formerly the radiopharmaceuticals division of The DuPont Merck Company);

.marketing and platform development agreement with Informax, Inc. related to
our proteomics program;

.a joint venture with Progenics Pharmaceuticals, Inc. for the development of
PSMA for immunotherapy for prostate and other cancers; and

.letter of intent for a licensing agreement with Molecular Staging, Inc. for
technology to be used in developing in vitro diagnostic tests using PSMA and
PSA.

Because our collaborative partners are responsible for certain of our sales,
marketing, manufacturing and distribution activities, these activities are
outside our direct control. We cannot assure you that our partners will
perform their obligations under these agreements with us. In the event that
our collaborative partners do not successfully market and sell our products or
breach their obligations under our agreements, our products may not be
commercially successful, any success may be delayed and new product
development could be inhibited.

Our business could be harmed if our collaborations expire or are terminated
early.

We cannot assure you that we will be able to maintain our existing
collaborative arrangements. If they expire or are terminated, we cannot assure
you that they will be renewed or that new arrangements will be available on
acceptable terms, if at all. In addition, we cannot assure you that any new
arrangements or renewals of existing arrangements will be successful, that the
parties to any new or renewed agreements will perform adequately or that any
potential collaborators will not compete with us.

We cannot assure you that our existing or future collaborations will lead to
the development of product candidates or technologies with commercial
potential, that we will be able to obtain proprietary rights or licenses for
proprietary rights for our product candidates or technologies developed in
connection with these arrangements or that we will be able to ensure the
confidentiality of proprietary rights and information developed in such
arrangements or prevent the public disclosure thereof.

We have limited sales, marketing and distribution capabilities for our
products.

We recently established a sales force and have limited internal sales,
marketing and distribution capabilities for our products. We depend on Berlex
for the sale, marketing and distribution of Quadramet in the United States. In
locations outside the United States, we have not established a selling
presence. If we are unable to establish and maintain significant sales,
marketing and distribution efforts, either internally or through arrangements
with third parties, our business may be harmed.

There are risks associated with the manufacture of our products.

If we are to be successful, our products will have to be manufactured either
internally or through third-party manufacturers in compliance with regulatory
requirements and at costs acceptable to us. We cannot assure you that we will
be able to continue to manufacture, arrange for manufacture on reasonable
terms or successfully outsource the manufacturing of our products. If we are
unable to successfully manufacture or arrange for the manufacture of our
products and product candidates, we would not be able to successfully
commercialize our products and our business may be seriously harmed.

Our business may be adversely affected by the uncertainty associated with our
third-party manufacturers' dependence on single source suppliers.

Quadramet is manufactured by DuPont pursuant to an agreement with both Berlex
and Cytogen. Some components of Quadramet, particularly Samarium/153/ and
EDTMP, are provided to DuPont by outside suppliers. Due to radioactive decay,
Samarium/153/ must be produced on a weekly basis. DuPont obtains its
requirements for Samarium/153/ from one supplier. Alternative sources for
these components may not be readily available. On one occasion, DuPont was
unable to manufacture Quadramet on a timely basis due to the failure of its
supplier to provide Samarium/153/. If DuPont cannot obtain sufficient
quantities of the components on commercially reasonable terms, or in a timely
manner, it would be unable to manufacture Quadramet on a timely and cost-
effective basis which could affect our ability to generate sufficient revenues
to become profitable.

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Compliance with manufacturing regulations is critical to our business.

We and our third-party manufacturers are required to adhere to US Food & Drug
Administration regulations setting forth requirements for current Good
Manufacturing Practices, or cGMP, and similar regulations in other countries,
which include extensive testing, control and documentation requirements.
Ongoing compliance with cGMP, labeling and other applicable regulatory
requirements are monitored through periodic inspections and market surveillance
by state and federal agencies, including the FDA, and by comparable agencies in
other countries. Failure of our third-party manufacturers or us to comply with
applicable regulations could result in sanctions being imposed on us, including
fines, injunctions, civil penalties, failure of the government to grant
premarket clearance or premarket approval of drugs, delays, suspension or
withdrawal of approvals, seizures or recalls of products, operating
restrictions and criminal prosecutions.

Failure of consumers to obtain adequate reimbursement from third-party payors
could limit market acceptance and affect pricing of our products, which would
materially adversely affect our business.

Our business, financial condition and results of operations will continue to be
affected by the efforts of governments and other third-party payors to contain
or reduce the costs of healthcare. There have been, and we expect that there
will continue to be, a number of federal and state proposals to implement
government control of pricing and profitability of therapeutic and diagnostic
imaging agents such as our products. In addition, an emphasis on managed care
increases possible pressure on pricing of these products. While we cannot
predict whether these legislative or regulatory proposals will be adopted, or
the effects these proposals or managed care efforts may have on our business,
the announcement of these proposals and the adoption of these proposals or
efforts could affect our stock price or our business. Further, to the extent
these proposals or efforts have a material adverse effect on other companies
that are our prospective corporate partners, our ability to establish strategic
alliances may be adversely affected.

Sales of our products depend in part on reimbursement to the consumer from
third-party payors, including Medicare, Medicaid and private health insurance
plans. Third-party payors are increasingly challenging the prices charged for
medical products and services. We cannot assure you that our products will be
considered cost-effective and that reimbursement to consumers will continue to
be available, or will be sufficient to allow us to sell our products on a
competitive basis. Approval of our products for reimbursement by a third- party
payor may depend on a number of factors, including the payor's determination
that our products are clinically useful and cost-effective, medically necessary
and not experimental or investigational. Reimbursement is determined by each
payor individually and in specific cases. The reimbursement process can be time
consuming. If we cannot secure adequate third-party reimbursement for our
products, there would be a material adverse effect on our business, financial
condition and results of operations.

Our potential oncology products will be subject to the risks of failure
inherent in the development of diagnostic or therapeutic products based on new
technologies.

Product development involves a high degree of risk. We cannot assure you that
the product candidates we develop, pursue or offer will prove to be safe and
effective, will receive the necessary regulatory approvals, will not be
precluded by proprietary rights of third parties or will ultimately achieve
market acceptance. These product candidates will require substantial additional
investment, laboratory development, clinical testing and regulatory approvals
prior to their commercialization. We cannot assure you that we will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of new products. If we are unable to develop and
commercialize products on a timely basis or at all, our business will be
harmed.

Before we obtain regulatory approvals for the commercial sale of any of our
products under development, we must demonstrate through preclinical studies and
clinical trials that the product is safe and efficacious for use in each target
indication. The results from preclinical studies and early clinical trials may
not be predictive of results that will be obtained in large-scale testing. We
cannot assure you that our clinical trials will demonstrate the safety and
efficacy of any products or will result in marketable products. A number of
companies in the biotechnology industry have suffered significant setbacks in
advanced clinical trials, even after promising results in earlier trials.
Clinical trials or marketing of any potential diagnostic or therapeutic
products may expose us to liability claims for the use of these diagnostic or
therapeutic products. We may not be able to obtain product liability insurance
or, if obtained, sufficient coverage may not be available at a reasonable cost.
In addition, as we develop diagnostic or therapeutic products internally, we
will have to make significant investments in diagnostic or therapeutic product
development, marketing, sales and

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regulatory compliance resources. We will also have to establish or contract for
the manufacture of products, including supplies of drugs used in clinical
trials, under the current Good Manufacturing Practices of the FDA. We also
cannot assure you that product issues will not arise following successful
clinical trials and FDA approval.

The rate of completion of clinical trials also depends on the rate of patient
enrollment. Patient enrollment depends on many factors, including the size of
the patient population, the nature of the protocol, the proximity of patients
to clinical sites and the eligibility criteria for the study. Delays in planned
patient enrollment may result in increased costs and delays, which could have a
harmful effect on our ability to develop the products in our pipeline.

If we are unable to comply with applicable governmental regulations, we may not
be able to continue our operations.

Any products tested, manufactured or distributed by us or on our behalf
pursuant to FDA clearances or approvals are subject to pervasive and continuing
regulation by numerous regulatory authorities, including primarily the FDA. We
may be slow to adapt, or we may never adapt to changes in existing requirements
or adoption of new requirements or policies. Our failure to comply with
regulatory requirements could subject us to enforcement action, including
product seizures, recalls, withdrawal of clearances or approvals, restrictions
on or injunctions against marketing our products based on our technology, and
civil and criminal penalties. We cannot assure you that we will not be required
to incur significant costs to comply with laws and regulations in the future or
that laws or regulations will not create an unsustainable burden on our
business.

Numerous federal, state and local governmental authorities, principally the
FDA, and similar regulatory agencies in other countries, regulate the
preclinical testing, clinical trials, manufacture and promotion of any
compounds or agents we or our collaborative partners develop, and the
manufacturing and marketing of any resulting drugs. The drug development and
regulatory approval process is lengthy, expensive, uncertain and subject to
delays.

The regulatory risks we face also include the following:

.any compound or agent we or our collaborative partners develop must receive
regulatory agency approval before it may be marketed as a drug in a particular
country;

.the regulatory process, which includes preclinical testing and clinical trials
of each compound or agent in order to establish its safety and efficacy,
varies from country to country, can take many years and requires the
expenditure of substantial resources;

.in all circumstances, approval of the use of previously unapproved
radioisotopes in certain of our products requires approval of either the
Nuclear Regulatory Commission or equivalent state regulatory agencies. A
radioisotope is an unstable form of an element which undergoes radioactive
decay, thereby emitting radiation which may be used, for example, to image or
destroy harmful growths or tissue. We cannot assure you that such approvals
will be obtained on a timely basis, or at all;

.data obtained from preclinical and clinical activities are susceptible to
varying interpretations which could delay, limit or prevent regulatory agency
approval; and

.delays or rejections may be encountered based upon changes in regulatory
agency policy during the period of drug development and/or the period of
review of any application for regulatory agency approval. These delays could
adversely affect the marketing of any products we or our collaborative
partners develop, impose costly procedures upon our activities, diminish any
competitive advantages we or collaborative partners may attain and adversely
affect our ability to receive royalties.

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We cannot assure you that, even after this time and expenditure, regulatory
agency approvals will be obtained for any compound or agent developed by or in
collaboration with us. Moreover, regulatory agency approval for a drug or
agent may entail limitations on the indicated uses that could limit the
potential market for any such drug. Furthermore, if and when such approval is
obtained, the marketing, manufacture, labeling, storage and record keeping
related to our products would remain subject to extensive regulatory
requirements. Discovery of previously unknown problems with a drug, its
manufacture or its manufacturer may result in restrictions on such drug,
manufacture or manufacturer, including withdrawal of the drug from the market.
Failure to comply with regulatory requirements could result in fines,
suspension of regulatory approvals, operating restrictions and criminal
prosecution.

The U.S. Food, Drug and Cosmetics Act requires that our products be
manufactured in FDA registered facilities subject to inspection. The
manufacturer must be in compliance with cGMP, which imposes certain procedural
and documentation requirements upon us, and our manufacturing partners with
respect to manufacturing and quality assurance activities. If we or our
manufacturing partners do not comply with cGMP we may be subject to sanctions,
including fines, injunctions, civil penalties, recalls or seizures of
products, total or partial suspension of production, failure of the government
to grant premarket clearance or premarket approval for drugs, withdrawal of
marketing approvals and criminal prosecution.

We depend on attracting and retaining key personnel.

We are highly dependent on the principal members of our management and
scientific staff. The loss of their services might significantly delay or
prevent the achievement of development or strategic objectives. Our success
depends on our ability to retain key employees and to attract additional
qualified employees. Competition for personnel is intense, and we cannot
assure you that we will be able to retain existing personnel or attract and
retain additional highly qualified employees in the future.

We have an employee retention agreement with our President and Chief Executive
Officer, H. Joseph Reiser, Ph.D., which provides for vesting of stock options
for the purchase of shares of our common stock based on continued employment
and on the achievement of performance objectives defined by the board of
directors. We do not have similar retention agreements with our other key
personnel. If we are unable to hire and retain personnel in key positions, our
management and operations will suffer unless a qualified replacement can be
found.

Our business exposes us to potential liability claims that may exceed our
financial resources, including our insurance coverage, and may lead to the
curtailment or termination of our operations.

Our business is subject to product liability risks inherent in the testing,
manufacturing and marketing of our products. We cannot assure you that product
liability claims will not be asserted against us, our collaborators or our
licensees. While we currently maintain product liability insurance in amounts
we believe are adequate, we cannot assure you that such coverage will be
adequate to protect us against future product liability claims or that product
liability insurance will be available to us in the future on commercially
reasonable terms, if at all. Furthermore, we cannot assure you that we will be
able to avoid significant product liability claims and adverse publicity. If
liability claims against us exceed our financial resources we may have to
curtail or terminate our operations.

Our business involves environmental risks that may result in liability for us.

We are subject to a variety of local, state and federal government regulations
relating to storage, discharge, handling, emission, generation, manufacture
and disposal of toxic, infectious or other hazardous substances used to
manufacture our products. If we fail to comply with these regulations, we
could be liable for damages, penalties or other forms of censure.

If our patent applications do not result in issued patents, then our
competitors may obtain rights to commercialize our discoveries.

Our business and competitive positions are dependent upon our ability to
protect our proprietary technology. Because of the substantial length of time
and expense associated with development of new products, we, like the rest of
the biopharmaceutical industry, place considerable importance on obtaining and
maintaining patent and trade secret protection for new technologies, products
and processes. We have filed patent applications for our technology for
diagnostic and therapeutic products and the methods for their production and
use.

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The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including us, are generally uncertain and involve complex legal and
factual questions. Our patent applications may not protect our technologies and
products because of the following reasons:

.there is no guarantee that any of our pending patent applications will result
in additional issued patents;

.we may develop additional proprietary technologies that are not patentable;

.there is no guarantee that any patents issued to us, our collaborators or our
licensors will provide a basis for a commercially viable product;

.there is no guarantee that any patents issued to us or our collaborators will
provide us with any competitive advantage;

.there is no guarantee that any patents issued to us or our collaborators will
not be challenged, circumvented or invalidated by third parties; and

.there is no guarantee that any patents previously issued to others or issued
in the future will not have an adverse effect on our ability to do business.

In addition, patent law in the technology fields in which we operate is
uncertain and still evolving, and we cannot assure you as to the degree of
protection that will be afforded any patents we are issued or license from
others. Furthermore, we cannot assure you that others will not independently
develop similar or alternative technologies, duplicate any of our technologies,
or, if patents are issued to us, design around the patented technologies
developed by us. In addition, we could incur substantial costs in litigation if
we are required to defend ourselves in patent suits by third parties or if we
initiate such suits. We cannot assure you that, if challenged by others in
litigation, the patents we have been issued, or which we have been assigned or
have licensed from others will not be found invalid. We cannot assure you that
our activities would not infringe patents owned by others. Defense and
prosecution of patent matters can be expensive and time-consuming and,
regardless of whether the outcome is favorable to us, can result in the
diversion of substantial financial, managerial and other resources. An adverse
outcome could:

.subject us to significant liability to third parties;

.require us to cease any related research and development activities and
product sales; or

.require us to obtain licenses from third parties.

We cannot assure you that any licenses required under any such third-party
patents or proprietary rights would be made available on commercially
reasonable terms, if at all. Moreover, the laws of certain countries may not
protect our proprietary rights to the same extent as U.S. law.

The issuance of patents may not provide us with sufficient protection.

We depend on our patents and proprietary rights. 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. Our patents and the patents we license could be challenged by
litigation and, if the outcome of such litigation was adverse, competitors
could be free to use the subject matter covered by the patent, or we may
license the technology to others in settlement of such litigation. Invalidation
of our key patents or non-approval of pending patent applications could
increase competition. In addition, any application or exploitation of our
technology could infringe patents or proprietary rights of others and any
licenses that we might need as a result of such infringement might not be
available to us on commercially reasonable terms, if at all.

We cannot predict whether our or our competitors' pending patent applications
will result in the issuance of valid patents. Litigation, which could result in
substantial cost to us, may also be necessary to enforce our patent and
proprietary rights and/or to determine the scope and validity of others'
proprietary rights. We may participate in interference proceedings that may in
the future be declared by the Patent and Trademark Office to determine priority
of invention, which could result in substantial cost to us. The outcome of any

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litigation or interference proceeding might not be favorable to us, and we
might not be able to obtain licenses to technology that we require at a
reasonable cost, if at all.

We are a defendant in litigation filed against us in the United States Federal
Court for the District of New Jersey by M. David Goldenberg and Immunomedics,
Inc. We were served with this lawsuit on March 17, 2000. The litigation claims
that our ProstaScint product infringes a patent purportedly held by the
plaintiffs. We believe that the purported patent sought to be enforced in the
litigation has now expired. As a result, the claim, even if successful, would
not result in a bar of the continued sale of ProstaScint or affect any other of
our products or technology. However, given the uncertainty associated with
litigation, we cannot give any assurance that the litigation could not result
in a material expenditure to us.

The termination of one or more license agreements that are important in the
manufacture of our current products and new product research and development
activities would harm our business.

We are a party to license agreements under which we have rights to use
technologies owned by other companies in the manufacture of our products and in
our proprietary research, development and testing processes. We are the
exclusive licensee of certain patents and patent applications held by the
University of North Carolina at Chapel Hill covering part of the technology
used in the proteomics program and of certain patents and patent applications
held by the Memorial Sloan-Kettering Institute covering PSMA. We depend upon
the enforceability of our license with The Dow Chemical Company with respect to
Quadramet. If the licenses were terminated, we may not be able to find suitable
alternatives to this technology on timely or reasonable terms, if at all. The
loss of the right to use these technologies that we have licensed would
significantly harm our business.

We cannot be certain that our security measures protect our unpatented
proprietary technology.

We also rely upon trade secret protection for some of our confidential and
proprietary information that is not subject matter for which patent protection
is being sought. To help protect our rights, we require all employees,
consultants, advisors and collaborators to enter into confidentiality
agreements that require disclosure, and in most cases, assignment to us, of
their ideas, developments, discoveries and inventions, and that prohibit the
disclosure of confidential information to anyone outside Cytogen. We cannot
assure you, however, that these agreements will provide adequate protection for
our trade secrets, know-how or other proprietary information in the event of
any unauthorized use or disclosure.

If we make any acquisitions, we will incur a variety of costs and may never
realize the anticipated benefits.

If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. We currently have no commitments or agreements with
respect to any acquisitions other than those described in this prospectus. If
we do undertake any transaction of this sort, the process of integrating an
acquired business, technology, service or product may result in operating
difficulties and expenditures and may absorb significant management attention
that would otherwise be available for ongoing development of our business.
Moreover, we may never realize the anticipated benefits of any acquisition.
Future acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and amortization
expenses related to goodwill and other intangible assets. These factors could
adversely affect our results of operations and financial condition, which could
cause a decline in the market price of our common stock.

We may invest or spend the proceeds of this offering in ways with which you may
not agree.

We will retain broad discretion over the use of proceeds from this offering.
You may not agree with how we spend the proceeds, and our use of the proceeds
may not yield a significant return or any return at all. We intend to use a
majority of the proceeds from this offering to fund our operations, including
continued development, manufacturing and commercialization of our proteomics
technologies, research and development of additional products, expansion of our
sales and marketing capabilities, and for general corporate purposes, including
working capital and capital expenditures. Because of the number and variability
of factors that determine our use of the net proceeds from this offering, we
cannot assure you that these uses will not vary substantially from our
currently planned uses. Until we use the net proceeds of this offering for the
above purposes, we intend to invest the funds in investment grade, interest
bearing securities.

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Our stock price has been and may continue to be volatile, and your investment
in our stock could decline in value.

The market prices for securities of biotechnology and pharmaceutical companies
have historically been highly volatile, and the market has from time to time
experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. The market price of our
common stock has fluctuated over a wide range and may continue to fluctuate
for various reasons, including, but not limited to, announcements concerning
our competitors or us regarding:

.results of clinical trials;

.technological innovations or new commercial products;

.changes in governmental regulation or the status of our regulatory approvals
or applications;

.changes in earnings;

.changes in health care policies and practices;

.developments or disputes concerning proprietary rights;

.litigation or public concern as to safety of the our potential products; and

.changes in general market conditions.

We have adopted various anti-takeover provisions which may affect the market
price of our common stock.

Our Board of Directors has the authority, without further action by the
holders of common stock, to issue from time to time, up to 5,400,000 shares of
preferred stock in one or more classes or series, and to fix the rights and
preferences of the preferred stock. Pursuant to these provisions, we have
implemented a stockholder rights plan by which one preferred stock purchase
right is attached to each share of common stock, as a means to deter coercive
takeover tactics and to prevent an acquirer from gaining control of us without
some mechanism to secure a fair price for all of our stockholders if an
acquisition was completed. These rights will be exercisable if a person or
group acquires beneficial ownership of 20% or more of our common stock and can
be made exercisable by action of our board of directors if a person or group
commences a tender offer which would result in such person or group
beneficially owning 20% or more of our common stock. Each right will entitle
the holder to buy one one-thousandth of a share of a new series of our junior
participating preferred stock for $20. If any person or group becomes the
beneficial owner of 20% or more of our common stock (with certain limited
exceptions), then each right not owned by the 20% stockholder will entitle its
holder to purchase, at the right's then current exercise price, common shares
having a market value of twice the exercise price. In addition, if after any
person has become a 20% stockholder, we are involved in a merger or other
business combination transaction with another person, each right will entitle
its holder (other than the 20% stockholder) to purchase, at the right's then
current exercise price, common shares of the acquiring company having a value
of twice the right's then current exercise price.

We are subject to provisions of Delaware corporate law which, subject to
certain exceptions, will prohibit us from engaging in any "business
combination" with a person who, together with affiliates and associates, owns
15% or more of our common stock for a period of three years following the date
that the person came to own 15% or more of our common stock unless the
business combination is approved in a prescribed manner.

These provisions of the stockholder rights plan, our certificate of
incorporation, and of Delaware law may have the effect of delaying, deterring
or preventing a change in control of us, may discourage bids for our common
stock at a premium over market price and may adversely affect the market
price, and the voting and other rights of the holders, of our common stock.

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

39
<PAGE>

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

A large number of our shares are eligible for future sale which may adversely
impact the market price of our common stock.

A large number of shares of common stock already outstanding, or issuable upon
exercise of options and warrants, are eligible for resale, which may adversely
affect the market price of the common stock. As of March 13, 2000, we had
72,649,096 shares of common stock outstanding. An additional 4,580,331 shares
of common stock are issuable upon the exercise of outstanding stock options and
warrants. Substantially all of such shares subject to outstanding options will,
when issued upon exercise thereof, be available for immediate resale in the
public market pursuant to currently effective registration statements under the
Securities Act of 1933, as amended, or pursuant to Rule 701 promulgated
thereunder.

Berlex Laboratories, Inc. exercised its registration rights with respect to
1,000,000 shares of common stock and we are contractually obligated to register
these shares. We expect to file this registration statement in the immediate
future. Berlex has agreed not to sell its shares for 90 days following the date
of this prospectus. Following this 90-day period, Berlex may sell these shares
from time to time.

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

40
<PAGE>

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Cytogen Common Stock is traded on the NASDAQ National Market tier of The
NASDAQ Stock Market under the trading symbol "CYTO."

The table below sets forth the high and low sale prices for Cytogen common
stock for each of the calendar quarters indicated, as reported by the NASDAQ
National Market.

<TABLE>
<CAPTION>
1998 High Low
- ---- ---- -----
<S> <C> <C>
First Quarter.................................................. 2 7/16 1 1/4
Second Quarter................................................. 2 5/8
Third Quarter.................................................. 2 9/16 3/4
Fourth Quarter................................................. 1 7/8 11/16

1999
- ----
First Quarter.................................................. 1 1/2 27/32
Second Quarter................................................. 2 7/8
Third Quarter.................................................. 2 3/8 1 3/8
Fourth Quarter................................................. 3 23/64 1 3/8
</TABLE>

As of February 14, 2000, there were approximately 4,818 holders of record
of the common stock.

Cytogen has never paid any cash dividends on its common stock and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. The Company currently intends to retain any future earnings to fund the
development and growth of its business. Any future determination to pay
dividends will be at the discretion of the Company's board of directors.

41
<PAGE>

Item 6. Selected Financial Data

The following selected financial information has been derived from the
consolidated financial statements of the Company for each of the five years in
the period ended December 31, 1999, which have been audited by Arthur Andersen
LLP, the Company's independent public accountants. The selected financial data
set forth below should be read in conjunction with the consolidated financial
statements, including the notes thereto, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and other information provided
elsewhere in this report.

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------
Statements of Operations Data: (All amounts in thousands, except per share date)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales .................................... $ 6,971 $ 8,976 $ 5,252 $ 1,507 $ 1,377
Royalties ........................................ 1,060 1,664 3,282 - -
License and contract ............................. 3,171 9,239 5,886 4,223 3,608
-------- -------- -------- -------- --------
Total revenues ................................. 11,202 19,879 14,420 5,730 4,985
-------- -------- -------- -------- --------

Operating Expenses:
Cost of product and contract
manufacturing revenues (1)...................... 4,111 12,284 5,939 - -
Research and development .......................... 3,849 9,967 17,913 20,539 22,594
Acquisition of technology rights.................. 1,214 - - - 45,878
Equity loss in Targon subsidiary................... - 1,020 9,232 288 -
Selling and marketing ............................. 4,210 5,103 5,492 4,143 4,493
General and administrative......................... 3,501 7,420 6,871 5,494 4,804
-------- -------- -------- -------- --------
Total operating expenses ....................... 16,885 35,794 45,447 30,464 77,769
-------- -------- -------- -------- --------

Operating loss.................................. (5,683) (15,915) (31,027) (24,734) (72,784)

Gain on sale of laboratory and manufacturing
facilities........................................ 3,298 - - - -
Gain on sale of Targon subsidiary.................... - 2,833 - - -
Other income (expense) .............................. 412 (70) 315 968 264
-------- -------- -------- -------- --------
Loss before income taxes ...................... (1,973) (13,152) (30,712) (23,766) (72,520)
Income tax benefit .................................. (2,702) - - - -
-------- -------- -------- -------- --------
Net income (loss).................................... 729 (13,152) (30,712) (23,766) (72,520)
Dividends, including deemed
dividends on preferred stock...................... - (119) (1,352) (4,571) -
-------- -------- -------- -------- --------
Net income (loss) to common stockholders............. $ 729 $(13,271) $(32,064) $(28,337) $(72,520)
======== ======== ======== ======== ========
Basic and diluted net income (loss) per
common share..................................... $ 0.01 $ (0.24) $ (0.63) $ (0.59) $ (2.11)
======== ======== ======== ======== ========
Weighted average common shares outstanding
Basic ............................................ 67,179 56,419 51,134 48,401 34,333
======== ======== ======== ======== ========
Diluted .......................................... 68,187 56,419 51,134 48,401 34,333
======== ======== ======== ======== ========
</TABLE>

42
<PAGE>

<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
Consolidated Balance Sheet Data: 1999 1998 1997 1996 1995
--------- ------------ ---------- ------------ ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Cash, short term investments and
restricted cash ................................ $ 12,394 $ 3,015 $ 7,401 $ 24,765 $ 29,135
Total assets ........................................ 18,605 10,900 27,555 41,543 37,149
Long-term liabilities ............................... 2,416 2,223 10,171 1,855 3,275
Accumulated deficit ................................. (301,283) (302,012) (288,741) (256,677) (228,340)
Stockholders' equity ................................ 10,549 443 9,983 32,927 25,276
</TABLE>

(1) Prior to 1997, product sales were minimal and no revenues were derived from
contract manufacturing, therefore, cost of product sales was immaterial and
was included in research and development expenses.

43
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

Cytogen Corporation ("Cytogen" or "The Company" which includes the Company
and its subsidiaries) is an established biopharmaceutical company with two
principal lines of business, proteomics and oncology. The Company is extending
its expertise in antibodies and molecular recognition to the development of new
products and a proteomics-driven drug discovery platform. The Company has
established a pipeline of product candidates based upon its proprietary antibody
and prostate specific membrane antigen, or PSMA, technologies. Cytogen is also
developing a proprietary protein pathway database as a drug discovery and
development tool for the pharmaceutical and biotechnology industries.

Cytogen's cancer management franchise currently comprises three marketed
FDA-approved products: ProstaScint, used to image the extent and spread of
prostate cancer; OncoScint CR/OV, marketed as a diagnostic imaging agent for
colorectal and ovarian cancer and Quadramet, marketed for the relief of cancer-
related bone pain. The Company is extending its cancer pipeline by exploiting
PSMA, which Cytogen exclusively licensed from Memorial Sloan-Kettering Cancer
Center. PSMA is a unique antigen highly expressed in prostate cancer cells and
in the neovasculature of a variety of other solid tumors, including breast, lung
and colon. The Company is developing its PSMA technology as part of its approach
to offering a full range of prostate cancer management products and services
throughout the progression of the disease, including gene-based immunotherapy
vaccines, antibody-delivered therapeutic compounds and novel assays for
detection of primary prostate cancer. Cytogen also plans to apply its PSMA
technology, including therapeutics and in vitro diagnostics, toward other types
of cancer based upon the Company's experience in prostate cancer. The Company's
in vivo immunotherapeutic development program is being conducted in
collaboration with Progenics Pharmaceuticals, Inc.

Proteomics is the study of the expression and interaction of proteins.
Genomics is the study and identification of an organism's genetic makeup. While
genomics provides important information regarding genetic makeup, it does not
directly provide information regarding protein functions or protein
interactions. However, genomics data can prove useful in proteomics research as
a source of obtaining complete protein sequences of ligands the Company has
identified. Public availability of this genomic information allows for effective
integration in the Company's database of public and proprietary information. The
Company recognized in its past research that the key to understanding or
developing the means to intervene in diseases was primarily based on
understanding protein interactions rather than only through the use or study of
genomics. The Company undertook this approach on its own initiative and with its
own funds. Cytogen's proteomics program, under development by its subsidiary,
AxCell Biosciences Corporation, is focused on the identification of protein
interaction and signaling pathways within cells as relating to disease
processes.

The Company utilizes its proprietary proteomics technology to map selective
protein-protein interactions and to develop a database, called the Inter-
Functional Proteomic Database, or IFP Database, which includes data relating to
protein signaling pathways linked to a variety of other bioinformatic data. The
IFP Database is designed to permit customers to integrate existing databases,
both public and proprietary, with the Company's proprietary data to create a
"virtual laboratory" on the computer desktop of researchers involved in drug
discovery. The Company believes this database has significant potential
commercial value to the pharmaceutical and biotechnology industries as a means
of expediting drug target identification, validation, screen development and
lead compound optimization faster and cheaper than with current methodologies.
These proprietary technologies are designed to provide a platform from which the
Company can quickly and cost-effectively determine protein-protein interactions
and build pathways of intracellular signaling data. The Company's IFP Database
also offers a consolidated platform to enable statistical and mathematical
modeling of complex protein pathways.

Results of Operations

Years ended December 31, 1999, 1998 and 1997

Revenues. Total revenues were $11.2 million in 1999, $19.9 million in 1998
and $14.4 million in 1997. The decrease in 1999 from 1998 and 1997 was primarily
due to lower product related revenues, the phasing out of contract manufacturing
services and lower license and research revenues. Product related revenues,

44
<PAGE>

including product sales and royalty revenues, accounted for 72%, 54% and 59% of
revenues in 1999, 1998 and 1997, respectively. License and contract revenues
accounted for the remainder of revenues.

Product related revenues were $8.0 million, $10.6 million and $8.5 million
in 1999, 1998 and 1997, respectively. ProstaScint accounted for 79%, 60% and 48%
of the revenues in 1999, 1998 and 1997, respectively, while Quadramet royalties
and sales accounted for 13%, 31% and 38% of revenues in 1999, 1998 and 1997
respectively. Sales from ProstaScint were $6.4 million, $6.4 million and $4.1
million in 1999, 1998 and 1997, respectively. In the fourth quarter of 1999, the
Company began transitioning sales of ProstaScint from C.R. Bard, Inc. to
Cytogen's in-house sales force. The Company cannot give any assurance as to the
impact on sales by assuming the sole responsibility for marketing and sales of
ProstaScint. Royalties and sales from Quadramet were $1.1 million, $3.3 million
and $3.3 million in 1999, 1998 and 1997, respectively. From the time of product
launch in the second quarter of 1997 through June 1998, Cytogen recorded royalty
revenues for Quadramet based on minimum contractual payments, which were in
excess of actual sales. Subsequent to June 1998, the minimum royalty arrangement
was discontinued and Cytogen recorded product revenues from Quadramet based on
actual sales. Beginning in 1999, Quadramet royalties are based on net sales of
Quadramet by Berlex, Cytogen's marketing partner for Quadramet. Berlex
relaunched the product in March 1999. Although Cytogen believes that Berlex is
an advantageous marketing partner, there can be no assurance that Quadramet
will, following the re-launch of the product, achieve market acceptance on a
timely basis or result in significant revenues for Cytogen.

Other product revenues, including sales from OncoScint CR/OV, were
$620,000, $923,000 and $1.2 million in 1999, 1998 and 1997, respectively. Sales
from OncoScint CR/OV were $620,000, $872,000 and $950,000 in 1999, 1998 and
1997, respectively. The Company sells OncoScint CR/OV for diagnostic use in
ovarian and colorectal cancer. The Company is experiencing competition in the
colorectal market and expects this competition to increase. In 1998 and 1997,
other product revenues included $51,000 and $245,000, respectively from
autologous lymphocyte therapy ("ALT") treatments for metastatic renal cell
carcinoma. Due to the discontinuance of the program in September 1998, the
Company received no additional revenues from ALT treatments in 1999.

License and contract revenues for 1999, 1998 and 1997 were $3.2 million,
$9.2 million and $5.9 million, respectively, and included up-front licensing and
milestone payments, contract manufacturing and research revenues. License and
contract revenues have fluctuated in the past and may fluctuate in the future.
Revenues from up-front licensing and milestone payments were $2.0 million, $7.2
million and $2.1 million in 1999, 1998 and 1997, respectively. In 1999, the
Company recorded $1.8 million for the licensing of certain applications of
PSMA to a joint venture formed by Cytogen and Progenics Pharmaceuticals Inc.
(see Note 3 to the Consolidated Financial Statements). In 1998, the Company
recorded a $7.1 million up-front licensing payment from Berlex for the marketing
and manufacturing rights of Quadramet. In 1997, Cytogen received a $2.0 million
milestone payment from DuPont upon FDA approval of Quadramet.

Revenues from contract manufacturing and research revenues were $1.2
million, $2.0 million and $3.8 million in 1999, 1998 and 1997, respectively.
Revenues from contract manufacturing were $604,000, $1.7 million and $984,000 in
1999, 1998 and 1997, respectively. The Company is phasing out contract
manufacturing services and expects to receive no further revenues from this
service after 1999. The 1997 revenues included $1.5 million from DuPont
Pharmaceutical Company ("DuPont") for the continued clinical development of
Quadramet (see Note 6 of Notes to the Consolidated Financial Statements) and
$924,000 from Elan Corporation, plc ("Elan") for a combined research program
between Cytogen and Elan to collaboratively develop orally administered
products.

Operating Expenses. Total operating expenses were $16.9 million, $35.8
million and $45.4 million in 1999, 1998, and 1997, respectively. The 1999
decrease from 1998 and 1997 was the result of savings from the implementation of
the Company's restructuring plan. The plan, implemented in 1998 and completed in
1999, included the sale of the manufacturing facility which eliminated excess
capacity and reduced the cost of manufacturing the Company's products, closure
of Cellcor, a subsidiary, corporate downsizing, the termination of product

45
<PAGE>

development efforts through Targon, a subsidiary, and termination and curtailing
of certain basic research and clinical programs. The 1999 operating expenditures
included a $1.2 million non-cash charge for the acquisition of exclusive
technology rights for immunotherapy to PSMA from Prostagen Inc. ("Prostagen").
The 1998 operating expenses included $1.4 million of restructuring costs
associated with the closure of Cellcor and corporate downsizing, $539,000 in
costs related to the implementation of the Company's turn-around plan, $4.0
million for a Quadramet manufacturing commitment and $995,000 for manufacturing
and distribution of Quadramet. The 1997 operating expenses included a one-time
license fee of $7.5 million for the acquisition of a product from Elan and a
milestone payment of $4.0 million to The Dow Chemical Company ("Dow") upon the
FDA's marketing approval of Quadramet.

Costs of product and contract manufacturing revenues were $4.1 million,
$12.3 million and $5.9 million in 1999, 1998 and 1997, respectively. The 1999
decrease from 1998 and 1997 was due to decreased manufacturing costs associated
with decreased contract manufacturing activities in 1999 and lower manufacturing
costs for Cytogen products as a result of the sale of the manufacturing
facility. The 1999 decrease compared to 1998 is also due to the 1998 costs
associated with a one-time charge of $4.0 million for a Quadramet manufacturing
commitment and $995,000 for the manufacturing and distribution of Quadramet (see
Note 6 of Notes to the Consolidated Financial Statements).

Research and development expenses were $3.8 million in 1999, $10.0 million
in 1998 and $17.9 million in 1997. These expenses principally reflect product
development efforts and support for various ongoing clinical trials. The 1999
decrease from 1998 and 1997 is due to the curtailing of certain of the Company's
product development efforts including the closure of Cellcor, the termination of
basic research programs and the scale back of various clinical programs. The
1999 decrease from 1997 is also due to a $4.0 million milestone payment to Dow
upon FDA's marketing approval of Quadramet in 1997.

Acquisition of technology rights of $1.2 million in 1999 represents a
non-cash charge related to the acquisition of Prostagen (see Note 2 to the
Consolidated Financial Statements).

Equity losses in Targon subsidiary were $1.0 million and $9.2 million in
1998 and 1997, respectively. The Company sold Targon in 1998.

Selling and marketing expenses were $4.2 million, $5.1 million and $5.5
million in 1999, 1998 and 1997, respectively. These expenses reflect marketing
efforts for the ProstaScint and expenses to establish and maintain the Partners
in Excellence ("PIE") program. The 1999 decrease from 1998 and 1997 is due to
open sales positions and lower commission due Bard under the Co-Marketing
Agreement. The Company is phasing out this agreement to assume sole
responsibility for marketing and sales of ProstaScint. The transition is
expected to be concluded by mid-year 2000, with the Co-Marketing Agreement
will terminate at that time. The Company is currently expanding its sales
force in preparation for this change.

General and administrative expenses were $3.5 million, $7.4 million and
$6.9 million in 1999, 1998 and 1997, respectively. The 1999 decrease from 1998
and 1997 is due to various cost containing efforts in the Company's
restructuring plan implemented in 1999 and 1998 such as the closure of Cellcor
and corporate downsizing. The 1999 decrease from 1998 is also due to the 1998
restructuring costs of $1.9 million including severance and implementation of a
turn-around plan.

Gain on sale of laboratory and manufacturing facilities. The Company
recorded a gain of $3.3 million during 1999 resulting from a sale of certain of
the Company's laboratory and manufacturing facilities to Purdue Bio Pharma for
net proceeds of $3.6 million in January 1999.

Gain on sale of Targon subsidiary was $2.8 million in 1998 as a result of
the sale of Cytogen's ownership interest in Targon to Elan (see Note 4 of Notes
to the Consolidated Financial Statements).

46
<PAGE>

Interest Income/Expense. Interest income was $441,000, $582,000 and
$606,000 for 1999, 1998 and 1997, respectively. The 1999 decrease from 1998 and
1997 is due primarily to interest income realized beginning July 1997 from the
$10.0 million note from Targon payable to Cytogen. The note was canceled as a
result of the sale of Targon to Elan in August 1998 (see Note 4 of Notes to the
Consolidated Financial Statements).

Interest expense was $29,000, $652,000 and $291,000 in 1999, 1998 and
1997, respectively. The 1999 decrease from 1998 and 1997 was due to the
cancellation and satisfaction of liabilities associated with Elan and Knoll
Pharmaceuticals Company ("Knoll"), respectively. The $10.0 million note due to
Elan was canceled as a result of the sale of Targon to Elan in August 1998. The
Company paid the balance of the obligation to Knoll in December 1998.

Income tax benefit. During 1999, the Company sold New Jersey State
operating loss carryforwards and research and development credits which
resulted in the recognition of a $2.7 million tax benefit. Under the current
legislation, the Company will be able to sell at least $1.6 million of the
approved $5.6 million of tax benefits in 2000. The actual amount of tax credits
the Company may sell will depend upon the allocation among qualifying companies
of an annual pool established by the State of New Jersey.

Net Income/Loss. Net income to common stockholders was $729,000 in 1999
compared to a net loss of $13.3 million and $32.1 million in 1998 and 1997,
respectively. Basic and fully diluted net income per common share in 1999 was
$0.01 based on average common shares outstanding of 67.2 million for basic and
68.2 million for diluted. The net loss per common share is $0.24 and $0.63 in
1998 and 1997, respectively, based on 56.4 million and 51.1 million average
common shares outstanding in each year, respectively. The 1997 net loss was
increased by $1.4 million of deemed and accrued dividends on the Series B
Preferred Stock.

Liquidity and Capital Resources

The Company's cash, cash equivalents and short-term investments were $12.4
million as of December 31, 1999, compared to $3.0 million as of December 31,
1998 and $7.4 million as of December 31, 1997. The cash used for operating
activities in 1999 was $3.9 million compared to $8.0 million in the same period
of 1998. The decrease in cash used for operating activities from 1998 was
primarily due to lower spending in all areas as a result of the implementation
of the Company's restructuring plan.

Historically, the Company's primary sources of cash have been proceeds
from the issuance and sale of its stock through public offerings and private
placements, product related revenues, revenues from contract manufacturing and
research services, fees paid under license agreements and interest earned on
cash and short term investments. In February 2000, the Company received $1.0
million from Berlex for the exercise of a warrant to purchase 1,000,000 shares
of Cytogen common stock at $1.002 per share. In December 1999, the Company
received $2.7 million for the sale of New Jersey State tax losses and research
and development credits. Under the current legislation, the Company will be able
to sell at least $1.6 million of the approved $5.6 million of tax benefits in
2000. The actual amount of tax credits the Company may sell will depend upon the
allocation among qualifying companies of an annual pool established by the state
of New Jersey. In October 1999, the Company sold its undeveloped land in New
Jersey for net proceeds of $714,000.

In August 1999, the Company sold 3,105,590 shares of Cytogen common stock
at an aggregate price of $5.0 million or $1.61 per share to the State of
Wisconsin Investment Board. As a result of this funding, the Company terminated
the remaining $11.5 million of a $12 million equity line agreement with an
institutional investor that was entered into in October 1998. Previously, the
Company sold $500,000 of Cytogen common stock at $1.0519 per share under this
equity line agreement in January 1999.

47
<PAGE>

In connection with the acquisition of Prostagen in June 1999, the Company
received $550,000 in cash along with other assets held by Prostagen (see Note 2
to the Consolidated Financial Statements). During 1999, the Company received
payments of $1.0 million related to the licensing of PSMA technology to a joint
venture between Cytogen and Progenics. The remaining balance of $1.0 million
will be paid in installments through December 31, 2001 (see Note 3 to the
Consolidated Financial Statements).

In January 1999, the Company sold its manufacturing and laboratory
facilities for net proceeds of $3.6 million, of which $744,000 of the net
proceeds were used to repay the outstanding balance of a term loan entered in
1998. In addition, Cytogen sold 2,666,667 shares of common stock to a subsidiary
of The Hillman Company at $0.75 per share for a total of $2.0 million.

The Company expects to significantly increase the funding of AxCell for
the proteomics program in 2000. The operating requirement for AxCell will be
funded by Cytogen's existing cash balance. The capital requirement for AxCell
may be funded by a $1.4 million line-of-credit agreement entered into in
February 2000 between the Company and Finova Capital Corporation ("Finova
Facility"). From time to time, until November 2000, the Company will draw on the
Finova Facility ("Each Loan") to finance the acquisition of computers and
equipment. Each Loan will have a fixed term of 42 months at an interest rate
equal to 8.65% plus the Index Rate and will be collateralized by the newly
purchased equipment.

The Company's capital and operating requirements may change depending upon
various factors, including: (i) whether the Company and its strategic partners
achieve success in manufacturing, marketing and commercialization of its
products; (ii) the amount of resources which the Company devotes to clinical
evaluations and the expansion of marketing and sales capabilities; (iii) results
of clinical trials and research and development activities; and (iv) competitive
and technological developments, in particular the Company may expend funds for
development of its proteomics and PSMA technologies.

The Company's financial objectives are to meet its capital and operating
requirements through revenues from existing products, license and research
contracts, and control of spending. To achieve its strategic objectives, the
Company may enter into research and development partnerships and acquire, in-
license and develop other technologies, products or services. Certain of these
strategies may require payments by the Company in either cash or stock in
addition to the costs associated with developing and marketing a product or
technology. The Company currently has no commitments or specific plans for
acquisitions or strategic alliances. However, the Company believes that, if
successful, such strategies may increase long-term revenues. There can be no
assurance as to the success of such strategies or that resulting funds will be
sufficient to meet cash requirements until product revenues are sufficient to
cover operating expenses. To fund these strategic and operating activities, the
Company may sell equity and debt securities as market conditions permit or enter
into credit facilities.

The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to implement its planned product development efforts,
including acquisition of products and complementary technologies, research and
development, clinical studies and regulatory activities, and to further its
marketing and sales programs. The Company expects that its existing capital
resources as of December 31, 1999, together with the net proceeds of $1.0
million from a sale of equity to Berlex in February 2000 and decreased operating
costs will be adequate to fund the Company's operations through the year 2001.
No assurance can be given that the Company will not consume a significant amount
of its available resources before that time. In addition, the Company expects
that it will have additional requirements for debt or equity capital,
irrespective of whether and when it reaches profitability, for further
development of products, product and technology acquisition costs, and working
capital.

48
<PAGE>

The Company's future capital requirements and the adequacy of available
funds will depend on numerous factors, including the successful
commercialization of its products, the costs associated with the acquisition of
complementary products and technologies, progress in its product development
efforts, the magnitude and scope of such efforts, progress with clinical trials,
progress with regulatory affairs activities, the cost of filing, prosecuting,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, and the expansion of strategic
alliances for the sales, marketing, manufacturing and distribution of its
products. To the extent that the currently available funds and revenues are
insufficient to meet current or planned operating requirements, the Company will
be required to obtain additional funds through equity or debt financing,
strategic alliances with corporate partners and others, or through other
sources. Based on the Company's historical ability to raise capital and current
market conditions, the Company believes other financing alternatives are
available. There can be no assurance that the financing commitments described
above or other financial alternatives will be available when needed or at terms
commercially acceptable to the Company or that the Company would have adequate
authorized unissued shares available for issuance without stockholder approval.
If adequate funds are not available, the Company may be required to delay,
further scale back or eliminate certain aspects of its operations or attempt to
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies, product
candidates, products or potential markets. If adequate funds are not available,
the Company's business, financial condition and results of operations will be
materially and adversely affected.

Year 2000 Compliance

The "Year 2000 problem" describes the concern that certain computer
applications, which use two digits rather than four to represent dates, will
interpret the year 2000 as 1900 and malfunction on or after January 1, 2000.

Cytogen's Internal Systems. The Company's programs and systems did not
fail or malfunction upon the arrival of January 1, 2000. The Company internal
systems were modified and replaced with fully compliant systems, prior to
December 31, 1999. The Company believes that it has achieved its goals regarding
year 2000 compliance on all of its critical and non-critical systems.

Readiness of Third Parties. The Company worked with its processing banks,
network providers and manufacturing partners to ascertain that their systems
were year 2000 compliant.

Risks Associated with the Year 2000. The Company is not aware, at this
time, of any year 2000 non-compliance issues that were not addressed and
repaired prior to December 31, 1999.

Recently Enacted Accounting Pronouncements

In December 1999, the Securities and Exchange Commission staff issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB 101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be applied, and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. The Company is evaluating SAB 101 and the effect it may have
on the Company's financial position or results of operations.

49
<PAGE>

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

The Company does not have operations subject to risks of foreign currency
fluctuations, nor does it use derivative financial instruments in its operations
or investment portfolio. The Company does not have exposure to market risks
associated with changes in interest rates, as it has no variable interest rate
debt outstanding. The Company does not believe it has any other material
exposure to market risks associated with interest rates.

Item 8. Financial Statements and Supplementary Data

The response to Item 8 is submitted as a separate section of this Form
10-K

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

PART III

Item 10. Directors and Executive Officers of the Registrant

Information regarding the Company's Directors is incorporated by reference
to the information contained under the captions "Nominees for Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy
Statement. Information regarding the Company's Executive Officers is set forth
in Part I of this Form 10-K.

Item 11. Executive Compensation

Incorporated by reference to the information contained under the caption
"Executive Compensation" in the Company's Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Incorporated by reference to the information contained under the caption
"Security Ownership of Management and Principal Stockholders" in the Company's
Proxy Statement.

Item 13. Certain Relationships and Related Transactions

In June 1999, Cytogen entered into an agreement with S. Leslie Misrock, and
others, to reacquire rights for immunotherapy to its PSMA technology by
acquiring Prostagen, Inc., of which Mr. Misrock was a principal holder. Mr.
Misrock was elected to the Board of Directors of the Company in August 1999. In
connection with the acquisition, Mr. Misrock received shares of the Company's
common stock. The Company may also issue additional shares upon completion of
certain objectives, including up to 450,000 shares of Cytogen common stock upon
the satisfactory termination of lease obligations assumed in the acquisition; up
to 500,000 shares upon beneficial resolution of other contractual arrangements
entered by Prostagen; and up to an additional $4.0 million in shares of Cytogen
common stock (calculated at the time of issuance) if certain milestones are
achieved in development of the PSMA technology. Mr. Misrock would receive a
portion of these shares.

50
<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Documents filed as a part of the Report:

(1) and (2)

The response to this portion of Item 14 is submitted as a separate section of
this Form 10-K.

(3) Exhibits --
--------

Exhibit No.
-----------

1.1 - Rights Agreement, dated as of June 19, 1998, between
Cytogen Corporation and Chase Mellon Shareholder
Services, L.L.C., as Rights Agent. The Rights Agreement
included the Form of Certificate of Designations of
Series C Junior Preferred Stock as Exhibit A, the form
of Rights Certificate as Exhibit B and the Summary of
Rights as Exhibit C. Filed as an exhibit to Form 8-K
dated June 17, 1998 (Commission File No. 333-020015)
and incorporated herein by reference.

1.2 - Amended and Restated Rights Agreement, dated as of
October 19, 1998 between Cytogen Corporation and Chase
Mellon Shareholder Services, L.L.C., as Rights Agent.
The Amended and Restated Rights Agreement includes the
Form of Certificate of Designations of Series C Junior
Preferred Stock as Exhibit A, the form of Rights
Certificate as Exhibit B and the Summary of Rights as
Exhibit C. Filed as an exhibit to Form 10-Q Quarterly
Report for the quarter ended September 30, 1998
(Commission File No. 333-02015) and incorporated herein
by reference.

3.1 - Restated Certificate of Incorporation of Cytogen
Corporation, as amended. Filed as an exhibit to Form
10-Q Quarterly Report for the quarter ended June 30,
1996 (Commission File No. 0-14879) and incorporated
herein by reference.

3.2 - By-Laws of Cytogen Corporation, as amended. Filed as an
exhibit to Form 10-Q Quarterly Report for the quarter
ended June 30, 1999 (Commission File No. 333-02015) and
incorporated herein by reference.

4.1 - Specimen of Common Stock Certificate. Filed as an
exhibit to Amendment No. 1 to Form S-1 Registration
Statement (No. 33-5533) and incorporated herein by
reference.

10.1 - Form of Registration Rights Agreement for Common Stock
between Cytogen Corporation and certain persons listed
on Schedule A thereto. Filed as an exhibit to Form S-4
Registration Statement (No. 33-62617) and incorporated
herein by reference.

10.2.1 - Lease Agreement, dated as of March 16, 1987, by and
between Peregrine Investment Partners I, as lessor, and
Cytogen Corporation, as lessee. Filed as an exhibit to
Form 10-K Annual Report for Year Ended January 2, 1988
(Commission File No. 0-14879) and incorporated herein
by reference.

51
<PAGE>

10.2.2 - Amendment, dated as of October 16, 1987, to Lease
Agreement between Peregrine Investment Partners I and
Cytogen Corporation. Filed as an exhibit to Form S-8
Registration Statement (No. 33-30595) and incorporated
herein by reference.

10.3 - 1989 Employee Stock Option Plan. Filed as an exhibit to
Form S-8 Registration Statement (No. 33-30595) and
incorporated herein by reference.+

10.4.1 - 1988 Stock Option Plan for Non-Employee Directors.
Filed as an exhibit to Form S-8 Registration Statement
(No. 33-30595) and incorporated herein by reference.+

10.4.2 - Amendment to the Cytogen Corporation 1988 Stock Option
Plan for Non-Employee Directors dated May 22, 1996.
Filed as an exhibit to Form 10-Q Quarterly Report for
the quarter ended June 30, 1996 (Commission File No. 0-
14879) and incorporated herein by reference.+

10.5 - Standard Form of Indemnification Agreement entered into
between Cytogen Corporation and its officers,
directors, and consultants. Filed as an exhibit to
Amendment No. 1 to Form S-1 Registration Statement (No.
33-31280) and incorporated herein by reference.+

10.6 - 1989 Stock Option Policy for Outside Consultants. Filed
as an exhibit to Amendment No. 1 to Form S-1
Registration Statement (No. 33-31280) and incorporated
herein by reference.+

10.7.1 - License Agreement dated as of March 31, 1993 between
Cytogen Corporation and The Dow Chemical Company. Filed
as an exhibit to Form 10-Q/A-1 Amendment to Quarterly
Report for the quarter ended July 3, 1993 (Commission
File No. 0-14879) and incorporated herein by
reference.*

10.7.2 - Amendment of the License Agreement between Cytogen
Corporation and The Dow Chemical Company dated
September 5, 1995. Filed as an exhibit to Form 10-Q
Quarterly Report for the quarter ended March 31, 1996
(Commission File No. 0-14879) and incorporated herein
by reference.*

10.7.3 - Second Amendment to the License Agreement between
Cytogen Corporation and The Dow Chemical Company dated
May 20, 1996. Filed as an exhibit to Form 10-Q/A-1
Amendment to Quarterly Report for the quarter ended
June 30, 1996 (Commission File No. 0-14879) and
incorporated herein by reference.*

10.8 - 1992 Cytogen Corporation Employee Stock Option Plan II,
as amended. Filed as an exhibit to Form S-4
Registration Statement (No. 33-88612) and incorporated
herein by reference. +

10.9 - License Agreement, dated March 10, 1993, between
Cytogen Corporation and The University of North
Carolina at Chapel Hill, as amended. Filed as an
exhibit to Form 10-K Annual Report for the year ended
December 31, 1994 (Commission File No. 0-14879) and
incorporated herein by reference.*

10.10 - Option and License Agreement, dated July 1, 1993,
between Cytogen Corporation and Sloan-Kettering
Institute for Cancer Research. Filed as an exhibit to
Form 10-K Annual Report for the year ended December 31,
1994 (Commission File No. 0-14879) and incorporated
herein by reference.*

52
<PAGE>

10.11.1 - Cytogen Corporation 1995 Stock Option Plan. Filed as an exhibit
to Form 10-K Annual Report for the year ended December 31, 1995
(Commission File No. 0-14879) and incorporated herein by
reference.

10.11.2 - Amendment No. 1 to the Cytogen Corporation 1995 Stock Option
Plan dated May 22, 1996. Filed as an exhibit to Form 10-Q
Quarterly Report for the quarter ended June 30, 1996 (Commission
File No. 0-14879) and incorporated herein by reference.+

10.12 - Horosziewicz - Cytogen Agreement, dated April 20, 1989, between
Cytogen Corporation and Julius S. Horosziewicz, M.D., DMSe.
Filed as an exhibit to Form 10-K Annual Report for the year
ended December 31, 1995 (Commission File No. 0-14879) and
incorporated herein by reference.*

10.13 - Marketing and Co-Promotion Agreement between Cytogen Corporation
and C.R. Bard, Inc. effective August 1, 1996. Filed as an
exhibit to Form 10-Q Quarterly Report for the quarter ended
September 30, 1996 (Commission File No. 0-14879) and
incorporated herein by reference.*

10.14 - Severance Agreement effective as of March 26, 1996 between
Cytogen Corporation and John D. Rodwell, Ph.D. Files as an
exhibit to Form 10-K Annual Report for the year ended December
31, 1996 (Commission File No. 0-14879) and incorporated herein
by reference. +

10.15 - Cytogen Corporation Employee Stock Purchase Plan. Filed as an
exhibit to Form S-8 Registration Statement (No. 333-27673) and
incorporated herein by reference. +

10.16 - License Agreement between Targon Corporation and Elan
Corporation, plc dated July 21, 1997. Filed as an exhibit to
Form 10Q Quarterly Report for the quarter ended June 30, 1997
(Commission File No. 0-14879) and incorporated herein by
reference.*

10.17 - Employment Agreement effective as of December 23, 1996 between
Cytogen Corporation and Dr. Graham S. May. Filed as an exhibit
to Form 10-K/A-1 Amendment to Annual Report for the Year Ended
December 31, 1997 (Commission File No. 333-02015) and
incorporated herein by reference. +

10.18 - Convertible Promissory Note dated as of August 12, 1998 between
Cytogen Corporation and Elan International Services, Ltd. Filed
as an exhibit to Form 10-Q Quarterly Report for the quarter
ended June 30, 1998 (Commission File No. 333-02015) and
incorporated herein by reference.

10.19 - Employment agreement effective as of August 20, 1998 between
Cytogen Corporation and H. Joseph Reiser. Filed as an exhibit to
Form 10-Q Quarterly Report for the quarter ended September 30,
1998 (Commission File No. 333-02015) and incorporated herein by
reference. +

10.21 - License Agreement by and between Berlex Laboratories, Inc. and
Cytogen Corporation dated as of October 28, 1998. Filed as an
exhibit to Form 10-Q/A-1 Amendment to Quarterly Report for the
quarter ended September 30, 1998 (Commission File No. 333-02015)
and incorporated herein by reference.

53
<PAGE>

10.22 - Manufacturing Space Agreement between Bard BioPharma L.P. and
Cytogen Corporation dated as of January 7, 1999. Filed as an
exhibit to Form S-1/A-1 Amendment to Registration Statement
(Commission File No. 333-67947) and incorporated herein by
reference.

10.23 - Employment Agreement effective as of June 10, 1997 between
Cytogen Corporation and Donald F. Crane, Jr. Filed herewith.+

10.24 - The 1999 Cytogen Corporation Non-Employee Directors Stock Option
Plan. Filed as an exhibit to Form 10-Q Quarterly Report for the
quarter ended June 30, 1999 (Commission File No. 333-02015) and
incorporated herein by reference.+

10.25 - Strategic Alliance Agreement between AxCell Biosciences
Corporation and InforMax, Inc. dated as of September 15, 1999.
Filed herewith.**

10.26 - AxCell Biosciences Corporation Employee Stock Option Plan. Filed
herewith.+

10.27 - Master Loan and Security Agreement No. S7600 among Cytogen
Corporation, AxCell Biosciences Corporation and Finova Capital
Corporation dated December 30, 1999. Filed herewith.

21 - Subsidiaries of Cytogen Corporation.

23 - Consent of Arthur Andersen LLP.

27 - Financial Data Schedule (submitted to SEC only in electronic
format).

+ Management contract or compensatory plan or arrangement.

* Cytogen Corporation has received confidential treatment of certain provisions
contained in this exhibit pursuant to an order issued by the Securities and
Exchange Commission. The copy filed as an exhibit omits the information
subject to the confidentiality grant.

**Cytogen Corporation has requested confidential treatment of certain provisions
contained in this exhibit. The copy filed as an exhibit omits the information
subject to the confidential request.

(b) Reports on Form 8-K:

None.

The Exhibits filed with this Form 10-K are listed above in response
to Item 14(a)(3).

(d) Financial Statement Schedules:

None

54
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 27th day of
March 2000.

Cytogen Corporation

By: /s/ H. Joseph Reiser
-------------------------------
H. Joseph Reiser
President and Chief Executive Officer

55
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ H. Joseph Reiser Chief Executive Officer and President March 28, 2000
-------------------------------
H. Joseph Reiser (Principal Executive Officer), and
Director

/s/ Jane M. Maida Vice President Finance & Administration March 28, 2000
-------------------------------
Jane M. Maida

/s/ John E. Bagalay, Jr. Director March 28, 2000
-------------------------------
John E. Bagalay, Jr.

/s/ Ronald J. Brenner Director March 28, 2000
-------------------------------
Ronald J. Brenner

/s/ Stephen K. Carter Director March 28, 2000
-------------------------------
Stephen K. Carter

/s/ James A. Grigsby Director and Chairman of the Board March 28, 2000
-------------------------------
James A. Grigsby

/s/ Robert F. Hendrickson Director March 28, 2000
-------------------------------
Robert F. Hendrickson

/s/ S. Leslie Misrock Director March 28, 2000
-------------------------------
S. Leslie Misrock
</TABLE>

56
<PAGE>

Annual Report on Form 10-K

Year Ended December 31, 1999

Item 8, Item 14(a)(1) and (2)

Cytogen Corporation

Princeton, New Jersey

57
<PAGE>

Form 10-K Item 14(a)(1) and (2)

Cytogen CORPORATION AND SUBSIDIARIES

(1) Consolidated Financial Statements
---------------------------------

The following consolidated financial statements of Cytogen Corporation
and Subsidiaries together with the related notes and report of Arthur Andersen
LLP, independent public accountants.

<TABLE>
<CAPTION>
Page in
Form 10-K
<S> <C>
Report of Independent Public Accountants.............................................. 21

Consolidated Balance Sheets as of December 31, 1999 and 1998 ......................... 22

Consolidated Statements of Operations--Years Ended December 31, 1999, 1998
and 1997......................................................................... 23

Consolidated Statements of Stockholders' Equity--Years Ended December 31, 1999,
1998 and 1997.................................................................... 24

Consolidated Statements of Cash Flows--Years Ended December 31, 1999, 1998
and 1997......................................................................... 25

Notes to Consolidated Financial Statements............................................ 26
</TABLE>

58
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Cytogen Corporation:

We have audited the accompanying consolidated balance sheets of Cytogen
Corporation (a Delaware Corporation) and Subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. 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 Cytogen Corporation and
Subsidiaries as of December 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Philadelphia, PA
January 27, 2000

59
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(all amounts in thousands, except share data)

<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents.......................................... $ 10,801 $ 3,015
Short-term investments............................................. 1,593 -
Receivable on common stock sold.................................... - 2,500
Accounts receivable, net........................................... 2,150 1,362
Inventories........................................................ 685 250
Other current assets............................................... 465 330
--------- ---------

Total current assets............................................ 15,694 7,457

Property and Equipment, net.......................................... 1,997 2,625
Other Assets......................................................... 914 818
--------- ---------

$ 18,605 $ 10,900
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current portion of long-term liabilities........................... $ 162 $ 848
Accounts payable and accrued liabilities........................... 5,478 7,386
--------- ---------

Total current liabilities....................................... 5,640 8,234
--------- ---------

Long-Term Liabilities................................................ 2,416 2,223
--------- ---------

Commitments and Contingencies (Notes 7 and 17)

Stockholders' Equity:
Preferred stock, $.01 par value, 5,400,000 shares authorized -
Series C Junior Participating Preferred Stock, $.01 par value,
200,000 shares authorized, none issued and outstanding........ - -

Common stock, $.01 par value, 89,600,000 shares authorized,
70,527,000 and 61,950,000 shares issued and outstanding
in 1999 and 1998, respectively................................ 705 619
Additional paid-in capital......................................... 311,209 301,836
Deferred compensation.............................................. (82) -
Accumulated deficit................................................ (301,283) (302,012)
--------- ---------

Total stockholders' equity...................................... 10,549 443
--------- ---------

$ 18,605 $ 10,900
========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

60
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in thousands, except per share data)

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Product related:
ProstaScint....................................................... $ 6,351 $ 6,378 $ 4,057
Quadramet......................................................... - 1,675 -
Others............................................................ 620 923 1,195
-------- -------- --------
Total product sales......................................... 6,971 8,976 5,252

Quadramet royalties............................................... 1,060 1,664 3,282
-------- -------- --------
Total product related....................................... 8,031 10,640 8,534

License and contract.................................................. 3,171 9,239 5,886
-------- -------- --------
Total revenue...............................................
11,202 19,879 14,420
-------- -------- --------

Operating Expenses:
Cost of product and contract manufacturing revenues................... 4,111 12,284 5,939
Research and development.............................................. 3,849 9,967 17,913
Acquisition of technology rights...................................... 1,214 - -
Equity loss in Targon subsidiary...................................... - 1,020 9,232
Selling and marketing................................................. 4,210 5,103 5,492
General and administrative............................................ 3,501 7,420 6,871
-------- -------- --------

Total operating expenses.................................... 16,885 35,794 45,447
-------- -------- --------

Operating loss.............................................. (5,683) (15,915) (31,027)

Gain on sale of laboratory and manufacturing facilities................. 3,298 - -
Gain on sale of Targon subsidiary....................................... - 2,833 -
Interest income......................................................... 441 582 606
Interest expense........................................................ (29) (652) (291)
-------- -------- --------

Loss before income taxes.................................... (1,973) (13,152) (30,712)
Income tax benefit...................................................... (2,702) - -
-------- -------- --------

Net income (loss)....................................................... 729 (13,152) (30,712)
Dividends, including deemed dividends on preferred stock................ - (119) (1,352)
-------- -------- --------
Net income (loss) to common stockholders................................ $ 729 $(13,271) $(32,064)
======== ======== ========

Net income (loss) per common share
Basic....................................................... $ 0.01 $ (0.24) $ (0.63)
======== ======== ========
Diluted..................................................... $ 0.01 $ (0.24) $ (0.63)
======== ======== ========
Weighted average common shares outstanding
Basic....................................................... 67,179 56,419 51,134
======== ======== ========
Diluted..................................................... 68,187 56,419 51,134
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

61
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'EQUITY
(All amounts in thousands, except share data)

<TABLE>
<CAPTION>
Unrealized
Gain
Additional Deferred (Loss) on Acc- Total
Common Paid-in Compel- Short-Term umlauted Stockholders'
Stock Capital station Investments Deficit Equity
---------- --------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>

Balance, December 31, 1996 $511 $ 289,098 $ - $ (5) $ (256,677) $ 32,927

Sale of 750 shares of Series B preferred
stock.................................... - 7,455 - - - 7,455
Sale of 100,282 shares of common
stock.................................... 1 335 - - - 336
Series B preferred stock conversion discount
deemed dividends......................... - 1,324 - - (1,324) -
Accrued dividends on Series B preferred
stock.................................... - - - - (28) (28)
Unrealized gain on investments.............. - - - 5 - 5
Net loss.................................... - - - - (30,712) (30,712)
---------- --------- --------- ------------ ----------- -------------

Balance, December 31, 1997.................. 512 298,212 - - (288,741) 9,983

Sale of 3,403,011 shares of common
stock.................................... 34 2,583 - - - 2,617
Dividends on Series B preferred
stock.................................... - - - - (119) (119)
Issuance of 7,377,054 shares of common stock
Upon conversion of Series B preferred
stock and accumulated dividends......... 73 55 - - - 128
Sale of warrants to purchase 1,000,000
shares of common stock................... - 855 - - - 855
Modification of existing warrants to
purchase
260,000 shares of common stock........... - 131 - - - 131
Net loss.................................... - - - - (13,152) (13,152)
---------- --------- --------- ------------ ----------- -------------

Balance, December 31, 1998 619 301,836 - - (302,012) 443

Issuance of 2,050,000 shares of common stock
in connection with the acquisition of
Prostagen, Inc........................... 21 1,824 - - - 1,845
Sale of 6,527,002 shares of common
stock.................................... 65 7,244 - - - 7,309
Issuance of options and warrants to purchase
338,778 shares of common stock........... - 221 - - - 221
Deferred compensation related to stock
options.................................. - 84 (84) - - -
Amortization of deferred
compensation............................. - - 2 - - 2
Net income.................................. - - - - 729 729
---------- --------- --------- ------------ ----------- -------------

Balance, December 31, 1999.................. $705 $ 311,209 $ (82) $ - $ (301,283) $ 10,549
========== ========= ========= ============ =========== =============
</TABLE>

The accompanying notes are an integral part of these statements.

62
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)

Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................................................ $ 729 $(13,152) $(30,712)
-------- -------- --------
Adjustments to reconcile net income (loss) to cash used in
operating activities:
Acquisition of technology rights............................................... 1,214 - -
Depreciation and amortization.................................................. 1,051 1,196 1,513
Imputed interest............................................................... (59) 81 261
Warrant, stock and stock option grants......................................... 221 163 45
Write down of property and equipment........................................... 79 657 384
Gain on sale of laboratory and manufacturing facilities........................ (3,298) - -
Gain on sale of Targon subsidiary.............................................. - (2,833) -
Gain on sale of land........................................................... (54) - -
Equity loss in Targon subsidiary............................................... - 1,020 9,232
Changes in assets and liabilities
Accounts receivable, net.................................................... (715) 2,702 (3,625)
Inventories................................................................. (435) 193 (185)
Other assets................................................................ (97) 4 (74)
Accounts payable and accrued liabilities.................................... (2,659) 1,944 727
Other liabilities........................................................... 146 - -
-------- -------- --------

Total adjustments...................................................... (4,606) 5,127 8,278
-------- -------- --------

Net cash used in operating activities....................................... (3,877) (8,025) (22,434)
-------- -------- --------

Cash Flows From Investing Activities:
Net cash acquired from Prostagen, Inc. (see Note 2).............................. 550 - -
Net proceeds from sale of laboratory and manufacturing facilities................ 3,584 - -
Net proceeds from the sale of land............................................... 714 - -
(Increase) decrease in short-term investments.................................... (1,593) - 4,474
Purchases of property and equipment.............................................. (523) (100) (621)
Investment in Targon subsidiary.................................................. - - (10,000)
Proceeds from sale of Targon subsidiary.......................................... - 2,000 -
-------- -------- --------
Net cash provided by (used in) investing activities......................... 2,732 1,900 (6,147)
-------- -------- --------

Cash Flows From Financing Activities:
Proceeds from issuance of notes payable.......................................... - 2,750 10,000
Payments of long-term liabilities................................................ (878) (1,898) (2,030)
Proceeds from issuance of common stock........................................... 9,809 51 261
Proceeds from issuance of Series B preferred stock............................... - - 7,455
Dividends on Series B preferred stock............................................ - (19) -
Proceeds from issuance of warrant................................................ - 855 -
-------- -------- --------
Net cash provided by financing activities................................... 8,931 1,739 15,686
-------- -------- --------

Net increase (decrease) in cash and cash equivalents............................. 7,786 (4,386) (12,895)
Cash and cash equivalents, beginning of year..................................... 3,015 7,401 20,296
-------- -------- --------
Cash and cash equivalents, end of year........................................... $ 10,801 $ 3,015 $ 7,401
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

63
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Business

Proteomics is the study of the expression and interaction of proteins.
Genomics is the study and identification of an organism's genetic makeup. While
genomics provides important information regarding genetic makeup, it does not
directly provide information regarding protein functions or protein
interactions. However, genomics data can prove useful in proteomics research as
a source of obtaining complete protein sequences of ligands the Company has
identified. Public availability allows for effective integration in the
Company's database of public and proprietary information. The Company recognized
in its past research that the key to understanding or developing the means to
intervene in diseases was primarily based on understanding protein interactions
rather than only through the use or study of genomics. The Company undertook
this approach on its own initiative and with its own funds. Cytogen's proteomics
program, under development by its subsidiary, AxCell Biosciences Corporation, is
focused on the identification of protein interaction and signaling pathways
within cells as relating to disease processes.

Basis of Consolidation

The consolidated financial statements include the accounts of Cytogen and
its wholly owned subsidiaries, AxCell Biosciences Corporation ("AxCell"),
Cellcor Inc. ("Cellcor") and Prostagen Inc. ("Prostagen"). The financial
statements also included the investment results of Targon Corporation
("Targon"), which were accounted for on the equity method (see Investment in
Targon Subsidiary). Intercompany balances and transactions have been eliminated
in consolidation. In the third quarter of 1998, the Company sold Targon and
closed Cellcor.

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.

Statement of Cash Flow

Cash and cash equivalents include cash on hand; cash in banks and all
highly liquid investments with maturity of three months or less at the time of
purchase. Cash paid for interest expense was $44,000, $500,000 and $524,000 in
1999, 1998, and 1997, respectively. During 1999, the Company purchased $223,000
of equipment under various capital leases.

64
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Short-Term Investments

At December 1999, the Company's short-term investments are classified as
available for sale and are carried at fair value based on quoted market prices.

Receivables

At December 31, 1999 and 1998, accounts receivable were net of an allowance
for doubtful accounts of $83,000 and $73,000, respectively. The Company charged
to expense $10,000 and $23,000 as a provision for doubtful accounts in 1999 and
1998, respectively. At December 31, 1999, approximately $870,000 of the
Company's accounts receivable balance was due from Progenics Pharmaceuticals,
Inc. ("Progenics") to be paid in installments through December 31, 2001 (see
Note 3).

At December 31, 1998, the Company had a $2.5 million receivable due from
The State of Wisconsin Investment Board relating to a sale of Cytogen common
stock. The Company received the proceeds from the stock sale in January 1999
(see Note 11).

Inventory

The Company's inventory is primarily related to ProstaScint and OncoScint
CR/OV. Inventory is stated at the lower of cost or market using the first-in,
first-out method and consisted of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Raw materials ..................... $ 529,000 $ 57,000
Work-in process ................... 28,000 143,000
Finished goods .................... 128,000 50,000
--------- ---------
$ 685,000 $ 250,000
========= =========
</TABLE>

Property and Equipment

Equipment and furniture are stated at cost, net of depreciation and a
$102,000 reserve for idle equipment. Leasehold improvements are amortized on a
straight-line basis over the lease period or the estimated useful life,
whichever is shorter. Equipment and furniture are depreciated on a straight-line
basis over five years. Expenditures for repairs and maintenance are charged to
expense as incurred. Property and equipment consisted of the following:

<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
----------- ------------
<S> <C> <C>
Leasehold improvements ............................. $ 3,196,000 $ 9,438,000
Equipment and furniture ............................ 4,764,000 7,350,000
----------- ------------
7,960,000 16,788,000
Less - accumulated depreciation and amortization.... (5,963,000) (14,163,000)
----------- ------------
$ 1,997,000 $ 2,625,000
=========== ============
</TABLE>

65
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In January 1999, the Company sold certain of its laboratory and
manufacturing facilities to Bard BioPharma L.P., a subsidiary of Purdue Pharma
L.P. ("Purdue"), for $3.6 million, net of approximately $300,000 of transaction
costs. Cytogen also signed a three-year agreement under which two of Cytogen's
products, ProstaScint and OncoScint CR/OV, will continue to be manufactured by
Cytogen at its former facility. As a result of the sale, the Company recognized
a gain of approximately $3.3 million during the first quarter of 1999.

Investment in Targon Subsidiary

As a result of the 1998 reduction of Cytogen's ownership interest in Targon,
the Company began accounting for its investment in Targon using the equity
method. Under the equity method, the Company recognized 100% of Targon's losses
through March 31, 1998 in its consolidated statement of operations as "Equity
Loss in Targon Subsidiary," with a corresponding reduction in the carrying
amount of its investment. The Company did not recognize Targon's losses after
March 31, 1998 based on the completion of the sale of Targon.

In August 1998 the Company sold its remaining ownership interest in Targon
to Elan Corporation, plc ("Elan") for $2.0 million (see Note 4). As a result,
the Company recorded a gain of approximately $2.8 million in 1998.

Other Assets

In October 1999, the Company sold its undeveloped land in Ewing, New Jersey
for net proceeds of $714,000. As a result of the sale the company recognized a
gain of approximately $54,000. During 1998 and 1997, the Company charged to
expense $240,000 and $384,000, respectively, to write down the land to its
estimated market value.

Revenue Recognition

Product related revenues include product sales by Cytogen to its customers
and Quadramet royalties. Product sales are recognized upon shipment of the
finished goods. From the time of Quadramet's launch in the second quarter of
1997 to June 1998, Cytogen recorded Quadramet royalty revenues from DuPont based
on minimum contractual payments, which were in excess of actual Quadramet sales.
Pursuant to an agreement between Cytogen and DuPont, the minimum royalty
arrangement was discontinued and Cytogen reclaimed the marketing rights to
Quadramet. Subsequent to June 1998, Cytogen recorded product revenues from
Quadramet based on actual sales. Starting in 1999, Quadramet royalties are based
on sales of Quadramet by Berlex Laboratories ("Berlex"), Cytogen's new marketing
partner for Quadramet (see Note 5).

License and contract revenues include milestone payments and fees under
collaborative agreements with third parties, revenues from contract
manufacturing and research services, and revenues from other miscellaneous
sources. The Company's contract manufacturing services included filling,
testing, validation, and process development of monoclonal antibodies; process
development and clinical development of biopharmaceutical products; and the
preclinical manufacturing of an antibody product. The Company is phasing out
contract manufacturing services, concurrent with the sale of the manufacturing
and laboratory facilities (see Property and Equipment above) and expects to
receive no further revenues from

66
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

this service after 1999. Revenues from milestone payments are recognized when
all parties concur that the events stipulated in the agreement have been
achieved. Revenues from cost-plus contracts are recognized when the costs are
incurred. Revenues from up-front payments are recognized when the Company has no
obligation to return the fee under any circumstances.

In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be applied, and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. The Company is evaluating SAB 101 and the effect it may have
on the Company's financial position or results of operations.

Cost of Product and Contract Manufacturing Revenues

In June 1998, the Company paid DuPont $995,000 for manufacturing and
distributing Quadramet as a result of Cytogen's reacquiring the marketing rights
of Quadramet. In addition, the Company recorded a $4 million charge for securing
a long-term manufacturing commitment for Quadramet from DuPont (see Note 6).
Beginning in 1999, pursuant to the marketing agreement with Berlex (see Note 5),
there is no manufacturing and distribution costs related to Quadramet. In
addition, the Company is phasing out the contract manufacturing services to
third parties which is resulting in lower costs associated with these services
and expects no further costs in 2000.

Research and Development

Research and development expenditures consist of projects conducted by the
Company and payments made to sponsored research programs and consultants. All
research and development costs are charged to expense as incurred. Research and
development expenditures for customer sponsored programs were $194,000, $228,000
and $1.1 million in 1999, 1998 and 1997, respectively.

Patent Costs

Patent costs are charged to expense as incurred.

Net Income (Loss) Per Share

Basic net income (loss) per common share is based upon the weighted average
common shares outstanding during each period. Diluted net income per common
share is based upon the weighted average common stock outstanding and common
stock equivalents which represent the incremental common shares that would have
been outstanding under certain employee stock options and warrants, upon assumed
exercise of dilutive stock options and warrants. Diluted net loss per share for
1998 and 1997 is the same as basic net loss per share, as the inclusion of
common stock equivalents would be antidilutive

67
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. ACQUISITION OF PROSTAGEN, INC.:

On June 15, 1999, Cytogen reacquired the rights for immunotherapy to its
PSMA technology by acquiring 100% of the outstanding capital stock of Prostagen
for 2,050,000 shares of Cytogen common stock, plus transaction costs. The
acquisition was accounted for using the purchase method of accounting, whereby
the purchase price was allocated to the assets acquired and liabilities assumed
from Prostagen based on the respective fair values at the acquisition date. The
excess of the purchase price over the fair value of the net tangible assets of
approximately $1.2 million was assigned to acquire technology rights and has
been recorded as a non-cash charge to operations in the accompanying financial
statements. Acquired technology rights reflects the value of the PSMA technology
development projects underway at the time of the Prostagen acquisition. The
Company may issue up to an additional 450,000 shares of Cytogen common stock
upon the satisfactory termination of lease obligations assumed in the Prostagen
acquisition.

The Company had sublicensed PSMA to Prostagen for prostate cancer
immunotherapy in 1996. In connection with the acquisition, Cytogen acquired
approximately $550,000 in cash, a minority ownership in Northwest
Biotherapeutics, Inc., which is developing PSMA for cell therapy, and a contract
with Velos, Inc. for marketing a cancer patient software management program for
hospitals and health care payors. In addition, the Company may issue up to an
additional $4.0 million worth of Cytogen common stock (based on the value at the
time of issuance) if certain milestones are achieved in the PSMA development
program. The Company may also issue up to 500,000 shares of Cytogen common stock
upon beneficial resolution of other contractual arrangements entered into by
Prostagen.

3. PROGENICS PHARMACEUTICALS, INC. JOINT VENTURE:

On June 15, 1999, Cytogen entered into a joint venture with Progenics to
develop vaccine and antibody-based immunotherapeutic products utilizing
Cytogen's proprietary PSMA technology. The joint venture will be owned equally
by Cytogen and Progenics. Progenics will fund up to $3 million of development
costs of the program. After that point, the Company and Progenics will equally
share the future costs of the program. Cytogen has the exclusive North American
marketing rights on products developed by the joint venture. In connection with
the licensing of the PSMA technology to the joint venture, Cytogen will receive
$2 million in payments of which $1 million was received in 1999, with the
balance to be paid in installments through December 31, 2001. As a result,
Cytogen recorded approximately $1.8 million in license fee revenue in the second
quarter of 1999, based on the net present value of the future payments (using a
discount rate of 10%).

4. SALE OF TARGON CORPORATION:

Targon was established in September 1996 pursuant to agreements between
Cytogen and Elan, and was a majority-owned (99.75%) subsidiary of Cytogen. In
March 1998, Elan exchanged its shares of the Company's Series A Convertible and
Exchangeable Preferred Stock for 50% of Cytogen's interest in Targon. In August
1998, Cytogen sold its remaining 49.875% interest in Targon to Elan for $2.0
million (see Note 1). As a result of the sale, a warrant to purchase up to
1,000,000 shares of Cytogen common stock previously granted to Elan and all
notes among Cytogen, Elan and Targon were cancelled. In addition, in August
1998, Cytogen received $2.0 million from Elan in exchange for a convertible
promissory note (see Note 10). The Company recognized a gain of approximately
$2.8 million in 1998 on the Targon transaction.

68
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. BERLEX LABORATORIES:

In October 1998, Cytogen entered into an exclusive license and marketing
agreement ("Berlex Agreement") with Berlex for the manufacture and sale of
Quadramet. Under the terms of the Berlex Agreement, Cytogen received a one-time
license fee of $8 million in 1998 and Berlex pays Cytogen royalties on net sales
of Quadramet, as well as milestone payments based on achievement of certain
sales levels. Quadramet was re-launched by Berlex in the first quarter of 1999.

In connection with the Berlex Agreement, Cytogen granted Berlex a warrant to
purchase 1,000,000 shares of Cytogen common stock at an exercise price of $1.002
per share. Using the Black-Scholes option pricing model, the estimated value of
the warrant was calculated at $855,000, and was recorded as a reduction of the
one-time license fee revenue, with a corresponding increase in stockholders'
equity.

6. THE DUPONT PHARMACEUTICAL COMPANY:

Pursuant to the terms of an agreement between Cytogen and DuPont, Cytogen
received from DuPont (i) $1.5 million in 1997 to fund clinical programs to
expand the use and marketing of Quadramet; (ii) a $2.0 million milestone payment
in 1997 upon the FDA clearance of Quadramet and (iii) royalty revenues of $1.7
million and $3.3 million in 1998 and 1997, respectively, based on minimum
contractual payments which were in excess of actual sales. In June 1998, the
agreement was amended and the minimum royalty arrangement was discontinued. In
1998, Cytogen terminated its marketing agreement with DuPont and recorded as a
charge to Costs of Product payments to DuPont of $4 million for securing a
long-term manufacturing commitment for Quadramet from DuPont and $995,000 for
manufacturing and distributing Quadramet in 1998.

7. THE DOW CHEMICAL COMPANY:

In 1993, Cytogen acquired from The Dow Chemical Company ("DOW") an exclusive
license for the treatment of osteoblastic bone metastases in the U.S. for
Quadramet. This license was amended in 1995 and 1998 to expand the territory to
include Canada, Latin America, Europe and Japan, in 1996 to expand the field to
include all osteoblastic diseases and in 1998 to include rheumatoid arthritis.
In 1997, the Company recorded a $4.0 million milestone payment to Dow upon FDA
clearance of Quadramet. The agreement also requires the Company to pay Dow
royalties based on a percentage of net sales of Quadramet, or a guaranteed
contractual minimum payments, whichever is greater, and future payments upon
achievement of certain milestones. The Company recorded $500,000, $500,000 and
$375,000, in royalty expense for 1999, 1998 and 1997, respectively. Future
annual minimum royalties due to Dow are $750,000 in both 2000 and 2001 and $1.0
million per year thereafter through 2012.

69
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. REVENUES FROM MAJOR CUSTOMERS:

Revenues from major customers as a percentage of total were as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Berlex (see Note 5) 9% 36% -%
DuPont (see Note 6) - 8 47
Progenics Pharmaceuticals, Inc. (see Note 3) 16 - -
Mallinckrodt Medical Inc. 16 8 6
Medi-Physics 15 10 9
</TABLE>

Mallinckrodt Medical Inc. and Medi-Physics are chains of radiopharmacies,
which distribute ProstaScint and OncoScint CR/OV kits.

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Accounts payable............................................. $1,785,000 $2,465,000
Accrued payroll and related expenses......................... 1,309,000 1,222,000
Restructuring accruals....................................... - 856,000
Accrued research contracts and materials..................... 236,000 474,000
Accrued commission and royalties............................. 404,000 828,000
Accrued professional and legal............................... 422,000 655,000
Facility payable............................................. 689,000 -
Other accruals............................................... 633,000 886,000
---------- ----------
$5,478,000 $7,386,000
========== ==========
</TABLE>

In connection with the closure of the Company's Cellcor subsidiary and
corporate downsizing in 1998, Cytogen incurred a restructuring charge of
approximately $1.9 million relating to severances, other closure related
expenses and costs to implement a corporate turnaround plan, of which $856,000
was accrued at December 31, 1998 and paid in full in 1999.

10. LONG-TERM LIABILITIES:

<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Due to Elan ................................................. $2,200,000 $2,054,000
Due to CIT Group/Credit Finance ............................. - 744,000
Capital lease obligations.................................... 378,000 273,000
---------- ----------
2,578,000 3,071,000
Less: Current portion....................................... (162,000) (848,000)
---------- ----------
$2,416,000 $2,223,000
========== ==========
</TABLE>

70
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In August 1998, Cytogen received $2.0 million from Elan in exchange for a
convertible promissory note. The note is convertible into shares of Cytogen
common stock at $2.80 per share, subject to adjustments, and matures in seven
years. The note bears annual interest of 7%, compounded semi-annually, however,
such interest is not payable in cash but will be added to the principal for the
first 24 months; thereafter, interest is payable in cash. In 1999 and 1998, the
Company accrued $146,000 and $54,000 in interest expense on this note.

In October 1998, the Company entered into a $750,000 term loan agreement
with The CIT Group/Credit Finance Inc., using the Company's tangible assets as
collateral. In January 1999, the Company paid the remaining balance of the loan
with the proceeds from the sale of its laboratory and manufacturing facilities
(see Note 1).

The Company leases certain equipment under capital lease obligations, which
will expire on various dates through 2002. Property and equipment leased under
non-cancelable capital leases have a net book value of $484,000 at December 31,
1999. Payments to be made under capital lease obligations (including interest of
$86,000) are $204,000 in 2000, $176,000 in 2001 and $84,000 in 2002.

11. COMMON STOCK:

In December 1998, the Company sold to The State of Wisconsin Investment
Board 3,333,334 shares of Cytogen common stock at an aggregate price of $2.5
million, or $0.75 per share.

In January 1999, the Company sold 2,666,667 shares of Cytogen common stock
to a subsidiary of The Hillman Company for an aggregate price of $2.0 million,
or $0.75 per share. Also in January, the Company exercised a put right granted
to Cytogen under a $12.0 million equity line agreement with an institutional
investor, for the sale of 475,342 shares of common stock at an aggregate price
of $500,000, or $1.0519 per share. The Company will not draw on the remaining
$11.5 million of the equity line agreement and has deregistered shares, which
were previously registered with the Securities and Exchange Commission to be
issued under the facility.

In August 1999, the Company sold to the State of Wisconsin Investment Board
3,105,590 shares of Cytogen common stock at an aggregate price of $5.0 million,
or $1.61 per share.

12. CONVERTIBLE PREFERRED STOCK:

In December 1997, Cytogen obtained a financing commitment from private
investors for the purchase of up to $20.0 million of its Convertible Preferred
Stock subject to satisfaction of certain conditions. Cytogen completed the first
tranche of the financing in December 1997 by issuing 750 shares of Series B
Preferred Stock ("Series B") for an aggregate price of $7.5 million. The Series
B carried a dividend rate of 6% which was payable in cash or common stock at the
option of Cytogen.

In connection with the conversion feature of the Series B, the Company
recorded a deemed dividend of $1.3 million in 1997, which represented the
maximum 15% conversion discount given to the holders of the Series B. In 1998,
all of the outstanding Series B was converted into 7,377,054 shares of Cytogen
common stock including $128,000 of accrued dividends.

71
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

13. STOCK OPTIONS AND WARRANTS:

The Company has various stock option plans that provide for the issuance of
incentive and non-qualified stock options to employees, non-employee directors
and outside consultants, for which an aggregate of 6,733,357 shares of common
stock have been reserved. The persons to whom options may be granted and the
number, type, and terms of the options vary among the plans. Options are granted
with an exercise term of 10 years and generally become exercisable in
installments over periods of up to 5 years at an exercise price determined
either by the plan or equal to the fair market value of the common stock at the
date of grant. Under certain circumstances, vesting may accelerate. In January
1998, the Company cancelled unexercised stock option grants to purchase 671,555
shares ranging in price from $3.687 to $16.50 per share and issued stock option
grants to purchase 537,244 shares at $1.95 per share which equaled fair market
value at the date of grant. This repricing was not available to officers,
directors, executives and consultants of the Company. Activity under these plans
was as follows:

<TABLE>
<CAPTION>
Aggregate
Number of Price Range Exercise
Shares Per Share Price
----------- -------------- ------------
<S> <C> <C> <C>
Balance at December 31, 1996 3,522,940 $ 2.69 - 17.00 $ 19,164,910
Granted 822,400 2.06 - 6.13 2,745,830
Exercised (60,350) 1.77 - 5.47 (197,267)
Cancelled (459,530) 2.69 - 8.88 (2,171,735)
----------- ------------

Balance at December 31, 1997 3,825,460 $ 2.06 - 17.00 19,541,738
Granted 2,285,920 0.70 - 2.13 3,927,819
Cancelled (2,319,085) 1.36 - 17.00 (10,480,467)
----------- ------------

Balance at December 31, 1998 3,792,295 $ 0.70 - 16.63 12,989,090
Granted 536,155 0.95 - 2.67 1,068,223
Exercised (231,842) 0.81 - 2.69 (306,507)
Cancelled (1,266,609) 0.80 - 8.06 (5,963,368)
----------- ------------

Balance at December 31, 1999 2,829,999 $ 0.70 - 16.63 $ 7,787,438
=========== ============
</TABLE>

72
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes information about stock options at December 31,
1999:

Outstanding Stock Options Exercisable Stock Options
- ------------------------------------------------------------------------ --------------------------------
Weighted-Average
Remaining Weighted-Average
Range of Outstanding Contractual Weighted-Average Exercisable Exercise
Exercise Prices Shares Life Exercise Price Shares Price
- --------------- ----------- ---------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
$ 0.70 - 1.83 716,822 8.4 $1.11 405,390 $ 1.00
1.84 - 3.67 1,465,042 6.3 2.13 674,233 2.10
3.68 - 5.50 444,075 4.7 5.10 356,772 5.11
5.51 - 7.33 118,060 4.8 5.99 98,660 6.07
7.34 - 9.17 58,000 5.5 7.74 38,800 7.78
9.17 - 11.00 500 6.1 9.28 300 9.28
14.66 - 16.50 15,000 1.9 15.69 15,000 15.69
16.50 - 16.63 12,500 2.8 16.51 12,500 16.51
--------- ---------

$ 0.70 - 16.63 2,829,999 6.5 $2.75 1,601,655 $ 3.12
========= =========
</TABLE>

At December 31, 1999, options to purchase 1,601,655 shares of common stock
were exercisable and 1,776,926 shares of common stock were available for
issuance under approved plans of additional options that may be granted under
the plans.

In August 1998, the Company granted to a key employee an option to purchase
2,250,000 shares of Cytogen common stock at an exercise price of $1.0937 per
share, of which, the vesting of 1,350,000 shares ("Performance Options") are
subject to the completion of certain performance based milestones as determined
by the Board of Directors (the "Board"). This option was granted outside of the
approved plans. During 1999, the Board approved the commencement of vesting for
675,000 of the Performance Options upon the achievement of certain milestones.
In 1999, the Company recorded $84,000 of deferred compensation related to the
vesting of the Performance Options, which represents the fair market value of
Cytogen's common stock in excess of the exercise price of the option on the
date, which the Board determined the performance milestones had been met.
Deferred compensation is being amortized over the three-year vesting period of
the Performance Options. As of December 31, 1999, 300,000 shares under this
option were exercisable.

In 1999, the Company granted options to purchase 152,384 shares of common
stock to certain former employees that are employed by Purdue and involved in
the manufacture of Cytogen's products. During 1999, the Company recorded $62,000
of expense related to these option grants.

In 1997, the Company adopted an employee stock purchase plan under which
eligible employees may elect to purchase shares of common stock at the lower of
85% of fair market value as of the first trading day of each quarterly
participation period, or as of the last trading day of each quarterly
participation period. In 1999, 1998 and 1997, employees purchased 29,209, 54,023
shares and 16,017 shares, respectively, for aggregate proceeds of $29,000,
$41,000 and $32,000, respectively. The Company has reserved 400,751 shares for
future issuance under its employee stock purchase plan.

73
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company applies Accounting Principle Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and the related interpretations in accounting
for its stock option plans. The disclosure requirement of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," was adopted by the Company in 1996. Had compensation cost of the
Company's common stock option plan been determined under SFAS No. 123, the
Company's net loss would have been increased to the following pro forma amounts:

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Net income (loss) to common stockholders, as reported $ 729,000 $(13,271,000) $(32,064,000)
Pro forma net loss to common stockholders $(1,103,000) $(16,601,000) $(34,946,000)

Diluted net income (loss) per common share, as reported $ 0.01 $ (0.24) $ (0.63)
Diluted pro forma net loss per common share $ (0.02) $ (0.29) $ (0.68)
</TABLE>

The average fair value per option of the options granted under the stock
option plans during 1999, 1998 and 1997 is estimated as $1.29, $0.92 and $2.10,
respectively, on the date of grant using the Black-Scholes option pricing model
with the following assumptions for 1999, 1998 and 1997: dividend yield of zero,
volatility of 87.99%, 78.42% and 69.87%, respectively, risk-free interest rate
of 5.85%, 5.37% and 6.07%, respectively, and an expected life of 5 years. The
average fair value per option ascribed to the employee stock purchase plan
during 1999, 1998 and 1997 is estimated at $0.40, $0.65 and $2.17, respectively,
on the date of grant using the Black-Scholes option pricing model with the
following assumptions for 1999, 1998 and 1997: divided yield of zero, volatility
of 111.48%, 84.75% and 50.20%, respectively, risk free interest rate of 4.46%,
4.88% and 5.13%, respectively, and expected life of three months. Because the
SFAS No. 123 method of accounting is not required to be applied to options
granted prior to January 1, 1995, the resulting pro forma compensation charge
may not be representative of that to be expected in future years.

14. RELATED PARTY TRANSACTION:

Consulting services have been provided to the Company under an agreement
with the Chairman of the Board of Directors related to time spent in that
function on Company matters. Fees and expenses under this agreement were
$136,000 and $172,000 in 1999 and 1998, respectively.

15. PENSION PLANS:

The Company maintains a defined contribution pension plan. The contribution
is determined by the Board of Directors each year and is based upon a percentage
of gross wages of eligible employees. The plan provides for vesting over five
years, with credit given for prior service. The Company also makes contributions
under a 401(k) plan in amounts, which match up to 50% of the salary deferred by
the participants. Matching is capped at 6% of deferred salaries. Total pension
expense was $182,000, $310,000 and $405,000 for 1999, 1998 and 1997,
respectively.

74
<PAGE>

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

16. INCOME TAXES:

As of December 31, 1999, Cytogen had federal net operating loss
carryforwards of approximately $187 million. The Company also had federal and
state research and development tax credit carryforwards of approximately $6.5
million. Certain operating loss and credit carryforwards began to expire in
1995.

The Tax Reform Act of 1986 contains provisions that limit the utilization of
net operating loss and tax credit carryforwards if there has been an "ownership
change". Such an "ownership change", as described in Section 382 of the Internal
Revenue Code may limit the Company's utilization of its net operating loss and
tax credit carryforwards.

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Based upon the Company's
loss history, a valuation allowance for deferred tax assets has been provided:

<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 63,700,000 $ 60,300,000
Capitalized research and development expenses 17,400,000 19,500,000
Research and development credit 6,500,000 5,400,000
Acquisition of in-process technology 1,200,000 1,200,000
Other, net 6,400,000 300,000
------------ ------------
Total deferred tax assets 95,200,000 86,700,000
Valuation allowance for deferred tax assets (95,200,000) (86,700,000)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
</TABLE>

In 1995, Cytogen acquired CytoRad and Cellcor, both of which had net
operating loss carryforwards. Due to Section 382 limitations, approximately $10
million of CytoRad and $12.0 million of Cellcor carryforwards may be available
to offset future taxable income. A 100% valuation allowance was established on
the acquisition dates as realization of these tax assets is uncertain.

During 1999, the Company sold New Jersey state operating loss carryforwards
and research and development credits, which resulted in the recognition of a
$2.7 million tax benefit.

17. COMMITMENTS AND CONTINGENCIES:

The Company leases its facilities and certain equipment under non-cancelable
operating leases that expire at various times through 2004. Rent expense
incurred on these leases was $998,000, $1.6 million and $1.8 million in 1999,
1998 and 1997, respectively. Minimum future obligations under the operating
leases are $3.6 million as of December 31, 1999 and will be paid as follows:
$1.3 million in 2000, $1.4 million in 2001, $496,000 in 2002, $214,000 in 2003
and $209,000 in 2004.

The Company is obligated to make minimum future payments under research and
development contracts that expire at various times. As of December 31, 1999, the
minimum future payments under contracts are $130,000 each year from 2000 and
thereafter. In addition, the Company is obligated to pay performance-based
compensation through mid-year 2000 to its marketing partner for ProstaScint and
royalties on revenues from commercial product sales including certain guaranteed
minimum payments.

75
<PAGE>

EXHIBIT INDEX
-------------

<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
10.25 Strategic Alliance Agreement between AxCell Biosciences
Corporation and InforMax, Inc. dated as of September 15, 1999. 39

10.26 Master Loan and Security Agreement No. S7600 among Cytogen

10.27 Master Loan and Security Agreement No. S7600 among Cytogen
Corporation, AxCell Biosciences Corporation and Finova Capital Corporation
dated December 30, 1999.

21 Subsidiaries of Cytogen Corporation

23 Consent of Arthur Andersen LLP

27 Financial Data Schedule (Submitted to SEC only in electronic format)
</TABLE>

<PAGE>

EXHIBIT 10.25

STRATEGIC ALLIANCE AGREEMENT
----------------------------

This Agreement, dated September 15, 1999 ("Effective Date") is made between
InforMax, Inc. ("InforMax"), a Delaware corporation doing business at 6010
--------
Executive Boulevard, North Bethesda, Maryland 20852 and AxCell Biosciences
Corporation ("AxCell"), a Delaware corporation doing business at 600 College
------
Road East, Princeton, New Jersey 08540, who, intending to be legally bound,
hereby agree as follows:

1. INTRODUCTION

1.1. InforMax has rights in software called Software Solutions for
BioMedicine and related end user documentation ("SSBM") and distributes certain
----
third party public and private genome data therewith ("Genome Database").
---------------

1.2. AxCell has rights in its proprietary protein interaction data (the

"Protein Database").
- -----------------

1.3. The parties desire to work together to (i) integrate the Protein
Database with SSBM to permit use with other databases including the Genome
Database, (ii) develop certain Tools for SSBM to enable the users of SSBM to
access the Protein Database and (iii) market and sell subscriptions for the
Protein Database to existing and potential SSBM customers as well as related
professional, research, and development services all in accordance with the
terms of this Agreement.

2. DEFINITIONS

2.1. "Confidential Information" means Protein Database, Genome Database,
------------------------
SSBM, any business or technical information of a party, including but not
limited to any information relating to a party's product plans, designs, costs,
finances, marketing plans, business opportunities, personnel, research,
development or know-how, and the terms and conditions of this Agreement.
Confidential Information shall not include information that: (i) is in or enters
the public domain without breach of this Agreement through no fault of the
receiving party; (ii) the receiving party was demonstrably in possession of
prior to first receiving it from the disclosing party; (iii) the receiving party
can demonstrate it was developed by the receiving party independently and
without use of or reference to the disclosing party's Confidential Information;
or (iv) the receiving party receives from a third party without restriction on
disclosure and without breach of a nondisclosure obligation.

2.2. "Database Launch Date" means the date the Protein Database is mutually
--------------------
accepted and first made commercially available by InforMax and/or AxCell.

2.3. "Distributor" means a direct or indirect customer of InforMax who is
-----------
authorized by a distributor agreement as specified in Section 4.3 to distribute
-----------
the Protein Database to End Users or other Distributors.

2.4. "End User" means a customer who is authorized by an end user
--------
subscription agreement as specified in Section 4.2 to use the Protein Database.
-----------
2.5. "Genome Database" has the meaning set forth in Section 1.1.
--------------- -----------
<PAGE>

2.6. "Intellectual Property Rights" means patent rights, copyright rights
----------------------------
(including, but not limited to, rights in audiovisual works and moral rights),
trade secret rights, and any other intellectual property or proprietary rights
recognized by the law of each applicable jurisdiction.

2.7. "Marks" means trademarks, service marks, trade names, logos or
-----
designations.

2.8. "Net Revenues" means [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
------------

2.9. "Protein Database" has the meaning set forth in Section1.3.
---------------- ----------

2.10. "SSBM" has the meaning set forth in Section1.1.
---- ----------

2.11. "Tools" has the meaning set forth in Section3.1.1.
----- ------------
3. COLLABORATION

3.1. Integration Project.
-------------------

3.1.1. General. The parties shall collaborate with each other in a
project ("Integration Project") to develop the Protein Database and to develop
-------------------
new visual and analytical software tools and/or algorithms and related
documentation for the purpose of making the Protein Database accessible via SSBM
and creating specific enhancements related thereto ("Tools"). The parties agree
-----
that AxCell will have primary responsibility for developing the Protein Database
in a format agreed to between the parties that will be compatible with SSBM, and
InforMax will have primary responsibility for developing the Tools.

3.1.2. Project Plan. Prior to commencement of the Integration Project,
the parties will, by mutual agreement, develop a project plan (the "Project
-------
Plan") to govern the Integration Project, and the Project Plan will contain the
- ----
specification of the work to be performed (including the identification and
specification of any Tools), each party's responsibilities, a project schedule,
milestones, schedule of deliverables, and a completion date. [CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED]

3.1.3. Change Control. Both parties acknowledge that the scope of
the Integration Project may require modification from time to time to meet
changing requirements or to take advantage of new technologies or processes. The
parties agree to discuss in advance any proposed change to determine its
desirability and its impact on the cost and schedule, and to refrain from making
any such change until it has been discussed and mutually approved by both
parties. For any approved change, the Project Plan will be modified accordingly.

3.1.4. Acceptance. Upon completion of the Protein Database and any
Tools, both parties will participate in acceptance testing to ensure that the
Protein Database and any Tools conform to the specifications, and will notify
the other [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] from delivery thereof of
any defects it has found. Each party will be responsible for correcting any
deficiency so noted in its portion of the deliverables and resubmitting any such
deliverables for retesting, until the parties mutually agree that the Protein
Database and Tools conform with the specifications set forth in the Project
Plan. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

-2-
<PAGE>

3.1.5. Database Launch Date. [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED]

3.1.6. SSBM License. Subject to the terms and conditions of this
Agreement, InforMax will provide to AxCell a non-transferable, non-exclusive,
license to use SSBM during the term of this Agreement solely for its internal
business purposes in accordance with InforMax's standard terms and conditions,
as modified for this arrangement, such software to be installed on an AxCell-
owned server.

3.2. Marketing. In the interest of promoting the Database, the parties
---------
agree to:

3.2.1. Actively work together to develop a joint marketing plan in
accordance with this Agreement covering mutually agreed upon marketing and
promotional activities and related budgets to promote the Protein Database, and
other products or services to which the plan will apply, including related
professional, research and development services ("Joint Marketing Plan"),
--------------------
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED];

3.2.2. Each use their commercially reasonable efforts to vigorously
advertise, market, promote the Protein Database and other products or services
to which the Joint Marketing Plan applies in accordance with the Joint Marketing
Plan and this Agreement, provided that neither party will use advertisements or
marketing material that contain the other party's Marks that have not been
approved in writing by the other party;

3.2.3. Coordinate and assist each other in joint presentations and
sales efforts as reasonably requested by the other party in accordance with the
agreed upon Joint Marketing Plan, and coordinate prospective customer calls as
necessary in cases where such joint presentations or similar cooperative
marketing or technical support efforts are anticipated.

3.2.4. Furnish each other with all reasonable scientific and
technical information and assistance for marketing support and planning
purposes.

3.2.5. Assist each other to develop appropriate educational and
promotional materials, and provide each other with copies of appropriate
promotional documentation, that each party's sales force may use for purposes of
this Agreement. All such material, however, to the extent it concerns the other
party's products and/or services, shall be subject to prior approval by such
other party in each case;

3.2.6. Periodically inform the other concerning any market
information that comes to the attention of that party respecting the other
party, its products and services, or the continued competitiveness of the other
party's products and services in the marketplace;

3.2.7. Provide appropriate technical support to the other for
demonstrations and mutually agreed upon general sales promotion as well as for
selected exhibitions and promotional seminars on a case-by-case basis; and

3.2.8. Perform its obligations under the Joint Marketing Plan.

3.3. Management. Each party shall appoint two senior managers to act as
----------
the primary representatives responsible for facilitating communication between
the parties and for coordinating the activities associated with the Integration
Project and each party's marketing efforts. Each party shall

-3-
<PAGE>

manage its own activities. The Parties' representatives shall confer, as needed,
to assess the status of the Integration Project, each party's marketing efforts,
and to coordinate on upcoming activities as necessary.

3.4. Staff. Each party shall train and maintain a sufficient number of
-----
capable technical and sales personnel having the knowledge and training
necessary to (i) inform customers properly concerning the features and
capabilities of the Protein Database; (ii) service and support the Protein
Database in accordance with its obligations under this Agreement; and (iii)
otherwise carry out its obligations and responsibilities under this Agreement.

3.5. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

4. PROTEIN DATABASE LICENSE GRANT

4.1. Protein Database License. Subject to the following sentence, AxCell
------------------------
grants InforMax an exclusive, worldwide license to (i) market, promote,
reproduce for distribution, distribute and sublicense the Protein Database to
Distributors and End Users solely for their own internal business purposes
during the term of this Agreement and (ii) use a reasonable number of copies of
the Protein Database for the sole purpose of performing its obligations under
Section 3, demonstrating the Protein Database, and providing training to
- ---------
Distributors and End Users. Notwithstanding anything to the contrary, AxCell
may market, promote, reproduce for distribution, distribute and sublicense the
Protein Database directly to End Users solely for their internal business
purposes but may not appoint another distributor to do so.

4.2. End User Agreement. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
------------------

4.3. Distributor Agreement. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
---------------------

4.4. License Restrictions. InforMax will not modify the Protein Database
--------------------
in any manner, except as it may be expressly directed by AxCell in writing.

4.5. Pricing. The parties understand and agree that the Protein Database
-------
and SSBM may be priced and licensed separately.

5. ADDITIONAL OBLIGATIONS AND COVENANTS

5.1. AxCell's Obligations. In addition to AxCell's other obligations set
--------------------
forth in this Agreement, AxCell shall:

5.1.1. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED];

5.1.2. Promptly inform InforMax in writing of any analytic or
visualization tools or other software enhancements AxCell determines are
reasonably necessary or desirable to include as Tools, and of any SSBM or Tools
defects, intellectual property infringement claims, or customer complaints;

5.1.3. Introduce InforMax's staff to AxCell's established contacts
and other appropriate personnel in the pharmaceutical industry who may be
interested in SSBM and/or the Protein Database and promptly inform InforMax of
any potential customers for the Protein Database or SSBM;

5.1.4. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED];

-4-
<PAGE>

5.1.5. Perform its obligations under any research and development
contracts that involve use of the Protein Database and/or SSBM to define targets
and validate leads;

5.1.6. Make available to End Users at rates no higher than AxCell's
published rates and if ordered, perform, appropriate and desirable Protein
Database related training and professional services;

5.1.7. Provide primary technical and scientific support to End Users
regarding the Protein Database, which shall include, without limitation,
diagnosing problems and using its reasonable efforts to provide solutions and
the other support obligations; and

5.1.8. Perform AxCell's obligations set forth in Section 3.
---------
5.2. InforMax's Obligations. In addition to InforMax's other obligations
----------------------
set forth in this Agreement, InforMax shall:

5.2.1. Assist in the use of SSBM to find targets and validate leads
for customers;

5.2.2. Make available to End Users at rates no higher than InforMax's
published rates and if ordered, perform appropriate and desirable Protein
Database related professional services support for the Protein Database;

5.2.3. Provide primary technical support to End Users regarding the
use of SSBM in accordance with InforMax's standard polices relating thereto;

5.2.4. Provide reasonable amounts of SSBM related training to
AxCell's technical and sales staff free of charge to enable such staff to inform
customers properly concerning the features and capabilities of SSBM; and

5.2.5. Perform InforMax's obligations set forth in Section 3,
---------
including without limitation, developing the Tools in accordance with the
Project Plan as set forth in Section 3.
---------

5.3. Covenants. Each party covenants to the other that it will (i) conduct
---------
business in a manner that reflects favorably at all times on the other party's
products and services, and the good name, good will and reputation of the other
party, (ii) avoid deceptive, misleading or unethical practices that are or might
be detrimental to the other party, its products and services, or the public;
(iii) make no false or misleading representations with regard to the other party
or its products and services; (iv) not publish or employ, or cooperate in the
publication or employment of, any misleading or deceptive advertising material
with regard to the other party or its products and services; and (v) make no
representations, warranties or guarantees to customers or to the trade with
respect to the specifications, features or capabilities of the other party's
products and services that are inconsistent with the literature distributed by
the other party.

5.4. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

5.5. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

5.5.1. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

-5-
<PAGE>

5.5.2. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

6. PAYMENTS

6.1. Compensation. Each party will pay royalties and fees to the other
------------
based upon the timing of End User payment as set forth in Exhibit A.
---------

6.2. Payment Terms. Within thirty (30) days from the close of the
-------------
preceding calendar quarter, each party will pay the other for any royalties or
fees due under this Agreement (based on Section 6.1 above) for payments received
-----------
from End Users during such quarter and within twenty (20) days from the close of
such quarter. Interest shall accrue on any past due payments at the lesser of
one and one-half percent (1-1/2%) per month or the maximum rate permitted by
applicable law.

6.3. Taxes. Each Party shall be responsible for paying any and all taxes
-----
resulting from any of its sales of Protein Database subscriptions, or of any
associated products and services, such taxes including but not limited to any
national, federal, state or local sales, income, use, value-added or other
taxes, customs duties, or similar tariffs and fees, but excluding any tax or
levy on the income of the non-selling party.

7. REPORTS, RECORDS AND AUDITS

7.1. Reports. Within [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] after the
--------
close of each calendar quarter each party will deliver to the other party a
report which will provide all information reasonably necessary for computation
and/or confirmation of the payments, if any, due or credited to the other party
for such period. Such report will include quarter gross revenues, deductions by
category, and net revenues received by customer and in total. In addition, an
accounts receivable report by customer and in total will be included to
reconcile the royalty and fees payment, net revenues and cash receipts.

7.2. Records and Audits. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
------------------

8. TERM AND TERMINATION

8.1. Term. The term of this Agreement will begin on the Effective Date and
----
will continue for three (3) years from the Database Launch Date unless it is
terminated earlier in accordance with the provisions hereof.

8.2. Events of Termination. Either party will have the right to terminate
---------------------
this Agreement if: (i) the other party breaches any material term or condition
of this Agreement and fails to cure such breach within [CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED] after written notice (including without limitation if
InforMax fails to materially perform its marketing obligations hereunder); or
(ii) the other party becomes the subject of an involuntary petition in
bankruptcy or any involuntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors, if such involuntary
petition or proceeding is not dismissed within sixty (60) days of filing, or
becomes the subject of a voluntary petition in bankruptcy or any voluntary
proceeding relating to insolvency, receivership, liquidation, or composition for
the benefit of creditors. In addition, AxCell may terminate this Agreement in
accordance with the provisions of Section 5.4.

-6-
<PAGE>

8.3. Effect of Termination.
---------------------

8.3.1. Upon termination or expiration of this Agreement: (i) all
license rights granted to each party hereunder will automatically terminate, and
InforMax will immediately cease soliciting orders for the Protein Database; (ii)
each party will immediately cease use of the other party's Marks and cease all
marketing activities with respect to the other party's products and services;
and (iii) each party will immediately return to the other party or (at the other
party's request) destroy all copies of the Protein Database and other
Confidential Information in its possession or control, and an officer of such
party will certify to the other party in writing that it has done so.
Notwithstanding the foregoing, the license grant in Section 10.1 shall survive
------------
termination or expiration of this Agreement and all end user agreements for
Protein Database subscriptions will remain in full force and effect. Upon such
termination or expiration, AxCell will maintain, update and transport updates to
such End Users, and support such End User's use of the Database for the term of
their Protein Database subscription.

8.3.2. Each party shall remain obligated to pay and shall continue to
pay any royalties due the other arising out of any sales of any Protein Database
subscriptions prior to the date of termination, but the obligation to pay
royalties shall cease upon the expiration or termination of such Protein
Database subscriptions as well as all on-going royalties due for End User
discoveries made using the Protein Database during the life of such End User's
subscription.

8.3.3. The rights and obligations of the parties contained in
Sections 8.3, 9, 10, 12, 13, and 15 will survive the termination or expiration
of this Agreement.

8.4. Nonexclusive Remedy. The exercise by either party of any remedy under
-------------------
this Agreement will be without prejudice to its other remedies under this
Agreement or otherwise.

9. CONFIDENTIALITY

9.1. Obligations. Each party will maintain the Confidential Information of
-----------
the other party in strict confidence and will exercise due care with respect to
the handling and protection of such Confidential Information, consistent with
its own policies concerning protection of its own Confidential Information of
like importance, which require at least reasonable care. Each party will use the
Confidential Information of the other party only as expressly permitted herein,
and will disclose such Confidential Information only to its employees and
consultants as is reasonably required in connection with the exercise of its
rights and obligations under this Agreement (and only subject to binding use and
disclosure restrictions at least as protective as those set forth herein
executed in writing by such employees and consultants). However, each party may
disclose Confidential Information of the other party pursuant to the order or
requirement of a court, administrative agency, or as required by applicable law,
and the receiving party will give reasonable notice to the other party to
contest such order or requirement. Any such disclosure by the receiving party of
the Confidential Information of the disclosing party, will, in no way, be deemed
to change, affect or diminish the confidential and proprietary status of such
Confidential Information. Each party's obligations under this Section 9 will
---------
survive for a period of five (5) years from the termination or expiration of
this Agreement.

9.2. Injunctive Relief. Each party acknowledges that improper use or
-----------------
disclosure of the Confidential Information of the other party would cause
substantial harm to the other party that could not be remedied by the payment of
damages alone. Accordingly, each party will be entitled to preliminary and
permanent injunctive relief and other equitable relief for any breach of this
Section9.
- --------

-7-
<PAGE>

10. PROPRIETARY RIGHTS

10.1. AxCell's Ownership. The Protein Database, and all updates thereto
------------------
are and will remain the sole and exclusive property of AxCell, including all
Intellectual Property Rights therein, AxCell reserves all rights in the Protein
Database not expressly granted herein. AxCell will use its reasonable best
efforts to protect and maintain the value of the Protein Database, and to
preserve all of its Intellectual Property Rights therein.

10.2. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

10.3. InforMax's Ownership. SSBM and all updates or enhancements to SSBM
--------------------
are and will remain the sole and exclusive property of InforMax and its
suppliers, if any, including all Intellectual Property Rights therein, whether
such items are separate or combined with any other products, and InforMax
reserves all rights in such items not expressly granted herein.

10.4. Proprietary Rights Notices. Neither party will delete or in any
--------------------------
manner alter the Intellectual Property Rights notices of the other party and its
suppliers, if any, appearing on or in connection with the Protein Database, SSBM
or the Tools, and will reproduce and display such notices on each copy it makes
of such items. Each party will also include appropriate trademark notices when
referring to SSBM or the Protein Database in advertising and promotional
materials.

10.5. Third Party Infringement. Each party will use its reasonable efforts
------------------------
to protect the other party's Intellectual Property Rights in the Protein
Database, SSBM, and Tools, as applicable, and will report promptly to the other
party any infringement of such rights of which it becomes aware.

10.6. Trademarks. Subject to the terms and conditions of this Agreement,
----------
each party grants to the other party a non-exclusive, non-transferable license
for the term of this Agreement to use the Marks of such party in connection with
the other party's performance of its marketing and promotional obligations set
forth in Section 3.2. Each party's use of the other party's Marks must be in
-----------
accordance with other party's trademark usage guidelines then in effect, and
such use will inure to the other party's benefit. Nothing in this Agreement
grants to either party ownership or any rights in or to use the Marks of the
other party, except in accordance with this license. The rights granted in this
Section 10.6 will terminate upon any termination or expiration of this
- ------------
Agreement. Upon such termination or expiration, each party will no longer make
any use of any of the other party's Marks. Each party will have the exclusive
right to own, use, hold, apply for registration for, and register its Marks
during the term of, and after the expiration or termination of, this Agreement
and the other party will neither take nor authorize any activity inconsistent
with such exclusive right.

11. WARRANTIES

AxCell warrants to InforMax that it has sufficient right and authority to
grant to InforMax all licenses and rights that AxCell grants under this
Agreement. InforMax warrants to AxCell that it has sufficient right and
authority to grant to AxCell all licenses and rights that InforMax grants under
this Agreement. THE WARRANTIES IN THIS SECTION ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS AND IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT.

12. INDEMNITIES

12.1. Mutual Indemnity. Each party agrees to indemnify and hold harmless
----------------
the other party against any third party claims against the indemnified party for
loss, damage, liability, or expense (including but not limited to reasonable
attorneys' fees) ("Losses") arising out of any acts or omissions of indemnifying
party arising from (i) the indemnifying party's willful misconduct, or
(ii) abreach of the indemnifying party's obligations under Section 5.3.
-----------

12.2. By InforMax. InforMax agrees to indemnify and hold harmless AxCell
-----------
from and against third party claims against AxCell for Losses arising out of any
claim that the SSBM or the Tools as supplied by InforMax infringe a U.S. patent,
copyright or trade secret of a third party. If a final injunction is obtained in
any such claim, or if in InforMax's opinion such an injunction is likely to be
obtained, InforMax may, at its sole option, either (a) obtain for AxCell's
customers the right to continue using the infringing item, (b) replace or modify
the infringing item or infringing portion thereof so that it becomes
noninfringing, or (c) if neither (a) nor (b) can be reasonably effected by
InforMax, terminate this Agreement. The foregoing indemnity will not apply to
modifications to the Tools or SSBM not performed by InforMax or InforMax's
compliance with AxCell's specifications or requirements for the Tools. The
foregoing states the entire liability of InforMax with respect to infringements
of any intellectual property rights by the Tools or SSBM or their use.

-8-
<PAGE>

12.3. By AxCell. AxCell agrees to indemnify and hold harmless InforMax
---------
from and against third party claims against InforMax for Losses arising out of
any claim that Protein Database as supplied by AxCell infringes a U.S. patent,
copyright or trade secret of third party. If a final injunction is obtained in
any such claim, or if in AxCell's opinion such an injunction is likely to be
obtained, AxCell may, at its sole option, either (a) obtain for InforMax's
customers the right to continue using the Protein Database or (b) replace or
modify the or infringing portion thereof so that it becomes noninfringing. The
foregoing indemnity will not apply to modifications to the Protein Database not
performed by AxCell. The foregoing states the entire liability of AxCell with
respect to infringements of any intellectual property rights by the Protein
Database or its use.

12.4. Contingency. The foregoing indemnities shall be contingent upon (i)
-----------
the indemnified party giving prompt written notice to the other party of any
claim, demand or action for which indemnity is sought; (ii) the indemnified
party being given sole control of the defense thereof; and (iii) the indemnified
party fully cooperating in the defense or settlement of any such claim, demand
or action, at the expense of the indemnifying party.

13. LIMITATIONS OF LIABILITY

IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PART FOR ANY SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT
(INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR OTHERWISE, AND WHETHER OR NOT SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. INFORMAX'S TOTAL
LIABILITY TO AXCELL UNDER THIS AGREEMENT WILL BE LIMITED TO THE PAYMENTS DUE
FROM INFORMAX UNDER THIS AGREEMENT. The parties have agreed that the limitations
specified in this Section 13 will survive and apply even if any limited remedy
specified in this Agreement is found to have failed of its essential purpose.

14. COMPLIANCE WITH LAW

Each party will comply with all applicable international, national, state,
regional, and local laws and regulations in performing its duties hereunder and
in any of its dealings with respect to the products of the other party.

15. GENERAL

15.1. Assignment. This Agreement will bind and inure to the benefit of
each party's permitted successors and assigns. Any assignment of this Agreement
by AxCell (except to an entity controlling, controlled by or under common
control with AxCell) without the prior written consent of InforMax shall be null
and void.

15.2. Non-Solicitation. The parties agree that, for the duration of the
term of this Agreement and for twelve (12) months thereafter, neither party
shall, directly or indirectly or for or on the behalf of any entity, solicit the
employment or services of the employees of the other party or enter into any
agreement for the purpose of causing such employees to leave the employment of
the other party.

15.3. Press Release. The parties agree to issue joint press releases (i)
announcing the execution of this Agreement within five (5) days of such
execution and (ii) announcing the commercial availability of the Protein
Database within five (5) days of the Database Launch Date.

15.4. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, excluding that body of law
known as conflicts of laws.

15.5. Severability. If any provision of this Agreement is found invalid or
------------
unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in full
force and effect.

15.6. Force Majeure. Neither party shall be liable to the other party for
-------------
failure or delay in fulfilling its obligations under this Agreement to the
extent that such failure or delay is due to causes beyond its control.

15.7. Notices. All notices under this Agreement will be deemed given when
-------
delivered personally, sent by confirmed facsimile transmission, or sent by
certified or registered U.S. mail or

-9-
<PAGE>

nationally-recognized express courier, return receipt requested, to the
respective addresses set forth in this Agreement or as may otherwise be
specified by either party to the other in accordance with this section.

15.8. Independent Contractors. The parties to this Agreement are
-----------------------
independent contractors. There is no relationship of partnership, joint venture,
employment, franchise, or agency between the parties. Neither party will have
the power to bind the other or incur obligations on the other's behalf without
the other's prior written consent.

15.9. Waiver. Failure or delay by either party to enforce compliance with
------
any term or condition of this Agreement shall not constitute a waiver of such
term or condition.

15.10. Dispute Resolution and Binding Arbitration.
------- ---------- --- ------- -----------

15.10.1. The parties shall attempt to settle any dispute between them
amicably and agree to exercise their best efforts to resolve the controversy or
dispute prior to seeking a judicial resolution. To invoke the dispute resolution
process, the invoking party shall give to the other party written notice of its
decision to do so, including a description of the issues subject to the
controversy or dispute and a proposed resolution thereof. The InforMax Project
Managers and the AxCell Project Managers shall attempt to resolve the
controversy or dispute within five (5) business days after receipt of such
notice. If they cannot resolve the controversy or dispute, the parties shall
meet at InforMax's office and describe the controversy or dispute and their
respective proposals for resolution to their respective chief operating officers
or another designated person with comparable authority who shall act in good
faith to resolve the controversy or dispute. If the controversy or dispute is
not resolved within ten (10) business days after such meeting, the parties by
mutual Agreement may engage an independent consultant to mediate the controversy
or dispute and the charges of the independent consultant shall be shared equally
by the parties. However, nothing in this clause shall preclude any party from
commencing suit or arbitration if said negotiations do not reach a resolution
within thirty (30) days after written notice that the negotiations have
commenced.

15.10.2. In the event that the parties cannot reach an amicable
settlement through an informal dispute resolution process, the parties agree
that any dispute, controversy, or claim arising out of or relating to this
contract, or the breach, termination or invalidity thereof, shall be finally
settled by binding arbitration. Such binding arbitration shall take place in the
location reasonably selected by the party not initiating the arbitration, and
shall be administered by the American Arbitration Association under its
Commercial Arbitration Rules. The number of arbitrators shall be one (1) and
shall be appointed within thirty (30) days following the commencement of
arbitration. If possible, the arbitrator will be an expert in the field of
bioinformatics and software development. If the parties cannot agree on an
arbitrator within such thirty (30) day period, the number or arbitrators shall
be increased to three (3), and each party will select an arbitrator within
fifteen (15) days, and those arbitrators will promptly select a third
arbitrator.

15.10.3. The arbitrator's award shall be final and binding and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. The parties expressly agree that prior to the
selection of the arbitrator(s), nothing in this Agreement shall prevent the
parties from applying to a court that would otherwise have jurisdiction for
provisional or interim measures.

-10-
<PAGE>

15.10.4. The costs of the arbitration shall be borne by the parties
to the arbitration in equal shares. Each party shall pay its own costs and
expenses, including attorneys' fees. The arbitration shall be conducted in the
English language. All submissions shall be made in English or with an English
translation. Witnesses may provide testimony in a language other than English,
provided that a simultaneous English translation is provided. Each party shall
bear its own translation costs.

15.11. Entire Agreement. This Agreement and its exhibits are the complete
----------------
and exclusive agreement between the parties with respect to the subject matter
hereof, superseding and replacing any and all prior agreements, communications,
and understandings (both written and oral) regarding such subject matter. This
Agreement may only be modified, or any rights under it waived, by a written
document executed by both parties.

[The rest of this page is intentionally left blank.]

-11-
<PAGE>

The parties have caused this Agreement to be executed by their duly-
authorized representatives as of the Effective Date.

InforMax: AxCell:
----------------------- ------------------------------

By: /s/ Alex Titomirov By: /s/ Brian Bullard

Name: Alex Titomirov Name: Brian Bullard

Title: President/CEO Title: Vice President, CIO

-12-
<PAGE>

[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]

-13-

<PAGE>

Exhibit 10.26

AXCELL BIOSCIENCES CORPORATION
STOCK OPTION PLAN

1. Purpose; Effective Date.

This Stock Option Plan is intended to encourage stock ownership by directors,
employees and designated paid consultants of AxCell BioSciences, Inc., a
Delaware corporation (the "Company", which shall include any subsidiaries of the
Company), in order to increase their proprietary interest in the success of the
Company and to encourage them to remain in its employ. The Plan provides for
options which qualify as incentive stock options as well as Non-Qualified Stock
Options. The effective date of this Plan is August 15, 1998, subject to approval
by the sole stockholder of the Company.

2. Definitions.

Whenever used in this Plan, the following terms will have the meanings set forth
in this paragraph:

"Board of Directors" means, until such time as the Company is Publicly
Traded, or is no longer a subsidiary of Cytogen Corporation, the Board of
Directors of Cytogen Corporation. At such time as the Company is Public
Traded, "Board of Directors" shall mean the Board of Directors of AxCell
BioSciences Corporation, and at such time as the Company is a subsidiary of
a corporation other than Cytogen Corporation, the Board of Directors (or
comparable governing body) of such other corporation.

"Code" means the U.S. Internal Revenue Code of 1986, as amended.

"Committee" means the committee described in paragraph 3.

"Common Stock" means the common stock, par value $.01 per share, of the
Company.

"Consultant" shall mean a paid consultant of the Company who would be
eligible to participate in a plan registrable under Form S-8 of the
Securities and Exchange Commission, or comparable successor forms.

"Date of Grant" means with respect to any Option the date the Committee
approves the grant of the Option or such later date as may be specified by the
Committee as the date the option will become effective.

"Employee" means any person employed by the Company (including, without
limitation, a person employed by the Company who is also an officer or director
of the Company).

"Exercise Price" means with respect to any Option the price per share which
must be paid upon exercise of the Option.
<PAGE>

"Fair Market Value" means (i) if the Company's stock is not registered
under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, such fair
market value as shall be determined by the Board or the Committee in good faith,
(ii) if the Common Stock is traded in a market in which actual transactions are
reported, the average of the high and low prices at which the Common Stock is
reported to have traded on the relevant date in the principal market on which
trading in the Common Stock is reported, or if there is no reported sale of the
Common Stock on the relevant date, the average of the highest reported bid price
and lowest reported asked price for the Common Stock on the relevant date, or
(iii) if the Common Stock is Publicly Traded but only in markets in which there
is no reporting of actual transactions, the average of the highest reported bid
price and the lowest reported asked price for the Common Stock on the relevant
date.

"Incentive Stock Option" means any Option that at the time of the grant
qualifies and is designated as an incentive stock option within the meaning of
Section 422 of the Code.

"Non-Qualified Option" means any Option that is not an Incentive Stock
Option.

"Option" means any Incentive Stock Option or Non-Qualified Option granted
under this Plan.

"Option Agreement" means an agreement in such form as may be determined by
the Committee, executed and delivered by the Company to the holder of any Option
with respect to that Option.

"Outside Director" means a member of the Board who is a "disinterested
person" within the meaning of rules promulgated under Section 16(b) of the
Securities Exchange Act of 1934, or any successor provision, and is a non-
employee director for purposes of Section 162(m) of the Code, and meets such
other applicable requirements with respect to employee stock option plans as may
imposed by a stock market or other governing entity.

"Plan" means the AxCell Biosciences Corporation 1998 Stock Option Plan.

"Publicly Traded" means, with respect to any class of stock, that the class
of stock is required to be registered under Section 12 of the Securities
Exchange Act of 1934, as amended, or that stock of that class has been sold
within the preceding 12 months in an underwritten public offering.

"Ten Percent Shareholder" means, with respect to the grant of any Option, a
person who at the Date of Grant is the beneficial owner of stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company.

"Termination of Employment" means the time when the employee-employer
relationship between an Employee and the Company ceases to exist for any reason,
or the time when an officer who is not also an Employee ceases to be an officer
of the Company for any reason, including, but not limited to, a termination by
resignation, discharge, death, Total Disability or

2
<PAGE>

retirement. Any leave of absence taken with the consent of the Company for a
period of not more than 90 days shall not be a Termination of Employment, or if
longer, so long as the optionee's right to reemployment with the Company is
guaranteed by contract. If the period of leave exceeds 90 days and if the right
to reemployment is not guaranteed by contract, the Termination of Employment
will be deemed to occur on the 91st day of the leave.

"Total Disability" means inability of an Employee to engage in any
substantial gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
All determinations as to the date and extent of disability of an Employee will
be made by the Committee.

3. Administration.

(a) This Plan shall be administered by a Committee of the Board of
Directors, which shall be composed of not less than two Outside Directors. The
Committee may, from time to time, adopt or rescind rules and regulations for
carrying out the provisions and purposes of this Plan. Subject to the express
provisions of this Plan, the Board or the Committee shall have the authority, in
their discretion, to determine which Employees (or categories of Employees)
shall receive Options, the time when Options shall be granted, the terms and
provisions of the Options (which may differ from one another) and to do
everything necessary or appropriate to administer this Plan, including, without
limitation, interpreting the provisions of this Plan and the Options. All
determinations made by the Committee with respect to this Plan and the Options
shall be final, binding and conclusive.

(b) No member of the Committee shall be liable for any act or omission of
the Committee or any other member of the Committee, or for any act or omission
on his own part, in connection with the administration, implementation or
interpretation of this Plan, unless it resulted from the member's own willful
misconduct.

4. Persons Eligible to Receive Options.

(a) Options may be granted under this Plan only to persons who at the Date
of Grant either (i) are officers or Employees of the Company, or (ii) have
agreed to become officers or Employees of the Company, and, in either case, are
determined by the Committee to be of substantial importance to the Company, or
(iii) directors of the Company, until such time as the Company becomes Publicly
Traded, or (iv) Consultants of the Company.

(b) Options granted to persons who are not yet officers or Employees at the
Date of Grant may not be exercised until the optionee has become an officer or
Employee, and shall expire if the optionee fails to commence service as an
officer or Employee within six months (or such other period as the Committee may
determine) after the Date of Grant.

(c) Incentive Stock Options may be granted only to persons who are Employees
at the Date of Grant, and only on such terms as are provided in paragraphs 6, 7
and 8 hereof.

3
<PAGE>

(d) No Employee to whom Options may be granted under this Plan may be
granted Options to purchase more than 200,000 shares in any one calendar year.

5. Stock Subject to the Plan.

Subject to any adjustment as may be permitted in Section 10, the maximum number
of shares of Common Stock which may at any time be subject to Options, or which
may be issued upon the exercise of Options granted under the Plan, shall be
limited to 2,000,000 based upon a minimum share capitalization of 10,000,000
outstanding shares, with the remaining shares initially held by Cytogen
Corporation. The shares reserved for issuance pursuant to the Plan may consist
either of authorized but previously unissued shares of stock, or of issued
shares of stock which have been reacquired by the Company. If any Option
expires, terminates or is canceled for any reason without having been exercised
in full, the shares of stock allocable to the unexercised portion of such Option
may again be made subject to an Option under the Plan.

6. Grants of Options.

(a) Subject to paragraph 4(d), the Committee will have complete discretion
to determine when, and to which officers or other Employees, Options are to be
granted, the number of shares of Common Stock to which Options granted to each
officer or other Employee will relate, whether and to what extent Options
granted to an officer or other Employee will be Incentive Stock Options or Non-
Qualified Options and, subject to the provisions of paragraphs 7 and 8, the
Exercise Price and the term of each Option. The Committee may, in its
discretion, provide that the Exercise Price may be paid in cash or by other
means; subject, however, to any requirements of applicable law which may limit
the type or amount of such non-cash consideration. If payment by interest
bearing promissory note at the applicable federal rate is permitted: (i) the
optionee shall be required to make a cash payment upon exercise of the Option of
not less than 20% of the Exercise Price; (ii) the note shall provide for full
recourse against the maker; and (iii) the note shall be payable in full prior to
its stated maturity upon the optionee's Termination of Employment for any reason
other than death or Total Disability.

(b) Any Options which are not designated as Incentive Stock Options when
they are granted will be Non-Qualified Options.

(c) Promptly after the Date of Grant of each Option, the Company shall
cause an Option Agreement to be executed and delivered to the holder of the
Option. The Option Agreement shall clearly state whether the Option granted is
or is not an Incentive Stock Option. Separate Option Agreements shall be used
for Incentive Stock Options and Non-Qualified Stock Options.

4
<PAGE>

7. Option Provisions.

(a) Exercise Price. No consideration shall be payable by any optionee for
the grant of an Option. Subject to the provisions of paragraph 8, the Exercise
Price of each Option will be as determined by the Committee. The Exercise Price
of a Non-Qualified Option may, until such time as the Company is Publicly
Traded, be less than the Fair Market Value of the Common Stock on the Date of
Grant of the Option; after such time as the Company is Publicly Traded, the
Exercise Price of a Non-Qualified Option may not be less than the Fair Market
Value of the Common Stock on the Date of Grant of the Option.

(b) Term. The term of each Option will be as determined by the Committee,
but in no event will the term of an Option be longer than ten years from the
Date of Grant, or five years in the case of an Incentive Stock Option granted to
a Ten Percent Shareholder. Options may not be exercised before six months after
the Date of Grant. Options will cease to be exercisable prior to the expiration
of their term under certain circumstances as provided in paragraphs 7(f), (g),
and (h). Subject to the foregoing, and to any vesting or other conditions
imposed at the time it is granted, an Option may be exercised in whole or in
part at any time, or from time to time, during its term.

(c) Manner of Exercise. To exercise an Option, the person exercising the
Option must deliver to the Company, at its principal office:

(i) a notice of exercise, which states the extent to which the Option
is being exercised;

(ii) a certified or bank cashier's check, or such other form of
payment as the Company may permit, in an amount equal to the Exercise Price
of the Option times the number of shares as to which it is being exercised,
or consideration in such other form as may be permitted under the terms on
which the Option is granted; and

(iii) payment of an amount equal to any withholding taxes the
Company is required to pay because of the exercise of the Option. The date
on which the Company receives all the items specified in this subsection
will be the date on which the Option is exercised to the extent described
in the notice of election.

(d) Delivery of Stock Certificates. As promptly as practicable after an
Option is exercised, the Company will deliver to the person who exercises the
Option certificates, registered in that person's name, representing the number
of shares of Common Stock which were purchased by the exercise of the Option.
Each certificate may bear a legend to indicate, if applicable, that (i) the
Common Stock represented by the certificate was issued in a transaction which
was not registered under the Securities Act of 1933, as amended, and may only be
sold or transferred in a transaction which is registered under that Act or is
exempt from the registration requirements of that Act, and (ii) the Common Stock
represented by the certificate is subject to the obligation of the holder to pay
any unpaid balance of the Exercise Price

5
<PAGE>

(whether pursuant to a promissory note or otherwise), and/or that the Common
Stock is pledged to secure such an obligation.

(e) Nontransferability of Options. During the lifetime of the person to
whom an Option is issued, the Option may be exercised only by that person or his
or her guardian or legal representative. An Option may not be assigned, pledged
or hypothecated in any way, will not be subject to execution, and will not be
transferable otherwise than by will or the laws of descent and distribution.
The Company will not recognize any attempt to assign, transfer, pledge,
hypothecate or otherwise dispose of an Option contrary to the provisions of this
Plan, or any levy of any attachment or similar process upon any Option, and,
except as expressly stated in this Plan, the Company will not be required to,
and will not, issue Common Stock on exercise of an Option to anyone who claims
to have acquired that Option from the person to whom it was granted.

(f) Termination of Employment of Holder of Option Other Than Because of
Total Disability or Death. If there is a Termination of Employment of a person
to whom an Option has been granted, other than by reason of the person's death
or Total Disability, each Option held by the person may be exercised (if
otherwise exercisable) until the earlier of (i) the end of the three-month
period immediately following the date of the Termination of Employment, (ii) the
expiration of the term specified in the Option, or (iii) such earlier time as
may be determined by the Committee at the time of granting the Option.

(g) Major Event. Upon the occurrence of a Major Event, as defined below,
in addition to those shares available for purchase as of the date of the Major
Event all of the remaining Option Shares not then otherwise available for
purchase as of such date shall become immediately available for purchase.

(i) The term "Major Event" as used in this Agreement shall mean (1) the
Company enters into one or more definitive agreements to merge or
consolidate the Company with or into another corporation, or to sell or
otherwise dispose of all or substantially all of the Company's assets, or
to effect any other transaction, consolidation or reorganization having
similar results or effect, or to sell a greater than 50% interest to third
parties other than in connection with the Company becoming Publicly Traded;
provided, that such events shall not be deemed a Major Event, in the
discretion of the Board or the Committee if provision is made in such
transaction for the Options to be converted into equivalent securities of
the entity with which such a transaction is entered at the same pricing as
received by the Company or Cytogen Corporation (or its successors) in such
transaction; and, following such time at which the Company is Publicly
Traded: (2) any person other than the Company makes a tender or exchange
offer for more than 50% of Common Stock pursuant to which purchases of any
amount of Common Stock are made; (3) stock representing more than 50% of
the voting power of the Company is acquired by any person other than the
Company in any one or more transactions; or (4) within any 24-month period
persons who were members of the Company's Board of Directors immediately
prior to such 24-month period, together with any persons who were first
elected as directors during such 24-month period by or upon the
recommendation of members of the Board of Directors who were members
immediately prior to such 24-month period and who constituted a

6
<PAGE>

majority of the Board of Directors at the time of such election, cease to
constitute a majority of the Board of Directors.

(g) Total Disability of Holder of Option. If there is a Termination of
Employment of a person to whom an Option has been granted by reason of his or
her Total Disability, each Option held by the person may be exercised (if
otherwise exercisable) until the earlier of (i) the end of the one-year period
immediately following the date of the Termination of Employment, (ii) the
expiration of the term specified in the Option, or (iii) such earlier time as
may be determined by the Committee at the time of granting the Option.

(h) Death of Holder of Option. If there is a Termination of Employment of
a person to whom an Option has been granted by reason of his or her death, or a
former officer or Employee dies following the date of his or her Termination of
Employment but at a time when an Option still would be exercisable by that
person but for the death of the person, each Option held by the person at the
time of his or her death may be exercised by the person or persons to whom the
Option passed by will or by the laws of descent and distribution (but by no
other persons) until the earlier of (i) the end of the one-year period
immediately following the date of death (or such other period as may be
determined by the Committee at the time of granting the Option), (ii) the
expiration of the term specified in the Option, or (iii) if the death occurs
after the Termination of Employment, the end of the period in which the Option
could be exercised under paragraph 7(f) or (g).

(i) Company's Right of First Purchase. While and so long as the stock
of the class subject to this Plan has not been Publicly Traded for at least
ninety days, and as a long as there has been no Major Event, any shares of
common stock issued on exercise of any Option shall be subject to the Company's
right of first purchase. By virtue of that right, (a) such stock may not be
transferred during the optionee's lifetime to any person other than members of
the optionee's immediate family, a partnership whose members are the optionee
and/or members of the optionee's immediate family, or a trust for the benefit of
the optionee and/or members of the optionee's immediate family, unless such
transfer occurs within fifteen days following the expiration of thirty days
after the Company has been given a written notice which correctly identified the
prospective transferees and which offered the Company an opportunity to purchase
such shares at the price of a bona fide offer by the prospective transferee or
third party in cash, and such offer was not accepted within thirty days after
the Company's receipt of that notice; and (b) upon the optionee's death, the
Company shall have the right to purchase all or some of such stock at its fair
market value within nine months after the date of death. This right of first
purchase shall continue to apply to any such shares after the transfer during
the optionee's lifetime of that stock to a member of the optionee's immediate
family or to a family partnership or trust as aforesaid, and after any transfer
of that stock with respect to which the Company expressly waived its right of
first purchase without also waiving it as to any subsequent transfers thereof,
but it shall not apply after a transfer of that stock with respect to which the
Company was offered but did not exercise or waive its right of first purchase or
more than nine months after the optionee's death. The Company may assign all or
any portion of its right of first purchase to any one or more of its
stockholders, or to a pension or retirement Plan

7
<PAGE>

or trust for employees of the Company, who may then exercise the right so
assigned. Stock certificates evidencing stock subject to this right of first
purchase shall be appropriately legended to reflect that right.

8. Special Provisions Relating to Incentive Stock Options.

The Exercise Price of an Incentive Stock Option will be not less than 100% of
the Fair Market Value of the Common Stock on the Date of Grant of the Option.
An Incentive Stock Option may not be granted to a person who, at the time the
Option is granted, is a Ten Percent Shareholder, unless (i) the Exercise Price
of the Option is at least 110% of the Fair Market Value of the Common Stock on
the Date of Grant and (ii) the Option by its terms is not exercisable after the
expiration of five years from the Date of Grant. To the extent that the
aggregate Fair Market Value (determined at the time an Incentive Stock Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
first exercisable by an Employee during any calendar year (under this Plan and
any other incentive stock option plans of the Company) exceeds $100,000, such
Options shall be treated as Non-Qualified Options.

9. Recapitalization.

(a) The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other corporate act or proceeding, whether
of a similar character or otherwise, or to sell additional shares of Common
Stock dilutive of the shares issuable upon exercise of Options. Unless
otherwise determined by the Board, the issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, for
cash or property, or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or on conversion of shares
or obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number, class or price of shares of Common Stock then subject to
outstanding Options.

(b) If as a result of any (i) reorganization or liquidation of the Company
or (ii) reclassification of the Company's capital stock, or (iii) consolidation
or merger of the Company with or into another corporation, or sale of all or
substantially all the assets of the Company (a reorganization or liquidation of
the Company or reclassification of the Company's capital stock, or a merger,
consolidation or sale of the type described in this subsection being a
"Corporate Transaction") while an Option is outstanding, the holders of the
Common Stock become entitled to receive with respect to their Common Stock,
securities or assets other than, or in addition to, their Common Stock, upon
exercise of that Option the holder will receive what the holder would have owned
if the holder had exercised the Option immediately before the Corporate
Transaction which occurred while the Option was outstanding and had not disposed

8
<PAGE>

of anything the holder would have received as a result of that and all
subsequent Corporate Transactions.

10. Rights of Option Holder.

(a) The holder of an Option will not have any rights as a stockholder by
reason of holding that Option. Upon exercise of an Option, the holder will be
deemed to acquire the rights of a stockholder when, but not before, the issuance
of Common Stock as a result of the exercise is recorded in the stock records of
the Company.

(b) Nothing in this Plan or in the grant of an Option will confer upon any
Employee the right to continue in the employment of the Company or will
interfere with or restrict in any way the rights of the Company to discharge any
Employee at any time for any reason whatsoever, with or without cause, nor will
it impose any obligation on the Employee to remain in the employ of the Company.

11. Laws and Regulations.

The obligation of the Company to sell and deliver shares of Common Stock on
exercise of Options will be subject to the condition that legal counsel for the
Company be satisfied that the sale and delivery will not violate the Securities
Act of 1933, as amended, or any other applicable laws, rules or regulations, and
to such conditions that the Company, if Publicly Traded, or Cytogen Corporation
(or its successor) may impose related to such securities laws requirements. The
Company and Cytogen Corporation (or its successors) shall have no obligation to
take such steps as may be required to permit exercises if the Board or a
Committee determines in good faith that such steps are not in the best interest
of the Company or a parent corporation.

12. Withholding of Taxes.

(a) In addition to the requirement in paragraph 7(c) that in order to
exercise an Option a person must make a payment to the Company or authorize
withholding in order to enable the Company to pay any withholding taxes due as a
result of the exercise, if a person who exercised an Incentive Stock Option
disposes of shares of Common Stock acquired through exercise of that Incentive
Stock Option either (i) within two years after the Date of Grant of the
Incentive Stock Option or (E) within one year after the issuance of the shares
on exercise of the Incentive Stock Option, the person will notify the Company
promptly of the occurrence of the event and, if the event was a disposition of
Common Stock acquired on exercise of an Incentive Stock Option, the amount
realized upon the disposition.

(b) If, whether because of a disposition of Common Stock acquired on
exercise of an Incentive Stock Option, or otherwise, the Company is required to
pay withholding taxes to any Federal, state or other taxing authority and the
Employee fails to provide the Company with the funds with which to pay that
withholding tax, the Company may withhold up to 50% of each payment of salary or
bonus to the Employee (which will be in addition to any other

9
<PAGE>

required or permitted withholding), until the Company has been reimbursed for
the entire withholding tax it was required to pay.

(c) The obligations contained in this paragraph 12 shall bind each
optionee, and each optionee, by accepting and/or exercising an Option, shall be
deemed to agree to observe and comply with them.

13. Reservation of Shares.

The Company will at all times keep reserved for issuance on exercise of Options
a number of authorized but unissued or reacquired shares of Common Stock equal
to the maximum number of shares the Company may be required to issue on exercise
of outstanding Options (assuming no subsequent adjustments under paragraph 9).

14. Amendment of the Plan.

The Board of Directors may at any time and from time to time modify or amend
this Plan in any respect effective at any date the Board of Directors
determines, subject to such requirements as may be imposed by the Securities
Exchange Act of 1934, as amended, the Code, or by the rules of any stock market
relating to stockholder approval, if applicable. No modification or amendment of
this Plan will, without the consent of the holder of an outstanding Option,
adversely affect the holder's rights under that Option.

15. Interpretation

The Committee shall have the power to interpret the Plan and to make and amend
rules for putting it into effect and administering it. It is intended that the
Incentive Stock Options granted under the Plan shall constitute incentive stock
options within the meaning of section 422 of the Code, that the Non-Qualified
Options shall constitute property subject to federal income tax pursuant to the
provisions of section 83 of the Code and that the Plan shall qualify for the
exemption available under Rule 16b-3 (or any similar rule) of the Securities and
Exchange Commission. It is also intended that all compensation income recognized
by optionees as the result of the exercise of Options or the disposition of
Common Stock acquired on exercise of Options shall be considered performance-
based compensation excludable from such optionee's "applicable employee
remuneration" pursuant to section 162(m)(4)(C) of the Code. The provisions of
the Plan shall be interpreted and applied insofar as possible to carry out such
intent.

16. Termination of the Plan.

This Plan shall terminate on August 15, 2009, unless sooner terminated. The
Board of Directors may suspend or terminate this Plan at any time or from time
to time, but no such action may adversely affect the rights of a person holding
an outstanding Option.

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<PAGE>

17. Applicable Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of New
Jersey, without reference to the principles of conflict or laws thereof, except
with respect to such matters as are governed by the corporate law of the State
of Delaware.

<PAGE>

Exhibit 10.27

FINANCIAL INNOVATORS

[LOGO]

FINOVA Capital Corporation
10 Waterside Drive
Farmington, CT 06032-3065
(860) 676-1818

MASTER LOAN AND SECURITY AGREEMENT

Master Loan and Security Agreement No. S7600, dated December 30, 1999

FINOVA Capital Corporation ("we," "us" or "FINOVA"), having its principal place
of business at 1850 North Central Avenue, Phoenix, Arizona 85004 is willing to
make a loan (the "Loan") to Cytogen Corporation having its principal place of
business at 600 College Road East, CN 5308,Princeton, New Jersey 08540 and
AxCell Biosciences Corporation, jointly and severally liable (collectively
"you" or "Borrower"), having its principal place of business at 825 Newtown
Yardley Road, Newtown, Pennsylvania 18940, in one or more advances made from
time to time (individually, an "Advance" and collectively, the "Advances"), in
the aggregate principal amount of up to One Million, Four Hundred Thousand
Dollars ($1,400,000), under the terms and conditions contained in this Master
Loan and Security Agreement (this "Master Agreement"). The entire Loan will be
"cross collateralized" and secured by the collateral (the "Collateral")
described in each schedule (individually, a "Schedule" and collectively,
"Schedules") which will be executed in connection with each Advance and the
related Note (as hereinafter defined). The Collateral includes the Equipment
hereinafter described and any and all replacement parts, additions, accessories
and accessions that you may add to the Equipment, as well as all replacements
and substitutions of the Equipment and all proceeds of the Equipment, including,
without limitation, insurance proceeds. We may treat any Schedule as a separate
loan and security agreement containing all of the provisions of this Master
Agreement.

1. THE CREDIT

(a) Advances. Each Advance shall be evidenced by and the specific terms
applicable thereto set forth in a Note and related Schedule. All of the Notes
and Schedules, taken together, will evidence the entire Loan. We will only make
the Loan to you if all the conditions in this Master Agreement have been met to
our reasonable satisfaction. We will rely on your representations and
warranties contained in this Master Agreement, in making the Loan. The terms of
this Master Agreement will each apply to the entire Loan.

(b) Use of Proceeds. The proceeds of the Advances will be used solely to
reimburse you for your payment of the purchase price for equipment which is
reasonably satisfactory to us and which is described in the applicable Schedule
("Equipment"). If you have not yet paid for the Equipment (but the same is
otherwise satisfactory to us), the proceeds of the Advance will be paid by us
directly to the supplier (which you have chosen) to pay the purchase price of
the Equipment.
<PAGE>

(c) Notes. Your obligation to repay the Advance and to pay interest
thereon will be evidenced by separate secured promissory notes (individually, a
"Note" and collectively, the "Notes"). Each Note will be dated the date of the
Schedule to which the Advance evidenced by the Note is related. The related
Schedule will be deemed to be part of the Note.

(d) Term. The term ("Term") of each Schedule (and the related Advance)
begins upon the date that we make payment for the Collateral covered under the
Schedule (the "Closing Date"). The Term continues until you fully perform all
of your obligations under this Master Agreement, each related Schedule and the
related Note(s).

(e) Loan Account. We will keep a loan account on our books and records
for the Loan. We will record all payments of principal and interest in the loan
account. Unless the entries in the loan account are in error, the loan account
will definitively indicate the outstanding principal balance and accrued
interest on the Loan.

(f) Payments. The scheduled payments of principal and interest (the
"Payments") are indicated on and due and payable in accordance with the terms of
the applicable Note and Schedule. The Payments are payable in advance and
otherwise on the dates and in the amounts set forth on the applicable Schedule.

(g) First Payment and Subsequent Payments. The first Payment under a Note
and Advance ("First Payment") is due at the beginning of its Term and shall, at
our option, either be deducted from the proceeds of the Advance or paid directly
to us by you. Subsequent Payments are due on the thirtieth (30th) day of each
successive month as set forth on the Schedule until you pay to us in full all of
the Payments and any other fees, costs, charges and expenses that you owe us.

(h) Interest. Prior to Maturity of an Advance, you will pay us interest
on the Advance at the interest rate indicated in the applicable Schedule (the
"Interest Rate"). "Maturity" means the scheduled maturity or any earlier date on
which we accelerate the Loan. The Payment amount indicated in the Schedule
includes interest at the applicable Interest Rate. Interest is calculated in
advance using a year of 360 days with twelve months of 30 days.

(i) Interim Interest Payment. If an Advance is made on a day other than
the thirtieth (30th) or thirty-first (31st) day of a month, you will also pay to
us, together with the First Payment, interest on the Advance at the applicable
interest rate for the period from the date the Advance is made until the twenty-
ninth (29th) day of the month in which the Advance is made. If an Advance is
made on the thirty-first (31st) day of a month, you will also pay to us,
together with the First Payment, interest on the Advance at the applicable
interest rate for the period from the date the Advance is made until the twenty-
ninth (29th) day of the following month. If an Advance is made on the thirtieth
(30th) day of a month, no interim interest will be due.

(j) Default Interest Rate. After Maturity of the Loan or any Advance, you
will pay us interest thereon at a rate of four (4%) percent per year above the
applicable Interest Rate. This is referred to as the "Default Rate."

(k) Usury. You and we intend to obey the law. If the Interest Rate
charged would exceed the maximum legal rate, you will only have to pay the
maximum legal rate. You do not have to pay any excess interest over and above
the maximum legal rate of interest. However, if it later becomes legal for you
to pay all or part of any excess interest, you will then pay it to us upon our
request.

(l) Payment Details. You will make all Payments due under this Master
Agreement by 12:00 P.M., Connecticut time, on the day they are due. You will
make all Payments in US Dollars (US$) in immediately available funds. We do not
have to make or give "presentment, demand, protest or notice" to get paid. You
waive "presentment, demand, protest and notice."

(m) Application of Payments. Each Payment under this Master Agreement is
to be

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<PAGE>

applied in the following order: first, to any fees, costs, expenses and
charges you may owe us; second, to any interest due; and third to the principal
balance.

(n) Prepayment. You may prepay the Loan as specifically permitted by
Exhibit B to the applicable Schedule.

(o) No Setoffs. Your obligation to pay us all Payments is absolute and
unconditional. You are not excused from making the Payments, in full, for any
reason. You agree that you have no defense for failure to make the Payments and
you will not make any counterclaims or setoffs to avoid making the Payments.

2. SECURITY INTEREST

(a) You grant us a first and only lien on and security interest in the
Collateral. The Collateral secures the full and timely payment and performance
of all of your now existing or hereafter arising indebtedness, liabilities and
obligations to us, whether under this Master Agreement, the Schedules, the Notes
and any other agreement, loan or lease that you may at any time or times have
with us or otherwise (collectively, the "Obligations"). You also grant us a
security interest in any additional collateral identified in any Schedule. Any
additional collateral is considered to be "Collateral" and it secures all of the
Obligations.

(b) If we request, you will put labels supplied by us stating "PROPERTY
SUBJECT TO A SECURITY INTEREST HELD BY FINOVA CAPITAL CORPORATION" on the
Collateral where they are clearly visible.

(c) You give us permission to add to this Master Agreement or any Schedule
the serial numbers and other information about the Collateral.

(d) You give us permission to file this Master Agreement or Uniform
Commercial Code financing statements, at your expense, in order to perfect our
security interest in the Collateral. You also give us permission to sign your
name on the Uniform Commercial Code financing statements where this is permitted
by law.

(e) You will pay our fees and costs for documentation, closing,
administration and termination of this Master Agreement, the Notes and
Schedules. These fees include such items as reasonable attorneys fees and
expenses incurred in preparing this Master Agreement and all agreements,
instruments and documents executed in connection herewith, and all amendments,
supplements and waivers hereto and thereto, as well as due diligence searches
and fees for preparing and filing UCC terminations and releases. You will also
pay any filing, recording or stamp fees or taxes resulting from filing this
Master Agreement or Uniform Commercial Code financing statements.

(f) At your expense, you will defend our first priority security interest
in the Collateral against, and keep the Collateral free of, any legal process,
liens, other security interests, attachments, levies and executions. You will
give us immediate written notice of any legal process, liens, attachments,
levies or executions, and you will indemnify us against any loss that results to
us from these causes.

(g) You will notify us at least 15 days before you change the address of
your principal executive office or principal place of business. Your principal
executive office and principal place of business are set forth at the beginning
of this Master Agreement.

(h) You will notify us at least 15 days before you change your state of
incorporation.

(i) You will promptly sign and return additional documents that we may
reasonably request in order to protect our first priority security interest in
the Collateral.

(j) Except as set forth in a Schedule, the Collateral is personal property
and will remain personal property. Except as set forth in a Schedule, you will
not incorporate it into real estate and will not do anything that will cause the
Collateral to become part of real estate or a fixture.

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<PAGE>

3. CONDITIONS OF LENDING

(a) See our Commitment Letter to you dated December 20, 1999 (the
"Commitment Letter"), which you and we consider to be a part of this Master
Agreement. The terms and conditions of the Commitment Letter continue following
the making of the first Advance, including, without limitation, conditions to
the Loan. However, if there is a conflict between the terms and conditions of
this Master Agreement, any Schedule or any Note and the terms and conditions of
the Commitment Letter, then you and we agree that the terms and conditions of
this Master Agreement, the Schedules and the Notes control over the Commitment
Letter terms and conditions.

(b) Before we disburse any proceeds of any Advance, we also require the
following:

(i) That no payment is past due to us under any other agreement, loan or
lease that you or any guarantor have with us.

(ii) That you are complying with all terms of this Master Agreement, the
Schedules and the Notes and there are no defaults hereunder or thereunder.

(iii) That we have received all the documents we requested, including
the signed Schedule and Note.

(iv) That there has been no material adverse change in your financial
condition, business or operations, or that of any guarantor, from the financial
condition that you or any guarantor have disclosed to us.

(v) All conditions contained in the Commitment Letter have been
satisfied.

4. REPRESENTATIONS AND WARRANTIES

You represent and warrant to us as follows:

(a) You and each guarantor are duly organized, existing and in good
standing wherever you or it are required by law to be so qualified, except where
such lack of qualification would not have a material adverse impact on your or
any guarantor's operations. You and each guarantor have full power and authority
to execute, deliver and carry out the provisions of this Master Agreement, the
Schedules and the Notes and to borrow hereunder and thereunder. This Master
Agreement, the Schedules and the Notes are validly executed and delivered by you
and the guarantors and are the legal, valid and binding obligations of you and
the guarantors, each enforceable in accordance with its terms.

(b) Neither you nor any guarantor is a defendant under any material
litigation and there are no judgments outstanding against you or any guarantor.

(c) All of the Equipment has been delivered to you and installed at the
location set forth on the Schedule and you have accepted all of the Equipment
for all purposes of this Master Agreement.

(d) You have good title to all of your assets, including, without
limitation, the Collateral, and in the case of the Collateral, free and clear of
all security interests, liens and other encumbrances. Upon filing of UCC-1
financing statements in all applicable filing offices, we will be granted a
first and only perfected lien on and security interest in all of the Collateral.
There are no other security interests, liens or encumbrances covering the
Collateral.

(e) You have supplied us with information about the Collateral. To the best
of your knowledge the amount of our Advance as to each item of Equipment is no
more than the fair and usual price for this kind of Equipment, taking into
account any discounts, rebates and allowances that you or any affiliate of yours
may have been given for the Equipment.

(f) The Collateral is located at the premises set forth on the Schedule.

(g) All financial information and other information that you or any
guarantor have given us is true and complete when provided. You or

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<PAGE>

any guarantor have not failed to tell us anything that would make the financial
information not misleading in any material respect. There has been no material
adverse change in your financial condition, business or operations, or the
financial condition of any guarantor, from the financial condition that you
disclosed to us.

(h) You have complied with all "environmental laws" and will continue to
comply with all "environmental laws." No "hazardous substances" are used,
generated, treated, stored or disposed of by you or at your properties except in
compliance with all environmental laws. "Environmental laws" mean all federal,
state or local environmental laws and regulations, including the following laws:
CERCLA, RCRA, Hazardous Materials Transport Act and The Federal Water Pollution
Control Act. "Hazardous substances" means all hazardous or toxic wastes,
materials or substances, as defined in the environmental laws, as well as oil,
flammable substances, asbestos that is or could become friable, urea
formaldehyde insulation, polychlorinated biphenyls and radon gas.

5. COVENANTS

You agree to do the following things (or not to do the following things if so
stated) until full payment of all amounts due to us under this Master Agreement,
the Schedules and the Notes:

(a) Care, Use, Location, Transfer, Encumbrance And Alteration of The
Collateral.

(i) You will make sure that the Collateral is maintained in good
operating condition, and that it is serviced, repaired and overhauled when this
is necessary to keep the Collateral in good operating condition. All maintenance
must be done according to the Supplier's or Manufacturer's requirements or
recommendations. All maintenance must also comply with any legal or regulatory
requirements.

(ii) You will maintain service logs for the Collateral, if applicable,
and permit us or our agents to inspect the Collateral, the service logs and
service reports. You give us and our agents permission to make copies of the
service logs and service reports.

(iii) We will give you prior notice if we, or our agents, want to inspect
the Collateral or the service logs or service reports. We may inspect it during
regular business hours. If we find during an inspection that you are not
complying with this Master Agreement in any material respect or if you are
otherwise in default under this Master Agreement, you (and not us) will pay our
travel, meals and lodging costs, our salary costs, and our costs and fees and
those of our agents for reinspection. You will promptly cure any problems with
the Collateral that are discovered during our inspections.

(iv) You will use the Collateral only for business purposes. You will
obey all legal and regulatory requirements in your use of the Collateral.

(v) You will make all additions, modifications and improvements to the
Collateral that are required by law or government regulation. Otherwise, you
will not alter the Collateral without our written permission, which will not be
unreasonably withheld. You will replace all worn, lost, stolen or destroyed
parts of the Collateral with replacement parts that are as good or better than
the original parts. The new parts will become subject to our security interest
upon replacement.

(vi) You will not remove the Collateral from the location indicated in
the Schedule.

(vii) You have and will have good and merchantable title to all of the
Collateral.

(viii) You will not convey, assign, sell, mortgage, transfer, encumber,
pledge, hypothecate, grant a security interest in, grant options with respect
to, lease or otherwise dispose of all or any part of any interest whatsoever in
or to any or all of the Collateral, or any interest therein.

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<PAGE>

(b) Year 2000 Compliant.

You represent, warrant and agree to take all action necessary, including, but
not limited to, due inquiry and due diligence with critical business partners to
assure that there will be no material adverse change to your business by reason
of the advent of the year 2000, including, without limitation, that all
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process all dates before and after December 31, 1999
("Y2K Compliant"). At our request, you shall provide to us assurance reasonably
acceptable to us that your computer-based systems, embedded microchips and other
processing capabilities are Y2K Compliant.

(i) You have the complete risk of loss or damage to the Collateral. Loss
or damage to the Collateral will not relieve you of your obligation to make the
Payments.

(ii) If any Collateral is lost or damaged, you have two choices although
if you are in default under this Master Agreement, we and not you will have the
two options. The choices are:

(A) Repair or replace the damaged or lost Collateral so that, once
again, the Collateral is in good operating condition and we have a perfected
first priority security interest in it.

(B) Pay us the present value (as of the date of payment) of the
remaining Payments. We will calculate the present value using a discount rate of
five (5%) percent per year. Once you have paid us this amount and any other
amount that you may owe us, we will release our security interest in the damaged
or lost Collateral and you (or your insurer) may keep the Collateral for salvage
purposes, on an "AS IS, WHERE IS" basis and without any representation or
warranty whatsoever.

(d) Insurance.

(i) Until you have made all Payments to us under this Master Agreement,
the Schedules and the Notes and all Obligations have been satisfied in full, you
will keep the Collateral insured. The amount of insurance, the coverage, and the
insurance company must be reasonably acceptable to us.

(ii) If you do not provide us with written evidence of insurance that is
reasonably acceptable to us, we may buy the insurance ourselves, at your
expense. You will promptly pay us the cost of this insurance. We have no
obligation to purchase any insurance. Any insurance that we purchase will be
our insurance, and not yours, and we may insure the Collateral beyond the date
of satisfaction of the Obligations.

(iii) Insurance proceeds may be used to repair or replace damaged or
lost Collateral or to pay us the present value of the Payments, as provided
above.

(iv) You appoint us as your "attorney-in-fact" to make claims under the
insurance policies, to receive payments under the insurance policies, and to
endorse your name on all documents, checks or drafts relating to insurance
claims for Collateral.

(e) Taxes.

(i) You will pay all sales, use, excise, stamp, documentary and ad
valorum taxes, license, recording and registration fees, assessments, fines,
penalties and similar charges imposed on the ownership, possession, use, lease
or rental of the Collateral or on the Loan.

(ii) You will pay all taxes (other than our federal or state net income
taxes) imposed on you or on us regarding the Payments.

(iii) You will reimburse us for any of these taxes that we pay or
advance.

(iv) You will file and pay for any personal property taxes on the
Collateral.

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<PAGE>

(f) Information Supplied By You and any Guarantor.

(i) During the Term you will promptly provide us with copies of any
current, quarterly and annual reports and all proxy (or information) statements
you or any guarantor file with the Securities and Exchange Commission ("SEC").

(ii) You and any guarantor will also provide us with the following
financial statements:

(A) Quarterly balance sheet and statements of earnings and cash flow -
within 45 days after the end of your first three fiscal quarters in each fiscal
year. These will be certified by the principal financial officer.

(B) Annual balance sheet and statements of earnings and cash flow - within
90 days after the end of each fiscal year. These will be audited by independent
auditors reasonably acceptable to us (Arthur Anderson & Company LLP is
acceptable). Their audit report must be unqualified.

All financial statements will be prepared according to generally accepted
accounting principles, consistently applied. All financial statements and SEC
filings that you or any guarantor provide us will be true and complete when
provided. They will not fail to tell us anything that would make them not
misleading in any material respect.

(iii) At the same time you deliver the financial statements described in
paragraph 5(f)(ii)(A) and cause to deliver the financial statements described in
paragraph 5(f)(ii)(B), you will also provide us with a certificate of your
principal financial officer stating that no default exists, or, if he cannot
certify this because a default does exist, he must specify in reasonable detail
the nature of the default.

(iv) For so long as AxCell Biosciences Corporation is a consolidated
subsidiary of Cytogen Corporation, information requirements within this Section
5(f) shall be satisfied by the provision of consolidated financial information
and filings with respect to Cytogen Corporation.

6. DEFAULTS

(a) Defaults. You are in default if any of the following happens:

(i) You do not pay us, when it is due, any Payment or other payment that
you owe us under this Master Agreement, any Schedule or any Note or that you owe
under any other agreement, loan, lease or other financial arrangement that you
have with us.

(ii) Any of the financial information that you give us is not true and
complete when provided, or you failed to tell us anything that would make the
financial information not misleading, in each case in any material respect.

(iii) You do something you are not permitted to do, or you fail to do
anything that is required of you, under this Master Agreement, any Schedule or
any other lease, loan or other financial arrangement that you have with us, in
each case in any material respect.

(iv) An event of default occurs for any other lease, loan or obligation of
yours (or any guarantor) that exceeds $50,000 in the aggregate.

(v) You or any guarantor file bankruptcy, or involuntary bankruptcy is
filed against you or any guarantor and such involuntary bankruptcy is not
dismissed within sixty (60) days.

(vi) You or any guarantor are subject to any other insolvency proceeding
other than bankruptcy (for example, a receivership action or an assignment for
the benefit of creditors) and such proceeding that is involuntary is not
dismissed within sixty (60) days.

(vii) Without our permission, you sell all or a substantial part of your
assets, merge or consolidate, or a majority of your voting stock or interests is
transferred. However without violating the provisions of this clause, you may
consolidate with or merge with a corporation or

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<PAGE>

other entity organized under the laws of one of the states of the United States
or the District of Columbia (the surviving entity, a "successor"), or sell
(except by means of a sale and leaseback arrangement) all or substantially all
of your business and assets to a transferee (the "transferee"), on the condition
that any successor or transferee either expressly or by operation of law assume
in writing all of your obligations pursuant to this Master Agreement, and that
the net tangible assets and the net worth (determined in accordance with
generally accepted accounting principles) of the successor or transferee after
the consolidation, merger or sale shall be at least equal to your net tangible
assets and net worth immediately prior to the consolidation, merger or sale.

(viii) There is a material adverse change in your financial condition,
business or operations, or that of any guarantor.

(b) Remedies, Default Interest, Late Fees.

If you are in default we may exercise one or more of our "remedies." Each
of our remedies is independent. We may exercise any of our remedies, all of our
remedies or none of our remedies. We may exercise them in any order we choose.
Our exercise of any remedy will not prevent us from exercising any other remedy
or be an "election of remedies." If we do not exercise a remedy, or if we delay
in exercising a remedy, this does not mean that we are forgiving your default or
that we are giving up our right to exercise the remedy. Our remedies allow us
to do one or more of the following:

(i) "Accelerate" the Loan balance under any or all Notes. This means that
we may require you to immediately pay us the entire outstanding principal
balance of the entire Loan.

(ii) Require you to immediately pay us all amounts that you are required
to pay us for the entire Term of any other agreements, loans, leases or
financial arrangements that you have with us.

(iii) Sue you for the entire outstanding principal balance of the Loan and
all other amounts you owe us (including, without limitation, all accrued and
unpaid interest, including interest at the Default Rate), outstanding fees,
costs, expenses and charges, plus all prepayment premiums.

(iv) Require you at your expense to assemble the Collateral at a location
we request in the United States of America.

(v) Exercise any remedy under the Uniform Commercial Code or otherwise
permitted by law including to the extent permitted retaking and removing the
Collateral. If required, we may disconnect and separate the Collateral from
your other property. You will not be entitled to any damages resulting from
removal or repossession of the Collateral. We may use, ship, store, repair or
lease any Collateral that we repossess. We may sell any repossessed Collateral
at private or public sale. You give us permission to show the Collateral to
buyers at your location free of charge during normal business hours. If we do
this, we do not have to remove the Collateral from your location. If we
repossess the Collateral and sell it, we will give you credit for the net sale
price, after subtracting our costs of repossessing and selling the Collateral.
If we rent the Collateral to somebody else, we will give you credit for the net
rent received, after subtracting our costs of repossessing and renting the
Collateral, but the credit will be discounted to present value using a discount
rate equal to the Default Rate. The credit will be applied against what you owe
us under this Master Agreement, the Schedules, the Notes and any other
agreements, loans, leases and other financial arrangements that you have with
us. If the credit exceeds the amount you owe under this Master Agreement, the
Schedule, the Notes and any other agreements, loans, leases or financial
arrangements that you have with us, we will refund the amount of the excess to
you.

(vi) We will have all of our rights and remedies under this Master
Agreement, the Notes, the Schedules and all agreements, instruments and
documents executed in connection herewith and therewith and all of our rights
and remedies under applicable law, whether as a secured party or otherwise.

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<PAGE>

(vii) Return conditions:

(A) Following a default, at our request you will return the Collateral,
freight and insurance prepaid by you, to us at a location we request in the
United States of America. It will be returned in good operating condition, as
required by Section 5 above. The Collateral will not be subject to any liens
when it is returned.

(B) You will pack or crate the Collateral for shipping in the original
containers, or comparable ones. You will do this carefully and follow all
recommendations of the Supplier and the Manufacturer as to packing or crating.

(C) You will also return to us the plans, specifications, operating
manuals, software, documentation, discs, warranties and other documents
furnished by the Manufacturer or Supplier. You will also return to us all
service logs and service reports, as well as all written materials that you may
have concerning the maintenance and operation of the Collateral.

(D) At our request, you will provide us with up to 60 days free storage of
the Collateral at your location, and will let us (or our agent) have access to
the Collateral in order to inspect it, display it to others for purchase and
sell it.

(E) You will pay us what it costs us to repair the Collateral if you do
not return it in the required condition.

(viii) You will also pay us the following:

(A) All our expenses of enforcing our remedies. This includes all our
expenses to repossess, store, ship, repair and sell the Collateral.

(B) Our reasonable attorney's fees and expenses.

(C) Default interest on everything you owe us from the date of your
default to the date on which we are paid in full at the Default Rate.

(D) A premium in the amount of five percent (5%) of the outstanding
principal balance of the Loan.

(ix) You will pay us a late fee whenever you pay any amount that you owe
us more than ten (10) days after it is due. You will pay the late fee within one
month after the late Payment was originally due. The late fee will be ten (10%)
percent of the late Payment. If this exceeds the highest legal amount we can
charge you, you will only be required to pay the highest legal amount. The late
fee is intended to reimburse us for our collection costs that are caused by late
Payment. It is charged in addition to all other amounts you are required to pay
us, including Default Interest.

(x) You realize that the damages we could suffer as a result of your
default are very uncertain. This is why we have agreed with you in advance on
the Default Rate to be used in calculating the payments you will owe us if you
default. You agree that, for these reasons, the payments you will owe us if you
default are "agreed" or "liquidated" damages. You understand that these
payments are not "penalties" or "forfeitures."

7. PERFORMING YOUR OBLIGATIONS IF YOU DO NOT

If you do not perform one or more of your obligations under this Master
Agreement or a Schedule or Note, we may perform it for you. We will notify you
in writing at least ten (10) days before we do this. We do not have to perform
any of your obligations for you. If we do choose to perform them, you will pay
us all of our expenses to perform the obligations. You will also reimburse us
for any money that we advance to perform your obligations, together with
interest at the Default Rate on that amount. These will be additional
"Payments" that you will owe us and you will pay them at the same time that your
next Payment is due.

8. INDEMNITY

(a) You will indemnify us, defend us and hold us harmless from and against
any and all

9
<PAGE>

claims, expenses and attorney's fees concerning or arising from the Collateral,
this Master Agreement, any Schedule or Note, or your breach of any
representation, warranty or covenant. It includes, without limitation, any
claims, losses or charges concerning, arising out of or in connection with the
manufacture, selection, delivery, possession, use, operation or return of the
Collateral and any claims, losses or damages concerning, arising out of or in
connection with this Master Agreement, any Schedule or the Notes.

(b) This obligation of yours to indemnify us continues even after the Term
is over.

9. MISCELLANEOUS

(a) Assignment.

WE MAY ASSIGN OR GRANT A SECURITY INTEREST IN THIS MASTER AGREEMENT, ANY
SCHEDULE, ANY NOTE OR ANY PAYMENTS WITHOUT YOUR PERMISSION. THE PERSON TO WHOM
WE ASSIGN IS CALLED THE "ASSIGNEE." THE ASSIGNEE WILL NOT HAVE ANY OF OUR
OBLIGATIONS UNDER THIS MASTER AGREEMENT. YOU WILL NOT BE ABLE TO RAISE ANY
DEFENSE, COUNTERCLAIM OR OFFSET AGAINST THE ASSIGNEE. NOTWITHSTANDING ANY SUCH
ASSIGNMENT OR GRANTING OF A SECURITY INTEREST, WE WILL CONTINUE TO BE LIABLE FOR
ALL OF OUR OBLIGATIONS UNDER THIS MASTER AGREEMENT.

UNLESS YOU RECEIVE OUR WRITTEN PERMISSION, YOU MAY NOT ASSIGN OR TRANSFER YOUR
RIGHTS UNDER THIS MASTER AGREEMENT OR ANY SCHEDULE. YOU ALSO ARE NOT ALLOWED TO
LEASE OR RENT THE COLLATERAL OR LET ANYBODY ELSE USE IT UNLESS WE GIVE YOU OUR
WRITTEN PERMISSION.

(b) Acceptance By FINOVA, Governing Law, Jurisdiction, Venue, Service of
Process, Waiver of Jury Trial.

THIS MASTER AGREEMENT WILL ONLY BE BINDING WHEN WE HAVE ACCEPTED IT IN WRITING.

THIS MASTER AGREEMENT IS GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW
YORK (NOT INCLUDING THE "CHOICE OF LAW" DOCTRINE). HOWEVER, IF THIS MASTER
AGREEMENT IS UNENFORCEABLE UNDER NEW YORK LAW, IT WILL INSTEAD BE GOVERNED BY
THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED.

YOU AND WE MAY ONLY SUE EACH OTHER IN A FEDERAL OR STATE COURT (A) THAT IS
LOCATED IN NEW YORK, (B) LOCATED IN THE STATE WHERE THE COLLATERAL IS LOCATED OR
(C) LOCATED IN THE STATE WHERE THE OTHER PARTY HAS ITS PRINCIPAL PLACE OF
BUSINESS. THIS APPLIES TO ALL LAWSUITS UNDER ALL LEGAL THEORIES, INCLUDING
CONTRACT, TORT AND STRICT LIABILITY. YOU CONSENT TO THE PERSONAL JURISDICTION
OF THESE COURTS. YOU WILL NOT CLAIM THAT THESE COURTS ARE AN "INCONVENIENT
FORUM" OR THAT THEY ARE NOT A PROPER "VENUE."

WE MAY SERVE YOU WITH PROCESS IN A LAWSUIT BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO YOUR ADDRESS INDICATED AFTER YOUR SIGNATURE BELOW.

YOU AND WE EACH WAIVE ANY RIGHT YOU OR WE MAY HAVE TO A JURY TRIAL IN ANY
LAWSUIT BETWEEN YOU AND US.

(c) Notices. Your address for notices is your address set forth below
your name on the signature page of this Master Agreement. We may give you
written notice in person, by mail, by overnight delivery service, or by fax.
Mail notice will be effective three (3) days after we deposit it with the U.S.
Postal Service. Overnight delivery notice requires a receipt and tracking
number. Fax notice requires a receipt from the

10
<PAGE>

sending machine showing that it has been sent to your fax number and received.

Our address for notices is our address set forth below our name on the signature
page of this Master Agreement, with Attention: Director, Contract
Administration. You will also give copies of all notices to us at our principal
place of business at the address set forth in the opening paragraph of this
Master Agreement, with attention to Vice President, Law Department. You may
give us notice the same way that we may give you notice.

(d) General.

This Master Agreement benefits our successors and assigns. This Master
Agreement benefits only those successors and assigns of yours that we have
approved in writing.

This Master Agreement binds your successors and assigns. This Master Agreement
binds only those successors and assigns of ours that clearly assume our
obligations in writing.

TIME IS OF THE ESSENCE OF THIS MASTER AGREEMENT

This Master Agreement, all of the Schedules and the Notes and the Commitment
Letter are together the entire agreement between you and us concerning the
Collateral.

Only an employee of FINOVA who is authorized by corporate resolution or policy
may modify or amend this Master Agreement or any Schedule or Note on our behalf,
and this must be in writing. Only he or she may give up any of our rights, and
this must be in writing. If more than one person is the Borrower under this
Master Agreement, then each of you is jointly and severally liable for your
obligations under this Master Agreement and all Schedules and Notes.

This Master Agreement is only for your benefit and for our benefit, as well as
our successors and assigns. It is not intended to benefit any other person.

If any provision in this Master Agreement is unenforceable, then that provision
must be deleted. Only unenforceable provisions are to be deleted. The rest of
this Master Agreement will remain as written.

We may make press releases and publish a tombstone announcing this transaction
and its total amount. You may publicize this transaction with our prior written
consent or as may be required by law.

BORROWER:

CYTOGEN CORPORATION
600 College Road East, CN 5308
Princeton, NJ 08540

BY: /s/ Jane Maida

PRINTED NAME: J. Maida

TITLE: VP Finance

Taxpayer ID# 22-2322400

FAX NUMBER: 609-750-8120

DATED: February 14, 2000

11
<PAGE>

STATE OF New Jersey
COUNTY OF Middlesex

I acknowledge that Jane Maida, who stated that he/she is VP Finance &
Administration of the CYTOGEN CORPORATION, signed this Master Loan and Security
Agreement in my presence today: 02/14/00. He/She acknowledged to me that
his/her signature on this Master Loan and Security Agreement was authorized by a
valid resolution or other valid authorization from Borrower's board of directors
or other governing body.

Theresa Eamello
----------------------------------
Notary Public

Theresa Eamello
Notary Public, State of New Jersey
ID No. 2217405
Qualified in Middlesex County
Commission Expires September 1, 2003
[SEAL]
\
LENDER: BORROWER:
FINOVA CAPITAL CORPORATION AXCELL BIOSCIENCES CORPORATION
10 Waterside Drive 825 Newtown Yardley Road
Farmington, CT 06032-3065 Newtown, PA 18940

BY: /s/ Linda Moschitto BY: /s/ Jane Maida

PRINTED NAME: Linda Moschitto PRINTED NAME: J. Maida

TITLE: Director, Contract Administration TITLE: CFO

FAX NUMBER: (860) 676-1814 Taxpayer ID# 22-3473342

DATE ACCEPTED: February 29, 2000 FAX NUMBER: 609-750-8120

DATED: February 14, 2000

STATE OF New Jersey
COUNTY OF Middlesex

I acknowledge that Jane Maida, who stated that he/she is CFO of AXCELL
BIOSCIENCES CORPORATION, signed this Master Loan and Security Agreement in my
presence today: 02/14/00. He/She acknowledged to me that his/her signature on
this Master Loan and Security Agreement was authorized by a valid resolution or
other valid authorization from Borrower's board of directors or other governing
body.

Theresa Eamello
-----------------------------------
Notary Public

Theresa Eamello
Notary Public, State of New Jersey
ID No. 2217405
Qualified in Middlesex County
Commission Expires September 1, 2003
[SEAL]

12
<PAGE>

PROMISSORY NOTE NO. 1

$___________ ______________, 2000

CYTOGEN CORPORATION, a Delaware corporation and AXCELL BIOSCIENCES CORPORATION,
a Delaware corporation ("you"), promise to pay to the order of FINOVA CAPITAL
CORPORATION ("we," "us" or "FINOVA") the principal amount of ______
_______________________ Dollars ($_________), together with interest on the
unpaid principal balance at the interest rate per annum and on the dates and as
otherwise provided in the "Master Agreement" and "Schedule" referred to below.

If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.

You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.

This Note is executed in connection with a Master Loan and Security Agreement
dated December 30, 1999 (the "Master Agreement"), between you and us. This Note
is one of the Notes referred to in the Master Agreement, is secured as provided
therein, and by all collateral set forth on Exhibit A to the attached Schedule
(the "Schedule"), dated the same date as this Note and made a part hereof, and
is entitled to all of the benefits of the Master Agreement and may be prepaid
only as provided in Exhibit B to the Schedule. All of the terms contained in
the Schedule are incorporated in full herein as if set forth in its entirety.
This Note may be accelerated by us upon a payment default or upon another
default under the Master Agreement or any agreement, instrument or document
executed in connection herewith or therewith.

TIME IS OF THE ESSENCE.

If you do not make a payment within ten (10) days after the date it is due, you
will also pay us a late charge of ten percent (10%) of the amount past due.
Your interest rate will be increased by four percent (4%) per annum, over and
above your regular interest rate if payment is not made at the scheduled or
accelerated maturity of this Note. You will also pay all of our costs of
collection, including our reasonable attorney's fees and expenses. If we
accelerate this Note, you will also owe us a premium, as set forth in Exhibit B
to the Schedule.

You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.

THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK. YOU CONSENT TO THE JURISDICTIONS OF ANY
FEDERAL OR STATE COURT LOCATED IN (A) THE STATE OF NEW YORK, (B) THE STATES IN
WHICH THE COLLATERAL IS LOCATED AND (C) THE STATE WHERE THE OTHER PARTY HAS ITS
PRINCIPAL PLACE OF BUSINESS. YOU WAIVE TRIAL BY JURY.

13
<PAGE>

You represent to us that the proceeds of the Loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.

CYTOGEN CORPORATION ATTEST:

By:___________________________________

Name:________________________________

Title:_________________________________

____________________________
[Assistant] Secretary

AXCELL BIOSCIENCES CORPORATION ATTEST:

By:___________________________________

Name:________________________________

Title:_________________________________

_____________________________
[Assistant] Secretary

14
<PAGE>

SCHEDULE NO. 1 TO PROMISSORY NOTE NO. 1
AND
MASTER LOAN AND SECURITY AGREEMENT

Schedule No. 1, dated __________, 2000, (this "Schedule") to PROMISSORY NOTE NO.
1 and MASTER LOAN AND SECURITY AGREEMENT dated as of December 30, 1999 (the
"Master Agreement") between CYTOGEN CORPORATION, a Delaware corporation, with
its executive office and principal place of business at 600 College Road East,
CN 5308, Princeton, New Jersey 08540 and AXCELL BIOSCIENCES CORPORATION, a
Delaware corporation, with its executive office and principal place of business
at 825 Newtown Yardley Road, Newtown, Pennsylvania 18940, jointly and severally
liable ("you"); and FINOVA CAPITAL CORPORATION, a Delaware corporation, with its
executive office and principal place of business at 1850 North Central Avenue,
Phoenix, Arizona 85004 ("we," "us", or "FINOVA").

1. Obligation to pay. You are presently borrowing ________________________
-----------------
Dollars ($_________) from us. This borrowing is evidenced by your promissory
note dated the same date as this Schedule in the amount of ____________________
Dollars ($_________) (the "Note") to which this Schedule is attached and made a
part thereof.

2. Payments (Subject to adjustment in Section 4). You will repay the Loan,
---------------------------------------------
together with interest at the interest rate described below, in forty-one (41)
consecutive monthly payments of principal and interest as follows: the first
monthly payment of principal and interest, in the amount of $______________,
followed by forty (40) consecutive monthly payments of principal and interest
each in the amount $___________. These payments will be adjusted two (2)
business days prior to the date we make the Loan to you as set forth in Section
4.

The first monthly payment of principal and interest ("First Payment") will be
due on the date that we make the Loan to you. Subsequent payments of principal
and interest are due and payable on the thirtieth (30th) day of each and every
month thereafter through and including the date upon which the last payment is
scheduled to be due (the "Maturity Date"). Any remaining amount that you owe us
is due on the Maturity Date. The First Monthly Payment of principal and
interest (as well as any interim interest referred to below) shall, at our
option, either be withheld from the proceeds of the Loan or paid directly to us
by you.

If the Loan is made on a day other than the thirtieth (30th) or thirty-first
(31st) day of a month, you will also pay to us, together with the First Payment,
interest on the Loan at the interest rate for the period from the date we make
the Loan to you until the twenty-ninth (29th) day of the same month. If the
Loan is made on the thirty-first (31st) day of a month, you will also pay to us,
together with the First Payment, interest on the Loan at the interest rate for
the period from the date we make the Loan to you until the twenty-ninth (29th)
day of the following month. If the Loan is made on the thirtieth (30th) day of
a month, no such interim interest will be due.

3. Transaction Fee. Borrower will pay Lender a transaction fee (the
----------------
"Transaction Fee") on either (a) the thirtieth day of the second month following
the Maturity Date equal to ten (10%) percent of the principal amount of the Loan
or (b) provided that no Event of Default (as defined in

15
<PAGE>

the Master Agreement) has occurred, Borrower shall pay thirteen (13) additional
consecutive monthly payments commencing on the thirtieth day of the month
following the Maturity Date of which the first twelve (12) shall be in an amount
equal to 1.50% of the principal amount of the Loan and the thirteenth payment
equal to 2.50% of the principal amount of the Loan. Thirty days prior to the
Maturity Date of the promissory note for the first Loan, Borrower shall give
notice to Lender of the option chosen to pay the Transaction Fee. The option
selected for the first Loan shall be deemed selected for all other Loans.

4. Interest; Indexing. The interest rate in your payments shown above is
------------------
calculated at the rate of 8.65% per annum plus an "Index Rate" of 6.02%. The
Index Rate means the highest yield, as published in The Wall Street Journal of
-----------------------
three-year United States Treasury Notes. The Index Rate of 6.02% was the Index
Rate published in The Wall Street Journal on October 21, 1999. Two-business
-----------------------
days prior to the date we make the Loan to you, we will read The Wall Street
---------------
Journal to determine the final Index Rate. If the Index Rate is not published
- -------
in The Wall Street Journal, we will determine it from another reliable source.
-----------------------
We will increase or decrease the payments set forth above in Section 2 to
reflect any increase or decrease in the Index Rate on such date. We will give
you notice of any increase or decrease as soon as we can. You will pay the
increased or decreased payments unless we have made an obvious mistake in our
calculations. Interest is calculated in advance using a 360-day year of twelve
30-day months.

5. Purpose of Loan; Security Interest. You are making this borrowing to
----------------------------------
finance (or refinance) your purchase of the equipment described in the attached
Exhibit A to this Schedule (the "Equipment"). The Equipment, together with all
other property described on the attached Exhibit A is hereinafter referred to as
the "Collateral". The Collateral includes, without limitation, the Equipment
and all replacement parts, additions, accessories and accessions thereto, all
replacements and substitutions thereof and all proceeds of the foregoing,
including, without limitation, insurance proceeds. In order to secure all of
the Obligations (as defined in the Master Agreement), you grant us a first lien
on and security interest in the Collateral, as well as any additions, omissions,
substitutions and proceeds of the Collateral, including, without limitation,
insurance proceeds. You also grant us a security interest in any leases and
rentals of the Collateral. This security interest secures the Note. It also
secures the full and timely payment and performance of all of your other
Obligations to us, whether under the Master Agreement, any other agreement, loan
or lease that you may have with us, or otherwise.

6. Collateral Acceptance Date. The Equipment shall be delivered, installed and
--------------------------
accepted no later than November 30, 2000.

16
<PAGE>

7. Terms of Master Agreement. The terms of the Master Agreement are made a
-------------------------
part of this Schedule as if repeated in its entirety in this Schedule. Any
declaration of default under the Master Agreement is a default under this
Schedule and permits us to exercise all remedies provided by the Master
Agreement.

CYTOGEN CORPORATION ATTEST:

By:__________________________________

Name:________________________________

Title:_______________________________

Date:________________________________ _____________________________
[Assistant] Secretary

AXCELL BIOSCIENCES CORPORATION ATTEST:

By:__________________________________

Name:________________________________

Title:_______________________________

Date:________________________________ _____________________________
[Assistant] Secretary

17
<PAGE>

EXHIBIT A TO SCHEDULE NO. 1

Collateral
----------

All of the following property, in each case, whether now existing or hereafter
arising, now owned or hereafter acquired, wherever located:

(a) all of the following laboratory equipment, computer servers, computer
equipment, peripherals, office furniture and general office equipment and other
assets ("Equipment"):

(b) all accessions and additions thereto, substitutions for, and all
replacements of, any and all of the foregoing, and all proceeds of the
foregoing, cash and non-cash, including insurance proceeds.

18
<PAGE>

EXHIBIT B TO SCHEDULE NO. 1

Prepayment

You may not prepay the Advance evidenced by the Note, in whole or in part, prior
to the date that you make the twenty-fourth (24) timely consecutive monthly
Payment. You shall have the right, upon not less than thirty (30) days prior
written notice to us, on any regularly scheduled Payment date occurring after
the twenty-fourth (24) regularly scheduled Payment date, to prepay the Advance
in whole, but not in part, provided that you shall pay to us, (i) the remaining
monthly Payments discounted at a rate of six (6%) percent, (ii) option "a" of
the Transaction Fee discounted at a rate of six (6%) percent, (iii) all accrued
and unpaid interest on the amount prepaid through the date of prepayment, and
(iv) all outstanding fees, charges and other amounts then due under the Master
Agreement, Schedule, Note and all of the other agreements, instruments and
documents executed in connection herewith.

Once you give us a notice of prepayment, that notice is final and irrevocable.
If we accelerate the Loan following a default the premium due upon acceleration
will be five (5%) percent of the outstanding principal balance.

If you prepay the Advance under the Note, you must prepay all other Advances
under the Loan and Master Agreement and all Notes, and pay to us the applicable
premiums due under those Notes as well as all other costs, fees, charges and
other amounts due under the Master Agreement, the Notes, the Schedules and all
other agreements, instruments and documents.

<PAGE>

Exhibit 21

Subsidiaries of Cytogen Corporation

AxCell Biosciences Corporation, a Delaware corporation, is a wholly owned
subsidiary of Cytogen Corporation.

Prostagen Inc., a Delaware corporation, is a wholly owned subsidiary of Cytogen
Corporation.

<PAGE>

Exhibit 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Cytogen CORPORATION:

As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed Form S-8
Registration Statement (File No. 33-30595), filed with the Securities and
Exchange Commission on August 18, 1989, Form S-3 Registration Statement (File
No. 33-35140), filed with the Securities and Exchange Commission on May 31,
1990, Form S-8 Registration Statement (File No. 33-52574), filed with the
Securities and Exchange Commission on September 29, 1992, Form S-8 Registration
Statement (File No. 33-57004), filed with the Securities and Exchange Commission
on January 12, 1993, Form S-3 Registration Statement (File No. 33-77396) filed
with the Securities and Exchange Commission on April 6, 1994, Form S-8
Registration Statement (File No. 33-63321), filed with the Securities and
Exchange Commission on October 10, 1995, Form S-8 Registration Statement (File
No. 333-00431), filed with the Securities and Exchange Commission on January 25,
1996 and Form S-8 Registration Statement (File No. 333-04679), filed with the
Securities and Exchange Commission on May 29, 1996, Form S-8 Registration
Statement (File No. 333-27673) filed with Securities and Exchange Commission on
May 23, 1997, Form S-3 Registration Statement (File No. 333-43809) filed with
the Securities and Exchange Commission on January 7, 1998, Form S-1/A-2
Registration Statement (File No. 333-68759) filed with the Securities and
Exchange Commission on January 8, 1999, Form S-1/A-1 Registration Statement
(File No. 333-67947) filed with the Securities and Exchange Commission on
January 27, 1999, Form S-1/A-2 Registration Statement (File No. 333-67947) filed
with the Securities and Exchange Commission on January 27, 1999 and Form S-3
Registration Statement (File No. 333-83215) filed with the Securities and
Exchange Commission on July 20, 1999.

ARTHUR ANDERSEN LLP

Philadelphia, PA
March 27, 2000

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,801,000
<SECURITIES> 1,593,000
<RECEIVABLES> 2,233,000
<ALLOWANCES> (83,000)
<INVENTORY> 685,000
<CURRENT-ASSETS> 465,000
<PP&E> 7,960,000
<DEPRECIATION> (5,963,000)
<TOTAL-ASSETS> 18,605,000
<CURRENT-LIABILITIES> 5,640,000
<BONDS> 0
0
0
<COMMON> 705,000
<OTHER-SE> 9,844,000
<TOTAL-LIABILITY-AND-EQUITY> 18,605,000
<SALES> 8,031,000
<TOTAL-REVENUES> 11,202,000
<CGS> 4,111,000
<TOTAL-COSTS> 8,321,000
<OTHER-EXPENSES> 8,564,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,000
<INCOME-PRETAX> (1,973,000)
<INCOME-TAX> (2,702,000)
<INCOME-CONTINUING> 729,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 729,000
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01

</TABLE>