ONCOGENE SCIENCE INC, 424B4, 1996-03-15

ONCOGENE SCIENCE INC
424B4, 1996-03-15
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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<PAGE> 1
Filed pursuant to Rule No. 424(b)(4)
Registration Nos. 333-937 and 333-1699

[PASTEUP LOGO]

2,825,000 SHARES

COMMON STOCK

All of the 2,825,000 shares of Common Stock offered hereby through the
Underwriters (the "Underwritten Offering") are being issued and sold by Oncogene
Science, Inc. ("Oncogene Science" or the "Company"). On March 13, 1996, the last
sale price of the Company's Common Stock, as reported on the Nasdaq National
Market, was $9.25 per share. See "Price Range of Common Stock." The Common Stock
of the Company is traded on the Nasdaq National Market under the symbol "ONCS."

Concurrently with this offering, the Company is offering 500,000 shares of
Common Stock directly to BioChem Pharma Inc. ("BioChem") by a separate
prospectus (the "BioChem Offering," and collectively with the Underwritten
Offering, the "Offerings"). Although the Underwritten Offering is not contingent
on the BioChem Offering, the closings of the Underwritten Offering and the
BioChem Offering may occur simultaneously. The gross price per share of the
Common Stock offered in the BioChem Offering will be the same as the per share
"Price to Public" set forth below. There can be no assurance that the BioChem
Offering will result in the purchase of any shares of Common Stock by BioChem.
See "BioChem Offering" and "Underwriting and Plan of Distribution."
------------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
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UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS COMPANY(1)
- ------------------------------------------------------------------------------------------------
Per Share................................... $9.125 $0.55 $8.575
- ------------------------------------------------------------------------------------------------
Total(2).................................... $25,778,125 $1,553,750 $24,224,375
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) Before deducting expenses payable by the Company estimated at $450,000, and
excluding any proceeds to the Company from the BioChem Offering.

(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 423,750 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If this option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $29,644,844, $1,786,813 and $27,858,031,
respectively.
------------------------

The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens &
Company"), San Francisco, California on or about March 19, 1996.

ROBERTSON, STEPHENS & COMPANY

THE DATE OF THIS PROSPECTUS IS MARCH 14, 1996
<PAGE> 2

AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected without charge and
copied at the public reference facilities maintained by the Commission at Room
1014, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: 7 World Trade Center, New
York, New York 10048; and 500 West Madison Street, 14th Floor, Chicago, Illinois
60661. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
the prescribed rates. Oncogene Science's Common Stock is listed and traded on
the Nasdaq National Market. Reports, proxy statements and other information
filed by the Company may also be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20002.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which provide certain information with respect to
Oncogene Science, are incorporated by reference in this Prospectus:

1. Annual Report of the Company on Form 10-K for the fiscal year ended
September 30, 1995, as amended by Forms 10-K/A filed on January 29
and February 20, 1996;

2. Quarterly Report of the Company on Form 10-Q for the fiscal quarter
ended December 31, 1995;

3. The description of the Company's Common Stock, $.01 par value, which
is contained in the Company's Registration Statement on Form 8-A,
including any amendments or reports filed for the purpose of
updating such description.

All documents filed by Oncogene Science pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated by reference or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that the statement is
modified or superseded by any other subsequently filed document which is
incorporated or is deemed to be incorporated by reference herein. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.

This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Oncogene Science hereby undertakes to provide
without charge to each person, including any beneficial owner, to whom this
Prospectus has been delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated into this Prospectus and deemed to be part hereof, other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference in such documents. These documents are available upon request from
Matthew Haines, Oncogene Science, Inc., 106 Charles Lindbergh Boulevard,
Uniondale, NY 11553, telephone (516) 222-0023.
------------------------
IN CONNECTION WITH THE UNDERWRITTEN OFFERING, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
IN CONNECTION WITH THE UNDERWRITTEN OFFERING, CERTAIN UNDERWRITERS AND
SELLING GROUP MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING AND PLAN
OF DISTRIBUTION."
------------------------

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<PAGE> 3

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

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

TABLE OF CONTENTS

<TABLE>
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PAGE
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Summary............................................................................... 4
Risk Factors.......................................................................... 6
Use of Proceeds....................................................................... 17
Dividend Policy....................................................................... 17
BioChem Offering...................................................................... 17
Price Range of Common Stock........................................................... 18
Capitalization........................................................................ 19
Dilution.............................................................................. 20
Selected Consolidated Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 22
Business.............................................................................. 27
Management............................................................................ 45
Principal Stockholders................................................................ 48
Description of Capital Stock.......................................................... 50
Underwriting and Plan of Distribution................................................. 51
Legal Matters......................................................................... 52
Experts............................................................................... 52
Additional Information................................................................ 52
Index to Consolidated Financial Statements............................................ F-1
</TABLE>

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SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," appearing elsewhere in this Prospectus or
incorporated by reference herein.

THE COMPANY

Oncogene Science, Inc., a leader in the innovation of drug discovery
technologies, combines genetically engineered live-cell assays with high
throughput robotic screening to discover novel, small molecule pharmaceuticals.
Independently and in collaboration with Pfizer Inc. ("Pfizer"), Hoechst Marion
Roussel, Inc. ("HMRI"), Wyeth-Ayerst Laboratories Division of American Home
Products Corporation ("Wyeth") and Ciba-Geigy, Ltd. ("Ciba"), the Company is
engaged in the discovery and development of drugs that target 30 proteins in a
wide range of disease areas, including cancer, atherosclerosis, neurological
disorders and chronic anemias. The Company is developing its most advanced drug
candidate, TGF-SS3, a recombinant protein, in collaboration with Ciba. The
Company expects that Ciba will commence Phase II clinical trials for TGF-SS3 in
wound healing and Phase I clinical trials for TGF-SS3 in oral mucositis in 1996.
In addition, the Company's collaborative program with Pfizer has resulted in the
identification of a proprietary lead compound that inhibits a protein associated
with a number of major cancers. The Company expects that Pfizer may file an
Investigational New Drug application ("IND") for this compound in the second
half of 1996.

The Company's technologies have been designed to solve many of the
limitations associated with conventional drug screens. The Company's technology
platform consists of applying its understanding of the molecular biology of gene
transcription to the development of proprietary live-cell assays. These assays
are used to test diverse compounds derived from natural sources and from
medicinal chemistry libraries of its collaborative partners, using automated,
high throughput robotic drug screening techniques. The Company believes its
technology platform is widely applicable to the identification of drug
candidates to treat many different diseases, including diseases due to mutations
or abnormalities in multiple genes. Utilizing its technologies, the Company is
able to identify lead compounds that it believes are potent and selective,
possess minimal or no cellular toxicity, have activity in live cells and are
more likely to progress successfully through preclinical studies compared to
lead compounds identified by traditional methods.

In its collaborative programs with HMRI and Wyeth, the Company's drug
screens have identified initial lead compounds for the disease areas being
targeted, and several of these lead compounds are in preclinical evaluation. In
addition to its collaborative programs, Oncogene Science conducts independent
drug discovery efforts to identify lead compounds in chronic anemias, virology
and muscle wasting disorders. The Company, is also engaged in the development of
a series of cancer diagnostic tests in collaboration with Becton Dickinson and
Company ("Becton").

The Company's strategy includes the following key elements: (i) enhance
drug discovery operations by combining new capabilities in combinatorial
chemistry with its proprietary robotics and information technology to optimize
lead drug candidates more quickly and effectively; (ii) maintain and expand
collaborations with pharmaceutical companies to provide funding, development and
commercialization capabilities, which enable the Company to focus on its core
strengths in drug discovery; and (iii) expand proprietary drug discovery efforts
to develop lead compounds through early clinical trials and seek collaborative
partners for proprietary programs later in the development process in order to
obtain more favorable terms for the funding, development and commercialization
of potential drug candidates.

The Company was incorporated in Delaware in March 1983. Oncogene Science's
corporate headquarters and principal research facilities are located at 106
Charles Lindbergh Boulevard, Uniondale, New York 11553, and its telephone number
is (516) 222-0023.

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THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company
Underwritten Offering........................................ 2,825,000 shares
BioChem Offering............................................. 500,000 shares(1)
Total................................................. 3,325,000 shares
Common Stock Outstanding after the Offerings................... 20,852,789 shares(2)
Use of Proceeds................................................ For research and development
expenses, including funds for
enhancing the Company's drug
discovery technologies, and for
general corporate purposes.
See "Use of Proceeds."
Nasdaq National Market Symbol.................................. ONCS
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------- -------------------
1993 1994 1995 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues..................................... $16,088 $16,299 $15,865 $ 4,208 $ 2,276
Operating expenses:
Research and development....................... 10,660 12,125 13,523 3,077 2,683
Production..................................... 1,443 1,428 1,253 405 22
Selling, general and administrative............ 6,430 7,487 7,140 1,875 1,332
Amortization of intangibles.................... 1,746 1,745 1,697 436 363
-------- -------- -------- -------- --------
-- -- -- -- --
Total operating expenses........................... 20,279 22,785 23,613 5,793 4,400
Loss from operations............................... (4,191) (6,486) (7,748) (1,585) (2,124)
Gain on sale of Research Products Business......... - - 2,720 - -
Other income, net.................................. 885 762 769 194 353
-------- -------- -------- -------- --------
-- -- -- -- --
Net loss........................................... $(3,306) $(5,724) $(4,259) $(1,391) $(1,771)
========== ========== ========== ========== ==========
Net loss per share................................. $ (0.21) $ (0.35) $ (0.25) $ (0.09) $ (0.10)
========== ========== ========== ========== ==========
Weighted average shares outstanding................ 16,080 16,335 16,757 16,343 17,476
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------
ACTUAL AS ADJUSTED(3)
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BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments...................... $ 24,085 $ 52,176
Total assets.............................................................. 41,739 69,830
Accumulated deficit....................................................... 27,900 27,900
Stockholders' equity...................................................... 39,188 67,279
</TABLE>

- ---------------
(1) Concurrently with the Underwritten Offering, the Company is offering to
BioChem the opportunity to acquire 500,000 shares of Common Stock at a gross
per share purchase price equal to the per share Price to Public indicated on
the cover page of this Prospectus. There can be no assurance that the
BioChem Offering will result in the purchase of any shares of Common Stock
by BioChem. See "BioChem Offering."
(2) As of December 31, 1995 and excluding outstanding options and warrants to
purchase 2,452,366 shares of Common Stock as of that date.
(3) Adjusted to reflect the sale by the Company of 2,825,000 shares of Common
Stock offered in the Underwritten Offering, and 500,000 shares of Common
Stock offered in the BioChem Offering, at a public offering price of $9.125
per share and the application of the estimated net proceeds therefrom, after
deducting underwriting discounts and commissions, financial advisory fees
and estimated offering expenses payable by the Company. See "Underwriting
and Plan of Distribution" and "Use of Proceeds."

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in "Risk
Factors."

Except as otherwise indicated, the information contained in this Prospectus
assumes (i) no exercise of the Underwriters' over-allotment option, (ii) no
exercise of stock options after December 31, 1995, and (iii) simultaneous
closings of the Underwritten Offering and BioChem Offering. See "Underwriting
and Plan of Distribution."

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RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby.

UNCERTAINTIES RELATED TO CLINICAL TRIALS

Oncogene Science has limited experience in conducting clinical trials and
intends to rely primarily on the pharmaceutical companies with which it
collaborates, including Ciba, Pfizer, HMRI and Wyeth, for clinical development
and regulatory approval of its product candidates. Before obtaining regulatory
approvals for the commercial sale of its products, the Company or its
collaborative partners will be required to demonstrate through preclinical
studies and clinical trials that the proposed products are safe and effective
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, and there can be no assurance that the clinical trials
conducted by the Company or its partners will demonstrate sufficient safety and
efficacy to obtain the required regulatory approvals or will result in
marketable products. In addition, clinical trials are often conducted with
patients having the most advanced stages of disease. During the course of
treatment, these patients can die or suffer other adverse medical effects for
reasons that may not be related to the pharmaceutical agent being tested, but
which can nevertheless affect clinical trial results. Various companies in the
pharmaceutical industry have suffered significant setbacks in advanced clinical
trials, even after promising results in earlier trials.

Clinical trials for the product candidates being developed by the Company
and its collaborators may be delayed by many factors. For example, clinical
trials for TGF-SS3, the Company's product candidate most advanced in clinical
development, have been delayed as a result of a failure on the part of Ciba's
temporary contract manufacturer's facility to fully comply with good
manufacturing practices ("GMP") in producing clinical quantities of TGF-SS3. No
assurance can be given that the same or similar problems will not recur and that
these clinical trials or trials with respect to its diagnostic and small
molecule pharmaceutical product candidates will not be subject to additional
delays or otherwise terminated. Any delays in, or termination of, the clinical
trials of any of the Company's product candidates would have a material adverse
effect on the Company's business, financial condition and results of operations.

In the Company's small molecule drug discovery operations, no product
candidates have entered clinical trials. Consequently, compounds discovered
using the Company's small molecule discovery technology have not yet been proven
safe or effective in humans. Furthermore, the Company's drug discovery assays
are focused on several target genes, the functions of which have not yet been
fully elucidated. As such, the safety and efficacy of drugs that alter the
transcription of these genes have not yet been established. No assurance can be
given that any lead small molecule compounds or diagnostic product candidates
emerging from the Company's discovery and development operations will
successfully enter or complete clinical trials or receive marketing approval
from the U.S. Food and Drug Administration ("FDA") or any foreign regulatory
authorities on a timely basis or at all. See "Business -- Product Development
and Research Programs."

DEPENDENCE ON COLLABORATIVE RELATIONSHIPS

The Company does not intend to conduct late-stage clinical trials, or
manufacturing or marketing activities with respect to any of its product
candidates in the foreseeable future. The Company has collaborations with Ciba,
Pfizer, HMRI and Wyeth for the development of potential drug candidates, and to
date, its most advanced programs are in TGF-SS3 with Ciba for wound healing and
oral mucositis and an oncogene inhibitor with Pfizer for the treatment of
certain cancers. The Company also collaborates with Becton in the development of
cancer diagnostic products. The Company is dependent on the pharmaceutical and
diagnostic companies with which it collaborates for the preclinical testing,
clinical development, regulatory approval, manufacturing and marketing of its
products. The Company's collaborative agreements allow its collaborative
partners significant discretion in electing to pursue or not to pursue any of
these activities. The Company cannot control the amount and timing of resources
its collaborative partners devote to the Company's programs or potential
products. If any of the Company's collaborative partners were to breach

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or terminate its agreements with the Company or otherwise fail to conduct its
collaborative activities successfully in a timely manner, the preclinical or
clinical development or commercialization of product candidates or research
programs would be delayed or terminated. Any such delay or termination could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company has a collaborative research agreement with Ciba relating to
the clinical development, manufacturing and marketing of the Company's
recombinant protein TGF-SS3 for various indications. Under this agreement, Ciba
has the right to manufacture TGF-SS3 for clinical development and commercial
purposes for all indications. The Company and other potential licensees of
TGF-SS3 are, and will be, dependent on Ciba as the sole manufacturer of TGF-SS3.
No assurance can be given that Ciba will supply TGF-SS3 to the Company and its
licensees as needed. Ciba has experienced delays in the production of TGF-SS3 as
a result of a failure on the part of its temporary contract manufacturer to
comply with certain FDA manufacturing regulations which have resulted in delays
in clinical trials. There can be no assurance that the Company or its licensees
will not experience problems in obtaining a supply of TGF-SS3 in the future. In
addition, a substantial milestone payment to the Company by Ciba under this
collaboration is dependent on Ciba accomplishing certain clinical development
objectives, over which the Company has no control. Failure of Ciba to complete
clinical development and obtain regulatory approval for TGF-SS3 in one or more
indications could have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company relies on its collaborative partners to provide funding in
support of its research operations. As of December 31, 1995, the Company had
received or accrued an aggregate of $62.7 million in research funding and
milestone payments from its collaborative partners, approximately one-half of
which has been provided by Pfizer. The Company would be required to devote
additional internal resources to product development, or scale back or terminate
certain development programs or seek alternative collaborative partners, if
funding from one or more of its collaborative programs were reduced or
terminated. For example, Becton has reduced its funding under the Company's
diagnostic products collaboration for fiscal 1996. This collaboration will
expire on September 30, 1996 and the Company is uncertain as to whether it will
be renewed at such time. The Company is negotiating with Pfizer for the renewal
of its collaboration with Pfizer, which expires on March 31, 1996. The Company
is also negotiating with HMRI for the consolidation of its three collaborative
research agreements with each of HMRI's predecessor companies, which expire on
various dates in 1997 and 1999. There can be no assurance that these
collaborations will be renewed on acceptable terms, if at all.

The Company owns or controls the rights to only a relatively small number
of the compounds that it tests in its drug discovery operations. The Company is
dependent on access to the compound libraries of its collaborative partners and
others in order to enhance the value of its high throughput drug screens.
Failure by the Company to gain access to the compound libraries of its
collaborative partners and others would restrict its ability to exploit fully
its high throughput screening capabilities and would have a material adverse
effect on its business, financial condition and results of operations.

Disputes may arise in the future with respect to the ownership of rights to
any technology developed with third parties. These and other possible
disagreements between collaborators and the Company could lead to delays in the
collaborative research, development or commercialization of certain product
candidates, or could require or result in litigation or arbitration, which would
be time-consuming and expensive, and would have a material adverse effect on the
Company's business, financial condition and results of operations.

Generally, in its collaborative research agreements, the Company agrees not
to conduct independently, or with any third party, any research that is
competitive with the research conducted under its collaborative programs. The
Company's collaborative relationships may have the effect of limiting the areas
of research the Company may pursue. For example, under its collaborative
research agreement with Pfizer, the Company is prohibited during the term of the
contract from pursuing or sponsoring research aimed at the discovery of drugs
for the treatment of cancer. However, the Company's collaborative partners may
develop, either alone or with others, products that are similar to or
competitive with the products or potential products that are the subject of the
Company's collaborations with such partners. Competing products, either
developed by the collaborative partners or to which the collaborative partners
have rights, may result in their withdrawal of

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<PAGE> 8

support for the Company's product candidates, which would have a material
adverse effect on the Company's business, financial condition and results of
operations.

All of the Company's collaborative programs with pharmaceutical companies
have terms of six or fewer years, which is generally less than the period
required for the discovery, clinical development and commercialization of most
drugs. The continuation of any of the Company's drug discovery and development
programs is dependent on the periodic renewal of the relevant collaborative
partnership. Furthermore, all of the Company's collaborative research agreements
are subject to termination under various circumstances. Certain of the Company's
collaborative research agreements provide that, upon expiration of a specified
period after commencement of the agreement, its collaborative partners have the
right to terminate the agreement on short notice without cause. For example, the
Company's collaborative research agreement with Wyeth is currently terminable by
Wyeth on four months notice. The termination or nonrenewal of this or any other
collaborative relationship could have a material adverse effect on the Company's
business, financial condition and results of operations.

There have been a significant number of recent consolidations among large
pharmaceutical and diagnostic companies. Such consolidations among these
companies with which the Company is engaged in collaborative research can result
in the diminution or termination of, or delays in, one or more of the Company's
collaborative programs. For example, in 1995, the pharmaceutical operations of
three companies with which the Company had collaborative research agreements,
Hoechst AG ("Hoechst"), Hoechst Roussel Pharmaceuticals, Inc. ("Hoechst
Roussel") and Marion Merrell Dow Inc. ("MMDI") were combined in one entity,
HMRI. This combination resulted in delays in the Company's collaborative
programs with each of the constituent companies. In addition, HMRI is conducting
a review of all of its research and development programs with a view to
determining which programs to continue or terminate. The Company and HMRI are
negotiating to consolidate all three collaborative research agreements under one
new agreement. However, HMRI's total funding commitment under the consolidated
agreement, assuming such agreement is entered into, will be less than the
aggregate historical funding provided under the separate agreements.
Notwithstanding this agreement in principle, there can be no assurance that HMRI
will not terminate or elect not to renew certain or all of its agreements with
the Company. Termination by HMRI of any of its agreements with the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations. Also, Ciba has announced that it plans to merge with
Sandoz, Ltd. There can be no assurance that this merger will not result in the
diminution or termination of, or delays in, one or more of the Company's
collaborative programs with Ciba.

The Company's strategy for the discovery, development, clinical testing,
manufacturing and marketing of certain of its potential products includes
establishing additional collaborations. There can be no assurance that the
Company will be able to negotiate such collaborative arrangements on acceptable
terms, if at all, or that such collaborations will be successful. See
"Business -- Product Development and Research Programs -- Small Molecule
Collaborative Programs."

UNCERTAINTIES RELATED TO THE EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL
UNCERTAINTIES

To date, the Company has generated no revenue from the sale of
pharmaceutical products. All of the lead compounds in the Company's small
molecule drug discovery programs are either in the discovery or the preclinical
evaluation phase. TGF-SS3, which is the Company's product candidate most
advanced in clinical development, to date has been subject to limited clinical
evaluation. The Company has commercialized one diagnostic product, which to date
has not generated significant sales and is not expected to generate significant
sales in the future. Any products resulting from the Company's development
programs are not expected to be commercially available for several years, if at
all.

All of the Company's potential products will require significant research
and development and are subject to significant risks. Potential products that
appear to be promising at early stages of development may not reach the market
for a number of reasons. Potential products may be found ineffective or cause
harmful side effects during preclinical testing or clinical trials, fail to
receive necessary regulatory approvals, be difficult to manufacture on a large
scale, be uneconomical to produce, fail to achieve market acceptance or be
precluded from commercialization by proprietary rights of third parties. There
can be no assurance that the Company's or its collaborative partners' product
development efforts will be successfully completed, that required

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regulatory approvals will be obtained or that any products, if introduced, will
be successfully marketed or achieve customer acceptance.

The Company's transcription-based live-cell assays are novel as a drug
discovery method and have not yet been shown to be successful in the development
of any commercialized drug. Furthermore, the Company's drug discovery assays are
focused on several target genes, the functions of which have not yet been fully
elucidated. There can be no assurance that the Company's live-cell assay
technology will result in lead compounds that will be safe and efficacious.
Development of new pharmaceutical products is highly uncertain, and no assurance
can be given that the Company's drug discovery technology will result in any
commercially successful products. See "Business -- Product Development and
Research Programs."

UNCERTAINTY OF FUTURE PROFITABILITY

Oncogene Science has had net operating losses since its inception in 1983.
At December 31, 1995, the Company's accumulated deficit was approximately $27.9
million. The Company's losses have resulted principally from costs incurred in
research and development, and from general and administrative costs associated
with the Company's operations. These costs have exceeded the Company's revenues,
which to date have been generated principally from collaborative research
agreements, and to a lesser extent, from operation of the Company's Research
Products Business, research grants and interest income. Oncogene Science expects
to incur substantial additional operating expenses over the next several years
as a result of increases in its expenses for research and development, including
enhancements in its drug discovery technologies, and with respect to its
internal proprietary projects, its small molecule and diagnostic clinical
development activities. If the Company does not obtain additional third party
funding for such expenses, the Company expects that such expenses will result in
increased losses from operations. Oncogene Science does not expect to generate
revenues from the sale of its small molecule products for several years, if
ever. The Company currently has limited sales of only one diagnostic product.
The Company's future profitability depends, in part, on its collaborative
partners obtaining regulatory approval for products derived from its
collaborative research efforts, the Company's collaborative partners
successfully producing and marketing products derived from technology or rights
licensed from the Company, and the Company's entering into agreements for the
development, commercialization, manufacture and marketing of any products
derived from the Company's internal proprietary programs. There can be no
assurance that the Company or its collaborative partners will obtain required
regulatory approvals, or successfully develop, commercialize, manufacture and
market product candidates or that the Company will ever achieve product revenues
or profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL

The Company will require substantial additional funding in order to
continue its research, product development, preclinical testing and clinical
trials of its product candidates. The Company's internal proprietary programs
and operations will require a significant amount of funding that will not be
provided by the Company's existing collaborative partners. The Company's
strategy includes developing product candidates in its internal proprietary
programs through early stage clinical development, before forming collaborations
for the further development of such product candidates. In addition, the Company
has implemented a program to enhance certain aspects of its drug discovery
technology and capabilities, including investment in, and possible acquisition
of, companies with complementary technology. These activities will require
investment of significant funds by the Company. No assurance can be given that
the Company will have adequate resources to support such existing and future
activities or that the Company will be able to enter into collaborative
arrangements on acceptable terms, if at all.

The Company's future capital requirements will depend on many factors,
including continued scientific progress in its research and development
programs, the size and complexity of these programs, progress with preclinical
testing and early stage clinical trials, the time and costs involved in
obtaining regulatory approvals for its product candidates, the costs involved in
filing, prosecuting and enforcing patent claims, competing technological and
market developments, the establishment of additional collaborative arrangements,
the cost of manufacturing arrangements, commercialization activities, potential
indemnification payments to the purchaser of the Research Products Business, and
the cost of product in-licensing and strategic acquisitions, if

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any. The Company evaluates on an ongoing basis potential collaborative
arrangements with third parties and acquisitions of companies or technologies
that may complement its business.

Generally, the Company's funding pursuant to any particular collaborative
research agreement is subject to reduction or termination under various
circumstances. For example, as a result of the business combination in 1995 of
Hoechst, Hoechst Roussel and MMDI, all pharmaceutical companies with which the
Company had collaborative research programs, the Company expects that the total
annual research funding it will receive in the future from the combined entity
will be reduced relative to the aggregate funding it received under the three
separate programs prior to the combination. In addition, Becton reduced its
funding under the diagnostic products collaboration in fiscal 1996, and the
Company is uncertain as to Becton's ongoing support for this program. There can
be no assurance that scheduled payments will be made by third parties, that
current agreements will not be cancelled, that government research grants will
continue to be received at current levels or that unanticipated events requiring
the expenditure of funds will not occur. There can be no assurance that the
Company's cash reserves and other liquid assets, including the net proceeds of
this offering and funding that may be received from the Company's collaborative
partners and interest income earned thereon, will be adequate to satisfy its
capital and operating requirements for the foreseeable future. See "Use of
Proceeds" and "Business -- Product Development and Research Programs."

NO ASSURANCE OF PROTECTION OF PATENTS AND PROPRIETARY TECHNOLOGY

The Company's success will depend in part on its ability or the ability of
its collaborative partners to obtain patent protection for product candidates,
to maintain trade secret protection and operate without infringing on the
proprietary rights of third parties.

The Company is aware of several U.S. and foreign patents owned by others
who may allege infringement by TGF-SS3, which the Company is seeking to develop
in collaboration within Ciba. Genentech, Inc. has U.S. patents relating to
certain recombinant materials and procedures for producing members of the TGF-SS
family, including TGF-SS3. In addition, the Company believes that Genentech has
license rights under a U.S. Government patent relating to work done at the
National Institute of Health of the U.S. Department of Health and Human Services
involving the identification and isolation of TGF-SS1. There can be no assurance
that the activities or products of the Company or its collaborative partners do
not or will not infringe the claims of these or other issued patents held by
third parties or any other patent issued in the future. Furthermore, there can
be no assurance that any license required under any such patents would be made
available or, if available, would be available on acceptable terms. Failure to
obtain patent protection or a required license could prevent the Company and
Ciba from commercializing TGF-SS3 products. The inability of the Company and
Ciba to commercialize TGF-SS3 products could have a material adverse effect on
the Company's business, financial condition and results of operations.

In the cancer diagnostics area, the Company has a U.S. patent relating to
an assay which the Company is seeking to develop for the detection of a protein
encoded by the neu oncogene ("neu") in serum. The Company is aware that a patent
application relating to a similar assay was filed by a third party shortly after
the Company filed the application from which its U.S. patent issued. It is
possible that the Company may have to participate in an interference proceeding
with such third party to determine priority of invention, which could result in
substantial costs to the Company. The Company cannot predict whether such an
interference proceeding will occur, or if it does occur, whether the Company
will prevail. If the Company does not prevail,

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it may not be able to commercialize its assay for neu in serum without a license
from such third party, which may not be available on acceptable terms or at all.

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

The extent to which efforts by other researchers have resulted or will
result in patents and the extent to which the issuance of patents to others
would have a material adverse effect on the Company or would force the Company
or its collaborative partners or other licensees to obtain licenses from others,
if available, is currently unknown. Generally, the Company's royalties on any
commercialized products could be reduced by up to 50% if its licensees or
collaborative partners are required to obtain such licenses. There can be no
assurance that the Company's products, operations or technology will not
infringe upon the rights of any third party.

The Company relies on trade secrets to protect technology where patent
protection is not believed to be appropriate or obtainable. The Company has
entered, and will continue to enter, into confidentiality agreements with its
employees, consultants, licensors and collaborative partners. There can be no
assurance, however, that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets, that such obligations of confidentiality will be
honored or that the Company will be able to effectively protect its rights to
proprietary information. See "Business -- Intellectual Property."

COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE

The pharmaceutical, biotechnology and diagnostics industries are intensely
competitive, and the Company faces, and will continue to face, intense
competition from organizations such as large pharmaceutical companies,
diagnostic companies, biotechnology companies, academic and research
institutions and government agencies. The Company is subject to significant
competition from industry participants who are pursuing the same or similar
technologies as those which constitute the Company's technology platform and
from organizations that are pursuing pharmaceutical products or therapies or
diagnostic products that are competitive with the Company's potential products.
Most of the organizations competing with the Company have greater capital
resources, research and development staffs and facilities, and greater
experience in drug discovery and development, obtaining regulatory approval and
pharmaceutical product manufacturing and marketing. The Company's major
competitors include fully integrated pharmaceutical companies, such as Merck &
Co., Inc., Glaxo Wellcome Inc. and SmithKline Beecham plc, that have extensive
drug discovery efforts and are developing novel small molecule pharmaceuticals,
as well as numerous smaller companies.

The Company's technology platform consists principally of utilizing
genetically engineered live cells, gene transcription technologies and high
throughput drug screening. Pharmaceutical and biotechnology companies and others
are active in all of these areas, and there can be no assurance that other
organizations will not acquire or develop technology superior to that of the
Company. Ligand Pharmaceuticals Inc., a publicly owned company, employs
live-cell assays, gene transcription, and high throughput robotics in its drug
discovery operations. Numerous other companies use one or more of these
technologies. Several private

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companies, including Tularik Inc., Signal Pharmaceuticals Inc. and Scriptgen
Pharmaceuticals, Inc., pursue drug discovery using gene transcription methods.

Companies pursuing different but related fields also present significant
competition for the Company. For example, research efforts with respect to gene
sequencing and mapping are identifying new and potentially superior target
genes. In addition, alternative drug discovery strategies, such as rational drug
design, may prove more effective than those pursued by the Company. Furthermore,
competing entities may have access to more diverse compounds for testing by
virtue of larger compound libraries or through combinatorial chemistry skills or
other means. These include Pharmacopeia, Inc., a publicly traded company,
CombiChem, Inc. and ArQule, Inc., all of which have major collaborations with
leading pharmaceutical companies. There can be no assurance that the Company's
competitors will not succeed in developing technologies or products that are
more effective than those of the Company or that would render the Company's
products or technologies obsolete or noncompetitive.

With respect to the Company's small molecule drug discovery programs, other
companies have potential drugs in clinical trials to treat all the disease areas
for which the Company is seeking to discover and develop drug candidates. These
competing drug candidates are further advanced in clinical development than are
any of the Company's potential products in its small molecule programs and may
result in effective, commercially successful products. Even if the Company and
its collaborative partners are successful in developing effective drugs, there
can be no assurance that the Company's products will compete effectively with
such products. No assurance can be given that the Company's competitors will not
succeed in developing and marketing products either that are more effective than
those that may be developed by the Company and its collaborators or that are
marketed prior to any products developed by the Company or its collaborators.

With respect to its efforts to develop TGF-SS3 for various indications, the
Company is aware of competing growth factor proteins in clinical trials, and
competing treatment regimens, for wound healing indications. Platelet derived
growth factor (PDGF) for diabetic skin ulcers, under development by Chiron
Corporation and Johnson & Johnson, has completed Phase III clinical trials in
the U.S. Chiron Corporation and Johnson & Johnson have announced that they
intend to file a Product Licensing Application ("PLA") for PDGF with the FDA in
1996. Fibroblast growth factor (FGF) for chronic dermal ulcers, under
development by Scios Nova Inc. and Kaken Pharmaceutical Co., Ltd., is in Phase
III clinical trials in Japan. TGF-SS2 for leg ulcers, under development by
Genzyme Corp. and Celtrix Pharmaceuticals, Inc., is in Phase II clinical trials
in the U.S. No assurance can be given that the Company and Ciba will
successfully develop TGF-SS3 for any indication, including wound healing.
Furthermore, if any of the competing growth factor product candidates listed
above or other growth factors prove to be effective for wound healing
indications, there can be no assurance that any TGF-SS3 product developed by the
Company will be able to compete effectively with such product or products.

Other competing approaches to the treatment of chronic wounds include
comprehensive service-based patient centers, which are dedicated to intensive
wound management. These centers may include the use of autologous growth factor
therapy, in which extracts prepared from the patient's own platelets are used to
treat the wounds. Surgical intervention is also frequently employed, which may
involve partial amputation and/or surgical revascularization. The use of skin
grafts to treat wounds, either autografts (skin from elsewhere on the same
patient) or cultured allografts, are also being investigated by several
companies, including Advanced Tissues Sciences, Inc. and Organogenesis, Inc. No
assurance can be given that TGF-SS3 will prove to be safe and effective or will
compete successfully against current and emerging therapies for any particular
clinical indication.

The Company will, for the foreseeable future, rely on its collaborative
partners for preclinical evaluation and clinical development of its potential
products and manufacturing and marketing of any products. In addition, the
Company relies on its collaborative partners for support in its drug discovery
operations. It is likely that all of the pharmaceutical companies with which the
Company has collaborations are conducting multiple product development efforts
within each disease area. Generally, the Company's collaborative research
agreements do not restrict a party from pursuing competing internal development
efforts based on reasonable commercial judgment and other factors. Any product
candidate of the Company, therefore, may be

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subject to competition with a potential product under development by the
pharmaceutical company with which the Company is collaborating in connection
with such product candidate.

Biotechnology and related pharmaceutical technology have undergone rapid
and significant change. The Company expects the technology associated with the
Company's research and development will continue to develop rapidly, and the
Company's future success will depend in large part on its ability to maintain a
competitive position with respect to this technology. Rapid technological
development by the Company or others may result in compounds, products or
processes becoming obsolete before the Company recovers any expenses it incurs
in connection with developing such products. See "Business -- Competition."

GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL

Prior to marketing by a collaborative partner, any new drug discovered by
the Company must undergo an extensive regulatory approval process in the U.S.
and other countries. This regulatory process, which includes preclinical testing
and clinical trials, and may include post-marketing surveillance, of each
compound to establish its safety and efficacy, can take many years and require
the expenditure of substantial resources. Data obtained from preclinical and
clinical activities are susceptible to varying interpretations that could delay,
limit or prevent regulatory approval. In addition, delays or rejections may be
encountered based upon changes in FDA policies for drug approval during the
period of product development and FDA regulatory review of each submitted new
drug application ("NDA") in the case of new pharmaceutical agents, or PLA in the
case of a biologic, such as the Company's TGF-SS3 product candidate. Similar
delays may also be encountered in the regulatory approval of any diagnostic
product. Such delays may also be encountered in obtaining regulatory approval in
foreign countries. There can be no assurance that regulatory approval will be
obtained for any drugs discovered, or diagnostic products developed, by the
Company. Furthermore, regulatory approval may entail limitations on the
indicated use of the drug.

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

NO MANUFACTURING CAPACITY; RELIANCE ON THIRD-PARTY MANUFACTURING

The Company does not intend to develop or acquire facilities for the
manufacture of drug candidates or diagnostic products for clinical trials or
commercial purposes, and has been, and will remain, dependent on its
collaborative partners or third parties for the manufacture of product
candidates for preclinical, clinical and commercial purposes.

The manufacture of the Company's candidate products for clinical trials and
the manufacture of resulting products for commercial purposes is subject to
current GMP regulations promulgated by the FDA. The Company will rely on
collaborative partners or outside contractors to manufacture its products in
their FDA approved manufacturing facilities. The Company's products may be in
competition with other products for

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priority of access to these facilities. Consequently, the Company's products may
be subject to delays in manufacture, if collaborative partners or outside
contractors give other products greater priority than the Company's products.
For this and other reasons, there can be no assurance that the Company's
collaborative partners will manufacture such products in an effective or timely
manner. If not performed in a timely manner, the clinical trial development of
the Company's product candidates or their submission for regulatory approval
could be delayed and the Company's ability to deliver products on a timely basis
could be impaired or precluded. There can be no assurance that the Company will
be able to enter into any necessary third party manufacturing arrangements on
acceptable terms if at all. The Company's current dependence upon others for the
manufacture of its products may adversely affect its future profit margin, if
any, and its ability to commercialize products on a timely and competitive
basis.

Pursuant to the collaborative research agreement between the Company and
Ciba, Ciba has the right to manufacture TGF-SS3 for all of the Company's
clinical and commercial requirements. As a result of the failure of its
temporary contract manufacturer's facilities to comply with GMP, Ciba has
experienced delays in manufacturing this compound, which has caused delays in
scheduled clinical trials for TGF-SS3. There can be no assurance that these
trials will proceed as planned or that the Company or its licensees will not be
adversely affected by further delays in the manufacture of TGF-SS3. See
"-- Dependence on Collaborative Relationships."

UNCERTAINTIES RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT

The Company's business, financial condition and results of operations may
be materially adversely affected by the continuing efforts of government and
third-party payors to contain or reduce the costs of health care through various
means. For example, in certain foreign markets, pricing and profitability of
prescription pharmaceuticals are subject to government control. In the United
States, the Company expects that there will continue to be a number of federal
and state proposals to implement similar government control. In addition,
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical products and diagnostic tests. Cost
control initiatives could decrease the price that the Company or any of its
collaborative partners or other licensees receives for any drugs it may discover
or develop or diagnostic products it may develop in the future and have a
material adverse effect on the Company's business, financial condition and
results of operations. Further, to the extent that cost control initiatives have
a material adverse effect on the Company's collaborative partners, the Company's
ability to commercialize its products and to realize royalties may be adversely
affected.

The Company's or any collaborative partner's or licensee's ability to
commercialize pharmaceutical or diagnostic products may depend in part on the
extent to which reimbursement for the products will be available from government
and health administration authorities, private health insurers and other
third-party payors. Significant uncertainty exists as to the reimbursement
status of newly approved health care products. Third-party payors, including
Medicare, are increasingly challenging the prices charged for medical products
and services. There can be no assurance that any third-party insurance coverage
will be available to patients for any products discovered and developed by the
Company and its collaborative partners. Government and other third-party payors
are increasingly attempting to contain health care costs by limiting both
coverage and the level of reimbursement for new therapeutic products and by
refusing in some cases to provide coverage for uses of approved products for
disease indications for which the FDA has not granted labeling approval. If
adequate coverage and reimbursement levels are not provided by government and
other third-party payors for the Company's products, the market acceptance of
these products would be adversely affected, which would have a material adverse
effect on the Company's business, financial condition and results of operations.

POTENTIAL PRODUCT LIABILITY

The use of any of the Company's potential products in clinical trials and
the sale of any approved products may expose the Company to liability claims
resulting from the use of products or product candidates. These claims might be
made directly by consumers, pharmaceutical companies, including the Company's
collaborative partners or others. The Company is currently an additional named
insured under a clinical trials liability insurance policy carried by Ciba with
respect to its TGF-SS3 clinical trials in the amount of $3 million.

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The Company does not independently maintain product liability insurance coverage
for claims arising from the use of its products in clinical trials. Insurance
coverage is becoming increasingly expensive, and no assurance can be given that
the Company will continue to be a named insured with respect to trials underway
or obtain insurance in the future at a reasonable cost or in sufficient amounts
to protect the Company. The Company's inability to obtain adequate liability
insurance could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will be able to obtain commercially reasonable product liability
insurance for any product approved for marketing in the future or that insurance
coverage and the resources of the Company would be sufficient to satisfy any
liability resulting from product liability claims. A successful product
liability claim or series of claims brought against the Company could have a
material adverse effect on its business, financial condition and results of
operations.

ATTRACTION AND RETENTION OF KEY EMPLOYEES AND CONSULTANTS

The Company is highly dependent on the principal members of its management
and scientific staff. The loss of services of any of these personnel could
impede the achievement of the Company's development objectives. Furthermore,
recruiting and retaining qualified scientific personnel to perform research and
development work in the future will also be critical to the Company's success.
There can be no assurance that the Company will be able to attract and retain
personnel on acceptable terms given the competition between pharmaceutical and
health care companies, universities and nonprofit research institutions for
experienced scientists. All of Oncogene Science's consultants are employed by
employers other than the Company and may have commitments to or consulting or
advisory contracts with other entities that may limit their availability to the
Company. See "Business -- Competition."

RISK ASSOCIATED WITH BIOLOGICAL MATERIALS

The activities of the Company involve the controlled use of potentially
harmful biological materials as well as chemicals and various radioactive
compounds. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal laws and regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. Furthermore, the full
health risks associated with certain biological materials, such as DNA, viruses
and fungal organisms, are unknown. In the event of contamination or injury, the
Company could be held liable for damages that result, and any such liability
could exceed the Company's resources or otherwise have a material adverse impact
on the Company's business, financial condition and results of operations.

VOLATILITY OF COMMON STOCK PRICE; MARKET FOR THE COMMON STOCK

The market prices for securities of biotechnology and pharmaceutical
companies, including Oncogene Science, 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. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new therapeutic products by the
Company or others, clinical trial results, developments concerning agreements
with collaborators, governmental regulation, developments in patent or other
proprietary rights, public concern as to the safety of drugs discovered or
developed by the Company or its collaborative partners or others, future sales
of substantial amounts of Common Stock by existing stockholders and general
market conditions can have an adverse effect on the market price of the Common
Stock. The realization of any of the risks described in these "Risk Factors"
could have an adverse effect on market price of the Company's Common Stock.

The Company's collaborative partners hold an aggregate of 3,837,500 shares
of the Company's Common Stock, which constituted approximately 22% of the
outstanding Common Stock at December 31, 1995. Of these shares, all but the
909,091 shares owned by Ciba are currently eligible for sale under Rule 144.
Ciba's shares become eligible for sale under Rule 144, subject to certain volume
and manner of sale limitations, on April 19, 1997. On April 19, 1998, Ciba's
shares will become freely saleable under Rule 144(k). In addition, HMRI has the
right until December 11, 1999 to purchase up to 500,000 shares of the Company's
Common

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Stock at a purchase price of $5.50 per share. Until April 19, 1999, Ciba has an
option to purchase $10.0 million of the Company's Common Stock at a purchase
price equal to the then current market price or $5.50 per share, whichever is
higher. In addition, if the BioChem Offering is consummated, BioChem will
acquire, simultaneously with, or within a short period after, the closing of the
Underwritten Offering, 500,000 shares of Common Stock, which will be freely
tradeable. Sales of a significant number of shares of Common Stock in the public
market could have an adverse effect on the price of the Common Stock. See
"Principal Stockholders" and "Description of Capital Stock -- Registration
Rights."

NO DIVIDENDS

The Company has not paid any dividends on its Common Stock and does not
anticipate paying any dividends in the foreseeable future. See "Dividend
Policy."

DILUTION

Upon the purchase of Common Stock, investors will experience substantial
dilution in the net tangible book value of the Common Stock they acquire in this
offering. Based on the net tangible book value of the Common Stock at December
31, 1995 and a public offering price of $9.125, dilution in net tangible book
value for purchasers in the Offerings would be $6.30 per share. See "Dilution."

ANTITAKEOVER PROVISIONS

Certain provisions of the Delaware corporate law may have the effect of
deterring hostile takeovers or delaying or preventing changes in the control or
management of the Company, including transactions in which stockholders might
otherwise receive a premium for their shares over the then current market
prices. See "Description of Capital Stock -- Delaware Takeover Statute."

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USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,825,000 shares of
Common Stock offered in the Underwritten Offering and the 500,000 shares of
Common Stock offered in the BioChem Offering, at a public offering price of
$9.125 per share, after deducting underwriting discounts and commissions and
financial advisory fees and estimated offering expenses, are estimated to be
approximately $28.1 million ($31.7 million if the Underwriters' over-allotment
option is exercised in full).

The Company estimates that the majority of the net proceeds from the
Offerings will be used for research and development expenses, including the cost
of enhancing the Company's drug discovery technologies, and the balance will be
used for general corporate purposes. The Company intends to continue funding its
own research and development expenses, including preclinical and clinical
expenses for projects that are not subject to collaborative arrangements and for
non-reimbursed expenses of those projects that are subject to collaborative
arrangements. The amounts actually expended for each purpose may vary
significantly depending upon numerous factors, including the progress of the
Company's research, drug discovery and development programs, the results of
preclinical studies and clinical trials, the timing of regulatory approvals,
technological advances, determinations as to commercial potential of the
Company's compounds and the status of competitive products. In addition,
expenditures will also depend upon other factors including the retention and
establishment of, and compliance with, collaborative research arrangements, and
the availability of other financing. The Company may acquire other companies in
order to enhance its drug discovery technology and capabilities. The Company
also may make minority investments in equity securities of other companies in
order to license or acquire relevant technology. The Company evaluates on an
ongoing basis potential collaborative arrangements with third parties and
acquisitions of companies or technologies that may complement its business.
Although the Company has not reached any agreements with such third parties, a
portion of the net proceeds of this offering may be used in one or more such
acquisitions.

Based upon its current operating plan, the Company believes that its
available cash and cash equivalents and short-term investments, together with
proceeds of the Offerings and interest earned thereon, will be adequate to
satisfy its currently anticipated capital needs through fiscal 1999. Pending
application of the proceeds as described above, the Company intends to invest
the net proceeds of this offering in short-term, investment-grade,
interest-bearing securities.

DIVIDEND POLICY

The Company has not paid any dividends since its inception and does not
anticipate paying any dividends in the foreseeable future.

BIOCHEM OFFERING

In addition to and concurrently with the Underwritten Offering, the Company
is offering 500,000 shares of Common Stock directly to BioChem. BioChem's
purchase price per share pursuant to the BioChem Offering is equal to the per
share Price to Public in the Underwritten Offering indicated on the cover page
of this Prospectus.

Any purchase by BioChem in the BioChem Offering would be made pursuant to
an agreement between the Company and BioChem and would not be part of the
Underwritten Offering. Except for a financial advisory fee payable by the
Company to Robertson, Stephens & Company in an amount equal to 5% of BioChem's
aggregate purchase price, the Underwriters will not receive any fees or
commissions in connection with the BioChem Offering.

BioChem is not obligated to purchase any shares of Common Stock until it
and the Company enter into a definitive agreement relating to BioChem's purchase
of shares of Common Stock. There can be no assurance that the BioChem Offering
will result in the purchase of any shares of Common Stock by BioChem. See
"Underwriting and Plan of Distribution" and "Product Development and Research
Programs -- Proprietory Drug Discovery and Development -- Virology."

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PRICE RANGE OF COMMON STOCK

The Company's Common Stock is on the Nasdaq National Market under the
symbol "ONCS." The following table sets forth, for the calendar periods
indicated, the range of high and low sale prices for the Common Stock of the
Company on the Nasdaq National Market. These prices do not include retail
mark-up, mark-down or commissions.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1993
First Quarter...................................................... $7 1/4 $4 5/8
Second Quarter..................................................... 6 1/4 4
Third Quarter...................................................... 5 1/8 3 5/8
Fourth Quarter..................................................... 4 3/4 3 1/2
1994
First Quarter...................................................... 4 1/8 3 1/8
Second Quarter..................................................... 3 7/8 2 7/8
Third Quarter...................................................... 3 5/8 2 1/4
Fourth Quarter..................................................... 3 3/8 2 3/8
1995
First Quarter...................................................... 3 3/8 2 1/2
Second Quarter..................................................... 4 5/8 2 /16
Third Quarter...................................................... 7 1/2 3 1/2
Fourth Quarter..................................................... 10 3/4 5
1996
First Quarter (through March 8).................................... 11 1/8 8
</TABLE>

As of December 31, 1995, there were 751 holders of record of the Common
Stock. On March 13, 1996, the last sale price reported on the Nasdaq National
Market for the Company's Common Stock was $9.25 per share.

18
<PAGE> 19

CAPITALIZATION

The following table sets forth the actual capitalization of the Company as
of December 31, 1995, and as adjusted to reflect the receipt of the estimated
proceeds from the sale of 2,825,000 shares of Common Stock offered in the
Underwritten Offering, and 500,000 shares of Common Stock in the BioChem
Offering, at a public offering price of $9.125 per share and the application of
estimated net proceeds therefrom, after deducting underwriting discounts and
commissions, financial advisory fees and estimated offering expenses payable by
the Company:

<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(in thousands)
<S> <C> <C>
Stockholders' equity:
Common Stock, $0.01 par value, 50,000,000 shares authorized;
17,750,310 shares issued; 21,075,310 shares issued, as
adjusted(1)...................................................... $ 178 $ 211
Additional paid-in capital.......................................... 66,998 95,056
Accumulated deficit................................................. (27,900) (27,900)
Cumulative foreign currency transaction adjustment.................. (40) (40)
Unrealized holding gain on short-term investments................... 95 95
Treasury stock, at cost (222,521 shares)............................ (143) (143)
-------- ----
Total stockholders' equity..................................... 39,188 67,279
-------- ----
Total capitalization........................................ $ 39,188 $ 67,279
======== ====
</TABLE>

- ---------------
(1) Excludes options and warrants outstanding at December 31, 1995 to purchase
2,452,366 shares of Common Stock at a weighted average exercise price of
$4.10 per share.

19
<PAGE> 20

DILUTION

The net tangible book value of the Company as of December 31, 1995 was
approximately $30.9 million or $1.76 per share of Common Stock. After giving
effect to the sale by the Company of the 2,825,000 shares of Common Stock
offered in the Underwritten Offering, and the 500,000 shares of Common Stock
offered in the BioChem Offering, at a public offering price of $9.125 per share
and the receipt of the net proceeds therefrom (after deducting underwriting
discounts and commissions, financial advisory fees and offering expenses payable
by the Company), the pro forma net tangible book value of the Company as of
December 31, 1995 would have been approximately $59.0 million, or $2.83 per
share. This represents an immediate increase in net tangible book value of $1.07
per share to existing stockholders and an immediate dilution in net tangible
book value of $6.30 per share to new investors purchasing shares at the public
offering price. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Public offering price per share(1)................................... $9.13
Net tangible book value before the Offerings(2).................... $1.76
Increase attributable to new investors in the Offerings............ 1.07
------
-
Pro forma net tangible book value after the offering................. 2.83
------
-
Dilution to new investors............................................ $6.30
=======
</TABLE>

- ---------------
(1) Before deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company.

(2) Net tangible book value per share is equal to total tangible assets of the
Company less total liabilities divided by the number of shares of Common
Stock outstanding.

20
<PAGE> 21

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected consolidated financial data for
Oncogene Science. The selected consolidated financial data as of September 30,
1994 and 1995, and for each of the three years in the period ended September 30,
1995, are derived from the Company's audited consolidated financial statements,
which consolidated financial statements are included elsewhere in this
Prospectus. The selected consolidated financial data set forth below as of
September 30, 1991, 1992 and 1993, and for each of the two years in the period
ended September 30, 1992, are derived from audited consolidated financial
statements, which consolidated financial statements are not included or
incorporated by reference in this Prospectus. The unaudited consolidated
financial data as of December 31, 1995, and for the three months ended December
31, 1994 and 1995, have been prepared on a basis consistent with the audited
consolidated financial statements and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition and results of operations for the periods
presented. The results for the three months ended December 31, 1995 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 1996. This selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes included in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1994 1995
------- ------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues...................... $ 7,824 $11,094 $ 16,088 $ 16,299 $ 15,865 $ 4,208 $ 2,276
Operating expenses:
Research and development.......... 4,860 8,127 10,660 12,125 13,523 3,077 2,683
Production........................ 749 1,421 1,443 1,428 1,253 405 22
Selling, general and
administrative.................. 4,131 5,219 6,430 7,487 7,140 1,875 1,332
Amortization of intangibles....... -- 1,746 1,746 1,745 1,697 436 363
------- ------- -------- -------- -------- -------- --------
Loss from operations................ (1,916) (5,419) (4,191) (6,486) (7,748) (1,585) (2,124)
Gain on sale of Research Products
Business.......................... -- -- -- -- 2,720 -- --
Other income, net................... 724 883 885 762 769 194 353
Relocation related expenses......... (342) -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net loss............................ $(1,534) $(4,536) $ (3,306) $ (5,724) $ (4,259) $ (1,391) $ (1,771)
======== ======== ========= ========= ========= ========= =========
Net loss per share.................. $(0.17) $(0.31) $(0.21) $(0.35) $(0.25) $(0.09) $(0.10)
======== ======== ========= ========= ========= ========= =========
Weighted average shares
outstanding....................... 9,184 14,801 16,080 16,335 16,757 16,343 17,476
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------------- DECEMBER 31,
1991 1992 1993 1994 1995 1995
------- ------- ------- ------- ------- --------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents
and short-term investments........ $10,110 $18,897 $22,390 $18,158 $26,787 $24,085
Working capital..................... 10,301 22,363 25,915 21,208 26,128 25,268
Total assets........................ 18,079 43,931 47,615 42,041 44,057 41,739
Stockholders' equity................ 15,867 41,961 45,045 38,656 40,550 39,188
</TABLE>

21
<PAGE> 22

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

OVERVIEW

Since its inception in March 1983, Oncogene Science has devoted most of its
resources to the development of its technology platform and research and drug
discovery programs. To date, none of the Company's collaborative programs have
resulted in a commercial product and, therefore, the Company has not received
any royalty revenue from the sale of therapeutic products by its collaborators.
Furthermore, the Company does not expect to generate any such revenues for
several years, if at all. The Company has incurred an accumulated deficit of
approximately $27.9 million as of December 31, 1995 and expects to continue to
incur operating losses for several years.

The Company has funded its operations primarily through public and private
placements of equity securities and payments under collaborative research
agreements with major pharmaceutical companies. The Company's revenues consist
principally of funding under such collaborative research agreements, and to a
lesser extent, government and private grants and investment income. The Company
also derived revenues from the operations of its Research Products Business,
which it sold to Calbiochem-Novabiochem International, Inc. in August 1995 for
$6.0 million in cash plus other considerations in order to concentrate on its
drug discovery operations. Although the Company anticipates increased
expenditures in research and development, it expects a portion of such expenses
to be reimbursed by the Company's existing and potential collaborative partners.
The Company's strategy is to develop its product candidates in collaboration
with others on whom the Company will rely for funding, clinical development,
regulatory approval, manufacturing and marketing capabilities.

The Company collaborates with leading pharmaceutical companies in most of
its drug discovery programs. Currently, the Company has collaborative programs
with Pfizer, HMRI, Wyeth and Ciba. Generally, the Company's collaborative
partners have exclusive, worldwide licenses to manufacture and market products
resulting from the collaborative research, in exchange for research funding and
the payment of royalties to the Company on product sales. In addition, the
collaborative partners generally have responsibility for clinical development
and obtaining regulatory approvals.

In the Company's collaboration with Pfizer, Oncogene Science is pursuing
the discovery and development of cancer therapeutic products that target
oncogenes and anti-oncogenes. Through December 31, 1995, cumulative revenues
from Pfizer were $31.8 million. The Company is negotiating with Pfizer for the
renewal of this collaboration, which expires on March 31, 1996. There can be no
assurance that this collaboration will be renewed on acceptable terms, if at
all.

The Company is pursuing the discovery and development of drugs in various
areas jointly with HMRI. In July 1995, the pharmaceutical operations of Hoechst,
Hoechst Roussel and MMDI were combined in one entity, HMRI. Prior to this date
the Company had collaborative agreements with all three of these companies. In
1992, the Company entered into a collaborative agreement with MMDI to discover
and develop drugs to treat certain indications in the area of cardiovascular
disease, primarily focused on atherosclerosis. Through December 31, 1995,
cumulative revenues under this agreement were $6.2 million. The Company entered
into a collaborative research agreement with Hoechst effective January 1993. The
collaboration is focused on discovering and developing drugs for the treatment
of inflammation, arthritis and metabolic disease. In October 1993, the Company
entered into a collaborative agreement with Hoechst Roussel pursuant to which
the companies are pursuing the discovery and development of drugs to treat
Alzheimer's disease. Under the agreements with Hoechst and Hoechst Roussel, the
Company is being reimbursed for its expenses under the collaborative programs on
a fixed-fee basis. Cumulative revenues under these two agreements through
December 31, 1995 were $3.1 million. The Company is negotiating with HMRI for
the consolidation of its three collaborative research agreements with each of
MMDI, Hoechst and Hoechst Roussel, which expire on various dates in 1997 and
1999. There can be no assurance that the Company and HMRI will enter into such
an overall agreement, or if such agreement is entered into, that it will not be
on terms less favorable than the current agreements.

22
<PAGE> 23

In December 1991, the Company entered into a collaborative research
agreement with Wyeth. Under the agreement, the companies are pursuing the
discovery and development of drugs for the treatment of diabetes, immune system
modulation, asthma and osteoporosis. Cumulative revenues under this
collaboration through December 31, 1995 were $4.9 million.

The Company entered into an agreement with Ciba in April 1995 with respect
to the development of TGF-SS3. This agreement grants to Ciba an exclusive
worldwide license to manufacture, use and sell TGF-SS3 products for oral
mucositis and wound healing, as well as certain other indications, including
psoriasis, while the Company retains the rights to all other indications. Under
this agreement, the Company will fund oral mucositis Phase I clinical trials and
Ciba will fund Phase II and III clinical trials. Ciba is responsible for the
clinical development of TGF-SS3 for wound healing indications. In exchange for
its exclusive license, Ciba will make royalty payments to the Company on the
sale of TGF-SS3 products, if any are commercialized. The Company also is
developing cancer diagnostic products in collaboration with Becton. Under this
collaboration, the Company granted Becton rights to market products derived from
the joint research in exchange for royalty payments to the Company on product
sales. In conjunction with this collaboration, the Company acquired the cancer
business of Applied bioTechnology, Inc. in October 1991. Becton is currently
funding a portion of the Company's cancer diagnostics program. Through December
31, 1995, cumulative revenues from Becton under this program were $16.7 million.

The Company's business is subject to significant risks, including, but not
limited to, the risks inherent in its research and development efforts,
including clinical trials, uncertainties associated both with obtaining and
enforcing its patents and with the patent rights of others, the lengthy,
expensive and uncertain process of seeking regulatory approvals, uncertainties
regarding government reforms and of product pricing and reimbursement levels,
technological change and competition, manufacturing uncertainties and dependence
on third parties. Even if the Company's product candidates appear promising at
an early stage of development, they may not reach the market for numerous
reasons. Such reasons include the possibilities that the products will be unsafe
or ineffective during clinical trials, will fail to receive necessary regulatory
approvals, will be difficult to manufacture on a large scale, will be
uneconomical to market or will be precluded from commercialization by
proprietary rights of third parties.

The Company will require substantial additional funding in order to
continue its research, product development, preclinical testing and clinical
trials of its product candidates. The Company sold its Research Products
Business in August 1995, and this will no longer be a source of revenue. The
Company is anticipating the combined collaborative revenue of the separate
Hoechst, Hoechst Roussel and MMDI collaborations to be lower under a new
agreement with HMRI, which has not yet been established. Accordingly, the
Company has reduced expenses under these programs. Additionally, revenues under
the Becton collaboration have been reduced due to a narrowing of Becton's focus
in the program. The Company expects grant revenue will be lower in fiscal 1996
as a result of the expiration of a drug discovery grant from the U.S.
government.

The Company intends to seek additional funding through arrangements with
corporate collaborators and through public or private sales of the Company's
securities, including equity securities. There can be no assurance, however,
that additional funding will be available on reasonable terms, if at all. Any
additional equity financing would be dilutive to the Company's stockholders. If
adequate funds are not available, the Company may be required to curtail
significantly one or more of its research and development programs and obtain
funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies or
product candidates. The Company will be dependent upon its collaborative
partners to conduct preclinical testing and clinical trials and to provide
adequate funding for the Company's development programs. Under certain of these
arrangements, the Company's collaborative partners may have all or a significant
portion of the development and regulatory approval responsibilities. Failure of
the collaborative partners to develop marketable products or to gain appropriate
regulatory approvals would have a material adverse effect on the Company's
business, financial condition and results of operations.

23
<PAGE> 24

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994

Revenues

Revenues for the quarter ended December 31, 1995 were approximately $2.3
million, a decrease of $1.9 million, or 46% compared to revenues of $4.2 million
reported for the quarter ended December 31, 1994. The decrease was due to lower
sales of research products, which accounted for approximately $1.3 million of
the decrease in revenues. The Company sold its Research Products Business for
$6.0 million in cash plus other considerations in August 1995, and accordingly
there were no significant sales of research products recorded after this date.
In the purchase agreement, the Company agreed to indemnify the purchaser for a
period of two years for certain breaches of the agreement. Collaborative program
revenue decreased approximately $331,000 or 14%. This was largely due to a
reduction in collaborative revenue under the collaborative arrangement with HMRI
as compared to the total revenue in the prior year's quarter from MMDI, Hoechst
Roussel and Hoechst. Other research revenues representing primarily government
grants decreased approximately $316,000 in the quarter ended December 31, 1995
compared to the quarter ended December 31, 1994 due in part to the expiration of
a U.S. government grant. The balance of the decrease represents changes in the
timing and amount of grant awards. The Company expects that grant revenue will
be somewhat lower in the current fiscal year.

Expenses

The Company's operating expenses decreased by approximately $1.4 million or
24% for the quarter ended December 31, 1995 compared to the quarter ended
December 31, 1994. Research and development expenses decreased approximately
$394,000 or 13% due to reductions in expenses in the HMRI and Becton
collaborations commensurate with the reduced funding in these programs. This was
offset in part by increased expenditures in the Company's proprietary research
programs. Production expenses and selling, general and administrative expenses
decreased approximately $926,000. These reductions were directly related to
expenses which were associated with the Company's Research Products Business in
the quarter ended December 31, 1994. The reduction of approximately $73,000 of
amortization of intangibles is due to a portion of goodwill relating to the
Research Products Business which was expensed when the business was sold in
1995.

Other Income and Expense

Net investment income increased approximately $144,000 or 65% for the
quarter ended December 31, 1995 compared to the quarter ended December 31, 1994.
This increase was largely due to the increase in funds invested as a result of
the proceeds from the sale of the Research Products Business and the sale of
stock to Ciba in April 1995.

FISCAL YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993

Revenues

Total revenues of $15.9 million in fiscal 1995 decreased approximately
$434,000 or 3% compared to fiscal 1994 and total revenues of $16.3 million in
fiscal 1994 increased approximately $211,000 or 1% compared to fiscal 1993.
Collaborative program revenues increased by approximately $597,000 or 7% in
fiscal 1995 due to the commencement of an additional research program with HMRI
in April 1994, the expansion and extension of the collaborative research
agreement with Wyeth in March 1994 and increases in revenues under the Pfizer
agreement with respect to anti-cancer drugs. These increases were offset by
decreased funding from Pfizer associated with Pfizer's reduced participation in
the TGF-SS3 oral mucositis program in order to focus exclusively on its
collaborative programs with the Company related to the research and development
of small molecule anti-cancer drugs. Previously, Pfizer had funded the Company's
TGF-SS3 oral mucositis program in addition to its anti-cancer collaborative
program. Under a collaborative agreement with Ciba entered into in April 1995,
the Company will fund the development of TGF-SS3 for oral mucositis through the
end of Phase I clinical trials and Ciba will fund its subsequent clinical
development. The increase in collaborative revenues in fiscal 1995 was offset by
decreases in sales of research products and other research revenues. The Company
sold its Research Products Business in August 1995, and accordingly, there were
no significant sales of research products recorded after this date. Sales of
research products decreased approximately $651,000 or

24
<PAGE> 25

13% in fiscal 1995 compared to fiscal 1994. Other research revenues decreased
approximately $380,000 or 17% in fiscal 1995 compared to fiscal 1994, which was
largely the result of the expiration of a U.S. government grant.

The increase in total revenues in fiscal 1994 compared to fiscal 1993 is
attributable to increases of $1.6 million in collaborative research revenues
relating to the commencement of the additional HMRI collaborative program and a
milestone payment from MMDI, grant revenues and sales of research products,
offset by a $1.4 million decrease in revenues from Pfizer. Sales of research
products increased approximately $111,000 or 2% in fiscal 1994 compared to
fiscal 1993, due primarily to a change in the mix of products sold. Other
research revenues in fiscal 1994 increased by approximately $408,000 or 22%,
compared to fiscal 1993, due to an increase in the number and size of grants
awarded to the Company.

Expenses

Research and development expenses increased by approximately $1.4 million
or 12% in fiscal 1995 compared to fiscal 1994 and increased by approximately
$1.5 million or 14% in fiscal 1994 compared to fiscal 1993. The increase in
fiscal 1995 was due principally to the start during 1994 of the additional
research program with HMRI, the expansion and extension of the Wyeth agreement
and the increase in activities related to the Company's proprietary programs in
the area of medicinal and natural products chemistry and clinical development of
TGF-SS3 for oral mucositis.

The increase in fiscal 1994 was due to an increase in expenditures in the
collaborative programs with MMDI and the commencement of the additional program
with HMRI, and increased research and development expenses incurred in
connection with the Company's proprietary and grant programs.

Research and development expenses reimbursed by collaborative partners and
government research grants aggregated approximately $10.7 million, $10.3 million
and $11.1 million for fiscal years 1995, 1994, and 1993, respectively.

Production expenses decreased approximately $175,000 or 12% for fiscal 1995
as compared with fiscal 1994, reflecting the sale of the Research Products
Business. Production expenses remained approximately constant in fiscal 1994
compared to fiscal 1993.

Selling, general and administrative expenses decreased approximately
$347,000 or 5% in fiscal 1995 compared to fiscal 1994. This decrease reflected
the reduction in sales and marketing expenses due to the sale of the Research
Products Business, offset by increases in professional fees related to corporate
development activities. Selling, general and administrative expenses increased
approximately $1.1 million or 16% in fiscal 1994 compared to fiscal 1993. This
increase was principally attributable to expenses incurred in the Company's
international operations including a subsidiary in France engaged in the sale of
research products, as well as increased payroll and consulting expenses. In
connection with the sale of the Research Products Business, the Company elected
to close down the operations of its French subsidiary. Costs associated with the
close down have been offset against the gain on the sale of the Research
Products Business.

Amortization of intangibles in fiscal 1995, 1994, and 1993 represents
amortization of patents and goodwill that resulted from the acquisition of the
cancer diagnostics business of Applied bioTechnology. The decrease in
amortization expense in fiscal 1995 is due to the portion of goodwill which was
expensed in connection with the sale of the Research Products Business.

Other Income and Expense

Net investment income decreased approximately $24,000 or 3% for fiscal 1995
compared to fiscal 1994. Interest income earned in fiscal 1995 was higher than
in fiscal 1994 despite a lower average principal balance in fiscal 1995 due to
increased interest rates. However, this was offset in part by a net realized
loss on the sale of certain investments.

Net investment income decreased approximately $72,000 or 8% for fiscal 1994
compared to fiscal 1993. This decrease was a result of declining interest rates
and decreased principal balance invested.

25
<PAGE> 26

The Company sold its Research Products Business to Calbiochem-Novabiochem
International, Inc. in August 1995 for $6.0 million in cash and other
considerations. The net gain on the sale was approximately $2.7 million.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1995, working capital (representing primarily cash, cash
equivalents and short-term investments) aggregated approximately $25.3 million.

The Company has been, and will continue to be, dependent upon collaborative
research revenues, government research grants, interest income and cash balances
until products developed from its technology are commercially marketed. In April
1995, Ciba purchased 909,091 shares of the Company's common stock for an
aggregate purchase price of $5.0 million.

During 1995, the pharmaceutical operations of Hoechst, Hoechst Roussel and
MMDI were consolidated into HMRI. The Company is aware that HMRI is conducting a
review of all its research and development programs. Based on discussions with
HMRI, the Company expects its programs with HMRI to continue under one overall
agreement in the future, although there can be no assurance that the Company and
HMRI will enter into such an agreement, or if such an agreement is entered into,
that it will not be on terms less favorable than the existing agreements with
each of Hoechst, Hoechst Roussel and MMDI. The Company anticipates that the
total funding under the consolidated agreement will be lower than the aggregate
level of funding under the three previously separate agreements.

Since its commencement in 1991 and until the second quarter of fiscal 1995,
the cancer diagnostics collaborative program with Becton has focused on both
serum-based and histochemical immunoassays. During the second quarter of fiscal
1995, Becton decided to focus exclusively on cellular cancer diagnostics,
including histochemical immunoassays. Becton has reduced its funding under this
program in fiscal 1996, and the Company is uncertain as to Becton's ongoing
support for this program. The Company is continuing the development of
serum-based cancer diagnostic products and is in discussions with possible new
collaborative partners in this area. However, there can be no assurance that the
development of these tests will not be terminated.

The Company believes that with the funding from its collaborative research
programs, government research grants, interest income, and cash balances, the
Company's financial resources are adequate for its operations through fiscal
1999. However, the Company's capital requirements may vary as a result of a
number of factors, including competitive and technological developments, funds
required for expansion of the Company's technology platform, including possible
joint ventures, collaborations, and acquisitions, the time and expense required
to obtain governmental approval of products, and any potential indemnification
payments to the purchaser of the Research Products Business, some of which
factors are beyond the Company's control. The Company intends to substantially
increase its expenditures and capital investment over the next several years to
enhance its drug discovery technologies and pursue internal proprietary drug
discovery programs. There can be no assurance that scheduled payments will be
made by third parties, that current agreements will not be cancelled, that
government research grants will continue to be received at current levels or
that unanticipated events requiring the expenditure of funds will not occur.
Further, there can be no assurance that the Company will be able to obtain any
additional required funds, or, if such funds are available, that such funds will
be available on favorable terms. Failure to obtain additional funds when
required would have a material adverse effect on the Company's business,
financial condition and result of operations.

26
<PAGE> 27

BUSINESS

Oncogene Science, Inc., a leader in the innovation of drug discovery
technologies, combines genetically engineered live-cell assays with high
throughput robotic screening to discover novel, small molecule pharmaceuticals.
Independently and in collaboration with Pfizer Inc. ("Pfizer"), Hoechst Marion
Roussel, Inc. ("HMRI"), Wyeth-Ayerst Laboratories Division of American Home
Products Corporation ("Wyeth") and Ciba-Geigy, Ltd. ("Ciba"), the Company is
engaged in the discovery and development of drugs that target 30 proteins in a
wide range of disease areas, including cancer, atherosclerosis, neurological
disorders and chronic anemias. The Company is developing its most advanced drug
candidate, TGF-SS3, in collaboration with Ciba. The Company expects that Ciba
will commence Phase II clinical trials for TGF-SS3 in wound healing and Phase I
clinical trials for TGF-SS3 in oral mucositis in 1996. In addition, the
Company's collaborative program with Pfizer has resulted in the identification
of a proprietary lead compound that inhibits a protein associated with a number
of major cancers. The Company expects that Pfizer may file an Investigational
New Drug application ("IND") in the second half of 1996.

BACKGROUND

Since the early 1980s, major advances in molecular biology have increased
the scientific understanding of the complex regulatory and functional mechanisms
that operate within the cell. Among these advances is the ability to isolate and
manipulate the key genetic molecules DNA and RNA. Genes are composed of segments
of DNA, which are located within the cell nucleus. Each gene contains the
chemical information required for the production of a single protein. Generally,
10,000 to 20,000 of the 100,000 genes contained in a human cell are actively
involved in the production of proteins specific to that cell.

Proteins are molecules that either regulate or perform most of the
physiological and structural functions of the body. Abnormalities in the
cellular production or activity of proteins are the causes of many diseases.
Most drugs work by binding to specific proteins to change their activity,
resulting in a therapeutic effect on the disease associated with that protein.

[INSERT DIAGRAM]

The above diagram illustrates the processes of gene
transcription and translation. The Company's cell-based drug
screens are designed to identify drug molecules that can
interact with receptors, transcription factors or signal
transduction proteins. Traditional drug screens typically
identify molecules that bind to isolated receptors or target
proteins.

27
<PAGE> 28

Gene transcription is a key step in the production of proteins by the cell.
Gene transcription occurs when a segment of DNA containing the coding sequence
for an individual protein is copied into an intermediate template called
messenger-RNA ("mRNA"). The DNA within a gene is divided into at least two types
of sequences. Certain types of sequences encode the structural information for
mRNA, while other sequences, called response elements, regulate the production
of mRNA. Certain intra-cellular proteins, known as transcription factors,
interact with response elements to regulate the production of mRNA and,
therefore, the production of the corresponding protein. The conversion of mRNA
into its corresponding protein takes place in a process called translation.

Changes in gene transcription occur in response to a wide variety of
signals. Complex interactions between transcription factors and response
elements control the rate with which gene transcription is carried out in
response to these signals. The process by which the information contained in
these signals is transmitted into the nucleus is called signal transduction.
Activation of gene transcription increases the levels of a protein while
inhibition of gene transcription decreases production of a protein.

TRADITIONAL DRUG DISCOVERY

The traditional discovery method for small molecule pharmaceuticals
involves the random testing of thousands of compounds in drug screens. These in
vitro tests or assays typically employ single proteins, such as receptors, as
targets for discovery of drug candidates. For each drug screen, the target
protein is selected because the scientist believes a compound that binds with
this target may have a therapeutic benefit with respect to the disease under
study. Lead compounds or "hits" are defined as compounds that bind to target
protein and either inhibit or stimulate its activity. Medicinal chemists then
focus on optimizing these initial lead compounds to improve potency and
specificity. Nearly all drugs sold today (with the exception of recombinant
proteins) were either discovered in drug screens or are derived from the lead
compounds identified in such screens.

The simplified drug screens used in traditional drug discovery employ
isolated components of the cell and are an inadequate representation of the
complex, physiological environment that exists within living cells. Receptors,
signal transduction proteins and transcription factors, which are targets for
therapeutic intervention, do not exist in isolation in the cell, but rather
occur as large complexes of multiple proteins bound together with specific
structures. Lead compounds identified in the artificial environment of
traditional drug screens are frequently found to be either ineffective or toxic
in live cells, because these complex intra-cellular interactions are not
reproduced in conventional in vitro screens. Consequently, drug companies often
devote substantial resources to optimizing a traditional drug screen lead
compound that will be found to be ineffective in the more complex environment of
live cells.

A further limitation of traditional drug discovery is that many of the
major diseases, such as many types of cancer, atherosclerosis and diabetes, are
due to mutations or abnormalities in more than one protein, many of which remain
unknown. Consequently, the classical drug discovery paradigm of targeting a
single protein in a drug screen has met with only limited success in identifying
drugs for treatment of such complex diseases.

In addition, slow and labor intensive traditional screening methods have
limited the number and chemical diversity of the compounds that can be tested in
assays. Traditional drug screens, carried out manually by scientists working at
the bench, or by using limited automation, typically evaluate less than 10,000
test compounds per year against each target protein. Even though many millions
of distinct chemical structures exist, with this approach it is not unusual for
screening to be terminated at the end of several years with no lead compounds
identified, after examining only a small fraction of available compounds. This
limitation of speed and scale often restricts both the quality and quantity of
lead compounds available for further testing and development and hinders drug
discovery.

The rising costs of health care and changes in health care management
policies are applying increasing competitive pressure on the pharmaceutical
industry, leading to an emphasis on the cost-effectiveness and quality of drug
candidates and the speed with which novel classes of pharmaceuticals can be
brought to the marketplace. In this environment, new discovery technologies that
improve the number and quality of lead

28
<PAGE> 29

compounds have become critical in order to identify novel drug candidates and to
conduct cost-effective clinical development.

ONCOGENE SCIENCE'S TECHNOLOGY PLATFORM

The Company's technologies have been designed to solve many of the
limitations associated with conventional drug screens. The Company's technology
platform consists of applying its understanding of the molecular biology of gene
transcription to the development of proprietary live-cell assays. These assays
are used to test diverse compounds derived from natural sources and from
medicinal chemistry libraries of its collaborative partners using automated,
high throughput robotic drug screening techniques. In addition, the Company is
expanding its capabilities in combinatorial chemistry. The Company believes its
technology platform is widely applicable to the identification of drug
candidates to treat many different diseases, including diseases due to mutations
or abnormalities in multiple genes. Utilizing its technology, the Company has
been able to identify lead compounds that it believes are potent and selective,
possess minimal or no cellular toxicity and have activity in live cells.

LIVE-CELL ASSAYS AND GENE TRANSCRIPTION

The Company's drug screens utilize live cells that express proteins
believed to be associated with a particular disease. For any one target protein,
there are multiple sites within the cell where a drug can act to exert a
specific effect. Cell-based screens, therefore, provide multiple sites of
therapeutic intervention, such as receptors, signal transduction proteins and
transcription factors, which the Company believes increases the probability of
finding promising lead compounds. Furthermore, live-cell assays provide data on
the cytotoxicity and specificity of the compounds tested, allowing the Company
to define key properties of a lead compound earlier in the development process.
Therefore, the Company believes that its drug discovery technology fosters the
generation of high quality leads that are more likely to progress through
preclinical studies compared to lead compounds identified by traditional
methods.

The Company believes its live-cell assays are effective in identifying
compounds that exert a therapeutic effect by altering transcription of
particular target genes. Gene transcription-based drugs act by increasing or
decreasing the amount of mRNA and, therefore, the amount of the corresponding
protein associated with a particular disease. It has been demonstrated in recent
years that a number of widely used drugs exert their primary clinical effect
through a gene transcription-based mechanism. These include oral contraceptives,
tamoxifan for breast cancer, cyclosporin A for immunosuppression (used in tissue
transplantation), retinoids for dermatology, and aspirin. These drugs were
discovered and developed prior to an understanding of gene transcription. Now
that gene transcription is better understood, the Company believes its gene
transcription technology is an important mechanism for therapeutic intervention
and a process through which drug discovery assays can be designed.

In order to measure production of the target protein produced by gene
transcription in the cell, Oncogene Science's live-cell assays utilize a
reporter gene, luciferase. Luciferase is the molecule that causes fireflies to
illuminate and is the source of one of nature's most sensitive chemilumiscent
reactions. The Company genetically engineers the luciferase gene into the
regulatory framework of the gene of interest to create a live cell line, where
the amount of light produced by luciferase corresponds to the level of the
target protein produced by the gene of interest. These cell lines are then
employed in screens for small molecule test compounds that affect expression of
the reporter gene. Lead compounds are readily identified by changes in the
amount of light produced by the tester cell line. Compounds that show activity
on the reporter gene in the specific cell line are then further tested to
confirm their activity on the target gene.

HIGH THROUGHPUT ROBOTIC SCREENING TECHNOLOGY

Since 1988, Oncogene Science has been a pioneer in the development of high
throughput screening. High throughput screening is the practice of rapidly
testing hundreds of thousands of test compounds against a target protein, and
has become a major focus of leading pharmaceutical companies over the last few
years. Competitive pressures in the pharmaceutical industry are requiring
pharmaceutical companies to find ways to

29
<PAGE> 30

identify quality drug candidates more quickly and cost effectively. The Company
believes that worldwide efforts to map and sequence the human genome will result
in the identification of increasing numbers of new target genes. Moreover, new
technologies, such as combinatorial chemistry, may generate tens of millions of
new compounds to test in in vitro and live-cell assays.

The Company has developed proprietary hardware and software systems to
automate the entire drug screening process, from the addition of the test
substances to the cells to the analysis of the data generated from the tests. In
its proprietary robotic screening facility, the Company can analyze up to
300,000 different test samples each week, depending on the complexity of the
assays. The Company's robotic systems are not limited to any particular assay
format and can be reconfigured to run a wide variety of assays. In addition to
transcription-based, live-cell assays, the Company's robotic systems can perform
conventional in vitro assays and live-cell assays not focusing on gene
transcription.

In designing drug screens, the Company generally selects the most relevant
human cell line for the target protein. For example, liver cells are used in
assays designed to test for the production of proteins normally produced in the
liver. In order to confirm results obtained in these cell lines, the Company
subjects lead compounds to assays using primary cells isolated from fresh
tissues, which it believes are the most accurate cell types to predict the
activity of the test compounds. Traditionally, these primary cell assays have
not been used in high throughput screens because the sensitivity of the cells to
small changes in temperature, humidity and carbon dioxide levels make accurate
quantitative data difficult to obtain. The Company has developed proprietary
environmental control chambers to tightly regulate these conditions and allow
the use of primary cells in high throughput screens. While the Company often
focuses on transcription-based screens, it has the ability to perform an
extensive portfolio of different screens depending on the targeted disease
indication.

DIVERSE COMPOUND LIBRARIES AND COMBINATORIAL CHEMISTRY

Access to large libraries of diverse compounds is an important aspect of
the Company's drug discovery efforts. The Company's collaborative partners have
provided large compound libraries to the Company pursuant to its collaborative
research programs. Certain collaborative partners have made their compound
libraries available for additional research by the Company outside the existing
collaborative programs. The Company has developed robotic systems to format
compound libraries into microtiter plates for high throughput screening and an
advanced inventory control process incorporating a bar code system to track
these compounds. The Company has prepared and archived several distinct
medicinal compound libraries belonging to the Company's pharmaceutical partners
for screening applications. In excess of 700,000 samples are archived at the
Company and over 150,000 of these can be made available to the Company's
proprietary discovery programs. For any compound from the Company's
collaborative partners' libraries that emerges as a lead in a proprietary
program, the partner will have the right of first refusal to develop the
compound or terminate its further development or to allow the Company to
commercialize the compound independently or with a third party in exchange for
royalty payments from the Company on product sales.

In addition to the medicinal chemistry compounds, the Company also makes
extensive use of natural product compounds in fungal fermentation extracts.
Fungi are a known source of novel pharmaceuticals, including penicillin,
cephalosporin, lovastatin, prevastatin and cyclosporin A. The Company has
established a collaboration with a company specializing in fungal fermentation
products in which the Company sponsors the research and development of fungal
extracts. Pursuant to this collaboration, the Company has acquired more than
60,000 extracts of fungal samples for its proprietary uses and has the capacity
to add to this collection at the rate of 1,000 to 2,000 samples per week.

Regardless of whether a lead compound is obtained by traditional or live
cell-based assays, the pharmaceutical properties of that compound must be
optimized before clinical development begins. Traditional lead optimization
requires medicinal chemists to synthesize new analogs. This methodology is
limited to producing approximately five to 20 new analogs per week.
Combinatorial chemistry techniques, however, enable the rapid production of
hundreds of chemical analogs per week. In a recent pilot program conducted by
the Company, nearly 3,000 analogs of a lead compound in one of the Company's
proprietary programs were synthesized over three months. The Company is
automating its combinatorial chemistry synthesis program in

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<PAGE> 31

order to produce analogs of lead compounds more rapidly. The Company believes
that the continued development of this technology will not only provide for a
rapid expansion in its proprietary libraries of medicinal compounds, but also
accelerate the Company's ability to rapidly analog lead compounds from its
screening programs.

ONCOGENE SCIENCE'S STRATEGY

The Company's goal is to discover and develop novel small molecule drugs
through proprietary and collaborative drug discovery programs using its
proprietary technology platform.

The Company's strategy includes the following key elements:

- Enhance Capabilities in Drug Discovery. The Company is seeking to
enhance its drug discovery operations by combining new capabilities in
combinatorial chemistry with its industry leading robotics and
information technologies to optimize leads more quickly and effectively.
The Company is also developing new live-cell assays to detect complex
intra-cellular mechanisms thereby enhancing the potential of discovering
lead compounds.

- Maintain and Expand Collaboration with Pharmaceutical Partners. The
Company will seek to maintain and expand collaborations with
pharmaceutical companies to provide funding, development and
commercialization capabilities, which enables the Company to focus on its
core strengths in drug discovery. The Company has collaborations with
four major pharmaceutical companies with which it is pursuing over 20
protein targets for various diseases.

- Expand Capabilities to Advance Internal Proprietary Programs. The
Company will seek to expand its proprietary drug discovery efforts to
develop lead compounds through early clinical trials. The Company
believes that by seeking collaborative partners later in the development
process, it will be able to realize more favorable terms for the funding,
development and commercialization of potential drug candidates.

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<PAGE> 32

PRODUCT DEVELOPMENT AND RESEARCH PROGRAMS

The following table summarizes Oncogene Science's current pharmaceutical
product development and research programs. The table is qualified in its
entirety by reference to the more detailed descriptions elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
No. of Protein
Drug Discovery Program/Partners Targets(1) Discovery(1) Preclinical(2) Phase I(3) Phase II(4)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Chronic Anemias 2 -- --
------------------------------------------------------------------------------------------------
Viral Infections 4 --
------------------------------------------------------------------------------------------------
Muscle Wasting Disorders 3 --
- ------------------------------------------------------------------------------------------------------------------
CIBA-GIEGY Wound Healing (TGF-SS3) 1 --
------------------------------------------------------------------------------------------------
Oral Mucositis in Cancer (TGF-SS3) 1 --
- ------------------------------------------------------------------------------------------------------------------
Cardiovascular 4 -- --
------------------------------------------------------------------------------------------------
Arthritis 2 --
------------------------------------------------------------------------------------------------
Alzheimer's 1 --
- ------------------------------------------------------------------------------------------------------------------
PFIZER Cancer: Oncogenes 4 -- --
------------------------------------------------------------------------------------------------
Tumor Suppressor Genes 1 --
------------------------------------------------------------------------------------------------
Angiogenesis 1 --
------------------------------------------------------------------------------------------------
Apoptosis 2 --
- ------------------------------------------------------------------------------------------------------------------
WYETH-AYERST Diabetes 1 -- --
------------------------------------------------------------------------------------------------
Immune Suppression 1 --
------------------------------------------------------------------------------------------------
Asthma 1 --
------------------------------------------------------------------------------------------------
Osteoporosis 1 --
- ------------------------------------------------------------------------------------------------------------------
TOTAL 30
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) For most of the Company's programs in the "Discovery" phase, the target
proteins are either undergoing high throughput screening or lead
compounds identified in these screens are being evaluated. Multiple lead
compounds may exist for any target protein. These lead compounds may be
at different stages of development, as indicated in the table above.

(2) In the "Preclinical" phase, the Company or its collaborative partners
optimize lead compounds and conduct laboratory pharmacology and
toxicology testing.

(3) "Phase I" clinical trials consist of small scale safety trials typically
in healthy human volunteers. The Company expects to conduct Phase I
clinical trials of TGF-SS3 for oral mucositis in 1996. No assurance can
be given that Phase I clinical trials will begin when planned, if at
all.

(4) "Phase II" clinical trials entail testing of compounds in humans for
safety and efficacy in a limited patient population. The Company expects
Ciba will commence Phase II efficacy studies with respect to the TGF-SS3
for wound healing indications in 1996. No assurance can be given that
Phase II clinical trials will begin when planned, if at all.

SMALL MOLECULE COLLABORATIVE PROGRAMS

As part of its business strategy, Oncogene Science pursues collaborations
with pharmaceutical companies to combine the Company's drug discovery
capabilities with the collaborators' development and financial resources.
Typically, the Company's collaborations provide for its partners to make
milestone or other payments in support of the Company's research programs and to
pay royalties on sales of any resulting products. The collaborative partners
retain manufacturing and marketing rights worldwide. In all cases, the
ONCOGENE
SCIENCE
HOECHST
MARION
ROUSSEL
<PAGE> 33

Company's collaborative partners give the Company access to their compound
libraries for screening against the target genes under their respective
collaborations. Certain pharmaceutical collaborators make their compound
libraries available to the Company for additional research outside the
collaborative programs. Generally, each collaborative research agreement
prohibits the Company from pursuing drug discovery research relating to the
target proteins identified under the collaboration with any third party. The
Company is currently in discussions with several pharmaceutical companies
regarding potential collaborations or other ventures related to the discovery or
optimization of lead compounds or the clinical development and commercialization
of potential product candidates. There can be no assurance, however, that
current collaborations will be successful, any new collaboration will be
established, or if established, will be on terms favorable to the Company.
Failure to either maintain its existing, or enter into any new, collaborations
could limit the scope of the Company's drug discovery and development
activities, particularly if alternative sources of funding are unavailable. Such
failure could have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company's existing collaborations are as follows:

Pfizer Inc.

In April 1986, Pfizer and the Company entered into a collaborative research
agreement and several other related agreements. During the first five years of
the collaboration, the Company and Pfizer focused principally on understanding
the molecular biology of oncogenes. In 1991, Pfizer and the Company renewed the
collaboration for a new five-year term and expanded the resources and scope of
the collaboration to focus on the discovery and development of cancer
therapeutic products that target oncogenes and anti-oncogenes. Oncogenes play a
key role in the conversion of normal cells to a cancerous state. Anti-oncogenes,
or tumor suppressor genes, encode proteins that generally function to block the
proliferative growth of particular cell types. A loss of function of certain
tumor suppressor genes can result in uncontrolled cell growth.

Currently, the Company's collaboration with Pfizer focuses on discovering
compounds that act upon eight target proteins involved in cancer. The Company's
screening program has resulted in the identification of a proprietary lead
compound that inhibits a protein associated with a number of major cancers.
Pfizer is currently conducting pre-IND safety and toxicity studies on this
compound. If such studies are successful, the Company expects that Pfizer may
file an IND as early as the second half of 1996. The success of such studies and
the continued development of this compound depends on several factors outside
the control of the Company, including the amount and timing of resources devoted
by Pfizer and the successful optimization of the compound. There can be no
assurance that this schedule will be met or that an IND for this lead compound
will be filed.

All patent rights and patentable inventions derived from the research under
this collaboration are owned jointly by the Company and Pfizer. The Company is
obligated to file, prosecute and maintain such patents. The Company has granted
Pfizer an exclusive, worldwide license to make, use, and sell the therapeutic
products resulting from this collaboration in exchange for royalty payments.
This license terminates on the date of the last to expire of the Company's
relevant patent rights.

Pfizer will be responsible for the clinical development, regulatory
approval, manufacturing and marketing of any products derived from the
collaborative research program. However, the collaborative research agreement
does not obligate Pfizer to pursue these activities. Generally, the Company is
prohibited during the term of the contract from pursuing or sponsoring research
aimed at discovery of drugs for the treatment of cancer. If the Company becomes
aware of an opportunity to pursue such research, it must notify Pfizer of this
opportunity and negotiate in good faith for a period of 120 days. If the parties
fail to reach agreement to include this opportunity in their collaboration, the
Company may pursue the opportunity independently. Pfizer is subject to a similar
restriction to the extent it desires to pursue any opportunity with a third
party, but Pfizer is not prohibited from pursuing any cancer research on its
own. The collaborative research agreement may be terminated early by either
party upon the occurrence of certain defaults by the other party. Any
termination of the collaboration resulting from a Pfizer default will cause a
termination of Pfizer's license rights. Pfizer will retain its license rights if
it terminates the agreement in response to a default by the Company.

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<PAGE> 34

From 1986 to 1991, Pfizer paid an aggregate amount of $13.7 million to the
Company in research funding. In addition, during the current five-year term of
the collaboration the Company received or accrued an aggregate of $18.1 million
through December 31, 1995 in research payments from Pfizer. In 1986, Pfizer
purchased 587,500 shares of the Company's common stock, which constitutes
approximately 3.4% of the Company's outstanding common stock, for an aggregate
purchase price of $3,525,000. The current collaborative research agreement
expires on March 31, 1996. The Company expects this agreement to be renewed
under substantially the same terms, effective April 1, 1996. There can be no
assurance, however, that the collaborative research agreement with Pfizer will
be renewed on similar terms, or at all. The failure to renew this collaboration
would have a material adverse effect on the Company's business, financial
condition and results of operations.

Hoechst Marion Roussel, Inc.

The Company is pursuing various areas jointly with HMRI. In July 1995, the
pharmaceutical operations of MMDI, Hoechst and Hoechst Roussel combined into one
entity, HMRI. Prior to this date, the Company had collaborative agreements with
all three of these companies. The Company and HMRI have agreed in principle to
consolidate these agreements into one collaborative program and are negotiating
the terms of this ongoing collaboration. The Company believes that this
consolidation will result in a stronger, more flexible collaborative program,
although it expects the total level of funding from HMRI will be less than the
aggregate funding from the three previously separate entities. In anticipation
of the HMRI transaction, during fiscal 1995 the Company reallocated resources
and reduced expenses under these collaborative programs. HMRI is responsible for
funding the costs of the Company's development of the assay cell lines and
compound screening, and as of December 31, 1995, the Company had received or
accrued an aggregate of $9.3 million in research funding from HMRI and its
predecessors, of which $6.2 million of this amount was provided by MMDI. There
can be no assurance, however, that the Company and HMRI will successfully
negotiate a new agreement on terms favorable to the Company or at all. Failure
to secure such agreement could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company's current collaborations with HMRI are as follows:

Atherosclerosis. In December 1992, the Company entered into a five-year
collaborative research agreement with MMDI to discover and develop gene
transcription-based drugs to treat certain indications in cardiovascular
disease, focused principally on atherosclerosis. The Company completed screening
MMDI's compound library in its assays incorporating artherosclerosis targets,
which resulted in the identification of several lead compounds. HMRI later
requested that the Company screen the compound libraries formerly of Hoechst and
Hoechst Roussel against the same atherosclerosis targets to determine whether
additional lead compounds could be identified. The Company has completed this
additional screening and identified several more lead compounds.

Inflammation, Arthritis and Metabolic Diseases. The Company entered into a
six-year collaborative research agreement with Hoechst, effective January 1993.
This collaboration is focused on discovering drugs for the treatment of
inflammation, arthritis and metabolic diseases. The Company has completed the
screening of HMRI's compound libraries against all three targets in this
collaboration. The lead compounds identified in these screens are undergoing
further analysis, including evaluation in animal models by HMRI.

Alzheimer's. In October 1993, the Company entered into a six-year
collaborative research agreement with Hoechst Roussel pursuant to which it is
pursuing the discovery and development of gene transcription-based drugs to
treat Alzheimer's disease. The Company has completed screening HMRI's compound
libraries in cell-based assays and has identified a potential lead compound that
is undergoing further analysis.

General. Under each of the Company's collaborative agreements with HMRI,
research committees were formed with equal representation from Oncogene Science
and HMRI. These committees, which meet at least three times a year, evaluate the
progress of the respective research programs, make priority and program
decisions, and prepare annual research plans identifying the drug targets to be
pursued and setting forth related research and budgeting information. The
Company is responsible for achieving its objectives in the annual research
plans. HMRI is responsible for assisting the Company in the pursuit of such
objectives,

34
<PAGE> 35

including advancing the pharmacological assessment of compounds identified by
the Company, determining the chemical structure of the selected compounds,
identifying and selecting development candidates, pursuing clinical development
and regulatory approval, and developing manufacturing methods and pharmaceutical
formulations for the selected candidates. HMRI, in its sole discretion, may
elect not to undertake one or more of these steps.

Generally, the Company is prohibited during the terms of the respective
contracts from pursuing or sponsoring research independent of HMRI on the
identified target proteins in the three areas of collaboration with HMRI. HMRI
is prohibited from sponsoring research with third parties employing the
Company's gene transcription technology on the identified target proteins. The
collaborative research agreements may be terminated early by either party upon
the occurrence of certain defaults by the other party. Any termination by the
Company resulting from an HMRI default will cause a termination of certain of
HMRI's license rights. HMRI will retain its license rights if it terminates an
agreement in response to a default by the Company.

The Company granted to MMDI an exclusive, worldwide license with respect
to, among other things, the use, manufacture and sale of products resulting from
their research collaboration. HMRI has the right to obtain an exclusive,
worldwide license from the Company with respect to any therapeutic product
derived from the original Hoechst and Hoechst Roussel research programs. In
exchange for these licenses, HMRI will pay royalties to the Company on sales of
such products. The license will become non-exclusive, and HMRI's obligation to
pay royalties on sales will terminate in each country, in the case of a patented
product, when the patent expires in such country, and in the case of a
non-patented product, ten years after the first commercial sale of such product
in such country. The Company and HMRI have mutually exclusive rights and
obligations to prosecute and maintain patent rights related to various specified
areas of the research under the original MMDI collaboration.

Wyeth-Ayerst Laboratories

In December 1991, the Company entered into a two-year collaborative
research agreement with Wyeth, which was extended for an additional three-year
term in December 1993. The purpose of the agreement is to discover and develop
transcription-based drugs for the treatment of diabetes, immune system
modulation, asthma and osteoporosis. This collaboration has been successful in
identifying active compounds on all four protein targets. Wyeth is continuing
preclinical evaluation of these compounds, and lead compounds identified for a
diabetes target have been shown to be active in animal studies, although there
can be no assurance that a safe and effective compound will be identified for
clinical evaluation.

Under the agreement, a research committee, composed of representatives from
the Company and Wyeth, prepares an annual research plan describing the goals of
the collaboration for the current year. The Company is responsible for achieving
the objectives set forth in the annual research plan. Wyeth is required to make
reasonably diligent efforts to advance the pharmacological assessment of
compounds identified by the Company, determine the chemical structure of the
compounds and make related compounds to determine the relationship between
structure and activity. Wyeth is also responsible for selecting development
candidates, assessing the safety of the development candidates in animals and
human patients under conditions designed to meet FDA requirements, and
developing manufacturing methods and pharmaceutical formulations for those
selected candidates.

The Company has granted to Wyeth an option to obtain exclusive, worldwide
licenses with respect to products resulting from this collaboration in exchange
for royalties to the Company on sales of such products. Under the agreement, all
technology and patent rights will remain owned by the respective parties and
each party has the right to prosecute and maintain its own patents.

During the term of this agreement, Oncogene Science is prohibited from
conducting or sponsoring research related to any target of its collaboration
with Wyeth outside of this collaboration. Wyeth is not prohibited from
conducting or sponsoring such research. The collaborative research agreement may
be terminated early by either party upon the occurrence of certain defaults by
the other party. Any termination by the Company resulting from a Wyeth default
will cause a termination of Wyeth's license rights. Wyeth will retain its
license rights if it terminates the agreement in response to a default by the
Company. Currently on

35
<PAGE> 36

four months notice, Wyeth may terminate the agreement without cause and retain
its license rights. Wyeth has funded the Company's drug discovery efforts under
this collaboration. As of December 31, 1995, Wyeth had provided the Company with
an aggregate of $4.9 million in research funding. The agreement will expire on
December 31, 1996. The parties have not yet determined whether to renew this
agreement, and there can be no assurance that this agreement will be renewed on
terms favorable to the Company, if at all.

RECOMBINANT TGF-SS3 COLLABORATION

In addition to its small molecule discovery programs, the Company has
developed the recombinant protein TGF-SS3 for various indications. The Company
believes it was the first to isolate TGF-SS3, a naturally occurring human growth
factor that exerts either stimulatory or inhibitory effects depending upon the
particular cell type to which it is applied. Topical or local application of
TGF-SS3 in animal studies has been shown to enhance and accelerate wound
healing. Similarly, animal studies have shown that TGF-SS3 can minimize the
severity of ulcerative mucositis when administered prior to chemotherapy.

The Company entered into an agreement with Ciba in April 1995 expanding the
scope of the two companies' prior collaborative efforts with respect to TGF-SS3.
This agreement grants to Ciba an exclusive, worldwide license to use and sell
TGF-SS3 products for oral mucositis and wound healing, as well as certain other
indications, including psoriasis, and an option to obtain rights to all
indications of TGF-SS3 currently held by the Company. In addition, Ciba has the
worldwide license to manufacture TGF-SS3 for all indications.

Oral Mucositis. Oral mucositis is a painful, often debilitating condition
characterized by mouth lesions that frequently occur as a side effect of
chemotherapy. In the U.S., over one million new cases of cancer occur each year,
over half of which receive multiple treatments of chemotherapy. Approximately
20% to 40% of chemotherapy patients exhibit some degree of oral mucositis. Most
chemotherapeutic agents exert their lethal effects primarily against cancerous
cells undergoing active growth. Chemotherapeutic agents also attack normal cells
that are subject to rapid division, such as the epithelial cells lining the
mouth. The Company and Ciba have developed topical formulations of TGF-SS3 to
temporarily inhibit the high proliferative growth rate of certain normal cells
in the mouth. The Company's objective is to develop TGF-SS3 to reduce the
toxicity associated with chemotherapeutic agents.

Under its agreement with Ciba, the Company will fund Phase I clinical
trials of TGF-SS3 for oral mucositis in the U.S. and Ciba will fund Phase I
clinical trials in Europe, and if successful, Ciba will fund all Phase II and
III clinical trials. An IND for this indication was filed by Ciba in January
1996. The Company expects to commence Phase I clinical trials in the U.S. in
1996. A second Phase I study is also expected to be conducted by Ciba in Europe
in 1996 to demonstrate safety and determine the maximum tolerated dose. If these
studies are successful, the Company expects that Ciba will initiate two Phase II
studies in 1997. No assurance can be given that any of these clinical trials
will demonstrate safety and efficacy or will begin when planned, or at all, in
part for the reasons discussed below.

Wound Healing. In addition to its program for the development of TGF-SS3 to
treat oral mucositis, the Company is collaborating with Ciba in the development
of TGF-SS3 in an application to promote soft tissue wound healing, including
venous leg ulcers, decubitus ulcers (pressure sores) and diabetic foot ulcers.
Such chronic cutaneous ulcers afflict an estimated three million people in the
U.S. TGF-SS3 is believed to promote wound healing by recruiting inflammatory
cells, such as neutrophils and macrophages, and fibroblasts, and stimulating
fibroblast proliferation and extracellular matrix production. TGF-SS3 is also
believed to stimulate angiogenesis (new blood vessel growth) at the wound site.

To date, Ciba has completed two Phase I safety studies, one in Europe using
a single dose of TGF-SS3 applied to intact skin, the other in the U.S. using a
multiple dose of TGF-SS3 applied to intact skin. In both studies, the drug was
found to be well tolerated with no adverse effects. Ciba recently completed
Phase II-A safety/dose-finding studies in Europe, involving a single dose
administration to venous leg ulcer patients. The drug was found to be well
tolerated in these patients. There is an ongoing Phase II-A safety/dose-ranging
study in Europe involving a single dose administration to decubitus ulcer
patients. Ciba intends to initiate a clinical trial of venous leg ulcer patients
in Europe, and another clinical trial in pressure sore patients in the U.S. and
Canada, which are scheduled to commence in late 1996. In addition, Ciba intends
to conduct additional Phase II venous leg ulcer, decubitus ulcer and burn wound
clinical trials in Japan in late 1996.

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<PAGE> 37

There can be no assurance that additional trials will demonstrate safety and
efficacy or will begin when planned, or at all in part for the reasons discussed
below.

General. In exchange for its exclusive license with respect to the wound
healing, oral mucositis and certain other indications for TGF-SS3, Ciba will
make royalty payments to the Company on the sale of TGF-SS3 products. Also, Ciba
purchased 909,091 shares of the Company's Common Stock at $5.50 per share for an
aggregate purchase price of $5 million in April 1995. If, and at the time, Ciba
decides to initiate Phase III clinical trials (or the equivalent in Europe) for
oral mucositis, Ciba will be required to make a $10 million payment to the
Company. In exchange for such payment, Ciba's license will be expanded to cover
all other indications for TGF-SS3. Ciba has the option to make such payment by
purchasing $10 million of the Company's Common Stock at the higher of $5.50 per
share or the then current market price. In the absence of a decision by Ciba to
pursue such clinical trials, Ciba may nonetheless exercise an option within four
years from inception of the agreement, or by April 1999, to expand its license
under the agreement to cover all indications for TGF-SS3 by making the $10
million payment.

Ciba has the right to discontinue clinical development at any time, in
which case all of its license rights from the Company with respect to TGF-SS3
will be terminated and it will make available to the Company the results of all
clinical work up to the date such activity was discontinued. Under the
agreement, Ciba has the right to manufacture TGF-SS3, and will supply the
Company and any licensee of the Company with all developmental and commercial
quantities of TGF-SS3 required. With respect to the Company's commercial
requirements in the future, if any, Ciba and the Company have agreed to
negotiate terms pursuant to which Ciba will supply TGF-SS3, subject to a
specified pricing formula should the parties fail to reach agreement. Ciba
recently experienced delays in manufacturing TGF-SS3 due to the failure of its
contract manufacturer's facilities to comply with GMP regulations. If Ciba is
unable or unwilling to scale up its capacity to supply TGF-SS3 to the Company or
its licensees in sufficient quantities, Ciba will license to the Company its
technology relating to the production of TGF-SS3 on terms to be negotiated
within specified parameters. There can be no assurance that the TGF-SS3 program
will not experience significant delays as a result of Ciba's failure to supply
TGF-SS3 on a timely basis.

The Company's agreement with Ciba ends upon the expiration of the last
Company's patents relating to TGF-SS3.

Ciba recently has announced that it plans to merge with Sandoz, Ltd. There
can be no assurance that this merger will not result in the diminution or
termination of, or delays in, one or more of the Company's collaborative
programs with Ciba.

PROPRIETARY DRUG DISCOVERY AND DEVELOPMENT

In addition to its collaborative programs, the Company has undertaken
independent efforts to discover and develop gene transcription-based
therapeutics in various areas. The Company initiated its proprietary programs in
1994 and is currently screening compounds against multiple target proteins in
live-cell assays associated with chronic anemias, virology and muscle wasting
disorders. The goal of these programs is to identify small molecule,
orally-active compounds that will regulate the expression of key proteins
associated with these diseases. Generally, the Company's objective with respect
to its proprietary programs is to identify lead compounds, transition them
through preclinical development and manage clinical development through
early-stage clinical trials. If its drug discovery efforts are successful, the
Company intends to partner with a large pharmaceutical firm for clinical and
commercial development of each potential proprietary product. There can be no
assurance that lead compounds identified in the Company's proprietary programs
will progress into clinical development, that any such compounds will proceed
successfully through clinical trials or that the Company will secure any
collaboration agreements with respect to any program or compound.

Chronic Anemias

Erythropoietin. Currently, the Company's proprietary discovery and
development efforts are focused principally on the protein erythropoietin
("EPO"). Injectable recombinant EPO is widely used for the treatment of anemia
due to chronic renal failure and anemia associated with chemotherapy for AIDS
and cancer. Sales of EPO therapeutics generated worldwide revenues of over $2.0
billion in 1995. EPO is also being tested for use in anemia resulting from other
indications. The Company believes the requirement that it

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<PAGE> 38

be administered by injection may place limitations on its more widespread use.
The Company believes that a significant market opportunity exists for an
effective, oral, small molecular weight compound that could induce the cellular
production of EPO. The Company's gene transcription screens have resulted in the
identification of several potent lead compounds that increase the expression of
EPO in cell lines which naturally secrete EPO. The Company is undertaking early
preclinical development, which involves medicinal chemistry and pharmacology, of
these lead compounds.

Fetal Hemoglobin. Sickle cell anemia and SS-thalassemia are caused by
genetic mutations which result in the mutation, absence or decrease in the SS
chain of hemoglobin (the protein in red blood cells that binds oxygen).
Currently available treatments for both of these diseases are inadequate and
expensive. In sickle cell anemia, "sickled" cells become trapped in the spleen
and break down to produce symptoms of anemia. The cost of treating each sickle
cell patient in the U.S. has been estimated to be in excess of $60,000 annually.
Regular blood transfusions are the mainstay of current therapy for
SS-thalassemia. The Company's approach to address sickle cell anemia and
SS-thalassemia is to discover a small molecule compound that increases
expression of a fetal hemoglobin ("HbF") gene to compensate for the defects in
the adult SS chain of hemoglobin. The Company has developed an assay to
determine the ability of test compounds to induce the production of HbF. The
Company's goal is to establish, through additional screening and evaluation, a
lead compound that induces expression of HbF as a candidate for clinical
development in this area.

Virology

The Company's virology program targets certain proteins which are believed
to be essential to viral pathogenesis. The current viral targets in this program
include human immunodeficiency virus, herpes simplex virus, human hepatitis B
virus ("HBV"), human hepatitis C virus ("HCV"), and influenza virus. For each of
these diseases there is an unmet need for new effective, anti-viral drugs. For
example, since the start of the AIDS epidemic, over 500,000 cases have been
reported in the U.S. Furthermore, HBV is a chronic infection that can progress
to cirrhosis and liver cancer, making HBV one of the most significant of all
infectious diseases. HCV is also a major viral pathogen. In the U.S., over 3.5
million people are infected with HCV, and the virus may account for 40% of all
chronic liver disease. Currently, the principal therapy for HCV is alpha
interferon administered by injection, but this therapy has limited efficacy.

The Company's principal drug discovery approach in its virology program
focuses on discovering small molecule compounds that affect transcription of
novel gene sequences in the virus. The Company has designed four novel assays
that target these genes. The Company is in discussions with BioChem regarding a
potential virology joint venture, although there can be no assurance that a
joint venture will be established.

Muscle Wasting Disorders

Cachexia. Cachexia is the accelerated breakdown of skeletal muscle coupled
with a high degree of morbidity and organ dysfunction. Cachexia is characterized
by progressive weight loss and a depletion of muscle. This "wasting syndrome" is
associated with a wide variety of chronic disease states and is particularly
common in both advanced metastic cancer and AIDS. While the exact mechanisms
responsible for the development of cachexia are not completely elucidated, the
Company believes both stimulators, or agonists, of growth hormone and
inhibitors, or antagonists, of tumor necrosis factor alpha could prove to be
effective agents in the treatment of this condition.

Human growth hormone (hGH) is a potent anabolic agent known to stimulate
protein accretion and to increase muscle mass. The usefulness of this hormone as
a therapy for wasting disorders associated with cancer, AIDS and old age is
being actively investigated by several companies. Furthermore hGH has completed
Phase III clinical trials and is pending FDA review. Recombinant hGH protein
requires injection for administration, and the current costs of this drug range
from $10,000 to $30,000 per patient annually. Recombinant hGH generated revenues
of over $1 billion in the treatment of growth disorders in 1994. The Company
believes there is a major market opportunity for an orally active,
cost-effective drug which acts to induce hGH gene expression and increase levels
of hGH in the body.

Muscular Dystrophy. Duchenne's and Becker's muscular dystrophy are due to
defects of the dystrophin gene. The Company is developing multiple approaches in
its discovery efforts with respect to a drug for the

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<PAGE> 39

treatment of muscular dystrophy. A portion of the funding for this project has
been provided by the Association Francaise Contre Les Myopathies.

CANCER DIAGNOSTICS

The Company is engaged in the development of a series of cancer diagnostic
tests based on oncogenes, tumor suppressor genes and other gene targets whose
proteins are directly involved in tumor growth or metastasis. One line of these
tests utilizes immunoassays and monoclonal antibodies to detect these cancer
markers in urine and serum. The other line of diagnostic tests utilizes a series
of monoclonal antibodies capable of measuring the cancer markers in tissue
sections using immunohistochemistry techniques such as manual pathology
diagnostic tests and image analysis. Both of these lines of tests are designed
to aid oncologists in the confirmation, monitoring, staging, screening or
prognosis of human cancer. These tests may enable reference labs and physicians
to select more effective types of treatment, more easily monitor patients during
therapy, or diagnose cancer at an earlier stage. The current focus of the
Company's diagnostic development program is on breast and colon cancer, but the
Company believes that many of the cancer markers in its program may have
clinical utility for other human tumors, such as lung, prostate, ovarian and
stomach cancer. None of these diagnostic tests have completed clinical
development or received FDA clearance to be marketed in the U.S.

The Company has been pursuing serum and tissue based cancer diagnostic
products in collaboration with Becton under a collaborative program started in
October 1991 (after an earlier collaboration from 1984 to 1989). During 1995,
the Company and Becton agreed that Becton would narrow its focus in the program
exclusively to tissue-based diagnostic tests including immunohistochemistry and
that the Company would continue its development program in serum-based cancer
diagnostics. Becton has reduced funding under this program in fiscal 1996 and
the Company is uncertain as to Becton's ongoing support of this program
thereafter. The Company believes Becton will seek FDA approval for one or more
immunohistochemistry tests for the manual pathology market in the next 12 to 18
months, although there is no assurance that such an approval will be received on
a timely basis, if at all. The Company is actively seeking to form
collaborations with one or more partners for the clinical and commercial
development of its serum-based diagnostic products. No assurance can be given
that the Company will establish such a collaboration on acceptable terms or at
all.

INTELLECTUAL PROPERTY

The Company believes that patents and other proprietary rights are vital to
its business. The Company's policy is to protect its intellectual property
rights in technology developed by its scientific staff by a variety of means,
including applying for patents in the United States and other major
industrialized countries. The Company also relies upon trade secrets and
improvements, unpatented proprietary know-how and continuing technological
innovations to develop and maintain its competitive position. In this regard,
the Company seeks restrictions in its agreements with third parties, including
research institutions, with respect to the use and disclosure of the Company's
proprietary technology. The Company also has confidentiality agreements with its
employees, consultants and scientific advisors.

The Company currently owns 12 U.S. patents and 35 foreign patents. In
addition, the Company currently has pending 30 applications for United States
patents, 3 of which have been allowed, and 33 applications for foreign patents,
2 of which have been allowed. In addition, other institutions have granted
exclusive rights under their United States and foreign patents and patent
applications to the Company.

There can be no assurance that patents will issue based upon the Company's
pending patent applications or any applications which it may file in the future,
that any patent issued will adequately protect a commercially marketable product
or process or that any patent issued will not be circumvented or infringed by
others or declared invalid or unenforceable. Moreover, there can be no assurance
that others may not independently develop the same or similar technology or
obtain access to the Company's proprietary technology. The Company is aware of
patents issued to other entities with respect to technology potentially useful
to the Company and, in some cases, related to products and processes being used
or developed by the Company. The Company currently cannot assess the effect, if
any, that these patents may have on its

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<PAGE> 40

operations in the future. The extent to which efforts by other researchers
resulted or will result in patents and the extent to which the issuance of
patents to other entities would have a material adverse effect on the Company or
would force the Company to seek licenses from such other entities currently is
unknown as is the availability to the Company of licenses from such other
entities, and whether, if available, such licenses can be obtained on terms
acceptable to the Company.

In the cancer diagnostics area, the Company has a U.S. patent relating to
an assay which the Company is seeking to develop for the detection of protein
encoded by the neu oncogene ("neu") in serum. The Company is aware that a patent
application relating to a similar assay was filed by a third party shortly after
the Company filed the application from which its U.S. patent issued. It is
possible that the Company may have to participate in an interference proceeding
with such third party to determine priority of invention, which could result in
substantial cost to the Company. The Company cannot predict whether such an
interference proceeding will occur, or if it does occur, whether the Company
will prevail. If the Company does not prevail, it may not be able to
commercialize its assay for neu in serum without a license from such third
party, which may not be available on acceptable terms or at all.

The Company is aware of several U.S. and foreign patents owned by others
who may allege infringement by products, including TGF-SS3, which the Company is
seeking to develop in collaboration with a partner. Genentech has U.S. patents
relating to certain recombinant materials and procedures for producing members
of the TGF-SS family, including TGF-SS3. In addition, the Company believes that
Genentech has license rights under a United States Government patent relating to
work done at the National Institute of Health of the U.S. Department of Health
and Human Services involving the identification and isolation of TGF-SS1.

The Company believes that the currently planned development by the Company
and Ciba, its collaborative partner for TGF-SS3, involving manufacture in Europe
by Ciba of TGF-SS3 in nonmammalian cells for subsequent distribution in Europe
and the United States does not infringe any valid claim of any patent owned by
Genentech or by the U.S. Government. The Company and Ciba have taken and
continue to take such actions, including the pursuit of opposition proceedings
against foreign patents, as they deem prudent to minimize the possibility of any
charge of patent infringement being validly raised against Ciba or the Company
based on such patents.

The Company does not believe that it is infringing any valid claim of any
patents owned by third parties. However, there can be no assurance that a
contrary position will not be asserted, or that, if asserted, such a position
would not prevail. If a patent infringement lawsuit were brought against the
Company or its licensees, the Company could incur substantial costs in defense
of such a suit, which could have a material adverse effect on the Company's
business, financial condition and results of operation, regardless of whether
the Company were successful in the defense. Furthermore, the Company's royalties
may be reduced by up to 50% if its licensees or collaborative partners are
required to obtain licenses from third parties whose patent rights are infringed
by the Company's products, technology or operations.

COMPETITION

The pharmaceutical, biotechnology and diagnostics industries are intensely
competitive. The Company faces, and will continue to face, intense competition
from organizations such as large pharmaceutical companies, diagnostic companies,
biotechnology companies, academic and research institutions and government
agencies. The Company is subject to significant competition from industry
participants who are pursuing the same or similar technologies as those which
constitute the Company's technology platform and from organizations that are
pursuing pharmaceutical products or therapies or diagnostic products that are
competitive with the Company's potential products. Most of the organizations
competing with the Company have greater capital resources, research and
development staffs and facilities, and greater experience in drug discovery and
development, obtaining regulatory approval and pharmaceutical product
manufacturing and marketing. The Company's major competitors include fully
integrated pharmaceutical companies, such as Merck & Co., Inc., Glaxo Wellcome
Inc. and SmithKline Beecham plc, that conduct extensive drug discovery efforts
and are developing novel small molecule pharmaceuticals, as well as numerous
smaller companies.

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<PAGE> 41

and others are active in all of these areas. Ligand Pharmaceuticals Inc., a
publicly owned company, employs live-cell assays, gene transcription, and high
throughput robotics in its drug discovery operations. Numerous other companies
use one or more of these technologies. Several private companies, including
Tularik Inc., Signal Pharmaceuticals Inc. and Scriptgen Pharmaceuticals, Inc.,
pursue drug discovery using gene transcription methods. Other organizations may
acquire or develop technology superior to that of the Company.

With respect to the Company's small molecule drug discovery programs, other
companies have potential drugs in clinical trials to treat all the disease areas
for which the Company is seeking to discover and develop drug candidates. These
competing drug candidates are further advanced in clinical development than are
any of the Company's potential products in its small molecule programs and may
result in effective, commercially successful products. Even if the Company and
its collaborative partners are successful in developing effective drugs, there
can be no assurance that the Company's products will compete effectively with
such products. No assurance can be given that the Company's competitors will not
succeed in developing and marketing products that either are more effective than
those that may be developed by the Company and its collaborative partners or are
marketed prior to any products developed by the Company or its collaborative
partners.

With respect to its efforts to develop TGF-SS3 for various indications, the
Company is aware of competing growth factor proteins in clinical trials, and
competing treatment regimens, for wound healing indications. Platelet derived
growth factor (PDGF) for diabetic skin ulcers, under development by Chiron
Corporation and Johnson & Johnson, has completed Phase III clinical trials in
the U.S. Chiron Corporation and Johnson & Johnson have announced that they
intend to file a Product Licensing Application ("PLA") for PDGF with the FDA in
1996. Fibroblast growth factor (FGF) for chronic dermal ulcers, under
development by Scios Nova Inc. and Kaken Pharmaceutical Co., Ltd., is in Phase
III clinical trials in Japan. TGF-SS2 for leg ulcers, under development by
Genzyme Corp. and Celtrix Pharmaceuticals, Inc., is in Phase II clinical trials
in the U.S. No assurance can be given that the Company and Ciba will
successfully develop TGF-SS3 for any indication, including wound healing.
Furthermore, if any of the competing growth factor product candidates listed
above or other growth factors proves to be effective for wound healing
indications, there can be no assurance that any product developed by the Company
will be able to compete effectively with such product or products.

The Company believes that its ability to compete successfully will be based
on, among other things, its ability to create and maintain scientifically
advanced technology, attract and retain scientific personnel with a broad range
of expertise, obtain patent protection or otherwise develop proprietary products
or processes, enter

41
<PAGE> 42

into collaborative arrangements, and, independently or with its collaborative
partners, conduct clinical trials, obtain required government approvals on a
timely basis, and commercialize its products.

MANUFACTURING

Ciba has the exclusive right to, and the Company will rely on Ciba for, the
manufacture of TGF-SS3 for all of the Company's requirements for clinical trials
and commercial purposes. Oncogene Science believes that, if Ciba should fail to
meet its requirements, there are other companies that could manufacture and
supply TGF-SS3, although there can be no assurance that this could be
accomplished on a timely basis, or at all.

The Company is, and will remain, dependent on its collaborative partners
and third parties for the manufacture of all products. There can be no assurance
that the Company will be able to manufacture products that will meet the
Company's demands for quality, quantity, cost and timeliness or otherwise
contract for manufacturing capabilities on acceptable terms. The failure of the
Company to successfully contract for the manufacture of products that satisfy
its requirements for quality, quantity, cost and timeliness would prevent the
Company from conducting preclinical testing and clinical trials and
commercializing its products.

MARKETING AND SALES

The Company does not intend to develop its own marketing and sales
capabilities. Potential therapeutic products subject to the Company's
collaborative agreements with Pfizer, HMRI, Wyeth and Ciba, and potential
diagnostic products under the Company's collaboration with Becton, will be
marketed by those companies worldwide. The Company will receive royalties of up
to 10% on net sales of products, depending upon the nature of the product and
the ownership of the underlying technology. The Company expects that any
products resulting from future collaborations in drug discovery and development
and diagnostic product development will be marketed under arrangements which are
similar to these agreements, although any collaborations established for
products resulting from proprietary programs may vary significantly.

GOVERNMENT REGULATION

The Company and its collaborative partners are, and any potential products
discovered and developed thereto, will be subject to comprehensive regulation by
the FDA in the United States and by comparable authorities in other countries.
These national agencies and other federal, state, and local entities regulate,
among other things, the preclinical and clinical testing, safety, effectiveness,
approval, manufacture, labeling, marketing, export, storage, record keeping,
advertising, and promotion of pharmaceutical and diagnostic products.

The process required by the FDA before pharmaceutical products may be
approved for marketing in the United States generally involves: (i) preclinical
laboratory and animal tests, (ii) submission to FDA of an investigational new
drug application, which must become effective before clinical trials may begin,
(iii) adequate and well controlled human clinical trials to establish the safety
and efficacy of the drug for its intended indication, (iv) submission to the FDA
of an NDA or, in the case of biological products, such as TGF-SS3, a PLA, and
(v) FDA review of the NDA or PLA in order to determine, among other things,
whether the drug is safe and effective for its intended uses. There is no
assurance that FDA review process will result in product approval on a timely
basis, if at all.

Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies, to assess the potential safety and
efficacy of the product. Certain preclinical tests are subject to FDA
regulations regarding current Good Laboratory Practices. The results of the
preclinical tests are submitted to the FDA as part of an IND and are reviewed by
the FDA prior to the commencement of clinical trials.

Clinical trials are conducted under protocols that detail such matters as
the objectives of the study, the parameters to be used to monitor safety and the
efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as
part of the IND.

Clinical trials are typically conducted in three sequential phases, which
may overlap. During Phase I, when the drug is initially given to human subjects,
the product is tested for safety, dosage tolerance,

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<PAGE> 43

absorption, metabolism, distribution and excretion. Phase II involves studies in
a limited patient population to: (i) evaluate preliminarily the efficacy of the
product for specific, targeted indications, (ii) determine dosage tolerance and
optimal dosage, and (iii) identify possible adverse effects and safety risks.
Phase III trials are undertaken in order to further evaluate clinical efficacy
and to further test for safety within an expanded patient population. The FDA
may suspend or terminate clinical trials at any point in this process if it
concludes that clinical subjects are being exposed to an unacceptable health
risk.

FDA approval of the Company's and its collaborators' products, including a
review of the manufacturing processes and facilities used to produce such
products, will be required before such products may be marketed in the United
States. The process of obtaining approvals from the FDA can be costly, time
consuming and subject to unanticipated delays. There can be no assurance that
approvals of the Company's proposed products, processes or facilities will be
granted on a timely basis, if at all. Any failure to obtain or delay in
obtaining such approvals would have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, even if
regulatory approval is granted, such approval may include significant
limitations on indicated uses for which a product could be marketed.

Among the conditions for NDA approval is the requirement that the
prospective manufacturer's manufacturing procedures conform to GMP requirements,
which must be followed at all times. In complying with those requirements,
manufacturers (including a drug sponsor's third-party contract manufacturers)
must continue to expend time, money and effort in the area of production and
quality control to ensure compliance. Domestic manufacturing establishments are
subject to periodic inspections by the FDA in order to assess, among other
things, GMP compliance. To supply products for use in the United States, foreign
manufacturing establishments must comply with GMP and are subject to periodic
inspection by the FDA or by regulatory authorities in certain countries under
reciprocal agreements with the FDA.

Both before and after approval is obtained, a product, its manufacturer and
the holder of the NDA for the product are subject to comprehensive regulatory
oversight. Violations of regulatory requirements at any stage, including the
preclinical and clinical testing process, the approval process, or thereafter
(including after approval) may result in various adverse consequences, including
the FDA's delay in approving or refusal to approve a product, withdrawal of an
approved product from the market, and the imposition of criminal penalties
against the manufacturer and NDA holder. In addition, later discovery of
previously unknown problems may result in restrictions on such product,
manufacturer or NDA holder, including withdrawal of the product from the market.
Also, new government requirements may be established that could delay or prevent
regulatory approval of the Company's products under development.

For marketing outside the United States, the Company and its collaborators
and the drugs developed thereby, if any, will be subject to foreign regulatory
requirements governing human clinical trials and marketing approval for drugs
and diagnostic products. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary widely from country to
country. In addition, before a new drug may be exported from the U.S., it must
be the subject of an approved NDA or comply with FDA regulations pertaining to
INDs.

In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and future federal, state or local regulations.
The Company's research and development involves the controlled use of hazardous
materials, chemicals and various radioactive compounds. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company.

Diagnostic tests undergo different FDA review processes depending whether
they are classified as "biologicals" or "medical devices." For medical devices,
a 510(k) application (for a product substantially equivalent to a product
already on the market) or a premarket approval ("PMA") application (generally, a
new product or method that is not substantially equivalent to an existing
product) must be filed with, and

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approved by, the FDA prior to commercialization. Obtaining premarket approval is
a costly and time-consuming process, comparable to that for new drugs. There can
be no assurance that the Company's cancer diagnostic product candidates will be
submitted for regulatory approval, or if submitted, that the Company would not
be required to seek pre-market approval as opposed to filing a 510(k)
application.

EMPLOYEES

The Company believes that its success will be largely dependent upon its
ability to attract and retain qualified personnel in scientific and technical
fields. As of December 31, 1995, the Company employed 107 persons, of whom 84
were primarily involved in research and development activities, with the
remainder engaged in executive and administrative capacities. Although the
Company believes that it has been successful to date in attracting skilled and
experienced scientific personnel, competition for such personnel is intense and
there can be no assurance that the Company will continue to be able to attract
and retain personnel of high scientific caliber. The Company considers its
employee relations to be good.

FACILITIES

The Company leases a 30,000 square foot facility located at 106 Charles
Lindbergh Boulevard, Uniondale, New York. This facility houses the Company's
principal executive officers and drug discovery laboratory. The Company also
leases an 11,000 square foot facility located at 80 Rogers Street/129 Binney
Street, Cambridge, Massachusetts. This facility contains the offices and
laboratories of the Company's diagnostic product operations. The Company
believes that its facilities will be adequate to meet current requirements for
the foreseeable future.

LITIGATION

There are no material legal proceedings pending against the Company.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Information with respect to the executive officers and directors of the
Company as of December 31, 1995 is set forth below:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------------------------
<S> <C> <C>
Edwin A. Gee, Ph.D. (1)(2)......... 75 Chairman of the Board and Director
Gary E. Frashier................... 59 Vice Chairman and Chief Executive Officer and
Director
Steve M. Peltzman.................. 49 President and Chief Operating Officer and Director
J. Gordon Foulkes, Ph.D............ 42 Vice President and Chief Scientific Officer and
Director
Colin Goddard, Ph.D................ 36 Vice President, Research Operations
Robert L. Van Nostrand............. 38 Vice President, Finance and Administration
Ann H. Rose, Ph.D.................. 54 Vice President, TGF-Beta Program and Regulatory
Affairs
G. Morgan Browne (2)............... 60 Director
John H. French II (1).............. 64 Director
Walter M. Lovenberg, Ph.D. (2)..... 61 Director
Walter M. Miller (1)............... 52 Director
Gary Takata (1).................... 61 Director
John P. White (1)(2)............... 49 Director
</TABLE>

- ---------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

Edwin A. Gee, Ph.D., a director of the Company since 1985, served as
President, Chairman of the Board and Chief Executive Officer of International
Paper Company from 1978 until his retirement in April 1985. Prior to 1978, Dr.
Gee was a Senior Vice President, member of the Executive Committee and a
director of E.I. du Pont de Nemours and Company. Dr. Gee also serves as a member
of the Board of Directors of Biocryst Pharmaceuticals, Inc. and the Buckhill
Falls Company. Dr. Gee is also Director Emeritus of the Salomon Brothers Fund,
Inc., the Salomon Brothers Investors Fund, Inc. and the Salomon Brothers Capital
Fund, Inc. Dr. Gee served as an executive officer of the Company, holding the
position of Chairman of the Board of the Company, from April 1987 until March
1990. Since March 1990, Dr. Gee has retained the title of Chairman of the Board
of Directors, but no longer serves as an officer of the Company.

Gary E. Frashier was appointed Vice Chairman and Chief Executive Officer in
March 1994. Prior to that, he had been President and Chief Executive Officer of
the Company since March 1990. He was elected to the Board of Directors of the
Company on March 21, 1990. From April 1987 to February 1990, he served as
President, Chief Executive Officer and a director of Genex Corporation, a
biotechnology company which specialized in protein engineering. From 1984
through March 1987, he was Chairman, President and Chief Executive Officer of
Continental Water Systems Corporation, a corporation engaged in the manufacture
and marketing of equipment to produce ultrapure water, which was purchased from
Millipore Corporation ("Millipore") in a management buy-out organized by Mr.
Frashier. Mr. Frashier served as an Executive Vice President of Millipore and
President of Waters Associates, Inc., Millipore's liquid chromatography
subsidiary, from 1980 through 1983.

Steve M. Peltzman was appointed President and Chief Operating Officer of
the Company in March 1994. Prior to that, he had been the Company's Executive
Vice President and Chief Operating Officer since October 1991, upon consummation
of the acquisition by the Company of the cancer business of Applied
bioTechnology, Inc. From June 1984 until October 1991, he served as President
and Chief Executive Officer of Applied bioTechnology, Inc. From 1986 to 1990,
Mr. Peltzman also was President of a partnership between Applied bioTechnology
and E.I. du Pont de Nemours and Company, which focused on the development of
products relating to the prevention, diagnosis and treatment of human cancer. He
became a director of the Company in March 1992.

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<PAGE> 46

J. Gordon Foulkes, Ph.D. has been the Chief Scientific Officer of the
Company since October 1991, a Vice President of the Company since 1990 and he
was Director of Therapeutics of the Company from 1987 until 1991. Prior to Dr.
Foulkes' employment with the Company, he was head of a laboratory and a tenured
member of the scientific staff of the Medical Research Council in London, U.K.
from 1984 to 1987. Dr. Foulkes became a director of the Company in March 1994.

Colin Goddard, Ph.D., has been the Vice President, Research Operations of
the Company since April 1995. Prior to that time, Dr. Goddard served in various
capacities for the Company, including Vice President, Research Operations,
Pharmaceutical Division from December 1993, Director, Pharmaceutical Operations
from February 1993, Director, Drug Discovery from May 1992, and Program Manager,
Drug Discovery from April 1991. Dr. Goddard was a research scientist with the
National Cancer Institute in Bethesda, Maryland from 1986 until he joined the
Company as a staff scientist in 1989.

Robert L. Van Nostrand has been the Vice President, Finance and
Administration of the Company since May 1990. He was appointed the Treasurer of
the Company in March 1992 and Secretary in March 1995. Prior to 1990, Mr. Van
Nostrand served as the Controller and Chief Accounting Officer of the Company
from September 1986. Mr. Van Nostrand was employed by the accounting firm of
Touche Ross & Co. prior to his employment by the Company. Mr. Van Nostrand is a
certified public accountant.

Ann H. Rose, Ph.D., was appointed Vice President, TGF-Beta Program and
Regulatory Affairs in April 1994. Dr. Rose was an independent consultant
providing clinical and regulatory development consulting services to companies
in the biopharmaceutical area prior to her employment by the Company.

G. Morgan Browne has been Administrative Director of the Cold Spring Harbor
Laboratory since June 1985. Prior to 1985, Mr. Browne provided management
services to a series of scientifically based companies. He is presently a
director of Harris & Harris Group, Inc., and the New York Biotechnology
Association, as well as a Director and Treasurer of the Long Island Research
Institute. Mr. Browne became a director of the Company in March 1993.

John H. French II has been Vice Chairman of Southern Pacific Petroleum N.L.
(U.S.) for the past five years. Mr. French has been the Vice Chairman of the
Russian American Chamber of Commerce since December 1994, and prior to that time
he was the Chairman of this organization from July 1992. He was Chairman of the
Board from January 1990 to February 1992, and President from 1960 to February
1992, of Research and Science Investors, Inc., a New York venture capital
concern. He became a director of the Company in July 1988.

Walter M. Lovenberg, Ph.D. was an Executive Vice President and member of
the Board of Directors of Marion Merrell Dow Inc. from 1989 through August 1993.
Dr. Lovenberg served as the President of the Merrell Dow Research Institute from
1989 to 1993 and Vice President from 1986 through 1989. Dr. Lovenberg has
received the Fulbright-Hayes Senior Scholar Award, the Public Health Service
Superior Service Award and the Third International Award for Research on Adult
Diseases. Dr. Lovenberg currently serves as a member of the Board of Directors
of Xenometrix Inc., Cytoclonal Pharmaceutics, Inc. and BioStart, Inc. Dr.
Lovenberg has served as a consultant to the Company since October 1993. Dr.
Lovenberg became a director of the Company in March 1994.

Walter M. Miller has been Senior Vice President of Becton Dickinson and
Company since July 1995. Prior to that Mr. Miller was Sector President,
Infectious Disease Diagnostics of Becton from October 1994 to June 1995, and
Sector President, Diagnostics of Becton from July 1986 to September 1994. Mr.
Miller became a director of the Company in September 1990.

Gary Takata, a founder of the Company, is a private investor and venture
capitalist. From August 1989 until April 1992, he was President and a director
of Zeron Acquisition I Corp. (formerly named Pilgrim Acquisition Corp.), a
business development company. Since March 1992, he has been President and a
director of Jupiter Acquisitions, Inc. and Zeron Acquisition II, Inc., and since
November 1992, he has been President and a director of Athena Acquisitions,
Inc., Saturn Acquisitions, Inc., Mars Acquisitions, Inc., Juno Acquisitions,
Inc. and Neptune Acquisitions, Inc. All of these firms are business development
companies. Mr. Takata has been a director of the Company since May 1983.

46
<PAGE> 47

John P. White is a partner in Cooper & Dunham, a New York City law firm
specializing in patent, trademark and related intellectual property matters, and
has been associated with the firm since 1977. Mr. White is a member of numerous
professional organizations, both legal and scientific, and has written and
lectured extensively on the subject of legal protection for biotechnology. Mr.
White also serves on the Board of Directors of Bio-Technology General Corp. and
Biocardia Corporation. Mr. White has been a director of the Company since May
1985.

The Corporation has entered into an agreement with Becton pursuant to which
Becton is entitled to
representation on the Board of Directors of the Corporation. Mr. Miller was
nominated to, and serves on, the Board of Directors pursuant to the agreement
between the Corporation and Becton.

The Compensation Committee of the Board of Directors is authorized, subject
to the Certificate of Incorporation and Bylaws of the Corporation and the
Delaware General Corporation Law, to exercise all power and authority of the
Board of Directors with respect to the compensation of employees of the
Corporation. It also addresses a variety of organizational matters with respect
to the Corporation and its employees. The Compensation Committee also
administers the Corporation's stock option plans. The Audit Committee of the
Board of Directors is responsible for reviewing the adequacy of the structure of
the Corporation's financial organization and the implementation of its financial
and accounting polices. In addition, the Audit Committee reviews the results of
the audit performed by the Corporation's outside auditors before the Annual
Report to Stockholders is published.

47
<PAGE> 48

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of December 31, 1995
regarding the beneficial ownership of the Common Stock by (i) all persons known
to the Corporation who own more than 5% of the outstanding shares of the Common
Stock, (ii) all stockholders with whom the Corporation has entered into
strategic collaborations, (iii) each director and nominee for director, (iv)
each executive officer, and (v) all executive officers and directors as a group.
Unless otherwise indicated, the persons named in the table below have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
SHARES -----------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNERS OWNED(1) OFFERINGS OFFERINGS
- ----------------------------------------------------------- ------------ --------- ---------
<S> <C> <C> <C>
Hoechst Marion Roussel, Inc................................ 1,590,909(2) 8.83% 7.45%
10236 Marion Park Drive
Kansas City, MO 64137
Amerindo Investment Advisors Inc........................... 1,483,600 8.46% 7.12%
388 Market Street
San Francisco, CA 94111
Becton Dickinson and Company............................... 1,250,000 7.13% 5.99%
One Becton Drive
Franklin Lakes, NJ 07417
Ciba-Geigy, Ltd............................................ 909,091 5.19% 4.36%
CH-4002 Basel
Switzerland
Pfizer Inc................................................. 587,500 3.35% 2.82%
235 East 42nd Street
New York, New York 10017
G. Morgan Browne........................................... 55,897(3) * *
J. Gordon Foulkes, Ph.D.................................... 114,157(4) * *
Gary E. Frashier........................................... 193,937(5) 1.10% *
John H. French II.......................................... 38,880(6) * *
Edwin A. Gee, Ph.D......................................... 88,747(7) * *
Colin Goddard, Ph.D........................................ 28,777(8) * *
Walter M. Lovenberg, Ph.D.................................. 53,000(9) * *
Walter M. Miller........................................... 0(10) * *
Steve M. Peltzman.......................................... 118,300(11) * *
Ann H. Rose, Ph.D.......................................... 25,559(12) * *
Gary Takata................................................ 9,700(13) * *
Robert L. Van Nostrand..................................... 54,084(14) * *
John P. White.............................................. 20,000 * *
All directors and executive officers as a group (13
persons)................................................. 769,038(15) 4.22% 3.49%
</TABLE>

- ---------------
* Represents ownership of less than 1% of the outstanding shares of the
Company's Common Stock.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to stock options and warrants currently exercisable or exercisable within
60 days are deemed beneficially owned by the person holding such options
and warrants. The percent of the outstanding shares of the Company's Common
Stock for any person or group who as of December 31, 1995 beneficially
owned any shares pursuant to options which are exercisable within 60 days
of December 31, 1995 is calculated assuming all such options have been
exercised in full and adding the number of shares subject to such options
to the total number of shares issued and outstanding on December 31, 1995.

48
<PAGE> 49

(2) Includes 500,000 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding warrants.

(3) Includes 400 shares owned by Mr. Browne's wife as to which Mr. Browne
disclaims beneficial ownership. Includes 18,747 shares that may be acquired
at or within 60 days of December 31, 1995 pursuant to the exercise of
outstanding options. Also includes 21,750 shares owned by Cold Spring
Harbor Laboratory, of which Mr. Browne is an executive officer. Mr. Browne
disclaims beneficial ownership of the shares owned by Cold Spring Harbor
Laboratory.

(4) Includes 113,987 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(5) Includes 185,003 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(6) Includes 34,380 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(7) Consists entirely of shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of options.

(8) Includes 27,899 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(9) Includes 50,000 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(10) Excludes 1,250,000 shares owned by Becton Dickinson and Company, of which
Mr. Miller is an executive officer. Mr. Miller disclaims beneficial
ownership of such shares.

(11) Includes 103,256 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(12) Includes 25,500 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(13) Consists entirely of shares owned by Mr. Takata's wife, as to which Mr.
Takata disclaims beneficial ownership.

(14) Includes 53,499 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

(15) Includes 701,018 shares that may be acquired at or within 60 days of
December 31, 1995 pursuant to the exercise of outstanding options.

49
<PAGE> 50

DESCRIPTION OF CAPITAL STOCK

As of the date of this Prospectus, the authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, par value $0.01 per
share.

COMMON STOCK

As of December 31, 1995, there were 17,527,789 shares of Common Stock
outstanding and held of record by 751 stockholders. The holders of Common Stock
are entitled to one vote for each share of Common Stock on matters to be voted
on by the stockholders of the Company. Holders of the Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available therefore. The Company has paid no cash dividends
on any of its capital stock and does not anticipate paying cash dividends in the
foreseeable future.

In the event of a liquidation, dissolution of winding up of the Company,
holders of Common Stock are entitled to share ratably and all assets remaining
after payment of liabilities and the liquidation preference of any outstanding
Preferred Stock (the issuance of which is not currently authorized by the
Company's Certificate of Incorporation). The outstanding shares of Common Stock
are, and the Common Stock to be outstanding upon completion of this Offering
will be, fully paid and nonassessable. No pre-emptive rights, conversion rights,
redemption rights or sinking fund provisions are applicable to the Common Stock.

REGISTRATION RIGHTS

Several of the Company's collaborative partners are parties to agreements
with the Company that grant these partners, as holders of shares of the
Company's Common Stock, rights to have their shares of Common Stock registered
under the Securities Act of 1933. Becton and HMRI have the right to demand
registration of their shares subject to certain conditions and limitations. If
the Company proposes to register any of its Common Stock for sale, Ciba, HMRI,
and Pfizer have "piggyback" registration rights under which they have the right
to include their shares in such registered offering initiated by the Company.
The Company will pay all registration expenses (excluding underwriting discounts
and commissions and, with certain exceptions, legal fees and costs of selling
stockholders) arising from the inclusion of the selling stockholder shares in
such registration.

DELAWARE TAKEOVER STATUTE

In February 1988, a law regulating corporate takeovers (the "Takeover Law")
took effect in Delaware. In certain circumstances, the Takeover Law prevents
certain Delaware corporations, including those whose securities are listed on
the Nasdaq National Market, from engaging in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with any
"interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date on
which such stockholder became an "interested stockholder." A Delaware
corporation may "opt out" of the Takeover Law with an express provision either
in its original Certificate of Incorporation or in its Certificate of
Incorporation or Bylaws resulting from an amendment approved by at least a
majority of the outstanding voting shares. The Company is a Delaware corporation
that is subject to the Takeover Law and has not "opted out" of its provisions.

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

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock of the Company is The
Bank of New York, 101 Barclay Street, New York, New York 10286.

50
<PAGE> 51

UNDERWRITING AND PLAN OF DISTRIBUTION

The Underwriters named below, acting through their representative,
Robertson, Stephens & Company (the "Representative"), have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company the number of shares of Common Stock set forth opposite their
respective names below (collectively, "the Underwritten Shares"). The
Underwriters are committed to purchase and pay for all such shares if any are
purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
--------------------------------------------------------------------- ----------------
<S> <C>
Robertson, Stephens & Company LLC.................................... 2,225,000
Schroder Wertheim & Co. Incorporated................................. 200,000
Cowen & Company...................................................... 200,000
Pacific Growth Equities, Inc......................................... 200,000
---------
Total...................................................... 2,825,000
=========
</TABLE>

The Company has been advised by the Representative that the Underwriters
propose to offer the Underwritten Shares to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not more than $0.31 per share, of which $0.10
may be reallowed to other dealers. After the public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
Representative. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 423,750
additional shares of Common Stock at the same price per share as the Company
will receive for the 2,825,000 Underwritten Shares that the Underwriters have
agreed to purchase. To the extent that the Underwriters exercise such option,
each of the Underwriters will have a firm commitment to purchase approximately
the same percentage of such additional shares that the number of shares of
Common Stock to be purchased by it shown in the above table represents as a
percentage of the 2,500,000 Underwritten Shares offered hereby. If purchased,
such additional shares will be sold by the Underwriters on the same terms as
those on which the Underwritten Shares are being sold.

The Company's officers and directors, Pfizer, HMRI, Ciba and Becton have
agreed with the Representative for a period of 90 days from the date of this
Prospectus (the "Lock-Up Period") not to offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any option to purchase any
shares of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock now owned or hereafter acquired directly by such holders or with respect
to which they have or hereinafter acquire the power of disposition without the
prior written consent of Robertson, Stephens & Company LLC, which may, in its
sole discretion and at any time or from time to time, without notice, release
all or any portion of the shares subject to the lock-up agreements. The Company
has agreed that during the Lock-Up Period, the Company will not, without the
prior written consent of Robertson, Stephens & Company, issue, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into, exercisable for or exchangeable for shares of Common Stock
other than the issuance of Common Stock upon the exercise of outstanding
warrants or options and the Company's grant of options and issuance of stock
under existing employee stock option and stock purchase plans.

The Underwriting Agreement contains covenants of indemnity between the
Underwriters and the Company against certain civil liabilities including
liabilities under the Securities Act.

The offering price for the Common Stock has been determined by negotiations
among the Company and the Representative of the Underwriters, based largely upon
the market price for the Common Stock as reported on the Nasdaq National Market.

The rules of the Commission generally prohibit the Underwriters and other
members of the selling group from making a market in the Company's Common Stock
during the period immediately preceding the commencement of sales in the
offering. The Commission has, however, adopted an exemption from these

51
<PAGE> 52

rules that permits passive market making under certain conditions. These rules
permit an Underwriter or other member of the selling group to continue to make a
market in the Company's Common Stock subject to the conditions, among others,
that its bid not exceed the highest bid by a market maker not connected with the
offering and that its net purchases on any one trading day not exceed prescribed
limits. Pursuant to these exemptions, certain Underwriters and other members of
the selling group intend to engage in passive market making the Company's Common
Stock during such period.

The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

In addition to the 2,825,000 Underwritten Shares of Common Stock to be sold
pursuant to the Underwritten Offering, the Company is offering to BioChem the
right to purchase directly from the Company in a concurrent offering 500,000
shares of Common Stock at a per share purchase price equal to the public
offering price in the Underwritten Offering. Such purchase would be pursuant to
an agreement between the Company and BioChem and not pursuant to the
Underwriting Agreement. Robertson, Stephens & Company will receive from the
Company a financial advisory fee for its services in connection with the BioChem
Offering equal to 5% of BioChem's aggregate purchase price. The Underwriters
will not receive any other compensation in connection with the BioChem Offering.
There can be no assurance that the BioChem Offering will result in the purchase
of any shares of Common Stock by BioChem.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Saul, Ewing, Remick & Saul, Philadelphia, Pennsylvania.
Certain legal matters relating to the Underwritten Offering will be passed upon
for the Underwriters by Testa, Hurwitz & Thibeault, Boston, Massachusetts.

EXPERTS

The consolidated financial statements included and incorporated by
reference in this Prospectus have been audited by KPMG Peat Marwick LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act, with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the and regulations of the Commission. Statements contained in this Prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete. For further information with respect to the Company and
such Common Stock, reference is made to the Registration Statement and the
exhibits and schedules thereto, copies of which may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Statements contained in this Prospectus as to the contents of any
contract or other document filed, or incorporated by reference, as an exhibit to
the Registration Statement are qualified in all respects by such reference.

52
<PAGE> 53

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheets......................................................... F-3
Consolidated Statements of Operations............................................... F-4
Consolidated Statements of Stockholders' Equity..................................... F-5
Consolidated Statements of Cash Flows............................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 54

INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors
Oncogene Science, Inc.:

We have audited the accompanying consolidated balance sheets of Oncogene
Science, Inc. and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended September 30, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Oncogene
Science, Inc. and subsidiaries at September 30, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended September 30, 1995 in conformity with generally accepted accounting
principles.

During fiscal 1994, the Company changed its method of accounting for income
taxes and marketable securities to adopt the provisions of the Statements of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", and No.
115, "Accounting for Certain Investments in Debt and Equity Securities",
respectively.

KPMG PEAT MARWICK LLP

Jericho, New York
December 1, 1995

F-2
<PAGE> 55

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1995 1994
----------- ----------- DECEMBER 31,
-------------
1995
-------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $17,919,609 $ 322,308 $ 1,787,990
Short-term investments...................................... 8,866,957 17,835,583 22,296,727
Receivables, including trade receivables of $163,132,
$956,747 and $88,371 at September 30, 1995 and 1994 and
December 31, 1995, respectively.......................... 1,320,015 3,032,839 2,253,533
Inventory................................................... -- 1,744,663 --
Interest receivable......................................... 45,263 147,222 67,769
Grants receivable........................................... 433,530 659,621 209,748
Prepaid expenses............................................ 518,150 445,464 652,024
----------- ----------- -----------
Total current assets................................ 29,103,524 24,187,700 27,267,791
----------- ----------- -----------
Property, equipment and leasehold improvements -- net......... 5,709,515 6,554,237 5,445,005
Other receivable.............................................. 262,703 425,520 408,659
Loans to officers and employees............................... 25,516 85,516 25,464
Other assets.................................................. 325,582 118,068 324,500
Intangible assets -- net...................................... 8,630,581 10,669,859 8,267,392
----------- ----------- -----------
$44,057,421 $42,040,900 $ 41,738,811
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses....................... $ 2,825,702 $ 2,522,171 $ 1,806,902
Current portion of unearned revenue......................... 150,041 457,384 193,166
----------- ----------- -----------
Total current liabilities........................... 2,975,743 2,979,555 2,000,068
----------- ----------- -----------
Other liabilities:
Long-term portion of unearned revenue....................... 165,839 216,588 151,509
Accrued postretirement benefit cost......................... 366,203 188,443 399,329
----------- ----------- -----------
Total liabilities................................... 3,507,785 3,384,586 2,550,906
----------- ----------- -----------
Stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized,
17,683,047 shares issued at September 30, 1995,
16,564,715 shares issued at September 30, 1994 and
17,750,310 shares issued at December 31, 1995............ 176,830 165,647 177,503
Additional paid-in capital.................................. 66,735,375 61,199,670 66,998,116
Accumulated deficit......................................... (26,129,341) (21,870,671) (27,899,935)
Cumulative foreign currency translation adjustment.......... (55,669) (41,773) (40,220)
Unrealized holding gain (loss) on short-term investments.... (35,000) (654,000) 95,000
----------- ----------- -----------
40,692,195 38,798,873 39,330,464
Less: treasury stock, at cost; 222,521 shares at September
30, 1995 and 1994 and December 31, 1995.................. (142,559) (142,559) (142,559)
----------- ----------- -----------
Total stockholders' equity.......................... 40,549,636 38,656,314 39,187,905
----------- ----------- -----------
Commitments and contingencies
$44,057,421 $42,040,900 $ 41,738,811
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 56

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------------------- -------------------------
1995 1994 1993 1995 1994
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Collaborative program revenues,
principally from related
parties........................... $ 9,685,856 $ 9,089,295 $ 9,396,609 $ 1,987,458 $ 2,318,374
Sales............................... 4,286,540 4,937,917 4,827,185 29,042 1,313,689
Other research revenue.............. 1,892,603 2,272,277 1,864,227 259,748 575,918
---------- ---------- ---------- ---------- ----------
15,864,999 16,299,489 16,088,021 2,276,248 4,207,981
---------- ---------- ---------- ---------- ----------
Expenses:
Research and development............ 13,523,043 12,125,210 10,659,806 2,683,262 3,076,965
Production.......................... 1,252,990 1,427,981 1,443,649 21,863 405,278
Selling, general and
administrative.................... 7,140,208 7,487,090 6,429,701 1,331,539 1,874,429
Amortization of intangibles......... 1,696,561 1,745,163 1,745,713 363,189 436,334
---------- ---------- ---------- ---------- ----------
23,612,802 22,785,444 20,278,869 4,399,853 5,793,006
---------- ---------- ---------- ---------- ----------
Loss from operations........... (7,747,803) (6,485,955) (4,190,848) (2,123,605) (1,585,025)
---------- ---------- ---------- ---------- ----------
Other income (expense):
Net investment income............... 834,830 858,904 930,428 364,524 220,672
Other expense....................... (66,086) (96,873) (45,622) (11,513) (26,634)
Gain on sale of Research Products
Business.......................... 2,720,389 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net loss................................. $(4,258,670) $(5,723,924) $(3,306,042) $(1,770,594) $(1,390,987)
========== ========== ========== ========== ==========
Weighted average number of shares of
common stock outstanding............... 16,757,370 16,335,000 16,080,000 17,476,343 16,342,604
========== ========== ========== ========== ==========
Net loss per weighted average share of
common stock outstanding............... $ (0.25) $ (0.35) $ (0.21) $ (0.10) $ (0.09)
========== ========== ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 57

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNREALIZED
HOLDING
FOREIGN GAIN
COMMON STOCK ADDITIONAL CURRENCY (LOSS) ON TOTAL
--------------------- PAID-IN ACCUMULATED TRANSLATION SHORT-TERM TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT INVESTMENTS STOCK EQUITY
---------- -------- ----------- ------------ ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September
30, 1992............ 15,285,092 $152,851 $54,791,281 $(12,840,705) $ -- $ -- $(142,559) $41,960,868
Options exercised.... 175,729 1,758 386,272 -- -- -- -- 388,030
Issuance of common
stock for employee
purchase plan...... 211 2 974 -- -- -- -- 976
Sale of common stock
and warrants to
Marion Merrell
Dow................ 1,090,909 10,909 5,989,091 -- -- -- -- 6,000,000
Foreign currency
translation
adjustment......... -- -- -- -- 771 -- -- 771
Net loss............. -- -- -- (3,306,042) -- -- -- (3,306,042)
---------- -------- ----------- ------------ -------- --------- --------- -----------
Balance of September
30, 1993........... 16,551,941 165,520 61,167,618 (16,146,747) 771 -- (142,559) 45,044,603
Options exercised.... 10,700 107 25,724 -- -- -- -- 25,831
Issuance of common
stock for employee
purchase plan and
other.............. 2,074 20 6,328 -- -- -- -- 6,348
Unrealized holding
loss on short-term
investments........ -- -- -- -- -- (654,000) -- (654,000)
Foreign currency
translation
adjustment......... -- -- -- -- (42,544) -- -- (42,544)
Net loss............. -- -- -- (5,723,924) -- -- -- (5,723,924)
---------- -------- ----------- ------------ -------- --------- --------- -----------
Balance at September
30, 1994........... 16,564,715 165,647 61,199,670 (21,870,671) (41,773) (654,000) (142,559) 38,656,314
Options exercised.... 206,025 2,060 571,408 -- -- -- -- 573,468
Issuance of common
stock for employee
purchase plan and
other.............. 3,216 32 10,523 -- -- -- -- 10,555
Unrealized holding
gain on short-term
investments........ -- -- -- -- -- 619,000 -- 619,000
Sale of common stock
to Ciba-Giegy...... 909,091 9,091 4,953,774 -- -- -- -- 4,962,865
Foreign currency
translation
adjustment......... -- -- -- -- (13,896) -- -- (13,896)
Net loss............. -- -- -- (4,258,670) -- -- -- (4,258,670)
---------- -------- ----------- ------------ -------- --------- --------- -----------
Balance at September
30, 1995........... 17,683,047 176,830 66,735,375 (26,129,341) (55,669) (35,000) (142,559) 40,549,636
Options exercised
(unaudited)........ 66,154 662 259,196 -- -- -- -- 259,858
Issuance of common
stock for employee
purchase plan and
other
(unaudited)........ 1,109 11 3,545 -- -- -- -- 3,556
Unrealized holding
gain on short-term
investments
(unaudited)........ -- -- -- -- -- 130,000 -- 130,000
Foreign currency
translation
adjustment
(unaudited)........ -- -- -- -- 15,449 -- -- 15,449
Net loss
(unaudited)........ -- -- -- (1,770,594) -- -- -- (1,770,594)
---------- -------- ----------- ------------ -------- --------- --------- -----------
Balance at December
31, 1995
(unaudited)........ 17,750,310 $177,503 $66,998,116 $(27,899,935) $ (40,220) $ 95,000 $(142,559) $39,187,905
========== ======== =========== ============ ======== ========= ========= ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 58

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER
YEARS ENDED SEPTEMBER 30, 31,
--------------------------------------------- ----------------------------
1995 1994 1993 1995 1994
----------- ------------ ------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net loss..................................... $(4,258,670) $ (5,723,924) $ (3,306,042) $ (1,770,594) $(1,390,987)
Adjustments to reconcile net loss to net cash
used by operating activities:
Gain on sale of Research Products
Business............................... (2,720,389) -- -- -- --
Loss (gain) on sale of investments....... 118,141 -- -- (27,608) --
Depreciation and amortization............ 1,037,044 1,165,809 955,952 341,240 323,233
Amortization of intangibles.............. 1,696,561 1,745,163 1,745,713 363,189 436,334
Foreign exchange loss.................... (13,896) (26,649) 5,319 15,449 11,474
Changes in assets and liabilities, net of
the effects of the sale of the Research
Products Business:
Receivables.......................... 1,605,217 114,152 (1,052,526) (933,518) 460,588
Inventory............................ 216,405 (197,570) (132,236) -- 111,282
Interest receivable.................. 101,959 (107,890) 171,643 (22,506) (117,109)
Grants receivable.................... 226,091 105,895 (497,240) 223,782 134,997
Prepaid expenses..................... (196,491) (98,068) 27,674 (133,874) 46,322
Other receivable..................... 162,817 92,090 (517,610) (145,956) (279,584)
Other assets......................... (234,378) 23,863 (115,851) 1,082 4,392
Accounts payable and accrued
expenses........................... (586,276) 232,439 468,673 (1,018,800) (375,977)
Unearned revenue..................... (358,092) 415,972 (209,500) 28,795 459,676
Accrued postretirement benefit
cost............................... 177,760 78,568 109,875 33,126 34,689
----------- ----------- -----------
Net cash used by operating activities.......... (3,026,197) (2,180,150) (2,346,156) (3,046,193) (140,670)
----------- ----------- -----------
Cash flows from investing activities:
Additions to short-term investments.......... (3,723,180) (5,918,880) (29,092,688) (15,772,162) (499,687)
Maturities and sales of short-term
investments................................ 13,192,665 9,135,823 25,827,272 2,500,000 1,756,725
Additions to property, equipment and
leasehold improvements..................... (403,275) (1,512,543) (1,486,646) (76,730) (428,460)
Disposition of equipment..................... -- -- 12,028 -- --
Net change in loans to officers and
employees.................................. 10,400 (40,258) (4,702) 52 --
Proceeds from sale of Research Products
Business................................... 6,000,000 -- -- -- --
Other........................................ -- (15,897) (4,548) -- (7,900)
----------- ----------- -----------
Net cash provided by (used in) investing
activities................................... 15,076,610 1,648,245 (4,749,284) (13,348,840) 820,678
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net........................................ 4,962,865 -- 6,000,000 -- --
Proceeds from exercise of stock options,
employee stock purchase plan and other..... 584,023 32,180 389,006 263,414 1,956
Repayment of loan to stockholders............ -- -- 1,000,000 -- --
----------- ----------- -----------
Net cash provided by financing activities...... 5,546,888 32,180 7,389,006 263,414 1,956
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................. 17,597,301 (499,725) 293,566 (16,131,619) 681,964
Cash and cash equivalents at beginning of
period....................................... 322,308 822,033 528,467 17,919,609 322,308
----------- ----------- -----------
Cash and cash equivalents at end of period..... $17,919,609 $ 322,308 $ 822,033 $ 1,787,990 $ 1,004,272
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 59

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 AND
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(INFORMATION AS OF DECEMBER 31, 1995 AND FOR THREE MONTHS ENDED
DECEMBER 31, 1995 AND 1994 IS UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements of the Company include the accounts
of Oncogene Science, Inc. and its wholly owned subsidiaries Applied
bioTechnology, Inc. and Oncogene Science S.A., a foreign subsidiary. All
intercompany balances and transactions have been eliminated. The Company is
engaged in the research and development of biopharmaceutical products for the
treatment and diagnosis of cancer, cardiovascular and other human diseases
associated with abnormalities of cell growth and control.

(b) Revenue Recognition

Collaborative research revenues represent funding arrangements for the
conduct of research and development ("R&D") in the field of biotechnology and
are recognized when earned in accordance with the terms of the contracts and the
related development activities undertaken. Other research revenues are
recognized pursuant to the terms of grants which provide reimbursement of
certain expenses related to the Company's other R&D activities. Collaborative
and other research revenues are accrued for expenses incurred in advance of the
reimbursement and deferred for cash payments received in advance of
expenditures. Such deferred revenues are recorded as revenue when earned. (See
Note 4)

Revenue from the sale of diagnostic and research reagent products is
recognized at time of shipment.

As a result of the Company's research and development programs, including
programs funded pursuant to the research and development funding agreements (See
Note 4), the Company has applied for a number of patents in the United States
and abroad. Such patent rights are of significant importance to the Company to
protect products and processes developed. Costs incurred in connection with
patent applications for the Company's research and development programs have
been expensed as incurred.

Patents and goodwill acquired in connection with the acquisition of Applied
bioTechnology's cancer business in October 1991, have been capitalized and are
being amortized on a straight-line basis over the remaining lives of the
respective patents, and over five years for goodwill. The Company continually
evaluates the recoverability of its intangible assets by assessing whether the
amortized value can be recovered through expected future results.

(d) Research and Development Costs

Research and development costs are charged to operations as incurred and
include direct costs of research scientists and equipment and an allocation of
laboratory facility and central service. In fiscal years 1995, 1994, and 1993
R&D activities include approximately $5,695,740, $3,516,000, and $3,012,000, of
independent R&D, respectively. For the three months ended December 31, 1995 and
1994 (unaudited) R&D includes approximately $1,049,000 and $1,114,000 of
independent R&D, respectively. Independent R&D represents those research and
development activities, including research and development activities funded by
government research grants, substantially all the rights to which the Company
will retain. The balance of research and development represents expenses under
the collaborative agreements funded by Pfizer Inc. (Pfizer), Becton Dickinson
and Co.(Becton), Wyeth-Ayerst, a division of American Home Products (Wyeth),
Marion Merrell Dow Inc. (Marion), Hoechst AG and Hoechst Roussel
Pharmaceuticals, Inc.

F-7
<PAGE> 60

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(Hoechst Roussel). In July 1995, Marion, Hoechst AG and Hoechst Roussel merged
forming a new company named Hoechst Marion Roussel, Inc. (HMRI).

(e) Inventories

Inventories represent principally diagnostics and research reagent products
and are stated at the lower of standard costs (approximating average costs) or
market. During fiscal 1995, the Company sold the business and certain assets,
including inventory, of the Research Products Business. (See Note 3)

(f) Depreciation and Amortization

Depreciation of equipment is provided over the estimated useful lives of
the respective asset groups on a straight-line basis. Leasehold improvements are
amortized on a straight-line basis over the lesser of the estimated useful lives
or the remaining term of their lease.

(g) Income Taxes

Effective October 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). SFAS No. 109 requires that the Company recognize deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under SFAS No.
109, deferred tax liabilities and assets are determined on the basis of the
difference between the tax basis of assets and liabilities and their respective
financial reporting amounts ("temporary differences") at enacted tax rates in
effect for the years in which the differences are expected to reverse.

The adoption of SFAS No. 109 did not have any impact on the financial
position or results of operations of the Company. The Company, in years prior to
fiscal 1994, accounted for income taxes in accordance with Accounting Principles
Board Opinion No. 11, "Accounting for Income Taxes."

(h) Loss Per Share

Loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding. Common share equivalents (stock
options) are not included in the computation since their inclusion would be
anti-dilutive.

(i) Cash and Cash Equivalents

The Company includes as cash equivalents reverse repurchase agreements,
treasury bills, and other time deposits with original maturities of three months
or less.

(j) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relative to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(k) Interim Financial Information

Information as of December 31, 1995, and for the three months ended
December 31, 1995 and 1994 is unaudited and, in the opinion of management,
reflects all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the Company's financial position as of December 31,
1995, its results of operations and its cash flows for the three months ended
December 31, 1995 and 1994. Certain reclassifica-

F-8
<PAGE> 61

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tions have been made to the prior financial statements to conform them to the
current presentation. It is recommended that these consolidated financial
statements be read in conjunction with the consolidated financial statements and
notes thereto in the Company's 1995 Annual Report on Form 10-K. Results for
interim periods are not necessarily indicative of results for the entire year.

(2) Investments

The Company invests its excess cash in U.S. Government securities and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company has established guidelines relative to diversification of
its cash investments and their maturities that should maintain safety and
liquidity. These guidelines are periodically reviewed and modified to take
advantage of trends in yields and interest rates. The Company uses the specific
identification method to determine the cost of securities sold.

The Company adopted SFAS No. 115, "Accounting for Investments in Certain
Debt and Equity Securities," (SFAS No. 115) as of October 1, 1993. SFAS No. 115
requires securities classified as available for sale to be recorded at estimated
fair value. The Company's short-term investments, which include United States
Treasury obligations and corporate debt securities with original maturities in
excess of one year, are classified as securities available for sale based upon
management's current investment policy. Such investments, prior to the adoption
of SFAS No. 115, were recorded at the lower of cost or estimated market value
with aggregate declines in market value below amortized cost charged against
earnings. Under SFAS No. 115, changes in the net unrealized gains or losses of
available for sale securities are reported as a separate component in
stockholder's equity. The adoption of SFAS No. 115 had no material impact on the
Company's financial position.

The following is a summary of available-for-sale securities as of December
31, 1995 and September 30, 1995 and 1994:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 GROSS
- --------------------------------------------------------- UNREALIZED
LOSSES FAIR
(Unaudited) COST (GAINS) VALUE
----------- ---------- -----------
<S> <C> <C> <C>
US Treasury Securities and obligations of US Government
agencies............................................... $12,155,908 $ (2,281) $12,153,627
Corporate debt securities................................ 10,045,819 97,281 10,143,100
----------- ---------- -----------
Total.......................................... $22,201,727 $ 95,000 $22,296,727
========== ========= ==========
</TABLE>

<TABLE>
<CAPTION>
GROSS
UNREALIZED
LOSSES FAIR
SEPTEMBER 30, 1995 COST (GAINS) VALUE
- --------------------------------------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
US Treasury Securities and obligations of US Government
agencies............................................... $ 6,232,027 $ (85,942) $ 6,146,085
Corporate debt securities................................ 2,669,930 50,942 2,720,872
----------- ---------- -----------
Total.......................................... $ 8,901,957 $ (35,000) $ 8,866,957
========== ========= ==========
</TABLE>

<TABLE>
<CAPTION>
GROSS
UNREALIZED FAIR
SEPTEMBER 30, 1994 COST LOSSES VALUE
- --------------------------------------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
US Treasury Securities and obligations of US Government
agencies............................................... $16,753,928 $ (458,000) $16,295,928
Corporate debt securities................................ 1,735,655 (196,000) 1,539,655
----------- ---------- -----------
Total.......................................... $18,489,583 $ (654,000) $17,835,583
========== ========= ==========
</TABLE>

F-9
<PAGE> 62

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Realized losses on sales of investments during fiscal 1995 were
approximately $149,000. The Company has not realized any significant gains or
losses on the sale of its short-term investments during fiscal years 1994 and
1993 and the three months ended December 31, 1995 and 1994 (unaudited).

(3) SALE OF RESEARCH PRODUCTS BUSINESS

In August 1995, the Company sold certain assets and the business of the
Research Products Business (Business) to Calbiochem-Novabiochem International,
Inc. (Calbiochem) for $6.0 million in cash. The assets sold included the
Business' line of research products sold or intended for sale to the academic,
industrial and clinical research markets, existing inventory, property and
equipment and certain other assets. The Company retained the trade accounts
receivable and accounts payable outstanding on the date of sale. In connection
with the sale, the Company wrote off the unamortized goodwill related to the
Business of approximately $343,000. The sale resulted in a net gain of
approximately $2.7 million.

The Company also signed a sublease agreement with Calbiochem relating to
the Cambridge facility for a term of three years, at an annual payment equal to
50% of the Company's fixed lease payment and related facility costs, plus
certain operating costs or approximately $448,000 per annum.

(4) PRODUCT DEVELOPMENT CONTRACTS

Effective April 1, 1986, the Company entered into a collaborative research
agreement (the "Agreement") with Pfizer. On December 14, 1990, the Company and
Pfizer entered into an agreement to extend the Agreement ("Extension Agreement")
for up to an additional five years effective April 1, 1991. Pursuant to the
Extension Agreement, Pfizer agreed to provide the Company with up to $16,225,000
in research funding, essentially on a ratable basis, over the five-year period
ending April 1, 1996. In consideration for the funding commitments by Pfizer,
the Company has granted to Pfizer certain rights to human cancer therapeutic
products developed by the Company.

On October 4, 1991, the Company and Becton established a collaborative
research program to develop cancer diagnostic products. The Company and Becton
share equally the cost of discovery phase and pre-clinical research and
development. If Food and Drug Administration ("FDA") approval is obtained, these
products will be sold to the clinical markets by Becton. The Company will retain
some manufacturing rights. Unless terminated by either party, the collaborative
research program will continue for an initial five-year term through September
30, 1996.

Effective December 31, 1991, the Company entered into a collaborative
research agreement with Wyeth. This agreement was extended and expanded in
January 1994 for an additional 3 years to provide for additional funding of
approximately $4,300,000.

Effective January 1, 1993, the Company and Marion entered into a
collaborative research and license agreement to identify and develop
transcription-based drugs to treat certain indications in the area of
cardiovascular disease. The agreement provided for payments to the Company of
$11,000,000 in research funding and license fees over a five year period through
December 31, 1997. Marion invested $6,000,000 in common stock (See Note 8(b)).
The payments with respect to 1996 and 1997 are being consolidated into a
proposed new research agreement.

On January 4, 1993, the Company and Hoechst AG entered into a collaborative
research agreement to jointly develop gene transcription-based drugs to treat
certain indications in the areas of inflammation, viral infection and metabolic
diseases. In April 1994, the Company and Hoechst Roussel, a unit of Hoechst AG,
entered into a collaborative agreement to discover and develop gene
transcription-based drugs to treat Alzheimer's disease.

F-10
<PAGE> 63

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In July 1995, Marion was acquired by an affiliate of Hoechst AG and with
Hoechst Roussel, merged into one entity, HMRI. All of the Company's
collaborative agreements with Marion, Hoechst AG and Hoechst Roussel have
continued under HMRI. The Company expects the related programs to continue under
one overall agreement in the future.

In April 1995, the Company entered into an agreement with Ciba-Geigy, Ltd.
("Ciba") to expand the scope of the two companies' collaborative efforts with
respect to the development of TGF-SS3 for the treatment of oral mucositis and
other indications. Under the agreement, the Company will fund development
through Phase I clinical trials and Ciba will fund Phase II and III clinical
trials. Ciba will pay the Company $10 million if, and at the time, it decides to
initiate Phase IIB or III clinical trials or, at the option of Ciba, within four
years of the agreement date. The payment will be characterized, at Ciba's
option, as a milestone payment or a purchase of the Company's common stock at
the higher of $5.50 per share or the then current market price. In exchange for
such payment, Ciba's license will be expanded to include all other indications
for TGF-SS3.

Under the terms of aforementioned collaborative research agreements, the
collaborative partners will pay the Company royalties ranging from 2% to 10% of
net sales of products resulting from these research programs. To date, the
Company has not received any royalties pursuant to these agreements. The Company
or its collaborative partners may terminate each of the collaborative research
programs upon the occurrence of certain events.

Total collaborative research revenues under the aforementioned agreements
are as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------ ---------------------------
1995 1994 1993 1995 1994
---------- ---------- ---------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Related Parties:
Pfizer.......................... $3,505,427 $3,373,573 $4,768,606 $ 748,309 $ 845,001
Becton.......................... 1,400,094 1,392,314 1,334,534 248,469 334,825
HMRI............................ 3,405,335 3,026,532 2,211,936 640,680 813,548
---------- ---------- ----------
$8,310,856 $7,792,419 $8,315,076 $1,637,458 $1,993,374
Other........................... 1,375,000 1,296,876 1,081,533 350,000 325,000
---------- ---------- ----------
Total........................... $9,685,856 $9,089,295 $9,396,609 $1,987,458 $2,318,374
========== ========== ==========
</TABLE>

(5) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements are recorded at cost and
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------
ESTIMATED -------------------------- 1995
LIFE (YEARS) 1995 1994 -------------
------------- ---------- ------------- (Unaudited)
<S> <C> <C> <C> <C>
Laboratory equipment.................... 5-15 $6,765,012 $ 6,376,997 $ 6,816,462
Office furniture and equipment.......... 5-10 1,622,524 1,708,534 1,636,045
Automobile equipment.................... 3 12,697 12,697 12,697
Leasehold improvements.................. Life of lease 4,176,290 4,214,228 4,188,048
---------- ----------
12,576,523 12,312,456 12,653,252
Less: accumulated depreciation and
amortization.......................... 6,867,008 5,758,219 7,208,247
---------- ----------
Net property, equipment and leasehold
improvements.......................... $5,709,515 $ 6,554,237 $ 5,445,005
========== ==========
</TABLE>

F-11
<PAGE> 64

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) INTANGIBLE ASSETS

The components of intangible assets are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------------- ------------
1995 1994 1995
---------- ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Patents........................................ $7,945,038 $ 8,712,250 $7,753,235
Goodwill....................................... 685,543 1,957,609 514,157
---------- -----------
$8,630,581 $ 10,669,859 $8,267,392
========== ===========
</TABLE>

The above amounts reflect accumulated amortization of $5,808,119,
$5,236,407 and $6,171,308 at September 30, 1995 and 1994, and December 31, 1995
(unaudited), respectively.

(7) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are summarized as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- ------------
1995 1994 1995
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Accounts payable.............................. $1,497,601 $1,326,744 $ 400,387
Accrued future lease escalations.............. 355,516 282,718 373,665
Accrued payroll and employee benefits......... 243,073 155,039 564,140
Accrued incentive compensation................ 424,705 426,189 90,000
Accrued expenses.............................. 304,807 331,481 378,717
---------- ---------- ------------
$2,825,702 $2,522,171 $1,806,909
========= ========= ==========
</TABLE>

(8) STOCKHOLDERS' EQUITY

(a) Stock Option Plans

The Company has established three stock option plans for its employees,
officers, directors and consultants. The Plans are administered by the
Compensation Committee of the Board of Directors, which may grant either
non-qualified or incentive stock options. The Committee determines the exercise
price and vesting schedule at the time the option is granted. Options vest over
various periods and may expire no later than 10 years from date of grant. The
total authorized shares under these plans is 3,400,000.

The following table summarizes changes in the number of common shares
subject to options in the stock option plans:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, THREE MONTHS ENDED
------------------------------------- DECEMBER 31,
1995 1994 1993 ------------------
--------- --------- --------- 1995
------------------
(Unaudited)
<S> <C> <C> <C> <C>
Beginning of period...................... 2,048,325 1,644,945 1,278,045 2,021,279
Granted-$3.50 to $4.13 per share in 1995;
$4.00 to $4.75 per share in 1994; $4.38
to $5.25 per share in 1993;............ 803,000 475,500 498,000 --
Exercised................................ (206,025) (10,700) (109,729) (66,154)
Cancelled................................ (624,021) (61,420) (21,371) (2,759)
--------- --------- ---------
End of period-$1.75 to $5.63 per share... 2,021,279 2,048,325 1,644,945 1,952,366
========= ========= =========
Exercisable.............................. 952,883 1,081,874 790,899 958,732
========= ========= =========
</TABLE>

F-12
<PAGE> 65

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995, the Company has reserved 1,952,366 shares (unaudited)
of its authorized common stock for all shares issuable under option.

On March 22, 1995, the Company granted the right to current option holders
to surrender their current options in exchange for replacement options on the
basis of three replacement options for four options surrendered. The exercise
price of the replacement options was $3.50 per share, which was greater than the
market price on the date of exchange. The replacement options vested 25% upon
grant with the remaining 75% vesting pro rata on a monthly basis over the
following three years. Option holders surrendered 606,000 options in exchange
for 454,500 replacement options.

(b) Sale of Stock to Marion

In December 1992, the Company entered into the common stock purchase and
common stock warrant purchase agreements with Marion. The company issued
1,090,909 shares of common stock at $5.50 per share and a warrant to purchase up
to 500,000 additional shares at $5.50 per share which are exercisable during the
period December 1994 to December 1999. The proceeds to the Company were
$6,000,000.

On April 19, 1995, Ciba purchased 909,091 shares of the Company's common
stock at $5.50 per share for an aggregate purchase price of $5,000,000.

(d) Stock Purchase Plan

On May 1, 1993, the Company adopted an Employee Stock Purchase Plan under
which eligible employees may contribute up to 10% of their base earnings toward
the quarterly purchase of the Company's Common Stock. The employees purchase
price is derived from a formula based on the fair market value of the common
stock. No compensation expense is recorded in connection with the plan. During
fiscal 1995, 1994 and 1993, 3,216, 2,074 and 211 shares were issued with 18, 13
and 10 employees participating in the plan, respectively. During the three month
periods ended December 31, 1995 and 1994 (unaudited), 709 and 651 shares were
issued with 16 and 12 employees participating in the plan, respectively.

(9) INCOME TAXES

There is no provision (benefit) for federal or state income taxes, since
the Company has incurred operating losses since inception and has established a
valuation allowance equal to the total deferred tax asset.

F-13
<PAGE> 66

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effect of temporary differences, net operating loss carryforwards
and research and development tax credit carryforwards as of September 30, 1994
and 1995 and December 31, 1995 are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------- DECEMBER 31,
1995 1994 1995
------------ ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................. $ 8,122,444 $ 6,421,863 $ 8,700,000
Research & development credits.................... 554,838 373,500 575,000
Inventory......................................... -- 838,361 --
Intangible assets................................. 1,274,336 863,220 1,350,000
Other............................................. 469,396 227,958 470,000
----------- ----------
$ 10,421,014 $ 8,724,902 $ 11,095,000
Valuation allowance............................... (10,421,014) (8,724,902) (11,095,000)
----------- ----------
$ -- $ -- $ --
=========== ==========
</TABLE>

As of December 31, 1995, the Company has available federal net operating
loss carryforwards of approximately $25 million (unaudited) which will expire in
various years from 1999 to 2010, and may be subject to certain annual
limitations. The Company's research and development tax credit carry forwards
noted above expire in various years through from 1999 to 2010.

(10) COMMITMENTS AND CONTINGENCIES

(a) Lease Commitments

The Company leases office, operating and laboratory space under various
lease agreements.

Rent expense was approximately $750,000, $743,000, $656,000, $176,000 and
$178,000 for the fiscal years ended September 30, 1995, 1994, and 1993,
respectively and for the three months ended December 31, 1995 and 1994
(unaudited), respectively.

The following is a schedule of future minimum rental payments required as
of December 31, 1995, assuming expiration of the lease for the Uniondale
facility on June 30, 2006 and the Cambridge facility on December 31, 2003.

<TABLE>
<S> <C>
Nine months ended September 30, 1996 (unaudited)................................. $ 441,000
Fiscal years ended 1997.......................................................... 619,375
1998.......................................................... 627,163
1999.......................................................... 644,288
2000.......................................................... 682,163
2001 and thereafter........................................... 3,637,311
---------
$6,651,300
=========
</TABLE>

(b) Contingencies

The Company has received several letters from other companies and
universities advising the Company that various products being marketed and
research being conducted by the Company may be infringing on existing patents of
such entities. These matters are presently under review by management and
outside counsel for the Company. Where valid patents of other parties are found
by the Company to be in place, management will consider entering into licensing
arrangements with the universities and/or other companies or discontinu-

F-14
<PAGE> 67

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ing the sale or use of any infringing products. Management believes that the
ultimate outcome of these matters will not have a material adverse effect on the
financial position of the Company.

(11) RELATED PARTY TRANSACTIONS

Effective January 1, 1993, the Company compensates its independent outside
directors on a $1,000 retainer per month. This amount increased to $1,500
effective January 1, 1995. For the years ended September 30, 1995, 1994 and 1993
and the three months ended December 31, 1995 and 1994 (unaudited) such fees
amounted to $99,000, $66,000, $45,000 and $27,000 and $18,000 respectively. The
Company also has compensated four directors for consulting services performed.
Two directors have consulting agreements, the other two were paid on a per diem
basis. For the years ended September 30, 1995, 1994 and 1993, and the three
months ended December 31, 1995 and 1994 (unaudited) consulting services in the
amounts of $90,000, $85,000, $56,000, $22,500 and $22,500 respectively, were
paid by the Company pursuant to these arrangements.

One director is a partner in a law firm which represents the Company on its
patent and license matters. Fees paid to this firm for the year ended September
30, 1995 are estimated to be approximately $260,000. Fees paid for this firm for
the years ended September 30, 1994 and 1993 amounted to approximately $372,000
and $538,000, respectively. Fees paid to this firm for the three months ended
December 31, 1995 and 1994 (unaudited) were approximately $65,000 and $12,000.

(12) EMPLOYEE SAVINGS AND INVESTMENT PLAN

The Company sponsors an Employee Savings and Investment Plan under Section
401(k) of the Internal Revenue Code. The plan allows employees to defer from 2%
to 10% of their income on a pre-tax basis through contributions into designated
investment funds. For each dollar the employee invests up to 6% of his or her
earnings, the Company will contribute an additional 50 cents into the funds. For
the years ended September 30, 1995, 1994, and 1993, the Company's expenses
related to the plan were approximately $180,000, $168,000 and $131,000,
respectively. For the three months ended December 31, 1995 and 1994 (unaudited)
the Company's expenses related to the plan were approximately $22,000 and
$33,000 respectively.

(13) EMPLOYEE RETIREMENT PLAN

On November 10, 1992, the Company adopted a plan which provides
postretirement medical and life insurance benefits to eligible employees, board
members and qualified dependents. Eligibility is determined based on age and
service requirements. These benefits are subject to deductibles, co-payment
provisions and other limitations.

The Company utilizes SFAS No. 106, "Employer's Accounting for Post
Retirement Benefits Other Than Pensions" to account for the benefits to be
provided by the plan. Under SFAS No. 106, the cost of post-retirement medical
and life insurance benefits is accrued over the active service periods of
employees to the date they attain full eligibility for such benefits. As
permitted by SFAS No. 106, the Company elected to amortize over a 20 year period
the accumulated postretirement benefit obligation related to prior service
costs.

F-15
<PAGE> 68

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net postretirement benefit cost for the years ended September 30, 1995 and
1994 and 1993 includes the following components:

<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Service cost for benefits earned during the period.......... $107,175 $65,830 $ 70,867
Interest cost on accumulated postretirement benefit
obligation................................................ 47,181 15,591 19,742
Amortization of unrecognized net loss (gain)................ 5,855 (20,402) --
Amortization of initial benefits attributable to past
service................................................... 17,549 17,549 19,266
------- ------ -------
Net postretirement benefit cost............................. $177,760 $78,568 $109,875
======= ====== =======
</TABLE>

Net postretirement benefit cost for the three months ended December 31,
1995 and 1994 (unaudited) were approximately $33,000 and $35,000.

The accrued postretirement benefit cost at September 30, 1995 (most recent
valuation date) and 1994 were as follows:

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accumulated post retirement benefit obligation -- fully eligible
active plan participants........................................... $ 790,437 $ 285,582
Unrecognized cumulative net gain (loss).............................. (121,517) 223,127
Unrecognized transition obligation................................... (302,717) (320,266)
-------- --------
Accrued postretirement benefit cost.................................. $ 366,203 $ 188,443
======== ========
</TABLE>

The accumulated postretirement benefit obligation was determined using a
discount rate of 7.5 percent and a health care cost trend rate of approximately
12 percent decreasing to 6 percent in year 1999 and thereafter for 1995 and
1994. Increasing the assumed health care cost trend rates by one percentage
point in each year and holding all other assumptions constant would increase the
accumulated post-retirement benefit obligation as of September 30, 1995 and 1994
by approximately $106,000 and $94,000 respectively.

(14) NEW ACCOUNTING PRONOUNCEMENTS

In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" was issued which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets and
certain intangibles to be disposed of. SFAS No. 121 requires that long-lived
assets and certain intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. SFAS No. 121 must be
implemented no later than fiscal 1997. The adoption of SFAS No. 121 is not
expected to have material impact on the Company's consolidated financial
position or operating results.

In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation",
was issued which establishes financial accounting and reporting standards for
stock-based employee compensation plans. SFAS No. 123 defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, SFAS No. 123 would permit the
Company to continue to measure compensation costs for its stock option plans
using the intrinsic value based method of accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees". If the Company elected to
remain with its current accounting, the Company must make pro forma disclosures
of net income and earnings (loss) per share as if the fair value based method of
accounting had been applied. SFAS No. 123 must be implemented no later than
fiscal 1997. The Company has not yet determined the valuation method it will
employ or the effect on operating results of implementing SFAS No. 123.

F-16
<PAGE> 69

ONCOGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15) DEPENDENCE ON COLLABORATIVE RELATIONSHIPS

The Company does not intend to conduct late-stage clinical trials,
manufacturing or marketing activities with respect to any of its product
candidates in the foreseeable future. The Company is dependent on the companies
with which it collaborates for the preclinical testing, clinical development,
regulatory approval, manufacturing and marketing of potential products developed
under its collaborative research programs. The Company's collaborative
agreements allow its collaborative partners significant discretion in electing
to pursue or not to pursue any of these activities. The Company cannot control
the amount and timing of resources its collaborative partners devote to the
Company's programs or potential products. If any of the Company's collaborative
partners were to breach or terminate its agreements with the Company or
otherwise fail to conduct its collaborative activities successfully in a timely
manner, the preclinical or clinical development or commercialization of product
candidates or research programs could be delayed or terminated. Any such delay
or termination could have a material adverse effect on the Company's business,
financial condition and results of operations.

F-17
<PAGE> 70

[LOGO]
<PAGE> 71

[PASTEUP LOGO]

500,000 SHARES

COMMON STOCK

This Prospectus relates to a direct offering by Oncogene Science, Inc.
("Oncogene Science" or the "Company") to BioChem Pharma Inc. (the "BioChem
Offering") of 500,000 shares of Common Stock at an offering price per share
equal to the Price to Purchaser set forth below. See "BioChem Offering" and
"Underwriting and Plan of Distribution."

In addition to the Common Stock offered hereby directly by the Company, the
Company is offering 2,825,000 shares of Common Stock through the Underwriters to
the public in a concurrent firm commitment underwritten offering (the
"Underwritten Offering," and together with the BioChem Offering, the
"Offerings"). The shares being offered pursuant to the Underwritten Offering are
being sold by the Company at the Price to Purchaser indicated below. The Company
has granted the Underwriters of the Underwritten Offering an option to purchase
up to 423,750 additional shares of Common Stock solely to cover over-allotments,
if any. See "Underwriting and Plan of Distribution."

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.

SEE "RISK FACTORS" BEGINNING ON PAGE 7.

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

<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
PRICE TO FINANCIAL PROCEEDS TO
PURCHASER(1) ADVISORY FEES COMPANY(2)
- ------------------------------------------------------------------------------------------------
Per Share................................... $9.125 $0.456 $8.669
- ------------------------------------------------------------------------------------------------
Total(2).................................... $4,562,500 $228,125 $4,344,375
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) The Price to Purchaser in the BioChem Offering is equal to the public
offering price in the Underwritten Offering. References to "Price to Public"
in this Prospectus are deemed to be references to the above Price to
Purchaser.

(2) Before deducting expenses payable by the Company estimated at $25,000, and
excluding any proceeds to the Company from the Underwritten Offering.

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

The date of this Prospectus is March 14, 1996.