ENDOREX CORP, S-2/A, 1998-03-12

ENDOREX CORP
S-2/A, 1998-03-12
PHARMACEUTICAL PREPARATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1998

Registration No. 333-44583

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 1 to
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FORM S-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ENDOREX CORP.
(Exact name of small business issuer as specified in its charter)
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DELAWARE 41-1505029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

900 NORTH SHORE DRIVE
LAKE BLUFF, ILLINOIS 60044
(847) 604-7555
(Address, including zip code, and telephone number,
including area code, of small business issuer's principal executive offices)
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DAVID G. FRANCKOWIAK

VICE PRESIDENT, FINANCE AND ADMINISTRATION

ENDOREX CORP.
900 North Shore Drive
Lake Bluff, Illinois 60044
(847) 604-7555
(Name, address, including zip code, and
telephone number, including area code,
of agent for service of process)
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COPIES TO:
RICHARD R. PLUMRIDGE, ESQ.
JOHN A. CALVO, ESQ.
BROBECK, PHLEGER & HARRISON LLP
1633 Broadway
New York, New York 10019

Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.

If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than Securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/

If the registrant elects to deliver its latest annual report to security
holders or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. /X/

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

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

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

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The Small Business Issuer hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Small
Business Issuer shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.

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PROSPECTUS

10,655,202 Shares

ENDOREX CORP.
Common Stock
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This Prospectus relates to the public offering (the "Offering") by certain
Selling Shareholders (as hereinafter defined), which is not being underwritten,
of up to 10,655,202 shares of Common Stock, par value $.001 per share (the
"Common Stock"), of Endorex Corp. ("Endorex Corp." or the "Company"). Of the
shares being registered for resale by the Selling Stockholders, 8,648,716 shares
of Common Stock (the "Private Placement Shares") have been issued to certain
Selling Stockholders under an exemption from registration under the Securities
Act of 1933, as amended (the "Securities Act"), and 2,006,486 shares of Common
Stock (the "Warrant Shares") are issuable by the Company to certain Selling
Stockholders under an exemption from registration under the Securities Act upon
the exercise of outstanding warrants (each, a "Warrant"). The Private Placement
Shares and the Warrant Shares (collectively, the "Shares") may be offered by the
holders of the Private Placement Shares and by current holders of the Warrants
who subsequently exercise such warrants (collectively, the "Selling
Stockholders").

Sales of the Shares by the Selling Stockholders may be made from time to
time, pursuant to this Prospectus or Rule 144 under the Securities Act (or any
other applicable exemption from registration under the Securities Act), in one
or more transactions, including block transactions, in the over-the-counter
market, on any exchange or quotation system on which the Common Stock may be
admitted for trading (collectively, "Exchanges"), pursuant to and in accordance
with the applicable rules of the Exchanges, in negotiated transactions or in a
combination of any such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Shares may be offered
directly, to or though agents designated from time to time, or to or through
brokers or dealers, or through any combination of such methods of sale. Such
agents, brokers or dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agents or to whom they
sell as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). A member firm of an Exchange may
be engaged to act as a Selling Stockholder's agent in the sale of Shares by such
Selling Stockholder. To the extent required, specific information regarding the
Shares will be set forth in an accompanying Prospectus Supplement. See "Selling
Stockholders" and "Plan of Distribution."

None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. Upon the issuance to the Selling
Stockholders under an exemption from registration under the Securities Act of
all of the Warrant Shares being registered hereunder, the Company could receive
aggregate proceeds of up to $5,100,000 (assuming an exercise price of $2.54375,
which is subject to adjustment under certain circumstances). See "Issuance of
the Warrant Shares and Use of Proceeds." The Company has agreed to bear the
expenses (other than selling commissions and fees and expenses of certain
advisors to the Selling Stockholders) in connection with the registration of the
Shares. The Company has agreed to indemnify certain of the Selling Stockholders
and their affiliates against certain liabilities, including liabilities under
the Securities Act. Certain of the Selling Stockholders have agreed to indemnify
the Company and its affiliates against certain liabilities, including
liabilities under the Securities Act under certain circumstances.

AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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The Common Stock of the Company is traded on the OTC Bulletin Board under
the symbol "ENDR." The last reported bid and asked prices of the Company's
Common Stock on the OTC Bulletin Board on March 9, 1998 were $6.25 and $6.875
per share, respectively. The Company has applied to have its Common Stock
listed on the Nasdaq SmallCap Market.

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

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THE DATE OF THIS PROSPECTUS IS March 11, 1998

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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Stockholder or by any other person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the Shares to any person or by anyone
in any jurisdiction in which such offer or solicitation may not lawfully be
made.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 under the Securities Act (the
"Registration Statement") with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and the schedules thereto. For further information
with respect to the Company and such Common Stock, reference is made to the
Registration Statement and exhibits and schedules thereto. Statements contained
in this Prospectus as to the contents of any contract or other document referred
to are not necessarily complete, and, with respect to any contract or other
document filed as an exhibit to the Registration Statement, each such statement
is qualified in all respects by reference to such exhibit. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission
described below.

The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected, and copies of such material may be obtained upon
payment of the prescribed fees, at the Commission's Public Reference Section ,
Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at the
Commission's Regional Offices at Seven World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained in person from the
Public Reference Section of the Commission at its principal office located at
450 Fifth Avenue, N.W., Washington, D.C. 20549, upon payment of the prescribed
fees. In addition, the Commission has a Web site on the World Wide Web at
http://www.sec.gov, containing registration statements, reports, proxy and
information statements, and other information that registrants, such as the
Company, file electronically with the Commission.

The Common Stock of the Company is traded on the OTC Bulletin Board.
Reports, proxy statements and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.

INFORMATION INCORPORATED BY REFERENCE

The following documents filed with the Commission are incorporated by
reference in their entirety in this Prospectus and shall be deemed to be part
hereof: the Annual Report of the Company on Form 10-KSB for the transition
period from February 1, 1996 to December 31, 1996, as amended by Amendments No.
1 and No. 2 (as amended, the "1996 Form 10-KSB"), the Quarterly Report of the
Company on Form 10-QSB for the fiscal quarter ended March 31, 1997, the
Quarterly Report of the Company on Form 10-QSB for the fiscal quarter ended June
30, 1997, the Quarterly Report of the Company on Form 10-QSB for the fiscal
quarter ended September 30, 1997, as amended by Amendment No. 1, the Current
Report of the Company on Form 8-K as filed January 27, 1997, as amended on
February 10, 1997 and February 21, 1997, the Current Report of the Company on
Form 8-K as filed on February 26, 1997, as amended on March 5, 1997, the Current
Report of the Company on Form 8-K as filed on January 6, 1998, the Current
Report of the Company on Form 8-K filed on January 30, 1998 and the Current
Report of the Company on Form 8-K filed on February 20, 1998. No other report
has been filed by the Company since the end of the transition period ended
December 31, 1996.

The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to the Secretary, Endorex Corp., 900 North Shore
Drive, Lake Bluff, Illinois 60044.

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This Prospectus is accompanied by a copy of the Company's 1996 Form 10-KSB.
This Prospectus shall be accompanied by a copy of the Company's Form 10-KSB,
together with any amendments thereto, filed with the Commission for each
subsequent fiscal year of the Company during the duration of this Offering and
by a copy of the Company's Proxy Statement used for the solicitation of
stockholders for each subsequent annual meeting of stockholders held during the
duration of this Offering.

The Company shall deliver without charge to each person to whom this
Prospectus is delivered a copy of the Company's latest Form 10-QSB filed with
the Commission with respect to the most recent fiscal quarter which ends after
the end of the latest fiscal year of the Company for which the Company has
delivered the 1996 Form 10-KSB as described above. The Company shall also
provide without charge a copy of each Form 8-K, if any, filed with the
Commission since the end of the latest fiscal year of the Company for which the
audited financial statements were included in the latest Form 10-KSB filed with
the Commission.

THE COMPANY

The Company was incorporated in Delaware in 1987 and originally named
ImmunoTherapeutics, Inc.; its predecessor, Biological Therapeutics, Inc., was
founded in 1984. The Company's principal offices are located at 900 North Shore
Drive, Lake Bluff, Illinois 60044 and its telephone number is (847) 604-7555.

SUBSEQUENT EVENTS

Reverse Stock Split. On June 11, 1997, the Company effected a
one-for-fifteen reverse stock split of the Company's Common Stock. As a result
of such reverse stock split, the Company changed the trading symbol of its
Common Stock from "ENDU" to "ENDR."

New Subsidiary. On July 29, 1997, the Company formed a new majority-owned
subsidiary, Wisconsin Genetics, Inc. ("WGI"). On August 1, 1997, WGI signed an
exclusive worldwide license agreement with the Wisconsin Alumni Research
Foundation for the development and commercialization of a new cancer drug. The
new drug, perillyl alcohol, has completed Phase I human trials sponsored by the
National Cancer Institute at several centers including the University of
Wisconsin, Yale University, Fox Chase Cancer Center and Memorial Sloan Kettering
Cancer Center and is currently undergoing Phase II human trials sponsored by the
National Cancer Institute.

Private Placement. Pursuant to a private placement (the "Private
Placement") of Common Stock, the Company issued and sold an aggregate of
8,648,716 shares of Common Stock to certain accredited investors on July 16,
October 10 and October 16, 1997, in consideration of an aggregate amount of
$20,000,000. The net proceeds to the Company after deducting commissions and
expenses of Paramount Capital, Inc., which acted as the placement agent for the
Private Placement (the "Placement Agent"), were $17,400,000.

Pursuant to the Placement Agency Agreement (the "Placement Agency
Agreement"), dated July 1, 1997, between the Company and the Placement Agent,
the Company and the Placement Agent entered into a financial advisory agreement
(the "Financial Advisory Agreement"), dated October 16, 1997, whereby the
Placement Agent will act as the Company's non-exclusive financial advisor for a
minimum period of 24 months in return for a monthly retainer of $4,000,
out-of-pocket expenses and cash and certain equity success fees in the event the
Placement Agent assists the Company in connection with certain financing,
acquisition and strategic transactions.

In connection with the Private Placement, the Company issued and sold to
the Placement Agent and/or its designees warrants (the "Placement Warrants") to
purchase up to an aggregate of 864,865 shares of Common Stock and, in connection
with the execution of the Financial Advisory Agreement, the Company issued and
sold to the Placement Agent warrants (the "Advisory Warrants") to purchase up to
an aggregate of 1,297,297 shares of Common Stock. The Placement Warrants and
the Advisory Warrants are exercisable beginning on April 16, 1998 until April
16, 2003, at an exercise price of $2.54375 per share, subject to adjustment
under certain circumstances. The Placement Warrants and the Advisory Warrants
constitute the Warrants and the shares of Common Stock issuable upon exercise of
the Placement Warrants and the Advisory Warrants, and which are being
registered, constitute the Warrants Shares. Of the Warrant Shares, an aggregate
of 2,006,482 shares of Common Stock issuable upon exercise of such warrants are
being registered pursuant to this Registration Statement. For accounting
purposes, the Company has assigned a value of $5,260,000 to the Warrants.

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Joint Venture with Elan Corporation. On January 21, 1998, the Company
announced that it had established a joint venture with Elan Corporation ("Elan")
for the exclusive research, development and commercialization of oral and
mucosal prophylactic and therapeutic vaccines. The joint venture will initially
be 80.1% owned by the Company and 19.9% owned by Elan. The new entity has
licensed on an exclusive basis Elan's drug delivery inventions, intellectual
property and existing and future patents relating to oral and mucosal delivery
technologies for the therapeutic and prophylactic vaccines for human and
animals. The entity will pay an initial license fee to Elan, plus future
milestones and royalties.

In connection with the license agreement and joint venture, the Company
issued $8.01 million of convertible preferred stock to Elan.

As part of the transaction, Elan made a $2,000,000 initial investment in
the Company through purchasing 307,692 shares of Common Stock and warrants to
acquire 230,770 shares of Common Stock at an exercise price of $10.00 per share
with a term of 6 years. In addition, the Company and Elan are each funding an
additional $1,500,000 of research and development activities during the first
year of the joint venture and will continue to fund activities of the joint
venture thereafter in proportion to their ownership interest.

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RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk and should not be made by any investors who cannot afford the
loss of their entire investment. In addition, this Prospectus contains certain
statements of a forward-looking nature relating to future events or the future
financial performance of the Company. Prospective investors are cautioned that
such statements are only predictions and that actual events or results may
differ materially. In evaluating such statements and in making any investment
decisions, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth in this
"Risk Factors" section, which could cause actual results to differ materially
from those indicated by such forward-looking statements.

Need for Substantial Additional Funds, Risk of Insolvency. The Company had
approximately $15,600,000 of cash, cash equivalents and marketable securities at
December 31, 1997. The Company may be required to seek additional financing in
the future to continue operations during such period in the event of cost
overruns, unanticipated expenses, a determination to pursue additional research
projects, or the failure to receive funds anticipated from other sources. In
addition to the net proceeds from the Private Placement, the Company will
require substantial additional funds to finance its business activities on an
ongoing basis. The Company's actual future capital requirements will depend on
numerous factors, including, but not limited to, costs associated with
technologies and products which it may license from third parties, progress in
its research and development programs, including preclinical and clinical
trials, costs of filing and prosecuting patent applications and, if necessary,
enforcing issued patents or obtaining additional licenses to patents, competing
technological and market developments, the cost and timing of regulatory
approvals, the ability of the Company to establish collaborative relationships,
and the cost of establishing manufacturing, sales and marketing capabilities.
The Company has no current commitment to obtain other additional funds and is
unable to state the amount or potential source of any other additional funds.

Because of the Company's potential long-term capital requirements, it may
undertake additional equity offerings whenever conditions are favorable, even if
it does not have an immediate need for additional capital at that time. There
can be no assurance that the Company will be able to obtain additional funding
when needed, or that such funding, if available, will be obtainable on
reasonable terms. Any such additional funding may result in significant
dilution to existing stockholders. If adequate funds are not available, the
Company may be required to accept unfavorable alternatives, including (i) the
delay, reduction or elimination of research and development programs, capital
expenditures, and marketing and other operating expenses, (ii) arrangements with
collaborative partners that may require the Company to relinquish material
rights to its products that it would not otherwise relinquish, or (iii) a merger
of the Company or a sale of the Company or its assets.

Early Stage of Development. The Company is a development state enterprise
and expects no significant revenue from the sale of products in the near future.
The Company's proprietary immunomodulator, ImmTher, has completed some Phase II
clinical trials for cancer with limited response in gross metastatic disease and
its immuno-adjuvant, Theramide, has completed a Phase I clinical trial for
cancer. The Company plans to initiate new Phase II clinical trials for ImmTher
in treating micro-metastasis in pediatric sarcomas with two major cancer
centers. For Theramide, the Company is completing preclinical data for new
phase I trials as an adjuvant for a vaccine program. Additionally, perillyl
alcohol has completed several Phase I trials and is currently undergoing several
Phase II trials as an anti-cancer drug. The Company's oral delivery technology
is in the preclinical evaluation stage. As a result, the Company be evaluated
in light of the problems, delays, uncertainties and complications encountered in
connection with early-stage biopharmaceutical development. The risks include,
but are not limited to, the possibilities that any or all of the Company's
potential products will be found to be ineffective or toxic, or fail to receive
necessary regulatory clearances in the United States or abroad. To achieve
profitable operations, the Company must successfully develop, obtain regulatory
approval for,

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introduce and successfully market through a larger pharmaceutical partner at a
profit products that are currently in the research and development phase. The
Company is currently not profitable, and no assurance can be given that the
Company's research and development efforts will be successful, that required
regulatory approvals will be obtained, that any of the Company's proposed
products will be safe and effective, that any such products, if developed and
introduced, will be successfully marketed or achieve market acceptance, or that
such products can be marketed at prices that will allow profitability to be
achieved or sustained. Failure of the Company to successfully develop, obtain
regulatory approval for, introduce and market its products under development
would have a material adverse effect on the business, financial condition and
results of operations of the Company.

History of Losses; Going Concern Reports; Uncertainty of Future Financial
Results. The Company has experienced significant operating losses since its
inception, and expects to incur losses for the next several years. As of
September 30, 1997, the Company's accumulated deficit was $10,219,680. The
Company's independent auditors have included an explanatory paragraph in their
report on the Company's financial statements at December 31, 1996, which
paragraph expresses substantial doubt concerning the Company's ability to
continue as a going concern. The amount of net losses may vary significantly
from year-to-year and quarter-to-quarter and depend on, among other factors, the
success of the Company in securing collaborative partners and the progress of
research and preclinical and clinical development programs. The Company's
ability to attain profitability will depend, among other things, on its
successfully completing development of its product candidates, obtaining
regulatory approvals, establishing manufacturing, sales and marketing
capabilities and obtaining sufficient funds to finance its activities. There
can be no assurance that the Company will be able to achieve profitability or
that profitability, if achieved, can be sustained.

Dependence on Elan Joint Venture. As described more fully under
"Subsequent Events -- Joint Venture with Elan Corporation," the Company recently
established a joint venture with Elan for the exclusive research, development
and commercialization of oral and mucosal prophylactic and therapeutic vaccines.
As part of the joint venture, the Company will be obligated to fund the joint
venture's research and development activities, in an amount of approximately
$1,500,000 during the first year of the joint venture and in proportion to its
ownership interest in the joint venture thereafter. In the event that the
Company is unable to have sufficient resources to meet its obligations under the
Elan joint venture, or if by meeting those funding obligations, the Company is
therefore unable to have sufficient resources to fund its other research and
development activities, such funding obligations could have a material adverse
effect on the Company's business, financial condition or results of operations.

Limited Experience and Dependence on Third Parties for Completion of
Clinical Trials, Manufacturing and Marketing. The Company has no experience
with receipt of government approvals or marketing pharmaceutical products and
has limited experience with clinical testing and manufacturing. The Company may
seek to form alliances with established pharmaceutical companies for the
testing, manufacturing and marketing of, and pursuit of regulatory approval for,
its products. There can be no assurance that the Company will be successful in
forming such alliances or that the Company's partners would devote adequate
resources to, and successfully market, the Company's products. If the Company
instead performs such tasks itself, it will be required to develop expertise
internally or contract with third parties to perform these tasks. This will
place increased demands on the Company's resources, requiring the addition of
new management personnel and the development of additional expertise by existing
management personnel. The failure to acquire such services or to develop such
expertise could materially adversely affect prospects for the Company's success.
All of the Company's scientific and clinical advisors are employed by others and
may have commitments to or consulting or advisory contracts with other entities
that may limit their availability to the Company.

Reliance on Patents and Other Proprietary Rights. The pharmaceutical
industry places considerable importance on obtaining patent and trade secret
protection for new technologies, products and processes. The Company's success
will depend, in part, on its ability to obtain protection for its products and
technologies under United States and foreign patent laws and other intellectual
property laws, to preserve its trade secrets and to operate without infringing
the proprietary rights of third parties. There can be no assurance that the
research conducted by or on behalf of the Company will result in any patentable
technology or products. Even if patents are obtainable, the procedure for
obtaining patents is expensive, time consuming and can be subject to lengthy
litigation. No assurance can be given that patents issued to or licensed by the
Company will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will provide competitive advantages to the Company. There
can be no assurance that the Company's patent applications will be approved,
that the Company will develop additional products that are patentable, that any
issued patent will provide the Company with any competitive advantage or
adequate protection for its inventions or will not be challenged by others, or
that the patents of others will not have an adverse effect on the ability of the
Company to do business. Competitors may have filed applications, may have been
issued patents or may obtain additional patents and proprietary rights relating
to

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products or processes competitive with those of the Company. Furthermore, there
can be no assurance that others will not independently develop similar products,
duplicate any of the Company's products or design around any patented products
developed by the Company. Moreover, it is possible, with respect to some
patentable items, that the Company may conclude that better protection would be
afforded by not seeking patents. Although the Company has endeavored, and will
continue to endeavor, to prevent disclosure of any confidential information by
adopting a policy to bind its scientific advisors and scientific and management
employees and consultants by confidentiality agreements. No assurance can be
given that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the Company's
trade secrets, or that the Company can effectively protect its rights to its
unpatented trade secrets. Any such discovery or disclosure would likely have an
adverse effect on the Company. The Company currently has several patents issued
and patent applications pending in the United States and foreign countries.
Although the Company intends to apply for additional patents, there can be no
assurance that the Company will obtain patents either under the pending
applications or any future applications or that any of its existing or any
future patent will provide effective protection against competitive products.
If patent or other proprietary rights cannot be obtained and maintained by the
Company, its products may face significantly increased competition.

The application of patent law to the area of biotechnology is relatively
new and has resulted in considerable litigation. The ability of the Company to
obtain patents, licenses and similar rights and the nature, extent and
enforceability of the intellectual property rights, if any, that are obtained as
a result of its research programs involve complex legal and factual issues. For
example, the Company is dependent upon its license of oral delivery technology
from M.I.T. and its license of perillyl alcohol from the Wisconsin Alumni
Research Foundation. No assurance can be given that the technology underlying
such license will be profitable, or that the Company will retain its license for
such technology or that the Company will obtain patent protection outside the
United States. The issues are more significant with respect to any product
based upon natural substances, for which available patent protection may be
limited due to the prior use or reported utility of such products (or their
natural sources) to treat various disorders or diseases. There can be no
assurance as to the degree of protection that proprietary rights, when and if
established, will afford the Company. To the extent that the Company relies on
trade secret protection and confidentiality agreements to protect technology,
there can be no assurance that others will not independently develop similar
technology, or otherwise obtain access to the Company's findings or research
materials embodying those findings.

There is also a substantial risk in the rapidly developing biotechnology
industry that patents and other intellectual property rights held by the Company
could be infringed by others or that products developed by the Company or their
method of manufacture could be covered by patents owned by other companies. To
the extent that any infringement should occur with respect to any patents issued
to the Company or licenses granted to the Company, or if the Company is alleged
to have infringed on patents or licenses held by others, the Company could be
faced with the expensive prospect of litigating such claims; if the Company were
to have insufficient funds on hand to finance its litigation, it might be forced
to negotiate a license with such other parties or to otherwise resolve such a
dispute on terms less favorable to the Company than could result from successful
litigation.

Uncertainty of Clinical Trials and Results. The results of clinical trial
and preclinical testing for the Company's products are subject to varying
interpretations. Furthermore, studies conducted with alternative designs or on
alternative populations could produce results that vary from those expected.
Therefore, there can be no assurance that the results or the Company's
interpretation of them will be accepted by governmental regulators or the
medical community. Even if the development of the Company's products in the
preclinical phase advances to the clinical stage, there can be no assurance that
they will prove to be safe and effective. The products that are successfully
developed, if any, will be subject to requisite regulatory approval prior to
their commercial sale, and the approval, if obtainable, may take several years.
Generally, only a very small percentage of the number of new pharmaceutical
products initially developed is approved for sale. Even if new products are
approved for sale, there can be no assurance that they will be commercially
successful. The Company may encounter unanticipated problems relating to
development, manufacturing, distribution and marketing, some of which may be
beyond the Company's financial and technical capacity to solve. The failure to
address such problems adequately could have a material adverse effect on the
Company's business, financial condition or results of operations. No assurance
can be given that the Company will succeed in the development and marketing of
any new drug products, or that they will not be rendered obsolete by products of
competitors.

-7-

<PAGE>

Uncertainty of Health Care Reform Measures. Federal, state and local
officials and legislators (and certain foreign government officials and
legislators) have proposed or are reportedly considering proposing a variety of
reforms to the health care systems in the United States and abroad. The Company
cannot predict what health care reform legislation, if any, will be enacted in
the United States or elsewhere. Significant changes in the health care system
in the United States or elsewhere are likely to have a substantial impact over
time on the manner in which the Company conducts its business. Such proposals
and changes could have a material adverse effect on the Company's ability to
raise capital. Furthermore, the Company's ability to commercialize its
potential products may be adversely affected to the extent that such proposals
have a material adverse effect on the business, financial condition and
profitability of other companies that are prospective corporate partners with
respect to certain of the Company's proposed products.

Uncertain Extent of Price Flexibility and Third-Party Reimbursement. The
Company's ability to commercialize its products successfully will depend in part
on the extent to which appropriate reimbursement levels for the cost of such
products and related treatment are obtained from government authorities, private
health insurers and other organizations, such as health maintenance
organizations ("HMOs"). Third party payers are increasingly challenging the
prices charged for medical products and services. Also, the trend towards
managed health care in the United States and the concurrent growth of
organizations such as HMOs, which could control or significantly influence the
purchase of health care services and products, as well as legislative proposals
to reduce government insurance programs, may all result in lower prices for the
Company's products. The cost containment measures that health care providers
are instituting could affect the Company's ability to sell its products and may
have a material adverse effect on the Company.

Government Regulation; Need for FDA and Other Regulatory Approval. Prior
to marketing, each of the Company's products must undergo an extensive
regulatory approval process conducted by the U.S. Food and Drug Administration
(the "FDA") and applicable agencies in other countries. The process, which
focuses on safety and efficacy and includes a review by the FDA of preclinical
testing and clinical trials and investigating as to whether good laboratory and
clinical practices were maintained during testing, takes many years and requires
the expenditure of substantial resources. The Company is, and will be dependent
on the external laboratories and medical institutions conducting its preclinical
testing and clinical trials to maintain both good laboratory practices
established by the FDA and good clinical practices. Data obtained from
preclinical and clinical testing are subject to varying interpretations which
could delay, limit or prevent regulatory approval. In addition, delays or
rejection may be encountered based upon changes in FDA policy for drug approval
during the period of development and by the requirement for regulatory review of
each submitted Product License Approval or New Drug Application. There can be
no assurance that, even after such time and expenditures, regulatory approval
will be obtained for any of the Company's product candidates. Moreover, such
approval may entail significant limitations on the indicated uses for which a
drug may be marketed. Even if such regulatory approval is obtained, a marketed
therapeutic product and its manufacturer are subject to continual regulatory
review, and later discovery of previously unknown problems with a product or
manufacturer may result in restrictions on such product or manufacturing,
including withdrawal of such product from the market. Change in the
manufacturing procedures used by the Company for any of the Company's approved
drugs are subject to FDA review, which could have an adverse effect upon the
Company's ability to continue the commercialization or sale of a drug. The
process of obtaining FDA and foreign regulatory approval is costly and time
consuming, and there can be no assurance that any product that the Company may
develop will be deemed to be safe and effective by the FDA. The Company will
not be permitted to market any product it may develop in any jurisdiction in
which the product does not receive regulatory approval.

The Company is also subject to various foreign, federal, state and local
laws, regulations and recommendations (collectively "Governmental Regulations")
relating to safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use, manufacture, storage, handling and
disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with the Company's
research and development work and manufacturing processes. Included in this
area is Good Manufacturing Practices ("GMP") compliance and its European
equivalent, ISO 9000. Currently, the Company's manufacturing activities for
preclinical and clinical supplies are not fully in GMP compliance, although the
Company expects to reach full compliance in the near future. There can be no
assurance that the Company will achieve such compliance. Although the Company
believes it is in compliance with all other Governmental Regulations in all
material respects there can be no assurance that the Company will not be
required to incur significant costs to comply with Governmental Regulations in
the future.

-8-

<PAGE>

Competition; Technological Change. There is substantial competition in the
pharmaceutical field in general and in vaccine development and lyposomal
formulation in particular. The Company's competitors include companies with
financial resources, and licensing, research and development staffs and
facilities substantially greater than those of the Company. Competitors in the
vaccine development field include major pharmaceutical companies, specialized
biotechnology firms, universities and governmental agencies, including American
Home Products, the Merck Company, SmithKline Beecham, MedImmune, Aviron and
Chiron. Competitors in the liposomal formulation field include The Liposome
Company, NexStar and Sequus. A competitor in the field of the oral delivery of
drugs is Emisphere which is currently in Phase I trials for oral heparin and in
preclinical development with an oral human growth hormone. Many competitors
have greater experience than the Company in undertaking preclinical testing and
clinical trials and obtaining FDA and other regulatory approvals. There can be
no assurance that the Company's competitors will not succeed in developing
similar technologies and products more rapidly than the Company and that these
technologies and products will not be more effective than any of those that are
being or will be developed by the Company, or that such competitors'
technologies and products will not render the Company's technologies and
products obsolete or noncompetitive.

Manufacturing and Marketing Capabilities. The Company does not now have,
and probably will not have in the foreseeable future, the resources to
manufacture or directly market on a large commercial scale any products which it
may develop. In connection with the Company's research and development
activities, it will seek to enter into collaborative arrangements with
pharmaceutical companies to assist in funding development costs, including the
costs of clinical testing necessary to obtain regulatory approvals. It is
expected that these entities will also be responsible for commercial scale
manufacturing which must be in compliance with applicable FDA regulations. The
Company anticipates that such arrangements may involve the grant by the Company
of the exclusive or semi-exclusive right to sell specific products to specified
market segments in particular geographic territories in exchange for a royalty,
joint venture, future co-marketing or other financial interest. The Company
believes that these arrangements will be more effective in promoting and
distributing therapeutic products in the United States in view of the Company's
limited resources and the extensive marketing networks and large advertising
budgets of large pharmaceutical companies. To date, the Company has not entered
into any collaborative marketing agreements or distributorship arrangements for
any of its proposed products and there can be no assurance that the Company will
be able to enter into any such arrangements on favorable terms or at all. The
Company may ultimately determine to establish its own manufacturing and/or
marketing capability, at least for certain products, in which case it will
require substantial additional funds and personnel.

Use of Hazardous Materials; Environmental Matters. The Company's research
and development involves the controlled use of small quantities 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 federal, state and local regulations,
the risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company could be held liable
for any resulting damages, and any such liability could exceed the resources of
the Company. There can be no assurance that the Company will not be required to
incur significant costs to comply with environmental laws and regulations in the
future, nor that the operations, business or assets of the Company will not be
materially adversely affected by current or future environmental laws or
regulations.

Product Liability Exposure; Limited Insurance Coverage. The testing and
marketing of pharmaceutical products entails an inherent risk of exposure to
product liability claims from adverse effects of products. The Company has
obtained liability insurance with limits of liability of $1,000,000 for each
claim and $3,000,000 in the aggregate. There is no assurance that current or
future policy limits will be sufficient to cover all possible liabilities.
Further, there can be no assurance that adequate product liability insurance
will continue to be available in the future or that it can be maintained at
reasonable costs to the Company. In the event of a successful product liability
claim against the Company, lack or insufficiency of insurance coverage could
have an adverse effect on the Company.

Dependence on Key Personnel and Scientific Advisors; Evolution of
Management. The Company is dependent on the principal members of its management
and scientific staff, the loss of whose services could impede the achievement of
development objectives. Furthermore, as the Company's focus evolves, the
Company's need for certain skills may diminish and the need for other skills may
arise. Thus, recruiting and retaining qualified scientific personnel to perform
research and development work in the future will also be critical to the
Company's success and may lead to further evolution of the Company's management.
Although the Company believes it will

-9-

<PAGE>

be successful in attracting and retaining skilled and experienced scientific
personnel, there can be no assurance that the Company will be able to attract
and retain such personnel on acceptable terms given the competition among
numerous pharmaceutical and health care companies, universities and non-profit
research institutions for experienced scientists and managers.

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

Limited Personnel; Dependence on Contractors. The Company has thirteen
full-time employees. With these exceptions, the Company relies, and for the
foreseeable future will rely, on certain independent organizations, advisors and
consultants to provide certain services with regard to clinical research. There
can be no assurance that their services will continue to be available to the
Company on a timely basis when needed, or that the Company could find qualified
replacements. The Company's advisors and consultants generally sign agreements
that provide for confidentiality of the Company's proprietary information.
However, there can be no assurance that the Company will be able to maintain the
confidentiality of the Company's technology, the dissemination of which could
have a material adverse effect on the Company's business, financial condition or
results of operations.

Conducting Business Abroad. Although the Company currently does not
conduct business outside the United States, it is in discussions with potential
strategic partners for the in-licensing and out-licensing of technology and the
development and marketing of its products. No assurance can be given that the
Company will be able to establish arrangements covering foreign countries, that
the necessary foreign regulatory approvals for its product candidates will be
obtained, that foreign patent coverage will be available or that the development
and marketing of its products through such licenses, joint ventures or other
arrangements will be commercially successful. The Company may also have greater
difficulty obtaining proprietary protection for its products and technologies
outside the United States rather than in it, and enforcing its rights in foreign
courts rather than in United States courts.

Limited Availability of Net Operating Loss Carry Forwards. For Federal
income tax purposes, net operating loss and tax credit carryforwards as of
December 31, 1996 are approximately $1,929,000 and $260,000, respectively.
These carryforwards will expire beginning in 2003 through 2010. The Tax Reform
Act of 1986 provided for a limitation on the use of net operating loss and tax
credit carryforwards following certain ownership changes. The Company believes
that the Private Placement, together with certain prior issuances of Common
Stock, is likely to restrict severely the Company's ability to utilize its net
operating losses and tax credits. Additionally, because U.S. tax laws limit the
time during which net operating loss and tax credit carryforwards may be applied
against future taxable income tax liabilities, the Company may not be able to
fully utilize its net operating loss and tax credits for federal income tax
purposes.

Potential Volatility of Price; Low Trading Volume. The market price of the
Common Stock, like that of many other development-stage public pharmaceutical or
biotechnology companies, has been highly volatile and may continue to be in the
future. Factors such as announcements of technological innovations or new
commercial products by the Company or its competitors, disclosure of results of
preclinical and clinical testing, adverse reactions to products, governmental
regulation and approvals, developments in patent or other proprietary rights,
public or regulatory agency concerns as to the safety of products developed by
the Company and general market conditions may have a significant effect on the
market price of the Common Stock and its other equity securities. In addition,
in general, the Common Stock has been thinly traded on the OTC Bulletin Board,
which may affect the ability of the Company's stockholders to sell shares of the
Common Stock in the public market. There can be no assurance that a more active
trading market will develop in the future.

Risks of Low-Priced Stock; Possible Effect of "Penny Stock" Rules on
Liquidity for the Company's Securities. Since the Company's securities are not
listed on a national securities exchange nor listed on a qualified automated
quotation system, they are, under certain circumstances, subject to Rule 15g-9
under the Securities

-10-

<PAGE>

Exchange Act of 1934, as amended (the "Exchange Act"), which imposes additional
sales practice requirements on broker-dealers that sell such securities to
persons other than established customers and "accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses). For transactions covered by
this Rule, a broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to sale. Consequently, such rule may affect the ability of broker-dealers
to sell the Company's securities and may materially adversely affect the ability
of purchasers in this Offering to sell any of the securities acquired hereby,
after subsequent registration, in the secondary market.

The SEC has adopted regulations that define a "penny stock" to be any
equity security that has a market price (as therein defined) of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market.
Disclosure is also required to be made about sales commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.

The foregoing required penny stock restrictions will not apply to the
Company's securities so long as the Company meets certain minimum net tangible
assets or average revenue criteria. Even while the Company's securities are
exempt from such restrictions, the Company would remain subject to Section
15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any
person from participating in a distribution of penny stock, if the SEC finds
that such a restriction would be in the public interest.

Dividends. The Company has never paid cash dividends on its Common Stock
and does not anticipate paying any such dividends in the foreseeable future.
The Company currently intends to retain its earnings, if any, for the
development of its business.

Certain Interlocking Relationships; Potential Conflicts of Interest. Steve
H. Kanzer, C.P.A., Esq., a director of the Company, is a Senior Managing
Director of the Placement Agent. See "Subsequent Events -- Private Placement."
Paramount Capital Asset Management, Inc. ("PCAM") is the investment manager and
general partner of The Aries Fund, a Cayman Island Trust, and the Aries Domestic
Fund, L.P., respectively. Lindsay A. Rosenwald, M.D., the President and sole
stockholder of PCAM, is also the President and sole stockholder of the Placement
Agent. Dr. Rosenwald is also President and sole stockholder of Paramount
Capital Investment LLC, a merchant banking and venture capital firm specializing
in biotechnology companies ("PCI"). In addition, certain officers, employees
and/or associates of the Placement Agent and/or its affiliates own securities in
the Company's subsidiaries. In the regular course of its business, PCI
identifies, evaluates and pursues investment opportunities in biomedical and
pharmaceutical products, technologies and companies. Generally, Delaware
corporate law requires that any transactions between the Company and any of its
affiliates be on terms that, when taken as a whole, are substantially as
favorable to the Company as those then reasonably obtainable from a person who
is not an affiliate in an arms-length transaction. Nevertheless, neither such
affiliates nor PCI is obligated pursuant to any agreement or understanding with
the Company to make any additional products or technologies available to the
Company, nor can there be any assurance, and the Company does not expect and
purchasers of the securities offered hereby should not expect, that any
biomedical or pharmaceutical product or technology identified by such affiliates
or PCI in the future will be made available to the Company. In addition,
certain of the current officers and directors of the Company or certain of any
officers or directors of the company hereafter appointed may from time to time
serve as officers or directors of other biopharmaceutical or biotechnology
companies. There can be no assurance that such other companies will not have
interests in conflict with those of the Company.

Concentration of Ownership and Control. The Company's directors, executive
officers and principal stockholders and certain of their affiliates have the
ability to influence the election of the Company's directors and most other
stockholder actions. In particular, pursuant to the Placement Agency Agreement,
so long as 50% of the Placement Shares remain outstanding and subject
contractual rights described in the Subscription Agreement between the Company
and each signatory thereto (the "Subscription Agreements"), the Company may not
do any of the following without the Placement Agent's prior approval: (i) issue
or increase the authorized amount or alter the terms of any securities of the
Company senior to, or on parity with, the Placement Shares with respect to
voting, liquidation or dividends, (ii) alter the Company's charter documents in
any manner that would adversely affect the

-11-

<PAGE>

relative rights, preferences, qualifications, limitations or restrictions of the
Placement Shares or of certain contractual rights described in the Subscription
Agreements, (iii) incur indebtedness in excess of $1,000,000, (iv) incorporate
or acquire any subsidiaries and (v) enter any transactions with affiliates of
the Company. In addition, the Company's Board of Directors cannot exceed seven
persons without the prior written consent of the Placement Agent. These
arrangements may discourage or prevent any proposed takeover of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over the then current market prices. Such stockholders may
influence corporate actions, including influencing elections of directors and
significant corporate events. See also, "--Certain Interlocking Relationships;
Potential Conflicts of Interest."

-12-
<PAGE>
ISSUANCE OF THE WARRANT SHARES AND USE OF PROCEEDS

The Warrant Shares are issuable by the Company to certain Selling
Stockholders pursuant to an exemption from registration under the Securities Act
upon the exercise of outstanding Warrants. The aggregate gross proceeds that the
Company could receive on the exercise of all of the outstanding Warrants being
registered hereunder is $5,100,000 (assuming an exercise price of $2.54375, the
current exercise price of the Warrants). The exercise price of the Warrants is
subject to adjustment under certain circumstances including if the Company
issues shares of its Common Stock below the average closing bid price of the
Common Stock on the OTC Bulletin Board, or such other exchange on which the
Common Stock is traded, for the 20 consecutive trading days ending on the
trading day immediately prior to the date on which such price is being
determined. No adjustment to the Warrants' exercise price is required if, among
other events, the Company issues shares of its Common Stock pursuant to a stock
option plan approved by the Company's Board of Directors.

The Company intends to use net proceeds, if any, from the exercise of the
Warrants for general corporate purposes, including working capital. None of the
proceeds from the sale of the Shares will be received by the Company.

SELLING STOCKHOLDERS

The following table sets forth the names of the Selling Stockholders and the
number of shares being registered for sale hereby as of the date of the
Prospectus and sets forth the number of shares of Common Stock known by the
Company to be beneficially owned by each of the Selling Stockholders as of
December 31, 1997. Except as indicated, none of the Selling Stockholders has had
a material relationship with the Company within the past three years other than
as a result of the ownership of the Shares or other securities of the Company.
The Shares offered by this Prospectus may be offered from time to time by the
Selling Stockholders. See "Plan of Distribution."

-13-
<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
NUMBER OF SHARES AFTER OFFERING(1)
BENEFICIALLY NUMBER OF SHARES --------------------------
OWNED REGISTERED NUMBER
NAME OF SELLING SHAREHOLDER PRIOR TO OFFERING FOR SALE HEREBY OF SHARES PERCENT
- ------------------------------------------------------- ----------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Cambrian Investments Limited
Partnership............................................ 10,811 10,811 0 *
Cass and Co.-Magnum Capital Growth Fund................ 43,244 43,244 0 *
Cass, Rosemary......................................... 8,649 8,649 0 *
CHI Trust.............................................. 10,811 10,811 0 *
Conrads, Robert J...................................... 21,622 21,622 0 *
Cox, Archibald, Jr..................................... 64,865 64,865 0 *
Curran, John P......................................... 10,811 10,811 0 *
Dale and Kim Sefarian.................................. 10,811 10,811 0 *
David Wilstein and Susan Wilstein, Ttee
of The Century Trust dated 12/18/94.................. 43,244 43,244 0 *
Donald E. and Virginia V. Vinson Trust................. 10,811 10,811 0 *
Doyle, J. William...................................... 21,622 21,622 0 *
Drapkin, Donald G...................................... 43,244 43,244 0 *
Drax Holdings, LP...................................... 216,217 216,217 0 *
Edelman, Joseph (4).................................... 8,702 8,702 0 *
Elkon, Sheila J........................................ 8,649 8,649 0 *
Evans, T. Cartter...................................... 17,298 17,298 0 *
Evans, Todd............................................ 25,946 25,946 0 *
Everett, Willis M. III................................. 17,298 17,298 0 *
Faisal Finance (Switzerland) S.A....................... 129,730 129,730 0 *
Falk, Robert I......................................... 43,244 43,244 0 *
Fischer, Lauren (5).................................... 1,000 1,000 0 *
Florin, Marc (6)....................................... 9,081 9,081 0 *
Frese Family Trust dated 4/1/96........................ 10,811 10,811 0 *
Fried, Albert, Jr...................................... 86,487 86,487 0 *
Frolich, Craig S....................................... 10,811 10,811 0 *
Frolich, David J. and Terri A.......................... 10,811 10,811 0 *
Gerald and Gloria Frolich, JT Tenants.................. 10,811 10,811 0 *
Giamanco, Joseph....................................... 21,622 21,622 0 *
Giant Trading, Inc..................................... 43,244 43,244 0 *
Gilbert Goldstein, Paul Shapiro Trustees
UIT Howard Gittis, dated 12/23/88.................... 54,055 54,055 0 *
Gittis, Howard......................................... 54,055 54,055 0 *
Gordon, Michael J...................................... 5,406 5,406 0 *
Greenberg, Alan Neil and Joy M. JT..................... 21,622 21,622 0 *
Grody, Rachel K........................................ 12,973 12,973 0 *
Gross, Bernhard (7).................................... 4,865 4,865 0 *
Harold Grossman, Ttee, The Grossman
Family Trust......................................... 10,811 10,811 0 *
Harrigan Family Trust.................................. 10,811 10,811 0 *
Henry, Steven T. and Frances M......................... 10,811 10,811 0 *
Heritage Finance and Trust Co.......................... 216,217 216,217 0 *
Hikari Power........................................... 43,244 43,244 0 *
Hilti Invest Limited (State Street Bank
GmbH)................................................ 108,109 108,109 0 *
HJK, LLC............................................... 86,487 86,487 0 *
Horowitz Family Trust, Richard M.
Horowitz, Trustee.................................... 10,811 10,811 0 *
Hyman Lezell Rev. Trust................................ 21,622 21,622 0 *
IMS Global Investments X Ltd........................... 345,946 345,946 0 *
Ivan Kaufman Grantor Retained Annuity
Trust................................................ 86,487 86,487 0 *
J.F. Shea Co., Inc. as Nominee 1997-50................. 216,217 216,217 0 *
Jackson Hole Investments Acquisitions LP............... 21,622 21,622 0 *
</TABLE>

-14-
<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
NUMBER OF SHARES AFTER OFFERING(1)
BENEFICIALLY NUMBER OF SHARES --------------------------
OWNED REGISTERED NUMBER
NAME OF SELLING SHAREHOLDER PRIOR TO OFFERING FOR SALE HEREBY OF SHARES PERCENT
- ------------------------------------------------------- ----------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
John S. Osterweis, Ttee, The Osterweis
Revocable Trust UA dated 9/13/93..................... 10,811 10,811 0 *
Joshua Black Trust..................................... 10,811 10,811 0 *
Kapito, Robert S....................................... 21,622 21,622 0 *
Karen Cook IRA......................................... 8,649 8,649 0 *
Kash, Peter (8)........................................ 110,551 110,551 0 *
Kash, Peter and Donna JTWROS (9)....................... 10,811 10,811 0 *
Katzmann, Scott A. (10)................................ 63,289 63,289 0 *
Keesee, Thomas W. III and Angela O.B. de Mello......... 10,811 10,811 0 *
Kehaya, Ery W.......................................... 21,622 21,622 0 *
Keio University........................................ 432,433 432,433 0 *
Kendall, Donald R. Jr.................................. 21,622 21,622 0 *
Kessel, Shirley S...................................... 10,811 10,811 0 *
Keys Foundation Curacao, Netherland Antilles........... 129,730 129,730 0 *
Kimtar Investments LLC................................. 172,973 172,973 0 *
Kohut, Richard......................................... 10,811 10,811 0 *
Kratchman, Martin S. (11).............................. 36,541 36,541 0 *
L and D Partnership.................................... 10,811 10,811 0 *
Lebovitz, Stephen H.................................... 10,811 10,811 0 *
Lenz Family Trust...................................... 10,811 10,811 0 *
Leo A. Small and Shelle D. Small....................... 10,811 10,811 0 *
Levine, Jeff (12)...................................... 10,811 10,811 0 *
LGT Bank in Liechtenstein AG........................... 43,244 43,244 0 *
Lisenby, S. Alan....................................... 10,811 10,811 0 *
Loeb, John L., Jr...................................... 10,811 10,811 0 *
Lydecker, Richard A. and Gay C......................... 2,163 2,163 0 *
Maeda, Susumu.......................................... 43,244 43,244 0 *
Maidenhair NV.......................................... 43,244 43,244 0 *
McInerney, Tim (13).................................... 1,946 1,946 0 *
MDBC Capital Corp...................................... 21,622 21,622 0 *
Mega International Corp................................ 21,622 21,622 0 *
Metzger, William and Katharine......................... 10,811 10,811 0 *
Meyer, Maurice III..................................... 10,811 10,811 0 *
MHR Capital Partners L.P............................... 432,433 432,433 0 *
Michael G. Jesselson 12/18/80 Trust.................... 86,487 86,487 0 *
Michael L. and Sherry R. Andrade,
Co-Ttees of MandS Andrade Rev. TR.
For Comm. and Sep. Property UA dtd
10-14-74, as amended................................. 10,811 10,811 0 *
Michael L. Metter, SEP-IRA............................. 21,622 21,622 0 *
Moonlight International, Ltd........................... 21,622 21,622 0 *
Moscati, Leonard F..................................... 86,487 86,487 0 *
Mullen, Michael A...................................... 10,811 10,811 0 *
Nagle, Arthur J........................................ 10,811 10,811 0 *
Negrin, Renato......................................... 21,622 21,622 0 *
Nomura Bank (Switzerland) Ltd.......................... 108,109 108,109 0 *
Oct 1983 Trust FBO Jesselson
Grandchildren........................................ 216,217 216,217 0 *
Oretexga Ltd. Partnership.............................. 15,136 15,136 0 *
Ostrovsky, Paul D. and Rebecca L....................... 6,487 6,487 0 *
Ostrovsky, Steven N.................................... 10,811 10,811 0 *
Oxcal Venture Fund LP.................................. 43,244 43,244 0 *
Palmetto Partners, Ltd................................. 86,487 86,487 0 *
</TABLE>

-15-
<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
NUMBER OF SHARES AFTER OFFERING(1)
BENEFICIALLY NUMBER OF SHARES --------------------------
OWNED REGISTERED NUMBER
NAME OF SELLING SHAREHOLDER PRIOR TO OFFERING FOR SALE HEREBY OF SHARES PERCENT
- ------------------------------------------------------- ----------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Pellizzon, Gregory P. and Christine K.,
JTWROS............................................... 10,811 10,811 0 *
Pellizzon, Peter and Pamela............................ 10,811 10,811 0 *
Pequot Scout Fund, L.P................................. 216,217 216,217 0 *
Prager, Tis............................................ 21,622 21,622 0 *
Privat Kredit Bank..................................... 172,973 172,973 0 *
Richard B. Chanin, IRA................................. 17,298 17,298 0 *
Rick Steiner Productions, Inc.......................... 12,973 12,973 0 *
Robert and Evelyn Elliott Trust........................ 10,811 10,811 0 *
Robert L. Spint, Ttee, Robert L. Spint TR
UD dated 10/19/89.................................... 10,811 10,811 0 *
Robert, Stephen........................................ 43,244 43,244 0 *
Rosenwald, Lindsay A. (14)............................. 1,434,032 1,434,032 0 *
Rubin, Wayne, L. (15).................................. 44,758 44,758 0 *
Ruggeberg, Karl (16)................................... 11,875 11,875 0 *
Ruttenberg, David W.................................... 10,811 10,811 0 *
Sagres Group Ltd....................................... 146,595 146,595 0 *
Sanger Investments..................................... 6,487 6,487 0 *
Schlotterbeck, Robert.................................. 10,811 10,811 0 *
Schonzeit, Andrew...................................... 21,622 21,622 0 *
Schwinger, Scott E..................................... 2,163 2,163 0 *
Silverman, Jeffrey S................................... 32,433 32,433 0 *
Slovin, Bruce.......................................... 43,244 43,244 0 *
Solomon, Deborah (18).................................. 5,405 5,405 0 *
Sparx Asset Management (19)............................ 22,703 22,703 0 *
Spear, Leeds and Kellogg............................... 108,109 108,109 0 *
Steinhardt, Michael H.................................. 43,244 43,244 0 *
Stern, James D......................................... 10,811 10,811 0 *
Stern Joint Venture, L.P............................... 43,244 43,244 0 *
Stern, Richard J....................................... 43,244 43,244 0 *
Subbah, M.D............................................ 43,244 43,244 0 *
Suppa, Enrico.......................................... 10,811 10,811 0 *
Taub, Hindy............................................ 21,622 21,622 0 *
Tauber, Herman......................................... 21,622 21,622 0 *
Teitelbaum, Myron M., M.D.............................. 10,811 10,811 0 *
The 1992 Houston Partnership, L.P...................... 43,244 43,244 0 *
The Aries Fund (20).................................... 1,742,980 1,233,746 509,234 5.2
Thomas L. Cassidy...................................... 21,622 21,622 0 *
Tokenhouse Trading Company Limited..................... 43,244 43,244 0 *
Trophy Hunter Investments, Ltd......................... 43,244 43,244 0 *
Valori Associates, Inc................................. 10,811 10,811 0 *
Victoria Black Trust................................... 10,811 10,811 0 *
Virgin Valley Credit Union Custodian
FBO Richard G. Fick IRA.............................. 10,811 10,811 0 *
Vitols, Juris.......................................... 43,244 43,244 0 *
Walner, David (21)..................................... 6,370 6,370 0 *
Warwick Investments Ltd................................ 43,244 43,244 0 *
Weiss, Melvyn I........................................ 43,244 43,244 0 *
Weiss, Michael (22).................................... 47,704 47,704 0 *
Whetten, Robert J...................................... 30,919 30,919 0 *
Widmer,Bruno........................................... 21,622 21,622 0 *
Wise, Alan and/or Terri JT............................. 10,811 10,811 0 *
Wolf, David A.......................................... 10,811 10,811 0 *
Wolford, Robert B...................................... 10,811 10,811 0 *
Yamazaki, Yoshimasa.................................... 43,244 43,244 0 *
</TABLE>

-16-
<PAGE>
- ------------------------

* Less than 1%.

(1) The figures for the number of shares and the percentage of shares
beneficially owned by the Selling Stockholders after the offering are based
on the assumption that all of the Selling Stockholders will sell all of the
shares registered for sale hereby. See "Plan of Distribution."

(2) Consists of 1,297 shares issuable upon exercise of a Warrant held by such
person. Mr. Abeshouse is an employee of the Placement Agent.

(3) Includes 56,533 shares issuable upon exercise of a Warrant and 23,333 shares
issuable upon a warrant exercisable until May 19, 2002 at a price of
$2.54375 each held by such entity. Lindsay A. Rosenwald, M.D. is the
president and sole shareholder of PCAM, the general partner of the Aries
Domestic Fund, L.P. Dr. Rosenwald and PCAM share the power to vote and/or
dispose of the shares of Common Stock held by the Aries Domestic Fund, L.P.,
but disclaim beneficial ownership thereof except to the extent of their
pecuniary interest therein, if any. See "Risk Factors--Certain Interlocking
Relationships; Potential Conflicts of Interest" "Risk Factors--Concentration
of Ownership and Control" for a description of certain material
relationships between the Aries Domestic Fund, L.P. and the Company. See
also "Subsequent Events--Private Placement."

(4) Consists of 8,702 shares issuable upon exercise of a Warrant held by such
person. Mr. Edelman is an employee of the Placement Agent.

(5) Consists of 1,000 shares issuable upon exercise of a Warrant held by such
person. Ms. Fischer is an employee of the Placement Agent.

(6) Consists of 9,081 shares issuable upon exercise of a Warrant held by such
person. Mr. Florin is an employee of the Placement Agent.

(7) Consists of 4,865 shares issuable upon exercise of a Warrant held by such
person. Mr. Gross is an employee of the Placement Agent.

(8) Consists of 110,551 shares issuable upon exercise of a Warrant held by such
person. Mr. Kash is a Senior Managing Director of the Placement Agent.

(9) Peter Kash is a Senior Managing Director of the Placement Agent.

(10) Consists of 63,289 shares issuable upon exercise of a Warrant held by such
person. Mr. Katzmann is an employee of the Placement Agent.

(11) Consists of 36,541 shares issuable upon exercise of a Warrant held by such
person. Mr. Kratchman is an employee of the Placement Agent.

(12) Consists of 10,811 shares issuable upon exercise of a Warrant held by such
person. Mr. Levine is an employee of the Placement Agent.

(13) Consists of 1,946 shares issuable upon exercise of a Warrant held by such
person. Mr. McInerney is an employee of the Placement Agent.

(14) Consists of 1,434,032 shares issuable upon exercise of a Warrant held by
such person. See Notes 3 and 20 and "Risk Factors-- Certain Interlocking
Relationships; Potential Conflicts of Interest" "Risk Factors--Concentration
of Ownership and Control" for a description of certain material
relationships between Dr. Rosenwald and the Company.

(15) Consists of 44,758 shares issuable upon exercise of a Warrant held by such
person. Mr. Rubin is an employee of the Placement Agent.

-17-
<PAGE>

(16) Consists of 11,875 shares issuable upon exercise of a Warrant held by such
person. Mr. Ruggeberg is an employee of the Placement Agent.

(17) Includes 16,865 shares issuable upon exercise of a Warrant held by such
entity.

(18) Consists of 5,405 shares issuable upon exercise of a Warrant held by such
person. Ms. Solomon is an employee of the Placement Agent.

(19) Consists of 22,703 shares issuable upon exercise of a Warrant held by such
entity.

(20) Includes 112,533 shares issuable upon exercise of a Warrant and 43,334
shares issuable upon exercise of a warrant exercisable until May 19, 2002 at
$2.54375 each held by such entity. Lindsay A. Rosenwald, M.D. is the
president and sole shareholder of PCAM, the investment manager of The Aries
Fund, a Cayman Island trust. Dr. Rosenwald and PCAM share the power to vote
and/or dispose of the shares of Common Stock held by The Aries Fund, but
disclaim beneficial ownership thereof except to the extent of their
pecuniary interest therein, if any. See "Risk Factors--Certain Interlocking
Relationships; Potential Conflicts of Interest" "Risk Factors--Concentration
of Ownership and Control" for a description of certain material
relationships between The Aries Fund and the Company. See also "Subsequent
Events--Private Placement."

(21) Consists of 6,370 shares issuable upon exercise of a Warrant held by such
person. Mr. Walner is an employee of the Placement Agent.

(22) Consists of 47,704 shares issuable upon exercise of a Warrant held by such
person. Mr. Weiss is an employee of the Placement Agent.

Of the Shares being offered hereby, the Private Placement Shares were
acquired by the Selling Stockholders from the Company in the Private Placement
and the Warrant Shares were acquired by the Placement Agent and/or its designees
in connection with the Private Placement and the execution of the Financial
Advisory Agreement. See "Subsequent Events--Private Placement." Assuming the
exercise of all the outstanding Warrants, the Warrant Shares will be acquired by
the Selling Stockholders at a purchase price per share of $2.54375, subject to
adjustment under certain circumstances. The Shares are being included in this
offering as a result of certain contractual arrangements with the Selling
Stockholders. The Company has agreed to bear the expenses (other than selling
commissions and fees and expenses of certain advisors to the Selling
Stockholders) in connection with the registration of the Shares.

The sale of Shares by "affiliates" (as such term is defined in Rule 144(a)
under the Securities Act) are subject to the volume and manner of sale
restrictions set forth in Rule 144. The Company has agreed to prepare and file
such amendments and supplements to the Registration Statement as may be
necessary to keep this Registration Statement effective until such date as the
holders of the Shares have completed the distribution described herein or until
such time that the Shares are no longer, by reason of Rule 144(k) under the
Securities Act, required to be registered.

The Private Placement Shares to which this Prospectus relates are subject to
a partial, diminishing lock-up for a period of up to nine months after the
effective date (the "Effective Date") of the Registration Statement of which
this Prospectus forms a part. Without the prior written consent of the Placement
Agent, the holders of such shares may not directly or indirectly sell or
otherwise dispose of such according to the following schedule: 75% of such
shares are subject to lock-up until three months after the Effective Date; 50%
of such shares are subject to lock-up until six months after the Effective Date;
and 25% of such shares are subject to lock-up until nine months after the
Effective Date. The remaining 25% of such shares are not subject to any lock-up
restriction.

-18-

<PAGE>
PLAN OF DISTRIBUTION

The Shares covered hereby may be offered and sold from time to time by the
Selling Stockholders, pursuant to this Prospectus or Rule 144 under the
Securities Act (or any other applicable exemption from registration under the
Securities Act). The Selling Stockholders will act independently of the Company
in making decisions with respect to the timing, manner and size of each sale.
The Selling Stockholders may sell the Shares being offered hereby in one or more
transactions, including block transactions, in the over-the-counter market, on
any Exchange pursuant to and in accordance with the applicable rules of such
Exchanges, in negotiated transactions or in a combination of any such methods of
sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices.

The Shares may be offered directly, to or through agents designated from
time to time or through brokers or dealers, or through any combination of these
methods of sale. Such agent, broker or dealer may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). A member
firm of an Exchange may be engaged to act as the Selling Stockholder's agent in
the sale of Shares by the Selling Stockholder. Brokerage fees will be paid by
the Selling Stockholders.

At the time a particular offer of Shares is made, to the extent required, a
supplemental Prospectus will be distributed which will set forth the number of
Shares being offered and the terms of the offering including the name or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from Selling Stockholders, any discounts,
commissions and other items constituting compensation from the Selling
Stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers.

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

The sale of Shares by affiliates are subject to the volume and manner of
sale restrictions set forth in Rule 144.

The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Selling Stockholder Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The Company has
agreed to indemnify certain Selling Stockholders and their affiliates against
certain liabilities, including liabilities under the Securities Act. Certain
Selling Stockholders have agreed to indemnify the Company and its affiliates
against certain liabilities, including liabilities under the Securities Act.

The Company has agreed to bear the expenses (other than selling commissions
and fees and expenses of certain advisors to the Selling Stockholders) in
connection with the registration of the Shares.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $.001 per share, and 500,000 shares of Preferred Stock,
par value $.05 per share.

Common Stock

As of December 31, 1997, there were 9,736,641 shares of Common Stock
outstanding, which were held of record by approximately 1,123 stockholders.

-19-
<PAGE>

The Warrants are exercisable beginning on April 16, 1998 until April 16,
2003, at an exercise price of $2.54375 per share, subject to adjustment under
certain circumstances (as more fully described under "Issuance of the Warrant
Shares and Use of Proceeds"). The Warrants contain a cashless exercise feature.

The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are fully paid and
non-assessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock.

LEGAL MATTERS

The validity of the Shares offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, New York, New York.

EXPERTS

The consolidated balance sheet as of December 31, 1996 and the consolidated
statements of operations, stockholders' equity and cash flows for the period
from February 1, 1996 to December 31, 1996 incorporated in this prospectus by
reference, have been incorporated herein in reliance on the report (which
includes an explanatory paragraph which refers to the Company's ability to
continue as a going concern, as discussed in Note 9 to the consolidated
financial statements) of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.

The statements of operations, stockholders' equity and cash flows for the
year ended January 31, 1996 and the period cumulative from inception (February
15, 1985) to January 31, 1996 are incorporated in this prospectus by reference,
have been incorporated herein in reliance on the report of Moore Stephens, P.C.,
former independent accountants, given on the authority of that firm as experts
in accounting and auditing.

The engagement of Moore Stephens, P.C. ended on January 20, 1997:

(1) Moore Stephens, P.C.'s report on the financial statements for either
of the past two fiscal years and any subsequent interim period through the date
of such dismissal did not contain an adverse opinion or disclaimer of opinion
and was not modified as to uncertainty, audit scope or accounting principles.

(2) The decision to change accountants was approved by the Company's Board
of Directors on January 7, 1997.

(3) There were no disagreements or reportable events with Moore Stephens,
P.C., whether or not resolved, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to Moore Stephens, P.C.'s satisfaction, would have caused
it to make reference to the subject matter of the disagreements in connection
with its reports.

Coopers and Lybrand L.L.P. was engaged by the Company as its independent
accountants on January 20, 1997. Coopers and Lybrand L.L.P. was not consulted
by the Company with respect to the application of accounting principles to a
specific completed transaction or contemplated transaction, or the type of audit
opinion that might be rendered on the Company's financial statement.

The Company has agreed to indemnify Moore Stephens, P.C. for any legal fees
it may incur in connection with the reissuance of its January 1996 report.

-20-
<PAGE>

INDEMNIFICATION

Article Thirteenth of the Company's Certificate of Incorporation, as
amended, and Article VII of the Company's By-Laws provide that the Company may
indemnify each current and former director, officer, and any employee or agent
of the corporation, his or her heirs, executors, and administrators, against
expenses reasonably incurred or any amounts paid by him or her in connection
with any action, suit, or proceeding to which he or she may be made a party by
reason of being or having been a director, officer, employee or agent of the
corporation to the fullest extent permitted by the Delaware General Corporation
Law.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

Reference is made to Section 145 of the Delaware General Corporation Law as
such Sections pertain to indemnification matters.

-21-
<PAGE>

10,655,202 Shares

Endorex Corp.

Common Stock

PROSPECTUS

March 11, 1998

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth an estimate of the expenses to be incurred
by the Company in connection with the issuance and distribution of the
securities being registered:

Amount to
Be Paid
-------------
<S> <C>

Registration Fee -- SEC.............................. $20,132
Legal Fees and Expenses.............................. 10,000
Accounting Fees and Expenses......................... 2,500
Miscellaneous........................................ 7,368
-------
Total................................................ $40,000
-------
-------

</TABLE>

Item 15. Indemnification of Directors and Officers

Reference is made to Section 145 of the Delaware General Corporation Law as
such Sections pertain to indemnification matters.

Item 16. Exhibits

The following is a list of Exhibits filed as part of the Registration
Statement:

<TABLE>

<S> <C>

3.1 Certificate of Incorporation of Registrant. (1)
3.2 Certificate of Ownership and Merger filed March 30, 1987. (1)
3.3 Certificate of Amendment to Certificate of Incorporation filed
September 7, 1989. (2)
3.4 Certificate of Amendment to Certificate of Incorporation filed
November 13, 1990. (3)
3.5 Certificate of Amendment to Certificate of Incorporation filed May 29,
1991. (3)
3.6 Certificate of Amendment to Certificate of Incorporation filed
February 27, 1992. (3)
3.7 Certificate of Amendment to Certificate of Incorporation filed
February 27, 1992. (3)
3.8 Certificate of Amendment to Certificate of Incorporation filed
June 29, 1993. (7)
3.9 Certificate of Amendment to Certificate of Incorporation filed
April 15, 1996. (7)
3.10 By-laws of Registrant. (1)
4.1 Specimen Common Stock Certificate. (1)
4.2 Form of Warrant Agreement between the Registrant and American Stock
Transfer & Trust Company. (1)
4.3 Warrant for the Purchase of 864,865 shares of Common Stock. (8)
4.4 Warrant for the Purchase of 1,297,297 shares of Common Stock. (8)
5 Opinion of Brobeck, Phleger & Harrison LLP.

</TABLE>

II-1
<PAGE>

<TABLE>

<S> <C>

10.1 Patent License Agreement dated December 16, 1996 between the
Registrant and Massachusetts Institute of Technology. (7)
10.2 Consultation Agreement dated as of September 1, 1996 between the
Registrant and Kenneth Tempero, Ph.D., M.D.. (7)
10.3 Employment Agreement dated June 1,1996 between the Registrant and
Gerald Vosika. (7)
10.4 Letter Agreement Amendment and Waiver dated June 25, 1996 to
Employment Agreement between Registrant and Gerald Vosika dated June
1, 1996. (7)
10.5 Employment Agreement dated July 25, 1996 between the Registrant and
Michael S. Rosen. (5)
10.6 Employment Agreement dated December 1, 1996 between the Registrant and
Robert N. Brey. (7)
10.7 Purchase Agreement dated March 1, 1996 between the Registrant and
Dominion Resources, Inc. (4)
10.8 Purchase Agreement dated as of June 13, 1996 between the Registrant,
Dominion Resources, Inc., The Aries Fund and The Aries Domestic Fund,
L.P. (7)
10.9 Purchase Agreement dated as of June 26, 1996 between the Registrant,
The Aries Fund and The Aries Domestic Fund, L.P. (7)
10.10 Incentive Stock Option Plan. (1)
10.11 Lease dated April 28, 1993 between the Registrant and Landmark
Investors. (7)
10.12 Office Lease dated September 18, 1996 between the Registrant and
American National Bank & Trust Company of Chicago, as amended. (7)
10.13 Placement Agency Agreement between the Registrant and Paramount
Capital, Inc. dated July 1, 1997. (8)
10.14 Side Letter #1 to Placement Agency Agreement. (8)
10.15 Form of Subscription Agreement for the purchase of Common Stock. (8)
10.16 Financial Advisory Agreement between the Registrant and Paramount
Capital, Inc. dated October 16, 1997. (8)
11 Statement re: computation of per share earnings. (7)
16 Letter on change in certifying accountants. (6)
21 Subsidiaries of the Registrant. (7)
23.1 Consent of Coopers & Lybrand L.L.P., independent certified public
accountants.
23.2 Consent of Moore Stephens, P.C., independent certified public
accountants.
23.3 Consent of Brobeck Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5).
24 Powers of Attorney.*

</TABLE>

* Previously filed.

(1) Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (File No. 33-13492).
(2) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended January 31, 1989.
(3) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended January 31, 1992.
(4) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended January 31, 1996.
(5) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB for the fiscal quarter ended July 31, 1996.
(6) Incorporated by reference to the Registrant'ts Report on Form 8-K/A
dated February 10, 1997.
(7) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB, as amended, for the transition period ended December 31, 1996.
(8) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB, as amended, for the fiscal quarter ended September 30, 1997.

Item 17. Undertakings

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the

II-2
<PAGE>

Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

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

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

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

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Small Business Issuer certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Village of Lake Bluff, State of Illinois, on March 11,
1998.

ENDOREX CORP.

By: /s/ Michael S. Rosen
------------------------------------------
Michael S. Rosen
President and Chief Executive Officer, and
Director

Pursuant to the requirements of the Securities Act of 1933, as amended,
this the Registration Statement has been signed by the following persons in the
capacities indicated on March 11, 1998.

By: /s/ Michael S. Rosen
-----------------------
Michael S. Rosen President, Chief Executive Officer, and
Director

By: /s/ David G. Franckowiak
------------------------
David G. Franckowiak Vice President, Finance and
Administration
(Principal Financial and Accounting Officer)

By: *
-------------------------
Richard Dunning Director

By:
-------------------------
Steve H. Kanzer Director

By: *
-------------------------
Paul D. Rubin Director

By: *
-------------------------
H. Laurence Shaw Director

By:
-------------------------
Andrew Stein Director

By: *
-------------------------
Kenneth Tempero Director

By:
-------------------------
Steven Thornton Director

II-4
<PAGE>

*By: /s/ Michael S. Rosen
------------------------------
Michael S. Rosen
Attorney-in-fact

II-5

<PAGE>

Exhibit 5

March 11, 1998

Endorex Corp.
900 North Shore Drive
Lake Bluff, Illinois 60044

Ladies and Gentlemen:

We have assisted in the preparation and filing by Endorex Corp. (the
"Company") of a Registration Statement on Form S-2 (the "Registration
Statement"), with the Securities and Exchange Commission, relating to the sale
of up to 10,655,202 shares (the "Shares") of Common Stock, $.001 par value (the
"Common Stock"), of the Company.

We have examined such records and documents and have made such
examination of laws as we considered necessary to form a basis for the opinion
set forth herein. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to us as copies
thereof.

Based upon and subject to the foregoing, we are of the opinion that
the Shares have been duly authorized and, when sold and paid for in accordance
with the terms of the Underwriting Agreement, will be validly issued, fully paid
and nonassessable.

We hereby consent to the use of our name in the Registration Statement
under the caption "Legal Matters" in the related Prospectus and consent to the
filing of this opinion as an exhibit thereto.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this registration statement
on Form S-2 of our report (which includes an explanatory paragraph which refers
to the ability of Endorex Corp. (the "Company") to continue as a going concern,
as discussed in Note 9 to the consolidated financial statements) dated April 11,
1997, on our audit of the consolidated balance sheet of the Company as of
December 31, 1996 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period from February 1, 1996 to
December 31, 1996. We also consent to the reference to our firm under the
caption "Experts."

/s/ Coopers & Lybrand L.L.P.

Chicago, Illinois

March 9, 1998

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this registration statement
on Form S-2 of our report dated March 15, 1996, on our audit of the statements
of operations, stockholders' equity, and cash flows of Endorex Corp. (formerly
Immunotherapeutics, Inc.) (a development stage company) for the year ended
January 31, 1996 and for the cumulative period from February 15, 1985 (date of
inception) to January 31, 1996. We also consent to the reference to our firm
under the caption "Experts."

/s/ Moore Stephens, P.C.
----------------------------
MOORE STEPHENS, P.C.
Certified Public Accountants

Cranford, New Jersey
March 11, 1998