APHTON CORP, 10-K, 2000-05-01

APHTON CORP
10-K, 2000-05-01
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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______________________
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________

FORM 10-K
(MARK ONE)
( ) Annual Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended January 31, 2000

( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (No Fee Required)
For the transition period from _____ to _____

Commission File No. 0-19122
___________

APHTON CORPORATION
444 Brickell Avenue, Suite 51-507
Miami, Florida 33131-2492
(305) 374-7338
Incorporated in I.R.S. Employer
Delaware Identification
No. 95-3640931

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

Common Stock ($.001 par value)
______________________
Title of Each Class

Number of shares of Common Stock ($.001 par value)
Outstanding as of April 3, 2000: 15,592,384

Aggregate market value of Common Stock ($.001 par value)
held by non-affiliates on April 1, 2000
based on the last sale price on April 3, 2000: $445,500,963

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

Documents Incorporated by Reference

Document Part of Form 10-K
Proxy Statement for the Annual Part III
Meeting of Stockholders

PART I

Item 1. Business
The Company

Aphton Corporation is a biopharmaceutical company developing products using its
innovative vaccine-like technology for neutralizing hormones that participate in
gastrointestinal system and reproductive system cancer and non-cancer diseases;
and the prevention of pregnancy. Aphton has strategic alliances with Aventis
Pasteur (formerly Pasteur Merieux Connaught, Rhone-Poulenc Group), SmithKline
Beecham, Schering-Plough Animal Health and the World Health Organization (WHO).
Aphton's Web page, describing the company, its technology, products, strategic
alliances and news releases can be visited at: www.aphton.com.

Basis of Approach

Aphton's approach to the treatment of major diseases is to employ (anti)
"hormone therapy." Aphton's hormone therapy involves neutralizing, or blocking,
targeted hormones which play a critical role in diseases of the gastrointestinal
and reproduction systems. Aphton has selected the strategy of hormone therapy
because it has proved, over many years, to be efficacious in the treatment of
major diseases, both malignant and non-malignant. In short, because this
risk-averse strategy has been proven to be effective in humans. Well-documented
examples of such efficacy in humans are blocking gastrin (Proglumide) or
blocking another hormone stimulated by gastrin, namely histamine (Zantac,
Tagamet), to reduce stomach acid. These treat GERD (severe "heart burn"),
ulcerations of the esophagus and peptic ulcers. Additional examples are blocking
estrogen (Tamoxifen), for breast cancer therapy and blocking the production of
testosterone (Lupron, Zoladex) for prostate cancer therapy.

Results and Status

Anti-Gastrin Immunogen
Overview

Aphton's current anti-gastrin immunogen, or vaccine, clinical programs treat
several human gastrointestinal system adenocarcinomas, including those of the
esophagus, stomach, pancreas, liver, colon and rectum. These cancers of the
gastrointestinal system are stimulated by the hormones gastrin 17 and
glycine-extended gastrin 17. Aphton's proprietary anti-gastrin immunogen induces
antibodies in the patient that neutralize both of them. The company knows of no
other vaccine or drug that selectively blocks or neutralizes both gastrin 17 and
glycine-extended gastrin 17. Aphton believes that its anti-gastrin vaccine can
extend survival in patients suffering from adenocarcinomas of the
gastrointestinal system, without adding toxicity to a therapy regimen.

Safety / Dose Ranging
Aphton has successfully completed safety and dose-ranging Phase I/II clinical
trials with its anti-gastrin immunogen in patients with terminal cancers of the
colon/rectum, stomach and pancreas. The anti-gastrin immunogen induced large
antibody responses in the patients, with no systemic toxicity.

Survival in Advanced Pancreatic Cancer Patients
In March 2000, Aphton and collaborating scientists announced results from a
Phase II dose-ranging clinical trial. The study consisted of 30 evaluable
patients, all of whom had advanced pancreatic cancer. All patients in the trial
received Aphton's anti-gastrin vaccine, with no additional or concurrent
therapies. Overall median survival of the 30 patients was 6.7 months. This
median survival of the patients treated with Aphton's anti-gastrin vaccine (both
responders and non-responders) was 56% greater than the baseline median survival
from published data of approximately 4.3 months for patients with advanced
pancreatic cancer. A further analysis showed that among those patients
responding to Aphton's anti-gastrin vaccine, median survival increased to 7.3
months. Thus, Aphton's anti-gastrin vaccine increased median survival by 70%
among patients responding to the therapy when compared to published data showing
a median survival of approximately 4.3 months for patients with advanced
pancreatic cancer. In this dose-ranging trial, approximately 30% of the patients
responded to Aphton's anti-gastrin vaccine at low-dose levels and approximately
80% of the patients responded at the higher-dose level. The immune responders
had the same clinical status as the immune non-responders. Thus, the likeliest
difference in survival is due to the immune responsiveness of the patients to
Aphton's anti-gastrin vaccine. As previously noted in patients with colorectal
or stomach cancer, the vaccine was well tolerated by these patients, with no
systemic toxicity.

Survival in End-stage Colorectal Cancer Patients
In 1998, Aphton announced increased survival results, which were statistically
significant, from a comparative analysis of its Phase I/II clinical trials in
which Aphton's anti-gastrin vaccine was administered to patients with end-stage
colorectal cancer ("advanced" Duke's D). The study was carried out at the Queens
Medical Center, University of Nottingham, United Kingdom (UK). The group treated
with the anti-gastrin vaccine had 40 evaluable patients. The comparative placebo
group was from a parallel study, time-wise, at the same medical center, with the
same principal investigator as the Aphton study, and was carried out under the
auspices of the Cancer Research Campaign (CRC). (The CRC is a leading cancer
research organization in the UK.) The placebo group from the CRC study had 77
evaluable patients, also with end-stage, "advanced" Duke's D colorectal cancer.
The anti-gastrin vaccine treatment group and the placebo group had similar
patient inclusion and exclusion criteria. The treatment group had a higher
proportion of patients with liver metastases and a similar incidence of lung
metastases. A larger proportion of patients in the placebo group had received
adjuvant chemotherapy or chemotherapy for advanced disease, prior to entry into
the trial. Both the lower rate of liver metastases and the higher proportion of
antecedent chemotherapy in the placebo group, tended to confer on the placebo
group an "expected," or theoretical, "survival advantage" over the treatment
group (Aphton's anti-gastrin vaccine). The end-stage colorectal cancer patients
immunized with Aphton's anti-gastrin vaccine had a median survival of 338 days,
versus 184 days for the placebo group. The increased survival in the treatment
group was statistically significant both by univariate analysis and even more so
by multivariate analysis, which takes into account antecedent differences in the
groups of patients.

Phase III Clinical Programs
Aphton's Phase III clinical trial programs encompass several of the
gastrointestinal system cancers. Aphton selected stomach cancer as the first
indication to begin Phase III clinical trials in, because: (a) survival time in
stomach cancer the "end point," is short relative to colon cancer (the patients
selected in the first Phase I/II trial); (b) trial costs are relatively low; (c)
there is no current effective therapy; (d) the number of patients, worldwide, is
in the millions.

Aphton's plan, which has been initiated, was to enter subsequently into separate
pivotal Phase III clinical trials, in the US and in Europe, with its
anti-gastrin vaccine to treat patients with advanced pancreatic cancer, because
such cancer patients have an even shorter survival time than stomach cancer
patients. Aphton also plans to initiate additional pivotal Phase III trials, one
in patients with metastatic colorectal cancer and the other in patients with
early-stage colorectal cancer.

Advanced Gastric Cancer Clinical Program
In March 2000, Aphton announced that the FDA has allowed its IND application to
commence late-stage clinical trials for the treatment of metastatic gastric
(stomach) cancer, with a combination immuno-chemo therapy regimen of Aphton's
anti-gastrin 17 immunogen and 5-FU plus cisplatin. The primary center for these
US trials is the M.D. Anderson Cancer Center in Houston, Texas.

Advanced Pancreatic Cancer Clinical Program
In April 2000, Aphton announced that the FDA has allowed its IND application to
commence a pivotal Phase III clinical trial for the treatment of metastatic
pancreatic cancer, with a combination immuno-chemo therapy regimen of Aphton's
anti-gastrin 17 immunogen and gemcitabine (Gemzar), versus gemcitabine.
Gemcitabine, a chemotherapeutic, is the current standard of care for treatment
of pancreatic cancer in the US. The primary center for this US trial will be the
University of California Los Angeles (UCLA) School of Medicine Cancer Center.

A second pivotal Phase III trial has been allowed, this by the Medicines Control
Agency (MCA) in the UK, for the treatment of advanced pancreatic cancer. In this
trial, which is being expanded on the continent of Europe, Aphton's anti-gastrin
17 immunogen will be tested directly against gemcitabine. Gemcitabine has not
been adopted as the standard of care in every country in Europe for the
treatment of pancreatic cancer.

Anti-Gastrin Immunogen Alliance
In 1997 Aphton signed an agreement with Pasteur Merieux Connaught (now called
Aventis Pasteur), for a strategic alliance for all human cancer applications of
its anti-gastrin immunogen product, including stomach/esophageal, colorectal,
and pancreatic cancers. Under the terms of the twenty-year agreement, Aphton is
responsible for product development, clinical trials and regulatory agency
approvals, and Aventis Pasteur is responsible for and will fund the promotion,
advertising, marketing, distribution and sales of Aphton's anti-gastrin vaccine
in North America, Mexico and Europe. In addition, Aphton and Aventis Pasteur
have entered into agreements providing for the supply of certain components of
the anti-gastrin immunogen (as well as other Aphton products) from Aventis
Pasteur to Aphton.

Aphton is in active discussions with potential strategic partners for marketing
rights to Aphton's anti-gastrin product for treatment of human cancers in Japan,
Asia and Latin America. Because of the high per capita incidence of
gastrointestinal cancers in Japan, other Asian countries and certain of the
Latin American countries, Aphton is pursuing these discussions as a high
priority subject.

GnRH pharmaccine
Overview
Aphton has developed a second major anti-hormone immunogen for human cancer
indications, one that targets the reproductive hormone Gonadotropin Releasing
Hormone (GnRH); and which is now in Phase I/II clinical trials. By successfully
neutralizing (blocking) GnRH, the immunogen shuts down the production of
estrogen and progesterone (in females) and testosterone (in males), which are
normally produced in their respective gonadal organs. Estrogen fuels breast
cancer and testosterone fuels prostate cancer. It has been known for decades
that biological blockage, like physical castration, is efficacious in the
treatment of prostate and breast cancers. Aphton's anti-GnRH immunogen induces
biological blockage.

Safety / Dose Ranging
In October 1998, a Safety / Dose Ranging trial was initiated using Aphton's
anti-GnRH immunogen product, called GnRH pharmaccine, in patients with advanced
prostate cancer. The primary purpose of the Safety / Dose Ranging trial is to
demonstrate safety, as well as to determine an optimal dose regimen to use in a
Phase III Efficacy trial.

Biological Castration
The objective of immunizing with GnRH pharmaccine is to reduce gonadal
testosterone to levels achieved by surgical castration. In March 1999, Aphton
announced that GnRH pharmaccine reduced, in some patients at the lowest dose
level, gonadal testosterone to levels achieved by surgical castration. This
demonstrated "proof of concept" in man. In addition, the prostate cancer
"progression" marker, Prostate Specific Antigen (PSA), was reduced markedly in
these patients to very low levels, in some cases from triple-digit to
single-digit. Aphton is proceeding in the development program which is designed
to exploit and capitalize on certain recent scientific findings, their relation
to prostate cancer patient survival, and related Aphton proprietary
developments.

Strategic Alliance
In June 1998, Aphton and SmithKline Beecham signed a Collaboration and License
agreement, granting SmithKline Beecham exclusive rights worldwide to Aphton's
GnRH-related patents and proprietary technology. The agreement covers the
diagnosis, treatment and prevention of GnRH-related cancers and other diseases
in humans. Human cancer indications for the anti-GnRH product are prostate,
breast, ovarian and endometrial cancer. Additional medical indications for the
anti-GnRH product are endometriosis, polycystic ovaries, uterine fibroids,
contraception, infertility and precocious puberty. Under terms of the agreement,
Aphton and SmithKline Beecham are collaborating in a joint product development
program, with SmithKline Beecham responsible for clinical trials and regulatory
approvals, and for worldwide marketing and distribution of approved products.
The agreement uses a royalty mechanism based on product sales, in dollars,
worldwide to determine Aphton's revenues.

GERD
Aphton is also in late-stage product development with it's anti-Gastrin
immunogen approach for the treatment of gastroesophageal reflux disease (GERD),
also known as "severe heartburn." GERD affects approximately 10% of the adult
population. Prescription drugs to treat this problem have annual revenues of
approximately $10 billion. Aphton believes it's therapy for GERD, which is not
yet partnered with any drug company, will obviate major risks associated with
current therapies while still providing their benefits. As a preliminary to
conducting a pivotal Phase III trial for GERD, Aphton is conducting limited
Phase II trials in Europe to optimize the product, given the different
performance-profile desired for this major, non-cancer application.

Immunocontraceptive
Aphton's anti-hCG immunocontraceptive product, which prevents pregnancy, has
been in a Phase I/II trial, funded by the World Health Organization (WHO).
Aphton has developed a "next generation" anti-hCG product which incorporates two
major advances: (1) Aphton's proprietary delivery vehicle which provides a
protection profile tailored to meet the consensus of needs as communicated to
Aphton and WHO by Women's Healthcare Organizations; (2) An additional target
(epitope) on hCG as part of the immunogen which is expected to provide increased
efficacy. A patent was issued in April, 1999 for this, the patent rights are
part of the intellectual property rights of Aphton. Women will be immunized in a
Phase I/II trial with the new formulation. Upon successful completion, a pivotal
Phase III trial will follow thereafter.

Equine Anti-Gastrin Immunogen
In 1998, a safety trial commenced using Aphton's Equine (horse) anti-gastrin
immunogen product to reduce stomach acid and heal peptic ulcers in horses.
Following completion of the safety trial, a pivotal Efficacy study is planned.

In August, 1997, Aphton announced that it formed an exclusive worldwide
strategic alliance with Schering-Plough Animal Health for the development,
clinical testing, manufacturing and marketing of Aphton's proprietary
anti-gastrin immunogen , as a veterinary product, that reduces stomach acid and
heals peptic ulcers in animals. Equine (horse) ulcers was selected as the first
indication to be pursued under the alliance. Under the terms of the agreement,
Schering-Plough Animal Health will work closely with Aphton's scientists and
management to bring the anti-gastrin immunogen to market. Schering-Plough is
responsible for all capital costs and financial requirements, product
development, clinical trials and marketing for each animal health indication.
Schering-Plough Animal Health and Aphton will share in all product profits.

Technology

Aphton's approach to the treatment of major diseases is to employ (anti)
"hormone therapy." Aphton's hormone therapy involves neutralizing, or blocking,
certain hormones that play a critical role in these diseases. This is
accomplished by immunizing the patients with a product called, appropriately, an
"immunogen," that induces in them a directed antibody response which
neutralizes, and removes from circulation, the targeted hormone.

Aphton has developed an innovative technology to create immunogens, which are
vaccine-like products. They harness and direct the body's immune system to
generate antibodies, which bind to specific peptide portions of the administered
immunogen. These antibodies cross-react (bind) with targeted "self" molecules,
such as hormones, when they encounter that portion of the hormone, which is
similar to the peptide portion of the administered immunogen. Because diseases
involving hormones are not pathogen (microorganism) driven, they have not been
viewed traditionally as being susceptible to treatment using the body's immune
system. Instead, the traditional pharmaceutical industry approach to controlling
these diseases has been to treat them with synthetic drugs. Unfortunately, these
drugs typically must be administered in relatively large quantities and on a
daily or more frequent basis, giving rise to patient compliance problems, and
often have adverse side effects.

In contrast, Aphton's immunogens create a strong antibody response from the
patient's own immune system (which effectively becomes a "drug factory") and
have a more potent and longer-lasting therapeutic effect. Aphton's technology
enables it to specifically target a small sequence within the hormone to be
neutralized, in order to achieve a specific desired biological and physiological
response. This approach directs all of the immunogen-induced antibodies to the
targeted hormone sequence. At the same time: minimizes the possibility of
undesired physiological consequences through cross-reactivity of the immunogen
with any self molecule or portion thereof, other than the specifically-targeted
hormone sequence. This avoids the possibility of autoimmune disease where the
antibody production is not "turned off." This is because the antibody production
can only be "turned on and kept on" in the presence of the "carrier" portion of
the immunogen (see below). Indeed, without a "booster shot" of the immunogen,
the antibodies wane (diminish) and are cleared by the body, over time. Aphton's
products may be administered in much smaller dosages and on a much less frequent
basis than pharmaceutical drugs; typically twice a year. This virtually
eliminates the problem of patient compliance, which is associated with
pharmaceutical drugs.

Aphtons anti-gastrin immunogen product, for example, consists of:

(a) A synthetic peptide, which is similar to a portion of the hormone
gastrin 17 which is targeted to be neutralized (i.e., blocked or prevented from
reaching and binding to its receptor).

(b) A "carrier," Diphtheria Toxoid (DT), foreign to the body, to which a
number of the synthetic peptides in (a) are chemically bound (conjugated). This
makes them available to be both bound to and, together with the DT, internalized
by "B-cells." DT contains the structures (epitopes) which, when internalized and
"presented" on B-cells and Macrophages, are bound to by "T-cells." By binding to
these foreign epitopes, these T-cells in turn, proliferate and signal the
B-cells, which bind to the peptides (a) to proliferate and to "mass produce" the
desired antibodies (all of which bind to the peptide (a)).

(c) A proprietary, slow-release "suspender" which contains (a) and (b).
This "delivery vehicle" is designed to enable the achievement of four
objectives, concurrently: i) a high antibody response; ii) a long antibody
response; iii) no systemic toxicity; and iv) long-term stability, or
"shelf-life."

The anti-gastrin product, which is administered by injection, with booster shots
at approximately six-month intervals, thus induces antibodies in the patient
which bind with peptide (a) and which also bind (cross-react) with and
neutralize gastrin 17 (when they encounter that portion on gastrin 17 which is
similar to peptide (a)). Gastrin 17 is known to drive (or fuel) colorectal,
stomach, liver and pancreatic cancer. Neutralizing gastrin 17 inhibits both the
growth and metastasis (spread) of these gastrointestinal cancers. In addition,
the anti-gastrin product uniquely neutralizes glycine-extended gastrin 17, which
has also been shown, recently, to fuel these gastrointestinal system cancers.

Gastrin 17 is also responsible for the production of the bulk of stomach acid
(approximately 90% in humans), the reduction of which is therapeutic for
gastroesophageal reflux disease (GERD) and for both peptic ulcers and NSAID
- -induced ulcers (NSAID examples include aspirin and ibuprofen).

Aphton's anti-GnRH product is similarly constructed. In this case, the synthetic
peptide sequence in (a) represents the hormone GnRH, which is targeted to be
neutralized. Neutralizing GnRH inhibits the production of estrogen, progesterone
and testosterone. Inhibiting estrogen (and progesterone) is therapeutic for
women with breast cancer, endometrial cancer, ovarian cancer and endometriosis.
Inhibiting testosterone is therapeutic for men with prostate cancer.

Aphton's immunocontraceptive product, which prevents pregnancy in humans, is
also similarly constructed. In this case, the so-called "C-terminal" peptide
portion of the hormone hCG (which is targeted to be neutralized) is synthesized.
A second, unique epitope (peptide), located on the hormone hCG, is now also
conjugated to the immunogen, which enhances efficacy. By not using a larger
portion of the hCG molecule, Aphton avoids inducing unwanted antibodies against
other hormones in the woman (LH and FSH), which share domains with some portions
of the hormone hCG. Pregnancy is prevented by immunizing the woman; this induces
antibodies which bind to and neutralize hCG.

Strategic Alliances

In June, 1998, Aphton completed a major strategic alliance agreement with
SmithKline Beecham for all human applications of its anti-GnRH product, as
discussed above. SmithKline Beecham is the world's largest vaccine company in
terms of annual sales.

In August, 1997, Aphton completed a major strategic alliance with
Schering-Plough Animal Health covering all animal health applications of
Aphton's anti-gastrin immunogen, as discussed above. Schering-Plough Animal
Health, in terms of annual sales, is one of the largest animal healthcare
companies in the world.

In February, 1997, Aphton completed a major strategic alliance agreement with
Pasteur Merieux Connaught (now called Aventis Pasteur) for all human cancer
applications of the anti-gastrin product, as discussed above. Aventis Pasteur is
the largest vaccine company in the world in terms of annual patients dosed.

In January, 1995, Aphton announced a major relationship with the World Health
Organization (WHO), for the development and testing of an immunocontraceptive
product (which prevents pregnancy), as well as exclusive rights for the
manufacture, distribution and supply of the immunocontraceptive product for the
developing countries, worldwide. Under a separate agreement executed
simultaneously, Aphton has exclusive manufacturing and distribution rights for
the immunocontraceptive product in the developed countries.

Manufacturing and Marketing

Absent or together with a strategic alliance or corporate partnering
relationship (such as those with Aventis Pasteur and SmithKline Beecham) which
may impact on the following, Aphton plans to commercialize its products by
executing long-term contracts with third parties, including major pharmaceutical
companies, to manufacture its products and by contracting with similar drug
companies to market, sell and distribute its products.

The contract manufacturing approach takes advantage of the large and available
manufacturing resources of pharmaceutical industry companies. Aphton has
contracted with drug manufacturing sources which have provided Aphton's
immunogens for toxicology studies and clinical trials. Aphton's contract
marketing, distribution and sales strategy, as exemplified by the Aventis
Pasteur, SmithKline Beecham and Schering-Plough Animal Health agreements,
similarly takes advantage of the large and effective sales forces of the major
pharmaceutical companies. Aphton's capital formation, personnel and plant and
equipment requirements, together with associated risks, are clearly greatly
reduced by such a commercialization strategy. This significantly enhances
Aphton's ability to achieve rapid market penetration and growth and to exploit
the benefits of the patent life of its products.

It should be noted that contract manufacturing and contract marketing differ
significantly from the normal "licensing" of products to third parties. In the
former, Aphton can retain a significantly larger degree of control, share of
profits and thus earnings. Under typical licensing (with royalty payments which
are generally a small percentage of sales), the opposite would be the case. By
avoiding the industry norm of "corporate partnering" with drug companies in its
earlier development stages, and by both undertaking and overcoming the
associated risks, Aphton has earned and retained its options and the ability to
optimally carry out its commercialization approach. This strategy was
successfully validated with Aphton's agreements with Aventis Pasteur, SmithKline
Beecham and Schering-Plough Animal Health.
Patents and Trade Secrets

Proprietary protection for Aphton's products is central to the Company's
business. Aphton's policy is to protect its technology by, among other things,
filing patent applications in worldwide markets of interest for products which
it considers important and intends to market. In that regard, Aphton has filed
patent applications and has continued to receive patents for its products, both
domestic and foreign. Additional patent applications are in preparation or being
filed or are pending in the US and in other countries. Aphton intends to
continue filing additional patent applications relating to its products and,
when appropriate, improvements in its technology and other specific products
that it develops.

Regulation

Government regulation in the US and other countries is a significant factor in
the development and marketing of all of the Company's products and in the
Company's ongoing research and development activities. International regulations
governing human clinical studies can vary widely, depending on the specific
country. Regulatory approval is required for marketing a product in the US and
other countries. Aphton conducts human clinical trials with the objective of
obtaining regulatory approvals in the key markets, worldwide.

Clinical trials of new drug are typically conducted in three sequential phases.
Phase I studies typically test the product for safety tolerance. Phase II
studies involve limited trials to determine the optimal dose and frequency of
administration and an indication of efficacy for defined indications. When the
product has been found safe and shows promise of efficacy, further (pivotal)
trials are undertaken in Phase III to fully evaluate clinical efficacy and to
test further for safety using a large number of patients at geographically
diverse medical centers.
Directors, Executive Officers and Employees

The directors and executive officers of the Company are set forth below:
Name: Position(s):
Philip C. Gevas Chairman of the Board of Directors,
President and Chief Executive Officer

William A. Hasler Vice Chairman of the Board of Directors
and Co-Chief Executive Officer

Robert S. Basso Chairman of Compensation and
Audit Committees and Director

Nicholas John Stathis, Esq. Director

Dov Michaeli, M.D., Ph.D. Senior Vice President, Director of
Medical Science and Chief Medical Officer

Paul Broome, MB., Ch.B., MFPM Vice President and Medical Director,
Clinical Trials and Regulatory Affairs

Douglas A. Eayrs Vice President, Finance

Frederick W. Jacobs Vice President, Treasurer and
Chief Accounting Officer

Philip C. Gevas - Chairman of the Board of Directors, President and Chief
Executive Officer, has served as Director, President and Chief Executive Officer
since co-founding Aphton in 1981. Previously, Mr. Gevas had many years
experience in executive management, including finance, manufacturing and
marketing, following years of experience as a project scientist/engineer. Mr.
Gevas conceived and directed the development of Aphton's inventions which have
resulted in numerous patents for Aphton, both US and foreign, for the treatment
of colorectal, pancreatic, liver, esophageal and stomach cancers, GERD and
chronic peptic ulcers. He is also a co-inventor for Aphton's human contraceptive
product (issued patent). Mr. Gevas has the degrees of M.E., and M.S. Mathematics
(Stevens Institute of Technology) and M.S.E.E. (Ohio State University).

William A. Hasler - Co-Chief Executive Officer, Director. In August, 1998, Mr.
Hasler was appointed the Co-Chief Executive Officer of the Company. Mr. Hasler
has been a Director of the Company since October, 1991 and was elected Vice
Chairman in 1996. From 1991 until he joined the Company in 1998 as Co-CEO, Mr.
Hasler was Dean of both the Graduate School and Undergraduate School of Business
at the University of California, Berkeley. Mr. Hasler was formerly Vice Chairman
of KPMG Peat Marwick, responsible for management consulting worldwide. He is
also a director of Solectron Corporation, Walker Interactive Systems, Tenera,
Inc., TCSI Corporation and is Public Governor of the Pacific Exchange.

Robert S. Basso - Director of the Company since February, 1988, has been a
Director of the Company or of its now dissolved subsidiary, Aphton Development
Corporation, since 1984. Mr. Basso has been President, Correspondent Services
Corporation (CSC) since 1990. Formerly, Mr. Basso was President, Broadcort
Capital Corporation and Managing Director, Merrill Lynch, Pierce, Fenner &
Smith.

Nicholas John Stathis, Esq. - Director of the Company since January, 1994. Mr.
Stathis is retired from the law firm of White & Case, where he was of counsel
from 1989 to 1993. Prior to that he was partner at Botein, Hays & Sklar, from
1984 to 1989. Previously, Mr. Stathis was a partner successively at Watson,
Leavenworth, Kelton & Taggart and Hopgood, Calimafde, Kalil, Blaustein &
Judlowe. Since 1954, Mr. Stathis has been engaged in the practice of all phases
of patent, trademark, copyright and unfair competition law, including conduct of
litigation and counseling of clients.

Dov Michaeli, M.D. (University of California, San Francisco), Ph.D. (University
of California, Berkeley) - Senior Vice President, Director of Medical Science
and Chief Medical Officer. Dr. Michaeli joined Aphton as a senior member of the
management team and was elected Vice President in 1989. Previously, Dr. Michaeli
was a Professor for twenty years at the University of California, San Francisco
(Departments of Biochemistry and Surgery). He has served as a member of Aphton's
Scientific Advisory Board since 1988. He has over thirty years of experience in
scientific research and in clinical medicine. This experience includes extensive
consulting on human clinical trials sponsored by drug companies. Dr. Michaeli
has five patents and over fifty published articles and book chapters.

Paul Broome, MB., Ch.B., MFPM (University of Sheffield Medical School, UK)--Vice
President and Medical Director for Clinical Trials and Regulatory Affairs. Dr.
Broome's more than twenty years of clinical experience includes the
responsibility at Glaxo for clinical trials which provided data for US (FDA) and
UK (MCA) registration of the indication for ranitidine (Zantac) as maintenance
therapy, which became the world's largest selling drug. Later, Dr. Broome was
Medical Director for BIOS, a leading company in the UK which provides services
ranging from consulting and R&D through clinical trials, regulatory affairs and
the registration of drugs for marketing approval from government regulatory
agencies.

Douglas A. Eayrs - Vice President, Finance. Prior to joining Aphton Corporation,
Mr. Eayrs was a Research Analyst for John G. Kinnard & Company, a
Minneapolis-based brokerage firm, for more than eight years where he focused
primarily on companies developing new pharmaceutical drugs and emerging medical
technologies. In 1996, Mr. Eayrs was named an "All-Star Analyst" in medical
stocks in the Wall Street Journal's annual analyst survey. Mr. Eayrs also holds
a Masters degree in Applied Economics (Marquette University).

Frederick W. Jacobs - Vice President, Treasurer and Chief Accounting Officer,
has been with the Company since June, 1989. Previously, Mr. Jacobs, a CPA, was
Chief Financial Officer for three years at a Health Maintenance Organization
(HMO) and before that served for four years on the staff of Coopers & Lybrand,
providing both audit and tax services.

The Company's Bylaws authorize the Board of Directors to fix the number of
directors from time to time by vote.

All directors currently hold office until the next annual meeting of
shareholders and until their successors have been elected. Officers are elected
to serve, subject to the discretion of the Board of Directors, until their
successors are appointed. There are no family relationships among executive
officers or directors of the Company.

Directors do not receive any fees for service on the Board. Board members are
reimbursed for their expenses for each meeting attended.

The Company's Audit Committee is composed of Messrs. Basso and Stathis. The
Compensation Committee is similarly composed of Messrs. Basso and Stathis.

Messrs. Basso and Stathis are non-executive Board Members.

Scientific Advisory Board

The members of the company's Scientific Advisory Board, which functions
primarily as a review board for research projects and for product development
programs, in addition to Philip C. Gevas, William A. Hasler and Drs. Dov
Michaeli, Paul Broome, Richard Ascione and Theo de Roij (see below), are:

Robert J. Scibienski, Ph.D., University of California, Los Angeles. A co-founder
of the Company, Dr. Scibienski focuses on immunology-related basic technology at
the Company, currently addressing immune system regulation and antigen
presentation. Dr. Scibienski is a co-inventor of both issued US patents and a
number of patent applications of the Company. Dr. Scibienski is Associate
Professor, Department of Medical Microbiology and Immunology and Director of the
campus-wide Central Hybridoma Facility at the University of California, Davis.
Dr. Scibienski has over thirty publications.

Demosthenes Pappagianis, M.D. (Stanford School of Medicine), Ph.D. (University
of California, Berkeley). A co-founder of the Company, Dr. Pappagianis is its
principal resource on the mechanisms of infection of pathogens and of host
defenses. Professor and Chairman (1967-1985) in the Department of Medical
Microbiology and Immunology at the University of California, Davis, Dr.
Pappagianis is widely recognized in the field of infectious diseases. He is a
Diplomate of the National Board of Medical Examiners and Diplomate of the
American Board of Medical Microbiology. In addition, he is a Fellow of the
Infectious Diseases Society of America and an Associate Member of the Armed
Forces Epidemiological Board. Dr. Pappagianis has over one hundred publications.

Vernon C. Stevens, Ph.D. Professor of Reproductive Biology, Ohio State
University. Dr. Stevens is recognized worldwide as one of the pre-eminent
authorities on vaccines for contraception and synthetic peptide based immunogen
formulations. He pioneered the development of synthetic peptide immunogens for
human use, particularly for Aphton's immunocontraceptive product, which prevents
pregnancy, under development with the World Health Organization (WHO).

Other scientists (consultants) participate when their expertise is needed on a
specific project.
Scientific Staff

In addition to the founding scientists R. Scibienski, Ph.D. and D. Pappagianis,
M.D., Ph.D., the Company's full-time scientific staff includes the following:

Dov Michaeli, M.D., Ph.D. - see "Directors and Executive Officers."

Paul Broome, MB., Ch.B., MFPM, - see "Directors and Executive Officers."

Richard Ascione, Ph.D. (Princeton University), - Vice President, is Aphton's
Director of the Laboratory of Molecular Medicine. Dr. Ascione directs R&D in the
area of Molecular Biology and works closely with Aphton's Laboratory of
Immunobiology in research and product development. Previously, Dr. Ascione was
Professor in the Department of Experimental Oncology and Associate Director of
the Center for Molecular and Structural Biology at the Hollings Cancer Center
and the Medical University of South Carolina, respectively, in Charleston, South
Carolina. Prior to that, Dr. Ascione was with the National Cancer Institute
(NCI) of the National Institutes of Health (NIH) for approximately twenty years,
the last ten of which he served as Deputy Chief of NCI's Laboratory of Molecular
Oncology. Dr. Ascione has published over sixty-five peer-reviewed papers,
several book chapters and articles related to the molecular biology of cancer,
human retroviruses and HIV/AIDS.

Theo de Roij, Ph.D., D.V.M., - Vice President, Business and Product Development
since September 1998. Prior to joining the company, Dr. de Roij served as the
Director of Business Development at SmithKline Beecham Biologicals S.A.
responsible for worldwide business development activities. Previously, Dr. de
Roij was employed by the Animal Health Division of Solvay, S.A. where he held
several senior positions during his 13 year tenure with the company. For several
years, he was the Corporate Director, Business Development for Solvay Animal
Health responsible for worldwide business development and strategic planning.

Peter Blackburn, Ph.D., - Vice President, Program Development of the Company
since September, 1997. Previously Dr. Blackburn was Executive Vice President,
Applied Microbiology, Inc., where he was employed for over ten years. His
responsibilities encompassed those of a chief operating officer, engaged in the
R&D and manufacture of antimicrobial peptides and pharmaceutical grade bulk
drug. Earlier, and for ten years, he was engaged in academic research at the
Rockefeller University, New York, in protein chemistry in the laboratory of two
recipients of the Nobel Prize for Chemistry. Dr. Blackburn has published
numerous papers in peer-reviewed journals and is the inventor on numerous US and
foreign patents.

Stephen L. Karr, Jr., Ph.D., University of California, Davis. Dr. Karr joined
Aphton in 1983 and serves in a number of capacities, namely:. Divisional Vice
President and General Manager, Laboratory of Immunobiology. Responsible for:
daily operations; program planning, budgeting and control; and Project Manager,
in which capacity he is responsible for the experimental design and
implementation of special projects. Dr. Karr, who is also an
immunoparasitologist, is an inventor of two of the Company's issued patents and
three pending patent applications. Dr. Karr has sixteen publications and had
presented twenty papers prior to joining the Company.

Stephen Grimes, Ph.D., University of California, Davis. Dr. Grimes, Divisional
Vice President, Immunology, is responsible for research and development in
immunology and the experimental design and implementation of immunology-based
projects. He also serves as the principal scientific deputy to Dr. Michaeli and
Dr. Broome for Aphton's clinical trials projects. Dr. Grimes is a co-inventor of
issued US patents of the Company and of additional patents in preparation and
pending. Dr. Grimes came directly to the Company in 1981 upon finishing his
doctoral dissertation under Dr. Scibienski at the University of California,
Davis.

Both Dr. Karr and Dr. Grimes support closely the office of Program Development
and Aphton's Product Development/Manufacturing Team in the UK, which includes
former SmithKline Beecham employees with many years of development /
manufacturing experience.

The Company employs approximately thirty-five individuals directly and has
numerous others under contracts with other supporting organizations.

Item 2. Properties

The Company has noncancelable facilities leases expiring at various dates
through fiscal 2003. The leases provide various options to renew. The minimum
rental commitments for the fiscal years 2001 through 2003, respectively, are,
$103,000, $80,000, $22,000 and none thereafter. Rental expense for these leases
for the years ended January 31, 2000 and 1999 and the nine months ended January
31, 1998, was approximately $101,000, $115,000, and $80,000.

Item 3. Legal Proceedings

The Company is not involved, and has never been involved, in any litigation,
administrative or governmental proceeding and none is believed by the Company's
management to be threatened.

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

Not applicable.

PART II

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

The Common Stock of Aphton has been trading on Nasdaq's National Market System
since June 2, 1994. Aphton had been traded in the Nasdaq Small-Cap Issues
(formerly over-the-counter) market since April 1, 1991, the date of Aphton's
initial public offering. The following table sets forth high and low price
information, provided by Nasdaq Historical Research Department, for each full
quarter beginning after January 31, 1998. The Company's Common Stock is traded
under the symbol "APHT."

Fiscal Period Ended January 31, 1999: High Low
1st Quarter $15 $ 11 7/16
2nd Quarter 18 1/8 11
3rd Quarter 13 1/4 6 1/4
4th Quarter 17 1/2 10 3/8
Fiscal Period Ended January 31, 2000:
1st Quarter $17 3/4 $10 3/4
2nd Quarter 14 3/4 9 13/16
3rd Quarter 15 5/8 12
4th Quarter 27 3/8 11 1/4

As of January 31, 2000, Aphton had approximately 300 shareholders of record and
approximately 4,000 beneficial holders of its Common Stock.

Item 6. Selected Financial Data

SELECTED FINANCIAL INFORMATION

The selected financial data set forth below with respect to the Company's
statements of operations and balance sheets for the years ended January 31, 2000
and 1999, the nine months ended January 31, 1998 and each of the three years in
the period ended April 30, 1997, are derived from audited financial statements
and should be read together with the financial statements and related notes
included in this Annual Report. All selected financial data are not covered by
the independent accountants' report. The data presented below should be read
together with the financial statements, related notes, and other financial
information included herein.
SUMMARY FINANCIAL INFORMATION
(In thousands except for per share data)

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Year Nine Months
Ended Ended Ended Year Ended April 30,
January 31, January 31, January 31,

Statement of Operations Data:

2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
Investment Income $ 1,404 $ 938 $ 534 $ 271 $ 438 $ 463
Net Loss (11,193) (9,757) (6,605) (5,629) (4,711) (3,930)
Research & Development
Expenditures 10,821 9,454 4,963 5,206 4,501 3,905
Net Loss per Share $ (0.76) $ (0.68) $ (0.48) $ (0.44) $ (0.37) $ (0.32)
Weighted Average Shares
Outstanding 14,731 14,431 13,733 12,913 12,723 12,378

January 31, January 31, January 31, April 30,
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
Balance Sheet Data:

Cash and Current

Investments $19,179 $10,555 $14,226 $8,846 $8,169 $7,520
Total Assets 28,192 19,891 23,580 18,362 8,354 7,741
Total Liabilities 16,132 13,339 12,273 15,851 1,313 997
Accumulated Deficit (52,954) (41,760) (32,004) (25,399) (19,770) (15,059)
Total Stockholders' 12,060 6,552 11,307 2,511 7,041 6,744
Equity
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Years Ended January 31, 2000, 1999 and the Nine
Months Ended January 31, 1998

During the year ended January 31, 2000, the Company reported a net loss of
$11,193,296. During this period the Company had no contract revenues. Investment
earnings on cash for twelve months was less than the $547,000 earned in the year
ended January 31, 1999 due to lower average cash balances. Although ending cash
and investments were approximately $9,000,000 greater than at January 31, 1999,
most of the funds were received during the period from October, 1999 to January,
2000. Total research and development expenditures increased approximately
$1,400,000. Research and development cash expenditures were approximately
$800,000 greater than in the year ended January 31, 1999. Non-cash research and
development expenses increased approximately $600,000 and were related to a
Company plan whereby individuals may forego immediate receipt of wages. The
Company has established a liability for these accrued wages payable and funded
the liability with the establishment of investment accounts which are subject to
the general creditors of the Company. The employees may direct the investments
and the changes in value in these investments are recognized as unrealized gains
and losses in the statement of operations with a corresponding increase or
decrease to research and development expense to adjust the liability for
employees' wages and benefits. Unrealized holding gains on trading securities
and the corresponding increase in research and development expense totaled $1.0
million in 2000 and $.4 million in 1999.

During the year ended January 31, 1999, the Company reported a net loss of
$9,756,815. During this period the Company had no contract revenues. Investment
earnings on cash for twelve months was approximately the same as the $534,000
earned in the nine months ended January 31, 1998 due to lower average cash
balances. Research and development expenditures were $9,453,826 (including
approximately $.4 million in non-cash expenses, as discussed above) which
represented an increase in average quarterly research and development
expenditures from about $1.7 million per quarter in the nine months ended
January 31, 1998 to about $2.3 million per quarter for the year ended January
31, 1999. This 35% increase was budgeted for and related to the on-going and
planned additional (human) clinical trials.

During the nine months ended January 31, 1998, the Company reported a net loss
of $6,604,544, including non-cash interest expense of $1,566,971 relating to the
convertible debenture described below. During this period the Company had no
contract revenues. Investment earnings on cash increased $262,738 to $533,908
due to higher average cash balances. Research and development expenditures were
$4,963,481 which represented an increase in average quarterly research and
development expenditures from about $1.3 million per quarter in the year ended
April 30, 1997 to about $1.7 million per quarter for the nine months ended
January 31, 1998. This increase was budgeted for and related to the on-going and
planned additional (human) Clinical Trials.

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative instruments
and hedging activities. SFAS No. 133 requires recognition of all derivative
instruments in the statement of financial position as either assets or
liabilities and the measurement of derivative instruments at fair value. In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133."
The original effective date for SFAS No. 133 was for all fiscal years beginning
after June 15, 1999. As a result of the issuance of SFAS No. 137, the effective
date for SFAS No. 133 is for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The adoption of SFAS No. 133, as amended by SFAS No. 137,
is not expected to have a material effect on the financial statements.
The Company has had no adverse impact from the year 2000 ("Y2K") issue and does
not expect that material incremental costs will be incurred in the aggregate or
in any single future year.

Inflation and changing prices have not had a significant effect on continuing
operations and are not expected to have any material effect in the foreseeable
future. Dividend, interest and other income were primarily derived from
money-market accounts.

Liquidity and Capital Resources

The Company had financed its operations since inception through the sale of its
equity securities and, to a lesser extent, operating revenues from R&D limited
partnerships to conduct research and development. These funds provided the
Company with the resources to acquire staff, construct its research and
development facility, acquire capital equipment and to finance technology and
product development, manufacturing and clinical trials.

On April 12, 2000, the Company announced that it had received gross proceeds of
$16.22 million from the closing of a private financing with several
international biotechnology/healthcare funds. The company issued 491,515 shares
of common stock at a price of $33.00 per share. There were no warrants or
options included with this private placement.

On January 14, 2000, the Company announced that it had received $5.5 million
from a leading investment banking firm through the exercise of 350,000 warrants
issued in prior years. The new Aphton common shares were purchased at an average
price of $15.714 per share through the exercise of these warrants.

On October 13, 1999, the Company announced that it had received $11.2 million
from the closing of a private financing of common stock with an undisclosed
institutional investor. The company placed 800,000 shares of common stock at a
price of $14.00 per share. There were no warrants, options or agent fees
included with this private financing.

In June 1998, Aphton and SmithKline Beecham signed a Collaboration and License
agreement, granting SmithKline Beecham exclusive rights worldwide to Aphton's
GnRH-related patents and proprietary technology. The agreement covers the
diagnosis, treatment and prevention of GnRH-related cancers and other diseases
in humans. Human cancer indications for the anti-GnRH product are prostate,
breast, ovarian and endometrial cancer. Additional medical indications for the
anti-GnRH product are endometriosis, polycystic ovaries, uterine fibroids,
contraception, infertility and precocious puberty. Under terms of the agreement,
Aphton and SmithKline Beecham are collaborating in a joint product development
program, with SmithKline Beecham responsible for clinical trials and regulatory
approvals, and for worldwide marketing and distribution of approved products.
The agreement uses a royalty mechanism based on product sales, in dollars,
worldwide to determine Aphton's revenues. As part of the Agreement, SmithKline
Beecham made an equity investment of $5,000,000 for 237,867 shares of newly
issued Aphton common stock.

In April 1997, the Company issued a $5,000,000 7% senior redeemable convertible
debenture. During the nine months ended January 31, 1998 the debenture and
related interest was converted into 559,068 shares of the Company's common
stock. Non-cash interest on such debt amounted to approximately $1,567,000 in
the nine months ended January 31, 1998 and $15,000 in fiscal 1997.

The Company anticipates that its existing capital resources which are composed
primarily of cash and short-term cash investments, including the proceeds of its
private placements and interest thereon, would enable it to maintain its
currently planned operations into the year 2002. The Company's working capital
and capital requirements will depend upon numerous factors, including the
following: the progress of the Company's research and development program,
preclinical testing and clinical trials; the timing and cost of obtaining
regulatory approvals; the levels of resources that the Company devotes to
product development, manufacturing and marketing capabilities; technological
advances; competition; and collaborative arrangements or strategic alliances
with other drug companies, including the further development, manufacturing and
marketing of certain of the Company's products and the ability of the Company to
obtain funds from such strategic alliances or from other sources.

Item 8. Financial Statements and Supplementary Data.
Financial Statements are set forth in this report beginning at page 17.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. Not applicable.

PART III

Item 10. Directors and Executive Officers of the Registrant.
The information required for this item is incorporated by reference to the
section captioned "Election of Directors" in the Company's Proxy Statement for
the Annual Meeting of Stockholders.

Item 11. Executive Compensation

The information required for this item is incorporated by reference to the
section captioned "Executive Compensation" in the Company's Proxy Statement for
the Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required for this item is incorporated by reference to the
section captioned "Election of Directors" of the Company's Proxy Statement for
the Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions.

Not applicable.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this Form 10-K
(i) Financial Statements:
Report of Independent Accountants

Balance sheets as of January 31, 2000 and 1999
Statements of Operations for the years ended January 31, 2000, January
31, 1999 and the nine months ended January 31, 1998

Statements of Stockholders' Equity for the years ended January 31, 2000,
January 31, 1999 and the nine months ended January 31, 1998

Statements of Cash Flows for the years ended January 31, 2000, January
31, 1999 and the nine months ended January 31, 1998

Notes to the Financial Statements
(ii) Financial Statements Schedules:
Financial Statement Schedules are omitted because they are either not
required, not applicable, or the information is included in the
Financial Statements or Notes thereto.

(b) Exhibits

Exhibit Number Description

3.1 Certificate of Incorporation (Incorporated by reference to
Exhibit B of the Registrant's Definitive Proxy Statement
filed October 8, 1997)

3.3 By-Laws (Incorporated by reference to Exhibit C of the
Registrant's Definitive Proxy Statement filed October 8, 1997)

23.1 Written Consent of PricewaterhouseCoopers LLP.
(attached as an exhibit)

27.1 Financial Data Schedules. (attached as an exhibit)

During the three-month period ending January 31, 2000, the Company did
not file any reports on Form 8-K.

Dated: April 28, 2000 APHTON CORPORATION

By: PHILIP C. GEVAS
Chairman of the Board, Chief Executive Officer,
and President

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

Signatures Title Date

PHILIP C. GEVAS Chairman of the Board, Chief Executive
Officer and President April 28, 2000

WILLIAM A. HASLER Vice Chairman of the Board
and Co-Chief Executive Officer April 28, 2000

ROBERT S. BASSO Director April 28, 2000

NICHOLAS JOHN STATHIS Director April 28, 2000

FREDERICK W. JACOBS Vice President, Treasurer and
Chief Accounting Officer April 28, 2000

INDEX TO FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Report of Independent Accountants..........................................18

Balance Sheets - January 31, 2000 and 1999 .............................. .19

Statements of Operations - for the years ended January 31, 2000,
January 31, 1999 and the nine months ended January 31, 1998............20

Statements of Stockholders' Equity - for the years ended January 31, 2000,
January 31, 1999 and the nine months ended January 31, 1998......... ..21

Statements of Cash Flows - for the years ended January 31, 2000,
January 31, 1999 and the nine months ended January 31, 1998............22

Notes to the Financial Statements..........................................23

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders
Aphton Corporation

In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of Aphton Corporation (the "Company") at
January 31, 2000 and 1999, and the results of its operations and its cash flows
for the two years ended January 31, 2000 and the nine months ended January 31,
1998, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Honolulu, Hawaii
April 24, 2000

APHTON CORPORATION

Balance Sheets - January 31, 2000 and 1999

2000 1999

Assets

Current Assets:
Cash and current investments:
Cash and short-term cash investments $9,920,263 $9,347,334
Investment securities-held-to-maturity 6,878,097 -
Investment securities-trading 2,380,880 1,207,786
--------- ----------
Total cash and current investments 19,179,240 10,555,120
Other assets (including current portion of
unconditional supply commitment) 688,013 469,811
--------- ----------
Total current assets 19,867,253 11,024,931
Equipment and improvements, at cost,
net of accumulated depreciation
and amortization 173,350 215,599
Unconditional supply commitment 8,151,650 8,650,000
--------- ---------
Total assets $28,192,253 $19,890,530
=========== ===========

Liabilities and Stockholders' Equity

Liabilities:
Current liabilities:
Accounts payable and other $6,131,771 $3,339,002
---------- ----------
Total current liabilities 6,131,771 3,339,002
Deferred revenue 10,000,000 10,000,000
---------- ----------
Total liabilities 16,131,771 13,339,002
---------- ----------

Commitments and Contingencies

Stockholders' Equity:
Common stock, $0.001 par value -
Authorized: 30,000,000 shares
Issued and outstanding: 15,592,984
shares at January 31, 2000 and
14,433,984 shares at January 31, 1999 15,593 14,434
Additional paid in capital 64,799,784 47,960,689
Purchase warrants 198,900 336,904
Accumulated deficit (52,953,795) (41,760,499)
------------ ------------
Total stockholders' equity 12,060,482 6,551,528
---------- ----------
Total liabilities and
stockholders' equity $28,192,253 $19,890,530
=========== ===========

The accompanying notes are an integral part of
the financial statements.

APHTON CORPORATION

Statements of Operations

for the years ended January 31, 2000 and 1999

and for the nine months ended January 31, 1998

2000 1999 1998

Revenue: $ - $ - $ -
Costs and Expenses:

General and administrative 1,775,652 1,241,323 608,000
Research and development 10,821,361 9,453,826 4,963,481
---------- --------- ---------
Total costs and expenses 12,597,013 10,695,149 5,571,481
---------- ---------- ---------
Loss from operations 12,597,013 10,695,149 5,571,481
---------- ---------- ---------
Other Income (expense):

Dividend, interest and
other income 444,980 547,283 533,908
Unrealized gains from
investments 958,737 391,051 -
Non-cash interest expense - - (1,566,971)
------- ------- ---------
Net loss $(11,193,296) $(9,756,815) $(6,604,544)
============= ============ ============
Per share data

Basic loss per common share $(0.76) $(0.68) $(0.48)
======= ======= =======
Diluted loss per common share $(0.76) $(0.68) $(0.48)
====== ======= =======
Weighted average number of
common shares outstanding 14,731,301 14,431,417 13,733,478
========== ========== ==========

The accompanying notes are an integral part of
the financial statements.

APHTON CORPORATION
Statements of Stockholders' Equity
for the years ended January 31, 2000 and 1999
and for the nine months ended January 31, 1998

Additional
Common Stock Paid in Purchase Accumulated
Shares Amount Capital Warrants Deficit Total
Balance,
May 1, 1997 12,913,149 $26,665,091 $1,097,560 $147,004 $(25,399,140) $2,510,515

Sale of
stock, net 715,000 10,000,000 - - - 10,000,000

Issuance of
purchase warrants
for services - - - 198,900 - 198,900

Exercise of
purchase
warrants 4,000 5,500 - (4,500) - 1,000

Transfer between
equity accounts
resulting from a
change in the par
value of the stock - (41,857,647)41,857,647 - - -

Conversion of
convertible
debt 559,068 5,201,247 - - - 5,201,247

Net loss - - - - (6,604,544)(6,604,544)
---------- ----------- ------- -------- ---------- ----------
Balance,
January 31,
1998 14,191,217 42,955,207 14,191 341,404 (32,003,684) 11,307,118

Exercise of
purchase
warrants 4,900 5,720 5 (4,500) - 1,225

Sale of
stock, net 237,867 4,999,762 238 - - 5,000,000

Net loss - - - - (9,756,815) (9,756,815)
---------- ----------- ------- -------- ---------- ----------
Balance,
January 31,
1999 14,433,984 47,960,689 14,434 336,904 (41,760,499) 6,551,528

Exercise of
purchase
warrants 359,000 5,639,895 359 (138,004) - 5,502,250

Sale of
stock, net 800,000 11,199,200 800 - - 11,200,000

Net loss - - - - (11,193,296)(11,193,296)
---------- ----------- ------- -------- ---------- ----------
Balance,
January 31,
2000 15,592,984 $64,799,784 $15,593 $198,900 $(52,953,795)12,060,482
========== =========== ======= ======== =========== ==========

The accompanying notes are an integral part of
the financial statements.

APHTON CORPORATION
Statements of Cash Flows
for the years ended January 31, 2000 and 1999
and the nine months ended January 31, 1998

Increase (decrease) in cash and short-term cash investments
2000 1999 1998
Cash flows from
operating activities:

Cash paid to suppliers
and employees $(9,446,861) $(9,119,463) $(5,115,606)

Purchase of trading
securities (2,201,968) (1,207,786) -

Proceeds from trading
securities 1,987,611 - -

Interest and
dividends received 444,980 547,283 533,908
--------- ------- -------
Net cash used in
operating activities (9,216,238) (9,779,966) (4,581,698)
--------- --------- ---------
Cash flows from
investing activities:

Purchase of held to
maturity securities (10,438,097) - -

Proceeds from maturity
of held to maturity
securities 3,560,000 - -

Capital expenditures (34,986) (99,925) (39,041)
---------- ------- ------

Net cash used in
investing activities (6,913,083) (99,925) (39,041)
--------- ------ ------
Cash flows from
financing activities:

Sales of stock 16,702,250 5,001,225 10,001,000
---------- --------- ----------
Cash received from
financing activities 16,702,250 5,001,225 10,001,000
---------- --------- ----------
Net increase (decrease)
in cash and short-term
cash investments 572,929 (4,878,666) 5,380,261

Cash and short-term
cash investments:
Beginning of period 9,347,334 14,226,000 8,845,739
--------- ---------- ---------
End of period $9,920,263 $9,347,334 $14,226,000
========== ========== ===========

Reconciliation of net loss to net cash
used in operating activities

Net loss $(11,193,296) $(9,756,815) $(6,604,544)
Adjustments to reconcile
net loss to net cash
used in operating
activities:

Depreciation and
amortization 77,236 82,062 57,428

Net increase in investment
securities-trading (214,357) - -

Unrealized gains
from investments (958,737) (391,051) -

Increase in accrued
employee benefits 958,737 391,051 -

Warrants issued for
services received - - 198,900

Stock issued for
non-cash debenture
interest, debenture
discount and
issuance costs - - 1,566,971

Changes in -

Other assets (138,357) (124,698) 75,148

Unconditional
supply commitment 205,000 175,000 -

Accounts payable and other 1,834,031 (141,856) 324,245
--------- --------- -------
Net cash used in
operating activities: $(9,216,238) $(9,779,966) $(4,581,698)
============ ============ ============

Non-cash investing and financing activities:

For information about non-cash investing and financing activities,
please see Note 7

The accompanying notes are an integral part of
the financial statements.

APHTON CORPORATION

Notes to the Financial Statements

1. Organization and Operations

Aphton changed its state of incorporation from California to Delaware effective
January 29, 1998. As part of the reincorporation, the Company's fiscal year end
was changed from April 30 to January 31.

2. Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements -

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates, however management believes such differences are unlikely to be
significant.

Reclassifications

The 1999 and 1998 financial statements were reclassified in certain respects
to conform to the 2000 presentation. Such reclassifications had no effect on
net loss as previously reported.

Research and Development Expenses -

Research and development costs are expensed as incurred.

General and Administrative Expenses -

Amounts shown represent expenses not clearly related to research and
development expense. A significant portion of these expenses are related to
intellectual property/patent legal costs and salaries.

Equipment and Improvements -

Equipment and furniture are depreciated using accelerated methods over the
estimated economic lives (5-7 years) of the assets. Improvements are
amortized over the term of the lease using the straight-line method.
Betterments that substantially extend the useful life of equipment and
furniture are capitalized and depreciated over the period of expected
benefit.

Income Taxes -

The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes," which
requires an asset and liability approach in accounting for income taxes.
Under this method, the amount of deferred tax asset or liability is
calculated by applying the provisions of enacted tax laws to the differences
in the bases of assets and liabilities for financial and income tax
purposes. Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities. Investment
tax credits and research and experimentation credits are accounted for using
the flow-through method.

Per Share Data -

The Company has adopted SFAS No. 128, "Earnings per Share," which specifies
the computation, presentation and disclosure requirements for earnings per
share. The Company's basic loss per common share was calculated by dividing
net loss by the weighted average number of common shares outstanding. The
Company's common stock equivalents are anti-dilutive, and accordingly, basic
and diluted loss per share are the same. Such common stock equivalents
consist of purchase warrants (See Note 8) and could potentially dilute basic
earnings per share in the future.

Cash Equivalents -

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments, including short-term cash investments,
purchased with an original maturity of three months or less to be cash
equivalents.

Investment Securities

Investment securities consist principally of debt securities issued by the
US Treasury and other US Government agencies and corporations and investment
in other securities, including mutual funds.

Investment securities are classified into three categories and accounted for
as follows: (1) Held-to-maturity securities are debt securities which the
Company has the positive intent and ability to hold to maturity. These
securities are reported at amortized cost. (2) Trading securities are
securities which are bought and held principally for the purpose of selling
them in the near term. These securities are reported at fair value, with
unrealized gains and losses included in current earnings. (3)
Available-for-sale securities are debt and equity securities not classified
as either held-to-maturity or trading securities. Available-for-sale
securities are reported at fair value, with unrealized gains and losses
excluded from current earnings. The unrealized gains and losses are reported
as a separate component of stockholders' equity. Gains and losses realized
on the sales of investment securities are determined using the specific
identification method.

Concentrations Of Credit Risk -

The Company's short-term cash investments are held in several financial
institutions and consist principally of insured money market accounts and
cash management accounts that are collateralized by or invested in US
Government and US Government agency securities.

The Company's held-to-maturity securities consist of marketable debt
securities. These securities are issued by a diversified selection of
corporate and US government agencies with strong credit ratings. Our
investment policy limits the amount of credit exposure with any one
institution. Other than asset-backed securities, these debt securities are
generally not collateralized. We have not experienced any material losses
due to credit impairment on our investments in marketable debt securities in
any year.

Impairment of the unconditional supply commitment -

As discussed in Note 3, the Company has the unconditional right to receive
supplies originally aggregating $9 million from Aventis Pasteur. The
Company's policy is to review the current market prices of available
supplies, if any, to assure that they remain above the stated Aventis
Pasteur contract price of the materials and that the right to receive the
supplies remains unimpaired. Aventis Pasteur is one of the largest
pharmaceutical vaccine manufacturers in the world. The Company monitors the
financial performance of Aventis Pasteur to assure that they will continue
to be able to perform under the contract, wherein the special order supplies
are to be provided from supplies manufactured by Aventis Pasteur in large
quantities and sold to many customers, including the US Government, as part
of Aventis Pasteur's basic franchise (business). The contract allows for
inflation based increases in the per unit costs of the supplies which the
Company and Aventis Pasteur believes are sufficient to assure that there
will be no future financial hardship incurred by Aventis Pasteur in the
execution of the agreement.

New Accounting Pronouncements-

Effective February 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which established standards for reporting
comprehensive income (defined to include net income, unrealized gains and
losses on available-for-sale investment securities, foreign currency
adjustments and certain other items not included in the income statement).
The Company does not have elements of other comprehensive income other than
net loss.

3. License and Co-Promotion Agreements

On February 14, 1997 Aphton signed an agreement with Pasteur Merieux Connaught
(Rhone-Poulenc Group) which is now known as Aventis Pasteur, a leader in medical
science and research and the world's largest vaccine manufacturer and marketer,
for a strategic alliance for all human cancer applications of the Company's
anti-gastrin immunogen product including stomach, colorectal, liver and
pancreatic cancers. Under the terms of the twenty-year license and co-promotion
agreement, Aphton will be responsible for product development, clinical trials
and regulatory agency approvals, and Aventis Pasteur will be responsible for
promotion, advertising, marketing, distribution and sales of the anti-gastrin
immunogen product in the United States, Canada, Europe (including the C.I.S.
countries) and Mexico. In addition, Aphton and Aventis Pasteur entered into
agreements providing for: (a) the supply of the anti-gastrin immunogen product
from Aphton to Aventis Pasteur; and (b) the supply of certain components of the
anti-gastrin immunogen product (as well as other Aphton products) from Aventis
Pasteur to Aphton. Aventis Pasteur will fund the costs associated with product
introduction, promotion, advertising and marketing throughout the territory
covered by the agreement. Under the terms of the agreement, in addition to
upfront consideration aggregating $10 million including $1 million cash and the
supply commitment (of material suitable for human use) of $9 million, Aphton
will receive the majority of the profits from sales of the anti-gastrin
immunogen product with the balance of profits to be retained by Aventis Pasteur.

The supply commitment of materials suitable for human use consists of Diphtheria
Toxoid and/or Tetanus Toxoid. Aphton may use some or all of the unconditional
supply commitment in the product under development with Aventis Pasteur or
Aphton may use some or all of the supply commitment on other current product
lines or on research and development. The supply commitment of material suitable
for human use is not readily obtained on the open market in such large
quantities. By comparison to lower quality material available in smaller
quantities management estimates that the market value of the supplies is
substantially greater than the carrying value of $9 million, if they could be
obtained. The carrying value of the supplies is based on the negotiated License
Fee. The amount of material to be received is based on negotiated per unit
costs, which are well below the per unit costs of lower quality materials
available in smaller quantities.

The $10 million upfront consideration has been classified as a license payment
and has been deferred and will be recognized for financial statement
(accounting) purposes as revenue within the twenty-year period of the agreement.
The revenue recognition will begin once regulatory agency approval to market the
product has been received and will be recognized ratably over the remaining
period of the contract, which ends February 13, 2017. The Company does not
speculate on the timing of regulatory approvals.

Under the agreement, Aventis Pasteur shall have the right to terminate upon one
hundred eighty (180) days prior notice to Aphton, in the event that it
determines, following completion of Phase III clinical trials of the Product
(and receipt by Aventis Pasteur of the results and supporting data obtained in
such trials), that for safety and efficacy reasons it does not wish to
co-promote, market or sell the Product. In addition, either party may terminate
the agreement by (a) mutual agreement, (b) for uncured material breach and (c)
due to liquidation, insolvency, etc. Further, under the agreement, none of the
aggregate $10 million consideration, either the cash or the Company's rights to
the full $9 million in unconditional supply commitment, is refundable to Aventis
Pasteur under any conditions. There is no provision under the agreement for the
unconditional supply commitment to be satisfied by Aventis Pasteur with a cash
payment. (The $10 million license payment was recognized for tax purposes in the
year ended April 30, 1997.)

4. Equipment And Improvements

At January 31, 2000 and 1999, equipment and improvements consisted
of the following:
January 31, January 31,
2000 1999
Laboratory equipment $ 501,078 $ 495,557
Leasehold improvements 293,584 276,955
Office and laboratory furniture and fixtures 229,454 216,618
-------- --------
1,024,116 989,130
Less accumulated depreciation and amortization (850,766) (773,531)
--------- --------
$173,350 $ 215,599
========= ========

5. Accounts Payable and Other

At January 31, 2000 and 1999, accounts payable and other was composed of (000's
omitted):

January 31,

2000 1999

Trade accounts payable $3,132 $1,673
Accrued wages payable 2,641 1,468
Employee benefits payable 359 198
----- -----
$6,132 $3.339
====== ======
See related Note 6.

6. Investment Securities

Securities classified as trading and held-to-maturity at January 31, 2000 and
1999 are summarized below. Estimated fair value is based on quoted market prices
for these or similar investments.

Amortized Unrealized Unrealized
January 31, 2000 Cost Gains Losses Fair Value

Total trading securities
(carried at fair value): $1,031,092 $1,349,788 $ -- $2,380,880

Securities held to maturity
(carried at amortized cost):$6,878,097 $499 $448 $6,878,046

January 31, 1999

Total trading securities
(carried at fair value): $816,735 $391,051 $ -- $1,207,786

The Company held no available-for-sale investment securities at January 31, 2000
and January 31, 1999. The Company had no held-to-maturity investment securities
at January 31, 1999.

The carrying value of all investment securities held at January 31, 2000 and
1999 is summarized below:

Security 2000 1999
- -------- ---- ----
Trading securities $2,380,880 $1,207,786
Securities held-to-maturity maturing within one year 6,878,097
--------- ---------
Total short-term investments $9,258,977 $1,207,786
========== ==========

The Company's trading securities consist of mutual funds and relate to a Company
plan whereby individuals may forego immediate receipt of wages. The Company has
established a liability for these accrued wages payable and funded the liability
with the establishment of investment accounts which are subject to the general
creditors of the Company. The employees may direct the investments and the
changes in value in trading securities are recognized as unrealized gains and
losses in the statement of operations with a corresponding increase or decrease
to research and development expense to adjust the liability for employees' wages
and benefits. Unrealized holding gains (losses) on trading securities and the
corresponding increase in research and development expense totaled $1.0 million
in 2000 and $.4 million in 1999.

7. Senior Redeemable Convertible Debenture

In April 1997, the Company issued a $5,000,000 7% senior redeemable convertible
debenture. For financial reporting purposes, $1,097,560 of the proceeds was
allocated to the conversion feature of the debt and recorded as additional paid
in capital. The value of the conversion feature was based on the Company's stock
market price at the date of issuance, less an 18% discount. As a result, the
convertible debt instrument of $5,000,000 was recorded net of discount equal to
the conversion feature which increased the effective interest rate of the debt.
Accordingly, beginning on the date of issuance, the discount was charged to
interest expense on a pro rata basis using the effective interest method as the
security became convertible. The effective interest rate on this debenture was
approximately 52%. Non-cash interest on such debt amounted to approximately
$15,000 in fiscal 1997. In the period ended January 31, 1998, the debenture and
related interest was converted to 559,068 shares of common stock. Non-cash
interest expense for the period then ended was approximately $1,567,000.

8. Common Stock and Purchase Warrants

Common Stock -

During fiscal 2000, in a private placement the Company sold 800,000 shares
of common stock for $11,200,000 net of insignificant legal, accounting and
filing fee expenses. The Company also issued 359,000 shares through the
exercise of outstanding purchase warrants, netting $5,502,250 in proceeds.

During fiscal 1999, SmithKline Beecham made an equity investment of
$5,000,000 for 237,867 shares of newly issued Aphton common stock.

During fiscal 1998, in a private placement, the Company sold 715,000 shares
of common stock for $10,000,000 net of insignificant legal, accounting and
filing fee expenses and 4,000 shares through the exercise of outstanding
purchase warrants.

Purchase Warrants -

Each warrant described below is exercisable for one share of common stock
and is subject to the restrictive holding requirements of SEC Rule 144. The
term of the warrants is from 8 to 23 years.

The Company accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, no compensation expense is recorded for
warrants issued to employees in fixed amounts and with fixed exercise prices
at least equal to the fair market value of the Company's common stock at the
date of grant. The Company has adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," through disclosure only. All
stock-based awards to nonemployees are accounted for at their fair value in
accordance with SFAS No. 123. There were 150,000 employee stock purchase
warrants granted in 2000. Based on Black-Scholes values, for the year ended
January 31, 2000, the pro forma net loss would be $13,231,796 and the pro
forma loss per common share would be $.90. There were no employee stock
purchase warrants granted in 1999 or 1998.

The following assumptions were used in the Black-Scholes option pricing
model for the 150,000 purchase warrants granted in fiscal 2000 to an
employee. The stock price and exercise price of $14.75 was set equal to the
fair market value of the Company's common stock on the date of grant. The
risk-free rate of return used was 7.0%. The expected dividend yield used was
0%. The expected time to exercise used was 10 years. The expected volatility
used was 100%.

The Company issued 13,000 warrants for services to nonemployees in 1998,
recognizing $198,900 in expense. The following assumptions were used in the
Black-Scholes option pricing model for the 13,000 purchase warrants granted
in fiscal 1998. The stock price and exercise price of $14.75 was set equal
to the fair market value of the Company's common stock on the date of grant.
The risk-free rate of return used was 7.01%. The expected dividend yield
used was 0%. The expected time to exercise used was 10 years. The expected
volatility used was 75%. In 1998 the Company also issued 225,000 warrants to
an institutional investor in conjunction with the sale of stock.

The following table summarizes purchase warrant activity Weighted-Average
over the past three fiscal periods:
Number of Shares Exercise Price
---------------- --------------
Outstanding and exercisable
at May 1, 1997 1,784,300 $13.26
Granted (1) 238,000 $17.35
Exercised (4,000) $.25
--------- ------
Outstanding and exercisable
at January 31,1998 2,018,300 $13.76
Exercised (4,900) $.25
---------- -----
Outstanding and exercisable
at January 31,1999 2,013,400 $13.76
Granted 150,000 $14.75
Exercised (359,000) $15.33
--------- ------
Outstanding and exercisable
at January 31, 2000 1,804,400 $13.58
========= ======

For warrants outstanding and exercisable at January 31, 2000, the exercise price
ranges and average remaining lives were:

Warrants Outstanding and Exercisable

Range of Exercise Prices

Number Outstanding Average Period (2) Average Price (3)

$.25 to $14.00 632,400 14.9 $ 9.62
$14.01 to $14.99 749,000 14.9 $14.75
$15.00 to $24.00 423,000 14.9 $17.42
--------
1,804,400 14.9 $13.58
=========

(1) Weighted average grant date fair value is $15.30
(2) Weighted average remaining years
(3) Weighted average exercise price

9. Income Taxes

Gross deferred tax assets result from net operating loss and income tax credit
carryforwards. Realization of these assets is dependent on the Company's ability
to generate sufficient future taxable income, prior to the expiration of the
carryforwards, which is dependent on the completion of research and development
activities and successful marketing of the Company's various products. Due to
the uncertainties related to the above and in accordance with guidance contained
in SFAS No. 109, a valuation allowance has been provided for these deferred tax
assets. Accordingly, these assets do not appear in the Company's balance sheet
at January 31, 2000 and 1999. The changes in the valuation allowance in 2000 and
1999 were $3,160,000 and $3,450,000, respectively.

January 31,

Deferred tax assets consisted of: 2000 1999

Federal net operating loss carryforward $12,218,000 $9,123,000
State net operating loss carryforward 324,000 1,213,000
----------- ---------
Total operating loss carryforward 12,542,000 10,336,000

Deferred license payment revenues 4,014,000 4,014,000
Expenses deductible in future periods 1,200,000 512,000

Federal tax credits 1,971,000 1,651,000
State tax credits 554,000 608,000
------- -------
Total tax credits 2,525,000 2,259,000
--------- ---------
Total deferred tax assets 20,281,000 17,121,000
Valuation allowance (20,281,000) (17,121,000)
---------- ----------
Net deferred tax assets $ - $ -
=========== ===========

At January 31, 2000, for Federal income tax purposes, the Company had net
operating loss carryforwards of approximately $35,935,000 and various income tax
credit carryforwards, primarily research and experimentation, aggregating
$1,971,000, which expire at various dates through 2020.

At January 31, 2000, for California income tax purposes, the Company had net
operating loss carryforwards of approximately $5,281,000, which expire at
various dates through 2005; and various income tax credit carryforwards,
primarily research and experimentation, aggregating $554,000, which expire at
various dates through 2014.

10. Commitments and Contingencies

11. Subsequent Event

On April 12, 2000, the Company announced that it had received gross proceeds of
$16.22 million from the closing of a private financing with several
international biotechnology/healthcare funds. The Company issued 491,515 shares
of common stock at a price of $33.00 per share. There were no warrants or
options included with this private placement.

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the registration
statements on Form S-3 (Registration Nos. 33-77286 and 333-31217) of Aphton
Corporation of our report dated April 24, 2000 relating to the financial
statements which appear in this Form 10-K.

PricewaterhouseCoopers LLP

Honolulu, Hawaii
April 24,2000

<ARTICLE> 5
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This schedule contains summary financial information extracted from the Annual
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<NAME> Aphton Corporation
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