NEOSE TECHNOLOGIES INC, S-3/A, 2000-03-15

NEOSE TECHNOLOGIES INC
S-3/A, 2000-03-15
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 15, 2000

REGISTRATION NO. 333-30148
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2

TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEOSE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C>
DELAWARE 13-3549286
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>

102 WITMER ROAD
HORSHAM, PA 19044
(215) 441-5890
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

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

P. SHERRILL NEFF
PRESIDENT AND CHIEF FINANCIAL OFFICER
NEOSE TECHNOLOGIES, INC.
102 WITMER ROAD
HORSHAM, PA 19044
(215) 441-5890
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

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Copies of all communications to:

<TABLE>
<S> <C>
DAVID R. KING JAMES A. LEBOVITZ
MORGAN, LEWIS & BOCKIUS LLP ROBERT L. WAX
1701 MARKET STREET DECHERT PRICE & RHOADS
PHILADELPHIA, PA 19103-2921 4000 BELL ATLANTIC TOWER
(215) 963-5000 1717 ARCH STREET
PHILADELPHIA, PA 19103
(215) 994-4000
</TABLE>

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

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

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, check the following box. / /

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

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

CALCULATION OF REGISTRATION FEE

(1) Includes 375,000 shares which the Underwriters will have the option to
purchase to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended.
Based on the average of the high and low prices of the Common Stock reported
on the Nasdaq National Market on March 14, 2000.

(3) $15,939 previously paid.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED MARCH 15, 2000

PROSPECTUS

2,500,000 SHARES

[LOGO]

COMMON STOCK

Neose Technologies, Inc. is offering 2,500,000 shares of its common stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"NTEC." On March 14, 2000, the reported last sale price of our common stock on
the Nasdaq National Market was $43.00 per share.

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<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions......................
Proceeds to Neose, before expenses..........................
</TABLE>

Neose has granted the underwriters the right to purchase up to an
additional 375,000 shares to cover over-allotments. The underwriters expect to
deliver the shares against payment on ________, 2000.

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

INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

CHASE H&Q

PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES

U.S. BANCORP PIPER JAFFRAY

WARBURG DILLON READ LLC

, 2000
<PAGE>
TABLE OF CONTENTS

PAGE
----
Prospectus Summary.......................................... 1

Risk Factors................................................ 4

Forward-Looking Statements.................................. 14

Use of Proceeds............................................. 15

Price Range of Common Stock................................. 15

Dividend Policy............................................. 15

Capitalization.............................................. 16

Dilution.................................................... 17

Selected Consolidated Historical Financial Data............. 18

Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19

Business.................................................... 22

Management.................................................. 34

Principal Stockholders...................................... 36

Description of Capital Stock................................ 38

Shares Eligible for Future Sale............................. 41

Underwriting................................................ 42

Legal Matters............................................... 44

Experts..................................................... 44

Available Information....................................... 44

Index to Consolidated Financial Statements.................. F-1

<PAGE>
PROSPECTUS SUMMARY

This summary highlights selected information from this prospectus and may
not contain all of the information that you should consider before investing in
our common stock. You should read carefully this entire prospectus, including
"Risk Factors," the financial statements, and the documents to which we have
referred you before making an investment decision. Unless we state otherwise,
the information we present in this prospectus assumes no exercise of the
underwriters' over-allotment option.

NEOSE TECHNOLOGIES

We are a leading developer of proprietary technologies for the synthesis
and manufacture of complex carbohydrates. Complex carbohydrates are critically
important molecules in biological processes. On cell surfaces, they regulate
communications with other cells, hormones, nutrients, and growth and death
factors. Traditionally, complex carbohydrates have been difficult and expensive
to produce in commercial quantities. Our proprietary enzymatic technology
platform offers a unique approach that enables the rapid and cost-effective
synthesis of a wide range of complex carbohydrates. We use our broad, enabling
technology to produce complex carbohydrates for pharmaceutical, biotechnology,
nutritional, and consumer product applications.

Cancer vaccines based on carbohydrates are one biopharmaceutical
application that could be enabled by our technology platform. We are
collaborating with Bristol-Myers Squibb Company to develop a commercial
manufacturing process for the ganglioside components in two therapeutic cancer
vaccines licensed to Bristol-Myers from Progenics Pharmaceuticals. These
gangliosides, complex carbohydrates that are attached to lipids, serve as the
active ingredients in the vaccines. The first vaccine candidate, GMK, is in
Phase III clinical trials for the treatment of malignant melanoma. We estimate
that there are 300,000 melanoma patients in the United States today. The
American Cancer Society estimated that 44,000 new cases of melanoma in the
United States were diagnosed in 1999. The second vaccine candidate, MGV, is
being developed for the treatment of a variety of other cancer indications,
including colorectal cancer, lymphoma, small cell lung cancer, sarcoma, gastric
cancer, and neuroblastoma.

We are also developing novel applications of our technologies for
nutritional and consumer product markets. In 1999, we entered into a joint
venture with the McNeil Specialty Products Division of Johnson & Johnson to
manufacture and market fructooligosaccharides, or FOS, and other complex
carbohydrates, including nutraceutical food additives, bulking agents for
McNeil's sucralose sweetener, and other related compounds. We believe that the
joint venture's technologies can yield products that are cleaner, more
consistent, and significantly less expensive than identical products derived
from agricultural sources. Our joint venture's initial plant in Athens, Georgia
will be completed in early 2000 and is expected to produce and commercialize
products this year. In 1999, we also entered into a collaboration agreement with
Wyeth Nutritionals International, a division of American Home Products, enabling
Wyeth to use our platform technology to develop and produce a bioactive
carbohydrate for use in infant and pediatric nutritional formulas.

GlycoAdvance(TM), another application of our technology platform, is used
to complete and correct critical portions of therapeutic glycoproteins, which
are proteins that include carbohydrate structures. We believe that GlycoAdvance
may permit the continued development of some glycoprotein drugs by overcoming
efficacy and side effect problems related to incomplete carbohydrate structures.
Many biotechnology drugs on the market or in development are glycoproteins, and
their associated carbohydrates are often critical to the function of the
protein. Current techniques to produce glycoproteins frequently yield incomplete
or incorrect complex carbohydrates, leading to problems such as decreased
efficacy, adverse reactions, and manufacturing inefficiencies. Our GlycoAdvance
technology uses our proprietary glycosyltransferase enzymes to add or remodel
therapeutic glycoproteins with the proper human sugars in an efficient and
flexible system. Examples of glycoprotein therapeutics currently on the market
include erythropoietins and interferons. The top eight glycoprotein drugs
accounted for more than $6.7 billion in estimated 1999 sales. There are more
than 200 glycoprotein drugs currently in development. We believe that the use of
GlycoAdvance technology for the production of human therapeutic glycoproteins
may result in improved pharmacokinetic profiles, potentially strengthened patent
claims, and significant manufacturing efficiencies.

1
<PAGE>

Our technology platform draws on our deep familiarity with human
carbohydrate structures and the enzymes that synthesize them, our strong
proprietary position in enzymatic synthesis of carbohydrates, and our
capabilities in the manipulation of carbohydrate structures. Our strategy is to
enhance our position as the leading developer of technologies for the synthesis
and manufacture of complex carbohydrates. The key elements of our strategy are
as follows:

o Strengthen our technology leadership position in carbohydrate
manufacture.
o Leverage the use of our technologies in the pharmaceutical and
biotechnology markets.
o Expand the use of our technologies in the nutritional and consumer
product markets.

Our principal executive offices are located at 102 Witmer Road, Horsham,
Pennsylvania 19044, and our telephone number is (215) 441-5890.

We maintain a web site on the World Wide Web at www.neose.com. The
information on our web site is not part of this prospectus. We have filed
trademark applications for "GlycoAdvance," and the Neose logo. All brand names
and trademarks appearing in this prospectus are the property of their respective
holders.

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THE OFFERING

The offering information provided below is as of March 14, 2000, assumes
that the underwriters' over-allotment is not exercised, and excludes:

o 2,044,288 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted-average exercise price of $12.49
per share; and

o 10,527 shares of common stock issuable upon the exercise of an
outstanding warrant at an exercise price of $14.25 per share.

<TABLE>
<S> <C>
Common stock offered by Neose................. 2,500,000 shares

Common stock to be outstanding after this
offering.................................... 14,053,502 shares

Use of Proceeds............................... We intend to use the estimated net proceeds
from this offering for ongoing research and
development activities; to make capital contributions
to our joint venture with McNeil; and for general
corporate purposes, which may include capital
expenditures and possible acquisitions of, or
investments in, technology, licenses, proprietary
rights, or companies that complement our
technologies.

Nasdaq National Market symbol................. NTEC
</TABLE>

2
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

The following Statements of Operations Data for the years ended December
31, 1995, 1996, 1997, 1998, and 1999 are derived from our audited consolidated
financial statements. The financial data set forth below should be read in
conjunction with the sections of this prospectus entitled "Selected Consolidated
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the financial statements and related
notes included elsewhere in this prospectus. The "Pro Forma as Adjusted" Balance
Sheet Data column gives effect to our sale of the 2,500,000 shares of our common
stock offered by this prospectus at an assumed public offering price of $43.00
per share, less underwriting discounts and estimated offering expenses.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue from collaborative agreements...................... $ 1,199 $ 1,383 $ 725 $ 390 $ 422
------- ------- ------- -------- --------
Operating Expenses:
Research and development................................. 4,733 6,502 8,013 9,912 10,649
General and administrative............................... 1,665 2,505 3,884 3,635 4,520
------- ------- ------- -------- --------
Total expenses........................................... 6,398 9,007 11,897 13,547 15,169
Interest income, net....................................... 132 1,483 2,108 1,250 1,429
------- ------- ------- -------- --------
Net loss................................................... $(5,067) $(6,141) $(9,064) $(11,907) $(13,318)
======= ======= ======= ======== ========
Basic and diluted net loss per share....................... $ (1.99) $ (0.82) $ (0.96) $ (1.25) $ (1.25)
Basic and diluted weighted-average shares outstanding...... 2,550 7,494 9,405 9,556 10,678
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securities.............................. $33,235 $133,616
Total assets................................................ 52,239 152,620
Long-term debt.............................................. 7,300 7,300
Deficit accumulated during the development stage............ (59,812) (59,812)
Total stockholders' equity.................................. 40,785 141,166
</TABLE>

3
<PAGE>
RISK FACTORS

You should carefully consider the risks and uncertainties described below
before making an investment decision. If any of the following occurs, our
business, financial condition, or operating results could be materially harmed.
This could cause the trading price of our common stock to decline, and you may
lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS

WE HAVE NOT YET COMMERCIALIZED ANY PRODUCTS OR TECHNOLOGIES, AND WE MAY NEVER
BECOME PROFITABLE.

We currently have no material revenues. Although we began operations in
1990, we have not generated any revenues from operations, except for interest
income and revenues from collaborative agreements. We have not yet
commercialized any products or technologies and we cannot be sure that we will
ever be able to do so. Even if we commercialize one or more of our products or
technologies, we may not become profitable. Our ability to achieve profitability
is dependent on a number of factors, including our ability to complete our
development efforts, obtain regulatory approval for our product candidates, and
commercialize successfully those product candidates or our technologies.

WE HAVE A HISTORY OF OPERATING LOSSES, AND WE MAY INCUR CONTINUED LOSSES FOR
SOME TIME.

We have incurred operating losses each year and, given our planned level of
operating expenses, we may continue to incur operating losses for some time. As
of December 31, 1999, we had an accumulated deficit of approximately $60
million. We expect additional losses for some time as we expand research and
development efforts, expand manufacturing scale-up activities, and begin sales
and marketing activities. We may continue to incur substantial operating losses
even if our revenues increase. As a result, we cannot predict the extent of
future losses or the time required for us to achieve profitability, if at all.

OUR TECHNOLOGIES MAY PROVE TO BE INEFFECTIVE, OR IT MAY BE YEARS, IF EVER,
BEFORE WE CAN DEVELOP AND COMMERCIALIZE OUR PRODUCTS.

Our technology involves new and unproven approaches. We are developing
processes based on our enzymatic carbohydrate synthesis technology platform to
manufacture complex carbohydrates. We are using these manufacturing processes to
discover, develop, and commercialize complex carbohydrates for pharmaceutical,
biotechnology, nutritional, and consumer product applications. Most complex
carbohydrates sold today are derived from natural sources. There has been only
very limited development and commercialization of synthesized complex
carbohydrates, in part because of manufacturing limitations. We may face
obstacles and difficulties unknown to us today. In addition, we may incur costs
that we did not expect, and the costs associated with manufacturing commercial
quantities of synthesized complex carbohydrates may make commercialization
unprofitable. We may fail to overcome the difficulties posed in manufacturing
synthesized complex carbohydrates, or complete successfully all the other
activities required to commercialize any synthesized complex carbohydrate.

To date, we have not entered into any major collaboration agreements
involving our glycoprotein remodeling technology. We also may find that our
glycoprotein remodeling technology fails to improve drug properties or is not
scaleable into commercial production processes. Either of these would prevent
our technology from being adopted by the biopharmaceutical industry.

OUR SUCCESS DEPENDS UPON OUR COLLABORATIVE RELATIONSHIPS.

We have collaborative agreements with Bristol-Myers, McNeil, and Wyeth. We
have committed significant resources and costs in the expectation that these
collaborations will become profitable in the future. Each of these collaborative
agreements presents risks to us as described below.

Bristol-Myers. Our agreement with Bristol-Myers requires us to develop
proprietary processes for the manufacture of complex carbohydrates for two
cancer vaccines being developed by Bristol-Myers. We

4
<PAGE>

may be unable to complete this development successfully. Even if we successfully
complete development of these processes and fulfill all of our obligations under
the agreement, Bristol-Myers may not obtain regulatory approval to market either
of these vaccines. Further, even if Bristol-Myers obtains regulatory approval to
market either of these vaccines, we cannot be sure that Bristol-Myers will enter
into a manufacturing contract with us, that the terms of a future contract with
Bristol-Myers will be favorable to us, or that either vaccine will be
commercially successful.

McNeil. The success of our joint venture with McNeil is dependent upon the
joint venture's ability to manufacture, sell, and market successfully complex
carbohydrates. If the joint venture is unsuccessful in these efforts, it will
not be profitable and our business, financial condition, and results of
operations will be materially and adversely affected.

Wyeth. Our agreement with Wyeth requires us to develop a large-scale
manufacturing process for a potential ingredient of infant formula. We may be
unable to complete this development successfully. Even if we successfully
develop a process and fulfill all of our obligations under the agreement, Wyeth
may fail to obtain regulatory approval to market the ingredient. Moreover, even
if Wyeth obtains regulatory approval for the ingredient, Wyeth may determine not
to add the ingredient to its products.

Our business strategy also contemplates entering into additional
collaborative agreements with pharmaceutical and other companies. We have
limited experience in marketing our technology platform to collaborators. We
cannot be sure that our collaborators will share our perspective on the relative
importance of our program, that they will commit sufficient resources to our
program to move it forward effectively, or that the program will advance as
rapidly as it might if we had retained complete control of all research,
development, regulatory, and commercialization decisions. Our collaborative
agreements are generally terminable by our partners on short notice. Suspension
or termination of collaborative agreements could have a material and adverse
impact on our business, financial conditions, and results of operations.

WE MAY BE REQUIRED TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS TO OUR JOINT VENTURE
WITH MCNEIL.

Under the terms of our joint venture with McNeil, we may be required to
make additional capital contributions to fund capital expenditures. If the joint
venture builds additional production facilities, and we wish to maintain our 50%
ownership in the joint venture, we are required to contribute half of the
expenditures, up to a maximum contribution of $8.85 million. However, we may
elect to contribute as little as $1.85 million of the cost of the expenditures,
so long as our aggregate capital contributions are at least 15% of the joint
venture's aggregate capital contributions. In that case, McNeil will fund the
remainder of our half of the joint venture's capital expenditures, and our
ownership percentage will be appropriately reduced. We have an option, expiring
in September 2006, to return to 50% ownership in the joint venture by
reimbursing McNeil. We cannot be sure, however, that we will have adequate
resources, either at the time of a required contribution or prior to the
expiration of the option, to make contributions to the joint venture. If we are
unable to make these contributions, our ownership interest will be
proportionately reduced.

WE HAVE LIMITED COMMERCIAL MANUFACTURING CAPABILITY AND EXPERIENCE, AND WE MAY
BE UNABLE TO MEET DEMAND FOR OUR PRODUCTS.

Our success depends on our ability to manufacture complex carbohydrates on
a commercial scale and in accordance with current Good Manufacturing Practices,
or cGMP, prescribed by the United States Food and Drug Administration, or FDA.
Our existing facility is not certified cGMP by the FDA and is not adequate for
large-scale, commercial manufacturing of all our products. Therefore, we will
need to develop commercial-scale manufacturing facilities meeting cGMP, or
depend on our collaborators, licensees, or contract manufacturers for the
commercial manufacture of our potential products.

The expansion of our manufacturing capacity will require additional funds
and personnel, and compliance with applicable regulations. We may be unable to
design, build, or operate additional facilities, and we may be unable to find
collaborators, licensees, or contract manufacturers to manufacture products

5
<PAGE>

in commercial quantities for sale at competitive prices. In addition to the
normal scale-up risks associated with any manufacturing process, we may face
unanticipated problems unique to carbohydrate manufacture.

Any facility we may operate, or any contract manufacturers that we may use,
must adhere to the FDA's regulations on cGMP, which are enforced by the FDA
through its facilities inspection program. These facilities must pass a plant
inspection before the FDA will grant marketing approval for the product. The
manufacture of product at these facilities will be subject to strict quality
control, testing, and record keeping requirements, and continuing obligations
regarding the submission of safety reports and other post-market information.
Ultimately, we, or our contract manufacturers, may be unable to secure or
maintain cGMP approvals.

If we encounter delays or difficulties in connection with our manufacture
of products or with contract manufacturers, packagers, or distributors, market
introduction and subsequent sales of our products could be delayed. In addition,
we may need to seek alternative sources of supply. If so, we may incur
additional costs or delays in product commercialization. If we change the source
or location of supply or modify the manufacturing process, regulatory
authorities will require us to demonstrate that the product produced by the new
source or from the modified process is equivalent to the product used in any
clinical trials that we had conducted.

THE FAILURE TO OBTAIN OR MAINTAIN ADEQUATE PATENTS, AND OTHER INTELLECTUAL
PROPERTY PROTECTION, COULD IMPACT OUR ABILITY TO COMPETE EFFECTIVELY.

Our success will depend in part on our ability to obtain commercially
valuable patent claims and to protect our intellectual property. Our patent
position is generally uncertain and involves complex legal and factual
questions. Legal standards relating to the validity and scope of claims in our
technology field are still evolving. Therefore, the degree of future protection
for our proprietary rights is uncertain. The risks and uncertainties that we
face with respect to our patents and other proprietary rights include the
following:

o the pending patent applications we have filed or to which we have
exclusive rights may not result in issued patents or may take longer than
we expect to result in issued patents;

o the claims of any patents that are issued may not provide meaningful
protection;

o we may not be able to develop additional proprietary technologies that
are patentable;

o the patents licensed or issued to us or our customers may not provide a
competitive advantage;

o other companies may challenge patents licensed or issued to us or our
customers;

o other companies may independently develop similar or alternative
technologies, or duplicate our technologies; and

o other companies may design around technologies we have licensed or
developed.

We own patents and patent applications, and have licensed patents and
patent applications from a number of institutions. If we commercialize any
products manufactured by use of technology licensed from another party, we will
be required to make payments as specified in the applicable license agreement.
Our business, financial condition, and results of operations may be materially
and adversely affected if any of these agreements is terminated.

We may incur substantial costs in asserting any patent rights and in
defending suits against us relating to intellectual property rights. Such
disputes could substantially delay our product development or commercialization
activities. The United States Patent and Trademark Office or a private party
could institute an interference proceeding relating to our patents or our patent
applications. An adverse decision in any such proceeding could result in the
loss of our intellectual property rights.

To facilitate development of our proprietary technology base, we may need
to obtain licenses to patents or other proprietary rights from other parties. If
we are unable to obtain such licenses, or obtain such licenses on what we
consider to be acceptable terms, our research and development efforts may be
delayed.

6
<PAGE>

Some of our proprietary rights have been licensed to us under agreements
that have performance requirements or other contingencies. The failure to comply
with these provisions could lead to termination or modifications of our rights
to these licenses.

In addition to patents and patent applications, we depend upon trade
secrets and proprietary know-how to protect our proprietary technology. We
require all employees, consultants, advisors, and collaborators to enter into
confidentiality agreements that prohibit the disclosure of confidential
information to any other parties. We require that our employees and consultants
disclose and assign to us their ideas, developments, discoveries, and
inventions. These agreements may not, however, provide adequate protection for
our trade secrets, know-how, or other proprietary information in the event of
any unauthorized use or disclosure.

INTERNATIONAL PATENT PROTECTION IS UNCERTAIN.

Patent law outside the United States is uncertain and is currently
undergoing review and revision in many countries. Further, the laws of some
foreign countries may not protect our intellectual property rights to the same
extent as U.S. laws. We may participate in opposition proceedings to determine
the validity of our or our competitors' foreign patents, which could result in
substantial costs and diversion of our efforts. Finally, some of our patent
protection in the United States is not available to us in foreign countries due
to the laws of those countries.

WE ARE EXPOSED TO INTENSE COMPETITION FROM MANY SOURCES. WE OPERATE IN AN
ENVIRONMENT OF RAPID TECHNOLOGICAL CHANGE, AND WE MAY FALL BEHIND OUR
COMPETITORS.

Some companies are producing by enzymatic and other means a limited variety
of complex carbohydrates. Although we do not believe any of these companies
currently has the ability to manufacture a wide variety of human carbohydrate
products in quantities sufficient for commercialization, any of these companies
may develop technologies superior to our technologies. In addition, some
companies are investigating novel methods of chemical synthesis, sometimes with
enzymatic steps, to produce commercial quantities of complex carbohydrates.
These and other efforts by potential competitors may be successful or other
methods of carbohydrate synthesis which compete with our technologies may be
developed.

Our potential competitors include nutritional products, pharmaceutical,
chemical, biotechnology, food, and consumer product companies. Many of these
companies have more:

o financial, scientific, and technical resources;

o manufacturing and marketing capabilities;

o experience conducting preclinical studies and clinical trials of new
products; and

o experience in obtaining regulatory approvals for products.

Competitors may succeed in developing products and technology that are more
effective and less costly than we may develop, or that would render our
technology or products, or both, obsolete or noncompetitive. Competitors also
may prove to be more successful in the manufacturing and marketing of products.
If we are unable to compete against our competitors, our commercial
opportunities will be reduced or diminished.

IF WE FAIL TO RETAIN MEMBERS OF OUR SENIOR MANAGEMENT, WE MAY BE UNABLE TO
ACHIEVE SUCCESS IN OUR RESEARCH AND PRODUCT DEVELOPMENT PROGRAMS.

We depend upon the efforts of our senior management, in particular Dr.
Stephen Roth, our Chief Executive Officer. Dr. Roth has entered into a
non-competition agreement, under which he has agreed not to compete with us
during his employment, and following his employment so long as we pay him
compensation to be mutually agreed upon at the time of his termination. If we
cannot reach an agreement with Dr. Roth at that time, and he competes with us,
we may be unable to achieve our development objectives.

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<PAGE>

WE MAY BE UNABLE TO RETAIN KEY EMPLOYEES OR RECRUIT ADDITIONAL QUALIFIED
PERSONNEL.

Because of the specialized scientific nature of our business, we are highly
dependent upon qualified scientific, technical, and managerial personnel. There
is intense competition for qualified personnel in our business. Therefore, we
may not be able to attract and retain the qualified personnel necessary for the
development of our business. The loss of the services of existing personnel, as
well as the failure to recruit additional key scientific, technical, and
managerial personnel in a timely manner would harm our research and development
programs and our business.

WE ARE EXPOSED TO PRODUCT LIABILITY AND RELATED RISKS.

The administration of drugs to humans, whether in clinical trials or
commercially, can result in product liability claims even if our drugs or a
collaborator's drugs are not actually at fault for causing an injury.
Furthermore, our products may cause, or may appear to cause, adverse side
effects or potentially dangerous drug interactions that we may not learn about
or understand fully until the drug is actually manufactured and sold. Product
liability claims can be expensive to defend, and may result in large judgments
against us or settlements. Even if a product liability claim is not successful,
the adverse publicity, time, and expense involved in defending such a claim may
interfere with our business. We have no product liability insurance coverage for
our clinical trials, and we may not be able to obtain insurance coverage at a
reasonable cost or in sufficient amounts to protect us against losses.

ANY FUTURE ACQUISITIONS WILL CREATE RISKS AND UNCERTAINTIES.

As part of our business strategy, we may acquire other assets,
technologies, and businesses. We cannot be sure, however, that acquisition
candidates will be available on terms acceptable to us. Future acquisitions that
we may complete involve risks such as the following:

o we may be exposed to unknown liabilities of acquired companies;

o our acquisition and integration costs may be higher than we anticipated;

o integrating or completing the development and application of acquired
technologies may disrupt our business and divert management's time and
attention;

o we may be unable to retain key employees of the acquired businesses; and

o our stockholders' ownership may be diluted if we pay for the acquisition
with equity securities.

RISKS RELATED TO GOVERNMENT APPROVALS

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION, AND WE OR OUR COLLABORATORS
MAY NOT OBTAIN NECESSARY REGULATORY APPROVALS.

The research, development, manufacture, marketing, and sale of product
candidates manufactured using our technology are subject to varying degrees of
regulation by a number of government authorities in the United States and other
countries.

Regulation of Pharmaceutical Products

Pharmaceutical product candidates manufactured using our technology must
undergo an extensive regulatory approval process before commercialization. This
process is regulated by the FDA and by comparable agencies in other countries.
Our products, and products employing our technology, are regulated in the United
States in accordance with the federal Food, Drug and Cosmetic Act, the Public
Health Service Act, and other laws. If the product is regulated as a biologic,
such as the cancer vaccines being developed by Bristol-Myers, the FDA Center for
Biologics Evaluation and Research, or CBER, will require the submission and
approval of a Biologic License Application, or BLA, before commercial marketing.
The BLA process generally requires:

o expensive and time-consuming preclinical studies and clinical trials to
establish the safety, potency, purity, and effectiveness of each compound
to be submitted with the FDA;

8
<PAGE>

o compliance with FDA good laboratory, clinical, and manufacturing
practices during testing and manufacturing; and

o continued FDA oversight of product and promotion after marketing approval
is obtained.

It may be many years, if ever, until regulatory approval is obtained.

Each manufacturer of drugs or biologics must be registered with the FDA and
pass an inspection by the FDA prior to approval to manufacture products for
commercial distribution. Failure to pass the inspection results in not receiving
approval to market products.

Our glycoprotein remodeling technology will require submission of Drug
Master Files with CBER for the production of recombinant therapeutic
glycoproteins. If we or our collaborators fail to comply with all applicable
regulatory requirements, the following delays or regulatory action could result:

o warning letters;

o fines;

o product recalls or seizures;

o operating restrictions;

o refusal of the FDA to complete review of pending market approval
applications or supplements to approval applications;

o withdrawal of previously approved product approvals;

o civil penalties; and

o criminal prosecution.

We have not submitted, and we may never submit, any pharmaceutical product
candidates for marketing approval to the FDA, or any other regulatory authority.
In addition, Bristol-Myers has not submitted, and may never submit, its vaccines
for marketing approval to the FDA, or any other regulatory authority.

If any product manufactured using our technology is submitted for
regulatory approval, it may not receive either the approvals necessary for
commercialization, the desired labeling claims, or coverage or adequate levels
of reimbursement under federal, state, or private healthcare insurance
providers. Any delay in receiving, or failure to receive, these approvals would
adversely affect our ability to generate product revenues or royalties. Even if
all requisite approvals were granted, these approvals may entail commercially
unacceptable limitations on the labeling claims. In addition, once an approval
is granted, both a marketed drug or compound and the manufacturer are subject to
continual review and inspection. Later discovery of previously unknown problems
with a product or manufacturer may result in restrictions or regulatory action
against the product or manufacturer, including withdrawal of the product from
the market. Additional governmental regulations may delay or alter regulatory
approval of any product candidate manufactured using our technology. We cannot
predict the impact of adverse governmental action that might arise from future
legislative and administrative action.

Regulation of Foods and Food Ingredients

We expect that many of the products of our joint venture with McNeil will
be food ingredients, including FOS and other bulking agents and nutraceutical
food additives. Foods and food ingredients are subject to the provisions of the
federal Food, Drug and Cosmetic Act. Food ingredients are broadly defined as any
substances that may become a component, or otherwise affect the characteristics,
of food. Food ingredients or ingredients used in animal feed are regulated
either as substances generally recognized as safe, or GRAS, or as food
additives.

9
<PAGE>

manufacturer to market and sell the additive or the food containing the
additive. Furthermore, a manufacturer's decision to rely on an independent
determination may limit the marketability of that manufacturer's products to
food manufacturers, many of whom require confirmation of GRAS status from the
FDA before they will purchase substances for use in foods from third parties.

Food ingredients that are not GRAS are regulated as food additives. All new
food additives require FDA approval prior to commercialization. Information
supporting the safety of a food additive is submitted to the FDA in the form of
a food additive petition. The food additive petition process is generally
expensive and lengthy. Commercialization of the food additive, if permitted by
the FDA, often occurs several years after the petition is submitted to the FDA.
The petition must establish with reasonable certainty that the food additive is
safe for its intended use at the level specified in the petition. The petition
is required to contain reports of safety investigations of the food additive and
details regarding its physical, chemical, and biological properties. Product
safety studies submitted to the FDA are typically conducted in accordance with
FDA good laboratory practices requirements. If a food additive petition is
submitted, the FDA may choose to reject the petition or deny any desired
labeling claims. Furthermore, the FDA may require the establishment of
regulations that necessitate costly and time-consuming compliance procedures.

Regulation of Infant Formula Additives

We are collaborating with Wyeth to develop an additive to infant formula.
The manufacture, composition, and labeling of infant formulas are subject to the
provisions of the United States Infant Formula Act. Prior to commercializing any
potential infant formula additive, an infant formula manufacturer must
demonstrate that its potential additive:

o is GRAS by previous regulation of the FDA, or is self-affirmed as GRAS by
the infant formula manufacturer; or

o is the subject of an approved food additive petition.

Wyeth may market infant formula containing the additive in foreign
countries. Infant formula regulatory requirements vary widely from country to
country, and may be more or less stringent than the FDA requirements. The time
required to obtain clearances, if required, in foreign countries may be longer
or shorter than that required in the United States.

WE USE HAZARDOUS MATERIALS IN OUR OPERATIONS THAT MAY SUBJECT US TO AN
ENVIRONMENTAL CLAIM OR LIABILITY.

Our research and development processes involve the controlled use of
hazardous materials, chemicals, and radioactive compounds. The risk of
accidental injury or contamination from these materials cannot be entirely
eliminated. We do not maintain a separate insurance policy for these types of
risks. In the event of an accident or environmental discharge, we may be held
liable for any resulting damages, and any liability could exceed our resources.
We are subject to federal, state, and local laws and regulations governing the
use, storage, handling, and disposal of these materials and specified waste
products. The cost of compliance with these laws and regulations could be
significant.

10
<PAGE>
RISKS RELATED TO THIS OFFERING

WE MAY NEED TO RAISE ADDITIONAL MONEY, BUT WE MAY NOT BE ABLE TO DO SO WHEN
NEEDED, OR ON TERMS FAVORABLE TO OUR STOCKHOLDERS.

To fund operations until we become profitable, and to make capital
investments, we may need to sell additional stock, borrow additional money, or
enter into new collaborative agreements. The timing and amount of our future
capital requirements will depend on many factors, including those discussed in
this "Risk Factors" section.

We may not be able to raise money when we need it. If we fail to obtain
adequate funds when needed:

o we may delay or eliminate our research and development activities, or

other aspects of our business;

o we may have to license or sell our technologies on unfavorable terms; or

o we may have to reduce or cease operations.

If we raise money by selling additional stock or borrowing additional
money, the terms may not be favorable and may dilute the ownership of our
stockholders. A debt financing may contain restrictive covenants, and, if we
default, may provide the lender with rights to some or all of our assets. For
example, our debt financing arrangement requires us to maintain at least $20
million of cash and short-term investments. If our cash and short-term
investments fall below $20 million, we will be required to deposit with the
lender cash collateral up to, but not more than, the loan's unpaid balance,
which was $8.3 million as of December 31, 1999.

OUR STOCK PRICE IS HIGHLY VOLATILE.

The market price for our common stock has been highly volatile and is
likely to continue to be highly volatile. The trading prices of many
biotechnology company stocks, including ours, have experienced significant price
and volume fluctuations in recent months. The following factors and events may
add to our stock price's volatility:

o relatively low liquidity in the market for our common stock;

o fluctuations in our operating results;

o announcements of technological innovations by us or our competitors;

o developments in our relationship with collaborative partners;

o published reports by securities analysts;

o progress with clinical trials;

o governmental regulation;

o developments in patent or other proprietary rights;

o additions or departures of our key personnel;

o broad market fluctuations;

o additional sales of our securities; and

o general market conditions.

Many of these factors are beyond our control. These factors may decrease
the market price of our common stock, regardless of our operating performance.

BECAUSE THE TOTAL PRICE YOU WILL PAY FOR YOUR SHARES IN THE OFFERING WILL BE
MUCH GREATER THAN THE VALUE OF OUR ASSETS AFTER SUBTRACTING OUR LIABILITIES, THE
VALUE OF YOUR INVESTMENT IN OUR COMMON STOCK WILL BE DILUTED.

If you purchase our common stock in this offering, the price you will pay
for our common stock will be much greater than the book value per share of our
outstanding common stock after the offering. In addition, the total amount of
our capital will be less than it would have been had you and all of the existing
stockholders, optionees, and warrant holders paid the same amount per share of
our common stock. Accordingly, you will suffer immediate and substantial
dilution of your investment. In the past, we have issued options and warrants to
buy our common stock at prices below the offering price. You will

11
<PAGE>

experience further dilution to the extent that additional shares of our common
stock are issued upon the exercise of outstanding stock options and warrants.
See "Dilution" for a detailed calculation of the dilution that will result from
this offering.

FUTURE SALES OF OUR COMMON STOCK COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO DECLINE.

Of the 14,053,502 shares of common stock outstanding after this offering
(assuming the underwriters do not exercise their over-allotment option), the
2,500,000 shares of common stock offered hereby and an additional 9,767,405
shares of common stock previously issued will be freely tradeable without
restriction in the public market unless such shares are held by "affiliates," as
that term is defined in Rule 144 under the Securities Act of 1933. The remaining
1,786,097 shares of common stock to be outstanding after this offering are
restricted securities as that term is defined in Rule 144 under the Securities
Act. In July 1999, we filed a Registration Statement on Form S-3 under the
Securities Act relating to 1,500,000 shares of these restricted securities. The
holder of the remaining 286,097 shares is entitled to require us either to
register its shares upon demand or to use our best efforts to include its shares
in registration statements we file under the Securities Act. Alternatively, this
holder may sell its shares in the public market upon the expiration of certain
holding periods under Rule 144 of the Securities Act, subject to the volume,
manner of sale, and other limitations of Rule 144.

Once any restricted securities are sold, either under a registration
statement or under Rule 144, the common shares will be freely tradable without
restriction in the public market, unless the shares are held by affiliates. We
are unable to predict the effect that sales of restricted securities may have on
the market price of our common stock. The sale of a significant number of
additional securities, or even the possibility thereof, may lower the market
price of our common stock.

In addition, we have filed registration statements on Form S-8 under the
Securities Act that cover 2,212,833 shares of common stock currently issuable
under our stock option and employee stock purchase plans. Shares issued under
these plans, other than shares issued to affiliates, are freely tradeable in the
public market without restrictions.

We expect that 2,087,324 shares of our common stock held by some of our
existing stockholders, including all of our officers and directors, will be
subject to "lock-up" agreements that will prohibit these stockholders from
selling their shares for 90 days after the consummation of this offering. When
the 90-day "lock-up" period expires, or if Chase Securities Inc. consents, in
its sole discretion, to an earlier sale, the existing stockholders bound by
those agreements will be able to sell their shares in the public market, subject
to legal restrictions. If our existing stockholders sell a large number of
shares in the public market, the market price of shares of common stock could
decline, as these sales may be viewed by the public as an indication of an
upcoming or recently occurring shortfall in our financial performance. Moreover,
the perception in the public market that these stockholders might sell shares of
our common stock could depress the market price of the common stock. Further,
some of our existing stockholders have the right to require us to register their
shares, which may facilitate their sale in the public market. See "Shares
Eligible for Future Sales" for a more detailed description of the eligibility of
shares of our common stock for future sales.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW, AND
RIGHTS GRANTED TO THE HOLDERS OF OUR COMMON AND PREFERRED STOCK, COULD PREVENT
OR DELAY A CHANGE IN CONTROL OF OUR COMPANY, EITHER OF WHICH COULD ADVERSELY
AFFECT OUR STOCK PRICE.

In September 1997, our board of directors adopted a plan that grants each
holder of our common stock the right to purchase shares of our Series A junior
participating preferred stock. This plan is designed to help insure that all our
stockholders receive fair value for their shares of common stock in the event of
a proposed takeover of Neose, and to guard against the use of partial tender
offers or other coercive tactics to gain control of Neose without offering fair
value to all holders of our common stock. The plan is likely to discourage a
merger or tender offer involving our securities that is not approved by our
board of directors. The plan could increase the cost of effecting a merger or
tender offer and could

12
<PAGE>

have an adverse impact on holders of our stock who might want to vote in favor
of a merger or participate in a tender offer.

Under our certificate of incorporation, our board of directors has the
authority, without further action by the holders of our common stock, to issue
4,700,000 additional shares of preferred stock from time to time in series and
with preferences and rights as it may designate, in addition to the 300,000
shares of Series A junior participating preferred stock already designated.
These preferences and rights may be superior to those of the holders of our
common stock. For example, the holders of preferred stock may be given a
preference in payment upon our liquidation, or for the payment or accumulation
of dividends before any distributions are made to the holders of our common
stock.

Although we have no present intention to authorize or issue any additional
series of preferred stock, any authorization or issuance, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could also have the effect of making it more difficult for a
third party to acquire a majority of our outstanding voting stock. The preferred
stock may have other rights, including economic rights senior to those of our
common stock, and, as a result, an issuance of additional preferred stock could
adversely affect the market value of our common stock. Provisions of Delaware
law may also discourage, delay or prevent someone from acquiring or merging with
us. See "Description of Capital Stock--Preferred Stock" and --"Other
Anti-Takeover Provisions" for a detailed description of the anti-takeover
provisions in our charter document and under Delaware law.

OUR MANAGEMENT WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS OF THIS OFFERING
AND WE CANNOT ASSURE YOU THAT WE WILL EFFECTIVELY UTILIZE THE PROCEEDS.

We intend to use the net proceeds from the sale of the common stock for
ongoing research and development activities, to make capital contributions to
our joint venture with McNeil, and for general corporate purposes, which may
include capital expenditures and possible acquisitions of, or investments in,
technology, licenses, proprietary rights, or companies that complement our
business. The failure of management to apply these funds effectively could harm
our business. Our management has not determined how it will allocate the
proceeds among the anticipated uses. Accordingly, our management will have
significant flexibility in applying the net proceeds of this offering and you
will not have the opportunity, as part of your investment decision, to assess
whether management is using the proceeds appropriately. Management has
flexibility to use the net proceeds for corporate purposes and cannot assure
that the proceeds will be expended effectively. Until the proceeds are needed,
we plan to invest them in short-term, investment grade, interest bearing
securities.

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<PAGE>
FORWARD-LOOKING STATEMENTS

Some of the statements in the sections entitled "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," and elsewhere in this
prospectus, and in the documents incorporated by reference herein, contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. When used in this prospectus and the documents incorporated into
this prospectus by reference, the words "anticipate," "believe," "estimate,"
"may," "expect," and similar expressions are generally intended to identify
forward-looking statements. These forward-looking statements include, among
others, the statements in Management's Discussion and Analysis about our:

o expectations for increases in operating expenses;

o expectations for increases in research and development and general and
administrative expenses in order to develop new products and manufacture
commercial quantities of products;

o expectations for the development, manufacturing, and approval of new
products;

o expectations for incurring additional capital expenditures to expand our
manufacturing capabilities;

o expectations for generating revenue or becoming profitable on a sustained
basis;

o ability to enter into additional marketing agreements and the ability of
our existing marketing partners to commercialize products incorporating
our technologies;

o estimate of the sufficiency of our existing cash and cash equivalents and
investments to finance our operating and capital requirements;

o expected losses; and

o expectations for future capital requirements.

Our actual results could differ materially from those results expressed in,
or implied by, these forward-looking statements. Potential risks and
uncertainties that could affect our actual results include the following:

o our ability to commercialize any of our products or technologies;

o our ability to maintain our existing collaborative arrangements and enter
into new collaborative arrangements;

o our ability to develop commercial-scale manufacturing facilities;

o our ability to protect our proprietary products, know-how, and
manufacturing processes;

o unanticipated cash requirements to support current operations or research
and development;

o the timing and extent of funding requirements for the joint venture's
activities;

o our ability to attract and retain key personnel; and

o general economic conditions.

These and other risks and uncertainties that could affect our actual
results are discussed in greater detail in this prospectus and in our other
filings with the Securities and Exchange Commission that are incorporated herein
by reference. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
events, levels of activity, performance, or achievements. We do not assume
responsibility for the accuracy and completeness of the forward-looking
statements.

We do not intend to update any of the forward-looking statements after the
date of this prospectus to conform them to actual results.

14
<PAGE>
USE OF PROCEEDS

The net proceeds we will receive from the sale of 2,500,000 shares in this
offering will be approximately $100.4 million. This is based upon an assumed
public offering price of $43.00 per share, and after deducting underwriting
discounts, commissions, and estimated offering expenses. If the underwriters
exercise their over-allotment option in full, the net proceeds to us are
estimated to be approximately $115.5 million.

We expect to use these proceeds for ongoing research and development
activities, to make capital contributions to our joint venture with McNeil, and
for general corporate purposes, which may include capital expenditures and
possible acquisitions of, or investments in, technology, licenses, proprietary
rights, or companies that complement our technologies.

Pending these uses, we intend to invest the net proceeds of this offering
in short-term, investment grade, interest-bearing securities.

PRICE RANGE OF COMMON STOCK

Our common stock is listed on the Nasdaq National Market under the symbol
NTEC. We commenced trading on the Nasdaq National Market on February 15, 1996.
The following table sets forth the high and low closing sale prices of our
common stock for the periods indicated.

<TABLE>
<CAPTION>
COMMON STOCK PRICE
-------------------
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................. $15.88 $12.13
Second Quarter............................................ 17.88 13.94
Third Quarter............................................. 16.25 8.75
Fourth Quarter............................................ 15.38 8.00
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................. 16.75 11.38
Second Quarter............................................ 13.69 9.75
Third Quarter............................................. 15.00 9.50
Fourth Quarter............................................ 16.75 12.69
YEAR ENDED DECEMBER 31, 2000
First Quarter (through March 14, 2000).................... 55.00 13.75
</TABLE>

On March 14, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $43.00 per share. There were approximately 270 record
holders and 2,900 beneficial holders of our common stock as of March 14, 2000.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any future earnings to fund the development and
growth of our business. Therefore, we do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay dividends
will be at the discretion of our board of directors.

15
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999:

o On an actual basis; and

o On a "pro forma as adjusted" basis to give effect to our receipt of the
estimated net proceeds from the sale of 2,500,000 shares of our common
stock.

The information below assumes a public offering price of $43.00 as reduced
for underwriting, discounts, commissions and expenses incurred in connection
with this offering. The following table does not reflect 2,152,037 shares of
common stock issuable upon the exercise of options outstanding as of December
31, 1999 at a weighted-average exercise price of $12.41 per share and 10,527
shares of common stock issuable upon the exercise of an outstanding warrant as
of December 31, 1999 at an exercise price of $14.25 per share.

You should read the information below together with our consolidated
financial statements and the notes appearing at the end of the financial
statements included in this prospectus.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt.............................................. $ 7,300 $ 7,300
-------- --------
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000
shares authorized; none issued......................... -- --
Common stock, $0.01 par value; 30,000,000 shares
authorized; 11,433,000 shares issued and outstanding
actual; 13,933,000 shares issued and outstanding pro
forma as adjusted...................................... 114 139
Additional paid-in capital................................ 101,013 201,369
Deferred compensation..................................... (530) (530)
Deficit accumulated during the development stage.......... (59,812) (59,812)
-------- --------
Total stockholders' equity............................. 40,785 141,166
-------- --------
Total capitalization................................. $ 48,085 $148,466
======== ========
</TABLE>

16
<PAGE>
DILUTION

Purchasers of the common stock offered by this prospectus will experience
an immediate dilution in the net tangible book value of their common stock from
the public offering price. The net tangible book value of our common stock as of
December 31, 1999 was approximately $37.6 million or $3.28 per share. Net
tangible book value per share of our common stock is equal to our net tangible
assets (tangible assets less total liabilities), divided by the number of shares
of common stock issued and outstanding as of December 31, 1999. Dilution per
share represents the difference between the public offering price per share of
our common stock and the pro forma net tangible book value per share of our
common stock after giving effect to this offering. After reflecting the assumed
sale of 2,500,000 shares of common stock offered by us hereby at the public
offering price of $43.00 per share, less underwriting discounts and estimated
offering expenses, the pro forma net tangible book value of our common stock as
of December 31, 1999 would have been approximately $137.9 million or $9.90 per
share. The change represents an immediate increase in net tangible book value
per share of our common stock of $6.62 per share to existing stockholders and an
immediate and substantial dilution of $33.10 per share to new investors
purchasing the shares of common stock in this offering. The following table
illustrates this per share dilution:

Assumed public offering price per share..................... $43.00
Net tangible book value per share as of December 31,
1999................................................... $3.28
Increase in net tangible book value per share attributable
to new investors....................................... 6.62
-----
Pro forma net tangible book value per share after this
offering.................................................. 9.90
------
Dilution per share to new investors in this offering........ $33.10
======

The preceding table does not reflect 2,152,037 shares of common stock
issuable upon the exercise of options outstanding as of December 31, 1999 at a
weighted-average exercise price of $12.41 per share and 10,527 shares of common
stock issuable upon the exercise of an outstanding warrant as of December 31,
1999 at an exercise price of $14.25 per share.

If the underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value of our common stock as of December 31, 1999 after
giving effect to the assumed sale of 2,875,000 shares of common stock offered by
us hereby at the public offering price of $43.00 per share, less underwriting
discounts and estimated offering expenses, would have been approximately $153.0
million or $10.69 per share, representing an immediate dilution of $32.31 per
share to new investors purchasing the shares of common stock in this offering
and an immediate increase in net tangible book value per share of our common
stock of $7.41 per share to existing stockholders.

17
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

The following Statements of Operations Data for the years ended December
31, 1995, 1996, 1997, 1998, and 1999, and for the period from inception (January
17, 1989) through December 31, 1999, are derived from our consolidated financial
statements that have been audited by Arthur Andersen LLP, independent public
accountants. The financial data set forth below should be read in conjunction
with the sections of this prospectus entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the financial
statements and notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 17,
1989) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------------ ------------
1995 1996 1997 1998 1999 1999
-------- -------- -------- --------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue from collaborative agreements....... $ 1,199 $ 1,383 $ 725 $ 390 $ 422 $ 6,767
-------- -------- -------- --------- --------- --------
Operating Expenses:
Research and development.................. 4,733 6,502 8,013 9,912 10,649 51,553
General and administrative................ 1,665 2,505 3,884 3,635 4,520 21,233
-------- -------- -------- --------- --------- --------
Total expenses............................ 6,398 9,007 11,897 13,547 15,169 72,786
Interest income (expense), net.............. 132 1,483 2,108 1,250 1,429 6,207
-------- -------- -------- --------- --------- --------
Net loss.................................... $ (5,067) $ (6,141) $ (9,064) $ (11,907) $ (13,318) $(59,812)
======== ======== ======== ========= ========= ========
Basic and diluted net loss per share........ $ (1.99) $ (0.82) $ (0.96) $ (1.25) $ (1.25)
Basic and diluted weighted-average shares
outstanding............................... 2,550 7,494 9,405 9,556 10,678
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securities.............. $ 11,189 $ 32,845 $ 43,303 $ 32,023 $ 33,235
Total assets................................ 14,639 37,118 58,886 46,265 52,239
Long-term debt.............................. 1,235 556 8,917 8,300 7,300
Deficit accumulated during development
stage..................................... (19,382) (25,523) (34,587) (46,494) (59,812)
Total stockholders' equity.................. 11,733 35,120 46,954 36,013 40,785
</TABLE>

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial
statements and related notes included in this prospectus.

OVERVIEW

We are a leading developer of proprietary technologies for the synthesis
and manufacture of complex carbohydrates. Our proprietary enzymatic technology
platform enables the rapid and cost-effective synthesis of a wide range of
complex carbohydrates in commercial quantities. We use our broad, enabling
technology to produce complex carbohydrates for pharmaceutical, biotechnology,
nutritional, and consumer product applications. Due to their structural
complexity, complex carbohydrates have been difficult and expensive to produce,
and their commercial development has been significantly limited.

We have incurred operating losses each year. As of December 31, 1999, we
had an accumulated deficit of approximately $60 million. We expect additional
losses for some time as we expand research and development efforts, expand
manufacturing scale-up activities, and begin sales and marketing activities.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1999 AND 1998

Revenues from collaborative agreements increased to $422,000 in 1999 from
$390,000 in 1998. Substantially all of our revenues during 1999 were payments
received by us under our collaborative agreements with Bristol-Myers and Wyeth.
Substantially all of our revenues during 1998 were payments received by us under
our collaborative agreement with Bristol-Myers.

Research and development expenses increased to $10.6 million in 1999 from
$9.9 million in 1998. The increase was primarily attributable to increased
funding of outside research, and the amortization of acquired technology from
Cytel Corporation.

General and administrative expenses increased to $4.5 million in 1999 from
$3.6 million in 1998. The increase was primarily attributable to increased
patent and general legal expenses associated with the intellectual property
acquired from Cytel Corporation, and increased business development expense.

Interest income increased to $1.9 million in 1999 from $1.8 million in 1998
due to higher average cash and marketable securities balances during 1999.
Interest expense decreased to $433,000 in 1999 from $534,000 in 1998 due to
lower average loan balances outstanding during 1999.

YEARS ENDED DECEMBER 31, 1998 AND 1997

Revenues from collaborative agreements decreased to $390,000 in 1998 from
$725,000 in 1997. Substantially all of our revenues during 1998 were payments
received by us under our collaborative agreement with Bristol-Myers.
Substantially all of our revenues during 1997 were payments received by us under
our collaborative agreement with Abbott.

Research and development expenses increased to $9.9 million in 1998 from
$8.0 million in 1997. The increase was primarily attributable to hiring
additional scientific personnel and increased purchases of laboratory supplies
and services related to our collaborative agreement with McNeil, and increased
funding of external research.

General and administrative expenses decreased to $3.6 million in 1998 from
$3.9 million in 1997. The decrease was primarily attributable to decreased
patent and business development expenses compared to the prior year, which
included expenses related to entering into our collaboration with McNeil.

Interest income decreased to $1.8 million in 1998 from $2.7 million in 1997
due to lower average cash balances during 1998. Interest expense decreased to
$534,000 in 1998 from $555,000 in 1997 due to lower average loan balances
outstanding during 1998.

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LIQUIDITY AND CAPITAL RESOURCES

We have incurred operating losses each year since our inception. As of
December 31, 1999, we had an accumulated deficit of approximately $60 million.
We have financed our operations through private and public offerings of our
securities, and revenues from our collaborative agreements. We had $33.2 million
in cash and marketable securities as of December 31, 1999, compared to $32.0
million in cash and marketable securities as of December 31, 1998. This increase
was primarily attributable to our completion of two private placements of common
stock totaling $17.4 million. The increase was partly offset by the use of funds
for the acquisition of intellectual property from Cytel Corporation and for our
continuing operating activities.

Under the terms of our joint venture with McNeil, we may be required to
make additional capital contributions to fund capital expenditures. If the joint
venture builds additional production facilities, and we wish to maintain our 50%
ownership in the joint venture, we are required to contribute half of such
expenditures, up to a maximum contribution of $8.85 million. However, we may
elect to contribute as little as $1.85 million of the cost of the facilities, so
long as our aggregate capital contributions are at least 15% of the joint
venture's aggregate capital contributions. In this case, McNeil will fund the
remainder of our half of the joint venture's capital expenditures, and our
ownership percentage will be proportionately reduced. We have an option,
expiring in September 2006, to return to 50% ownership in the joint venture by
reimbursing McNeil for this amount. In addition, until the joint venture is
profitable, McNeil is required to fund, as a non-recourse, no-interest loan, all
of the joint venture's aggregate capital expenditures in excess of an agreed
upon amount, and all of the joint venture's operating losses. These loans would
be repayable by the joint venture to McNeil over seven years, and in the event
of any dissolution of the joint venture would be payable to McNeil before any
distribution of assets to us.

We will account for our investment in the joint venture under the equity
method, under which we will recognize our share of earnings and losses of the
joint venture. We will record our share of the losses of the joint venture,
however, only to the extent of our actual or committed investment in the joint
venture. In 1999, we recorded a loss from operations of the joint venture of
$345,000, which is included in research and development expense.

On March 26, 1999, we acquired the carbohydrate manufacturing patents,
licenses, and other intellectual property of Cytel Corporation. We paid $3.5
million in cash to Cytel and an additional $1.5 million in cash into escrow, the
release of which is conditioned on Cytel's satisfaction, prior to September 26,
2000, of certain matters relating to the acquired patents and licenses. We have
recorded the $1.5 million placed into escrow as Restricted Cash on our
Consolidated Balance Sheet. Any cash remaining in the escrow account on
September 26, 2000 will be returned to us and will be available for general
corporate purposes.

Because the acquired intellectual property consists of core technology with
alternative future uses, we have capitalized $3.3 million of the amount paid to
Cytel as Acquired Technology. The remaining $200,000 was charged to expenses in
our Consolidated Statement of Operations in 1998.

In 1997, we issued, through the Montgomery County (Pennsylvania) Industrial
Development Authority, $9.4 million of taxable and tax-exempt bonds. The bonds
were issued to finance the purchase of our previously leased building and the
construction of a pilot-scale manufacturing facility within our building. The
bonds are supported by an AA-rated letter of credit, and a reimbursement
agreement between our bank and the letter of credit issuer. The interest rate on
the bonds will vary weekly, depending on market rates for AA-rated taxable and
tax-exempt obligations, respectively. During 1999, the

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weighted-average, effective interest rate was 6.5% per annum, including
letter-of-credit and other fees. To provide credit support for this arrangement,
we have given a first mortgage on the land, building, improvements, and certain
machinery and equipment to our bank. In addition, we have agreed to maintain at
least $20 million of cash and short-term investments. If we fail to comply with
this covenant, we are required to deposit with the lender cash collateral up to,
but not more than, the loan's unpaid balance, which was $8.3 million as of
December 31, 1999.

During 1997, 1998, and 1999, we purchased approximately $10.8 million, $0.8
million, and $1.2 million of property, equipment, and building improvements.

We expect that our existing cash and short-term investments, plus the
expected proceeds of this offering, will be adequate to fund our operations
through at least 2001, although changes in our collaborative relationships or
our business, whether or not initiated by us, may cause us to deplete our cash
and short-term investments sooner than the above estimate. The timing and amount
of our future capital requirements and the adequacy of available funds will
depend on many factors, including if or when any products manufactured using our
technology are commercialized.

RECENT ACCOUNTING PRONOUNCEMENT

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be applied, and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We are evaluating SAB 101 and the effect it may have on our
financial statements. At this time, we believe that SAB 101 will not have a
material impact on our financial position or results of operations.

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BUSINESS

OVERVIEW

Cancer vaccines based on carbohydrates are one biopharmaceutical
application that could be enabled by our carbohydrate technology platform. We
are collaborating with Bristol-Myers Squibb Company to develop a commercial
manufacturing process for the ganglioside components in two therapeutic cancer
vaccines licensed to Bristol-Myers from Progenics Pharmaceuticals.

We are also developing novel applications of our technologies for large
nutritional and consumer product markets. In 1999, we entered into a joint
venture with the McNeil Specialty Products Division of Johnson & Johnson to
manufacture and market FOS and other complex carbohydrates, including
nutraceutical food additives, bulking agents for McNeil's sucralose sweetener,
and other related compounds. We believe that the joint venture's technologies
can yield products that are cleaner, more consistent, and significantly less
expensive than identical products derived from agricultural sources. In 1999, we
also entered into a collaboration agreement with Wyeth Nutritionals
International, a division of American Home Products, enabling Wyeth to use our
platform technology to develop and produce a bioactive carbohydrate for use in
infant and pediatric nutritional formulas.

GlycoAdvance(TM), another application of our technology platform, is used
to complete and correct critical portions of therapeutic glycoproteins, which
are proteins that include carbohydrate structures. We believe that GlycoAdvance
may permit the continued development of some drugs by overcoming efficacy and
side effect problems related to incomplete carbohydrate structures. Many
biotechnology drugs on the market or in development are glycoproteins, and their
associated carbohydrates are often critical to the function of the protein.
Current techniques to produce glycoproteins frequently yield incomplete or
incorrect complex carbohydrates, leading to problems such as decreased efficacy,
adverse reactions, and manufacturing inefficiencies. Our GlycoAdvance technology
uses our proprietary enzymes to add or remodel therapeutic glycoproteins to
incorporate the proper human sugars in an efficient and flexible system.
Examples of glycoprotein therapeutics currently on the market include
erythropoietins and interferons. The top eight glycoprotein drugs accounted for
more than $6.7 billion in estimated 1999 sales. There are more than 200
glycoprotein drugs currently in development. We believe that the use of
GlycoAdvance technology for the production of human therapeutic glycoproteins
may result in an improved pharmacokinetic profile, potentially strengthened
patent claims, and significant manufacturing efficiencies.

COMPLEX CARBOHYDRATES

Complex carbohydrates are chains of simple sugar molecules that can be
joined in many different combinations. For example, four different
monosaccharides can be arranged to make approximately 36,000 different complex
carbohydrates. In contrast, the assembly of amino acids into proteins is much
simpler than the assembly of simple sugar molecules. For example, four different
amino acids can be combined to make a total of 24 distinct peptides.

Complex carbohydrates are critically important molecules in biological
processes. On cell surfaces, they regulate communications with other cells,
hormones, nutrients, and growth and death factors. For example, the majority of
cancers are characterized by complex carbohydrate irregularities on the cell
surface that have been implicated in the process of tumor growth and metastatic
disease. Complex carbohydrates also serve as the primary source of nutrition for
all cells in all organisms.

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Carbohydrates are also joined together with other types of compounds. For
example, complex carbohydrates can be joined to lipids, as they are in
therapeutic cancer vaccines, and to proteins called glycoproteins. Many
biotechnology drugs on the market or in development are glycoproteins, and their
associated carbohydrates are often critical to the pharmacokinetics of proteins.

Traditional Methods

Simple sugars can be linked in many different combinations, with each
combination potentially having a different biological activity. Chemical
synthesis of complex carbohydrates is difficult, time consuming, prohibitively
expensive, and becomes more complex as the length of a chain increases. Most
commercial complex carbohydrates are extracted from plants, which can be an
unreliable source due to supply problems created by weather, political
instability, contamination, and product inconsistency. Complex carbohydrates
developed for pharmaceutical use are purified from animal sources; for example,
heparin, a multi-billion dollar per year pharmaceutical product, is now derived
largely from pig intestines. Some of these animal sources may not be desirable
from a regulatory or safety perspective.

Glycoproteins are currently produced in non-human mammalian cell expression
systems. Current methods often results in incomplete or incorrect glycosylation.
Glycosylation refers both to the linkage pattern of carbohydrate molecules, and
to the process of creating or modifying these linkages. The impact of incomplete
or incorrect glycosylation includes reduced half-life of the injected drug,
increased dosing level or frequency, and increased immunogenicity. Incomplete
glycosylation can also result in production inefficiencies, including lower
production yields, higher purification costs, and increased capital and
facilities requirements. Conventional methods of solving these problems of
incomplete or incorrect glycosylation include choice of cell types for use in
cell expression systems, cell re-engineering, cell culture media optimization,
and purification of the most complete glycoforms during recovery. These
approaches are expensive and ineffective.

Our Enzymatic Glycosylation Technology

Our proprietary enzymatic glycosylation technology is applicable to all
natural complex carbohydrates, and makes feasible the rapid and cost-effective
synthesis of commercial quantities of a wide range of complex carbohydrates. Our
methods can produce complex carbohydrates that are attached to lipids, as in
therapeutic cancer vaccines, are attached to proteins, as in recombinant
therapeutic glycoproteins, or are solely carbohydrates, as found in human breast
milk.

Our manufacturing methods offer an alternative to unpredictable, scarce, or
undesirable natural sources and to cumbersome, expensive, and time consuming
chemical synthesis of complex carbohydrates. Although identical to natural
compounds, enzymatically-produced complex carbohydrates are cleaner and more
homogeneous. Our technology is also capable of correcting or completing the
human carbohydrate patterns on glycoproteins, potentially resulting in improved
pharmacokinetic profiles and manufacturing efficiencies.

Our proprietary enzymatic technology synthesizes specific chemical linkages
among individual sugar molecules. These enzymes, which are referred to as
glycosyltransferases, are catalysts that link sugars together in highly specific
ways. Glycosyltransferases synthesize linkages rapidly, efficiently, and can be
used continuously for months before replacement. We have developed recombinant
methods of producing the glycosyltransferases necessary to manufacture many
naturally occurring complex carbohydrates.

Our glycosylation synthesis technology leadership position was enhanced
significantly by our acquisition of related technologies from Cytel Corporation
in 1999. While we had been primarily focused on the use of multiple
glycosyltransferases to link simple sugars, Cytel was focused primarily on other
enzymes. We have identified areas of Cytel's technology that, coupled with our
existing synthesis technology, have significantly broadened our enzymatic
glycosylation technology platform.

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OUR STRATEGY

Our strategy is to enhance our position as the leading developer of
technologies for the synthesis and manufacture of complex carbohydrates. The
following are the key elements of our strategy:

o Strengthen Our Technology Leadership Position in Carbohydrate
Manufacture. We have a leadership position in cost-effective production
methods for a variety of complex carbohydrates. We expect to continue our
internal efforts in research and development, to pursue in-licensing
opportunities, sponsor academic research, and to acquire complementary
technologies. Our acquisition of closely related technologies from Cytel
Corporation during 1999 enabled us to broaden our technology platform.

o Leverage the Use of Our Technologies in the Pharmaceutical and
Biotechnology Markets. Our collaborative agreement with Bristol-Myers
illustrates our enabling technology's applicability to the development of
biopharmaceutical therapeutics. In addition, we are currently using our
GlycoAdvance glycoprotein remodeling technology to modify glycoproteins,
on an evaluative basis, for a number of major biopharmaceutical
companies. We are seeking additional collaborations with both
biotechnology and pharmaceutical firms to incorporate our GlycoAdvance
technology into their drug development programs.

o Expand the Use of Our Technologies in the Nutritional and Consumer
Product Markets. Our existing joint venture, collaborative, and
licensing relationships with McNeil and Wyeth demonstrate our ability to
extend our technology platform into additional markets. We are seeking
additional collaborations for the development of other nutritional and
consumer applications.

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OUR MAJOR PROJECTS

We are using our broad, enabling technology to produce complex
carbohydrates for a variety of product candidates. The table below lists major
projects under development that use applications of our technology platform:

PHARMACEUTICAL AND BIOTECHNOLOGY APPLICATIONS

Therapeutic Cancer Vaccines

Under an agreement with Bristol-Myers, we are developing proprietary
technologies that enable cGMP processes for the manufacture of two gangliosides
for use as the active pharmaceutical ingredients in two cancer vaccines being
developed by Bristol-Myers. Both vaccine candidates have been licensed to
Bristol-Myers from Progenics Pharmaceuticals.

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The first of these vaccine candidates, GMK, is in Phase III clinical trials
for the treatment of malignant melanoma. We estimate that there are 300,000
melanoma patients in the United States today. The American Cancer Society
estimated that 44,000 new cases of melanoma in the United States were diagnosed
in 1999. The ganglioside GM2 is overexpressed in malignant melanoma cells, and
is being used as an antigen to stimulate the patient's immune system to
eliminate tumor cells. We are developing a complete, synthetic, enzymatic
manufacturing process for the active compound, under cGMP conditions, for use in
clinical trials and for commercial distribution upon approval.

The second vaccine candidate, MGV, is also being developed for a variety of
other cancer indications, including colorectal cancers, lymphoma, sarcoma, small
cell lung cancer, gastric cancer, and neuroblastoma. The vaccine is based on a
combination of the gangliosides GM2 and GD2, both of which are enriched on the
surfaces of a number of tumor cell types. In addition to the process we are
developing for GM2, we will also use our proprietary technology to develop a
manufacturing process for GD2. We will then produce both GM2 and GD2 for the MGV
vaccine for use in subsequent clinical trials and for commercial use upon
approval.

Under our current agreements with Bristol-Myers, we expect to be paid for
process development, for the delivery of qualified materials for clinical trial
use, and for stability and other pre-launch needs. If Bristol-Myers proceeds
with GMK or MGV, we expect to enter into a mutually exclusive long-term
manufacturing and supply agreement to provide Bristol-Myers with commercial
requirements for the vaccines.

GlycoAdvance Glycoprotein Remodeling Technology

Our GlycoAdvance technology uses our proprietary enzymes to add or remodel
therapeutic glycoproteins to incorporate the proper human sugars in an efficient
and flexible system. We believe that GlycoAdvance may permit the continued
development of some drugs by overcoming efficacy and side effect problems
related to incomplete carbohydrate structures. We also believe that the use of
GlycoAdvance in the production of human therapeutic glycoproteins may result in
improved pharmacokinetic profiles, potentially strengthened patent claims, and
significant manufacturing efficiencies. GlycoAdvance can be incorporated easily
into the manufacturer's production system as a post-secretion modification of
the expressed protein. Estimated 1999 sales of the top eight selling
glycoprotein drugs were greater than $6.7 billion. Of the approximately 350
biotechnology drugs currently in development, more than 200 are glycoproteins.
We believe that our glycoprotein remodeling technologies are potentially
applicable to many of these drugs.

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[GRAPHIC]

In the printed version of the document, a graph appears which depicts the
following plot points:

A good example of the importance of glycosylation can be seen by comparing
two similar interferon drugs: Betaseron(TM) and AVONEX(TM). Betaseron is
expressed in E. coli, AVONEX in Chinese hamster ovary cells. Because bacteria do
not add sugars to proteins, Betaseron is not glycosylated. On the other hand,
AVONEX is manufactured using a mammalian expression system, which can produce
varying levels of glycosylated proteins. Published research shows AVONEX is ten
times more potent per milligram than Betaseron, a difference directly related to
the carbohydrate molecules attached to the AVONEX drug. This results in a
recommended dosage for AVONEX of 30 micrograms, once per week, intramuscularly,
compared with 250 micrograms, every other day, subcutaneously for Betaseron. In
1999, the worldwide market share for AVONEX was approximately 60% of total
interferon sales, estimated to be $1.0 billion.

We are using GlycoAdvance to modify glycoproteins for a number of major
biopharmaceutical companies on an evaluative basis. In collaboration with these
biopharmaceutical companies, we have shown that GlycoAdvance technology can
increase the efficiencies and in vivo half-lives of recombinant glycoproteins
produced in mammalian expression systems. We are actively seeking to establish
longer-term collaborative relationships for use of GlycoAdvance in drug
development and manufacture.

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NUTRACEUTICALS AND CONSUMER PRODUCT APPLICATIONS

Joint Venture with McNeil

In late 1999, we entered into a joint venture with McNeil for the
large-scale enzymatic production of FOS and other complex carbohydrates. The
construction of the joint venture's initial commercial manufacturing plant in
Athens, Georgia will be completed in early 2000. Validation procedures for the
new plant are currently underway. We expect the joint venture to begin
production of its initial commercial products during 2000.

The joint venture is focused on the development and marketing of FOS and
other related compounds for a number of large commercial applications,
including:

o Novel bulking agents for sucralose, McNeil's recently approved no-calorie
sweetener;

o Nutraceutical food ingredients or dietary supplements that foster the
growth of desirable bacteria in the human gastrointestinal tract;

o Low-cost, high-quality ingredients for use in foods such as cereals and
ice creams;

o Antibiotic replacements in animal and poultry feeds; and

o Oral health products.

Sucralose Bulking Agent. McNeil's primary impetus for the initial research
collaboration with us was the need for a high-quality, healthful,
attractively-priced soluble fiber to be used in products with McNeil's recently
approved no-calorie sweetener, sucralose. McNeil is developing consumer products
combining the joint venture's bulking agent with sucralose. These products are
expected to have the mass, look, feel, texture, and cooking properties of table
sugar. The joint venture is also developing bulking agents for use in industrial
food applications in combination with McNeil's sucralose.

Nutraceutical Food Ingredients. The joint venture plans to sell FOS
products to food and nutritional companies for nutraceutical applications. FOS
is useful as a soluble dietary fiber, and promotes the growth of helpful
bacteria called bifidobacteria. Although these products have become popular in
various international markets, especially Japan, significant markets have not
yet been established in the United States.

Food Ingredients, Animal Feed, and Oral Health Products. Other
applications under consideration include development of FOS and other compounds
to replace polydextrose, which is currently used as the bulking agent in a wide
variety of low fat and reduced-calorie food products like diet ice creams, gums,
dressings, spreads, jams, and peanut butter. Although polydextrose is
inexpensive and widely used in food products, it is not favored as a food
ingredient because of the taste, color, and adverse side effects that result
from its use. We also believe that use of FOS compounds in animal and poultry
feeds may have significant health benefits, eventually allowing the replacement
of current antibiotic supplements routinely added in poultry and animal feeds.
The joint venture is also funding research being conducted at the University of
Pennsylvania Dental School on the potential use of other compounds as oral
health products. Opportunities in these areas are still at early stages of
exploration.

The joint venture is owned equally by Neose and McNeil. Neose and McNeil
each contributed intellectual property to the joint venture. In addition, McNeil
contributed to the joint venture the initial commercial manufacturing facility,
for which 50% of the cost will be reimbursed by the joint venture.

If the joint venture builds additional production facilities, and we wish
to maintain our 50% ownership in the joint venture, we are required to
contribute half of the expenditures, up to a maximum contribution of $8.85
million. However, we may elect to contribute as little as $1.85 million of the
cost of the facilities, so long as our aggregate capital contributions are at
least 15% of the joint venture's aggregate capital contributions. In this case,
McNeil will fund the remainder of our half of the joint venture's capital
expenditures, and our ownership percentage will be proportionately reduced. We
have an option, expiring in September 2006, to return to 50% ownership in the
joint venture by reimbursing McNeil for these amounts. In addition, until the
joint venture is profitable, McNeil is required to fund, as a non-recourse,
no-interest loan, all of the joint venture's aggregate capital expenditures in
excess of an agreed upon amount, and all of the joint venture's operating
losses. These loans would be repayable by the joint

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venture to McNeil over seven years, and in the event of any dissolution of the
joint venture would be payable to McNeil before any distribution of assets to
us. McNeil has the exclusive right to purchase the joint venture's bulking agent
for use in specified consumer product applications at a constant mark-up over
the joint venture's cost.

Infant Formula Additive

During 1999, we entered into an agreement with Wyeth to develop a
manufacturing process for bioactive carbohydrate to be used as an ingredient in
Wyeth's infant and pediatric nutritional formula products. We will develop a
large-scale manufacturing process for this ingredient, and Wyeth plans the
introduction of this proprietary ingredient into its infant formula lines. We
will receive contract development payments and milestone payments, and will sell
product to Wyeth upon commercialization. Wyeth is a leading global infant
formula manufacturer with products distributed in more than 90 countries.

OTHER PROGRAMS

Carbohydrates are involved in many critical biological functions and may be
broadly useful as pharmaceutical compounds. We are seeding and cultivating a
number of early stage research projects on promising, carbohydrate-based
therapeutic approaches. We do not intend to proceed beyond early stage clinical
trials on any pharmaceutical product without a suitable partner for late stage
development and commercialization.

Abbott Laboratories has a non-exclusive license to use our technology to
manufacture and commercialize, for nutritional purposes only, any complex
carbohydrate naturally found in human breast milk. If Abbott commercializes any
products manufactured using our technology, we will receive fees from Abbott
tied to commercial quantities.

PATENTS AND PROPRIETARY RIGHTS

We solely own 18 issued U.S. patents, we co-own 2 issued U.S. patents, and
have licensed 45 issued U.S. patents from 8 institutions. In addition, we own or
have licensed over 40 patent applications pending in the United States. There
are a number of U.S. and foreign patent applications related to our owned and
licensed patents. We have licensed, or have an option to license, patents and
patent applications from the following institutions: University of California,
The Scripps Research Institute, University of Pennsylvania, Japan Tobacco, Inc.,
University of Michigan, Marukin Shoyu Co., Ltd., Celltech Therapeutics Limited,
University of Arkansas, University of British Columbia, Rockefeller University,
University of Alberta, Genencor International, National Research Council Canada,
Harvard University, and University of Washington.

GOVERNMENT REGULATION

Products manufactured using our technology, and our manufacturing and
research activities, will be subject to varying degrees of regulation by a
number of government authorities in the United States and other countries. The
development, manufacture, marketing, and sale of products manufactured using our
technology will be subject to one of the following regulatory review processes:

o pharmaceutical--new drug application or biologic license application;

o infant formula additive--new infant formula submission; or

o foods and food ingredients--either self-affirmed to be or notified as
GRAS or food additive petition process.

Generally, pharmaceuticals are regulated more rigorously than foods and
food ingredients. Infant formula additives are special types of food ingredients
that are regulated more rigorously than most other types of food ingredients.

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Our operations are also subject to regulation under the Occupational Safety
and Health Act, the Environmental Protection Act, the Toxic Substances Control
Act, the Resource Conservation and Recovery Act, and other similar federal,
state, and local laws, rules, and regulations governing laboratory activities,
waste disposal, handling dangerous materials, and other matters. We voluntarily
comply with the National Institutes of Health Guidelines for Research Involving
Recombinant DNA Technologies.

Regulation of Pharmaceutical Product Candidates

We are developing proprietary processes for the manufacture of complex
carbohydrates for two cancer vaccines being developed by Bristol-Myers. Our
research and development activities regarding, and the future manufacturing and
marketing of, our pharmaceutical product candidates, as well as the Bristol-
Myers vaccines, are and will be subject to significant regulation by numerous
governmental authorities in the United States and other countries.
Pharmaceutical products intended for therapeutic use in humans are governed
principally by the federal Food, Drug and Cosmetic Act, Public Health Service
Act, and FDA regulations in the United States, and by comparable laws and
regulations in foreign countries. The federal Food, Drug and Cosmetic Act and
other federal statutes and regulations govern the testing, manufacture, safety,
effectiveness, labeling, storage, record keeping, approval, advertising, and
promotion of pharmaceutical products. The process of completing pre-clinical and
clinical testing and obtaining FDA approval for a new pharmaceutical product
requires a number of years and the expenditure of substantial resources.

Following drug discovery, the steps required before a new pharmaceutical
product may be marketed in the United States include:

o preclinical laboratory and animal tests;

o the submission to the FDA of an Investigational New Drug application;

o human clinical and other studies to assess safety and parameters of use;

o adequate and well-controlled clinical trials, typically conducted in
three phases, to establish the safety and effectiveness of the drug;

o the submission of a New Drug Application or Biologic License Application
to the FDA;

o and FDA approval of the New Drug Application or Biologic License
Application prior to any promotion, commercial sale, or shipment of the
drug.

Clinical trials are typically conducted in three sequential phases, which
may overlap. Phase I clinical trials are designed to determine the metabolic and
pharmacologic effects of the drug in humans, the side effects associated with
increasing doses, and, possibly, to obtain early indications of efficacy. These
studies generally involve a small number of healthy volunteer subjects, but may
be conducted on people with the disease the drug is intended to treat. Phase II
studies are conducted to evaluate the effectiveness of the drug for a particular
indication and thus involve patients with the disease under study. These studies
also provide evidence of the short-term side effects and risks associated with
the drug. Phase III studies are generally designed to provide the substantial
evidence of safety and effectiveness of a drug required to obtain FDA approval.
They often involve a substantial number of patients in multiple study centers
and may include chronic administration of the drug in order to assess the
overall benefit-risk relationship of the drug. A clinical trial may combine the
elements of more than one phase, and typically two or more Phase III studies may
be required. Typical estimates of the total time required for completing such
clinical testing vary between four and ten years. For marketing outside the
United States, foreign regulatory requirements govern human clinical trials and
marketing approval for drugs. The requirements relating to the conduct of
clinical trials, product licensing, pricing, and reimbursement vary widely from
country to country.

Third Party Reimbursement

Our ability and our collaborator's ability to commercialize successfully
drug products may depend in part on the extent to which coverage and
reimbursement for the cost of such products will be available from government
health administration authorities, private health insurers, and other
organizations. Significant uncertainty exists as to the reimbursement status of
new therapeutic products and we cannot be

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sure that third-party reimbursement would be available for therapeutic products
we or our collaborators might develop. Health care reform especially as it
relates to prescription drugs is an area of increasing national attention and a
priority of many governmental officials. Certain reform proposals, if adopted,
could impose limitations on the prices we will be able to charge in the United
States for our products or the amount of reimbursement available for our
products or the amount of reimbursement available for our products from
governmental agencies or third-party payors.

Regulation of Infant Formula Additives

We are collaborating with Wyeth to develop a complex carbohydrate as a
potential nutritional additive to infant formula. The manufacture, composition,
and labeling of infant formulas are subject to the provisions of the United
States Infant Formula Act. Prior to commercializing any potential infant formula
additive, an infant formula manufacturer must demonstrate that its potential
additive:

o is GRAS either by previous regulation of the FDA, or is self-affirmed as
GRAS by the infant formula manufacturer; or

o is the subject of an approved food additive petition.

Under the United States Infant Formula Act, infant formula manufacturers
are required to notify the FDA of any intent to revise, add, or substitute any
protein, fat, or carbohydrate in infant formula ninety days prior to the
intended date of commercial distribution. This new infant formula submission
must contain the quantitative formulation of the new infant formula, a
description of any reformulation or change in processing, and assurances that
the new infant formula will not be marketed without complying with the nutrient
and quality factor requirements and cGMP control requirements. Upon
notification, the FDA has a ninety-day period, in which to request additional
information, or deny marketing rights for the new formula. If no response is
received from the FDA within the ninety-day period, the manufacturer may proceed
with commercial sales of the newly formulated product. Under our agreement,
Wyeth is responsible for all regulatory activities relating to the infant
formula additive. Wyeth has not yet made, and may never make, any filings with
the FDA to propose inclusion of an infant formula additive manufactured using
our technology. Their efforts to commercialize any infant formula additive may
be materially and adversely affected if they do not self-affirm GRAS status of
this potential infant formula additive.

Wyeth may market infant formula containing this additive in foreign
countries. Infant formula regulatory requirements vary widely from country to
country, and may be more or less stringent than FDA requirements. The time
required to obtain clearances, if required, in foreign countries may be longer
or shorter than that required in the United States.

Regulation of Foods and Food Ingredients

The initial product to be manufactured by our McNeil joint venture will be
regulated as a food ingredient. Foods and food ingredients are subject to the
provisions of the federal Food, Drug and Cosmetic Act. Food ingredients are
broadly defined as any substances that may become a component, or otherwise
affect the characteristics, of food. Food ingredients are regulated either as
substances GRAS or as food additives.

Food ingredients that are GRAS are excluded from the definition of food
additives. The FDA has affirmed by regulation a number of substances as GRAS,
although it is not required that a substance be affirmed as GRAS by regulation
of the FDA in order to be GRAS. Alternatively, under a new proposed regulatory
framework, a manufacturer may submit GRAS notification to the FDA claiming that
a food ingredient is GRAS. The FDA generally will respond to the notification
within approximately ninety days as to whether there is sufficient evidence to
support the notifier's conclusion that the substance is GRAS. A positive
response from the FDA indicates that it has no objection to the notifier's
conclusion that a substance is a GRAS. A manufacturer also may self-affirm a
substance as GRAS by making an independent determination that qualified experts
would generally agree that the substance is GRAS for a particular use. If the
FDA disagrees with the manufacturer's self determination or GRAS notification,
the manufacturer generally must submit a food additive petition to obtain
approval to market the food ingredient. If the FDA disagrees with a
determination, the manufacturer must complete the food additive petition process

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<PAGE>

for the substance to be approved by the FDA. Affirmation of GRAS status either
by the manufacturer or regulation of the FDA would allow the manufacturer to
market and sell the additive or the food containing the additive. Furthermore, a
manufacturer's decision to rely on an independent determination may limit the
marketability of that manufacturer's products to food manufacturers, many of
whom require confirmation of GRAS status from the FDA before they will purchase
substances for use in foods from third parties.

COMPETITION

Some companies are producing by enzymatic and other means a limited variety
of complex carbohydrates. Although we do not believe any of these companies has
the ability currently to manufacture a wide variety of human carbohydrate
products in quantities sufficient for commercialization, any of these companies
may develop technologies superior to our technologies. In addition, some
companies are investigating novel methods of chemical synthesis, sometimes with
enzymatic steps, to produce commercial quantities of complex carbohydrates.
These and other efforts by potential competitors may be successful or other
methods of carbohydrate synthesis which compete with our technologies, may be
developed.

Our joint venture's products may face significant competition. FOS products
that may be produced by the joint venture for nutraceutical applications will
face competition from existing FOS products. Principal competitors in this area
include a Japanese company, Meiji Seika Kaisha, which sells FOS products under
the brand name, Meioligo(TM), a European joint venture, Beghin-Meiji Industries,
which sells its FOS products under the brand name Actilight(TM), and a European
company, Orafti, which sells its FOS products under the brand names
Raftiline(TM) and Raftilose(TM). Another planned joint venture product will be
added to McNeil's sucralose sweetener as a bulking agent. These products will in
turn compete with other natural and artificial sweeteners. The joint venture
will also sell this bulking agent directly to other users for use in such items
as cake mixes, low-fat cookies, or ice cream. There is significant competition
from other bulking agents in this market as well, and thus the ability to
produce the bulking agent at an attractive price and to offer other product
features will be important.

Our glycoprotein remodeling technology will compete with several
alternative technologies that seek to improve therapeutic glycoproteins as
drugs. A number of companies are developing technologies that will compete with
our glycoprotein remodeling technology, to increase the dosing level achievable
without side effects and the half-life of these proteins in humans, thus
reducing the frequency of required injections. These competitive technologies
include microsphere encapsulation, polyethelyne glycol modification, and human
albumin fusion.

MANUFACTURING

We intend to manufacture complex carbohydrates. To commercialize our
products, we must manufacture our products in commercial quantities under cGMP
prescribed by the FDA, at acceptable costs.

We believe we have the capacity to produce, in our existing facility,
adequate quantities of the active pharmaceutical ingredients required by
Bristol-Myers for its GMK and MGV cancer vaccines for clinical

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<PAGE>

trials and commercial launch. We believe we have the capacity to develop
scalable manufacturing processes required for our collaboration with Wyeth in
our existing facilities, although we currently estimate that we will require
additional facilities to produce these ingredients at commercial scale. We will
need to develop commercial-scale manufacturing facilities meeting cGMP, or
depend on our collaborators, licensees, or contract manufacturers for the
commercial manufacture of our potential products.

The joint venture's initial commercial manufacturing plant is scheduled to
be completed in early 2000. The initial plant is located in Athens, Georgia. In
order to expand manufacturing capacity for the joint venture, the joint venture
would need to construct additional facilities. We have the capacity, in our
current facility in Horsham, Pennsylvania, to manufacture the quantities of
enzyme required to supply the initial commercial manufacturing facility in
Georgia.

MARKETING, DISTRIBUTION, AND SALES

We have no experience or capability in marketing, distributing, or selling
products. If we commercialize any products, we will have to develop a sales
force or rely on our collaborators, licensees, or arrangements with others to
provide marketing, distribution, and sales support for these products.

EMPLOYEES

As of December 31, 1999, we employed 68 individuals, consisting of 51
employees engaged in research and development activities and 17 employees
devoted to business development, finance, and administrative activities. Our
staff includes carbohydrate biochemists as well as scientists with expertise in
organic chemistry, analytic chemistry, molecular biology, microbiology, cell
biology, scale-up manufacture, and regulatory affairs. A significant number of
our employees have prior experience with pharmaceutical or biotechnology
companies, and in the food industry, and many have specialized training in
carbohydrate technology. None of our employees is covered by collective
bargaining agreements. We believe we have good relations with our employees.

33
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table provides information regarding our directors and
executive officers as of December 31, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Stephen A. Roth, Ph.D.................. 57 Chairman, Chief Executive Officer, and Director

President, Chief Financial Officer, and
P. Sherrill Neff....................... 48 Director

Edward J. McGuire, Ph.D................ 62 Vice President, Research and Development

David A. Zopf, M.D..................... 57 Vice President, Drug Development

William F. Hamilton, Ph.D.............. 60 Director

Douglas J. MacMaster, Jr............... 69 Director

Mark H. Rachesky, M.D.................. 40 Director

Lindsay A. Rosenwald, M.D.............. 44 Director

Lowell E. Sears........................ 48 Director

Jerry A. Weisbach, Ph.D................ 66 Director
</TABLE>

Our current directors and executive officers, along with their backgrounds,
are as follows:

Stephen A. Roth, Ph.D., has served on our Board since 1989, and as Chairman
and Chief Executive Officer since August 1994. Dr. Roth co-founded Neose. From
1992 until August 1994, he served as Senior Vice President, Research and
Development, and Chief Scientific Officer. Dr. Roth was on the faculty of the
University of Pennsylvania from 1980 to 1994, and was Chairman of Biology from
1982 to 1987. Dr. Roth received his A.B. in biology from The Johns Hopkins
University, and his Ph.D. in developmental biology from the Case Western Reserve
University. He completed his post-doctorate training in carbohydrate chemistry
at The Johns Hopkins University.

P. Sherrill Neff has served as our President and Chief Financial Officer,
and as a director of Neose since December 1994. From 1993 to December 1994, Mr.
Neff was Senior Vice President, Corporate Development at U.S. Healthcare, Inc.,
a managed healthcare company. From 1984 to 1993, he worked at Alex. Brown & Sons
Incorporated, an investment banking firm, where he held a variety of positions,
most recently as Managing Director and Co-Head of the Financial Services Group.
Mr. Neff received his B.A. in religion from Wesleyan University, and his J.D.
from the University of Michigan Law School. Mr. Neff is a director of Resource
America, Inc., a publicly held specialty financial services company.

Edward J. McGuire, Ph.D., has served as our Vice President, Research and
Development since April 1990. He is responsible for leading the complex
carbohydrate synthesis team. Dr. McGuire was a member of the faculty of the
University of Pennsylvania from 1985 to April 1990. From 1984 to 1985, Dr.
McGuire served as a Senior Researcher at Genetic Engineering, Inc., a
biotechnology company. Dr. McGuire received his B.A. in biology from Blackburn
College, his Ph.D. in biochemistry/chemistry from the University of Illinois
Medical School.

David A. Zopf, M.D., has served as our Vice President, Drug Development
since April 1992. From April 1988 to July 1991, Dr. Zopf served as Vice
President and Chief Operating Officer of BioCarb, Inc., a biotechnology company
and the U.S. subsidiary of BioCarb AB, where he managed the research and
development programs of novel carbohydrate-based diagnostics and therapeutics.
Dr. Zopf received his A.B. from Washington University, and his M.D. from
Washington University School of Medicine.

William F. Hamilton, Ph.D., has served on our Board since 1991. Dr.
Hamilton has served on the University of Pennsylvania faculty since 1967, is the
Landau Professor of Management and Technology,

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<PAGE>

and Director of the Jerome Fisher Program in Management and Technology at The
Wharton School and the School of Engineering and Applied Science. He serves as a
director of the following publicly held companies: Digital Lightwave, Inc., a
manufacturer of telecommunications test equipment; Hunt Manufacturing Co., a
manufacturer of art and office supplies; and Marlton Technologies, Inc., a trade
show supply company. Dr. Hamilton received his B.S. and his M.S. in chemical
engineering and his M.B.A. from the University of Pennsylvania, and his Ph.D. in
applied economics from the London School of Economics.

Douglas J. MacMaster, Jr. has served on our Board since May 1993. Mr.
MacMaster served as Senior Vice President of Merck & Co., Inc. from 1988 to
1992, where he was responsible for worldwide chemical and pharmaceutical
manufacturing, the Agvet Division, and the Specialty Chemicals Group. From 1985
to 1988, Mr. MacMaster was President of the Merck Sharp Dohme Division of Merck.
He was an employee of Merck for 30 years. Mr. MacMaster serves as a director of
the following publicly held companies: American Precision Industries, Inc., a
heat transfer and precision equipment manufacturing company; and Martek
Biosciences Corp., a biological products manufacturing company. He received his
B.A. from St. Francis Xavier University and his J.D. from Boston College Law
School.

Mark H. Rachesky, M.D., has served on our Board since 1999. Dr. Rachesky is
the founder and President of MHR Fund Management LLC and affiliates, investment
managers of various private investment funds that invest in inefficient market
sectors, including special situation equities and distressed investments. From
February 1990 through June 1996, Dr. Rachesky was employed by Carl C. Icahn,
initially as a senior investment officer and for the last three years as sole
Managing Director of Icahn Holding Corporation, and acting chief investment
advisor. Dr. Rachesky is currently on the board of directors of Samsonite
Corporation. Dr. Rachesky is a graduate of Stanford University School of
Medicine, and Stanford University School of Business. Dr. Rachesky graduated
from the University of Pennsylvania with a major in Molecular Aspects of Cancer.

Lindsay A. Rosenwald, M.D., has served on our Board since 1989, and served
as our Chairman since August 1994. He is an investment banker, a venture
capitalist, and a fund manager. Dr. Rosenwald has served as Chairman of
Paramount Capital, Inc., an NASD member broker dealer, since 1992; Chairman of
Paramount Capital Investments, LLC, a merchant and investment bank, since 1996;
and Chairman of Paramount Capital Asset Management, Inc., which manages the
investment of several funds specializing in the biotechnology sector, since
1994. He is also a director of Interneuron Pharmaceuticals, Inc., a publicly
held biotechnology company. Dr. Rosenwald received his B.S. in finance from
Pennsylvania State University, and his M.D. from Temple University School of
Medicine.

Lowell E. Sears has served on our Board since September 1994. He has been a
private investor involved in portfolio management and life sciences venture
capital since April 1994. From 1988 until April 1994, Mr. Sears was Chief
Financial Officer of Amgen Inc., a pharmaceutical company, and from 1992 until
1994, he also served as Senior Vice President responsible for the Asia-Pacific
region. Mr. Sears is a director of Techne Corp., a publicly held biological
products manufacturing company. Mr. Sears received his B.A. in economics from
Claremont McKenna College and his M.B.A. from Stanford University.

Jerry A. Weisbach, Ph.D., has served on our Board since May 1993. From 1988
to July 1994, he served as Director of Technology Transfer and Adjunct Professor
at The Rockefeller University. Dr. Weisbach served as Vice President of
Warner-Lambert Company from 1981 to 1987 and President, Pharmaceutical Research
Division from 1979 to 1987, where he was responsible for all pharmaceutical
research and development activities. Dr. Weisbach serves as a director of Inkine
Pharmaceutical Company, Inc., a publicly held biopharmaceutical company. Dr.
Weisbach received his B.S. in chemistry from Brooklyn College, and his M.A. and
his Ph.D. in chemistry from Harvard University.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 14, 2000, and as adjusted to reflect
the sale of common stock offered hereby for (i) each stockholder who is known by
us to own beneficially more than 5% of our common stock, (ii) each director and
executive officer, and (iii) all of our directors and executive officers as a
group. Except as otherwise indicated, we believe, based on information furnished
by the persons named in this table, that such persons have voting and investment
power with respect to all shares of common stock beneficially owned by them,
subject to community property laws, where applicable.

As of March 14, 2000, there were 11,553,502 shares of our common stock
outstanding. To calculate a shareholder's percentage of beneficial ownership, we
must include in the numerator and denominator those shares underlying options
beneficially owned by that shareholder. Options held by other shareholders,
however, are disregarded in this calculation. Therefore, the denominator used in
calculating beneficial ownership among our shareholders may differ.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES -----------------------
BENEFICIALLY PRIOR TO AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------ ------------ -------- --------
<S> <C> <C> <C>
Emerald Advisors, Inc. (1)
1857 William Penn Way
Lancaster, PA 17601................................ 733,183 6.4% 5.2%
Larry N. Feinberg (2)
712 Fifth Avenue, 45th Floor
New York, NY 10019................................. 588,600 5.1% 4.2%
Directors and Officers
Lindsay A. Rosenwald, M.D. (3)(4)
c/o Paramount Capital, Inc.
787 7th Avenue
New York, NY 10019................................. 945,005 8.2% 6.7%
Mark H. Rachesky, M.D. (3)(5)
c/o MHR Fund Management LLC
40 West 57th Street, 33rd Floor
New York, NY 10019................................. 755,873 6.6% 5.4%
Stephen A. Roth, Ph.D. (3)(6)........................ 438,936 3.8% 3.1%
P. Sherrill Neff (3)(7).............................. 332,637 2.8% 2.3%
Edward J. McGuire, Ph.D. (3)......................... 136,734 1.2% 1.0%
William F. Hamilton, Ph.D. (3)....................... 92,947 * *
Douglas J. MacMaster, Jr. (3)........................ 73,698 * *
Lowell E. Sears (3)(8)............................... 52,622 * *
David A. Zopf, M.D. (3).............................. 51,039 * *
Jerry A. Weisbach (3)(9)............................. 42,948 * *
All executive officers and directors as a group (9
persons) (2)....................................... 2,922,439 23.6% 19.6%
</TABLE>

- ------------------------------
* Less than one percent.

(1) According to a Schedule 13G filed February 4, 2000, Emerald Advisors, Inc.
owns and has sole dispositive power for 733,183 shares of common stock. Of
these, Emerald Advisors has sole voting power for 550,578 shares.

(2) According to a Schedule 13G filed on March 6, 2000, Mr. Feinberg owns
588,600 shares, all of which he has shared voting and shared dispositive
power. Includes (i) 363,300 shares held by Oracle Partners, L.P., of which
Mr. Feinberg is the general partner, (ii) 92,400 shares held by Oracle
Institutional Partners, L.P., of which Mr. Feinberg is the general partner,
and (iii) 132,900 shares beneficially owned by Oracle Investment Management,
Inc., of which Mr. Feinberg is the sole shareholder, which

36
<PAGE>

serves as investment manager to and has investment discretion over the
securities held by SAM Oracle Investments Inc. with respect to shares of
common stock directly owned by SAM Oracle Investments Inc. and Oracle
Offshore Limited, with respect to shares of common stock directely owned by
Oracle Offshore Limited.

(3) Includes the following shares of common stock issuable under stock options
that are exercisable within 60 days after March 14, 2000: Rosenwald - 10,045
shares; Rachesky - 483 shares; Roth - 225,833 shares; Neff - 317,500 shares;
McGuire - 70,500 shares; Hamilton - 52,863 shares; MacMaster - 37,864
shares; Sears - 31,298 shares; Zopf - 50,865 shares; Weisbach - 37,864
shares; and all directors and executive officers as a group - 835,115
shares.

(4) Includes (i) 75,624 shares of common stock owned by Dr. Rosenwald's wife;
(ii) 30,250 shares of common stock held by Dr. Rosenwald's wife as custodian
for Dr. Rosenwald's children; (iii) 216,708 shares of common stock held by
The Aries Master Fund; (iv) 96,140 shares of common stock held by The Aries
Domestic Fund, L.P.; (v) 15,321 shares of common stock held by the Aries
Domestic Fund II, L.P.; and (vi) 32,000 shares of common stock held by The
Rosenwald Foundation, Inc. Paramount Capital Asset Management, Inc., of
which Dr. Rosenwald is the sole shareholder, serves as the investment
manager to The Aries Master Fund and also is the General Partner of the
Aries Domestic Fund and the Aries Domestic Fund II. Dr. Rosenwald disclaims
beneficial ownership of the shares held by The Aries Master Fund, the Aries
Domestic Fund and the Aries Domestic Fund II, except to the extent of his
pecuniary interest in the funds. Dr. Rosenwald may be deemed to have voting
and investment control with respect to the shares held by The Aries Master
Fund, the Aries Domestic Fund, and the Aries Domestic Fund II. In addition,
Dr. Rosenwald disclaims beneficial ownership of the shares held by The
Rosenwald Foundation. Dr. Rosenwald may be deemed to share voting and
investment power with respect to the shares held by The Rosenwald
Foundation.

(5) Includes (i) 210,526 shares of common stock held by MHR Capital Partners LP,
(ii) 502,759 shares of common stock held by MRL Partners LP, and (iii)
42,105 shares of common stock held by OTT LLC. Dr. Rachesky is the managing
member of MHR Advisors LLC, which is the General Partner of MHR Capital
Partners and MRL Partners. Dr. Rachesky is the managing member of OTT LLC.
Dr. Rachesky may be deemed to have voting and investment control over the
shares held by MHR Capital Partners, MRL Partners, and OTT LLC. Dr. Rachesky
disclaims beneficial ownership of the shares held by MHR Capital Partners,
MRL Partners, and OTT LLC, except to the extent of his pecuniary interest in
the funds.

(6) Includes 100,000 shares of common stock owned by Dr. Roth's wife, and 15,758
shares of common stock owned by Dr. Roth's daughter. Dr. Roth disclaims
beneficial ownership of the shares held by his wife and daughter.

(7) Includes 1,000 shares of common stock owned by Mr. Neff's wife. Mr. Neff
disclaims beneficial ownership of the shares held by his wife.

(8) Includes 21,324 shares of common stock owned by the Sears Family Living
Trust, of which Mr. Sears is trustee.

(9) Includes 3,000 shares of common stock held by Dr. Weisbach's children as
custodian for his grandchildren, Dr. Weisbach disclaims beneficial ownership
of the shares held by his children.

37
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 30,000,000 shares of common stock,
par value $0.01 per share, and 5,000,000 shares of preferred stock, par value
$0.01 per share.

COMMON STOCK

On March 14, 2000, there were 11,553,502 shares of common stock outstanding
and held of record by approximately 270 stockholders. On March 14, 2000, there
were options outstanding to purchase an aggregate of 2,044,288 shares of common
stock with a weighted-average exercise price of $12.49.

Each holder of common stock is entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Except as
required by applicable law, the holders of the common stock will vote together
with the holders of each series of outstanding preferred stock, who vote on an
as converted basis. There is no cumulative voting for the election of directors
and, as a consequence, minority stockholders will not be able to elect directors
on the basis of their votes alone. Subject to preferences that may be applicable
to the then outstanding shares of preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared by the board of
directors out of funds legally available therefor. Upon our liquidation,
dissolution or winding up, the holders of common stock then outstanding are
entitled to share in our assets remaining after the payment of liabilities and
the satisfaction of any liquidation preference granted to the holders of any
outstanding shares of preferred stock. All shares of common stock outstanding
and to be outstanding upon completion of this offering are and will be fully
paid and nonassessable.

PREFERRED STOCK

We are authorized to issue up to 5,000,000 shares of preferred stock with
such voting rights, designations, preferences, and rights and such
qualifications, limitations or restrictions thereof, as may be determined by our
board of directors. There were also rights to purchase Series A junior
participating preferred stock in connection with our Stockholder Rights Plan
discussed below. Although we have no current plans to issue any shares of
preferred stock, the issuance of preferred stock or of rights to purchase
preferred stock could be used to discourage an unsolicited acquisition proposal.
In addition, the possible issuance of preferred stock could discourage a proxy
contest, make more difficult the acquisition of a substantial block of our
common stock or limit the price that investors would be willing to pay in the
future for shares of our common stock. Such preferred stock could be issued with
voting and conversion rights that could adversely affect the voting power of
holders of the common stock.

We believe that the preferred stock provides us with increased flexibility
in structuring possible future financings and acquisitions, and in meeting other
corporate needs that might arise. Having such authorized shares available for
issuance allows us to issue shares of preferred stock without the expense and
delay of holding a special stockholders' meeting. The authorized shares of
preferred stock, as well as shares of common stock, will be available for
issuance without further action by our stockholders, unless such action is
required by applicable law or the rules of any stock exchange or quotation
system on which our securities may be listed or quoted.

COMMON STOCK WARRANT

We have a warrant outstanding for the purchase of 10,527 shares of common
stock at an exercise price of $14.25 per share. The warrant is immediately
exercisable and, if remaining unexercised, expires in June 2002. The exercise
price and number of shares of common stock issuable upon exercise of the warrant
is subject to adjustment upon the occurrence of certain events, including stock
splits, stock dividends, reorganization, recapitalization, merger, or sale.

38
<PAGE>

REGISTRATION RIGHTS

The holders of 1,792,119 shares of common stock are entitled to require us
to register their shares upon demand. However, holders of 1,506,022 shares of
common stock with these registration rights may sell their stock without
restriction under Rule 144 of the Securities Act. In addition, the holders of
3,309,662 shares of common stock are entitled, subject to certain limitations,
to require us to use our best efforts to include their shares in this and any
future registration statements we file under the Securities Act. However,
holders of 2,059,649 shares of common stock with these piggyback registration
rights may sell their shares without restriction under Rule 144 of the
Securities Act, unless the shares are held by affiliates. We have requested the
holders of these piggyback registration rights to waive their rights for this
Registration Statement. If any holder requires us to include their shares in
this, or any other, registration statement, their shares would become freely
tradable without restriction under the Securities Act immediately upon the
effectiveness of the registration statement.

LIMITATION ON LIABILITY

As permitted by the Delaware General Corporation Law, our certificate of
incorporation provides that our directors shall not be personally liable to us
or our stockholders for monetary damages for a breach of fiduciary duty as a
director, except for liability:

o for any breach of such person's duty of loyalty;
o for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
o for the payment of unlawful dividends and certain other actions
prohibited by Delaware corporate law; and
o for any transaction resulting in receipt by such person of an improper
personal benefit.

Our certificate of incorporation also contains provisions indemnifying our
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law.

We currently carry directors' and officers' liability insurance to provide
our directors and officers with insurance coverage for losses arising from
claims based on breaches of duty, negligence, errors, and other wrongful acts.

STOCKHOLDER RIGHTS PLAN

In September 1997, our board of directors adopted a stockholder rights plan
and in connection with that plan designated 300,000 shares of Series A junior
participating preferred stock. Under this plan, a preferred share purchase right
was issued as a dividend on each outstanding share of our common stock as of the
close of business on October 6, 1997. This preferred share purchase right
entitles its holder to purchase from us a unit consisting of 1/100th of a share
of our Series A junior participating preferred stock at an exercise price of
$150 per unit, subject to adjustment. Each unit carries voting and dividend
rights that are intended to produce the equivalent of one share of common stock.
These rights expire on October 6, 2007.

The preferred share purchase rights granted under the stockholder rights
plan will be exercisable and will trade separately from our common stock only if
a person or group acquires beneficial ownership of 15% or more of our common
stock or commences a tender or exchange offer that would result in such a person
or group owning 15% or more of our common stock. Only when one or more of these
events occur will stockholders receive certificates for the rights granted under
the stockholder rights plan.

If any person actually acquires 15% or more of our common stock--other than
through a tender or exchange offer for our common stock at a price and on terms
that provide fair value to all stockholders--or if a holder of 15% or more of
our common stock engages in certain "self-dealing" transactions or engages in a
merger or other business combination in which we survive and our common stock
remains outstanding, the other holders of our common stock will be able to
exercise their preferred share purchase rights and receive shares of our common
stock having a value equal to double the exercise price of the right.
Additionally, if we are involved in certain other mergers where our shares are
exchanged or certain

39
<PAGE>

major sales of our assets occur, the holders of our common stock will be able to
exercise their preferred share purchase rights and receive shares of the
acquiring company having a value equal to double the exercise price of the
right. In either case, the holders of the rights may, in lieu of exercise,
surrender the rights in exchange for one-half of the amount of securities
otherwise purchasable. Upon the occurrence of any of these events, the preferred
share purchase rights will no longer be exercisable into Series A junior
participating preferred stock.

We will be entitled to redeem the preferred share purchase rights at $.01
per right at any time until the 10th day following a public announcement that a
person has acquired a 15% ownership position in our common stock. In our
discretion, we may extend the period during which we can redeem these rights.

OTHER ANTI-TAKEOVER PROVISIONS

Our certificate of incorporation provides that our board of directors may
establish the rights of, and cause us to issue, substantial amounts of preferred
stock without the need for stockholder approval. The issuance of preferred stock
may have the effect of discouraging, delaying or preventing a change in control
of Neose. We have no present plans to issue any shares of preferred stock.

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 of the Delaware General Corporation Law generally
prohibits certain business combinations between a Delaware corporation and an
interested stockholder. An interested stockholder is generally defined as a
person who, together with any affiliates or associates of such person,
beneficially owns, or within the preceding three years did own, directly or
indirectly, 15% or more of the outstanding voting shares of a Delaware
corporation. The statute broadly defines business combinations to include:

o mergers;
o consolidations;
o sales or other dispositions of assets having an aggregate value in excess
of 10% of the consolidated assets of the corporation or 10% of the
aggregate market value of all outstanding stock of the corporation; and
o specified transactions that would increase the interested stockholder's
proportionate share ownership in the corporation.

The statute prohibits any such business combination for a period of three
years commencing on the date the interested stockholder becomes an interested
stockholder, unless:

o the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder becomes an
interested stockholder;
o the interested stockholder acquired at least 85% of the voting stock of
the corporation (other than stock held by directors who are also officers
or by certain employee stock plans) in the transaction in which it
becomes an interested stockholder; or
o the business combination is approved by a majority of the board of
directors and by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the common stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.

40
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our common stock in the public market
following this offering could adversely affect the market price of our common
stock and adversely affect our ability to raise capital at a time and on terms
favorable to us.

Of the 14,053,502 shares to be outstanding after this offering (assuming
that the underwriters do not exercise their overallotment option), the 2,500,000
shares of common stock offered hereby and an additional 9,767,405 shares of
common stock will be freely tradable without restriction in the public market
unless such shares are held by "affiliates," as that term is defined in Rule 144
under the Securities Act of 1933.

The remaining 1,786,097 shares of common stock to be outstanding after this
offering are restricted securities under the Securities Act of 1933. In July
1999, we filed a registration statement on Form S-3 under the Securities Act
relating to 1,500,000 shares of these restricted securities. The holder of the
remaining 286,097 shares is entitled to require us either to register its shares
upon demand or to use our best efforts to include its shares in registration
statements we file under the Securities Act. Alternatively, this holder may sell
its share in the public market upon the expiration of certain holding periods
under Rule 144, subject to the volume, manner of sale, and other limitations of
Rule 144.

In addition, as of March 14, 2000, there were options to purchase 2,044,288
shares of common stock, of which 1,139,448 options were fully vested and
exercisable. An additional 213,543 shares were reserved for issuance under our
stock option and employee stock purchase plans.

LOCK-UP ARRANGEMENTS

All of our officers and directors have agreed not to sell or otherwise
dispose of any shares of common stock for a period of 90 days after the date of
this prospectus without the prior written consent of Chase Securities Inc.

41
<PAGE>
UNDERWRITING

The underwriters named below, through their representatives Chase
Securities Inc., Prudential Securities Incorporated, U.S. Bancorp Piper Jaffray
Inc. and Warburg Dillon Read LLC, have severally agreed to purchase, and we have
agreed to sell to them, an aggregate of 2,500,000 shares of common stock
pursuant to an underwriting agreement. The number of shares of common stock that
each underwriter has agreed to purchase is listed opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Chase Securities Inc........................................
Prudential Securities Incorporated..........................
U.S. Bancorp Piper Jaffray Inc..............................
Warburg Dillon Read LLC.....................................

---------
TOTAL.................................................. 2,500,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters are conditioned on the absence of any material adverse change in
our business and the receipt of certificates, opinions and letters from us,
their counsel and the independent auditors. The nature of the underwriters'
obligation is such that they are committed to purchase all shares of common
stock offered by this prospectus if any of the shares are purchased.

The following table shows the per share and total underwriting discounts
and commissions we will pay to the underwriters. These amounts are shown
assuming both no exercise and full exercise of the underwriters' over-allotment
option to purchase additional shares of common stock.

UNDERWRITING DISCOUNTS AND COMMISSIONS PAYABLE BY US

<TABLE>
<CAPTION>
WITHOUT OVER- WITH OVER-
ALLOTMENT EXERCISE ALLOTMENT EXERCISE
------------------ ------------------
<S> <C> <C>
Per Share........................... $ $
Total.......................... $ $
</TABLE>

We estimate that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $400,000.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to selected dealers at a price that represents
a concession not in excess of $___ per share under the public offering price.
The underwriters may allow, and such dealers may reallow, a concession not in
excess of $___ per share to other underwriters or selected other dealers. After
the initial offering of the shares of common stock, the offering price and other
selling terms may be changed by the representatives of the underwriters.

In the underwriting agreement, we have granted to the underwriters an
option, exercisable no later than 30 days after the date of this prospectus, to
purchase up to an aggregate of 375,000 additional shares of common stock at the
public offering price, less underwriting discounts and commissions, listed on
the cover page of this prospectus. The underwriters may exercise this option
solely for the purpose of covering overallotments, if any, made in connection
with the offering of the shares of common stock offered by this prospectus. To
the extent that the underwriters exercise this option, each underwriter will
have a firm commitment to purchase approximately the same percentage which the
number of shares of common stock

42
<PAGE>

to be purchased by it shown in the above table bears to the total number of
shares of common stock offered by this prospectus.

The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part. We have
agreed to indemnify the underwriters against liabilities, including liabilities
under the Securities Act, and to contribute to payments the underwriters may be
required to make with respect to these liabilities.

We anticipate that our directors and officers will agree not to directly or
indirectly, without the prior written consent of Chase Securities Inc. on behalf
of the underwriters, whether any such transaction described above is to be
settled by delivery of common stock or such other securities, in cash or
otherwise, during the 90-day period following the date of this prospectus:

o offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock (whether
any such shares or any such securities are then owned by such person or
are later acquired directly from us); or
o enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock.

We have also agreed that we will not, without the prior written consent of
Chase Securities Inc., offer or sell any shares of common stock, options or
warrants to acquire shares of our common stock or securities exchangeable for or
convertible into shares of common stock during the 90-day period following the
date of this prospectus. We may issue shares upon the exercise of options
granted prior to the date of this prospectus, and may grant additional options
under our stock option plans, providing that, without the prior written consent
of Chase Securities Inc., the additional options shall not be exercisable during
the 90-day period following the date of this prospectus.

The restrictions described in this paragraph do not apply to:

o the sale of shares of common stock under the underwriting agreement to
the underwriters;
o the issuance of shares of our common stock upon the exercise of an option
or a warrant or the conversion of a security outstanding on the date of
this prospectus which is described in this prospectus;
o transactions by any person other than Neose relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares;
o transfers by any person other than Neose by gift, will, or intestacy, or
to affiliates or immediate family members, provided that the transferee
agrees to be bound by such restrictions; or
o issuance of shares of common stock or options to purchase shares of
common stock pursuant to our employee benefit plans as in existence on
the date of this prospectus and consistent with past practices.

The underwriters participating in this offering may over-allot or effect
tranactions which stabilize, maintain or otherwise affect the market price of
the common stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of common stock sold by the syndicate member are purchased
in syndicate covering transactions. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise.
Stabilizing, if commenced, may be discontinued at any time.

43
<PAGE>

Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor(sm), a full service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Dechert Price & Rhoads, Philadelphia, PA.

EXPERTS

The financial statements contained in our Annual Report on Form 10-K for
the year ended December 31, 1999 incorporated by reference and included
elsewhere in this prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving such reports.

AVAILABLE INFORMATION

A registration statement on Form S-3 with respect to the shares offered
hereby (together with any amendments, exhibits and schedules thereto) has been
filed with the Securities and Exchange Commission under the Securities Act. This
prospectus does not contain all of the information contained in such
registration statement on Form S-3, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
For further information with respect to Neose and the shares offered hereby,
reference is made to the registration statement on Form S-3. Statements
contained in this prospectus regarding the contents of any contract or any other
documents are not necessarily complete and, in each instance, reference in
hereby made to the copy of such contract of document filed as an exhibit to the
registration statement on Form S-3. The registration statement may be inspected
without charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all of any part thereof may be obtained from the
Public Reference section, Securities and Exchange Commission, Washington, D.C.,
20549, upon payment of prescribed fees.

We also file annual, quarterly, and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements, or other information we file at the Securities and
Exchange Commission public reference rooms located at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, IL 60661 and 7 World Trade Center, Suite 1300, New York, NY
10048.

Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Our filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the Securities and Exchange Commission at
http://www.sec.gov.

The Securities and Exchange Commission allows us to incorporate by
reference information into this prospectus, which means that we can disclose
important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the Securities and Exchange Commission. These documents contain
important information about us, our business, and our finances.

The documents that we are incorporating by reference are:

o Our Annual Report on Form 10-K for the year ended December 31, 1999;
o Our Current Report on Form 8-K dated February 2, 2000;

44
<PAGE>

o Our definitive Proxy Statement dated April 30, 1999, filed in connection
with our 1999 Annual Meeting of Stockholders; and
o The description of rights to purchase preferred shares contained in our
registration statement on Form 8-A filed with the SEC on October 1, 1997,
including any amendments or reports filed for the purpose of updating
such descriptions.

Any documents which we file pursuant to Sections 13(a), 13(c), 14, or 15(d)
of the Exchange Act after the date of this prospectus but before the end of any
offering of securities made under this prospectus will also be considered to be
incorporated by reference.

If you request, either orally or in writing, we will provide you with a
copy of any or all documents which are incorporated by reference. We will
provide such documents to you free of charge, but will not include any exhibits,
unless those exhibits are incorporated by reference into the document. You
should address written requests for documents to A. Brian Davis, Director,
Finance, Neose Technologies, Inc., 102 Witmer Road, Horsham, PA 19044, (215)
441-5890.

We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our reports on Form 10-Q, Form 8-K, and Form 10-K to the SEC. Also
note that we provide a cautionary discussion of risks and uncertainties relevant
to our business in the "Risk Factors" section of this prospectus. These are
factors that we think could cause our actual results to differ materially from
expected results. Other factors besides those listed here could also adversely
affect us. This discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.

45
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----
Report of Independent Public Accountants.................... F-2

Consolidated Balance Sheets................................. F-3

Consolidated Statements of Operations....................... F-4

Consolidated Statements of Stockholders' Equity and
Comprehensive Loss........................................ F-5

Consolidated Statements of Cash Flows....................... F-7

Notes to Consolidated Financial Statements.................. F-8

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Neose Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Neose
Technologies, Inc. (a Delaware corporation in the development-stage) and
subsidiaries as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity and comprehensive loss, and cash
flows for each of the three years in the period ended December 31, 1999, and for
the period from inception (January 17, 1989) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Neose Technologies, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, and for the period from inception (January 17, 1989) to
December 31, 1999, in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Philadelphia, Pennsylvania
January 28, 2000

F-2
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
ASSETS -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 9,484 $ 10,365
Marketable securities (Note 4)............................ 22,539 22,870
Restricted cash (Notes 6 and 8)........................... 468 2,285
Prepaid expenses and other................................ 235 118
-------- --------
Total current assets................................... 32,726 35,638
Property and equipment, net (Note 5)........................ 13,539 13,366
Acquired technology, net (Note 6)........................... -- 3,235
-------- --------
Total assets................................................ $ 46,265 $ 52,239
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt (Note 8)................ $ 617 $ 1,000
Accounts payable.......................................... 45 237
Accrued expenses (Note 7)................................. 1,290 2,112
Deferred revenue.......................................... -- 805
-------- --------
Total current liabilities.............................. 1,952 4,154
Long-term debt (Note 8)..................................... 8,300 7,300
-------- --------
Total liabilities...................................... 10,252 11,454
-------- --------
Commitments (Note 11)
Stockholders' equity (Notes 9 and 10):
Preferred stock, $.01 par value, 5,000 shares authorized,
none issued............................................ -- --
Common stock, $.01 par value, 30,000 shares authorized;
9,589 and 11,434 shares issued and outstanding......... 96 114
Additional paid-in capital................................ 82,400 101,013
Deferred compensation..................................... (211) (530)
Deficit accumulated during the development stage.......... (46,494) (59,812)
Unrealized gains on marketable securities................. 222 --
-------- --------
Total stockholders' equity............................. 36,013 40,785
-------- --------
Total liabilities and stockholders' equity.................. $ 46,265 $ 52,239
======== ========
</TABLE>

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

F-3
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 17,
YEAR ENDED DECEMBER 31, 1989) TO
------------------------------ DECEMBER 31,
1997 1998 1999 1999
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from collaborative agreements......... $ 725 $ 390 $ 422 $ 6,767
Operating expenses:
Research and development.................... 8,013 9,912 10,649 51,553
General and administrative.................. 3,884 3,635 4,520 21,233
-------- -------- -------- --------
Total operating expenses................. 11,897 13,547 15,169 72,786
-------- -------- -------- --------
Operating loss................................ (11,172) (13,157) (14,747) (66,019)
Interest income............................... 2,663 1,784 1,862 8,855
Interest expense.............................. (555) (534) (433) (2,648)
-------- -------- -------- --------
Net loss...................................... $ (9,064) $(11,907) $(13,318) $(59,812)
======== ======== ======== ========
Basic and diluted net loss per share.......... $ (0.96) $ (1.25) $ (1.25)
======== ======== ========
Basic and diluted weighted-average shares
outstanding................................. 9,405 9,556 10,678
======== ======== ========
</TABLE>

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

F-4
<PAGE>
NEOSE TECHNOLOGIES, INC. SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY AND COMPREHENSIVE LOSS
(IN THOUSANDS)
<TABLE>
<CAPTION>

DEFICIT
CONVERTIBLE ACCUMULATED UNREALIZED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE GAINS ON
--------------- --------------- PAID-IN- DEFERRED DEVELOPMENT MARKETABLE
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STAGE SECURITIES
------ ------ ------ ------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 17, 1989 (inception).... -- $-- -- $ -- $ -- $ -- $ -- $ --
Initial issuance of common stock....... -- -- 1,302 13 (3) -- -- --
Shares issued pursuant to consulting,
licensing, and antidilutive
agreements........................... -- -- 329 3 (1) -- -- --
Sale of common stock................... -- -- 133 1 1 -- -- --
Net loss............................... -- -- -- -- -- -- (460) --
------ --- ------ ----- -------- ------ -------- --------
Balance, December 31, 1990............... -- -- 1,764 17 (3) -- (460) --
Sale of stock.......................... 1,517 15 420 4 4,499 (7) -- --
Shares issued pursuant to consulting
and antidilutive agreements.......... -- -- 145 1 -- -- -- --
Capital contributions.................. -- -- -- -- 10 -- -- --
Dividends on preferred stock........... -- -- -- -- (18) -- -- --
Net loss............................... -- -- -- -- -- -- (1,865) --
------ --- ------ ----- -------- ------ -------- --------
Balance, December 31, 1991............... 1,517 15 2,329 22 4,488 (7) (2,325) --
Sale of stock.......................... 260 2 17 -- 2,344 -- -- --
Shares issued pursuant to redemption of
notes payable........................ -- -- 107 1 682 -- -- --
Exercise of stock options and
warrants............................. -- -- 21 -- 51 -- -- --
Amortization of deferred
compensation......................... -- -- -- -- -- 5 -- --
Dividends on preferred stock........... -- -- -- -- (36) -- -- --
Net loss............................... -- -- -- -- -- -- (3,355) --
------ --- ------ ----- -------- ------ -------- --------
Balance, December 31, 1992............... 1,777 17 2,474 23 7,529 (2) (5,680) --
Sale of preferred stock................ 250 3 -- -- 1,997 -- -- --
Shares issued to licensor.............. -- -- 3 -- -- -- -- --
Shares issued to preferred stockholder
in lieu of cash dividends............ -- -- 1 -- 18 -- -- --
Amortization of deferred
compensation......................... -- -- -- -- -- 2 -- --
Dividends on preferred stock........... -- -- -- -- (36) -- -- --
Net loss............................... -- -- -- -- -- -- (2,423) --
------ --- ------ ----- -------- ------ -------- --------
Balance, December 31, 1993............... 2,027 20 2,478 23 9,508 -- (8,103) --
Sale of preferred stock................ 2,449 25 -- -- 11,040 -- -- --
Exercise of stock options.............. -- -- 35 1 14 -- -- --
Shares issued to preferred stockholder
in lieu of cash dividends............ -- -- 10 1 53 -- -- --
Dividends on preferred stock........... -- -- -- -- (18) -- -- --
Net loss............................... -- -- -- -- -- -- (6,212) --
------ --- ------ ----- -------- ------ -------- --------
Balance, December 31, 1994............... 4,476 45 2,523 25 20,597 -- (14,315) --
Sale of preferred stock................ 2,721 27 -- -- 10,065 -- -- --
Exercise of stock options and
warrants............................. -- -- 116 1 329 -- -- --
Shares issued to employees in lieu of
cash compensation.................... -- -- 8 -- 44 -- -- --
Deferred compensation related to grant
of stock options..................... -- -- -- -- 360 (360) -- --
Shares issued to stockholder related to
the initial public offering.......... -- -- 23 -- -- -- -- --
Shares issued to preferred stockholder
in lieu of cash dividends............ -- -- 3 -- 18 -- -- --
Dividends on preferred stock........... -- -- -- -- (36) -- -- --
Conversion of preferred stock into
common stock......................... (1,417) (14) 472 5 9 -- -- --
Net loss............................... -- -- -- -- -- -- (5,067) --
------ --- ------ ----- -------- ------ -------- --------
Balance, December 31, 1995............... 5,780 $58 3,145 $ 31 $ 31,386 $ (360) $(19,382) $ --

<CAPTION>
COMPREHENSIVE
LOSS
ACCUMULATED
DURING THE
DEVELOPMENT
STAGE
-------------
<S> <C>
Balance, January 17, 1989 (inception).... $ --
Initial issuance of common stock....... --
Shares issued pursuant to consulting,
licensing, and antidilutive
agreements........................... --
Sale of common stock................... --
Net loss............................... (460)
--------
Balance, December 31, 1990............... (460)
Sale of stock.......................... --
Shares issued pursuant to consulting
and antidilutive agreements.......... --
Capital contributions.................. --
Dividends on preferred stock........... --
Net loss............................... (1,865)
--------
Balance, December 31, 1991............... (2,325)
Sale of stock.......................... --
Shares issued pursuant to redemption of
notes payable........................ --
Exercise of stock options and
warrants............................. --
Amortization of deferred
compensation......................... --
Dividends on preferred stock........... --
Net loss............................... (3,355)
--------
Balance, December 31, 1992............... (5,680)
Sale of preferred stock................ --
Shares issued to licensor.............. --
Shares issued to preferred stockholder
in lieu of cash dividends............ --
Amortization of deferred
compensation......................... --
Dividends on preferred stock........... --
Net loss............................... (2,423)
--------
Balance, December 31, 1993............... (8,103)
Sale of preferred stock................ --
Exercise of stock options.............. --
Shares issued to preferred stockholder
in lieu of cash dividends............ --
Dividends on preferred stock........... --
Net loss............................... (6,212)
--------
Balance, December 31, 1994............... (14,315)
Sale of preferred stock................ --
Exercise of stock options and
warrants............................. --
Shares issued to employees in lieu of
cash compensation.................... --
Deferred compensation related to grant
of stock options..................... --
Shares issued to stockholder related to
the initial public offering.......... --
Shares issued to preferred stockholder
in lieu of cash dividends............ --
Dividends on preferred stock........... --
Conversion of preferred stock into
common stock......................... --
Net loss............................... (5,067)
--------
Balance, December 31, 1995............... $(19,382)
</TABLE>

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

F-5
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY AND COMPREHENSIVE LOSS--(CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>

DEFICIT
CONVERTIBLE ACCUMULATED UNREALIZED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE GAINS ON
--------------- --------------- PAID-IN- DEFERRED DEVELOPMENT MARKETABLE
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STAGE SECURITIES
------ ------ ------ ------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995............... 5,780 $58 3,145 $ 31 $ 31,386 $(360) $(19,382) $ --
Dividends on preferred stock........... -- -- -- -- (18) -- -- --
Sale of common stock in initial public
offering............................. -- -- 2,588 26 29,101 -- -- --
Conversion of preferred stock into
common stock......................... (5,780) (58) 2,411 24 34 -- -- --
Exercise of stock options and
warrants............................. -- -- 65 1 162 -- -- --
Shares issued pursuant to employee
stock purchase plan.................. -- -- 6 -- 60 -- -- --
Deferred compensation related to
acceleration of option vesting....... -- -- -- -- 106 -- -- --
Amortization of deferred
compensation......................... -- -- -- -- -- 90 -- --
Net loss............................... -- -- -- -- -- -- (6,141) --
------ --- ------ ----- -------- ----- -------- --------
Balance, December 31, 1996............... -- -- 8,215 82 60,831 (270) (25,523) --
Sale of common stock in public
offering............................. -- -- 1,250 13 20,326 -- -- --
Exercise of stock options and
warrants............................. -- -- 42 -- 139 -- -- --
Shares issued pursuant to employee
stock purchase plan.................. -- -- 18 -- 189 -- -- --
Deferred compensation related to grants
of stock options..................... -- -- -- -- 322 (322) -- --
Amortization of deferred
compensation......................... -- -- -- -- -- 231 -- --
Net loss............................... -- -- -- -- -- -- (9,064) --
------ --- ------ ----- -------- ----- -------- --------
Balance, December 31, 1997............... -- -- 9,525 95 81,807 (361) (34,587) --
Exercise of stock options.............. -- -- 49 1 261 -- -- --
Shares issued pursuant to employee
stock purchase plan.................. -- -- 15 -- 171 -- -- --
Deferred compensation related to grants
of stock options..................... -- -- -- -- 161 (161) -- --
Amortization of deferred
compensation......................... -- -- -- -- -- 311 -- --
Unrealized gains on marketable
securities........................... -- -- -- -- -- -- -- 222
Net loss............................... -- -- -- -- -- -- (11,907) --
------ --- ------ ----- -------- ----- -------- --------
Balance, December 31, 1998............... -- -- 9,589 96 82,400 (211) (46,494) 222
Sales of common stock in private
placements........................... -- -- 1,786 18 17,398 -- -- --
Exercise of stock options and
warrants............................. -- -- 43 -- 263 -- -- --
Shares issued pursuant to employee
stock purchase plan.................. -- -- 16 -- 156 -- -- --
Deferred compensation related to grants
of stock options..................... -- -- -- -- 796 (796) -- --
Amortization of deferred
compensation......................... -- -- -- -- -- 477 -- --
Unrealized gains on marketable
securities........................... -- -- -- -- -- -- -- (222)
Net loss............................... -- -- -- -- -- -- (13,318) --
------ --- ------ ----- -------- ----- -------- --------
Balance December 31, 1999................ -- $-- 11,434 $ 114 $101,013 $(530) $(59,812) $ --
====== === ====== ===== ======== ===== ======== ========

<CAPTION>
COMPREHENSIVE
LOSS
ACCUMULATED
DURING THE
DEVELOPMENT
STAGE
-------------
<S> <C>
Balance, December 31, 1995............... $(19,382)
Dividends on preferred stock........... --
Sale of common stock in initial public
offering............................. --
Conversion of preferred stock into
common stock......................... --
Exercise of stock options and
warrants............................. --
Shares issued pursuant to employee
stock purchase plan.................. --
Deferred compensation related to
acceleration of option vesting....... --
Amortization of deferred
compensation......................... --
Net loss............................... (6,141)
--------
Balance, December 31, 1996............... (25,523)
Sale of common stock in public
offering............................. --
Exercise of stock options and
warrants............................. --
Shares issued pursuant to employee
stock purchase plan.................. --
Deferred compensation related to grants
of stock options..................... --
Amortization of deferred
compensation......................... --
Net loss............................... (9,064)
--------
Balance, December 31, 1997............... (34,587)
Exercise of stock options.............. --
Shares issued pursuant to employee
stock purchase plan.................. --
Deferred compensation related to grants
of stock options..................... --
Amortization of deferred
compensation......................... --
Unrealized gains on marketable
securities........................... 222
Net loss............................... (11,907)
--------
Balance, December 31, 1998............... (46,272)
Sales of common stock in private
placements........................... --
Exercise of stock options and
warrants............................. --
Shares issued pursuant to employee
stock purchase plan.................. --
Deferred compensation related to grants
of stock options..................... --
Amortization of deferred
compensation......................... --
Unrealized gains on marketable
securities........................... (222)
Net loss............................... (13,318)
--------
Balance December 31, 1999................ $(59,812)
========
</TABLE>

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

F-6
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 17,
YEAR ENDED DECEMBER 31, 1989)
-------------------------------- TO DECEMBER 31,
1997 1998 1999 1999
-------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (9,064) $(11,907) $ (13,318) $ (59,812)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization........................... 1,117 2,149 2,172 7,377
Common stock issued for noncash charges and other....... -- -- -- 35
Changes in operating assets and liabilities:
Prepaid expenses and other............................ (292) 282 117 (118)
Accounts payable...................................... 130 (302) 192 237
Accrued expenses...................................... 477 (338) 822 1,430
Deferred revenue...................................... (121) -- 805 805
-------- -------- ---------- ----------
Net cash used in operating activities.............. (7,753) (10,116) (9,210) (50,046)
-------- -------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment....................... (10,803) (761) (1,207) (17,731)
Proceeds from sale-leaseback of equipment................. -- -- -- 1,382
Purchases of marketable securities........................ (26,808) (24,315) (88,662) (139,785)
Proceeds from sales of marketable securities.............. 603 1,982 8,882 11,467
Proceeds from maturities of and other changes in
marketable securities................................... -- 26,221 79,227 105,448
Purchase of acquired technology........................... -- -- (3,550) (3,550)
Restricted cash related to acquired technology............ -- -- (1,500) (1,500)
-------- -------- ---------- ----------
Net cash provided by (used in) investing
activities....................................... (37,008) 3,127 (6,810) (44,269)
-------- -------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of debt............................ 9,329 -- -- 11,955
Repayment of debt......................................... (677) (1,040) (617) (4,952)
Restricted cash related to debt........................... (305) (18) (317) (714)
Proceeds from issuance of preferred stock, net............ -- -- -- 29,497
Proceeds from issuance of common stock, net............... 189 171 17,572 18,277
Proceeds from public offerings, net....................... 20,339 -- -- 49,466
Proceeds from exercise of stock options and warrants...... 139 262 263 1,223
Dividends paid............................................ -- -- -- (72)
-------- -------- ---------- ----------
Net cash provided by (used in) financing
activities....................................... 29,014 (625) 16,901 104,680
-------- -------- ---------- ----------
Net increase (decrease) in cash and cash equivalents........ (15,747) (7,614) 881 10,365
Cash and cash equivalents, beginning of period.............. 32,845 17,098 9,484 --
-------- -------- ---------- ----------
Cash and cash equivalents, end of period.................... $ 17,098 $ 9,484 $ 10,365 $ 10,365
======== ======== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................. $ 511 $ 548 $ 429 $ 2,538
======== ======== ========== ==========
Noncash financing activities:
Issuance of common stock for dividends.................. $ -- $ -- $ -- $ 90
======== ======== ========== ==========
Issuance of common stock to employees in lieu of cash
compensation.......................................... $ -- $ -- $ -- $ 44
======== ======== ========== ==========
</TABLE>

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

F-7
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BACKGROUND

Neose, a development-stage company, is a leading developer of proprietary
technologies for the synthesis and manufacture of complex carbohydrates. Our
proprietary enzymatic glycosylation technology platform enables the rapid and
cost-effective synthesis of a wide range of complex carbohydrates in commercial
quantities. We use our broad, enabling technology to produce these complex
carbohydrates for pharmaceutical, biotechnology, nutritional, and consumer
product applications.

We commenced operations in August 1990. We have not generated any material
revenues from operations, except for interest income and revenues from
collaborative agreements. We have incurred operating losses each year and, given
our planned level of operating expenses, we may continue to incur operating
losses for some time. As of December 31, 1999, we had an accumulated deficit of
approximately $60 million. We expect additional losses for some time as we
expand research and development efforts, expand manufacturing scale-up
activities, and begin sales and marketing activities. We may continue to incur
substantial operating losses even if our revenues increase. Our future operating
results are subject to certain additional risks and uncertainties.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Neose
Technologies, Inc. and its wholly-owned subsidiaries. The financial statements
reflect the elimination of all significant intercompany accounts and
transactions.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the amounts reported in the financial statements. Actual results
could differ from those estimates.

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of three months
or less on the date of purchase to be cash equivalents.

Marketable Securities

In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," we determine
the appropriate classification of our debt securities at the time of purchase
and re-evaluate such designation as of each balance sheet date. Marketable
securities that we have the positive intent and ability to hold to maturity are
classified as held-to-maturity securities and recorded at amortized cost. Our
other marketable securities are classified as available-for-sale securities and
are carried at fair value, based on quoted market prices, with unrealized gains
and losses reported as a separate component of stockholders' equity. All
realized gains and losses on our available-for-sale securities, computed using
specific identification, and any declines in value determined to be permanent
are recognized in the Consolidated Statements of Operations. As of December 31,
1999, all marketable securities were classified as "held-to-maturity"
securities.

Marketable securities consist of investments that have a maturity of more
than three months on the date of purchase. To maintain the safety and liquidity
of our marketable securities, we have established guidelines for the
concentration, maturities, and credit ratings of our investments.

F-8
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Property and Equipment

Property and equipment are stated at cost. Property and equipment
capitalized under capital leases are recorded at the present value of the
minimum lease payments due over the lease term. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives of
the related assets or the lease term, whichever is shorter. We use depreciable
lives of three to seven years for computer, office, research, and manufacturing
equipment, and eighteen to twenty years for building and improvements.

Impairment of Long-Lived Assets

As required by SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," we assess the
recoverability of any long-lived assets for which an indicator of impairment
exists. Specifically, we calculate, and recognize, any impairment losses by
comparing the carrying value of these assets to our estimate of the undiscounted
future operating cash flows. Although our current and historical operating and
cash flows are indicators of impairment, we believe the future cash flows to be
received from our long-lived assets will exceed the assets' carrying value.
Accordingly, we have not recognized any impairment losses through December 31,
1999.

Research and Development

Research and development costs are charged to expense as incurred.

Income Taxes

We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The objective of
this pronouncement is to recognize and measure, using enacted tax laws, the
amount of current and deferred income taxes payable or refundable at the date of
the financial statements as a result of all events that have been recognized in
the financial statements.

Net Loss Per Share

Basic loss per share is computed by dividing net loss by the
weighted-average number of common shares outstanding for the period. Diluted
loss per share reflects the potential dilution from the exercise or conversion
of securities into common stock. For the years ended December 31, 1997, 1998,
and 1999, the effects of the exercise of outstanding stock options and warrants
were antidilutive; accordingly, they were excluded from the calculation of
diluted loss per share.

Revenue Recognition

We record revenue from collaborative agreements either when we perform
specified services or ratably over the term of the applicable agreement.

New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be applied, and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We are evaluating SAB 101 and the effect it may have on our
financial statements. At this time, we believe that SAB 101 will not have a
material impact on our financial position or results of operations.

F-9
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. COLLABORATIVE AGREEMENTS

Agreement with McNeil

During 1999, we entered into a joint venture with the McNeil Specialty
Products Division of Johnson & Johnson for the large-scale enzymatic production
of fructooligosaccharides (FOS) and other complex carbohydrates. The joint
venture is focused on the development and marketing of FOS and other related
compounds for a number of large commercial applications, including:

o Bulking agents for sucralose, McNeil's recently approved no-calorie
sweetener;

o Nutraceutical food supplements that foster the growth of desirable
bacteria in the human gastro-intestinal tract;

o Low-cost, high-quality ingredients for use in foods such as cereals and
ice creams;

o Antibiotic replacements in animal and poultry feeds; and

o Oral health products.

The joint venture is owned equally by Neose and McNeil. Each of Neose and
McNeil contributed various intellectual property owned by it to the joint
venture, and all of the intellectual property developed by the parties under an
earlier research and development agreement was similarly contributed to the
joint venture. In addition, McNeil contributed to the joint venture the initial
commercial manufacturing facility, for which 50% of the cost will be reimbursed
by the joint venture.

If the joint venture builds additional production facilities, and we wish
to maintain our 50% ownership in the joint venture, we are required to
contribute half of the expenditures, up to a maximum contribution of $8.85
million. However, we may elect to contribute as little as $1.85 million of the
cost of the facilities, so long as our aggregate capital contributions are at
least 15% of the joint venture's aggregate capital contributions. In this case,
McNeil will fund the remainder of our half of the joint venture's capital
expenditures, and our ownership percentage will be appropriately reduced. We
have an option, expiring in September 2006, to return to 50% ownership in the
joint venture by reimbursing McNeil for these amounts. In addition, until the
joint venture is profitable, McNeil is required to fund, as a non-recourse,
no-interest loan, all of the joint venture's aggregate capital expenditures in
excess of $20 million, and all of the joint venture's operating losses. These
loans would be repayable by the joint venture to McNeil over seven years, and in
the event of any dissolution of the joint venture would be payable to McNeil
before any distribution of assets to us. McNeil has the exclusive right to
purchase the joint venture's bulking agent for use in specified consumer product
applications at a constant mark-up over the joint venture's cost.

We will account for our investment in the joint venture under the equity
method, under which we will recognize our share of losses or earnings of the
joint venture. We will record our share of the losses of the joint venture,
however, only to the extent of our actual or committed investment in the joint
venture. In 1999, we recorded a loss from operations of the joint venture of
$345,000, which is included in research and development expense.

The success of our joint venture with McNeil is dependent upon the joint
venture's ability to manufacture, sell, and market successfully complex
carbohydrates. If the joint venture is unsuccessful in these efforts, it will
not be profitable and our business, financial condition, and results of
operations will be materially and adversely affected.

Agreement with Bristol-Myers

In 1998, we entered into an agreement with Bristol-Myers Squibb Company to
develop proprietary technologies that enable cGMP processes for the manufacture
of two gangliosides (complex carbohydrate structures attached to a lipid) for
use as the active pharmaceutical ingredients in two cancer vaccines being
developed by Bristol-Myers. During the years ended December 31, 1998 and 1999,
we recorded revenues of $375,000 and $205,000, respectively, from Bristol-Myers.

F-10
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. COLLABORATIVE AGREEMENTS -- (CONTINUED)

Under our current agreements with Bristol-Myers, we expect to be paid for
process development, and for the delivery of qualified materials for clinical
trial use, and for stability and other pre-launch needs. Bristol-Myers may
terminate the development agreement on 90 days' prior notice. If Bristol-Myers
proceeds with GMK or MGV, we expect to enter into a mutually exclusive long-term
manufacturing and supply agreement to supply Bristol-Myers' commercial
requirements for the vaccines.

Even if we successfully complete development of these processes, and
fulfill all of our obligations under the agreement, Bristol-Myers may not obtain
regulatory approval to market either of these vaccines. Further, even if
Bristol-Myers obtains regulatory approval to market either of these vaccines, we
cannot be sure that Bristol-Myers will enter into a contract with us for the
manufacture of complex carbohydrates for the vaccines, or that the terms of a
future contract with Bristol-Myers will be favorable to us.

Agreement with Wyeth

During 1999, we entered into an agreement with Wyeth Nutritionals, a
division of American Home Products, to develop a manufacturing process for a
bioactive carbohydrate to be used as an ingredient in Wyeth's infant and
pediatric nutritional formula products. We will develop a large-scale
manufacturing process for this ingredient, and Wyeth plans the introduction of
these proprietary ingredients into its infant formula lines. We will receive
contract development payments and milestone payments, and will sell product to
Wyeth upon commercialization.

In 1999, we received a non-refundable, up-front license fee of $500,000 and
research funding for November 1999 through April 2000 of $500,000. The
non-refundable, up-front license fee will be recognized as revenue ratably over
the three-year development program. As of December 31, 1999, we deferred
$333,000 of the research funding, calculated as the amount relating to 2000.

We may fail to develop a large-scale manufacturing process successfully or
in a cost-effective or efficient manner. Even if we successfully develop a
process, and fulfill all of our obligations under the agreement, Wyeth may fail
to obtain regulatory approval to market the ingredient. Moreover, even if Wyeth
obtains regulatory approval for the ingredient, Wyeth may determine the
incremental cost of adding the ingredient to infant formula exceeds the benefit
to Wyeth.

Agreement with Abbott

Abbott Laboratories has a non-exclusive license to use our technology to
manufacture and commercialize, for nutritional purposes only, any complex
carbohydrate naturally found in human breast milk. If Abbott commercializes any
product manufactured using our technology, we will receive fees from Abbott tied
to commercial quantities. During the year ended December 31, 1997, we recognized
$500,000 of revenue under our collaborative agreement with Abbott.

Agreement with Bracco

We recognized approximately $209,000 of revenue under our collaborative
research agreement with Bracco Research USA Inc. for the year ended December 31,
1997. We mutually agreed to terminate our research collaboration in September
1997.

F-11
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. MARKETABLE SECURITIES

As of December 31, 1998 and 1999, marketable securities consisted of
securities and obligations of either the U.S. Treasury or U.S. government
agencies. The following summary contains additional information about our
marketable securities (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- ------------ -------- --------
<S> <C> <C>
Available-for-sale securities
Cost...................................................... $ 30,303 $ 9,483
Gross unrealized gains.................................... 222 --
Amortized discount........................................ -- 52
-------- --------
Fair value of available-for-sale securities............... 30,525 9,535
Less amounts classified as cash equivalents............... (7,986) (9,535)
-------- --------
Total available-for-sale securities......................... 22,539 --
Held-to-maturity securities (at amortized cost)............. -- 22,870
-------- --------
$ 22,539 $ 22,870
======== ========
</TABLE>

The weighted-average maturity of our marketable securities as of December
31, 1999 was five months. During the years ended December 31, 1998 and 1999, we
received proceeds from the sales of marketable securities of approximately
$1,982,000 and $8,882,000, respectively. Realized gains on these sales for the
years ended December 31, 1998 and 1999 were approximately $74,000 and $796,000,
respectively.

NOTE 5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- ------------ -------- --------
<S> <C> <C>
Building and improvements................................... $ 13,212 $ 13,524
Research equipment.......................................... 2,652 3,068
Manufacturing equipment..................................... 842 1,178
Computer and office equipment............................... 411 528
-------- --------
17,117 18,298
Less accumulated depreciation and amortization.............. (4,278) (5,632)
-------- --------
12,839 12,666
Land........................................................ 700 700
-------- --------
$ 13,539 $ 13,366
======== ========
</TABLE>

Depreciation and amortization expense was approximately $1,838,000 and
$1,380,000 for the years ended December 31, 1998 and 1999, respectively.

NOTE 6. ACQUIRED TECHNOLOGY

On March 26, 1999, we acquired the carbohydrate manufacturing patents,
licenses, and other intellectual property of Cytel Corporation's Glytec business
unit. We paid $3.5 million in cash to Cytel and an additional $1.5 million in
cash into escrow, the release of which is conditioned on Cytel's satisfaction,
prior to September 26, 2000, of certain matters relating to the acquired patents
and licenses. We have recorded the $1.5 million placed into escrow as Restricted
Cash on our December 31, 1999 Consolidated Balance Sheet.

F-12
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6. ACQUIRED TECHNOLOGY -- (CONTINUED)

Because the acquired intellectual property consists of core technology with
alternative future uses, we have capitalized $3.3 million of the amount paid to
Cytel as Acquired Technology. The remaining $200,000 was paid to Cytel from an
escrow account funded by us in 1998. This amount was charged to expense in our
1998 Consolidated Statement of Operations.

In addition, we agreed to pay Cytel up to an additional $1.6 million in
cash, contingent on potential payments and revenues realized by us from certain
future corporate collaborations, as long as we enter into any such collaboration
by March 26, 2000. We are obligated to pay $250,000 of the $1.6 million as a
result of entering into a Collaboration and License Agreement with the Wyeth
Nutritionals Division of American Home Products (see Note 3). This amount has
also been capitalized as Acquired Technology on our December 31, 1999
Consolidated Balance Sheet. Any cash remaining in the escrow account on
September 26, 2000 will be returned to us and will be available for general
corporate purposes. The Acquired Technology balance will be amortized to our
Consolidated Statement of Operations over eight years, which we estimate to be
the useful life of the technology. During the year ended December 31, 1999, we
recorded amortization expense of $315,000 relating to the Acquired Technology.

NOTE 7. ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- ------------ ------- -------
<S> <C> <C>
Accrued compensation........................................ $ 330 $ 455
Accrued professional fees................................... 200 348
Amount due to joint venture with McNeil..................... -- 345
Accrued acquired technology................................. -- 250
Accrued clinical expenses................................... 250 199
Accrued royalty expense..................................... 142 142
Accrued outside research expenses........................... 183 123
Accrued other expenses...................................... 185 250
------- -------
$ 1,290 $ 2,112
======= =======
</TABLE>

NOTE 8. LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- ------------ ------- -------
<S> <C> <C>
MCIDA bond issuance......................................... $ 8,900 $ 8,300
Other....................................................... 17 --
------- -------
8,917 8,300
Less current portion........................................ (617) (1,000)
------- -------
$ 8,300 $ 7,300
======= =======
</TABLE>

Minimum principal repayments of long-term debt as of December 31, 1999 were
as follows (in thousands): 2000--$1,000; 2001--$1,100; 2002--$1,100;
2003--$1,200; 2004--$1,200; and thereafter--$2,700 (2005--$100; 2006--$200;
2007--$100; 2008 through 2011--$200; 2012--$300; 2013--$200; 2014--$300;
2015--$200; 2016--$300; and 2017--$200).

F-13
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. LONG-TERM DEBT -- (CONTINUED)

MCIDA Bond Issuance

In 1997, we issued, through the Montgomery County (Pennsylvania) Industrial
Development Authority, $9.4 million of taxable and tax-exempt bonds. The bonds
were issued to finance the purchase of our previously leased building and the
construction of a pilot-scale manufacturing facility within our building. The
bonds are supported by a AA-rated letter of credit, and a reimbursement
agreement between our bank and the letter of credit issuer. The interest rate on
the bonds will vary weekly, depending on market rates for AA-rated taxable and
tax-exempt obligations, respectively. During 1999, the weighted-average,
effective interest rate was 6.5% per year, including letter-of-credit and other
fees.

The terms of the bond issuance provide for monthly, interest-only payments
and a single repayment of principal at the end of the twenty-year life of the
bonds. However, under our agreement with our bank, we are making monthly
payments to an escrow account to provide for an annual prepayment of principal.

As of December 31, 1999, we had Restricted Cash relating to the bonds of
$785,000, which consisted of our monthly payments to an escrow account plus
interest revenue on the balance in the escrow account.

To provide credit support for the bond issuance, we have given a first
mortgage on the land, building, improvements, and certain machinery and
equipment to our bank. In addition, we have agreed to maintain at least $20
million of cash and short-term investments. If we fail to comply with this
covenant, we are required to deposit with the lender cash collateral up to, but
not more than, the loan's unpaid balance, which was $8.3 million as of December
31, 1999.

Capital Lease Obligation

In June 1995, we entered into a master equipment lease agreement with a
finance company. We borrowed $1.4 million under the agreement. As of December
31, 1998, we had satisfied our obligations under the agreement. In connection
with the lease, we granted the lessor a warrant to purchase 10,527 shares of
common stock at $14.25 per share. The stock warrant, which expires on June 30,
2002, remained outstanding as of December 31, 1999.

NOTE 9. STOCKHOLDERS' EQUITY

Common Stock

On June 29, 1999, we sold 1.5 million shares of common stock in a private
placement to a group of institutional and individual investors at a price of
$9.50 per share, generating net proceeds of approximately $13.4 million. On
January 13, 1999, we sold 286,097 shares of common stock to Johnson & Johnson
Development Corporation at a price of $13.98 per share, generating net proceeds
of $4 million.

On January 29, 1997, we sold 1,250,000 shares of common stock in a public
offering at a price of $17.50 per share. Our net proceeds from this offering
after the payment of placement fees and offering expenses were approximately
$20,339,000.

Our initial public offering closed on February 22, 1996. We sold 2,587,500
shares, which included the exercise of the underwriters' over-allotment option
on March 4, 1996, of common stock at a price of $12.50 per share. Our net
proceeds from this offering after the underwriting discount and payment of
offering expenses were approximately $29,127,000. In connection with this
offering, all outstanding shares of Series A, C, D, E, and F Convertible
Preferred Stock converted into 2,410,702 shares of common stock. Some of these
common shares have registration rights.

F-14
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. STOCKHOLDERS' EQUITY -- (CONTINUED)

From 1991 through 1995, we sold 7,196,884 shares of Series A, B, C, D, E,
and F Convertible Preferred Stock. On December 7, 1995, all outstanding shares
of Series B Convertible Preferred Stock converted into 472,249 shares of common
stock. As discussed above, in connection with the initial public offering, all
outstanding shares of Series A, C, D, E, and F converted into 2,410,702 shares
of common stock.

Shareholder Rights Plan

In September 1997, we adopted a Shareholder Rights Plan. Under this plan,
which was amended in December 1998, holders of common stock are entitled to
receive one right for each share of common stock held. Separate rights
certificates would be issued and become exercisable if any acquiring party
either accumulates or announces an offer to acquire at least 15% of our common
stock. Each right will entitle any holder who owns less than 15% of our common
stock to buy one one-hundredth share of the Series A Junior Participating
Preferred Stock at an exercise price of $150 per unit. Each one one-hundredth
share of the Series A Junior Participating Preferred Stock is essentially
equivalent to one share of our common stock. If an acquiring party accumulates
at least 15% of our common stock, each right entitles any holder who owns less
than 15% of our common stock to purchase for $150 either $300 worth of our
common stock or $300 worth of the 15% acquiror's common stock. The rights expire
in September 2007 and may be redeemed by us at a price of $.01 per right at any
time up to ten days after they become exercisable.

NOTE 10. EMPLOYEE BENEFIT PLANS

Stock Option Plans

We have three stock option plans, the 1991, 1992, and 1995 Stock Option
Plans, under which a total of 2,511,666 shares of common stock have been
reserved. The 1995 Stock Option Plan, which incorporates the two predecessor
plans, provides for the granting of both incentive stock options and
nonqualified stock options to our employees, officers, directors, and
consultants. In addition, the plan allows us to issue shares of common stock
directly either through the immediate purchase of shares or as a bonus tied to
either an individual's performance or our attainment of prescribed milestones.
Incentive stock options may not be granted at an exercise price less than the
fair market value on the date of grant. In addition, the plan includes stock
appreciation rights to be granted at our discretion. The stock options are
exercisable over a period, which may not exceed ten years from the date of
grant, determined by our board of directors.

We have elected to adopt the disclosure provisions only of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," or SFAS 123. Accordingly, we apply APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for our stock-based compensation plans. We record deferred
compensation for option grants to employees for the amount, if any, the market
price per share exceeds the exercise price per share. In addition, we record
deferred compensation for option grants to non-employees in the amount of the
fair value per share, as computed using the Black-Scholes option-pricing model
and variable plan accounting. We amortize deferred compensation amounts over the
vesting periods of each option. We recognized compensation expense of
approximately $231,000, $311,000, and $477,000 for the years ended December 31,
1997, 1998, and 1999, respectively.

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model. We used the following
weighted-average assumptions for 1997, 1998, and 1999 grants, respectively:
risk-free interest rate of 5.8%, 4.6%, and 5.9%; an expected life of 5.3, 5.1,
and 5.2 years;

F-15
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

volatility of 60%; and a dividend yield of zero. If we had elected to record
compensation cost for our stock-based compensation plans consistent with SFAS
123, our net loss and basic and diluted net loss per share would have been
increased to the pro forma amounts indicated below (in thousands, except per
share data):

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss--as reported.................................... $ (9,064) $(11,907) $(13,318)
Net loss--pro forma...................................... $(11,524) $(14,756) $(15,853)
Basic and diluted net loss per share--as reported........ $ (0.96) $ (1.25) $ (1.25)
Basic and diluted net loss per share--pro forma.......... $ (1.23) $ (1.54) $ (1.48)
</TABLE>

A summary of the status of our stock option plans as of December 31, 1997,
1998, 1999 and changes during each of the years then ended, is presented below:

<TABLE>
<CAPTION>
1997 1998 1999
----------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
OUTSTANDING PER SHARE OUTSTANDING PER SHARE OUTSTANDING PER SHARE
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1.......... 1,201,087 $10.03 1,564,176 $11.73 1,785,489 $12.15
Granted..................... 419,704 15.76 312,212 13.38 443,626 13.22
Exercised................... (41,618) 3.40 (50,320) 5.40 (35,663) 7.41
Canceled.................... (14,997) 11.48 (40,579) 13.69 (41,415) 14.15
--------- ------ --------- ------ --------- ------
Balance at December 31........ 1,564,176 $11.73 1,785,489 $12.15 2,152,037 $12.41
========= ====== ========= ====== ========= ======
Options exercisable at
December 31................. 636,164 $ 7.84 930,954 $ 9.82 1,242,583 $11.07
========= ====== ========= ====== ========= ======
</TABLE>

A summary of options granted at exercise prices equal to, greater than, and
less than the market price on the date of grant is presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1998 1999
- ----------------------- -------- -------- --------
<S> <C> <C> <C>
Price = Market Value
Options granted....................... 402,665 306,165 397,366
Weighted-average exercise price....... $ 15.75 $ 13.55 $ 12.17
Weighted-average fair value........... $ 8.97 $ 7.48 $ 6.89

Price > Market Value
Options granted....................... 10,000 -- 40,000
Weighted-average exercise price....... $ 20.50 $ -- $ 25.00
Weighted-average fair value........... $ 8.86 $ -- $ 5.50

Price < Market Value
Options granted....................... 7,039 6,047 6,260
Weighted-average exercise price....... $ 9.68 $ 4.92 $ 4.75
Weighted-average fair value........... $ 13.70 $ 11.40 $ 11.01
</TABLE>

F-16
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

The following table summarizes information about stock options outstanding
as of December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------------- ---------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.90 - $12.54 822,952 5.7 $ 7.67 651,889 $ 7.05
$12.69 - $14.56 717,755 8.8 13.63 214,405 13.62
$14.63 - $30.00 611,330 7.4 17.36 376,289 16.59
--------- ---------
$ 0.90 - $30.00 2,152,037 7.2 $12.41 1,242,583 $11.07
========= =========
</TABLE>

The weighted-average fair value of employee purchase rights granted under
our employee stock purchase plan (see below) in 1997, 1998, and 1999 was $5.97,
$6.05, and $6.25, respectively. The fair value of the purchase rights was
estimated using the Black-Scholes model with the following weighted-average
assumptions for 1997, 1998, and 1999, respectively: risk-free interest rate of
5.7%, 4.6%, and 6.5%; an expected life of seventeen, seventeen, and eighteen
months; volatility of 60%; and a dividend yield of zero.

Employee Stock Purchase Plan

We maintain an employee stock purchase plan, or ESPP, that allows any
eligible employee the opportunity to purchase shares of our common stock through
payroll deductions at the end of semiannual purchase periods. Any employee who
is expected to work at least 20 hours per week for at least five months per
calendar year is eligible to participate. The ESPP, which became effective in
February 1996, provides for successive, two-year offering periods, each of which
is contemplated to have four semiannual purchase periods. Pursuant to the ESPP,
100,000 shares of common stock were reserved for issuance. The purchase price is
85% of the lower of the market price per share on the employee's entry date into
the offering period or the market price per share on the purchase date. Any
employee who owns less than 5% of our common stock may purchase up to the lesser
of:

o 10% of his or her eligible compensation;

o 1,000 shares per purchase; or

o the number of shares per year that does not exceed the quotient of
$25,000 divided by the market price per share on the employee's entry
date into the offering period.

A total of 76,712, 61,632, and 46,092 shares of common stock remained
available for issuance under the ESPP at December 31, 1997, 1998, and 1999,
respectively. The total purchases of common stock under the ESPP during the
years ended December 31, 1997, 1998, and 1999, were 17,657 shares at a total
purchase price of approximately $189,000, 15,080 shares at a total purchase
price of approximately $171,000, and 15,540 shares at a total purchase price of
approximately $156,000, respectively. We have not recorded any compensation
expense for the ESPP.

NOTE 11. COMMITMENTS

License Agreements

We have entered into agreements with various institutions under which we
have been granted licenses to use patent rights and technology. Typically, these
agreements will terminate upon the expiration of the applicable patent rights,
and require us to reimburse the licensor for all reasonable fees related to the

F-17
<PAGE>
NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11. COMMITMENTS -- (CONTINUED)

acquisition and maintenance of the patents licensed to us. In addition, we
usually are required to pay royalties to the licensor based on either sales of
applicable products by us or specified license fees, milestone fees, and
royalties received by us from sublicensees, or both.

NOTE 12. INCOME TAXES

As of December 31, 1999, we had net operating loss carryforwards for
federal and state income tax purposes of approximately $8,257,000 and
$3,620,000, respectively. In addition, we had federal research and development
credit carryforwards of approximately $1,497,000. These carryforwards begin to
expire in 2004. Due to the uncertainty surrounding the realization of the tax
benefit associated with these carryforwards, we have provided a full valuation
allowance against this tax benefit. In addition, pursuant to the Tax Reform Act
of 1986, the annual utilization of our net operating loss carryforwards will be
limited. We do not believe that these limitations will have a material adverse
impact on the utilization of our net operating loss carryforwards.

The approximate income tax effect of each type of temporary difference and
carryforward is as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- ------------ -------- --------
<S> <C> <C>
Benefit of net operating loss carryforwards................. $ 2,535 $ 3,159
Research & development credit carryforwards................. 1,169 1,497
Capitalized research and development........................ 8,360 10,615
Start-up costs.............................................. 5,594 7,204
Nondeductible depreciation and amortization................. 1,737 2,414
Deferred compensation....................................... 299 493
Accrued expenses not currently deductible................... 199 352
Deferred revenue............................................ -- 192
Other....................................................... (223) (468)
-------- --------
19,670 25,458
Valuation allowance......................................... (19,670) (25,458)
-------- --------
$ -- $ --
======== ========
</TABLE>

NOTE 13. RELATED-PARTY TRANSACTIONS

Paramount Capital, Inc., of which the sole shareholder is a member of our
Board of Directors, acted as a finder for our private placement of common stock
in June 1999 (see Note 9). We paid Paramount Capital $783,750 for its assistance
in completing the private placement. Entities affiliated with Paramount Capital
purchased 110,000 shares of common stock in the private placement.

In 1997, we entered into an agreement with an employee of Paramount Capital
for consulting services. Under the agreement, which may be terminated by either
party upon sixty days prior notice, we granted the consultant options to
purchase 15,000 shares of common stock at prices equal to and in excess of the
then market price. The weighted-average exercise price of the options is $18.00
per share. The options vest in equal, annual amounts over four years. In
addition, we are obligated to pay the consultant an annual amount of $50,000.
During 1999, we granted the consultant an additional option to purchase 30,000
shares of common stock at an exercise price of $10.38, the market price on the
date of grant. The option vests in equal, annual amounts in 2002 and 2003.

F-18
<PAGE>
2,500,000 SHARES

[LOGO]

COMMON STOCK

PROSPECTUS

CHASE H&Q

PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES

U.S. BANCORP PIPER JAFFRAY

WARBURG DILLON READ LLC

_____________, 2000

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO
PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN THAT JURISDICTION. PERSONS WHO COME INTO POSSESSION OF THIS
PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO INFORM
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND THE
DISTRIBUTION OF THIS PROSPECTUS APPLICABLE TO THAT JURISDICTION.

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, in connection with the issuance and
distribution of the shares of common stock being registered, all of which are
being borne by the Company:

<TABLE>
<S> <C>
SEC Registration fee........................................ $32,895
NASD listing fee............................................ 17,500
Transfer agent and registrar fees........................... 6,000
Printing and engraving...................................... 100,000
Legal fees and expenses..................................... 175,000
Blue Sky fees and expenses.................................. 10,000
Accounting fees and expenses................................ 50,000
Miscellaneous............................................... 8,605
-------
Total..................................................... 400,000
=======
</TABLE>

- ------------------------------
* To be filed by amendment

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents, and controlling persons of a
corporation under certain conditions and subject to certain limitations. Section
145 empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
by reason of the fact that he or she is or was a director, officer, or agent of
the corporation or another enterprise if serving at the request of the
corporation. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit, or proceeding if the person indemnified acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to, the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the right of the corporation, no
indemnification may be made with respect to any claim, issue, or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper. Section 145 further provides that to
the extent a director, officer, employee, or agent of a corporation has been
successful in the defense of any action, suit, or proceeding referred to above
or in the defense of any claim, issue, or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith. Section 6 of Article 7 of
Neose's Amended and Restated By-laws provides to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law for the indemnification of
each person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that he or she
is or was, or has agreed to become, a director or officer of the corporation, or
is or was serving, or has agreed to serve, at the request of the corporation, as
a director, officer, or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust, or other enterprise (including
any employee benefit plan), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by such person or on such person's behalf in connection with such
action, suit, or proceeding and any appeal therefrom.

II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1* Form of Underwriting Agreement
5.1* Opinion of Morgan, Lewis & Bockius LLP regarding legality of
shares of common stock being registered
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5.1 hereto)
24.1+ Power of Attorney (included on signature page to this
Registration Statement)
27.1+ Financial Data Schedule
</TABLE>

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

* filed herewith

+ Previously filed as an exhibit to this registration statement as originally
filed with the Securities and Exchange Commission on February 11, 2000.

ITEM 17. UNDERTAKINGS.

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.

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 its Restated Certificate of Incorporation, its By-laws,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against a public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

II-2
<PAGE>

The undersigned Registrant hereby undertakes:

<TABLE>
<S> <C> <C>
(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 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and

(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.
</TABLE>

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 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to 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.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Horsham, Pennsylvania,
on March 15, 2000.

NEOSE TECHNOLOGIES, INC.

By /s/ P. Sherrill Neff
-----------------------------------
P. Sherrill Neff
President and Chief Financial
Officer

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

<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<S> <C> <C>
/s/ * Chief Executive Officer and Chairman March 15, 2000
- ------------------------------------ of the Board (principal executive
Stephen A. Roth officer)

/s/ P. Sherrill Neff President, Chief Financial Officer March 15, 2000
- ------------------------------------ and Director (principal financial
P. Sherrill Neff and accounting officer)

/s/ * Director March 15, 2000
- ------------------------------------
William F. Hamilton

/s/ * Director March 15, 2000
- ------------------------------------
Douglas J. MacMaster, Jr.

/s/ * Director March 15, 2000
- ------------------------------------
Mark H. Rachesky

/s/ * Director March 15, 2000
- ------------------------------------
Lindsay A. Rosenwald

/s/ * Director March 15, 2000
- ------------------------------------
Lowell E. Sears

/s/ * Director March 15, 2000
- ------------------------------------
Jerry A. Weisbach

*By P. Sherrill Neff, as attorney-in-fact
- -----------------------------------------
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
1.1* Form of Underwriting Agreement
5.1* Opinion of Morgan, Lewis & Bockius LLP regarding legality of
shares of common stock being registered
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5.1 hereto)
24.1+ Power of Attorney (included on signature page to this
Registration Statement)
27.1+ Financial Data Schedule
</TABLE>

- ------------------------------
* filed herewith

+ Previously filed as an exhibit to this registration statement as originally
filed with the Securities and Exchange Commission on February 11, 2000.

II-5

NEOSE TECHNOLOGIES, INC.

2,500,000 SHARES(1)

COMMON STOCK

UNDERWRITING AGREEMENT

March __, 2000

CHASE SECURITIES INC.
PRUDENTIAL SECURITIES INCORPORATED
U.S. BANCORP PIPER JAFFRAY
WARBURG DILLON READ LLC
c/o Chase Securities Inc.
One Bush Street
San Francisco, CA 94104

Ladies and Gentlemen:

Neose Technologies, Inc., a Delaware corporation (herein called the
Company), proposes to issue and sell 2,500,000 shares of its authorized but
unissued Common Stock, $.01 par value (herein called the Common Stock), (said
2,500,000 shares of Common Stock being herein called the Underwritten Stock).
The Company proposes to grant to the Underwriters (as hereinafter defined) an
option to purchase up to 375,000 additional shares of Common Stock (herein
called the Option Stock and with the Underwritten Stock herein collectively
called the Stock). The Common Stock is more fully described in the Registration
Statement and the Prospectus hereinafter mentioned.

The Company hereby confirms the agreements made with respect to the
purchase of the Stock by the several underwriters, for whom you are acting,
named in Schedule I hereto (herein collectively called the Underwriters, which
term shall also include any underwriter purchasing Stock pursuant to Section
3(b) hereof). You represent and warrant that you have been authorized by each of
the other Underwriters to enter into this Agreement on its behalf and to act for
it in the manner herein provided.

1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-3 (No. 333-30148), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
Securities Act) of the Stock. Copies of

- --------------
(1) Plus an option to purchase from the Company up to 375,000 additional shares
to cover over-allotments.

<PAGE>

such registration statement and of each amendment thereto, if any, including the
related preliminary prospectus (meeting the requirements of Rule 430A of the
rules and regulations of the Commission) heretofore filed by the Company with
the Commission have been delivered to you.

The term Registration Statement as used in this agreement shall mean such
registration statement, including all documents incorporated by reference
therein, all exhibits and financial statements, all information omitted
therefrom in reliance upon Rule 430A and contained in the Prospectus referred to
below, in the form in which it became effective, and any registration statement
filed pursuant to Rule 462(b) of the rules and regulations of the Commission
with respect to the Stock (herein called a Rule 462(b) registration statement),
and, in the event of any amendment thereto after the effective date of such
registration statement (herein called the Effective Date), shall also mean (from
and after the effectiveness of such amendment) such registration statement as so
amended (including any Rule 462(b) registration statement). The term Prospectus
as used in this Agreement shall mean the prospectus, including the documents
incorporated therein, relating to the Stock first filed with the Commission
pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as
included in the Registration Statement) and, in the event of any supplement or
amendment to such prospectus after the Effective Date, shall also mean (from and
after the filing with the Commission of such supplement or the effectiveness of
such amendment) such prospectus as so supplemented or amended. The term
Preliminary Prospectus as used in this Agreement shall mean each preliminary
prospectus, including the documents incorporated therein, included in such
registration statement prior to the time it becomes effective.

The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

(a) Each of the Company and its subsidiaries hereby represents and warrants
as follows:

(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement and the Prospectus and as being conducted, and is duly qualified
as a foreign corporation and in good standing in all jurisdictions in which
the character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary (except where the failure to
be so qualified would not have a material adverse effect on the business,
properties, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole).

(ii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
materially adverse change in the business, properties, financial condition
or results of operations of the

-2-
<PAGE>

Company and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, other than as set forth in
the Registration Statement and the Prospectus, and since such dates, except
in the ordinary course of business, neither the Company nor any of its
subsidiaries has entered into any material transaction not referred to in
the Registration Statement and the Prospectus.

(iii) The Registration Statement and the Prospectus comply, and on the
Closing Date (as hereinafter defined) and any later date on which Option
Stock is to be purchased, the Prospectus will comply, in all material
respects, with the provisions of the Securities Act [and the Securities
Exchange Act of 1934, as amended (herein called the Exchange Act)] and the
rules and regulations of the Commission thereunder; on the Effective Date,
the Registration Statement did not contain any untrue statement of a
material fact and did not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus did not and, on the
Closing Date and any later date on which Option Stock is to be purchased,
will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that none of the representations and warranties in this
subparagraph (iii) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information herein or otherwise furnished in writing to the
Company by or on behalf of the Underwriters for use in the Registration
Statement or the Prospectus.

(iv) The Stock will be, when issued and sold to the Underwriters as
provided herein, duly and validly authorized and issued, fully paid and
nonassessable and conforms to the description thereof in the Prospectus. No
further approval or authority of the stockholders or the Board of Directors
of the Company will be required for the issuance and sale of the Stock as
contemplated herein.

3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.

(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
2,500,000 shares of the Underwritten Stock to the several Underwriters, and each
of the Underwriters agrees to purchase from the Company the respective aggregate
number of shares of Underwritten Stock set forth opposite its name in Schedule
I. The price at which such shares of Underwritten Stock shall be sold by the
Company and purchased by the several Underwriters shall be $___ per share. The
obligation of each Underwriter to the Company shall be to purchase from the
Company that number of shares of the Underwritten Stock which represents the
same proportion of the total number of shares of the Underwritten Stock to be
sold by the Company pursuant to this Agreement as the number of shares of the
Underwritten Stock set forth opposite the name of such Underwriter in Schedule I
hereto represents of the total number of shares of the Underwritten Stock to be
purchased by all Underwriters pursuant to this Agreement, as adjusted by you in
such manner as you deem advisable to avoid fractional shares. In making this
Agreement, each Underwriter is contracting severally and not jointly; except as
provided in paragraphs (b) and (c) of this Section 3, the agreement of each
Underwriter is to purchase only the respective number of shares of the
Underwritten Stock specified in Schedule I.

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<PAGE>

(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for
the number of shares of the Stock agreed to be purchased by such Underwriter or
Underwriters, the Company shall immediately give notice thereof to you, and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon between you
and such purchasing Underwriter or Underwriters and upon the terms herein set
forth, all or any part of the shares of the Stock which such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such shares
and portion, the number of shares of the Stock which each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement shall be
automatically increased on a pro rata basis to absorb the remaining shares and
portion which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such shares and portion on the terms herein
set forth. In any such case, either you or the Company shall have the right to
postpone the Closing Date determined as provided in Section 5 hereof for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to said Section 5 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If neither the non-defaulting Underwriters nor the Company shall
make arrangements within the 24-hour periods stated above for the purchase of
all the shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase hereunder, this Agreement shall be terminated without further
act or deed and without any liability on the part of the Company to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.

(c) On the basis of the representations, warranties and covenants herein
contained, and subject to the terms and conditions herein set forth, the Company
grants an option to the several Underwriters to purchase, severally and not
jointly, up to 375,000 shares in the aggregate of the Option Stock from the
Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-allotments
in the sale of the Underwritten Stock by the Underwriters and may be exercised
in whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of the
Option Stock as to which the several Underwriters are exercising the option.
Delivery of certificates for the shares of Option Stock, and payment therefor,
shall be made as provided in Section 5 hereof. The number of shares of the
Option Stock to be purchased by each Underwriter shall be the same percentage of
the total number of shares of the Option Stock to be purchased by the several
Underwriters as such Underwriter is

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<PAGE>

purchasing of the Underwritten Stock, as adjusted by you in such manner as you
deem advisable to avoid fractional shares.

4. OFFERING BY UNDERWRITERS.

(a) The terms of the initial public offering by the Underwriters of the
Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.

(b) The information set forth [in the last paragraph on the front cover
page and] under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus, and the Prospectus, and you
on behalf of the respective Underwriters represent and warrant to the Company
that the statements made therein are correct.

5. DELIVERY OF AND PAYMENT FOR THE STOCK.

(a) Delivery of certificates for the shares of the Underwritten Stock and
the Option Stock (if the option granted by Section 3(c) hereof shall have been
exercised not later than 7:00 A.M., San Francisco time, on the date two business
days preceding the Closing Date), and payment therefor, shall be made at the
office of ______________, ________________, at 7:00 a.m., San Francisco time, on
the [fourth] business day after the date of this Agreement, or at such time on
such other day, not later than seven full business days after such [fourth]
business day, as shall be agreed upon in writing by the Company and you. The
date and hour of such delivery and payment (which may be postponed as provided
in Section 3(b) hereof) are herein called the Closing Date.

(b) If the option granted by Section 3(c) hereof shall be exercised after
7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of __________, ________, at 7:00
a.m., San Francisco time, on the third business day after the exercise of such
option.

(c) Payment for the Stock purchased from the Company shall be made to the
Company or its order, in each case by wire transfer in immediately available
funds to the accounts specified by the Company to you. Such payment shall be
made upon delivery of certificates for the Stock to you for the respective
accounts of the several Underwriters against receipt therefor signed by you.
Certificates for the Stock to be delivered to you shall be registered in such
name or names and shall be in such denominations as you may request at least two
business days before the Closing Date, in the case of Underwritten Stock, and at
least two business days prior to the purchase thereof, in the case of the Option
Stock. Such certificates will be made available to the Underwriters for
inspection, checking and packaging at the offices of Lewco Securities
Corporation, 2 Broadway, New York, New York 10004 on the business day prior to
the Closing Date or, in the case of the Option Stock, by 3:00 p.m., New York
time, on the business day preceding the date of purchase.

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<PAGE>

It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose wire transfer shall not have
been received by you on the Closing Date or any later date on which Option Stock
is purchased for the account of such Underwriter. Any such payment by you shall
not relieve such Underwriter from any of its obligations hereunder.

6. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees as
follows:

(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at
the time of effectiveness of the Registration Statement in reliance on Rule
430A and (ii) not file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been
advised and furnished with a copy or to which you shall have reasonably
objected in writing or which is not in compliance with the Securities Act
or the rules and regulations of the Commission.

(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, (iii) the
institution or notice of intended institution of any action or proceeding
for that purpose, (iv) the receipt by the Company of any notification with
respect to the suspension of the qualification of the Stock for sale in any
jurisdiction, or (v) the receipt by it of notice of the initiation or
threatening of any proceeding for such purpose. The Company will make every
reasonable effort to prevent the issuance of such a stop order and, if such
an order shall at any time be issued, to obtain the withdrawal thereof at
the earliest possible moment.

(c) The Company will (i) on or before the Closing Date, deliver to you
a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement
becomes effective and, promptly upon the filing thereof, a signed copy of
each post-effective amendment, if any, to the Registration Statement
(together with, in each case, all exhibits thereto unless previously
furnished to you) and will also deliver to you, for distribution to the
Underwriters, a sufficient number of additional conformed copies of each of
the foregoing (but without exhibits) so that one copy of each may be
distributed to each Underwriter, (ii) as promptly as possible deliver to
you and send to the several Underwriters, at such office or offices as you
may designate, as many copies of the Prospectus as you may reasonably
request, and (iii) thereafter from time to time during the period in which
a prospectus is required by law to be delivered by an Underwriter or
dealer, likewise send to the Underwriters as many additional copies of the
Prospectus and as many copies of any supplement to the Prospectus and of
any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.

(d) If at any time during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer any event relating to or
affecting the

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<PAGE>

Company, or of which the Company shall be advised in writing by you, shall
occur as a result of which it is necessary, in the opinion of counsel for
the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser of
the Stock, the Company will forthwith prepare and file with the Commission
a supplement to the Prospectus or an amended prospectus so that the
Prospectus as so supplemented or amended will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time such Prospectus is delivered to such purchaser, not
misleading. If, after the initial public offering of the Stock by the
Underwriters and during such period, the Underwriters shall propose to vary
the terms of offering thereof by reason of changes in general market
conditions or otherwise, you will advise the Company in writing of the
proposed variation, and, if in the opinion either of counsel for the
Company or of counsel for the Underwriters such proposed variation requires
that the Prospectus be supplemented or amended, the Company will forthwith
prepare and file with the Commission a supplement to the Prospectus or an
amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the
several Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with
the applicable provisions of the Securities Act and the applicable rules
and regulations thereunder for such period.

(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment
to the Registration Statement and any supplement to the Prospectus or any
amended prospectus proposed to be filed.

(f) The Company will cooperate, when and as requested by you, in the
qualification of the Stock for offer and sale under the securities or blue
sky laws of such jurisdictions as you may reasonably request and, during
the period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, in keeping such qualifications in good standing
under said securities or blue sky laws; provided, however, that the Company
shall not be obligated to file any general consent to service of process or
to qualify as a foreign corporation in any jurisdiction in which it is not
so qualified. The Company will, from time to time, prepare and file such
statements, reports, and other documents as are or may be required to
continue such qualifications in effect for so long a period as you may
reasonably request for distribution of the Stock.

(g) During a period of three years commencing with the date hereof,
the Company will furnish to you, and to each Underwriter who may so request
in writing, copies of all periodic and special reports furnished to
stockholders of the Company and of all information, documents and reports
filed with the Commission (including the Report on Form SR required by Rule
463 of the Commission under the Securities Act).

(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective Date,
the Company will make generally available to its security holders an
earnings statement in accordance with Section 11(a) of the Securities Act
and Rule 158 thereunder.

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<PAGE>

(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs
and expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc.
("NASD") of the Registration Statement, any Preliminary Prospectus and the
Prospectus, (ii) the furnishing to the Underwriters of copies of any
Preliminary Prospectus and of the several documents required by paragraph
(c) of this Section 6 to be so furnished, (iii) the printing of this
Agreement and related documents delivered to the Underwriters, (iv) the
preparation, printing and filing of all supplements and amendments to the
Prospectus referred to in paragraph (d) of this Section 6, (v) the
furnishing to you and the Underwriters of the reports and information
referred to in paragraph (g) of this Section 6 and (vi) the printing and
issuance of stock certificates, including the transfer agent's fees.

(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements
(including counsel fees and disbursements and cost of printing memoranda
for the Underwriters) paid by or for the account of the Underwriters or
their counsel in qualifying the Stock under state securities or blue sky
laws and in the review of the offering by the NASD.

(k) The Company hereby agrees that, without the prior written consent
of Chase Securities, Inc. on behalf of the Underwriters, the Company will
not, for a period of 90 days following the commencement of the public
offering of the Stock by the Underwriters, directly or indirectly, (i)
sell, offer, contract to sell, make any short sale, pledge, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of
any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any rights to purchase or acquire Common
Stock or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences or ownership of Common
Stock, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the Stock
to be sold to the Underwriters pursuant to this Agreement, (B) shares of
Common Stock issued by the Company upon the exercise of options granted
under the stock option plans of the Company (the "Option Plans") or upon
the exercise of warrants outstanding as of the date hereof, all as
described under the caption "Capitalization" in the Preliminary Prospectus,
and (C) the granting of options to purchase Common Stock under the Option
Plans.

(l) The Company is familiar with the Investment Company Act of 1940,
as amended, and has in the past conducted its affairs, and will in the
future conduct its affairs, in such a manner to ensure that the Company was
not and will not be an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.

7. INDEMNIFICATION AND CONTRIBUTION.

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<PAGE>

(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act, or the common law or otherwise, and the
Company agrees to reimburse each such Underwriter and controlling person for any
legal or other expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that (1) the indemnity agreements of the Company contained in this paragraph (a)
shall not apply to any such losses, claims, damages, liabilities or expenses if
such statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in writing to the
Company by or on behalf of any Underwriter for use in any Preliminary Prospectus
or the Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, (2) the indemnity agreement contained in this paragraph (a)
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Stock which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
(excluding the documents incorporated therein by reference) and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the Company
with paragraph (c) of Section 6 hereof. The indemnity agreements of the Company
contained in this paragraph (a) and the representations and warranties of the
Company contained in Section 2 hereof shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Stock.

(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Statement on his own
behalf or pursuant to a power of attorney, each of its directors, and each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, from and against any and all losses, claims, damages
or liabilities, joint or several, to which such indemnified parties or any of
them may become subject under the Securities Act, the Exchange Act, or the
common law or otherwise and to reimburse each of them for any legal or other
expenses (including,

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<PAGE>

except as otherwise hereinafter provided, reasonable fees and disbursements of
counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding which may
be brought against, the respective indemnified parties, in each case arising out
of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the Prospectus
as part thereof and any Rule 462(b) registration statement) or any
post-effective amendment thereto (including any Rule 462(b) registration
statement) or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if such statement or
omission was made in reliance upon and in conformity with information furnished
as herein stated or otherwise furnished in writing to the Company by or on
behalf of such indemnifying Underwriter for use in the Registration Statement or
the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Stock.

(c) Each party indemnified under the provision of paragraphs (a) and (b) of
this Section 7 agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against, it in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (herein called the Notice) of such service or notification to the
party or parties from whom indemnification may be sought hereunder. No
indemnification provided for in such paragraphs shall be available to any party
who shall fail so to give the Notice if the party to whom such Notice was not
given was unaware of the action, suit, investigation, inquiry or proceeding to
which the Notice would have related and was prejudiced by the failure to give
the Notice, but the omission so to notify such indemnifying party or parties of
any such service or notification shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (herein called the Notice of Defense) to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided, however,
that (i) if the indemnified party or parties reasonably determine that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified

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<PAGE>

party or parties shall be entitled to conduct the defense to the extent
reasonably determined by such counsel to be necessary to protect the interests
of the indemnified party or parties and (ii) in any event, the indemnified party
or parties shall be entitled to have counsel chosen by such indemnified party or
parties participate in, but not conduct, the defense. If, within a reasonable
time after receipt of the Notice, an indemnifying party gives a Notice of
Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under paragraphs (a) through (c) of this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear the legal and other expenses incurred in connection with the
conduct of the defense as referred to in clause (i) of the proviso to the
preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.

(d) If the indemnification provided for in this Section 7 is applicable by
its terms but is unavailable or insufficient to hold harmless an indemnified
party under paragraph (a) or (b) of this Section 7, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in paragraph (a) or (b) of this
Section 7 (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party from the offering of the Stock or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each indemnifying party in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, or actions in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Stock received by the Company and the total
underwriting discount received by the Underwriters, as set forth in the table on
the cover page of the Prospectus, bear to the aggregate public offering price of
the Stock. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by each indemnifying party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission.

The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting

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<PAGE>

discount applicable to the Stock purchased by such Underwriter. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this paragraph (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.

Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).

(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or proceeding.

8. TERMINATION. This Agreement may be terminated by you at any time prior
to the Closing Date by giving written notice to the Company if after the date of
this Agreement trading in the Common Stock shall have been suspended, or if
there shall have occurred (i) the engagement in hostilities or an escalation of
major hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change in economic or political conditions in the financial markets of
the United States would, in the Underwriters' reasonable judgment, make the
offering or delivery of the Stock impracticable, (iii) suspension of trading in
securities generally or a material adverse decline in value of securities
generally on the New York Stock Exchange, the American Stock Exchange, or The
Nasdaq Stock Market, or limitations on prices (other than limitations on hours
or numbers of days of trading) for securities on either such exchange or system,
(iv) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of, or commencement of any proceeding
or investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company to the
Underwriters and no liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the

-12-
<PAGE>

Company under this Agreement, including all reasonably incurred costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof.

9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several
Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all its obligations to be performed hereunder at
or prior to the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and to the following further conditions:

(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and
no proceedings therefor shall be pending or threatened by the Commission.

(b) The legality and sufficiency of the sale of the Stock hereunder
and the validity and form of the certificates representing the Stock, all
corporate proceedings and other legal matters incident to the foregoing,
and the form of the Registration Statement and of the Prospectus (except as
to the financial statements contained therein), shall have been approved at
or prior to the Closing Date by Dechert Price & Rhoads, counsel for the
Underwriters.

(c) You shall have received from Morgan, Lewis & Bockius LLP, counsel
for the Company, and from _________, patent counsel for the Company,
opinions, addressed to the Underwriters, dated the Closing Date and in
forms satisfactory to the Underwriters and their counsel, and if Option
Stock is purchased at any date after the Closing Date, additional opinions
from each such counsel, addressed to the Underwriters and dated such later
date, confirming that the statements expressed as of the Closing Date in
such opinions remain valid as of such later date.

(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true
and correct in all material respects and neither the Registration Statement
nor the Prospectus omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, respectively,
not misleading, (ii) since the Effective Date, no event has occurred which
should have been set forth in a supplement or amendment to the Prospectus
which has not been set forth in such a supplement or amendment, (iii) since
the respective dates as of which information is given in the Registration
Statement in the form in which it originally became effective and the
Prospectus contained therein, there has not been any material adverse
change or any development involving a prospective material adverse change
in or affecting the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business, and,
since such dates, except in the ordinary course of business, neither the
Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein,
(iv) neither the Company nor any of its subsidiaries has any material
contingent obligations which are not disclosed in the Registration
Statement and the Prospectus, (v) there are not any pending or known
threatened legal proceedings to which the Company or any of its
subsidiaries is a party or of which property of the Company or any of its
subsidiaries is the subject which are material and which are not

-13-
<PAGE>

disclosed in the Registration Statement and the Prospectus, (vi) there are
not any franchises, contracts, leases or other documents which are required
to be filed as exhibits to the Registration Statement which have not been
filed as required, (vii) the representations and warranties of the Company
herein are true and correct in all material respects as of the Closing Date
or any later date on which Option Stock is to be purchased, as the case may
be, and (viii) there has not been any material change in the market for
securities in general or in political, financial or economic conditions
from those reasonably foreseeable as to render it impracticable in your
reasonable judgment to make a public offering of the Stock, or a material
adverse change in market levels for securities in general (or those of
companies in particular) or financial or economic conditions which render
it inadvisable to proceed.

(e) You shall have received on the Closing Date and on any later date
on which Option Stock is purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the
Chief Financial Officer of the Company, stating that the signer of said
certificate has examined the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein and any
supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (d) of this Section 9 are, to the
best of such officer's knowledge, true and correct.

(f) You shall have received from Arthur Andersen LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any
later date on which Option Stock is purchased, confirming that they are
independent public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and
regulations thereunder and based upon the procedures described in their
letter delivered to you concurrently with the execution of this Agreement
(herein called the Original Letter), but carried out to a date not more
than three business days prior to the Closing Date or such later date on
which Option Stock is purchased (i) confirming, to the extent true, that
the statements and conclusions set forth in the Original Letter are
accurate as of the Closing Date or such later date, as the case may be, and
(ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter which are necessary to reflect
any changes in the facts described in the Original Letter since the date of
the Original Letter or to reflect the availability of more recent financial
statements, data or information. The letters shall not disclose any change,
or any development involving a prospective change, in or affecting the
business or properties of the Company or any of its subsidiaries which, in
your sole judgment, makes it impractical or inadvisable to proceed with the
public offering of the Stock or the purchase of the Option Stock as
contemplated by the Prospectus.

(g) You shall have received from Arthur Andersen LLP a letter stating
that their review of the Company's system of internal accounting controls,
to the extent they deemed necessary in establishing the scope of their
examination of the Company's financial statements as at December 31, 1999,
did not disclose any weakness in internal controls that they considered to
be material weaknesses.

-14-
<PAGE>

(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the qualification
referred to in paragraph (f) of Section 6 hereof.

(i) Prior to the Closing Date, the Stock to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.

(j) On or prior to the Closing Date, you shall have received from all
directors and officers, and certain beneficial holders of more than 5% of
the outstanding Common Stock stockholders agreements, in substantially the
form set forth in Annex A and relating to sales and certain other
dispositions of shares of stock.

All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Dechert Price & Rhoads, counsel for the Underwriters,
shall be satisfied that they comply in form and scope.

In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the transactions
contemplated hereby.

10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of the
Company to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.

In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company by giving notice to
you. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof.

11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to its other obligations
under Section 7 of this Agreement, the Company agrees to reimburse on a
quarterly basis the

-15-
<PAGE>

Underwriters for all reasonable legal and other expenses incurred in connection
with investigating or defending any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in paragraph (a) of Section 7 of this
Agreement, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be held to be improper; provided,
however, that (i) to the extent any such payment is ultimately held to be
improper, the persons receiving such payments shall promptly refund them and
(ii) such persons shall provide to the Company, upon request, reasonable
assurances of their ability to effect any refund, when and if due.

12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to
the benefit of the Company and the several Underwriters and, with respect to the
provisions of Section 7 hereof, the several parties (in addition to the Company
and the several Underwriters) indemnified under the provisions of said Section
7, and their respective personal representatives, successors and assigns.
Nothing in this Agreement is intended or shall be construed to give to any other
person, firm or corporation any legal or equitable remedy or claim under or in
respect of this Agreement or any provision herein contained. The term
"successors and assigns" as herein used shall not include any purchaser, as such
purchaser, of any of the Stock from any of the several Underwriters.

13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Chase Securities Inc., One Bush Street,
San Francisco, California 94104; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 102 Witmer Road, Horsham,
Pennsylvania 19044, Attention: P. Sherrill Neff, President and Chief Financial
Officer. All notices given by telegraph shall be promptly confirmed by letter.

14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of paragraphs
(l) and (n) of Section 6 hereof shall be of no further force or effect.

This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.

-16-
<PAGE>

Please sign and return to the Company in care of the Company the enclosed
duplicates of this letter, whereupon this letter will become a binding agreement
between the Company and the several Underwriters in accordance with its terms.

Very truly yours,

NEOSE TECHNOLOGIES, INC.

By
-----------------------
[Name]
[Title]

The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.

CHASE SECURITIES INC.
PRUDENTIAL SECURITIES INCORPORATED
U.S. BANCORP PIPER JAFFRAY
WARBURG DILLON READ LLC
c/o Chase Securities Inc.

By
-------------------------------
Managing Director

Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.

-17-
<PAGE>

SCHEDULE I

UNDERWRITERS

NUMBER OF SHARES
UNDERWRITERS TO BE PURCHASED

CHASE SECURITIES INC.
PRUDENTIAL SECURITIES INCORPORATED
U.S. BANCORP PIPER JAFFRAY
WARBURG DILLON READ LLC

Total ........................................... -------

-18-

<PAGE>

ANNEX A

FORM OF LOCK-UP LETTER

February 1, 2000

Chase Securities, Inc.
Prudential Vector Healthcare Group
US Bancorp Piper Jaffray
Warburg Dillon Read LLC
As Representatives of the
Several Underwriters
c/o Chase Securities, Inc.
One Bush Street
San Francisco, California 94104

Ladies and Gentlemen:

The undersigned is a shareholder of Neose Technologies, Inc. (the "Company") and
wishes to facilitate the public offering (the "Offering") of Common Stock of the
Company ("Common Stock") pursuant to a Registration Statement on Form S-3 (the
"Registration Statement") to be transmitted for filing with the Securities and
Exchange Commission on or about February 8, 2000.

In consideration of the foregoing, and in order to induce you to act as
underwriters in the Offering, the undersigned hereby irrevocably agrees that it
will not, directly or indirectly, sell, offer, contract to sell, transfer the
economic risk of ownership in, make any short sale, pledge or otherwise dispose
of any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for or any other rights to purchase or acquire Common Stock,
without the prior written consent of Chase Securities, Inc. (or its successor
entity) acting alone for a period of 90 days from the effective date of the
Registration Statement.

Notwithstanding the foregoing, if the undersigned is an individual, he or she
may transfer any shares of Common Stock or securities convertible into or
exchangeable or exercisable for the Company's Common Stock either during his or
her lifetime or on death by will or intestacy to his or her immediate family or
to a trust the beneficiaries of which are exclusively the undersigned and/or a
member or members of his or her immediate family; provided, however, that prior
to any such transfer each transferee shall execute an agreement, satisfactory to
Chase Securities, Inc., pursuant to which each transferee shall agree to receive
and hold such shares of Common Stock, or securities convertible into or
exchangeable or exercisable for the Common Stock, subject to the provisions
hereof, and there shall be no further transfer except in accordance with the
provisions hereof. For the purposes of this paragraph, "immediate family" shall
mean spouse, lineal descendant, father, mother, brother or sister of the
transferor.

-19-

<PAGE>

Chase Securities, Inc.
Prudential Vector Healthcare Group
US Bancorp Piper Jaffray
Warburg Dillon Read LLC
As Representatives of the
Several Underwriters
February 1, 2000
Page 2

The undersigned hereby waives any rights of the undersigned to sell shares of
Common Stock or any other security issued by the Company pursuant to the
Registration Statement, and acknowledges and agrees that for a period of 90 days
from the effective date of the Registration Statement the undersigned has no
right to require the Company to register under the Securities Act of 1933 such
Common Stock or other securities issued by the Company and beneficially owned by
the undersigned.

The undersigned understands that the agreements of the undersigned are
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns and that such agreements shall benefit
any successor entity of any of the Representatives. The undersigned agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of Common Stock or other securities of the Company
held by the undersigned except in compliance with this agreement.

Very truly yours,

Dated:
-------------------- ----------------------------------
Signature

----------------------------------
Printed Name and Title

-20-

EXHIBIT 5.1

[LETTERHEAD OF MORGAN, LEWIS & BOCKIUS LLP]

March 15, 2000

Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044

Re: Public Offering of 2,875,000 Shares of Common Stock,
$0.01 Par Value Per Share, of Neose Technologies, Inc.
------------------------------------------------------

Ladies and Gentlemen:

We have acted as counsel to Neose Technologies, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of the subject Registration
Statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), to register up to 2,875,000 shares (the "Shares") of Common Stock, par
value $0.01 per share (the "Common Stock") to be sold in a public offering (the
"Offering"), which includes up to 375,000 shares of Common Stock subject to
an overallotment option, all of which shares are authorized but heretofore
unissued.

In rendering the opinion set forth below, we have reviewed (a) the Registration
Statement; (b) the Company"s Certificate of Incorporation, as amended, and the
Company"s By-laws, as amended, as in effect on the date hereof; (c) certain
records of the Company"s corporate proceedings as reflected in its minute and
stock books; (d) the Form of Underwriting Agreement filed as Exhibit 1.1 to the
Registration Statement (the "Underwriting Agreement"), to be executed by the
Company and Chase Securities Inc., as representatives of the underwriters for
the Offering (the "Underwriters"); and (e) such records, documents, statutes and
decisions as we have deemed relevant. 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 original of all documents submitted to
us as copies thereof.

<PAGE>

Neose Technologies, Inc.
March 15, 2000
Page 2

Based upon the foregoing, we are of the opinion that the Shares to be sold by
the Company as described in the Registration Statement, when and to the extent
purchased by the Underwriters in accordance with the Underwriting Agreement,
will be validly issued, fully paid and nonassessable.

We hereby consent to the use of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to this firm under the caption "Legal Matters."
In giving such opinion, we do not thereby admit that we are acting within the
category of persons whose consent is required under Section 7 of the Act or the
rules or regulations of the Securities and Exchange Commission promulgated
thereunder.

Very truly yours,

/s/ Morgan, Lewis & Bockius LLP

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 28, 2000
included in Neose Technologies, Inc.'s Form 10-K for the year ended December 31,
1999, and included herein and to all references to our Firm included in this
registration statement.

/s/ Arthur Andersen LLP

Philadelphia, PA

March 15, 2000