ENTREMED INC, S-1/A, 1996-05-17

ENTREMED INC
S-1/A, 1996-05-17
PHARMACEUTICAL PREPARATIONS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 1996

REGISTRATION NO. 333-3536

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

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

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ENTREMED, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8071 58-1959440
(State or other (Primary standard industrial (I.R.S. employer
jurisdiction of incorporation) classification code number) identification
number)
</TABLE>

9610 MEDICAL CENTER DRIVE, SUITE 200
ROCKVILLE, MARYLAND 20850
(301) 217-9858
(Address and telephone number of Registrant's principal executive offices)

JOHN W. HOLADAY, PH.D.
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ENTREMED, INC.
9610 MEDICAL CENTER DRIVE, SUITE 200
ROCKVILLE, MARYLAND 20850
(301) 217-9858
(Name, address and telephone number of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
JILL COHEN, ESQ. ROBERT H. WERBEL, ESQ.
Bachner, Tally, Polevoy & Misher LLP Werbel McMillin & Carnelutti,
380 Madison Avenue A Professional Corporation
New York, New York 10017 711 Fifth Avenue
(212) 687-7000 New York, New York 10022
(212) 832-8300
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please 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
registration statement for the same offering. / /

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

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Shares of Common Stock, $.01 par value...... 4,025,000 $16.00 $64,400,000 $22,207(3)
</TABLE>

(1) Includes 480,000 shares subject to the Underwriters' over-allotment option.

(2) Estimated solely for purposes of calculating the registration fee.

(3) Previously paid.

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

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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
ENTREMED, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM AND CAPTION LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside Front Cover page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Front and Outside Back Cover Pages
3. Summary Information and Risk Factors................. Prospectus Summary; Risk Factors; Financial
Statements
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Risk Factors; Underwriting
6. Dilution............................................. Risk Factors; Dilution
7. Selling Security Holders............................. *
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........... Outside Front Cover Page; Description of Capital
Stock
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information With Respect to the Registrant........... Prospectus Summary; Risk Factors; The Company;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal
Stockholders; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>

- ------------------------
* Not applicable.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED MAY 17, 1996

PROSPECTUS

3,200,000 SHARES

[LOGO]

COMMON STOCK
----------------

All of the shares of Common Stock, par value $.01 per share ("Common
Stock"), offered hereby are being sold by EntreMed, Inc. (the "Company" or
"EntreMed"). Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently anticipated that the initial public
offering price will be between $14.00 and $16.00 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company intends to make an application for quotation
of the Common Stock on the Nasdaq National Market under the symbol "ENMD."

Bristol-Myers Squibb Company, a party to a collaboration with the Company,
has agreed to purchase from the Company in a private placement on the closing of
this offering $5,000,000 of Common Stock at the initial public offering price
(333,333 shares, assuming an initial public offering price of $15.00 per share)
(the "BMS Shares").

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

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON PAGE 6.
---------------------

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

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share................................... $ $ $
Total (3)................................... $ $ $
</TABLE>

(1) The Company has agreed to reimburse the Representatives of the Underwriters
for certain expenses incurred in connection with the offering and to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses of the offering payable by the Company estimated
at $ , including reimbursement of expenses of the Underwriters of up
to $200,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
480,000 additional shares of Common Stock on the same terms and conditions
as set forth herein, solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the certificates representing such shares of Common
Stock will be made on or about , 1996 at the offices of Allen &
Company Incorporated, 711 Fifth Avenue, New York, New York 10022.
------------------------

ALLEN & COMPANY
INCORPORATED
DILLON, READ & CO. INC.

VOLPE, WELTY & COMPANY

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
ANGIOGENESIS AND CANCER

[PHOTO] [PHOTO]

TUMOR

ANGIOGENESIS

BLOOD VESSEL

Angiogenesis is the fundamental process by which new blood vessels are
formed. In these illustrations, cancer cells stimulate angiogenesis, which
provides the blood supply that nourishes the tumor and supports its growth.
EntreMed believes that antiangiogenic products, which inhibit the abnormal
growth of blood vessels, may have significant advantages over traditional
therapies for cancer. The Company is currently developing several angiogenesis
inhibitors.

All of the Company's product candidates are in the development stage and
require further research, development, testing and regulatory clearances.

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements audited by its independent certified
public accountants.
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, THE INFORMATION IN
THIS PROSPECTUS (I) DOES NOT GIVE EFFECT TO THE EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND (II) GIVES RETROACTIVE EFFECT TO A TWO-FOR-THREE
REVERSE STOCK SPLIT OF THE COMMON STOCK EFFECTED IN APRIL 1996 AND THE AUTOMATIC
CONVERSION OF THE 3,000,000 OUTSTANDING SHARES OF THE COMPANY'S PREFERRED STOCK
INTO 2,000,000 SHARES OF COMMON STOCK EFFECTIVE ON THE DATE OF THIS PROSPECTUS.
SEE "CAPITALIZATION," "DESCRIPTION OF CAPITAL STOCK" AND NOTE 13 OF NOTES TO
FINANCIAL STATEMENTS. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET
FORTH UNDER THE HEADING "RISK FACTORS."

THE COMPANY

EntreMed is engaged primarily in the research and development of
biopharmaceutical products that address the role of blood and blood vessels in
the prevention and treatment of a broad range of diseases. The Company's core
technologies include (i) an antiangiogenesis program focused on the development
of proprietary products intended to inhibit the abnormal growth of new blood
vessels associated with cancer and certain causes of blindness and (ii) a blood
cell permeation device designed to enhance the ability of red blood cells to
deliver oxygen to organs and tissues and which may also be used to deliver
drugs, genes or other therapeutic agents that otherwise would not readily
diffuse through blood cell membranes.

Angiogenesis is the fundamental process by which new blood vessels are
formed and primarily occurs during the first three months of embryonic
development. Except for wound healing and certain reproductive processes in
women, angiogenesis is otherwise generally associated with several diseases,
including cancer and certain causes of blindness. The Company believes that
antiangiogenic products, which inhibit the abnormal growth of blood vessels, may
have significant advantages over traditional therapies for these diseases. The
Company is currently developing several angiogenesis inhibitors, including
thalidomide and its chemical analogs and Angiostatin-TM-, a protein produced by
the body. The Company is also applying its expertise in the role of blood
function to the development of a blood cell permeation device designed to
enhance the oxygen releasing capabilities of red blood cells. Organs and tissues
in the body require oxygen to function properly and oxygen deficiency may lead
to tissue damage or death.

In December 1995, the Company and Bristol-Myers Squibb Company
("Bristol-Myers") entered into a collaboration to develop and commercialize
certain antiangiogenesis therapeutics. This collaboration provides for
Bristol-Myers to fund Company research, provide milestone payments to the
Company and pay the Company royalties on net sales of any products developed
under the collaboration. In addition, Bristol-Myers made a $6,500,000 equity
investment in the Company and agreed to make an additional $5,000,000 equity
investment at the closing of this offering. In return, the Company granted
Bristol-Myers exclusive worldwide rights to antiangiogenic applications of
thalidomide, thalidomide analogs and Angiostatin-TM- protein.

The Company's product candidates have been developed primarily through
sponsored research collaborations and licensing agreements. The principal
antiangiogenesis therapeutics currently under development by the Company were
licensed from Children's Hospital at Harvard Medical School where the Company
sponsors research under the direction of Dr. M. Judah Folkman. The flow
electroporation technology used in the cell permeation device was licensed from
the Center for Blood Research Laboratories at Harvard Medical School. The
Company's sponsored research programs are augmented by its internal capabilities
in the fields of the vasculature system, blood vessel growth and blood function.

3
<PAGE>
To date, the Company and its collaborators have:

-Initiated Phase II clinical trials to evaluate the antiangiogenic effects
of thalidomide in inhibiting the progression of breast cancer, prostate
cancer and Kaposi's sarcoma.

-Initiated Phase II clinical trials to evaluate the antiangiogenic effects
of thalidomide in inhibiting the progression of age-related macular
degeneration, a major cause of blindness.

-Isolated, identified, sequenced, cloned and recombinantly expressed
Angiostatin-TM- protein. In preclinical studies, Angiostatin-TM- protein
appeared to inhibit vascularization and growth of primary and metastatic
tumors.

-Constructed a prototype device designed to introduce inositol hexaphosphate
("IHP") molecules into red blood cells, which may enhance the delivery of
oxygen to organs and tissues in the body.

The Company's strategy is to accelerate development of its antiangiogenesis
and cell permeation technologies as well as other promising technologies which
the Company perceives to have clinical and commercial potential. The principal
elements of the Company's strategy are (i) to focus its resources on current
core technologies, (ii) to broaden its product and technology portfolio through
sponsored research collaborations with academic institutions, government
organizations and private enterprises, (iii) to augment product development with
its in-house research and development capabilities and (iv) to leverage its
resources through corporate partnerships in order to minimize the cost to the
Company of late-stage clinical trials and to accelerate effective product
commercialization. All of the Company's product candidates are in the
development stage and require further research, development, testing and
regulatory clearances.

The Company was incorporated in Delaware in September 1991. The Company's
executive offices are located at 9610 Medical Center Drive, Suite 200,
Rockville, Maryland 20850 and its telephone number is (301) 217-9858.
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered hereby.................. 3,200,000 shares
Common Stock to be outstanding after the
offering.................................... 11,993,912 shares (1)
Use of Proceeds.............................. For research and development, working capital
and general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol....... ENMD
Risk Factors................................. The Common Stock offered hereby involves a
high degree of risk. See "Risk Factors."
</TABLE>

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

(1) Includes (i) 333,333 shares (assuming an initial public offering price of
$15.00 per share) to be sold to Bristol-Myers in a private placement on the
closing of this offering at the initial public offering price and (ii)
2,000,000 shares of Common Stock issuable upon the automatic conversion of
all outstanding shares of Preferred Stock, $1.00 par value (the "Preferred
Stock") on the date of this Prospectus. Excludes (i) 2,381,688 shares of
Common Stock issuable upon exercise of outstanding options and warrants at a
weighted average exercise price of $4.92 per share and 444,444 shares of
Common Stock issuable upon exercise of warrants issued to Bristol-Myers
exercisable at $22.50 per share (assuming an initial public offering price
of $15.00 per share) and (ii) an additional 642,969 shares reserved for
issuance under the Company's stock option plans. See "Capitalization,"
"Business -- Collaborations and License Agreements," "Management -- Stock
Options" and "Description of Capital Stock."

4
<PAGE>
SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
SEPTEMBER 18, 31,
1991 (DATE OF YEAR ENDED DECEMBER 31, (UNAUDITED)
INCEPTION) TO -------------------------------------------------- ------------------------
DECEMBER 31, 1991 1992 1993 1994 1995 1995 1996
----------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues (1):
Grant revenues............ $ -- $ -- $ -- $ 90,185 $ 347,001 $ -- $ --
Collaborative research and
development.............. -- -- -- -- 347,501 -- 1,042,500
License fees.............. -- -- -- -- 16,667 -- 50,000
----------------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues.............. -- -- -- 90,185 711,169 -- 1,092,500
Expenses:
Research and development.. -- 645,752 4,772,652 3,673,929 5,939,512 1,596,677 2,063,270
General and
administrative........... 23,873 812,198 1,552,143 1,549,705 2,458,976 455,342 771,411
Interest expense.......... -- -- -- -- 65,754 -- 9,547
Interest income........... -- (56,383) (85,939) (18,993) (44,854) (5,559) (76,321)
----------------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss.................... $ (23,873) $(1,401,567) $(6,238,856) $(5,114,456) $(7,708,219) $(2,046,460) $(1,675,407)
----------------- ----------- ----------- ----------- ----------- ----------- -----------
----------------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss per share.......... $ (0.01) $ (0.32) $ (1.04) $ (0.76) $ (1.06) $ (0.29) $ (0.23)
----------------- ----------- ----------- ----------- ----------- ----------- -----------
----------------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted average number of
shares outstanding......... 3,001,153 4,331,153 5,982,052 6,713,929 7,271,943 7,152,183 7,312,035
----------------- ----------- ----------- ----------- ----------- ----------- -----------
----------------- ----------- ----------- ----------- ----------- ----------- -----------
Pro forma net loss per share
(3)........................ $ (0.83) $ (0.18)
----------- -----------
----------- -----------
Pro forma weighted average
number of shares
outstanding (3)............ 9,271,943 9,312,035
----------- -----------
----------- -----------
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------
ACTUAL AS ADJUSTED (2)
--------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 7,600,058 $ 56,000,058
Working capital................................................................ 3,727,118 52,127,118
Total assets................................................................... 8,606,849 57,006,849
Deferred revenue, less current portion......................................... 2,566,667 2,566,667
Accumulated deficit............................................................ (22,162,378) (22,162,378)
Total stockholders' equity..................................................... 2,051,853 50,451,853
</TABLE>

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(1) With the exception of license fees and research funding under the
Bristol-Myers collaboration and research grants, the Company has not derived
any revenues from operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

(2) Adjusted to give effect to the sale at an assumed initial public offering
price of $15.00 of (i) the Common Stock offered hereby and (ii) 333,333
shares of Common Stock by the Company to Bristol-Myers in a private
placement at the closing of this offering, and the receipt of the estimated
net proceeds therefrom.

(3) Pro forma net loss per share and weighted average shares outstanding for the
year ended December 31, 1995 and the three month period ended March 31, 1996
give effect to the automatic conversion of 3,000,000 outstanding shares of
Preferred Stock into 2,000,000 shares of Common Stock upon the date of this
Prospectus.

5
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE SHARES BEING OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IN
EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT THE STATEMENTS IN THIS PROSPECTUS THAT
ARE NOT DESCRIPTIONS OF HISTORICAL FACTS MAY BE FORWARD LOOKING STATEMENTS THAT
ARE SUBJECT TO RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE CURRENTLY ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING THOSE
IDENTIFIED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

HISTORY OF LOSSES; ACCUMULATED DEFICIT AND ANTICIPATED FUTURE LOSSES. To
date, the Company has been engaged primarily in research and development
activities and, with the exception of license fees and research and development
funding under the collaboration with Bristol-Myers (the "Bristol-Myers
Collaboration") and research grants, has not derived any revenues from
operations. At March 31, 1996, the Company had an accumulated deficit of
approximately $22,162,000 and significant losses are expected to continue for
the foreseeable future. The Company will be required to conduct substantial
research and development and clinical testing activities for all of its proposed
products, which activities are expected to result in operating losses for the
foreseeable future, particularly due to the extended time period before the
Company expects to commercialize any products, if ever. In addition, to the
extent the Company relies upon others for development and commercialization
activities, the Company's ability to achieve profitability will be dependent
upon the success of such third parties. There can be no assurance that the
Company will be able to generate revenues from operations or achieve
profitability on a sustained basis, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

EARLY STAGE AND UNCERTAINTY OF PRODUCT DEVELOPMENT. The Company's proposed
products and research programs are in the early developmental stage and require
significant time-consuming and costly research and development, testing and
regulatory clearances. Accordingly, the Company does not expect any of its
product candidates to be commercially available for several years, if ever. The
successful development of any product is subject to the risks of failure
inherent in the development of products or therapeutic procedures based on
innovative technologies. These risks include the possibilities that any or all
of these proposed products or procedures are found to be ineffective or toxic,
or otherwise fail to receive necessary regulatory clearances; that the proposed
products or procedures are uneconomical to manufacture or market or do not
achieve broad market acceptance; that third parties hold proprietary rights that
preclude the Company from marketing them; or that third parties market a
superior or equivalent product. The failure of the Company's research and
development activities to result in any commercially viable products would
materially adversely affect the Company's future prospects.

UNCERTAINTIES RELATED TO CLINICAL TRIALS. The Company has limited
experience in conducting clinical trials and intends to rely primarily on
Bristol-Myers or other pharmaceutical companies with which it may collaborate in
the future for clinical development and regulatory approval of its product
candidates. Before obtaining regulatory approvals for the commercial sale of its
products, the Company or its collaborative partners will be required to
demonstrate through preclinical studies and clinical trials that the proposed
products are safe and effective for use in each target indication. The results
from preclinical studies and early clinical trials may not be predictive of
results that will be obtained in large-scale testing, and there can be no
assurance that the clinical trials conducted by the Company or its partners will
demonstrate sufficient safety and efficacy to obtain the required regulatory
approvals or will result in marketable products. One of the Company's potential
products, thalidomide, is believed to have caused severe birth defects in
children during the late 1950s and early 1960s. Although the Company believes
that the characteristics of thalidomide that may have affected fetal development
and caused birth defects by blocking new blood vessel growth may make

6
<PAGE>

thalidomide useful in the prevention and treatment of angiogenic disorders,
there can be no assurance that clinical trials with the drug will demonstrate
its safety and efficacy or that the drug will not be associated with other
characteristics that prevent or limit its commercial use.

In addition, clinical trials are often conducted with patients having the
most advanced stages of disease. During the course of treatment, these patients
can die or suffer other adverse medical effects for reasons that may not be
related to the pharmaceutical agent being tested, but which can nevertheless
affect clinical trial results. Various companies in the pharmaceutical industry
have suffered significant setbacks in advanced clinical trials, even after
attaining promising results in earlier trials. Clinical trials for the product
candidates being developed by the Company and its collaborators may be delayed
by many factors. Any delays in, or termination of, the clinical trials of any of
the Company's product candidates, or the failure of any clinical trials to meet
applicable regulatory standards, could have a material adverse effect on the
Company's business, financial condition and results of operations.

DEPENDENCE ON BRISTOL-MYERS AND OTHER COLLABORATIVE PARTNERS AND
LICENSEES. The Company does not intend to conduct late-stage clinical trials,
or manufacture or market any of its product candidates in the foreseeable
future. The Company has granted Bristol-Myers the right to conduct development,
manufacturing, commercialization and marketing activities relating to certain of
the Company's antiangiogenesis technologies. Accordingly, the Company is
substantially dependent on Bristol-Myers for the development, funding and
commercial success of any of these product candidates. In addition, payments
from Bristol-Myers may constitute a substantial portion of the Company's
revenues for the next several years. The Bristol-Myers Collaboration may be
terminated for any reason by Bristol-Myers on six months' notice, in which event
Bristol-Myers would have no further funding obligation to the Company. In the
event Bristol-Myers were to terminate its agreement with the Company or
otherwise fail to conduct its collaborative activities successfully and in a
timely manner, the preclinical and clinical development or commercialization of
the licensed antiangiogenesis product candidates would be delayed or terminated.
Any such delay or termination could have a material adverse effect on the
Company's business, financial condition and results of operations. The success
of the Bristol-Myers Collaboration will depend in part upon Bristol-Myers' own
competitive, marketing and strategic considerations, including the relative
advantages of alternative products being developed and marketed by Bristol-Myers
and its competitors. In addition, if Bristol-Myers is unsuccessful in
commercializing any product candidates, the Company's business, financial
condition and results of operations would be materially adversely affected.
Bristol-Myers has agreed, as soon as reasonably practicable, to sublicense to a
third party ophthalmological applications of thalidomide and its analogs, unless
Bristol-Myers reasonably believes that the dosage or method of administration
will not be significantly different from oncological indications. Any failure or
delay by Bristol-Myers to enter into such a sublicense may substantially limit
or preclude the commercial development of these applications.

The Company intends to enter into additional corporate alliances to develop
and commercialize products based upon its cell permeation technology and any
other technologies that may be acquired or developed by the Company. The Company
expects to grant to its collaborative partners rights to commercialize any
products developed under these collaborative agreements, and the Company may
rely on its collaborative partners to conduct research and development efforts
and clinical trials on, obtain regulatory approvals for, and manufacture and
market any products licensed to these partners. The amount and timing of
resources devoted to these activities generally will be controlled by each such
individual partner. Because the Company generally expects to retain only a
royalty interest in sales or a percentage of profits of products licensed to
third parties, its revenues may be less than if it retained all
commercialization rights and marketed products directly. In addition, there can
be no assurance that the corporate partners will not pursue alternative
technologies or develop competitive products as a means for developing
treatments for the diseases targeted by the Company's programs.

7
<PAGE>
There can be no assurance that the Company will be successful in
establishing any additional collaborative arrangements, that products will be
successfully commercialized under any collaborative arrangement or that the
Company will derive any revenues from such arrangements. In addition, the
Company's strategy involves entering into multiple, concurrent strategic
alliances to pursue commercialization of its core technologies. There can be no
assurance that the Company will be able to manage simultaneous programs
successfully. With respect to existing and potential future strategic alliances
and collaborative arrangements, the Company will be dependent upon the expertise
and dedication of sufficient resources by these outside parties to develop,
manufacture or market products. Should a strategic alliance or collaborative
partner fail to develop or commercialize a product to which it has rights, the
Company's business, financial condition and results of operations could be
materially and adversely affected.

FUTURE CAPITAL NEEDS AND COMMITMENTS; UNCERTAINTY OF ADDITIONAL
FUNDING. The Company has incurred negative cash flows since inception and has
expended, and expects to continue to expend, substantial funds to continue its
research and development programs. The Company anticipates that its existing
resources, together with the net proceeds of this offering and the proceeds from
the sale of the BMS Shares and committed funding from Bristol-Myers, will be
sufficient to fund the Company's operating expenses and capital requirements for
approximately 24 months from the date of this Prospectus, although there can be
no assurance that the Company will not require additional funds prior to such
time. There can be no assurance that the results of research and development
activities, progress of preclinical studies or clinical trials, changes in or
terminations of relationships with strategic partners, changes in the focus,
direction or costs of the Company's research and development programs,
competitive and technological advances, the regulatory approval process or other
factors will not result in the expenditure of the Company's resources before
such time. The Company will require substantial funds in addition to the
proceeds of this offering to conduct research and development activities,
preclinical studies and clinical trials, apply for regulatory approvals and
commercialize any potential products, to the extent the Company engages directly
in such activities.

The Company is a party to sponsored research agreements requiring it to fund
an aggregate of approximately $6,492,000 through 1999 (including $6,000,000 to
Children's Hospital at Harvard Medical School ("Children's Hospital")) and has
recently agreed to preliminary terms regarding a proposed transaction that, if
consummated, would require the Company to fund additional sponsored research and
an equity investment in the approximate aggregate amount of $1,850,000 over the
next two years. Pursuant to the terms of certain license agreements, the Company
is also obligated to exercise diligence in bringing potential products to market
and to make certain milestone payments that, in some instances, are substantial.
The Company's failure to make any required sponsored research or milestone
payment could result in the termination of the relevant sponsored research or
license agreement, which could have a material adverse effect on the Company.

The Company may seek additional funding through collaborative arrangements
and public or private financings, including equity financings. There can be no
assurance that such collaborative arrangements or that additional financing will
be available on acceptable terms or at all. If additional funds are raised by
issuing equity securities, further dilution to stockholders may result. If
adequate funds are not available, the Company may be required to delay, reduce
the scope of or eliminate one or more of its research and development programs
or forfeit its rights to future technologies; to obtain funds through
arrangements with collaborative partners or others that may require the Company
to relinquish rights to certain of its technologies, product candidates or
products that the Company would otherwise seek to develop or commercialize
itself; or to license the rights to such products on terms that are not
favorable to the Company. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business --
Collaborations and License Agreements."

8
<PAGE>
UNCERTAINTY OF GOVERNMENT REGULATORY REQUIREMENTS; LENGTHY APPROVAL
PROCESS. The Company's research, development, preclinical and clinical trials,
manufacturing and marketing of most of its product candidates are subject to an
extensive regulatory approval process by the United States Food and Drug
Administration (the "FDA") and other regulatory agencies in the United States
and abroad. The process of obtaining FDA and other required regulatory approvals
for drug and biologic products, including required preclinical and clinical
testing, is lengthy, expensive and uncertain. There can be no assurance that,
even after such time and expenditures, the Company will be able to obtain
necessary regulatory approvals for clinical testing or for the manufacturing or
marketing of any products. The Company or its collaborators may encounter
significant delays or excessive costs in their efforts to secure necessary
approvals or licenses. Even if regulatory clearance is obtained, a marketed
product is subject to continual review, and later discovery of previously
unknown defects or failure to comply with the applicable regulatory requirements
may result in restrictions on a product's marketing or withdrawal of the product
from the market as well as possible civil or criminal sanctions. See "Business
- -- Government Regulation."

COMPETITION; RISK OF TECHNOLOGICAL OBSOLESCENCE. The pharmaceutical,
biotechnology and bio-

pharmaceutical industries are intensely competitive and competition from other
companies and other research and academic institutions is expected to increase.
Many of these companies have substantially greater financial and other resources
and research and development capabilities than the Company and have
substantially greater experience in undertaking preclinical and clinical testing
of products, obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products. The Company is aware of other companies engaged in the
development of thalidomide for various disease indications, including Celgene
Corporation and Andrulis Pharmaceuticals, and a number of other companies and
academic institutions are pursuing angiogenesis research and are testing other
angiogenesis inhibitors. The Company's blood oxygen enhancement product
candidate will also compete for certain applications with numerous other
available therapeutics and with blood and blood substitute products in
development by others. In addition to competing with universities and other
research institutions in the development of products, technologies and
processes, the Company may compete with other companies in acquiring rights to
products or technologies from universities.

Moreover, the pharmaceutical, biotechnology and biopharmaceutical industries
are rapidly evolving fields in which developments are expected to continue at a
rapid pace. There can be no assurance that the Company will develop products
that are more effective or achieve greater market acceptance than competitive
products, or that the Company's competitors will not succeed in developing
products and technologies that are more effective than those being developed by
the Company or that would render the Company's products and technologies less
competitive or obsolete. See "Business -- Competition."

DEPENDENCE ON PATENTS AND OTHER PROPRIETARY RIGHTS; UNCERTAINTY OF PATENT
POSITION AND PROPRIETARY RIGHTS. The Company's success will depend in part on
its ability to obtain patent protection for its products, both in the United
States and abroad. The patent position of biotechnology and pharmaceutical
companies in general is highly uncertain and involves complex legal and factual
questions. Although the Company has filed a number of patent applications
related to the Company's technologies in the United States, and foreign
counterparts of certain of these patent applications have been filed in other
countries, no patents have been granted to date. There can be no assurance that
any patents will be granted or that patents issued to the Company will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide proprietary protection to the Company. Furthermore, there can be no
assurance that others will not independently develop similar products or, if
patents are issued to the Company or its collaborators, will not design around
such patents.

9
<PAGE>
Furthermore, the enactment of the legislation implementing the General
Agreement on Trade and Tariffs has resulted in certain changes to United States
patent laws that became effective on June 8, 1995. Most notably, the term of
patent protection for patent applications filed on or after June 8, 1995 is no
longer a period of seventeen years from the date of grant. The new term of a
United States patent will commence on the date of issuance and terminate twenty
years from the earliest effective filing date of the application. Because the
time from filing to issuance of biotechnology patent application is often more
than three years, a twenty-year term from the effective date of filing may
result in a substantially shortened term of patent protection, which may
adversely impact the Company's patent position. If this change results in a
shorter period of patent coverage, the Company's business could be adversely
affected to the extent that the duration and level of the royalties it is
entitled to receive from a collaborative partner is based on the existence of a
valid patent.

The Company's potential products may conflict with patents which have been
or may be granted to competitors, universities or others. As the biotechnology
industry expands and more patents are issued, the risk increases that the
Company's potential products may give rise to claims that they infringe the
patents of others. Such other persons could bring legal actions against the
Company claiming damages and seeking to enjoin clinical testing, manufacturing
and marketing of the affected products. Any such litigation could result in
substantial cost to the Company and diversion of effort by the Company's
management and technical personnel. If any such actions are successful, in
addition to any potential liability for damages, the Company could be required
to obtain a license in order to continue to manufacture or market the affected
products. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms, if at all. Failure to obtain needed patents,
licenses or proprietary information held by others may have a material adverse
effect on the Company's business. In addition, if the Company becomes involved
in litigation, it could consume a substantial portion of the Company's time and
resources.

Composition of matter patent protection is not available for thalidomide.
The Company is aware of at least two other issued patents covering certain
non-antiangiogenic uses of thalidomide. Although the Company believes that the
claims in such patents will not interfere with the Company's proposed use of
thalidomide, there can be no assurance that the holders of such patents will not
be able to exclude the Company from using thalidomide for other
non-antiangiogenic uses of thalidomide.

The Company also relies on trade secret protection for its confidential and
proprietary information. However, trade secrets are difficult to protect and
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology, or that
the Company can meaningfully protect its rights to unpatented trade secrets. The
Company requires its employees, consultants and advisors to execute a
confidentiality agreement upon the commencement of an employment or consulting
relationship with the Company. The agreements generally provide that all trade
secrets and inventions conceived by the individual and all confidential
information developed or made known to the individual during the term of the
relationship shall be the exclusive property of the Company and shall be kept
confidential and not disclosed to third parties except in specified
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection for the Company's proprietary information in the
event of unauthorized use or disclosure of such information.

To the extent that consultants, key employees or other third parties apply
technological information independently developed by them or by others to the
Company's proposed projects, disputes may arise as to the proprietary rights to
such information which may not be resolved in favor of the Company. Certain of
the Company's consultants are employed by or have consulting agreements with
third parties and any inventions discovered by such individuals generally will
not become property of the Company. See "Business -- Patents and Proprietary
Rights."

10
<PAGE>

DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS. The Company is dependent on
certain of its executive officers and scientific personnel, including John W.
Holaday, Ph.D., the Company's Chairman, President and Chief Executive Officer,
and Carol Nacy, Ph.D., the Company's Executive Vice President. The Company has
obtained key person life insurance policies on the lives of Drs. Holaday and
Nacy and, in April 1996 effective January 1, 1996, entered into a three-year
employment agreement with Dr. Holaday. Competition for qualified employees among
pharmaceutical and biotechnology companies is intense, and the loss of certain
of such persons, or an inability to attract, retain and motivate additional
highly skilled scientific, technical and management personnel, could materially
adversely affect the Company's business and prospects. There can be no assurance
that the Company will be able to retain its existing personnel or attract and
retain additional qualified employees.

The Company may also be dependent, in part, upon the continued contributions
of the lead investigators of the Company's sponsored research programs. The
Company's scientific consultants and collaborators may have commitments to or
consulting or advisory agreements with other entities that may affect their
ability to contribute to the Company or may be competitive with the Company.
Inventions or processes discovered by such persons will not necessarily become
the property of the Company, but may remain the property of such persons or of
such persons' full-time employers. See "Management."

RISK OF PRODUCT LIABILITY; AVAILABILITY OF INSURANCE. The use of the
Company's potential products in clinical trials and the marketing of any
pharmaceutical products may expose the Company to product liability claims. The
Company has obtained a level of liability insurance coverage that it deems
appropriate for its current stage of development. However, there can be no
assurance that the Company's present insurance coverage is adequate. Such
existing coverage will not be adequate as the Company further develops products,
and no assurance can be given that in the future adequate insurance coverage or
indemnification by collaborative partners will be available in sufficient
amounts or at a reasonable cost. A successful product liability claim could have
a material adverse effect on the business and financial condition of the
Company.

UNCERTAINTY RELATED TO HEALTH CARE REIMBURSEMENT AND REFORM MEASURES. The
Company's success may depend, in part, on the extent to which reimbursement for
the costs of therapeutic products and related treatments will be available from
third-party payors such as government health administration authorities, private
health insurers, managed care programs and other organizations. Over the past
decade, the cost of health care has risen significantly, and there have been
numerous proposals by legislators, regulators and third-party health care payors
to curb these costs. Some of these proposals have involved limitations on the
amount of reimbursement for certain products. There can be no assurance that
similar federal or state health care legislation will not be adopted in the
future or that any products sought to be commercialized by the Company or its
collaborators will be considered cost-effective or that adequate third-party
insurance coverage will be available for the Company to establish and maintain
price levels sufficient for realization of an appropriate return on its
investment in product development. Moreover, the existence or threat of cost
control measures could have an adverse effect on the willingness or ability of
Bristol-Myers or other potential collaborators to pursue research and
development programs related to the Company's product candidates.

HAZARDOUS MATERIALS. The Company's research and development involves the
controlled use of hazardous, controlled and radioactive materials. The Company
is subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by such
laws and regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident, the
Company could be held liable for any damages that result and any such liability
could have a material adverse effect on of the Company. See "Business --
Government Regulation."

11
<PAGE>
NO MANUFACTURING OR MARKETING CAPACITY. The Company does not generally
expect to engage directly in manufacturing or marketing of products in the near
term, but may elect to do so in certain cases. The Company does not currently
have the capacity to manufacture or market products or any experience in such
activities. If the Company elects to perform these functions, the Company will
be required to either develop these capacities, or contract with others to
perform some or all of these tasks. The Company may be dependent to a
significant extent on corporate partners, licensees or other entities for
manufacturing and marketing of products. If the Company engages directly in
manufacturing or marketing, the Company will require substantial additional
funds and personnel and will be required to comply with extensive regulations
applicable to such a facility. There can be no assurance that the Company will
be able to develop or contract for these capacities when required in connection
with the Company's business. See "Business -- Manufacturing and Marketing."

ABSENCE OF PRIOR TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior
to this offering, there has been no public market for the Common Stock, and
there is no assurance that an active market will develop or be sustained after
this offering. The initial public offering price will be determined by
negotiation between the Company and the Representatives of the Underwriters and
may bear no relationship to the price at which the Common Stock will trade after
completion of this offering. See "Underwriting" for factors to be considered in
determining such offering price. The market price of the shares of Common Stock,
like that of the common stock of many other early-stage biopharmaceutical
companies, is likely to be highly volatile. Factors such as the results of
preclinical studies and clinical trials by the Company or its competitors, other
evidence of the safety or efficacy of product candidates of the Company or its
competitors, announcements of technological innovations or new commercial
therapeutic products by the Company or its competitors, governmental regulation,
changes in reimbursement policies, healthcare legislation, developments in
patent or other proprietary rights, developments in the Company's relationships
with future collaborative partners, if any, public concern as to the safety and
efficacy of drugs developed by the Company, fluctuations in the Company's
operating results, and general market conditions may have a significant impact
on the market price of the Common Stock.

FUTURE SALES OF COMMON STOCK; REGISTRATION RIGHTS. Future sales of shares
of Common Stock by existing stockholders pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), through the exercise
of outstanding registration rights or through the sale of shares of Common Stock
issuable upon exercise of options, warrants or otherwise, could have an adverse
effect on the price of the Company's Common Stock. In addition to the 3,200,000
shares of Common Stock offered hereby, approximately 3,424,290 shares of Common
Stock will be eligible for immediate resale in the public market and, subject to
compliance with Rule 144 under the Securities Act, approximately 2,925,714
shares of Common Stock will be eligible for sale in the public market beginning
90 days from the date of this Prospectus. An additional 855,930 shares of Common
Stock issuable upon the exercise of vested options and warrants will also become
eligible for sale in the public market pursuant to Rule 701 and Rule 144 under
the Securities Act beginning 90 days from the date of this Prospectus. The
Securities and Exchange Commission has recently proposed an amendment to the
holding period requirements of Rule 144 to permit resales of restricted
securities after a one-year holding period rather than a two-year holding
period, and to permit unrestricted resales by non-affiliates after a two-year
holding period rather than a three-year holding period. The Underwriters have
requested that the holders of all outstanding shares of Common Stock and options
and warrants agree not to sell or transfer any of their shares for a period of
180 days from the date of this Prospectus without the prior written consent of
Allen & Company Incorporated, on behalf of the Underwriters. Additionally,
beginning one year from the date of this Prospectus, Bristol-Myers is entitled
to certain registration rights with respect to 874,999 shares of Common Stock
and warrants to purchase 444,444 shares of Common Stock (which amounts include
333,333 shares to be purchased upon the closing of this offering and assume an
initial public offering price of $15.00 per share) and, beginning 13 months from
the date of this Prospectus, holders of 1,157,344 shares of Common Stock and
211,315 warrants

12
<PAGE>
to purchase Common Stock will have registration rights with respect to shares
owned by them. In addition, the Company intends to file a Form S-8 to register
an aggregate of 1,750,000 shares subject to outstanding options or reserved for
issuance pursuant to the Company's stock option plans. See "Description of
Capital Stock -- Registration Rights" and "Shares Eligible for Future Sale."

DILUTION. Investors purchasing shares of Common Stock in this offering will
incur immediate and substantial net tangible book value dilution of
approximately $10.80 per share, or 72%, assuming an initial public offering
price of $15.00 per share. This dilution will be increased to the extent that
holders of outstanding options and warrants to purchase Common Stock at prices
below the initial public offering price exercise such securities. See
"Dilution."

CONTROL OF COMPANY; POTENTIAL ANTI-TAKEOVER PROVISIONS. Upon the completion
of this offering and the sale of the BMS Shares by the Company, the officers and
directors of the Company will own or control approximately 26% of the
outstanding shares of Common Stock of the Company (25% if the Underwriters'
over-allotment option is exercised in full). As a result, such individuals will
generally be able to influence significantly the outcome of corporate
transactions or other matters submitted for stockholder approval. Such influence
by principal stockholders could preclude any unsolicited acquisition of the
Company and consequently adversely affect the market price of the Common Stock.
In addition, the Company's Board of Directors is authorized to issue from time
to time, without stockholder authorization, additional shares of preferred stock
with such terms and conditions as the Board of Directors may determine in its
sole discretion. The Company is also subject to a Delaware statute regulating
business combinations. Any of these provisions could discourage, hinder or
preclude an unsolicited acquisition of the Company and could make it less likely
that stockholders receive a premium for their shares as a result of any such
attempt. See "Management," "Principal Stockholders" and "Description of Capital
Stock."

OUTSTANDING OPTIONS AND WARRANTS. The Company has outstanding options and
warrants to purchase an aggregate of 2,381,688 shares of Common Stock at a
weighted average exercise price of $4.92 per share and warrants issued to
Bristol-Myers to purchase an additional 444,444 shares of Common Stock
exercisable at $22.50 per share (assuming an initial public offering price of
$15.00 per share). Holders of such options and warrants are likely to exercise
them when, in all likelihood, the Company could obtain additional capital on
terms more favorable than those provided by the options and warrants. In
addition, the exercise of such options and warrants will result in dilution to
the interests of the stockholders of the Company to the extent that the exercise
price is less than the fair market value of the Common Stock. See "Management --
Stock Options" and "Description of Capital Stock."

ABSENCE OF DIVIDENDS. The Company has never paid any cash dividends on its
Common Stock and does not intend to pay cash dividends in the foreseeable
future. The Company currently intends to retain all earnings, if any, for the
development of its business.

13
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,200,000 shares of
Common Stock offered hereby, at an assumed initial public offering price of
$15.00 per share and after deducting the estimated underwriting discounts and
expenses payable by the Company, are estimated to be approximately $43,400,000
($50,060,000 if the Underwriters' over-allotment option is exercised in full).
In addition, the net proceeds to the Company from the sale of the BMS Shares by
the Company will be $5,000,000.

The Company currently intends to use approximately $34,000,000 of the net
proceeds of this offering and the sale of the BMS Shares for research and
development activities, of which approximately $16,000,000 is expected to be
allocated to its antiangiogenesis program, including funding sponsored and
internal early-stage research, approximately $11,000,000 is expected to be
allocated to its cell permeation technology, including the evaluation of the
technology for a variety of disease indications and therapeutic agents, and
approximately $7,000,000 is expected to be allocated to other research and
development programs, of which approximately $2,000,000 is expected to be
allocated to sponsored research on cellular immunity (in connection with a
proposed acquisition) and approximately $5,000,000 is expected to be allocated
to sponsored research or acquisitions of new technologies, businesses or product
candidates. Although the Company in the ordinary course of its business
investigates, evaluates and discusses with others such potential acquisitions,
except as described herein, the Company has no agreements or arrangements with
respect to such acquisitions. The remainder of the net proceeds of this offering
and the sale of the BMS Shares is expected to be used for working capital and
general corporate purposes, a portion of which may be used to establish a new
facility. However, the Company has not yet identified any potential new facility
for lease or site for building, and expects to seek debt financing to fund a
portion of such cost if it determines to build a facility.

The amounts, timing and allocation of such expenditures may vary
significantly depending upon numerous factors, including the progress of the
Company's research and development programs (which may vary as product
candidates are added or abandoned), preclinical testing and clinical trials,
achievement of regulatory milestones, the Company's corporate partners
fulfilling their obligations to the Company, the timing and cost of seeking
regulatory approvals, the level of resources that the Company devotes to the
development of manufacturing, marketing and sales capabilities, if any,
technological advances, the status of competitors, the ability of the Company to
maintain existing and establish new collaborative arrangements with other
companies to provide funding to the Company to support these activities and
other factors.

Pending such uses, the net proceeds from this offering and the sale of the
BMS Shares will be temporarily invested by the Company in short-term, interest
bearing, investment grade securities.

DIVIDEND POLICY

The Company has never paid cash dividends on its capital stock and does not
intend to pay cash dividends in the foreseeable future. The Company currently
intends to retain all earnings, if any, for the development of its business.

14
<PAGE>
CAPITALIZATION

The following table sets forth as of March 31, 1996 (a) the actual
capitalization of the Company (after giving retroactive effect to a
two-for-three reverse stock split of the Common Stock effected in April 1996);
(b) the pro forma capitalization of the Company after giving effect to the
automatic conversion of 3,000,000 outstanding shares of Preferred Stock into
2,000,000 shares of Common Stock on the date of this Prospectus; and (c) the
capitalization as adjusted to reflect the sale by the Company of the 3,200,000
shares of Common Stock offered hereby and the sale of the BMS Shares at an
assumed initial public offering price of $15.00 per share and the receipt of the
estimated net proceeds therefrom. This table should be read in conjunction with
the Financial Statements and the Notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
ACTUAL PRO FORMA AS ADJUSTED
--------------- --------------- ---------------
<S> <C> <C> <C>
Stockholders' Equity (1):
Preferred Stock, $1.00 par value; 8,000,000 authorized;
3,000,000 issued and outstanding actual, no shares issued
and outstanding pro forma and as adjusted.................. 3,000,000 -- --
Common Stock, $.01 par value; 27,000,000 shares authorized;
6,460,579 shares issued and outstanding actual; 8,460,579
shares issued and outstanding pro forma; and 11,993,912
shares issued and outstanding as adjusted.................. 64,606 84,606 119,939
Additional paid-in capital.................................. 21,149,625 24,129,625 72,494,292
Accumulated deficit......................................... (22,162,378) (22,162,378) (22,162,378)
--------------- --------------- ---------------
Total stockholders' equity................................ 2,051,853 2,051,853 50,451,853
--------------- --------------- ---------------
Total capitalization.......................................... $ 2,051,853 $ 2,051,853 $ 50,451,853
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

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

(1) Does not include (i) 2,381,688 shares of Common Stock issuable upon exercise
of outstanding options and warrants at a weighted average exercise price of
$4.92 per share and 444,444 shares of Common Stock issuable upon exercise of
warrants issued to Bristol-Myers exercisable at $22.50 per share (assuming
an initial public offering price of $15.00 per share) and (ii) an additional
642,969 shares reserved for issuance under the Company's stock option plans.
See "Management -- Stock Options" and "Description of Capital Stock."

15
<PAGE>
DILUTION

The pro forma net tangible book value of the Company at March 31, 1996,
after giving effect to the conversion of the Preferred Stock on the date of this
Prospectus, was $2,005,755, or approximately $0.24 per share. Net tangible book
value per share is equal to the Company's total tangible assets less its total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the sale of the 3,200,000 shares of Common Stock in this
offering and the sale of the BMS Shares at an assumed initial public offering
price of $15.00 per share and receipt of the estimated net proceeds therefrom,
the pro forma net tangible book value at March 31, 1996 would have been
$50,405,755 or $4.20 per share. This represents an immediate increase in such
net tangible book value of $3.96 per share to existing stockholders and an
immediate dilution in net tangible book value of $10.80 per share to new
investors purchasing shares in this offering. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $ 15.00
Pro forma net tangible book value per share at December 31,
1995............................................................. $ 0.24
Increase per share attributable to new investors.................. 3.96
---------
Pro forma net tangible book value per share after this offering and
the sale of the BMS Shares......................................... 4.20
---------
Dilution per share to new investors................................. $ 10.80
---------
---------
</TABLE>

If the Underwriters' over-allotment option were exercised in full, the
adjusted pro forma net tangible book value after the offering would be
$57,105,755, resulting in immediate dilution to new investors of $10.42 per
share.

The following table summarizes on a pro forma basis at March 31, 1996 the
difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders since inception and by new investors in this offering
(assuming an initial public offering price of $15.00 per share and before
deducting the estimated underwriting discounts and offering expenses):

<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
-------------------------- --------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.................. 8,460,579 70.5% $ 23,592,231 30.8% $ 2.79
New Investors (1)...................... 3,533,333 29.5 53,000,000 69.2 $ 15.00
------------- ----- -------------- -----
Total.............................. 11,993,912 100.0% $ 76,592,231 100.0%
------------- ----- -------------- -----
------------- ----- -------------- -----
</TABLE>

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

(1) Includes the BMS Shares, which are being purchased from the Company upon the
closing of this offering at the initial public offering price pursuant to a
private placement. Bristol-Myers also is an existing stockholder of the
Company. See "Principal Stockholders."

The foregoing tables do not give effect to any exercise of (i) 2,381,666
shares of Common Stock issuable upon exercise of outstanding options and
warrants at a weighted average exercise price of $4.92 per share and (ii)
444,444 shares of Common Stock issuable upon exercise of outstanding warrants
issued to Bristol-Myers of Common Stock exercisable at $22.50 per share
(assuming an initial public offering price of $15.00 per share). To the extent
that such options and warrants are exercised, there will be additional dilution
to new investors. See "Management -- Stock Options."

16
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data as of December 31, 1991, 1992, 1993,
1994 and 1995 and for the period from September 18, 1991 (date of inception) to
December 31, 1991 and the years ended December 31, 1992, 1993, 1994 and 1995 are
derived from the financial statements of EntreMed, Inc., which have been audited
by Ernst & Young LLP, independent auditors. The data should be read in
conjunction with the financial statements, related notes and other financial
information included herein. The selected financial data as of March 31, 1996
and for the three months ended March 31, 1995 and 1996 are derived from the
unaudited financial statements of the Company which are also included herein. In
the opinion of management, the unaudited financial statements have been prepared
on a basis consistent with the audited financial statements and include all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of the financial position and results of operations for these
periods. The operating results for the three months ended March 31, 1996 are not
necessarily indicative of results that may be expected for the entire fiscal
year.

Expenses:
Research and development................... -- 645,752 4,772,652 3,673,929 5,939,512 1,596,677
General and administrative................. 23,873 812,198 1,552,143 1,549,705 2,458,976 455,342
Interest expense........................... -- -- -- -- 65,754 --
Interest income............................ -- (56,383) (85,939) (18,993) (44,854) (5,559)
----------------- ----------- ----------- ----------- ----------- -----------
Net loss..................................... $ (23,873) $(1,401,567) $(6,238,856) $(5,114,456) $(7,708,219) $(2,046,460)
----------------- ----------- ----------- ----------- ----------- -----------
----------------- ----------- ----------- ----------- ----------- -----------
Net loss per share........................... $ (0.01) $ (0.32) $ (1.04) $ (0.76) $ (1.06) $ (0.29)
----------------- ----------- ----------- ----------- ----------- -----------
----------------- ----------- ----------- ----------- ----------- -----------
Weighted average number of shares
outstanding................................. 3,001,153 4,331,153 5,982,052 6,713,929 7,271,943 7,152,183
----------------- ----------- ----------- ----------- ----------- -----------
----------------- ----------- ----------- ----------- ----------- -----------
Pro forma net loss per share (2)............. $ (0.83)
-----------
-----------
Pro forma weighted average number of shares
outstanding (2)............................. 9,271,943
-----------
-----------

1996
-----------
<S> <C>
Statement of Operations Data:
Revenues (1):
Grant revenues............................. $ --
Collaborative research and development..... 1,042,500
License fees............................... 50,000
-----------
Total revenues........................... 1,092,500
Expenses:
Research and development................... 2,063,270
General and administrative................. 771,411
Interest expense........................... 9,547
Interest income............................ (76,321)
-----------
Net loss..................................... $(1,675,407)
-----------
-----------
Net loss per share........................... $ (0.23)
-----------
-----------
Weighted average number of shares
outstanding................................. 7,312,035
-----------
-----------
Pro forma net loss per share (2)............. $ (0.18)
-----------
-----------
Pro forma weighted average number of shares
outstanding (2)............................. 9,312,035
-----------
-----------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
--------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 2,342 $ 1,399,072 $ 2,188,665 $ 218,619 $ 6,885,099
Working capital (deficit)............................. (18,671) 1,356,666 2,112,738 (332,427) 5,689,810
Total assets.......................................... 23,640 1,586,691 3,258,995 843,742 10,146,383
Deferred revenue, less current portion................ -- -- -- -- 2,741,666
Long-term debt........................................ -- -- -- -- 104,152
Accumulated deficit................................... (23,873) (1,401,567) (7,280,210) (12,778,752) (20,486,971)
Total stockholders' equity (deficit).................. (2,627) 1,524,235 3,183,068 292,696 3,601,260

MARCH 31, 1996
--------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 7,600,058
Working capital (deficit)............................. 3,727,118
Total assets.......................................... 8,606,849
Deferred revenue, less current portion................ 2,566,667
Long-term debt........................................ --
Accumulated deficit................................... (22,162,378)
Total stockholders' equity (deficit).................. 2,051,853
</TABLE>

- ------------------------
(1) With the exception of license fees and research funding under the
Bristol-Myers Collaboration and research grants, the Company has not derived
any revenues from operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

(2) Pro forma net loss per share and weighted average shares outstanding for the
year ended December 31, 1995 and the three month period ended March 31, 1996
give effect to the automatic conversion of 3,000,000 outstanding shares of
Preferred Stock into 2,000,000 shares of Common Stock on the date of this
Prospectus.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Since its inception in September 1991, the Company has devoted substantially
all of its efforts and resources to sponsoring and conducting research and
development on its own behalf and through collaborations with corporate partners
and academic research and clinical institutions, and establishing its facilities
and hiring personnel. Prior to 1994, the primary focus of the Company's research
and development efforts and expenditures was the development of vaccines. The
Company has substantially reduced its vaccine related development activity,
reflecting in part its desire to prioritize its limited financial resources and
the perceived greater proprietary and commercial potential of its
antiangiogenesis and blood cell permeation technology programs.

With the exception of license fees and research and development funding from
Bristol-Myers and certain research grants, the Company has not generated any
revenue from operations. For the period from inception to March 31, 1996, the
Company incurred a cumulative net loss of approximately $22,162,000 and expects
to incur additional operating losses for the foreseeable future. In December
1995, the Company entered into the Bristol-Myers Collaboration and, through
March 31, 1996, had received $5,700,000 in license and research and development
fees and expense reimbursements and a $6,500,000 equity investment pursuant to
this alliance. The Company expects that its revenue sources for at least the
next several years will be limited to research grants and future collaboration
payments from Bristol-Myers and from other collaborators under arrangements that
may be entered into in the future. The timing and amounts of such revenues, if
any, will likely fluctuate sharply and depend upon the achievement of specified
milestones, and results of operations for any period may be unrelated to the
results of operations for any other period. See "Business -- Collaborations and
License Agreements."

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1995 AND 1996

Revenues under collaborative research and development agreements were
$1,092,500 for the three months ended March 31, 1996 as compared to no revenues
for the three months ended March 31, 1995. The collaborative research and
development fees relate to the amortization over five years of a one-time
payment of $2,500,000 and the amortization over six months of semi-annual
payments of $1,835,000 under the Bristol-Myers Collaboration. The license fees
represent the amortization over five years of a one-time $1,000,000 license fee
under the Bristol-Myers Collaboration, a portion of which was paid to Children's
Hospital. Three month's amortization of these amounts is included in the three
month period ended March 31, 1996, as the Bristol-Myers Collaboration was
entered into in December 1995.

Research and development expenses increased by 29% from approximately
$1,597,000 in the three months ended March 31, 1995 to approximately $2,063,000
in the three months ended March 31, 1996. Research and development expenditures
related to sponsored research payments increased by 53% from $1,052,000 for the
three months ended March 31, 1995 to $1,605,000 in the corresponding period in
1996, reflecting increased efforts in the Company's sponsored research and
product development programs related to its angiogenesis and cell permeation
technologies.

General and administrative expenses increased by 69% in the three months
ended March 31, 1996 to approximately $771,000 from approximately $455,000 in
the three months ended March 31, 1995, reflecting the Company's expanded
operations and a one-time charge of $233,000 related to the future payments
under a termination agreement with Steve Gorlin, a founder and former director
of the Company. Mr. Gorlin ceased providing services to the Company during the
three months ended March 31, 1996. See "Certain Transactions." Interest expense
increased from zero in the three

18
<PAGE>

months ended March 31, 1995 to $10,000 in the three months ended March 31, 1996
as a result of the completion, subsequent to March 31, 1995, of a sale-leaseback
agreement. Interest income increased to $76,000 in the three months ended March
31, 1996 from $6,000 in the corresponding period in 1995, as a result of the
additional capital available to invest following the execution of the
Bristol-Myers Collaboration.

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

Revenues under collaborative research and development agreements were
approximately $348,000 and license fees were approximately $17,000 in the year
ended December 31, 1995. The collaborative research and development fees relate
to the amortization over five years of a one-time payment of $2,500,000 and the
amortization over six months of a semi-annual payments of $1,835,000 under the
Bristol-Myers Collaboration. The license fees represent the amortization over
five years of a one-time $1,000,000 license fee under the Bristol-Myers
Collaboration, a portion of which was paid to Children's Hospital. Approximately
one month's amortization of these amounts is included in 1995 as the
Bristol-Myers Collaboration was entered into in December 1995. The Company had
no collaboration revenues in 1993 or 1994. In addition, revenues during 1994 and
1995 included grant revenues from World Health Organization and SBIR grants of
$90,000 and $347,000, respectively.

Research and development expenses decreased by 23% from approximately
$4,773,000 in 1993 to $3,674,000 in 1994, reflecting the reduction in expenses
relating to the Company's decreased emphasis on vaccine development, and
increased by 62% to approximately $5,940,000 in 1995, due primarily to increased
efforts in the Company's internal and sponsored research and product development
programs related to its antiangiogenesis and blood cell permeation technologies.
Research and development expenditures included sponsored research payments of
approximately $3,054,000, $1,369,000 and $2,570,000 and internal research and
development expenses of approximately $1,719,000, $2,305,000 and $3,370,000 in
1993, 1994 and 1995, respectively.

General and administrative expenses remained relatively constant in 1993 and
1994 and increased by 59% in 1995 to $2,459,000 from $1,550,000 in 1994 as a
result of increases in the number of Company personnel. Interest income
decreased from $86,000 in 1993 to $19,000 in 1994 and increased to $45,000 in
1995, reflecting the lower average cash balance during 1994, which increased
during 1995. During 1995, the Company had interest expense of approximately
$66,000 as a result of capital lease obligations.

LIQUIDITY AND CAPITAL RESOURCES

From inception through March 31, 1996, the Company financed its operations
from (i) the net proceeds of private placements of equity securities which
raised approximately $18,000,000, (ii) payments from Bristol-Myers, including
$9,700,000 received in December 1995 (of which $6,500,000 was an equity
investment) and $2,500,000 received in March 1996, (iii) various grants from the
World Health Organization and Small Business Innovation Research ("SBIR") grants
totalling approximately $437,000 and (iv) proceeds of approximately $654,000
under capital leases.

Bristol-Myers is obligated to make additional semi-annual payments to the
Company of $1,835,000 in each of June and December through June 2000 and
$365,000 in December 1996 as well as additional payments in the event certain
mostly late-stage regulatory milestones are achieved. Bristol-Myers may
terminate the collaboration agreement and return the licensed technology to the
Company at any time upon six months' notice, in which event it would have no
further funding obligation to the Company. See "Business -- Collaborations and
License Agreements."

At March 31, 1996, the Company had working capital of approximately
$3,727,000. The Company's cash resources have been used to finance research and
development, including sponsored research, capital expenditures, including
leasehold improvements to the Company's laboratory facility, and general and
administrative expenses. Over the next several years, the Company expects to

19
<PAGE>
incur substantial additional research and development costs, including costs
related to early-stage research in areas not reimbursed by Bristol-Myers,
preclinical and clinical trials, increased administrative expenses to support
its research and development operations and increased capital expenditures for
pilot manufacturing capacity, various equipment needs and facility improvements.

At March 31, 1996, the Company was a party to sponsored research agreements
requiring it to fund an aggregate of approximately $6,492,000 through 1999
(including $6,000,000 to Children's Hospital) and license agreements requiring
milestone payments of up to $2,360,000 and additional payments upon attainment
of regulatory milestones. In addition, the Company has recently agreed to
preliminary terms regarding a proposed transaction that, if consummated, would
require the Company to fund additional sponsored research and an equity
investment in the approximate aggregate amount of $1,850,000 over the next two
years. The Company is also a party to an office lease expiring in 2003 with
total future minimum lease payments of $1,620,300. See Note 4 of Notes to
Financial Statements. See "Business -- Collaborations and License Agreements."

At December 31, 1995, the Company had available net operating loss
carryforwards of $17,100,000 to offset any future taxable income for federal tax
purposes. The utilization of the loss carryforwards to reduce future income
taxes will depend on the Company's ability to generate sufficient taxable income
prior to the expiration of the net operating loss carryforwards. The
carryforwards begin to expire in the year 2006. However, the Tax Reform Act of
1986 limits the maximum annual use of net operating loss and tax credit
carryforwards in certain situations where changes occur in the stock ownership
of a corporation. For financial reporting purposes, a valuation allowance has
been recognized to reduce the net deferred tax assets to zero due to
uncertainties with respect to the Company's ability to generate taxable income
in the future sufficient to realize the benefit of deferred income tax assets.
See Note 8 of Notes to Financial Statements.

The Company believes that the net proceeds from this offering and from the
sale of the BMS Shares by the Company, together with its existing resources and
committed funding from Bristol-Myers, will be sufficient to meet its capital
needs for approximately 24 months, although there can be no assurance the
Company will not require additional funds prior to such date. However, the
Company's working capital requirements will depend upon numerous factors,
including the progress of the Company's research and development programs (which
may vary as product candidates are added or abandoned), preclinical testing and
clinical trials, achievement of regulatory milestones, the Company's corporate
partners fulfilling their obligations to the Company, the timing and cost of
seeking regulatory approvals, the level of resources that the Company devotes to
the development of manufacturing, marketing and sales capabilities, if any,
technological advances, the status of competitors, the ability of the Company to
maintain existing and establish new collaborative arrangements with other
companies to provide funding to the Company to support these activities and
other factors. In any event, the Company will require substantial funds in
addition to the proceeds of this offering to develop any of its product
candidates and otherwise to meet its business objectives. The Company has no
commitments to obtain any additional funds and there can be no assurance such
funds will be available on acceptable terms, or at all.

20
<PAGE>
BUSINESS

GENERAL

In December 1995, the Company and Bristol-Myers Squibb Company
("Bristol-Myers") entered into a collaboration (the "Bristol-Myers
Collaboration") to develop and commercialize certain antiangiogenesis
therapeutics. This collaboration provides for Bristol-Myers to fund Company
research, provide milestone payments to the Company and pay the Company
royalties on net sales of any products developed under the collaboration. In
addition, Bristol-Myers made a $6,500,000 equity investment in the Company and
agreed to make an additional $5,000,000 equity investment upon the closing of
this offering. In return, the Company granted Bristol-Myers exclusive worldwide
rights to antiangiogenic applications of thalidomide, thalidomide analogs and
Angiostatin-TM- protein.

The Company's product candidates have been developed primarily through
sponsored research collaborations and licensing agreements. The principal
antiangiogenesis therapeutics currently under development by the Company were
licensed from Children's Hospital at Harvard Medical School ("Children's
Hospital") where the Company sponsors research under the direction of Dr. M.
Judah Folkman. The flow electroporation technology used in the cell permeation
device was licensed from the Center for Blood Research Laboratories at Harvard
Medical School ("CBRL"). The Company's sponsored research programs are augmented
by its internal capabilities in the fields of the vasculature system, blood
vessel growth and blood function.

To date, the Company and its collaborators have:

-Initiated Phase II clinical trials to evaluate the antiangiogenic effects
of thalidomide in inhibiting the progression of breast cancer, prostate
cancer and Kaposi's sarcoma.

-Initiated Phase II clinical trials to evaluate the antiangiogenic effects
of thalidomide in inhibiting the progression of age-related macular
degeneration, a major cause of blindness.

-Constructed a prototype device designed to introduce inositol hexaphosphate
("IHP") molecules into red blood cells, which may enhance the delivery of
oxygen to organs and tissues in the body.

21
<PAGE>
CORPORATE STRATEGY

ANGIOGENESIS

OVERVIEW

Within the human body, a network of arteries, capillaries and veins, known
as the vasculature, functions to transport blood throughout the body. The basic
network of the vasculature is developed through angiogenesis, a fundamental
process by which new blood vessels are formed. The primary angiogenic period in
humans takes place during the first three months of embryonic development.
During this period, cytokines and growth factors, which are normally suppressed,
are activated to stimulate the growth of new blood vessels. Once the general
network of the blood vessels is complete, these angiogenic stimulators are
inhibited and blood vessels grow longer and larger in diameter until adulthood
through a different process termed vasculogenesis. Although angiogenesis occurs
in embryonic development, wound healing and in certain reproductive processes in
women, angiogenesis is otherwise generally associated with several diseases,
including cancer and diabetic retinopathy and macular degeneration, both of
which are major causes of blindness.

ANGIOGENESIS AND CANCER

The term cancer includes many different types of uncontrolled cellular
growth. Clusters of cancer cells, referred to as tumors, may destroy surrounding
organs, impair physiological function and often lead to death. In order to
survive, cancer cells require oxygen and nutrients which they receive from the
body's blood supply. In order to access this blood supply, cancer cells initiate
a biochemical mechanism that stimulates angiogenesis, which provides the blood
supply that nourishes the tumor. As cancer cells grow and metastasize (spread
from primary sites to secondary sites) they require continuous angiogenesis.
Antiangiogenic substances are intended to inhibit the growth of blood vessels
and may be effective in treating certain cancers, with fewer adverse side
effects than traditional therapies. Cancer is the second leading cause of death
in the United States and it is estimated that approximately 1,360,000 new cases
of cancer will be diagnosed in 1996.

Existing cancer treatments include surgery, radiation therapy and
chemotherapy. Surgery requires invasive procedures to remove cancerous cells.
Often, cancer tumors located in sites that are difficult to access or tumors
that have metastasized to vital organs cannot be treated surgically. Radiation
therapy produces ionized molecules within the body that attack cancer cells but
which may also damage healthy cells. Chemotherapy involves the administration of
toxic substances designed to kill cancer cells and usually produces severe side
effects. In addition, resistance to chemotherapy occurs over time. The Company
believes that its antiangiogenesis technologies may have significant advantages
over traditional cancer therapies, including reduced toxicity, and may be
administered in conjunction with such other therapies.

ANGIOGENESIS AND BLINDNESS

Angiogenesis within the eye, a condition often associated with diabetes and
age-related macular degeneration, is a major cause of blindness. Macular
degeneration, which is age-related, and diabetic retinopathy, a secondary effect
of diabetes, both involve the formation of new blood vessels in front of or
behind the retina. The blood vessels that grow in front of the retina occlude
vision and the blood vessels that grow behind the retina often hemorrhage or
cause the detachment of the retina, in each case resulting in blindness. It is
estimated that approximately 8,000,000 people experience diabetic

22
<PAGE>
retinopathy, and that 25,000 new cases of blindness develop each year. It is
estimated that approximately 13,000,000 people suffer from macular degeneration,
and that 1,700,000 develop vision impairment, of which 100,000 new cases of
blindness develop each year. Current treatments for diabetic retinopathy and, to
a more limited extent, macular degeneration involve laser-based photocoagulation
treatments, which often cause unintended damage to the retina and surrounding
cells.

ANGIOGENESIS AND OTHER DISEASE INDICATIONS

A variety of other disease indications may be associated with angiogenesis,
including rheumatoid arthritis, cardiovascular disease (atherosclerosis),
psoriasis and Crohn's disease. The Company believes that its antiangiogenesis
technologies may be applicable to these other diseases. To date, the Company has
not pursued research for applications of antiangiogenesis to diseases outside of
cancer or macular degeneration. There can be no assurance that the Company will
pursue research outside these indications, that product candidates will result
from any research undertaken or that any products for these diseases will ever
be commercialized.

ENTREMED'S ANTIANGIOGENESIS PROGRAM

The Company believes that certain drugs or proteins that exhibit
antiangiogenic effects may be used as effective, safe therapeutics for diseases
involving angiogenesis. The Company currently focuses on angiogenesis inhibition
as a treatment for cancer, macular degeneration and diabetic retinopathy.
Product candidates under development include: (i) thalidomide and several of its
chemical analogs which focus the therapeutic activity of thalidomide
specifically on angiogenesis and (ii) Angiostatin-TM- protein, a newly
discovered angiogenesis inhibitor naturally produced by the body. The Company's
evaluation of thalidomide and its chemical analogs as antiangiogenic
therapeutics will also enable the Company to generate clinical and marketing
data on the general utility of angiogenesis inhibitors. These data can then be
applied in the development of Angiostatin-TM- protein, which the Company
believes may have greater efficacy as an antiangiogenic therapeutic. The Company
believes that, if successfully developed, these products could be used alone or
in combination with each other to treat certain angiogenic diseases.

PRODUCT CANDIDATES

ORAL ANTIANGIOGENESIS DRUG. The Company is evaluating the antiangiogenic
properties of the drug thalidomide and its chemical analogs. Thalidomide, which
was widely prescribed as a sedative in Europe in the late 1950s and early 1960s,
is believed to have caused severe birth defects in children. The Company
believes that thalidomide may have affected fetal development and caused birth
defects by blocking new blood vessel growth, a characteristic that may make
thalidomide useful in the prevention and treatment of angiogenic disorders. In
preclinical animal studies conducted at Children's Hospital, thalidomide has
been shown to block angiogenesis. Because of the negative precedent associated
with thalidomide, as well as patent and competitive issues, the Company also
intends to screen for and conduct research on chemical analogs of thalidomide
having substantially similar mechanisms of action as thalidomide but which may
focus the therapeutic activity of this drug specifically on angiogenesis. The
Company proposes to develop thalidomide or a thalidomide analog as a long-term
patient administered oral therapeutic to inhibit the progression of certain
angiogenic diseases, including cancer and certain causes of blindness.

The Company, Bristol-Myers and the National Cancer Institute recently
initiated Phase II clinical trials to evaluate the antiangiogenic effects of
thalidomide in inhibiting the progression of breast cancer, prostate cancer and
Kaposi's sarcoma. The Company and its collaborators intend to conduct similar
studies regarding brain cancer in the near future. Based on results of these
studies, as well as development activities relating to thalidomide analogs, the
Company will determine, together with Bristol-Myers, whether to pursue the
commercialization of thalidomide by expanding these trials or by initiating a
Phase III trial, or to develop an analog of thalidomide, or both. In animal
studies performed at Children's Hospital, thalidomide was shown to inhibit the
abnormal formation of blood vessels in the eye, a major cause of blindness. The
Company is currently conducting Phase II clinical

23
<PAGE>
trials at the Scheie Eye Institute at the University of Pennsylvania School of
Medicine and with the Retina Associates of Cleveland to evaluate the
antiangiogenic effects of thalidomide in blindness due to age-related macular
degeneration.

Although not approved for sale in the United States, thalidomide has been
used as an investigational agent to treat a limited number of patients for
leprosy and other diseases and is being developed by other companies for various
disease indications. See "-- Government Regulation."

ANGIOSTATIN-TM- PROTEIN. The Company is developing Angiostatin-TM- protein
as a potential long-term cancer therapeutic to prevent metastatic disease and as
a therapy for primary tumors. Metastatic tumor growth is attributed to the
implantation and growth of tumor cells at secondary sites. These tumor cells are
released by a primary tumor, or are released into circulation during surgical
removal of the primary tumor. Although surgeons generally remove significant
amounts of healthy tissue surrounding the tumor, in many cases "seed cells" have
already escaped the primary tumor and are circulated through the body until they
become embedded elsewhere. It has been observed that in certain cases, these
seed cells, or metastases, do not vascularize and grow while the primary tumor
is in place. However, after the primary tumor is removed, secondary metastatic
tumors often grow rapidly.

In Company-sponsored research at Children's Hospital, a substance associated
with primary tumors was identified which appears to prevent vascularization and
growth of metastatic tumors. Based upon such research, the Company believes that
the primary tumor secretes an enzyme that cleaves plasminogen, a known protein
associated with blood clotting, into a smaller, previously undiscovered protein.
The Children's Hospital team isolated and identified the protein, which the
Company named Angiostatin-TM- protein, and the Company has cloned and expressed
the gene that codes for Angiostatin-TM- protein. In preclinical studies,
including the murine Lewis Lung Carcinoma metastatic model, it has been
demonstrated that Angiostatin-TM- protein inhibits the growth of metastatic
tumors derived from carcinomas and sarcomas. In addition, Angiostatin-TM-
protein was shown to reduce the size of primary murine carcinomas and sarcomas
as well as human prostate, breast and colon cancers grown in immunodeficient
mice. The Company and Bristol-Myers are addressing additional required
preclinical studies, while manufacturing Angiostatin-TM- protein in limited
quantities.

The Company currently anticipates that Angiostatin-TM- protein, as an
endogenous angiogenesis inhibitor, would be administered as an adjunct therapy
after diagnosis and sustained thereafter. The Company believes that
Angiostatin-TM-protein may also be effective in inhibiting other angiogenic
diseases such as diabetic retinopathy and macular degeneration, although the
Company has not conducted any research to date in these areas. The Company has
obtained an exclusive license from Children's Hospital to this technology,
including rights to patent applications filed on Angiostatin-TM- protein and
related technology.

OTHER ANTIANGIOGENESIS RESEARCH

The Company maintains an internal discovery and development program and also
continues to sponsor and support research at Children's Hospital on angiogenesis
technologies with the aim of developing antiangiogenesis products in addition to
Angiostatin-TM- protein, thalidomide and thalidomide analogs. To the extent that
additional antiangiogenesis therapeutics are developed at Children's Hospital
and licensed by the Company, Bristol-Myers has a right of first refusal to
sublicense from the Company such technologies. See "-- Collaborations and
License Agreements." The Company's research in these areas is currently early
stage, although the Company and Children's Hospital have identified several
endogenous proteins and compounds with angiogenic or antiangiogenic properties
that may be candidates for further development. The Company intends to use a
portion of the proceeds of this offering to fund early-stage internal and
sponsored research on angiogenesis technologies. See "Use of Proceeds."

24
<PAGE>
ENTREMED'S CELL PERMEATION TECHNOLOGY

OVERVIEW

The Company is applying its expertise in the role of blood function to the
development of a cell permeation technology that may facilitate the delivery
into blood cells of drugs, genes or other therapeutic agents that otherwise
would not readily diffuse through the cell membrane. To date, the Company has
focused its cell permeation research on a method of enhancing the oxygen
delivery capabilities of blood.

Human blood is comprised of four components: red blood cells, white blood
cells, plasma and platelets. The principal functions of human blood are to
transport oxygen and nutrients to tissues, carry waste products away from
tissues and defend the body against infection. Hemoglobin, a protein-iron
molecule contained within red blood cells, is responsible for carrying oxygen
from the lungs to tissues throughout the body. Tissues and organs in the body
require oxygen to function properly, and oxygen deficiency may lead to tissue
damage or death. In human blood, each hemoglobin molecule carries four molecules
of oxygen, but releases only one. It has been proposed that IHP, a naturally
occurring plant chemical, may enhance the oxygen releasing capabilities of
hemoglobin by allowing the release of three oxygen molecules. The theory that
IHP could enhance the oxygen releasing capacity of hemoglobin has been proposed
for several years. Scientists have observed that a molecule similar to IHP found
in the hemoglobin of birds is more efficient at releasing oxygen than a
corresponding molecule (2,3 diphosphoglycerate, or 2,3 DPG) found in human
hemoglobin. However, IHP does not readily diffuse through the cell membrane of
human red blood cells and previous techniques used to introduce IHP into such
red blood cells have experienced significant problems and have resulted in
substantial cell damage.

The Company's research has led to the development of a prototype device
designed to introduce IHP into red blood cells without significant cell damage.
The Company intends to develop this application as a therapeutic in such chronic
and acute diseases as angina, congestive heart failure, heart attacks, stroke
and other diseases involving inadequate circulation or respiratory functions.
Existing methods of treatment for these diseases, including surgical remedies,
drug therapies and non-surgical devices, treat such diseases by seeking to
increase blood flow, rather than increasing the blood's oxygen releasing
capacity. In addition, unlike blood that is stored in blood banks, which loses
its capacity to deliver oxygen for approximately 12 to 24 hours following a
transfusion, blood treated with IHP may be able to release oxygen to tissues
more rapidly following transfusion. The Company intends to investigate the
application of IHP-treated blood for storage in blood banks. Because IHP-treated
blood may release more oxygen to tissues than untreated human blood, it may also
be possible that a smaller amount of IHP-treated blood can be transfused to
obtain equivalent tissue oxygenation.

With the exception of IHP-treated blood, the Company has not yet explored
any other applications of its cell permeation technology. Potential therapeutic
candidates will be selected based on an analysis of various disease indications
and related market potential, the likely time and expense required for
development and adaptation of the core technology for the specific application
and the interest of potential strategic partners. Potential product candidates
may be reformulations of existing compounds approved by the FDA where
enhancement of delivery through blood cell membranes is believed to have
increased clinical value compared to existing methods. The Company intends to
use a portion of the proceeds of this offering to investigate potential
applications of this technology. See "Use of Proceeds."

DEVICE FOR OXYGEN ENHANCED BLOOD DELIVERY

The Company has constructed a prototype device designed to introduce IHP
molecules into red blood cells, which may enhance the delivery of oxygen to
tissues and organs. The device permits red blood cells drawn from patients to be
separated from plasma and treated with IHP in a disposable flow electroporation
chamber. The flow electroporation chamber combines the separated red blood cells

25
<PAGE>
with IHP and, through an electrical charge, renders the red blood cell membrane
permeable, permitting IHP to pass through the cell membrane and combine with
hemoglobin. IHP-treated blood is then ready for infusion into the patient or for
storage for later infusion.

The Company is sponsoring contract research and development on IHP-treated
blood. An initial prototype flow electroporation device has been constructed and
the accompanying reagents have been developed, although design activities are
ongoing and there can be no assurance that a clinically acceptable device will
be completed. Following completion of a clinically acceptable prototype, the
Company intends to conduct preclinical toxicology studies required to
demonstrate the safety and efficacy of IHP-treated red blood cells in enhancing
the delivery of oxygen to tissues in relevant disease states.

The Company's flow electroporation technology is based on Company sponsored
research conducted at the CBRL. In November 1992, the Company obtained an
exclusive worldwide license to this technology from the CBRL and a United States
patent application for the device and method for introducing IHP into red blood
cells was filed in March 1993. Device and disposable component engineering and
development has been and continues to be conducted by a contract manufacturer,
which is also expected to provide pilot manufacturing capabilities.

The Company is in discussions with several major pharmaceutical companies
and is seeking to enter into collaborative arrangements with corporate partners
to develop and commercialize the Company's cell permeation technology, which may
cover specific product candidates or disease indications. However, there can be
no assurance that any such agreements will be entered into with any of these
companies or any potential partner or that the terms of any agreement will be
favorable to the Company. See "-- Manufacturing and Marketing."

COLLABORATIONS AND LICENSE AGREEMENTS

GENERAL. The Company intends to continue to develop in-licensed products
and sponsored research programs and to enter into collaborations and licensing
agreements with corporate partners for product development, manufacturing and
marketing. The Company believes that it will be necessary to enter into
collaborative arrangements with other companies in the future to develop,
commercialize, manufacture and market its cell permeation technology, as well as
any additional products or technologies it may acquire or develop.

BRISTOL-MYERS COLLABORATION. In December 1995, the Company entered into the
Bristol-Myers Collaboration for the development of certain antiangiogenesis
products. The Bristol-Myers Collaboration provides for a five year research
program, the grant to Bristol-Myers of an exclusive license to the Company's
thalidomide, thalidomide analogs and Angiostatin-TM- protein technologies and an
equity investment in the Company by Bristol-Myers.

During the five year research term, the Company has agreed to conduct
research and Bristol-Myers has agreed to support and fund such research.
Bristol-Myers has agreed to provide funding of $18,350,000, payable in
semi-annual payments of $1,835,000. In addition, Bristol-Myers has agreed to pay
an additional $730,000 to reimburse the Company for ongoing thalidomide clinical
studies, one-half of which has been paid and the remainder is payable in
December 1996. Bristol-Myers also paid to the Company $1,000,000 in license
fees, a portion of which was paid to Children's Hospital, and $2,500,000 in
consideration of know-how and research and development performed by the Company.

The Company granted Bristol-Myers an exclusive worldwide royalty-bearing
license to make, use and sell products that are based upon the Company's
Angiostatin-TM- protein, thalidomide and thalidomide analog technologies.
Bristol-Myers has a right to sublicense, and has undertaken to secure a
sublicense to develop thalidomide-related products for ophthalmological
indications, unless Bristol-Myers reasonably believes that the dosage or method
of administration will not be significantly different from oncological
indications. Any failure or delay by Bristol-Myers to enter into such a
sublicense may substantially limit or preclude the commercial development of
these applications.

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Bristol-Myers also received a five year right of first refusal with respect to
the development of any technology licensed or to be licensed by the Company from
Children's Hospital in the field of antiangiogenic therapeutics.

The Bristol-Myers Collaboration also provides for royalties to the Company
based on the net sales price of products sold by Bristol-Myers. With respect to
any product that is derived from Angiostatin-TM- protein, the royalty shall be
15% of net sales, subject to a reduction to no less than 10% based on
manufacturing costs. With respect to any product derived from thalidomide, the
royalty shall be 8% and, with respect to thalidomide analogs, the royalty shall
range from 8% to 12.5% based on sales volume. In the case of thalidomide, the
royalties shall be subject to reduction based on competitive factors.

In addition, the Company may be entitled to receive additional payments for
each product category based upon the achievement of defined and primarily
late-stage clinical development and regulatory filing milestones. While there
can be no assurance that these milestones will be reached, these additional
payments could total $32,000,000. Up to $9,000,000 of the milestone payments for
products related to thalidomide and thalidomide analogs and up to $4,000,000 of
the milestones for products related to Angiostatin-TM- protein will be
creditable against any royalties that may become payable by Bristol-Myers to the
Company, although the cumulative amount of credits in any year may not exceed
50% of the aggregate royalties otherwise payable. The Company retained certain
co-promotion rights if Bristol-Myers elects to seek a co-promotion partner with
respect to any products covered by the collaboration. The Bristol-Myers
Collaboration may be terminated by Bristol-Myers for any reason upon six months
notice without any further liability for future payments.

Upon execution of the Bristol-Myers Collaboration, Bristol-Myers purchased
541,666 shares of the Company's Common Stock for $12.00 per share and agreed to
purchase an additional $5,000,000 of Common Stock at the closing of this
offering in a private placement at the initial public offering price per share.
The Company also issued to Bristol-Myers a warrant, exercisable for one-year
from the date of this Prospectus, to purchase up to $10,000,000 of Common Stock
at an exercise price per share equal to 150% of the initial public offering
price per share. The Company has granted to Bristol-Myers certain registration
rights with respect to all of these shares. See "Description of Capital Stock --
Registration Rights."

ACADEMIC COLLABORATIONS. In addition to its in-house research program, the
Company collaborates with several academic institutions to support research in
areas of the Company's product development interests. Usually, research
supported at outside academic institutions is performed in conjunction with
additional in-house research. Often, the faculty members responsible for
supervision of the research performed at the academic institution will
participate further as consultants to the Company's in-house effort.

Typically under these arrangements, the Company agrees to fund the research
it has chosen to support with a specified budget over a specified time period,
usually one to three years. In return, the Company usually obtains an exclusive
license, with the right to grant sublicenses, and the right to further develop
and market products that arise out of the technology being supported. Under
several of these licenses, the Company is required to meet specified milestones
or diligence requirements in order to retain its license of such technologies.
There can be no assurance that the Company will satisfy these milestones and
diligence requirements and be able to retain such licenses. In addition to
providing research support, the Company usually is required to pay royalties to
the academic institution on sales, if any, of any licensed products resulting
from such research. The Company in most instances files and prosecutes patent
applications on behalf of the institutions.
The Company's primary academic collaboration is with Children's Hospital. In
September 1993, the Company entered into a sponsored research agreement with
Children's Hospital to support research conducted under the direction of Dr. M.
Judah Folkman on the role of angiogenesis in pathological conditions. Under the
agreement, as amended in August 1995, the Company agreed to pay to Children's
Hospital $11,000,000, of which $5,000,000 was paid through April 1996,
$1,000,000

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is due on October 1, 1996 and the remainder is due in equal semi-annual payments
of $1,000,000 until April 1, 1999. The Company also granted to Children's
Hospital options to acquire 83,334 shares of Common Stock at an exercise price
of $6.00 per share and additional options to acquire 50,000 shares at an
exercise price of $6.375 per share. The Company obtained an exclusive option to
negotiate an exclusive, worldwide, royalty-bearing license to any technology
resulting from the research at Children's Hospital in areas covered by the
agreement. The Company received a right to sublicense the licensed technologies,
although the Company agreed to pay to Children's Hospital a portion of all
sublicensing payments, which do not include payments to support research and
development by the Company or equity investments in the Company. The Company has
also received certain rights of first refusal to certain additional research
projects and any new project opportunities arising from Dr. Folkman's core
laboratory activities.
The Company exercised its option in May 1994 to obtain exclusive worldwide
licenses to certain oral antiangiogenesis technology (thalidomide and its
analogs), cancer diagnostic and prognostic technology, and endogenous
antiangiogenesis technology (Angiostatin-TM- protein). These license agreements
provide for certain milestone payments by the Company to Children's Hospital as
well as royalties based on sales, if any, of any products developed from the
licensed technologies. The milestone payments aggregate $2,650,000, of which
$290,000 has been paid through March 31, 1996, and are based upon license fees
and the achievement of regulatory approvals. See "-- Angiogenesis Program."

OTHER COLLABORATIVE ARRANGEMENTS. The Company is sponsoring research at
Innovative Therapeutics, Inc. ("ITI"), a company that is performing early-stage
research on methods to treat disease by stimulating cellular immunity. The
methods under development pursuant to this sponsored research program are
designed to target specific diseases by the administration of synthetic peptides
or recombinant proteins that mimic proteins which occur naturally during that
particular disease. These therapeutic agents are designed to initiate cellular
immune responses exclusively, without affecting humoral immunity. Through March
31, 1996, the Company has paid ITI approximately $682,500 pursuant to this
collaboration.

The Company and ITI have agreed to preliminary terms regarding a proposed
transaction whereby a subsidiary to be formed by the Company ("Newco") would
acquire substantially all of the assets of ITI in exchange for 15% of the equity
of Newco and a research funding commitment by the Company. The terms contemplate
an equity investment by the Company in Newco of $250,000 and research funding
for this 85% owned subsidiary of an aggregate of $1,600,000 during the first two
years, with an additional $1,500,000 to be provided at the sole option of the
Company during the third year. The acquisition is subject to the execution of
definitive agreements, and there can be no assurance that the proposed
transaction will be completed on the terms set forth above or at all.

The Company intends to continue to support and fund research at other
companies or academic or other institutions in selected areas in exchange for
rights to technologies and products derived from such sponsored research or
equity positions in such companies. The Company expects to focus on sponsored
research in areas in which it has existing expertise or where a strong market
opportunity is perceived. The Company may establish subsidiaries to develop and
commercialize promising technologies or products generated from this research,
which may create opportunities for separately financing and managing new
development programs. The Company may use a portion of the proceeds of this
offering to fund sponsored research by other organizations. See "Use of
Proceeds."

COMPETITION

Competition in the pharmaceutical, biotechnology and biopharmaceutical
industries is intense and based significantly on scientific and technological
factors, the availability of patent and other protection for technology and
products, the ability and length of time required to obtain governmental
approval for testing, manufacturing and marketing and the ability to
commercialize products in a timely fashion. Moreover, the biopharmaceutical
industry is characterized by rapidly evolving technology that could result in
the technological obsolescence of any products developed by the Company. The

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Company competes with many specialized biopharmaceutical firms, as well as a
growing number of large pharmaceutical companies that are applying biotechnology
to their operations. Many biopharmaceutical companies have focused their
development efforts in the human therapeutics area, and many major
pharmaceutical companies have developed or acquired internal biotechnology
capabilities or made commercial arrangements with other biopharmaceutical
companies. These companies, as well as academic institutions, governmental
agencies and private research organizations, also compete with the Company in
recruiting and retaining highly qualified scientific personnel and consultants.

The Company's competition will be determined in part by the potential
indications for which the Company's compounds may be developed and ultimately
approved by regulatory authorities. The Company is relying on Bristol-Myers to
commercialize the licensed antiangiogenesis products and, accordingly, the
success of these products in the target indications of cancer and blindness will
depend in significant part on Bristol-Myers' efforts and ability to compete in
these markets. The success of the Bristol-Myers Collaboration will depend in
part upon Bristol-Myers' own competitive, marketing and strategic
considerations, including the relative advantages of alternative products being
developed and marketed by Bristol-Myers and its competitors. For example,
Bristol-Myers currently markets cancer therapeutics, which would be competitive
with any antiangiogenic products developed under the Bristol-Myers Collaboration
to treat cancer. Bristol-Myers has a right to sublicense, and has undertaken to
secure a sublicense to develop thalidomide-related products for ophthalmological
indications, unless Bristol-Myers reasonably believes that the dosage or method
of administration will not be significantly different from oncological
indications. Any failure or delay by Bristol-Myers to enter into such a
sublicense may substantially limit or preclude the commercial development of
these applications. See "-- Collaborations and License Agreements."

The Company is aware of companies and research institutions investigating
the role of angiogenesis generally and specifically as it may be useful in
developing therapeutics to treat various diseases associated with abnormal blood
vessel growth. In studies available to date, these angiogenetic inhibitors have
shown varying effectiveness in inhibiting angiogenesis and differing degrees of
bioavailability and toxicity. Significant further preclinical and clinical
development of these products is needed prior to an assessment of the more
significant competitive product candidates in the antiangiogenesis disease
indications targeted by the Company.

The Company is aware of other companies developing thalidomide and certain
of its chemical analogs for various disease indications, including Celgene
Corporation, for the treatment of AIDS-related cachexia (or wasting) and mouth
ulcers, and Andrulis Pharmaceuticals, for diabetes. Although the Company
believes that its patent rights, if granted, would preclude another company from
marketing thalidomide for antiangiogenic indications, there can be no assurance
that any patent will issue or afford meaningful protection.

A substantial number of companies utilize or are developing cell permeation
or drug delivery technologies and competition for the development of drug
delivery products is intense, although the Company's focus is on blood cell
permeation. The Company is aware of at least one other company, Allos
Therapeutics, Inc., that is engaged in early-stage research regarding a method
to acutely increase the oxygen-releasing capacity of hemoglobin for treating
cancer. The Company also anticipates that IHP-treated blood (which is not
technically a blood replacement), will compete for use in blood transfusions
with readily available products, including whole human blood or packed red blood
cells, and products under development, such as blood substitutes.

Many of the Company's existing or potential competitors have substantially
greater financial, technical and human resources than the Company and may be
better equipped to develop, manufacture and market products. In addition, many
of these competitors have extensive experience in preclinical testing and human
clinical trials and in obtaining regulatory approvals. The existence of

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competitive products, including products or treatments of which the Company is
not aware, or products or treatments that may be developed in the future, may
adversely affect the marketability of products which may be developed by the
Company.

MANUFACTURING AND MARKETING

The Company's strategy is to enter into collaborative arrangements with
pharmaceutical and other companies for the development, manufacturing and
marketing of products requiring broad marketing capabilities and for overseas
marketing. These collaborators are generally expected to be responsible for
funding or reimbursing all or a portion of the development costs, including the
costs of clinical testing necessary to obtain regulatory clearances and for
commercial scale manufacturing, in exchange for exclusive or semi-exclusive
rights to market specific products in particular geographic territories. To
date, the Company has entered into one collaboration agreement, with
Bristol-Myers, relating to certain of its antiangiogenesis technologies.
However, the Company may, in the future, consider manufacturing or marketing
certain products directly and to co-promote certain products if it believes it
is appropriate under the circumstances. The Company has no experience in
manufacturing or marketing products on a commercial scale and does not have the
resources to manufacture or market by itself on a commercial scale any of its
product candidates. In the event the Company decides to establish a
manufacturing facility, the Company will require substantial additional funds,
and will be required to hire and train significant additional personnel and
comply with the extensive "good manufacturing practice" regulations applicable
to such a facility.

PATENTS AND PROPRIETARY RIGHTS

The Company's success will depend in part on its ability to obtain patent
protection for its products, both in the United States and abroad. The patent
position of biotechnology and pharmaceutical companies in general is highly
uncertain and involves complex legal and factual questions. The Company has
filed eight U.S. patent applications covering Angiostatin-TM- protein, DNA
coding for the Angiostatin-TM- protein, the use of Angiostatin-TM- protein as a
therapeutic agent and the use of Angiostatin-TM- protein as a diagnostic agent.
The Company also has filed three U.S. patent applications covering the use of
the thalidomide molecule and thalidomide analogs as an antiangiogenic agent for
the treatment of a wide variety of diseases that are caused by uncontrolled
angiogenesis. These patent applications also include composition of matter
coverage for certain thalidomide analogs. The Company has also filed four U.S.
patent applications covering the device and method for introducing substances
into cells by flow electroporation. These patent applications cover the
electroporation chamber in the device, the overall electroporation device and
the treatment of a wide variety of diseases using cells that have been treated
in the electroporation device. Patent applications corresponding to the U.S.
patent applications have been filed in Europe, Japan, Canada and other selected
countries. The Company has also filed intent-to-use trademark applications in
the U.S. Patent and Trademark Office for the marks "Angiostatin-TM-" and
"EntreMed."

There can be no assurance that any patents will be granted or that patents
issued to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide proprietary protection to the
Company. Furthermore, there can be no assurance that others will not
independently develop similar products or, if patents are issued to the Company
or its collaborators, will not design around such patents.

Furthermore, the enactment of the legislation implementing the General
Agreement on Trade and Tariffs has resulted in certain changes to United States
patent laws that became effective on June 8, 1995. Most notably, the term of
patent protection for patent applications filed on or after June 8, 1995 is no
longer a period of seventeen years from the date of grant. The new term of a
United States patent will commence on the date of issuance and terminate twenty
years from the earliest effective filing date of the application. Because the
time from filing to issuance of biotechnology patent application is often more
than three years, a twenty-year term from the effective date of filing may

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result in a substantially shortened term of patent protection, which may
adversely impact the Company's patent position. If this change results in a
shorter period of patent coverage, the Company's business could be adversely
affected to the extent that the duration and level of the royalties it is
entitled to receive from a collaborative partner is based on the existence of a
valid patent.

The Company's potential products may conflict with patents which have been
or may be granted to competitors, universities or others. As the biotechnology
industry expands and more patents are issued, the risk increases that the
Company's potential products may give rise to claims that they infringe the
patents of others. Such other persons could bring legal actions against the
Company claiming damages and seeking to enjoin clinical testing, manufacturing
and marketing of the affected products. If any such actions are successful, in
addition to any potential liability for damages, the Company could be required
to obtain a license in order to continue to manufacture or market the affected
products. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms, if at all. If the Company becomes involved in
litigation, it could consume a substantial portion of the Company's time and
resources.

The Company requires its employees, consultants and advisors to execute a
confidentiality agreement upon the commencement of an employment or consulting
relationship with the Company. The agreements generally provide that trade
secrets and all inventions conceived by the individual and all confidential
information developed or made known to the individual during the term of the
relationship shall be the exclusive property of the Company and shall be kept
confidential and not disclosed to third parties except in specified
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection for the Company's proprietary information in the
event of unauthorized use or disclosure of such information.

GOVERNMENT REGULATION

The Company's development, manufacture and potential sale of therapeutics is
subject to extensive regulation by United States and foreign governmental
authorities.

REGULATION OF PHARMACEUTICAL PRODUCTS. Products being developed by the
Company may be regulated by the FDA as drugs or biologics or, in some cases, as
medical devices. New drugs are subject to regulation under the Federal Food,
Drug, and Cosmetic Act, and biological products, in addition to being subject to
certain provisions of that Act, are regulated under the Public Health Service
Act. The Company believes that drug products developed by it or its
collaborators will be regulated either as biological products or as new drugs.
Both statutes and the regulations promulgated thereunder govern, among other
things, the testing, manufacturing, safety, efficacy, labeling, storage, record
keeping, advertising and other promotional practices involving biologics or new
drugs, as the case may be. FDA approval or other clearances must be obtained
before clinical testing, and before manufacturing and marketing, of biologics
and drugs.

Obtaining FDA approval has historically been a costly and time consuming
process. Generally, in order to gain FDA pre-market approval, a developer first
must conduct pre-clinical studies in the

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laboratory and in animal model systems to gain preliminary information on an
agent's efficacy and to identify any safety problems. The results of these
studies are submitted as a part of an investigational new drug ("IND")
application, which the FDA must review before human clinical trials of an
investigational drug can start. The IND application includes a detailed
description of the clinical investigations to be undertaken.

In order to commercialize any products, the Company or its collaborator must
sponsor and file an IND and be responsible for initiating and overseeing the
clinical studies to demonstrate the safety, efficacy and potency that are
necessary to obtain FDA approval of any such products. For Company or
collaborator-sponsored INDs, the Company or its collaborator will be required to
select qualified investigators (usually physicians within medical institutions)
to supervise the administration of the products, and ensure that the
investigations are conducted and monitored in accordance with FDA regulations,
including the general investigational plan and protocols contained in the IND.
Clinical trials are normally done in three phases, although the phases may
overlap. Phase I trials are concerned primarily with the safety and preliminary
effectiveness of the drug, involve fewer than 100 subjects, and may take from
six months to over one year. Phase II trials normally involve a few hundred
patients and are designed primarily to demonstrate effectiveness in treating or
diagnosing the disease or condition for which the drug is intended, although
short-term side effects and risks in people whose health is impaired may also be
examined. Phase III trials are expanded clinical trials with larger numbers of
patients which are intended to evaluate the overall benefit-risk relationship of
the drug and to gather additional information for proper dosage and labeling of
the drug. Clinical trials generally take two to five years to complete, but may
take longer. The FDA receives reports on the progress of each phase of clinical
testing, and it may require the modification, suspension, or termination of
clinical trials if it concludes that an unwarranted risk is presented to
patients.

If clinical trials of a new product are completed successfully, the sponsor
of the product may seek FDA marketing approval. If the product is regulated as a
biologic, the FDA will require the submission and approval of both a Product
License Application ("PLA") and an Establishment License Application before
commercial marketing of the biologic. If the product is classified as a new
drug, the Company must file a New Drug Application ("NDA") with the FDA and
receive approval before commercial marketing of the drug. The NDA or PLA must
include detailed information about the drug and its manufacture and the results
of product development, preclinical studies and clinical trials. The testing and
approval processes require substantial time and effort and there can be no
assurance that any approval will be granted on a timely basis, if at all. NDAs
and PLAs submitted to the FDA can take, on average, two to five years to receive
approval. If questions arise during the FDA review process, approval can take
more than five years. Notwithstanding the submission of relevant data, the FDA
may ultimately decide that the NDA or PLA does not satisfy its regulatory
criteria for approval and deny approval or require additional clinical studies.
In addition, the FDA may condition marketing approval on the conduct of specific
post-marketing studies to further evaluate safety and effectiveness. Even if FDA
regulatory clearances are obtained, a marketed product is subject to continual
review, and later discovery of previously unknown problems or failure to comply
with the applicable regulatory requirements may result in restrictions on the
marketing of a product or withdrawal of the product from the market as well as
possible civil or criminal sanctions.

Thalidomide is regulated by the FDA's Center for Drug Evaluation and
Research. Although not approved for sale in the U.S., thalidomide has been used
as an investigational agent to treat thousands of patients for leprosy and other
diseases. EntreMed has filed an IND application and started Phase II trials in
macular degeneration, a leading cause of blindness, and expects that the
analysis of these results could determine whether Phase III trials may be
attempted. The National Cancer Institute in collaboration with EntreMed and
Bristol-Myers has begun Phase II trials in breast cancer, prostate cancer and
Kaposi's sarcoma. It is expected that future cancer trials may be dependent on
the results of these studies. Thalidomide must meet the standard regulatory
requirements of any new drug, and successful Phase III clinical trials will be
necessary to form the basis of an NDA.

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Analogs of thalidomide may be regulated as new chemical entities by the
FDA's Center for Drug Evaluation and Research. Although these compounds are in
the discovery phase of research, it is expected that as new chemical entities
are discovered complete preclinical toxicology studies will be required prior to
studies in humans. The remainder of the developmental and regulatory
requirements will be similar to that of any new drug.

Angiostatin-TM- protein, a naturally occurring substance, is considered a
biologic and will be regulated by the FDA's Center for Biologics Evaluation and
Research. As a genetically engineered and endogenous protein, Angiostatin-TM-
protein will face unique and specific regulation hurdles, such as those related
to the manufacture of the product and the behavior of the product in the body.
The regulatory requirements for recombinant proteins have been developed for
other endogenous molecules (e.g., Epogen, Neupogen and Interferons) and
Angiostatin-TM-protein is expected to follow these established guidelines.
Successful preclinical studies and Phase I, II and III trials will be necessary
to form the basis for a PLA.

The cell permeation technology, and specifically IHP-treated red blood
cells, will likely be regulated by the FDA's Center for Biologics Evaluation and
Research. The Company anticipates that the FDA will view the IHP-treated red
blood cells (rather than IHP itself) as the regulated product. In addition, the
device used to insert IHP into the red blood cells may be regulated by the
Center for Biologics Evaluation and Research under the medical device provisions
of the Federal Food, Drug and Cosmetic Act (described below). It would be
expected that the preclinical and clinical trials necessary for approval of a
PLA would also be relevant to the approval of the device. Historically, the
FDA's Office of Blood Research and Review has had the most expertise and
experience in regulating blood, apheresis equipment and disposables associated
with the processing of human blood. Further development for IHP-treated blood is
expected to follow a similar path to that of any therapeutic biologic, with
successful completion of Phase I, Phase II and Phase III trials required to
precede the filing of a PLA. Because the cell permeation technology requires the
use of red blood cells produced from humans, the Company will be required to
comply with, or to contract with suppliers that comply with, stringent
regulation of blood component collection. That regulation is designed to protect
both donors and recipients of blood products and involves significant
recordkeeping and other burdens.

REGULATION OF DEVICES. Any device products which may be developed by the
Company are likely to be regulated by the FDA as medical devices rather than
drugs. In addition, as noted, the device used to insert IHP in blood cells may
be regulated as a medical device. The nature of the FDA requirements applicable
to such products depends on their classification by the FDA. A device developed
by the Company would be automatically classified as a Class III device,
requiring pre-market approval, unless the Company could demonstrate to the FDA,
in the required pre-market notification procedure, that the device was
substantially equivalent to an existing device that has been classified in Class
I or Class II or to a pre-1976 device that has not yet been classified. If the
Company were unable to demonstrate such substantial equivalence, it would be
required to undertake the costly and time-consuming process, comparable to that
for new drugs, of conducting preclinical studies, obtaining an investigational
device exemption to conduct clinical tests, filing a premarket approval
application, and obtaining FDA approval.

If the Company could demonstrate substantial equivalence to a Class I
product, the "general controls" of the Federal Food, Drug, and Cosmetic Act --
chiefly adulteration, misbranding, and good manufacturing practice requirements
- -- would nevertheless apply. If substantial equivalence to a Class II device
could be shown, the general controls plus "special controls" -- such as
performance standards, guidelines for safety and effectiveness, and post-market
surveillance -- would apply. While demonstrating substantial equivalence to a
Class I or Class II product is not as costly or time-consuming as the pre-market
approval process for Class III devices, it can in some cases also involve
conducting clinical tests to demonstrate that any differences between the new
device and devices already on the market do not affect safety or effectiveness.
If substantial equivalence to a pre-1976

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device that has not yet been classified has been shown, it is possible that the
FDA would subsequently classify the device as a Class III device and call for
the filing of premarket approval applications at that time. If the FDA took that
step, then filing an application acceptable to the FDA would be a prerequisite
to remaining on the market.

If the FDA chooses to regulate the device (the electroporation device and
disposable flow chamber) used to insert IHP in blood cells as a medical device,
it is likely that the review process will nevertheless occur in the Center for
Biologics Evaluation and Research. It is possible, however, that such Center
would consult with relevant officials in the FDA's Center for Devices and
Radiological Health. Such a consultation might further delay approval of the
device and thus of this technology.

OTHER. In addition to the foregoing, the Company's business is and will be
subject to regulation under various state and federal environmental laws,
including the Occupational Safety and Health Act, the Resource Conservation and
Recovery Act and the Toxic Substance Control Act. These and other laws govern
the Company's use, handling and disposal of various biological, chemical and
radioactive substances used in and wastes generated by its operations. The
Company believes that it is in material compliance with applicable environmental
laws and that its continued compliance therewith will not have a material
adverse effect on its business. The Company cannot predict, however, whether new
regulatory restrictions on the marketing of biotechnology products will be
imposed by state or federal regulators and agencies.

EMPLOYEES

As of May 15, 1996, the Company had 27 full-time employees, of which 19 were
in research and development and eight were in management and administration. The
Company intends to hire additional personnel. The Company also utilizes
part-time or temporary consultants on an as-needed basis. None of the Company's
employees is represented by a labor union and the Company believes its relations
with its employees are satisfactory.

PROPERTIES

The Company currently occupies an aggregate of approximately 11,600 square
feet of office space (approximately 8,250 square feet of which is laboratory
space) in Rockville, Maryland pursuant to a lease expiring in April 2003. The
lease provides for annual rent of approximately $215,000 during 1996, subject to
specified annual increases. See Note 4 of Notes to Financial Statements. The
Company anticipates that its current facilities will be sufficient through 1996,
at which time it is likely to require additional or larger space. The Company
has not yet determined whether to lease additional space or build a new
facility, but expects to use proceeds of this offering to fund a portion of the
costs relating to any such expansion. See "Use of Proceeds."

LEGAL PROCEEDINGS

The Company is a party to certain litigation initiated in August 1995 in the
United States District Court for the Eastern District of Tennessee by Bolling,
McCool & Twist, a consulting firm. The suit relates to a claim for services
rendered in the approximate amount of $50,000 and seeks a finder's fee in an
unspecified amount in connection with the Bristol-Myers Collaboration. In April
1996, the Company filed a motion to compel discovery. Due to the lack of
discovery and early stage of the proceedings, the Company is unable to predict
with certainty the eventual outcome of the lawsuit. The Company intends to
contest the action vigorously and believes that this proceeding will not have a
material adverse effect on the Company or on its financial statements, although
there can be no assurance that this will be the case.

34
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the names, ages and positions of the
executive officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -----------------------------------------------
<S> <C> <C>
John W. Holaday, Ph.D. (1)....... 50 Chairman of the Board, President, Chief
Executive Officer and Director
Carol A. Nacy, Ph.D. ............ 48 Executive Vice President
Edward R. Gubish, Ph.D. ......... 47 Vice President -- Regulatory and Clinical
Development
Leo Einck, Ph.D. ................ 45 Vice President -- Extramural Programs
John C. Thomas, Jr. ............. 42 Treasurer and Chief Financial Officer
Carl Alving, M.D. ............... 56 Director
Donald S. Brooks (2)(3).......... 60 Director
Bart Chernow, M.D. .............. 48 Director
Samuel R. Dunlap, Jr. (1)(2)..... 46 Executive Advisor and Director
Mark C.M. Randall (3)............ 33 Director
Leon E. Rosenberg, M.D. ......... 63 Director
Wendell M. Starke (1)(2)......... 54 Director
</TABLE>

- ------------------------
(1) Member of Executive Committee

(2) Member of Compensation Committee

(3) Member of Audit Committee

JOHN W. HOLADAY, PH.D. is a co-founder of the Company and has served as its
President and Chief Executive Officer and a director since August 1992 and its
Chairman of the Board since November 1995. Prior thereto, from May 1989 to
August 1992, he was a co-founder of Medicis Pharmaceutical Corp. where he served
as Scientific Director, Senior Vice President for Research and Development and
director. From 1968 to 1989, he served at the Walter Reed Army Institute of
Research, where he founded the Neuropharmacology Branch in 1980. He serves as an
officer and fellow in several biomedical societies and has authored and edited
numerous scientific articles in journals and books. His current academic
positions include Associate Professor of Anesthesiology and Critical Care
Medicine and Senior Lecturer in Medicine at The Johns Hopkins University of
Medicine, Baltimore, Maryland; Adjunct Professor of Pharmacology and Psychiatry
at the Uniformed Services University School of Medicine, Bethesda, Maryland; and
Clinical Assistant Professor of Surgery at the University of Connecticut Health
Center, Farmington, Connecticut.

CAROL A. NACY, PH.D. joined the Company as Senior Vice President of Research
in December 1992 and became Executive Vice President in November 1995. From 1978
until December 1992, Dr. Nacy was employed by the Walter Reed Army Institute of
Research, where she served in various capacities, including Project Director of
Immunotherapy and Infectious Diseases and Assistant Chief of the Department of
Cellular Immunology since 1988. Dr. Nacy currently serves as the President of
the American Society of Microbiology. Her current academic appointments include
Catholic University and Howard University in Washington, D.C. Dr. Nacy serves as
an officer of international scientific societies and as editor of several
scientific journals.

35
<PAGE>
EDWARD R. GUBISH, PH.D. has served as Vice President - Regulatory and
Clinical Development of the Company since November 1995 and has been employed by
the Company since October 1993. From 1990 to September 1993, Dr. Gubish served
as senior director of Regulatory Affairs for Baker Norton Pharmaceuticals (IVAX)
and Fujisawa Pharmaceuticals. From 1986 to 1990, Dr. Gubish served as Chief of
regulatory affairs for the AIDS Division at the National Institutes of Health
and as a scientific and administrative contact for sponsors of new biological
products and IND submissions for the, Center for Drugs and Biologics at the FDA.

LEO EINCK, PH.D. has served as Vice President -- Extramural Programs of the
Company since November 1995. From 1985 to September 1993, Dr. Einck was the
Director of Operations for HEM Pharmaceuticals, a company engaged in the
development of biopharmaceutical agents. From 1980 to 1985, Dr. Einck was a
researcher in molecular biology at the National Institutes of Health.

JOHN C. THOMAS, JR. has served part-time as Chief Financial Officer of the
Company since its inception in September 1991. Mr. Thomas has also served as the
Chief Financial Officer of several other companies, including Credit Depot
Corporation, a public company engaged in loan financing (from August 1990 to
March 1993 and from January 1995 until April 1996), Tapistron International,
Inc., a public company engaged in the development of technology for the textile
industry (from August 1991 until July 1995), and Sealite Sciences, a private
biotechnology company (from June 1991 to March 1993). Mr. Thomas is a certified
public accountant.

CARL ALVING, M.D. is a co-founder of the Company and has been a director of
the Company since August 1992. He has been Chief of the Department of Membrane
Biochemistry at the Walter Reed Army Institute of Research since 1978. Dr.
Alving has been the inventor of a number of patented technologies in the fields
of drug delivery and immunology.

DONALD S. BROOKS has been a director of the Company since April 1996. Since
July 1993, Mr. Brooks has been a practicing attorney with the law firm Carella
Byrne Bain Gilfillan Cecchi Stewart & Olstein, Roseland, New Jersey, which
represents the Company on certain matters. Prior thereto, Mr. Brooks was
employed by Merck & Co., Inc. for 27 years, most recently, from 1986 to 1993, as
Senior Counsel. From 1980 to 1985, Mr. Brooks served as a U.S. employer delegate
to the Chemical Industries Committee International Labor Organization in Geneva,
Switzerland.

BART CHERNOW, M.D. is a co-founder of the Company and has been a director
since the Company's inception. Dr. Chernow has served as Physician-in-Chief at
Sinai Hospital of Baltimore since 1990 and as a Professor of Medicine,
Anesthesiology and Critical Care at The Johns Hopkins University School of
Medicine part-time since 1990. Dr. Chernow is the Editor-in-Chief of the Journal
of CRITICAL CARE MEDICINE. From 1987 to 1990 Dr. Chernow was the Director of the
Henry K. Beecher Memorial Research Laboratories and Attending Physician of
Critical Care (anesthesia) at the Massachusetts General Hospital, Harvard
Medical School, where he also served as an Associate Professor.

SAMUEL R. DUNLAP, JR. has served as an Executive Advisor and a director to
the Company since August 1992. Mr. Dunlap also has (i) served as Chairman of
Dunlap & Partners, Ltd., a financial consulting firm in Atlanta, Georgia, since
October 1988, (ii) served as an Executive Advisor and is currently a director to
First Pacific Networks, Inc., a publicly-held telecommunications company, (iii)
served as a director of Credit Depot Corporation, of which he was a founder,
since December 1986, (iv) served as a director and a consultant of Golf Training
Systems, Inc., a public company, from August 1994 until December 1995 and (v)
served as a director from July 1991 until February 1994 and an Executive Advisor
from July 1991 until November 1994 of Tapistron International, Inc. From April
1986 until December 1988, Mr. Dunlap served as Executive Vice President and
director of CytRx Corporation, a publicly-held pharmaceutical company ("CytRx")
of which he was a founder. Mr. Dunlap also served as Executive Vice President of
Elan Pharmaceutical Research Corp., a publicly-held company, from August 1982 to
December 1983 and President and a director of such entity from January 1984 to
January 1985.

36
<PAGE>
MARK C.M. RANDALL has been a director of the Company since April 1996. Since
1985, Mr. Randall has been associated with Sarasin International Securities
Limited, London, England, a wholly-owned subsidiary of Bank Sarasin & Cie, a
private bank based in Switzerland, where he has been Director since 1994.

LEON E. ROSENBERG, M.D. has been a director of the Company since January
1996. Since September 1991 Dr. Rosenberg has served as the President of
Bristol-Myers Squibb Pharmaceutical Research Institute. From 1984 to September
1991, Dr. Rosenberg served as the dean of the Yale University School of
Medicine. Dr. Rosenberg is a member of the National Academy of Sciences and
serves on the Board of Directors of the Whitehead Institute for Biomedical
Research.

WENDELL M. STARKE has been a director of the Company since April 1994. Mr.
Starke is a Chartered Financial Analyst and a Chartered Investment Counselor.
Mr. Starke was President of INVESCO Capital Management, Inc. from 1979 to 1991
and has been its Chairman since 1991. In 1992, he became Chairman of INVESCO,
Inc., the parent company of INVESCO Capital Management and other INVESCO money
management subsidiaries with 1995 year-end assets of over $75 billion under
management in the United States. Mr. Starke also serves as a member of the
Board, Global Chief Investment Officer and Chairman of the Global Asset
Allocation Committee of INVESCO, PLC, the London-based parent company of the
worldwide INVESCO organization.

The Board of Directors currently consists of eight members. Successors to
those directors whose terms have expired are required to be elected by
stockholder vote; vacancies in unexpired terms and any additional positions
created by board action are filled by action of the existing Board of Directors.
Officers are elected to serve, subject to the discretion of the Board of
Directors, until their successors are appointed.

The Executive Committee currently consists of three members. The Executive
Committee acts as a liaison between management and the Board of Directors and is
responsible for all matters that arise between regular meetings of the Board of
Directors, to the extent permitted by Delaware law.

The Audit Committee currently consists of two directors. The Audit Committee
reviews, with the Company's independent accountants, the scope and timing of
their audit services and any other services they are asked to perform, their
report on the Company's financial statements following completion of their audit
and the Company's policies and procedures with respect to internal accounting
and financial controls. In addition, the Audit Committee makes annual
recommendations to the Board of Directors for the appointment of independent
public accountants for the ensuing year.

The Compensation Committee consists of three directors. This Committee
reviews and recommends to the Board of Directors the compensation and benefits
of all officers of the Company, reviews general policy matters relating to
compensation and benefits of employees of the Company and administers the
Company's stock option plans.

37
<PAGE>
EXECUTIVE COMPENSATION

The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to the Chief Executive Officer and
to each of the most highly compensated executive officers whose annual
compensation exceeded $100,000 for the fiscal year ended December 31, 1995
(collectively, the "named executive officers") for services during the fiscal
year ended December 31, 1995:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION ANNUAL SALARY($) BONUS ($) OPTIONS (NO.) COMPENSATION ($)
- ------------------------------------- ---------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
John W. Holaday, Ph.D. .............. 200,000 100,000 270,001 12,551(1)
Chairman, President and Chief
Executive Officer
Carol A. Nacy, Ph. D. ............... 175,000 60,750 166,667 --
Executive Vice President
Edward R. Gubish, Ph.D. ............. 126,600 10,750(2) 70,000 --
Vice President -- Regulatory and
Clinical Development
Leo Einck, Ph.D. .................... 91,000 10,750(2) 70,000 --
Vice President -- Extramural
Programs
</TABLE>

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

(1) Represents the premiums paid by the Company with respect to a split-dollar
life insurance policy on the life of Dr. Holaday. Premiums paid by the
Company on such policy are treated as non-interest bearing advances to the
insured for the policy. The initial proceeds of any death benefit are
required to be used to repay the indebtedness, and the balance of the
insurance proceeds are payable as designated by the insured. See "--
Employment Agreements."

(2) Includes $10,000 accrued in 1995 and paid in 1996.

The following table sets forth certain information with respect to
individual grants of stock options and warrants made during the fiscal year
ended December 31, 1995 to each of the named executive officers.

OPTION AND WARRANT GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS/SARS APPRECIATION FOR OPTION
OPTIONS/ GRANTED TO EXERCISE TERM (1)
SARS EMPLOYEES OR BASE EXPIRATION ------------------------
NAME GRANTED (#) IN FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ----------------------------------------- ----------- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
John W. Holaday, Ph.D. .................. 270,001 22.6% $ 6.375 11/1/2005 4,875,678 8,783,403
Carol A. Nacy, Ph.D. .................... 166,667 13.9% $ 6.375 11/1/2005 3,009,673 5,421,844
Edward R. Gubish, Ph.D. ................. 70,000 5.8% $ 6.375 11/1/2005 1,264,060 2,277,170
Leo Einck, Ph.D. ........................ 70,000 5.8% $ 6.375 11/1/2005 1,264,060 2,277,170
</TABLE>

- ------------------------
(1) Assumes an initial public offering price of $15.00. The 5% and 10% assumed
annual rates of appreciation are mandated by the rules and regulations of
the Securities and Exchange Commission and do not reflect the Company's
estimates or projections of future Common Stock prices. There can be no
assurance that the rates of return reflected in the table will be achieved.

38
<PAGE>
The following table sets forth information concerning all option holdings
for the fiscal year ended December 31, 1995 for each of the named executive
officers:

AGGREGATED OPTION/EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/VALUE

<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-
AT FY-END (#) MONEY OPTIONS AT FY-
SHARES ACQUIRED VALUE EXERCISABLE/ END ($)(1)
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------- --------------- ----------- ------------------- ----------------------------
<S> <C> <C> <C> <C>
John W. Holaday, Ph.D. ............... -- -- 176,669/200,000 $ 1,993,767/$1,725,000
Carol A. Nacy, Ph.D. ................. -- -- 170,000/146,667 $ 2,205,000/$1,265,003
Edward R. Gubish, Ph.D. .............. -- -- 30,000/80,000 $ 270,000/$693,750
Leo Einck, Ph.D. ..................... -- -- 10,667/72,667 $ 96,003/$627,753
</TABLE>

- ------------------------
(1) Assumes that the fair market of the common stock equalled the assumed
initial public offering price of $15.00.

EMPLOYMENT AGREEMENTS

In April 1996, effective as of January 1, 1996, the Company entered into a
three-year employment agreement with John W. Holaday, Ph.D., Chairman and Chief
Executive Officer of the Company. The agreement provides for an annual base
salary of $250,000 per year. The Company may terminate the agreement without
cause and, upon such termination, Dr. Holaday will be entitled to receive his
base salary through the end of the initial term of the agreement (subject to an
offset for salary received from subsequent employment). The agreement contains
confidentiality and non-competition provisions.

The Company is the beneficiary of a $1,000,000 key person life insurance
policy on the life of Dr. Holaday. In addition, the Company maintains a
$2,000,000 split-dollar life insurance policy on the life of Dr. Holaday at an
annual cost of approximately $12,500. Premiums paid by the Company on such
policy are treated as non-interest bearing advances to the insured for the
policy. The initial proceeds of any death benefit are required to be used to
repay the indebtedness, and the balance of the insurance proceeds are payable as
designated by the insured.

Each of the Company's employees has entered into a Proprietary Information
and Invention Assignment Agreement providing, among other things, that such
employee will not disclose any confidential information or trade secrets in any
unauthorized manner and that all inventions of such officer relating to the
Company's current or anticipated business during the term of employment become
the Company's property.

DIRECTOR COMPENSATION

Directors are entitled to compensation of $2,000 for each Board of Directors
meeting attended and are reimbursed for expenses actually incurred in connection
with attending such meetings. Directors are also awarded initial grants of
non-qualified stock options to purchase 15,000 shares of Common Stock upon
joining the Board of Directors and annual grants of non-qualified stock options
to purchase 5,000 shares of Common Stock. In addition, each member of a
committee of the Board of Directors will receive certain additional grants of
non-qualified stock options. All options are granted at the then fair market
value. See "-- Stock Options" and "Certain Transactions."

LIMITATION ON LIABILITY; INDEMNIFICATION AGREEMENTS

The General Corporation Law of Delaware permits a corporation through its
Certificate of Incorporation to eliminate the personal liability of its
directors to the corporation or its stockholders for monetary damages for breach
of fiduciary duty of loyalty and care as a director, with certain

39
<PAGE>
exceptions. The exceptions include a breach of the director's duty of loyalty,
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, improper declarations of dividends, and transactions
from which the directors derived an improper personal benefit. The Company's
Certificate of Incorporation exonerates its directors from monetary liability to
the fullest extent permitted by this statutory provision but does not restrict
the availability of non-monetary and other equitable relief.

The Company intends to enter into Indemnification Agreements with each of
its directors and executive officers. Each such Indemnification Agreement will
provide that the Company will indemnify the indemnitee against expenses,
including reasonable attorney's fees, judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
any civil or criminal action or administrative proceeding arising out of the
performance of his duties as an officer, director, employee or agent of the
Company. Such indemnification is available if the acts of the indemnitee were in
good faith, if the indemnitee acted in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and, with respect to any
criminal proceeding, the indemnitee had no reasonable cause to believe his
conduct was unlawful.

STOCK OPTIONS

GENERAL. In December 1992, the Company adopted the 1992 Stock Incentive
Plan (the "1992 Plan"), which provides for the grant by the Company of options
to purchase up to an aggregate of 1,233,333 shares of the Company's authorized
but unissued Common Stock and in March 1996, the Company adopted the 1996 Stock
Option Plan, which was amended and restated in April 1996 (the "1996 Plan" and,
together with the 1992 Plan, the "Plans"), which provide for the grant by the
Company of options to purchase up to an aggregate of 516,667 shares of the
Company's authorized but unissued Common Stock (in each case subject to
adjustment in certain cases including stock splits, recapitalizations and
reorganizations) to officers, directors, employees, consultants and independent
contractors of the Company. The purposes of the Plans are to ensure the
retention of existing executive personnel, key employees, directors and
consultants of the Company, to attract and retain competent new executive
personnel, key employees, directors and consultants and to provide additional
incentive to all such persons by permitting them to participate in the ownership
of the Company. The 1992 Plan terminates in December 2002 and the 1996 Plan
terminates in March 2006.

The Plans will be administered by the Board of Directors or a committee of
the Board of Directors, provided, however, that with respect to "officers" and
"directors," as such terms are defined for the purposes of Rule 16b-3 ("Rule
16b-3") promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), such committee shall consist of "disinterested" directors as defined in
Rule 16b-3, but only if at least two directors meet the criteria of
"disinterested" directors as defined in Rule 16b-3. The 1996 Plan provides for
automatic grants of options to certain directors in the manner set forth below
under "Directors' Options."

Options granted under the Plans may be either incentive options or
non-qualified options. Incentive options granted under the Plans are exercisable
for a period of up to 10 years from the date of grant at an exercise price which
is not less than the fair market value of the Common Stock on the date of the
grant, except that the term of an incentive option granted under the Plans to a
stockholder owning more than 10% of the outstanding voting power may not exceed
five years and its exercise price may not be less than 110% of the fair market
value of the Common Stock on the date of the grant. To the extent that the
aggregate fair market value, as of the date of grant, of the shares for which
incentive options become exercisable for the first time by an optionee during
the calendar year exceeds $100,000, the portion of such option which is in
excess of the $100,000 limitation will be treated as a non-qualified option.
Additionally, the aggregate number of shares of Common Stock that may be subject
to options granted to any person in a calendar year shall not exceed 25% of the
maximum number of shares of Common Stock which may be issued from time to time
under the Plans. Options

40
<PAGE>
granted under the Plans to officers, directors or employees of the Company may
be exercised only while the optionee is employed or retained by the Company or
within 90 days of the date of termination of the employment relationship or
directorship. However, options which are exercisable at the time of termination
by reason of death or permanent disability of the optionee may be exercised
within 12 months of the date of termination of the employment relationship or
directorship. Upon the exercise of an option, payment may be made by cash or by
any other means that the Board of Directors or the committee determines.

Options may be granted only to such employees, officers and directors of,
and consultants and advisors to, the Company or any subsidiary of the Company as
the Board of Directors or the committee shall select from time to time in its
sole discretion, provided that only employees of the Company or a subsidiary of
the Company shall be eligible to receive incentive options. As of March 31,
1996, the number of employees, officers and directors of the Company eligible to
receive grants under the Plans was approximately 35 persons. The number of
consultants and advisors to the Company eligible to receive grants under the
Plans is not determinable. An optionee may be granted more than one option under
the Plans. The Board of Directors or the committee will, in its discretion,
determine (subject to the terms of the Plans) who will be granted options, the
time or times at which options shall be granted, the number of shares subject to
each option and whether the options are incentive options or non-qualified
options. In making such determination, consideration may be given to the value
of the services rendered by the respective individuals, their present and
potential contributions to the success of the Company and its subsidiaries and
such other factors deemed relevant in accomplishing the purpose of the Plans.

Under the Plans, the optionee has none of the rights of a stockholder with
respect to the shares issuable upon the exercise of the option until such shares
shall be issued upon such exercise. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date of
exercise, except as provided in the Plans. During the lifetime of the optionee,
an option shall be exercisable only by the optionee. No option may be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of decent and distribution.

The Board of Directors may amend or terminate the Plans except that
stockholder approval is required to effect a change so as to increase the
aggregate number of shares that may be issued under the Plans (unless adjusted
to reflect such changes as a result of a stock dividend, stock split,
recapitalization, merger or consolidation of the Company), to modify the
requirements as to eligibility to receive options, to increase materially the
benefits accruing to participants or as otherwise may be required by Rule 16b-3
or Section 422 of the Code. No action taken by the Board may materially and
adversely affect any outstanding option grant without the consent of the
optionee.

Under current tax law, there are no Federal income tax consequences to
either the employee or the Company on the grant of non-qualified options if
granted under the terms set forth in the Plans. Upon exercise of a non-qualified
option, the excess of the fair market value of the shares subject to the option
over the option price (the "Spread") at the date of exercise is taxable as
ordinary income to the optionee in the year it is exercised and is deductible by
the Company as compensation for Federal income tax purposes, if Federal income
tax is withheld on the Spread. However, if the shares are subject to vesting
restrictions conditioned on future employment or the holder is subject to the
short-swing profits liability restrictions of Section 16(b) of the Exchange Act
of (i.e., is an executive officer, director or 10% stockholder of the Company)
then taxation and measurement of the Spread is deferred until such restrictions
lapse, unless a special election is made under Section 83(b) of the Code to
report such income currently without regard to such restrictions. The optionee's
basis in the shares will be equal to the fair market value on the date taxation
is imposed and the holding period commences on such date.

41
<PAGE>
Incentive option holders incur no regular Federal income tax liability at
the time of grant or upon exercise of such option, assuming that the optionee
was an employee of the Company from the date the option was granted until 90
days before such exercise. However, upon exercise, the Spread must be added to
regular Federal taxable income in computing the optionee's "alternative minimum
tax" liability. An optionee's basis in the shares received on exercise of an
incentive stock option will be the option price of such shares for regular
income tax purposes. No deduction is allowable to the Company for Federal income
tax purposes in connection with the grant or exercise of such option.

If the holder of shares acquired through exercise of an incentive option
sells such shares within two years of the date of grant of such option or within
one year from the date of exercise of such option (a "Disqualifying
Disposition"), the optionee will realize income taxable at ordinary rates.
Ordinary income is reportable during the year of such sale equal to the
difference between the option price and the fair market value of the shares at
the date the option is exercised, but the amount includable as ordinary income
shall not exceed the excess, if any, of the proceeds of such sale over the
option price. In addition to ordinary income, a Disqualifying Disposition may
result in taxable income subject to capital gains treatment if the sales
proceeds exceed the optionee's basis in the shares (i.e., the option price plus
the amount includable as ordinary income). The amount of the optionee's taxable
ordinary income will be deductible by the Company in the year of the
Disqualifying Disposition.

At the time of sale of shares received upon exercise of an option (other
than a Disqualifying Disposition of shares received upon the exercise of an
incentive option), any gain or loss is long-term or short-term capital gain or
loss, depending upon the holding period. The holding period for long-term
capital gain or loss treatment is more than one year.

The foregoing is not intended to be an exhaustive analysis of the tax
consequences relating to stock options issued under the Plans. For instance, the
treatment of options under state and local tax laws, which is not described
above, may differ from the treatment for Federal income tax purposes.

As of March 31, 1996, there were outstanding under the 1992 Plan options to
purchase 1,107,031 shares of Common Stock at exercise prices ranging from $1.50
to $15.00 per share and no options were outstanding under the 1996 Plan. In
addition, the Company had outstanding at March 31, 1996 133,334 options granted
outside of the Plans at exercise prices ranging from $6.00 to $6.375 per share.
The exercise price of all options was at least equal to the fair market value on
the date of grant.

DIRECTORS' OPTIONS. The provisions of the 1996 Plan provide for the
automatic grant of non-qualified stock options to purchase shares of Common
Stock ("Director Options") to directors of the Company ("Eligible Directors").
Eligible Directors of the Company elected after the date hereof will be granted
a Director Option to purchase 15,000 shares of Common Stock on the date such
person is first elected or appointed a director (an "Initial Director Option").
Further, commencing on the day immediately following the date of the annual
meeting of stockholders for the Company's fiscal year ending December 31, 1996,
(i) each Eligible Director will be granted a Director Option to purchase 5,000
shares of Common Stock, (ii) each member of the Audit Committee and the
Compensation Committee will be granted a Director Option to purchase 1,000
shares of Common Stock and (iii) each member of the Executive Committee will be
granted a Director Option to purchase 5,000 shares of Common Stock (each, an
"Automatic Grant") on the day immediately following the date of each annual
meeting of stockholders, as long as such director is a member of the Board of
Directors or such committee, as the case may be. The exercise price for each
share subject to a Director Option shall be equal to the fair market value of
the Common Stock on the date of grant, except for directors who receive
incentive options and who own more than 10% of the voting power, in which case
the exercise price shall be not less than 110% of the fair market value on the
date of grant. Director Options are exercisable in three equal annual
installments, commencing on the date of grant. Director Options will expire the
earlier of 10 years after the date of grant or 90 days after the termination of
the director's service on the Board of Directors.

42
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors of the Company has established a Compensation
Committee which, during fiscal 1995, consisted of Samuel R. Dunlap, Jr., Wendell
M. Starke and Bart Chernow, M.D.

In November 1995, the Company issued to Mr. Dunlap options to purchase
166,667 shares of Common Stock at an exercise price of $6.375 per share. The
Company has in the past maintained a consulting arrangement with Mr. Dunlap and
in January 1996 entered into a new three year consulting agreement with Mr.
Dunlap that provides for annual payments of $90,000. In November 1995, the
Company granted Mr. Dunlap warrants to purchase 166,667 shares, exercisable
66,667 immediately and the remainder in three equal annual installments at an
exercise price of $6.375 per share.

In April 1993, a trust of which Wendell M. Starke is the trustee and
beneficiary (the "Starke Trust") purchased 50,000 shares of Common Stock from
the Company at a purchase price of $6.00 per share. In July 1994, the Starke
Trust loaned the Company $300,000, which loan was evidenced by a convertible
promissory note payable on demand bearing interest at 8% per annum. In September
1994, the principal amount of such note was converted into 47,066 shares of
Common Stock (a conversion price of $6.375 per share). In October 1994, the
Starke Trust purchased 84,633 shares of Common Stock from the Company at a
purchase price of $6.375 per share. In February 1995, the Starke Trust purchased
33,333 shares of Common Stock from the Company at a purchase price of $6.375 per
share. In June 1995, Mr. Starke loaned the Company an aggregate of $162,916 in
exchange for a promissory note due and paid in December 1995, together with
interest at the rate of 9% per annum, and warrants to purchase 10,648 shares at
$6.375 per share. See "Certain Transactions."

CERTAIN TRANSACTIONS

In October 1991, the Company issued 333,333 shares of Common Stock to each
of Steve Gorlin, John W. Holaday, Ph.D. and Bart Chernow, M.D., co-founders of
the Company, at a purchase price of $.015 per share.

In June 1992, the Company issued an aggregate of 1,545,000 shares of Common
Stock at a purchase price of $.015 per share, including 433,333 shares to each
of Drs. Holaday and Chernow, 133,333 shares to Mark Rogers, M.D., 50,000 shares
to Steve Gorlin and 33,333 shares to each of Stephen Ayres, M.D., David Evans
and Richard Franco. Each of Messrs. Rogers, Gorlin, Ayres, Evans and Franco was
a director of the Company at the time of the transaction. In addition, in June
1992, the Company sold 1,500,000 shares of Preferred Stock to each of Steve
Gorlin and to D.H. Blair Investment Banking Corp. at a purchase price of $1.00
per share. Mr. Gorlin paid for a portion of his shares of Preferred Stock by
executing a promissory note in the principal amount of $350,000. The note was
payable with interest at 8% per annum and was paid in full in December 1993,
partially through the offset of $220,000 of amounts due Mr. Gorlin from the
Company for use of his aircraft for Company business, as noted below.

In June 1992, the Company and Carl Alving, M.D. entered into a Stock and
Asset Exchange Agreement pursuant to which Dr. Alving assigned to the Company
his rights to various vaccine technologies. In return, the Company issued
766,666 shares of Common Stock to Dr. Alving, paid Dr. Alving an initial royalty
of $40,000 and agreed to pay annual royalties of $40,000 through June 1996. See
"Management -- Director Compensation."

From the inception of the Company through December 31, 1993, the Company
utilized aircraft owned by Steve Gorlin or entities controlled by Steve Gorlin
at a cost of approximately $220,000, which amount was determined by the
Company's Board of Directors to be the fair market value based on costs charged
by other chartered service operators. Such amounts were paid by the Company
through offset against the $350,000 note payable by Mr. Gorlin described above.
In May 1992, the

43
<PAGE>
Company extended an interest-free loan of approximately $24,000 to Mr. Gorlin,
which amount was repaid in August 1992. From inception until August 1, 1992, the
Company operated out of the offices of Mr. Gorlin at no cost to the Company.

In April 1993, the Starke Trust purchased 50,000 shares of Common Stock from
the Company at a purchase price of $6.00 per share. In July 1994, the Starke
Trust loaned the Company $300,000, which loan was evidenced by a convertible
promissory note payable on demand bearing interest at 8% per annum. In September
1994, the principal amount of such note was converted into 47,066 shares of
Common Stock (a conversion price of $6.375 per share). In October 1994, the
Starke Trust purchased 84,633 shares of Common Stock from the Company at a
purchase price of $6.375 per share. In February 1995, the Starke Trust purchased
33,333 shares of Common Stock from the Company at a purchase price of $6.375 per
share. In June 1995, Mr. Starke loaned the Company an aggregate of $162,916 in
exchange for a promissory note due and paid in December 1995, together with
interest at the rate of 9% per annum, and warrants to purchase 10,648 shares at
$6.375 per share. In November 1995, the Company granted Mr. Dunlap warrants to
purchase 166,667 shares, exercisable 66,667 immediately and the remainder in
three equal annual installments at an exercise price of $6.375 per share.

The Company and Mr. Gorlin, Dr. Holaday, Dr. Alving, Dr. Chernow, D.H. Blair
Investment Banking Corp. and Kinder Investments, L.P. are parties to a
Shareholder Agreement, dated June 4, 1992, as amended and restated on December
10, 1993 (the "Shareholder Agreement"). The Shareholder Agreement grants to Dr.
Alving the right, in connection with an initial public offering of the Company's
securities, to request the registration of shares of Common Stock held by him
having a value of $250,000. Mr. Gorlin agreed to purchase such shares from Dr.
Alving in the event that such shares are not so registered following a request
by Dr. Alving. Dr. Alving has waived his right to request such registration.

Pursuant to a consulting arrangement, the Company paid Mr. Dunlap fees of
$54,000 in each of 1993, 1994 and 1995 and a $100,000 bonus in 1995. The Company
entered into a three year consulting agreement with Mr. Dunlap commencing
January 1, 1996 that provides for annual payments of $90,000. See "Management --
Director Compensation." In May 1996 effective August 1995, the Company entered
into a termination agreement with Steve Gorlin, a co-founder and former director
of the Company, superseding a previous consulting agreement with Mr. Gorlin,
that provides for annual payments of $90,000 per year for a three year period.

44
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the ownership
of Common Stock for (i) each person known by the Company to own beneficially
more than five percent of the outstanding voting stock, (ii) each director and
named executive officer of the Company and (iii) all executive officers and
directors of the Company as a group, prior to this offering and as adjusted to
give effect to the sale of the Common Stock offered hereby and the sale of the
BMS Shares.

<TABLE>
<CAPTION>
SHARES TO BE
PURCHASED IN
NUMBER OF SHARES PERCENTAGE CONCURRENT PERCENTAGE
NAME AND ADDRESS OF BENEFICIALLY OWNED OWNED BEFORE PRIVATE OWNED AFTER
BENEFICIAL OWNER (1) BEFORE OFFERING OFFERING PLACEMENT OFFERING
- ----------------------------------------------- ------------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
John W. Holaday, Ph.D.......................... 886,901(2) 10.27% 7.29%
Carl R. Alving, M.D............................ 778,235(3) 9.19 6.48
Donald S. Brooks............................... 40,001(4) * *
Bart Chernow, M.D.............................. 714,917(3) 8.44 5.96
Samuel R. Dunlap, Jr........................... 394,237(5) 4.50 3.21
Leo Einck, Ph.D................................ 11,667(6) * *
Edward R. Gubish, Ph.D......................... 31,000(7) * *
Carol A. Nacy, Ph.D............................ 170,000(8) 1.97 1.40
Mark C.M. Randall.............................. 40,001(4) * *
Leon E. Rosenberg, M.D......................... --(9) -- --
Wendell M. Starke.............................. 318,097(10) 3.72 2.63
Bristol-Myers Squibb Company .................. 986,110(11) 11.07 333,333(12) 10.61
P.O. Box 4000
Princeton, New Jersey 08543
D.H. Blair Investment Banking Corp. . 1,000,000(13) 11.82 8.36
44 Wall Street
New York, New York 10005
Steve Gorlin................................... 706,709(14) 8.25 5.84
All executive officers and directors of the
Company as a group (12 persons)............... 3,405,223(15) 37.12 26.24
</TABLE>

- ------------------------
* Less than 1%

(1)Unless otherwise indicated, the address is c/o EntreMed, Inc., 9610 Medical
Center Drive, Suite 200, Rockville, MD 20850. Except as otherwise indicated,
each of the parties listed above has sole voting and investment power over
the shares owned.

(2)Includes 176,669 shares issuable upon exercise of options which are
currently exercisable. Does not include 200,000 shares issuable upon
exercise of options not exercisable within 60 days.

(3)Includes 10,002 shares issuable upon exercise of options which are currently
exercisable.

(4)Includes 40,001 shares issuable upon exercise of options which are currently
exercisable.

(5)Includes 293,336 shares issuable upon exercise of options which are
currently exercisable. Does not include 100,000 shares issuable upon
exercise of options not exercisable within 60 days.

(6)Includes 10,667 shares issuable upon exercise of options which are currently
exercisable. Does not include 72,667 shares issuable upon exercise of
options not exercisable within 60 days.

45
<PAGE>
(7)Includes 30,000 shares issuable upon exercise of options which are currently
exercisable. Does not include 80,000 shares issuable upon exercise of
options not exercisable within 60 days.

(8)Includes 170,000 shares issuable upon exercise of options which are
currently exercisable. Does not include 146,667 shares issuable upon
exercise of options not exercisable within 60 days.

(9)Does not include shares owned by Bristol-Myers Squibb Company. Dr. Rosenberg
is the President of Bristol-Myers Squibb Pharmaceutical Research Institute,
an entity affiliated with Bristol-Myers, and he disclaims beneficial
ownership of any shares held by Bristol-Myers.

(10)Includes (i) 83,984 shares issuable upon exercise of options and warrants
which are currently exercisable and (ii) 40,561 shares owned by various
family members of Mr. Starke, as to which Mr. Starke disclaims beneficial
ownership.

(11)Includes 444,444 shares (assuming an initial public offering price of $15.00
per share) issuable upon exercise of warrants which are exercisable for one
year commencing on the date of this Prospectus.

(12)Represents shares which Bristol-Myers has agreed to purchase on the date of
this Prospectus.

(13)Excludes (i) 375,666 shares owned by the adult children and grandchildren of
J. Morton Davis, the sole stockholder of D.H. Blair Investment Banking Corp.
("Blair") and (ii) 18,000 shares owned by the Vice Chairman of Blair and his
children, as to all of which shares Blair disclaims beneficial ownership.
Also excludes an aggregate of 1,061,563 shares owned by Steve Gorlin and
June Gorlin, Mr. Gorlin's former wife, which are subject to the Gorlin
Pledge (as defined below).

(14)Includes (i) 110,002 shares issuable upon exercise of options which are
currently exercisable and (ii) 15,134 shares owned by Mr. Gorlin's children,
as to which Mr. Gorlin disclaims beneficial ownership. All of the shares
owned by Mr. Gorlin are pledged to Blair and J. Morton Davis to secure
obligations owed by Mr. Gorlin to Blair (the "Gorlin Pledge"). Such shares
may be voted by Mr. Gorlin until such time as a default occurs under the
Gorlin Pledge or the underlying obligation. Does not include 381,192 shares
owned by June Gorlin, as to which Mr. Gorlin disclaims beneficial ownership.
Includes 30,000 shares that Mr. Gorlin has agreed to distribute to his
former wife. See footnote 13 above.

(15)Includes 982,997 shares issuable upon exercise of options which are
currently exercisable. Does not include 599,334 shares issuable upon
exercise of options not exercisable within 60 days.

Each of Steve Gorlin and Drs. Holaday, Alving and Chernow may be deemed a
"founder" of the Company, as that term is defined under the Securities Act.

46
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Set forth below is a summary of the terms of the capital stock of the
Company. Such summary is qualified in its entirety by reference to the Company's
Restated Certificate of Incorporation, attached as an exhibit hereto, and gives
effect to the filing of a Certificate of Amendment thereto, the form of which is
attached as an exhibit hereto.

The Company's authorized capital stock currently consists of 27,000,000
shares of Common Stock, $.01 par value, and 8,000,000 shares of Preferred Stock,
$1.00 par value.

COMMON STOCK

Immediately prior to the date hereof, there were 8,460,579 shares of Common
Stock outstanding (including 2,000,000 shares issuable upon conversion of the
3,000,000 outstanding shares of Preferred Stock) held by approximately 260
shareholders of record. Holders of shares of Common Stock are entitled to one
vote at all meetings of shareholders for each share held by them and are not
entitled to cumulative voting. Holders of Common Stock have no preemptive rights
and have no other rights to subscribe for additional shares of the Company nor
does the Common Stock have any conversion rights or rights of redemption, either
of which rights have not been waived. 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. See "Dividend Policy." Upon liquidation,
all holders of Common Stock are entitled to participate pro rata in the assets
of the Company available for distribution, subject to the rights of any class of
preferred stock then outstanding. All of the outstanding shares of Common Stock
are, and the shares to be issued pursuant to this offering will be, when issued,
fully paid and nonassessable.

PREFERRED STOCK

Effective upon the closing of this offering, the Company will be authorized
to issue up to 5,000,000 shares of Preferred Stock. The Board of Directors will
have the authority to issue this Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of shares
constituting any series of the designation of such series, without further vote
or action by the stockholders. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the Company
without further action by the stockholders and may adversely affect the voting
and other rights of the holders of Common Stock, including the loss of voting
control to others. Prior to the date hereof, there were 3,000,000 shares of
Preferred Stock outstanding held by 19 shareholders of record, which shares will
be automatically converted into 2,000,000 shares of Common Stock on the date of
this Prospectus, and the shares of Preferred Stock will be cancelled and
retired.

REGISTRATION RIGHTS

Beginning one year from the date of this Prospectus, Bristol-Myers is
entitled to certain registration rights with respect to 874,999 shares of Common
Stock (including 333,333 shares to be purchased in a private placement upon the
closing of this offering) and 444,444 shares issuable upon exercise of warrants
(which amounts assume an initial public offering price of $15.00 per share) and,
beginning 13 months from the date of this Prospectus, certain holders of
1,157,344 shares of Common Stock and the holders of 211,315 warrants are
entitled to certain registration rights with respect to such shares and the
Common Stock issuable upon exercise of the warrants. Under the agreements
between the Company and these holders, the holders may request that the Company
file a registration statement under the Securities Act and, upon such request
and subject to certain minimum size conditions, the Company generally will be
required to use its best efforts to effect any such registration. In addition,
if the Company proposes to register any of its Common Stock, either for its own
account or for the account of other stockholders, the Company is required, with
certain exceptions, to notify the holders

47
<PAGE>
described above and, subject to certain limitations, to include in such
registration all of the shares of Common Stock requested to be included by such
holders. The Company is generally obligated to bear the expenses, other than
underwriting discounts and sales commissions, of all of these registrations.

Any exercise of such registration rights may hinder efforts by the Company
to arrange future financings of the Company and/or have an adverse effect on the
market price of the Company's shares.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer and Trust Company, New York, New York, will act as
transfer agent and registrar for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering and the sale of the BMS Shares by the
Company, the Company will have 11,993,912 shares of Common Stock outstanding,
assuming that the Underwriters' over-allotment option and other outstanding
options and warrants are not exercised. Of these shares, the 3,200,000 shares
offered hereby will be freely tradeable without restriction or further
registration under the Securities Act, unless purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act ("Rule
144") described below. The remaining 8,793,912 shares outstanding upon
completion of this offering are "restricted securities" as that term is defined
under Rule 144 (the "Restricted Shares") and may not be sold publicly unless
they are registered under the Securities Act or are sold pursuant to Rule 144 or
another exemption from registration. Approximately 3,424,290 of the Restricted
Shares will become eligible for sale immediately following the date of the
Prospectus and, subject to compliance with Rule 144 under the Securities Act,
approximately 2,925,714 of the Restricted Shares will be eligible for sale in
the public market beginning 90 days from the date of this Prospectus. The
remaining Restricted Shares will become eligible for sale pursuant to the Rule
144 between June 1996 and June 1998. In addition, the Company intends to file a
Form S-8 to register an aggregate of 1,750,000 shares subject to outstanding
options or reserved for issuance pursuant to the Company's stock option plans.

Beginning 90 days after the date of this Prospectus, certain shares issuable
upon exercise of options granted by the Company prior to the date of this
Prospectus will also be eligible for sale in the public market pursuant to Rule
701 under the Securities Act. In general, Rule 701 permits resales of shares
issued pursuant to certain compensatory benefit plans and contracts commencing
90 days after the issuer becomes subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, in reliance upon Rule 144 but
without compliance with certain restrictions, including the holding period
requirements, contained in Rule 144. If all the requirements of Rule 701 are
met, as of March 31, 1996, an aggregate of approximately 855,930 shares of
Common Stock issuable upon exercise of currently outstanding options will be
eligible for sale pursuant to such rule.

Notwithstanding the foregoing, the Underwriters have requested that all
directors and executive officers and other stockholders of the Company agree not
to sell or otherwise dispose of any shares of the Company's Common Stock without
the prior written consent of Allen & Company Incorporated, on behalf of the
Underwriters, for a period of 180 days after the date hereof. See
"Underwriting."

In general under Rule 144, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years, including
persons who may be deemed to be "affiliates" of the Company, would be entitled
to sell within any three-month period a number of shares that does not exceed
the greater of (i) one percent of the then outstanding shares of Common Stock or
(ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain requirements as to the manner of sale, notice and the availability of
current public information about the Company. In addition, a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days

48
<PAGE>

preceding a sale, and who has beneficially owned for at least three years the
shares proposed to be sold, would be entitled to sell such shares under Rule
144(k) without regard to the requirements described above. Moreover, the
Securities and Exchange Commission has recently proposed an amendment to the
holding period requirements of Rule 144 to permit resales of restricted
securities after a one-year holding period rather than a two-year holding
period, and to permit unrestricted resales by non-affiliates pursuant to Rule
144(k) after a two-year holding period rather than a three-year holding period.
In the event that such proposal is adopted, the dates upon which certain of the
Restricted Shares will become eligible for sale pursuant to Rule 144 will be
accelerated.

Certain holders of Common Stock and warrants to purchase Common Stock have
certain demand and piggy-back registration rights. See "Description of Capital
Stock -- Registration Rights."

Prior to this offering, there has been no market for the Common Stock of the
Company, and the Company cannot predict what effect, if any, that sales of
Common Stock or the availability of Common Stock for sale will have on the
market price of such securities prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices and the ability of the Company to
raise equity capital in the future.

49
<PAGE>
UNDERWRITING

The Underwriters named below, for whom Allen & Company Incorporated, Dillon,
Read & Co. Inc. and Volpe, Welty & Company are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company the
aggregate number of shares of Common Stock set forth below opposite their
respective names:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
Allen & Company Incorporated.........................................................................
Dillon, Read & Co. Inc...............................................................................
Volpe, Welty & Company...............................................................................

-----------
Total............................................................................................ 3,200,000
-----------
-----------
</TABLE>

Pursuant to the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the shares of Common Stock offered hereby (other than shares that may be
purchased under the over-allotment option) if any are purchased. The
Underwriters propose initially to offer the shares to the public at the price
set forth on the cover page of this Prospectus. The Underwriters may allow a
selling concession not exceeding $ per share of Common Stock to certain
dealers. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to other dealers. The public offering price and
concessions may be changed by the Representatives after the initial public
offering.

The Company has agreed to reimburse the Representatives amounts up to an
aggregate of $200,000 toward their out-of-pocket expenses incurred in connection
with this offering.

The Company has granted to the Underwriters an option expiring 30 days after
the date of the Underwriting Agreement, to purchase up to an additional 480,000
shares of Common Stock at the public offering price, less underwriting discounts
and commissions, all as set forth on the cover page of this Prospectus. The
Underwriters may exercise the option only to cover over-allotments, if any, in
the sale of shares of Common Stock in this offering. To the extent that the
Underwriters exercise their option, each Underwriter will be committed, subject
to certain conditions, to purchase a number of such additional shares
proportionate to such Underwriter's initial commitment.

Bristol-Myers has agreed to purchase from the Company in a private placement
on the closing of this offering $5,000,000 of Common Stock at the initial public
offering price (333,333 shares, assuming an initial public offering price of
$15.00 per share). Bristol-Myers, which is an existing stockholder of the
Company, has agreed not to sell, offer for sale, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable for shares of Common Stock or any rights to acquire Common Stock for
a period of 180 days after the date this Prospectus, without the prior written
consent of Allen & Company Incorporated, on behalf of the Underwriters.

The Company has agreed, and the Underwriters have requested that the
officers, directors and shareholders of the Company agree, not to sell, offer
for sale, contract to sell or otherwise dispose of

50
<PAGE>
any shares of Common Stock or any securities convertible into or exercisable for
shares of Common Stock or any rights to acquire Common Stock for a period of 180
days after the date this Prospectus, without the prior written consent of Allen
& Company Incorporated, on behalf of the Underwriters.

The Company and the Underwriters have agreed to indemnify one another
against certain liabilities, including liabilities under the Securities Act.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated between the Company
and the Representatives. Among the factors to be considered in determining the
initial public offering price of the Common Stock, in addition to the prevailing
market conditions, will be the Company's historical performance, capital
structure, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and consideration of the
above factors in relation to market values of the companies in related
businesses. The Representatives have informed the Company that the Underwriters
do not intend to confirm sales to accounts over which they exercise
discretionary authority.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for the
Company by Bachner, Tally, Polevoy & Misher LLP, New York, New York. The
statements in this Prospectus under the captions "Risk Factors -- Dependence on
Patents and Other Proprietary Rights; Uncertainty of Patent Position and
Proprietary Rights" and "Business -- Patents and Proprietary Rights" and other
references herein to patent matters have been reviewed and will be passed on by
Jones & Askew, Atlanta, Georgia, patent counsel to the Company. As a condition
to consummation of this offering, Arnold & Porter, Washington, D.C., will render
to the Underwriters its opinion that, without having verified any factual
statements in this Prospectus and subject to certain assumptions and other
qualifications stated in such opinion, the statements in this Prospectus under
the caption "Risk Factors -- Uncertainty of Government Regulatory Requirements;
Lengthy Approval Process" and "Business -- Government Regulation" to the extent
they reflect legal matters arising under federal laws administered by the U.S.
Food and Drug Administration fairly summarize the material legal and regulatory
requirements of such laws currently applicable to the Company's products as they
are described in this Prospectus. Certain legal matters will be passed upon for
the Underwriters by Werbel McMillin & Carnelutti, A Professional Corporation,
New York, New York.

EXPERTS

The financial statements of EntreMed, Inc. at December 31, 1994 and 1995 and
for each of the three years in the period ended December 31, 1995 appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement on Form S-1 under the
Securities Act with the Securities and Exchange Commission (the "Commission") in
Washington, D.C. with respect to the shares of Common Stock offered hereby. This
Prospectus, which is part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is hereby made to the Registration
Statement and such exhibits and schedules, which may be inspected without charge
at the office of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Reports and other information filed by the Company with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at the

51
<PAGE>
following addresses: New York Regional Office, Seven World Trade Center, New
York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Statements contained
in this Prospectus as to the contents of any contract or other document referred
to are not necessarily complete and in each instance reference is made to the
copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.

52
<PAGE>

ENTREMED, INC.
INDEX TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
Report of Independent Auditors........................................................ F-2
<S> <C>
Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996.................... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996....................................... F-4
Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and
1995 and for the three months ended March 31, 1995 and 1996.......................... F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996....................................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
EntreMed, Inc.

We have audited the accompanying balance sheets of EntreMed, Inc. as of
December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. 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 EntreMed, Inc. at December
31, 1994 and 1995 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Atlanta, Georgia
January 25, 1996,
except for Note 13, as to which the date is
March 29, 1996

F-2
<PAGE>
ENTREMED, INC.
BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MARCH 31, 1996
DECEMBER 31, --------------------------
-------------------------- PRO FORMA
1994 1995 ACTUAL (NOTE 1)
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 218,619 $ 6,885,099 $ 7,600,058 $ 7,600,058
Account receivable..................... -- 2,500,000 100,000 100,000
Interest receivable.................... -- 4,016 15,389 15,389
------------ ------------ ------------ ------------
Total current assets..................... 218,619 9,389,115 7,715,447 7,715,447
Furniture and equipment, net............. 605,006 754,399 744,410 744,410
Other assets:
Deposits............................... 894 894 894 894
Other.................................. 19,223 1,975 146,098 146,098
------------ ------------ ------------ ------------
Total other assets....................... 20,117 2,869 146,992 146,992
------------ ------------ ------------ ------------
Total assets............................. $ 843,742 $ 10,146,383 $ 8,606,849 $ 8,606,849
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable....................... $ 551,046 $ 367,250 $ 1,405,643 $ 1,405,643
Accrued liabilities.................... -- 341,776 501,788 501,788
Capital lease obligations.............. -- 396,113 404,233 404,233
Deferred revenue....................... -- 2,594,166 1,676,665 1,676,665
------------ ------------ ------------ ------------
Total current liabilities.............. 551,046 3,699,305 3,988,329 3,988,329
Capital lease obligations, less current
portion................................. -- 104,152 -- --
Deferred revenue, less current portion... -- 2,741,666 2,566,667 2,566,667
Stockholders' equity:
Convertible preferred stock, $1.00 par
value and $1.50 liquidation value:
5,000,000 shares authorized,
3,000,000 shares issued and
outstanding......................... 3,000,000 3,000,000 3,000,000 --
Common stock, $0.01 par value:
20,000,000 shares authorized,
5,064,101 and 6,376,588 shares
issued and outstanding at December
31, 1994 and 1995, respectively..... 50,641 63,766 64,606 84,606
Additional paid-in capital............. 10,020,807 21,024,465 21,149,625 24,129,625
Accumulated deficit.................... (12,778,752) (20,486,971) (22,162,378) (22,162,378)
------------ ------------ ------------ ------------
Total stockholders' equity............... 292,696 3,601,260 2,051,853 2,051,853
------------ ------------ ------------ ------------
Total liabilities and stockholders'
equity.................................. $ 843,742 $ 10,146,383 $ 8,606,849 $ 8,606,849
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes.

F-3
<PAGE>
ENTREMED, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Grant revenues.......................... $ -- $ 90,185 $ 347,001 $ -- $ --
Collaborative research and
development............................ -- -- 347,501 -- 1,042,500
License fees............................ -- -- 16,667 -- 50,000
-------------- -------------- -------------- -------------- --------------
-- 90,185 711,169 -- 1,092,500
Expenses:
Research and development................ 4,772,652 3,673,929 5,939,512 1,596,677 2,063,270
General and administrative.............. 1,552,143 1,549,705 2,458,976 455,342 771,411
-------------- -------------- -------------- -------------- --------------
6,324,795 5,223,634 8,398,488 2,052,019 2,834,681
Interest expense.......................... -- -- (65,754) -- (9,547)
Interest income........................... 85,939 18,993 44,854 5,559 76,321
-------------- -------------- -------------- -------------- --------------
Net loss.................................. $ (6,238,856) $ (5,114,456) $ (7,708,219) $ (2,046,460) $ (1,675,407)
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Net loss per share........................ $ (1.04) $ (0.76) $ (1.06) $ (0.29) $ (0.23)
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Weighted average number of shares
outstanding.............................. 5,982,052 6,713,929 7,271,943 7,152,183 7,312,035
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Pro forma net loss per share.............. $ (0.83) $ (0.18)
-------------- --------------
-------------- --------------
Pro forma weighted average number of
shares outstanding....................... 9,271,943 9,312,035
-------------- --------------
-------------- --------------
</TABLE>

See accompanying notes.

F-4
<PAGE>
ENTREMED, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL STOCK
--------------------- ------------------------ PAID-IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT
---------- --------- ----------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993........ 3,311,600 $ 33,115 3,000,000 $ 3,000,000 $ 16,560 $ (100,000) $ (1,425,440)
Issuance of common stock at
$.015 per share ($6.00 fair
value) for research and
development costs.............. 66,666 667 -- -- 399,333 -- --
Sale of common stock at $6.00
per share, net of offering
costs of approximately
$89,000........................ 1,183,696 11,837 -- -- 7,001,766 -- --
Payment of stock subscription... -- -- -- -- -- 100,000 --
Net loss........................ -- -- -- -- -- -- (6,238,856)
---------- --------- ----------- ----------- ------------ ------------ -------------
Balance at December 31, 1993...... 4,561,962 45,619 3,000,000 3,000,000 7,417,659 -- (7,664,296)
Issuance of common stock for
options exercised at $1.50 per
share.......................... 33,331 333 -- -- 49,667 -- --
Issuance of common stock for
compensation to employees at
$6.00 per share................ 15,660 157 -- -- 93,843 -- --
Issuance of common stock for
consulting services at $6.00
per share...................... 6,666 67 -- -- 39,933 -- --
Sale of common stock at $6.38
per share, net of offering
costs of approximately
$422,000....................... 446,482 4,465 -- -- 2,419,705 -- --
Net loss........................ -- -- -- -- -- -- (5,114,456)
---------- --------- ----------- ----------- ------------ ------------ -------------
Balance at December 31, 1994...... 5,064,101 50,641 3,000,000 3,000,000 10,020,807 -- (12,778,752)
Issuance of common stock for
options exercised at $1.50 per
share.......................... 42,663 427 -- -- 63,573 -- --
Issuance of common stock for
compensation to directors at
$6.38 per share................ 12,150 121 -- -- 77,379 -- --
Sale of common stock at $6.38
per share, net of offering
costs of approximately
$180,000....................... 710,862 7,109 -- -- 4,306,382 -- --
Sale of common stock in
connection with research
agreement at $12.00 per share.. 541,666 5,417 -- -- 6,494,583 -- --
Sale of common stock at $12.00
per share...................... 5,146 51 -- -- 61,741 -- --
Net loss........................ -- -- -- -- -- -- (7,708,219)
---------- --------- ----------- ----------- ------------ ------------ -------------
Balance at December 31, 1995...... 6,376,588 $ 63,766 3,000,000 $ 3,000,000 $ 21,024,465 $ -- $ (20,486,971)
---------- --------- ----------- ----------- ------------ ------------ -------------
Issuance of common stock for
option exercised at $1.50 per
share (unaudited)................ 83,991 840 -- -- 125,160 -- --
Net loss (unaudited).............. -- -- -- -- -- -- (1,675,407)
---------- --------- ----------- ----------- ------------ ------------ -------------
Balance at March 31, 1996
(unaudited)...................... 6,460,579 $ 64,606 3,000,000 $ 3,000,000 21,149,625 $ -- $ (22,162,378)
---------- --------- ----------- ----------- ------------ ------------ -------------
---------- --------- ----------- ----------- ------------ ------------ -------------

TOTAL
------------
<S> <C>
Balance at January 1, 1993........ $ 1,524,235
Issuance of common stock at
$.015 per share ($6.00 fair
value) for research and
development costs.............. 400,000
Sale of common stock at $6.00
per share, net of offering
costs of approximately
$89,000........................ 7,013,603
Payment of stock subscription... 100,000
Net loss........................ (6,238,856)
------------
Balance at December 31, 1993...... 2,798,982
Issuance of common stock for
options exercised at $1.50 per
share.......................... 50,000
Issuance of common stock for
compensation to employees at
$6.00 per share................ 94,000
Issuance of common stock for
consulting services at $6.00
per share...................... 40,000
Sale of common stock at $6.38
per share, net of offering
costs of approximately
$422,000....................... 2,424,170
Net loss........................ (5,114,456)
------------
Balance at December 31, 1994...... 292,696
Issuance of common stock for
options exercised at $1.50 per
share.......................... 64,000
Issuance of common stock for
compensation to directors at
$6.38 per share................ 77,500
Sale of common stock at $6.38
per share, net of offering
costs of approximately
$180,000....................... 4,313,491
Sale of common stock in
connection with research
agreement at $12.00 per share.. 6,500,000
Sale of common stock at $12.00
per share...................... 61,792
Net loss........................ (7,708,219)
------------
Balance at December 31, 1995...... $ 3,601,260
------------
Issuance of common stock for
option exercised at $1.50 per
share (unaudited)................ 126,000
Net loss (unaudited).............. (1,675,407)
------------
Balance at March 31, 1996
(unaudited)...................... $ 2,051,853
------------
------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
ENTREMED, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31,
---------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................ $ (6,238,856) $ (5,114,456) $ (7,708,219) $ (2,046,460) $ (1,675,408)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization................. 83,270 153,015 201,593 48,457 48,124
Stock issued for compensation and consulting
expense...................................... 399,000 134,000 77,500 -- --
Deferred revenue.............................. -- -- 5,335,832 -- (1,092,500)
Changes in assets and liabilities:
Account receivable.......................... -- -- (2,500,000) -- 2,400,000
Other assets................................ 12,346 -- -- 13,120 (44,665)
Accounts payable............................ 13,471 475,119 (183,796) 78,553 1,198,405
Accrued liabilities......................... -- -- 341,776 -- --
Deposits.................................... 75,659 -- -- -- --
Interest receivable......................... 20,050 -- (4,016) -- (11,373)
------------ ------------ ------------ ------------ ------------
Net cash used by operating activities........... (5,635,060) (4,352,322) (4,439,330) (1,906,330) 822,583
CASH FLOWS FROM INVESTING ACTIVITIES
Investments..................................... -- -- -- -- (100,000)
Purchases of furniture and equipment............ (689,950) (91,894) (210,829) (34,386) (37,592)
------------ ------------ ------------ ------------ ------------
Net cash used by investing activities........... (689,950) (91,894) (210,829) (34,386) (137,592)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale lease-back................... -- -- 654,020 -- --
Payment of lease obligation..................... -- -- (276,664) -- (96,032)
Sales of common stock........................... 7,014,603 2,474,170 10,939,283 1,783,227 126,000
Repayment of note payable....................... -- -- (510,000) -- --
Proceeds from note payable...................... -- -- 510,000 -- --
Sales of preferred stock........................ 100,000 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities....... 7,114,603 2,474,170 11,316,639 1,783,227 29,968
Net increase (decrease) in cash and cash
equivalents.................................... 789,593 (1,970,046) 6,666,480 (157,489) 714,959
Cash and cash equivalents at beginning of
period......................................... 1,399,072 2,188,665 218,619 218,619 6,885,099
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period...... $ 2,188,665 $ 218,619 $ 6,885,099 $ 61,130 $ 7,600,058
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
AND NONCASH INVESTMENT AND FINANCING ACTIVITIES
Interest paid................................... $ -- $ -- $ 65,754 $ -- $ 9,547
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Equipment purchased under capital lease......... $ -- $ -- $ 122,909 $ -- $ --
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>

See accompanying notes.

F-6
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

EntreMed, Inc. (the "Company") is engaged primarily in the research and
development of biopharmaceutical products that address the role of blood and
blood vessels in the prevention and treatment of a broad range of diseases. The
Company's core technologies include (i) an antiangiogenesis program focused on
the development of proprietary products intended to inhibit the abnormal growth
the new blood vessels associated with cancer and certain causes of blindness and
(ii) a blood cell permeation device designed to enhance the ability of red blood
cells to deliver oxygen to organs and tissues and which may also be used to
deliver drugs, genes or other therapeutic agents that otherwise would not
readily diffuse through blood cell membranes.

The Company's strategy is to accelerate development of its antiangiogenesis
and cell permeation technologies as well as other promising technologies which
the Company perceives to have clinical and commercial potential. The principal
elements of the Company's strategy are (i) to focus its resources on current
core technologies, (ii) to broaden its product and technology portfolio through
sponsored research collaborations with academic institutions, government
organizations and private enterprises, (iii) to augment product development with
its in-house research and development capabilities and (iv) to leverage its
resources through corporate partnerships in order to minimize the cost to the
Company of late-stage clinical trials and to accelerate effective product
commercialization. All of the Company's product candidiates are in the
development stage and require further research, development, testing and
regulatory clearances.

The Company was organized in September 1991 as a Delaware corporation and
from inception through December 1995 was in the development stage. In December
1995, the Company and Bristol-Myers Squibb Company ("Bristol-Myers") entered
into a collaboration to develop and commercialize certain antiangiogenesis
therapeutics (see Note 6). The Company received approximately 50% of its
revenues from Bristol-Myers in 1995 and expects this concentration to increase
in future years.

RESEARCH AND DEVELOPMENT

Research and development expenses consist of independent proprietary
research and development costs, the costs associated with work performed under
collaborative research agreements and the Company's sponsored funding of
research programs performed by others. Research and development costs are
expensed as incurred.

PATENT COSTS

Costs incurred in filing, prosecuting and maintaining patents are expensed
as incurred. Such costs aggregated approximately $356,400, $455,800 and $454,600
in 1993, 1994 and 1995, respectively, and $100,555 (unaudited) and $109,834
(unaudited) for the three months ended March 31, 1995 and 1996, respectively.

FURNITURE AND EQUIPMENT

Furniture and equipment are stated at cost and are depreciated over their
expected useful lives of five years. Depreciation is provided on a straight-line
basis. Amortization associated with capital leases is included in depreciation
expense.

CASH EQUIVALENTS

Cash equivalents include cash and short-term investments with original
maturities of less than 90 days.

F-7
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

Income taxes have been provided using the liability method in accordance
with FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES.

REVENUE RECOGNITION

Revenues related to grants received for specific project proposals are
recognized in revenue as earned in accordance with specified provisions,
including performance requirements, in the contracts. Revenue from the
collaborative research and development agreement mentioned in Note 6 is recorded
when earned as defined under the terms of the agreement. Nonrefundable fees
received upon contract signing are recorded as deferred revenue and recognized
over the term of the agreement. Other periodic research funding payments
received which are related to future performance are deferred and recognized as
income when earned.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited financial statements as of March 31, 1996 and for
the three month periods ended March 31, 1995 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, such financial statements do not include all of the
information and disclosures required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.

PRO FORMA BALANCE SHEET (UNAUDITED)

The March 31, 1996 unaudited pro forma balance sheet reflects the automatic
conversion of 3,000,000 outstanding shares of preferred stock into 2,000,000
shares of common stock upon the effective date of a public offering of the
Company's common stock.

NET LOSS PER SHARE

Net loss per share is based on the weighted average number of common shares
outstanding. Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common and convertible preferred stock issued for consideration
below the assumed initial public offering price of $15.00 and stock options and
warrants issued with exercise prices below the assumed initial public offering
price during the twelve-month period preceding the initial filing of the
registration statement, have been included in the calculation of common shares,
using the treasury stock method, as if they were outstanding for all periods
prior to the effective date of the initial public offering.

Pro forma net loss per share and weighted average shares outstanding for the
year ended December 31, 1995 and the three month period ended March 31, 1996
give effect to the automatic conversion of 3,000,000 outstanding shares of
preferred stock into 2,000,000 shares of common stock upon the effective date of
a public offering of the Company's common stock.

STOCK BASED COMPENSATION

The Company accounts for stock options in accordance with APB Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Under APB No. 25, no compensation
expense is recognized for stock or stock options issued at fair market value.

F-8
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION ("SFAS 123"), which provides an
alternative to APB No. 25 in accounting for stock based compensation issued to
employees. SFAS 123 provides for a fair value based method of accounting for
employee stock options and similar equity instruments. However, for companies
that continue to account for stock based compensation arrangements under APB No.
25, SFAS 123 requires disclosure of the pro forma effect on net income and
earnings per share as if the fair value based method prescribed by SFAS 123 had
been applied. The disclosure requirements are effective for fiscal years
beginning after December 31, 1995, or upon initial adoption of the statement, if
earlier. The Company plans to continue to account for stock based compensation
arrangements under APB No. 25 and plans to adopt the pro forma disclosure
requirements of SFAS 123 in 1996.

ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results inevitably will differ from those estimates,
and such differences may be material to the financial statements.

2. RELATED PARTY TRANSACTIONS

During 1995, the Company borrowed approximately $510,000 from related
parties, of which $162,916 was borrowed from a director of the Company, and
issued its notes payable at 9% interest. Upon receipt of proceeds from the
collaborative research and development agreement mentioned in Note 6, the
Company paid the notes and accrued interest.

3. FURNITURE AND EQUIPMENT
Furniture and equipment are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
------------ ------------
<S> <C> <C>
Furniture and equipment........................................ $ 840,369 $ 941,226
Less: accumulated depreciation................................. (235,363) (186,827)
------------ ------------
$ 605,006 $ 754,399
------------ ------------
------------ ------------
</TABLE>

4. OPERATING LEASE
The Company leases its primary facilities through March 31, 2003. The lease
agreement provides for escalation of the lease payments over the term of the
lease, however, rent expense is recognized under the straight-line method. The
future minimum payments under the lease as of December 31, 1995 are as follows:

<TABLE>
<S> <C>
1996........................................................... $ 215,400
1997........................................................... 221,100
1998........................................................... 227,000
1999........................................................... 233,200
Thereafter..................................................... 723,600
----------
Total minimum payments..................................... $1,620,300
----------
----------
</TABLE>

Rental expense for the years ended December 31, 1993, 1994 and 1995 was
$158,000, $187,000, and $210,000, respectively.

F-9
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

5. SPONSORED RESEARCH PROGRAM AGREEMENTS

During 1994 and 1995, the Company entered into several agreements to sponsor
external research programs. The Company's primary external research program
agreement was entered into in September 1993 with the Children's Hospital in
Boston, Massachusetts, an entity affiliated with Harvard Medical School
("Children's Hospital"). Under this sponsored research agreement the Company
agreed to pay Children's Hospital $11,000,000 to support research on the role of
angiogenesis in pathological conditions. In accordance with the terms of this
sponsored research agreement, $4,000,000 has been paid as of December 31, 1995,
$1,000,000 is due on April 1, 1996 and the remainder is due in equal semi-annual
payments until April 1, 1999. This sponsored research agreement gives the
Company an exclusive option to negotiate an exclusive, worldwide,
royalty-bearing license to any technology resulting from the research at
Children's Hospital in areas covered by the agreement. Amounts due under the
sponsored research agreement with Children's Hospital, which is cancelable by
the Company upon six months' notice, are paid in advance each six months and are
expensed as incurred as research and development costs. As of December 31, 1995,
the Company's total commitments for external research programs are as follows:

<TABLE>
<S> <C>
1996........................................................... $2,304,000
1997........................................................... 2,188,000
1998........................................................... 2,000,000
1999........................................................... 1,000,000
----------
Total commitments.......................................... $7,492,000
----------
----------
</TABLE>

6. COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT

In December 1995, the Company and Bristol-Myers entered into a collaboration
to develop and commercialize certain antiangiogenesis therapeutics. This
collaboration provides for Bristol-Myers to fund Company research, provide
milestone payments to the Company, and pay the Company royalties on net sales of
any products developed under the collaboration. In return, the Company granted
Bristol-Myers exclusive worldwide rights to antiangiogenic applications of
thalidomide, thalidomide analogs and Angiostatin protein.

Bristol-Myers is obligated under the Bristol-Myers collaboration to fund
$18.35 million over five years for costs to be incurred by the Company related
to specified research and development. The Company may receive an additional $32
million if the Company attains certain late-stage clinical development and
regulatory filing milestones under the Bristol-Myers collaboration, a portion of
which will be credited against royalties. In addition to this funding,
Bristol-Myers has committed to fund $730,000 for clinical studies and
ophthalmological trials. Bristol-Myers may terminate this collaboration for any
reason with six months notice, in which event Bristol-Myers would have no
further funding obligation to the Company. In the event Bristol-Myers were to
terminate the Bristol-Myers collaboration or otherwise fail to conduct its
collaborative activities successfully and in a timely manner, the preclinical
and clinical development or commercialization of the Company's licensed
antiangiogenesis product candidates would be delayed or terminated.

The Company received a non-refundable, non-creditable licensing fee of $1
million in 1995 under the Bristol-Myers collaboration and an additional $2.5
million on March 31, 1996 in recognition of certain research and development
efforts of the Company. These amounts were recorded as deferred revenue and are
being recognized over five years, the initial term of the collaboration
agreement.

F-10
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

6. COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT (CONTINUED)
Concurrent with the signing of the Bristol-Myers collaboration, the Company
issued Bristol-Myers 541,666 shares of common stock for aggregate cash proceeds
of $6,500,000. Bristol-Myers also agreed to purchase $5,000,000 (333,333 shares,
assuming an initial public offering price of $15.00 per share) of additional
common stock of the Company at the initial public offering price if and when the
Company completes an initial public offering in the future and was granted the
right to purchase an additional $10,000,000 of Company common stock at 150% of
the initial public offering price (444,444 shares, assuming an initial public
offering price of $15.00 per share) from the Company at any time up to one year
from the effective date of the initial public offering.

During 1995, the Company recognized approximately $347,000 in revenue and
incurred costs of approximately $500,000 related to the above described
collaborative research and development agreement. For the three month period
ended March 31, 1996, the Company recognized $1,092,500 (unaudited) in revenue
and incurred costs of $1,351,930 (unaudited) under this agreement.

7. SALE-LEASEBACK AGREEMENT
During 1995, the Company entered into a sale-leaseback agreement which is
accounted for as a capital lease. The lessor agreed to purchase the Company's
equipment and also assumed and exercised the Company's purchase option on other
leased equipment. The Company agreed to lease-back the equipment over an initial
term of two years with annual renewal options in years three and four. The
Company has the option to purchase the equipment at fair market value at the end
of years two and three. If the option is not exercised the Company must purchase
all equipment at fair market value at the end of year four. In connection with
the agreement, the Company granted the lessor warrants for 33,334 shares of
common stock at an exercise price of $6.38 per share.

Capitalized leased furniture and equipment with a cost of $776,929 is
included in furniture and equipment (see Note 3).

Future minimum payments under this lease agreement as of December 31, 1995
are as follows:

<TABLE>
<S> <C>
1996............................................................. $ 422,314
1997............................................................. 105,570
---------
Total minimum lease payments..................................... 527,884
Less amount representing interest................................ 27,619
---------
Present value of net minimum lease payments...................... $ 500,265
---------
---------
</TABLE>

8. INCOME TAXES
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $17,100,000 for income tax purposes that expire in years 2006
through 2010. The Company also has research and development tax credit
carryforwards of approximately $1,239,000 that expire in years 2007 through
2010. The utilization of the net operating loss and research and development
carryforwards may be limited in future years due to changes in ownership of the
Company pursuant to Internal Revenue Code Section 382. For financial reporting
purposes, a valuation allowance has been recognized to reduce the net deferred
tax assets to zero due to uncertainties with respect to the Company's ability to
generate taxable income in the future sufficient to realize the benefit of
deferred income tax assets.

F-11
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

8. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income tax assets and liabilities as of December 31, 1994
and 1995 are as follows:

<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Deferred income tax assets (liability):
Research and development credit carryforwards............ $ 1,119,000 $ 1,239,000
Net operating loss carryforwards......................... 4,337,000 5,819,000
Deferred revenues........................................ -- 976,000
Other.................................................... 11,000 160,000
Depreciation............................................. (27,000) (24,000)
Valuation allowance for deferred income tax assets....... (5,440,000) (8,170,000)
-------------- --------------
Net deferred income taxes.............................. $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>

A reconciliation of the provision for income taxes to the federal statutory
rate is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Tax at statutory rate......................... $ (2,121,000) $ (1,739,000) $ (2,621,000)
Tax credits................................... (791,000) (287,000) (120,000)
Other......................................... 2,000 2,000 11,000
Valuation allowance........................... 2,910,000 2,024,000 2,730,000
-------------- -------------- --------------
$ -- $ -- $ --
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

9. CONVERTIBLE PREFERRED STOCK
The preferred stock has certain preferential rights in the event of
liquidation or dissolution of the Company but does not have any preferences in
regard to voting rights or dividend distributions. The preferred stock is
convertible into the Company's common stock at the option of the preferred
stockholder. Upon the effective date of a public offering of the Company's
common stock, the preferred stock will automatically be converted into common
stock. See Note 13.

10. STOCK OPTIONS AND WARRANTS
The Company adopted an incentive and nonqualified stock option plan on
December 2, 1992, whereby 1,233,333 shares of the Company's common stock were
reserved for grants to various

F-12
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

10. STOCK OPTIONS AND WARRANTS (CONTINUED)
executive, scientific and administrative personnel of the Company as well as
outside directors and consultants. These options vest over periods varying from
vesting immediately through four years and generally expire 10 years from the
date of grant. Stock option activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
----------- ------------------
<S> <C> <C>
Outstanding at December 31, 1992......................... 333,337 $1.50
Granted................................................ 207,343 $1.50 - $ 6.00
-----------
Outstanding at December 31, 1993......................... 540,680 $1.50 - $ 6.00
Granted................................................ 63,340 $6.00 - $ 6.38
-----------
Outstanding at December 31, 1994......................... 604,020 $1.50 - $ 6.38
Granted................................................ 436,343 $6.00 - $12.00
-----------
Outstanding at December 31, 1995......................... 1,040,363 $1.50 - $12.00
-----------
-----------
Exercisable at December 31, 1995......................... 684,559
-----------
-----------
</TABLE>

The Company also granted 83,334 and 50,000 options to purchase common stock
at $6.00 and $6.38 per share during 1993 and 1995, respectively, to Children's
Hospital in connection with a sponsored research agreement (see Note 5). These
options are not covered by the incentive and nonqualified stock option plan and
are included in the table below.

The Company also has granted warrants to various executive, scientific and
administrative personnel of the Company as well as outside directors,
consultants, and certain third parties. Warrants granted generally expire after
10 years from the date of grant. Stock warrant activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
WARRANTS PER SHARE
----------- -----------------
<S> <C> <C>
Outstanding at December 31, 1992.......................... 600,000 $1.50
Granted................................................. 83,334 $6.00
-----------
Outstanding at December 31, 1993.......................... 683,334 $1.50 - $6.00
Exercised............................................... (33,331) $1.50
Granted................................................. 44,648 $7.65
-----------
Outstanding at December 31, 1994.......................... 694,651 $1.50 - $7.65
Exercised............................................... (42,663) $1.50
Granted................................................. 706,669 $6.38
-----------
Outstanding at December 31, 1995.......................... 1,358,657 $1.50 - $7.65
-----------
-----------
Exercisable at December 31, 1995.......................... 980,879
-----------
-----------
</TABLE>

The Company also granted warrants to Bristol-Myers in connection with the
Bristol-Myers collaboration described in Note 6.

F-13
<PAGE>
ENTREMED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

11. FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and account receivable.

The Company maintains cash and cash equivalents with various financial
institutions. The Company's policy is to limit exposure to any one institution.
The account receivable is due from Bristol-Myers.

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates their fair values.

ACCOUNT RECEIVABLE AND ACCOUNTS PAYABLE: The carrying amounts reported
in the balance sheet for the account receivable and accounts payable
approximate their fair values.

CAPITAL LEASE PAYABLE: The fair value of the Company's capital lease is
estimated using discounted cash flow analysis, based on the Company's
current incremental borrowing rates for similar types of borrowing
arrangements. The carrying amount reported in the balance sheet for the
capital lease payable approximates its fair value.

12. COMMITMENTS AND CONTINGENCIES

The Company is a party to certain litigation initiated in August 1995 in the
United States District Court for the Eastern District of Tennessee by Bolling,
McCool & Twist, a consulting firm. The suit relates to a claim for services
rendered in the approximate amount of $50,000 and seek a finder's fee in an
unspecified amount in connection with the Bristol-Myers collaboration. Due to
the lack of discovery and early stage of the proceedings, the Company is unable
to predict with certainty the eventual outcome of the lawsuit. The Company
intends to contest the action vigorously and believes that this proceeding will
not have a material adverse effect on the Company or on its financial
statements.

The Company is obligated to make annual license agreement payments of
$40,000 to a director of the Company for certain rights to technologies. The
payments began on June 4, 1992 and conclude on June 4, 1996.

In May 1994, the Company entered into a license agreement, which was amended
in 1995, whereby the Company gained the rights to make, use, lease and sell
licensed products developed by Children's Hospital. In consideration for
receiving the rights, the Company must pay a royalty on any sublicensing fees,
as defined in the agreement, to Children's Hospital. The Company is also
required to pay certain amounts upon the attainment of certain milestones. The
milestone payments aggregate $2,650,000, of which $290,000 has been paid to
date, and are based upon license fees and achievement of regulatory approvals.

In addition, the license agreement requires the Company to pay Children's
Hospital a specified percentage of the royalty income received on the first $100
million in net sales of the licensed products, and an increased percentage
thereafter, with a minimum payment based on a percentage of net sales of the
licensed products by any sublicensees.

13. SUBSEQUENT EVENT
On March 29, 1996, the Company's Board of Directors declared a two-for-three
reverse stock split of the common stock to be effective, subject to stockholder
approval, retroactively to the date of inception (September 18, 1991). Upon such
effectiveness, the conversion ratio of the convertible preferred stock,
previously one-for-one, will be adjusted to reflect the reverse stock split. All
common stock, option information, weighted average shares and earnings per share
information has been retroactively restated to reflect the reverse stock split.

F-14

<PAGE>

IHP-TREATED RED BLOOD CELLS

Organs and tissues in the body require oxygen to function properly. Inositol
hexophosphate (IHP), a naturally occurring plant chemical, may enhance the
oxygen releasing capabilities of red blood cells. This schematic illustrates
IHP-treated red blood cells. EntreMed is developing a cell permeation
technology to deliver IHP into red blood cells and which may also be used to
deliver drugs, genes or other therapeutic agents that otherwise would not
readily diffuse through blood cell membranes.

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 14
Dividend Policy................................ 14
Capitalization................................. 15
Dilution....................................... 16
Selected Financial Data........................ 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 18
Business....................................... 21
Management..................................... 35
Certain Transactions........................... 43
Principal Stockholders......................... 45
Description of Capital Stock................... 47
Shares Eligible for Future Sale................ 48
Underwriting................................... 50
Legal Matters.................................. 51
Experts........................................ 51
Additional Information......................... 51
Index to Financial Statements.................. F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

3,200,000 SHARES

[LOGO]

COMMON STOCK

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

P R O S P E C T U S
---------------------

ALLEN & COMPANY
INCORPORATED

DILLON, READ & CO. INC.

VOLPE, WELTY & COMPANY

, 1996

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered (other than
underwriting discounts and commissions) are as follows:

<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
SEC Registration Fee............................................................. $ 22,207
NASD Filing Fee.................................................................. 6,940
Nasdaq Listing Fee............................................................... *
Reimbursement of Underwriters' Expenses.......................................... 200,000
Printing and Engraving Expenses.................................................. *
Accounting Fees and Expenses..................................................... *
Legal Fees and Expenses.......................................................... *
Blue Sky Fees and Expenses....................................................... *
Transfer Agent's Fees and Expenses............................................... *
Miscellaneous Expenses........................................................... *
-----------
Total........................................................................
-----------
-----------
</TABLE>

- ------------------------
* To be completed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Certificate of Incorporation and By-Laws of the Registrant provides that
the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporation Law (the "GCL"). Section 145 of the GCL, relating
to indemnification, is hereby incorporated herein by reference.

Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Company pursuant
to the Company's By-laws and the Delaware General Corporation Law, the Company
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

The Company's Restated Certificate of Incorporation includes certain
provisions permitted pursuant to Delaware law whereby officers and directors of
the Company are to be indemnified against certain liabilities. The Company's
Restated Certificate of Incorporation also limits, to the fullest extent
permitted by Delaware law, a director's liability for monetary damages for
breach of fiduciary duty, including gross negligence, except liability for (i)
breach of the director's duty of loyalty, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(iii) the unlawful payment of a dividend or unlawful stock purchase or
redemption and (iv) any transaction from which the director derives an improper
personal benefit. Delaware law does not eliminate a director's duty of care and
this provision has no effect on the availability of equitable remedies such as
injunction or rescission based upon a director's breach of the duty of care.

In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Registrant eliminates the personal liability of directors
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director with certain limited exceptions set forth in Section
102(a)(7).

II-1
<PAGE>
The Registrant also intends to enter into indemnification agreements with
each of its executive officers and directors, the form of which is filed as
Exhibit 10.16 hereto and reference is hereby made to such form.

Reference is made to Section 6 of the Underwriting Agreement (Exhibit 1.1)
which provides for indemnification by the Underwriters of the Registrant, its
officers and directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The following discussion gives retroactive effect to the two-for-three
reverse stock split effected in April 1996. Since March 1993, the Registrant has
sold and issued the following unregistered securities:

In March through October 1993, the Registrant issued an aggregate of
1,183,696 shares of Common Stock to 77 accredited investors for a purchase price
of $6.00 per share. The shares were issued pursuant to an exemption from
registration provided by Regulation D promulgated under Section 4(2) of the
Securities Act.

In April 1994, the Registrant issued 33,331 shares of Common Stock to Samuel
R. Dunlap, Jr., a director of the Registrant, upon the exercise of options
exercisable at $1.50 per share.

In May 1994, the Registrant issued 15,660 shares of Common Stock valued at
$6.00 per share to 18 employees in consideration for services rendered.

In May 1994, the Registrant issued 6,666 shares of Common Stock valued at
$6.00 per share to Bolling, McCool & Twist, an independent consultant, in
consideration for consulting services rendered.

In September through November 1994, the Registrant issued an aggregate of
446,482 shares of Common Stock to 35 accredited investors for a purchase price
of $6.375 per share. The shares were issued pursuant to an exemption from
registration provided by Regulation D promulgated under Section 4(2) of the
Securities Act. Josephthal Lyon and Ross Incorporated acted as the Registrant's
placement agent in connection with this private placement. In connection
therewith, the Registrant paid sales commissions in the amount of approximately
$228,000 and a non-accountable expense allowance in the aggregate amount of
approximately $31,000.

In May through November 1995, the Registrant issued an aggregate of 42,663
shares of Common Stock to Samuel R. Dunlap, Jr., a director of the Registrant,
upon the exercise of options exercisable at $1.50 per share.

In May and November 1995, the Registrant issued 12,150 shares of Common
Stock valued at $6.375 per share to ten directors of the Registrant in
consideration for services rendered.

In December 1994 through September 1995, the Registrant issued an aggregate
of 710,862 shares of Common Stock to 34 accredited investors for a purchase
price of $6.375 per share. The shares were issued pursuant to an exemption from
registration provided by Regulation D promulgated under Section 4(2) of the
Securities Act. In connection therewith, the Registrant paid an aggregate of
approximately $175,000 in sales commissions.

In December 1995, the Registrant issued to Bristol-Myers Squibb Company
541,666 shares of Common Stock at a purchase price of $12.00 per share and a
warrant to purchase 444,444 shares of Common Stock at an exercise price of
$22.50 (assuming an initial public offering price of $15.00 per share).

In December 1995, the Registrant issued 5,149 shares of Common Stock valued
at $12.00 per share to eight accredited investors.

II-2
<PAGE>

In January through March 1996, the Registrant issued an aggregate of 84,000
shares of Common Stock to Samuel R. Dunlap, Jr., a director of the Registrant,
upon the exercise of stock options exercisable at $1.50 per share.

Except as otherwise noted above, (i) the above transactions were private
transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof, (ii) the sale of securities was without the use of an
underwriter and (iii) the certificates evidencing the shares bear a restrictive
legend permitting the transfer thereof only upon registration of the shares or
an exemption under the Securities Act of 1933, as amended.

The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities Act
of 1933, as amended, pursuant to Section 4(2) thereof. Except as otherwise
indicated, the sale of securities was without the use of an underwriter, and the
certificates evidencing the shares bear a restrictive legend permitting the
transfer thereof only upon registration of the shares or an exemption under the
Securities Act of 1933, as amended.

ITEM 16. EXHIBITS

<TABLE>
<C> <S>
1.1. Revised Form of Underwriting Agreement
3.1.* Amended and Restated Certificate of Incorporation of the Registrant
3.2* Form of Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the Registrant
3.3* By-laws of the Registrant
5.1** Opinion of Bachner, Tally, Polevoy & Misher LLP
10.1* Research Collaboration and License Agreement, dated December 7, 1995, between the
Registrant and Bristol-Myers Squibb Company ("BMS")
10.2 Restricted Stock Purchase Agreement, dated December 7, 1995, between the
Registrant and BMS
10.3* Warrant to Purchase Common Stock, dated December 7, 1995, issued by the Registrant
to BMS
10.4* Registration Rights Agreement, dated December 7, 1995, between the Registrant and
BMS
10.5* Research Agreement, dated September 29, 1993, between the Registrant and
Children's Hospital
10.6*+ Amendment to Research Agreement, dated August 23, 1995, between the Registrant and
Children's Hospital
10.7*+ License Agreement, dated May 26, 1994, between Children's Medical Center
Corporation ("CMCC") and the Registrant
10.8*+ Amendment to License Agreement, dated August 23, 1995, between CMCC and the
Registrant
10.9*+ License Agreement, dated May 26, 1994, between CMCC and the Registrant
10.10*+ Amendment to License Agreement, dated August 23, 1995, between CMCC and the
Registrant
10.11* Sponsored Research Agreement, dated November 5, 1992, between the Registrant and
CBR Laboratories, Inc. ("CBRL")
10.12*+ Licensing Agreement, dated November 5, 1992, between the Registrant and CBRL
10.13* Employment Agreement, dated as of January 1, 1996, between the Registrant and John
W. Holaday, Ph.D.
10.14* 1992 Stock Incentive Plan
10.15 Amended and Restated 1996 Stock Option Plan
10.16* Form of Stock Option Agreement
</TABLE>

II-3
<PAGE>

<TABLE>
<C> <S>
10.17* Consulting Agreement between the Registrant and Samuel R. Dunlap, Jr.
10.18* Consulting Agreement between the Registrant and Steve Gorlin (superseded by
Exhibit 10.18a)
10.18(a) Termination Agreement dated May 15, 1996 effective August 1, 1996, between the
Registrant and Steve Gorlin
10.19* Master Equipment Lease Agreement, dated April 10, 1995, between the Registrant and
MMC/GATX Partnership No. 1
10.20* Lease between the Registrant and Red Gate III Limited Partnership
10.21 Form of Indemnification Agreement
10.22 Research and License Agreement, dated August 1993, between the Registrant and
Innovative Therapeutics, Inc.
11.1 Computation of per share data
23.1** Consent of Bachner, Tally, Polevoy & Misher LLP (Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3* Consent of Jones & Askew
23.4* Consent of Arnold & Porter
24.1* Power of Attorney
</TABLE>

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

* Previously filed.

** To be filed by amendment.

+ Confidential treatment has been requested.

ITEM 17. UNDERTAKINGS

UNDERTAKINGS REQUIRED BY REGULATION S-K, ITEM 512(F).
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

UNDERTAKING REQUIRED BY REGULATION S-K, ITEM 512(H).

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than 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 public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

UNDERTAKINGS REQUIRED BY REGULATION S-K, ITEM 512(I).

The undersigned registrant hereby undertakes that:

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

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

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rockville,
State of Maryland on the 16th day of May, 1996.

ENTREMED, INC.

By: /s/ JOHN W. HOLADAY, PH.D.

-----------------------------------
John W. Holaday, Ph.D., Chairman of
the
Board and Chief Executive Officer

SIGNATURE

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

<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ JOHN W. HOLADAY, PH.D. Chairman of the Board and Chief
------------------------------------------- Executive Officer (principal executive May 16, 1996
John W. Holaday, Ph.D. officer)

/s/ JOHN C. THOMAS
------------------------------------------- Chief Financial Officer (principal May 16, 1996
John C. Thomas accounting and financial officer)

/s/ CARL ALVING, M.D.
------------------------------------------- Director May 16, 1996
Carl Alving, M.D.

/s/ DONALD S. BROOKS
------------------------------------------- Director May 16, 1996
Donald S. Brooks

/s/ BART CHERNOW, M.D.
------------------------------------------- Director May 16, 1996
Bart Chernow, M.D.

------------------------------------------- Executive Advisor and Director , 1996
Samuel R. Dunlap, Jr.

/s/ MARK C.M. RANDALL
------------------------------------------- Director May 16, 1996
Mark C.M. Randall

/s/ LEON E. ROSENBERG, M.D.
------------------------------------------- Director May 16, 1996
Leon E. Rosenberg, M.D.

/s/ WENDELL M. STARKE
------------------------------------------- Director May 16, 1996
Wendell M. Starke
</TABLE>

II-5

<PAGE>

DRAFT OF 5/13/96

===============================================================================

3,500,000 SHARES

ENTREMED, INC.

COMMON STOCK

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

UNDERWRITING AGREEMENT
SELECTED DEALER AGREEMENT

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

____________, 1996

===============================================================================

3,500,000 SHARES

ENTREMED, INC.

COMMON STOCK

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

UNDERWRITING AGREEMENT

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

___________, 1996

ALLEN & COMPANY INCORPORATED
DILLON, READ & CO. INC.
VOLPE, WELTY & COMPANY
As Representatives of the Several
Underwriters
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022

Dear Sirs:

EntreMed, Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement with the several Underwriters named in schedule A
hereto (the "Underwriters"), for which you are acting as representatives (the
"Representatives"), as follows:

1. DESCRIPTION OF SECURITIES. The Company has authorized by
appropriate corporate action and proposes to issue and sell to the
Underwriters its shares of Common Stock, $.01 par value. As further
described in Section 3 hereof, 3,500,000 of such shares (the "Purchased
Shares") are being sold by the Company to the Underwriters and the Company is
granting to the Underwriters an option to purchase up to 525,000 additional
shares (the "Option Shares"). The Purchased Shares and Option Shares are
herein collectively referred to as the "Shares".

2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to and agrees with each Underwriter that:

(a) A registration statement on Form S-1 (File No. 333-3536) with
respect to the Shares, including a preliminary form of prospectus, copies of
which have heretofore been delivered to you, has been prepared by the Company
in conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") under the Act, and
has been filed with the Commission under the Act; such amendment or
amendments to such registration statement, copies of which have heretofore
been delivered to you, as may have been made prior to the date of this
Agreement have been so prepared and filed; and the Company has so prepared
and proposes so to file in a timely manner after the effective date of such
registration statement the final form of prospectus. Such registration
statement (including all exhibits thereto), as finally amended and revised as
of the time the Underwriters first offer the Shares for sale to the public
together with information, if any, which is permitted to be, and is,
subsequently filed pursuant to Rule 430A of the Rules and Regulations, is
herein referred to as the "Registration Statement". Such prospectus in the
form filed pursuant to Rule 424(b) of the Rules and Regulations, or, if no
final prospectus is filed with the Commission pursuant to Rule 424(b), in
such form as such final prospectus is included in the Registration Statement,
is herein referred to as the "Prospectus". Each preliminary form of
prospectus is herein referred to as a "Preliminary Prospectus".

(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time of filing of
each Preliminary Prospectus, such prospectus did not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. When the Registration Statement was declared
effective and at all times subsequent thereto up to and at each Closing Date
(hereinafter defined) (i) the Registration Statement did and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, and (ii) the Registration Statement did not or will not include
as of its date any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading. When
the Prospectus or any amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment
or supplement is not required to be so filed, when the Registration Statement
or the amendment thereto containing such amendment or supplement to the
Prospectus was or is declared effective), on the date when the Prospectus is
otherwise amended or supplemented and on each Closing Date (as hereinafter
defined), the Prospectus, as amended or supplemented at any such time, (i)
complied or will comply in all material respects with the requirements of the
Act and the Rules and Regulations and (ii) did not or will not include 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. The foregoing
representations and warranties shall not apply to information contained in or
omitted from the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of any Underwriter for
use in the preparation thereof.

(c) Except as described in or contemplated by the Prospectus,
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company has not incurred any
direct or, to the best of the Company's knowledge, contingent material
liabilities or material obligations, or entered into any material
transactions or contracts not in the ordinary course of business, and there
has not been any material change in its capital shares, options or warrants,
nor any material increase or decrease in the amount thereof outstanding or in
any of its long-term debt outstanding, except pursuant to the terms of the
instruments governing the same, or any material adverse change in the
condition (financial or otherwise), results of operations, business or
prospects of the Company.

(d) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before any court or governmental
or regulatory agency or body which could reasonably be expected to result in
any material adverse change in the condition (financial or otherwise),
results of operations, business or prospects of the Company, or could
reasonably be expected to materially and adversely affect the properties,
assets or ability to do business as contemplated in the Prospectus of the
Company; and there are no contracts or documents required to be filed as
exhibits to the Registration Statement by the Act or by the Rules and
Regulations which have not been filed as exhibits to the Registration
Statement.

(e) This Agreement has been duly authorized, executed and
delivered on behalf of the Company and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms, except
(1) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (2) as rights to indemnity or contribution
hereunder may be limited by federal or state securities laws; the execution,
delivery and performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation of
any term or provision of, or constitute a default under, (i) any currently
existing statute, any indenture, mortgage, deed of trust, note agreement or
other agreement or instrument filed as an exhibit to the Registration
Statement or any other material indenture, mortgage, deed of trust, note or
agreement or other agreement or instrument to which the Company is a party or
by which it or its property is bound; (ii) the charter or by-laws of the
Company; or (iii) any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or over its properties;
no consent, approval, authorization or order of any court or governmental
agency or body is required for the consummation by the Company of the
transactions on its part herein contemplated, except such as have been
obtained or such as may be required under the Act or as may be required under
state or other securities or blue sky laws in connection with the purchase
and distribution of the Shares by the Underwriters; and the Company is not in
material default, and no event has occurred which with the giving of notice
or lapse of time or both would be a default, under any contract, agreement,
indenture, mortgage or other undertaking to which the Company is a party and
which is material to the condition (financial or otherwise), results of
operations, business or prospects of the Company.

(f) 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, with full power and authority, corporate or otherwise, to own
its properties and conduct its business as described and contemplated in the
Registration Statement, and is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions where its operations
or ownership of property requires such qualifications, except where failure
so to qualify would not have a material effect on the Company.

(g) The Company has the authorized and outstanding capital stock
set forth in the Prospectus; the outstanding capital stock of the Company
conforms, and the Shares when issued and sold as herein contemplated will
conform, in all material respects, to all statements in relation thereto
contained in the Registration Statement and the Prospectus and all such stock
has been duly authorized and the outstanding capital stock has been and the
Shares, when issued and delivered against payment therefor as provided
herein, will be validly issued, fully-paid and nonassessable; except as
stated in the Prospectus, the stockholders of the Company have no preemptive
rights with respect to the Shares and there are no outstanding rights,
options or warrants to acquire any securities of the Company; to the extent
that any rights, options or warrants to acquire any securities of the Company
are outstanding, except as otherwise set forth in the Prospectus, the
issuance of the Shares as described in the Prospectus will not result in an
adjustment of the exercise price or number of shares issuable upon the
exercise in respect of any such rights, options or warrants; and, except as
otherwise set forth in the Prospectus, the Company does not own (directly or
indirectly) any shares of capital stock of any subsidiaries.

(h) Except as otherwise set forth in the Prospectus, the Company
owns, possesses or has rights to, or can acquire on reasonable terms,
adequate patents, patent applications, patent licenses, trademarks, service
marks and trade names necessary to carry on its business as presently
conducted, and except as set forth in the Prospectus, the Company has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent licenses, trademarks, service
marks or trade names which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could materially and adversely
affect the condition (financial or otherwise), earnings, affairs, business or
prospects of the Company.

(i) Except as set forth in the Prospectus, the Company holds in
good standing or has applied for all licenses, permits, authorizations,
franchises, consents and orders of all federal, state, local, and foreign
governmental bodies that are material to the conduct of its business as
presently conducted as described in the Prospectus; except as stated in the
Prospectus, the Company has good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by
it, in each case free and clear of all liens, encumbrances and defects with
such exceptions as are not material to the Company; and the real property and
personal property referred to in the Prospectus as held under lease by the
Company is held by it under valid, subsisting and enforceable leases with
only such exceptions as are referred to in the Prospectus or as in the
aggregate are not material to the conduct of its business as presently
conducted as described in the Prospectus.

(j) The Company is conducting and proposes to conduct its business
so as to comply in all material respects with all material applicable
federal, state, local and foreign governmental statutes, rules and
regulations; and except as set forth in the Prospectus, the Company is not
charged with, or to the Company's knowledge, is under investigation with
respect to, any violation of any of such statutes, rules or regulations.

(k) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the business in which it is engaged; and, the
Company does not have any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
business or financial condition of the Company, except as described or
contemplated in the Prospectus.

(l) Ernst & Young LLP, which has examined and expressed its
opinion on certain of the financial statements of the Company filed with the
Commission as a part of the Registration Statement, are, to the Company's
best knowledge, independent accountants with respect to the Company within
the meaning of the Act and the Rules and Regulations; the financial
statements, together with the related notes, forming part of the Registration
Statement and Prospectus fairly present the financial condition of the
Company and its results of operations as of the dates and for the periods
described in such opinion in the Prospectus; and such financial statements
have been prepared in accordance with the Rules and Regulations of the
Commission.

(m) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that transactions are executed in
accordance with management's general or specific authorizations and are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles.

(n) Except as stated in the Prospectus, the Company knows of no
outstanding claims for services, either in the nature of a finder's fee or
origination fee, with respect to the transactions contemplated hereby, and
the Company agrees to indemnify and hold the Underwriters harmless from any
such claim for any such services of such nature arising from the act of any
person other than any Underwriter or person acting on behalf of any
Underwriter.

(o) No person holds a right to require or participate in the
registration under the Act of the Common Stock of the Company to be effected
by the Registration Statement, which right has not been effectively waived by
the holder thereof as of the date hereof.

(p) The Company has obtained from each of its officers and
directors, and from each of its shareholders owning in excess of [1%] of the
shares of the Company's Common Stock outstanding immediately prior to the
offering contemplated hereby, and will use its best efforts to obtain from
each of its other shareholders, an executed agreement in form and substance
satisfactory to the Representatives that they will not, without the prior
written consent of Allen & Company Incorporated on behalf of the
Underwriters, sell, offer for sale, contract to sell or otherwise dispose of
any shares of the Company's Common Stock or any securities exercisable for or
convertible into its Common Stock or any rights to acquire Common Stock for a
period of 180 days from the date of the final Prospectus.

3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to each
Underwriter and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $______ per Share, the
number of Shares set forth opposite the name of such Underwriter in Schedule
A hereto.

The Company will deliver the Purchased Shares to you for the
accounts of the several Underwriters at the office of Allen & Company
Incorporated, 711 Fifth Avenue, New York, New York, against payment of the
purchase price therefor by certified or official bank check or checks in New
York Clearing House funds, payable to the order of EntreMed, Inc., at 10:00
A.M., New York Time, on ____________, 1996 or at such other time and date not
later than five full business days thereafter as you and the Company may
determine, such time and date of delivery and payment being herein called the
"First Closing Date". The certificates for the Purchased Shares to be so
delivered will be made available to you at such office for checking at least
one full business day prior to such Closing Date and will be in such names
and denominations as you may request in writing not less than two full
business days prior to such Closing Date.

On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Company grants to the Underwriters an option to purchase up to 525,000
Option Shares at the same price per share as the Underwriters shall pay for
the Purchased Shares. Such option may be exercised only to cover
over-allotments arising in connection with the sale of Purchased Shares by
the Underwriters, such exercise to be upon written notice by you to the
Company within 30 days of the date hereof setting forth the number of Options
Shares as to which the Underwriters are exercising the option, the
denominations and names in which certificates for such Shares should be
registered and the time and place at which such certificates are to be
delivered. Such time and place (unless such time is the First Closing Date),
herein referred to as the "Second Closing Date", shall be determined by you
but shall not be earlier than the First Closing Date, nor earlier than three
full business days or later than ten full business days after the exercise of
such option. The Company will deliver Option Shares to you for the accounts
of the several Underwriters against payment of the purchase price therefor by
certified or official bank check or checks in New York Clearing House funds
payable to the order of EntreMed, Inc. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the
aggregate number of Option Shares purchased as the number of Purchased Shares
set forth opposite the name of such Underwriter in Schedule A hereto bears to
3,500,000.

It is understood that you, individually and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment on behalf of any Underwriter or Underwriters for Shares to
be purchased by such Underwriter or Underwriters. Any such payment by you
shall not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder.

After the Registration Statement becomes effective, the several
Underwriters propose to offer the Shares to the public as set forth in the
Prospectus.

4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that:

(a) The Company will use its best efforts to cause the
Registration Statement and any subsequent amendment thereto to become
effective as promptly as possible; it will notify you, promptly after it
shall receive notice thereof, of the time when the Registration Statement or
any subsequent amendment to the Registration Statement has become effective
or any supplement to the Prospectus has been filed; it will notify you
promptly of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; it
will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in your reasonable opinion or
the reasonable opinion of the Company or its counsel, may be necessary in
connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if,
at any time when a prospectus relating to the Shares is required to be
delivered under the Act, any event shall have occurred as a result of which
the Prospectus would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus after the nine-month period
referred to in Section 10(a)(3) of the Act in connection with sales of the
Shares purchased by the Underwriters from the Company pursuant to Section 3
or otherwise acquired by the Underwriters during the distribution of the
Shares in connection with stabilization or otherwise, the Company will
prepare and file with the Commission promptly upon request of, but at the
expense of, such Underwriter, any amendments or supplements to the
Registration Statement or Prospectus as may be necessary, in such
Underwriter's reasonable opinion, to permit the sale of such Shares in the
manner determined by such Underwriter, in compliance with the requirements of
the Act, including Section 10(a)(3) thereunder; and it will file no amendment
or supplement to the Registration Statement or Prospectus that shall not
previously have been submitted to you in writing a reasonable time prior to
the proposed filing thereof or to which you shall reasonably object in
writing, except as may be required by law.

(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order suspending trading in the Shares or other of the Company's
securities or of the initiation or threat of any proceeding for that purpose;
and it will use promptly its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such a stop order should be issued.

(c) The Company will use its best efforts to qualify the Shares for
sale under the blue sky or securities laws of such jurisdictions as you may
reasonably designate and to continue such qualifications in effect for so long
as may be required for purposes of the distribution of the Shares, except that
the Company shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation or to execute a general consent to
service of process in any state.

(d) The Company will furnish to you, as soon as available, copies of
the Registration Statement (one of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and any amendments or
supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you may
from time to time reasonably request.

(e) The Company will make generally available to its security holders
as soon as practicable, an earnings statement (which will be in reasonable
detail but need not be audited) covering a 12-month period beginning after the
effective date of the Registration Statement which shall satisfy the provisions
of Section 11(a) of the Act.

(f) The Company agrees, during each fiscal year for a period of five
years from the date hereof, to furnish to its stockholders as promptly as may be
practicable an annual report (including financial statements audited by
independent public accountants) and to furnish quarterly financial statements
(which need not be audited) for each of the first three quarters of each fiscal
year, and to furnish, upon request, to each Underwriter hereunder (i) as soon as
practicable after the end of each of the first three quarters of each fiscal
year, the Company's quarterly report on Form 10-Q or statements of operations of
the Company for such quarter in reasonable detail and certified by the Company's
principal financial or accounting officer; (ii) as soon as practicable after the
end of each fiscal year, financial statements of the Company as at the end of
such fiscal year, including statements of operations, retained earnings and
changes in cash flow of the Company for such fiscal year, all in reasonable
detail and accompanied by a copy of the report thereon of independent public
accountants or the Company's annual report on Form 10-K; and (iii) as soon as
they are available, copies of all reports and financial statements filed with
the Commission. During such period, if and so long as the Company shall have
active subsidiaries, the foregoing financial statements shall be on a combined
or consolidated basis to the extent that the accounts of the Company and its
subsidiaries are combined or consolidated.

(g) The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements, and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act; (ii) all other
expenses in connection with the preparation, printing, and filing of the
Registration Statement, each Preliminary Prospectus, and the Prospectus and
amendments and supplements thereto, and the mailing and delivering of copies
thereof to the Underwriters and dealers; (iii) the cost of printing this
Agreement, the Selected Dealer Agreement, the Blue Sky Memorandum, and any
other documents in connection with the offering, purchase, sale and delivery
of the Shares; (iv) all costs and expenses in connection with the issuance
and delivery of the Shares hereunder to the Underwriters, including related
transfer taxes, if any; (v) all expenses in connection with the qualification
of the Shares for offering and sale under the securities laws of various
jurisdictions, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky Survey; (vi) the filing fees incident to securing any required
review by the National Association of Securities Dealers, Inc. of the terms
of the sale of the Shares; (vii) the costs of preparing stock certificates;
(viii) the cost and charges of any transfer agent or registrar; and (ix) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
4. In addition to the foregoing, the Company shall reimburse the
Underwriters, upon request from time to time, for their reasonable itemized
out-of-pocket expenses up to a maximum of $200,000, including their
reasonable legal fees and disbursements and travel, roadshow and syndicate
expenses, upon the presentation of reasonable documentation thereof. If the
Company determines not to proceed with the offering for any reason, other
than the Underwriters' unwillingness to proceed on the terms and conditions
set forth in this Agreement, or if the Representatives exercise their right
to terminate this Agreement pursuant to Section 10(b)(i) hereof, the Company
shall reimburse the Underwriters for all reasonable out-of-pocket expenses
including reasonable legal fees and disbursements and travel, roadshow and
syndicate expenses actually incurred by the Underwriters, upon the
presentation of reasonable documentation thereof, up to a maximum of
$300,000. The Company shall not in any event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement.

(h) The Company agrees that it will not, without the prior written
consent of the Allen & Company Incorporated on behalf of the Underwriters, sell,
offer for sale, contract to sell or otherwise dispose of any shares of its
Common Stock or any securities exercisable for or convertible into shares of its
Common Stock or any rights to acquire Common Stock, for a period of 180 days
after the date of the final Prospectus, otherwise than in accordance with this
Agreement or as contemplated in the Prospectus; provided, that the Company may
issue Common Stock, or options, rights or warrants with respect thereto, (i)
upon the exercise of stock options and warrants outstanding on the date hereof,
(ii) pursuant to stock option plans of the Company existing on the date hereof,
to persons who have received, or who are eligible to receive, grants of such
options and (iii) not to exceed, in the aggregate, 10% of the outstanding shares
of Common Stock as of the First Closing Date, in connection with any new bona
fide research, licensing or corporate partnering relationships and equipment
lease transactions. In addition, the Company also agrees to obtain the written
agreement, in form and substance satisfactory to the Representatives, of each of
its officers and directors, and each of its shareholders owning in excess of
[1%] of the shares of the Company's Common Stock outstanding immediately prior
to the offering contemplated hereby, and the Company agrees to use best efforts
to obtain the written agreement of each of its other shareholders, that such
person will not, without such prior written consent, sell, offer for sale,
contract to sell or otherwise dispose of any of such Common Stock or any
securities exercisable for or convertible into shares of its Common Stock or any
rights to acquire Common Stock held by such holder for a period of 180 days
after the date of the final Prospectus.

5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Purchased Shares on the First
Closing Date and the Option Shares on the Second Closing Date, as provided
herein shall be subject to the accuracy, as of the date hereof and such Closing
Date (as if made on and as of such Closing Date), of the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following additional conditions:

(a) The Registration Statement shall have become effective not later
than 5:30 P.M., New York City Time, on the date of this Agreement, or such later
date as shall be consented to in writing by you; if required, the Prospectus and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rule 424(b) under the Act; and
no stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to your
reasonable satisfaction.

(b) Prior to such Closing Date, except as contemplated in the
Prospectus, there shall not have been any change in the capital shares, nor the
issuance of any rights, options, or warrants to purchase any capital shares, nor
any material increase or decrease in any long-term debt of the Company or any
material adverse change in the condition (financial or otherwise), results of
operations, business or prospects of the Company which in your reasonable
judgment renders it inadvisable to proceed with the offering and sale of the
Shares.

(c) You shall have received the opinion of Bachner, Tally, Polevoy &
Misher LLP, counsel for the Company, in form and substance satisfactory to you
and dated such Closing Date, to the effect that:

(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own its
properties and to conduct its business as described in the
Registration Statement and is duly qualified to do business as a
foreign corporation in Maryland and in each state or jurisdiction
where its operations and the ownership of its properties requires such
qualification, except where the failure to so qualify has not had and
will not have a material adverse effect on the business of the
Company;

(ii) the Company has authorized capital stock as set forth in the
Prospectus; all shares of Common Stock, including the Shares, conform
as to legal matters in all material respects to the appropriate
descriptions thereof under the heading "Description of Capital Stock"
in the Prospectus; all outstanding shares of Company capital stock
have been duly authorized and are validly issued, fully paid and non-
assessable; and the issuance of the Shares has been duly authorized
and, when issued, delivered and paid for in accordance with this
Agreement, the Shares will be validly issued, fully paid and non-
assessable; and, except as described in the Prospectus, the issuance
of the Shares as described in the Prospectus will not result in any
adjustment of the exercise price or number of shares issuable upon
exercise in respect of any outstanding options or warrants of the
Company;

(iii) this Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company, enforceable in accordance with its terms, except that
(1) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and (2) rights to indemnity or
contribution hereunder may be limited by federal or state securities
laws and (3) except as enforceability may be limited by equitable
principles affecting the availability of remedies; the sale of the
Shares under this Agreement and the consummation of the transactions
herein contemplated do not result in a breach or violation of any
material terms or provisions of, or constitute a material default
under, any applicable statute, or any indenture, mortgage, deed of
trust, note agreement or other agreement or instrument filed as an
exhibit to the Registration Statement or otherwise known to counsel to
which the Company is a party or by which it or its properties are
bound or affected, or to which any of the material property or assets
of the Company is subject, the Company's certificate of incorporation
and by-laws, or, to the best of such counsel's knowledge, any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or its properties;

(iv) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the
Company of the transactions contemplated by this Agreement that has
not been obtained, except such as may be required under the Act or as
may be required under state securities or blue sky laws in connection
with the purchase and distribution of the Shares by the Underwriters;

(v) the Registration Statement has become effective under the
Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act;

(vi) except as set forth in the Prospectus, to the best of such
counsel's knowledge, the Company holds in good standing all material
licenses, permits, authorizations, franchises, consents and orders, of
Federal, State or local, and foreign governmental bodies necessary to
carry on its business as reflected in the Registration Statement;

(vii) the agreements or documents to which the Company is a party
which are summarized under the headings "Business - Collaboration and
License Agreements," "Management - Employment Agreements," "Certain
Transactions" and "Description of Capital Stock - Registration Rights"
in the Prospectus conform in all material respects to such summaries;

(viii) to the best of such counsel's knowledge after due inquiry
(it being understood that for purposes of this opinion, due inquiry
does not include any search of court or administrative records), there
are no legal or governmental proceedings pending or threatened to
which the Company is a party or to which any properties of the Company
is subject which is required to be described in the Registration
Statement or the Prospectus and is not so described;

(ix) the Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective or
issue dates, comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations (except that
such counsel need express no opinion as to the financial statements,
notes to financial statements, related schedules or other financial
data contained in or omitted from the Registration Statement or the
Prospectus);

(x) to the best of such counsel's knowledge after due inquiry,
all contracts and documents pertaining to the Company required to be
filed as Exhibits to the Registration Statement have been filed as
required and, to the best of such counsel's knowledge, all contracts
and documents required to be described in the Prospectus have been
accurately described therein in all material respects;

(xi) Such counsel shall also state that it has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company
and the representatives of the Underwriters, at which the contents of
the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel did not independently verify, and
is not passing upon and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus, on the basis of the
foregoing (relying as to materiality to a large extent upon the
opinions of officers and other representatives of the Company), no
facts have come to such counsel's attention which lead such counsel to
believe that the Registration Statement (except with respect to the
financial statements and schedules thereto and other financial or
statistical data, as to which such counsel need not make any
statement) at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus (except with respect to
the financial statements and schedules thereto and other financial or
other statistical data, as to which such counsel need not make any
statement) on the date thereof or on the Closing Date contained any
untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances in which they were made, not misleading.

Such counsel need express no opinion as to the statements made in the
Prospectus relating to patents or proprietary rights under the captions "Risk
Factors - Dependence on Patents and Other Proprietary Rights; Uncertainty of
Patent Position and Proprietary Rights" and "Business - Patents and Proprietary
Rights" or statements made in the Prospectus relating to government regulatory
matters under the captions "Risk Factors - Uncertainty of Government Regulatory
Requirements; Lengthy Approval Process" and "Business - Government Regulation."

In rendering the foregoing opinions, such counsel may rely as to
factual matters on certificates of officers and representatives of the Company
and of public officials, and will not be required to independently verify the
accuracy or completeness of information or documents furnished to it in respect
to the Registration Statement or the Prospectus. To the extent that such
counsel's opinion relates to the laws of jurisdictions other than New York or
Delaware, such counsel shall be permitted to rely on the opinion of local
counsel reasonably satisfactory to counsel for the several Underwriters.

(d) You shall have received from Jones & Askew, patent counsel to the
Company, an opinion, dated such Closing Date, in form and substance satisfactory
to you, to the effect that the statements in the Prospectus under the captions
"Risk Factors -Dependence on Patents and Other Proprietary Rights; Uncertainty
of Patent Position and Proprietary Rights" and "Business - Patents and
Proprietary Rights", insofar as they pertain to legal matters, fairly present in
all material respects the information presented therein.

(e) You shall have received from Arnold & Porter, regulatory counsel
to the Company, an opinion, dated such Closing Date, in form and substance
satisfactory to you, to the effect that the statements in the Prospectus under
the captions "Risk Factors - Uncertainty of Government Regulatory Requirements;
Lengthy Approval Process" and "Business - Government Regulation", insofar as
they pertain to legal matters, fairly present in all material respects the
information presented therein.

(f) You shall have received from Werbel McMillin & Carnelutti, A
Professional Corporation, counsel for the several Underwriters, an opinion or
opinions, dated such Closing Date, in form and substance satisfactory to you,
with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have reasonably requested for the
purpose of enabling them to pass upon such matters.

(g) You shall have received, at the time of execution of this
Agreement and on such Closing Date from Ernst & Young LLP, independent public
accountants, a letter or letters, dated the date of delivery thereof,
substantially in the form and substance heretofore approved by you.

(h) You shall have received a certificate, dated such Closing Date,
of each of the President and Chief Executive Officer and the Chief Financial
Officer of the Company, delivered on behalf of the Company, to the effect that:

(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of such Closing
Date; and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to such Closing Date;

(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or, to their knowledge, are contemplated
by the Commission; and

(iii) except as contemplated in the Prospectus, the Company has
not incurred any direct or, to the best of the Company's knowledge,
contingent material liabilities or obligations, or entered into any
material transactions or contracts not in the ordinary course of
business, and there has not been any change in the capital shares of
the Company, nor the issuance of any rights, options, or warrants to
purchase any capital shares, nor any material increase or decrease in
any thereof or in any long-term debt or any material adverse change in
the condition (financial or otherwise) results of operations, business
or prospects of the Company.

(i) The Company shall have furnished to you such certificates, in
addition to those specifically mentioned herein, as you may have reasonably
requested, as to the accuracy and completeness at such Closing Date of any
statement in the Registration Statement or Prospectus, as to the accuracy at
such Closing Date of the representations and warranties of the Company herein,
as to the performance by the Company of its obligations hereunder, and as to the
fulfillment of the conditions concurrent and precedent to the obligations of the
Underwriters hereunder.

(j) The Company shall have furnished to you the agreements described
in Section 2(p) of this Agreement.

(k) The Company shall have effected a two-for-three reverse stock
split of its Common Stock and all issued and outstanding shares of its Preferred
Stock shall have been automatically converted into Common Stock, each
transaction occurring as described in the Prospectus.

6. INDEMNIFICATION. (a) The Company will indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon 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,
and, subject to Section 6(c), will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending against any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, such Preliminary Prospectus, the Prospectus
or such amendment or such supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any Underwriter
for use therein; and provided further, that the foregoing indemnity with respect
to Preliminary Prospectuses shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) if such untrue
statement or omission or alleged untrue statement or omission made in any
Preliminary Prospectus is eliminated or remedied in the Prospectus and a copy of
the Prospectus has not been furnished to the person asserting any such losses,
claims, damages, or liabilities at or prior to the written confirmation of the
sale of such Shares to such person. Such indemnity obligation will be in
addition to any liability which the Company may otherwise have. The indemnity
agreement 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 Shares.

(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director,
officer or controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon 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, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter for use
therein; and, subject to Section 6(c), will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending against any
such loss, claim, damage, liability or action. Such indemnity obligation will
be in addition to any liability which such Underwriter may otherwise have. 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 Shares.

(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof.
Indemnification shall not be available to any party who shall fail so to give
notice, if the party to whom notice was required to be given was unaware of the
action, suit, investigation, inquiry or proceeding to which the notice would
have related, to the extent that such party was prejudiced by the failure to
give notice; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel chosen by
such indemnifying party which is reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that (i) if the indemnified party reasonably determines that there may be a
conflict between the positions of the indemnifying party and of the indemnified
party in conducting the defense of such action, suit, investigation, inquiry or
proceeding or that there may be legal defenses available to such indemnified
party different from or in addition to those available to the indemnifying
party, then counsel for the indemnified party 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 and (ii) in any event, the
indemnified party (at its own expense) shall be entitled to have counsel chosen
by such indemnified party participate in, but not conduct, the defense (it being
understood, however, that in either such case, the indemnifying party shall not,
in connection with any one such action or separate but substantially similar or
related actions arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified parties). No indemnifying party shall be liable
to any indemnified party in respect to any settlement effected without its prior
written consent, which consent shall not be unreasonably withheld. In addition,
the indemnifying party will not, without the prior written consent of an
indemnified party, which shall not be unreasonably withheld, 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 indemnified party is a party to such
claim, action or suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding.

7. CONTRIBUTION. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 6(a) or 6(b) hereof is
for any reason, other than the first proviso to Section 6(a), held to be
unavailable, the Company and the Underwriters shall contribute to the
aggregate losses, claims, damages and liabilities of the nature contemplated
by such indemnification provisions (including any investigation, legal and
other expenses incurred in connection with, any amount paid in settlement of,
any action, suit or proceeding or any claims asserted, but after deducting
any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of
Section 15 of the Act, officers of the Company who signed the Registration
Statement and directors of the Company, who may also be liable for
contribution) to which the Company and one or more of the Underwriters may be
subject, in such proportions so that the Underwriters are responsible for
that portion in each case represented by the percentage that the respective
underwriting discounts appearing on the cover page of the Prospectus bear to
the public offering price of the Shares, and the Company is responsible for
the remaining portion; provided, however, that (i) except as may be provided
in its Master Agreement Among Underwriters provided to Allen & Company
Incorporated, in no case shall any Underwriter be responsible for any amount
in excess of the underwriting discount applicable to the Shares purchased by
such Underwriter hereunder and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the
Act shall have the same rights to contribution as such Underwriter, and each
person, if any, who controls the Company within the meaning of Section 15 of
the Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same right to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 7. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim for contribution may be made against
another party or parties under this Section 7, notify such party or parties
from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Section 7. No party shall be liable
for contribution with respect to any action or claim settled without its
consent, which consent shall not be unreasonably withheld.

8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements of the Company or of the
Underwriters herein or in certificates delivered pursuant hereto shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any Underwriter or any controlling person, the Company, or
any of its officers, directors, or controlling persons, and shall survive
delivery of the Shares to the several Underwriters hereunder.

9. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Shares to be purchased by
such Underwriter or Underwriters hereunder upon tender of such Shares in
accordance with the terms hereof, and if the aggregate number of Shares which
such defaulting Underwriter or Underwriters so agreed but failed to purchase
does not exceed 10% of the Shares, the remaining Underwriters shall be
obligated severally in proportion to their respective commitments hereunder
to take up and pay for the Shares of such defaulting Underwriter or
Underwriters. If one or more of the Underwriters shall fail or refuse (other
than for a reason sufficient to justify the termination of this Agreement)
to purchase on any Closing Date the aggregate number of Shares agreed to be
purchased by such Underwriter or Underwriters and the aggregate number of
Shares agreed to be purchased by such Underwriter or Underwriters shall
exceed 10% of the aggregate number of Shares to be sold on any Closing Date
hereunder by the Company to the Underwriters, then the other Underwriters
shall have the right to purchase or procure one or more other
underwriters to purchase, in such proportions as they may agree upon and
upon the terms herein set forth, the Shares which such defaulting
Underwriter or Underwriters agreed to purchase, and this Agreement shall be
carried out accordingly. If such other Underwriters do not exercise such
right within thirty-six hours after receiving notice of any such default,
which notice the Representatives shall have also promptly delivered to the
Company, then the Company shall have the right to procure another party or
parties reasonably satisfactory to the Representatives to purchase or agree
to purchase such Shares on the terms herein set forth. If the Company is
unable to procure another such party, the Company may notify the
Representatives that the non-defaulting Underwriters are, by the giving of
such notice, released from their obligations to purchase such number of
Shares being sold hereunder by the Company as are indicated in such notice
as, when subtracted from the total number of Shares originally agreed to be
purchased by all of the Underwriters hereunder, shall leave a reduced number
of Shares to be purchased by the non-defaulting Underwriters not in excess of
110% of the aggregate number of Shares originally contracted to be purchased
hereunder by the non-defaulting Underwriters, and each of them, in which
event such non-defaulting Underwriters shall purchase such reduced number of
Shares. In any such case, either the Representatives or the Company shall
have the right to postpone any Closing Date for a period of not more than
seven business days in order that necessary changes and arrangements may be
effected by the Representatives and the Company. If neither the
non-defaulting Underwriters nor the Company shall make arrangements within
the period stated for the purchase of the Shares which such defaulting
Underwriter or Underwriters agreed to purchase, including such arrangements
for the purchase of a reduced number of Shares as are provided for in this
Section 9, then this Agreement shall terminate without liability on the part
of any non-defaulting Underwriters to the Company and without liability on
the part of the Company to the Underwriters, provided that this Agreement
shall not terminate if such events relate to the sale of Option Shares at a
Second Closing Date.

In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section, the Company shall not be under any
liability to any Underwriter (except as provided in Section 4(g) and 6
hereof) nor shall any Underwriter (other than an Underwriter who shall have
failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Shares to be purchased by such Underwriter hereunder,
which Underwriter shall remain liable to the Company and the other
Underwriters for damages resulting from such default) be under any liability
to the Company (except as provided in Section 6 hereof).

The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 9.

10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.

(a) This Agreement shall become effective at such time after the
declaration by the Commission of the effectiveness of the Registration
Statement as you in your discretion shall first release the Shares for sale
to the public. For the purposes of this Section the Shares shall be deemed to
have been released for sale to the public upon release by you for publication
of a newspaper advertisement relating to the Shares or upon release by you of
letters or telegrams offering the Shares for sale to securities dealers,
whichever shall first occur. By giving notice as hereinafter specified before
the time this Agreement becomes effective, you, as Representatives of the
several Underwriters, or the Company may prevent this Agreement from becoming
effective without liability on the part of the Company to any Underwriter or
of any Underwriter to the Company, other than as provided in Sections 4(g)
and 6 hereof.

(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time at or prior to the First Closing Date if (i) the
Company shall have failed, refused or been unable, at or prior to the First
Closing Date, to perform any material agreement on its part to be performed,
or because any other material condition of the Underwriters' obligations
hereunder required to be fulfilled by the Company is not fulfilled; (ii)
trading on the New York Stock Exchange shall have been suspended, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required, on the New York Stock
Exchange by the New York Stock Exchange or by order of the Commission or any
other governmental authority having jurisdiction, since the execution of this
Agreement; (iii) a banking moratorium shall have been declared by Federal or
New York authorities since the execution of this Agreement; or (iv) an
outbreak of major hostilities or other national calamity shall have occurred.
Any such termination shall be without liability on the part of the Company to
any Underwriter or of any Underwriter to the Company other than as provided
in Sections 4(g) and 6 hereof.

(c) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section, the Company shall
be notified promptly by you by telephone or telegram, confirmed by letter. If
the Company shall elect to prevent this Agreement from becoming effective,
you shall be notified promptly by the Company by telephone or telegram,
confirmed by letter.

11. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall
be mailed, delivered or telecopied and confirmed to you c/o Allen & Company
Incorporated, 711 Fifth Avenue, New York, New York 10022, with copy to Werbel
McMillin & Carnelutti, a Professional Corporation, 711 Fifth Avenue, New
York, New York 10022, Attention: Robert H. Werbel, Esq. or if sent to the
Company shall be mailed, delivered or telecopied and confirmed to the Company
at 9610 Medical Center Drive, Suite 200, Rockville, Maryland 20850,
Attention: Dr. John W. Holaday with a copy to Bachner, Tally, Polevoy &
Misher LLP, Attention: Jill Cohen, Esq. Notice to any Underwriter pursuant
to Section 6 shall be mailed, delivered or telecopied and confirmed to such
Underwriter's address as set forth in its Master Agreement Among Underwriters
furnished to Allen & Company Incorporated.

12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
successors and assigns. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person or corporation, other than
the parties hereto and their respective successors and assigns and the
controlling persons, officers and directors referred to in Section 6, any
legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained; this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of the parties hereto and their respective successors
and assigns and said controlling persons and said officers and directors, and
for the benefit of no other person or corporation. No purchaser of any of the
Shares from any Underwriter shall be construed a successor or assign merely
by reason of such purchase.

In all dealings with the Company under this Agreement, you shall be
and are authorized to act on behalf of each of the several Underwriters, and
the Company shall be entitled to act and rely upon any statement request,
notice or agreement on behalf of each of the several Underwriters if the same
shall have been made or given in writing by you.

13. APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York applicable
to agreements made, and to be fully performed, therein.

14. COUNTERPARTS. This Agreement may be executed in several
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.

If the foregoing correctly sets forth the understanding between the
Company and the several Underwriters, please so indicate in the space
provided below for that purpose whereupon this letter shall constitute a
binding agreement between the Company and the several Underwriters.

Very truly yours,

ENTREMED, INC.

By:_________________________
President

Accepted as of the date
first above written:

ALLEN & COMPANY INCORPORATED
DILLON, READ & CO. INC.
VOLPE, WELTY & COMPANY

By: ALLEN & COMPANY INCORPORATED

By:___________________________

On behalf of each of the several
Underwriters named in Schedule A hereto.

SCHEDULE A

NAME OF UNDERWRITER NUMBER
OF
SHARES

Allen & Company Incorporated . . . . . . . . . . . . . . . .
Dillon, Read & Co. Inc. . . . . . . . . . . . . . . . . . .
Volpe, Welty & Company . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . ._______

3,500,000 Shares

ENTREMED, INC.

Common Stock

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

SELECTED DEALER AGREEMENT

________________, 1996

Dear Sirs:

1. PURCHASE OF SECURITIES BY THE SEVERAL UNDERWRITERS. The several
Underwriters named in the enclosed Prospectus, on whose behalf we are acting
as Representatives, have severally agreed to purchase from EntreMed, Inc.
(the "Company") an offering of 3,500,000 Shares of the Company's Common Stock
(the "Shares"), as set forth in the Prospectus and subject to the terms of
the Underwriting Agreement between the several Underwriters and the Company.
The Shares are described in the Prospectus, additional copies of which will
be supplied in reasonable quantities upon request to us.

2. OFFERING TO SELECTED DEALERS. One or more of the several
Underwriters acting through us are severally offering a portion of the Shares
to certain dealers ("Selected Dealers") as principals, subject to the terms
and conditions of their purchase, to the terms and conditions hereof, and to
the modification or cancellation of the offering without notice, at the
public offering price set forth in the Prospectus, less a concession not in
excess of $.____ per Share. Shares purchased by the several Underwriters, and
not sold to the Selected Dealers as aforesaid, may be sold by the several
Underwriters. Any of the several Underwriters may be included among the
Selected Dealers.

The offering of a portion of the Shares to Selected Dealers may be made
on the basis of reservations or allotments against subscription. We are
advising you by telegram of the method and terms of the offering. Acceptance
of any reserved Shares received by us at the office of Allen & Company
Incorporated, 711 Fifth Avenue, New York, New York 10022, after the time
specified therefor in the telegrams, and any subscriptions for additional
Shares, will be subject to prior sale and allotment. Subscription books may
be closed by us at any time without notice, and the right is reserved to
reject any subscriptions in whole or in part.

3. OFFERING TO PUBLIC BY SELECTED DEALERS. Upon receipt of the
aforementioned telegram, the Shares purchased by you hereunder may be
re-offered to the public in conformity with the terms of offering set forth
in the Prospectus. You may, in accordance with the rules of the National
Association of Securities Dealers, Inc., reallow a concession of $.___ per
Share sold by you to any other dealer or broker who is a member of the
National Association of Securities Dealers, Inc., provided such discount is
retained.

Neither you nor any other person is or has been authorized by the
Company, any of the several Underwriters or us to give information or make
any representations in connection with the sale of the Shares other than
those contained in the Prospectus.

In the event that during the term of this agreement we, as
Representatives for the account of the several Underwriters, shall purchase
or contract to purchase, at or below the original public offering price set
forth in the Prospectus, any of the Shares purchased by you hereunder (which
Shares theretofore were not effectively placed for investment by you,
including Shares represented by transfers), we may, at our election, either
(a) require you to repurchase such Shares at a price equal to the total cost
of such Shares purchased by us, including brokerage commissions, if any, and
transfer taxes on the redelivery, or (b) charge you with and collect from you
an amount equal to the selling concession with respect to the Shares so
purchased by us.

4. PAYMENT AND DELIVERY. Payment for the Shares which you have agreed
to purchase hereunder shall be made by you on _______, 1996, or such later
date as we may advise you, at 9:00 a.m., New York Time, at Allen & Company
Incorporated's office at 711 Fifth Avenue, New York, New York 10022, by
certified or bank cashier's check payable in New York Clearing House funds to
the order of Allen & Company Incorporated, against delivery of such Shares.
Delivery instructions must be in our hands at said address at such time as we
request.

Additional Shares confirmed to you shall be delivered on such date or
dates as we shall advise you.

5. BLUE SKY MATTERS. Neither we nor any of the several Underwriters
shall have any obligation or responsibility with respect to the right of any
dealer to sell the Shares in any jurisdiction, notwithstanding any
information which may be furnished as to the states under the securities laws
of which it is believed the Shares may be sold.

6. TERMINATION. This agreement shall terminate 20 full days after the
First Closing Date (as defined in the Underwriting Agreement) but may be
extended for a period or periods not exceeding in the aggregate 20 days as we
may determine. We may terminate this Agreement at any time without prior
notice. Notwithstanding the termination of this agreement, you shall remain
liable for your portion of any transfer tax or other liability which may be
asserted or assessed against us or any one or more of the several
Underwriters or Selected Dealers based upon the claim that the Selected
Dealers or any of them constitute a partnership, an association, an
unincorporated business or other separate entity.

7. OBLIGATIONS OF SELECTED DEALERS. Your acceptance hereof will
constitute an obligation on your part to purchase, upon the terms and
conditions hereof, the aggregate amount of the Shares reserved for and
accepted by you and to perform and observe all the terms and conditions
hereof.

You are not authorized to act as agent for any of the several
Underwriters in offering Shares to the public or otherwise. Nothing contained
herein shall constitute the Selected Dealers an association, or partners with
the several Underwriters, with us, or with each other.

8. POSITION OF THE REPRESENTATIVES. We shall have full authority to
take such action as we may deem advisable in respect of all matters
pertaining to the offering or arising hereunder, but shall act only as
Representatives of the several Underwriters. Neither we nor any of the
several Underwriters shall be under any liability to you, except for our own
want of good faith, obligations assumed in this agreement, or any liabilities
arising under the Securities Act of 1933. No obligation not expressly assumed
by us in this agreement shall be implied hereby or inferred herefrom.

9. NOTICES. All communications from you should be addressed to us,
c/o Allen & Company Incorporated, 711 Fifth Avenue, New York, New York 10022.
Any notice from us to you shall be deemed to have been duly given if mailed
or telegraphed to you at the address to which this letter is mailed.

Please confirm the foregoing by signing the duplicate copy of this
agreement enclosed herewith and returning it to us at the address in Section
9 above.

Very truly yours,

ALLEN & COMPANY INCORPORATED
DILLON, READ & CO. INC.
VOLPE, WELTY & COMPANY

By: ALLEN & COMPANY INCORPORATED

By:_________________________
Vice President

ALLEN & COMPANY INCORPORATED
DILLON, READ & CO. INC.
VOLPE, WELTY & COMPANY
As Representatives of the Several
Underwriters
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022

Sirs:

We hereby confirm our agreement to purchase Shares of the EntreMed, Inc.
(the "Shares"), subject to your acceptance or rejection in whole or in part in
the case of a subscription subject to allotment or in excess of any reservation,
and subject to all the other terms and conditions stated in the foregoing
letter.

We hereby acknowledge receipt of the prospectus relating to the above
described Shares (the "Prospectus") and we further state that in purchasing the
Shares confirmed to us we have relied upon such Prospectus and on no other
statements whatsoever, written or oral.

We hereby represent that we are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and agree to comply with the
provisions of Article III, Section 24 of the NASD's Rules of Fair Practice (the
"NASD Rules"), or, if we are not such a member, we are a foreign dealer or
institution that is not registered under Section 15(b) of the Securities
Exchange Act of 1934 and that hereby agrees (i) to make no sales within the
United States, its territories or its possessions or to persons who are citizens
thereof or residents therein, (ii) if the offering of the Shares is one within
the scope of the NASD's Interpretation with Respect to Free-Riding and
Withholding, not to make other sales of Shares to persons enumerated in
paragraphs "1" through "5" of such Interpretation or in a manner inconsistent
with paragraph "6" thereof and (iii) to comply with the provisions of Article
III, Sections 8, 24, 25 (as applicable to a non-member broker/dealer in a
foreign country) and 36 of the NASD Rules.

Name of Selected Dealer

____________________________________

____________________________________
(Authorized Signature)

Dated:________________ , 199__

<PAGE>

RESTRICTED STOCK PURCHASE AGREEMENT

THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
the 7th day of December, 1995 by and among EntreMed, Inc., a Delaware
corporation, with its principal office at 9610 Medical Center Drive, Rockville,
Maryland 20850 (the "Company") and Bristol-Myers Squibb Company, a Delaware
corporation, with its principal office at Post Box 4000, Princeton, New Jersey
08543-4000 ("the Purchaser").

WHEREAS, the Company and the Purchaser have entered into a Research
Collaboration and License Agreement of even date herewith, attached hereto as
EXHIBIT A (the "License Agreement") pursuant to which the Company will grant to
the Purchaser a license to certain of the Company's patent rights as further
defined and described therein.

WHEREAS, in furtherance of and in partial consideration for the execution
and delivery of the License Agreement, the Company has agreed to sell to the
Purchaser and the Purchaser has agreed to purchase an aggregate of 812,500
shares of the Company's common stock, $.01 par value (the "Common Stock"), at a
purchase price of $8.00 per share, on the terms set forth herein and additional
shares of the Company's Common Stock as set forth herein.

NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:

1. SALE OF THE SHARES.

1.01 INITIAL SALE BY THE COMPANY. Subject to and upon the terms and
conditions of this Agreement, at the Initial Closing (as defined in Section
2.01):

(a) The Company shall sell to the Purchaser, and the Purchaser
shall purchase from the Company, 812,500 shares of the Company's Common Stock
(the "Initial Shares"), at a purchase price of $8.00 per share, for an aggregate
purchase price of $6,500,000 (the "Purchase Price"). The Purchase Price will be
payable to the Company at the Initial Closing by delivering to the Company a
certified check or wire transfer in the amount of the Purchase Price.

(b) The Company shall issue to the Purchaser a warrant in the
form attached hereto as EXHIBIT B (the "Warrant") for the purchase of shares of
the Company's Common Stock as set forth herein. The Warrant shall expire on the
earlier of (i) three (3) years following the date of the Initial Closing, or
(ii) one (1) year following the IPO (as defined in Section 1.02). (The Company
makes no representation or agreement as to whether an IPO shall occur). The
Warrant may be exercised only following an IPO, if any. The exercise price of
each share of Common Stock which may be purchased under the Warrant shall be
equal to 150% of the initial public offering price of a share of Common Stock in
the IPO (the "Exercise Price"). The number of shares of Common Stock for which
the Warrant may be exercised shall be equal to $10,000,000 divided by the
Exercise Price.

1.02 PURCHASE OF ADDITIONAL SHARES BY THE PURCHASER. Subject to
and upon the terms and conditions of this Agreement, the terms and conditions
recommended by the managing underwriter of the IPO, and provided a
Termination Event (defined hereinafter) has not occurred, at the Company's
initial public offering of shares of Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") (such offering, the "IPO"), the Purchaser hereby agrees
that the Purchaser will purchase $5,000,000 of additional shares of the
Company's Common Stock at the initial public offering price per share. The
Purchaser's obligation under this Section 1.02 shall be effective if and only
if the IPO is an underwritten offering, on a firm commitment basis, by a
nationally or regionally recognized investment banking firm which yields a
minimum of $15,000,000 in gross proceeds to the Company, including the
proceeds from the purchase of such Additional Shares (defined hereinafter) by
the Purchaser.

1.03 ANTIDILUTION PROVISION. In the event that, at any time on or
after the date of this Agreement and prior to its IPO, the Company issues any
Common Stock or Common Stock equivalents (the "Below-Purchase Price Shares") for
a consideration of less than $8.00 per share (subject to adjustment from and
after the date of this Agreement upon each stock dividend, stock split, reverse
stock split, or other reclassification or recapitalization or similar event),
taking into account the fair market value of any preferred stock issued as units
with the Common Stock included in any such issuance, then upon such issuance the
Company shall issue to the Purchaser such number of shares of Common Stock (the
"Antidilution Shares") in accordance with the following formula:

The "Adjusted Per Share Purchase Price" equals (a) the sum
of (1) the number of Below-Purchase Price Shares to be
issued by the Company, multiplied by the per share offering
price of such Below-Purchase Price Shares, plus (2) the
aggregate purchase price paid by the Purchaser for the
shares of Common Stock then held
by the Purchaser (the "Purchaser's Cost"); divided
by (b) the sum of (1) the number of shares of
Common Stock then held by the Purchaser,
plus (2) the number of Below-Purchase Price Shares to be
issued by the Company; PROVIDED, that in no event shall the
Adjusted Per Share Purchase Price be less than $6.00. The
Purchaser's Cost shall be divided by the Adjusted Per Share
Purchase Price to calculate the "Adjusted Shares." The
Adjusted Shares minus the number of shares of Common Stock
acquired initially by the Purchaser shall equal the number
of Antidilution Shares that the Company shall issue to the
Purchaser.

All such Antidilution Shares shall be issued within ten (10) days after the
issuance of such Below-Purchase Price Shares to which they relate, at no cost to
the Purchaser.

The anti-dilution provisions in this Section 1.03 shall not be
applicable to:

(i) Common Stock issuable or issued to employees, advisors,
consultants or directors of the Company upon exercise of options, restricted
stock awards or similar arrangements which are approved by the Board of
Directors of the Company;

(ii) Common Stock issued to non-affiliates of the Company in
connection with bona fide research, licensing, acquisitions or corporate
partnering relationships, in connection with equipment lease financings, or upon
exercise of warrants issued to institutional lenders in connection with non-
convertible debt financings, in each case approved by the Board of Directors of
the Company, provided that such issuances are for other than primarily equity
financing purposes;

(iii) Common Stock issuable upon exercise or conversion of
options, warrants or other convertible securities outstanding on the date
hereof; or

(iv) Common Stock issued or issuable in connection with a merger or
consolidation as a result of which the holders of the Company's outstanding
securities immediately prior to the consummation of such transaction hold
securities in excess of fifty percent (50%) of the voting power of the surviving
or resulting entity.

The provisions of this Section 1.03 shall terminate upon the closing
of the IPO.

1.04 "ADDITIONAL SHARES" DEFINED. The term "Additional Shares" shall
mean all shares of Common Stock issued to the Purchaser pursuant to the exercise
of the Warrant and pursuant to Sections 1.02 and 1.03.

2. CONDITIONS TO PURCHASER'S OBLIGATION.

The obligation of the Purchaser to purchase the Initial Shares and the
Warrant pursuant to Section 1.01 of this Agreement is subject to satisfaction of
the following conditions at or prior to the Initial Closing:

2.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company set forth in Section 6 hereof shall be true and
correct as of the date of the Initial Closing.

2.02 REGISTRATION RIGHTS AGREEMENT. The Company and the Purchaser
shall have entered into the Registration Rights Agreement attached hereto as
EXHIBIT C (the "Registration Rights Agreement"), and the Registration Rights
Agreement shall be in full force and effect as of the date of the Initial
Closing.

2.03 LICENSE AGREEMENT. The Company and the Purchaser shall have
executed and delivered the License Agreement and the License Agreement shall be
in full force and effect as of the date of the Initial Closing.

2.04 OPINION OF THE COMPANY'S COUNSEL. The Purchaser shall have
received an opinion from Bachner, Tally, Polevoy & Misher LLP, counsel to the
Company, substantially in the form attached hereto as Exhibit D, dated as of the
date of the Initial Closing.

2.05 DOCUMENTATION AT THE INITIAL CLOSING. The Purchaser shall have
received, prior to or at the Initial Closing, all of the following documents or
evidence of the occurrence of the following events:

(a) An Officer's Certificate, executed by the President of the
Company and dated as of the date of the Initial Closing, stating that the
representations and warranties of the Company contained in Section 6 hereof are
true and correct as of the date of the Initial Closing and that all of the
obligations and covenants of the Company contained in this Agreement required to
be performed or satisfied prior to or at the Initial Closing, including, without
limitation the conditions specified in Sections 2.01 through 2.04, inclusive,
have been performed or satisfied in all material respects.

(b) A Secretary's Certificate, executed by the Secretary or
the Assistant Secretary of the Company and dated as of the date of the
Initial Closing, providing: (1) a certified copy of the resolutions of the
Board of Directors and, if required, the stockholders, of the Company
evidencing approval of this Agreement, authorization for the issuance of the
Initial Shares, the Warrant and the Additional Shares, execution of all other
agreements and documents contemplated hereby, and performance of all of the
transactions contemplated hereby and thereby; (2) a certified copy of the
Certificate of Incorporation of the Company, as amended and in effect as of
the date of the Initial Closing; (3) a certified copy of the by-laws of the
Company, as amended and in effect as of the date of the Initial Closing; and
(4) the names of officers of the Company authorized to sign this Agreement,
the certificate for the Initial Shares, the Warrant, and the other documents
or certificates to be delivered pursuant to this Agreement by the Company or
any of its officers, together with the true signatures of such officers.

(c) A certificate of good standing of the Company, issued by the
Secretary of State of the State of Delaware and each State where the Company is
qualified to do business as a foreign corporation, dated as of the close of
business on a date within ten (10) business days of the date of the Initial
Closing.

(d) Copies of all other documents evidencing other necessary
corporate or other action and third party and governmental approvals, if any,
with respect to this Agreement and the other documents executed in connection
with this Agreement and the transactions contemplated hereby or thereby.

2.06 DOCUMENTS AND PROCEEDINGS. All documents to be provided to the
Purchaser hereunder, and all corporate and other proceedings taken or required
to be taken in connection with the transactions contemplated hereby and to be
consummated at or prior to the Initial Closing and all documents incident
thereto, shall be reasonably satisfactory in form and substance to the Purchaser
or its counsel.

2.07 WAIVER. Any condition specified in this Section 2 may be waived
by the Purchaser; PROVIDED, HOWEVER, that no such waiver shall be effective
unless (i) it is set forth in a writing executed by the Purchaser or (ii) the
Purchaser consummates the Initial Closing.

3. CLOSING.

3.01 INITIAL CLOSING. The closing with respect to the issuance of the
Initial Shares and the Warrant (the "Initial Closing") shall take place at the
Company offices at 9610 Medical Center Drive, Rockville, Maryland 20850 at 10:00
a.m., Rockville Time, on December 7, 1995 or at such other place, time or date
as may be mutually agreed upon in writing by the parties.

3.02 DELIVERY OF CERTIFICATES REPRESENTING THE SHARES AND WARRANT. At
the Initial Closing, the Company shall deliver to the Purchaser (i) a stock
certificate, registered in the name of the Purchaser, representing the Initial
Shares, and (ii) a certificate, registered in the name of the Purchaser,
representing the Warrant, and, at the IPO, a stock certificate registered in the
name of the Purchaser representing that number of Additional Shares required to
be issued pursuant to the terms of Section 1.02 and Section 1.03, if applicable.

4. RIGHTS TO REPURCHASE SHARES.

(a) In the event that the License Agreement is terminated as a
result of a breach by the Purchaser thereunder or by the Purchaser prior to its
expiration (except as a result of a breach by the Company), (such termination a
"Termination Event"), the Company, shall have the right and option, for sixty
(60) days from the occurrence of the Termination Event, to elect to purchase
from the Purchaser, and the Purchaser shall sell or cause to be sold to the
Company, upon the Company's exercise of such right, such number of Initial
Shares and any Additional Shares (collectively the "Option Shares") owned by the
Purchaser on such date as is specified by the Company, at a per share price
equal to (i) $8.00 per share with respect to the Initial Shares, PROVIDED, that
to the extent any Additional Shares issued pursuant to Section 1.03 are
outstanding on such date, the per share purchase price for such Initial Shares
and any such shares issued pursuant to Section 1.03 shall equal the Adjusted Per
Share Purchase Price, (ii) the Exercise Price, with respect to shares of Common
Stock acquired pursuant to the exercise of the Warrant, to the extent any such
shares are outstanding, or (iii) the purchase price established for the IPO,
with respect to shares of Common Stock purchased pursuant to Section 1.02, as
the case may be. Notwithstanding anything herein to the contrary, to the extent
not previously exercised, the Warrant shall terminate upon the occurrence of any
Termination Event.

The right to repurchase the Option Shares provided in this
Section 4(a) shall be exercised by the Company, if at all, by delivery to the
Purchaser during the applicable aforesaid 60-day period, of a written notice of
election to purchase such Option Shares (the"Election Notice").

(b) The number of Option Shares subject to repurchase and the
purchase price thereof, at the time of any stock dividend or other distribution
made on or in respect of the shares of capital stock of the Company or any
subdivision, combination, redemption or reclassification of the outstanding
capital stock of the Company or received in exchange for the Option Shares or
any part thereof, shall be adjusted to give effect to such stock dividend, other
distribution, subdivision, combination, redemption or reclassification.

(c) The sale of Option Shares effected under the terms of
Section 4(a) hereof shall be made at the offices of the Company on a mutually
acceptable business day which day shall be within 15 days after the expiration
of the applicable 60-day period referred to in Section 4(a), and shall be such
15th day if the parties do not agree on such date. Delivery of certificates or
other instruments evidencing such Option Shares duly endorsed for transfer shall
be made on such date against payment of the purchase price thereof. Payment for
the Option Shares purchased pursuant to this Section 4 shall be made in the form
of a certified check or a wire transfer of clearing house funds to an account
designated by the Purchaser.

(d) Following the occurrence of a Termination Event, if and to
the extent that the Company does not exercise its right to purchase the Option
Shares within the exercise period, this Section 4 shall be null and void and the
Purchaser may sell or otherwise transfer up to all of the Initial Shares and the
Additional Shares, subject only to compliance with the provisions of Section 5
of this Agreement and any applicable laws or regulations.

5. PROCEDURES ON SALE OF SHARES TO THIRD PARTIES BY THE PURCHASER.
Except as otherwise expressly provided herein, the Purchaser hereby agrees that
it shall not Sell (as defined in subsection (e) below) any Initial Shares or
Additional Shares, as the case may be (the "Offered Shares") to any person other
than the Company, except in accordance with the following procedures:

(a) The Purchaser shall first deliver to the Company a
written notice (the "Transfer Notice"), which Transfer Notice shall be
irrevocable for a period of thirty (30) days after delivery thereof (the
"Offer Period"), offering to the Company, all of the Offered Shares proposed
to be sold by the Purchaser at the purchase price and on the terms specified
therein. The Company shall have the right and option, at its sole
discretion, for a period of 30 days after its receipt of the Transfer Notice,
to accept the offer of all, but not less than all, of the Offered Shares at
the purchase price and upon the terms stated in the Transfer Notice. Such
acceptance will be made by delivery of a written notice to the Purchaser
within the Offer Period (the "Acceptance Notice").

(b) The sale of Offered Shares under the terms of Section 5(a)
above shall be made at the offices of the Company on a mutually acceptable
business day, which day shall be within 15 days after the expiration of the
Offer Period and shall be such 15th day if the parties do not agree on such
date. Delivery of certificates or other instruments evidencing such Offered
Shares duly endorsed for transfer shall be made on such date against payment of
the purchase price therefor. Payment for the Offered Shares purchased pursuant
to this Section 5 shall be made in the form of a certified check or a wire
transfer of clearing house funds to an account designated by the Purchaser.

(c) If effective acceptance shall not be received pursuant to
Section 5(a) above with respect to all Offered Shares offered for sale
pursuant to the Transfer Notice then the Purchaser may Sell to a third party
or third parties all, but not less than all, the shares so offered for sale
at a price not less than the price, and on terms not more favorable to the
purchaser thereof than the terms, stated in the Transfer Notice, at any time
within 90 days after the expiration of the Offer Period. In the event that
such shares are not sold by the Purchaser during such 90-day period, the
right of the Purchaser to Sell such shares without renewed compliance with
this Section 5 shall expire and the obligations of this Section 5 shall be
reinstated; PROVIDED, HOWEVER, that in the event that the Purchaser
determines, at any time during such 90-day period, that the sale of all of
the shares on the terms set forth in the Transfer Notice is impracticable,
the Purchaser can terminate the offer of the shares to a third party or
parties and reinstate the procedure provided in this Section 5 without
waiting for the expiration of such 90-day period.

(d) Anything contained herein to the contrary notwithstanding,
any third party purchaser of shares pursuant to this Section 5 who or which is
not a signatory to an agreement with the Company that places restrictions on
such Offered Shares substantially similar to the restrictions set forth in
Section 7.02(d)-(e) of this Agreement shall agree in writing, as a condition to
such sale, to be bound by all applicable provisions of Section 7.02(d)-(e) of
this Agreement .

(e) As used above, the term "Sell" shall mean to sell, or in any
other way, directly or indirectly, transfer, assign, distribute, pledge,
encumber or otherwise dispose of, either voluntarily or involuntarily any of the
Initial Shares or Additional Shares.

(f) Anything contained herein to the contrary
notwithstanding, the provisions of this Section 5 shall not be applicable (i)
if, and to the extent that, the Purchaser Sells any Offered Shares to the
public pursuant to a registration statement declared effective by the
Securities and Exchange Commission under the Securities Act, (ii) if, and to
the extent that, the Purchaser Sells any Offered Shares after the IPO in an
open-market transaction meeting the "manner of sale" requirements set forth
in Rule 144 under the Securities Act or (iii) after the third anniversary of
the IPO.

(g) The Company shall not be required (a) to transfer on its
books any of the shares which shall have been sold or transferred in violation
of any of the provisions set forth in this Agreement, or (b) to treat as owner
of such shares or to pay dividends to any transferee to whom any such shares
shall have been sold or transferred.

6. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants
to the Purchaser that:

6.01 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority (corporate and other) to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The Company is duly qualified to do business and is in good standing in all
jurisdictions in which its ownership of property or the character of its
business requires such qualification and in which the failure to be so qualified
would have a material adverse effect on the Company.

6.02 AUTHORIZATION. The execution and delivery by the Company of
this Agreement, and any other documents and agreements to be executed in
connection with this Agreement (the "Company's Transaction Documents"), and
the consummation by the Company of all transactions contemplated hereunder,
including without limitation the issuance and sale of the Initial Shares, the
Warrant, and the Additional Shares to the Purchaser pursuant to Section 1,
have been duly authorized by all requisite corporate action (other than any
required increase in the authorized capital stock of the Company, which
increase, if required, will be recommended by the Company to its
stockholders). The Company's Transaction Documents have been duly executed
by the Company and constitute the valid and legally binding obligations of
the Company, enforceable against it in accordance with their respective
terms, subject to laws of general application relating to bankruptcy,
insolvency, relief of debtors and equitable principles and except as rights
to indemnity or contribution may be limited by applicable law. The
execution, delivery and performance by the Company of the Company's
Transaction Documents and the consummation by the Company of the transactions
contemplated thereby, will not, with or without the giving of notice or the
passage of time or both, (i) conflict with or result in a breach of the
material terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in the creation of any lien, security interest, charge or
encumbrance upon the Company's capital stock or assets pursuant to, (iv) give
any third party the right to accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption
or other action by or notice to any court or administrative or governmental
body pursuant to, the certificate of incorporation or by-laws of the Company,
or any law, statute, rule or regulation to which the Company is subject, or
any material agreement, instrument, order, judgment of decree to which the
Company is subject, except where any such event listed above would not have a
material adverse effect on the Company. Except as set forth on EXHIBIT E,
the issuance of the Initial Shares and the Warrant do not, and the issuance
of the Additional Shares will not, require any further corporate action
related specifically to such issuances (other than any required increase in
the authorized capital stock of the Company, which increase, if required,
will be recommended by the Company to its stockholders), and are not and will
not be subject to any preemptive or other preferential rights or similar
statutory or contractual rights either arising pursuant to any agreement or
instrument to which the Company is a party or which is otherwise binding upon
the Company.

6.03 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS. The Company is in
compliance in all respects with the terms and provisions of this Agreement and
of its certificate of incorporation and by-laws. To the Company's knowledge,
the Company is in compliance in all material respects with the terms and
provisions of the mortgages, indentures, leases, agreements and other
instruments and of all judgments, decrees, governmental orders, statutes, rules
or regulations by which it is bound or to which it or any of its material
properties or assets are subject and which the failure to comply with would have
a materially adverse effect upon the Company, and the Company has not received
notice of any claimed default with respect to such judgments, decrees, orders,
statutes, rules and regulations.

6.04 GOVERNMENTAL APPROVAL. Subject to the accuracy of the
Purchaser's representations herein, no authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, under any applicable laws or regulations presently in effect, is or
will be necessary for, or in connection with, the offer, issuance, sale,
execution or delivery by the Company of the Initial Shares, the Warrant, the
Additional Shares or for the performance by the Company of its obligations under
this Agreement or any other Company's Transaction Documents except as may be
required under the Securities Act or applicable state securities laws.

6.05 CAPITALIZATION; STATUS OF CAPITAL STOCK. The authorized capital
of the Company consists of: (i) 5,000,000 shares of Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), of which 3,000,000 shares are issued
and outstanding; and (ii) 20,000,000 shares of Common Stock, par value $.01 per
share (the "Common Stock"), of which 8,744,852 shares are issued and
outstanding. EXHIBIT E sets forth a list of the principal stockholders of the
Company. The Initial Shares and the Additional Shares, when issued, delivered
and paid for in accordance with the terms hereof, will be authorized, validly
issued and fully paid and nonassessable. Except as set forth on EXHIBIT E,
there are no options, warrants, convertible securities or other rights to
purchase shares of capital stock or other securities of the Company which are
authorized, issued or outstanding, nor is the Company obligated in any other
manner to issue shares of its capital stock or other securities, and the Company
has no obligation to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof, except as contemplated by this Agreement or as
set forth on EXHIBIT E. Except as otherwise contemplated by this Agreement or
as set forth on EXHIBIT E, no person is entitled to any preemptive right, right
of first refusal or similar right with respect to the issuance of any capital
stock of the Company, and there are no restrictions on the transfer of shares of
capital stock of the Company other than those imposed by relevant state and
federal securities laws. Assuming the accuracy of the Purchaser's
representations herein and the issuance to the Purchaser pursuant to the terms
hereof, the offer, sale or issuance of the Initial Shares and the Warrant do not
require registration under the Securities Act or any applicable state securities
laws. There exists no agreement between the Company and the Company's
stockholders with respect to the voting or transfer of the Company's capital
stock, except as set forth on EXHIBIT E or otherwise disclosed in this
Agreement.

6.06 INVESTMENTS; SUBSIDIARIES. The Company does not own of record or
beneficially, or hold the right to acquire, directly or indirectly (i) any share
of capital stock or security convertible into or exercisable for capital stock
of any other corporation, or (ii) any interest in any partnership, joint
venture, business trust or other non-corporate business enterprise. The Company
does not control, directly or indirectly, any other entity.

6.07 LITIGATION. Except as set forth on EXHIBIT E or as otherwise
disclosed to the Purchaser, there is no litigation or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company affecting any of its properties or assets or, to the knowledge of
the Company, against any officer or key employee of the Company which might
result, either in any case or in the aggregate, in any material adverse change
in the business, operations, affairs or condition of the Company or any of its
properties or assets, or which might call into question the validity of this
Agreement, the Warrant, any of the Initial Shares or the Additional Shares or
any action taken or to be taken pursuant hereto, nor, to the knowledge of the
Company, has there occurred any event nor does there exist any condition on the
basis of which any such litigation, proceeding or investigation might properly
be instituted. The Company, to the knowledge of the Company, is not in default
with respect to any order, writ, injunction, decree, ruling or decision of any
court, commission, board or other government agency that might result, either in
any case or in the aggregate, in any material adverse change in the business,
operations, affairs or financial condition of the Company or any of its
properties or assets. The foregoing sentences include, without limiting their
generality, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's officers or key
employees or their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers.

6.08 REGISTRATION RIGHTS. Except as set forth in the Registration
Rights Agreement and on EXHIBIT E, no person has demand or other rights to cause
the Company to file any registration statement under the Securities Act relating
to any securities of the Company or any right to participate in any such
registration statement.

6.09 MATERIAL CONTRACTS. Except as set forth on EXHIBIT E, the
Purchaser or its counsel has been supplied with a true and correct copy, in
certain cases redacted to protect confidential information, of the material
contracts and agreements of the Company (including lease obligations required to
be capitalized in accordance with applicable Statements of the Financial
Accounting Standards Board).

6.10 CERTAIN AGREEMENTS OF OFFICERS AND EMPLOYEES.

(a) To the Company's knowledge, no officer or key employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant relating to the right of any such officer
or employee to be employed by the Company because of the nature of the business
conducted or presently proposed to be conducted by the Company or relating to
the use of trade secrets or proprietary information of others.

(b) The Company has taken all reasonable measures designed to
protect and preserve the security and confidentiality of its proprietary
information, including its trade secret and other confidential information.
Each officer and key employee of the Company who has or has had access to
proprietary information of the Company has executed a nondisclosure and
assignment of invention agreement deemed adequate by the Company to protect its
proprietary information. To the knowledge of the Company, no officer or key
employee of former officer or key employee of the Company is in violation of the
terms of the aforesaid agreements relating to the use of confidential or
proprietary information of the Company including, without limitation, any
disclosure of any proprietary information which is the subject of the License
Agreement.

6.11 TITLE TO ASSETS, PATENTS.

(a) The Company has good and marketable title in fee to such of
its fixed assets as are real property, and good and merchantable title to all of
its other material assets, free of any material mortgages, pledges, charges,
liens, security interests or other encumbrances, except such encumbrances and
liens which arise in the ordinary course of business and do not materially
impair the Company's ownership or use of such property or assets and except as
set forth on EXHIBIT E. The Company enjoys peaceful and undisturbed possession
under all leases under which it is operating, and all said leases are valid and
subsisting and in full force and effect.

(b) The Company owns or has a license to use the patents, patent
rights, licenses, permits, trade secrets, trademarks, trademark rights, trade
names or trade name rights or franchises, copyrights, inventions, know-how,
technical information and other intellectual property rights (including, without
limitation, confidential information material to the conduct of its business as
now operated) (the "Proprietary Rights").

6.12 FINANCIAL STATEMENTS.

(a) The Company has furnished to the Purchaser the following
financial statements: (i) the audited balance sheet of the Company (the
"Audited Balance Sheet") at December 31, 1994, and the related audited income
statement and statement of cash flows of the Company for the year then ended,
certified by the Company's independent public accountants (the Audited Balance
Sheet and related income statement and statement of cash flows are hereinafter
collectively referred to as the "Audited Financial Statements") and (ii) the
unaudited balance sheet of the Company (the "Interim Balance Sheet") at June 30,
1995, and the related unaudited income statement of the Company for the six
months then ended (the Interim Balance Sheet and related income statement are
hereinafter collectively referred to as the "Unaudited Financial Statements").

(b) The Audited Financial Statements, including all notes
thereto (if any), are complete and correct in all material respects and present
fairly the financial condition and results of operations of the Company, as of
the dates and for the periods indicated, and have been prepared in accordance
with generally accepted accounting principles consistently applied. The
Unaudited Financial Statements are in accordance with the books and records of
the Company and present fairly the financial condition and results of operations
of the Company, as of the dates and for the periods indicated.

6.13 ABSENCE OF CHANGES. Since the Interim Balance Sheet Date, (i)
there has been no material adverse change in the assets, liabilities or
financial condition of the Company from that reflected in the Interim Balance
Sheet, except for changes in the ordinary course of business; and (ii) none of
the business, prospects, financial condition, operations property or affairs of
the Company has or have been materially adversely affected by any occurrence or
development, whether or not insured against; it being understood, however, that
the Company continues to incur additional operating losses and decreases in
working capital and the Company has raised approximately $1,800,000 in
additional capital pursuant to the Confidential Private Placement Memorandum
dated December 31, 1994.

6.14 EMPLOYEES; ERISA.

(a) No officer, director, employee or agent of the Company has
been or is authorized by the Company to make or receive, and the Company does
not know of any such person making or receiving, any bribe, kickback or other
similar payment on behalf of the Company and known by the Company to be illegal.

(b) Except as set forth on EXHIBIT E, the Company does not
maintain or contribute to, and has not maintained or contributed to, an
"employee benefit plan", as such term is defined in Section 3 of Employee
Retirement Income Security Act ("ERISA"), with respect to which the Company is
required to file IRS Form 5500, and the Company does not presently contribute to
and never has contributed to any "multi-employer plan," as such term is defined
in Section 3 of ERISA.

6.15 BOOKS AND RECORDS. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
shareholders and its Board of Directors and committees thereof.

6.16 NO BROKERS OR FINDERS. Except as otherwise disclosed to the
Purchaser, no person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or valid claim against or
upon the Company for any commission, fee or other compensation as a finder or
broker because of any act by the Company or of any agent of the Company. The
Company will pay, and hold the Purchaser harmless against, any liability, loss
or expense (including, without limitation, reasonable attorneys' fees and out-
of-pocket expenses) arising in connection with any claim for any such
commission, fee or other compensation.

6.17 CLOSING DATE. The representations and warranties of the
Company contained in this Section 6 and elsewhere in this Agreement, and all
information contained in any exhibit, schedule or attachment hereto or in any
writing delivered by, or on behalf of, the Company to the Purchaser, will be
true and correct in all material respects on the date of the Initial Closing as
though then made, except as affected by the transactions expressly contemplated
by this Agreement. Said representations and warranties shall not be reaffirmed
by the Company at the time the Additional Shares are purchased.

7. REPRESENTATIONS OF THE PURCHASER. The Purchaser represents and
warrants to the Company as follows:

7.01 (a) ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority (corporate and other) to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Purchaser is duly qualified to do business and is in
good standing in all jurisdictions in which its ownership of property or the
character of its business requires such qualification and in which the failure
to be so qualified would have a material adverse effect on the Purchaser.

(b) AUTHORIZATION. The execution and delivery by the Purchaser
of this Agreement and the consummation by the Purchaser of all transactions
contemplated hereunder has been duly authorized by all requisite corporate
action. This Agreement has been duly executed by the Purchaser. This Agreement
and all other agreements and obligations entered into and undertaken in
connection with the transactions contemplated hereby to which the Purchaser is a
party constitute the valid and legally binding obligations of the Purchaser,
enforceable against it in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency, relief of
debtors and equitable principles and except as rights to indemnity or
contribution may be limited by applicable law. The execution, delivery and
performance by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
the Certificate of Incorporation or By-laws of the Purchaser; or (b) violate any
judgment, decree, order or award of any court, governmental body or arbitrator
or any material agreement to which the Purchaser is a party or by which the
Purchaser is bound.

7.02 INVESTMENT REPRESENTATION.

(a) The Purchaser is acquiring the Initial Shares and any
Additional Shares for its own account for investment and not with a view to, or
for sale in connection with, any distribution thereof, nor with any present
intention of selling or distributing the same and the Purchaser has no present
or contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the distribution thereof.

(b) The Purchaser has carefully reviewed the representations
concerning the Company and has made a detailed inquiry concerning the Company,
its business and its personnel; the officers of the Company have made available
to the Purchaser the opportunity to ask questions and receive answers concerning
the terms and conditions of the offering of the Initial Shares and any
Additional Shares made hereby and to obtain any additional information that the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information provided by the Company to the
Purchaser; the Purchaser has sufficient knowledge and experience in business and
financial matters so as to be able to evaluate the risks and merits of its
investment in the Company and is able to sustain a complete loss of its
investment in the Company; and the Purchaser is an "accredited investor," as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

(c) The Purchaser understands that (i) there is currently no
market for the Company's Common Stock and there can be no assurance that such a
market will ever develop or be sustained, (ii) the Initial Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act; (iii) the Initial Shares cannot be
sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available; (iv) in any event, the exemption from registration under Rule 144 or
otherwise may not be available for at least two years and even then will not be
available unless a public market then exists for the Common Stock, adequate
information concerning the Company is then available to the public, and other
terms and conditions of Rule 144 are complied with; and (v) there is now no
registration statement on file with the Securities and Exchange Commission with
respect to any stock of the Company and the Company has no obligation or current
intention to register the Initial Shares under the Securities Act.

(d) The Purchaser will not attempt to sell, transfer or
otherwise dispose of all or any portion of the Initial Shares in the absence of
an effective registration statement unless (i) an exemption from such
registration is available under the Securities Act and (ii) if requested by the
Company, the Purchaser shall have furnished to the Company an opinion of
reputable securities counsel satisfactory in form and substance to the Company
and its counsel that such proposed sale, transfer or other disposition would not
be in violation of the Securities Act and applicable state securities laws.

(e) A legend substantially in the following form will be placed
on the Certificate representing the Initial Shares:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN A RESTRICTED STOCK PURCHASE AGREEMENT DATED
DECEMBER 7, 1995, BY AND AMONG ENTREMED, INC. AND BRISTOL-
MYERS SQUIBB COMPANY AND NO TRANSFER OF SUCH SECURITIES
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. COPIES OF SUCH AGREEMENTS CAN BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF THIS
CERTIFICATE TO THE SECRETARY OF ENTREMED, INC.

7.03 NO BROKERS OR FINDERS. No person has or will have, as a result
of the transactions contemplated by this Agreement, any right, interest or valid
claim against or upon the Purchaser for any commission, fee or other
compensation as a finder or broker because of any act by the Purchaser or of any
agent of the Purchaser. The Purchaser will pay, and hold the Company harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.

7.04 CLOSING DATE. The representations and warranties of the
Purchaser contained in this Section 7 and elsewhere in this Agreement and all
information delivered by, or on behalf of, the Purchaser to the Company, will be
true and correct in all material respects on the date of the Initial Closing as
though then made, except as affected by the transactions expressly contemplated
by this Agreement and the representations and warranties of the Purchaser in
Section 7.02 shall be true and correct in all material respects on the date
Additional Shares are purchased.

8. REPORTING COVENANTS OF THE COMPANY. Until the IPO, the Company will
furnish the following to the Purchaser, so long as the Purchaser continues to
own at least half of the Initial Shares purchased under this Agreement:

8.01 If prepared in the ordinary course of the Company's business, as
soon as available, consolidated balance sheets of the Company as of the end of
each calendar quarter and consolidated statements of income for such quarter and
for the year to date setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year.

8.02 As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the annual audited
financial statements of the Company prepared by its independent auditors,
including therein consolidated and consolidating balance sheets of the Company
as of the end of such fiscal year and consolidated and consolidating statements
of income and retained earnings and of cash flows for such fiscal year of the
Company setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, certified by independent public accountants of
recognized standing.

8.03 Each of the financial statements referred to in Section 8.01 and
8.02 will be complete and correct in all material respects as of the dates and
for the periods stated therein.

8.04 Within fifteen (15) days after the commencement thereof,
notice of all material actions and suits instituted by or against the Company.

8.05 Except as otherwise required by law or judicial order or decree
of by any governmental agency or authority, each person entitled to receive
information regarding the Company under this Section 8 will treat all nonpublic
information obtained by it thereunder which the Company reasonably designates as
proprietary or confidential in nature with the same care as it treats its own
confidential information and will use its best efforts to maintain the
confidentiality of such information; provided that each such Person may disclose
such information in connection with the sale or transfer of any of the Initial
Shares, the Warrant or the Additional Shares so long as the transferee shall
furnish the Company with a written agreement to be bound by and comply with the
confidentiality provisions of this Section 8.04.

9. NOTICES. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by telex,
nationally recognized overnight delivery service, facsimile (receipt confirmed),
registered or certified mail, postage prepaid, addressed as follows or to such
other address of which the parties may have given notice:

(i) if to the Purchaser, to:

Bristol-Myers Squibb Company
Post Box 4000
Princeton, New Jersey 08543-4000
Attn: Charles Linzner, Esq.,
Vice President and Senior Counsel,
Pharmaceutical Research Institute and
Worldwide Strategic Business Development
Fax No.: (609) 252-4232

(ii) if to the Company, to:

EntreMed, Inc.
9610 Medical Center Drive
Rockville, Maryland 10850
Attn: President
Fax No.: (301) 217-9594

with a copy to:

Jill M. Cohen, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
18th Floor
New York, New York 10017
Fax No.: (212) 682-5729

Unless otherwise specified herein, such notices or other communications shall be
deemed delivered (a) on the date delivered, if delivered by facsimile or
personally; (b) on the day after the notice is delivered into the possession and
control of a nationally recognized overnight delivery services, duly marked for
delivery to the receiving party; or (c) three business days after being sent, if
sent by registered or certified mail.

10. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Purchaser, on the one hand, and the Company, on the other hand,
may not assign their respective obligations hereunder without the prior written
consent of the other party. Any assignment in contravention of this Section 10
shall be void. No assignment shall release the Purchaser or the Company from
any obligation or liability under this Agreement unless expressly agreed to by
the non-assigning party.

11. REMEDIES. The parties acknowledge that a breach of this Agreement
will cause them irreparable harm which will be difficult to quantify and for
which money damages would be inadequate. Therefore, in the event of such a
breach or threat of such a breach, in addition to any other legal or equitable
remedies it may have, each party shall be entitled to obtain specific
performance of the other party's obligations and to obtain immediate injunctive
relief, in each case without the necessity of posting a bond.

12. STANDSTILL; COOPERATION IN CONNECTION WITH IPO. The Purchaser agrees
that in the event of any underwritten public offering of securities of the
Company, the Purchaser will comply with and agree to any reasonable restriction
on the transfer of shares of Common Stock imposed by an underwriter and shall
perform all acts and sign all necessary documents required with respect thereto.

13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral and written and all contemporaneous oral
negotiations, commitments and understandings between such parties. This
Agreement may be amended only by a written amendment executed by both parties.

14. SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.

15. EXPENSES. Except as otherwise expressly provided herein, the
Purchaser, on the one hand, and the Company, on the other hand, will pay all
fees and expenses (including, without limitation, legal and accounting fees and
expenses) incurred by each of them in connection with the transactions
contemplated hereby.

16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Agreement or any other instrument or document delivered
in connection herewith or therewith, shall survive the execution and delivery
hereof or thereof for a period of three (3) years.

17. WAIVER. No failure or delay on the part of a party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder.

18. FURTHER ASSURANCES. From and after the date of this Agreement, upon
the reasonable request of one party hereto, the other party hereto shall execute
and deliver such instruments, documents and other writings as may be necessary
or desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.

19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to choice of
law principles.

20. SECTION HEADINGS. The section headings are for the convenience of the
parties and in no way alter, modify, amend, limit, or restrict the contractual
obligations of the parties.

21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.

22. PERSON. The term Person as used in this Agreement means any
individual, partnership, corporation, trust or other entity.

IN WITNESS WHEREOF, this Agreement has been duly executed under seal by the
parties hereto and delivered as of the date first above written.

ENTREMED, INC.

By: /s/ John W. Holaday
---------------------------------
John W. Holaday, Ph.D.
Chief Executive Officer

BRISTOL-MYERS SQUIBB COMPANY

By: /s/ Leon E. Rosenberg
---------------------------------

EXHIBIT A

Reference is made to the Research Collaboration and License Agreement filed
as Exhibit 10.2 to the Company's Registration Statement on Form S-1 (File No.
333-3536).

EXHIBIT B

Reference is made to the Warrant to Purchase Common Stock filed as Exhibit
10.3 to the Company's Registration Statement on Form S-1 (File No. 333-3536).

EXHIBIT C

Reference is made to the Reddddgistration Rights Agreement filed as Exhibit
10.4 to the Company's Registration Statement on Form S-1 (File No. 333-3536).

EXHIBIT D

December 7, 1995

Bristol-Myers Squibb Company
Post Office Box 4000
Princeton, New Jersey 08543-4000

Ladies and Gentlemen:

We have acted as counsel to EntreMed, Inc., a Delaware corporation (the
"Company"), in connection with the sale by the Company to you of an aggregate of
812,500 shares (the "Shares") of the Company's Common Stock, $.01 par value
("Common Stock") and a warrant (the "Warrant") to purchase shares of Common
Stock, pursuant to a Restricted Stock Purchase Agreement (the "Agreement") of
even date and by and between the Company and Bristol-Myers Squibb Company
("BMS"). The Agreement and the Warrant are sometimes collectively referred to
herein as the "Transaction Documents."

As such counsel, we have made such examinations of law and have reviewed
copies of the Company's Restated Certificate of Incorporation, certain
resolutions adopted by the Company's Board of Directors relating to the
Transaction Documents, the By-Laws of the Company, the Transaction Documents,
the form of stock certificate approved by the Company's Board of Directors to
evidence shares of the Company's Common Stock and such other records,
agreements, instruments and certificates or other documents as we have deemed
necessary to render the opinions hereinafter set forth. In our examination, we
have assumed the legal capacity of natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as certified, conformed
or photostatic copies and the authenticity of the originals of such copies,
which facts we have not independently verified. We also have assumed that each
of the Transaction Documents has been duly authorized, executed and delivered
by, and is the legal, valid and binding obligation of each party thereto other
than the Company and assumed the accuracy of the representations of each of the
Company and BMS made in the Transaction Documents. As to certain questions of
fact material to the opinions expressed herein, we have relied upon certificates
of officers of the Company and the representations of the Company contained in
the Transaction Documents and certificates and orders of public officials and
other documents that we have deemed necessary to render the opinions hereinafter
set forth. Capitalized terms used herein and not defined herein shall have the
meanings given thereto in the Agreement.

In rendering the following opinions, we do not express any opinion with
respect to the laws of any jurisdiction other than the State of New York and the
State of Delaware and those laws of the United States of America applicable to
the opinions herein expressed. Where the phrase "to our knowledge" or a similar
phrase is used in this opinion, it shall mean that we have based our legal
analysis upon those facts which are known by any attorney in our firm who is
involved or has been involved in the transactions which are the subject of this
opinion, or, who is or was otherwise involved in substantive work for the
Company and any other facts established by the representations and warranties of
the Company.

Based upon the foregoing, and subject to the other limitations and
assumptions set forth herein, it is our opinion that:

1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as presently conducted, and is duly qualified and in
good standing in each jurisdiction in which its ownership of property or the
conduct of its business requires such qualification, except where the failure to
so qualify would not materially adversely affect the Company.

2. The Company has all requisite corporate power and authority to execute
and deliver the Transaction Documents, and to consummate all the transactions
contemplated thereby, including, without limitation, the issuance and sale of
the Warrant, the Initial Shares and the Additional Shares subject, in the case
of Additional Shares, to a potential requirement to amend the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock. Each of the Transaction Documents constitutes a valid obligation
of the Company enforceable in accordance with its terms.

3. The execution, delivery and performance of the Transaction Documents
and the consummation by the Company of the Transactions contemplated thereby,
will not, with or without the giving of notice or the passage of time or both,
violate, conflict with or otherwise result in a breach or violation of the
terms, conditions or provisions of, or constitute a default under, (i) the
Restated Certificate of Incorporation or By-Laws of the Company; or (ii) to our
knowledge, any law, statute, rule, regulation, order, judgment or decree to
which the Company is subject.

4. The Warrant and the Initial Shares issued to BMS have been duly
authorized and validly issued. Upon payment therefor in accordance with the
terms of the Transaction Documents, the Initial Shares will be fully paid and
nonassessable. The Additional Shares, when such shares are issued and delivered
and paid for in accordance with the terms of the Agreement or the Warrant, as
the case may be, will be duly authorized and validly issued, and will be fully
paid and nonassessable subject, in the case of the Additional Shares, to a
potential requirement to amend the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock.

5. The Company has a total authorized capitalization consisting of twenty
million shares of Common Stock and five million shares of Preferred Stock.
Except as disclosed in the Agreement and the exhibits thereto or as contemplated
by the Transaction Documents, based solely on a review of the stock ledger of
the Company and certificates of representatives of the Company, (i) there are no
options, warrants, convertible securities or other rights to purchase shares of
capital stock or other securities of the Company which are authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares of
its capital stock or other securities, and the Company has no obligation to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof, and (ii) no person is entitled to any preemptive right, right
of first refusal or similar right with respect to the issuance of any capital
stock of the Company, and there are no restrictions on the transfer of shares of
capital stock of the Company other than those imposed by relevant state and
federal securities laws.

All opinions herein contained with respect to the enforceability of
documents are qualified to the extent that:

(a) The availability of equitable remedies, including without limitation,
specific enforcement and injunctive relief, is subject to the discretion of the
court before which any proceedings therefor may be brought; and

(b) The enforceability of certain terms in the documents may be limited by:

(i) applicable bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation and other similar laws relating to or
affecting the enforcement of creditors' rights and remedies generally
as at the time in effect,

(ii) general principles of equity and the discretion of a court in
granting equitable remedies (whether enforceability is considered in a
proceeding at law or in equity), and

(iii) no opinion is expressed as to the enforceability under Federal
securities laws of any indemnification or contribution provisions of
the Transaction Documents.

The opinions expressed herein are based upon the laws and judicial
decisions of the States of New York and Delaware and the United States of
America as of the date hereof and are subject to any amendment, repeal or other
modification of the applicable laws or judicial decisions that served as the
basis for our opinion, or laws or judicial decisions hereafter enacted or
rendered. Our engagement by the Company with respect to the opinions expressed
herein does not require and shall not be construed to constitute a continuing
obligation on our part to notify or otherwise inform the addressee hereof of the
amendment, repeal or other modification of the applicable laws or judicial
decisions that served as the basis for our opinion or laws or judicial decisions
hereafter enacted or rendered which impact on our opinion.

This opinion is being delivered to you pursuant to Section 2.04 of the
Agreement solely for your benefit and neither this opinion nor any part hereof
may be delivered to, used or relied upon by any other party without our prior
written consent.

Very truly yours,

BACHNER, TALLY, POLEVOY & MISHER LLP

EXHIBIT E

SCHEDULE OF EXCEPTIONS

The several disclosures made in this disclosure schedule qualify the
representations and warranties contained in the Restricted Stock Purchase
Agreement, dated December 7, 1995 between EntreMed, Inc. (the "Company") and
Bristol-Myers Squibb Company (the "Agreement"). Notwithstanding any reference
to a particular section of the Agreement, each disclosure shall be deemed to be
a disclosure with respect to each other section to which the disclosure may
apply.

SECTION 6.05 - Exhibit E-1 sets forth a list of the principal stockholders
of the Company. Exhibit E-2 sets forth a list of all authorized, issued or
outstanding options, warrants and convertible securities of the Company.

SECTION 6.07 - In July 1995, Bolling, McCool and Twist, Inc. ("BMT") filed
a claim in Tennessee state court seeking the recovery of approximately $47,000
for services rendered. The Company filed a counterclaim seeking recission of an
agreement between the Company and BMT and certain damages. The parties are
proceeding with discovery and a trial date has been set for September 1996.

SECTION 6.08 - Pursuant to an Amended and Restated Shareholder Agreement,
dated December 10, 1993, among the Company and certain of its stockholders, Dr.
Carl Alving was granted certain piggyback registration rights in connection with
the Company's initial public offering ("IPO"). The holders of Units issued
pursuant to Confidential Private Placement Memoranda dated August 3, 1994 and
December 31, 1994 have certain demand and piggyback registration rights
commencing 13 months after an IPO. MMC/GATX Partnership No. 1 ("GATX") also has
certain demand and piggyback registration rights commencing 13 months after an
IPO. Josephthal Lyon & Ross Incorporated has certain demand and piggyback
registration rights commencing after an IPO with respect to the shares
underlying its warrants. The Company also granted certain piggyback
registration rights to Children's Hospital.

SECTION 6.11 - Pursuant to the Master Equipment Lease Agreement and a
related Security Agreement, each dated as of April 10, 1995, between the Company
and GATX, the Company granted to GATX a security interest in the Company's blood
oxygenation and electroporation technology. Pursuant to the terms of the
Security Agreement, this security interest will be released upon the execution
of the Bristol-Myers Research Collaboration Agreement. In addition, the Company
recently granted a purchase money security interest in certain laboratory
equipment purchased for approximately $55,000.

SECTION 6.14 - The Company maintains a non-contributory 401(k) plan and a
cafeteria medical benefits plans for its employees.

<PAGE>
ENTREMED, INC.

AMENDED AND RESTATED 1996 STOCK OPTION PLAN

1. PURPOSE.

The purpose of this plan (the "Plan") is to secure for ENTREMED, INC. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company and its subsidiary corporations who are expected to contribute
to the Company's future growth and success. Those provisions of the Plan which
make express reference to Section 422 shall apply only to Incentive Stock
Options (as that term is defined in the Plan).

2. TYPE OF OPTIONS AND ADMINISTRATION.

(a) TYPES OF OPTIONS. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code") or non-statutory options which are not intended to meet the requirements
of Section 422 of the Code.

(b) ADMINISTRATION. The Plan will be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company, whose
construction and interpretation of the terms and provisions of the Plan shall be
final and conclusive. The delegation of powers to the Committee shall be
consistent with applicable laws or regulations (including, without limitation,
applicable state law and Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3")). The
Committee may in its sole discretion grant options to purchase shares of the
Company's Common Stock, $.01 par value per share ("Common Stock") and issue
shares upon exercise of such options as provided in the Plan. The Committee
shall have authority, subject to the express provisions of the Plan, to construe
the respective option agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements, which need not be identical, and
to make all other determinations in the judgment of the Committee necessary or
desirable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect and it shall be the sole and final judge of such
expediency. No director or person acting pursuant to authority delegated by the
Board of Directors shall be liable for any action or determination under the
Plan made in good faith. Subject to adjustment as provided in Section 15 below,
the aggregate number of shares of Common Stock that may be subject to options
granted to any person in a calendar year shall not exceed [25]% of the maximum
number of shares which may be issued and sold under the Plan, as set forth in
Section 4 hereof, as such section may be amended from time to time.

(c) APPLICABILITY OF RULE 16B-3. Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply to the Company only at such time as
the Company's Common Stock is registered under the Exchange Act, subject to the
last sentence of Section 3(b), and then only to such persons as are required to
file reports under Section 16(a) of the Exchange Act (a "Reporting Person").

3. ELIGIBILITY.

(a) GENERAL. Options may be granted to persons who are, at the time of
grant, employees, officers or directors of, or consultants or advisors to, the
Company or any subsidiaries of the Company as defined in Sections 424(e) and
424(f) of the Code ("Participants") PROVIDED, that Incentive Stock Options may
only be granted to individuals who are employees of the Company (within the
meaning of Section 3401(c) of the Code). A person who has been granted an
option may, if he or she is otherwise eligible, be granted additional options if
the Committee shall so determine.

(b) GRANT OF OPTIONS TO REPORTING PERSONS. The selection of a director or
an officer who is a Reporting Person (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board of Directors,
of which all members shall be "disinterested persons" (as hereinafter defined),
(ii) by a committee consisting of two or more directors having full authority to
act in the matter, each of whom shall be a "disinterested person" or
(iii) pursuant to provisions for automatic grants set forth in Section 3(c)
below. For the purposes of the Plan, a director shall be deemed to be a
"disinterested person" only if such person qualifies as a "disinterested person"
within the meaning of Rule 16b-3, as such term is interpreted from time to time.
If at least two of the members of the Board of Directors do not qualify as a
"disinterested person" within the meaning of Rule 16b-3, as such term is
interpreted from time to time, then the granting of options to officers and
directors who are Reporting Persons under the Plan shall not be determined in
accordance with this Section 3(b) but shall be determined in accordance with the
other provisions of the Plan.

(c) DIRECTORS' OPTIONS. Commencing on the date this plan is adopted by
the Board of Directors, directors of the Company ("Eligible Directors") will be
granted an option (a "Director Option") to purchase 15,000 shares of Common
Stock on the date that such person is first elected or appointed a director
("Initial Director Option"). Commencing on the day immediately following the
date of the annual meeting of stockholders for the Company's fiscal year ending
December 31, 1996, (i) each Eligible Director will receive an automatic grant of
a Director Option to purchase 5,000 shares of Common Stock, (ii) each member of
any committee of the Board of Directors, other than the Executive Committee,
will receive an automatic grant of a Director Option to purchase 1,000 shares of
Common Stock and (iii) each member of the Executive Committee of the Board of
Directors will receive an automatic grant of a Director Option to purchase 5,000
shares of Common Stock (each, an "Automatic Grant") on the day immediately
following the date of each annual meeting of stockholders, as long as such
director is a member of the Board of Directors. The exercise price for each
share subject to a Director Option shall be equal to the fair market value of
the Common Stock on the date of grant. Director Options shall become
exercisable in three equal annual installments commencing on the date the option
is granted and will expire the earlier of 10 years after the date of grant or 90
days after the termination of the director's service on the Board unless such
Director Option is an Incentive Stock Option in which case such Director Option
shall be subject to the additional terms and conditions set forth in Section 11.

4. STOCK SUBJECT TO PLAN.

The stock subject to options granted under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. Subject to adjustment as
provided in Section 15 below, the maximum number of shares of Common Stock of
the Company which may be issued and sold under the Plan is 516,667 shares. If
an option granted under the Plan shall expire, terminate or is cancelled for any
reason without having been exercised in full, the unpurchased shares subject to
such option shall again be available for subsequent option grants under the
Plan.

5. FORMS OF OPTION AGREEMENTS.

As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.

6. PURCHASE PRICE.

(a) GENERAL. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors at the time
of grant of such option; PROVIDED, HOWEVER, that in the case of an Incentive
Stock Option, the exercise price shall not be less than 100% of the Fair Market
Value (as hereinafter defined) of such stock, at the time of grant of such
option, or less than 110% of such Fair Market Value in the case of options
described in Section 11(b). "Fair Market Value" of a share of Common Stock of
the Company as of a specified date for the purposes of the Plan shall mean the
closing price of a share of the Common Stock on the principal securities
exchange (including the Nasdaq National Market) on which such shares are traded
on the day immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded. If the shares are not
publicly traded, Fair Market Value of a share of Common Stock (including, in the
case of any repurchase of shares, any distributions with respect thereto which
would be repurchased with the shares) shall be determined in good faith by the
Board of Directors. In no case shall Fair Market Value be determined with
regard to restrictions other than restrictions which, by their terms, will never
lapse.

(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or by any other means which the Board of Directors determines are consistent
with the purpose of the Plan and with applicable laws and regulations
(including, without limitation, the provisions of Rule 16b-3 and Regulation T
promulgated by the Federal Reserve Board).

7. OPTION PERIOD.

Subject to earlier termination as provided in the Plan, each option and all
rights thereunder shall expire on such date as determined by the Board of
Directors and set forth in the applicable option agreement, provided, that such
date shall not be later than (10) ten years after the date on which the option
is granted.

8. EXERCISE OF OPTIONS.

Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the option agreement evidencing such option, subject to the provisions
of the Plan. No option granted to a Reporting Person for purposes of the
Exchange Act, however, shall be exercisable during the first six months after
the date of grant. Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable, the
Board of Directors may (i) in the agreement evidencing such option, provide for
the acceleration of the exercise date or dates of the subject option upon the
occurrence of specified events, and/or (ii) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such option.

9. NONTRANSFERABILITY OF OPTIONS.

No option granted under this Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. An option may be exercised during the lifetime of the optionee only
by the optionee. In the event an optionee dies during his employment by the
Company or any of its subsidiaries, or during the three-month period following
the date of termination of such employment, his option shall thereafter be
exercisable, during the period specified in the option agreement, by his
executors or administrators to the full extent to which such option was
exercisable by the optionee at the time of his death during the periods set
forth in Section 10 or 11(d).

10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.

Except as provided in Section 11(d) with respect to Incentive Stock Options
and except as otherwise determined by the Committee at the date of grant of an
option, and subject to the provisions of the Plan, an optionee may exercise an
option at any time within three (3) months following the termination of the
optionee's employment or other relationship with the Company or within one (1)
year if such termination was due to the death or disability of the optionee but,
except in the case of the optionee's death, in no event later than the
expiration date of the option. If the termination of the optionee's employment
is for cause or is otherwise attributable to a breach by the optionee of an
employment or confidentiality or non-disclosure agreement, the option shall
expire immediately upon such termination. The Board of Directors shall have the
power to determine what constitutes a termination for cause or a breach of an
employment or confidentiality or non-disclosure agreement, whether an optionee
has been terminated for cause or has breached such an agreement, and the date
upon which such termination for cause or breach occurs. Any such determinations
shall be final and conclusive and binding upon the optionee.

11. INCENTIVE STOCK OPTIONS.

Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:

(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.

(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:

(i) The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the Fair Market
Value of one share of Common Stock at the time of grant; and

(ii) the option exercise period shall not exceed five years from the
date of grant.

(c) DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate Fair Market Value, as of the
respective date or dates of grant, of more than $100,000.

(d) TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:

(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), PROVIDED, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-statutory
option under the Plan;

(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and

(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provisions thereto) while in
the employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be such
an employee because of such disability (or within such lesser period as may
be specified in the applicable option agreement).

For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.

12. ADDITIONAL PROVISIONS.

(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, rights of first refusal, commitments to pay cash bonuses, to
make, arrange for or guaranty loans or to transfer other property to optionees
upon exercise of options, or such other provisions as shall be determined by the
Board of Directors; PROVIDED, that such additional provisions shall not be
inconsistent with any other term or condition of the Plan and such additional
provisions shall not cause any Incentive Stock Option granted under the Plan to
fail to qualify as an Incentive Stock Option within the meaning of Section 422
of the Code.

(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised; PROVIDED, HOWEVER, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3 (if applicable).

13. GENERAL RESTRICTIONS.

(a) INVESTMENT REPRESENTATIONS. The Company may require any person to
whom an option is granted, as a condition of exercising such option or award, to
give written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option or
award, for his or her own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws, or with covenants or
representations made by the Company in connection with any public offering of
its Common Stock, including any "lock-up" or other restriction on
transferability.

(b) COMPLIANCE WITH SECURITIES LAW. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
or award upon any securities exchange or automated quotation system or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, or that the disclosure of non-public information or the
satisfaction of any other condition is necessary as a condition of, or in
connection with the issuance or purchase of shares thereunder, such option or
award may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval, or satisfaction of such
condition shall have been effected or obtained on conditions acceptable to the
Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.

14. RIGHTS AS A SHAREHOLDER.

The holder of an option shall have no rights as a shareholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares.
No adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.

15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS, REORGANIZATIONS AND RELATED
TRANSACTIONS.

(a) RECAPITALIZATIONS AND RELATED TRANSACTIONS. If, through or as a
result of any recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities of the Company, or (ii) additional shares or
new or different shares or other non-cash assets are distributed with respect to
such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares reserved for issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other securities subject to any then outstanding
options under the Plan, and (z) the price for each share subject to any then
outstanding options under the Plan, without changing the aggregate purchase
price as to which such options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment (i) would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3 or (ii) would be considered as the adoption of a new
plan requiring stockholder approval.

(b) REORGANIZATION, MERGER AND RELATED TRANSACTIONS. All outstanding
options under the Plan shall become fully exercisable for a period of sixty (60)
days following the occurrence of any Trigger Event, whether or not such options
are then exercisable under the provisions of the applicable agreements relating
thereto. For purposes of the Plan, a "Trigger Event" is any one of the
following events:

(i) the date on which shares of Common Stock are first purchased
pursuant to a tender offer or exchange offer (other than such an offer by
the Company, any Subsidiary, any employee benefit plan of the Company or of
any Subsidiary or any entity holding shares or other securities of the
Company for or pursuant to the terms of such plan), whether or not such
offer is approved or opposed by the Company and regardless of the number of
shares purchased pursuant to such offer;

(ii) the date the Company acquires knowledge that any person or group
deemed a person under Section 13(d)-3 of the Exchange Act (other than the
Company, any Subsidiary, any employee benefit plan of the Company or of any
Subsidiary or any entity holding shares of Common Stock or other securities
of the Company for or pursuant to the terms of any such plan or any
individual or entity or group or affiliate thereof which acquired its
beneficial ownership interest prior to the date the Plan was adopted by the
Board), in a transaction or series of transactions, has become the
beneficial owner, directly or indirectly (with beneficial ownership
determined as provided in Rule 13d-3, or any successor rule, under the
Exchange Act), of securities of the Company entitling the person or group
to 30% or more of all votes (without consideration of the rights of any
class or stock to elect directors by a separate class vote) to which all
shareholders of the Company would be entitled in the election of the Board
of Directors were an election held on such date;

(iii) the date, during any period of two consecutive years, when
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by
the shareholders of the Company, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period; and

(iv) the date of approval by the shareholders of the Company of an
agreement (a "reorganization agreement") providing for:

(A) The merger of consolidation of the Company
with anothercorporation where the shareholders of the Company,
immediately prior to the merger or consolidation, do not
beneficially own, immediately after the merger or
consolidation, shares of the corporation issuing cash or
securities in the merger or consolidation entitling such
shareholders to 80% or more of all votes (without
consideration of the rights of any class of stock to elect
directors by a separate class vote) to which all
shareholders of such corporation would be entitled in the
election of directors or where the members of the Board of
Directors of the Company, immediately prior to the merger or
consolidation, do not, immediately after the merger or
consolidation, constitute a majority of the Board of
Directors of the corporation issuing cash or securities in
the merger or consolidation; or

(B) The sale or other disposition of all or
substantially all the assets of the Company.

(c) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments
under this Section 15 will be made by the Board of Directors, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. No fractional shares will be
issued under the Plan on account of any such adjustments.

16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.

(a) GENERAL. In the event of any sale, merger, transfer or
acquisition of the Company or substantially all of the assets of the Company in
which the Company is not the surviving corporation, and provided that after the
Company shall have requested the acquiring or succeeding corporation (or an
affiliate thereof), that equivalent options shall be substituted and such
successor corporation shall have refused or failed to assume all options
outstanding under the Plan or issue substantially equivalent options, then any
or all outstanding options under the Plan shall accelerate and become
exercisable in full immediately prior to such event. The Committee will notify
holders of options under the Plan that any such options shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the options will terminate upon expiration of such notice.

(b) SUBSTITUTE OPTIONS. The Company may grant options
under the Plan in substitution for options held by employees of another
corporation who become employees of the Company, or a subsidiary of the Company,
as the result of a merger or consolidation of the employing corporation with the
Company or a subsidiary of the Company, or as a result of the acquisition by the
Company, or one of its subsidiaries, of property or stock of the employing
corporation. The Company may direct that substitute options be granted on such
terms and conditions as the Board of Directors considers appropriate in the
circumstances.

17. NO SPECIAL EMPLOYMENT RIGHTS.

Nothing contained in the Plan or in any option shall confer
upon any optionee any right with respect to the continuation of his or her
employment by the Company or interfere in any way with the right of the Company
at any time to terminate such employment or to increase or decrease the
compensation of the optionee.

18. OTHER EMPLOYEE BENEFITS.

Except as to plans which by their terms include such amounts
as compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.

19. AMENDMENT OF THE PLAN.

(a) The Board of Directors may at any time, and from time
to time, modify or amend the Plan in any respect; provided, however, that if at
any time the approval of the shareholders of the Company is required under
Section 422 of the Code or any successor provision with respect to Incentive
Stock Options, or under Rule 16b-3, the Board of Directors may not effect such
modification or amendment without such approval; and provided, further, that the
provisions of Section 3(c) hereof shall not be amended more than once every six
months, other than to comport with changes in the Code, the Employer Retirement
Income Security Act of 1974, as amended, or the rules thereunder.

(b) The modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected,
the Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to
amend or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.

20. WITHHOLDING.

(a) The Company shall have the right to deduct from
payments of any kind otherwise due to the optionee any federal, state or local
taxes of any kind required by law to be withheld with respect to any shares
issued upon exercise of options under the Plan. Subject to the prior approval
of the Company, which may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or (ii) by delivering to the Company
shares of Common Stock already owned by the optionee. The shares so delivered
or withheld shall have a Fair Market Value equal to such withholding obligation
as of the date that the amount of tax to be withheld is to be determined. An
optionee who has made an election pursuant to this Section 20(a) may only
satisfy his or her withholding obligation with shares of Common Stock which are
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.

(b) The acceptance of shares of Common Stock upon exercise
of an Incentive Stock Option shall constitute an agreement by the optionee
(i) to notify the Company if any or all of such shares are disposed of by the
optionee within two years from the date the option was granted or within one
year from the date the shares were issued to the optionee pursuant to the
exercise of the option, and (ii) if required by law, to remit to the Company, at
the time of and in the case of any such disposition, an amount sufficient to
satisfy the Company's federal, state and local withholding tax obligations with
respect to such disposition, whether or not, as to both (i) and (ii), the
optionee is in the employ of the Company at the time of such disposition.

(c) Notwithstanding the foregoing, in the case of a
Reporting Person whose options have been granted in accordance with the
provisions of Section 3(b) herein, no election to use shares for the payment of
withholding taxes shall be effective unless made in compliance with any
applicable requirements of Rule 16b-3.

21. CANCELLATION AND NEW GRANT OF OPTIONS, ETC.

The Board of Directors shall have the authority to effect,
at any time and from time to time, with the consent of the affected optionees,
(i) the cancellation of any or all outstanding options under the Plan and the
grant in substitution therefor of new options under the Plan covering the same
or different numbers of shares of Common Stock and having an option exercise
price per share which may be lower or higher than the exercise price per share
of the cancelled options or (ii) the amendment of the terms of any and all
outstanding options under the Plan to provide an option exercise price per share
which is higher or lower than the then-current exercise price per share of such
outstanding options.

22. EFFECTIVE DATE AND DURATION OF THE PLAN.

(a) EFFECTIVE DATE. The Plan shall become effective when
adopted by the Board of Directors, but no Incentive Stock Option granted under
the Plan shall become exercisable unless and until the Plan shall have been
approved by the Company's shareholders. If such shareholder approval is not
obtained within twelve months after the date of the Board's adoption of the
Plan, no options previously granted under the Plan shall be deemed to be
Incentive Stock Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan not requiring shareholder approval shall
become effective when adopted by the Board of Directors; amendments requiring
shareholder approval (as provided in Section 21) shall become effective when
adopted by the Board of Directors, but no Incentive Stock Option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such Incentive
Stock Option to a particular optionee) unless and until such amendment shall
have been approved by the Company's shareholders. If such shareholder approval
is not obtained within twelve months of the Board's adoption of such amendment,
any Incentive Stock Options granted on or after the date of such amendment shall
terminate to the extent that such amendment to the Plan was required to enable
the Company to grant such option to a particular optionee. Subject to this
limitation, options may be granted under the Plan at any time after the
effective date and before the date fixed for termination of the Plan.

(b) TERMINATION. Unless sooner terminated in accordance
with Section 16, the Plan shall terminate upon the earlier of (i) the close of
business on the day next preceding the tenth anniversary of the date of its
adoption by the Board of Directors, or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then options outstanding on such date
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.

23. PROVISION FOR FOREIGN PARTICIPANTS.

The Board of Directors may, without amending the Plan,
modify awards or options granted to participants who are foreign nationals or
employed outside the United States to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax,
securities, currency, employee benefit or other matters.

24. GOVERNING LAW.

The provisions of this Plan shall be governed and construed
in accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws.

Adopted by the Board of Directors on March 29, 1996 and
amended and restated on May 7, 1996.

<PAGE>

ENTREMED, INC.

TERMINATION AGREEMENT

THIS AGREEMENT is made as of May 15, 1996 and is effective as of
August 1, 1995 (the "Effective Date"), between EntreMed, Inc., a corporation
organized under the laws of the State of Delaware The "Company"), and Steve
Gorlin ("Gorlin").

RECITALS:

In consideration of the above premises and the mutual agreements hereinafter set
forth the parties hereby agree as follows:

1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
variant forms shall have the meaning set forth below:

1.1 "Agreement" shall mean this Agreement and any Exhibits
incorporated herein together with any amendments hereto made in the manner
described in this Agreement.

1.2 "Affiliate" shall mean any business entity which controls the
Company, is controlled by, or is under common control with the Company.

1.3 "Area" shall mean the states of Massachusetts, Connecticut, New
York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, District of
Columbia, North Carolina, Illinois, Texas and California, of the United States
of America.

1.4 "Business of the Company" shall mean the business of researching,
developing, inventing, manufacturing, licensing or selling vaccines, vaccine
adjuvants, immunotherapeutic agents, diagnostics and related pharmaceutical
products.

1.5 "Initial Term" shall mean that period of time commencing with the
Effective Dtae and running until the earlier of (a) three (3) years thereafter
or (b) any termination of this Agreement as provided for in Section 3 hereof.

1.6 "Invention" shall mean any discovery, whether or not patentable,
including, but not limited to, any useful process, method, formula, technique,
machine, manufacture, composition of matter, algorithm or computer program, as
well as improvements thereto, which is new or which Gorlin has a reasonable
basis to believe may be new.

<PAGE>

1.7 "Proprietary Information" shall mean:

(a) information related to the Company or any Affiliate that (i) derives
economic value, actual or potential, from not being generally known to or
readily ascertainable by other persons who can obtain economic value from
its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy;

(b) if the criteria in (a) above are satisfied, Proprietary Information
shall include, but not be limited to, all tangible reproductions or
embodiments of such information, technical and nontechnical data related to
the formulas, patterns, designs, compilations, programs, inventions,
methods, techniques, drawings, processes, finances, actual or potential
customers and suppliers, existing and future products, and employees of the
Company or its Affiliates; and

(c) Proprietary Information also shall include information that has been
disclosed to the Company or its Affiliates by a third party and which the
Company or any Affiliate is obligated to treat as confidential.

1.8 "Subject Invention" shall mean any Invention which is conceived
by Gorlin alone or in a joint effort with others during Gorlin's engagement by
the Company that:

(a) May be reasonably expected to be used in the Company's research and
development efforts relative to the Business of the Company, or in a
current product or future product of the Company, or a product similar to a
Company product or future product; or

(b) Results from work that Gorlin has been assigned as part of Gorlin's
duties as a consultant to the Company; or

(c) Is in an area of technology which is the same as or substantially
related to the areas of technology with which Gorlin is involved in the
performance of Gorlin's duties as a consultant to the Company; or

(d) Is useful, or which Gorlin reasonably expects may be useful, in any
manufacturing or product design process of the Business of the Company.

1.9 "Term" shall mean the Initial Term and all subsequent renewal periods.

1.10 "Work" shall mean a copyrightable work of authorship, including
without limitation, any technical descriptions for products, user's guides,
illustrations, advertising materials, computer programs (including the contents
of read only memories), plans, diagrams, specifications and other such works,
and any contribution to such materials.

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2. Duties.

If requested by the Company, Gorlin shall perform such consulting or
advisory tasks and services as may be delegated to him by the President of the
Company. Gorlin shall have no right whatsoever to make any contracts binding
upon the Company or take any actions on behalf of the Company, other than as
specifically authorized by the President of the Company or his designee.

3. Term and Termination.

3.1 Term. This Agreement shall remain in effect for the Term, but may
sooner be terminated by the Company for cause. Upon expiration of the Initial
Term or any subsequent renewal Term, this Agreement may be renewed only by
mutual, written agreement of Gorlin and the Company. Absent such written renewal
agreement, this Agreement shall expire at the end of the then current Term.

3.2 Effect of Termination. The obligations of Gorlin pursuant to Sections
6, 7, 8, 9, and 10 shall survive the termination of the engagement of Gorlin
hereunder.

4. Compensation. Gorlin shall receive the following compensation hereunder:

4.1 Base Compensation. Gorlin shall be compensated at a rate of Ninety
Thousand Dollars ($90,000) per year, payable periodically in accordance with the
Company's normal practices.

4.2 Expense Reimbursement. In the event the Company requests consulting
services hereunder, expenses incurred by Gorlin in the performance of such
services shall be reimbursed by the Company if such expenses are approved in
advance by the President of the Company or his designee. Any expenses not so
approved shall be the sole responsibility of Gorlin.

5. Gorlin's Representations and Warranties.

5.1 No Previously Conceived Inventions. Gorlin warrants and represents
that Gorlin has not, as of the Effective Date, previously conceived any
Invention or acquired any ownership interest in any Invention (other than any
Invention assigned by Gorlin to the Company contemporaneously with the execution
of this Agreement) which:

(a) Relates to the Business of the Company; and

(b) Is Gorlin's property, or of which he is a joint owner with another
person or company; and

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<PAGE>

(d) Has not previously been transferred or assigned to the Company.

In the event that the foregoing warranty and representation is breached by
Gorlin, the Invention in question shall be considered to be licensed to the
Company on a non-exclusive, perpetual, royalty free basis, for any use in or
reasonably related to the Business of the Company.

5.2 Gorlin's Prior Patent Rights. Gorlin neither owns nor has the right
to license any patents, individually or jointly with others, except those
specifically described on Exhibit A attached hereto and incorporated herein by
reference.

5.3 No Prior Works. Gorlin claims no ownership rights in any Works
relative to Gorlin's area of responsibility as a consultant to the Company
except described on Exhibit A.

5.4 No Prior Agreements. Except as described on Exhibit A, Gorlin is not
a party to any employment or consulting contract or similar agreement that
prohibits Gorlin, during any period of time, from:

(a) Competing with or participating in a business that competes with
Gorlin's former employer or business;

(b) Soliciting personnel of the former employer or business to leave the
former employer's employment or to leave the business; or

5.5 No Inventions or Works Affected. Gorlin hereby warrants and
represents to the Company that Gorlin has not executed any agreement with any
other party which purports to require Gorlin to assign or license any Work or
any Invention pertaining to the Business of the Company created, conceived or
first practiced by Gorlin during a period of time which includes the Effective
Date.

5.6 No Violation of Laws. Gorlin hereby represents and warrants to the
Company that Gorlin's execution and performance of Gorlin's under this Agreement
will not result in a violation or breach of any applicable law, rule or
regulation of any governmental entity.

6. Inventions and Copyrights

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<PAGE>

6.1 Subject Inventions. Gorlin agrees that all Subject Inventions
conceived or first practiced by Gorlin during this engagement by the Company,
and all patent rights and copyrights to the Subject Inventions, will become the
property of the Company, and Gorlin hereby irrevocably assigns to the Company
all of Gorlin's rights to all Subject Inventions.

6.2 Notification of Conception of Invention. Gorlin agrees that if Gorlin
conceives an Invention during this engagement by the Company and there is a
reasonable basis to believe that the Invention is a Subject Invention, Gorlin
will promptly provide a written description of the Invention to the Company
adequate to allow evaluation for a determination as to whether the Invention is
a Subject Invention.

6.3 Records. Gorlin shall maintain appropriate records of all research
and development activities adhering to any specific guidelines for the same
which are promulgated by the Company, which shall, if properly maintained and
promptly disclosed to the Company, satisfy the requirement of providing a
written disclosure of any Subject Inventions. It is agreed that all the
notebooks and written disclosures, and any copyrights or ideas therein, are the
sole and exclusive property of the Company. Gorlin shall complete written call
reports on contacts with prospective or existing customers adhering to any
specific guidelines for the same which are promulgated by the Company.

6.4 Patent Applications. Gorlin agrees that should the Company elect to
file an application for patent protection either in the United States or in any
foreign country, on a Subject Invention of which Gorlin was an inventor, Gorlin
will execute all necessary documentation relating to the patent applications,
including formal assignments to the Company. Gorlin further agrees to cooperate
with attorneys or other persons designated by the Company by explaining the
nature of any Subject Invention for which the Company elects to file an
application for patent protection, reviewing applications and other papers and
providing any other cooperation required for prosecution of the patent
applications. The Company will be responsible for all expenses incurred for the
preparation and prosecution of all patent applications on Subject Inventions
assigned to the Company.

6.5 Works Created by Gorlin in Course of Business. Gorlin agrees that
every Work created by Gorlin in the course of Gorlin's duties as a consultant to
the Company and related to the Business of the Company is subject to the work
Made for Hires provisions contained in Sections 101 and 201 of the United States
Copyright Law, Title 17 of the United States Code. All right, title and interest
to copyrights in all Works which have been or will be prepared by Gorlin within
the scope of Gorlin's engagement by the Company will be the property of the
Company. Gorlin acknowledges and agrees that, to the extent the provisions of
Title 17 of the United States Code do not vest in the Company the copyrights to
such Works, Gorlin hereby assigns to the Company all right, title and interest
to copyrights which Gorlin may have in the Works; the foregoing shall be deemed
a continuing assignment. Gorlin shall disclose to the Company such Works and
will execute and deliver all applications, registrations, and documents

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<PAGE>

relating to the copyrights to the Works and will provide assistance to secure
and perfect the Company's title to the copyrights in the Works. The Company will
be responsible for all expenses incurred in connection with the registration of
all the copyrights.

7. Proprietary Information.

7.1 Ownership of Proprietary Information. All Proprietary Information
received or developed by Gorlin while a consultant to the Company will remain
the sole and exclusive property of the Company

7.2 Obligations of Gorlin. Gorlin will hold the Proprietary Information
in trust and strictest confidence, and will not use, reproduce, distribute,
disclose or otherwise disseminate the Proprietary Information except to the
extent necessary to perform the duties assigned by the Company.

7.3 Delivery upon Termination. Upon termination of Gorlin's engagement by
the Company, Gorlin will promptly deliver to the Company all property belonging
to the Company, including without limitation all Proprietary Information then in
Gorlin's possession or control.

8. Limitations on Future Competitive Activities.

8.1 Non-Competition. Gorlin shall not, during Gorlin's engagement by the
Company hereunder and for a period of one (1) year thereafter (except on behalf
of or with the prior written consent of the Company), within the Area, either
directly or indirectly, on Gorlin's own behalf or in the service or on behalf of
others, as a manager, supervisor, administrator, consultant, producer,
instructor, salesman, or in any other capacity which involves duties and
responsibilities similar to those undertaken for the Company, engage in any
business which is the same as or essentially the same as the Business of the
Company. It is the express intent of the parties that the Area, as that term is
defined herein, is the area where Gorlin performs or performed services on
behalf of the Company under this Agreement as of, or within a reasonable time
prior to, the termination of Gorlin's engagement hereunder.

8.2 Non-Solicitation of Customers. Gorlin shall not, during Gorlin's
engagement by the Company hereunder and for a period of one ( 1) year thereafter
(except on behalf of or with the prior written consent of the Company) within
the Area, on Gorlin's own behalf or in the service or on behalf of others,
solicit or accept, or attempt to solicit or accept, directly or by assisting
others, any business from any of the Company's customers, including actively
sought prospective customers, with whom Gorlin has or had material contact
during this engagement for purposes of providing products or services that are
competitive with those provided by the Company.

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<PAGE>

8.3 Non-Solicitation of Employees. Gorlin shall not, during Gorlin's
engagement by the Company hereunder and for a period of two (2) years
thereafter, on Gorlin's own behalf or in the service or on behalf of others,
solicit, recruit or hire, or attempt to recruit or hire, directly or by
assisting others, any employee of the Company or its affiliates, whether or not
such employee is a full-time employee or a temporary employee of the Company,
and whether or not such employment is pursuant to written agreement and whether
or not such employment is for a determined period or is at will.

9. Indemnification. Gorlin shall indemnify the Company from and hold it
harmless against any loss, liability, damage, action, cause of action, cost or
expense (including without limitation attorneys' fees) arising out of (a) any
unauthorized act or omission of Gorlin which may be determined to be binding
upon the Company, (b) any material breach of the obligations and undertakings of
Gorlin hereunder, or (c) the negligent, reckless or willful misconduct of
Gorlin.

10. Remedies. Gorlin agrees that the covenants contained in Sections 5 through
9 of this Agreement are of the essence of this Agreement; that each of the
covenants is reasonable and necessary to protect the business, interests and
properties of the Company; and that irreparable loss and damage will be suffered
by the Company should he breach any of the covenants. Therefore, Gorlin agrees
and consents that, in addition to all the remedies provided by law or in equity,
the Company shall be entitled to a temporary restraining order and temporary and
permanent injunctions to prevent a breach or contemplated breach of any of the
covenants. The Company and Gorlin agree that all remedies available to the
Company or Gorlin, as applicable, shall be cumulative.

11. Severability. The parties agree that each of the provisions included in
this Agreement is separate, distinct, and severable from the other provisions of
this Agreement, and that the invalidity or unenforceability of any Agreement
provision shall not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
shall be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.

12. Notice. All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand or overnight courier, in which event the notice shall be deemed effective
when delivered. All notices and other communications under this Agreement shall
be given to the parties hereto at the following addresses:

(i) If the Company:

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<PAGE>

Chief Executive Officer
EntreMed, Inc.
Suite 200
9610 Medical Center Drive
Rockville, Maryland 20850

with a copy to:

Donald S. Brooks, Esquire
Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein
6 Becker Farm Road
Roseland, NJ 07068-1739

(ii) If to Gorlin:

Steve Gorlin
c/o S. Gorlin Co.
5115 New Peachtree Road, Suite 200
Chamblee, GA 30341

13. Assignment. Neither party hereto may assign or delegate this Agreement or
any of its rights and obligations hereunder without the written consent of the
other party hereto.

14. Waiver. A waiver by the Company of any breach of this Agreement by Gorlin
shall not be effective unless in writing, and no waiver shall operate or be
construed as a waiver of the same or another breach on a subsequent occasion.

15. Law and Jurisdiction. This Agreement shall be subject to the law of
Maryland, and the parties consent and submit to the jurisdiction of the
cognizant courts of Maryland for any disputes or causes arising hereunder.

16. Entire Agreement. This Agreement embodies the entire and final agreement
of the parties on the subject matter stated in the Agreement. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Gorlin unless made in writing and signed by both parties.

All prior understandings and agreements relating to the subject matter of this
Agreement are hereby expressly terminated.

THIS AGREEMENT, AS A CONDITION OF GORLIN'S ENGAGEMENT BY THE COMPANY, CONTAINS
AN ASSIGNMENT OF CERTAIN PATENT AND RELATED RIGHTS TO INVENTIONS CONCEIVED WHILE
A GORLIN TO THE COMPANY, MAY

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<PAGE>

AFFECT RIGHTS TO INVENTIONS OWNED BY GORLIN AT THE TIME THIS ENGAGEMENT BY THE
COMPANY BEGINS, AND IMPOSES UPON GORLIN CERTAIN CONFIDENTIALITY RESTRICTIONS
WITH RESPECT TO PROPRIETARY INFORMATION BELONGING TO THE COMPANY. PLEASE READ
THIS AGREEMENT CAREFULLY BEFORE SIGNING.

IN WITNESS WHEREOF, the Company and Gorlin have executed and delivered this
Agreement as of the Effective Date.

ENTREMED, INC.

_____________________________ _____________________________
Steve Gorlin John W. Holaday, President & CEO

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<PAGE>

ENTREMED, INC.

Consulting Agreement With Steve Gorlin

EXHIBIT A

INVENTIONS, PATENTS, COPYRIGHTS AND AGREEMENTS

1. Previously Conceived Inventions
(Please describe any Inventions which you have developed or in which you
have some ownership or licensing interest or right.)

2. Patents
(Please list or describe all patents you own or have an interest in,
individually or with others, or for which applications are pending.)

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<PAGE>

3. Copyrights
(Please describe any Works for which you claim ownership or licensing
rights of the copyright, either individually or with others.)

4. Employment Agreements
(Please list and provide copies of pertinent portions of all agreements
with former employers or others containing the restrictions described in
Section 10 or requiring the assignment or licensing of inventions,
copyrightable works, or contributions to copyrightable works.)

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<PAGE>
INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT, made and entered into as of the
_______ day of ___________, 199_ ("Agreement"), by and between EntreMed, Inc., a
Delaware corporation (the "Corporation"), and
("Indemnitee").

WHEREAS, recently, highly competent persons have become more reluctant
to serve both privately and publicly-held corporations as directors, officers,
or in other capacities, unless they are provided with better protection from the
risk of claims and actions against them arising out of their service to and
activities on behalf of such corporations; and

WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties related to indemnification have increased the difficulty
of attracting and retaining such persons; and

WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that the ability to attract and retain such persons is in the best
interests of the Corporation's shareholders and that such persons should be
assured that they will have better protection in the future; and

WHEREAS, it is reasonable, prudent and necessary for the Corporation
to obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law, so that such persons will serve or continue to
serve the Corporation free from undue concern that they will not be adequately
indemnified; and

WHEREAS, this Agreement is a supplement to and in furtherance of
Article VII of the Amended and Restated Certificate of Incorporation of the
Corporation (the "Certificate") and Article IV of the By-Laws of the Corporation
("By-Laws"); any rights granted under the Certificate or By-Laws and any
resolutions adopted pursuant thereto shall not be deemed to be a substitute
therefor nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Corporation on the condition that
he be indemnified according to the terms of this Agreement;

NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:

Section 1. DEFINITIONS. For purposes of this Agreement:

(a) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in response to
Item 6(e) of Schedule l4A of Regulation l4A (or in response to any similar item
on any similar schedule or form) promulgated under the Securities Exchange Act
of 1934 (the "Act"), whether or not the Corporation is then subject to such
reporting requirement; provided, however, that, without limitation, such a
Change in Control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule l3d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board in office
immediately prior to such person attaining such percentage interest; (ii) the
Corporation is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members of the
Board in office immediately prior to such transaction or event constitute less
than a majority of the Board thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board (including for this purpose any new director whose election or
nomination for election by the Corporation's shareholders was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the beginning of such period) cease for any reason to constitute at least a
majority of the Board.

(b) "Corporate Status" means the status of a person who
is or was a director, officer, employee, agent or fiduciary of the Corporation
or of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the request of
the Corporation.

(c) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.

(d) "Expenses" means all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.

(e) "Independent Counsel" means a law firm, or a member
of a law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Corporation or Indemnitee in any other matter material to either such party,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine
Indemnitee's rights under this Agreement.

(f) "Proceeding" means any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing or
any other proceeding, whether civil, criminal, administrative or investigative,
except one initiated by an Indemnitee pursuant to Section 11 of this Agreement
to enforce his rights under this Agreement.

Section 2. SERVICES BY INDEMNITEE. Indemnitee agrees
to serve as a director of the Corporation, and, at its request, as a director,
officer, employee, agent or fiduciary of certain other corporations and
entities. Indemnitee may at any time and for any reason resign from any such
position (subject to any other contractual obligation or any obligation imposed
by operation of law).

Section 3. INDEMNIFICATION - GENERAL. The Corporation
shall indemnify, and advance Expenses to, Indemnitee as provided in this
Agreement to the fullest extent permitted by applicable law in effect on the
date hereof and to such greater extent as applicable law may thereafter from
time to time permit. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.

Section 4. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION. Indemnitee shall be entitled to the rights of
indemnification provided in this Section if, by reason of his Corporate Status,
he is, or is threatened to be made, a party to any threatened, pending, or
completed Proceeding, other than a Proceeding by or in the right of the
Corporation. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with any such
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.

Section 5. PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION. Indemnitee shall be entitled to the rights of indemnification
provided in this Section if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending, or completed
Proceeding brought by or in the right of the Corporation to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with any such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation. Notwithstanding
the foregoing, no indemnification against such Expenses shall be made in respect
of any claim, issue or matter in any such Proceeding as to which Indemnitee
shall have been adjudged to be liable to the Corporation if applicable law
prohibits such indemnification unless the Chancery Court of the State of
Delaware, or the court in which such Proceeding shall have been brought or is
pending, shall determine that indemnification against Expenses may nevertheless
be made by the Corporation.

Section 6. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO
IS WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of his Corporate Status,
a party to and is successful, on the merits or otherwise, in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith. If Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all claims, issues or matters in such Proceeding,
the Corporation shall indemnify Indemnitee against all Expenses actually and
reasonably incurred by him or on his behalf in connection with each successfully
resolved claim, issue or matter. For the purposes of this Section and without
limiting the foregoing, the termination of any claim, issue or matter in any
such Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.

Section 7. INDEMNIFICATION FOR EXPENSES OF A WITNESS.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.

Section 8. ADVANCEMENT OF EXPENSES. The Corporation
shall advance all Expenses incurred by or on behalf of Indemnitee in connection
with any Proceeding within twenty days after the receipt by the Corporation of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses.

Section 9. PROCEDURE FOR DETERMINATION OF ENTITLEMENT
TO INDEMNIFICATION.

(a) To obtain indemnification under this Agreement in
connection with any Proceeding, and for the duration thereof, Indemnitee shall
submit to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Corporation shall, promptly
upon receipt of any such request for indemnification, advise the Board in
writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for
indemnification pursuant to Section 9(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in such case: (i) if a Change in Control shall have occurred, by Independent
Counsel (unless Indemnitee shall request that such determination be made by the
Board or the shareholders, in which case in the manner provided for in clauses
(ii) or (iii) of this Section 9(b)) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; (ii) if a Change of Control shall not
have occurred, (A) by the Board by a majority vote of a quorum consisting of
Disinterested Directors, or (B) if a quorum of the Board consisting of
Disinterested Directors is not obtainable, or even if such quorum is obtainable,
if such quorum of Disinterested Directors so directs, either (x) by Independent
Counsel in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee, or (y) by the shareholders of the Corporation, as determined by such
quorum of Disinterested Directors, or a quorum of the Board, as the case may be;
or (iii) as provided in Section 10(b) of this Agreement. If it is so determined
that Indemnitee is entitled to indemnification, payment to Indemnitee shall be
made within ten (10) days after such determination. Indemnitee shall cooperate
with the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Corporation
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.

(c) If required, Independent Counsel shall be selected
as follows: (i) if a Change of Control shall not have occurred, Independent
Counsel shall be selected by the Board, and the Corporation shall give written
notice to Indemnitee advising him of the identity of Independent Counsel so
selected; or (ii) if a Change of Control shall have occurred, Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board, in which event (i) shall apply), and
Indemnitee shall give written notice to the Corporation advising it of the
identity of Independent Counsel so selected. In either event, Indemnitee or the
Corporation, as the case may be, may within 7 days after such written notice of
selection shall have been given, deliver to the Corporation or to Indemnitee, as
the case may be, a written objection to such selection. Such objection may be
asserted only on the grounds that Independent Counsel so selected does not meet
the requirements of "Independent Counsel" as defined in Section 1 of this
Agreement, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is made, Independent Counsel
so selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 9(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Corporation or Indemnitee may petition the Chancery
Court of the State of Delaware, or other court of competent jurisdiction, for
resolution of any objection which shall have been made by the Corporation or
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by such court or by such
other person as such court shall designate, and the person with respect to whom
an objection is so resolved or the person so appointed shall act as Independent
Counsel under Section 9(b) hereof. The Corporation shall pay any and all
reasonable fees and expenses of Independent Counsel incurred by such Independent
Counsel in connection with its actions pursuant to this Agreement, and the
Corporation shall pay all reasonable fees and expenses incident to the
procedures of this Section 9(c), regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due commencement date
of any judicial proceeding or arbitration pursuant to Section 11(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).

Section 10. PRESUMPTION AND EFFECTS OF CERTAIN
PROCEEDINGS.

(a) If a Change of Control shall have occurred, in
making a determination with respect to entitlement to indemnification hereunder,
the person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9(a) of this
Agreement, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.

(b) If the person, persons or entity empowered or
selected under Section 9 of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within 60 days
after receipt by the Corporation of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) prohibition of such
indemnification under applicable law; PROVIDED, HOWEVER, that such 60-day period
may be extended for a reasonable time, not to exceed an additional 30 days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith require(s) such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and PROVIDED, FURTHER, that the foregoing provisions of this Section
10(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the shareholders pursuant to Section 9(b) of this Agreement and
if (A) within 15 days after receipt by the Corporation of the request for such
determination the Board has resolved to submit such determination to the
shareholders for their consideration at an annual meeting thereof to be held
within 75 days after such receipt and such determination is made thereat, or (B)
a special meeting of shareholders is called within 15 days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within 60 days after having been so called and such determination is
made thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 9(b) of this Agreement.

(c) The termination of any Proceeding or of any claim,
issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of NOLO CONTENDERE or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to believe that his
conduct was unlawful.

Section 11. REMEDIES OF INDEMNITEE.

(a) In the event that (i) a determination is made
pursuant to Section 9 of this Agreement, (ii) advancement of Expenses is not
timely made pursuant to Section 8 of this Agreement, (iii) the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 9(b) of this Agreement and such determination shall not have been made
and delivered in a written opinion within 90 days after receipt by the
Corporation of the request for indemnification, (iv) payment of indemnification
is not made pursuant to Section 7 of this Agreement within ten (10) days after
receipt by the Corporation of a written request therefor, or (v) payment of
indemnification is not made within ten (10) days after a determination has been
made that Indemnitee is entitled to indemnification or such determination is
deemed to have been made pursuant to Section 9 or 10 of this Agreement,
Indemnitee shall be entitled to an adjudication in the Chancery Court of the
State of Delaware, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses. Alternatively,
Indemnitee, at his option, may seek an award in arbitration to be conducted by a
single arbitrator in Delaware. Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 11(a). The Corporation shall not oppose Indemnitee's
right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been
made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred in any
judicial proceeding or arbitration commenced pursuant to this Section, the
Corporation shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made or deemed
to have been made pursuant to Section 9 or 10 of this Agreement that Indemnitee
is entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant to
this Section, absent (i) a misstatement by Indemnitee of a material fact, or an
omission of a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for indemnification, or
(ii) prohibition of such indemnification under applicable law.

(d) The Corporation shall be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to this Section
that the procedures and presumptions of this Agreement are not valid, binding
and enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this
Agreement.

(e) In the event that Indemnitee, pursuant to this
Section, seeks a judicial adjudication of, or an award in arbitration to
enforce, his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Corporation, and shall be
indemnified by the Corporation against, any and all expenses (of the kinds
described in the definition of Expenses) actually and reasonably incurred by him
in such judicial adjudication or arbitration, but only if he prevails therein.
If it shall be determined in such judicial adjudication or arbitration that
Indemnitee is entitled to receive part but not all of the indemnification or
advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.

Section 12. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS;
INSURANCE; SUBROGATION.

(a) The rights of indemnification and to receive
advancement of Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the certificate of incorporation or by-laws of the
Corporation, any agreement, a vote of shareholders for a resolution of
directors, or otherwise. No amendment, alteration or repeal of this Agreement
or any provision hereof shall be effective as to any Indemnitee with respect to
any action taken or omitted by such Indemnitee in his Corporate Status prior to
such amendment, alteration or repeal.

(b) To the extent that the Corporation maintains an
insurance policy or policies providing liability insurance for directors,
officers, employees, agents or fiduciaries of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person serves at the request of the Corporation,
Indemnitee shall be covered by such policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any such
director, officer, employee, agent or fiduciary under such policy or policies.

(c) In the event of any payment under this Agreement,
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and take
all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to enforce
such rights.

(d) The Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
under any insurance policy, contract, agreement or otherwise.

Section 13. DURATION OF AGREEMENT. This Agreement
shall continue until and terminate upon the later of: (a) 10 years after the
date that Indemnitee shall have ceased to serve as a director, officer,
employee, agent or fiduciary of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which Indemnitee served at the request of the Corporation; or (b) the final
termination of all pending Proceedings in respect of which Indemnitee is granted
rights of indemnification or advancement of Expenses hereunder and of any
proceeding commenced by Indemnitee pursuant to Section 11 of this Agreement.
This Agreement shall be binding upon the Corporation and its successors and
assigns and shall inure to the benefit of Indemnitee and his heirs, executors
and administrators.

Section 14. SEVERABILITY. If any provision or
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.

Section 15. EXCEPTION TO RIGHT OF INDEMNIFICATION OR
ADVANCEMENT OF EXPENSES. Except as provided in Section 11(e), Indemnitee shall
not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding, or any claim therein, brought or made
by him against the Corporation.

Section 16. IDENTICAL COUNTERPARTS. This Agreement may
be executed in one or more counterparts, each of which shall for all purposes be
deemed to be an original but all of which together shall constitute one and the
same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.

Section 17. HEADINGS. The headings of the paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.

Section 18. MODIFICATION AND WAIVER. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.

Section 19. NOTICE BY INDEMNITEE. Indemnitee agrees
promptly to notify the Corporation in writing upon being served with any
summons, citation, subpoena, complaint, indictment, information or other
document relating to any Proceeding or matter which may be subject to
indemnification or advancement of Expenses covered hereunder.

Section 20. NOTICES. All notices, requests, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if (i) delivered by hand and receipted for by the party to
whom such notice or other communication shall have been directed, or (ii) mailed
by certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:

(a) If to Indemnitee, to:

(b) If to the Corporation, to:

EntreMed, Inc.
9610 Medical Center Drive
Suite 200
Rockville, Maryland 20850

or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.

Section 21. GOVERNING LAW. The parties agree that this
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware.

Section 22. MISCELLANEOUS. Use of the masculine
pronoun shall be deemed to include usage of the feminine pronoun where
appropriate.

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.

ENTREMED, INC.

By:
---------------------------------
Name:
Title:

INDEMNITEE

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

<PAGE>

RESEARCH AND LICENSE AGREEMENT

BETWEEN

INNOVATIVE THERAPEUTICS, INC. AND ENTREMED, INC.

<PAGE>

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

Article 1 -- Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Article 2 -- The Work. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article 3 -- Grant of License. . . . . . . . . . . . . . . . . . . . . . 6
Article 4 -- Right of First Refusal on Products Outside the Field. . . . 10
Article 5 -- Representations and Warranties. . . . . . . . . . . . . . . 11
Article 6 -- Patent Prosecution and Infringement.. . . . . . . . . . . . 13
Article 7 -- Indemnification . . . . . . . . . . . . . . . . . . . . . . 15
Article 8 -- Confidentiality . . . . . . . . . . . . . . . . . . . . . . 15
Article 9 -- Term and Termination. . . . . . . . . . . . . . . . . . . . 17
Article 10 -- Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Article 11 -- Captions. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Article 12 -- Restrictions on Use of Names. . . . . . . . . . . . . . . . 19
Article 13 -- Independent Contractor. . . . . . . . . . . . . . . . . . . 20
Article 14 -- Severability. . . . . . . . . . . . . . . . . . . . . . . . 20
Article 15 -- Assignments and Sublicenses . . . . . . . . . . . . . . . . 20
Article 16 -- Force Majeure . . . . . . . . . . . . . . . . . . . . . . . 21
Article 17 -- Obligations to NJC. . . . . . . . . . . . . . . . . . . . . 22
Article 18 -- Modifications in Writing. . . . . . . . . . . . . . . . . . 22
Article 19 -- Governing Law . . . . . . . . . . . . . . . . . . . . . . . 22
Article 20 -- Construction. . . . . . . . . . . . . . . . . . . . . . . . 23
Article 21 -- Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 23

<PAGE>

RESEARCH AND LICENSE AGREEMENT

THIS AGREEMENT, effective as of August __, 1993 (the
"Effective Date") between ENTREMED, INC., a Delaware corporation,
with its principal place of business at 9610 Medical Center
Drive, Suite 200, Rockville, Maryland 20850, (hereinafter
referred to as "ENTREMED") and INNOVATIVE THERAPEUTICS, INC., a
Delaware corporation, with its principal place of business at
4860 N. Broadway, Denver, Colorado 80216 (hereinafter referred to
as "INNOVATIVE").

WITNESSETH:

WHEREAS, INNOVATIVE has an exclusive worldwide license from
National Jewish Center for Immunology and Respiratory Medicine to
technology related to Transfer Factor; and

WHEREAS, ENTREMED desires to contribute to the funding of
INNOVATIVE'S attempts to produce and purify Transfer Factor, to
perform efficacy tests and chemical analyses of the Transfer
Factor, and to complete all of the steps through the drafting of
the protocol for human clinical trials for the Transfer Factor
(the "Work," as further defined below) in exchange for certain
rights in the technology upon the terms and conditions
hereinafter set forth;

WHEREAS, ENTREMED desires to obtain an exclusive worldwide
license from INNOVATIVE to the technology related to Transfer
Factor; and

NOW, THEREFORE, in consideration of the mutual covenants
herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:

ARTICLE 1 -- DEFINITIONS

As used in this Agreement, the following terms shall have
the meanings as set forth below:

1.1 "FIELD" shall means Herpes Simplex I and Herpes
Simplex II indications.

1.2 "KNOW-HOW" shall mean inventions, whether or not
patentable, information, data, knowledge, method,
procedure, process, or other subject matter now or
hereafter within the knowledge and possession of
INNOVATIVE which arises out of or in connection with
Phase I of the Work or which otherwise contributes in
whole or in part to the Patents in the Field and the
use of the Transfer Factor in the Field.

1.3 "NET SALES" shall mean the gross amount invoiced for
all sales, uses, leases, or transfers of Products by
ENTREMED or its Affiliates less:

1.3.1 transportation and related charges actually
paid or granted;

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<PAGE>

1.3.2 ordinary and usual trade, quantity, cash or
other discounts and independent brokers' or
independent agents' commissions, if any, paid
to independent parties in arms-length
transactions;

1.3.3 credits made or given on account for rejects
and returns;

1.3.4 any tax or govermental charge directly on the
sale, transportation, use or delivery of
products actually paid and not recovered from
the purchaser in U.S. income tax credits and
separate from the purchase price or license
fee;

1.3.5 rebates, accrued, incurred or paid to Federal
Medicaid or State Medicare, or other Federal
Health Program and amounts exactly repaid or
credited by reason of rejections or the return
of products (due to recalls, dating or other
reasons) and retroactive deductions.

For the purpose of this definition of Net Sales, products
shall be considered "sold" and royalties shall be due under
this Agreement when products are invoiced, shipped, or
transferred, whichever occurs first. All uses, sales and
transfers of products by ENTREMED, its affiliates, and
sublicensees shall be royalty bearing or considered as such
for the purpose of calculating royalties under this
Agreement. All such uses, sales and transfers shall be for
a fair consideration reasonably determined in arms-length
transactions.

1.4 "NJC" shall mean National Jewish Center for
Immunology and Respiratory Medicine located at 1400
Jackson Street, Denver, Colorado 80206.

1.5 "NJC AGREEMENT" shall mean the Agreement between NJC
and Innovative Therapeutics dated August 20, 1991,
and is attached hereto as Exhibit B.

1.6 "PRODUCTS" shall mean Transfer Factor preparations
covered by the Patents.

1.7 "PATENTS" shall mean:

1.7.1 U.S. Patent Application Serial No. 07/718,571,
filed June 26, 1991, entitled "Transfer Factor
and Methods of Use," which is a continuation-in-part
of U.S. Patent Application Serial No. 07/547,500,
filed July 2, 1990, entitled "Process for Obtaining
Pure Peptide Transfer Factor, Transfer Factor thus
Obtained and Uses Thereof," now abandoned.

1.7.2 Any U.S. patent issued as a result of the
foregoing applications and any division,
continuation or continuation-in-part, or
reissue of such application or patent issued
thereon;

1.7.3 Any U.S. patent that may be filed directed to
Transfer Factor or otherwise arising out of the
Work;

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<PAGE>

1.7.4 any patent applications filed or patent
issued outside the United States which
is the counterpart of any of the
foregoing.

1.8 "PHASE I OF THE WORK" shall mean the production of
the Transfer Factor in a quantity sufficient for
purification; the purification of the Transfer Factor
by immunoaffinity chromatography and biochemical
parameters, as appropriate; the performance of
efficacy studies on the purified transfer factor
material in experimental models of Herpes Simplex
virus infections; the performance of chemical
analyses of the purified Transfer Factor, including
amino acid composition, peptide mapping and
sequencing.

1.9 "PHASE 1 OF THE WORK" shall mean the synthesis of
peptides of known sequence which are identical to
naturally derived Transfer Factor and demonstrating
the efficacy of the Transfer Factor in an IN VIVO
animal model and may include the drafting of
protocols for human clinical trials of Transfer
Factor.

1.10 "TERRITORY" shall mean the entire world.

1.11 "TRANSFER FACTOR" shall mean a molecule capable of
transferring cell mediated immunity which is
disclosed and claimed in U.S. Patent Application
Serial No. 07/718,571.

1.12 "WORK" shall mean Phase I of the Work and Phase II of
the Work, collectively, together with such additional
research and development activities as agreed to by
the parties.

ARTICLE 2 -- THE WORK

2.1 PAYMENT. ENTREMED shall pay INNOVATIVE Two Hundred
Fifty Thousand Dollars ($250,000) in accordance with
Exhibit A for the purpose of funding the completion of
Phase I of the Work.

2.2 REPORTING - RESEARCH COOPERATION. INNOVATIVE shall,
on approximately a quarterly basis, provide ENTREMED
wifh informal written reports, describing the
progress on Phase I of the Work. In any event,
INNOVATIVE shall provide such written report to
ENTREMED approximately two weeks in advance of the
next payment due from ENTREMED. In addition,
ENTREMED shall be entitled to obtain regular updates
by telephone on the progress of Phase I of the Work.
Also during this period, both parties' technical
personnel shall collaborate and exchange ideas and
information as necessary and appropriate to
facilitate Phase I of the Work, and ENTREMED's
personnel shall be entitled to Visit INNOVATIVE's
facilities in connection with such collaboration.

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<PAGE>

2.3 COMPLETION OF PHASE I OF THE WORK. Phase I of the
Work shall be deemed to have been completed upon the
delivery of a final report describing the results of
the efficacy studies on the purified transfer factor
material in experimental models of Herpes Simplex
virus infections, together with the results of
chemical analyses of the purified Transfer Factor,
including amino acid composition, and peptide mapping
and sequencing.

2.4 PHASE II OF THE WORK. During Phase I of the Work,
INNOVATIVE and ENTREMED shall work together to
prepare a detailed written plan and budget for Phase
II of the Work. Upon completion of the plan and
budget, ENTREMED shall have thirty (30) days to
determine whether it will provide INNOVATIVE with the
required funding as described in the plan budget for
the completion of Phase II of the Work. ENTREMED
shall provide INNOVATIVE with written notice of its
decision within such thirty (30) day period (the
"Notice). In the event that ENTREMED declines to
participate in the funding of Phase II of the Work,
or ceases funding during but prior to completion of
Phase II of the Work, then this Agreement shall
terminate pursuant to 9.2 below. During the term of
this Agreement, ENTREMED shall be entitled to a right
of first refusal for licenses for Products outside
the Field under the Patents and the Know-How pursuant
to Article 4 below.

2.5 BEST EFFORTS. If ENTREMED elects to enter into Phase
11 of the Work, ENTREMED agrees to use its best
efforts to bring the Product to market and to exploit
and market the Product worldwide.

2.6 OWNERSHIP OF INTELLECTUAL PROPERTY. Except as
otherwise expressly provided in this Agreement,
INNOVATIVE or NJC, as applicable, shall retain all of
their respective rights, title and interest in and to
and ownership of all copyrights, trademarks, trade
secrets, patents and all other industrial and
intellectual property embodied in the Transfer
Factor, Patents and the Know-How, including any
improvements or enhancements thereto. Except as
otherwise expressly provided in this Agreement or
other agreements between ENTREMED and NJC, ENTREMED
has no right, title or interest in the Transfer
Factor, Patents or the Know-How or any industrial or
intellectual property relating thereto, and shall not
reproduce or otherwise use, in whole or in part, the
Transfer Factor, Patents or the Know-How. Except as
otherwise expressly provided in this Agreement,
ENTREMED shall keep each and every item to which
INNOVATIVE or NJC retains title free and clear of all
claims, liens, and encumbrances except those of
INNOVATIVE or NJC, and any act of ENTREMED, voluntary
or involuntary, purporting to create a claim, lien,
or encumbrance on such item shall be void.

ARTICLE 3 -- GRANT OF LICENSE

3.1 LICENSE GRANT. INNOVATIVE hereby grants ENTREMED an
exclusive license, under the Patents and the Know-How, to make, have
made, use and sell any and all

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<PAGE>

Products and to practice processes and methods under
Patents within the Field in the Territory. Subject to the
conditions in Article 9, the license shall expire upon the
expiration date of the last to expire of the Patents .

3.2 RIGHT TO GRANT SUBLICENSES. ENMEMED has the right to
grant sublicenses under the Patents and the Know-How,
to make, have made, use, and sell any and all
Products and to practice processes and methods under
Patents in the Territory provided that INNOVATIVE be
informed by written notice of the identity of any
prospective Sublicensee. INNOVATIVE shall have the
right to approve of said Sublicensee. Such approval
shall not be unreasonably withheld. If INNOVATIVE
does not object in writing within forty-five (45)
days of said written notice, approval shall be
presumed conclusively to have been given.

3.3 ROYALIES AND PAYMENTS

3.3.1 MINIMUM ROYALTIES. In partial consideration
for the license granted hereunder, ENTREMED
shall pay minimum royalties to INNOVATIVE.
Such minimum royalty shall be negotiated no
later than the filing of a New Drug Application
(NDA) with the Food and Drug Administration.
To the extent the minimum royalties paid are in
excess of the royalties earned, such excess
shall be credited to the next royalties due
which are not required to be paid as a part of
any minimum royalties.

3.3.2 ROYALTIES. In partial consideration for the license
granted hereunder, ENTREMED shall pay royalties to
INNOVATIVE of six percent (6%) of Net Sales of
Product incorporating a Transfer Factor specific for
a Herpes Simplex I or Herpes Simplex II antigen. If
INNOVATIVE is required to pay a royalty to NJC on the
sale of any product by ENTREMED, ENTREMED will pay
INNOVATIVE an additional royalty of two percent (2%)
of Net Sales. In the event that ENTREMED issues a
royalty-bearing license to a sublicensee, then
ENTREMED shall pay INNOVATIVE a royalty of 35% of
revenues received from such sublicensee. Sales of a
Product shall be subject to only one royalty to
INNOVATIVE under this Agreement, regardless of the
number of Patents or claims thereof applicable to the
manufacture or sale of such Product. No royalties as
set forth in this Article shall be payable on sales
for resales between or among ENTREMED and/or its
affiliates, subsidiaries or sublicensees, the final
sale to a third party alone being used for the
purpose of determining the royalty payments due
hereunder.

3.3.3 MANNER OF PAYMENT. Payment of royalties
specified in Sections 3.11 and shall be made
by ENTREMED to INNOVATIVE within thirty (30)
days after March 31, June 30, September 30, and
December 31, of each year during the term of this
License Agreement covering the payments received
during the preceding calendar quarter. The last such
payment shall be made

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within forty-five (45) days after termination of this
Agreement. Except as otherwise stated herein, all payments
to be made under this Article shall be paid in United States
dollars in Rockville, Maryland, or at such other place and
in such other way, as INNOVATIVE may reasonably designate,
without deduction of exchange, collection or other charges.
A royalty shall be paid on product and method when
appropriate as where a Product is sold and a method
licensed.

3.3.4 ROYALTIES ACCRUED IN FOREIGN COUNTRIES. Royalties on the
Net Sales of Products shall accrue and be computed in the
currency of the country in which such sales shall have been
made by ENTREMED or its sublicensees and such royalties
shall be payable in United States dollars, using as the rate
of exchange the prevailing official selling rate in United
States dollars as stated in the Wall Street Journal (New
York Edition) as of the last day of the ninety (90) day
period referred to in Article 3.3.3 above. If at any time,
legal restrictions prevent the prompt remittance of part or
all royalties with respect to any jurisdiction where the
Products are sold, ENTREMED and its sublicensees shall have
the right to make such payments by depositing the amount
thereof in local currency to INNOVATIVE's account in a bank
or depository in such jurisdiction. If any Amount so
deposited has not been remitted after a period of two (2)
years, ENTREMED shall pay INNOVATIVE the U.S. dollar
equivalent of such amount (determined as provided in Article
3.3.4 as of the date of deposit) and the amount so deposited
shall become the property of ENTREMED.

3.3.5 TAXES. Any and all taxes levied by proper taxing authority
and paid by ENTREMED on account of royalties accruing to
INNOVATIVE under this Agreement, remittable from a country
in which provision is made in the law or by regulation for
withholding of taxes, may be deducted from such royalty paid
by ENTREMED, provided that proof of payment is provided to
INNOVATIVE as evidence of such payment.

3.3.6 LATE PAYMENT. In the event that any payment due hereunder
is not made when due, the payment shall accrue interest
beginning on the first date following the due date as herein
specified, calculated at the ANNUAL rate of the sum of (a)
three percent (3%) plus (b), the prime interest rate quoted
by the Wall Street Journal on the date said payment is due
the interest being compounded on the last day of each
calendar quarter, provided that in no event shall said
annual rate exceed the maximum legal interest rate in
Colorado. The payment of such interest shall not foreclose
INNOVATIVE from exercising any other rights it may have as a
consequence of the lateness of any payment.

3.3.7 RECORDS - AUDIT RIGHTS. ENTREMED shall keep true books of
account

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containing an accurate record of all data necessary for the
determination of the amounts payable under Article 3.3.2
hereof. Said records shall be kept at ENTREMED's principal
place of business or the principal place of business of the
appropriate division of ENTREMED to which this Agreement
relates. Said records shall be available for inspection by
a certified public accountant, selected by INNOVATIVE and
reasonably acceptable to ENTREMED, during regular business
hours for five (5) years following the end of the calendar
year to which they pertain in order to allow INNOVATIVE to
ascertain the correctness of any report and/or payment made
under this Agreement. Said inspection shall be at
INNOVATIVE's expense, unless the inspection reveals that
ENTREMED underpaid by five percent (5%) or more, in which
case the inspection's reasonable cost shall be ENTREMED'S
responsibility. The provision of this Section 3.3.7 shall
survive termination of this Agreement.

3.3.8 REPORTS. Within forty-five (45) days after March 31, June
30, September 30, and December 31, of each year in which
this Agreement is in effect after the first commercial sale
of a Product, ENTREMED shall deliver to INNOVATIVE full,
true and accurate reports of its activities and the
activities of its sublicensee(s), if any, relating to this
Agreement during the preceding three month period. Each
such report shall be accompanied by the royalty payments due
and payable as provided for in Section 3.3.2. If no
royalties are due, ENTREMED shall so report. Reports shall
include at least the following information relating to the
Product made, used or sold pursuant to the rights to be
granted herein:

(1) the quantity of such Product manufactured, used and
sold or methods performed;

(2) the total billings for such Product sold, where
applicable;

(3) the deductions applicable to a determination of Net
Sales;

(4) the total royalties due.

ARTICLE 4 -- RIGHT OF FIRST REFUSAL ON PRODUCTS OUTSIDE THE FIELD

4.1 PRODUCTS OUTSIDE THE FIELD. For Products outside the Field,
INNOVATIVE shall present to ENTREMED a proposal to develop the Product
outside the Field. Such proposal shall include a budget and timetable
for completing the development of the Product. ENTREMED shall notify
INNOVATIVE within 30 days whether ENTREMED shall elect to license the
Product. If ENTREMED elects to license the Product, the parties agree
to modify this Agreement to expand the Field to include such Product

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and to otherwise grant to ENTREMED the exclusive license under the
Patents and Know-How with respect to such Product. ENTREMED also
agrees to enter into a sponsored research agreement under which that
Product will be developed; which efforts will be considered a part of
the "Work" as used in this Agreement.

4.2 THIRD PARTY NEGOTIATIONS. If ENTREMED elects not to license the
Product outside the Field as provided in Section 4.1 above, INNOVATIVE
shall, during the 60 day period following ENTREMED's decision not to
license the Product, be free to grant such rights to third parties on
terms that are not substantially more favorable to any such third
party than those offered to ENTREMED. Thereafter, INNOVATIVE shall be
free to grant a license on the Product to a third party free of any
restrictions.

ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES

5.1 INNOVATIVE WARRANTIES. INNOVATIVE hereby warrants the following:

5.1.1 the execution and delivery of this Agreement by INNOVATIVE
have been duly and validly authorized and this Agreement
constitutes a legal, valid and binding obligation of
INNOVATIVE enforceable in accordance with its terms. The
execution and delivery and performance of this Agreement do
not conflict with or violate any charter document or any
contract binding upon INNOVATIVE or the technology licensed
hereunder.

5.1.2 that INNOVATIVE has not received notice of any asserted or
unasserted claim that any of the Patents or Know-How
infringes upon any third party's know-how, patent or other
intellectual property rights.

5.1.3 that INNOVATIVE is the exclusive owner or licensee of all
rights in and to the Patents and Know-How. INNOVATIVE
warrants that all Patents and Know-How are free and clear of
all liens and encumbrances except as granted herein.

5.1.4 that INNOVATIVE, upon execution of this agreement, will give
notice to NJC as described in Article 3, Section 1 (b) of
the NJC Agreement, of the potential issuance of stock under
Article 9.2 of this Agreement.

5.2 ENTREMED WARRANTIES. ENTREMED hereby warrants the execution and
delivery of this Agreement by ENTREMED have been duly and validly
authorized and this Agreement constitutes a legal, valid and binding
obligation of ENTREMED enforceable in accordance with its terms. The
execution and delivery and performance of this Agreement do not
conflict with or violate any charter document or any contract binding
upon ENTREMED.

5.3 LIMITATION ON WARRANTIES. EXCEPT AS OTHERWISE PROVIDED IN THIS

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AGREEMENT, INNOVATIVE MAKES NO WARRANTY, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OR
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO
ANY PATENT, TRADEMARK, SOFTWARE, NON-PUBLIC OR OTHER INFORMATION, OR
TANGIBLE RESEARCH PROPERTY, LICENSED OR OTHERWISE PROVIDED TO ENTREMED
HEREUNDER, EXCEPT AS GOVERNED BY THIS AGREEMENT, AND HEREBY DISCLAIMS
THE SAME. INNOVATIVE DOES NOT WARRANT THE VALIDITY OF THE LICENSED
PATENTS HEREUNDER AND MAKES NO REPRESENTATION WHATSOEVER WITH REGARD
TO THE SCOPE OF THE LICENSED PATENTS, OR THAT SUCH LICENSED PATENTS
MAY BE EXPLOITED BY LICENSEE, AFFILIATE OR SUBLICENSEE WITHOUT
INFRINGING OTHER PATENTS. INNOVATIVE MAKES NO REPRESENTATION THAT ANY
BIOLOGICAL MATERIALS LICENSED HEREUNDER ARE FREE FROM LIABILITY FOR
PATENT INFRINGEMENT.

ARTICLE 6 -- PATENT PROSECUTION AND INFRINGEMENT.

6.1 Subject to the reimbursement of foreign filing costs as outlined in
Section 6.2, INNOVATIVE shall be responsible for prosecution of all
Patents and shall be responsible for all costs related to prosecution
of the Patents.

6.2 ENTREMED shall reimburse INNOVATIVE for the costs related to entering
national phase for International Application No. PCT/US91/04779. The
total cost for entering National Phase is $30,946.62.

6.3 The parties shall each give prompt notice to the other of any possible
infringement of the Patents or Know-How by third parties as may come
to its knowledge. ENTREMED shall have the right, but not the
obligation, to prosecute any such infringement. If ENTREMED has not
within six (6) months of the date it was notified or otherwise becomes
aware of an infringement, either terminated such infringement, abated
such infringement by granting a sublicense, at initiated legal action
against the infringer, INNOVATIVE shall have the right, but not the
obligation, to prosecute an action against the infringer.

6.4 Either party instituting the action may join the other party as a
plaintiff in such proceeding if necessary to prosecute such actions,
but shall indemnify and hold harmless the party so joined against
attorneys' fees, court costs or damages resulting from the use of such
party's name in the action.

6.5 Any party that has instituted an action in accordance with the
provisions of this Article 6 shall have sole authority to prosecute,
settle and compromise the claim without the consent of the other party
as long as such other party is not required to

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<PAGE>

make any monetary payment, transfer any rights in or to the Patents or
the Know-How, or become subject to an injunction. ENTREMED shall not
enter into any settlement that effects INNOVATIVE's rights or
interests without INNOVATIVE's prior written consent,

6.6 Any settlement amount or monetary damages awarded and actually
received in any such proceeding shall be applied, first, to reimburse
the prosecuting party for its costs and expenses (including attorneys'
fees and expenses) incurred as a result of such prosecution. Of the
remainder, (i) INNOVATIVE shall receive an amount equal to such
remainder times a fraction, the numerator of which is.06 (or .08 if a
royalty payment is then due NJC), and the denominator of which is the
then prevailing royalty rate payable by sublicensees (if any) of
ENTREMED for the sale of Product under the Patents or the Know-How of
the same general type manufactured or sold by the alleged infringer,
and ENTREMED shall receive the balance, or (ii) if no sublicensees
then exist, INNOVATIVE shall receive six percent (6%) (or eight
percent (8%) if a royalty payment is then due NJC) of the Assumed Net
Sales (as defined herein) of such Product sold by the alleged
infringer, and ENTREMED shall receive the balance "Assumed Net Sales"
shall mean ENTREMED's reasonable estimate of the Net Sales by ENTREMED
required to generate net operating income to ENTREMED equal to the
remainder.

6.7 PATENT INFRINGEMENT BY ENTREMED. If, in order to make, use or sell a
product under the Patents or the Know-How, ENTREMED is accused of
infringing a patent owned by a third party, ENTREMED shall have the
right either to terminate the corresponding license and related
royalty payments with regard to the country or countries in which the
accused infringement occurs; or after consultation with INNOVATIVE,
enter into negotiations with such other party to obtain rights under
the third party patent. If, in obtaining such rights and after
consultation with INNOVATIVE, ENTREMED is required to make payments to
a third party in consideration for rights under a patent owned or
controlled by said third party, the royalties payable to INNOVATIVE on
sales in the country in which ENTREMED has obtained such rights shall
be reduced by the amount of said payment, except that the royalty
payable to INNOVATIVE shall not be reduced to less than one percent,
or three percent if a royalty payment is due to NJC, of Net Sales of
the product at issue in that jurisdiction.

ARTICLE 7 -- INDEMNIFICATION

7.1 INDEMNIFICATION BY ENTREMED. ENTREMED hereby indemnifies and agrees to
hold INNOVATIVE and its affiliates, employees, directors and agents
harmless from any claims, demands, suits or causes of action,
including all judgments, damages and costs (including reasonable
attorneys' fees) resulting therefrom, arising out of the use,
manufacture, sale, storage or advertising of any Product by ENTREMED
or its affiliates or its sublicensees, sold pursuant to the Patents or
the Know-How.

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7.2 In the event any such action is commenced or claim made or threatened
against INNOVATIVE, INNOVATIVE shall notify ENTREMED of such event.
ENTREMED shall assume the defense of, and may settle, that part of any
such claim or action commenced or made against INNOVATIVE which
relates to ENTREMED'S indemnification and ENTREMED may take such other
steps as may be necessary to protect itself. ENTREMED shall not be
liable to INNOVATIVE on account of any settlement of any such claim or
litigation affected without ENTREMED's consent.

ARTICLE 8 - CONFIDENTIALITY

8.1 OBLIGATION. Each party acknowledges that certain proprietary
information relating to the Transfer Factor, Patents and Know-How, as
well as the design, development, manufacture, operation and marketing
of Product made, used or sold under the Patents and the Know-How, in
addition to the business, plans, customers, Product and related
information of the other party (the "Confidential Information"), will
be disclosed by the other party during the course of the parties'
business relationship. During the term of this Agreement, and
thereafter, each party will maintain in confidence all Confidential
Information disclosed by the other, and will not use, disclose or
grant use of such Confidential Information except as expressly
authorized by this Agreement. Each party will use at least the same
standard of care as it uses to protect its own trade secrets or
proprietary information to ensure that such employees, agents and
consultants do not disclose or make any unauthorized use of such
Confidential Information. Each party will use its best efforts to
apprise its employees, agents and consultants of the confidential
nature of the information disclosed to them pursuant to this
Agreement. Each party will promptly notify the other upon discovery
of any unauthorized use or disclosure of the Confidential Information.
All tangible forms of Confidential Information that is disclosed by
either party shall be clearly marked "Confidential" or "Proprietary"
and any Confidential Information disclosed orally or visually by
either party shall be confirmed in writing to the recipient no later
that fourteen (14) days after the disclosure of the Confidential
Information.

8.2 EXCLUSIONS. Confidential Information shall not include any
information which:

8.2.1 was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure
by the other party and can be shown by written records;

8.2.2 was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the
receiving party;

8.2.3 became generally available to the public or otherwise part
of the public domain after its disclosure and other than
through any act or omission of the receiving party in breach
of this Agreement;

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<PAGE>

8.2.4 was disclosed to the receiving party, other than under an
obligation of confidentiality, by a third party who had no
obligation to the other party not to disclose such
information to others;

8.2.5 is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for
maintaining such information in confidence have been
exhausted;

8.2.6 is shown by the recipient to be independently developed by
the recipient or third party.

ARTICLE 9 - TERM AND TERMINATION

9.1 TERM. UNLESS EARLIER TERMINATED AS HEREINAFTER PROVIDED, THIS
AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT FOR THE LIFE OF THE
LAST TO EXPIRE PATENT ISSUED UNDER THE PATENTS.

9.2 TERMINATION OF LICENSE AGREEMENT BY ENTREMED AFTER PHASE I. IF
ENTREMED CHOOSES TO NOT FUND PHASE II OF THE WORK OR CEASES TO FUND
DURING BUT PRIOR TO COMPLETION OF PHASE II OF THE WORK, THE LICENSE
GRANTED TO ENTREMED HEREUNDER FOR EXCLUSIVE RIGHTS TO THE FIELD SHALL
BE TERMINATED AND ALL RIGHTS TO THE TECHNOLOGY GRANTED TO ENTREMED
SHALL REVERT BACK TO INNOVATIVE. IN CONSIDERATION OF SUCH REVERSION,
ENTREMED SHALL THEN BE GRANTED SHARES OF COMMON STOCK OF INNOVATIVE IN
AN AMOUNT EQUAL TO TWENTY PERCENT (20%) OF THE INNOVATIVE OUTSTANDING
COMMON STOCK, ON A FULLY DILUTED BASIS AND AFTER ISSUANCE OF SUCH
SHARES. SUCH SHARES SHALL BE FULLY TRANSFERABLE (SUBJECT TO
APPLICABLE SECURITIES LAWS).

9.3 TERMINATION WITHOUT CURE. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT
TO THE CONTRARY, EITHER PARTY SHALL HAVE THE RIGHT, IN ADDITION AND
WITHOUT PREJUDICE TO ANY OTHER RIGHTS OR REMEDIES, TO TERMINATE THIS
AGREEMENT IMMEDIATELY UPON WRITTEN NOTICE AFTER THE OCCURRENCE OF THE
FOLLOWING:

9.3.1 ALL OR A SUBSTANTIAL PORTION OF THE ASSETS OF THE OTHER
PARTY ARE TRANSFERRED TO AN ASSIGNEE FOR THE BENEFIT OF
CREDITORS, TO A RECEIVER OR TO A TRUSTEE IN BANKRUPTCY;

9.3.2 A PROCEEDING IS COMMENCED BY OR AGAINST THE OTHER PARTY FOR
RELIEF UNDER BANKRUPTCY OR SIMILAR LAWS AND SUCH PROCEEDING
IS NOT DISMISSED WITHIN SIXTY (60) DAYS; OR

9.3.3 THE OTHER PARTY IS ADJUDGED BANKRUPT.

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9.4 TERMINATION WITH CURE. IN THE EVENT EITHER PARTY DEFAULTS OR BREACHES
ANY MATERIAL PROVISION OF THIS AGREEMENT,THE OTHER PARTY MAY TERMINATE
THIS AGREEMENT BY GIVING THE DEFAULTING OR BREACHING PARTY NINETY (90)
DAYS PRIOR WRITTEN NOTICE THEREOF, UNLESS WITHIN THE NINETY (90) DAY
PERIOD REFERRED TO SUCH DEFAULT OR BREACH IS CURED IN WHICH EVENT THIS
AGREEMENT SHALL CONTINUE IN FULL FORCE AND EFFECT THE SAME AS IF SUCH
DEFAULT OR BREACH HAD NOT OCCURRED.

9.5 SURVIVAL OF SUBLICENSES. TERMINATION OF THE NJC AGREEMENT OR THIS
AGREEMENT UNDER SECTIONS 9.3 OR 9.4 HEREUNDER AS TO ENTREMED SHALL NOT
PREJUDICE ANY SUBLICENSEE OF ENTREMED UNDER A SUBLICENSE GRANTED PRIOR
TO SAID TERMINATION. IF SUCH SUBLICENSEE ASSUMES THE ROYALTY
OBLIGATION UNDER ARTICLE III OF THE NJC AGREEMENT OR ARTICLE 3 OF THIS
AGREEMENT WITHIN THE FIELD OF THE SUBLICENSE WITHIN THIRTY (30) DAYS
AFTER NOTICE OF TERMINATION, SAID SUBLICENSEE OF ENTREMED THEREAFTER
SHALL HAVE STANDING AS LICENSEE OF THE OTHER PARTY TO THE APPLICABLE
LICENSE AGREEMENT. ENTREMED'S SUBLICENSEES WHICH DO NOT TAKE
ADVANTAGE OF THEIR RIGHT AS DESCRIBED ABOVE, SHALL HAVE THE RIGHT TO
COMPLETE ANY CONTRACTS FOR THE SALE OF PRODUCTS WHICH WERE EXECUTED
PRIOR TO TERMINATION, AND TO COMPLETE THE PRODUCTION AND SALE OF
PRODUCTS WHICH WERE IN PROCESS AT THE TIME OF TERMINATION, PAYING THE
SAME ROYALTY AS PROVIDED HEREIN, AND PROVIDED THAT SUCH SALES SHALL BE
COMPLETED WITHIN SIX (6) MONTHS OF SAID TERMINATION. TO THE EXTENT A
SUBLICENSEE ASSUMES THE ROYALTY OBLIGATIONS OF INNOVATIVE UNDER THE
NJC AGREEMENT, THE ROYALTIES TO INNOVATIVE SHALL BE REDUCED BY A LIKE
AMOUNT.

ARTICLE 10 - NOTICES

10.1 REPORTS, NOTICES AND OTHER COMMUNICATIONS FROM INNOVATIVE TO ENTREMED
AS PROVIDED FOR HEREUNDER SHALL BE SENT TO:

JOHN HOLADAY, PH. D.
PRESIDENT AND CEO
ENTREMED, INC.
9610 MEDICAL CENTER DRIVE, SUITE 200
ROCKVILLE, MD 20850
(301) 217-9858
FAX: (301) 217-9594

OR OTHER INDIVIDUALS OR ADDRESSES AS SHALL HEREAFTER BE FURNISHED BY
WRITTEN NOTICE FROM ENTREMED TO INNOVATIVE.

NOTICES OF OTHER COMMUNICATIONS FROM ENTREMED TO INNOVATIVE AS
PROVIDED

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HEREUNDER SHALL BE SENT TO:

CHARLES KIRKPATRICK, M.D.
PRESIDENT
INNOVATIVE THERAPEUTICS, INC.
4860 NO. BROADWAY
DENVER, CO 80216
(303) 298-9625
FAX: (303) 398-1806

OR OTHER INDIVIDUALS OR ADDRESSES AS SHALL HEREAFTER BE FURNISHED BY
WRITTEN NOTICE BY INNOVATIVE TO ENTREMED.

ARTICLE 11 - CAPTIONS

11.1 THE CAPTIONS ARE PROVIDED FOR CONVENIENCE AND ARE NOT TO BE USED IN
CONSTRUING THIS AGREEMENT.

ARTICLE 12 - RESTRICTIONS ON USE OF NAMES

12.1 NEITHER PARTY SHALL USE THE OTHER'S NAME, THEIR RELATED ENTITIES AND
THEIR EMPLOYEES, OR ANY ADAPTATIONS THEREOF, IN ANY PRODUCT
ADVERTISING, PROMOTIONAL OR SALES LITERATURE WITHOUT THE PRIOR WRITTEN
CONSENT OF THE OTHER PARTY.

ARTICLE 13 - INDEPENDENT CONTRACTOR

13.1 FOR THE PURPOSE OF THIS AGREEMENT AND ALL SERVICES TO BE PROVIDED
HEREUNDER, BOTH PARTIES SHALL BE, AND SHALL BE DEEMED TO BE,
INDEPENDENT CONTRACTORS AND NOT AGENTS OR EMPLOYEES OF THE OTHER.
NEITHER PARTY SHALL HAVE AUTHORITY TO MAKE ANY STATEMENTS,
REPRESENTATIONS OR COMMITMENTS OF ANY KIND, OR TO TAKE ANY ACTION,
THAT WILL BE BINDING ON THE OTHER PARTY.

ARTICLE 14 - SEVERABILITY

14.1 IF ANY ONE OR MORE OF THE PROVISIONS OF THIS AGREEMENT SHALL BE HELD
TO BE INVALID, ILLEGAL OR UNENFORCEABLE, THE VALIDITY, LEGALITY OR
ENFORCEABILITY OF THE REMAINING PROVISIONS OF THIS AGREEMENT SHALL NOT
IN ANY WAY BE AFFECTED OR IMPAIRED THEREBY.

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ARTICLE 15 - ASSIGNMENTS AND SUBLICENSES

15.1 EXCEPT AS OTHERWISE PROVIDED HEREIN, ENTREMED MAY ASSIGN ITS RIGHTS
HEREUNDER AS PART OF THE SALE OR TRANSFER OF ITS ENTIRE BUSINESS, OR
ALL OF ITS BUSINESS WHICH RELATES TO TRANSFER FACTOR, WITHOUT THE
CONSENT OF INNOVATIVE AND INNOVATIVE MAY ASSIGN ITS RIGHTS TO RECEIVE
ROYALTIES TO ANY AFFILIATE PROVIDED THAT ANY SUCH ASSIGNEE OF ENTREMED
OR INNOVATIVE ASSUMES ALL OBLIGATIONS OF THE ASSIGNOR HEREUNDER.
OTHERWISE, THIS AGREEMENT IS UNASSIGNABLE BY EITHER PARTY WITHOUT THE
PRIOR WRITTEN CONSENT OF THE OTHER. NOTHING HEREIN SHALL AFFECT THE
RIGHTS OF ENTREMED DERIVED FROM PERSONS OTHER THAN INNOVATIVE.

15.2 SUBJECT TO THE RESTRICTIONS SET FORTH HEREIN, THIS AGREEMENT, AND EACH
AND EVERY PROVISION HEREOF SHALL BE BINDING UPON AND SHALL INURE TO
THE BENEFIT OF THE PARTIES, THEIR RESPECTIVE SUCCESSORS, SUCCESSORS-
IN-TITLE, HEIRS AND ASSIGNS, AND EACH AND EVERY SUCCESSOR-IN-INTEREST
TO ANY PARTY, WHETHER SUCH SUCCESSOR ACQUIRES SUCH INTEREST BY WAY OF
GIFT, INHERITANCE, PURCHASE, FORECLOSURE, OR BY ANY OTHER METHOD,
SHALL HOLD SUCH INTEREST SUBJECT TO ALL THE TERMS AND PROVISIONS OF
THIS AGREEMENT.

15.3 ANY SUBLICENSEE OF ENTREMED SHALL HAVE THE RIGHT TO EXERCISE AND
ENFORCE THE RIGHTS OF ENTREMED HEREUNDER WITH RESPECT TO THE PRODUCTS
SO SUBLICENSED.

15.4 PROVISIONS FOR THE MINIMUM ROYALTY IN ARTICLE 3.3.1 WILL BE HONORED BY
ANY SUCCESSOR IN INTEREST TO ENTREMED.

15.5 ENTREMED AGREES THAT IT WILL NOT NEGOTIATE OR ENTER INTO ANY AGREEMENT
WITH NJC AS LONG AS INNOVATIVE IS A FUNCTIONING BUSINESS.

ARTICLE 16 - FORCE MAJEURE

16.1 FAILURE OF ANY PARTY TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT
(EXCEPT THE OBLIGATION TO MAKE PAYMENTS) SHALL NOT SUBJECT SUCH PARTY
TO ANY LIABILITY TO THE OTHER PARTY IF SUCH FAILURE IS CAUSED BY ANY
CAUSE BEYOND THE REASONABLE CONTROL OF SUCH NONPERFORMING PARTY,
INCLUDING WITHOUT LIMITATION, ACTS OF GOD, FIRE, EXPLOSION, FLOOD,
DROUGHT, WAR, RIOT, SABOTAGE, EMBARGO, STRIKES OR OTHER LABOR
DISTURBANCES, NATIONAL HEALTH EMERGENCY, FAILURE OF PUBLIC UTILITIES
OR COMMON CARRIERS, COMPLIANCE WITH ANY ORDER OR REGULATION OF ANY
GOVERNMENT ENTITY ACTING WITH COLOR OF RIGHT, OR ANY REGULATORY DELAY.

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ARTICLE 17 - OBLIGATIONS TO NJC

17.1 INNOVATIVE AGREES TO SATISFY ALL OBLIGATIONS TO NJC UNDER THE NJC
AGREEMENT BETWEEN INNOVATIVE AND NJC. SAID NJC AGREEMENT IS IN FULL
FORCE AND EFFECT AND NEITHER PARTY THERETO IS IN DEFAULT OF ANY
OBLIGATIONS THEREUNDER. INNOVATIVE AGREES NOT TO MODIFY OR AMEND THE
NJC AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF ENTREMED. IF
INNOVATIVE IS UNABLE TO SATISFY AN OBLIGATION UNDER THE NJC AGREEMENT
OR INNOVATIVE RECEIVES A NOTIFICATION OF DEFAULT THEREUNDER,
INNOVATIVE WILL PROMPTLY NOTIFY ENTREMED OF SUCH OBLIGATION OR DEFAULT
AND ENTREMED SHALL HAVE THE RIGHT OF SATISFY THE OBLIGATION OR CURE
THE DEFAULT. ANY PAYMENTS MADE OR EXPENSES INCURRED BY ENTREMED TO
SATISFY AN OBLIGATION OR CURE THE DEFAULT OR ATTEMPT TO DO THE SAME
SHALL BE DEDUCTED FROM ROYALTIES DUE TO INNOVATIVE. INNOVATIVE
ACKNOWLEDGES THAT IN THE EVENT ENTREMED SUCCEEDS TO THE RIGHTS OF
INNOVATIVE, IN ACCORDANCE WITH ARTICLE 7.3 OF THE NJC AGREEMENT ANY
ROYALTIES DUE INNOVATIVE WILL BE REDUCED BY THE AMOUNT OF THE PAYMENTS
TO NJC.

ARTICLE 18 - MODIFICATIONS IN WRITING

18.1 NO CHANGE, MODIFICATION, EXTENSION, TERMINATION OR WAIVER OF THIS
AGREEMENT, OR ANY OF THE PROVISIONS HEREIN CONTAINED, SHALL BE VALID
UNLESS MADE IN WRITING AND SIGNED BY A DULY AUTHORIZED REPRESENTATIVE
OF EACH PARTY.

ARTICLE 19 - GOVERNING LAW

19.1 THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE LEGAL
RELATIONS OF THE PARTIES TO IT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF COLORADO.

ARTICLE 20 - CONSTRUCTION

20.1 THE PARTIES AGREE THAT THEY HAVE PARTICIPATED EQUALLY IN THE FORMATION
OF THIS AGREEMENT AND THAT THE LANGUAGE HEREIN SHOULD NOT BE
PRESUMPTIVELY CONSTRUED AGAINST EITHER OF THEM.

ARTICLE 21 - MISCELLANEOUS

21.1 THIS AGREEMENT, TOGETHER WITH ANY AND ALL EXHIBITS ANNEXED HERETO,
SETS FORTH AND CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERSEDES ANY
AND ALL PRIOR AGREEMENTS, UNDERSTANDINGS, PROMISES AND REPRESENTATIONS
MADE BY EITHER PARTY TO THE OTHER CONCERNING THE SUBJECT MATTER HEREOF
AND THE TERMS APPLICABLE HERETO. IT IS UNDERSTOOD BY THE PARTIES THAT
THE NON-DISCLOSURE

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AGREEMENT EXECUTED BETWEEN ENTREMED AND INNOVATIVE DATED DECEMBER 1,
1992, SHALL SURVIVE THIS AGREEMENT AND REMAIN IN FULL FORCE AND
EFFECT. A COPY OF THAT NON-DISCLOSURE AGREEMENT IS ATTACHED HERETO AS
EXHIBIT C.

21.2 THIS AGREEMENT MAY NOT BE RELEASED OR AMENDED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY THE PARTY TO BE BOUND.

21.3 THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF
WHICH SHALL BE AN ORIGINAL; BUT SUCH COUNTERPARTS SHALL TOGETHER
CONSTITUTE BUT ONE AND THE SAME INSTRUMENT.

21.4 EACH PARTY HERETO AGREES TO PROMPTLY ISSUE FROM TIME TO TIME AS
REASONABLY REQUESTED BY THE OTHER PARTY, ESTOPPEL CERTIFICATES AS TO
THE STATUS OF THIS AGREEMENT.

IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO
BE EXECUTED IN QUADRUPLICATE BY THEIR DULY AUTHORIZED REPRESENTATIVES AS OF THE
EFFECTIVE DATE.

INNOVATIVE THERAPEUTICS, INC. ENTREMED, INC.
By: /s/ CHARLES H. KIRKPATRICK BY: /s/JOHN W. HOLADAY
--------------------------- --------------------------
TITLE: PRESIDENT TITLE: PRESIDENT AND CEO

-17-

<PAGE>

EXHIBIT A

FIRST PAYMENT UPON EXECUTION OF LICENSE $76,000
SECOND PAYMENT NOVEMBER 1, 1994 $62,500
THIRD PAYMENT FEBRUARY 1, 1993 $62,500
FOURTH PAYMENT MAY 1, 1993 $49,000

-18-

<PAGE>
EXHIBIT 11.1

ENTREMED, INC.
COMPUTATION OF EARNINGS PER SHARE (1)

<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED DECEMBER 31, PERIOD ENDED
MARCH 31,
----------------------------------------------------------------------------------------
------------------------
1991 1992 1993 1994 1995 1995 1996
---------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Weighted average common and
common equivalent shares
outstanding during the
period........................ 1,000,000 2,330,000 3,980,899 4,712,776 5,485,763 5,151,030 6,460,717
Effect of common stock issued
and stock options and warrants
granted subsequent to April
12, 1995 computed in
accordance with the treasury
stock method as required by
the SEC (2)................... 2,001,153 2,001,153 2,001,153 2,001,153 1,786,180 2,001,153 851,318
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total common and common
equivalent shares........... 3,001,153 4,331,153 5,982,052 6,713,929 7,271,943 7,152,183 7,312,035
---------- ----------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss....................... $ (23,873) $(1,401,567) $(6,238,856) $(5,114,456) $(7,708,219) $(2,046,460) $(1,675,407)
---------- ----------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss per share............. $ (0.01) $ (0.32) $ (1.04) $ (0.76) $ (1.06) $ (0.29) $ (0.23)
---------- ----------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- ----------- -----------
Pro forma net loss per share
(3)........................... $ (0.83) $ (0.18)
----------- -----------
----------- -----------
Pro forma weighted average
number of shares outstanding
(3)........................... 9,271,943 9,312,035
----------- -----------
----------- -----------
</TABLE>

- ------------------------------
(1) All share information has been adjusted to reflect a two-for-three reverse
stock split.

(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, Common and Preferred Stock issued and stock options and warrants
grants at prices below the assumed initial public offering price of $15.00
per share during the 12-month period immediately preceding the initial
filing date of the Company's Registration Statement for its initial public
offering have been included as outstanding for all periods presented using
the treasury stock method.

(3) Pro forma net loss per share and weighted average shares outstanding for
the year ended December 31, 1995 and the three month period ended March 31,
1996 give effect to the automatic conversion of 3,000,000 outstanding
shares of Preferred Stock into 2,000,000 shares of Common Stock on the date
of this Prospectus.

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated January 25,
1996 (except for Note 13, as to which the date is March 29, 1996) in the
Registration Statement on Form S-1 and related Prospectus of EntreMed Inc. for
the registration of 4,025,000 shares of its Common Stock.

ERNST & YOUNG LLP

Atlanta, Georgia,
May 16, 1996