PALATIN TECHNOLOGIES INC, S-3, 1999-02-24

PALATIN TECHNOLOGIES INC
S-3, 1999-02-24
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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As filed with the Securities and Exchange Commission on February 24, 1999

Registration No. 333-______

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

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

PALATIN TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE 95-4078884
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

214 CARNEGIE CENTER, SUITE 100

PRINCETON, NJ 08540

(609) 520-1911

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

COPY TO:
EDWARD J. QUILTY, CHAIRMAN OF THE BOARD, FAITH L. CHARLES
PRESIDENT AND CHIEF EXECUTIVE OFFICER GRAHAM & JAMES LLP
214 CARNEGIE CENTER, SUITE 100 885 THIRD AVENUE, 21ST FLOOR
PRINCETON, NJ 08540 NEW YORK, NY 10022-4834
(609) 520-1911 (212) 848-1000

(Name, address, including zip code,
and telephone number including area code,
of agent for service)

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from
time to time, following the effective date of this registration statement.

If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]

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

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

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

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

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class of Amount to be Proposed maximum Proposed maximum aggregate Amount of
securities to be registered registered offering price per share (1) offering price (1) registration fee
<S> <C> <C> <C> <C>
Common Stock 2,181,018 Shares $4.4375 $9,678,267.38 $2,690.56
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, and based
on the average of the high and low prices of the registrant's common
stock reported on The Nasdaq SmallCap Market(sm) on February 17,
1999.

Also includes an indeterminate number of shares of common stock that
may become issuable to prevent dilution resulting from stock splits, stock
dividends and conversion price or exercise price adjustments, which are included
pursuant to Rule 416 under the Securities Act of 1933.

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.

<PAGE>

SUBJECT TO COMPLETION, DATED FEBRUARY 24, 1999

PROSPECTUS

[GRAPHIC OMITTED]

PALATIN TECHNOLOGIES, INC.

214 Carnegie Center, Suite 100
Princeton, New Jersey 08540
(609) 520-1911

2,181,018 SHARES OF COMMON STOCK

Selling stockholders identified in this prospectus are selling up to 2,181,018
shares of common stock of Palatin Technologies, Inc. Palatin Technologies will
not receive any proceeds from the sale of shares by the selling stockholders.

Palatin Technologies' common stock is listed on the Nasdaq SmallCap Market(sm)
under the symbol PLTN. On February 17, 1999, the closing sale price of the
common stock, as reported on the Nasdaq SmallCap Market, was $4.50 per share.

Selling stockholders can sell their common stock on the Nasdaq SmallCap Market
or in privately negotiated transactions, whenever they decide and at the
price they set. The Common Stock may be sold at market price, but the selling
stockholders have the right to sell common stock at a premium or discount to
market price.

INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATES SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

The Date Of This Prospectus Is _______ __, 1999

<PAGE>

TABLE OF CONTENTS

Where You Can Find More Information........................................ iii

Incorporation by Reference................................................. iii

Note Concerning Forward Looking Statements................................. iv

About Palatin Technologies................................................. 1

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

Use of Proceeds............................................................ 13

Selling Stockholders....................................................... 13

Plan of Distribution....................................................... 15

Legal Matters.............................................................. 16

Experts.................................................................... 16

<PAGE>

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission, commonly called
the SEC. You can read and copy any document we file at the SEC's public
reference rooms in Washington, DC, New York, NY and Chicago, IL. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
cost. Please call the SEC at 1-800-SEC-0330 for further information on public
reference rooms. Our SEC filings are also available to the public from the SEC's
website at "http://www.sec.gov".

In addition, you can read and copy our SEC filings at the National
Association of Securities Dealers, Inc. at 1735 K Street NW, Washington, DC
20006.

INCORPORATION BY REFERENCE

The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings (File No.
0-22686) we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:

* Our Quarterly Report on Form 10-QSB for the six months ended December
31, 1998, filed on February 16, 1999;

* Our Quarterly Report on Form 10-QSB for the three months ended September
30, 1998, filed on November 16, 1998;

* Our amended Annual Report on Form 10-KSB/A for the year ended June 30,
1998, filed on October 2, 1998;

* Our Annual Report on Form 10-KSB for the year ended June 30, 1998, filed
on September 28, 1998; and

* The description of our common stock contained in our Registration
Statement on Form 8-A filed on October 22, 1993.

You may request a copy of these filings, at no cost, by writing or
telephoning our Vice President and Chief Financial Officer at the following
address:

Stephen T. Wills
Vice President and CFO
Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton NJ 08540
Telephone (609) 520-1911

iii

<PAGE>

NOTE CONCERNING FORWARD LOOKING STATEMENTS

WE MAKE STATEMENTS IN THIS PROSPECTUS AND THE DOCUMENTS WE
INCORPORATE BY REFERENCE THAT ARE CONSIDERED "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. SOMETIMES THESE STATEMENTS CONTAIN WORDS SUCH
AS "ANTICIPATES," "PLANS," "INTENDS," "EXPECTS" AND SIMILAR EXPRESSIONS TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF OUR
FUTURE PERFORMANCE AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS WHICH MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE
MATERIALLY DIFFERENT FROM WHAT WE SAY IN THIS PROSPECTUS. THESE RISKS,
UNCERTAINTIES AND FACTORS INCLUDE:

* DELAYS IN DEVELOPMENT OF OUR PRODUCTS;

* PROBLEMS OR DELAYS WITH CLINICAL TRIALS OF OUR PRODUCTS;

* FAILURE TO RECEIVE OR DELAYS IN RECEIVING REGULATORY APPROVAL OF OUR
PRODUCTS;

* OUR ABILITY TO MARKET AND SELL OUR PRODUCTS;

* ACCEPTANCE OF OUR PRODUCTS BY THE MEDICAL COMMUNITY;

* THE ENFORCEABILITY OF OUR PATENTS AND PATENTS GRANTED TO OUR
COMPETITORS;

* COMPETING PRODUCTS AND TECHNOLOGIES;

* CHANGES IN OUR BUSINESS STRATEGY OR DEVELOPMENT PLANS;

* BUSINESS ABILITIES AND JUDGMENT OF OUR PERSONNEL, INCLUDING MANAGEMENT;

* AVAILABILITY AND TERMS OF CAPITAL WE NEED TO COMPLETE PRODUCT
DEVELOPMENT; AND

* GENERAL ECONOMIC AND BUSINESS CONDITIONS.

GIVEN THESE UNCERTAINTIES, YOU SHOULD NOT PLACE UNDUE RELIANCE ON
THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS
PROSPECTUS. WE WILL NOT REVISE THE FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS PROSPECTUS OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

<PAGE>

ABOUT PALATIN TECHNOLOGIES

THIS IS A SUMMARY OF OUR BUSINESS. YOU SHOULD READ THIS SUMMARY IN
THE CONTEXT OF THE RISK FACTORS STARTING ON PAGE 4. FOR ADDITIONAL INFORMATION,
YOU SHOULD READ OUR REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

Introduction

We are developing pharmaceutical drugs and technologies. We are
concentrating our efforts on the following:

* A diagnostic imaging product called LeuTech(TM). This product is for
use in the nuclear medicine departments of hospitals to image, or
locate, the site of an infection or inflammation within the body. We
are conducting clinical trials with LeuTech for diagnosis of
appendicitis and bone infections at medical centers in the United
States.

* A therapeutic product called PT-14 that is for the treatment of
sexual dysfunction, primarily male erectile dysfunction. PT-14 is in
the early stages of clinical trials.

* A technology called MIDAS(TM), which allows us to make specific
kinds of small molecules, called peptides, which may be useful for
treatment of diseases or for diagnostic imaging. We are conducting
research in two product areas - a peptide for diagnostic imaging of
infections and a peptide for treatment of obesity.

We have not completed the development of any products. Accordingly,
we do not have any revenues from the sale of products, and rely on money from
the sale of our stock, from loans and from payments under agreements with other
pharmaceutical companies to pay for the development of our products. It will be
at least two years before we begin to sell any product. It could take much
longer before we begin to sell any product, and we may never start selling
products. Developing pharmaceutical drugs like our products is very expensive,
difficult and time consuming, with a significant possibility of failure.

The LeuTech Product

LeuTech uses a protein called a monoclonal antibody that attaches to
white blood cells. As part of the immune response to an infection or
inflammation, large numbers of white blood cells migrate to and collect at the
site of infection or inflammation. If a physician knows where white blood cells
are concentrated, then the physician has identified the site of infection or
inflammation. We designed LeuTech to provide this specific diagnostic
information.

We supply LeuTech as a kit containing freeze-dried monoclonal
antibody and chemicals required for radiolabeling, or attaching, a diagnostic
radioisotope. Before administering LeuTech to a patient, the physician has
LeuTech radiolabeled with a diagnostic radioisotope called technetium-99m.

After radiolabeling, the physician administers LeuTech to the patient
by intravenous injection. The radiolabeled LeuTech monoclonal antibody rapidly
binds to white blood cells present at the site of the infection or circulating
in the blood stream. After administering LeuTech to the patient, a gamma camera
can readily detect the location of radioactivity in the patient. Gamma cameras
are devices available in most hospital nuclear medicine departments. Using

<PAGE>

LeuTech, physicians can take a definitive image within 90 minutes of
administration, permitting rapid detection and imaging of the site of infection.

The U.S. Food and Drug Administration, commonly known as the FDA,
regulates LeuTech as a pharmaceutical product. We filed an application with the
FDA to start human clinical trials, and have completed two of the three required
phases of human clinical trials. In Phase 1, we gave LeuTech to 10 healthy
volunteers. The purpose of the Phase 1 study was to test LeuTech for safety and
to determine the distribution of LeuTech in the body. The results showed that
there were no significant safety concerns associated with LeuTech.

In the Phase 2 clinical trial, we tested LeuTech for its ability to
diagnose equivocal, or difficult to diagnose, appendicitis. We gave LeuTech to
56 patients at two medical centers. Each of the patients had a preliminary
diagnosis of equivocal appendicitis. Using LeuTech, physicians diagnosed 28
patients previously suspected of having appendicitis as not having appendicitis.
These patients avoided unnecessary hospitalization. Two patients scheduled for
surgery for suspected appendicitis did not have surgery when LeuTech showed that
they did not have appendicitis. Two other patients were diagnosed with
appendicitis using LeuTech, and had appropriate surgery rather than being
discharged from the hospital. The Phase 2 clinical trial results indicated that
LeuTech is safe and effective for the detection of appendicitis in patients with
equivocal appendicitis.

In July 1998, we met with the FDA to discuss LeuTech Phase 2 clinical
trial results and plans for a Phase 3 clinical trial. After this meeting, plans
for a Phase 3 clinical trial were submitted to the FDA, and the LeuTech Phase 3
clinical trial started in September 1998. This Phase 3 clinical trial is testing
LeuTech for the diagnosis of equivocal appendicitis.

We intend to complete the Phase 3 clinical trial of LeuTech in the
first half of 1999. If the results show that LeuTech works as predicted for the
diagnosis of appendicitis, we will then file an application with the FDA to
approve LeuTech for diagnosis of equivocal appendicitis. We do not know whether
we will successfully complete the Phase 3 clinical trial, or if we do, whether
the FDA will ever approve LeuTech.

We believe that LeuTech can also be used to diagnose a wide range of
infections. These include infections of the intra-abdominal area, such as
intestinal, spleen, liver or urinary tract infections, as well as bone,
prosthetic and other infections. We started a Phase 2 clinical trial in February
1999 to test LeuTech for diagnosis of bone infections.

The PT-14 Product

PT-14 is our designation for a stabilized peptide that works like a
natural hormone called alpha-MSH. We are developing PT-14 for the treatment of
male erectile dysfunction, a form of impotence. We believe that PT-14 is
different from currently available treatments for male erectile dysfunction
because PT-14 works through receptors found in the brain. Currently available
treatments work by having a direct effect on blood flow to the penis. We believe
that PT-14 may be useful in treating patients who do not respond well to current
therapies.

In a preliminary double blind clinical study conducted under an
investigational new drug application submitted to the FDA and held in the name
of an investigator at the University of Arizona, eight out of 10 men achieved
clinically significant erectile response using PT-14. We began testing

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PT-14 as a treatment for male erectile dysfunction in the fall of 1998. We also
plan to test PT-14 as a treatment for women suffering from sexual dysfunction.

In a recent study, the National Institutes of Health estimated that
more than 20,000,000 men in the United States may be afflicted with some form of
male erectile dysfunction. Because of the large number of men believed to be
afflicted with male erectile dysfunction, the market for treatment of male
erectile dysfunction is estimated to be more than several billion dollars per
year. There is tremendous competition to develop and market drugs for treatment
of male erectile dysfunction.

In its current form, PT-14 is administered as a non-penile injection.
We have begun efforts to develop an oral form of PT-14. As part of this effort,
we entered into an agreement with TheraTech, Inc. to jointly develop an oral
transmucosal delivery system for PT-14. This agreement also includes a license
to certain patents owned by TheraTech.

PT-14 is in the early stages of clinical testing. We do not know
whether PT-14 will prove to be both safe and effective in clinical trials. Even
if we complete clinical trials with PT-14, we do not know whether the FDA will
ever approve PT-14. While we are working on developing an oral form of PT-14, we
do not know whether we will be successful in our efforts to do so.

The MIDAS Technology

MIDAS is a novel peptide chemistry that may have broad application in
making pharmaceutical drugs. The MIDAS technology combines a metal ion with
specially designed peptides, resulting in a biologically active molecule.
Peptides, which are short chains of amino acids, play important roles in
regulating a variety of biological functions. Natural peptides function by
conforming or bending to fit specific molecules on cell surfaces, called
receptors, which signal the cell to initiate a biological activity. Some
important biological functions controlled by peptide cell signaling include
overall growth and behavior, inflammatory responses, immune responses and wound
healing.

In order to effectively regulate cell signaling a peptide must bind
to its target receptor. Binding a peptide to its target receptor depends on the
conformation, or three-dimensional shape, of the peptide. Many naturally
occurring peptides are flexible and can take on multiple conformations, allowing
them to interact with more than one type of cell receptor, and to control
multiple functions within the body. However, when such peptides are used as
pharmaceutical drugs, this multiple reactivity is a disadvantage as it may
potentially lead to side effects. The ability to construct high-affinity
peptides that target specific receptors offers a significant opportunity to
develop potent receptor-specific drugs.

We believe that our patent-pending MIDAS technology can be used to
rationally design and produce receptor-specific drugs. With the MIDAS technology
the metal ion constrains, or locks, the peptide into a specific conformation. By
designing MIDAS peptides to mimic the conformation required for a specific
receptor, we can make a stable, receptor-specific peptide that binds tightly and
has enhanced biological activity. If a radioactive metal ion is used, then the
MIDAS peptide can be used for diagnostic imaging or nuclear medicine therapy. If
a non-radioactive metal ion is used, then the MIDAS can be used for treatment of
disease.

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<PAGE>

We are engaged in research and development on several potential
products using our MIDAS technology, including development of a MIDAS peptide to
diagnose infections and development of a MIDAS peptide to treat obesity. We
believe that MIDAS technology may have medical applications in a variety of
areas, including immune disorders, cancers and cardiology. We intend to seek
strategic alliances or collaborative arrangements with other companies to
provide additional financial and technical resources for the development of
MIDAS.

RISK FACTORS

INVESTING IN OUR SHARES IS HIGHLY SPECULATIVE AND RISKY. YOU SHOULD
BE ABLE TO BEAR A COMPLETE LOSS OF YOUR INVESTMENT. YOU SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS, TOGETHER WITH OTHER INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS.

THERE MAY BE ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN
TO US OR THAT WE CURRENTLY BELIEVE ARE IMMATERIAL WHICH COULD ALSO HAVE A
NEGATIVE IMPACT ON OUR BUSINESS OPERATIONS. IF ANY OF THE FOLLOWING RISKS
ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS
WOULD BE MATERIALLY ADVERSELY AFFECTED. IN THAT EVENT, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.

Early Stage of Development and Uncertainty of Product Development. We
are at an early stage of development. We have not started to sell any
pharmaceutical products. It will be a number of years before we will have
significant revenues from product sales or royalties. It is possible that we
will never have any significant revenues.

Before we can sell any of the pharmaceutical products we are
developing, we must conduct time-consuming and costly research, pre-clinical
studies, and clinical trials. We must also establish manufacturing capabilities,
either using our facilities or contract manufacturers. We must also seek and
obtain required regulatory approvals. We can not assure you that our research
and development programs will be successful, that our products will prove to be
safe and effective, or that our products will obtain required regulatory
approvals. Even if we successfully develop products and obtain regulatory
approvals, we can not assure you that we will be able to manufacture products on
a large scale, that our products will be cost-competitive, or that our products
will receive market acceptance.

We currently depend on third parties for some critical tasks,
including product manufacturing. We intend to have third parties market our
products, but have not yet reached agreement with any third party to market any
of the products we are developing. We cannot assure you that we will find
appropriate third parties, or that we can reach an agreement on commercially
reasonable terms. Even if we identify third parties and reach agreements with
them, we can not assure you that the third parties will perform their
obligations.

Patent or other proprietary rights of third parties could preclude us
from marketing the products that we are developing. It is also possible that one
or more of our competitors will market superior or equivalent products.

History of Operating Losses and Accumulated Deficit. We have incurred
net operating losses since our inception (January 28, 1986). As of December 31,

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1998, we had an accumulated deficit of approximately $28,474,687. This deficit
continues to increase. We anticipate additional losses over at least the next
several years. We expect that these losses will increase as we expand clinical
trials and manufacturing efforts on LeuTech and continue research and
development of PT-14 and MIDAS technology. We cannot predict how long it will
take us to become profitable. We cannot assure you that we will ever be
profitable, or that if we do become profitable, that we will remain profitable.

Need for Additional Financing and Access to Capital. We have incurred
negative cash flow from operations since our inception. To the extent that we
have funds available, we will continue to spend substantial funds to develop our
products and technologies. We are currently spending approximately $850,000 each
month on research, development and administrative costs. In addition, we have
debt payments of $92,000 each month payable through May 1999. Based on our
current spending levels, we believe that our existing funds are adequate to make
scheduled debt payments and to fund our operations through May 31, 1999.

We will seek additional funds through public or private financings,
including equity or debt financings, and through collaborative or other
arrangements with other companies. We cannot assure you that we will obtain
additional financing, that we will obtain financing when we need it, or that
financing will be available on terms acceptable to us. If adequate additional
funds are not available, we will be required to delay, scale back or eliminate
certain of our research and development activities. We may also be required to
delay, scale back or eliminate manufacturing and marketing efforts and may be
required to license to third parties our products or technologies that we would
otherwise seek to commercialize ourselves. If adequate funds are not available,
this will have a material and adverse effect on us.

The amount of funds we will need in the future depends on many
factors. These factors include progress in our research and development
activities, progress with pre-clinical studies and clinical trials, prosecution
and enforcement of patents, technological and market developments, our ability
to establish product development arrangements, and the cost of manufacturing
scale-up and marketing activities. We cannot predict the amount of additional
funds we will need before we become profitable.

Uncertainty Regarding Ability to Continue as a Going Concern. The
audit report from our independent accountants, Arthur Andersen LLP, included in
our most recent Form 10-KSB (which is incorporated by reference in this
prospectus), included an explanatory paragraph regarding our ability to continue
as a going concern. Future financial statements could include a similar
explanatory paragraph if we are unable to raise sufficient funds or generate
sufficient cash flow from operations to cover the cost of our operations. The
presence of such an explanatory paragraph raises concerns about our ability to
fulfill contractual obligations. This can adversely affect our relationships
with third parties and could affect our ability to complete future financings.
Accordingly, the presence of such an explanatory paragraph in our Form 10-KSB
report and in any future financial statements could have a material adverse
effect on our business, business prospects, financial conditions or results of
operations.
Patents and Proprietary Rights, No Assurance of Enforceability or
Significant Competitive Advantage. In general, the patent positions of companies

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relying upon biotechnology are highly uncertain and involve complex legal and
factual questions. We can not assure you that the scope of any claims granted in
any of our issued patents will provide a competitive advantage or meaningful
proprietary protection. We can not assure you that patents will be issued from
any of our pending patent applications. We can also not assure you that other
companies will not challenge the validity or enforceability of our patents. If
other companies challenge one or more of our patents, we can not assure you that
a court will uphold our patents. It is also possible that our competitors will
be able to circumvent patents issued or licensed to us.

We have not had our patent attorneys give an infringement opinion on
any of the products we are developing. We do not know of any United States or
foreign patents that we would infringe upon by the manufacture, use or sale of
the products we are developing. However, we can not assure you that we have
identified all possible United States or foreign patents that pose a risk of
infringement. It is also possible that patents will be issued in the future that
our products would infringe upon. We may be unable to avoid infringement of any
such patents and may have to seek a license, defend an infringement action, or
challenge the validity of such patents in court. We can not assure you that a
license will be available to us at all, or if a license were available, that it
would be on terms and conditions acceptable to us. We can also not assure you
that we will prevail in any patent litigation. Patent litigation is costly and
time-consuming, and we can not assure you that we will have sufficient resources
to pursue such litigation. If a court finds that we are infringing upon a patent
belonging to another company, we may be liable for significant money damages, we
may encounter significant delays in bringing products to market, or may be
precluded from making, using or selling products covered by such patents.

The United States Patent and Trademark Office has declared an
interference proceeding between a patent application owned by another company
and an issued patent we own. Our patent relates to the labeling of peptides with
radioisotopes. We believe that the final outcome of this proceeding, even if
adverse to us, will not have a material adverse effect on our current product
development plans.

We also rely on certain proprietary technologies, such as trade
secrets and know-how, which are not patentable. We have taken steps to protect
our trade secrets and know-how, in part through the use of confidentiality
agreements with our employees, consultants and certain of our contractors.
However, we can not assure you that these confidentiality agreements will not be
breached or that we would have adequate remedies for any breach. If any
confidentiality agreements are breached and ownership of proprietary information
or inventions are in dispute, we can not assure you that we will ultimately
be found to be the owner. It is also possible that our competitors will
independently develop or discover our trade secrets.

Uncertainty of Development and Commercialization of LeuTech. We have
entered into an exclusive royalty-bearing license agreement for a defined field
of use with The Wistar Institute of Biology and Anatomy for the antibody used in
LeuTech and its parent cell line. This agreement contains specific performance
criteria and requires benchmark payments. Failure to meet the performance
criteria or any other event of default under the license agreement leading to
termination of the license agreement with Wistar would have a material adverse
effect on us.

We depend on a sole-source contract manufacturer located outside the
United States to produce and purify the monoclonal antibody for use in LeuTech.
The contract manufacturer has only two facilities in which monoclonal antibodies
can be produced and purified, and has produced and purified the monoclonal

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antibody for us in only one of its facilities. There are a limited number of
contract facilities in the world that can produce monoclonal antibodies for use
in pharmaceutical drugs. It can take a substantial period of time for a contract
facility to begin producing and purifying monoclonal antibodies for use in
pharmaceutical drugs. We are accordingly dependent on the contract manufacturer
to produce and purify monoclonal antibody that meets FDA required acceptance
standards for LeuTech. We can not assure you that our contract manufacturer will
perform as agreed or will remain in the contract manufacturing business for the
time we require to successfully produce and market LeuTech. Failure of our
contract manufacturer to produce the monoclonal antibody we need would have a
material adverse effect on us.

We have negotiated long-term contractual arrangements for the
manufacture of LeuTech. However, there can be no assurance that our contractors
will be able to successfully manufacture LeuTech on a sustained basis or that
our contractors will remain in the contract manufacturing business for the time
required by us to market LeuTech. Failure of our contractors to perform as
agreed would have a material adverse effect on us.

We intend to complete the Phase 3 clinical trial of LeuTech in the
first half of 1999. If the results show that LeuTech works as we predict, we
will then file an application with the FDA to market LeuTech for diagnosis of
equivocal appendicitis. We can not assure you that the FDA will continue to
permit our clinical trial to proceed as planned, that LeuTech will prove to be
safe and effective in the Phase 3 clinical trial or that the FDA will ever
approve LeuTech. Even if the FDA approves LeuTech, we can not assure you that we
will be able to manufacture LeuTech in commercially required quantities on a
sustained basis and at an acceptable price. In addition, we can not assure you
that we will identify and reach agreements with marketing partners in both the
United States and other parts of the world. Even if we identify and reach
agreements with marketing partners, we can not assure you that we, together with
our marketing partners, will be successful in marketing LeuTech and in obtaining
market acceptance of LeuTech.

Uncertainty of Development of PT-14. We have entered into an
exclusive license agreement with Competitive Technologies, Inc. to develop and
market PT-14. This license agreement requires us to pay royalties on product
sales, and requires us to meet specified performance criteria and make benchmark
payments. We have also signed an agreement with TheraTech, including a license
to certain patents owned by TheraTech, to collaboratively develop an oral
transmucosal delivery system for PT-14. The agreement with TheraTech contains
certain performance criteria and financial obligations. Failure to meet the
performance criteria for any reason or any other event of default under either
or both agreements leading to the termination of an agreement may have a
material adverse effect on us. We can not assure you that TheraTech and we will
ever be able to develop an acceptable oral delivery system for PT-14, or that we
can do it in a reasonable period of time or for acceptable costs.

We can not assure you that our PT-14 development program will be
successful, that PT-14 will prove to be safe and effective in clinical trials,
or that PT-14 will obtain required regulatory approvals from the FDA and other
regulatory agencies. Even if the FDA approves PT-14, we can not assure you that
we will be successful in obtaining market acceptance of PT-14, either by
ourselves or with the help of marketing partners. In addition, we may encounter
problems and delays relating to research and development, regulatory approval,
manufacturing and marketing of PT-14. Failure to develop, obtain regulatory
approval for, manufacture and market PT-14 on a timely basis may have a material
adverse effect on us.

7
<PAGE>

Uncertainty of Development of MIDAS Technology. We are engaged in
research and development on several potential products using our MIDAS
technology, including development of an infection imaging agent and a
therapeutic agent for treatment of obesity. We believe that MIDAS technology may
have medical applications in a variety of areas, including immune disorders,
cancers and cardiology. We intend to expand research and development of MIDAS
technology applications primarily through strategic alliances with other
companies. We can not predict when or whether we will ever be able to reach a
strategic alliance with another company. Failure to reach alliances on a timely
basis will limit our ability to develop MIDAS technology, which could have a
material adverse effect on us. We expect to devote resources to expand research
and development of MIDAS technology to the extent funding is available. We
can not predict, however, when or whether the areas in which we have ongoing
MIDAS technology research projects will yield scientific discoveries, or whether
such research projects will lead to commercial products.

Extensive Government Regulation; Uncertainty of Product Approval. The
research, development, testing, clinical trials, manufacture, advertising,
distribution and sale of pharmaceutical products are subject to extensive
regulation by governmental authorities in the United States and other countries.
The FDA is the primary regulatory agency in the United States, but individual
states also have regulatory authority. The regulatory process requires that we
conduct pre-clinical studies and clinical trials of each proposed product to
establish safety and effectiveness. The FDA also requires our contractors and us
to maintain specified good laboratory, clinical and manufacturing practices
during testing and manufacturing. The regulatory process is complex, can take
many years to complete and is expensive.

We have not submitted any of the products we are developing for
approval by the FDA or any other regulatory authority. We can not assure you
that we will ever submit any of our products for approval. If we do submit
products for approval, we can not assure you that the FDA or regulatory
authorities will approve our products. Even if the FDA or other regulatory
authorities approve one of our products, it is possible that they will limit the
approved uses of that product, which could limit the market potential of that
product. Delays in obtaining or failure to obtain required regulatory approvals
would have a material adverse effect on us.

We are and will continue to be dependent upon the laboratories and
medical institutions conducting our pre-clinical studies and clinical trials to
maintain both good laboratory and good clinical practices. We can not assure you
that such facilities will maintain appropriate standards. Failure to do so could
further delay the approval process.

Once one of our products is approved, then our company, the approved
product, the manufacturer of the product and the facilities in which the product
is manufactured are subject to ongoing regulatory review. Discovery of
previously unknown problems can result in restrictions on a product or
withdrawal of the product from the market.

Uncertainty of Completing Clinical Trials. As part of obtaining
regulatory approval of our products, we must demonstrate through clinical trials
that our products are safe and effective. Completing clinical trials depends on
many factors, including the availability of qualified clinical investigators and
access to suitable patient populations. We rely, in part, on contractors to
design clinical trials and prepare regulatory filings. We can not assure you
that we will be able to find appropriate contractors to provide services
relating to clinical trials. Delays in initiating and completing clinical trials

8
<PAGE>

may result in increased trial costs and delays in the FDA submissions, which
would have a material adverse effect on us.

A number of companies in the biotechnology and pharmaceutical
industries have suffered significant setbacks in Phase 3 clinical trials, even
after showing promising results in earlier studies or trials. It is possible
that we will encounter problems in our clinical trials that will cause us to
delay or suspend clinical trials. It is also possible that because of problems
with safety or product performance we will never complete our clinical trials,
or that the clinical trials will ultimately show that our products are not safe
or effective. If any such problems occur, this would have a material adverse
effect on us.

Limited Marketing, Distribution or Sales Capability and Experience.
We have limited experience in marketing pharmaceutical products. We will have to
develop a sales force and/or rely on collaborators or licensees or on
arrangements with others to provide for the marketing, distribution, and sales
of our proposed products. We can not assure you that we will be able to
establish marketing, distribution and sales capabilities or arrange with third
parties to perform such activities on acceptable terms. If we rely on others to
do marketing, distribution and sales, we will have limited control over the
results. We can not assure you that we or any third party we rely on will be
successful in marketing, distributing or selling any of our products. Failure to
be successful in marketing, distributing and selling our products will have a
material adverse effect on us.

Significant Competition. The pharmaceutical industry is highly
competitive. There are several companies developing and commercializing products
for diagnostic imaging using monoclonal antibodies and peptides. Some of these
products are for the diagnosis of infections and inflammation. In addition,
other products and technologies compete with some of the uses of LeuTech. In the
development of products to treat sexual dysfunction, there are many companies
that have commercialized products or that have programs to develop products to
treat sexual dysfunction. In the pharmaceutical industry, there are a number of
companies developing peptide-based drugs, including companies exploring a number
of different approaches to make peptides with a specific conformation for use as
therapeutic drugs.

We are likely to encounter significant competition with each of the
products we are developing. Most of our competitors have substantially greater
financial and technological resources and marketing capabilities than we do, and
have greater experience in research and development. It is possible that our
competitors will develop products and underlying technologies more rapidly than
we will be able to. Our competitors may also develop products that are more
effective and useful and are less costly than the products that we develop. Our
competitors may also be more successful than we are in manufacturing and
marketing such products. Academic institutions, hospitals, governmental agencies
and other public and private research organizations also conduct research and
seek patent protection, and may develop competing products or technologies on
their own or through strategic alliances or collaborative arrangements. We can
not assure you that even if we are successful in receiving FDA approval for our
products that we will be able to successfully compete.

Dependence on Key Management and Qualified Personnel; Limited
Personnel; Dependence on Contractors. We are highly dependent upon the efforts

9
<PAGE>

of our management. The loss of the services of one or more members of management
would delay our efforts in product development, obtaining financing and reaching
marketing and other agreements.

Edward J. Quilty, who is our Chairman of the Board, Chief Executive
Officer and President, also serves as Chairman of the Board of Derma Sciences,
Inc., a publicly traded medical technology company. Stephen T. Wills, our Vice
President and Chief Financial Officer, works for us on a part-time basis, and
also serves as Chief Financial Officer of Derma Sciences. Mr. Quilty and Mr.
Wills devote their business time to the business and interests of both companies
as is necessary to perform their duties to each company. Our Board of Directors
believes there is not a conflict of interest between our business and Derma
Sciences because, among other things, we are in the business of discovering and
developing pharmaceutical drugs while Derma Sciences is in the business of
selling wound care devices and products.

Due to the specialized scientific nature of our business, we are
highly dependent upon our ability to attract and retain qualified scientific and
technical personnel. There is intense competition for qualified personnel in the
areas in which we are working, and we can not assure you that we will be able to
continue to attract and retain the qualified personnel we need. In addition, we
may grow and expand into areas requiring additional skill and expertise, such as
marketing, including sales and distribution. This will require the addition of
new management personnel and the development of additional expertise by present
management personnel. The loss of, or failure to recruit, scientific, technical,
marketing, and managerial personnel could have a material adverse effect on us.

We rely on and will continue to use independent organizations,
advisors and consultants to provide substantially all aspects of manufacturing
and certain aspects of regulatory approval and clinical management. We can not
assure you that the services of such providers will continue to be available to
us or will be available to us when needed and at an acceptable price, or that we
could find qualified replacements.

Year 2000 Compatibility. The year 2000 issue is the result of
computer programs being written using two digits rather than four digits to
define the applicable year. In other words, date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations causing disruptions of
operations, including, among others, a temporary inability to process
transactions and information or engage in similar normal business activities.

We are working to resolve the potential impact of the year 2000 on
the ability of our computerized information systems to accurately process
information that may be date-sensitive. We believe that we do not have
significant year 2000 issues related to our computerized information systems and
are currently reviewing these systems. We expect to complete this review during
1999.

In addition, it is also possible that certain computer systems or
software products of our suppliers and contractors may not be year 2000
compatible. We are requesting assurances from all software vendors from which we
have purchased or from which we may purchase software that such software will
correctly process all date information at all times. Furthermore, we are asking
our suppliers and contractors as to their progress in identifying and addressing
problems that their computer systems will face in correct processing date
information as the year 2000 approaches. We expect to complete this assessment

10
<PAGE>

during 1999 and currently believe that the cost of addressing this issue will
not have a material adverse impact on our financial position. However, if we and
third parties upon which we rely are unable to address this issue in a timely
manner, it could result in a material financial risk to us. In order to assure
that this does not occur, we plan to devote all resources required to resolve
any significant year 2000 issues in a timely manner.

To date we have not made any contingency plans to address third-party
year 2000 risks. We plan to formulate contingency plans to the extent necessary
in 1999.

Risk of Liability; Adequacy of Insurance Coverage; Risk of Product
Recall. Our business may be affected by potential product liability risks which
are inherent in the testing, manufacturing and marketing of the pharmaceutical
products we are developing. We can not assure you that product liability claims
will not be made against us or any third parties that market our products. It is
likely that we will be required to bear all or a portion of the risks associated
with clinical trials and sale of our products, even if a third party assists in
development or marketing of our products. This risk, including the risk of a
lawsuit against us, could have a material adverse impact on our financial
position.

We have liability insurance providing up to a maximum of $5,000,000
coverage for certain clinical trial risks, and we will seek to obtain product
liability insurance before we start selling products. However, we can not assure
you that we will be able to find product liability insurance on acceptable
terms, or that any coverage we obtain will be adequate to protect us against all
future claims. In addition, even if we have adequate insurance coverage, product
liability or related lawsuits could have a material adverse impact on us. To the
extent that any third parties sell, distribute or market our products, we can
not assure you that these third parties will be adequately insured or will be
able to satisfy product liability claims.

The products we are developing are subject to recall either
voluntarily by us or at the request of the FDA and other regulatory agencies for
a many different reasons. We can not assure you that our products will not be
subject to recall. A recall could have a material adverse impact on us.

Hazardous Materials; Compliance with Environmental Regulations. Our
research and development involves the use of hazardous materials and chemicals,
including radioactive compounds. We believe that our safety procedures for
handling and disposing of these materials comply with standards set by federal,
state and local governments. However, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of an
accident, we could be held liable for any damages that result, and this
liability could exceed our financial resources.

Certain Interlocking Relationships; Potential Conflicts of Interest.
One of our directors is also an officer of Paramount Capital, Inc. and of
Paramount Capital Investments, LLC. Paramount Capital Investments is a merchant
bank and venture capital firm specializing in biotechnology and
biopharmaceutical companies. In the regular course of its business, Paramount
Capital Investments identifies, evaluates and pursues investment opportunities
in biomedical and pharmaceutical products, technologies and companies. Neither
Paramount Capital Investments nor any other person is obligated to make any
products or technologies available to us.

11
<PAGE>

In addition, some of our officers, directors, consultants and
advisors currently do and will continue to serve as officers, directors,
consultants or advisors of other pharmaceutical or biotechnology companies, or
to investment banking, venture capital or similar firms. It is possible that in
the future such other companies will have interests in conflict with our
interests.

Potential Volatility of Price; Low Trading Volume. The market price
of our common stock, like that of many other development stage public
pharmaceutical and biotechnology companies, has been highly volatile and will
likely continue to be so in the future. In general, development stage companies
are more susceptible to extreme price and volume fluctuations than are companies
with significant revenues. There are a number of factors that can affect the
market price, many of which are beyond our control. These factors include
product developments by us or our competitors, governmental regulation and
approval, developments in patent or other proprietary rights and litigation, as
well as general market conditions.

The average daily trading volume and average number of transaction
per day of our common stock is comparatively low. This may affect the ability of
our stockholders to sell shares of the common stock in the public market. We do
not know whether a more active trading market will develop in the future.

Control by Officers, Directors, and Existing Stockholders. Our
executive officers, directors and five percent (5%) stockholders together
currently control approximately 26.3% of our securities with voting rights. In
addition, these individuals and entities hold options or warrants to acquire a
significant number of additional shares of common stock and Series A Preferred
Stock. Therefore, these stockholders, acting together, will be able to influence
significantly most matters requiring approval by our stockholders, including the
election of directors. Such a concentration of ownership could have the effect
of delaying or preventing a change in control, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices.

Immediate and Substantial Dilution. A purchaser of common stock under
this prospectus will experience immediate and substantial dilution. As of
December 31, 1998, we had a net tangible book value of approximately $1,634,924,
or approximately $0.21 per share of common stock, assuming conversion of all
outstanding preferred stock and no exercise of any warrants or options.

No Dividends. We have never paid cash dividends on our common stock
and do not intend to pay any dividends on our common stock in the foreseeable
future. Our Series A Preferred Stock and Series B Preferred Stock have dividend
preferences.

Shares Eligible for Future Sale; Exercise of Options and Warrants May
have a Dilutive Effect on Market; Effect on Ability to Raise Capital. There are
currently 5,818,178 shares of common stock outstanding, as well as 69,708 shares
of Series A Preferred Stock that are convertible into 1,489,487 shares of common
stock and 17,925 shares of Series B Preferred Stock that are convertible into
509,232 shares of common stock. The conversion rates applicable to Series A and
Series B Preferred Stock are subject to adjustment under certain circumstances.
Additional common stock, including up to 3,136,532 shares issuable upon the
exercise of outstanding options and warrants, may become eligible for sale in
the public market from time to time in the future. In addition, we have

12
<PAGE>

authorized the issuance of options to purchase an additional 495,000 shares
of common stock contingent on approval by the stockholders of an increase in
shares of common stock reserved for our 1996 Stock Option Plan.

We have registered up to 7,694,430 shares of common stock, including
common stock issuable on conversion of Series A and Series B Preferred Stock and
on exercise of certain warrants. We have also registered up to 1,279,144 shares
of common stock available for issuance under certain option grants, including
our 1996 Stock Option Plan. Many of the options and warrants are likely to be
exercised at a time when we might be able to obtain additional equity capital on
terms that are more favorable. While those options and warrants are outstanding,
they may adversely affect the terms on which we can obtain capital. We cannot
predict the effect, if any, that market sales of common stock, the exercise of
any options or warrants, or the availability of such common stock for sale will
have on the market price prevailing from time to time.

USE OF PROCEEDS

We will not receive any proceeds from the resale of the shares
offered by this prospectus nor will any of the proceeds be available for our use
or benefit. All proceeds from the resale of such shares will be for the account
of the selling stockholders. See "Selling Stockholders" and "Plan of
Distribution" below.

SELLING STOCKHOLDERS

We have based common stock ownership information in the following
table solely upon (1) information furnished to us by the selling stockholders,
(2) reports furnished to us under rules of the SEC and (3) our stock ownership
records.

In the following table, we have noted if any selling stockholders has
had, within the past three years, any position, office or other material
relationship with us or any of our predecessors or affiliates.

13
<PAGE>

<TABLE>
<CAPTION>
Shares of Common Shares of Common Percent of Common
Stock Owned or Shares of Common Stock Owned or Stock Owned or
Issuable before Stock Offered by Issuable after this Issuable after
Name of Selling Stockholder Offering this Prospectus Offering (1) this Offering (1)
<S> <C> <C> <C> <C>
Greenlight Capital, L.P. 15,200 15,200 0 *
Greenlight Capital Offshore, Ltd. 15,600 15,600 0 *
Greenlight Capital Qualified, L.P. 19,200 19,200 0 *
J. F. Shea Co., Inc. (2) 256,837 150,000 106,837 1.8%
Scott Katzmann (3) 76,797 32,050 44,747 *
Donald R. Kendall, Jr. (2) 55,341 50,000 5,341 *
John Knox (3) 5,009 981 4,028 *
Siegfried Mangels 12,500 12,500 0 *
Timothy McInerney (3) (5) 151,498 39,375 112,123 1.9%
Michael C. Miles 25,000 25,000 0 *
M.S.B. Research, Inc. 150,000 150,000 0 *
Steven M. Oliveira 50,000 50,000 0 *
Osterweis Revocable Trust (2) 30,341 25,000 5,341 *
Pace Partners, L.P. 100,000 100,000 0 *
Anthony J. Pace 50,000 50,000 0 *
John Papadimitropoulos (3) 981 981 0 *
Porter Partners, LP 210,000 210,000 0 *
Edward J. Quilty (6) 364,154 47,918 316,236 4.2%
Mark Rogers, M.D. (7) 6,000 6,000 0 *
Lindsay A. Rosenwald, M.D. (5) (8) 204,479 45,797 158,682 2.7%
Wayne Rothbaum 50,000 50,000 0 *
Wayne L. Rubin (3) 36,887 7,852 29,035 *
David W. Ruttenberg (2) 21,341 16,000 5,341 *
David Tanen (3) 981 981 0 *
Techvest, LLC (9) 1,750 1,750 0 *
Michael S. Weiss (3) (5) (10) 63,694 7,852 55,842 *
Jonathan M. Young (2) 35,683 25,000 10,683 *
---------
TOTAL 2,181,018
</TABLE>
- ---------------------------------
* Indicates less than one percent

(1) The numbers in these columns assume that the selling stockholder has
sold all of the common stock offered for sale under this prospectus,
and that the selling stockholder has converted any preferred stock
and exercised any warrants or options owned by the selling
stockholder which are convertible or exercisable as of the date of
this prospectus.

14
<PAGE>

(2) The ownership of this selling stockholder includes common stock the
selling stockholder can obtain by converting Series A Preferred
Stock owned by the selling stockholder. The number of shares of
common stock is based on the conversion rate that applies to the
Series A Preferred Stock as of the date of this prospectus.

(3) Employee of Paramount Capital, Inc. Paramount Capital has acted as
finder or placement agent in connection with several of our
financings, including the sale of securities included in this
prospectus to certain of the selling stockholders. We also have an
introduction agreement with Paramount Capital to act as our
non-exclusive financial advisor.

(4) We have a consulting agreement with Mr. Fried to provide services,
including financing related services. Pursuant to this agreement Mr.
Fried received warrants to purchase 100,000 shares of common stock
included in this prospectus.

(5) The ownership of this selling stockholder includes common stock and
Series A Preferred Stock the selling stockholder can obtain by
exercising warrants held by the selling stockholder. The number of
shares of common stock is based on the warrant exercise rates and
conversion rate that applies to the Series A Preferred Stock as of
the date of this prospectus.

(6) Mr. Quilty is our Chairman of the Board, Chief Executive Officer and
President.

(7) Dr. Rogers is the President of Paramount Capital, Inc.

(8) Dr. Rosenwald is the Chairman of the Board and sole stockholder of
Paramount Capital, Inc.

(9) We had an introduction agreement with Techvest, LLC pursuant to which
Techvest had the non-exclusive right to introduce prospective
investors to us. Pursuant to this agreement Techvest received
warrants to purchase 1,750 shares of common stock included in this
prospectus.

(10) Mr. Weiss is a member of our Board of Directors and a Senior
Managing Director of Paramount Capital, Inc.

PLAN OF DISTRIBUTION

Selling stockholders may sell all or a portion of the shares they are
offering on the Nasdaq SmallCap Market or in privately negotiated transactions.
Selling stockholders may sell shares by means of (1) ordinary brokerage
transactions in which the broker solicits purchasers, (2) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account, (3)
block trades in which a broker or dealer attempts to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction and (4) privately negotiated transactions. In arranging sales,
brokers and dealers engaged by a selling stockholder may arrange for other
brokers or dealers to participate. Selling stockholders may sell shares at the
market price at the time of sale, at prices related to such market price or at
negotiated prices. Brokers or dealers may negotiate and receive commissions or
discounts from a selling stockholder, but it is expected that the amount of the
commission or discount will be customary for the types of transactions involved.

15
<PAGE>

The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in the sale of shares may be
"underwriters" within the meaning of the Securities Act in connection with such
sales. Any commissions received by broker-dealers or agents and such sales and
any profit on the resale of shares purchased by broker-dealers or agents may be
deemed to be underwriting commissions or discounts under the Securities Act.

We have informed the selling stockholders that the anti-manipulation
provisions of Regulation M promulgated under the Securities Exchange Act may
apply to the sales of shares. We have also advised the selling stockholders of
the requirement for delivery of this prospectus with any sale of shares offered
under this prospectus.

Selling stockholders may from time to time purchase shares of common
stock in the open market. We have informed the selling stockholders that they
should not sell shares under this prospectus unless they have stopped buying,
bidding for or attempting to induce any other person to bid for or buy common
stock in the open market as provided in applicable securities regulations,
including Regulation M.

LEGAL MATTERS

The legality of the shares of common stock offered under this
prospectus will be passed upon by our counsel, Graham & James LLP, New York, New
York. Certain members of Graham & James LLP have been granted options under the
1996 Stock Option Plan to purchase an aggregate of 12,500 shares of common stock
at an exercise price of $8.00 per share, which options are immediately
exercisable and expire on January 3, 2007, and an option to purchase 5,000
shares of common stock at an exercise price of $6.00 per share, which option is
partially exercisable and expires on January 21, 2008.

EXPERTS

The audited consolidated financial statements incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to said report, which includes an explanatory paragraph
regarding the Company's ability to continue as a going concern, as discussed in
Note 2 to the Company's financial statements.

16
<PAGE>

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

This prospectus is part of a registration statement we filed with the Securities
and Exchange Commission. You should rely only on the information or
representations contained in this prospectus. We have not authorized anyone to
provide information other than that provided in this prospectus. We have not
authorized anyone to provide you with any information that is different. We are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.

2,181,018

SHARES OF COMMON STOCK

[GRAPHIC OMITTED]

PALATIN TECHNOLOGIES, INC.

PROSPECTUS

<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Company will bear all expenses, estimated at $50,000, incurred in
connection with the registration of the shares offered in this registration
statement (the "Registered Shares") under the Securities Act and qualification
or exemption of the Registered Shares under state securities laws for the named
selling stockholders (the "Selling Stockholders"). The Selling Stockholders will
pay all underwriting discounts and selling commissions applicable to the sale of
Registered Shares.

SEC registration fees......................... $2,691
Blue Sky fees and expenses*................... $10,000
Costs of printing and engraving*.............. $3,000
Legal fees and expenses*...................... $25,000
Accounting fees and expenses*................. $5,000
Miscellaneous*................................ $4,309
TOTAL........................................ $50,000
*Estimated.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or serving at the request of the corporation in similar capacities,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or 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, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of an action
or suit by or in the right of the corporation, no indemnification shall be made
with respect to any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the court having jurisdiction shall determine that such person is fairly and
reasonably entitled to indemnity.

Article V, Section 3 of the Company's Certificate of Incorporation
provides that to the fullest extent permitted by the Delaware General
Corporation Law, no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for breach of a fiduciary duty
as a director.

Part II-1
<PAGE>

Article VI of the Company's Certificate of Incorporation provides that
the Company shall make the indemnification permitted under Section 145 of the
Delaware General Corporation Law, as summarized above, but only (unless ordered
by a court) upon a determination by a majority of a quorum of disinterested
directors, by independent legal counsel in a written opinion, or by the
stockholders, that the indemnified person has met the applicable standard of
conduct. Article VI further provides that the Company may advance expenses for
defending actions, suits or proceedings upon such terms and conditions as the
Company's Board of Directors deems appropriate, and that the Company may
purchase insurance on behalf of indemnified persons whether or not the Company
would have the power to indemnify such persons under Section 145 the Delaware
General Corporation Law.

The Company's Bylaws contain substantially the same indemnification
provisions as the Company's Certificate of Incorporation, summarized above.

The Company's employment agreement with Edward J. Quilty requires the
Company to indemnify and advance expenses to Edward J. Quilty, the Company's
Chairman of the Board, President and Chief Executive Officer, to the fullest
extent permitted under Section 145 of the Delaware General Corporation Law.

The agreement with the Selling Stockholders pursuant to which the
Company has registered the Registered Shares in the Registration Statement
provides that the Company will indemnify each such Selling Stockholder
(including control persons, officers, directors and constituent partners of such
Selling Stockholder), and each such Selling Stockholder will indemnify the
Company (including control persons, officers and directors) against certain
liabilities which might arise from the registration of the Registered Shares.
The indemnifications may cover liabilities arising under the Securities Act. The
obligation of each such Selling Stockholder to indemnify the Company or its
affiliates is limited to liabilities based on written information which such
Selling Stockholder provides to the Company for inclusion in the Registration
Statement.

The Company has obtained a directors' and officers' liability insurance
policy which covers, among other things, certain liabilities arising under the
Securities Act.

ITEM 16. EXHIBITS.
EXHIBITS

The following exhibits are filed with this Registration Statement, or
incorporated by reference as noted:

2.1 Agreement and Plan of Reorganization dated as of April 12, 1996
by and between Interfilm, Inc., Interfilm Acquisition Corp. and
RhoMed Incorporated; incorporated by reference to Exhibit 2.1 of
the Company's Form 8-K dated June 25, 1996, filed with the
Commission on July 10, 1996.

2.2 Waiver and Consent dated as of June 24, 1996, between Interfilm,
Inc., Interfilm Acquisition Corp. and RhoMed Incorporated;
incorporated by reference to Exhibit 2.2 of the Company's Form
10-KSB Annual Report for the period ended June 30, 1996, filed
with the Commission on September 27, 1996.

Part II-2
<PAGE>

4.1 Specimen Certificate for Common Stock; incorporated by reference
to Exhibit 4.1 of the Company's Form 8-K dated July 19, 1996,
filed with the Commission on August 9, 1996.

5.1 Opinion of Graham & James LLP, counsel to the Company, re
legality.

10.40 Form of Warrant dated as of December 31, 1998, between the
Company and certain purchasers, incorporated by reference to
Exhibit 10.40 of the Company's Report on Form 10-QSB for the six
months ended December 31, 1998, filed with the Commission on
February 16, 1999.

10.41 Form of Stock Purchase Agreement dated as of December 31, 1998,
between the Company and certain purchasers, incorporated by
reference to Exhibit 10.41 of the Company's Report on Form
10-QSB for the six months ended December 31, 1998, filed with
the Commission on February 16, 1999.

10.42 Registration Rights Agreement dated as of December 31, 1998,
between the Company and certain purchasers, incorporated by
reference to Exhibit 10.42 of the Company's Report on Form
10-QSB for the six months ended December 31, 1998, filed with
the Commission on February 16, 1999.

23.1 Consent of Graham & James LLP. (Included in Exhibit 5.1.)

23.2 Consent of Arthur Andersen LLP.

24.1 Power of Attorney (included on the signature page hereof).

27 Financial Data Schedule; incorporated by reference and
previously filed as an exhibit to the Company's Report on Form
10-QSB for the six months ended December 31, 1998, filed with
the Commission on February 16, 1999.

ITEM 17. UNDERTAKINGS.

The Company will:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

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

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

(iii) include any additional or changed material information on
the plan of distribution;

Part II-3
<PAGE>

provided, however, that paragraphs (1)(i) and (1)(ii) will not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of such securities at that time to be the initial bona
fide offering thereof.

(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

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

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

Part II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Princeton, State of New Jersey, on February 24, 1999.

PALATIN TECHNOLOGIES, INC.

By: /s/ Edward J. Quilty
---------------------------
Edward J. Quilty
Chairman of the Board, President
and Chief Executive Officer

Part II-5

<PAGE>

POWER OF ATTORNEY

We, the undersigned officers and directors of Palatin Technologies, Inc.,
severally constitute Edward J. Quilty and Stephen T. Wills, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, the
Registration Statement on Form S-3 filed herewith and any and all subsequent
amendments to said registration statement, and generally to do all such things
in our names and behalf in our capacities as officers and directors to enable
Palatin Technologies, Inc. to comply with all requirements of the Securities and
Exchange Commission.

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

SIGNATURE TITLES DATE

/s/ Edward J. Quilty
- -------------------------- Chairman of the Board, President February 24, 1999
Edward J. Quilty and Chief Executive Officer
(principal executive officer)

/s/ Carl Spana
- -------------------------- Executive Vice President and February 24, 1999
Carl Spana Director

/s/ Stephen T. Wills
- -------------------------- Vice President and Chief February 24, 1999
Stephen T. Wills Financial Officer (principal
financial and accounting officer)

- -------------------------- Director February 24, 1999
Michael S. Weiss

/s/ James T. O'Brien
- -------------------------- Director February 24, 1999
James T. O'Brien

- -------------------------- Director February 24, 1999
John K.A. Prendergast

/s/ Robert G. Moussa
- -------------------------- Director February 24, 1999
Robert G. Moussa

/s/ Charles L. Putnam
- -------------------------- Executive Vice President February 24, 1999
Charles L. Putnam and Director

/s/ Robert K. deVeer, Jr.
- -------------------------- Director February 24, 1999
Robert K. deVeer, Jr.

GRAHAM & JAMES LLP
------------------

[LETTERHEAD]

February 24, 1999

Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, New Jersey 08540

We have acted as counsel for Palatin Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") on February 24, 1999,
under the Securities Act of 1933, as amended (the "Act"), for registration under
the Act of the following securities:

1. 939,250 shares of common stock, par value $.01 per share (the
"Common Stock"), issued as of December 31, 1998 and February 8, 1999 to certain
of the selling stockholders ("Selling Stockholders") named in the Registration
Statement.

2. 47,918 shares of Common Stock issued to Edward J. Quilty ("Mr.
Quilty") on the exercise of certain stock options on November 11, 1996 and
April 11, 1997.

3. Up to 939,250 shares of Common Stock issuable upon exercise of the
Company's Common Stock Warrants ("Common Stock Warrants") issued to certain of
the Selling Stockholders in conjunction with their purchase of Common Stock
described in paragraph 1 above.

4. Up to 254,600 shares of Common Stock issuable upon exercise of
other outstanding common stock warrants of the Company ("Additional Common Stock

<PAGE>

Warrants") issued to certain of the Selling Stockholders as of December 31,
1998, January 4, 1999 and February 8, 1999.

As counsel to the Company, we have examined such corporate records,
documents, agreements and such matters of law as we have considered necessary or
appropriate for the purpose of this opinion. Upon the basis of such examination,
we advise you that in our opinion:

1. The 939,250 shares of Common Stock issued to the Selling
Stockholders were legally issued, fully paid and non-assessable.

2. The 47, 918 shares of Common Stock issued to Mr. Quilty were
legally issued, fully paid and non-assessable.

3. Up to 939,250 shares of Common Stock issuable upon exercise
of Common Stock Warrants, if and when paid for and issued upon exercise of
Common Stock Warrants in accordance with the terms thereof, will be legally
issued, fully paid and non-assessable.

4. Up to 254,600 shares of Common Stock issuable upon exercise
of Additional Common Stock Warrants, if and when paid for and issued upon
exercise of Additional Common Stock Warrants in accordance with the terms
thereof, will be legally issued, fully paid and non-assessable.

We are members of the Bar of the State of New York, and the opinions
expressed herein are limited to questions arising under the laws of the State of
New York, the General Corporation Law of the State of Delaware and the Federal
laws of the United States of America, and we disclaim any opinion whatsoever
with respect to matters governed by the laws of any other jurisdiction.

We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the caption
"Legal Matters" in the Prospectus which is a part of the Registration Statement.
Reference is made to the section of the Registration Statement entitled "Legal
Matters" for a description of ownership of the Company's securities by certain
attorneys of this firm.

Very truly yours,

GRAHAM & JAMES LLP

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
August 10, 1998 included in Palatin Technologies, Inc.'s Form 10-KSB for the
year ended June 30, 1998 and to all references to our Firm included in this
registration statement.

ARTHUR ANDERSEN LLP

Philadelphia, PA
February 24, 1999