INGENEX INC, SB-2/A, 1996-07-03

INGENEX INC
SB-2/A, 1996-07-03
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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As filed with the Securities and Exchange Commission on July 3, 1996.

Registration No. 33-95654

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 2 TO FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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INGENEX, INC.
(Name of small business issuer as specified in its charter)
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<TABLE>
<CAPTION>
Delaware 2836 94-3163294
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

1505 O'Brien Drive
Menlo Park, California 94025
(415) 617-9570

(Address and telephone number of principal executive offices)
------------
MARK E. FURTH, Ph.D.
President and Chief Executive Officer
Ingenex, Inc.
1505 O'Brien Drive
Menlo Park, California 94025
(415) 617-9570

(Name, address and telephone number of agent for service)
------------
Copies to:

CHARLES I. WEISSMAN, ESQ. MARTIN H. LEVENGLICK, ESQ.
Shereff, Friedman, Hoffman & Goodman, LLP JULIE M. ALLEN, ESQ.
919 Third Avenue O'Sullivan Graev & Karabell, LLP
New York, New York 10022 30 Rockefeller Plaza
(212) 758-9500 New York, New York 10112
(212) 408-2400
------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
------------

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

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

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

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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
maximum Proposed maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered per share(1) offering price(1) registration fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value(2)...... 2,127,500 $9.50 $20,211,250 $6,969.40
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</TABLE>

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

(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a).
(2) Includes 277,500 shares which the Underwriters have the option to
purchase from the Company to cover over-allotments, if any.

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>

INGENEX, INC.

Cross Reference Sheet
Showing Location in Prospectus of Information
Required by Items of Form SB-2

Form SB-2 Item Number
and Heading Location in Prospectus
- ----------------------------------------------------------- ----------------------------------------------
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1. Front of Registration Statement and Outside Front
Cover of Prospectus.................................. Outside Front Cover Page of Prospectus

2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages of
Prospectus........................................... Prospectus

3. Summary Information and Risk Factors.................. Prospectus Summary; Risk Factors

4. Use of Proceeds....................................... Use of Proceeds

5. Determination of Offering Price....................... Underwriting

6. Dilution.............................................. Dilution

7. Selling Security Holders.............................. Not Applicable

8. Plan of Distribution.................................. Outside Front Cover Page of Prospectus; Risk
Factors; Underwriting

9. Legal Proceedings..................................... Business--Litigation

10. Directors, Executive Directors, Promoters and Control
Persons............................................... Management

11. Security Ownership of Certain Beneficial Owners and
Management............................................ Principal Stockholders

12. Description of Securities............................. Description of Capital Stock

13. Interest of Named Experts and Counsel................. Not Applicable

14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities........................ Management--Indemnification of Directors and
Officers

15. Organization Within Last Five Years................... Business

16. Description of Business............................... Prospectus Summary; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business

17. Management's Discussion and Analysis or Plan of
Operation............................................. Management's Discussion and Analysis of Financial
Condition and Results of Operations

18. Description of Property............................... Business -- Facilities

19. Certain Relationships and Related Transactions........ Certain Transactions

20. Market for Common Equity and Related Stockholder
Matters............................................... Prospectus Summary; Risk Factors; Dividend Policy;
Business; Principal Stockholders

21. Executive Compensation................................ Management -- Executive Compensation

22. Financial Statements.................................. Financial Statements

23. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure................... Changes in Accountants
</TABLE>

<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 the registration or qualification under the securities laws of any such
State.

SUBJECT TO COMPLETION, DATED JULY 3, 1996
PROSPECTUS
1,850,000 Shares

INGENEX, INC.

Common Stock

The 1,850,000 shares of Common Stock, $.001 par value per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by Ingenex,
Inc. Prior to the Offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price of
the Common Stock will be between $8.50 and $9.50 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company has applied to have the Common Stock
approved for quotation on The Nasdaq National Market under the symbol "INGX".

Titan Pharmaceuticals, Inc. ("Titan"), a Delaware corporation that owns
approximately 81% of the outstanding Common Stock, has expressed an interest
in purchasing approximately 222,222 of the shares of Common Stock offered
hereby at the initial public offering price. See "Underwriting." In addition,
in consideration of a payment to the Company of $100,000, the Company has
issued to Titan an option to purchase approximately an additional 333,333 shares
of Common Stock at an exercise price per share equal to the initial public
offering price (the "Titan Option") and an additional option and a right of
first refusal with respect to future issuances of Common Stock in order for
Titan to maintain ownership of a majority of the outstanding Common Stock. See
"Certain Transactions."

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 8 AND "DILUTION."

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.
=============================================================================
Underwriting Discounts Proceeds to
Price to Public and Commissions (1) the Company(2)
--------------- ---------------------- --------------
Per Share ...... $ $ $
Total(3) ....... $ $ $
=============================================================================
(1) Excludes (i) a non-accountable expense allowance payable to the
representative of the Underwriters (the "Representative") equal to 2% of
the gross proceeds of the Offering, of which $25,000 has been paid to
date, and (ii) warrants to be issued to the Representative to purchase
up to 185,000 shares of Common Stock (the "Representative's Warrants").
In addition, the Company has agreed to indemnify the Underwriters
against certain civil 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 the Representative's non-accountable
expense allowance.

(3) The Company has granted to the Underwriters a 30-day option to purchase
up to 277,500 additional shares of Common Stock on the same terms as set
forth above, solely to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will
be $ , $ and $ , respectively. See "Underwriting."

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

The shares of Common Stock offered hereby are being offered by the
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in
part. It is expected that the certificates for the shares of Common Stock will
be available for delivery on or about , 1996 at the offices of Kaufman Bros.,
L.P., New York, New York.
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KAUFMAN BROS., L.P.
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The date of this Prospectus is , 1996

<PAGE>

MDRx1 and GSX are trademarks of the Company.

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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
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus, including
information under "Risk Factors" and the Financial Statements and Notes
thereto. Unless otherwise indicated, all information contained in this
Prospectus (i) reflects a 1.875-for-one stock split of the Common Stock
effected in September 1994, (ii) reflects a 3.438924545-for-one reverse stock
split of the Common Stock and the Series A Preferred Stock of the Company and
a 2.328840417-for-one reverse stock split of the Series B Preferred Stock of
the Company effected in May 1995, (iii) gives effect to the conversion (the
"Preferred Stock Conversion") of all outstanding shares of Series A Preferred
Stock and Series B Preferred Stock of the Company (collectively, the
"Preferred Stock") into 1,291,234 shares of Common Stock upon the consummation
of the Offering, (iv) assumes no exercise of the Representative's Warrants and
(v) assumes no exercise of the Underwriters' over-allotment option.

The Company

Ingenex, Inc. ("Ingenex" or the "Company") is a biopharmaceutical
company engaged in the development of proprietary gene-based therapies and the
application of functional genetics to pharmaceutical discovery. The Company's
initial commercial strategy is to develop gene therapy products for the
oncology market. The Company currently is sponsoring a Phase 1/2 clinical
trial of MDRx1, a gene therapy product aimed at limiting the destruction by
cytotoxic drugs of normal blood-forming cells in the bone marrow of cancer
patients undergoing chemotherapy. The Company believes that MDRx1 will permit
the administration of increased doses of cytotoxic drugs to cancer patients,
resulting in the increased efficacy of chemotherapy. Ingenex also is
developing a gene therapy product based on RB94, a modified form of RB, a
tumor suppressor gene. This product is intended to cause the regression of
localized, malignant cancers. In addition, the Company is building a new,
proprietary genomics technology, the GSX System, which identifies genes based
on their function and is designed to pinpoint key steps in a disease pathway
for therapeutic intervention. Ingenex believes that the GSX System may be used
to develop treatments for a wide range of diseases through the discovery of
both gene therapy products and small molecule drugs.

Genomics entails the identification and sequencing of human genes and
the identification of genes implicated in particular diseases. Certain
scientists in the public and private sectors are seeking to identify and
sequence the approximately 100,000 human genes and to discover genes
associated with human diseases. However, the knowledge of a gene's DNA
sequence alone does not identify its biological role. Furthermore, the
association of a gene with a disease process usually does not suggest a way to
treat that disease. Ingenex's functional genetics strategy focuses on the
identification of genes and fragments of genes that are capable of altering
the genetic program of a cell or organism to facilitate the discovery of
effective solutions to medical problems through gene therapy or drug
discovery.

MDRx1 Program. A significant limitation of cancer chemotherapy is the
destruction by cytotoxic drugs of certain normal cells in the body, especially
blood progenitor or stem cells

<PAGE>

in the bone marrow, which are responsible for the production of white blood
cells, red blood cells and platelets. Ingenex is developing a product based on
the insertion and expression of MDR-1, the human multidrug resistance gene,
into blood progenitor or stem cells purified from bone marrow or blood. MDR-1
produces a protein that actively pumps many cytotoxic drugs out of cells. The
introduction of MDR-1 into blood progenitor or stem cells is intended to make
them less sensitive to such drugs, thereby potentially enabling more
aggressive chemotherapy. In an ongoing Phase 1/2 clinical trial of MDRx1, the
Company's collaborators at The University of Texas M.D. Anderson Cancer Center
("MD Anderson") have introduced MDR-1 into blood progenitor or stem cells
removed from 20 patients with ovarian or breast cancer who have then undergone
bone marrow transplantation with their own modified cells. The trial is
intended to assess whether cells genetically modified for multidrug resistance
can be safely reintroduced and maintained in patients as they undergo multiple
cycles of chemotherapy at increasing doses. In addition, the results of such
clinical trial may suggest whether the modified cells will improve cancer
patients' ability to tolerate chemotherapy.

RB94 Program. Tumor suppressor genes are generally believed to block
cancer progression. The loss or inactivation of certain tumor suppressor
genes, including RB, has been observed frequently in most of the common human
cancers, and various scientists have proposed that the reintroduction of a
functional tumor suppressor may halt the proliferation of such cancers.
Ingenex's scientific collaborators at MD Anderson, formerly affiliated with
Baylor College of Medicine ("Baylor"), have reported that RB94 produces a
shorter, more stable protein (the "RB94 protein") than the naturally-occurring,
full-length RB gene. In preclinical studies conducted by these scientists, the
addition of RB94 to RB-deficient cancer cells prevented tumor growth more
completely than the addition of a full-length RB gene. Furthermore, the Company
believes that RB94 may have broader clinical utility than RB because RB94 also
blocks the growth of certain tumors that still contain a naturally-occurring,
full-length RB gene. Ingenex believes that an important medical use of RB94
gene therapy may be as a supplemental or alternative procedure to surgery in
the treatment of certain regionalized tumors.

The GSX System. The GSX System identifies genes based on their
functional roles in a biological or disease process. This system selects short
gene fragments that inhibit a biological or disease process and confer a
medically desirable cellular property, such as increased resistance of cells
to a virus. Ingenex believes that the GSX System, because it selects genetic
elements by virtue of their specific functions, represents an important
advance over methods that identify gene sequences or disease-associated genes
having no known cellular function. The GSX System has been employed by the
Company and its scientific collaborators at the University of Illinois at
Chicago ("UIC") both to gain insight into the specific functions of previously
identified genes and to discover new genes and gene fragments. Ingenex has
utilized the GSX System to identify gene fragments capable of blocking the
replication of the Human Immunodeficiency Virus ("HIV"). The Company is also
exploring the use of the GSX System to discover novel therapeutics for cancer
and other diseases characterized by aberrant cellular function. In addition to
identifying therapeutic genetic elements, the Company believes that
information obtained using the GSX System may promote pharmaceutical discovery
by demonstrating that intervention in a specific biochemical process will have
a desired outcome.

<PAGE>

The Company's gene therapy products are currently in preclinical and
clinical development. MDRx1 is being tested in a Phase 1/2 clinical trial.
However, none of the Company's other proposed products is being tested in
clinical trials or has been submitted for regulatory approval. While the
Company anticipates that it will file an Investigational New Drug Application
(an "IND") in late 1997 for the use of RB94 to treat prostate cancer, there
can be no assurance that an IND will be filed within such anticipated time
period, or at all. There also can be no assurance that the results of the
clinical trial of MDRx1 or any future clinical trials will demonstrate the
safety or efficacy of MDRx1 or RB94, or that any of the Company's proposed
products will be successfully developed or will receive the necessary
regulatory approvals, or that, even if such approvals are received, that such
products will be commercialized. In addition, there can be no assurance that
the GSX System will provide the basis for the development of additional
gene-based therapeutic products. See "Risk Factors."

Ingenex is a majority-owned subsidiary of Titan. Titan participates
in the management of five operating biopharmaceutical companies, four of which
are majority-owned subsidiaries, in the fields of central nervous system
disorders, cancer therapy, blood and immune disorders and other life-
threatening diseases. Titan has expressed an interest in purchasing
approximately 222,222 of the shares of Common Stock offered hereby at the
initial public offering price. Following the Offering, assuming Titan
purchases these shares, Titan will own approximately 54% of the outstanding
Common Stock (or approximately 51% if the Underwriters' over-allotment option
is exercised in full). The Company has granted Titan an additional option and a
right of first refusal with respect to future issuances of Common Stock in order
for Titan to maintain ownership of a majority of the outstanding Common Stock.
Titan has agreed to certain restrictions with respect to its influence over the
Company. See "Business -- Relationship to Titan Pharmaceuticals, Inc." and
"Underwriting."

The Company was originally incorporated in New York under the name
Pharm-Gen Systems, Ltd. in July 1991 and was reincorporated in April 1993 in
Delaware as Ingenex, Inc. The Company's corporate headquarters are located at
1505 O'Brien Drive, Menlo Park, California 94025, and its telephone number is
(415) 617-9570.

<PAGE>

The Offering

Common Stock offered hereby........................ 1,850,000 shares

Common Stock to be outstanding after the Offering.. 4,844,391 shares (1)

Use of proceeds.................................... Repayment of indebtedness,
research and development,
working capital and other
general corporate purposes.
See "Use of Proceeds."

Proposed Nasdaq National Market symbol............. INGX
- -------------

(1) Excludes (i) 449,830 shares of Common Stock issuable upon the
exercise of outstanding stock options at June 30, 1996, at a
weighted average exercise price of $2.59 per share, (ii) 300,000
shares of Common Stock issuable upon the exercise of outstanding
warrants, at an exercise price of $2.50 per share, (iii) 185,000
shares of Common Stock issuable upon exercise of the
Representative's Warrants and (iv) approximately 333,333 shares
of Common Stock issuable upon the exercise of the Titan Option.
See "Management -- 1994 Stock Option Plan," "Certain
Transactions" and "Underwriting."

Risk Factors

An investment in the Common Stock offered hereby involves a high
degree of risk. See "Risk Factors."

Summary Financial Information
(In thousands, except per share data)

Period from
Year Ended Three Months Ended Commencement
December 31, March 31, of Operations
-------------------- ------------------------ (July 25, 1991) to
1994 1995 1995 1996 March 31, 1996
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<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue................................. $ --- $ 140 $ --- $ 46 $ 186
Loss from operations.................... (4,907) (3,886) (1,047) (681) (12,092)
Net loss................................ (4,884) (4,995) (1,088) (904) (13,432)
Pro forma net loss per share (1)........ --- (1.72) --- (0.29) ---
Shares used in per share
computations (1)..................... 2,904,670 2,946,821 ---

</TABLE>

March 31, 1996
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Pro Forma
Actual Pro Forma As Adjusted(3)
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<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $ --- $ --- $ 12,762
Working capital (deficiency)................. (5,095) (912) 12,323
Total assets................................. 190 190 12,952
Payable to parent............................ 4,183 --- ---
Technology financing......................... 1,627 1,627 ---
Deficit accumulated during the
development stage......................... (13,432) (13,432) (13,432)
Total stockholders' equity (net capital
deficiency)............................... (6,113) (1,930) 12,459
</TABLE>

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(1) Gives effect to additional common shares from assumed conversion of
(i) indebtedness of the Company to Titan and (ii) Preferred Stock.

(2) Gives pro forma effect to (i) the conversion of an aggregate of
$4,183,066 of indebtedness of the Company to Titan, as of March 31,
1996, into 760,557 shares of Common Stock prior to the consummation of
the Offering (the "Titan Debt Conversion") and (ii) the Preferred
Stock Conversion. In June 1996, Titan converted a total of $5,400,000
of indebtedness, including the $4,183,066 balance at March 31, 1996
plus additional amounts incurred after March 31, 1996, into a total of
981,818 shares of Common Stock.

(3) Adjusted to give effect to the sale of the 1,850,000 shares of Common
Stock by the Company in the Offering at an assumed initial public
offering price of $9.00 per share (after deducting underwriting
discounts and commissions and estimated offering expenses) and the
initial application of the net proceeds as set forth in "Use of
Proceeds." See "Use of Proceeds."

<PAGE>

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk, and the Common Stock should not be purchased by persons who cannot
afford the loss of their entire investment. In addition to the other
information in this Prospectus, the following factors should be considered
carefully in evaluating an investment in the Common Stock offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below and
under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."

Early Stage of Development. The Company's products are under development,
with only one of the Company's planned products in the clinical trial phase.
To date, no revenues have been generated by the Company from product sales nor
are any product revenues expected for the foreseeable future. As a result, the
Company must be evaluated in light of the problems, delays, uncertainties and
complications encountered in connection with a development stage
biopharmaceutical business, which include, but are not limited to, the
possibilities that any or all of the Company's potential products will be
found to be ineffective or toxic, or will fail to receive necessary regulatory
clearances. To achieve profitable operations, the Company must successfully
develop, obtain regulatory approvals for, introduce and commercialize products
that are currently in the research and development phase. The substantial
majority of the preclinical research and clinical development work and testing
for the Company's product candidates remains to be completed. Moreover, the
results of preclinical testing do not necessarily predict or prove safety or
efficacy in humans. The Company currently is not profitable, and no assurance
can be given that the Company's research and development efforts will be
successful, that required regulatory approvals will be obtained, that any of
the Company's proposed products will be safe and effective, that any such
products, if developed and introduced, will be commercialized or that the
Company will ever become profitable. Failure of the Company to successfully
develop, obtain regulatory approvals for, introduce and commercialize its
products under development would have a material adverse effect on the
Company. See "Business."

History of Operating Losses; Need for Substantial Additional Financing. The
Company has experienced significant operating losses since its inception in
July 1991. As of March 31, 1996, the Company had incurred cumulative net
operating losses of approximately $13,432,000 and its working capital
deficiency was approximately $5,095,000. The Company will continue to incur
substantial operating losses for the foreseeable future. Such losses have been
and will be principally the result of the various costs associated with the
Company's research and development activities. The Company's products are
still in research and development, and the Company has not generated any
revenues from the sale of products to date. The Company is dependent upon the
net proceeds from the Offering to continue its business operations for the
next 18 months, and it will be required to seek additional financing in the
future to continue its research and development activities thereafter. The
Company will seek to obtain additional funds through public or private equity
or debt financings, collaborative or other arrangements with corporate
partners or from other sources. The Company does not have any commitments or
arrangements to obtain such financing, and there can be no assurance that the
Company will not

<PAGE>

require additional financing prior to the end of such 18-month period or that
it can obtain such financing on satisfactory terms or at all. If such
financing is not available, the Company may be required to modify its business
development plans or reduce or cease certain or all of its operations. The
Company also intends to seek and enter into collaborative arrangements with
corporate partners to fund its research and development activities, but there
can be no assurance that the Company will be able to find any such corporate
partners or, if the Company finds any such partners, that it will be able to
form a collaborative relationship on favorable terms. A failure by the Company
to obtain additional financing or to enter into collaborative arrangements to
fund its research and development activities would have a material adverse
effect on the Company. See "--Dependence on License and Sponsored Research
Agreements," "Use of Proceeds" and "Business." The report of the Company's
independent accountants with respect to the Company's financial statements for
the fiscal year ended December 31, 1995 includes an explanatory paragraph
indicating that certain conditions raise substantial doubt as to the ability
of the Company to continue as a going concern; although the Company believes
that this explantory paragraph would have been omitted if the Offering had been
completed as of the date of such report. See Report of Ernst & Young LLP,
Independent Auditors.

Dependence on License and Sponsored Research Agreements. The Company is
dependent upon the license and sponsored research agreements that it has
entered into with academic or other institutions, in particular Baylor, UIC,
MD Anderson, the Massachusetts Institute of Technology ("MIT") and PARTEQ
Research and Development Innovations ("PARTEQ"), the technology transfer
entity of Queen's University of Ontario, Canada ("Queen's"). The Company is
dependent upon its license agreements as the basis of its proprietary
technology and on its sponsored research agreement with MD Anderson for the
clinical trial of MDRx1.

The license agreements that have been entered into by the Company typically
require the payment of license fees and royalties based on sales of licensed
products and processes with minimum annual royalties, the use of due diligence
in bringing products to market, the achievement of funding milestones and, in
some cases, the issuance of Common Stock to the licensor. The Company is also
obligated under the licenses to indemnify its licensors against certain
liabilities, including liabilities arising out of product liability claims. In
those cases where the technology licensed to the Company was developed, at least
in part, with federal funds, the license to the Company is subject to a
statutory nonexclusive, nontransferable, irrevocable, paid-up license retained
by the U.S. government for use by, or on behalf of, the U.S. government. The
sponsored research agreement between the Company and MD Anderson currently
requires periodic payments on a monthly basis. If the Company does not meet
its financial or other obligations under its license agreements or its
sponsored research agreement in a timely manner, the Company could lose the
rights to its proprietary technology or the right to have MD Anderson conduct
the clinical trial of MDRx1. From time to time in the past, the Company has
failed to make payments to MD Anderson on a timely basis, although the Company
is now current under its sponsored research agreement with MD Anderson and its
license agreements. The Company anticipates that the net proceeds from the
Offering will enable the Company to satisfy its financial obligations under
its license and sponsored research agreements, as well as other anticipated
operating expenses, for a period of 18 months after the consummation of the

<PAGE>

Offering. Upon the expiration of such 18-month period, substantial additional
financing will be necessary for, among other things, the Company to timely
honor its financial obligations under its license and sponsored research
agreements. There can be no assurance that the Company will continue to have
the funds necessary to satisfy its obligations under its license and sponsored
research agreements. See "-- History of Operating Losses; Need for Substantial
Additional Financing." If the rights of the Company under its license and
sponsored research agreements are terminated because it does not have the
funds to timely meet its financial obligations thereunder, or for any other
reason, such termination would have a material adverse effect on the Company.

Further development of the Company's proposed products depends upon the
Company's ability to maintain existing and establish new sponsored research
relationships with scientific and corporate collaborators. The Company's MDRx1
product is currently being clinically tested by its collaborators at MD
Anderson. The Company's other gene therapy product, RB94, is in preclinical
research and development, and the Company intends to continue to develop this
product in collaboration with a partner with expertise in gene delivery. The
Company's in-house research program is utilizing the GSX System to identify
genes and/or gene fragments that potentially could lead to the development of
additional gene therapy products and may seek to collaborate with other
companies in such research and development. The Company is not able to
exercise direct control over the conduct of its sponsored research. No assurance
can be given as to the success of any of the Company's sponsored research
programs or that the Company will be able to maintain or establish new sponsored
research relationships. The failure by the Company to establish and maintain
satisfactory sponsored research relationships would have a material adverse
effect on the Company. See "Business -- Product Research and Development" and
"-- Proprietary Rights."

Uncertainty Relating to Patents and Proprietary Technology. At the present
time, Ingenex does not own any patents, although it does have one pending U.S.
patent application. The Company relies on third-party licenses to obtain
rights in respect of certain patents and patent applications and other
proprietary rights owned by such third parties that are essential to the
research and development of its proposed processes and products. See "--
Dependence on License and Sponsored Research Agreements." The Company may, in
the future, seek to patent other technologies and seek rights from third
parties to other patents and patent applications. The success of the Company
will depend in part on the ability of the Company and its licensors to obtain
and maintain patent protection for any processes and products developed by the
Company and on the ability of the Company to preserve its trade secrets.
Patent positions in the field of biotechnology are generally highly uncertain
and involve complex legal and scientific questions. To date, no consistent
policy has been developed in the U.S. Patent and Trademark Office regarding
the breadth of claims allowed in biotechnology patents. In addition, since
patent applications in the U.S. are maintained in secrecy until patents are
issued and since publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, the Company cannot be certain
that it or its licensors were the first creators of the subject matter covered
by the Company's patent application or licensed patents and patent
applications, or that it or such licensors were the first to file patent
applications in respect of such subject matter. Accordingly, there can be no
assurance that

<PAGE>

patent applications owned by or licensed to the Company will
result in the issuance of patents, or that, if issued, such patents will be
valid or will afford the Company protection against competitors with similar
technologies. In addition, no assurance can be given that any issued patents
will provide competitive advantages for the processes and products of the
Company or will not be successfully challenged or circumvented by competitors.
Further, there can be no assurance that the patents of others will not be
infringed by the Company's processes and products or that others will not
independently develop processes and products similar to the Company's
processes and products. The Company also relies upon unpatented proprietary
technology. No assurance can be given that the Company can meaningfully
protect its rights with regard to such unpatented proprietary technology or
that competitors will not duplicate or independently develop substantially
equivalent technology. Each of the Company's employees and service providers,
and those of the Company's consultants and advisors who, to the Company's
knowledge, have access to the Company's proprietary information, have entered
into a proprietary information and inventions agreement with the Company.
There can be no assurance that the obligation to maintain the confidentiality
of such trade secrets or proprietary know-how set forth in such agreements
will not be breached by such employees, service providers, consultants and
advisors, or that the Company's trade secrets or proprietary know-how will not
otherwise become known or be independently developed by competitors. Any
failure (as described above or otherwise) by the Company to protect its rights
to any product or process it develops could have a material adverse effect on
the Company.

The Company believes that there may be a significant amount of litigation in
the industry involving patent and other intellectual property rights. If the
Company were to become involved in such litigation, regardless of the outcome, a
substantial portion of the Company's financial and human resources could be
diverted. The Company's processes and products may be found to infringe patents
which have been or will be granted to competitors or research institutions. The
possibility of infringement becomes a growing concern as the biotechnology
industry expands and more patents are issued. Should infringement occur, legal
action could be brought against the Company, damages could be sought and certain
of the Company's research, development and commercialization activities could be
enjoined. If such actions were successful, in addition to any potential
liability for damages, the Company could be required either to obtain a license
to continue using the affected process or manufacturing or selling the affected
product, or to cease using such process or manufacturing or selling such
product. There can be no assurance that the Company could obtain any license
required on terms acceptable to the Company, if at all. Alternatively, the
Company's licensed patents could be infringed. There can be no assurance that
the Company would prevail in (or have adequate resources to commence) any
litigation based on the infringement of such licensed patents. A failure by the
Company to obtain any such necessary licenses or to prevail in any such
litigation could have a material adverse effect on the Company.

The Company is aware of a United States patent issued to a third-party
(U.S. Patent 4,912,039) (the "Riordan patent") relating to multidrug
resistance. The Riordan patent describes the isolation of two DNA molecules
that code for fractional portions of the hamster protein associated with
multidrug resistance (the "hamster MDR-1 gene"), whereas a patent licensed by
the Company (U.S. Patent 5,206,352) (the "Roninson patent") describes "and
claims" the entire human MDR-1 gene, which is the DNA that codes for the entire
protein associated with multidrug resistance in human cells. Nonetheless, the
Riordan patent claims a DNA molecule coding for a protein, or a fragment of a
protein, that is associated with multidrug resistance in living cells,
including human cells. The Riordan patent has an earlier effective filing date
than the Roninson patent and there can be no assurance that the Riordan patent
will not be asserted against the Company. Thus, it may be necessary for the
Company to obtain a license under the Riordan patent to pursue
commercialization of its proposed gene therapy products utilizing the MDR-1
gene. There can be no assurance that such a license, if required, will be made
available to the Company, if at all, on terms acceptable to the Company.
Failure to obtain such a license, if required, could have a material adverse
effect on the
Company.

<PAGE>

not be necessary for the Company to obtain a license from a party to the
interference (or its licensee) to pursue commercialization of its proposed gene
therapy products utilizing ex vivo gene therapy. There can be no assurance
that such a license, if required, will be made available to the Company, if at
all, on terms acceptable to the Company. Failure to obtain such a license, if
required, could have a material adverse effect on the Company.

The Company has received notice that three companies, Chiron Corp, Sandoz
AG, and Introgene NV, are opposing the grant of a European patent
corresponding to the Roninson patent, which the Company has licensed from UIC,
with claims directed to the human MDR-1 gene and gene fragments. While the
Company, through its licensor, intends to vigorously respond to the
oppositions, no assurances can be given as to the scope of the claims, if any,
which the European Patent Office ultimately will find patentable.

The Company is aware of the existence of a prior art reference (European
Patent Application 0 259 031) which may affect the validity of certain claims
in an issued U.S. patent licensed by the Company from Baylor (U.S. Patent
5,496,731) (the "Baylor patent"). These claims relate to DNA molecules
encoding the RB94 protein. Other claims in the Baylor patent are directed to
expression vectors containing these DNA molecules. Although a patent is presumed
valid, there can be no guarantee that the Baylor patent, if challenged, will not
be found invalid. In any event, given that this prior art reference relates to
DNA molecules but not to methods of gene therapy, the existence of this
reference alone, would not, as a matter of U.S. law, be expected to affect the
patentability of claims directed to the use of the DNA molecules in gene
therapy of certain cancers, which claims presently are pending in a related
patent application licensed from Baylor.

Technological Uncertainty. Gene therapy is a new and rapidly evolving
field, and there is only limited preclinical and clinical data on the safety
and efficacy of gene therapy. Data relating to the Company's specific gene
therapy approaches is even more limited. There can be no assurance that
unacceptable side effects will not be discovered during preclinical and
clinical testing of the Company's potential products. Possible serious side
effects of gene therapy include viral infections and the initiation of cancers
in the patient. The Company's potential products are, or will be, delivered by
a viral vector to patients' cells and certain safety issues have been raised
by the use of viral vectors for gene therapy. For example, it is possible that
regeneration of an infectious virus may occur during the production or use of
such vectors. Thus, production and quality assurance processes must be
designed to reduce the possibility of infectious virus regeneration. In
addition, any gene therapy approach that involves the random insertion of
genetic material into the target cell's DNA could cause the activation of a
gene involved in the development or spread of cancer or other harmful cells or
the inactivation of a beneficial gene. Further, as with most other
biopharmaceutical products, there is also a possibility of toxicity associated
with a host immune response toward the vector. The possibility of such
response may be increased if there is a need to deliver the vector repeatedly.
There can be no assurance that the Company will be able to utilize viral
vector enabling technology in a form, and in a manner, that mitigates such
risks. In addition, the Company may begin development of in vivo (inside the
body) approaches to gene therapy that will target specific cells. There can be
no assurance that the desired specificity will be attained or that the

<PAGE>

Company's proposed products will not have serious side effects. If the
Company's potential products have serious side effects, it would have a
material adverse effect on the Company.

There are many reasons why potential products that appear promising at an
early stage of research or development do not result in commercialization.
There can be no assurance that the Company will be permitted to undertake
further clinical trials for any of its proposed products or that the results
of such testing will demonstrate safety or efficacy. Even if clinical trials
are successful, there is no assurance that the Company will obtain regulatory
approval for any indication, or that an approved product can be produced in
commercial quantities at reasonable costs or be commercialized at all. A
failure by the Company to obtain such regulatory approval or to commercialize
its proposed products would have a material adverse effect on the Company. See
"Business."

Government Regulation. Because gene therapy is a relatively new technology
and has not been extensively tested in humans, the regulatory requirements
governing gene therapy products are uncertain and may be subject to change by
various regulatory authorities in the U.S. and abroad. This uncertainty may
result in extensive delays in initiating clinical trials and in the regulatory
approval process. Regulatory requirements ultimately imposed could adversely
affect the Company's ability to clinically test or commercialize products.

The research, preclinical development and clinical trials conducted by the
Company, and the manufacturing and marketing of its gene therapy products, are
subject to regulation by the U.S. Food and Drug Administration (the "FDA") and
similar health authorities in foreign countries. FDA approval of the Company's
proposed products, as well as the manufacturing processes and facilities used
to produce such products, will be required before such products may be
marketed in the U.S. The process of obtaining approvals from the FDA is
costly, time consuming and often subject to unanticipated delays. There can be
no assurance that approvals of the Company's proposed products, processes or
facilities will be granted on a timely basis, or at all. Many academic
institutions and companies doing research in the gene therapy field are using
a variety of approaches and technologies. Any adverse results obtained by such
researchers in preclinical or clinical studies, even if not related to the
Company's potential products, could adversely affect the regulatory
environment for gene therapy products generally and possibly lead to delays in
the approval process for the Company's potential products. Any future failure
to obtain or delay in obtaining any such approvals will materially and
adversely affect the ability of the Company to commercialize its proposed
products. Moreover, even if such regulatory approvals are granted, such
approvals may include significant limitations on indicated uses for which any
such products could be marketed. Further, even if such regulatory approvals
are obtained, a marketed drug or biological compound and its manufacturer are
subject to continuous regulatory oversight, and later discovery of previously
unknown problems may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market. In addition, new
government regulations may be established that could delay or prevent
regulatory approvals of the Company's products, processes or facilities.
Failure of the Company to obtain and maintain regulatory approvals of its
products, processes or facilities would have a material adverse effect on the
Company.

<PAGE>

On October 25, 1993, the vaccines and related biological products advisory
committee to the Center for Biologics Evaluation and Research of the FDA met
to review issues related to gene therapy, including the use of retroviruses
and adenoviruses as viral vectors. The committee made certain recommendations
that may form a component of a revision of the FDA's 1991
"Points to Consider on Human Somatic Cell Therapy and Gene Therapy" document
related to gene therapies and somatic cell therapies, but the committee made
no formal recommendations limiting the use of viral vectors. There can be no
assurance, however, that new guidelines will not be instituted limiting the
use of viral vectors, or that the Company will be able to continue to comply
with existing or future regulations.

The Company's research and development activities involve the controlled
use of hazardous materials. The Company is subject to federal, state and local
laws and regulations governing the use, manufacture, storage, handling and
disposing 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 exceed
the financial resources of the Company. Although the Company believes that it
is currently in compliance in all material respects with applicable
environmental laws and regulations, there can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations in the future, or that the Company will not be materially
adversely affected by current or future environmental laws or regulations.

The Company's proposed products, processes and facilities may also be
subject to certain other federal, state and local government (as well as
foreign) regulations, including, but not limited to, the Public Health Service
Act, the Occupational Safety and Health Act and state, local and foreign
counterparts to certain of such acts. The Company cannot predict the extent of
the adverse effect on its business or the financial and other costs that might
result from any such existing or future government regulations. See "Business
- -- Government Regulation."

Competition. Competition in the biopharmaceutical industry from
pharmaceutical companies, biotechnology companies, universities and others is
intense and is expected to increase. Many of the Company's competitors and
potential competitors have significantly greater research and development
capabilities, experience in obtaining regulatory approvals, manufacturing and
marketing expertise and technological, financial and managerial resources than
the Company. Acquisitions of, or investments in, competing biotechnology
companies by large pharmaceutical companies could enhance such competitors'
financial and other resources. The Company also competes with universities and
other research institutions in the development of technologies, processes and
products. There can be no assurance that competitors of the Company will not
succeed in developing technologies, processes or products that are more
effective than those of the Company or that will render the Company's
technologies, processes or proposed products obsolete. In addition, certain of
such competitors may achieve patent protection or product commercialization
earlier than the Company. See "-- Uncertainty Relating to Patents and
Proprietary Technology."

<PAGE>

The Company is aware of a number of competitors that have commenced, or
that are likely to commence shortly, clinical trials of the effects of the
transfer of the MDR-1 gene into progenitor or stem cells. The Company believes
that the focus of such trials and potential trials generally is the same as
the clinical trial commenced by the Company's collaborators at MD Anderson in
December 1994 (with respect to ovarian cancer) and January 1995 (with respect
to breast cancer), in each case with respect to the MDR-1 gene and its effects
on the suppression of multidrug resistance. There can be no assurance that
competitors of the Company will not complete their clinical trials and obtain
additional approvals required for later phases of development prior to the
Company, or that the results of the Company's clinical trial will result in
the issuance of such additional approvals for the Company's MDRx1 gene therapy
product. The failure of the Company to compete successfully in the research,
development and commercialization of its products and processes would have a
material adverse effect on the Company. See "Business -- Competition."

Dependence on Key Employees. The Company is highly dependent on its
scientific staff, the loss of one or more of whom could substantially impair
the Company's ability to achieve its goals as planned. Because of the
specialized nature of the Company's business, the Company's ability to
maintain its competitive position will depend, in large part, upon its ability
to attract and retain qualified scientific personnel. Competition for such
personnel is intense. There can be no assurance that the Company will be able
to hire sufficient qualified personnel on a timely basis or retain such
personnel given the competition among numerous pharmaceutical, health care
companies, universities and nonprofit research institutions for experienced
scientists. The Company's future success also depends on its continuing
ability to attract and retain highly qualified managerial and other personnel,
especially since the Company's anticipated growth is expected to place
increased demands on its resources, which will require the addition of new
personnel. Competition for such personnel also is intense. The Company is
currently seeking to hire a Vice President-Finance. The Company has an
employment agreement with Dr. Mark E. Furth, its President and Chief Executive
Officer; however, such agreement is terminable by either party without cause
at any time and it does not assure the services of Dr. Furth. The Company does
not currently maintain any "key person" insurance for any of its personnel.
There can be no assurance that the Company can retain its key scientific,
managerial and other employees or that it will be able to attract, assimilate
or retain other highly qualified scientific, managerial and other personnel in
the future. The failure to attract, assimilate or retain such persons could
have a material adverse effect on the Company. See "Business -- Employees" and
"Management."

Dependence on Third Parties for Manufacturing and Marketing. To date, the
Company has not completed the development of or commercialized any products.
To be commercialized, the Company's proposed products under development must
be manufactured in compliance with regulatory requirements at acceptable costs
and successfully marketed. The Company does not have any manufacturing or
marketing experience nor does the Company anticipate having the resources in
the foreseeable future to allocate to the commercial manufacture or marketing
of its proposed products and, therefore, the Company intends to pursue
collaborative arrangements with corporations with respect to the manufacture
and marketing of such products in the future. The future success of the
Company may depend, in part, on its ability to maintain relationships with
such corporate collaborators and their success in manufacturing and

<PAGE>

marketing any such products. To the extent that the Company determines not to,
or is unable to, enter into collaborative arrangements with respect to the
manufacture and marketing of its proposed products, significant capital
expenditures, management resources and time will be required for the Company
to establish a manufacturing facility and develop a sales and marketing force.
The Company has no experience in manufacturing or marketing. There can be no
assurance that the Company will be able to enter into collaborative
arrangements with respect to the manufacture and marketing of its proposed
products, or, in lieu thereof, to establish a manufacturing facility or
develop a sales and marketing force, or be successful in gaining market
acceptance of its proposed products. The failure by the Company to enter into
collaborative arrangements to manufacture and market its proposed products or
to develop its own manufacturing and marketing capabilities would have a
material adverse effect on the Company. See "Business -- Manufacturing and
Marketing."

Risk of Product Liability. In the event that the Company successfully
develops any products, the Company may face the risk of product liability
claims alleging that such products produce adverse effects. The Company does
not presently carry product liability insurance and product liability
insurance for the biopharmaceutical industry, if available, generally is
expensive. The Company expects to obtain product liability insurance prior to
the commercial distribution or sale of any of its proposed products and, in
most cases, is required to obtain such insurance prior to the commencement of
production, sale or transfer of any products covered by its license
agreements. There can be no assurance that the Company will avoid significant
product liability claims and the attendant adverse publicity, or be able to
obtain and retain product liability insurance at an acceptable cost, or, if
obtained, that such insurance will be adequate to cover any or all litigation
expenses and damage claims. The failure by the Company to avoid significant
product liability claims or obtain and maintain adequate product liability
insurance could have a material adverse effect on the Company.

Uncertainty of Health Care Reimbursement. In both domestic and foreign
markets, sales of the Company's potential products will depend in part upon
the availability and amount of reimbursement from third-party health care
payor organizations, including government agencies, private health care
insurers and other health care payors. Third-party payors are attempting to
control rising health care costs by limiting coverage of products and
treatments and the level of reimbursement for products and services. There is
considerable pressure to reduce the cost of drug products, and reimbursement
may become more restricted in the future. The Company expects that the costs
associated with its proposed products will be substantial. There can be no
assurance that the Company's products, if successfully developed, will be
considered cost-effective by third-party payors, or that reimbursement will be
available, or, if available, that reimbursement will be at levels sufficient
to allow the Company to sell such products on a profitable basis.

Guarantees of Obligations of Others. In February 1994, the Company, along
with Geneic Sciences, Inc., Theracell, Inc. and Ansan, Inc., subsidiaries of
Titan (collectively, the "Sublessees"), entered into a sublease agreement (the
"Sublease") with Titan whereby the Sublessees agreed to sublease from Titan
certain equipment that Titan leases pursuant to a Master Equipment Lease (the
"Master Lease"). Geneic Sciences, Inc. ceased operations in September 1995.
Under the terms of the Master Lease, Titan is obligated to make monthly

<PAGE>

payments currently totaling approximately $31,000 per month. As of March 31,
1996, the amount outstanding under the Master Lease was approximately
$920,000. The Sublessees have jointly and severally guaranteed all amounts
payable by Titan and all other obligations of Titan under the Master Lease.
Each of Titan and each Sublessee has experienced significant operating losses
to date and is expected to continue to do so for the foreseeable future. The
failure by Titan or any Sublessee to fulfill its obligations with respect to
the Master Lease would have a material adverse effect on the Company. See
"Business -- Relationship to Titan Pharmaceuticals, Inc."

Control by Existing Stockholder; Relationship to Titan. Following the
Offering, assuming that Titan purchases approximately 222,222 of the shares of
Common Stock offered hereby, Titan will own approximately 54% of the
outstanding Common Stock (51% if the Underwriters' over-allotment option is
exercised in full). In addition, the Company and Titan have entered into a
shareholders agreement in which the Company and Titan have agreed that (i) a
majority of the Board of Directors of the Company shall consist of members who
are unaffiliated with Titan, its executive officers, directors or any of their
respective affiliates (collectively, "Titan Affiliates"); (ii) all future
transactions between Titan Affiliates and the Company must be approved by a
majority of the disinterested members of the Board of Directors of the
Company; (iii) Titan shall be granted a right of first refusal to maintain a
majority equity interest in the outstanding Common Stock; (iv) no additional
assets shall be added to the Master Lease; (v) prior to the consummation
of the Offering, the Certificate of Incorporation of the Company will be
amended to provide, among other things, that the Company shall not merge or
consolidate with, or sell, assign, lease or otherwise dispose of all or
substantially all of its assets to Titan or any Titan Affiliate without the
affirmative vote of stockholders holding at least two-thirds of the issued and
outstanding shares of Common Stock and (vi) the Board of Directors of the
Company shall maintain a Nominating Committee of three directors, one of whom
shall be designated by Titan. In addition, in consideration of a payment to the
Company of $100,000, the Company has issued to Titan the Titan Option pursuant
to the shareholders agreement. Finally, pursuant to the shareholders agreement,
the Company has granted Titan an option, exercisable for a period of 60 days
from the date upon which Titan's ownership interest in the outstanding Common
Stock falls below a majority, to purchase such number of shares of Common Stock
as necessary for Titan to maintain its majority ownership interest at an
exercise price per share equal to the then-current fair market value of the
Common Stock. Louis R. Bucalo, M.D., the Chairman of the Board of Directors of
Ingenex, is the President, Chief Executive Officer and a director of Titan; a
member of the Board of Directors of Theracell, Inc. ("Theracell"), a subsidiary
of Titan; and the Chairman of the Board of Directors of each of Ansan, Inc.
("Ansan"), ProNeura, Inc. ("ProNeura") and Ascalon, Inc. ("Ascalon"), each a
subsidiary of Titan. John K.A. Prendergast, Ph.D., another director of the
Company, is a Managing Director of The Castle Group Ltd., a principal
stockholder of Titan. While Ingenex does not believe that such companies
currently have any interests in conflict with those of the Company, there can be
no assurance that such companies will not in the future have such conflicting
interests. The Company and Titan also have entered into a Corporate Services
Agreement, wherein Titan has agreed to provide certain services to the Company
for a fee of $10,000 per month. See "Business -- Relationship to Titan
Pharmaceuticals, Inc.," "Certain Transactions" and "Principal Stockholders."

No Prior Public Market; Possible Volatility of Stock Price; Arbitrary
Determination of Offering Price of the Common Stock. Prior to the Offering,
there has been no public market for the Common Stock. Although the Company has
applied to list the Common Stock offered hereby for quotation and trading on
The Nasdaq National Market, there can be no assurance that an active trading
market will develop or be sustained after the Offering. The absence of an
active trading market would reduce the liquidity of an investment in the
Common Stock. The initial public offering price of the Common Stock will be
determined by the Company and the

<PAGE>

Representative, based in part on market factors, and may not necessarily be
related to the Company's assets, book value, results of operations or other
established and quantifiable criteria of value and should not be regarded as
any indication of the future market price of the Common Stock. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The trading price of the Common Stock could
be subject to wide fluctuations in response to quarterly variations in
operating results, announcements of technological innovations or new products
by the Company or its competitors and other events or factors. In addition,
the stock market has experienced volatility that has particularly affected the
market prices of equity securities of many biotechnology companies and that
often has been unrelated to the operating performance of such companies. These
broad market fluctuations may adversely affect the market price of the Common
Stock.

Shares Eligible for Future Sale; Registration Rights. Sales of
substantial amounts of Common Stock in the public market, or the perception
that such sales may occur, could adversely affect the prevailing market price
of the Common Stock and the ability of the Company to raise capital through a
public offering of its equity securities. Of the 4,844,391 shares of Common
Stock to be outstanding upon consummation of the Offering, the 1,850,000
shares of Common Stock offered hereby (2,127,500 shares if the Underwriters'
over-allotment option is exercised in full) will be immediately freely
tradeable without restriction (except as to affiliates of the Company,
including Titan) or further registration under the Securities Act of 1933, as
amended (the "Securities Act"). Any shares of Common Stock purchased in the
Offering by Titan or any other affiliate of the Company will be subject to
certain of the resale limitations of Rule 144 under the Securities Act ("Rule
144"). The remaining 2,994,391 shares of Common Stock will be "restricted"
securities within the meaning of Rule 144 and may only be sold if registered
under the Securities Act or pursuant to an exemption from such registration
requirement, including the exemption provided by Rule 144. Holders of shares
of Common Stock, including each director, officer, member of the Company's
Scientific Advisory Board and principal stockholder of the Company (including
Titan), have agreed that they will not offer to sell, contract to
sell, sell, distribute, grant any option to purchase, pledge, hypothecate or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into, or exercisable or exchangeable for, shares of
Common Stock for a period of 360 days after the date of this Prospectus
without the prior written consent of the Representative. Taking into account the
restrictions of Rule 144 and the lock-up agreements of the restricted
shares will become eligible for sale in the public market beginning 90 days
after the date of this Prospectus and will become eligible for sale in
the public market beginning 360 days after the date of this Prospectus.
Additional shares of Common Stock, including shares issuable upon the exercise
of options and warrants, will also become available for sale in the public
market from time to time in the future.

Certain of the holders of Common Stock and warrants to purchase shares of
the Common Stock, including the Representative's Warrants, have demand and
piggy-back registration rights. If such holders, by exercising their
registration rights, cause a large number of shares of Common Stock to be
registered and sold in the public market, such sales could have an adverse
effect on the market price of the Common Stock. In addition, the exercise of
such registration rights could involve substantial expense to the Company.
Holders

<PAGE>

of the warrants to purchase an aggregate of shares of Common Stock and
shares of Common Stock have agreed not to exercise their registration rights
prior to the expiration of one year from the date of this Prospectus. See
"Shares Eligible for Future Sale" and "Underwriting."

Anti-takeover Effects of Restated Certificate of Incorporation, Bylaws
and Delaware Law. Upon the consummation of the Offering, the Board of
Directors of the Company will have the authority to issue up to 4,000,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the Company's stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and for other corporate purposes,
could have the effect of making it more difficult for a third party to acquire
a majority of the outstanding voting stock of the Company. The Company has no
present plans to issue shares of preferred stock. Further, certain provisions
of the Company's Restated Certificate of Incorporation and Bylaws and of
Delaware law could delay or make more difficult a merger, tender offer or
proxy contest involving the Company. See "Description of Capital Stock --
Preferred Stock" and "-- Anti-takeover Effects of Provisions of the Restated
Certificate of Incorporation, Bylaws and Delaware Law."

Dilution. The Offering will result in immediate dilution of $6.30 or
70.0% in the pro forma net tangible book value per share to new investors,
assuming an initial public offering price of $9.00 per share and after
deducting underwriting discounts and commissions and estimated offering
expenses. To the extent that currently outstanding or subsequently granted
options or warrants to purchase shares of Common Stock are exercised, there
will be further dilution. See "Dilution."

Broad Discretion In Application of Proceeds. Substantially all of the
estimated net proceeds from the Offering have been allocated to fund the
Company's research and development activities and for working capital and
other general corporate purposes. Accordingly, the Company will have broad
discretion as to the application of the net proceeds from the Offering. See
"Use of Proceeds."

No Dividends. The Company has not paid any cash dividends on the Common
Stock since its inception and does not anticipate paying such dividends in the
future. The Company anticipates that all earnings and other resources of the
Company, if any, will be retained by the Company for investment in its
business. See "Dividend Policy."

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,850,000 shares of
Common Stock offered by the Company hereby are estimated to be $14,388,500
($16,661,225 if the Underwriters' over-allotment option is exercised in full),
at an assumed initial public offering price of $9.00 per share and after
deducting underwriting discounts and commissions and estimated offering
expenses.

The Company intends to use approximately $1,500,000 of the net proceeds to
repay all of its outstanding indebtedness under a License Agreement and
License Assignment, dated January 31, 1995, as amended (the "ACM Agreement"),
between the Company and Aberlyn Capital Management Limited Partnership
("ACM"). Pursuant to the ACM Agreement, the Company assigned its rights under
four licenses (the "Assigned Licenses") to ACM in exchange for the payment of
$2,000,000 from ACM to the Company. The Company's products that are being
developed using technology covered by the Assigned Licenses include MDRx1 and
the GSX System. Under the ACM Agreement, the rights under the Assigned
Licenses are sublicensed-back to Ingenex by ACM in consideration for the
Company making six monthly payments of $25,000 beginning in February 1995 and
42 monthly payments of $60,060 thereafter (collectively, the "License
Payments"). As of March 31, 1996, the unpaid balance of the License Payments
aggregated approximately $1,627,000.

The remainder of the net proceeds are expected to be used to fund the
Company's research and development activities, including clinical trials of
the MDRx1 gene therapy product, preclinical studies of the RB94 gene therapy
product and further development of the GSX System, and for working capital and
other general corporate purposes, including the opening of an additional
research and development facility in North Carolina.

Over the next 18 months, the Company intends to engage in both clinical
trials and research and development activities. The Company estimates (based
on its current operating budget) that approximately $7,800,000 will be
expended over the next 18 months in the clinical trial relating to MDRx1 and
further research and development of RB94 and of the GSX System. There can be
no assurance, however, that such budgeted amounts will not be adjusted in the
future. Further, the Company expects to pay approximately $180,000 under its
service agreement with Titan over the next 18 months and approximately
$1,000,000 under the Sublease over the next 18 months. In addition, the
Company anticipates paying approximately $500,000 in the aggregate over the
next 18 months for the opening of an additional research and development
facility in North Carolina. The Company will use the balance of the net
proceeds for working capital and other general corporate purposes. See
"Business--Product Research and Development, "-- Proprietary Rights" and "--
Relationship to Titan Pharmaceuticals, Inc."

The cost, timing and amount of funds required for specific uses by the
Company cannot be determined precisely at this time and will be based on the
rate of the Company's progress in research and development, the results of
preclinical studies and clinical trials, the timing of regulatory approvals,
payments due under existing and any future license, sponsored research or
other collaborative agreements, competitive developments and the availability
of alternate methods of

<PAGE>

financing. Pending such uses, the net proceeds from the Offering will be
invested in short-term, investment grade, interest-bearing securities.

Future events, including the problems, delays, expenses and complications
frequently encountered by development stage companies, as well as changes in
economic, regulatory or competitive conditions, or changes in the Company's
planned business and the success or lack thereof, or changes in the Company's
research and development activities, may require reallocation of funds or may
require the delay, abandonment or reduction of the Company's research and
development efforts. There can be no assurance that the Company's estimates
will prove accurate, that research and development efforts will not require
considerable additional expenditures or that unforeseen expenses will not be
incurred.

DIVIDEND POLICY

The Company has not paid any cash dividends on the Common Stock since its
inception. The Company does not expect to pay cash dividends on the Common
Stock in the future. The payment of dividends, if any, in the future is within
the discretion of the Company's Board of Directors and will depend on the
Company's earnings, capital requirements and financial condition.

<PAGE>

CAPITALIZATION

The following table sets forth (i) the capitalization of the Company as of
March 31, 1996; (ii) the capitalization of the Company as of such date on a
pro forma basis to reflect the Titan Debt Conversion and the Preferred Stock
Conversion; and (iii) the pro forma capitalization of the Company as of such
date as adjusted to reflect the sale of the 1,850,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $9.00 per share
(after deducting underwriting discounts and commissions and estimated offering
expenses) and the initial application of the proceeds therefrom as set forth
in "Use of Proceeds." See "Use of Proceeds." This table should be read in
conjunction with the Financial Statements and the Notes thereto included
elsewhere in this Prospectus.

March 31, 1996
------------------------------------------------
Pro Forma
As
Actual Pro Forma Adjusted(1)
------------------------------------------------
<S> <C> <C> <C>
Payable to parent ................................................ $4,183 $ -- $ ---
Technology financing(2) .......................................... 1,627 1,627 ---
------- ------- ------------
Stockholder's equity (capital deficiency)(2):
Preferred Stock: $.001 par value, 7,465,866 shares
authorized (4,000,000 shares authorized pro forma); 1,291,234 shares
issued and outstanding actual; no shares issued and outstanding
pro forma and pro forma as adjusted ......................... 6,565 --- ---
Common Stock: $.001 par value, 25,000,000 shares
authorized; 721,038 shares issued and outstanding
actual; 2,772,829 shares issued and outstanding pro
forma and 4,622,829 shares issued and outstanding
pro forma as adjusted ....................................... 154 10,902 25,291
Additional capital ...................................... 600 600 600
Accumulated deficit ..................................... (13,432) (13,432) (13,432)
------- ------- ------------
Total stockholders' equity (net capital (6,113) (1,930) 12,459
------- ------- ------------
deficiency).............................................
Total capitalization (net deficiency) ............ $ (303) $ (303) $ 12,459
======= ======= ============
</TABLE>

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

(1) Excludes (i) 221,261 shares of Common Stock issued in June 1996 upon
conversion by Titan of $1,216,934 additional intercompany indebtedness
arising after March 31, 1996, (ii) 449,830 shares of Common Stock
issuable upon the exercise of outstanding stock options, at a weighted
average exercise price of $2.59 per share, (iii) 300,000 shares of
Common Stock issuable upon the exercise of outstanding warrants, at an
exercise price of $2.50 per share, (iv) 185,000 shares of Common Stock
issuable upon the exercise of the Representative's Warrants and (v)
approximately 333,333 shares of Common Stock

<PAGE>

issuable upon the exercise of the Titan Option. See "Management -- 1994
Stock Option Plan," "Certain Transactions" and "Underwriting."

(2) See Note 4 of Notes to Financial Statements.

<PAGE>

DILUTION

Dilution represents the difference between the initial public
offering price paid by the purchasers in the Offering and the net tangible
book value per share immediately after consummation of the Offering. Net
tangible book value per share represents the amount of the Company's total
assets minus the amount of its intangible assets and liabilities, divided by
the number of shares of Common Stock outstanding (assuming conversion of
preferred stock). At March 31, 1996, the Company had a negative net tangible
book value of $(6,113,105) or $(3.04) per share and a negative pro forma net
tangible book value of $(1,930,039) or $(0.70) per share. The pro forma
adjustment to the historical net book value gives effect to the Titan Debt
Conversion. After giving retroactive effect to the sale of 1,850,000 shares of
Common Stock offered hereby at an assumed initial public offering price of $9.00
per share (after deducting underwriting discounts and commissions and estimated
offering expenses) and the initial application of the proceeds therefrom as set
forth in "Use of Proceeds," the net tangible book value of the Company, as
adjusted, at March 31, 1996 would have been $12,459,000 or $2.70 per share,
resulting in an immediate dilution to the public investors of $6.30 per share
(or 70%). The following table illustrates this per share dilution:

<S> <C> <C>
Assumed public offering price per share........................................ $9.00
Pro forma negative net tangible book value per share
as of March 31, 1996.................................................. $(0.70)
Increase per share attributable to new investors.......................... 3.40
------
Pro forma net tangible book value per share after the Offering................. 2.70
-----
Dilution per share to new investors(1)......................................... $6.30
====
</TABLE>

- --------
(1) If the over-allotment option is exercised in full, the net tangible
book value after the Offering would be approximately $3.01 per share,
resulting in dilution to new investors in the Offering of $5.99 per
share (or 66.6%).

The following table summarizes, on a pro forma basis, the differences
between existing stockholders and new investors with respect to the number of
shares of Common Stock purchased from the Company, the total consideration
paid to the Company (before deducting costs of issuance) and the average price
per share paid by existing stockholders and by new investors at an assumed
initial public offering price of $9.00 per share (before deducting
underwriting discounts and commissions and estimated offering expenses):

Shares Purchased Total Consideration Paid Average Price Per
---------------------- ---------------------------- Share
Number Percent Amount Percent -----
-------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 2,772,829 60.0% $11,211,000 40.2% $4.04
</TABLE>

<PAGE>

<S> <C> <C> <C> <C> <C>
New investors................. 1,850,000 40.0% $16,650,000 59.8% $9.00
--------- ------- ----------- -------
Total ........................ 4,622,829 100.0% $27,861,000 100.0%
=========== ======= =========== =======
</TABLE>

The foregoing does not give effect to exercise of any outstanding
options or warrants and excludes (i) 221,261 shares of Common Stock issued in
June 1996 upon conversion by Titan of $1,216,934 additional intercompany
indebtedness arising after March 31, 1996, (ii) 449,830 shares of Common Stock
issuable upon the exercise of outstanding stock options, at a weighted average
exercise price of $2.59 per share, (iii) 300,000 shares of Common Stock
issuable upon the exercise of outstanding warrants, at an exercise price of
$2.50 per share, (iv) 185,000 shares of Common Stock issuable upon exercise of
the Representative's Warrants and (v) approximately 333,333 shares of Common
Stock issuable upon the exercise of the Titan Option. See "Management -- 1994
Stock Option Plan," "Certain Transactions" and "Underwriting."

<PAGE>

SELECTED FINANCIAL DATA
(In thousands, except share and per share data)

The following selected financial data should be read in conjunction
with the Financial Statements and Notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations included
elsewhere in this Prospectus. The statement of operations data for the fiscal
years ended December 31, 1994 and 1995 and the balance sheet data as at
December 31, 1995 are derived from, and are qualified by reference to, the
financial statements of the Company which have been audited by Ernst & Young
LLP, Independent Auditors, included elsewhere in this Prospectus. The
statements of operations data for the three-month periods ended March 31, 1995
and 1996 and for the period from the Company's inception through March 31,
1996 and the balance sheet data as at March 31, 1996 have been derived from
unaudited financial statements of the Company and, in the opinion of the
Company's management, include all normal, recurring adjustments necessary for
a fair presentation of the financial position and results of operations for
those periods. Operating results for the three months ended March 31, 1996 are
not necessarily indicative of the results which may be expected for the entire
year ending December 31, 1996.

Three Months Period from
Year Ended Ended Commencement of
December 31, March 31, Operations
------------------ ------------------ (July 25, 1991) to
1994 1995 1995 1996 March 31, 1996
---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue.................................................... $ -- $ 140 $ -- $46 $186

Cost and expenses:
Research and development.............................. 3,988 2,501 772 513 8,764
Research and development--stockholders................ 369 321 67 0 1,438
General and administrative............................. 550 1,204 208 215 2,076
------ ----- --- --- -----
Total costs and expenses............................... 4,907 4,026 1,047 728 12,278
----- ----- ----- --- ------

Loss from operations....................................... (4,907) (3,886) (1,047) (681) (12,092)

Interest income (expense), net............................. 23 (1,109) (41) (223) (1,340)
----- ----- ----- --- ------

Net loss................................................... $(4,884) $(4,995) $(1,088) $(904) $(13,432)
======= ======= ======= ===== ========

Pro forma net loss per share (1)........................... --- $(1.72) --- $(0.29)

Shares used in per share
computations(1).......................................... --- 2,904,670 --- 2,946,821
</TABLE>

<PAGE>

December 31, 1995 March 31, 1996
----------------- --------------
Actual Pro Forma(2)
------ ------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............... $ 38 $ --- $ ---
Working capital (deficiency)............ (4,091) (5,095) (912)
Total assets............................ 209 190 190
Payable to parent....................... 1,313 4,183 ---
Technology financing.................... 1,783 1,627 1,627
Deficit accumulated during the
development stage .................. (12,528) (13,432) (13,432)

Total stockholders' equity (net
capital deficiency)................. (5,209) (6,113) (1,930)
</TABLE>

- ---------------
(1) Gives effect to additional common equivalent shares resulting from the
assumed conversion of (i) indebtedness of the Company to Titan
and (ii) Preferred Stock. See Note 1 of Notes to Financial
Statements for additional information regarding the calculation
of pro forma net loss per share.

(2) Gives pro forma effect to the Titan Debt Conversion and the Preferred
Stock Conversion

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company is a development stage company. Since its inception
in July 1991, the Company's efforts have been principally devoted to research
and development and raising capital to fund these activities. To date, the
Company has not generated any revenues from the sale of products nor does it
expect to generate any revenues from the sale of products for the foreseeable
future, if at all. The Company has experienced significant operating losses
since its inception. As of March 31, 1996, the Company had incurred cumulative
net operating losses of approximately $13,432,000. Such losses have been
principally the result of the various costs associated with the Company's
research and development activities. The Company expects to continue to incur
substantial research and development costs in the future due to ongoing
research and development programs, patent and regulatory related expenses and
preclinical and clinical testing of the Company's products. The Company also
expects that general and administrative costs (including legal and other
professional fees) related to financing activities necessary to support its
research and development activities will increase in the future. Accordingly,
the Company expects to incur increasing operating losses for the foreseeable
future. There can be no assurance that the Company will ever achieve
profitable operations.

The Company estimates that the proceeds from the sale of the
Common Stock offered hereby will be sufficient to fund its operations for 18
months, depending on the amount of research and development actually conducted
by the Company during such period. The Company will require additional funds
to support its continued research and development activities, preclinical
studies and clinical trials and to obtain regulatory approvals for and to
commercialize its proposed products. The Company will seek to obtain
additional funds through public or private equity or debt financings,
collaborative or other arrangements with corporate partners or from other
sources. There can be no assurance that such additional financing can be
obtained on desirable terms, if at all. See "Risk Factors -- History of
Operating Losses; Need for Substantial Additional Financing."

Results of Operations

Three months ended March 31, 1996 compared to three months ended March
31, 1995

Revenue. The Company's revenue consists of revenue from
government grants that support the Company's research efforts in specific
research projects. These grants generally provide for reimbursement of
approved costs incurred as defined in the various grants. The Company
recognizes revenue when paid. For the three months ended March 31, 1996, the
Company recognized revenue of approximately $46,000 relating to its Phase I
Small Business Innovation Research ("SBIR") grant from the National Institutes
of Health ("NIH") associated with its MDRx1 program. The Company did not
recognize any revenue for the three months ended March 31, 1995.

<PAGE>

Research and Development Expenses. During the three months
ended March 31, 1996 and March 31, 1995, the Company expended approximately
$513,000 and $839,000, respectively, on its research and development
activities. Approximately $935,000 and $153,000 of these expenses,
respectively, was paid to Titan. See "Certain Transactions." The decrease was
primarily due to reduced scientific payroll and personnel expenses in
connection with the implementation of cost reductions as a result of financing
constraints and a decrease in lab lease payments related to the termination in
March 1995 of the lease of a certain research facility.

General and Administrative Expenses. General and administrative
expenses for the three months ended March 31, 1996 and March 31, 1995 were
approximately $214,000 and $208,000, respectively. Such expenses primarily
reflect legal, accounting and other professional expenses principally related
to the Company's financing activities and non-scientific personnel expenses.

Interest Expense. Interest expense for the three months ended
March 31, 1996 and March 31, 1995 was approximately $223,000 and $55,000,
respectively. The increase primarily represents interest payable on certain
bridge notes issued in May 1995, interest payable on certain indebtedness of
the Company to Titan in connection with its repayment in January and February
1996 of such bridge notes and interest payable under the ACM Agreement.

Fiscal year ended December 31, 1995 compared to fiscal year ended
December 31, 1994

Revenue. For the fiscal year ended December 31, 1995, the
Company recognized revenue of approximately $140,000 relating to its Phase I
SBIR grants from the NIH associated with its MDRx1 program and GSX System. The
Company did not recognize any revenue for the fiscal year ended December 31,
1994.

Research and Development Expenses. During the fiscal years ended
December 31, 1995 and December 31, 1994, the Company expended approximately
$2,821,000 and $4,357,000, respectively, on its research and development
activities. Approximately $471,000 and $515,000 of these expenses,
respectively, was paid to Titan. See "Certain Transactions." The decrease was
primarily due to reduced expenditures related to the Company's sponsored
research agreement with MD Anderson in accordance with the terms of such
agreement and decreases in lab supplies expenses and lab lease payments
related to the termination in March 1995 of the lease of a certain research
facility.

General and Administrative Expenses. General and administrative
expenses for the fiscal years ended December 31, 1995 and December 31, 1994
were approximately $1,204,000 and $550,000, respectively. Such expenses
primarily reflect legal, accounting and other professional expenses
principally related to the Company's financing activities and non-scientific
personnel expenses. The increase primarily relates to expenses incurred as a
result of a bridge financing in May 1995 and the initial public offering
contemplated in 1995. See "Certain Transactions."

<PAGE>

Interest Expense. Interest expense for the fiscal year ended
December 31, 1995 was approximately $1,150,000. The Company did not incur any
interest expense for fiscal year ended December 31, 1994. Such expense
primarily represents amortization of the debt discount relating to certain
bridge warrants issued in May 1995, amortization of deferred financing costs
and interest payable under the ACM Agreement.

Liquidity and Capital Resources

The Company has financed its operations since inception
principally through advances from and investments by Titan and private
placements of its securities, which placements resulted in net proceeds of
approximately $3,199,000 to date; the assignment and license-back transaction
entered into by the Company in January 1995 with ACM; and SBIR grants from the
NIH, which have aggregated approximately $186,000 to date. The proceeds of the
private placements, the ACM Agreement and the SBIR grants have been used to fund
approximately $12,012,000 of the Company's operating expenses to date, including
approximately $3,183,000 in payments associated with its license, sponsored
research and consulting agreements.

Under the ACM Agreement, the Company assigned its rights under
four licenses to ACM in exchange for ACM's payment to the Company of
$2,000,000. Under the ACM Agreement, the Company is obligated to make 48
monthly license payments (which commenced in February 1995), the first six of
which are in the amount of $25,000 each and the last 42 of which are in the
amount of $60,060 each. As of March 31, 1996, the outstanding balance of the
Company's payment obligations (including interest) under such agreement was
$1,627,000. The Company intends to use approximately $1,500,000 of the net
proceeds from the Offering to repay all of its outstanding indebtedness under
the ACM Agreement. See "Use of Proceeds."

The Company has also financed the lease of certain equipment
pursuant to the Sublease. In February 1994, the Company, together with the
other Sublessees, entered into the Sublease with Titan whereby the Sublessees
agreed to sublease from Titan certain equipment that it leases pursuant to the
Master Lease. Under the terms of the Master Lease, Titan is obligated to make
monthly payments currently totaling approximately $31,000 per month. As of
March 31, 1996, the amount outstanding under the Master Lease was
approximately $920,000. The Sublessees have jointly and severally guaranteed
all amounts payable by Titan and all other obligations of Titan under the
Master Lease. Each of Titan and each Sublessee has experienced significant
operating losses to date and is expected to continue to do so for the
foreseeable future. The failure by Titan or any Sublessee to fulfill its
obligations in respect of the Master Lease would have a material adverse
effect on the Company. See "Risk Factors--Guarantees of Obligations of Others"
and "Business--Relationship to Titan Pharmaceuticals, Inc."

At March 31, 1996, the Company had no cash and cash equivalents,
and a working capital deficit of approximately $5,095,000.

The Company is party to several license and sponsored research
agreements. See "Business--Product Research and Development" and
"--Proprietary Rights." The Company

<PAGE>

may terminate its rights under such license agreements at any time upon prior
notice to the relevant licensors. In the event that Ingenex elects to continue
to license the technology covered by all such existing licenses, the fixed
annual license fees payable by it would be $89,000 in fiscal 1996, $126,500 in
fiscal 1997, $148,500 in fiscal 1998, $163,500 in fiscal 1999, $188,500 in
fiscal 2000 and $231,000 per fiscal year thereafter. The actual fixed annual
license fees paid by Ingenex may vary if Ingenex terminates any of its current
license agreements and/or enters into new license agreements. In addition to
such annual license fees, Ingenex is obligated to pay approximately $240,000
(in the aggregate) under its extended sponsored research agreement with MD
Anderson related to the clinical trials of MDRx1.

The Company expects its cash requirements to increase
significantly in future periods. The Company will require substantial funds to
conduct its research and development programs, preclinical studies and
clinical trials of its potential pharmaceutical products (including MDRx1 and
RB94), and the commercialization of pharmaceutical products that are
developed, if any. The Company's capital requirements will depend on numerous
factors, including the progress of its research and development programs, the
scope and results of preclinical studies and clinical trials, the time and
costs involved in obtaining regulatory approvals, the costs of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, changes in
the Company's existing research relationships, the ability of the Company to
establish and maintain collaborative arrangements and the development of
commercialization activities and arrangements.

The report of the independent auditors on the Company's
financial statements as of December 31, 1995 contains an explanatory paragraph
regarding an uncertainty with respect to the ability of the Company to
continue as a going concern. The Company expects that the net proceeds from
the Offering will be sufficient to fund its planned operations for the next 18
months. Over the next 18 months, the Company intends to engage in both
clinical trials and research and development activities. The Company estimates
(based on its current operating budget) that approximately $7,800,000 will be
expended over the next 18 months in the clinical trial relating to MDRx1 and
further research and development of RB94 and of the GSX System. There can be
no assurance, however, that such budgeted amounts will not be adjusted in the
future. Further, the Company expects to pay approximately $180,000 under its
service agreement with Titan over the next 18 months and approximately
$1,000,000 under the Sublease over the next 18 months. In addition, the
Company is committed to pay approximately $500,000 in the aggregate over the
next 18 months for the opening of an additional research and development
facility in North Carolina. The Company will use the balance of the net
proceeds for working capital and other general corporate purposes. See "Use of
Proceeds," "Business--Product Research and Development, "--Proprietary Rights"
and "-- Relationship to Titan Pharmaceuticals, Inc."

The Company will be required to seek additional financing in the
future to continue its research and development activities. The Company will
seek to obtain additional funds through public or private equity or debt
financings, collaborative or other arrangements with corporate partners or
from other sources. The Company does not have any commitments or arrangements
to obtain such financing, and there can be no assurance that the Company will
not require such additional financing prior to the end of the next 18 months,
or that it can

<PAGE>

obtain such financing on satisfactory terms or at all. In the event that the
Company fails to raise any funds it requires, it may be necessary for the
Company to significantly curtail its activities or cease operations. See "Risk
Factors -- History of Operating Losses; Need for Substantial Additional
Financing" and "Use of Proceeds."

In February 1992, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," which requires an asset and liability approach
for financial accounting and reporting for income taxes. There was no effect
of adoption since the Company has incurred losses since its inception.

At December 31, 1995, the Company had net operating loss
carryforwards of approximately $11,600,000 and research and development tax
credit carryforwards of approximately $300,000 for federal income tax purposes
available to offset future taxable income. Such carryforwards expire at
various dates between fiscal 2007 and 2010. The Tax Reform Act of 1986 (the
"Tax Act") contains certain provisions that may limit the Company's ability to
utilize net operating loss and tax credit carryforwards in any given year if
certain events occur, including cumulative changes in ownership interests in
excess of 50% over a three-year period. Assuming Titan purchases 222,222
shares of Common Stock in the Offering, consummation of the Offering will not
result in such change in ownership.

In October 1995, the FASB also issued SFAS No. 123, "Accounting
for Stock-Based Compensation," which established financial accounting and
reporting standards for stock-based employee compensation plans. Companies are
encouraged, rather than required, to adopt a new method that accounts for
stock compensation awards based on their fair value using an option pricing
model. Companies that do not adopt this new standard will have to make pro
forma disclosures of net income as if the fair value-based method of
accounting required by this standard had been applied. The accounting
requirements of this standard, if adopted by the Company, are effective for
fiscal 1997. The pro forma disclosures are required for fiscal 1996. The
Company expects to adopt the pro forma disclosure requirements.

<PAGE>

BUSINESS

Ingenex is a biopharmaceutical company engaged in the
development of proprietary gene-based therapies and the application of
functional genetics to pharmaceutical discovery. The Company's initial
commercial strategy is to develop gene therapy products for the oncology
market. The Company currently is sponsoring a Phase 1/2 clinical trial of
MDRx1, a gene therapy product aimed at limiting the destruction by cytotoxic
drugs of normal blood- forming cells in the bone marrow of cancer patients
undergoing chemotherapy. The Company believes that MDRx1 will permit the
administration of increased doses of cytotoxic drugs to cancer patients,
resulting in the increased efficacy of chemotherapy. Ingenex also is
developing a gene therapy product based on RB94, a modified form of RB, a
tumor suppressor gene. This product is intended to cause the regression of
localized, malignant cancers. In addition, the Company is building a new,
proprietary genomics technology, the GSX System, which identifies genes based
on their function and is designed to pinpoint key steps in a disease pathway
for therapeutic intervention. Ingenex believes that the GSX System may be used
to develop treatments for a wide range of diseases through the discovery of
both gene therapy products and small molecule drugs.

Gene Discovery and Gene Therapy

Gene Discovery: Genomics and Functional Genetics

The activities of all living cells are controlled by the genetic
programs encoded within their DNA. DNA is organized into segments called
genes, with each gene containing the information required to express, or
produce, a specific protein. The DNA code contained in a gene is copied to
first produce an intermediate, called "messenger RNA," which serves as a
template to direct the correct assembly of the appropriate protein. Proteins
are the fundamental components of living cells and are essential to their
structure, growth, metabolism and specialized function. In higher organisms,
which contain a variety of types of cells (such as nerve, muscle, blood and
epithelial), many proteins are produced only in particular sets of cells.

Abnormalities in genes and their expression contribute to many
diseases. Some diseases, such as cystic fibrosis, can be attributed to
specific genetic abnormalities, or mutations, in one out of the approximately
100,000 human genes. Such gene mutations may cause the production of aberrant
proteins or the complete absence of particular proteins. Other diseases, such
as cancer, cardiovascular disease, diabetes and Alzheimer's Disease, appear to
involve mutations or variations in multiple genes. Cancer, in particular,
displays a very strong genetic influence. Some individuals inherit mutations
that predispose them to develop various cancers, such as those of the breast,
colon or kidney. In addition, mutations can occur in growing cells of the body
that cause the transformation of normal cells into cancer cells and that
promote the progressive growth and spread of malignant tumors. There is also a
strong genetic influence in the progression of viral diseases. Viruses
introduce their own genes into host cells in order to reproduce. Mutations in
such viral genes may allow the virus to overcome both host defense mechanisms
and anti-viral drugs.

<PAGE>

Numerous scientists in the public and private sectors are
currently working to identify and patent genes and gene sequences involved in
disease processes. In particular, some companies and academic laboratories are
using high-throughput automated DNA sequencing and computerized database
techniques in an attempt to sequence all expressed human genes and to
catalogue the types of cells in which particular genes are expressed. Other
companies and academic laboratories are concentrating primarily on the use of
genetic mapping and "positional cloning" strategies to find genetic mutations
or variants associated with increased susceptibility to various diseases.
Collectively, such studies of gene organization, structure and disease
association are referred to as "genomics." Despite the recent dramatic
advances in human genomics, the knowledge of a gene's DNA sequence alone does
not identify its biological role. Furthermore, the identification of a gene
that appears to be associated with a disease process usually does not suggest
a way to treat that disease.

A gene is a discrete DNA sequence with a specific biological
function. A short piece or fragment of a gene may also exert a specific
biological effect. Gene fragments may act via any of several mechanisms to
suppress or inhibit a biological process. Some produce "antisense" RNA
molecules that interfere with the proper expression of the corresponding
full-length gene. Others appear to produce short RNA molecules or fragments of
proteins that interfere or compete with the action of intact proteins.
Functional genetics focuses on the identification of genetic elements
displaying properties thought to be predictive of a beneficial therapeutic
outcome. The isolation of functional genetic elements capable of affecting a
disease process does not depend on having prior knowledge of the genetic basis
of that disease.

Gene Therapy

Gene therapy involves the insertion of genetic material into
cells in an attempt to produce a medically beneficial outcome. In some cases,
the goal of gene therapy is to produce a specific protein needed to correct or
modulate a disease condition. For instance, if a disease results from a
mutation that inactivates a particular human gene, then the goal of gene
therapy would be to insert a normal copy of that gene into those cells in
which the corresponding protein is required. Such gene replacement may not be
effective for the treatment of infectious diseases or for many other major
human diseases that generally do not arise from mutations in a single gene.
However, a gene or gene fragment capable of introducing a new functional
capacity to a cell or actively blocking a key step in a disease process may
provide the basis for effective gene therapy.

Gene therapy products require both a therapeutic genetic element
and a delivery system, or "vector," to transfer that element into, and allow
it to be expressed by, the correct target cells. The process of gene transfer
can be accomplished ex vivo, in which cells are removed from the body,
genetically modified and then restored to the patient, or in vivo, in which
the vector carrying the therapeutic gene is injected directly into the
patient's circulation or into a specific organ or tumor. A number of gene
therapy vectors have been derived from viruses, including retroviruses,
adenoviruses, adeno-associated viruses and herpes viruses, among others, and
nonviral delivery systems also are under development. To ensure safety, viral
vectors generally are crippled to prevent replication in the patient's body,
while still allowing the efficient transfer of therapeutic genes. See "Risk
Factors--Technological Uncertainty."

<PAGE>

Technological and Commercial Strategy

Ingenex's functional genetics strategy is designed not only to
discover novel therapeutic genetic elements, but also to enable the discovery
of small molecule drugs. The Company focuses on the identification of genes
and gene fragments that are capable of altering the genetic program of a cell
or organism so as to effect a desired change in its properties or behavior.
Ingenex's patented GSX System utilizes functional selection to identify gene
fragments that may confer medically useful properties to cells, such as
resistance to viruses, or increased sensitivity to therapeutic drugs. In some
instances, the application of such discoveries may be as gene therapy
products. However, in other cases it may prove more effective to employ the
information obtained from the GSX approach to screen for chemical inhibitors
that mimic the effect of a selected gene fragment on a disease process. In
such a drug discovery strategy, the principal value of the genetic information
is to define and validate biochemical targets and assays prior to the
inception of expensive and time-consuming searches for chemical leads.

Ingenex intends to develop certain gene therapy products,
primarily for the oncology market. Because of the substantial financial
requirements to support larger scale clinical testing, the Company anticipates
that it will seek alliances with larger corporations for later stage
development programs. In its development of gene therapy products, Ingenex
concentrates on the identification of therapeutic genetic elements. The
Company believes that various vectors have advantages and disadvantages for
particular applications, and that it will be beneficial to choose a delivery
system well-matched to each therapeutic genetic element and anticipated use.
Ingenex therefore intends to access multiple delivery systems by seeking
collaborative relationships and/or licensing agreements with institutions or
companies developing such systems. With respect to small molecule discovery
programs, the Company intends to enter into collaborative relationships with
biopharmaceutical companies engaged in drug discovery, in order to access
their medicinal chemistry resources.

Product Research and Development

Ingenex currently has one gene therapy product for cancer,
MDRx1, in clinical development and a second, RB94, in preclinical development.
The Company also is utilizing its GSX System in an in-house research program
to attempt to identify genetic suppressors of HIV replication that potentially
could lead to the development of a gene therapy product for the treatment of
Acquired Immunodeficiency Syndrome ("AIDS"). The following table summarizes
the potential target indications and status of the Company's current research
and development programs. Due to the early stage of the research and
development of the Company's potential products and the new and evolving
nature of gene therapy technology generally, the Company cannot predict with
any certainty when it will be able to commercialize any of its potential
products, if at all. Moreover, the Company's research and development
activities are dependent upon the Company maintaining existing, and
establishing new, collaborative arrangements, and there can be no assurance
that the Company will be able to maintain or enter into such collaborative
arrangements or that any such collaborative arrangements will lead to the
development of a successful product. There can also be no assurance that, even
if a product is developed, required regulatory approvals

<PAGE>

will be obtained, such product will be safe and effective or such product will
be commercialized. See "Risk Factors," including "--Early Stage of
Development," "--Dependence on License and Sponsored Research Agreements," "--
Technological Uncertainty" and "--Government Regulation."

<S> <C> <C>
Program Development Status Initial Indication
MDRx1 Phase 1/2 Clinical Testing(1) Protection against toxicity of
Gene Therapy chemotherapeutic drugs in
patients with ovarian and
breast cancer
RB94 Preclinical Development(2) Treatment of prostate cancer
Tumor Suppressor

GSX System Research(3) Treatment of viral infections
(HIV)
</TABLE>

- -----------------
(1) Initial clinical testing of MDRx1 at MD Anderson commenced in December
1994 (in connection with the treatment of ovarian cancer) and January
1995 (in connection with the treatment of breast cancer). The purpose
of such testing is to determine whether cells modified by MDRx1 can be
safely reintroduced and maintained in cancer patients as they undergo
multiple cycles of chemotherapy at increasing doses. The Company
expects such trial to be completed in late 1996 or early 1997.

(2) Preclinical development includes pharmacological testing in animals,
toxicology testing, formulation work and manufacturing scale-up.

(3) Research includes research related to identification of drugs and/or
therapeutic genetic elements.

MDRx 1

Chemotherapy has been one of the oncologists' primary weapons in
combating cancer. There is, however, wide variation in tumor susceptibility to
chemotherapy. Some cancers, such as childhood acute lymphocytic leukemia,
choriocarcinoma, Hodgkin's disease and diffuse large cell lymphoma, are
relatively sensitive to cytotoxic drugs. Other cancers, such as melanoma,
renal cancer and pancreatic cancer, appear much more resistant to
chemotherapy. However, many of the most common cancers, such as bladder,
breast, colon, lung and ovarian cancer, display moderate sensitivity to
chemotherapy and would potentially respond more completely to higher doses of
cytotoxic drugs, if such higher doses could be tolerated by the patient.

<PAGE>

The major impediment to administering higher, potentially more
efficacious doses of available cytotoxic drugs is that, in addition to
destroying cancer cells, such drugs also damage certain healthy cells in the
body. The drugs used in cancer therapy often are particularly toxic to those
normal cells that proliferate most actively, especially progenitor or stem
cells of white blood cells, red blood cells and platelets. As a result,
significant side effects of cancer chemotherapy include infection, bleeding
and anemia.

Another significant problem that limits the effectiveness of current
chemotherapy is the simultaneous resistance of certain tumor cells to several
structurally unrelated classes of cytotoxic drugs, such as doxorubicin,
etoposide (VP-16), Taxol and vinca alkaloids, while other tumors develop
similarly broad resistance during the course of treatment. The phenomenon of
cross resistance to multiple classes of drugs is known as "multidrug
resistance."

The gene responsible for the multidrug resistance of many human
cancer cells, MDR-1, has been identified largely through the work of Dr. Igor
Roninson, a consultant to the Company and an original member of its Scientific
Advisory Board, and his collaborators. See "--Scientific Advisory Board." A
characteristic feature of multidrug resistance is the decreased intracellular
accumulation of cytotoxic drugs due to the pumping of these drugs back across
the cell membrane. This active extrusion of drugs out of potentially
susceptible cells is mediated by a transport protein, P- glycoprotein, which
is produced by the MDR-1 gene. The resistance of many cancer cells to
chemotherapeutic drugs appears to result from overproduction of
P-glycoprotein.

The identification and molecular cloning of the human MDR-1 gene
suggests a potential gene therapy to facilitate more effective chemotherapy.
Normal cells that are especially susceptible to destruction by
chemotherapeutic drugs appear to express low or undetectable levels of P-
glycoprotein. Ingenex believes that if normal bone marrow progenitor or stem
cells could be genetically modified so as to produce significantly elevated
levels of P-glycoprotein, then such cells, and the mature blood cells they
produce, would become less susceptible to destruction by cytotoxic drugs.
This, in turn, might allow more aggressive chemotherapy and improved treatment
outcomes for certain cancers. MDRx1 is based on the insertion and expression
of MDR-1 into progenitor or stem cells, purified from bone marrow or blood, in
order to produce P-glycoprotein. The introduction of MDR-1 into bone marrow
cells is intended to make them less sensitive to destruction by cytotoxic
drugs, thereby potentially enabling more aggressive chemotherapy. There can be
no assurance, however, that MDRx1 will allow such protection, that other
dose-limiting toxicities of the chemotherapeutic drugs will not occur or that
the MDR-1 gene will not be inadvertently delivered to tumor cells, thereby
enhancing the resistance of such cells to the relevant chemotherapeutic drug.

As the graph below illustrates, a preclinical study in mice performed
by Ingenex's academic collaborators at MD Anderson demonstrated that the
treatment of bone marrow cells with MDRx1 led to a significant increase in the
resistance of white blood cell production to treatment with the cytotoxic
drug, Taxol.

Insertion of Ingenex's MDRx1 into Bone Marrow Stem Cells Protects
Against Destruction of White Blood Cells in Mice Treated with Taxol

<PAGE>

[GRAPH]

Mice were given transplants of bone marrow cells genetically modified
with the human MDR-1 gene. These mice were treated with taxol, and
white blood cell counts were measured. After recovery, bone marrow
cells were transplanted into a new mouse, and Taxol treatment was
repeated. This process was repeated for up to six cycles. Increased
resistance to destruction of white blood cells by Taxol was observed
after each treatment cycle, indicating that MDRx1- modified stem
cells retained the ability to repopulate the bone marrow.

Based on these preclinical studies, the United States Recombinant DNA
Advisory Committee (the "RAC") and the Food and Drug Administration (the
"FDA") approved the commencement of a clinical trial of MDRx1 in patients with
ovarian and breast cancer. This Phase 1/2 clinical trial began in December
1994 (with respect to ovarian cancer) and January 1995 (with respect to breast
cancer). The Company's scientific collaborators at MD Anderson have introduced
MDR-1 via a retrovirus vector into blood progenitor or stem cells removed from
20 patients with ovarian or breast cancer who have then undergone bone marrow
transplantation with their own modified cells in order to assess whether cells
genetically modified for multidrug resistance can be safely reintroduced and
maintained in cancer patients as they undergo multiple cycles of chemotherapy
with Taxol. The results of such clinical trial may suggest whether the
modified cells will improve patients' ability to tolerate chemotherapy. The
Company expects such trial to be completed in late 1996 or early 1997.

The Phase 1/2 clinical trial of MDRx1 at MD Anderson is funded by the
Company pursuant to a sponsored research program with MD Anderson. Dr. Albert
Deisseroth, an original member of the Company's Scientific Advisory Board, is
the principal investigator of the trial. See "--Scientific Advisory Board."
Pursuant to the Company's sponsored research agreement with MD Anderson, the
initial term of which was set to expire in March 1996, the Company has paid MD
Anderson approximately $1,240,000 for costs and expenses of the program. The
Company and MD Anderson have agreed to extend the sponsored research agreement
from March 1996 through December 1996 in return for the Company's payment of
$240,000 in ten equal monthly installments beginning in March 1996. If Ingenex
fails to make such payments in accordance with the terms of the sponsored
research agreement or fails to comply with certain other terms and conditions,
MD Anderson may terminate the agreement. Through its sponsored research
agreement with MD Anderson, Ingenex has an option to exclusively license any
patentable technology that may be developed by MD Anderson under the program
and certain other rights to license other inventions of MD Anderson. The
sponsored research agreement with MD Anderson will expire in December 1996
unless extended by the Company, in its sole discretion, to March 1998. See
"Risk Factors -- Dependence on License and Sponsored Research Agreements."

RB94

Normal cell division is tightly controlled by the interaction of
growth promoting signals counterbalanced by growth constraining signals.
Cancer is thought to result from the accumulation in growing cells of
mutations that disrupt this genetic system of checks and

<PAGE>

balances, so that cells can proliferate in an uncontrolled manner. Altered
genes that actively drive the growth of cancer cells are called oncogenes.
Genes that help to maintain normal regulation of cellular proliferation are
called tumor suppressors. The development of many types of cancers appears to
result from both the activation of oncogenes and the inactivation of tumor
suppressor genes. The mutation or loss of specific tumor suppressor genes has
been linked to the progression of several common human cancers. For example,
inactivation of the RB tumor suppressor gene has been observed in a
significant fraction of a diverse group of common solid tumors. Mutations
affecting other tumor suppressor genes, such as p53, also appear in many human
cancers.

It is widely believed that a potential gene therapy for the treatment
of cancer would be to restore to malignant cells a normal, functional copy of
a specific tumor suppressor gene that had been inactivated during the
progression of a particular tumor. Studies in cell cultures and in animal
models have provided encouraging support for this approach. Various scientists
have demonstrated that the transfer of a normal tumor suppressor gene (e.g.,
RB or p53) to certain cancer cell lines in which that gene had been
inactivated results in growth inhibition and tumor suppression.

Growth arrest by tumor suppressor genes is often transient or
incomplete. This phenomenon, termed "tumor suppressor gene resistance,"
represents a significant challenge to cancer treatment based on the
restoration of tumor suppressor genes. As shown in the figures below, the
Company's scientific collaborators at MD Anderson, formerly affiliated with
Baylor, have reported that cancer cells treated with RB94, a truncated form of
the RB tumor suppressor gene, appear much less susceptible to tumor suppressor
gene resistance than cells treated with the naturally-occurring, full- length
RB gene. Furthermore, these scientists have reported that RB94 appears to
block the growth of other human tumors that retain the naturally-occurring,
full-length RB gene.

Effectiveness of Ingenex's RB94 in Causing Regression of an
RB-Negative Human Tumor

[GRAPH]

Human cancer cells lacking a functional RB gene were grown in mice,
and the tumors were injected with the RB gene or the RB94 gene, each
using the same delivery vector. "Control" refers to tumors injected
with no tumor suppressor gene.

Ingenex's RB94 Causes Regression of an RB-Positive Human Tumor

[GRAPH]

<PAGE>

Human cancer cells containing a functional RB gene were injected with
the RB94 gene. "Control" refers to tumors injected with no tumor
suppressor gene.

There can be no assurance that the positive results of these studies
would correlate to similar results in human subjects.

Ingenex has exclusively licensed patent rights relating to RB94 from
Baylor and is developing a product that incorporates RB94 into a suitable
delivery system, such as one based on a human adenovirus, for the treatment of
localized tumors. Ingenex believes that an important medical use of RB94 gene
therapy may be as a supplemental or alternative procedure to surgery in the
treatment of certain regionalized tumors such as those of the prostate gland and
bladder. The Company intends to focus its research and development efforts on
methods to introduce effective doses of RB94 into such tumors. Ingenex intends
to continue to develop RB94 in collaboration with a partner with expertise in
gene delivery and anticipates filing an IND in late 1997 for the use of RB94
to treat prostate cancer. However, there can be no assurance that an IND will
be filed within the anticipated time period, or at all.

The GSX System

The Company's proprietary platform technology in functional
genetics, the GSX System, identifies genes based on their functional roles in
a biological or disease process through the isolation of short gene fragments
that confer a medically desirable cellular property, such as increased
resistance of cells to a virus. Ingenex believes that the GSX System, because
it selects genetic elements by virtue of their specific functions, represents
an important advance over methods that identify gene sequences or
disease-associated genes having no known cellular function.

Gene fragments selected by the GSX System may be utilized to develop
new gene therapy products. In addition, Ingenex believes that the GSX System
can facilitate the discovery of small molecule drugs. One of the key steps in
many drug discovery programs is the choice of a biochemical target, usually a
specific protein such as an enzyme or a receptor, that a drug may inhibit or
activate to cause a pharmacological effect. However, target selection is an
uncertain trial and error process, often based on best guesses and unproven
assumptions about how to intervene to slow or halt a disease process. Because
the GSX System selects, from a random collection of fragments, only those gene
fragments that effect desired changes in cellular properties, the Company
believes that it provides a tool for the unbiased selection of valid drug
targets. The Company believes that a fragment of a given gene acting to block a
disease process can facilitate the discovery of small molecule drugs that are
capable of achieving the same outcome and are directed against the protein
encoded by that gene.

The Company has initially focused its efforts to develop and validate
the GSX System on the discovery and characterization of protective gene
fragments capable of interfering with the replication of HIV. The Company has
employed functional selection to identify specific, potentially therapeutic
genetic suppressor elements ("GSEs") from libraries of random fragments of the
HIV genome. The Company believes that such GSEs could potentially be
incorporated into a gene therapy product to protect cells of the immune system
in patients

<PAGE>

with AIDS. A key goal of future research will be to identify the
most potent gene fragments, derived from the HIV genome and/or human genes,
capable of blocking either the activation of HIV in latently infected cells or
the replication of HIV in previously uninfected cells. The Company believes
that a particular benefit of the GSX System is that GSEs of short length can
be identified so that it may be possible to combine several therapeutic
genetic elements in a single product without exceeding the capacity of
available delivery systems. As illustrated in the graph below, several gene
fragments, each derived from a different HIV gene, limit HIV infection in
human cells. The three examples shown in this illustration were representative
of a larger set and were not necessarily chosen to be the most effective. The
Company believes that a combination in a single product of multiple GSEs
directed at different target genes of HIV in a single product potentially
could increase efficacy and reduce the chances of acquired viral resistance by
mutation.

Ingenex's Anti-HIV GSEs Limit HIV Infection of Human Cells in Culture

[GRAPH]

Three different anti-HIV GSEs derived from HIV (IGX-009, IGX-004 and
IGX-230) were inserted into uninfected human cells in culture. The
cells were then exposed to a virulent strain of HIV, and the
percentage remaining free of active virus was measured over time.
"Control" refers to a cell culture lacking a protective GSE.

The Company has recently been awarded by the NIH a two year Phase II
SBIR grant in the amount of approximately $716,000 to fund its development of
a gene therapy product for AIDS. The Company intends to collaborate with
scientists at the Duke University School of Medicine, Durham, N.C., including
Dr. Eli Gilboa, a member of the Company's Scientific Board, in connection with
such development and a portion of the grant was designated for such
collaboration. See "--Scientific Advisory Board."

Ingenex believes that the GSX System may have other important medical
applications, including the identification of novel antiviral targets useful
in drug discovery. The Company has carried out preliminary experiments to
demonstrate the feasibility of selecting gene fragments protective against the
Hepatitis B Virus. In addition, studies utilizing the GSX technology to
identify genetic elements and drug targets of potential value for the
treatment of cancer already have been reported by Ingenex's academic
collaborators at UIC, and the Company has licensed certain of their
inventions. In an in-house research project supported by a Phase I SBIR
grant from the NIH, the Company has selected GSEs that appear to reverse
multidrug resistance in human cells.

The Company anticipates that it will continue to apply the GSX System
to attempt to identify novel targets for the treatment of cancer and other
diseases, both in-house and in collaboration with academic institutions and
other companies. It is likely that other disease targets also will be chosen,
as appropriate libraries, selection strategies and academic and

<PAGE>

corporate collaborations are developed. However, there can be no assurance
that the discoveries, if any, made with the GSX System will result in the
successful development of gene therapies or drugs.

Scientific Advisory Board

The Company has a Scientific Advisory Board ("SAB") comprised of
individuals with extensive experience in the Company's fields of interest. The
SAB members meet as a board with management and key scientific employees of
the Company on a semi-annual basis and in smaller groups or individually on an
informal basis from time to time. The members of the SAB are not compensated
for attending meetings (except that each of Drs. J. Levy, R. Levy, D. Nathan
and A. Varshavsky receives $2,000 for each SAB meeting attended) , are not
employees of the Company and are not obligated to devote any specified amount
of time to the affairs of the Company. See "Management--Consulting
Agreements." The Company anticipates that the SAB members will assist the
Company in identifying scientific and product development opportunities, in
reviewing and evaluating with management the progress of research programs and
in recruiting and evaluating scientists and other employees. Certain members
of the SAB have been granted options to purchase shares of Common Stock. See
"Management--1994 Stock Option Plan."

The SAB presently consists of the following members:

Richard L. Davidson, Ph.D., is the Benjamin Goldberg Professor and
the Head of the Department of Genetics at UIC. Dr. Davidson is an original
member of the SAB. Dr. Davidson's laboratory at UIC is currently investigating
molecular mechanisms of gene regulation and mutagenesis in mammalian cells.
Dr. Davidson's research involves a combination of the techniques of somatic
cell genetics with those of molecular biology. Dr. Davidson was the recipient
of the University of Illinois College of Medicine Faculty of the Year Award in
1991. He has been the Editor-in-Chief of the journal entitled Somatic Cell and
Molecular Genetics since 1983. Dr. Davidson is also the editor of the book
entitled Somatic Cell Hybridization and has been an Associate Editor of the
journal entitled Cancer Research since 1991. He was the Editor-in-Chief of the
journal entitled Somatic Cell Genetics from 1974 to 1983. Dr. Davidson
received both his B.A. in Chemistry and his Ph.D. in Biology from Case Western
Reserve University.

Albert Deisseroth, M.D., Ph.D., is the Ensign Professor of Medicine
and Chief of the Medical Oncology Section in the Department of Medicine at the
Yale University School of Medicine. He is also the Associate Director for
Clinical Research at the Yale Cancer Center. Before joining Yale in September
1995, Dr. Deisseroth was the Anderson Professor of Cancer Treatment and
Research and Chairman of the Department of Hematology at MD Anderson. Dr.
Deisseroth is an original member of the SAB. He has published over 300
scientific papers and has written extensively in the area of bone marrow and
peripheral blood transplantation and in the area of leukemias, lymphomas and
solid tumors. Dr. Deisseroth received his B.A. in Chemistry, his Ph.D. in
Biochemistry and his M.D. from the University of Rochester.

<PAGE>

Eli Gilboa, Ph.D., is a Professor in the Departments of Surgery
and Immunology at the Duke University Medical Center. Dr. Gilboa's work is
currently focused in the area of gene therapy applications to HIV and cancer.
Dr. Gilboa is the author of numerous scientific publications. He received the
CapCURE Foundation Research Award for Gene Therapy for Prostate Cancer in 1993
and the NIH M.E.R.I.T. Award in 1992. Dr. Gilboa received his B.S. in
Biochemistry from the Hebrew University in Israel and his Ph.D. in Molecular
Biology from the Weizmann Institute, Israel.

Andrei Gudkov, Ph.D., is an Assistant Professor in the Department
of Genetics at UIC. Dr. Gudkov is the former Head of the Laboratory of
Molecular Genetics at the Cancer Research Center in Moscow. He has published
over 60 scientific articles and reviews. Dr. Gudkov received his M.S. in
Virology from Moscow State University, his Ph.D. in Experimental Oncology from
the Cancer Research Center in Moscow and his D.Sci. in Molecular Biology from
Moscow State University.

Jay A. Levy, M.D., is a Professor of Medicine at the Cancer Research
Institute at the University of California School of Medicine in San Francisco.
He is an original member of the SAB. Dr. Levy has received numerous awards and
honors as a distinguished lecturer, most recently as the Henry T. Finch Jr.
Lecturer at the Regional HIV AIDS Consortium in Charlotte, North Carolina in
1995. He received the Award of Distinction from the American Foundation for
AIDS Research in 1994. Dr. Levy is the editor of a textbook on AIDS and has
served on the editorial boards of numerous scientific journals. Dr. Levy
received his B.A. from Wesleyan University and his M.D. from Columbia
University.

Ronald Levy, M.D., is a Professor of Medicine and the Chief of the
Division of Oncology at the Stanford University School of Medicine. Dr. Levy
is an original member of the SAB. Dr. Levy has published over 200 scientific
papers. He received his A.B. in Biochemistry from Harvard University and his
M.D. from Stanford University School of Medicine.

David G. Nathan, M.D., is a Professor of Pediatrics and holds the
Richard and Susan Smith Professor of Medicine Chair at Harvard Medical School.
Dr. Nathan is an original member of the SAB. He has been the President of the
Dana-Farber Cancer Institute since 1995 and served as the Physician-in-Chief
at Children's Hospital in Boston from 1984 to 1995. Dr. Nathan was awarded the
National Medal of Science in 1990. He is the author of over 250 scientific
papers and has served on the editorial board of many medical journals,
including the Journal of Clinical Investigation, Blood and the New England
Journal of Medicine. He has been the hematology editor for Cecil's Textbook of
Medicine, and is the primary editor of a textbook entitled Hematology of
Infancy and Childhood, now in its fourth edition. Dr. Nathan received his B.A.
in English Literature from Harvard College and his M.D. from Harvard Medical
School.

Igor B. Roninson, Ph.D., is the Chairman of the SAB and an original
member of the SAB. He is a Professor in the Department of Genetics and the
Head of the Division of Molecular Oncology at UIC. Dr. Roninson is currently
researching the molecular biology of cancer. Dr. Roninson is one of the
scientists credited with the discovery of the multidrug resistance gene, MDR-1,
and the inventor of the subject matter covered by certain patents

<PAGE>

licensed to the Company by UIC. He is the author of over 80 articles and book
chapters and the editor of a book on multidrug resistance in cancer. Dr.
Roninson was the 1994 recipient of the C.P. Rhoads Award from the American
Association for Cancer Research. He received his Ph.D. in Biochemistry from
MIT.

Alexander J. Varshavsky, Ph.D., is the Howard and Gwen Laurie Smits
Professor of Cell Biology at the California Institute of Technology. Dr.
Varshavsky has published over 120 scientific papers on topics such as gene
expression and chromosome structure, DNA replication, drug resistance and gene
amplification. Dr. Varshavsky received his B.S. in Chemistry from Moscow
University and his Ph.D. in Biochemistry from the Institute of Molecular
Biology in Moscow.

Members of the SAB may be employed by, or have consulting agreements
with, entities other than the Company, some of which may conflict or compete
with the Company, or which may limit a particular member's availability to the
Company. Certain of the institutions with which the SAB members are affiliated
may have regulations or policies with respect to the ability of such personnel
to act as part-time consultants or in other capacities for a commercial
enterprise. Regulations or policies now in effect or adopted in the future
might limit the ability of the SAB members to consult with the Company. The
loss of the services of certain of the SAB members could adversely affect the
Company.

Inventions or processes discovered by any SAB member, unless
otherwise agreed, will not become the property of the Company but will remain
the property of such person or of such person's full-time employers. However,
each current SAB member has entered into a consulting agreement with the
Company that provides that any inventions discovered by the consultant while
performing services for the Company will be the sole property of the Company.
See "Management--Consulting Agreements." The institutions with which the SAB
members are affiliated may make available the research services of their
scientific and other skilled personnel, including the SAB members, to entities
other than the Company. In rendering such services, such institutions may be
obligated to assign or license to a competitor of the Company patents and
other proprietary information which may result from such services, including
research performed by an advisor or consultant for a competitor of the
Company.

Proprietary Rights

Ingenex does not own any patents; however, it currently has pending
one U.S. patent application filed in December 1995 relating to certain GSEs
associated with HIV. Currently, the Company relies on third-party licenses to
obtain rights to certain patents and other proprietary rights owned by such
third parties that are essential to the development of its proposed products.
The license agreements that have been entered into by the Company typically
require the payment of license fees and royalties based on sales of licensed
products and

<PAGE>

processes with minimum annual royalties, the use of due diligence in bringing
products to market, the achievement of funding milestones and, in some cases,
the issuance of Common Stock to the licensor. The Company intends to enter
into collaborative arrangements with respect to the manufacturing and
marketing of its proposed products. See "--Manufacturing and Marketing." The
Company is also obligated under the licenses to indemnify its licensors
against certain liabilities, including liabilities arising out of product
liability claims. In those cases where the technology licensed to the Company
was developed, at least in part, with federal funds, the license to the Company
is subject to a statutory nonexclusive, nontransferable, irrevocable, paid-up
license retained by the U.S. government for use by, or on behalf of, the U.S.
government. A summary of the Company's material licenses is set forth below. The
Company's failure to comply with the terms of the licenses could lead to their
termination. Termination of one or more of the licenses would have a material
adverse on the Company. See "Risk Factors -- Dependence on License and Sponsored
Research Agreements."

UIC Licenses

In May 1992, the Company acquired three exclusive worldwide licenses
(the "May 1992 UIC Licenses") from UIC regarding patent properties relating to
(i) a monoclonal antibody, (ii) the GSX System and (iii) the human MDR-1 gene.
Each of the May 1992 UIC Licenses continues in effect until the expiration of
the last to expire patent covered by such license or, if earlier, termination
by UIC for cause or by Ingenex upon notice to UIC. The exclusive nature of the
May 1992 UIC Licenses is subject in certain instances to certain reservations,
including the use of all or part of the subject matter of the licenses for
research, education and other non-commercial purposes. In addition, Ingenex's
rights under the license relating to the human MDR-1 gene are subject to a
non-exclusive right granted to Glaxo-Wellcome, PLC to introduce the MDR-1 gene
into the cell lines by transfection and to use such transfectants to conduct
research in producing drugs for research purposes. Glaxo does not, however,
have the right to sell or transfer to any third party the transfectants or any
derivatives thereof, without the written authorization of UIC. The May 1992
UIC Licenses provide for the payment of license issue fees totaling, in the
aggregate, approximately $145,000 (all of which have been paid through March
31, 1996), royalties based on sales of products and processes incorporating
the licensed technology, subject to certain minimum royalty payments,
royalties based on sublicensing income, a percentage of revenues from research
relating to the subject matter of each May 1992 UIC License that is performed
on a contract basis for third parties and all costs and expenses associated
with patent prosecution and maintenance. Under the May 1992 UIC Licenses,
Ingenex must use its best efforts to bring any products developed under the
May 1992 UIC Licenses to market, deliver and comply with a detailed business
plan, obtain all necessary government approvals and timely pay all license and
royalty fees. Additionally, the Company must use its best efforts to ensure
that products incorporating the licensed technology which are sold in the U.S.
are substantially manufactured or assembled in the U.S.

In July 1994, Ingenex obtained three exclusive worldwide licenses
(the "July 1994 UIC Licenses") from UIC to foreign and domestic patent
applications relating to genes and genetic elements associated with (i)
sensitivity to cisplatin, an anti-cancer drug, in human cells, (ii) neoplastic
transformation, the genetic process involved in the development of malignant
tumors

<PAGE>

and (iii) sensitivity to chemotherapeutic drugs along with the association of
kinesin, a cellular protein, with chemotherapeutic drug sensitivity. All three
of the July 1994 UIC Licenses are subject to certain rights of third parties
for non-commercial research and educational purposes. Each of the July 1994
UIC Licenses continues in effect until the expiration of the last to expire
patent covered by such license or, if earlier, termination by UIC for cause or
by Ingenex upon notice to UIC. The July 1994 UIC Licenses provide for the
payment of license fees totaling $50,000 (all of which have been paid through
March 31, 1996), royalties based on sales of products and processes
incorporating the licensed technology, subject to certain minimum annual
amounts, a percentage of all revenue received from any sublicense of the
licensed technology, and all costs and expenses incurred in prosecuting and
maintaining patent applications and patents licensed under the July 1994 UIC
Licenses. Under the July 1994 UIC Licenses, the Company must use its best
efforts to bring licensed products or processes to market, deliver and comply
with a detailed business, research and development plan, obtain all necessary
government approvals and timely pay all license and royalty fees.
Additionally, the Company must use its best efforts to ensure that products
incorporating the licensed technology which are sold in the U.S. are
substantially manufactured or assembled in the U.S.

MIT License

In September 1992, Ingenex acquired an exclusive license (the "MIT
License") under a patent (issued in March 1993) assigned to MIT. The patent
covers the use of MDR genes for creating and selecting drug resistant
mammalian cells. The MIT License continues in effect until the expiration of
the underlying patent covered by such license or, if earlier, termination by
MIT for cause or by Ingenex upon notice to MIT. The MIT license is subject to
prior grants of non-exclusive licenses to Eli Lilly & Co. and Genetics
Institute, Inc. (a biotechnology company) for research purposes and
non-exclusive, commercial licenses that may be granted pursuant to options
granted to Eli Lilly and Genetics Institute to use aspects of the licensed
technology solely to manufacture and sell products that do not incorporate
genes claimed in the patent, proteins expressed by such genes or probes,
antibodies and inhibitors to such genes. The MIT License provides for the
payment of royalties based on net sales of products and processes
incorporating the licensed technology, subject to certain minimum annual
amounts, and a percentage of sublicensing income arising from the license of
such products and processes. In connection with the execution of the MIT
License, the Company issued to MIT 13,630 shares of Common Stock. An aggregate
of $13,500 has been paid to MIT in connection with the MIT License through
March 31, 1996. Under the MIT License, Ingenex must also use reasonable best
efforts to bring any products developed under the MIT License to market,
deliver and comply with a detailed business plan and make timely payment of
all license and royalty fees.

Baylor License

In October 1992, Ingenex acquired an exclusive worldwide license (the
"Baylor License") under U.S. and foreign patent applications assigned to
Baylor relating to a modified tumor suppressor gene. The Baylor License
continues in effect until the expiration of the last to expire patent covered
by such license, or, if earlier, termination by Baylor for cause or by Ingenex
upon notice to Baylor. The Baylor License provides for royalties based on net
sales of products and processes incorporating the licensed technology, subject
to certain minimum annual amounts, and

<PAGE>

a percentage of sublicensing income arising from the license of such products
and processes. In connection with the execution of the Baylor License, the
Company issued to Baylor and its designees an aggregate of 34,013 shares of
Common Stock. An aggregate of $38,000 has been paid to Baylor under the Baylor
License through March 31, 1996. Under the Baylor License, Ingenex must use
reasonable best efforts to bring any products developed under the Baylor
License to market, deliver and comply with a detailed business plan, make
timely payment of all royalty fees and pay all costs and expenses incurred in
patent filing, prosecution and maintenance.

PARTEQ License

In December 1993, Ingenex acquired a co-exclusive license (the
"PARTEQ License") from PARTEQ under certain patent applications and know-how
relating to a chemotherapy resistance gene and its use in gene therapy. The
PARTEQ License continues in effect until (a) the later of the expiration date
of the last to expire patent covered by such license or ten years after the
first commercial sale of any product covered by such license or, if earlier,
(b) termination by PARTEQ for cause or by Ingenex upon notice to PARTEQ.
PARTEQ retained the right to license the same subject matter to one additional
party. In the event of a termination of the license agreement between PARTEQ
and such additional party, Ingenex has an option to negotiate for exclusive
rights. However, if PARTEQ and Ingenex cannot agree on such exclusive rights,
PARTEQ may grant a license to a different third party. Additionally, PARTEQ
and Queen's retained the non-exclusive, non-transferable personal right to use
the subject matter of the license for their own use for non- commercial,
research or academic purposes. Ingenex paid an initial, up-front license fee
of $15,000 and must pay royalties based on sales of the licensed products by
Ingenex and its licensees, subject to certain annual fees to maintain the
PARTEQ License. Ingenex also is required to make certain milestone payments
totaling $120,000 that are tied to achieving regulatory approval for the first
product developed under the PARTEQ License. The Company has paid an aggregate
of $25,000 under the PARTEQ License through March 31, 1996. In addition,
Ingenex must use its best commercially reasonable efforts to exploit the
licensed technology in those countries in the world in which such exploitation
is reasonable.

Proprietary Rights of Others

The Company is aware of a United States patent issued to a
third-party (U.S. Patent 4,912,039) (the "Riordan patent") relating to
multidrug resistance. The Riordan patent describes the isolation of two DNA
molecules that code for fractional portions of the hamster protein associated
with multidrug resistance (the "hamster MDR-1 gene"), whereas a patent licensed
by the Company (U.S. Patent 5,206,352) (the "Roninson patent") describes and
claims the entire human MDR-1 gene, which is the DNA that codes for the entire
protein associated with multidrug resistance in humancells. Nonetheless, the
Riordan patent claims a DNA molecule coding for a protein, or a fragment of a
protein, that is associated with multidrug resistance in living cells,
including human cells. The Riordan patent has an earlier effective filing date
than the Roninson patent and there can be no assurance that the Riordan patent
will not be asserted against the Company. Thus, it may be necessary for the
Company to obtain a license under the Riordan patent to pursue
commercialization of its proposed gene therapy products utilizing the MDR-1
gene. There can be no assurance that such a license, if required, will be made
available to the Company, if at all, on terms acceptable to the

<PAGE>

Company. Failure to obtain such a license, if required, could have a material
adverse effect on the Company.

The Company also is aware of a United States patent issued to a third
party (U.S. Patent 5,399,346) (the "Anderson patent"), relating to ex vivo
gene therapy. The Anderson patent is reported to be exclusively licensed to
Genetics Therapy, Inc. The Company believes that the Anderson patent could be
asserted to cover gene therapeutics developed by the Company, to the extent
that the introduction of a gene into a subject's cells is performed ex vivo.
Earlier this year, it was reported that an interference proceeding had been
instituted in the U.S. Patent and Trademark Office between the issued Anderson
patent and two pending patent applications. Depending on the outcome of the
interference proceeding, it may or may not be necessary for the Company to
obtain a license from a party to the interference proceeding to pursue
commercialization of its proposed gene therapy products utilizing ex vivo gene
therapy. There can be no assurance that such a license, if required, will be
made available to the Company, if at all, on terms acceptable to the Company.
Failure to obtain such a license, if required, could have a material adverse
effect on the
Company.

The Company has received notice that three companies, Chiron Corp,
Sandoz AG, and Introgene NV, are opposing the grant of a European patent
corresponding to the Roninson patent, which the Company has licensed from UIC,
with claims directed to the human MDR-1 gene and gene fragments. While the
Company, through its licensor, intends to vigorously respond to the
oppositions, no assurances can be given as to the scope of the claims, if any,
which the European Patent Office ultimately will find patentable.

The Company is aware of the existence of a prior art reference
(European Patent Application 0 259 031) which may affect the validity of
certain claims in an issued U.S. patent licensed by the Company from Baylor
(U.S. Patent 5,496,731) (the "Baylor patent"). These claims relate to DNA
molecules encoding RB94. Other claims in the Baylor patent are directed to
expression vectors containing these DNA molecules. Although a patent is
presumed valid, there can be no guarantee that the Baylor patent, if
challenged, will not be found invalid. In any event, given that this prior art
reference relates to DNA molecules but not to methods of gene therapy, the
existence of this reference alone, would not, as a matter of U.S. law, be
expected to affect the patentability of claims directed to the use of the DNA
molecules in gene therapy of certain cancers, which claims presently are
pending in a related patent application licensed from Baylor.

Further development of the Company's products depends upon the
Company's ability to maintain existing and establish new relationships with
scientific and corporate collaborators. The Company's MDRx1 product is
currently being clinically tested by its collaborators at MD Anderson. The
Company's other gene therapy product, RB94, is in preclinical development, and
the Company intends to continue to develop this product in collaboration with
a partner with expertise in gene delivery. The Company's in-house research
program is utilizing the GSX System to identify GSEs that potentially could
lead to the development of additional gene therapy products and may seek to
collaborate with other companies in such research and development. There can
be no assurance that the Company will be able to maintain or enter into any
such collaborations, or that any commercially

<PAGE>

valuable products or processes will be developed as a result of any existing
or proposed collaborations, or that Ingenex will be able to successfully
commercialize, exploit or protect any inventions or discoveries arising out of
such collaborations. Further, there can be no assurance that any of Ingenex's
licensed patent applications will result in issued patents or that, upon
issuance, any of its licensed patents will afford protection against a
competitor. Such competitors may include companies with substantially greater
financial and other resources than those of the Company, and therefore, with a
potentially greater ability to commercialize, exploit or protect their
inventions and discoveries. See "Risk Factors--Dependence on License and
Sponsored Research Agreements" and "--Competition."

Manufacturing and Marketing

The Company does not have any manufacturing or marketing experience
nor does the Company anticipate having the resources in the foreseeable future
to allocate to the commercial manufacture or marketing of its proposed
products and, therefore, the Company intends to pursue collaborative
arrangements with other companies with respect to the manufacture and
marketing of its proposed products in the future. The future success of the
Company will depend, in part, on its ability to maintain relationships with
such corporate collaborators and their success in manufacturing and marketing
any products developed by the Company. To the extent that the Company
determines not to, or is unable to, enter into collaborative arrangements with
respect to the manufacture and marketing of its proposed products, significant
capital expenditures, management resources and time will be required to
establish a manufacturing facility and develop a sales and marketing force.
There can be no assurance that the Company will be able to enter into
collaborative arrangements with respect to the manufacture and marketing of
its proposed products or, in lieu thereof, to establish a manufacturing
facility or develop a sales and marketing force, or be successful in gaining
market acceptance of its proposed products. The failure by the Company to
enter into collaborative arrangements to manufacture and market its proposed
products or to develop its own manufacturing and marketing capabilities would
have a material adverse effect on the Company.

Government Regulation

The research, preclinical development and clinical trials conducted
by the Company, and the product manufacturing and marketing to be conducted
for or by the Company, are subject to regulation by the FDA and similar health
authorities in foreign countries. Preclinical testing in the U.S. is generally
conducted in the laboratory to evaluate the potential safety and efficacy of a
biological product. The results of these tests must be submitted to the FDA as
part of an IND before clinical testing can begin. Typically, clinical testing
involves a three-phase process, although in some cases a single study may
encompass more than one phase. Phase 1 consists of testing the product in a
small number of humans to determine its preliminary safety and tolerable dose
range. Phase 2 involves larger studies to evaluate the effectiveness of the
product in humans having the disease or medical condition for which the
product is indicated and to identify possible common side effects in a larger
group of subjects. Phase 3 consists of additional controlled testing to
establish clinical safety and effectiveness in an expanded patient population
of geographically dispersed test sites, to evaluate the overall benefit-risk
relationship for administering the product and to provide an adequate basis
for product labeling.

<PAGE>

Among the conditions for clinical studies and IND approval is the
requirement that the prospective manufacturer's quality control and
manufacturing procedures conform to "good manufacturing practices" that must
be followed at all times. In complying with standards set forth in these
regulations, manufacturers must continue to expend time, monies and effort in
the area of production and quality control to ensure full technical
compliance.

FDA approval of the Company's proposed products, as well as the
manufacturing processes and facilities used to produce such products, will be
required before such products may be marketed in the U.S. The process of
obtaining approvals from the FDA is costly, time consuming and often subject
to unanticipated delays. There can be no assurance that required approvals of
the Company's proposed products, processes or facilities will be granted on a
timely basis, or at all. Many academic institutions and companies doing
research in the gene therapy field are using a variety of approaches and
technologies. Any adverse results obtained by such researchers in preclinical
or clinical studies, even if not related to the Company's potential products,
could adversely affect the regulatory environment for gene therapy products
generally and possibly lead to delays in the approval process for the
Company's potential products. Any future failure to obtain or delay in
obtaining such approvals will materially and adversely affect the ability of
the Company to commercialize its proposed products. Moreover, even if
regulatory approvals are granted, such approvals may include significant
limitations on indicated uses for which any such products could be marketed.
Further, even if such regulatory approvals are obtained, a marketed drug or
biological compound and its manufacturer are subject to continuous regulatory
oversight, and later discovery of previously unknown problems may result in
restrictions on such product or manufacturer, including withdrawal of the
product from the market. In addition, new government regulations may be
established that could delay or prevent regulatory approval of the Company's
products, processes or facilities. Failure of the Company to obtain and
maintain regulatory approvals of its products, processes or facilities would
have a material adverse effect on the Company.

The Company's research and development activities involve the
controlled use of hazardous materials. The Company is subject to federal,
state and local laws and regulations governing the use, manufacture, storage,
handling and disposing 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 exceed the financial resources of the Company. Although the
Company believes that it is currently in compliance in all material respects
with applicable environmental laws and regulations, there can be no assurance
that the Company will not be required to incur significant costs to comply
with such laws and regulations in the future, or that the Company will not be
materially adversely affected by current or future environmental laws or
regulations.

The proposed products, processes and facilities of the Company may
also be subject to certain other federal, state and local government (as well
as foreign) regulations, including, but not limited to, the Public Health
Service Act, the Occupational Safety and Health Act and state, local and
foreign counterparts to certain of such acts. The Company cannot predict the
extent of

<PAGE>

the adverse effect on it or the financial and other cost that might result
from any government regulations arising out of future legislative,
administrative or judicial action.

For marketing outside of the United States, the Company is also
subject to foreign regulatory requirements governing human clinical trials and
marketing approval for drugs. The requirements governing the conduct of
clinical trials, product licensing, pricing and reimbursement vary widely from
country to country.

Under guidelines established by the NIH, deliberate transfers of
recombinant DNA into human subjects conducted within NIH laboratories or with
NIH funds must be approved by the Director of the NIH (the "NIH Director").
The NIH Director may approve a procedure if it is determined that no
significant risk to health or the environment is presented. The NIH has
established the RAC to advise the NIH Director concerning approval of
NIH-supported research involving the use of recombinant DNA. A proposal will
be considered by the RAC only after the protocol has been approved by a
clinical investigator's local Institutional Review Board and other committees.
Although the jurisdiction of the NIH applies only when NIH-funded research or
facilities are involved in any aspect of the protocol, the RAC encourages all
gene transfer protocols to be submitted for its review. The Company intends to
comply with RAC and NIH guidelines.

See also "Risk Factors--Government Regulation" and "--Uncertainty of
Health Care Reimbursement."

Competition

The Company faces competition both from companies investigating gene
therapy and companies that have developed or are developing treatments for
diseases targeted by the Company. The Company is aware of several development
stage and established enterprises that are exploring the field of human gene
therapy, such as Genetics Therapy, Inc., Somatix Therapy Corp. and Targeted
Genetics Inc., or are actively engaged in research and development in areas
including multidrug resistance and tumor suppressor genes such as subsidiaries
of Chiron Corp. and Sandoz (multidrug resistance) and Intragene and Schering
Plough (tumor suppressors). Other companies, such as Systemix, Inc. and
Viagene, Inc., are also developing gene-based therapies for the treatment of
HIV. Numerous other companies such as Human Genome Sciences Inc., InCyte
Pharmaceuticals Inc., Millenium Pharmaceuticals Inc., Myriad Genetics, Inc.
and Sequana Therapeutics, Inc. are engaged in gene discovery. As the field of
human gene therapy receives increasing exposure and as human trials proposed
or now underway become increasingly visible, other competitors may enter the
field and competition in this field will intensify. The Company may also
experience competition from companies that have acquired technology from
universities and other research institutions. Certain competitors and
potential competitors of the Company have substantially greater product
development capabilities and financial, scientific, marketing and human
resources than the Company. Moreover, potential competitors have or may have
patent or other rights with respect to genes and technology which may be used
in gene therapy, some of which may conflict with the patent position of the
Company. See "--Proprietary Rights." It may be difficult or impossible for the
Company to obtain appropriate licenses covering such genes and technology,
which would thereby hamper or prevent the commercialization of the Company's
proposed products. In addition, other entities may receive patents on
technology or genes necessary

<PAGE>

to the Company's business and be unwilling to grant licenses to the Company.
The failure to obtain such licenses could have a material adverse effect on
the Company. There can be no assurance that research and development by others
will not render the Company's proposed products obsolete or uneconomical or
result in treatments or cures superior to any therapy that may be developed by
the Company, or that any therapy that may be developed by the Company will be
preferred to any existing or newly developed technologies. Other companies may
succeed in developing and commercializing products earlier than the Company.

The Company faces competition from major multinational pharmaceutical
and biotechnology firms and other companies, non-profit research institutions
and other U.S. or foreign government- financed entities that have
substantially larger research and development capabilities and financial,
manufacturing, marketing, human resources and other corporate resources than
the Company. These competitors may succeed in discovering genes and developing
products faster than the Company or its collaborators, obtaining local, state
and federal approvals for such products more rapidly or developing products
that are more effective or less costly than those developed by the Company or
its collaborators. Certain of these competitors at the current time may be
further advanced in product development than the Company is with its proposed
products. There can be no assurance that the efforts of others will not render
the products which the Company or its collaborators are developing, or plans
to develop, obsolete, uneconomical or otherwise inferior. It is expected that
competition in the fields where the Company is involved will intensify.

Competition is based on product efficacy, safety, the timing and
scope of regulatory approvals, availability of supply, marketing and sales
capability, reimbursement coverage, price and patent position. See "Risk
Factors -- Technological Uncertainty" and "--Competition."

Relationship to Titan Pharmaceuticals, Inc.

Titan is a biopharmaceutical holding company founded to advance
therapeutic product development and commercialization in cancer, central
nervous system disorders, blood and immune disorders and other
life-threatening diseases. Titan currently has four operating companies in
which it owns a majority interest, Ingenex, Ascalon, Theracell and ProNeura,
and one operating company, Ansan, in which it owns a 44% interest. Titan has
provided initial financing and management services to its operating companies.

Titan provided approximately $5,324,000 in initial financing for
Ingenex and currently owns approximately 81% of the outstanding Common Stock.
See "Risk Factors -- Control by Existing Stockholder; Relationship with
Titan." Ingenex's association with Titan helps the Company obtain management
resources, facilities and capital equipment and other assets in a
cost-effective manner, but there can be no assurance that Titan will provide
direct financing to the Company in the future. Dr. Bucalo, the Chairman of the
Company's Board of Directors is the President, Chief Executive Officer and a
director of Titan; a member of the Board of Directors of Theracell, and the
Chairman of the Board of Directors of each of Ansan, ProNeura and Ascalon. Dr.
Prendergast, another director of the Company, is a Managing Director of The
Castle Group Ltd., a principal stockholder of Titan.

<PAGE>

In February 1994, the Company, together with the other Sublessees,
entered into the Sublease with Titan whereby the Sublessees agreed to sublease
from Titan certain equipment which it leases from Phoenix Leasing Incorporated
("Phoenix") pursuant to the Master Lease. Under the terms of the Master Lease,
Titan is obligated to make monthly payments to Phoenix currently totaling
approximately $31,000 per month. As of March 31, 1996, the amount outstanding
under the Master Lease was approximately $920,000. The Sublessees have jointly
and severally guaranteed all amounts payable by Titan and all other
obligations of Titan under the Master Lease. Each of Titan and each Sublessee
has experienced significant operating losses to date and is expected to
continue to do so for the foreseeable future. The failure by Titan or any
Sublessee to fulfill its obligations in respect of the Master Lease would have
a material adverse effect on the Company. See "Risk Factors-- Guarantees of
Obligations of Others."

The Company and Titan have agreed that (i) a majority of the Board of
Directors of the Company shall consist of members who are unaffiliated with
Titan, its executive officers, directors or any of their respective
affiliates; (ii) all future transactions between Titan Affiliates and the
Company must be approved by a majority of the disinterested members of the
Board of Directors of the Company; (iii) Titan shall be granted a right of
first refusal to maintain a majority equity interest in the outstanding Common
Stock; (iv) no additional assets shall be added to the Master Lease; (v) prior
to the consummation of the Offering, the Certificate of Incorporation of the
Company will be amended to provide, among other things,
that the Company shall not merge or consolidate with, or sell, assign, lease
or otherwise dispose of all or substantially all of its assets to Titan or any
Titan Affiliate without the affirmative vote of stockholders holding at least
two-thirds of the issued and outstanding shares of Common Stock and (vi) the
Board of Directors of the Company shall maintain a Nominating Committee
consisting of three directors, one of whom shall be designated by Titan. The
Company also issued to Titan, in consideration of a payment to the Company of
$100,000, the Titan Option pursuant to the shareholders agreement.
Finally, pursuant to the shareholders agreement, the Company has granted Titan
an option, exercisable for a period of 60 days from the date upon which Titan's
ownership interest in the outstanding Common Stock falls below a majority, to
purchase such number of shares of Common Stock as necessary for Titan to
maintain a majority ownership interest at an exercise price per share equal to
the then-current fair market value of the Common Stock. The shareholders
agreement remains in effect so long as Titan owns at least 33-1/3% of the
outstanding Common Stock. The Company and Titan also have entered into a
Corporate Services Agreement, wherein Titan has agreed to provide certain
services to the Company for a fee of $10,000 per month.

On August 1, 1994, the Company entered into an Amended Services
Agreement with Titan pursuant to which Titan, at the request of and under the
direction of the Company, provided executive and administrative, financial,
human resources, business development and regulatory services to the Company.
The Company paid Titan for such services on a quarterly basis. The amount
billed to the Company for each quarter was based on the total operating
expenses of each department of Titan to the extent such expenses were
allocable to the services provided by such department under the Services
Agreement. Such allocation was based on the percentage of time expended by
each such department's personnel and the percentage of each such department's
other resources utilized in providing the services. The percentage was
determined at the beginning of each calendar year by the head of each such
department of Titan providing the services to the Company. The Company also
paid for any out of pocket expenses incurred by Titan in providing the
services to the Company. In addition, the Company currently uses certain
facilities and equipment leased by Titan and reimburses Titan on a quarterly
basis for the expenses incurred by Titan with respect to such use. During
fiscal 1994 and 1995, the Company made payments aggregating $948,000 and
$839,000, respectively, to Titan for services and the lease of facilities and
equipment.

<PAGE>

Employees

As of June 24, 1996, the Company had a total of 16 employees, 14 of
whom were full-time employees. Of the total, 14 were in research and
development and 2 were in administration and finance. The Company's future
success depends in significant part upon the continued service of its key
scientific and senior management personnel and its continuing ability to
attract and retain highly qualified scientific and managerial personnel. See
"Risk Factors--Dependence on Key Employees." Competition for such personnel is
intense, and there can be no assurance that the Company can retain its key
scientific and managerial employees or that it can attract, assimilate or
retain other highly qualified scientific and managerial personnel in the
future. None of the Company's employees is represented by a labor union. The
Company has not experienced any work stoppages and considers its relations
with its employees to be satisfactory. Each of the Company's employees are
parties to a confidentiality agreement with the Company.

Facilities

The Company's principal administrative, sales, marketing, support,
research and development facility is currently located in a building in Menlo
Park, California providing approximately 22,000 square feet of available
space. The Company's current monthly lease payment for this facility is
approximately $27,200 per month. The Company intends to lease an additional
research and development facility in North Carolina within the next several
months. The Company has not entered into any arrangements or understandings in
connection with such lease nor has it identified any potential facilities. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

Litigation

The Company is not a party to any material legal proceedings.

<PAGE>

MANAGEMENT

Officers and Directors

The officers and directors of the Company, and their ages as of July
1, 1996, are as follows:

Name Age Position
- ---- --- --------
<S> <C> <C>
Mark E. Furth, Ph.D. 45 President, Chief Executive Officer and Director
Carol G. Darby 43 Controller
Louis R. Bucalo, M.D. 37 Chairman of the Board of Directors
Robert T. Abbott, Ph.D. (2) 49 Director
Vincent T. DeVita, Jr., M.D. 61 Director
John K.A. Prendergast, Ph.D.(1)(2) 42 Director
Wilhelm F. Schaeffler, Ph.D., D.V.M.(1)(2) 64 Director
</TABLE>

- ------
(1) Member of Audit Committee

(2) Member of Compensation Committee

Mark E. Furth, Ph.D., became the President and Chief Executive
Officer of the Company effective August 14, 1995 and a Director of the Company
in November 1995. From May 1993 to August 1995, Dr. Furth was Vice President,
Molecular Sciences, of Glaxo Wellcome, Inc., a multinational pharmaceutical
company. From January 1992 to May 1993, Dr. Furth was Vice President,
Technology, of Regeneron Pharmaceuticals, Inc., a biotechnology company
("Regeneron"). From July 1988 to January 1992, Dr. Furth was Program Director,
Molecular and Cell Biology of Regeneron. From January 1987 to July 1988, Dr.
Furth was Program Director, Diagnostics, of Oncogene Science, Inc, a
biotechnology company. From November 1982 to December 1986, Dr. Furth was an
assistant member of the Sloan-Kettering Institute of the Memorial
Sloan-Kettering Cancer Center and, concurrently, an assistant professor at the
Sloan-Kettering Division of the Cornell University Graduate School of Medical
Sciences. He held post-graduate fellowships with the National Cancer Institute
in Bethesda, Maryland, and the Medical Research Council Laboratory of
Molecular Biology, Cambridge, England. Dr. Furth received his Ph.D. in
Molecular Biology from the University of Wisconsin-Madison and B.A. in
Biochemical Sciences from Harvard University.

Carol G. Darby has been the Controller of the Company since June
1996 and the Controller of Titan since February 1996. From June 1995 to
February 1996, Ms. Darby was the Controller of the Company. From May 1990 to
June 1995, Ms. Darby was a consultant with the Brenner Group, a management
consulting firm. Ms. Darby received her B.B.A. from the University of Texas,
Austin in 1974.

Louis R. Bucalo, M.D., is a co-founder of the Company and has served
as a director of the Company since March 1993. From January 1993 to August 14,
1995, Dr. Bucalo was the Company's President and Chief Executive Officer.
Since January 1993, Dr. Bucalo has been the President and Chief Executive
Officer and a director of Titan, and is also a director of

<PAGE>

Theracell and the Chairman of the Board of Directors of Ansan, ProNeura and
Ascalon. From July 1990 to April 1992, Dr. Bucalo was the Associate Director
of Clinical Research at Genentech, Inc., a biotechnology company. Dr. Bucalo
received his M.D. from Stanford University and B.A. in Biochemistry from
Harvard University.

Robert T. Abbott, Ph.D., has served as a director of the Company
since February 1996. Since January 1996, Dr. Abbott has been the President and
Chief Executive Officer and a director of Angiogenesis Technologies, Inc., a
biotechnology company. From January 1991 to December 1995, Dr. Abbott was the
President and Chief Executive Officer and a director of Viagene, Inc., a gene
therapy company that was acquired by Chiron Corporation in September 1995.
From May 1984 to May 1990, Dr. Abbott was the President and Chief Executive
Officer of NeoRx Corporation, a biotechnology company that he founded and that
was involved in the development of monoclonal antibody-based cancer imaging
and therapeutic products. Dr. Abbott received his Ph.D. in Pathology from
McGill University and M.B.A. from the University of Missouri at St. Louis.

Vincent T. DeVita, Jr., M.D., has served as a director of the
Company since June 1996. Since July 1993, Dr. DeVita has been the Director of
the Yale Cancer Center. From September 1988 to July 1993, he was successively
Physician-in-Chief, Attending Physician and Member in the Program of Molecular
Pharmacology and Therapeutics at Memorial Sloan-Kettering Cancer Center. From
July 1980 to September 1988, Dr. DeVita was the Director of the National
Cancer Institute. Dr. DeVita has been the recipient of numerous scientific
awards, including the Medal of Honor from the American Cancer Society in 1985
and the Albert and Mary Lasker Medical Research Award in 1972. In 1985, he was
elected to the Institute of Medicine at the National Academy of Sciences. Dr.
DeVita has been a member of the Board of Directors of ImClone Systems
Incorporated, a biotechnology company, since 1991. Dr. DeVita received his
B.S. in Chemistry from the College of William and Mary and M.D. with
Distinction from The George Washington University School of Medicine.

John K.A. Prendergast, Ph.D., is a co-founder of the Company and has
served as a director since its inception in July 1991. Since October 1991, Dr.
Prendergast has been a Managing Director of The Castle Group Ltd., a
biotechnology venture capital firm ("The Castle Group"). Prior to joining The
Castle Group, Dr. Prendergast was an associate of D.H. Blair & Co., Inc., an
investment bank, for several months. Dr. Prendergast received his M.Sc. in
Microbiology and Ph.D. in Molecular Pathology from the University of New South
Wales, Sydney, Australia and C.S.S. in Administration and Management from
Harvard University.

Wilhelm F. Schaeffler, Ph.D., D.V.M., has served as a director of
the Company since September 1994. Since September 1994, Dr. Schaeffler has
been a private consultant to biotechnology and pharmaceutical companies. From
January 1986 to August 1994, Dr. Schaeffler was an Executive Vice President,
Business Development of Miles, Inc., the U.S. subsidiary of Bayer AG, a German
pharmaceutical company. Dr. Schaeffler received his D.V.M. from the University
of Giessen and M.Sc. and Ph.D., each in Veterinary Medicine, from the University
of Illinois.

<PAGE>

Certain of the officers and directors of the Company may from time to
time serve as officers or directors of other biopharmaceutical or
biotechnology companies. There can be no assurance that such other companies
will not in the future have interests in conflict with those of the Company.

The number of directors of the Company is presently fixed at six.
Each director holds office until the next annual meeting of stockholders or
until his successor is duly elected and qualified. The Company's officers
serve at the discretion of the Board of Directors.

Significant Employees

Significant employees of the Company include the following persons:

Tanya Holzmayer, Ph.D., became the Director of Research of the
Company in June 1995. From August 1993 to June 1995, Dr. Holzmayer was a
Senior Scientist for the Company. From July 1989 to August 1993, Dr. Holzmayer
was an Instructor in the Department of Genetics at UIC. She received her Ph.D.
in Molecular Biology from the Institute of Genetics and Selection of
MicroOrganisms in Moscow.

Andrew Dayn, Ph.D., became the Director of Technology Development
of the Company in June 1995. From October 1994 to June 1995, Dr. Dayn was a
Group Leader at Pangene Corporation, a biotechnology company. From June 1992
to October 1994, Dr. Dayn was a Senior Scientist in the Division of Research
and Development of Abbott Laboratories, a multi-national pharmaceutical
company. From June 1990 to October 1994, Dr. Dayn conducted post-doctoral
research in the Department of Genetics at UIC. Dr. Dayn received his Ph.D. in
Microbiology from the Gamaleya Institute of Epidemiology and Microbiology of
the Russian Academy of Sciences.

Board Committees

The Company's Board of Directors has a Compensation Committee and
an Audit Committee. The Compensation Committee sets (subject to the approval
of the full Board of Directors) the compensation for certain of the Company's
personnel and administers the Company's 1994 Stock Option Plan. The
Compensation Committee consists of Drs. Abbott, Prendergast and Schaeffler.

The Audit Committee reviews, with the Company's independent auditors
and management, the scope and results of the annual audit, the scope of other
services provided by the Company's independent auditors, the Company's
significant accounting principles, policies and practices and the Company's
policies and procedures with respect to its internal accounting, auditing and
financial controls and makes recommendations to the Board of Directors on the
engagement of the independent auditors, as well as other matters that may come
before it or as directed by the Board of Directors. The Audit Committee
consists of Drs. Prendergast and Schaeffler.

Director Compensation

Directors of the Company do not receive compensation for services
provided as a director (except for grants of stock options under the Company's
1994 Stock Option Plan and except

<PAGE>

that each of Drs. Abbott, DeVita and Schaeffler receive $2,500 for each
meeting of the Board of Directors he attends). The Company also does not pay
compensation for committee participation or special assignments undertaken by
a director at the request of the Board of Directors.

Indemnification of Directors and Officers

The Company's Certificate of Incorporation eliminates in certain
circumstances the liability of directors of the Company for monetary damages
for breach of their fiduciary duty as directors. This provision does not
eliminate the liability of a director (i) for breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions by the
director not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for willful or negligent declaration of an
unlawful dividend, stock purchase or redemption or (iv) for transactions from
which the director derived an improper personal benefit. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission.

The Company believes that it is the position of the Securities and
Exchange Commission (the "SEC") that insofar as the foregoing provision may be
invoked to disclaim liability for damages arising under the Securities Act,
such provision is against public policy as expressed in the Securities Act an
is therefore unenforceable. Such limitation of liability also does not affect
the availability of equitable remedies such as injunctive relief or
rescission.

The Company intends to enter into indemnification agreements (the
"Indemnification Agreements") with each of its directors and officers prior to
the consummation of the Offering. Each such Indemnification Agreement will
provide that the Company will indemnify the indemnitee against any and all
expenses (including attorneys' fees), witness fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the Company) to which he is, was or
at any time becomes a party, or is threatened to be made a party, by reason of
the fact that he is, was, or at any time becomes a director, officer, employee
or agent of the Company, or is or was serving, or at any time serves, at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. Such indemnification will be available, subject to certain
exceptions, if the indemnitee acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. The Indemnification Agreements will also require that the Company
indemnify the director or officer in all cases to the fullest extent permitted
by applicable law. Each Indemnification Agreement will permit the director or
officer that is a party thereto to bring suit to seek recovery or amounts due
under the Indemnification Agreement and to recover the expenses of such a suit
if successful.

The Company's Bylaws provide that the Company shall indemnify its
directors, officers, employees or agents to the full extent permitted by the
Delaware General Corporation Law ("DGCL"), and the Company shall have the
right to purchase and maintain insurance

<PAGE>

on behalf of any such person whether or not the Company would have the power
to indemnify such person against the liability. The Company has not currently
purchased any such insurance policy on behalf of any of its directors,
officers, employees or agents but intends to do so prior to the consummation
of the Offering.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that may result in a claim for indemnification.

Executive Compensation

The following Summary Compensation Table sets forth the compensation
earned in fiscal 1994 and 1995 by certain former and present executive
officers of the Company (collectively, the "Named Officers") for services
rendered in all capacities to the Company for such fiscal years.

Summary Compensation Table
-------------------------- Long-Term
Compensation
Annual Compensation Awards
------------------- Securities
Underlying
Name and Options(#)
Principal Position ------------
Other Annual
Year Salary($) Compensation($)
---- --------- ---------------
<S> <C> <C> <C> <C>
Dr. Mark E. Furth ........................ 1994 --- --- ---
President and Chief 1995 73,125 --- 144,000
Executive Officer since
August 1995

Dr. Louis R. Bucalo ...................... 1994 48,351 --- 25,099
former President and 1995 45,269 --- ---
Chief Executive Officer (from
January 1993 to August 1995)

Dr. Gregory R. Reyes...................... 1994 144,585 68,142(2) 13,967
former Vice President, Research 1995 85,809 49,165(2) 32,737
and Development (from
September 1993 to June 1995)
</TABLE>

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

(1) Dr. Bucalo's cash compensation for the year ended December 31, 1995
was paid by Titan pursuant to an employment agreement between Dr.
Bucalo and Titan. Titan was reimbursed by the Company for such
compensation. The amount

<PAGE>

listed herein does not include compensation paid to Dr. Bucalo by
Titan for services rendered other than with respect to the Company.\

(2) Represents moving and relocation costs paid by the Company on Dr.
Reyes' behalf.

Option Grants in Last Fiscal Year

The following table contains information concerning the stock option
grants made to each of the Named Officers for the year ended December 31,
1995. No stock appreciation rights were granted to these individuals during
such year.

Individual Grants
-------------------------------------------------
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration
Name (#) Fiscal Year(2) ($/Sh)(3) Date
---- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Dr. Mark E. Furth(1).................. 144,000 52.3% 2.00 7/31/05
Dr. Louis R. Bucalo................... --- --- --- ---
Dr. Gregory R. Reyes(1)............... 27,737 11.9% 0.86 EXPIRED
5,000 3.50 11/01/05
</TABLE>

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

(1) Dr. Furth's options were granted on July 31, 1995 and Dr. Reyes'
options were granted on January 20, 1995 and November 1, 1995,
respectively. All of the options are immediately exercisable;
however, the shares of Common Stock purchasable thereunder are
subject to a right of repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of
service prior to his vesting in such shares. Such shares vest over a
four-year period. The repurchase right has lapsed as to the following
number of shares as of March 31, 1996: Dr. Furth - 0 and Dr. Reyes -
521. Dr. Reyes' options to purchase 27,737 shares of Common Stock
were terminated upon his resignation in June 1995. See "--1994 Stock
Option Plan."

(2) The percentage of options granted to each Named Officer is based on a
total number of options granted during fiscal 1995 of 275,361.

(3) The exercise price may be paid in cash, in shares of Common Stock
valued at their fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the
purchased shares. The Company may also finance the option exercise by
loaning the optionee sufficient funds to pay the exercise price for
the purchased shares,

<PAGE>

together with any federal and state income tax liability incurred by
the optionee in connection with such exercise. The exercise prices
equalled the fair market value of the Common Stock on the grant date
as determined by the Compensation Committee of the Company's Board of
Directors.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth information concerning option
exercises and option holdings for the year ended December 31, 1995 with
respect to each of the Named Officers. No stock appreciation rights were
exercised during such year or were outstanding at the end of that year.

Value of
Number of Unexercised
Securities Underlying In-the-Money
Shares Unexercised Options Options
Acquired Value at FY-End (#)(2) at FY-End($)(3)
Name on Exercise (#) Realized(1)($) Exercisable /Unexercisable Exercisable /Unexercisable
- ---- --------------- -------------- ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Dr. Mark E. Furth --- 144,000/0 72,000/0
Dr. Louis Bucalo --- --- 25,099/0 60,444/0
Dr. Gregory Reyes 4,422 10,649 5,000/0 ---/0
</TABLE>

(1) Market value at exercise less exercise price.

(2) Options are immediately exercisable for all the underlying shares,
but any shares purchased under the options will be subject to a right
of repurchase by the Company at the original exercise price per share
upon the optionee's cessation of service prior to vesting in such
shares. See "-- 1994 Stock Option Plan." The repurchase right has
lapsed as to the following number of shares as of March 31, 1996: Dr.
Furth - 0; Dr. Bucalo - 11,504; and Dr. Reyes - 521.

(3) Represents the value of unexercised, in-the-money options at December
31, 1995 using the $2.50 fair market value as of such date as
determined by the Compensation Committee of the Company's Board of
Directors.

Employment Agreements

Ingenex has entered into an employment agreement, dated as of July
25, 1995, with Dr. Mark E. Furth (the "Furth Employment Agreement"), the
Company's President and Chief Executive Officer. Such agreement is terminable
by Dr. Furth or Ingenex at any time. Pursuant to the terms of the Furth
Employment Agreement, Dr. Furth is entitled to an annual salary of $195,000
and an annual performance bonus of 15% to 25% of his base salary upon the
Company's achievement of certain targets. In addition, in connection with the
execution of the Furth Employment Agreement, Dr. Furth received options to
acquire 144,000 shares of Common Stock at an exercise price of $2.00 per
share. Dr. Furth is also eligible to be awarded additional options based upon
outstanding performance. In the event of a sale or transfer of

<PAGE>

substantially all of the assets of Ingenex, the vesting of the shares of
Common Stock underlying Dr. Furth's options will automatically accelerate
immediately prior to such event such that 100% of such shares will become
vested. The Furth Employment Agreement also prohibits Dr. Furth from engaging
in any activity that is competitive with the Company during the term of his
employment with the Company.

The Company entered into an employment agreement with Dr. Gregory
R. Reyes in September 1993 (the "Reyes Employment Agreement"). Dr. Reyes
resigned from his position as Vice President, Research and Development of the
Company, in June 1995. Pursuant to the terms of the Reyes Employment
Agreement, during his employment, Dr. Reyes received an annual salary of
$145,000 and was eligible to receive an annual performance bonus up to 10% of
his base salary. In addition, Dr. Reyes received certain stock options.

1994 Stock Option Plan

The Company's 1994 Stock Option Plan (the "1994 Plan") was adopted by
the Company's directors in December 1993 and the Company's stockholders in
December 1994. Prior to the consummation of the Offering, the Company intends
to amend the 1994 Plan so that options granted thereunder will meet the
requirements of Rule 16(b)(3), promulgated under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), for exemption from the restrictions of
Section 16(b) of the 1934 Act and to increase the number of shares of Common
Stock authorized for issuance under the 1994 Plan to 847,500. As amended, the
1994 Plan will provide for grants of stock options to employees (including
officers and directors) and consultants of the Company. Prior to the
amendment, the Plan provided for grants to employees, consultants and
directors of the Company, Titan and the Company's subsidiaries. As of June 30,
1996, options to purchase an aggregate of 433,069 shares of Common Stock were
outstanding under the 1994 Plan at a weighted average price of $2.59, all of
which were immediately exercisable. All options granted under the Plan are
immediately exercisable; however, any shares of Common Stock purchasable upon
the exercise of options are subject to repurchase by the Company at the
original price paid per share upon the optionee's cessation of service prior
to his vesting in such shares. Such shares generally vest in 25% increments
over four years. There is no limitation on the number of options which may be
granted to any individual under the Plan. As of such date, 375,072 of the
shares of Common Stock issuable upon the exercise of such options are subject
to a right of repurchase by the Company at the original exercise price in the
event of termination of employment of the option holder.

As amended, the 1994 Plan will be administered by the Compensation
Committee of the Company's Board of Directors that will consist of at least
two disinterested directors. Eligible individuals may, at the discretion of
the Compensation Committee, be granted incentive stock options to purchase
shares of Common Stock at not less than the fair market value (110% of the
fair market value in the case of 10% stockholders) of such shares on the grant
date or non-statutory options to purchase shares of Common Stock at not less
than 85% of the fair market value of such shares on the grant date. The
Compensation Committee will determine the vesting or exercise schedule (if
any) for each granted option (which vesting or exercise schedule shall not be
more restrictive than 20% per year beginning one year after the date of
grant). The Compensation

<PAGE>

Committee may accelerate the vesting and/or exercisability of any outstanding
option in whole or in part at any time.

Each option granted under the 1994 Plan has a maximum term of ten
years, subject to earlier termination following the optionee's cessation of
service with the Company. Options are not assignable or transferable by the
optionee except by will or the laws of inheritance following the optionee's
death. Moreover, each option is subject to a six-month holding period from the
acquisition of the option prior to the disposition of the option or the
underlying shares. An optionee will have no stockholder rights with respect to
the shares subject to his or her outstanding options until such options are
exercised and the purchase price is paid for the shares.

In the event that the Company is acquired by merger or asset sale,
each outstanding option under the 1994 Plan which is not to be assumed or
replaced with a comparable option from the successor corporation will
automatically terminate. The Company's outstanding repurchase rights under the
1994 Plan also will terminate, and the shares subject to those repurchase
rights will become fully vested upon the merger or asset sale, unless such
repurchase rights are assigned to the successor corporation.

The Compensation Committee has the authority to effect, from time to
time, with the consent of the affected option holder, the cancellation of
outstanding options under the 1994 Plan in return for the grant of new options
for the same or different number of shares with an exercise price per share
based upon the fair market value of the Common Stock on the new grant date.

The Company's Board of Directors may amend or modify the 1994 Plan at
any time, provided that no such amendment or modification may adversely affect
the rights and obligations of the participants with respect to their
outstanding options without their consent. In addition, no amendment of the
1994 Plan may, without the approval of the Company's stockholders, (i)
materially increase the benefits accruing to participants or modify the class
of individuals eligible for participation, or (ii) increase the number of
shares available for issuance, except in the event of certain changes to the
Company's capital structure. The 1994 Plan will terminate on December 2003,
unless sooner terminated in accordance with its terms.

Consulting Agreements

The Company has entered into consulting agreements with the following
individuals who are experts in their fields of interest. Such individuals
generally will consult with the Company on such projects as may be
specifically agreed. The consultants work for the Company on an as required
basis and receive compensation in the form of cash or shares of Common Stock.
The Company may retain additional special consultants as the need arises.

William F. Benedict, M.D., is a member of the staff of MD Anderson. In
August 1993, the Company entered into a two-year consulting agreement with Dr.
Benedict, which was renewed for an additional one-year period in August 1995.
The agreement will be extended for an additional one-year period unless either
party provides prior notice of non-renewal. Annual compensation under the
agreement is $22,000.

<PAGE>

Richard Davidson, Ph.D., is a member of the SAB. See
"Business--Scientific Advisory Board." In May 1992, the Company entered into a
three-year consulting agreement with Dr. Davidson, which was renewed for an
additional three-year term in May 1995. Annual compensation under the
agreement is $25,000. The agreement may be terminated by either party under
certain circumstances. Pursuant to the agreement, the Company issued 28,743
shares of Common Stock to Dr. Davidson, which shares are subject to a right of
repurchase by the Company upon the occurrence of certain events, including Dr.
Davidson's termination for cause as a consultant to the Company.

Eli Gilboa, Ph.D., is a member of the SAB. In January 1994, the
Company entered into a three-year consulting agreement with Dr. Gilboa. The
agreement will be automatically extended for consecutive periods of one-year
each unless either party gives prior notice of non-renewal. The agreement may
be terminated by either party upon written notice. Annual compensation under
the agreement is $15,000. Additionally, in connection with the execution of
the agreement, Dr. Gilboa was granted options to purchase 1,888 shares of
Common Stock at an exercise price of $0.918 per share for a three-year period
under the 1994 Plan. See"--1994 Stock Option Plan."

Richard E. Giles, Ph.D., is a member of the staff at MD Anderson. In
September 1993, the Company entered into a one-year consulting agreement with
Dr. Giles which was renewed for two consecutive one-year periods and is
currently set to expire in September 1996. Either party may terminate the
agreement upon prior notice. Annual compensation under the agreement is
$40,000.

Andrei Gudkov, Ph.D., is a member of the SAB. See
"Business--Scientific Advisory Board." In September 1993, the Company entered
into a one-year consulting agreement with Dr. Gudkov, which was renewed for an
additional two-year period in September 1994. Annual compensation under the
agreement is $15,000 (subject to increase by the Company's Board of
Directors).

Igor B. Roninson, Ph.D., is a member of the SAB. See
"Business-Scientific Advisory Board." In May 1992, the Company entered into a
three-year consulting agreement with Dr. Roninson, which was renewed for an
additional three-year term in May 1995. Annual compensation under the
agreement is $30,000. Additionally, the Company paid Dr. Roninson's legal fees
aggregating $12,900 incurred in connection with the agreement. The agreement
may be terminated by either party under certain circumstances. Pursuant to the
agreement, the Company issued 143,718 shares of Common Stock to Dr. Roninson,
which shares are subject to a right of repurchase by the Company upon the
occurrence of certain events, including Dr. Roninson's termination for cause
as a consultant to the Company.

Hong J. Xu, M.D., is a member of the staff of MD Anderson. In August
1993, the Company entered into a two-year consulting agreement with Dr. Xu,
which was renewed for an additional one-year period in August 1995. The
agreement will be extended for an additional one-year period unless either party
provides prior notice of non-renewal. Annual compensation under the agreement
is $22,500.

<PAGE>

CERTAIN TRANSACTIONS

The Company believes that all of the transactions set forth below were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. All future transactions, including loans,
between the Company and its officers, directors, principal stockholders and
their affiliates will be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors on
the Board of Directors, and will continue to be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.

In May 1994, Titan purchased 1,007,834 shares of the Company's Series
A Preferred Stock for $5.28 per share. See "Principal Stockholders." In
connection with Titan's purchase of the Series A Preferred Stock, Titan was
granted the right, exercisable in prescribed circumstances, to demand or to
participate in certain registrations of the Company's securities under the
Securities Act. Titan has waived such right to the extent that it may have
been exercisable in connection with the Offering.

In September 1994, four purchasers purchased 283,400 shares of the
Series B Preferred Stock of the Company for $2.50 per share. Such purchasers
included certain entities affiliated with Invesco Trust Company, a principal
stockholder, who purchased 257,637 of such shares and who, as a result
thereof, collectively beneficially own in excess of 5% of the outstanding
Common Stock. In connection with such purchase, such purchasers were granted
the right, exercisable in prescribed circumstances, to demand or to
participate in certain registrations of the Company's securities under the
Securities Act. Such purchasers have waived such right to the extent that it
may have been exercisable in connection with the Offering.

<PAGE>

Stock and (vi) the Board of Directors of the Company shall maintain a Nominating
Committee consisting of three directors, one of whom shall be designated by
Titan. The Company has also issued to Titan, in consideration of a payment to
the Company of $100,000, the Titan Option pursuant to the shareholders
agreement. Finally, pursuant to the shareholders agreement, the Company has
granted Titan an option, exercisable for a period of 60 days from the date upon
which Titan's ownership interest in the outstanding Common Stock falls below a
majority, to purchase such number of shares of Common Stock as necessary for
Titan to maintain a majority ownership interest at an exercise price per share
equal to the then-current fair market value of the Common Stock. The
shareholders agreement remains in effect so long as Titan owns at least 33-1/3%
of the outstanding Common Stock. The Company and Titan also have entered into a
Corporate Services Agreement, wherein Titan has agreed to provide certain
services to the Company for a fee of $10,000 per month. See "Business --
Relationship to Titan Pharmaceuticals, Inc." and "Principal Stockholders."

On May 31, 1995, the Company consummated a private placement of its
securities pursuant to which the Company issued notes in the aggregate
principal amount of $1,500,000 (the "Bridge Notes") and warrants to acquire an
aggregate of 300,000 shares of Common Stock at an exercise price of $2.50 per
share, subject to anti-dilution adjustment (the "Bridge Warrants"). The Bridge
Notes bore interest at the rate of 9% per annum and were due on the earlier of
December 31, 1995 or the fifth business day following the closing of an
initial public offering of securities of the Company. In connection with such
purchase, the holders of the Bridge Warrants were granted the right,
exercisable in prescribed circumstances, to demand or to participate in
certain registrations of the Company's securities under the Securities Act.
Such holders have waived such right to the extent that it may have been
exercisable in connection with the Offering. In January and February 1996, Titan
used $1,588,000 of the net proceeds from an initial public offering of its
securities to repay the Bridge Notes on behalf of the Company. In June 1996,
the Company issued an aggregate of 981,818 shares of Common Stock to Titan in
consideration of such repayment and the cancellation by Titan of certain other
indebtedness of the Company aggregating $5,400,000.

In February 1994, the Company entered into the Sublease with Titan
whereby the Sublessees agreed to sublease from Titan certain equipment that
Titan leases pursuant to the Master Lease. Under the terms of the Master
Lease, Titan is obligated to make monthly payments currently totaling
approximately $31,000 per month. As of March 31, 1996, the amount outstanding
under the Master Lease was approximately $920,000. The Sublessees have jointly
and severally guaranteed all amounts payable by Titan and all other
obligations of Titan under the Master Lease. Each of Titan and each Sublessee
has experienced significant operating losses to date and is expected to
continue to do so for the foreseeable future. The failure by Titan or any
Sublessee to fulfill its obligations with respect to the Master Lease would
have a material adverse effect on the Company. See "Business -- Relationship
to Titan Pharmaceuticals, Inc."

In connection with the purchase of Class B Common Shares in May 1992
(which class has since been eliminated and all of which shares have been
converted into shares of Common Stock), Drs. Roninson and Davidson were
granted the right to have 65,427 shares of Common Stock included in any
registration of the Company's securities under the Securities Act, except for
an initial public offering of the Company's securities and subject to certain
underwriter cutbacks.

Ray Dirks Research Advisory ("RDRA") received a $140,000 finders' fee
in connection with the ACM Agreement. Michael Hsu, a director of Titan, is
also the Director of Corporate Finance for RDRA.

In connection with the ACM Agreement, Titan issued to ACM a warrant
to purchase 112,375 shares of Titan's common stock at a price of $3.56 per
share. The warrant expires

<PAGE>

January 31, 2002. Titan also guaranteed payment of
Company's obligations under the ACM Agreement and issued warrants to RDRA and
Mr. Hsu to purchase an aggregate of 7,395 shares of Titan's common stock at an
exercise price of $3.25 per share. The warrants expire in January 2002.

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding
beneficial ownership of the Common Stock as of June 30, 1996 and as adjusted
to reflect the sale of the 1,850,000 shares of Common Stock offered hereby, by
(i) each person who is known by the Company to own beneficially more than 5%
of the Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Officers and (iv) all current executive officers and directors of the
Company as a group. In addition to information regarding direct ownership of
the Common Stock, information regarding the ownership of Titan's common stock
has been included in the footnotes to the following table to reflect any
indirect ownership of the Common Stock through direct ownership of Titan's
common stock.

Number of Shares Percent Beneficially
Beneficially Owned(2) Owned (3)
--------------------------- --------------------------
Before the After the Before After
Name of Beneficial Owner (1) Offering Offering Offering Offering
- ---------------------------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Titan Pharmaceuticals, Inc................. 2,416,024(4) 2,971,579(5) 81% 58%
400 Oyster Point Boulevard,
Suite 315
South San Francisco, CA 94080

Entities affiliated with Invesco
Trust Company(6)........................... 257,637 257,637 9% 5%
7800 East Union Avenue,
Suite 800
Denver, CO 80237

Dr. Igor Roninson.......................... 143,718 143,718 5% 3%
University of Illinois at Chicago
Department of Genetics
(M/C 669)
880 S. Wood Street
Chicago, IL 60612

Dr. Mark E. Furth(7)....................... 200,000 200,000 6% 4%

Dr. Louis R. Bucalo........................ 2,456,024(8) 3,011,579(9) 81% 58%

Dr. Gregory R. Reyes(10).................. 9,422 9,422 * *

Dr. Robert T. Abbott(11).................. 15,000 15,000 * *

Dr. Vincent T. DeVita, Jr.(12)............ 15,000 15,000 * *
</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Dr. John K.A. Prendergast(13)............. 40,000 40,000 1% *

Dr. Wilhelm F. Schaeffler(14)............. 20,000 20,000 * *

All executive officers and directors
as a group (7 persons)(15)................ 2,756,024 3,311,579 83% 61%
</TABLE>

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

(1) Unless otherwise indicated, the address of all persons named in the
table is c/o the Company, 1505 O'Brien Drive, Menlo Park, California
94025.

(2) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community
property laws where applicable and the information contained in the
footnotes to the table.

(3) Applicable percentage of ownership of the Common Stock is based on
2,994,391 shares of Common Stock outstanding as of June 30, 1996,
together with applicable exercisable options or warrants for such
stockholder. Assumes conversion of 1,007,834 shares of Series A
Preferred Stock and 283,400 shares of Series B Preferred Stock,
respectively, into shares of Common Stock on a one-for-one basis.

(4) Includes 1,007,834 shares of Common Stock issuable upon conversion of
the same number of shares of Series A Preferred Stock upon
consummation of the Offering.

(5) Includes 1,007,834 shares of Common Stock issuable upon conversion of
the same number of shares of Series A Preferred Stock upon
consummation of the Offering. Assumes Titan's purchase of 222,222
shares of Common Stock in the Offering. Includes 333,333 shares of
Common Stock which may be acquired upon exercise of the Titan Option
within 60 days of June 30, 1996. See "Risk Factors--Control by
Existing Stockholder; Relationship to Titan."

(6) Includes 103,055 shares of Common Stock owned by Sealion & Co.,
103,055 shares of Common Stock owned by Pirate Ship & Co., and 51,527
shares of Series B Preferred Stock owned by Waterbean & Co. (in each
case issuable upon conversion of the same number of shares of Series
B Preferred Stock upon consummation of the Offering). INVESCO Funds
Group, Inc., as investment adviser to Pirate Ship & Co. and Waterbean
& Co., and INVESCO Trust Company, as sub-adviser to the foregoing
portfolios and as investment adviser to Sealion & Co., may be deemed
to share voting and investment with respect to these securities.
INVESCO Trust Company is also a principal stockholder of Titan.

<PAGE>

(7) Represents 200,000 shares of Common Stock which may be acquired
upon exercise of options within 60 days of June 30, 1996. All of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- 1994 Stock Option
Plan."

(8) Includes 40,000 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. 29,542 of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- 1994 Stock Option
Plan." Includes 2,416,024 shares held by Titan, which Dr. Bucalo, as
the President and Chief Executive Officer and a director of Titan,
may be deemed to beneficially own. Dr. Bucalo is the holder of record
and beneficial owner of approximately 2.7% of Titan's common stock.
See footnote (4) above.

(9) Includes 40,000 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. 29,542 of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- 1994 Stock Option
Plan." Includes 2,971,579 shares to be beneficially held by Titan,
which Dr. Bucalo, as the President and Chief Executive Officer and a
director of Titan, may be deemed to beneficially own. Dr. Bucalo is
the holder of record and beneficial owner of approximately 2.7% of
Titan's common stock. See footnote (5) above.

(10) Includes 5,000 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. 4,479 of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- Executive
Compensation" and "--1994 Stock Option Plan."

(11) Represents 15,000 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. All of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- 1994 Stock Option
Plan."

(12) Represents 15,000 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. All of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- 1994 Stock Option
Plan."

(13) Includes 21,463 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. All of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- 1994 Stock Option
Plan."

(14) Represents 15,000 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. 17,121 of the
shares issuable

<PAGE>

upon exercise of such options are subject to the Company's right of
repurchase. See "Management--1994 Stock Option Plan."

(15) Includes 321,463 shares of Common Stock which may be acquired upon
exercise of options within 60 days of June 30, 1996. 304,080 of the
shares issuable upon exercise of such options are subject to the
Company's right of repurchase. See "Management-- 1994 Stock Option
Plan." See footnotes (4), (5), (7), (8), (9), (11), (12), (13), (14)
and (15) above.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $.001 par value per share. After giving effect to the
amendment of the Company's Certificate of Incorporation to delete references
to the Series A and Series B Preferred Stock, which will occur upon conversion
of such Preferred Stock into Common Stock upon the consummation of the
Offering, the Company will have authorized 4,000,000 shares of preferred
stock.

As of June 30, 1996, there were 2,994,391 shares of Common Stock
outstanding, which were held of record by 23 stockholders (after giving effect
to the conversion of the Series A and Series B Preferred Stock into Common
Stock upon the consummation of the Offering). No shares of preferred stock
will be outstanding upon the consummation of the Offering.

Common Stock

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the holders of Common Stock. The holders of Common
Stock are not entitled to cumulative voting rights. Subject to preferences
that may be applicable to any outstanding preferred stock, the holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Company's Board of Directors out of funds
legally available therefor. The Company does not intend to pay any dividends
in the foreseeable future. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of preferred stock, if any,
then outstanding. The Common Stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are
fully paid and non-assessable, and the shares of Common Stock to be issued
upon consummation of the Offering will be fully paid and non-assessable.

Preferred Stock

The authorized preferred stock of the Company is currently divided
into two series. The first series consists of 3,465,866 shares of Series A
Preferred Stock. The second series consists of 4,000,000 shares of Series B
Preferred Stock. All the issued and outstanding shares of Series A and Series
B Preferred Stock are to be converted into an aggregate of 1,291,234 shares of
Common Stock upon the consummation of the Offering. At such time, pursuant to
the Company's Restated Certificate of Amendment which will then become
effective, the Board of Directors of the Company will have the authority to
issue up to 4,000,000 shares of preferred stock and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of
those shares without any further vote or action by the stockholders. The
rights of the holders of Common Stock will be subject to, and may be affected
by, the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. Because the terms of
the preferred stock may be fixed by the Board of Directors of the Company
without stockholder action, the

<PAGE>

preferred stock could be issued with terms calculated to defeat or delay a
proposed takeover of the Company, or to make the removal of the management of
the Company more difficult. Under certain circumstances, this would have the
effect of decreasing the market price of the Common Stock. The Company has no
present plans to issue shares of preferred stock.

Anti-takeover Effects of Provisions of the Restated Certificate of
Incorporation, Bylaws and Delaware Law

Restated Certificate of Incorporation and Bylaws

In addition to the ability of the Company's Board of Directors to
issue preferred stock without further stockholder approval, the Company's
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws (to become effective upon consummation of the Offering) (the "Bylaws")
contain several provisions that may be deemed to have the effect of making
more difficult the acquisition of control of the Company by means of a hostile
tender offer, open market purchases, a proxy contest or otherwise. The
provisions of the Amended and Restated Certificate of Incorporation and Bylaws
discussed below are designed to help to ensure that holders of Common Stock
are treated fairly and equally in a multi-step acquisition. In addition, they
are intended to encourage persons seeking to acquire control of the Company to
initiate such an acquisition through arm's-length negotiations with the
Company's Board of Directors.

Requirements For Advance Notification of Stockholder Nominations and
Proposals. The ByLaws require not less than 20 nor more than 60 days' notice
to the Company with regard to stockholder proposals and the nomination, other
than by or at the direction of the Board of Directors, of candidates for
election as directors. Such notice must provide specified information,
including information regarding the ownership of Common Stock by the person
giving the notice, information regarding the proposal or the nominees and
information regarding the interest of the proponent in the proposal or the
nominations.

Stockholder Meetings. The Bylaws provide that a special meeting of
the stockholders may be called by the President and shall be called by the
President or Secretary at the request of a majority of the Board, and may not
be called absent such a request. In addition, pursuant to the Company's
Amended and Restated Certificate of Incorporation, stockholders may not take
any action by written consent.

Delaware Takeover Statute

Upon consummation of the Offering, the Company will become subject to
Section 203 of the DGCL ("Section 203"), which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years following the date
that such stockholder became an interested stockholder, unless: (i) prior to
such date, the board of directors of the corporation approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at

<PAGE>

the time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (x) by persons who are
directors and also officers and (y) by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
662/3% of the outstanding voting stock that is not owned by the interested
stockholder.

Section 203 defines a business combination to include, among other
things: (i) any merger or consolidation involving the corporation and the
interested stockholder; (ii) any sale, lease, exchange, mortgage, transfer,
pledge or other disposition of 10% or more of the assets of the corporation
involving the interested stockholder; (iii) subject to certain exceptions, any
transaction that results in the issuance or transfer by the corporation of any
stock of the corporation to the interested stockholder; (iv) any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series of the corporation beneficially
owned by the interested stockholder; or (v) the receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation. In general,
Section 203 defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

Transfer Agent and Registrar

The transfer agent and registrar for the Common Stock is American
Stock Transfer & Trust Company.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market, or
the perception that such sales may occur, could adversely affect the
prevailing market price of the Common Stock and the ability of the Company to
raise capital through a public offering of its equity securities. Of the
4,844,391 shares of Common Stock to be outstanding upon consummation of the
Offering, the 1,850,000 shares of Common Stock offered hereby (2,127,500
shares if the Underwriters' over-allotment option is exercised in full) will
be immediately freely tradeable without restriction (except as to affiliates
of the Company, including Titan) or further registration under the Securities
Act. The remaining 2,944,391 shares of Common Stock will be "restricted"
securities within the meaning of Rule 144 and may only be sold if registered
under the Securities Act or pursuant to an exemption from such registration
requirement, including the exemption provided by Rule 144. Any shares of
Common Stock purchased in the Offering by Titan or any other affiliate of the
Company will be subject to certain of the resale limitations of Rule 144.
Holders of shares of Common Stock, including each director, officer, member of
the SAB and principal stockholder of the Company (including Titan), have
agreed that they will not offer, sell, offer to sell, contract to sell, sell,
distribute, grant any option to purchase, pledge, hypothecate or otherwise
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock for a period of 360 days after the date of this Prospectus
without the prior written consent of the Representative, on behalf of the
Underwriters. Taking into account the restrictions of Rule 144 and the lock-up
agreements, of the restricted shares will become eligible for sale in the
public market beginning 90 days after the date of this Prospectus and will
become eligible for sale in the public market beginning 360 days after the
date of this Prospectus. Additional shares of Common Stock, including shares
issuable upon the exercise of options and warrants, will also become available
for sale in the public market from time to time in the future.

In general, under Rule 144 as currently in effect, beginning 90 days
after the Offering, a person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least two years, including a
person who may be deemed an affiliate of the Company, is entitled to sell
within any three-month period a number of shares of Common Stock that does not
exceed the greater of 1% of the then-outstanding shares of Common Stock
(approximately shares after giving effect to the Offering) or the average
weekly trading volume of the Common Stock on The Nasdaq National Market during
the four calendar weeks preceding the filing of a Form 144 relating to such
sale. Sales under Rule 144 are subject to certain restrictions relating to
manner of sale, notice and the availability of current public information
about the Company. Under clause (k) of Rule 144, a person who is not an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned restricted shares for at least three years, would
be entitled to sell such shares immediately following the Offering without
regard to the volume limitations, manner of sale provisions or notice or other
requirements of Rule 144.

Prior to the Offering, there has been no public market for the Common
Stock and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts
of such restricted shares in the public market, or the perception that such
sales

<PAGE>

could occur, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.

Options

As of June 30, 1996, options to purchase a total of 433,069 shares of
Common Stock granted under the 1994 Plan were outstanding and exercisable. An
additional 414,431 shares of Common Stock were available for future option
grants under the 1994 Plan, as amended. In addition, as of June 30, 1996,
options to purchase a total of 16,761 shares of Common Stock, which were
granted to certain officers of the Company outside of the 1994 Plan, were
outstanding and exercisable. An aggregate of the shares of Common Stock
purchasable upon exercise of such options are subject to Lock-up Agreements.
See "Underwriting."

Rule 701 under the Securities Act generally provides that shares of
Common Stock acquired on the exercise of outstanding options awarded pursuant
to certain written compensation benefit plans for employees, directors,
officers, consultants or advisors may be resold by persons other than
"affiliates," beginning 90 days after the date of this Prospectus, subject
only to the manner of sale provisions of Rule 144, and by "affiliates"
beginning 90 days after the date of this Prospectus, subject to all provisions
of Rule 144 except its two-year minimum holding period. The Company intends to
file one or more registration statements on Form S-8 under the Securities Act
to register all shares of Common Stock purchasable upon exercise of options
under the 1994 Plan. Such registration statements are expected to become
effective upon filing. Shares covered by these registration statements will
thereupon be eligible for sale in the public markets, subject to the Lock-up
Agreements, if applicable.

Bridge Warrants

As of June 30, 1996, Bridge Warrants to purchase a total of 300,000
shares of Common Stock were outstanding and exercisable. An aggregate of the
Bridge Warrants and the shares of Common Stock underlying the Bridge Warrants
are subject to lock-up agreements that apply for a 360-day period from the
date of this Prospectus. See "Underwriting."

Registration Rights

After the Offering, the holders of 1,182,233 shares of Common Stock
will be entitled to certain rights with respect to the registration of such
shares under the Securities Act, including the holders of the Bridge Warrants.
Under the terms of the agreements between the Company and the holders of such
registrable securities, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include shares
of such Common Stock therein. Certain of such stockholders benefitting from
these rights may also require the Company to file a registration statement
under the Securities Act at the Company's expense with respect to their shares
of Common Stock, and the Company is required to use its diligent reasonable
efforts to effect such registration. Further, holders may require the Company
to file additional registration statements on Form S-3 at the Company's
expense. These rights are subject to certain conditions and limitations, among
them the right of the underwriters of an offering

<PAGE>

to limit the number of shares included in such registration in certain
circumstances. All of the holders of such securities have agreed not to
exercise their registration rights prior to the expiration of one year from
the date of this Prospectus. See "Certain Transactions."

Furthermore, the holders of the Representative's Warrants and the
securities underlying the Representative's Warrants have certain registration
rights with respect to such securities. See "Underwriting."

CHANGES IN ACCOUNTANTS

Ernst & Young LLP, which has been and is the independent auditors for
Titan and for each of Titan's subsidiaries, declined in July 1995 to consent
to the use of its report in the Registration Statement on Form SB-2 (the
"Registration Statement") to which this Prospectus forms a part as originally
filed. As a result, the Company engaged Richard A. Eisner & Company, LLP as
independent auditors effective July 1995 for the purpose of auditing and
reporting on the Company's financial statements for the periods from July 25,
1991 (inception) through December 31, 1994. The report of Richard A. Eisner &
Company, LLP on such financial statements, which report was dated July 21,
1995 and was included in the Registration Statement as originally filed and in
Amendment No. 1 thereto, did not contain an adverse opinion or a disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope, or
accounting principles. However, such report contained an explanatory paragraph
that described the substantial doubt as to the ability of the Company to
continue as a going concern.

Ernst & Young, LLP now has consented to the use of its report, which
is dated February 23, 1996 (except as to certain subsequent events) and which
relates to the Company's financial statements for the periods from July 25,
1991 (inception) through December 31, 1995, in Amendment No. 2 to the
Registration Statement. Such report contains an explanatory paragraph that
describes the substantial doubt as to the ability of the Company to continue
as a going concern.

The report of Richard A. Eisner & Company, LLP has been removed from
the Registration Statement effective with Amendment No. 2. In connection with
its audit of the Company's financial statements for the period from July 25,
1991 (inception) through December 31, 1994 and subsequent thereto until the
commencement by Ernst & Young LLP of its audit of the Company's financial
statements of the year ended December 31, 1995, there were no disagreements
between Richard A. Eisner & Company, LLP and the Company on any matters of
accounting principles or practices, financial statement disclosure, or
auditing scope and procedures which, if not resolved to the satisfaction of
Richard A. Eisner & Company, LLP, would have caused Richard A. Eisner &
Company, LLP to make reference to the matter in its report.

<PAGE>

UNDERWRITING

The Underwriters named below, for whom Kaufman Bros., L.P. is acting
as the Representative (the "Representative"), have severally agreed, subject
to the terms and conditions contained in the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth below
opposite their respective names:

Name Number of Shares
---- ----------------
Kaufman Bros., L.P.....................................

Total.......................................... 1,850,000

The Underwriting Agreement provides that the several Underwriters are
obligated to purchase all of the 1,850,00 shares of Common Stock offered by
the Underwriters hereby (other than shares which may be purchased under the
over-allotment option), if any are purchased. The Representative has advised
the Company that the Underwriters propose to offer the shares to the public
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession
of $ per share and that such dealers may reallow a concession of $ per share
to certain other dealers. After the public offering, the offering price and
the concessions may be changed by the Representative.

The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary
authority.

The Company has granted to the Underwriters an option, expiring at
the close of business on the 30th day after the date of the Underwriting
Agreement, to purchase up to 277,500 additional shares of Common Stock at the
initial 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 the Offering. To the extent that the Underwriters
exercise the option, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares to be purchased by each of them as shown in the foregoing
table bears to the 1,850,000 shares of Common Stock initially offered hereby.

The Company has agreed to pay to the Representative, individually,
and not in its capacity as Representative, a non-accountable expense allowance
of two percent of the gross proceeds of the Offering ($ if the Underwriters'
over-allotment option is not exercised and $ if the Underwriters'
over-allotment option is exercised in full), of which $25,000 has been paid to
date. If the Offering is not consummated, the Representative will be entitled
to be reimbursed for actual out-of-pocket expenses, on an accountable basis
only, up to $50,000,

<PAGE>

inclusive of the amount paid to date. The Company has
also agreed to pay all expenses in connection with registering or qualifying
the Common Stock offered hereby for sale under the laws of the states in which
the Common Stock is sold by the Underwriters (including expenses of counsel
retained for such purposes by the Underwriters) as well as certain expenses
associated with information meetings.

The Company has agreed to sell to the Representative, or its
designees, warrants (the "Representative's Warrants") to purchase 185,000
shares of Common Stock at an aggregate purchase price of $185.00. The exercise
price per Representative's Warrant, subject to anti-dilution adjustment, is
equal to 120% of the initial public offering price per share of Common Stock
offered hereby. The Representative's Warrants are exercisable for a period of
five years beginning one year from the date of the consummation of the
Offering (the "Warrant Exercise Term"). The Representative's Warrants may not
be transferred, sold, assigned or hypothecated for a period of one year
commencing from the date of the consummation of the Offering, except that they
may be transferred during such period to officers of the Representative or
members of the underwriting or selling group and/or their officers or
partners, if any. During the Warrant Exercise Term, the holders of the
Representative's Warrants are given, at nominal cost, the opportunity to
profit from an increase in the market price of the Common Stock without
assuming the risk of ownership, with a resulting dilution in the interest of
other security holders of the Company. The Company has granted the
Representative certain registration rights with respect to the
Representative's Warrants. All registration rights will terminate seven years
from the date of the consummation of the Offering.

The Company and holders of shares of Common Stock, including each
director, officer, member of the SAB and principal stockholder of the Company
(including Titan), have agreed that they will not offer to sell,
contract to sell, sell, distribute, grant any option to purchase, pledge,
hypothecate or otherwise dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock for a period of 360 days after the
date of this Prospectus without the prior written consent of the
Representative.

Pursuant to the Underwriting Agreement, the Representative will have
the right to designate an observer to attend all of the meetings of the
Company's Board of Directors (at the expense of the Company) for a period of
three years after the consummation of the Offering.

The initial public offering price of the Common Stock offered hereby
will be determined through negotiations between the Company and the
Representative. Among the factors to be considered in making such
determination will be the prevailing market conditions, the Company's fiscal
and operating history and condition, the Company's prospects and the prospects
of its industry, the management of the Company, the market price of securities
for companies in businesses similar to that of the Company and other relevant
factors. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offering at or above the initial offering price.

<PAGE>

The Representative became registered as a broker-dealer in July 1995.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon
for the Company by Shereff, Friedman, Hoffman & Goodman, LLP, New York, New
York and for the Underwriters by O'Sullivan Graev & Karabell, LLP, New York,
New York.

EXPERTS

The financial statements of Ingenex, Inc. at December 31, 1994 and
1995, and for each of the years then ended, and the period from July 25, 1991
(inception), through December 31, 1995, appearing in this Prospectus and the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph with respect to the uncertainty surrounding the Company's ability to
continue as a going concern) appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. The statements relating to United States patent
matters, under the headings "RISK FACTORS - Uncertainty Relating to Patents and
Proprietary Technology" and "BUSINESS - Proprietary Rights," except those
statements qualified as being based on the Company's belief, have been reviewed
and approved by Pennie & Edmonds, New York, N.Y., special patent counsel to the
Company, and have been included, herein, in reliance upon the review and
approval by such firm, as experts in United States patent law.

ADDITIONAL INFORMATION

The Company has filed with the SEC a Registration Statement on Form
SB-2 (the "Registration Statement") under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement
and the exhibits and schedules filed as a part thereof. Statements contained
in this Prospectus concerning the contents of any contract or any other
document referred to are not necessarily complete; reference is made in each
instance to the copy of such contract or document filed as an exhibit to the
Registration Statement. Each such statement is qualified in all respects by
such reference to such exhibit. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the SEC's
principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part thereof may be obtained from such office after
payment of fees prescribed by the SEC.

Upon consummation of the Offering, the Company will become subject to
the periodic reporting and other informational requirements of the Exchange
Act and in accordance therewith will be required to file reports and other
information with the SEC. Such reports and other information can be inspected
and copied at the public reference facilities maintained by the SEC at its
principal offices.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

Page
----
Report of Ernst & Young LLP, Independent Auditors......................F-2

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

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

Statement of Net Capital Deficiency....................................F-5

Statements of Cash Flows...............................................F-6

Notes to Financial Statements..........................................F-7

F-1

<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
Ingenex, Inc.

We have audited the accompanying balance sheets of Ingenex, Inc. (a
development stage company) as of December 31, 1994 and 1995, and the related
statements of operations, net capital deficiency, and cash flows for the years
then ended and for the period from July 25, 1991 (commencement of operations)
to 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 Ingenex, Inc. (a
development stage company) at December 31, 1994 and 1995, and the results of
its operations and its cash flows for the years then ended and for the period
from July 25, 1991 (commencement of operations) to December 31, 1995 in
conformity with generally accepted accounting principles.

As more fully described in Note 1 to the financial statements, the
Company is in the development stage, has incurred losses since inception of
approximately $12.5 million and expects to incur substantial and increasing
operating losses over the next several years. At December 31, 1995, the
Company had a working capital deficit and a net capital deficiency of
approximately $4.1 million and $5.2 million, respectively. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans as to these matters are also described in Note 1. The 1995
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/S/ ERNST & YOUNG LLP

Palo Alto, California
February 23, 1996, except for
Note 8 as to which the date is June 28, 1996.

F-2

<PAGE>

INGENEX, INC.
(a development stage company)

BALANCE SHEETS

Unaudited
Pro Forma
Liabilities
and Net
Capital
Deficiency at
December 31, December 31, March 31, March 31,
1994 1995 1996 1996
----------------- ----------------- --------------- ----------------
(unaudited) (Note 8)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 693,538 $ 37,938 $ -
Prepaid sponsored research 76,844 - -
Other current assets 16,198 - 54,137
----------------- ----------------- ---------------
Total current assets 786,580 37,938 54,137

Furniture and equipment, net - 3,760 4,878
Deferred offering costs - 25,000 -
Deferred financing costs - 142,604 131,039
Other assets 14,323 - -
----------------- ----------------- ---------------
$ 800,903 $ 209,302 $ 190,054
================= ================= ===============

Liabilities and Net Capital Deficiency
Current liabilities:
Accounts payable $ 409,179 $ 376,172 $ 267,346 $ 267,346
Note payable - bridge financing - 1,500,000 -
Payable to parent 592,331 1,313,214 4,183,066
Accrued sponsored research 522,824 197,622 -
Other accrued liabilities 91,975 248,291 226,182 226,182
Current portion of technology financing - 494,107 472,313 472,313
----------------- ----------------- --------------- ----------------
Total current liabilities 1,616,309 4,129,406 5,148,907 965,841

Noncurrent portion of technology financing - 1,289,313 1,154,252 1,154,252
</TABLE>

Commitments

Net capital deficiency:
Preferred stock, $.01 par value; issuable in series, at amounts
paid in; 7,465,866 convertible shares authorized (4,000,000 pro
forma):
<S> <C> <C> <C> <C>
Series A - 1,007,834 shares issued and outstanding at
December 31, 1994 and 1995 and March 31, 1996
(none pro forma); liquidation preference of
$5,341,520 at December 31, 1995 and March 31,
1996 5,323,570 5,323,570 5,323,570 $ -
Series B - 283,400 shares issued outstanding at
December 31, 1994 and 1995 and March 31, 1996
(none pro forma); liquidation preference of
$1,643,720 at December 31, 1995 and March 31,
1996 1,241,032 1,241,032 1,241,032 $ -
Common stock, $.001 par value, at amounts paid in;
25,000,000 shares authorized;
585,807, 708,535, and 721,038 shares issued and
outstanding at December 31, 1994 and 1995, and
March 31, 1996 respectively (2,772,829 pro forma) 24,457 154,085 154,135 10,901,803
Additional capital 128,805 600,000 600,000 600,000
Deficit accumulated during the development stage (7,533,270) (12,528,104) (13,431,842) (13,431,842)
--------------- --------------- -------------- ---------------
Total net capital deficiency (815,406) (5,209,417) (6,113,105) (1,930,039)
--------------- --------------- -------------- ---------------
$ 800,903 $ 209,302 $ 190,054 $ 190,054
=============== =============== ============== ===============
</TABLE>

See accompanying notes.

F-3

<PAGE>

INGENEX, INC.
(a development stage company)

STATEMENTS OF OPERATIONS

Period from
Commencement
Years ended December 31, of Operations
------------------------ (July 25, 1991) to
1994 1995 December 31, 1995
--------------- --------------- -------------------

<S> <C> <C> <C>
Revenue $ $ 139,522 $ 139,522

Costs and expenses:
Research and Development (1) 3,988,139 2,500,817 8,250,972
Research and development-stockholders (2) 368,684 320,543 1,437,340
General and administrative (1) 549,663 1,204,166 1,861,827
--------------- --------------- ---------------------
Total cost and expenses 4,906,486 4,025,526 11,550,139
--------------- --------------- ---------------------
Loss from operations (4,906,486) (3,886,004) (11,410,617)
Other income (expense):
Interest Income 22,885 41,036 63,921
Interest Expense - (1,149,866) (1,181,508)
--------------- --------------- ---------------------
Net Loss $ (4,883,601) $ (4,994,834) $ (12,528,204)
=============== =============== =====================
Pro forma net (loss) per share $ (1.72)
===============
Shares used in computing pro forma 2,904,670
net (loss) per share

</TABLE>

(RESTUBBED FROM ABOVE)

Period from
Commencement
Three Months Ended March 31, of Operations
---------------------------- (July 25, 1991) to
1995 1996 March 31, 1996
- ------------------ ------------- -------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C>
$ - $ 46,418 $ 185,940

772,137 513,305 8,764,277
66,407 - 1,437,240
208,134 214,339 2,076,166
------------------ ------------- ---------------------
1,046,678 727,644 12,277,683
------------------ ------------- ---------------------
(1,046,678) (681,226) (12,091,743)

14,084 42 63,963
(55,424) (222,554) (1,404,062)
------------------ ------------- ---------------------
$ (1,088,018) $ (903,738) $ (13,431,842)
================== ============= =====================
$(0.29)
=============
2,946,821
</TABLE>

(1) See Note 6 for description of related party transactions.
(2) See Note 2 for description of sponsored research agreements
with certain stockholders (3 universities).

See accompanying notes.

F-4

<PAGE>

INGENEX, INC.
(a development stage company)

STATEMENT OF NET CAPITAL DEFICIENCY

Class A
Preferred Stock Common Stock
--------------- ------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Issuance of common stock to parent for amount receivable in $ - 426,372 $ 782
February 1993 at $0.0018 per share
Issuance of common stock to directors for cash and amount - - 37,074 67
receivable in February 1993 at $0.0018 per share
Issuance of common stock to a university for cash in - - 16,356 1,508
February 1993 at $0.072 per share
Issuance of common stock for cash to consultants in - - - -
February 1993 for $0.072 per share
Issuance of common stock to a college of medicine for cash - - 26,948 50
in April 1993 and November 1993 at $0.0018 per share
Foregiveness of note payable to related party - - - 10,000
Net loss - from incorporation (July 25, 1991) to - - - -
December 31, 1993
----------- ----------- --------- -----------
Balance at December 31, 1993 - - 506,750 12,407

Receipt of cash for stockholder receivable - - - -
Issuance of Series A convertible preferred stock to Parent for
cash and settlement of payable in May 1994 at $5.28 per 1,007,834 5,323,570 - -
share
Issuance of common stock as partial consideration for a
license to an institute in May 1994 at $0.53 per share - - 13,630 7,250
Issuance of Series B convertible preferred stock to investors
for cash in September 1994 at $5.82 per share (net of
issuance costs of $408,968) 283,400 1,241,032 - -
Conversion of Class B common into common stock 65,427 4,800
Common stock to be issued to a college of medicine and
pursuant to antidilutive provisions - - - -
Net loss - - - -
----------- ----------- --------- -----------
Balance at December 31, 1994 1,291,234 6,564,602 585,807 24,457

Issuance of antidilutive common stock in February 1995 - - 107,034 99,562
Issuance of common stock to a college of medicine in April - - 7,061 29,243
1995
Issuance of common stock upon exercise of stock option grants
in November 1995 - - 5,725 556
Issuance of common stock upon exercise of stock option grant
in December 1995 - - 2,908 267
Issuance of warrants in connection with a bridge financing - - - -
Net loss - - - -
----------- ----------- --------- -----------
Balance at December 31, 1995 1,291,234 6,564,602 708,535 154,085
Issuance of common stock upon exercise of stock option grants
in March 1996 (unaudited) - - 12,503 50
Net loss - three months ended March 31, 1996 (unaudited)
----------- ----------- --------- -----------
Balance at March 31, 1996 (unaudited) 1,291,234 $6,564,602 721,038 $ 154,135
=========== =========== ========= ===========
</TABLE>

<PAGE>

(RESTUBBED FROM ABOVE)

Class B
Common Stock Receivable Common During the Net
------------ from Stock Additional Developmental Capital
Shares Amount Stockholders To Be Issued Capital Stage Deficiency
------ ------ ------------ ------------- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
- $ - $ (782) $ - - $ - $ -

- - (34) - - - 33

- - - - - - 1,508

65,427 4,800 - - - - 4,800

- - - - - - 50

- - - - - - 10,000
- - - - - (2,649,669) (2,649,669)

- --------- ----------- -------------- -------------- ------------- ---------------- -------------
65,427 4,800 (816) - - (2,649,669) (2,633,278)

- - 816 - - - 816

- - - - - - 5,323,570

- - - - - - 7,250

- - - - - - 1,241,032
(65,427) (4,800) - -

- - 128,805 - 128,805
- - - - (4,883,601) (4,883,601)
- --------- ----------- -------------- -------------- ------------- ---------------- -------------
- - - 128,805 - (7,533,270) (815,406)

- - - (99,562) - - -
- - - (29,243) - - -

- - - - - - 556

- - - - - - 267
- - - - 600,000 - 600,000
- - - - - (4,994,834) (4,994,834)
- --------- ----------- -------------- -------------- ------------- ---------------- -------------
- - - - 600,000 (12,528,104) (5,209,417)

- - - - - 50
(903,738) (903,738)
- --------- ----------- -------------- -------------- ------------- ---------------- -------------
- $ - $ - $ - $ 600,000 $(13,431,842) $ (6,113,105)
========= =========== ============== ============== ============= ================ =============
</TABLE>

See accompanying notes.

F-5

<PAGE>

INGENEX, INC.
(a development stage company)

STATEMENT OF CASH FLOWS

Years ended December 31,
1994 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (4,883,601) $ (4,994,834)
Adjustments to reconcile net loss to net cash used in operating
activities
Amortization and depreciation 10,837 555
Amortization of debt discount - 600,000
Amortization of debt issue costs - 237,396
Common stock issued or subsequently issued in exchange
for consulting services and license agreements 136,055 -
Changes in operating assets and liabilities:
Prepaid sponsored research 54,107 76,844
Due from parent 324,136 -
Other current assets (16,198) 16,198
Other assets - 14,323
Accounts payable 275,134 (33,007)
Accrued sponsored research 414,364 (325,202)
Other accrued liabilities 61,878 156,316
---------- ----------
Net cash used in operating activities (3,623,288) (4,251,411)
---------- ----------

Cash flows from investing activities
Purchase of furniture and equipment - (4,315)
---------- ----------
Net cash used in investing activities - (4,315)
---------- ----------

Cash flows from financing activities
Proceeds from notes payable to related parties - -
Payments of notes payable to related parties - -
Net proceeds from issuance of preferred stock 3,199,017 -
Proceeds from issuance of common stock 816 823
Payable to parent 1,113,797 720,883
Proceeds from technology financing - 2,000,000
Payment of principal on technology financing - (216,580)
Proceeds from bridge financing - 1,500,000
Payment of principal on bridge financing - -
Deferred offering costs - (25,000)
Deferred financing costs - (380,000)
---------- ----------
Net cash provided by financing activities 4,313,630 3,600,126
---------- ----------

Net increase (decrease) in cash and cash equivalents 690,342 (655,600)
Cash and cash equivalents, beginning of period 3,196 693,538
---------- ----------
Cash and cash equivalents, end of period $ 693,538 $ 37,938
========== ==========
Supplemental cash flow disclosure
Forgiveness of note payable to a related party $ 10,000 $ -
========== ==========
Issuance of Series A preferred stock for settlement
payable to Parent $ 3,365,585 $ -
========== ==========
Interest paid $ - $ 233,720
========== ==========
</TABLE>

<PAGE>

(RESTUBED FROM ABOVE)

Period from Period from
Commencement Commencement
of Operations of Operations
(July 25, 1991) to (July 25, 1991) tro
December 31, Three Months Ended March 31, March 31,
1995 1995 1996 1996
- --------------------------- ---------- ---------- ---------------------
(unaudited) (unaudited) (unaudited)

<C> <C> <C> <C>
$ (12,528,104) $ (1,088,018) $ (903,738) $ (13,431,842)

14,101 - 443 14,544
600,000 - - 600,000
237,396 7,708 11,565 248,961

136,055 - - 136,055

- 12,207 - -
- - - -
- - (54,137) (54,137)
(13,546) 14,323 - -
376,172 (26,995) (108,826) 267,346
197,622 (200) (197,622) -
248,291 25,104 (22,109) 226,182
- --------------------------- ------------ ---------- ---------------------
(10,732,013) (1,055,871) (1,274,424) (11,992,891)
- --------------------------- ------------ ---------- ---------------------

(4,315) - (1,561) (19,423)
- --------------------------- ------------ ---------- ---------------------
(4,315) - (1,561) (19,423)
- --------------------------- ------------ ---------- ---------------------

435,000 - - 435,000
(425,000) - - (425,000)
3,199,017 - - 3,199,017
8,030 - 50 8,080
4,678,799 - 2,869,852 7,548,651
2,000,000 (182,922) - 2,000,000
(216,580) 2,000,000 (156,855) (373,434)
1,500,000 (26,135) - 1,500,000
- - (1,500,000) (1,500,000)
(25,000) (46,664) 25,000 -
(380,000) (185,000) - (380,000)
- --------------------------- ------------- ---------- ---------------------
10,774,266 1,559,279 1,238,047 12,012,314
- --------------------------- ------------- ---------- ---------------------

37,938 503,408 (37,938)
- 693,538 37,938 $ -
- --------------------------- ------------- ---------- ---------------------
$ 37,938 $ 1,196,946 $ - $ -
=========================== ============= ========== =====================

$ 10,000 $ - $ - $ 10,000
=========================== ============= ========== =====================
$ 3,365,585 $ - $ - $ 3,365,585
=========================== ============= ========== =====================

$ 233,720 $ 47,715 $ 151,145 $ 384,865
=========================== ============= ========== =====================

</TABLE>

See accompanying notes

F-6

<PAGE>

Ingenex, Inc.
(a development stage company)
Notes to Financial Statements
(Information at March 31, 1996 and for the three month periods ended
March 31, 1995 and 1996 is unaudited)

1. Organization and Summary of Significant Accounting Policies

The Company

Ingenex, Inc. (the "Company") is a biopharmaceutical company engaged in
the development of proprietary gene-based therapies and the application of
functional genetics to pharmaceutical discovery. The Company's initial
commercial strategy is to develop gene therapy products for the oncology
market. The Company is currently a majority-owned subsidiary of Titan
Pharmaceuticals, Inc. ("Titan" or "Parent").

The Company is dependent on its Parent to provide working capital,
facilities and equipment and certain administrative, financial, regulatory,
business development and human resource services. The Company and the Parent
have members of boards of directors in common. The Company also depends on
third parties for the license of certain technologies and for sponsored
research. All of the Company's current products under development are the
subject of license agreements which will require the payment of future
royalties.

Basis of Presentation

The Company's activities since incorporation have primarily consisted of
establishing its offices and research facilities, recruiting personnel,
conducting research and development, performing business and financial
planning and raising capital. Accordingly, the Company is considered to be in
the development stage and expects to incur increasing losses and require
additional financial resources to achieve commercialization of its products.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since inception, the Company has
incurred cumulative net operating losses of approximately $12.5 million and
has a working capital deficiency of approximately $4.1 million as of December
31, 1995. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management expects the Company to incur
additional losses for the next several years and recognizes the need for an
infusion of cash during 1996. The Parent has committed to funding the Company
in the amount of $2.6 million in addition to repayment of the bridge
financing. The Company is actively pursuing various options which include
securing additional equity financing and believes that sufficient funding will
be available to achieve its planned business objectives. However, if the
Company is unable to obtain necessary cash, other more substantial
restructuring options may be necessary, which would have a material adverse
effect on the Company's business, results of operations and prospects. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result.

In September of 1994, the Company effected a 1.875-for-one split of all
outstanding common and preferred stock. In May 1995, the Company effected a
3.4389-for-one reverse stock split of the Company's Series A convertible
preferred stock and common stock, and a 2.3288-for-one reverse stock split of
the Company's Series B convertible preferred stock. All share and per share
amounts included in the accompanying financial statements have been
retroactively adjusted to reflect the stock split and reverse stock splits.

Interim Financial Information

The financial information at March 31, 1996 and for the three months ended
March 31, 1995 and March 31, 1996 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the financial position at such date and
of the operating results and cash flows for those periods. Results of the 1996
interim period are not necessarily indicative of results expected for the
entire year.

F-7

<PAGE>

Ingenex, Inc.
(a development stage company)
Notes to Financial Statements
(Information at March 31, 1996 and for the three month periods ended
March 31, 1995 and 1996 is unaudited)

Cash and Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments with a maturity from
date of purchase of 90 days or less to be cash equivalents. At December 31,
1994 and 1995, the Company had $662,935 and $7,244, respectively, in money
market mutual funds which invest in various U.S. government securities
including Treasury bills, notes and bonds. The funds seek to maintain a
constant $1 net asset value per share. These amounts are included in cash and
cash equivalents.

The Company's investment policy is to maintain liquidity and ensure the
safety of principal.

Furniture and Equipment

Furniture and equipment is stated at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets ranging
from three to five years.

Revenue

Revenue consists of revenue from government grants which support the
Company's research effort in specific research projects. These grants
generally provide for reimbursement of approved costs incurred as defined in
the various agreements. Revenues are recognized as earned.