GENVEC INC, S-1, 1998-04-30

GENVEC INC
S-1, 1998-04-30
PHARMACEUTICAL PREPARATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998.

REGISTRATION NO. 333-

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

GENVEC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

DELAWARE 2834 23-2705690
(STATE OF INCORPORATION) (PRIMARY STANDARD (I.R.S. EMPLOYER
INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
CODE NUMBER)

GENVEC, INC.
12111 PARKLAWN DRIVE
ROCKVILLE, MARYLAND 20852
(301) 816-0396
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

DR. PAUL H. FISCHER
CHIEF EXECUTIVE OFFICER
GENVEC, INC.
12111 PARKLAWN DRIVE
ROCKVILLE, MARYLAND 20852
(301) 816-0396
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

COPIES TO:
PAGE MAILLIARD, ESQ. LESLIE E. DAVIS, ESQ.
NAN H. KIM, ESQ. KATHY A. FIELDS, ESQ.
WILSON SONSINI GOODRICH & ROSATI TESTA, HURWITZ & THIBEAULT, LLP
PROFESSIONAL CORPORATION HIGH STREET TOWER
650 PAGE MILL ROAD 125 HIGH STREET
PALO ALTO, CALIFORNIA 94304-1050 BOSTON, MASSACHUSETTS 02110
(650) 493-9300 (617) 248-7000
---------------

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

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

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 any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is 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
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value per share........ 2,875,000 $13.00 $37,375,000 $11,025.63
</TABLE>
==============================================================================
(1) Includes 375,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any. Also reflects the proposed 5.9 for 1
reverse stock split of the Company's Common Stock, subject to stockholder
approval, which is anticipated to be consummated prior to the closing of
the offering contemplated hereby.
(2) Estimated solely for the purposes of computing the amount of the
registration fee in accordance with Rule 457(a).

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>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 30, 1998

[GENVEC LOGO]

2,500,000 SHARES

COMMON STOCK

All of the 2,500,000 shares of Common Stock offered hereby are being sold by
GenVec, Inc. ("GenVec" or the "Company"). Prior to this offering, there has
been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for information relating to the method of
determining the initial public offering price.

Warner-Lambert Company ("Warner-Lambert") is a party to a strategic alliance
with the Company. Pursuant to an existing agreement with the Company, Warner-
Lambert has agreed to purchase $5,000,000 of the Company's Common Stock in a
private transaction concurrent with this offering at a price per share equal to
125% of the initial public offering price. See "Business--Strategic Alliances--
Corporate Collaborations--Warner-Lambert Company."

-----------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.

-----------

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

================================================================================
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
- --------------------------------------------------------------------------------
Total(3)................................... $ $ $
</TABLE>
================================================================================
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $900,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 375,000 shares of Common Stock solely to cover over-
allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $___, $___ and $___, respectively.

-----------

The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about _____, 1998.

BANCAMERICA ROBERTSON STEPHENS

J.P. MORGAN & CO.

SALOMON SMITH BARNEY

The date of this Prospectus is , 1998
<PAGE>

TREATMENT OF CORONARY ARTERY DISEASE WITH GENE THERAPY

GenVec's lead product candidate, BIOBYPASS angiogen, is designed to induce
new blood vessel formation in tissues with inadequate blood flow. In December
1997, the Company initiated a Phase I/II clinical trial with BIOBYPASS
angiogen for direct injection into the hearts of patients with coronary artery
disease who are undergoing coronary artery bypass graft surgery. The Company
also intends to commence a Phase I/II clinical trial in patients with
peripheral vascular disease in May 1998.

[PICTURE: ANGIOGRAMS OF PIG HEARTS: CONTROL AND BIOBYPASS ANGIOGEN]

BIOBYPASS angiogen was evaluated in a pig model of coronary artery disease.
Blood flow through the left circumflex artery of the pig heart was blocked
with an ameroid constrictor, shown in the upper left corners of both images.
In a single procedure three weeks later, the hearts received multiple
injections around the blockage site with either BIOBYPASS angiogen or a
control. The coronary angiograms above were taken four weeks after the
injections. In the treated heart, BIOBYPASS angiogen induced the formation of
new blood vessels, and refilling of the left circumflex artery beyond the area
of blockage was observed (figure 2). In contrast, no filling of the circumflex
artery was visible in the control case (figure 1). These and other preclinical
data have shown that administration of BIOBYPASS angiogen to the heart
increased the number of blood vessels, improved blood flow and restored
cardiac contractility to normal. See "Risk Factors--Uncertainties Related to
Clinical Development."

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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
OF THE COMPANY 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.

2
<PAGE>

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

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 26
Management............................................................... 46
Certain Transactions..................................................... 54
Principal Stockholders................................................... 55
Description of Capital Stock............................................. 57
Shares Eligible For Future Sale.......................................... 60
Underwriting............................................................. 62
Legal Matters............................................................ 63
Experts.................................................................. 63
Additional Information................................................... 64
Index to Financial Statements............................................ F-1
</TABLE>

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BIOBYPASS is a trademark of the Company, and the term angiogen is used to
refer to an angiogenic agent. Tradenames and trademarks of other companies
appearing in this Prospectus are the property of their respective holders.

The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent certified public accounting
firm and quarterly reports containing unaudited interim financial information
for each of the first three quarters of each year.

The Company was incorporated in Delaware in 1992. The Company's executive
offices are located at 12111 Parklawn Drive, Rockville, Maryland 20852, and
its telephone number is (301) 816-0396.

3
<PAGE>

SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," and the Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors" and elsewhere in this Prospectus.

THE COMPANY

GenVec focuses on the development and commercialization of novel gene therapy
products for major disease markets. GenVec's lead product candidate, BIOBYPASS
angiogen, is designed to induce angiogenesis, or new blood vessel formation, in
tissues with inadequate blood flow. BIOBYPASS angiogen uses an adenovirus
vector to deliver and express the gene for vascular endothedial growth factor-
121 ("VEGF/121/"). BIOBYPASS angiogen is being developed for the treatment
of coronary artery disease ("CAD") and peripheral vascular disease ("PVD"), and
is intended to be used either alone or as an adjunct to existing surgical
procedures. In December 1997, the Company initiated a Phase I/II clinical trial
with its BIOBYPASS angiogen for direct injection into the hearts of patients
with CAD who are undergoing coronary artery bypass graft ("CABG") surgery. The
Company also intends to commence a Phase I/II clinical trial in patients with
PVD in May 1998. The Company has entered into a collaboration with the Warner-
Lambert Company ("Warner-Lambert") to develop and commercialize BIOBYPASS
angiogen and other gene therapy products for therapeutic angiogenesis. Under
the terms of the collaboration, Warner-Lambert may pay to the Company a total
of more than $100 million in milestone payments, research funding, equity
purchases and technology access fees, if specified milestones are achieved. As
of April 20, 1998, Warner-Lambert had paid to the Company $13.5 million under
this collaboration, and had purchased $2.0 million of the Company's stock.

Additionally, GenVec is developing product candidates and vector technology
in the areas of cardiovascular disease, oncology and neurology. For the
treatment of restenosis associated with angioplasty and vascular damage
associated with arteriovenous ("A-V") grafts, GenVec is developing Ad.iNOS, an
adenovirus vector containing the inducible nitric oxide synthase ("iNOS") gene.
In oncology, GenVec is developing Ad.TNF(alpha) under a collaboration agreement
with Varian Associates, Inc. ("Varian"). Ad.TNF(alpha), an adenovirus vector
containing the tumor necrosis factor alpha ("TNF(alpha)") gene, is designed to
enhance the effectiveness of radiation therapy without increasing toxicity to
normal tissue. In collaboration with Fuso Pharmaceutical Industries, Ltd.
("Fuso"), GenVec is developing Ad.CD and is conducting research on immunotherapy
of cancer based on the delivery of tumor antigen genes. Ad.CD, an adenovirus
vector containing the cytosine deaminase ("CD") gene, is designed to convert a
nontoxic precursor drug into fluorouracil to effect tumor destruction, either
alone or in combination with radiation therapy. In neurology, GenVec intends to
develop product candidates through the application of its herpes simplex virus
("HSV") vector technology.

To customize gene therapy products for specific medical needs, GenVec is
developing vectors for cell-specific gene delivery and promoters which regulate
the level and duration of gene expression. GenVec's technology portfolio
includes: (i) therapeutic genes such as VEGF/121/, iNOS, TNF(alpha) and CD; (ii)
vector systems such as adenovirus and HSV; (iii) receptor mediated targeting
technology and (iv) tissue-specific and inducible promoters.

GenVec intends to successfully develop and commercialize product candidates
by applying the following business strategies: (i) enhance leadership in
therapeutic angiogenesis; (ii) expand its portfolio of products under
development; (iii) broaden its technology platform; (iv) strengthen product
development through corporate collaborations and (v) maintain and expand
intellectual property strength.

4
<PAGE>

THE OFFERING

<TABLE>
<C> <S>
Common Stock Offered by the Company.......... 2,500,000 shares
Common Stock Outstanding after the Offering.. 9,857,784 shares (1)
Use of Proceeds.............................. For research and development,
clinical trials, capital
expenditures, working capital
and general corporate purposes,
including possible acquisitions
of complementary technology,
products or businesses. See "Use
of Proceeds."
Proposed Nasdaq National Market Symbol....... GNVC
</TABLE>

SUMMARY FINANCIAL DATA
(in thousands, except per share data)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- --------------------
1995 1996 1997 1997 1998
------- ------- -------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................... $ 1,005 $ 698 $10,188 $ -- $ 3,688
Operating expenses:
Research and development.. 6,500 6,355 8,986 1,614 3,093
General and
administrative........... 2,025 2,947 2,720 550 739
Total operating expenses.... 8,967 9,302 11,706 2,164 3,832
Interest income, net........ 413 496 263 74 115
------- ------- -------- --------- ---------
Net loss.................... $(7,549) $(8,108) $ (1,255) $(2,090) $ (29)
======= ======= ======== ========= =========
Pro forma basic net loss per
share (2).................. $ (0.18) $(0.01)
======== =========
Shares used in computing pro
forma basic
net loss per share (2)..... 6,999 7,019
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED (3)
-------- ---------------
(unaudited)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term
investments........................................ $ 7,262 $ 39,262
Working capital..................................... 7,883 39,883
Total assets........................................ 10,692 42,692
Accumulated deficit................................. (28,889) (28,889)
Total stockholders' equity ......................... 8,639 40,639
</TABLE>
- --------
(1) Based on number of shares of Common Stock outstanding as of March 31, 1998.
Includes 333,333 shares of Common Stock to be sold to Warner-Lambert at an
assumed price of $15.00 per share. Excludes (i) 1,105,955 shares of Common
Stock issuable upon exercise of outstanding options as of March 31, 1998,
at a weighted average exercise price of $1.95 per share and (ii) 320,416
shares of Common Stock issuable upon exercise of outstanding warrants as of
March 31, 1998, at a weighted average exercise price of $12.65 per share.
(2) See Note 2 of Notes to Financial Statements for a description of the
computation of pro forma basic net loss per share.
(3) As adjusted to give effect to (i) the conversion of all issued and
outstanding shares of Preferred Stock into 6,042,263 shares of Common Stock
upon the completion of this offering; (ii) the sale of 2,500,000 shares of
Common Stock offered hereby at the assumed initial public offering price of
$12.00 per share and (iii) the sale of 333,333 shares of Common Stock to
Warner-Lambert at an assumed price of $15.00 per share. See "Use of
Proceeds" and "Capitalization."

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

Unless otherwise indicated, all information in this Prospectus (i) has been
adjusted to give effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock and the conversion of all outstanding
warrants to purchase shares of Preferred Stock into warrants to purchase Common
Stock upon the completion of this offering; (ii) has been adjusted to give
effect to a proposed 5.9 for 1 reverse split of the shares of Common Stock and
Preferred Stock, which is subject to stockholder approval (the "Reverse Split")
and (iii) assumes no exercise of the Underwriters' over-allotment option. See
"Capitalization" and "Underwriting."

5
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus.

UNCERTAINTIES RELATED TO CLINICAL DEVELOPMENT

Before obtaining regulatory approvals for the commercial sale of its product
candidates, including its BIOBYPASS angiogen, the Company or its corporate
collaborators will be required to demonstrate through preclinical studies and
clinical trials that the product candidates are safe and effective for use in
each target indication. To date, the Company's product candidates have only
undergone limited preclinical evaluation and in some cases, initial clinical
testing. There can be no assurance that the Company will obtain authorization
for human clinical testing of any of its products currently in research or
preclinical development or for further testing of products in clinical trials.
In addition, the results from preclinical studies and early clinical trials
may not be predictive of results that will be obtained in large-scale testing,
and there can be no assurance that the clinical trials conducted by the
Company or its collaborators will demonstrate sufficient safety and efficacy
to obtain the required regulatory approvals. Further, the Company or
regulatory authorities may suspend clinical trials at any time if it is
thought that the participants are being exposed to unacceptable health risks.
Even after regulatory approval, a product may later be shown to be unsafe or
not to have its purported effect, preventing its widespread use or requiring
its withdrawal from the market and exposing the Company to potential product
liability. The Company has limited experience conducting clinical trials and
intends to rely primarily on its corporate collaborators for clinical testing
of its product candidates.

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

UNCERTAINTIES RELATED TO GENE THERAPY

The Company's products are subject to risks particular to the development of
gene therapy products. Gene therapy is a new and rapidly evolving medical
approach, whose safety and efficacy have not been demonstrated on a widespread
basis. Data relating to the Company's specific approaches to gene therapy are
also limited. Product development involving new therapies is highly uncertain,
and gene therapy generally, or the Company's specific gene therapy products,
may prove to have undesirable and unintended side effects, show unacceptable
toxicity, trigger immune responses, demonstrate inadequate therapeutic
efficacy, or have other characteristics that may prevent or limit their
commercial use.

The Company's product candidates, including its BIOBYPASS angiogen and its
gene delivery technologies, are in the early developmental stage and require
significant additional research and development, testing and regulatory
approval. To date no gene therapy products have been successfully manufactured
on a large scale or commercialized by the Company or others. The Company's
development of products will be subject to other risks of failure including,
among others, the possibilities that any such products will be found to be
ineffective or toxic, or otherwise fail to receive necessary regulatory
approvals; that any of the products, if safe and effective, will prove
difficult or impossible to manufacture on a large scale

6
<PAGE>

or will be uneconomical to market; that the proprietary rights of third
parties will preclude the Company or its collaborators from marketing any
products developed; that the products will fail to achieve market acceptance;
and that third parties will market equivalent or superior products. As a
result, there can be no assurance that the Company or its collaborators will
be able to develop, manufacture and successfully commercialize the Company's
product candidates within a reasonable time frame or ever. Failure to develop
successfully the Company's current product candidates would materially and
adversely affect the Company's business, financial condition and results of
operations.

RELIANCE ON WARNER-LAMBERT AND OTHER CORPORATE COLLABORATORS

The Company's strategy for development and commercialization of therapeutic
products depends, in large part, upon the formation of multiple corporate
collaborations and licensing arrangements with third parties. The Company has
established a corporate collaboration with Warner-Lambert in the area of
therapeutic angiogenesis, and has granted Warner-Lambert the right to conduct
research, development, marketing, commercialization and certain manufacturing
activities relating to gene therapy products incorporating the vascular
endothelial growth factor ("VEGF") gene for therapeutic angiogenesis.
Accordingly, the Company is substantially dependent on Warner-Lambert for the
development, funding and commercial success of any of its therapeutic
angiogenesis product candidates, including BIOBYPASS angiogen. In addition,
payments from Warner-Lambert are expected to constitute a substantial portion
of the Company's revenues for the next several years. The Warner-Lambert
agreement may be terminated by either party for breach. The research program
under the Warner-Lambert agreement may be terminated by Warner-Lambert on six
months prior written notice after July 21, 2000, in which event Warner-Lambert
would have no further research funding obligation to the Company. If Warner-
Lambert were to terminate its agreement with the Company or otherwise fail to
conduct its collaborative activities successfully and in a timely manner, the
preclinical and clinical development or commercialization of BIOBYPASS
angiogen, or any other potential therapeutic angiogenesis product candidates,
would be delayed or terminated. Any such delay or termination could have a
material adverse effect on the Company's business, financial condition and
results of operations. The success of the corporate collaboration with Warner-
Lambert will depend in part upon Warner-Lambert's own competitive, marketing
and strategic considerations, including the relative advantages of alternative
products being developed and marketed by Warner-Lambert and its competitors.
If Warner-Lambert is unsuccessful in commercializing any product candidate for
any reason, the Company's business, financial condition and results of
operations could be materially adversely affected.

The Company has also entered into strategic alliances with Fuso in certain
areas of oncology, and Varian in the area of radiation therapy. Each of these
and any other strategic alliances requires time, resources and management
attention. The Company's strategy includes entering into multiple, concurrent
corporate collaborations. There can be no assurance that the Company will
successfully manage simultaneous collaborative programs. Failure by the
Company to manage existing and future strategic alliances, maintain
confidentiality among corporate collaborators or prevent the occurrence of
conflicts among corporate collaborators could lead to disputes that result in,
among other things, a significant strain on management resources, legal claims
involving significant time, expense and loss of reputation, loss of capital or
loss of revenues, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover,
the Company has received substantially all of its revenues since inception
from its corporate collaborators and expects to continue to do so in the near
term. There can be no assurance that the Company will successfully establish
additional corporate collaborations or licensing arrangements in the future
under terms acceptable to the Company or that any future corporate
collaborations or licensing arrangements will ultimately be successful.
Failure of the Company to enter into additional corporate collaborations could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company intends to rely primarily on corporate collaborators for
preclinical studies, clinical development, regulatory approval, manufacturing
and marketing of its gene therapy products, if any. Agreements with corporate
collaborators typically allow such collaborators significant discretion in
electing

7
<PAGE>

whether to pursue any of these activities. The Company cannot control the
amount and timing of resources its corporate collaborators may devote to the
Company's programs or potential products, and there can be no assurance that
such collaborators will perform their obligations as expected. A corporate
collaborator's performance under its agreement with the Company could be
materially adversely affected if such collaborator were involved in certain
third-party transactions such as a business combination or in the event that
the corporate collaborator experienced a significant strategic shift in its
business focus. If any corporate collaborator were to breach its agreement
with the Company, otherwise fail to conduct its collaborative activities in a
timely manner or terminate the collaboration agreement early, such action
could have a material adverse effect on the Company's business, financial
condition and results of operations. The failure of a collaborator to develop
or commercialize a product to which it has rights could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Under its current corporate collaborations, the Company has agreed not to
conduct certain research, independently or with other third parties, that is
in the same field as the research conducted under the collaboration agreement.
Consequently, such arrangements have the effect of limiting the areas of
research the Company may elect to pursue, either alone or with others. There
can be no assurance that a corporate collaborator will not develop, either
alone or with others, alternative technologies or products which are
competitive with any that might result from the Company's research program
with the corporate collaborator. Possible disagreements between the Company
and its corporate collaborators, including disputes relating to the ownership
of rights to any technology developed with third parties, could lead to delays
in collaborative research, development or commercialization of certain
products or could require or result in litigation or arbitration, which would
be time consuming and expensive, and could have a material adverse effect on
the Company's business, financial condition and results of operations.

EARLY STAGE OF COMPANY DEVELOPMENT; LIMITED EXPERIENCE

The Company is at an early stage of development and has limited resources
and operating experience. To date, the Company has no experience with respect
to conducting late stage clinical trials, obtaining regulatory approvals for
product commercialization, marketing, product sales and large-scale
manufacturing. The Company will depend, to a significant extent, on the
resources and experience of corporate collaborators in these and related
areas. There can be no assurance that the Company will be able to enter into
arrangements with corporate collaborators on acceptable terms, if at all.
Failure to enter into acceptable collaborative arrangements, or the failure of
collaborators to provide the Company with adequate resources and experience,
may have a material adverse effect on the Company's ability to develop and
deliver products on a timely and competitive basis, if at all. To the extent
the Company directly engages in the late stage clinical trials, marketing,
sales and large-scale manufacturing of its product candidates, it will require
substantial additional funds, personnel and production facilities.

INTELLECTUAL PROPERTY

The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including the Company, are generally uncertain and involve complex
legal and factual questions. In addition, patent law, and particularly patent
law relating to the gene therapy field, is still evolving. Development and
commercialization of the Company's product candidates and any potential
products will require, among other things, the integration of genes, vectors
and promoters with a delivery mechanism and the development of commercially
viable manufacturing processes. The Company's commercial success will be
dependent in part upon achieving such integration and development without
infringing the proprietary rights of others and upon obtaining intellectual
property protection that will give the Company's products an exclusive market
position.

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components. There can be no assurance that third parties will not develop
products using such components that compete with the Company's potential
products.

There can be no assurance that any of the pending patent applications owned
or licensed by the Company contain patentable and enforceable claims or will
result in valid issued patents, that the claims of any issued patents or any
patents issued in the future are valid and enforceable and will provide
meaningful protection, that the Company or its collaborators will develop
additional proprietary technologies that are patentable, or that any patents
now or in the future licensed or issued to the Company or its collaborators
will provide a basis for commercially viable products or will provide the
Company with any competitive advantages. Furthermore, there can be no
assurance that others will not independently develop similar or alternative
technologies, duplicate any of the Company's technologies, or, if patents are
licensed or issued to the Company, design around or otherwise circumvent the
patented technologies or other intellectual property licensed to or developed
by the Company. For example, while the Company has an exclusive license under
two United States patents relating to the VEGF/121/ gene and the use
thereof for gene therapy applications, third parties have patents for other
forms of the VEGF gene and such third parties or their licensees may develop
products using such other forms of the VEGF gene. There can be no assurance
that products based on such other forms of the VEGF gene or based upon other
growth factors will not be functionally equivalent to or better than the
Company's proposed products, or that such other products will not be more
commercially successful than any products commercialized by the Company or its
collaborators for other reasons, such as superior marketing or lower costs.
Similarly, other parties hold patents for other nitric oxide synthase, tumor
necrosis factor and CD genes. Patents and patent applications of the Company,
its collaborators and its licensors may become involved in interferences,
oppositions or similar proceedings, and there can be no assurance that such
patents and patent applications will survive, in whole or in part, such
proceedings. No assurance can be given that patents issued to the Company, its
collaborators or its licensors, if any, will not be contested, narrowed,
revoked or invalidated. Academic collaborators and the U.S. government may
retain certain rights in intellectual property, including patents and patent
applications, developed by such academic collaborators.

While the Company has not conducted freedom to use patent searches on
aspects of its product candidates and potential products and may therefore be
unaware of relevant patents and patent applications of third parties, the
Company is aware of several United States patents and patent applications and
foreign patents and patent applications owned by third parties relating to
gene therapy, promoters, cell lines, vectors and delivery mechanisms which do
or may cover aspects of the Company's product candidates and potential
products or their use, or manufacture including BIOBYPASS angiogen, as well as
other aspects of the Company's technology. Because patent applications are
maintained in secrecy in the United States, the Company cannot be certain that
third parties have not filed applications relating to technology being
developed by the Company or its collaborators or technology covered by patents
or patent applications of the Company, its collaborators or its licensors.
Certain third-party patent applications contain broad claims, and it is not
possible to determine whether or not such claims will be narrowed during
prosecution or will issue as patents, even if the claims appear to encompass
prior art or have other defects. The Company, its collaborators or its
licensors may choose to oppose or challenge third-party patents and patent
applications and such an opposition or challenge can be expensive and time
consuming. There can be no assurance that any opposition or challenge will be
successful. There can also be no assurance that the development, manufacture,
use, offer for sale, sale or importation of the Company's product candidates
and potential products by the Company or its collaborators will not infringe
claims of these or other issued patents, or claims that may issue from these
or other applications or that a third party will not threaten or file an
infringement action.

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<PAGE>

interference proceeding and could become involved in additional interference
proceedings declared by the United States Patent and Trademark Office or
opposition proceedings in a foreign patent office. Patent infringement actions
and other intellectual property litigation, as well as participation in
interference or opposition proceedings, can be expensive and time-consuming,
even in those instances in which the outcome is favorable to the Company.
There can be no assurance that the Company or its collaborators will prevail
in any such litigation or proceedings. The Company and its licensors obtain
intellectual property, including biological material and know-how, from third
parties pursuant to various agreements and arrangements. Third parties may
challenge the intellectual property rights of the Company or its licensors or
claim ownership of intellectual property developed by the Company or its
collaborators. The Company could incur substantial expenses in contesting such
claims, whether successful or not.

The Company has certain licenses and believes that it or its collaborators
will be required to obtain additional licenses under third-party patents and
patent applications to continue research and development and to commercialize
the Company's product candidates and potential products, and there can be no
assurance that any such license will be made available on commercially viable
terms, if at all. In addition, licensors may terminate existing or future
license agreements, or terminate the exclusive nature of such agreements, if
the Company fails to meet specified milestones or other events. Any
termination of a license, or any failure of the Company or its collaborators
to obtain any required license on reasonable terms or at all, or the failure
to maintain the exclusivity of the Company's exclusive licenses, could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's product candidates and potential products
will require several components that may each be the subject of a license
agreement. The cumulative license fees and royalties for these components may
make the commercialization of such product candidates and potential products
uneconomical.

The Company may rely on trade secret protection and confidentiality
agreements to protect its interests. There can be no assurance that
proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information or
otherwise gain access to the Company's trade secrets, or that the Company can
meaningfully protect its trade secrets. Any material leak of confidential
information into the public domain or to third parties may have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Intellectual Property."

INTENSE COMPETITION

Competition among entities attempting to identify and develop new therapies
is intense. The Company faces, and will continue to face, competition from
pharmaceutical and biotechnology companies, academic and research institutions
and government agencies, both in the United States and abroad. Many of the
Company's competitors have substantially greater capital resources, research
and development staffs, facilities, manufacturing and marketing experience,
distribution channels and human resources than the Company. Future competition
will likely come from existing competitors (including competitors with rights
to proprietary forms of the VEGF gene and other genes the Company currently
uses in its product candidates), as well as other companies seeking to develop
new treatments. Competitors or their academic collaborators may identify
important genes or delivery mechanisms before the Company, or develop gene
therapies that are more effective than those developed by the Company or its
corporate collaborators, or obtain regulatory approvals of their drugs more
rapidly than the Company or its corporate collaborators. Moreover, there can
be no assurance that the Company's competitors will not obtain patent
protection or other intellectual property rights that would limit the
Company's or its collaborators' ability to use the Company's gene therapy
technologies. Any of these events could materially and adversely affect the
Company's business, financial condition and results of operations.

The Company will rely on its corporate collaborators for support of certain
of its enabling technologies and intends to rely on its corporate
collaborators for preclinical and clinical development of related potential
products and the manufacturing and marketing of such products. Generally, the
Company's strategic alliance agreements do not preclude the corporate
collaborator from pursuing development efforts utilizing approaches distinct
from that which is the subject of the alliance. Product candidates of the
Company,

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<PAGE>

therefore, may be subject to competition with a potential product under
development by a corporate collaborator. See "--Reliance on Warner-Lambert and
Other Corporate Collaborators."

Rapid technological development by the Company or others may result in
products or technologies becoming obsolete before the Company recovers
development expenses. Products developed by the Company could be made obsolete
by less expensive or more effective technologies, even technologies unrelated
to gene therapy. For example, competitors may also develop small molecule,
protein, antisense or other therapeutic or surgical approaches that may
compete with or obviate the need for the Company's products. There can be no
assurance that the Company will be able to make the enhancements to its
technology necessary to compete successfully with existing or newly emerging
technologies.

MANUFACTURING LIMITATIONS

The Company has limited experience in manufacturing and currently lacks the
resources or capability to manufacture any of its product candidates on a
commercial scale. It currently has a research facility for the production of
its product candidates for preclinical purposes and relies on third-party
manufacturers of its product candidates for clinical purposes. For the
Company's lead product, BIOBYPASS angiogen, Warner-Lambert has the right to
fill and finish the final product. However, production of BIOBYPASS angiogen
for future clinical trials and possible commercialization is currently
intended to be performed primarily through a third-party manufacturer. The
Company currently intends to rely primarily on corporate collaborators and
third-party manufacturers for clinical and commercial purposes. If a third-
party manufacturer cancels or terminates an existing relationship or if the
Company is unable to contract for or obtain a sufficient supply of its product
candidates on acceptable terms, there could be significant reductions in sales
and delays in bringing the Company's product candidates to market, as well as
delays in the Company's clinical testing schedule, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, it is anticipated that production of the
Company's product candidates will be based in part on proprietary technology
of the Company. Successful technology transfer will be necessary. There can be
no assurance that manufacturers will abide by any limitations or
confidentiality restrictions on licenses with the Company. In addition, any
such manufacturer may develop process technology related to the manufacture of
the Company's compounds that such manufacturer owns either independently or
jointly with the Company. This would increase the Company's reliance on such
manufacturer or require the Company to obtain a license from such manufacturer
in order to have its products manufactured. There can be no assurance that any
such license would be available on terms acceptable to the Company, if at all.
Further, there can be no assurance that the arrangements with third-party
manufacturers will be successful.

Successful large-scale manufacturing of gene therapy products has yet to be
demonstrated by any third party, and it is anticipated that significant
process development changes will be necessary for the commercial process. For
example, changes in the current production process will be required for any
commercial manufacture of BIOBYPASS angiogen. There can be no assurance that
the Company or any third party will be able to manufacture commercial-scale
quantities of gene therapy products, or receive appropriate governmental
approvals.

In addition, the Company intends to continue to develop its own
manufacturing capability, which will require significant resources and will be
subject to ongoing government approval and oversight. There can be no
assurance that the Company's efforts in this regard will be successful. See
"Business--Manufacturing" and "Business--Government Regulation."

HISTORY OF OPERATING LOSSES; FUTURE CAPITAL REQUIREMENTS

The Company has incurred operating losses in each year since its inception,
and as of March 31, 1998, had an accumulated deficit of approximately $28.9
million. The Company expects that it will incur additional losses for at least
the next several years and that such losses will increase as the Company
expands its research

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<PAGE>

and development activities. The Company's losses to date have resulted
principally from costs incurred in research and development and from general
and administrative costs associated with the Company's operations.
Substantially all of the Company's revenues to date have been derived from
payments from corporate collaborations, and the Company expects that
substantially all of its revenues for the next several years will result from
payments from corporate collaborations. There can be no assurance that the
Company will be successful in entering into any new corporate collaboration
that results in revenues. The Company expects that it will be several years,
if ever, before the Company will recognize revenue from product sales or
royalties. Failure to achieve significant revenues or profitability would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The Company believes that the net proceeds from this offering and the sale
of shares to Warner-Lambert, existing cash and short-term securities and
anticipated cash flow from corporate collaborations will be sufficient to
support the Company's operations at least through 1999. However, this
expectation is based on the Company's current operating plan, which could
change as a result of many factors, and the Company could require additional
funding sooner than expected. In addition, the Company may choose to raise
additional capital due to market conditions or strategic considerations even
if it has sufficient funds for its operating plan. The Company's actual future
capital requirements and the adequacy of its available funds will depend on
many factors, including progress of its research and development programs, the
number and breadth of these programs, the results and timing of the Company's
clinical trials, the ability of the Company to establish and maintain
strategic alliance and licensing arrangements and the progress of the
development and commercialization efforts of the Company's corporate
collaborators. These factors also include the level of the Company's
activities relating to the development and commercialization rights it retains
in its corporate collaboration arrangements, competing technological and
market developments and the costs involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims and other intellectual property
rights.

The Company expects that it will require significant additional funding in
the future, which it may seek through public or private equity offerings, debt
financings or additional strategic alliance and licensing arrangements. Upon
the closing of this offering, the Company will have no credit facility or
other committed sources of capital. No assurance can be given that additional
financing or strategic alliances and licensing arrangements will be available
when needed, or that, if available, such financing will be obtained on terms
favorable to the Company or its stockholders. To the extent the Company raises
additional capital by issuing equity or convertible securities, ownership
dilution to stockholders will result. If adequate funds are not available when
needed, the Company may be required to curtail operations significantly or to
obtain funds by entering into strategic alliances and licensing arrangements,
in which case the Company may be required to relinquish rights to certain of
its technologies, discoveries or potential products, or to grant licenses on
terms that are not favorable to the Company, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Unavailability of adequate funds would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS

The Company is highly dependent on its scientific and management employees.
The Company also relies heavily on consultants to assist the Company in its
research and development programs. Attracting and retaining qualified
personnel and consultants is critical to the Company's success. The loss of
the services of any of these persons could significantly impede the
accomplishment of the Company's scientific and business objectives. The
Company's success is also dependent upon its ability to attract and retain
additional qualified scientific and managerial personnel. The Company is
actively recruiting additional personnel, including, without limitation, a
Chief Financial Officer. The Company faces substantial competition for
qualified individuals from numerous biotechnology, pharmaceutical and health
care companies, universities and other research organizations. The inability
of the Company to retain its current scientific and managerial personnel

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<PAGE>

and to attract and retain additional key employees and consultants could have
a material adverse effect on the Company's business, financial condition and
results of operations.

In addition, a significant portion of the Company's research and development
is conducted under sponsored research programs with several universities and
research institutions. The Company depends on the availability of a principal
investigator for such programs, and the Company cannot assure that any of
these individuals or their research staffs will be available to conduct
research and development for the Company. In addition, the Company's academic
collaborators are not employees of the Company. As a result, the Company has
limited control over their activities and can expect that only limited amounts
of their time will be dedicated to the Company's activities. The Company's
academic collaborators may have relationships with other commercial entities,
some of which could compete with the Company.

GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL

Prior to marketing, any products developed by the Company or its corporate
collaborators must undergo an extensive regulatory approval process in the
United States and other countries. This regulatory process, which includes
preclinical studies and clinical trials, and may include post-marketing
surveillance of each compound to establish its safety and efficacy, can take
many years and require the expenditure of substantial resources. Data obtained
from preclinical studies and clinical trials are subject to varying
interpretations that could delay, limit or prevent regulatory approval. Delays
or rejections may also be encountered based upon changes in FDA policies for
drug approval during the period of product development and FDA regulatory
review. Similar delays may also be encountered in obtaining regulatory
approval in foreign countries. Delays in obtaining regulatory approvals could
adversely affect the marketing of any drugs developed by the Company or its
corporate collaborators, impose costly procedures upon the Company's or its
corporate collaborators' activities, diminish any competitive advantages that
the Company or its corporate collaborators may attain and adversely affect the
Company's receipt of royalties. There can be no assurance that regulatory
approval will be obtained for products developed by the Company or its
corporate collaborators. Furthermore, regulatory approval may entail
limitations on the indicated uses of a proposed product. Because certain of
the Company's product candidates involve the application of new technologies
and may be based upon a new therapeutic approach, such products may be subject
to substantial additional review by various government regulatory authorities,
and, as a result, regulatory approvals may be obtained more slowly than for
products based upon more conventional technologies. The Company's product
candidates may require a delivery device and such product and device may be
subject to separate regulatory review, which could also delay regulatory
approval.

The Company believes that the commercial uses of its products will be
regulated as biologics by the FDA and comparable regulatory bodies of other
countries. Gene therapy is, however, a relatively new technology, and the
regulatory requirements governing gene therapy products are uncertain. This
uncertainty may result in excessive costs or extensive delays in the
regulatory approval process, adding to the already lengthy review process for
human therapeutic products in general. The Company is not aware of any gene
therapy products that have received marketing approval from the FDA or any
comparable regulatory body of any other country. The regulation of the
Company's products and its ongoing research is subject to change, and future
legislative or administrative acts in the United States or other countries
could have a material adverse effect on the Company's business, financial
condition and results of operations. Regulatory requirements ultimately
imposed could adversely affect the ability of the Company's corporate
collaborators to clinically test, manufacture or market products, and could
significantly delay or reduce the milestone or royalty payments payable to the
Company.

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<PAGE>

manufacturing practices ("GMP"), may result in various adverse consequences to
the Company, including the FDA's delay in approval or refusal to approve a
product, withdrawal of an approved product from the market or the imposition
of criminal penalties against the manufacturer and license holder. There can
be no assurance that the Company or its corporate collaborators will be able
to conduct clinical testing or obtain necessary approvals from the FDA or
other regulatory authorities for any products. Further, the terms of approval
of any marketing application, including the labeling content, may be more
restrictive than the Company desires and could affect the marketability of the
Company's proposed products. Failure to obtain required governmental approvals
will delay or preclude the Company or its corporate collaborators from
marketing products or limit the commercial use of such products and could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Government Regulation."

UNCERTAINTY RELATED TO PRICING AND REIMBURSEMENT

In both domestic and foreign markets, sales of the Company's product
candidates will depend in part upon the availability of reimbursement from
third-party payers, such as government health administration authorities,
managed care providers, private health insurers and other organizations. In
addition, other third-party payers are increasingly challenging the price and
cost effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
In many major markets outside the United States, pricing approval is required
before sales can commence. There can be no assurance as to what price can be
obtained or whether government-approved prices, once established, may not be
reduced in subsequent years. There can be no assurance that the Company's
product candidates will be considered cost effective or that adequate third-
party reimbursement will be available to enable the Company to maintain price
levels sufficient to realize an appropriate return on its investment in
product development. Legislation and regulations affecting pricing of medical
products may change before the Company's product candidates are approved for
marketing. Adoption of such legislation could further limit reimbursement for
medical products. If adequate coverage and reimbursement levels are not
provided by the government and third-party payers for the Company's potential
products, the market acceptance of these products would be adversely affected,
which would have a material adverse effect on the Company's business,
financial condition and results of operations.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company's quarterly operating results may fluctuate significantly as a
result of a variety of factors, including variations in payments received or
made by the Company under strategic alliances, which include milestone
payments, royalties, license fees and other revenues, changes in the research
and development budgets of the Company's corporate collaborators and any
potential collaborators, adoption of new technologies, manufacturing
results, regulatory actions, changes in the demand for the Company's product,
the timing of new product introductions, if any, and the introduction of new
products by the Company's competitors and other competitive factors. If
revenue in a particular period does not meet expectations, the Company may not
be able to adjust significantly its level of expenditures in such period,
which would have an adverse effect on the Company's operating results. The
Company believes that quarterly comparisons of its financial results will not
necessarily be a meaningful indication of future performance. Given these
factors, in some future quarter or quarters the Company's operating results
may be below the expectations of public market analysts and investors. In such
event, the price of the Company's Common Stock could be materially and
adversely affected.

RISKS ASSOCIATED WITH HAZARDOUS MATERIALS

The Company's research and development activities involve the controlled use
of certain biological and other hazardous materials, chemicals and various
radioactive materials. The Company is subject to federal, state and local laws
and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by federal, state and local laws and regulations, the

14
<PAGE>

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 liability could exceed the
resources of the Company and could have a material adverse effect on the
Company's business, financial condition and results of operations.

PRODUCT LIABILITY EXPOSURE

Clinical trials, manufacturing, marketing and sale of any of the potential
products of the Company or its corporate collaborators may expose the Company
to liability claims from the use of such products. Such risks exist even with
respect to products that are manufactured in licensed and regulated facilities
or that otherwise possess regulatory approval for commercial sale. Product
liability insurance coverage is expensive, difficult to obtain and may not be
available in the future on acceptable terms, if at all. There can be no
assurance that the Company or its corporate collaborators will be able to
obtain such insurance for commercial or other applications or, if obtained,
that sufficient coverage can be acquired at a reasonable cost. The inability
to obtain sufficient insurance coverage at an acceptable cost or to otherwise
protect against potential product liability claims could prevent or inhibit
the commercialization of pharmaceutical products developed by the Company or
its corporate collaborators. A product liability claim or recall would have a
material adverse effect on the Company's business, financial condition and
results of operations.

CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS

Upon completion of this offering, the Company's executive officers,
directors and affiliated individuals and entities together will beneficially
own approximately 50.5% of the outstanding shares of Common Stock (48.7% if
the Underwriters' over-allotment option is exercised in full). As a result,
these stockholders, acting together, will be able to exert significant
influence over most matters requiring approval by the stockholders of the
Company, including approvals of amendments to the Company's Certificate of
Incorporation, mergers, a sale of all or substantially all of the assets of
the Company, going private transactions and other fundamental transactions. In
addition, the Company's Certificate of Incorporation, as it is proposed to be
amended and restated concurrently with the closing of this offering (the
"Restated Certificate"), does not provide for cumulative voting with respect
to the election of directors. Consequently, the present executive officers,
directors and affiliated individuals and entities will be able to influence
significantly the election of the members of the Board of Directors of the
Company. Such a concentration of ownership could affect the liquidity of the
Company's Common Stock and have an adverse effect on the price of the Common
Stock, and may have the effect of delaying or preventing a change in control
of the Company, including transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices. See
"Principal Stockholders" and "Description of Capital Stock."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after this offering or that the
market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price will be determined by
negotiations between the Company and the Underwriters and is not necessarily
indicative of the market price at which the Common Stock of the Company will
trade after this offering. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price.

The market prices for securities of biotechnology and pharmaceutical
companies have been highly volatile, and the market has experienced
significant price and volume fluctuations that are often unrelated to the
operating performance of particular companies. Announcements of technological
innovations or new commercial products by the Company or its competitors,
disputes or other developments concerning proprietary rights, including
patents and litigation matters, developments concerning strategic alliance
agreements, publicity regarding actual or potential results with respect to
products or technology under

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<PAGE>

development by the Company, its corporate collaborators or its competitors,
regulatory developments in both the United States and foreign countries,
public concern as to the efficacy of new technologies, quarterly fluctuations
in the Company's operating results, future sales of substantial amounts of
Common Stock by existing stockholders and comments by securities analysts, as
well as general market conditions and other factors, may have a significant
impact on the market price of the Common Stock. In particular, the realization
of any of the risks described in these "Risk Factors" could have a material
adverse impact on such market price.

ANTI-TAKEOVER PROVISIONS

The Restated Certificate authorizes the Board of Directors of the Company,
without stockholder approval, to issue additional shares of Common Stock and
to fix the rights, preferences and privileges of and issue additional shares
of Preferred Stock with voting, conversion, dividend and other rights and
preferences that could adversely affect the voting power or other rights of
the holders of Common Stock. The issuance of Preferred Stock, rights to
purchase Preferred Stock or additional shares of Common Stock may have the
effect of delaying or preventing a change in control of the Company. In
addition, the possible issuance of Preferred Stock or additional shares of
Common Stock could discourage a proxy contest, make more difficult the
acquisition of a substantial block of the Company's Common Stock or limit the
price that investors might be willing to pay for shares of the Company's
Common Stock. Further, the Restated Certificate provides that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may
not be effected by written consent. Special meetings of the stockholders of
the Company may be called only by the Board of Directors, by the President of
the Company or by stockholders holding a majority of the shares outstanding
and entitled to vote. These and other provisions contained in the Restated
Certificate and the Company's Amended and Restated Bylaws, as well as certain
provisions of Delaware law, could delay or make more difficult certain types
of transactions involving an actual or potential change in control of the
Company or its management (including transactions in which stockholders might
otherwise receive a premium for their shares over then current market prices)
and may limit the ability of stockholders to remove current management of the
Company or approve transactions that stockholders may deem to be in their best
interests and, therefore, could adversely affect the price of the Company's
Common Stock. See "Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE AND POTENTIAL ADVERSE EFFECT ON MARKET PRICE

Future sales of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. Upon completion
of this offering, the Company will have 9,857,784 shares of Common Stock
outstanding, assuming no exercise of currently outstanding options or
warrants. Of these shares, the 2,500,000 shares sold in this offering (plus
any additional shares sold upon exercise of the Underwriters' over-allotment
option) will be freely transferable without restriction under the Securities
Act of 1933, as amended (the "Securities Act"), unless they are held by
"affiliates" of the Company as that term is used under the Securities Act and
the regulations promulgated thereunder. The remaining 7,357,784 shares of
Common Stock held by existing stockholders are "restricted securities" as that
term is defined in Rule 144 of the Securities Act (the "Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 or Rule 701
under the Securities Act. As a result of contractual restrictions and the
provisions of Rules 144 and 701, additional shares will be available for sale
in the public market as follows: (i) 49,748 Restricted Shares will be eligible
for immediate sale on the date of this Prospectus; (ii) 76,658 Restricted
Shares will be eligible for sale 90 days after the date of this Prospectus and
(iii) 7,231,378 Restricted Shares will be eligible for sale 180 days from the
date of this Prospectus upon expiration of their respective holding periods
under Rule 144.

16
<PAGE>

The holders of 6,375,891 shares of Common Stock and the holders of warrants
to purchase 211,864 shares of Common Stock have the right in certain
circumstances to require the Company to register their shares under the
Securities Act for resale to the public beginning 180 days from the date of
this Prospectus. If such holders, by exercising their demand registration
rights, cause a large number of shares to be registered and sold in the public
market, such sales could have an adverse effect on the market price for the
Company's Common Stock. If the Company were required to include in a Company-
initiated registration shares held by such holders and holders of an
additional 505,809 shares of Common Stock pursuant to the exercise of their
piggyback registration rights, such sales may have an adverse effect on the
Company's ability to raise needed capital. In addition, the Company expects to
file a registration statement on Form S-8 registering a total of 2,326,218
shares of Common Stock subject to outstanding stock options or reserved for
issuance under the Company's equity incentive plans. Such registration
statement is expected to be filed and to become effective 180 days after the
effective date of this offering. Shares registered under such registration
statement will, subject to Rule 144 volume limitations applicable to
affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions with the Company or the lock-up agreements
described above.

DILUTION; ABSENCE OF CASH DIVIDENDS

Purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
investment from the initial public offering price. Additional dilution will
occur upon exercise of outstanding options and warrants. The Company has never
paid any dividends and does not anticipate paying dividends in the foreseeable
future. See "Dilution," "Dividend Policy" and "Shares Eligible for Future
Sale."

YEAR 2000 COMPLIANCE

17
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of 2,500,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering
price of $12.00 per share, after deducting the estimated underwriting
discounts and commissions and offering expenses payable by the Company are
estimated to be approximately $27.0 million ($31.2 million if the
Underwriters' over-allotment option is exercised in full).

The Company intends to use the net proceeds from this offering and the sale
of shares to Warner-Lambert to expand laboratories, office and manufacturing
facilities and to purchase equipment (approximately $10.0 million), and to use
the remainder to fund its research and development activities, including the
therapeutic angiogenesis, vascular damage, oncology and neurology programs,
and for general corporate purposes. The Company's management will retain broad
discretion over the allocation of the net proceeds. The Company may also use a
portion of the net proceeds to fund acquisitions of complementary
technologies, products or businesses, although the Company has no current
agreements or commitments for any such acquisitions. Pending such uses, the
Company intends to invest the net proceeds of this offering in short-term,
interest-bearing, investment-grade securities.

The amounts actually expended for each purpose may vary significantly
depending upon numerous factors, including progress of the Company's product
programs, the number and breadth of these programs, future revenue growth, if
any, achievement of milestones under corporate collaborations and licensing
arrangements, the ability of the Company to establish and maintain corporate
collaborations and other arrangements, the progress of the development efforts
of the Company's corporate collaborators and the amount of cash, if any,
generated by the Company's operations. Such factors also include the pace and
amount of any acquisitions or investments, and competing technological and
market developments that make the Company's technologies relatively less
attractive to corporate collaborators.

The Company believes that its existing capital resources, together with the
net proceeds from this offering, interest income and future payments due under
its existing corporate collaborations, will be sufficient to satisfy its
current and projected funding requirements at least through 1999. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Liquidity and Resources" and "Risk Factors--History of Operating
Losses; Future Capital Requirements."

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on its capital stock
since its inception and does not anticipate paying any cash dividends in the
foreseeable future. The Company currently intends to retain any future
earnings to fund the development of its business.

18
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1998, and as adjusted to reflect (i) the proposed Reverse Split; (ii) the
conversion of all outstanding shares of Preferred Stock into 6,042,263 shares
of Common Stock upon the closing of this offering; (iii) the sale of 2,500,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $12.00 per share and (iv) the sale of 333,333 shares of Common Stock
to Warner-Lambert at an assumed price of $15.00 per share, and the application
of the estimated net proceeds therefrom:

<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------
ACTUAL (1)(2) AS ADJUSTED (3)
------------- ---------------
(in thousands)
<S> <C> <C>
Current portion of capital leases................ $ 131 $ 131
======== ========
Long-term capital leases less current portion.... $ 26 $ 26
Stockholders' equity: (2)(3)
Convertible Preferred Stock, $0.001 par value;
6,365,785 shares authorized, 6,042,263 shares
issued and outstanding, actual; 6,365,785
shares authorized, none issued and
outstanding, as adjusted...................... 6 --
Preferred Stock, $0.001 par value; no shares
authorized, issued and outstanding at December
31, 1996 and 1997 and March 31, 1998,
(5,000,000 shares authorized, no shares issued
and outstanding)..............................
Common Stock, $0.001 par value; 9,553,191
shares authorized,
1,029,488 shares issued and outstanding,
actual; 50,000,000 shares authorized,
9,857,784 shares issued and outstanding, as
adjusted...................................... 1 10
Additional paid-in capital..................... 37,521 69,518
Accumulated deficit............................ (28,889) (28,889)
Treasury stock, at cost, 47,300 common shares.. -- --
-------- --------
Total stockholders' equity................... 8,639 40,639
-------- --------
Total capitalization....................... $ 8,796 $ 40,796
======== ========
</TABLE>
- --------
(1) Excludes: (i) 1,105,955 shares of Common Stock issuable upon exercise of
outstanding stock options as of March 31, 1998, at a weighted average
exercise price of $1.95 per share and (ii) 320,416 shares of Common Stock
issuable upon exercise of outstanding warrants, at a weighted average
exercise price of $12.65 per share. See "Management--Equity Incentive
Plans," "Description of Capital Stock--Warrants" and Note 7 of Notes to
Financial Statements.
(2) See the Financial Statements and Note 7 of Notes to Financial Statements
for descriptions of the authorized, issued and outstanding shares,
liquidation preferences and conversion features of the individual classes
of Preferred Stock.
(3) As adjusted to give effect to (i) the conversion of all issued and
outstanding shares of Preferred Stock into 6,042,263 shares of Common
Stock upon the completion of this offering; (ii) the sale of 2,500,000
shares of Common Stock offered hereby at the assumed initial public
offering price of $12.00 per share and (iii) the sale of 333,333 shares of
Common Stock to Warner-Lambert at an assumed price of $15.00 per share.
See "Use of Proceeds."

19
<PAGE>

DILUTION

The pro forma unaudited net tangible book value of the Company as of March
31, 1998, was $8,639,099 or $1.23 per share of Common Stock. The pro forma net
tangible book value per share represents the amount of the Company's total
tangible assets less total liabilities, divided by the number of shares of
Common Stock outstanding after giving effect to the proposed Reverse Split and
the conversion of all outstanding shares of Preferred Stock into Common Stock.

Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of shares of Common
Stock in this offering and the net tangible book value per share of the Common
Stock immediately after completion of this offering. After giving effect to
the sale by the Company of 2,500,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $12.00 per share and after
deducting estimated underwriting discounts and commissions and offering
expenses payable by the Company, without giving effect to the sale of $5.0
million of Common Stock to Warner-Lambert and assuming no other changes in the
net tangible book value after March 31, 1998, the Company's pro forma net
tangible book value as of March 31, 1998, would have been $35,639,099 or $3.74
per share. This represents an immediate increase in pro forma net tangible
book value of $2.51 per share to existing stockholders and an immediate
dilution in pro forma net tangible book value of $8.26 per share to new
purchasers of Common Stock in this offering, as illustrated by the following
table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $12.00
Pro forma net tangible book value per share as of March 31,
1998....................................................... $1.23
Increase attributable to new investors...................... 2.51
-----
Pro forma net tangible book value per share after the offering
as of March 31, 1998......................................... 3.74
------
Dilution per share to new investors........................... $ 8.26
======
</TABLE>

The following table sets forth on a pro forma basis, as of March 31, 1998,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
the existing holders of Common Stock and by the new investors, before
deducting the estimated underwriter discounts and commissions and offering
expenses payable by the Company:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1).................... 7,024,451 73.8% $34,881,824 53.8% $ 4.97
New investors........... 2,500,000 26.2% $30,000,000 46.2% $12.00
--------- ------ ----------- ------
Total................. 9,524,451 100.0% $64,881,824 100.0%
========= ====== =========== ======
</TABLE>
- --------
(1) Gives effect to the conversion of all outstanding shares of Preferred
Stock into 6,042,263 shares of Common Stock upon the closing of this
offering.

The calculation of net tangible book value and other computations above
assume no exercise of outstanding options and warrants and does not give
effect to the sale of $5.0 million of Common Stock to Warner-Lambert. As of
March 31, 1998, 1,426,371 shares of Common Stock were subject to outstanding
options and warrants at a weighted average price of $4.36 per share. To the
extent additional shares are purchased pursuant to the exercise of outstanding
options and warrants, there will be further dilution to new investors. See
"Management--Equity Incentive Plans," "Description of Capital Stock--
Warrants" and Note 7 of Notes to Financial Statements.

20
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Financial Statements and Notes thereto included
elsewhere in the Prospectus. The statement of operations data for the years
ended December 31, 1995, 1996 and 1997, and the balance sheet data at December
31, 1996 and 1997, are derived from the financial statements of the Company
included elsewhere in this Prospectus which have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report thereon is included elsewhere
in this Prospectus. The statement of operations data for the years ended
December 31, 1993 and 1994, and the balance sheet data as of December 31,
1993, 1994 and 1995, are derived from financial statements audited by KPMG
Peat Marwick LLP, which are not included herein. Financial data as of March
31, 1998, and for the three month periods ended March 31, 1997 and 1998, are
derived from unaudited financial statements included elsewhere herein, and, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, that the Company considers necessary for a fair
presentation of its financial position and results of operations for such
periods. The results for the interim periods are not necessarily indicative of
results to be expected for any future period. The Company has not declared or
paid cash dividends on its Common Stock since inception and does not intend to
pay any cash dividends in the foreseeable future.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- -------- -------- ----------- -------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 750 $ 1,000 $ 1,005 $ 698 $ 10,188 $ -- $ 3,688
Expenses:
Research and
development........... 2,888 5,646 6,500 6,355 8,986 1,614 3,093
General and
administrative........ 1,040 1,605 2,025 2,947 2,720 550 739
Purchase of in-process
technology............ -- 2,581 442 -- -- -- --
------- -------- -------- -------- -------- -------- -------
Total Expenses........ 3,928 9,832 8,967 9,302 11,706 2,164 3,832
------- -------- -------- -------- -------- -------- -------
Loss from operations... (3,178) (8,832) (7,962) (8,604) (1,518) (2,164) (144)
Other income, net...... 136 139 413 496 263 74 115
------- -------- -------- -------- -------- -------- -------
Net loss............... $(3,042) $ (8,693) $ (7,549) $ (8,108) $ (1,255) $ (2,090) $ (29)
======= ======== ======== ======== ======== ======== =======
Pro forma basic net
loss per share (1).... $ (0.18) $ (0.01)
======== =======
Shares used in
computing basic
net loss per share
(1)................... 6,999 7,019
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------------------------- -----------
1993 1994 1995 1996 1997 1998
------- -------- -------- -------- -------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents and short-
term investments...... $ 6,040 $ 9,037 $ 13,880 $ 7,725 $ 9,364 $ 7,262
Total assets........... 6,738 9,965 15,226 8,638 10,547 10,692
Capital lease
obligations (2)....... -- 799 889 572 221 158
Accumulated deficit.... (3,254) (11,947) (19,496) (27,605) (28,860) (28,889)
Total stockholders'
equity................ 6,107 8,483 13,691 6,864 8,644 8,639
</TABLE>
- --------
(1) See Note 2 of Notes to Financial Statements for a description of the
computation of the pro forma basic net loss per share.
(2) Includes current portion.

21
<PAGE>

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

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve
risks and uncertainties. Actual events and results could differ materially
from those anticipated in these forward-looking statements as a result of
various factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus.

OVERVIEW

GenVec was incorporated under the laws of the state of Delaware on December
7, 1992. GenVec focuses on the development and commercialization of novel gene
therapy products for major disease markets. GenVec's lead product candidate,
BIOBYPASS angiogen, is currently in Phase I/II clinical trials for the
treatment of CAD. GenVec also intends to initiate a Phase I/II clinical trial
in patients with PVD in May 1998. The Company is developing BIOBYPASS angiogen
as part of its collaboration with Warner-Lambert, under which the Company
could receive payments totaling over $100 million in milestone payments,
research funding, equity purchases and technology access fees, upon the
achievement of specified milestones. As of April 20, 1998, Warner-Lambert had
paid to the Company $13.5 million under this collaboration. The Company is
also pursuing research and development programs in the areas of vascular
damage, oncology and neurology. GenVec has also entered into corporate
collaborations with Varian and Fuso in certain areas of oncology. See
"Business--Strategic Alliances--Corporate Collaborations."

The Company has incurred operating losses each year since inception and, as
of March 31, 1998, had an accumulated deficit of approximately $28.9 million.
The Company's losses have resulted principally from costs incurred in research
and development and from general and administrative costs associated with the
Company's operations. The Company expects to incur substantial additional
operating losses for at least the next few years as a result of increases in
its expenses for research and development capabilities.

The Company's future profitability will depend in part on the successful
development and marketing of its BIOBYPASS angiogen and other products, and
the continued establishment of corporate collaborations. Payments from
corporate collaborators and interest income are expected to be the Company's
only sources of revenue for several years. These payments will include
licensing payments, milestone payments and research and development funding.
Milestone payments under strategic alliances will be subject to significant
fluctuation in both timing and amount, and therefore the Company's results of
operations for any period may not be comparable to the results of operations
for any other period. Royalties or other revenues from commercial sales of
products are not expected for at least several years, if at all. If revenues
in a particular period do not meet expectations, the Company may not be able
to adjust significantly its level of expenditures in such period, which would
have an adverse effect on the Company's operating results. The Company
believes that quarterly comparisons of its financial results will not
necessarily be a meaningful indication of future performance.

RESULTS OF OPERATIONS

Three Months Ended March 31, 1998 and March 31, 1997

Revenues

Revenues were approximately $3.7 million for the three months ended March
31, 1998. For the same period in 1997, the Company received no revenues.
Revenues for the three month period in 1998 were attributable primarily to the
Company's collaboration agreement with Warner-Lambert and to a lesser extent,
the Company's research and development agreement with Fuso. Such revenues
included a $2.0 million milestone payment from Warner-Lambert as a result of
the Company's investigational new drug application ("IND") filing with the FDA
for PVD.

22
<PAGE>

Operating Expenses

Research and development expenses were approximately $3.1 million and $1.6
million for the three months ended March 31, 1998 and 1997, respectively.
Research and development expenses increased approximately 92% primarily as a
result of the Company's therapeutic angiogenesis product development
activities, including license payments, increased intellectual property legal
expenses in connection with patent filings and expenses related to the Phase
I/II trial for CAD.

General and administrative expenses were approximately $739,000 and $550,000
for the three months ended March 31, 1998 and 1997, respectively. The 34%
increase was primarily attributable to increased payroll and personnel in
support of the Company's collaboration agreements.

Other Income

Other income, consisting primarily of interest income, net of interest
expense, was approximately $115,000 and $74,000 for the three months ended
March 31, 1998 and 1997, respectively. The 54% growth in other income was due
to an increase in the Company's cash balances during this period.

As of March 31, 1998, the Company had an accumulated deficit of $28.9
million, and had carried an accumulated deficit since inception, and therefore
had not paid any federal income taxes. Realization of deferred tax assets is
dependent on future earnings, if any, the timing and amount of which is
uncertain. See Note 8 of Notes to Financial Statements.

Years Ended December 31, 1997 and 1996

Revenues

Revenues were approximately $10.2 million and $698,000 in 1997 and 1996,
respectively. Revenues in 1997 were attributable primarily to the Company's
collaboration agreement with Warner-Lambert and to a lesser extent, the
Company's research and development agreement with Fuso. Revenues in 1996 were
attributable to research and development funding from other sources.

Operating Expenses

Research and development expenses were approximately $9.0 million and $6.4
million in 1997 and 1996, respectively. Research and development expenses
increased 41.4% from 1996 to 1997 primarily as a result of the Company's
therapeutic angiogenesis product development activities, including license
payments, as well as increased intellectual property legal costs in connection
with patent filings and acquisitions of technology, increased payments for
sponsored research and outside consultants, and increased facility costs due
to the expansion of research and development facilities. The Company expects
research and development expenses to increase as the Company continues to
expand its product development programs.

General and administrative expenses were approximately $2.7 million and $2.9
million in 1997 and 1996, respectively. The 7.7% decrease from 1996 to 1997
was primarily attributable to the one-time expense associated with a
termination agreement in 1996 with a former officer of the Company. The
Company expects that general and administrative expenses will increase
slightly in 1998 due to increased personnel in late 1997 and anticipated
administrative hiring in 1998, potentially including a Chief Financial
Officer.

Other Income

Other income, consisting primarily of interest income, net of interest
expense, was approximately $263,000 and $496,000 in 1997 and 1996,
respectively. The 47.0% decrease from 1996 to 1997 was due to variations in
the Company's cash balances during this period.

Years ended December 31, 1996 and 1995

Revenues

Revenues were approximately $698,000 and $1.0 million in 1996 and 1995,
respectively. Revenues in 1996 and 1995 were attributable to research and
development funding.

23
<PAGE>

Operating Expenses

Research and development expenses were approximately $6.4 million and $6.5
million in 1996 and 1995, respectively. Research and development expenses for
1995 and 1996 remained essentially flat as the Company shifted its research
and development efforts to therapeutic angiogenesis product opportunities.

General and administrative expenses were approximately $2.9 million and $2.0
million in 1996 and 1995, respectively. The 45.5% increase from 1995 to 1996
was primarily attributable to increased payroll, personnel and professional
fees in connection with the expansion of the Company's business development
efforts and operations, as well as a one-time expense of $270,000 in
connection with the termination agreement in September 1996 with a former
officer of the Company.

The in-process technology expense of approximately $442,000 in 1995 was a
partial charge resulting from the issuance of capital stock in connection with
the acquisition of Theragen, Inc. in 1994. See Note 4 of Notes to Financial
Statements.

Other Income

Other income, consisting primarily of interest income, net of interest
expense, was approximately $496,000 and $413,000 in 1996 and 1995,
respectively. The 20.1% increase from 1995 to 1996 was due to variations in
the Company's cash balances during the period as a result of the private
placement of equity securities in late 1994 and 1995.

LIQUIDITY AND CAPITAL RESOURCES

From inception through March 31, 1998, the Company financed its operations
through the private placement of equity securities, payments from corporate
collaborators and capital leases. As of March 31, 1998, the Company had
received aggregate gross proceeds of approximately $34.5 million through the
private placement of equity securities, approximately $17.3 million in
research and development funding and milestone payments from corporate
collaborators and approximately $1.4 million of equipment capital lease
financing. As of March 31, 1998, the Company had approximately $7.3 million in
cash and cash equivalents and short-term investments.

Net cash used in operating activities was approximately $484,000, $6.9
million and $6.9 million in 1997, 1996 and 1995, respectively. The decrease in
1997 resulted from research and milestone revenue received from the Warner-
Lambert collaboration. Expenditures for acquisition of property and equipment
were approximately $476,000, $86,000 and $235,000 in 1997, 1996 and 1995,
respectively. The decrease in 1996 took place during the Company's shift in
research focus to therapeutic angiogenesis, while the increase in late 1997
was in connection with the Warner-Lambert collaboration. Cash flow from
financing activities was approximately $2.6 million, $860,000 and $12.0
million in 1997, 1996 and 1995, respectively. Financing cash flows related to
private equity financing in 1995 and equity purchases in connection with
license and corporate collaboration agreements in 1996 and 1997, offset by
payments under capital equipment lease obligations.

The Company anticipates that annual expenditures for research and
development, clinical trials, product development, preclinical studies and
general and administrative activities will increase significantly in future
years. However, the Company's actual capital requirements may change depending
on numerous factors, including, without limitation, the progress of the
Company's research and development programs, the scope and results of
preclinical and clinical studies, the number and nature of the indications the
Company pursues in clinical studies, the timing of regulatory approvals,
technological advances, shifts in the Company's product development efforts
and the status of competitive products. In addition, expenditures may be
dependent on the establishment and maintenance of collaboration relationships
with other companies, the availability of financing and other factors.

The Company believes that the net proceeds from this offering and the sale
of shares to Warner-Lambert, existing cash and short-term investments and
anticipated cash flow from its current corporate

24
<PAGE>

collaborators will be sufficient to support the Company's operations at least
through 1999. The Company expects that it will require significant additional
financing in the future, which it may seek to raise through public or private
equity offerings, debt financing, additional strategic alliance and licensing
arrangements or some combination of these financing alternatives. No assurance
can be given that any such additional financing will be available when needed,
if at all, or that it will be obtained on terms favorable to the Company or
its stockholders. To the extent that the Company raises additional capital by
issuing equity or convertible securities, ownership dilution to stockholders
will result. If adequate financing is not available when needed, the Company
may be required to curtail significantly one or more of its research and
development programs or to obtain funds through agreements with corporate
collaborators or others that may require the Company to relinquish rights to
certain of its technologies or potential products, or to grant licenses on
terms that are not favorable to the Company, any of which could have a
material adverse effect on the Company's financial condition and results of
operations.

The Company uses a number of computer software programs and operating
systems in its internal operations, including applications used in financial
business systems and various administration functions. To the extent that
these software applications, and the software applications of the Company's
vendors, suppliers, financial institutions and service providers, contain
source code that is unable to appropriately interpret the upcoming calendar
year "2000," some level of modification or even possibly replacement of such
source code or applications will be necessary. The Company is in the process
of identifying the software applications that are not "Year 2000" compliant
and it will be communicating with its vendors, suppliers, financial
institutions and service providers regarding their "Year 2000" compliance.
Given the information known at this time about the Company's systems, coupled
with the Company's ongoing efforts to upgrade or replace business critical
systems as necessary, it is currently not anticipated that these "Year 2000"
costs will have a material adverse impact on the Company's business, financial
condition and results of operations. However, the Company is still analyzing
its software applications and, to the extent they are not fully "Year 2000"
compliant, there can be no assurance that the costs necessary to update
software or potential systems interruptions would not have a material adverse
effect on the Company's business, financial condition and results of
operations.

25
<PAGE>

BUSINESS

The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

OVERVIEW

GenVec focuses on the development and commercialization of novel gene
therapy products for major disease markets. GenVec's lead product candidate,
BIOBYPASS angiogen, is designed to induce angiogenesis, or new blood vessel
formation, in tissues with inadequate blood flow. BIOBYPASS angiogen uses an
adenovirus vector to deliver and express the gene for VEGF/121/. BIOBYPASS
angiogen is being developed for the treatment of CAD and PVD, and is intended
to be used either alone or as an adjunct to existing surgical procedures. In
December 1997, the Company initiated a Phase I/II clinical trial with its
BIOBYPASS angiogen for direct injection into the hearts of patients with CAD
who are undergoing CABG surgery. The Company also intends to commence a Phase
I/II clinical trial in patients with PVD in May 1998. The Company has entered
into a collaboration with Warner-Lambert to develop and commercialize
BIOBYPASS angiogen and other gene therapy products for therapeutic
angiogenesis. Under the terms of the collaboration, Warner-Lambert may pay to
the Company a total of more than $100 million in milestone payments, research
funding, equity purchases and technology access fees, if specified milestones
are achieved. As of April 20, 1998, Warner-Lambert had paid to the Company
$13.5 million under this collaboration, and had purchased $2.0 million of the
Company's stock.

Additionally, GenVec is developing product candidates and vector technology
in the areas of cardiovascular disease, oncology and neurology. For the
treatment of restenosis associated with angioplasty and vascular damage
associated with A-V grafts, GenVec is developing Ad.iNOS, an adenovirus vector
containing the iNOS gene. In oncology, GenVec is developing Ad.TNF(alpha) under
a collaboration agreement with Varian. Ad.TNF(alpha), an adenovirus vector
containing the TNF(alpha) gene, is designed to enhance the effectiveness of
radiation therapy without increasing toxicity to normal tissue. In collaboration
with Fuso, GenVec is developing Ad.CD and is conducting research on
immunotherapy of cancer based on the delivery of tumor antigen genes. Ad.CD, an
adenovirus vector containing the CD gene, is designed to convert a nontoxic
precursor drug into fluorouracil to effect tumor destruction, either alone or in
combination with radiation therapy. In neurology, GenVec intends to develop
product candidates through the application of its HSV vector technology.

To customize gene therapy products for specific medical needs, GenVec is
developing vectors for cell-specific gene delivery and promoters which
regulate the level and duration of gene expression. GenVec's technology
portfolio includes: (i) therapeutic genes such as VEGF/121/, iNOS, TNF(alpha)
and CD; (ii) vector systems such as adenovirus and HSV; (iii) receptor
mediated targeting technology and (iv) tissue-specific and inducible
promoters.

GENVEC STRATEGY

The Company's objective is to be a leader in the development and
commercialization of gene therapy products. To achieve this objective, GenVec
intends to:

. Enhance Leadership in Therapeutic Angiogenesis. GenVec's primary focus is
on the development of its lead product candidate, BIOBYPASS angiogen, for
the treatment of CAD and PVD. The Company also seeks to develop new
therapeutic angiogenesis products in these and other disease indications.

26
<PAGE>

. Expand Its Portfolio of Products under Development. The Company intends
to expand its existing portfolio of product candidates for the treatment
of cardiovascular disease and cancer. The Company will also pursue
product candidates in new therapeutic areas, including neurological
disorders using its HSV vector technology. GenVec focuses its new product
development efforts in areas where gene therapy has potential benefits
over currently available therapies. GenVec takes into account market
attractiveness, technical feasibility, the potential to develop a
proprietary position and the predictiveness of animal models in choosing
among new product development opportunities.

. Broaden Its Technology Platform. The Company plans to broaden its
portfolio of genes, vectors, promoters and other technologies to develop
new products and attract corporate and academic collaborators. GenVec
intends to accomplish this through internal and sponsored research, in-
licensing and technology acquisitions.

. Strengthen Product Development through Corporate Collaborations. GenVec
establishes corporate collaborations to enhance the development,
manufacture and commercialization of its product candidates. The Company
intends to participate in the manufacture and commercialization of select
product opportunities by retaining certain rights in these areas.

. Maintain and Expand Intellectual Property Strength. The Company seeks to
enable and protect its product opportunities by pursuing patents either
alone or with corporate or academic collaborators or by seeking licenses
from third parties. As of March 31, 1998, the Company held or had
licenses to 154 issued, allowed or pending patents worldwide, of which 28
are issued or allowed in the U.S.

GENE THERAPY RATIONALE AND PRODUCT COMPONENTS

Rationale. Gene therapy seeks to treat a broad range of diseases by
intervening at the genetic level to modify the activity of the body's cells.
Gene therapies provide the body's cells with information in the form of
segments of deoxyribonucleic acid ("DNA"). These DNA segments contain sets of
instructions that direct the body's cells to synthesize specific proteins to
perform basic biochemical and physiological functions. Gene therapy, by adding
or modifying DNA in the body's cells, can cause these cells to augment the
production of proteins already being produced by the body or to produce
proteins not currently present in the target tissue. These proteins can either
be secreted or remain within the target cell. The development of gene therapy
is generally focused on diseases where the specific molecular pathways are
well characterized. The goal of many gene therapies is the local production of
a therapeutic protein, potentially resulting in a more efficacious treatment
alternative with fewer side effects than conventional approaches.

Product Components. A gene therapy product requires several key components
in order to produce a therapeutic effect. A specific gene which encodes a
therapeutic protein must be identified. In addition, regulatory sequences of
DNA, including a promoter, are combined with the gene to regulate production
of the therapeutic protein. A gene therapy product also requires delivery of
the specific gene and its regulatory sequences to the target cell. Typically,
the regulatory and therapeutic gene sequences are inserted into a vector that
can bind to the target cell. After binding to the cell surface, the vector is
internalized and transported to the cellular nucleus where the therapeutic
gene is used for protein expression. This overall process is known as
transfection. The residual vector protein is degraded.

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GENVEC PRODUCT DEVELOPMENT PROGRAMS

GenVec's product development activities are focused on diseases that it
believes are well suited for therapeutic intervention using currently
available gene therapy technologies. The Company's current programs focus on
cardiovascular disease, oncology and neurology. The Company's lead product
candidate, BIOBYPASS angiogen, is designed to treat CAD and PVD. BIOBYPASS
angiogen uses an adenovirus vector to deliver the VEGF/121/ gene directly
to tissues with inadequate blood flow to stimulate new blood vessel formation.

GenVec's product development programs are summarized below:

<TABLE>
<CAPTION>
DEVELOPMENT CORPORATE
PRODUCT DEVELOPMENT PROGRAM THERAPEUTIC GENE VECTOR STATUS (1) COLLABORATOR
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CARDIOVASCULAR
Ischemic Tissue Disease
Warner-
CAD (BIOBYPASS angiogen) VEGF/121/ Adenovirus Phase I/II Lambert
Warner-
PVD (BIOBYPASS angiogen) VEGF/121/ Adenovirus Phase I/II Lambert
Vascular Damage
Restenosis iNOS Adenovirus Preclinical --
Arteriovenous Graft iNOS Adenovirus Preclinical --
ONCOLOGY
Radiation Therapy TNF(alpha) Adenovirus Preclinical Varian
Phase
CD Adenovirus I/II (2) Fuso
Immunotherapy -- Adenovirus Research Fuso
Herpes simplex
NEUROLOGY -- virus Research --
</TABLE>

(1) Product candidates in research are in the early stages of development.
During the preclinical stage, laboratory and animal studies are conducted
to evaluate the therapeutic efficacy of a product candidate. Phase I/II
clinical trials are designed to assess the safety and efficacy of a
product candidate in volunteer patients with the targeted disease.

(2) The Company has initiated a Phase I/II trial with Ad.CD in patients with
colorectal cancer metastatic to the liver to assess the safety of Ad.CD.
These trials do not involve radiation. The Company is currently conducting
preclinical trials of Ad.CD used in combination with radiation therapy and
intends to conduct further studies in this area.

Cardiovascular

Ischemic Tissue Disease

Recent estimates indicate that over 55 million Americans have one or more
types of cardiovascular disease. Cardiovascular disease is the leading cause
of death in the United States and many other developed countries. A major
contributing factor to cardiovascular disease is atherosclerosis, or the
hardening of the arteries due to plaque formation. As atherosclerosis
progresses, the blood vessels narrow, and may close entirely. As a result,
ischemia, or inadequate blood flow to tissues, can result and damage the
affected tissue. In patients with CAD, ischemia in the heart can lead to
severe rest pain, impaired cardiac function or, if very severe, heart attacks.
PVD involves ischemia in the extremities and can lead to intermittent pain
("claudication"), and in severe cases, chronic pain while at rest. In some PVD
cases, amputation of a limb may be required.

Coronary Artery Disease. Approximately 50% of deaths attributable to
cardiovascular disease are due to CAD. Treatment alternatives for CAD range
from risk factor modification and exercise programs in patients with limited
disease to major surgical procedures in severe disease. Drug therapy is a
mainstay of treatment

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for CAD and many different pharmacologic agents are available. In patients
with severe disease, surgical intervention such as angioplasty is often used
to open occluded vessels. Angioplasty procedures typically use an inflatable
balloon catheter to physically open a narrowed blood vessel. In 1995, more
than 400,000 patients in the U.S. underwent this procedure. Studies have shown
that within seven months following angioplasty, the artery narrows again, or
undergoes restenosis, 30% to 40% of the time. The procedure is difficult or
impossible to perform on certain patients with multiple vessel disease,
diffuse disease, calcified vessels or vessels that are too small to access.
The average cost of angioplasty in the U.S. was approximately $20,000 in 1995.

Another surgical option for CAD is CABG, the replacement of the diseased
artery with a new vessel. In 1995, approximately 360,000 patients in the U.S.
underwent CABG. During the CABG procedure, a blocked coronary artery is
replaced with a vessel harvested from another location in the body. The
conventional CABG procedure requires cutting through the sternum of the chest
and placing the patient on cardiopulmonary bypass, both of which involve
significant risk of morbidity and mortality. In addition, it is difficult or
impossible to perform CABG on certain patients with diffuse atherosclerotic
disease or severe small vessel disease or patients who have previously
undergone a CABG. The average cost of CABG was approximately $45,000 in 1995.

The Company believes there is a need for products that can provide longer
lasting, improved therapeutic outcomes and reduced morbidity in patients
undergoing surgical procedures. For patients whose blocked arteries cannot be
opened by angioplasty or replaced by CABG, new treatments are necessary.

Peripheral Vascular Disease. Current data suggests approximately one million
Americans suffer from intermittent claudication in their lower extremities, a
key symptom of PVD. Current therapies for PVD are similar to those for CAD.
Treatment options range from risk factor modification and exercise programs
for patients with mild disease, to angioplasty or artery bypass grafting in
patients with severe disease. However, progression of disease and recurrence
of symptoms after these treatments is typical and ongoing medical management
of the underlying disease process is often necessary. In addition, PVD
patients who have diffuse disease, calcified vessels or vessels that are too
small to access tend to be poor candidates for angioplasty or vascular grafts.
A lack of adequate pharmacological therapy further emphasizes the need for new
treatment strategies for PVD.

Rationale for Therapeutic Angiogenesis. GenVec believes that restoring blood
flow to areas of ischemia through angiogenesis, the formation of new blood
vessels, offers one of the most promising therapeutic options for CAD and PVD.
Angiogenesis is the body's natural response to ischemia. It also occurs as a
normal physiological process during periods of tissue growth, such as an
increase in muscle or fat and during the menstrual cycle and pregnancy.
Angiogenesis may also occur in certain pathological conditions either as a
natural response to the underlying disease (as in inflammation, wound healing
and rheumatoid arthritis) or as a contributing factor to disease progression
(as in tumor growth).

The angiogenesis process is well understood, and a number of genes involved
in the process have been identified. It is believed that under ischemic
conditions, expression of these genes leads to the production of growth
factors and other proteins involved in angiogenesis. The endothelial cells
which line blood vessels contain receptors which bind to growth factors.
Binding of the growth factors to these cell surface receptors triggers a
complex series of events, including the replication and migration of
endothelial cells to ischemic sites, as well as their formation into new blood
vessels. However, in ischemic conditions, the growth factor genes often may
not produce sufficient amounts of the corresponding proteins to generate an
adequate number of new blood vessels. A logical therapeutic approach to this
problem is to enhance the body's own response by temporarily providing higher
concentrations of growth factors at the site of disease.

BIOBYPASS Angiogen. GenVec's lead product candidate, BIOBYPASS angiogen, is
intended to induce angiogenesis in tissue with inadequate blood flow.
BIOBYPASS angiogen uses an adenovirus vector to deliver and express the
VEGF/121/ gene, GenVec's proprietary form of the VEGF gene. The Company is
developing BIOBYPASS angiogen to be used alone and as an adjunct to existing
surgical procedures for the treatment of CAD and PVD.

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VEGF is a protein which induces angiogenesis and is an important mediator of
the normal angiogenic response to ischemia. VEGF has a high degree of
specificity for endothelial cells, unlike many other angiogenic factors that
can cause proliferation of additional cell types, such as smooth muscle cells
or fibroblasts. However, VEGF is rapidly cleared from the circulation, making
it difficult to sustain high concentrations of VEGF in the blood. Furthermore,
systemic administration of VEGF can lead to hypotension. In contrast to direct
administration of proteins, gene therapy has the advantage of achieving
localized, sustained production of the therapeutic protein in tissue with
inadequate blood flow. GenVec has accomplished this by administering BIOBYPASS
angiogen directly to the target tissue.

GenVec believes the adenovirus vector is well suited for therapeutic
angiogenesis because it induces expression of VEGF in tissues for about a
week. This period of expression has been shown to cause the formation of new
blood vessels, but does not appear to cause toxicity. In addition, adenovirus
vectors efficiently transfer genes to the heart so only small amounts of the
vector are needed. Adenovirus vectors have been used in many gene therapy
clinical trials and appear to be well tolerated. In the Company's current CAD
clinical trial, BIOBYPASS angiogen is being administered by direct injection
into the heart using a standard syringe. The Company believes that other
delivery modalities, including endocardial catheters and intraarterial
catheters, may be used in the future and is evaluating various delivery
devices that are currently available or in development by third parties.

GenVec and its collaborators have demonstrated the therapeutic potential of
BIOBYPASS angiogen in animal models of CAD and PVD. A pig model of cardiac
ischemia was used to evaluate the effects of BIOBYPASS angiogen in CAD.
Administration of BIOBYPASS angiogen to the heart increased the number of
blood vessels, improved blood flow and restored cardiac contractility to
normal. The parameters used in this preclinical study are the endpoints
typically used to assess improvement in patients with CAD. In a PVD
preclinical model of hind limb ischemia, BIOBYPASS angiogen increased the
number of blood vessels and the amount of blood flow in the ischemic limb.

The Company initiated a Phase I/II clinical trial with BIOBYPASS angiogen in
December 1997, for patients who are undergoing CABG and also have areas of
diffuse CAD that are not amenable to surgical treatment. BIOBYPASS angiogen is
directly injected into the ischemic regions of the heart that are not amenable
to bypass grafts. In April 1998, the FDA approved the Company's IND for a
Phase I/II clinical trial in PVD. The Company intends to initiate this trial
in PVD patients with intermittent claudication and for patients with rest pain
in May 1998.

In July 1997, the Company entered into a collaborative agreement with
Warner-Lambert to develop and commercialize gene therapy products
incorporating the VEGF gene for therapeutic angiogenesis. As part of this
corporate collaboration, Warner-Lambert has primary responsibility for
clinical development and commercialization of BIOBYPASS angiogen and related
VEGF gene therapies. Under the terms of the collaboration, the Company may
receive a total of more than $100 million in milestone payments, research
funding, equity purchases and technology access fees, if specified milestones
are achieved. As of April 20, 1998, Warner-Lambert had paid to the Company an
aggregate of $13.5 million, and had purchased $2.0 million of the Company's
capital stock. See "--Strategic Alliances--Corporate Collaborations--Warner-
Lambert Company."

Vascular Damage

Vascular damage can result from a variety of procedures which mechanically
disturb blood vessel walls. It occurs in several medical conditions, including
restenosis following angioplasty procedures in patients with CAD and PVD, and
the closing ("stenosis") of A-V grafts which are used for vascular access in
patients with renal disease who require dialysis. In these conditions,
vascular damage causes local biological responses such as the proliferation of
smooth muscle cells and the inhibition of endothelial cell layer regrowth,
both of which contribute to vessel narrowing. The local concentration of
nitric oxide, an important regulator of blood vessel function, declines when
there is damage to the endothelial cell layer. Studies suggest that increasing
levels of

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<PAGE>

nitric oxide can inhibit smooth muscle cell proliferation and help prevent the
biological processes that lead to narrowing of blood vessels at the site of
damage.

Restenosis Following Angioplasty. Severe cases of CAD and PVD are often
treated by angioplasty. The damage caused by the angioplasty procedure leads
to restenosis in 30% to 40% of patients within seven months of the procedure.
Current techniques to prevent restenosis involve insertion of a stent, a small
metallic scaffold, to prop open the blood vessel at the site of angioplasty.
However, even following stent replacement, 20% to 30% of angioplasty patients
still suffer restenosis within seven months after stent placement. Restenosis
rates of over 50% have been observed for certain high risk patients who have
received a stent. Sales of coronary stents have been estimated to exceed $1.0
billion worldwide in 1997.

Stenosis of Arteriovenous Grafts. In 1995, approximately 700,000 patients
suffered end-stage renal disease worldwide. In the U.S. alone, in 1995 more
than 200,000 patients with end-stage renal disease received dialysis to
cleanse the blood. Dialysis requires long-term, repetitive access to the
patient's vasculature so as to facilitate the insertion of dialysis needles.
The most common form of access site is an A-V graft, which is constructed by
directly connecting an artery of the arm to a large vein or by using a
synthetic graft. This graft then serves as a high blood flow site into which
dialysis needles can be repetitively placed. However, placing the A-V graft
can cause vascular damage that frequently leads to stenosis, limiting its
useful life to about one to three years. Currently, there are no effective
therapies for the treatment of stenosis in A-V grafts.

iNOS Gene Therapy Rationale. The Company believes local production of nitric
oxide by gene therapy has the potential to reduce stenosis and restenosis.
Nitric oxide, a molecule that inhibits smooth muscle cell proliferation and
promotes endothelial cell layer regrowth following vessel damage, is difficult
to administer systemically due to its toxicity and short half-life. To achieve
the local production of nitric oxide, the Company utilizes gene therapy to
deliver the iNOS gene to the site of vascular damage. iNOS catalyzes the
conversion of L-arginine, a common amino acid, to nitric oxide. GenVec and its
collaborators have shown in large animal efficacy models that Ad.iNOS, the
Company's gene therapy product candidate, inhibits the narrowing of damaged
blood vessels.

Ad.iNOS. Ad.iNOS, an adenovirus vector containing the iNOS gene, is intended
for use in combination with stent placement and A-V grafts to prevent
stenosis. This product candidate is designed to enhance the physical
attributes of a stent with locally produced nitric oxide to inhibit
restenosis. Ad.iNOS is in preclinical development for use with stent placement
in CAD and PVD patients following angioplasty. Ad.iNOS is also in preclinical
development to block stenosis which commonly occurs in A-V grafts of renal
dialysis patients. The therapeutic objectives are to mitigate the medical
complications due to vascular damage arising from A-V grafts and to extend the
useful life of the grafts.

GenVec is conducting additional research to evaluate iNOS gene therapies for
other uses, including organ transplants and wound healing. GenVec intends to
establish corporate collaborations to assist in the development and
commercialization of iNOS gene therapy products.

Oncology

Cancer is the second leading cause of death in the U.S. More than a million
newly diagnosed cases of cancer and 500,000 deaths due to cancer are
anticipated this year. Surgery and radiation therapy are typically used to
control localized disease, whereas chemotherapy is often used in patients with
metastatic cancer. Although new treatments of certain cancers have improved
clinical outcomes, many tumors remain refractory to aggressive surgical,
radiological and chemotherapeutic approaches.

Radiation Therapy

Approximately 60% of all cancer patients in the U.S. receive radiation
therapy each year. Even though radiation therapy can be delivered to a
localized area, its therapeutic benefit is often limited by the radiation

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<PAGE>

damage to surrounding normal tissue. GenVec believes that a potential solution
to this major problem is the use of gene therapy to deliver therapeutic
proteins to the tumor to enhance the antitumor activity of radiation therapy
without increasing toxicity to normal tissue.

Ad.TNF(alpha). TNF(alpha) is a potent, immune regulatory protein with
demonstrated clinical antitumor activity. TNF(alpha) exerts its effects by
binding to receptors on the surface of cells, including tumor cells and cells of
the immune system. The clinical utility of TNF(alpha) has been limited because
systemic exposure to TNF(alpha) causes considerable toxicity. The Company's
TNF(alpha)-based gene therapy product candidate, Ad.TNF(alpha) is intended to
address this problem by producing high concentrations of TNF(alpha) in the
target tumor while minimizing systemic exposure to TNF(alpha). Ad.TNF(alpha) is
an adenovirus vector that contains the TNF(alpha) gene and a radiation
responsive promoter. Ad.TNF(alpha) will be injected directly into the tumor in
order to localize production of TNF(alpha) at the site of disease. Since
TNF(alpha) is a secreted protein, transfection of only a portion of the tumor
cells may be sufficient to produce therapeutic concentrations of TNF(alpha) in
the tumor.

The Company expects to develop Ad.TNF(alpha) for use in combination with
radiation therapy for the treatment of cancer. GenVec and its collaborators have
shown that Ad.TNF(alpha) enhances the antitumor activity of radiation in several
animal models of human cancer. For example, in a human head and neck cancer
model, animals receiving both Ad.TNF(alpha) and radiation were observed to have
90% greater tumor shrinkage than animals receiving either radiation or
Ad.TNF(alpha) alone. Although the precise mechanism accounting for the marked
increase in therapeutic effect of radiation is not known, it appears that
disruption of the tumor vasculature is involved. Damage to the blood vessels and
rapid necrosis was evident in the tumors but not in the surrounding normal
tissues. To further enhance the usefulness of Ad.TNF(alpha), a proprietary
promoter was inserted to increase the expression of the TNF(alpha) gene during
radiation therapy. The Company licensed rights to the TNF(alpha) gene for use in
gene therapy in the United States from Asahi Chemical Industry Co., Ltd.
("Asahi"). GenVec entered into a corporate collaboration with Varian, a provider
of radiation therapy equipment in the U.S., to enhance the clinical development
of Ad.TNF(alpha). The Company anticipates filing an IND for Ad.TNF(alpha) in
1999.

Ad.CD. The toxicity produced following the systemic administration of many
antitumor agents, such as fluorouracil, often limits the amount of drug that
can be administered and, consequently, limits the clinical benefit. Selective
delivery of such drugs to tumors should enhance their effectiveness and reduce
side effects. A strategy to accomplish this is to treat the patient with an
inactive drug that can be activated preferentially in the tumor.
Fluorocytosine is a relatively nontoxic precursor of fluorouracil that can be
converted to fluorouracil by the enzyme CD. Since CD is not normally present
in the body, local delivery of CD to tumors by gene therapy may provide a
method to selectively produce fluorouracil at the tumor sites. GenVec and its
collaborators have shown that injection of Ad.CD, an adenovirus vector
containing the CD gene, into tumors can inhibit their growth if the animal is
also administered fluorocytosine. GenVec has initiated a Phase I/II clinical
study in patients with colorectal cancer metastatic to the liver in which
Ad.CD is injected into the tumor and fluorocytosine is given orally. Since
fluorouracil can sensitize tumors to the therapeutic effects of radiation,
GenVec also intends to evaluate Ad.CD in combination with radiation therapy.
GenVec entered into a license agreement with the National Institutes of Health
for certain gene therapy applications of the CD gene, including the treatment
of cancer using replication deficient viral and synthetic vectors. The Company
is conducting research and development of Ad.CD as part of its corporate
collaboration with Fuso.

Immunotherapy

The Company has entered into a corporate collaboration with Fuso to develop
new gene therapy products for the treatment of human cancer. One of the goals
of this research program is the development of gene therapies that can be used
to treat metastatic cancer by stimulating the body's immune system to seek
out, recognize and kill tumor cells. Gene therapy has the potential to
stimulate specific cells of the immune system, such as dendritic cells, to
recognize tumor antigens. These cells appear to play an important role in
generating a robust antitumor response. Delivery of specific tumor antigens to
the dendritic cells by gene transfer has been shown by the Company's
collaborators to enhance an antitumor immune response. Fuso,

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GenVec and their collaborators are conducting a research program aimed at
identifying new product possibilities for the immunotherapy of cancer.

Neurology

Neurological disorders represent an area of major medical need. Current
treatments often have limited effectiveness, and the complex etiology of these
diseases has slowed the development of new treatments. Additionally, changing
demographics are expected to result in significant increases in the elderly
population in whom certain neurological disorders are most prevalent.

Recent scientific advances have led to the discovery of a number of proteins
and corresponding genes implicated in neurological disorders. As the list of
such therapeutic proteins continues to expand, effective delivery of these
proteins to the specific sites of action may be required to optimize
therapeutic utility. As for other indications, gene therapy offers the
potential advantage of providing protein production at the target site for the
treatment of neurological disorders, while minimizing complications due to
systemic exposure.

GenVec intends to develop products for the treatment of neurological disease
based on the use of HSV vectors. Replication-deficient HSV vectors are
attractive for use in gene therapy because of their ability to enter and
persist in tissues of the nervous system. HSV vectors have an additional
advantage of accommodating larger DNA sequences than most other vectors. The
Company believes medical applications may include the treatment of chronic
pain, spinal cord injury and Parkinson's disease.

GenVec, through sponsored research at the University of Pittsburgh and the
University of Glasgow/Medical Research Council's Institute of Virology, has
engineered HSV vectors for the potential treatment of neurological disorders
and created specialized cell lines for the production of such vectors. GenVec
intends to further develop HSV vectors for the treatment of neurological
disorders.

GENVEC CORE TECHNOLOGIES

Gene therapy products are complex entities comprised of vectors, promoters
and therapeutic genes. Targeting therapeutic genes to specific cell types and
regulating the level and duration of gene expression may be possible with the
appropriate combination of technology. Toward this end, GenVec has established
a portfolio of proprietary technology, including therapeutic genes, advanced
adenovirus and HSV vectors, receptor mediated vector targeting capability and
promoters. The Company seeks to expand product development opportunities by
broadening its technology portfolio through internal research and technology
acquisitions.

Technology Portfolio

GenVec's portfolio of technologies includes genes, vectors, receptor
mediated targeting and promoters.

Genes

VEGF. VEGF is a protein which potently induces angiogenesis and is an
important mediator of the normal angiogenic response to ischemia. VEGF has a
high degree of specificity for endothelial cells. In ischemic conditions, VEGF
binds to receptors found on the endothelial cells which line blood vessels.
This binding triggers a complex series of events, including the replication
and migration of endothelial cells to ischemic sites, as well as their
formation into new blood vessels. The Company has an exclusive license for all
gene therapy applications of the VEGF/121/ gene.

iNOS. iNOS catalyzes the conversion of L-arginine to nitric oxide, a short-
lived molecule with a range of cardiovascular actions, including inhibition of
smooth muscle cell proliferation and promotion of endothelial cell layer
regrowth following vessel damage. The Company believes that the local
production of nitric oxide resulting from iNOS gene therapy has the potential
to be used for multiple vascular damage applications,

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<PAGE>

including the reduction of restenosis after an angioplasty procedure and
stenosis of A-V grafts which are often used for dialysis in patients with
renal disease. The Company has an exclusive license for all gene therapy
applications of the iNOS gene.

TNF(alpha). TNF(alpha) is a potent immune regulatory protein with demonstrated
clinical antitumor activity. It exerts its effects by binding to receptors on
the surface of cells, including tumor cells and cells of the immune system.
Since TNF(alpha) is a secreted protein, transfection of only a portion of the
tumor cells may be sufficient to produce therapeutic concentrations of
TNF(alpha) in the tumor. GenVec and its collaborators have shown that
Ad.TNF(alpha) enhances the antitumor activity of radiation. The Company has a
license to all gene therapy applications of the TNF(alpha) gene in the U.S.

CD. CD is an enzyme that converts the relatively nontoxic fluorocytosine to
fluorouracil, an active antitumor agent. In addition, fluorouracil can
sensitize tumors to the therapeutic effects of radiation. The Company has an
exclusive license for certain gene therapy applications of the CD gene,
including the treatment of cancer using replication-deficient viral and
synthetic vectors.

Vectors

Vectors typically serve as the delivery system for carrying the DNA
sequences of therapeutic genes and their corresponding regulatory elements to
cells. These DNA sequences are inserted into a vector that can bind to the
target cell. After binding to the cell surface, the vector is internalized and
transported to the cellular nucleus where the therapeutic gene is used for
protein expression. A variety of vector types with different characteristics
have been developed over the years in an attempt to optimize the outcome of
this gene transfer process. Vectors can be viral or non-viral based, and the
choice of vector type depends on many parameters including the specific
disease, the organ and tissue type involved and the therapeutic gene used.
Each vector has its own set of advantages and disadvantages.

For viral vectors, a number of DNA and RNA viruses (including adenovirus and
HSV) have been developed as potential candidates for safe gene transfer. The
Company believes that in most cases, it is undesirable for these viruses to
freely infect and replicate within the target cell. For this reason, viruses
have been modified through the deletion of certain essential genes to render
them replication-deficient. For non-viral approaches, various synthetic
vectors have been designed using components such as lipids, proteins and DNA
in order to enhance the uptake of genes into cells.

GenVec is currently developing gene therapy products using adenovirus and
HSV as vectors. In addition to the development of technologies which could
improve these viral vectors with regard to safety, efficiency, duration of
gene expression and ease of manufacture, the Company routinely evaluates other
viral and non-viral approaches.

Adenovirus Vectors. Adenoviruses are common DNA viruses that can cause upper
respiratory infections, such as the common cold, in humans. The adenovirus DNA
can be manipulated by standard technology to remove DNA necessary for viral
replication. Therapeutic genes can then be inserted into the modified vector
and efficient gene expression can occur in the absence of viral replication.

Adenovirus vectors have several important features which make them
potentially useful in gene therapy. These vectors can be produced in the high
concentrations necessary for commercial production. In addition, they can
transfer genes to both dividing and non-dividing cells. Adenovirus vectors
have been used for gene transfer in many clinical trials and have an excellent
safety profile. Adenovirus vectors do not integrate into the human DNA,
reducing the risk of toxicity.

After transfection, adenovirus vectors typically express the therapeutic
gene for a few days or weeks, but long-term expression is not usually
observed. This feature is well suited for many applications where acute
expression is desired, such as therapeutic angiogenesis. The Company is
further modifying its adenovirus vectors, as well as evaluating other gene
delivery systems, for use when long-term expression is desired.

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GenVec's adenovirus vector development has centered on removing essential
DNA from the adenovirus to alter performance and improve vector manufacture.
In order to produce replication-deficient adenovirus vectors, special cell
lines must be constructed that contain information necessary for vector
production. These new vectors and cell lines provide the manufacturing
platform from which vectors can be produced for gene therapy products. Vectors
that are deficient in multiple viral genes have an increased capacity to carry
larger therapeutic genes, multiple therapeutic genes or promoters. By
eliminating regions of the adenovirus DNA necessary for viral replication, as
exemplified by GenVec's GV10 and GV11 vectors, potential safety, production
and efficacy advantages may be realized. The expression profile of a
therapeutic gene can be altered using different vectors or promoters. A goal
of GenVec's research program is to develop vectors in which the expression of
a therapeutic gene can be tailored to a specific medical need.

Herpes Simplex Virus Vectors. HSV readily infects cells of the nervous
system and then persists in a quiescent state in these cells. Because of these
characteristics, the Company is conducting research on the use of these
vectors for the treatment of neurological disease. GenVec has developed novel,
proprietary vectors derived from genetically engineered herpes simplex virus
type I. The strategy for HSV vector development is similar to that for
adenovirus vectors, including the deletion of genes required for viral
replication. The modified HSV vectors are produced in special cell lines that
have been engineered to contain the information needed for vector production.

GenVec has developed a family of proprietary, non-replicating HSV vectors
with different gene expression characteristics and will evaluate these vectors
for a variety of applications, with an initial focus on the treatment of
neurological disorders. Persistent gene expression has also been demonstrated
using certain of the HSV vectors, suggesting that they may have utility when
chronic expression of the therapeutic gene is desired. This technology has
been developed through arrangements with the Universities of Pittsburgh,
Michigan and Glasgow.

Receptor Mediated Targeting

The goal of the Company's receptor mediated targeting program is to develop
vectors that are more efficient and can target specific cell types more
selectively than currently available vectors. The Company believes such
vectors will have significant safety, efficacy and cost advantages.

A number of clinically relevant cells and tissues have been found to express
few or no adenovirus receptors, including skeletal muscle, vascular smooth
muscle, certain endothelial cells and multiple types of tumor cells.
Consequently, these cell types are not as efficiently transfected by
adenovirus vectors as cells which express high levels of adenovirus receptors.
The Company is developing adenovirus vectors with enhanced efficiency and
targeting features by improving their ability to bind to alternative cellular
receptors. For example, binding structures have been incorporated into
adenovirus coat proteins for attachment to specific cellular receptors. Using
this approach, GenVec has developed a vector to bind to specific integrin
receptors present on endothelial cells that has potential for improved
specificity and efficiency when delivered through a vascular route. The
Company has also created certain vectors which have been shown by the Company
and its collaborators to increase transfection to vascular smooth muscle cells
in a porcine restenosis model by over 40-fold. The Company believes that these
and other vectors may have application in the Company's therapeutic
angiogenesis, vascular damage and oncology programs.

Promoters

The goal of GenVec's promoter program is to tailor gene expression to the
specific needs of its potential products. Promoters strongly influence the
level and duration of therapeutic gene expression induced by gene therapy
vectors. GenVec believes its promoter technology will be important in matching
therapeutic gene expression to the desired actions of the corresponding
therapeutic protein. For example, promoters that restrict expression of the
therapeutic gene to a target tissue, such as the heart, may be useful in the
treatment of cardiovascular disease.

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<PAGE>

GenVec is using its proprietary radiation-induced promoter technology to
increase the expression of the TNF(alpha) gene in tumors receiving radiation
therapy. In normal tissues that do not receive exposure to radiation, expression
of TNF(alpha) would not be induced. This approach is intended to enhance the
efficacy of the Ad.TNF(alpha) product candidate while reducing the likelihood of
side effects. GenVec is also developing promoters for use in HSV vectors that
produce long-term gene expression in cells of the nervous system for potential
use in products for the treatment of neurological disorders. By combining the
appropriate vector, promoter and therapeutic gene, GenVec believes products with
improved therapeutic effects can be developed.

STRATEGIC ALLIANCES

Corporate Collaborations

To enhance the evaluation, development and commercialization of product
opportunities, GenVec intends to continue to establish corporate
collaborations. These corporate collaborations may reduce financial risk to
the Company and provide for a continued stream of cash flow. The Company
strives to retain various rights in its corporate collaborations to
participate in the manufacturing and commercialization of products, as
appropriate. Over time, and as the Company establishes or acquires increased
internal capabilities, the Company may elect to work more independently with
respect to the development and commercialization of specific product
opportunities. There can be no assurance that any of the Company's corporate
collaborations will result in the successful development or commercialization
of any technologies or products or that the Company will receive any milestone
payments or royalties from any of these corporate collaborations.

Warner-Lambert Company

In July 1997, the Company entered into a collaboration agreement and stock
purchase agreement with Warner-Lambert to develop and commercialize gene
therapy products incorporating the VEGF gene for therapeutic angiogenesis
("Collaboration Products"). Under the terms of these agreements, the Company
may receive a total of more than $100 million in milestone payments, research
funding, equity purchases and technology access fees, if specified milestones
are achieved. Under the terms of the collaboration agreement, Warner-Lambert
had paid to the Company an aggregate of $13.5 million through April 20, 1998,
in technology access fees, research funding and milestone payments. Pursuant
to the stock purchase agreement, Warner-Lambert purchased $2.0 million of the
Company's capital stock in December 1997, has agreed to purchase $5.0 million
of the Company's Common Stock in a private transaction concurrent with this
offering, and is required to purchase, at the election of the Company, up to
an additional $18.0 million of the Company's capital stock upon the
achievement of certain milestones. The purchase price for all of these equity
investments is 125% of the fair market value of the securities. Upon the
closing of this offering and the concurrent private transaction, Warner-
Lambert will own approximately 6.9% of the Company's Common Stock.

The focus of the initial research and development effort is on any potential
application of the Collaboration Products, including CAD and PVD. Prior to
July 1999, Warner-Lambert may elect to retain indications in addition to CAD
and PVD. In that event, GenVec would receive additional research and
development funding, and the structure of any royalty and milestone payments
would be essentially the same as that covering the initial indications.

Under the collaboration agreement, GenVec granted to Warner-Lambert an
exclusive, royalty-bearing license to sell Collaboration Products worldwide,
excluding Asia, subject to the Company's right to co-promote. Warner-Lambert
is responsible for the costs of developing and commercializing any
Collaboration Products worldwide, excluding Asia, provided the Company will be
responsible for certain expenses if it elects to exercise its co-promotion
right. GenVec retains the right to co-promote Collaboration Products for any
indications other than PVD in the United States and Canada. In addition, the
Company has retained all rights to develop and commercialize Collaboration
Products discovered outside of the designated fields of research, as well as
the option to manufacture bulk quantities of Collaboration Products. Neither
party may sell or

36
<PAGE>

commercialize any product with the same mechanism of action as BIOBYPASS
angiogen that would compete with a Collaboration Product. Between July 1999
and July 2000, Warner-Lambert has certain negotiation rights with regard to
the development and commercialization of VEGF gene therapy products not
retained by Warner-Lambert.

Warner-Lambert's research and development funding obligations extend through
2002, although Warner-Lambert may terminate the research program under the
collaboration agreement with six months written notice after July 21, 2000.
Both parties have the right to terminate the collaboration agreement for
breach. The collaboration agreement expires on a Collaboration Product-by-
Collaboration Product and country-by-country basis until neither party has any
remaining royalty obligations. The stock purchase agreement terminates upon
the termination of the collaboration agreement. An Executive Committee
comprising of three representatives from each of the Company and Warner-
Lambert oversees and manages the collaboration.

Fuso Pharmaceuticals Industries, Ltd.

In September 1997, GenVec and Fuso established a collaboration to conduct
research and to identify, evaluate and develop gene therapy products for the
treatment of cancer. If the research program continues for its full term, Fuso
is required to provide $1.0 million in research funding annually for five
years, of which $750,000 will be paid to the Company each year. Fuso has the
right to terminate the collaboration after the second anniversary of the
collaboration upon 90 days prior written notice. In connection with
establishment of the collaboration, Fuso purchased shares of the Company's
capital stock for $1.0 million.

As part of the collaboration, GenVec granted Fuso an exclusive, royalty-
bearing license to develop and commercialize products developed under the
collaboration for the treatment of cancer in Japan and at Fuso's option, Korea
and Taiwan. Fuso will be responsible for the development and commercialization
of any products in its territory. GenVec will receive additional payments for
the achievement by Fuso of specified product development and regulatory
milestones, and royalties on the sale of any such products commercialized by
Fuso. GenVec has retained all rights to develop and commercialize such
products for the treatment of cancer in the rest of the world, and for all
other uses worldwide, subject to certain restrictions, independently and with
third parties.

Varian Associates, Inc.

In March 1998, the Company and Varian entered into a three-year
collaborative agreement in the field of radiation and gene therapy. Under the
agreement, the parties will collaborate on the preclinical and clinical
research and development of specific products and technology, with the goal of
developing novel, improved therapies based on the combined use of radiation
therapy and gene therapy products. Varian will have primary responsibility for
the development of equipment and software for delivery of targeted radiation
therapy, and the Company will have primary responsibility for developing gene
therapy products. The Company and Varian each retain the right to develop and
commercialize their respective products and technologies independently or with
third parties.

Selected Academic Collaborations and Technology Licenses

GenVec's objective is to create multiple innovative products that meet major
medical needs. To accomplish this objective, the Company combines its core
technology development activities with acquisitions and licensing of its
business technologies, including therapeutic genes, from various sources. In
addition to the contractual arrangements described below, the Company funds
research in laboratories of leading authorities at several academic
institutions for the development of new technologies and the conduct of
preclinical and clinical activities. The Company generally establishes
exclusive license agreements with these and other institutions to obtain the
benefits of any intellectual property invented in connection with such funded
activities. There can be no assurance that the Company's academic
collaborations will result in the successful development or commercialization
of any technologies or products.

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<PAGE>

Cornell University

In May 1993, the Company entered into a five-year sponsored research
agreement with Cornell University for activities to be conducted in the
laboratory of Dr. Ronald G. Crystal at the Cornell Medical Center.

Upon expiration in March 1998 of the May 1993 agreement, the Company and
Cornell University entered into a new, four-year sponsored research agreement
for the conduct of preclinical and clinical research in the laboratory of Dr.
Crystal. Under the terms of the new agreement and subject to certain
termination rights, GenVec has committed to pay approximately $3.6 million in
sponsored research during a specified minimum term. The Company retains the
option to exclusively license inventions arising from the sponsored research
activities.

The University of Pittsburgh

In June 1996, GenVec signed an agreement with the University of Pittsburgh
providing the Company with an exclusive, worldwide license to all gene therapy
applications of the human iNOS gene. The Company will make future payments
based on the achievement of specified regulatory milestones and will share
with the University of Pittsburgh certain profits the Company realizes from
the research, development and commercialization of products incorporating the
iNOS gene. GenVec has agreed to provide a minimum royalty on the sale of these
products, all royalties are creditable against the profits to be shared. In
addition, the Company granted the University of Pittsburgh a warrant to
purchase shares of the Company Common Stock, which shall vest upon the earlier
of the achievement of specified product development and regulatory milestone
events or certain dates. In June 1996, GenVec also entered into a two-year
sponsored research agreement to fund the research of iNOS in Dr. Timothy
Billiar's laboratory at the University of Pittsburgh School of Medicine.

In addition, the Company has separate sponsored research arrangements and a
license agreement with the University of Pittsburgh relating to HSV vector
technology.

Scios, Inc.

In May 1996, the Company entered into an exclusive, worldwide license with
Scios for rights to all gene therapy applications of its proprietary form of
the VEGF gene. The parties will share in certain profits the Company realizes
from the research, development and commercialization of products incorporating
the VEGF gene. GenVec has agreed to provide a minimum royalty on the sale of
these products, which are creditable against the profits to be shared. In
addition, the Company granted Scios a warrant to purchase shares of the
Company's Common Stock, which vests upon the earlier of the achievement of
specified product development milestone events or certain dates. In May 1996,
Scios purchased $1.0 million of the Company's capital stock.

Asahi Chemical Corporation

In February 1998, the Company entered into a license agreement with Asahi
for the rights in the United States to all gene therapy applications of the
TNF(alpha) gene. The Company paid Asahi a fee upon the execution of the
agreement, and will make future payments based upon the achievement of specified
product development and regulatory milestones. Under the agreement, the Company
will also pay to Asahi royalties on sales of products in the United States
incorporating the TNF(alpha) gene.

INTELLECTUAL PROPERTY

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<PAGE>

commercialization of the Company's product candidates and any potential
products will require, among other things, the integration of genes, vectors
and promoters with a delivery mechanism and the development of commercially
viable manufacturing processes. The Company's commercial success will be
dependent in part upon achieving such integration and development without
infringing the proprietary rights of others and upon obtaining intellectual
property protection that will give the Company's products an exclusive market
position.

The Company and its licensors have obtained patents and continue to seek
patent protection for technologies which may relate to the Company's product
candidates and potential products, as well as technologies which may prove
useful for future products, including technologies related to the VEGF/121/
gene, the iNOS gene, the TNF(alpha) gene, the CD gene, adenovirus and HSV vector
components, cell lines, viral targeting technology and promoters. As of March
31, 1998, the Company held or had licenses to 154 issued, allowed or pending
patents worldwide, of which 28 are issued or allowed in the U.S. Of those
patents, the Company has been granted an exclusive license for all gene therapy
applications under two United States patents relating to the VEGF/121/ gene and
the use thereof, an exclusive license in the field of gene therapy under two
United States patents relating to the human iNOS gene and the use thereof, and
an exclusive license in the field of gene therapy for the treatment of cancer
and restenosis, but excluding applications which utilize viral-based delivery
systems which are replication competent, under two United States patents
relating to the CD gene and the use thereof. The Company has also been granted a
nonexclusive license under the U.S. patent relating to the TNF(alpha) gene and
the use thereof. In addition, the Company and its licensors have patent
applications pending in Europe, Japan and other countries. In furtherance of its
current and prospective business, the Company anticipates that it and its
current and future licensors will continue to seek to improve existing
technologies and to develop new technologies and, when possible, secure patent
protection for such improvements and new technologies.

Certain intellectual property components used in developing gene therapy
products, such as certain vectors and promoters used by the Company and
others, are in the public domain. As a result, the Company is unable to obtain
patent protection with respect to such components and third parties can freely
use such components. There can be no assurance that third parties will not
develop products using such components that compete with the Company's
potential products.

There can be no assurance that any of the pending patent applications owned
or licensed by the Company contain patentable and enforceable claims or will
result in valid issued patents, that the claims of any issued patents or any
patents issued in the future are valid and enforceable and will provide
meaningful protection, that the Company or its collaborators will develop
additional proprietary technologies that are patentable, or that any patents
now or in the future licensed or issued to the Company or its collaborators
will provide a basis for commercially viable products or will provide the
Company with any competitive advantages. Furthermore, there can be no
assurance that others will not independently develop similar or alternative
technologies, duplicate any of the Company's technologies, or, if patents are
licensed or issued to the Company, design around or otherwise circumvent the
patented technologies or other intellectual property licensed to or developed
by the Company. For example, while the Company has an exclusive license under
two United States patents relating to the VEGF/121/ gene and the use
thereof for gene therapy applications, third parties have patents for other
forms of the VEGF gene and such third parties or their licensees may develop
products using such other forms of the VEGF gene. There can be no assurance
that products based on such other forms of the VEGF gene or based upon other
growth factors will not be functionally equivalent to or better than the
Company's proposed products, or that such other products will not be more
commercially successful than any products commercialized by the Company or its
collaborators for other reasons, such as superior marketing or lower costs.
Similarly, other parties hold patents for other nitric oxide synthase, tumor
necrosis factor and CD genes. Patents and patent applications of the Company,
its collaborators and its licensors may become involved in interferences,
oppositions or similar proceedings and there can be no assurance that such
patents and patent applications will survive, in whole or in part, such
proceedings. No assurance can be given that patents issued to the Company, its
collaborators or its licensors, if any, will not be contested, narrowed,
revoked or invalidated. Academic collaborators and the U.S. government may
retain

39
<PAGE>

certain rights in intellectual property, including patents and patent
applications, developed by such academic collaborators.

While the Company has not conducted freedom to use patent searches on
aspects of its product candidates and potential products and may therefore be
unaware of relevant patents and patent applications of third parties, the
Company is aware of several United States patents and patent applications and
foreign patents and patent applications owned by third parties relating to
gene therapy, promoters, cell lines, vectors and delivery mechanisms which do
or may cover aspects of the Company's product candidates and potential
products or their use or manufacture, including BIOBYPASS angiogen, as well as
other aspects of the Company's technology. Because patent applications are
maintained in secrecy in the United States, the Company cannot be certain that
third parties have not filed applications relating to technology being
developed by the Company or its collaborators or technology covered by patents
or patent applications of the Company, its collaborators or its licensors.
Certain third-party patent applications contain broad claims, and it is not
possible to determine whether or not such claims will be narrowed during
prosecution or will issue as patents, even if the claims appear to encompass
prior art or have other defects. The Company, its collaborators or its
licensors may choose to oppose or challenge third-party patents and patent
applications and such an opposition or challenge can be expensive and time
consuming. There can be no assurance that any opposition or challenge will be
successful. There can also be no assurance that the development, manufacture,
use, offer for sale, sale or importation of the Company's product candidates
and potential products by the Company or its collaborators will not infringe
claims of these or other issued patents, or claims that may issue from these
or other applications or that a third party will not threaten or file an
infringement action.

If the Company or one of its collaborators brings a patent infringement
action or otherwise brings an action to protect proprietary rights against
third parties or is required to defend against a charge of patent infringement
or a charge of infringement of other intellectual property rights, substantial
costs could be incurred and such actions could result in a significant
diversion of management's time and attention. In addition to being a potential
party to patent infringement litigation, the Company is involved in an
interference proceeding and could become involved in additional interference
proceedings declared by the United States Patent and Trademark Office or
opposition proceedings in a foreign patent office. Patent infringement actions
and other intellectual property litigation, as well as participation in
interference or opposition proceedings, can be expensive and time-consuming,
even in those instances in which the outcome is favorable to the Company.
There can be no assurance that the Company or its collaborators will prevail
in any such litigation or proceedings. The Company and its licensors obtain
intellectual property, including biological material and know-how, from third
parties pursuant to various agreements and arrangements. Third parties may
challenge the intellectual property rights of the Company or its licensors or
claim ownership of intellectual property developed by the Company or its
collaborators. The Company could incur substantial expenses in contesting such
claims, whether successful or not.

The Company may rely on trade secret protection and confidentiality
agreements to protect its interests. It is the Company's policy to require its
employees, consultants, contractors, manufacturers, collaborators and

40
<PAGE>

other advisors to execute confidentiality agreements upon the commencement of
employment, consulting or collaborative relationship with the Company. The
Company also requires signed confidentiality agreements from any entity that
is to receive confidential data. In the case of employees, consultants and
contractors, the agreements generally provide that all inventions made by the
individual while rendering individual services to the Company shall be
assigned to the Company as the property of the Company. Nevertheless, there
can be no assurance that proprietary information will not be disclosed, that
others will not independently develop substantially equivalent proprietary
information or otherwise gain access to the Company's trade secrets, or that
the Company can meaningfully protect its trade secrets. In the case of a
collaborative arrangement which requires the sharing of information, the
Company's policy is to make available to its collaborator only such
information as is relevant to the arrangement, under controlled circumstances,
and only during the contractual term of the collaborative arrangement, and
subject to a duty of confidentiality on the part of its collaborator. There
can be no assurance, however, that such measures will adequately protect the
Company's information. Any material leak of confidential information into the
public domain or to third parties may have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors--Intellectual Property."

SCIENTIFIC ADVISERS

The Company has established a select group of scientists and clinicians as
its Scientific Advisory Board ("SAB") to advise the Company on scientific and
technical matters. The Company also consults with teams of scientists and
clinicians on scientific and technical matters for each of the Company's
anticipated product areas. The scientific advisers are generally compensated
by retainer or on a time and expense basis, and certain of them have received
shares of or options to purchase the Company's Common Stock. The Company has
entered into consulting agreements with a number of the scientific advisers.

Scientific Advisory Board

The SAB includes:

Jan L. Breslow, M.D., Frederick Henry Leonhardt Professor, The Rockefeller
University, New York. Dr. Breslow is a member of the National Academy of
Sciences and a former President of the American Heart Association. Dr. Breslow
received his M.D. from Harvard Medical School.

Ronald G. Crystal, M.D., Bruce Webster Professor of Internal Medicine at
Cornell University Medical College, Chief of the Division of Pulmonary and
Critical Care Medicine at The New York Hospital-Cornell Medical Center and
Director of the Gene Therapy Core Facility at Cornell University Medical
College. Dr. Crystal is the Chairman of the SAB and a founder of the Company.
Dr. Crystal received his M.D. from the University of Pennsylvania.

Joseph C. Glorioso III, Ph.D., William S. McEllroy Professor of Biochemistry
and Chairman, Department of Molecular Genetics and Biochemistry, University of
Pittsburgh School of Medicine, Director of the Pittsburgh Human Gene Therapy
Center, Founding Board Member and Treasurer of the American Society of Gene
Therapy and the U.S. Editor for Gene Therapy. Dr. Glorioso received his Ph.D.
in Microbiology from Louisiana State University.

Samuel Hellman, M.D., A.N. Pritzker Distinguished Service Professor,
Department of Radiation and Cellular Oncology, University of Chicago. Dr.
Hellman was formerly Dean for the Medical Center and Physician-in-Chief of the
Memorial Sloan-Kettering Cancer Center. Dr. Hellman received his M.D. from the
State University of New York, College of Medicine at Syracuse.

Cardiovascular Medicine

Timothy R. Billiar, M.D., Watson Professor of Surgery, University of
Pittsburgh School of Medicine. Dr. Billiar received his M.D. from the
University of Chicago.

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<PAGE>

Maurizio C. Capogrossi, M.D., Chief, Laboratory of Vascular Pathology,
Instituto Dermopatico dell'Immacolata, Rome, Italy. Dr. Capogrossi received
his M.D. from the Universita Statale "La Sapienza" in Rome, Italy.

Delos M. Cosgrove, M.D., Chairman of the Department of Thoracic and
Cardiovascular Surgery, The Cleveland Clinic Foundation, Cleveland, Ohio. Dr.
Cosgrove received his M.D. from the University of Virginia School of Medicine.

Todd K. Rosengart, M.D., Associate Professor of Cardiothoracic Surgery,
Cornell University Medical College, New York. Dr. Rosengart received his M.D.
from Northwestern University.

Eric J. Topol, M.D., Chairman of the Department of Cardiology and Director,
Joseph J. Jacobs Center for Thrombosis and Vascular Biology, The Cleveland
Clinic Foundation, Cleveland, Ohio. Dr. Topol received his M.D. from the
University of Rochester School of Medicine and Dentistry, Rochester, New York.

Jeffrey D. Trachtenberg, M.D., Attending Assistant Professor of Surgery,
University of Pittsburgh School of Medicine. Dr. Trachtenberg received his
M.D. from the State University of New York. His general surgery and vascular
surgery training were conducted at Washington University, St. Louis, Missouri.

Oncology

Albert B. Deisseroth, M.D., Ph.D., Ensign Professor of Medicine, Chief of
Medical Oncology, Yale University School of Medicine, New Haven, Connecticut.
Dr. Deisseroth received his M.D. and Ph.D. from the University of Rochester
School of Medicine and Dentistry, Rochester, New York.

Donald W. Kufe, M.D., Professor of Medicine, Harvard Medical School, Chief,
Cancer Pharmacology, Department of Adult Oncology, Dana-Farber Cancer
Institute and Deputy Director of the Dana-Farber Cancer Center, Boston,
Massachusetts.

Tsuneya Ohno, M.D., Ph.D., Jikei University School of Medicine, Tokyo, Japan
and Chairman, the Study Group for Gene Therapy in Japan. Dr. Ohno received his
M.D. from the Jikei University School of Medicine in Tokyo, Japan and his
Ph.D. in Molecular Biology from Keio University in Tokyo, Japan.

Ralph R. Weichselbaum, M.D., Harold H. Hines, Jr. Professor and Chairman,
Department of Radiation and Cellular Oncology, University of Chicago. Dr.
Weichselbaum is a member of the Institute of Medicine of the National Academy
of Sciences. Dr. Weichselbaum received his M.D. from the University of
Illinois.

Herpes Virus Vectors

Neal A. DeLuca, Ph.D., Professor, Department of Molecular Genetics and
Biochemistry, University of Pittsburgh. Dr. DeLuca received his Ph.D. in
Biophysics from the Pennsylvania State University.

David J. Fink, M.D., Professor of Neurology and Professor of Molecular
Genetics and Biochemistry, the University of Pittsburgh Medical School. Dr.
Fink received his M.D. from Harvard Medical School.

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<PAGE>

Christopher Preston, Ph.D., Band 2 Scientist, Non-Clinical Scientific Staff
at the Institute of Virology, Glasgow. Dr. Preston received his Ph.D. in
Biochemistry at the University of Cambridge.

Adenovirus Vectors

Min Li, Ph.D., Assistant Professor of Neuroscience, John Hopkins University
School of Medicine. Dr. Li received his Ph.D. in Molecular Biology and
Genetics from the John Hopkins University School of Medicine.

Charles S. H. Young, D.Phil., Professor of Microbiology, Columbia
University. Dr. Young received his D.Phil. in Yeast Genetics from Oxford
University.

COMPETITION

MANUFACTURING

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production of its product candidates for preclinical purposes and relies on
third-party manufacturers of its product candidates for clinical purposes. For
the Company's lead product, BIOBYPASS angiogen, Warner-Lambert has the right
to fill and finish the final product. However, production of BIOBYPASS
angiogen for future clinical trials and possible commercialization is
currently intended to be performed primarily through a third-party
manufacturer. The Company currently intends to rely primarily on corporate
collaborators and third-party manufacturers for clinical and commercial
purposes. If a third-party manufacturer cancels or terminates an existing
relationship or if the Company is unable to contract for or obtain a
sufficient supply of its product candidates on acceptable terms, there could
be significant reductions in sales and delays in bringing the Company's
product candidates to market, as well as delays in the Company's clinical
testing schedule, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
Furthermore, it is anticipated that production of the Company's product
candidates will be based in part on proprietary technology of the Company.
Successful technology transfer will be necessary. There can be no assurance
that manufacturers will abide by any limitations or confidentiality
restrictions on licenses with the Company. In addition, any such manufacturer
may develop process technology related to the manufacture of the Company's
compounds that such manufacturer owns either independently or jointly with the
Company. This would increase the Company's reliance on such manufacturer or
require the Company to obtain a license from such manufacturer in order to
have its products manufactured. There can be no assurance that any such
license would be available on terms acceptable to the Company, if at all.
Further, there can be no assurance that the arrangements with third-party
manufacturers will be successful.

In addition, the Company intends to continue to develop its own
manufacturing capability, which will require significant resources and will be
subject to ongoing government approval and oversight. There can be no
assurance that the Company's efforts in this regard will be successful. See
"Risk Factors--Manufacturing Limitations" and "Risk Factors--Government
Regulation; No Assurance of Regulatory Approval."

GOVERNMENT REGULATION

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<PAGE>

more conventional technologies. The Company's product candidates may require a
delivery device and such product and device may be subject to separate
regulatory review, which could also delay regulatory approval.

Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may result in withdrawal of the product from the
market, and could have a material adverse effect on the Company's business,
financial condition and results of operations. Violations of regulatory
requirements at any stage during the regulatory process, including preclinical
studies and clinical trials, the approval process, post-approval or in GMP,
may result in various adverse consequences to the Company, including the FDA's
delay in approval or refusal to approve a product, withdrawal of an approved
product from the market or the imposition of criminal penalties against the
manufacturer and license holder. There can be no assurance that the Company or
its corporate collaborators will be able to conduct clinical testing or obtain
necessary approvals from the FDA or other regulatory authorities for any
products. Further, the terms of approval of any marketing application,
including the labeling content, may be more restrictive than the Company
desires and could affect the marketability of the Company's proposed products.
Failure to obtain required governmental approvals will delay or preclude the
Company or its corporate collaborators from marketing products or limit the
commercial use of such products and could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Risk Factors--Government Regulation; No Assurance of Regulatory Approval."

EMPLOYEES

As of March 31, 1998, the Company had a total of 54 employees, 16 of whom
hold M.D. or Ph.D. degrees and 15 of whom hold other advanced degrees. Of
these, 38 were engaged in research and development and 16 were engaged in
business development, finance and general administration. The Company's future
success depends in significant part upon the continued service of its key
scientific, technical and senior management personnel and its continuing
ability to attract and retain highly qualified technical and management
personnel. None of the Company's employees is represented by a labor union or
covered by a collective bargaining agreement. The Company has not experienced
any work stoppages and considers its relations with its employees to be good.

FACILITIES

The Company's facilities are located in Rockville, Maryland. The Company
leases approximately 14,000 square feet of laboratory and office space on a
month-to-month basis. The Company may terminate this lease by giving notice
for each of five defined areas, one at a time, over a period that, in the
aggregate, would total at least 210 days. In addition, the Company leases
approximately 9,000 square feet of office space under a lease which expires in
April 2000. The Company believes that these facilities will be adequate for
its current and near-term needs but is in the process of identifying new
facilities for expansion.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the Company's
directors and executive officers as of April 28, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ------------------------------------------------
<S> <C> <C>
Herbert J. Conrad (1)(2).. 65 Chairman of the Board of Directors
Paul H. Fischer, Ph.D.
(1)...................... 48 President, Chief Executive Officer and Director
Thomas E. Smart........... 34 Vice President, Corporate Development, Corporate
Secretary and Treasurer
Imre Kovesdi, Ph.D........ 51 Vice President, Discovery Research
Grant Yonehiro............ 34 Vice President, Product Management
Hal S. Broderson, M.D.
(2)(3)................... 40 Director
Harry T. Rein (1)......... 53 Director
Wendell Wierenga Ph.D..... 50 Director
Gregory F. Zaic (3)....... 50 Director
</TABLE>
- --------
(1) Member of Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee

Herbert J. Conrad has served as Chairman of the Board of Directors of the
Company since September 1996, and as a director of the Company since August
1994. From September 1996 to November 1996, he was the President and Chief
Executive Officer of the Company. From September 1993 to August 1994, he was a
director of Theragen, Inc., which merged into the Company in August 1994. He
served as President of the Pharmaceuticals Division and Senior Vice President
of Hoffmann-LaRoche, Inc. ("Roche") from 1982 until his retirement in 1993.
Mr. Conrad joined Roche in 1960 and held various positions, including Senior
Vice President of the Pharmaceuticals Division, Chairman of the Board of Medi-
Physics, Inc., and Vice President, Public Affairs and Planning Division. Mr.
Conrad is a director of Gensia Sicor Inc., Bio-Technology General Corp.,
UroCor, Inc. and Dura Pharmaceuticals, Inc.

Paul H. Fischer, Ph.D. has served as President, Chief Executive Officer, and
as a director of the Company since November 1996, and in various positions
with the Company since March 1995. From May 1992 to April 1995, he was
Executive Vice President of Research and Development with Oncologix, Inc., a
biotechnology company. From September 1987 to May 1992, he served as Manager,
Cancer Research at Pfizer, Inc., a pharmaceutical company. Dr. Fischer
received his B.S. in Biology from the University of Denver, his Ph.D. in
Pharmacology from the University of California at San Francisco and performed
post-doctoral research in Pharmacology at Yale University School of Medicine.

Thomas E. Smart has served as Vice President of Corporate Development of the
Company since July 1996. From March 1995 to June 1996, he was Executive
Director of Corporate Development of the Company. From August 1991 to March
1995, he was with Cell Genesys, Inc., a biotechnology company, most recently
as Director of Business Development. From July 1990 to July 1991, Mr. Smart
was with G.D. Searle & Co., a pharmaceutical company, most recently as a
Policy Planning Associate, Corporate Strategic Planning. Mr. Smart received
his B.S. in biological sciences from Cornell University and his M.B.A. from
the University of Chicago Graduate School of Business.

Imre Kovesdi, Ph.D. has served as Vice President of Discovery Research of
the Company since September 1995, and as Director of Vector Biology of the
Company from July 1993 to September 1995. From

46
<PAGE>

1992 to 1993, he led projects in eukaryotic gene expression and neurotrophic
factors at Lederle Laboratories. From 1990 to 1993, he was Adjunct Assistant
Professor of Microbiology and Immunology at the New York Medical College. Dr.
Kovesdi received his B.A.Sc. in Electrical Engineering from the University of
British Columbia and his Ph.D. in Molecular Biology from Simon Fraser
University.

Grant Yonehiro has served as Vice President of Product Management of the
Company since September, 1997, as Director of Corporate Development from May
1997 to September 1997, and as Associate Director of Corporate Development
from March 1996 to May 1997. From January 1994 to March 1996, he was at Cell
Genesys, Inc., a biotechnology company, most recently as Manager of Business
Development. From June 1992 to December 1993, he was a Research Analyst for
Focus Advisors, Inc., an equity research organization focusing on health care.
Mr. Yonehiro received his Bachelor of Individualized Studies from the
University of Minnesota and his M.B.A. from the University of California at
Berkeley.

Hal S. Broderson, M.D. has served as a director of the Company since
inception. From December 1992 to September 1993, he was the Company's
President. From 1988 to the present, he has been a general partner of Cashon
Biomedical Associates, L.P., which is the managing general partner of the
Hillman Medical Ventures Partnerships. These venture capital funds focus on
early stage medical technology. Dr. Broderson is currently President of Rock
Hill Ventures, Inc., a venture capital and management firm. Dr. Broderson
received his B.A. in Biology from Indiana University, his M.D. from the
University of Kentucky College of Medicine and his M.B.A. from the Wharton
School at the University of Pennsylvania.

Harry T. Rein has served as a director of the Company since September 1995.
From 1987 to the present, he has been Managing General Partner of Canaan
Partners, a venture capital firm. Mr. Rein received his A.B. from Ogelthorpe
College and his M.B.A. from the University of Virginia. Mr. Rein is also a
director of Anadigics, Inc. and Perception, Inc.

Wendell Wierenga, Ph.D. has served as a director of the Company since April
1998. From 1990 to the present, he has been with the Parke-Davis
Pharmaceutical Research division of the Warner-Lambert Company, most recently
as Senior Vice President of Worldwide Preclinical Research, Development and
Technologies. From 1997 to the present he has been Adjunct Professor in the
Department of Chemistry at the University of Michigan. Dr. Wierenga received
his B.A. in Chemistry from Hope College and his Ph.D. in Chemistry from
Stanford University. Dr. Wierenga is also a director of Onyx Pharmaceuticals,
Inc.

Gregory F. Zaic has served as a director of the Company since inception.
From May 1993 to September 1993, Mr. Zaic was Chief Executive Officer of the
Company and from May 1993 to September 1996, he was Chairman of the Board of
Directors of the Company. From 1987 to the present, he has been a general
partner of Prince Ventures, L.P., a venture capital firm. Mr. Zaic received
his B.S. in Aerospace and Mechanical Engineering from Princeton University and
his M.S. in Mechanical Engineering and his M.S. in Management from the
Massachusetts Institute of Technology. Mr. Zaic is also a director of Aronex
Pharmaceuticals, Inc.

COMMITTEES OF THE BOARD OF DIRECTORS

The Executive Committee comprises Dr. Fischer, Mr. Conrad and Mr. Rein. The
Executive Committee exercises all powers and authority of the Board with
certain exceptions as provided under Delaware law.

The Compensation Committee comprises Mr. Conrad and Dr. Broderson. The
Compensation Committee makes recommendations regarding the Company's Amended
and Restated 1993 Stock Incentive Plan, the 1998 Director Option Plan and the
1998 Employee Stock Purchase Plan, determines salaries for the executive
officers and incentive compensation for employees and consultants of the
Company, and reviews certain other compensation matters.

The Audit Committee comprises Mr. Zaic and Dr. Broderson. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors and reviews
and evaluates the Company's audit and control functions.

47
<PAGE>

DIRECTOR COMPENSATION

The Company's Outside Directors (as defined below) currently receive $1,000
per Board meeting attended, $500 per Committee meeting attended and $1,250 per
quarter as a retainer. All Directors receive reimbursement for travel expenses
from the Company for their service as members of the Board of Directors. Under
the 1998 Director Option Plan, each New Outside Director (as defined below)
automatically receives an option to purchase 10,000 shares of Common Stock
upon the later of (i) the effective date of this offering and (ii) the date
such Outside Director joins the Board of Directors. Each Outside Director who
has served on the Board of Directors for at least six months shall receive an
option to acquire 5,000 shares of Common Stock on (i) the effective date of
this offering and (ii) the date of each of the Company's annual meetings of
stockholders, provided such Outside Director is re-elected. Each option
granted under the 1998 Director Option Plan will become exercisable ratably
over a four-year period. The term "Outside Directors" refers to directors who
are not employees of the Company, and the term "New Outside Directors" refers
to Outside Directors who join the Board after March 31, 1998. See "Certain
Transactions" for a description of the Company's Consulting Agreement with Mr.
Conrad.

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth summary
information concerning compensation paid by the Company during the fiscal year
ended December 31, 1997, to the Company's Chief Executive Officer and the
three other most highly compensated executive officers who earned in excess of
$100,000 in salary and bonus during the fiscal year ended December 31, 1997
(the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ ----------------------
SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY ($) (1) BONUS ($) UNDERLYING OPTIONS (2)
- --------------------------- ---- -------------- --------- ----------------------
<S> <C> <C> <C> <C>
Paul H. Fischer, Ph.D...... 1997 $205,000 $25,000 38,135
President, Chief Executive
Officer and Director
Thomas E. Smart............ 1997 132,900 15,000 27,118
Vice President, Corporate
Development, Corporate
Secretary and Treasurer
Grant Yonehiro............. 1997 105,784 7,500 50,846
Vice President, Product
Management
Imre Kovesdi, Ph.D......... 1997 159,120 -- --
Vice President, Discovery
Research
</TABLE>
- --------
(1) In accordance with the rules of the Securities and Exchange Commission
(the "Commission"), the compensation described in this table does not
include medical, group life insurance or other benefits received by the
Named Executive Officers that are available generally to all salaried
employees of the Company, and certain perquisites and other personal
benefits received by the Named Executive Officers that do not exceed the
lesser of $50,000 or 10% of any such officer's salary and bonus disclosed
in this table.
(2) Issued pursuant to the Amended and Restated 1993 Stock Incentive Plan.

48
<PAGE>

STOCK OPTION GRANTS

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information regarding stock options
granted during the fiscal year ended December 31, 1997, to each of the Named
Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED (#) FISCAL 1997 (%)(1) ($/SH) (2) DATE 5% ($) 10% ($)
---- ----------- ------------------ ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul H. Fischer, Ph.D... 38,135 24% $4.13 09/17/2007 $ 99,049 $ 251,010
Thomas E. Smart......... 27,118 17 4.13 09/17/2007 70,434 178,494
Grant Yonehiro.......... 23,728 15 3.54 06/30/2007 52,825 133,869
27,118 17 4.13 10/20/2007 70,434 178,494
Imre Kovesdi, Ph.D...... -- -- -- -- -- --
</TABLE>

- --------
(1) Based on options to purchase 158,476 shares granted to employees in fiscal
1997, including the Named Executive Officers. The options were granted
under the Company's Amended and Restated 1993 Stock Incentive Plan.
(2) Represents the fair market value of the underlying Common Stock as
determined by the Board of Directors on the date of grant.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years) and the per-share market price at
the time of the grant. It is calculated assuming that the stock price on
the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock
price. These amounts represent certain assumed rates of appreciation only,
in accordance with the rules of the Commission, and do not reflect the
Company's estimate or projection of future stock price performance. Actual
gains, if any, are dependent on the actual future performance of the
Company's Common Stock.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

The following table sets forth, with respect to each of the Named Executive
Officers, information regarding the number and value of securities underlying
unexercised options held by the named Executive Officers as of December 31,
1997:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul H. Fischer, Ph.D... -- -- 98,248 143,269 $1,077,262 $1,393,456
Thomas E. Smart......... -- -- 15,025 61,238 160,500 583,666
Grant Yonehiro.......... -- -- 3,460 50,775 29,272 423,555
Imre Kovesdi, Ph.D...... -- -- 30,964 26,039 353,300 297,104
</TABLE>
- --------
(1) Based on the assumed initial public offering price of $12.00 per share,
less the exercise price.

EMPLOYMENT AGREEMENTS

On March 9, 1995, Paul H. Fischer, the President, Chief Executive Officer
and a director and stockholder of the Company, entered into an employment
agreement with the Company. Should Dr. Fischer's employment be terminated for
any reason other than for cause, his salary will continue to be paid for nine

49
<PAGE>

months from the effective date of such termination. These salary payments will
cease if Dr. Fischer becomes permanently employed at the same or a greater
salary during the nine-month period.

On March 9, 1995, Thomas E. Smart, the Vice President of Corporate
Development, entered into an employment agreement with the Company. The
employment agreement provided for the payment of bonuses in cash and in
options to purchase shares of the Company's Common Stock upon the consummation
of certain corporate collaborations. Should Mr. Smart's employment be
terminated for any reason other than for cause, his salary will continue to be
paid for six months from the effective date of such termination. These salary
payments will cease if Mr. Smart becomes permanently employed at the same or
greater salary during the six-month period. Mr. Smart's unvested options to
purchase the Company's Common Stock will fully vest on the date of approval of
a liquidation or change of control of the Company.

On June 6, 1993, Imre Kovesdi, the Vice President of Discovery Research,
entered into an employment agreement with the Company. Should Dr. Kovesdi's
employment be terminated for any reason other than for cause, his salary will
continue to be paid for one year from the effective date of such termination.
These salary payments will cease if Dr. Kovesdi becomes permanently employed
at the same or greater salary during the one-year period.

EQUITY INCENTIVE PLANS

Amended and Restated 1993 Stock Incentive Plan

The Company adopted its 1993 Stock Incentive Plan (the "Stock Plan") in
October 1993, and amended and restated the Stock Plan in October 1997 and
April 1998. An aggregate of 1,846,218 shares of the Common Stock has been
reserved for issuance, which number will be increased each year on the date of
the annual stockholder meeting, by a number of shares equal to (i) the number
of shares needed to restore the maximum aggregate number of shares reserved
for issuance under the Stock Plan to 1,846,218 or (ii) a lesser amount
determined by the Board of Directors. The purposes of the Stock Plan are to
attract and retain the best available personnel to serve the Company and to
provide additional incentive to the Company's key personnel. The Stock Plan
will continue in effect for a term of ten years, unless it is sooner
terminated by the Board.

The Stock Plan permits the grant of options intended to qualify as incentive
stock options ("ISOs") under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), to employees (including officers and employee
directors), options that do not so qualify ("NSOs," and together with ISOs,
the "Options") to employees (including officers and employee directors) and
consultants (including non-employee directors) and awards of restricted stock.

The Stock Plan is administered by the Board or a committee appointed by the
Board. Subject to limitations set forth in the Stock Plan, the Board has
authority to select the persons to whom Options will be granted, the number of
shares to be converted by each Option, when Options will be granted, and other
terms of Options granted. Options currently granted under the Stock Plan
generally become exercisable at the rate of 12.5% of the shares six months
from the vesting commencement date and approximately 1/48th of the shares
monthly thereafter, such that the Option is fully exercisable four years from
the vesting commencement date.

The maximum term for ISOs granted under the Stock Plan is ten years, except
that if, at the time of the grant, the optionee possesses more than ten
percent of the combined voting power of the Company or of an affiliate (as
defined in the Code) of the Company the maximum term of the ISO is five years.
The exercise price of ISOs must be at least 100% of the fair market value of
the shares subject to the Option on the date of the grant; provided, however,
that if an ISO is granted to a ten percent stockholder, then the exercise
price must be at least 110% of the fair market value of the stock subject to
the Option on the date of the grant. Options granted under the Stock Plan
generally are non-transferrable and expire three months after the termination
of an optionee's service to the Company.

50
<PAGE>

In addition, in the event of a Change of Control (as defined below), Options
held by employees, advisors or consultants of the Company or members of the
Board of Directors at the time of a Change of Control become immediately
exercisable in full and the restrictions applicable to restricted stock of
employees, advisors or consultants of the Company or members of the Board of
Directors at the time of a change of control lapse immediately. Upon a Change
of Control, the Board of Directors may take whatever action it deems desirable
with respect to outstanding Options, including accelerating the expiration or
termination date no earlier than 30 days after notice of such acceleration is
given to the optionees. A "Change of Control" is deemed to have occurred upon
the earliest to occur of the following events: (i) the date the stockholders
of the Company (or the Board of Directors, if stockholder action is not
required) approve a plan or other arrangement pursuant to which the Company
will be dissolved or liquidated; (ii) the date the stockholders of the Company
(or the Board of Directors, if stockholder action is not required) approve a
definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company; (iii) the date the stockholders of the Company (or the
Board of Directors, if stockholder action is not required) and the
stockholders of the other constituent corporation (or its board of directors
if stockholder action is not required) have approved a definitive agreement to
merge or consolidate the Company with or into such other corporation, other
than, in either case, a merger or consolidation of the Company in which
holders of shares of the Company's Common Stock immediately prior to the
merger or consolidation will have at least a majority of the ownership of
common stock of the surviving corporation (and, if one class of common stock
is not the only class of voting securities entitled to vote on the election of
directors of the surviving corporation, a majority of the voting power of the
surviving corporation's voting securities) immediately after the merger or
consolidation, which common stock (and, if applicable, voting securities) is
to be held in the same proportion as such holders' ownership of Common Stock
of the Company immediately before the merger or consolidation; (iv) the date
any entity, person or group, within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Securities Exchange Act of 1934, as amended, other than the
Company or any of its subsidiaries or any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its subsidiaries, or
any person who does not conduct any active trade or business shall have become
the beneficial owner of, or shall have obtained voting control over, more than
fifty percent (50%) of the outstanding shares of the Company's Common Stock;
or (v) the date that fewer than a majority of the Board of Directors are
Incumbent Directors (as defined below). "Incumbent Directors" means directors
who either (x) are directors of the Company as of the effective date of the
Stock Plan or (y) are elected, or nominated for election to the Board of
Directors with the affirmative votes of at least a majority of those directors
whose election or nomination was not in connection with any transaction
described in subsection (i) to (iv) or in connection with an actual or
threatened proxy contest relating to the election of directors of the Company.

1998 Employee Stock Purchase Plan

In April 1998, the Company adopted the 1998 Employee Stock Purchase Plan
(the "Purchase Plan") covering an aggregate of 350,000 shares of Common Stock.
The number of shares reserved will be increased automatically each year on the
date of the Company's annual stockholder meeting by an amount equal to (i) the
number of shares needed to restore the maximum number of shares reserved for
issuance under the Purchase Plan to 350,000 shares or (ii) a lesser amount
determined by the Board of Directors. The Purchase Plan is intended to qualify
as an employee stock purchase plan within the meaning of Section 423 of the
Code. Under the Purchase Plan, the Board may authorize participation by
eligible employees, including officers, in periodic offerings following the
commencement of the Purchase Plan. The initial offering under the Purchase
Plan will commence on the date of this Prospectus and terminate on April 30,
2000.

Unless otherwise determined by the Board, employees are eligible to
participate in the Purchase Plan only if they are employed by the Company or a
subsidiary of the Company designated by the Board for at least 20 hours per
week and are customarily employed by the Company or a subsidiary of the
Company designated by the Board for at least five months per calendar year.
Employees who participate in a offering may have up to ten percent of their
earnings withheld pursuant to the Purchase Plan. The amount withheld is then
used to purchase shares of the Common Stock on specified dates determined by
Board. The price of

51
<PAGE>

Common Stock purchased under the Purchase Plan will be equal to 85% of the
lower of the fair market value of the Common Stock at the commencement date of
each offering or the relevant purchase date. Employees may end their
participation in this offering at any time during this offering, and
participation ends automatically on termination of employment with the
Company.

In the event of a merger, reorganization, consolidation or liquidation
involving the Company, the Board has the discretion to provide that each right
to purchase Common Stock will be assumed or an equivalent right substituted by
the successor corporation or the Board may shorten this offering, and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such merger or other transaction. The Board has the
authority to amend or terminate the Purchase Plan, provided, however, that no
such action may adversely affect any outstanding rights to purchase Common
Stock.

1998 Director Option Plan

In April 1998, the Company adopted the 1998 Director Option Plan (the
"Director Plan") to provide for the automatic grant of options to purchase
shares of Common Stock to non-employee directors of the Company.

The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Director Plan is 130,000. Each New Outside Director
is automatically granted on the later of (i) the effective date of this
offering and (ii) the date such Outside Director joins the Board of Directors
an option to purchase 10,000 shares of Common Stock. In addition, each Outside
Director who has served on the Board of Directors for at least six months
shall receive an option to purchase 5,000 shares of Common Stock on (i) the
effective date of this offering and (ii) the date of each of the Company's
annual meetings of stockholders, provided such Outside Director is re-elected
as a director at such meeting. Each option granted under the Director Plan has
a term of ten years. The options vest over a four-year period, with an
exercise price per share equal to 100% of the fair market value per share on
the date of the grant. Options granted under the Director Plan are generally
non-transferrable. Unless otherwise terminated by the Board of Directors, the
Director Plan terminates automatically in April 2008. On the effective date of
this offering, options to purchase an aggregate of 30,000 shares of Common
Stock will be granted under the Director Plan, with an exercise price equal to
the initial public offering price per share. Upon a Change of Control (as
defined in the Stock Plan), options held by directors shall become immediately
exercisable in full.

401(K) PLAN

The Company has established a tax-qualified employee savings and retirement
plan. Employees must be 21 years old to participate and are eligible on the
first day of the quarter following six months as an employee of the Company.
All amounts contributed by employee participants and earnings on these
contributions are fully vested at all times. Employee participants may elect
to invest their contributions in various established funds.

LIMITATIONS OF DIRECTORS' AND EXECUTIVE OFFICERS' LIABILITY AND
INDEMNIFICATION

The Company's Restated Certificate provides that directors of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty as a Director, except to the extent
that such exemption from liability or limitation thereof is not permitted by
the Delaware General Corporation Law as currently in effect or as the same as
subsequently amended. Such limitation of liability does not apply to
liabilities arising under the federal securities laws and does not affect the
availability of equitable remedies such as injunctive relief or rescission.

The Company's Amended and Restated Bylaws empower the Company to indemnify
its directors, officers, employees and agents to the fullest extent permitted
by law. Pursuant to this provision, the Company has entered into
indemnification agreements with each of its Directors and Executive Officers.

52
<PAGE>

53
<PAGE>

CERTAIN TRANSACTIONS

In September 1995, the Company entered a Second Class C Preferred Stock
Purchase Agreement with Canaan S.B.I.C., L.P., Canaan Capital Limited
Partnership, Canaan Capital Offshore L.P., C.V. (collectively, "Canaan") and
The CIT Group/Venture Capital, Inc. ("The CIT Group"), among others, pursuant
to which Canaan purchased 305,084 shares of Class C Preferred Stock for $1.8
million, and The CIT Group purchased 338,983 shares of Class C Preferred Stock
for $2.0 million. Canaan is affiliated with Harry T. Rein, a director of the
Company. Bruce Schackman, a former director of the Company, is affiliated with
the CIT Group.

Each series of the Company's Preferred Stock has certain conversion rights
and protection against certain dilutive issuances of securities by the
Company. Each holder of Preferred Stock is entitled to one vote for each share
held. Holders of Preferred Stock are also entitled to certain preferences over
holders of Common Stock with respect to dividends and in certain liquidation
events. Certain holders of Common Stock and Preferred Stock are entitled to
certain registration rights with respect to such Common Stock and shares of
Common Stock issued upon the conversion thereof. See "Description of Capital
Stock--Registration Rights."

In July 1997, the Company and Warner-Lambert entered a Stock Purchase
Agreement pursuant to which Warner-Lambert is obligated to purchase up to an
aggregate of $25.0 million of the Company's securities. Concurrently, the
Company and Warner-Lambert entered a Research, Development and Collaboration
Agreement. Wendell Wierenga, a director of the Company, is affiliated with
Warner-Lambert. See "Business--Strategic Alliances--Corporate Collaborations--
Warner-Lambert Company."

The Company has entered employment agreements with certain of its executive
officers. See "Management--Employment Agreements" for a description of the
employment agreements with Dr. Fischer, Mr. Smart and Dr. Kovesdi.

The Company entered a consulting agreement with Mr. Conrad, Chairman of the
Company's Board of Directors, on April 28, 1998. Pursuant to the agreement,
Mr. Conrad will be available to the Company for a minimum of five and up to
ten business days per month, and in exchange will receive $1,500 per day. The
agreement has a one-year term, and is renewable.

The Company has granted options to certain of its directors and executive
officers. The Company has also entered into an indemnification agreement with
each of its directors and executive officers.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions 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
disinterested directors and will continue to be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.

54
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information known to the Company with respect
to the beneficial ownership of its Common Stock as of March 31, 1998, and as
adjusted to reflect the sale of Common Stock offered by the Company hereby for
(i) each person who is known by the Company to own beneficially more than five
percent of the Common Stock; (ii) each of the Company's directors; (iii) each
Named Executive Officer and (iv) all directors and executive officers as a
group.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(2)
SHARES ------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS (1) OWNED(2) OFFERING OFFERING
-------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Hillman Medical Ventures
Partnerships (3)................. 1,101,693 15.68% 11.18%
c/o Rock Hill Ventures, Inc.
One Tower Bridge, Suite 1350
100 Front Street
West Conshohocken, PA 19428
Attention: Hal S. Broderson, M.D.
Biotech Growth SA................. 847,457 12.06 8.60
Bellevue Asset Management, AG
Grasenweg 4
Zug/Postach, Zug-6301
Switzerland
Attention: Andreas Bremer, Ph.D.
Genentech, Inc.................... 734,576 10.46 7.45
One DNA Way
South San Francisco, CA 94080
Prince Venture Partners, III,
L.P.............................. 550,846 7.84 5.59
25 Ford Road
Westport, CT 06880
Attention: Gregory Zaic
Sierra Ventures, III, L.P. (4).... 550,846 7.84 5.59
3000 Sand Hill Road
Building 4, Suite 210
Menlo Park, CA 94025
Attention: Petri Vainio, M.D.,
Ph.D.
Warner-Lambert Company............ 349,853 4.98 6.93 (5)
201 Tabor Road
Morris Plains, NJ 07950
Herbert J. Conrad (6)............. 33,929 * *
Ronald J. Brenner, Ph.D. (7)...... 1,101,693 15.68 11.18
Hal S. Broderson, M.D. (7)........ 1,101,693 15.68 11.18
Thomas S. Porter (8).............. 286,397 4.08 2.91
Harry T. Rein (9)................. 305,084 4.34 3.09
Gregory F. Zaic (10).............. 550,846 7.84 5.59
Paul H. Fischer, Ph.D. (11)....... 137,176 1.92 1.37
Thomas E. Smart (12).............. 65,448 * *
Imre Kovesdi, Ph.D. (13).......... 60,872 * *
Grant Yonehiro (14)............... 16,665 * *
All directors and executive
officers as a group (11 persons)
(15)............................. 2,558,110 35.30% 25.38%
</TABLE>

55
<PAGE>

- --------
* Represents beneficial ownership of less than one percent.
(1) Unless otherwise indicated, the address of each of the named individuals
is: c/o GenVec, Inc., 12111 Parklawn Drive, Rockville, Maryland 20852.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them. Percentage of beneficial
ownership is based on 7,024,451 shares of Common Stock outstanding as of
March 31, 1998, and 9,857,784 shares of Common Stock after completion of
this offering including 333,333 shares to issued to Warner-Lambert upon
closing of this offering. Amounts shown in the above table and the
following notes include shares issuable within the 60-day period
following March 31, 1998, pursuant to the exercise of options.
(3) Includes 84,745 shares owned by Hillman Medical Ventures 1992 L.P.,
508,474 shares owned by Hillman Medical Ventures 1993 L.P., and 508,474
shares owned by Hillman Medical Ventures 1994 L.P. The general partners
of the Hillman Medical Ventures partnerships are Cashon Biomedical
Associates L.P. ("Cashon") and Hillman/Dover Limited Partnership
('"Hillman/Dover"). The general partners of Cashon are Hal S. Broderson,
Ronald J. Brenner and Charles G. Hadley (the "Cashon General Partners").
The general partner of Hillman/Dover is a wholly-owned subsidiary of The
Hillman Company, a firm engaged in diversified investments and
operations. The Hillman Company is controlled by Henry L. Hillman, Elsie
Hilliard Hillman and C.G. Grefenstette, Trustees (the "Trustees") of the
Henry L. Hillman Trust. The Cashon General Partners and the Trustees may
be deemed to be the beneficial owners of the 1,101,693 shares owned by
the Hillman Medical Ventures partnerships.
(4) Includes 21,207 shares held by Sierra Ventures International IV, L.P. and
529,639 shares held by Sierra Ventures IV, L.P.
(5) Adjusted to reflect the sale of 333,333 additional shares to Warner-
Lambert concurrently with the closing of this offering.
(6) Includes 28,528 shares subject to options exercisable within the 60-day
period following March 31, 1998.
(7) Includes 84,745 shares owned by Hillman Medical Ventures 1992 L.P.,
508,474 shares owned by Hillman Medical Ventures 1993 L.P. and 508,474
shares owned by Hillman Medical Ventures 1994 L.P. The general partners
of the Hillman Medical Ventures partnerships are Cashon Biomedical
Associates L.P. ("Cashon") and Hillman/Dover Limited Partnership
("Hillman/Dover"). The general partners of Cashon are Hal S. Broderson,
Ronald J. Brenner and Charles G. Hadley (the "Cashon General Partners").
The general partner of Hillman/Dover is a wholly-owned subsidiary of The
Hillman Company, a firm engaged in diversified investments and
operations. The Hillman Company is controlled by Henry L. Hillman, Elsie
Hillard Hillman and C.G. Grefenstette, Trustees (the "Trustees") of the
Henry L. Hillman Trust. The Cashon General Partners and the Trustees may
be deemed to be the beneficial owners of the 1,101,693 shares owned by
the Hillman Medical Ventures partnerships.
(8) Includes 286,397 shares held by Enterprise Development Fund, L.P., as to
which Mr. Porter disclaims beneficial ownership.
(9) Includes 16,322 shares held by Canaan Capital, L.P., 136,220 shares held
by Canaan Capital Offshore L.P., C.V. and 152,542 shares held by Canaan
S.B.I.C., L.P., as to which Mr. Rein disclaims beneficial ownership.
(10) Includes 550,846 shares held by Prince Venture Partners III, L.P., as to
which Mr. Zaic disclaims beneficial ownership.
(11) Includes 124,465 shares subject to options exercisable within the 60-day
period following March 31, 1998.
(12) Includes 23,076 shares subject to options exercisable within the 60-day
period following March 31, 1998, and 4,837 shares subject to repurchase
by the Company within such period.
(13) Includes 37,373 shares subject to options exercisable within the 60-day
period following March 31, 1998.
(14) Includes 9,886 shares subject to options exercisable within the 60-day
period following March 31, 1998, and 1,271 shares subject to repurchase
by the Company within such period.
(15) Includes 223,328 shares subject to options exercisable within the 60-day
period following March 31, 1998, and 6,108 shares subject to repurchase
by the Company within such period.

56
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company will consist of 50,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock after giving
effect to the proposed Reverse Split, the conversion of all outstanding shares
of Preferred Stock into Common Stock and the restatement of the Company's
Certificate of Incorporation upon the closing of this offering.

The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Restated
Certificate which is included as an exhibit to the Registration Statement of
which this Prospectus is a part, and by the provisions of applicable law.

COMMON STOCK

As of March 31, 1998, there were 7,024,451 shares of Common Stock
outstanding which were held of record by 82 stockholders, on a pro forma basis
to reflect the proposed Reverse Split and the conversion of all outstanding
shares of Preferred Stock which will occur upon the closing of this offering.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. 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 Board of Directors out of funds legally available for
that purpose. See "Dividend Policy." In the event of a 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 the closing of this offering will be fully paid and non-assessable.

PREFERRED STOCK

Effective upon the closing of this offering, the Company will be authorized
to issue 5,000,000 shares of undesignated Preferred Stock, none of which will
be outstanding upon the closing of this offering. The Board of Directors will
have the authority, without further action by the stockholders, to issue the
undesignated Preferred Stock in one or more series, to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated Preferred Stock and to fix the number of
shares constituting any series and the designation of such series.

The issuance of Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of the Company without further action by the
stockholders, may discourage bids for the Company's Common Stock at a premium
over the market price of the Common Stock and may adversely affect the market
price of and the voting and other rights of the holders of Common Stock. At
present, the Company has no plans to issue any of the Preferred Stock.

WARRANTS

As of March 31, 1998, the Company had outstanding (i) a warrant to purchase
211,864 shares of Common Stock at $13.28 per share expiring in May 2001, or,
if the Company has not effected an initial public offering by May 31, 1998,
upon the fifth anniversary of the initial public offering, but not later than
May 31, 2006; (ii) a warrant to purchase 67,796 shares of Common Stock at
$14.75 per share expiring in May 2001, or, if the Company has not effected an
initial public offering by June 30, 1998, on the third anniversary of the
initial public offering but not later than June 30, 2006; (iii) a warrant to
purchase 16,949 shares of Common Stock at $5.90 per share expiring in
September 2006 and (iv) warrants to purchase 23,807 shares of Common Stock at
$5.90 per share expiring upon the later of October 17, 2005 and five years
from the effective date of the

57
<PAGE>

Company's initial public offering. The shares underlying certain of these
warrants are entitled to registration rights.

REGISTRATION RIGHTS

The holders of 6,375,891 shares of Common Stock and warrants to purchase
211,864 shares of Common Stock (the "Registrable Securities") or certain of
their transferees are entitled to certain rights with respect to the
registration of the Registrable Securities under the Securities Act. These
rights are provided under the terms of an agreement between the Company and
the holders of Registrable Securities. Subject to certain limitations in the
agreement, the holders of the Registrable Securities may require, on three
occasions beginning 180 days following the date of this Prospectus, that the
Company use its best efforts to register the Registrable Securities for public
resale. If the Company registers any of its Common Stock either for its own
account or for the account of other security holders, the holders of
Registrable Securities and holders of an additional 505,809 shares of the
Common Stock are entitled to include their shares of Common Stock in the
registration, subject to the ability of the underwriters to limit the number
of shares included in the offering. Certain holders of Registrable Securities
may also require the Company to register all or a portion of their Registrable
Securities on Form S-3 when use of such form becomes available to the Company.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is governed by the provisions of Section 203 of the Delaware
Law. In general, Section 203 prohibits a public Delaware corporation from
engaging in "business combinations" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. A "business combination" includes mergers, asset sales
or other transactions resulting in a financial benefit to a stockholder, and
an "interested stockholder" is a person who, together with affiliates and
associates owns (or within three years, did own) 15% or more of the
corporation's voting stock. The existence of this provision would be expected
to have anti-takeover effects with respect to transactions not approved in
advance by the Board of Directors, such as discouraging takeover attempts that
might result in a premium over the market price of the Common Stock.

Certain provisions of the Company's Restated Certificate and Amended and
Restated Bylaws may have the effect of preventing, discouraging or delaying a
change in the control of the Company and may maintain the incumbency of the
Board of Directors and management. The authorization of undesignated Preferred
Stock makes it possible for the Board of Directors to issue Preferred Stock
with voting or other rights or preferences that could impede the success of
any attempt to change control of the Company. In addition, the Company's
Amended and Restated Bylaws limit the ability of stockholders of the Company
to raise matters at a meeting of stockholders without giving advance notice.

The Restated Certificate provides that stockholder action can be taken only
at an annual or special meeting of stockholders and cannot be taken by written
consent in lieu of a meeting. The Amended and Restated Bylaws provide that,
except as otherwise required by law, special meetings of the stockholders can
only be called by the Board of Directors, by the President of the Company, or
by stockholders holding a majority of the shares outstanding and entitled to
vote.

The Amended and Restated Bylaws establish an advance notice procedure for
stockholder proposal to be brought before an annual meeting of stockholders of
the Company, including proposed nominations of persons for election to the
Board of Directors. Stockholders at an annual meeting may only consider
proposals or nominations specified in the notice of meeting or brought before
the meeting by or at the direction of the Board of Directors or by a
stockholder who was a stockholder of record on the record date for the
meeting, who is entitled to vote at the meeting and who has given to the
Company's Secretary timely written notice, in proper form, of the
stockholder's intention to bring that business before the meeting. Although
the Amended

58
<PAGE>

and Restated Bylaws do not give the Board of Directors the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the Amended and
Restated Bylaws may have the effect of precluding the conduct of certain
business at a meeting if the proper procedures are not followed or may
discourage or defer a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Chase Mellon
Shareholder Services, L.L.C.

59
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices. Furthermore,
since only a limited number of shares will be available for sale shortly after
the offering because of certain contractual and legal restrictions on resale
described below, sales of substantial amounts of Common Stock of the Company
in the public market after restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.

Upon completion of the offering, the Company will have 9,857,784 shares of
Common Stock outstanding, assuming no exercise of currently outstanding
options. Of these shares, the 2,500,000 shares sold in this offering (plus any
additional shares sold upon exercise of the Underwriters' over-allotment
option) will be freely transferable without restriction under the Securities
Act, unless they are held by "affiliates" of the Company as that term is used
under the Securities Act and the regulations promulgated thereunder
("Affiliates"). The remaining 7,357,784 shares of Common Stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 of the Securities Act (the "Restricted Shares"). Restricted Shares
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities
Act. As a result of contractual restrictions and the provisions of Rules 144
and 701, additional shares will be available for sale in the public market as
follows: (i) 49,748 Restricted Shares will be eligible for immediate sale on
the date of this Prospectus; (ii) 76,658 Restricted Shares will be eligible
for sale 90 days after the date of this Prospectus and (iii) 7,231,378
Restricted Shares will be eligible for sale 180 days from the date of this
Prospectus upon expiration of their respective holding periods under Rule 144.

In addition, the Company expects to file a registration statement on Form S-
8 registering a total of 2,326,218 shares of Common Stock subject to
outstanding stock options or reserved for issuance under the Company's equity
incentive plans. The Form S-8 registration statement is expected to be filed
and to become effective 180 days following the effective date of this
offering. Shares registered under such registration statement will be
available for sale in the open market, subject to Rule 144 value limitations
applicable to Affiliates, unless such shares are subject to vesting
restrictions with the Company.

In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the offering, an Affiliate of the Company or person (or
persons whose shares are aggregated) who has beneficially owned restricted
shares (as defined under Rule 144) for at least one year is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the then outstanding shares of the Company's
Common Stock or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which the notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to the manner of sale, notice, and availability of current public
information about the Company. A person (or persons whose shares are
aggregated) who is not an Affiliate of the Company at any time during the 90
days immediately preceding the sale, and who has beneficially owned restricted
shares for at least two years is entitled to sell such shares under Rule
144(k) without regard to the limitations described above.

60
<PAGE>

An employee, officer or director of the Company or a consultant to the
Company who purchased or was awarded shares or options to purchase shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701 of the Securities Act, which permit Affiliates
and non-Affiliates to sell their Rule 701 shares without having to comply with
holding period restrictions of Rule 144, in each case commencing 90 days after
the date of this Prospectus. In addition, non-Affiliates may sell Rule 701
shares without complying with the public information, volume and notice
provisions of Rule 144.

61
<PAGE>

UNDERWRITING

The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, J.P. Morgan Securities Inc. and Smith Barney,
Inc. (the "Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company the
number of shares of Common Stock set forth opposite their respective names
below. The Underwriters are committed to purchase and pay for all such shares,
if any are purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
BancAmerica Robertson Stephens................................
J.P. Morgan Securities Inc....................................
Smith Barney, Inc.............................................
---------
Total....................................................... 2,500,000
=========
</TABLE>

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price, less a concession of not more than $ per
share, of which $ per share may be reallowed to other dealers. After the
initial public offering, the public offering price, concession and
reallowances to dealers may be reduced by the Representatives.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
additional 375,000 shares of Common Stock at the same price per share as the
Company will receive for the 2,500,000 shares that the Underwriters have
agreed to purchase. To the extent that the Underwriters exercise such option,
each of the Underwriters will have a firm commitment to purchase approximately
the same percentage of such additional shares that the number of shares of
Common Stock to be purchased by it shown in the above table represents as a
percentage of 2,500,000 shares offered hereby. If purchased, such additional
shares will be sold by the Underwriters on the same terms as those on which
the 2,500,000 shares are being sold. The Company will be obligated, pursuant
to such option, to sell shares to the Underwriters to the extent such option
is exercised. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of shares of Common Stock offered
hereby.

The Underwriting Agreement contains covenants of indemnity between the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liability arising from breaches of
representations and warranties contained in the Underwriting Agreement.

Each officer and director of the Company and certain stockholders, together
holding approximately 98.3% of the shares of Common Stock outstanding
immediately prior to the closing of the offering, have agreed with the
Representatives that, until 180 days from the date of this Prospectus, subject
to certain limited exceptions, they will not, directly or indirectly, sell,
offer, contract to sell, pledge, grant any option to purchase or otherwise
dispose of any shares of Common Stock (or any securities convertible into, or
exchangeable for, or any rights to purchase or acquire, shares of Common
Stock), held by such holders, acquired by such holder after the date hereof or
which may be deemed to be beneficially owned by such holder, without the prior
written consent of BancAmerica Robertson Stephens. Approximately 7,231,378 of
such shares will be eligible for immediate public sale following expiration of
the lock-up period and their respective holding periods under Rule 144.
BancAmerica Robertson Stephens may, in its sole discretion without notice,
release all or any portion of the securities subject to the lock-up
agreements. In addition, the Company has agreed that, until 180 days from the
date of this Prospectus, the Company will not, without the prior written
consent of BancAmerica Robertson Stephens, subject to certain limited
exceptions, sell or otherwise dispose of, any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock (or any securities

62
<PAGE>

convertible into, exercisable for or exchangeable for shares of Common Stock)
other than the Company's sale of shares in this offering, the issuance of
Common Stock upon the exercise of outstanding options, or the Company's grant
of options and issuance of stock under existing stock option or stock purchase
plans, or the shares to be sold to Warner-Lambert concurrent with this
offering or otherwise pursuant to the Company's existing agreement with
Warner-Lambert. See "Shares Eligible for Future Sale."

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

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level
above that which might otherwise prevail in the open market. A "stabilizing
bid" is a bid for or the purchase of the Common Stock on behalf of the
Underwriters for the purpose of fixing or maintaining the price of the Common
Stock. A "syndicate covering transaction" is the bid for or the purchase of
the Common Stock on behalf of the Underwriters to reduce a short position
incurred by the Underwriters in connection with this offering. A "penalty bid"
is an arrangement permitting the Representatives to reclaim the selling
concession otherwise accruing to an Underwriter or syndicate member in
connection with this offering if the Common Stock originally sold by such
Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed
by such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on the Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined through negotiations between the Company and the
Representatives. The material factors to be considered in such negotiations
are prevailing market conditions, certain financial information of the Company
in recent periods, market valuations of other companies that the Company and
the Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development, the Company's management and other factors deemed relevant. The
estimated initial public offering price range set forth on the cover of this
preliminary prospectus is subject to change as a result of market conditions
and other factors. There can be no assurance that an active or orderly trading
market will develop for the Common Stock or that the Common Stock will trade
in the public market subsequent to this offering at or above the initial
trading price. See "Risk Factors--No Prior Public Market for the Common Stock;
Potential Volatility of Stock Price" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Certain legal matters will be passed upon
for the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts.

EXPERTS

The financial statements of the Company as of December 31, 1996 and 1997,
and for each of the years in the three-year period ended December 31, 1997,
have been included herein and in the registration statement in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein and upon the authority of said firm as experts in
accounting and auditing.

63
<PAGE>

Certain statements included in this Prospectus under the captions "Risk
Factors--Intellectual Property", "Business--GenVec Strategy", and "Business--
Intellectual Property" have been reviewed and approved by Leydig, Voit &
Mayer, Ltd., patent counsel for the Company, as experts on such matters.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus, which is a part of the Registration Statement, omits certain
information, exhibits, schedules and undertakings set forth in the
Registration Statement. For further information pertaining to the Company and
the Common Stock offered hereby, reference is made to such Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents or provisions of any contract or other document
referred to herein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement may be
inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York,
New York 10048. Copies of all or any part of the Registration Statement may be
obtained from such offices upon the payment of the fees prescribed by the
Commission. In addition, registration statements and certain other filings
made with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's web
site on the Internet's World Wide Web, located at http://www.sec.gov. The
Registration Statement, including all exhibits thereto and amendments thereof,
has been filed with the Commission through EDGAR.

64
<PAGE>

GENVEC, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors..................... F-2
Balance Sheets at December 31, 1996 and 1997 and March 31, 1998
(unaudited).............................................................. F-3
Statements of Operations for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 (unaudited) and 1998
(unaudited).............................................................. F-4
Statements of Stockholders' Equity for the three years in the period ended
December 31, 1997 and the three months ended March 31, 1998 (unaudited).. F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 (unaudited) and 1998
(unaudited).............................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

When the events referred to in Note 10 of the Notes to the Financial
Statements have been consummated, we will be in a position to render the
following report.

/s/ KPMG Peat Marwick LLP

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
GenVec, Inc.:

We have audited the accompanying balance sheets of GenVec, Inc. as of
December 31, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997. 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 GenVec, Inc. as of
December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997,
in conformity with generally accepted accounting principles.

McLean, Virginia
March 6, 1998, except for Note 10
which is as of May , 1998

F-2
<PAGE>

GENVEC, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- PRO FORMA
1996 1997 MARCH 31, 1998 MARCH 31, 1998
------------ ----------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............. $ 5,146,226 $ 6,786,390 $ 4,694,205 $ 4,694,205
Short-term investments
(note 3)................ 2,579,124 2,577,990 2,567,866 2,567,866
Accounts receivable...... -- -- 2,000,000 2,000,000
Prepaid expenses......... 164,928 410,826 341,388 341,388
Other current assets..... 103,712 135,715 293,379 293,379
------------ ----------- ----------- -----------
Total current assets.... 7,993,990 9,910,921 9,896,838 9,896,838
------------ ----------- ----------- -----------
Property and equipment
(note 6):
Equipment................ 1,566,091 1,995,004 2,240,553 2,240,553
Leasehold improvements... 176,311 198,933 226,744 226,744
Furniture and fixtures... 58,256 82,481 90,814 90,814
------------ ----------- ----------- -----------
1,800,658 2,276,418 2,558,111 2,558,111
Less: accumulated
depreciation and
amortization............ (1,194,228) (1,678,562) (1,800,612) (1,800,612)
------------ ----------- ----------- -----------
Net property and
equipment.............. 606,430 597,856 757,499 757,499
------------ ----------- ----------- -----------
Other assets.............. 37,950 37,950 37,950 37,950
------------ ----------- ----------- -----------
Total assets............ $ 8,638,370 $10,546,727 $10,692,287 $10,692,287
============ =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......... $ 264,011 $ 387,150 $ 193,622 $ 193,622
Accrued expenses......... 252,509 252,891 419,396 419,396
Accrued technological
license and
intellectual property
expenses................ 439,466 920,484 1,177,478 1,177,478
Accrued payroll and
related expenses........ 245,843 94,341 91,783 91,783
Current portion of
capital lease
obligation (note 6)..... 414,529 174,611 131,386 131,386
------------ ----------- ----------- -----------
Total current
liabilities............ 1,616,358 1,829,477 2,013,665 2,013,665
------------ ----------- ----------- -----------
Capital lease obligation,
less current portion
(note 6).................... 157,729 46,563 26,273 26,273
Other non-current
liabilities.............. -- 26,500 13,250 13,250
------------ ----------- ----------- -----------
Total non-current
liabilities............ 157,729 73,063 39,523 39,523
------------ ----------- ----------- -----------
Commitments (note 6)
Stockholders' equity
(notes 5 and 7):
Convertible preferred
stock, $.001 par value:
Class A, 226,099 shares
authorized, issued and
outstanding
(liquidation preference
of $667,000) at
December 31, 1996 and
1997, and March 31,
1998 (no shares
authorized, issued and
outstanding pro
forma)................. 226 226 226 --
Class B, 2,000,079
shares authorized, and
1,918,688 shares issued
and outstanding
(liquidation preference
of $11,320,314) at
December 31, 1996 and
1997, and March 31,
1998 (no shares
authorized, issued and
outstanding pro
forma)................. 1,919 1,919 1,919 --
Class C, 3,570,332
shares authorized,
issued and outstanding
(liquidation preference
of $21,065,000) at
December 31, 1996 and
1997, and March 31,
1998 (no shares
authorized, issued and
outstanding pro
forma)................. 3,570 3,570 3,570 --
Class D, 338,983 shares
authorized, and 96,852
shares issued and
outstanding
(liquidation preference
of $1,000,000) at
December 31, 1996 and
1997, and March 31,
1998 (no shares
authorized, issued and
outstanding pro
forma)................. 97 97 97 --
Class E, 75,329 shares
authorized, issued and
outstanding
(liquidation preference
$1,000,000) at December
31, 1997 and March 31,
1998 (no shares
authorized, issued and
outstanding pro forma) -- 75 75 --
Class E1, 154,963 shares
authorized, issued and
outstanding
(liquidation preference
$2,000,000) at December
31, 1997 and March 31,
1998 (no shares
authorized, issued and
outstanding pro
forma)................. -- 155 155 --
------------ ----------- ----------- -----------
Total convertible
preferred stock....... 5,812 6,042 6,042 --
------------ ----------- ----------- -----------
Preferred stock, $0.001
par value, no shares
authorized, issued and
outstanding at December
31, 1996 and 1997, and
March 31, 1998,
(5,000,000 shares
authorized, no shares
issued and outstanding
pro forma).............. -- -- -- --
Common stock, $0.001 par
value, 8,814,423,
9,553,191 and 9,553,191
shares authorized at
December 31, 1996 and
1997, and March 31,
1998; 987,419,
1,021,013 and 1,029,488
shares issued and
outstanding at December
31, 1996 and 1997, and
March 31, 1998,
respectively,
(50,000,000 shares
authorized, 7,071,751
shares issued and
outstanding pro
forma).................. 987 1,021 1,030 7,072
Additional paid-in
capital................. 34,462,121 37,497,019 37,521,010 37,521,010
Accumulated deficit...... (27,604,590) (28,859,848) (28,888,936) (28,888,936)
Treasury stock, at cost,
47,300 common shares.... (47) (47) (47) (47)
------------ ----------- ----------- -----------
Total stockholders'
equity................. 6,864,283 8,644,187 8,639,099 8,639,099
------------ ----------- ----------- -----------
Total liabilities and
stockholders' equity... $ 8,638,370 $10,546,727 $10,692,287 $10,692,287
============ =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

GENVEC, INC.

STATEMENTS OF OPERATIONS

See accompanying notes to financial statements.

F-4
<PAGE>

GENVEC, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D CLASS E
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
---------------- ------------------ ------------------ ----------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ------ ---------- ------ ---------- ------ -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1994............ 226,099 $ 226 1,850,109 $1,850 1,474,569 $1,475 -- $ -- -- $ --
Issuance of
Class C
convertible
preferred
shares, net of
issuance costs
of $53,698 (note
7).............. -- -- -- -- 2,095,763 2,095 -- -- -- --
Issuance of
common stock.... -- -- -- -- -- -- -- -- -- --
Exercise of
options......... -- -- -- -- -- -- -- -- -- --
Issuance of
stock for
Theragen
contingent
shares, net of
issuance costs
of $13,335 (note
4).............. -- -- 68,579 69 -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- --
-------- ----- ---------- ------ ---------- ------ -------- ------ -------- ------
Balance,
December 31,
1995............ 226,099 226 1,918,688 1,919 3,570,332 3,570 -- -- -- --
Issuance of
Class D
convertible
preferred
shares, net of
issuance costs
of $8,683
(note 7)........ -- -- -- -- -- -- 96,852 97 -- --
Purchase of
47,300 common
shares (note
7).............. -- -- -- -- -- -- -- -- -- --
Exercise of
options......... -- -- -- -- -- -- -- -- -- --
Stock option and
warrant
compensation
expense
(note 7)........ -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- --
-------- ----- ---------- ------ ---------- ------ -------- ------ -------- ------
Balance,
December 31,
1996............ 226,099 226 1,918,688 1,919 3,570,332 3,570 96,852 97 -- --
Issuance of
Class E
convertible
preferred
shares, net of
issuance costs
of $3,215
(note 7)........ -- -- -- -- -- -- -- -- 75,329 75
Issuance of
Class E1
convertible
preferred
shares, net of
issuance costs
of $68,842 (note
7).............. -- -- -- -- -- -- -- -- -- --
Exercise of
options......... -- -- -- -- -- -- -- -- -- --
Stock option and
warrant
compensation
expense
(note 7)........ -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- --
-------- ----- ---------- ------ ---------- ------ -------- ------ -------- ------
Balance,
December 31,
1997............ 226,099 226 1,918,688 1,919 3,570,332 3,570 96,852 97 75,329 75
Exercise of
options
(unaudited)..... -- -- -- -- -- -- -- -- -- --
Stock option
compensation
expense
(unaudited)..... -- -- -- -- -- -- -- -- -- --
Net loss
(unaudited)..... -- -- -- -- -- -- -- -- -- --
-------- ----- ---------- ------ ---------- ------ -------- ------ -------- ------
Balance, March
31, 1998
(unaudited)..... 226,099 226 1,918,688 1,919 3,570,332 3,570 96,852 97 75,329 75
Pro forma
conversion of
preferred stock
to common stock
(unaudited)..... (226,099) (226) (1,918,688) (1,919) (3,570,332) (3,570) (96,852) (97) (75,329) (75)
-------- ----- ---------- ------ ---------- ------ -------- ------ -------- ------
Pro forma
balance at March
31, 1998
(unaudited)..... -- $ -- -- $ -- -- $ -- -- $ -- -- $ --
======== ===== ========== ====== ========== ====== ======== ====== ======== ======
<CAPTION>
CLASS E1 TREASURY
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCK
----------------- ---------------- PAID-IN ACCUMULATED --------
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT AMOUNT TOTAL
--------- ------- --------- ------ ------------ ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1994............ -- $ -- 532,480 $ 533 $20,425,958 $(11,947,257) $ -- $8,482,785
Issuance of
Class C
convertible
preferred
shares, net of
issuance costs
of $53,698 (note
7).............. -- -- -- -- 12,309,207 -- -- 12,311,302
Issuance of
common stock.... -- -- 20,424 20 12,030 -- -- 12,050
Exercise of
options......... -- -- 7,812 8 5,030 -- -- 5,038
Issuance of
stock for
Theragen
contingent
shares, net of
issuance costs
of $13,335 (note
4).............. -- -- 63,492 63 428,611 -- -- 428,743
Net loss........ -- -- -- -- -- (7,549,172) -- (7,549,172)
--------- ------- --------- ------ ------------ ------------- -------- -----------
Balance,
December 31,
1995............ -- -- 624,208 624 33,180,836 (19,496,429) -- 13,690,746
Issuance of
Class D
convertible
preferred
shares, net of
issuance costs
of $8,683
(note 7)........ -- -- -- -- 991,220 -- -- 991,317
Purchase of
47,300 common
shares (note
7).............. -- -- -- -- (27,860) -- (47) (27,907)
Exercise of
options......... -- -- 363,211 363 212,865 -- -- 213,228
Stock option and
warrant
compensation
expense
(note 7)........ -- -- -- -- 105,060 -- -- 105,060
Net loss........ -- -- -- -- -- (8,108,161) -- (8,108,161)
--------- ------- --------- ------ ------------ ------------- -------- -----------
Balance,
December 31,
1996............ -- -- 987,419 987 34,462,121 (27,604,590) (47) 6,864,283
Issuance of
Class E
convertible
preferred
shares, net of
issuance costs
of $3,215
(note 7)........ -- -- -- -- 996,712 -- -- 996,787
Issuance of
Class E1
convertible
preferred
shares, net of
issuance costs
of $68,842 (note
7).............. 154,963 155 -- -- 1,931,002 -- -- 1,931,157
Exercise of
options......... -- -- 33,594 34 22,286 -- -- 22,320
Stock option and
warrant
compensation
expense
(note 7)........ -- -- -- -- 84,898 -- -- 84,898
Net loss........ -- -- -- -- -- (1,255,258) -- (1,255,258)
--------- ------- --------- ------ ------------ ------------- -------- -----------
Balance,
December 31,
1997............ 154,963 155 1,021,013 1,021 37,497,019 (28,859,848) (47) 8,644,187
Exercise of
options
(unaudited)..... -- -- 8,475 9 4,991 -- -- 5,000
Stock option
compensation
expense
(unaudited)..... -- -- -- -- 19,000 -- -- 19,000
Net loss
(unaudited)..... -- -- -- -- -- (29,088) -- (29,088)
--------- ------- --------- ------ ------------ ------------- -------- -----------
Balance, March
31, 1998
(unaudited)..... 154,963 155 1,029,488 1,030 37,521,010 (28,888,936) (47) 8,639,099
Pro forma
conversion of
preferred stock
to common stock
(unaudited)..... (154,963) (155) 6,042,263 6,042 -- -- -- --
--------- ------- --------- ------ ------------ ------------- -------- -----------
Pro forma
balance at March
31, 1998
(unaudited)..... -- $ -- 7,071,751 $7,072 $37,521,010 $(28,888,936) $(47) $8,639,099
========= ======= ========= ====== ============ ============= ======== ===========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

GENVEC, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- -----------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss.............. $(7,549,172) $(8,108,161) $(1,255,258) $(2,089,670) $ (29,088)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization
expense............. 387,045 503,285 484,334 119,916 132,174
Stock option and
warrant compensation
expense (note 7).... -- 105,060 84,898 -- 19,000
Non-cash purchase of
in-process
technology (note
4).................. 442,078 -- -- -- --
(Increase) decrease
in other current
assets.............. (3,276) (66,669) (32,003) 39,736 (157,664)
(Increase) decrease
in other assets..... (4,696) 514 -- -- --
(Increase) in
accounts
receivable.......... -- -- -- -- (2,000,000)
(Increase) decrease
in prepaid
expenses............ (170,684) 82,718 (245,897) 4,347 69,438
Increase (decrease)
in accounts
payable............. (84,148) (334,736) 123,139 (29,501) (193,528)
Increase (decrease)
in accrued
expenses............ 37,344 459,634 (151,121) 20,321 297,597
Increase (decrease)
in accrued
technological
license and
intellectual
property expenses... 9,211 430,344 481,018 (292,987) 123,344
Increase (decrease)
in other non-current
liabilities......... -- -- 26,500 -- (13,250)
----------- ----------- ----------- ----------- ----------
Net cash used in
operating
activities......... (6,936,298) (6,928,011) (484,390) (2,227,838) (1,751,977)
----------- ----------- ----------- ----------- ----------
Cash flows from
investing activities:
Purchase of property
and equipment........ (235,053) (86,387) (475,760) (64,040) (281,693)
Purchases of
investments.......... -- (8,769,124) (4,361,879) (1,783,889) --
Proceeds from
maturities of
investments.......... -- 6,190,000 4,363,013 2,094,412 --
----------- ----------- ----------- ----------- ----------
Net cash provided by
(used in) investing
activities......... (235,053) (2,665,511) (474,626) 246,483 (281,693)
----------- ----------- ----------- ----------- ----------
Cash flows from
financing activities:
Proceeds from issuance
of common stock...... 5,038 213,228 22,320 3,618 5,000
Proceeds from issuance
of preferred stock,
net of issuance
costs................ 12,311,302 991,317 2,927,944 -- --
Purchase of treasury
stock................ -- (27,907) -- -- --
Payments under capital
lease obligation..... (302,020) (433,191) (351,084) (104,707) (63,515)
Sale of property and
equipment............ -- 116,555 -- -- --
----------- ----------- ----------- ----------- ----------
Net cash provided by
(used in) financing
activities......... 12,014,320 860,002 2,599,180 (101,089) (58,515)
----------- ----------- ----------- ----------- ----------
Increase (decrease) in
cash and cash
equivalents........... 4,842,969 (8,733,520) 1,640,164 (2,082,444) (2,092,185)
Cash and cash
equivalents, beginning
of period............. 9,036,777 13,879,746 5,146,226 5,146,226 6,786,390
----------- ----------- ----------- ----------- ----------
Cash and cash
equivalents, end of
period................ $13,879,746 $ 5,146,226 $ 6,786,390 $ 3,063,782 $4,694,205
=========== =========== =========== =========== ==========
Supplemental
disclosures of cash
flow information:
Cash paid during the
period for interest.. $ 73,568 $ 75,272 $ 36,158 $ 12,901 $ 2,332
=========== =========== =========== =========== ==========
Supplemental schedule
of non-cash investing
and financing
activities:
Capital stock issued
for the purchase of
Theragen, Inc.
(note 4)............. $ 428,743 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ==========
Assets acquired under
capital lease (note
6)................... $ 391,678 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ==========
Issuance of stock in
payment of accrued
expenses............. $ 12,050 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ==========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

(1) ORGANIZATION AND BUSINESS DESCRIPTION

GenVec, Inc. ("GenVec" or the "Company") was incorporated under the laws of
the state of Delaware on December 7, 1992. GenVec focuses on the development
and commercialization of novel gene therapy products for major disease
markets. GenVec's lead product candidate, BIOBYPASS angiogen, is currently in
Phase I/II clinical trials for the treatment of coronary artery disease.
GenVec also intends to initiate a Phase I/II clinical trial in patients with
peripheral vascular disease in May 1998. The Company is developing BIOBYPASS
angiogen as part of its collaboration with the Warner-Lambert Company
("Warner-Lambert"), under which the Company could receive payments totaling
over $100 million in milestone payments, research funding, equity purchases
and technology access fees, upon the achievement of specified milestones. As
of April 20, 1998, Warner-Lambert had paid to the Company $13.5 million under
this collaboration. The Company is also pursuing research and development
programs in the areas of vascular damage, oncology and neurology. GenVec has
entered into corporate collaborations with Varian Associates, Inc. ("Varian")
and Fuso Pharmaceutical Industries, Ltd. ("Fuso") in certain areas of
oncology.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Information

The interim financial statements of the Company for the three months ended
March 31, 1997 and 1998, included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations relating to interim financial statements. In the opinion
of management, the accompanying unaudited interim financial statements reflect
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company at March 31, 1997 and
1998, and the results of its operations and its cash flows for the three
months ended March 31, 1997 and 1998.

Revenue Recognition

Revenue from research and development contracts is recognized when earned as
defined under the terms of the respective contracts. Revenue from milestone
events is recognized when the milestone is achieved. Revenue recognized in the
accompanying statements of operations is not subject to repayment.

Research and Development

Research and development costs are charged to operations as incurred. Such
costs include proprietary research and development activities and expenses
associated with collaborative research agreements.

Property and Equipment

Property and equipment are stated at cost. Capitalized lease assets are
stated at the lower of the present value of the future minimum lease payments
or fair value at the inception of the lease.

Property and equipment is depreciated over the estimated useful lives of
assets, generally three to seven years, using the straight-line method.

F-7
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

Income Taxes

Income taxes are accounted for in accordance with Statement 109, Accounting
for Income Taxes.

Under the asset and liability method of Statement 109, deferred tax assets
and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with original
maturities of three months or less, and are recorded at amortized cost which
approximates fair value. Cash equivalents consist primarily of money market
funds, bonds and commercial paper.

Short-term Investments

The Company's short-term investments, consisting primarily of bonds and
commercial paper, are classified as held to maturity portfolio as the Company
has both the ability and intent to hold securities until maturity. The
portfolio is carried at amortized cost which approximates fair value.

Basic Net Loss Per Share and Pro Forma Basic Net Loss Per Share

The Company adopted Statement 128, Earnings Per Share, in 1997. Statement
128 requires the presentation of basic earnings (loss) per share and diluted
earnings (loss) per share, if more dilutive, for all periods presented.

In accordance with Statement 128, basic net loss per share has been computed
using the weighted average number of shares of common stock outstanding during
the period.

Pro forma basic net loss per share as presented in the statement of
operations has been computed as described above and also gives effect to the
conversion of the convertible preferred stock that will occur upon completion
of the Company's initial public offering (using the as-if converted method
from the original date of issuance.)

A reconciliation of shares used in the calculation of basic and pro forma
basic net loss per share follows (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
------------------------------ ENDED
1995 1996 1997 MARCH 31, 1998
-------- -------- ---------- ---------------
(unaudited)
<S> <C> <C> <C> <C>
Net loss....................... $ (7,549) $ (8,108) $ (1,255) $ (29)
======== ======== ========== ==========
Weighted average shares of
common stock outstanding
(shares used in computing
basic net loss per share)..... 561,319 801,769 956,856 976,365
Basic net loss per share....... $ (13.45) $ (10.11) $ (1.31) $ (0.03)
======== ======== ========== ==========
Shares used in computing basic
net loss per share............ 956,856 976,365
Adjustment to reflect the
effect of the assumed
conversion of preferred
stock......................... 6,042,263 6,042,263
---------- ----------
Shares used in computing pro
forma basic net loss per
share......................... 6,999,119 7,018,628
========== ==========
Pro forma basic net loss per
share......................... $ (0.18) $ (0.01)
========== ==========
</TABLE>

Had the Company been in a net income position, diluted earnings per share
would have been presented and would have included the shares used in the
computation of pro forma basic net loss per share as well as

F-8
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

additional potential common shares related to outstanding options and
warrants. The diluted EPS computation is not included, as all potential common
shares are antidilutive.

Pro Forma Balance Sheet (unaudited)

The unaudited pro forma balance sheet as of March 31, 1998, reflects the
conversion of the existing shares of convertible preferred stock into an
equivalent number of shares of common stock (adjusted for the common stock
reverse split), which conversion is contingent upon the closing of the
offering (see note 10).

Use of Estimates

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

Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments, as reflected in
the accompanying balance sheets, approximate fair value. Financial instruments
consist of cash and cash equivalents, short-term investments, accounts
receivable, accounts payable, accrued technological license and intellectual
property expenses, accrued expenses, accrued payroll and related expenses and
capital lease obligations.

Stock Option Plan

The Company accounts for its stock option plan in accordance with Statement
123, Accounting for Stock-Based Compensation, which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, Statement 123 also allows entities
to continue to apply the provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants as if the
fair-value-based method defined in Statement 123 had been applied. Under APB
Opinion No. 25, compensation expense would be recorded on the date of grant
only if the current market price of the underlying stock exceeded the exercise
price. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosures of Statement 123 for
employee stock option grants. Non-employee stock option grants are recorded in
accordance with the provisions of Statement 123.

(3) SHORT-TERM INVESTMENTS

The Company holds all securities to maturity. The amortized cost, gross
unrealized holding gains and losses and fair value for held-to-maturity
securities by major security type at December 31, 1996 and 1997 and March 31,
1998, are as follows:

<TABLE>
<CAPTION>
1996
------------------------------------
GROSS
UNREALIZED
AMORTIZED HOLDING FAIR
COST GAINS (LOSSES) VALUE
---------- -------------- ----------
<S> <C> <C> <C>
Classified as investments:
Corporate bonds...................... $1,686,350 $15,759 $1,702,109
Commercial paper..................... 892,774 (6,537) 886,237
---------- ------- ----------
$2,579,124 $ 9,222 $2,588,346
========== ======= ==========
Classified as cash equivalents:
Corporate bonds...................... $ 601,932 $ 37 $ 601,969
Commercial paper..................... 989,656 -- 989,656
---------- ------- ----------
$1,591,588 $ 37 $1,591,625
========== ======= ==========
</TABLE>

F-9
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997
------------------------------------
GROSS
UNREALIZED
AMORTIZED HOLDING FAIR
COST GAINS (LOSSES) VALUE
---------- -------------- ----------
<S> <C> <C> <C>
Classified as investments:
Tax exempt bonds..................... $ 499,191 $ 534 $ 499,725
Corporate bonds...................... 2,078,799 2,327 2,081,126
---------- ------ ----------
$2,577,990 $2,861 $2,580,851
========== ====== ==========
Classified as cash equivalents:
Corporate bonds...................... $1,998,589 $1,411 $2,000,000
Commercial paper..................... 1,286,427 -- 1,286,427
---------- ------ ----------
$3,285,016 $1,411 $3,286,427
========== ====== ==========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998 (UNAUDITED)
------------------------------------
GROSS
UNREALIZED
AMORTIZED HOLDING FAIR
COST GAINS (LOSSES) VALUE
---------- -------------- ----------
<S> <C> <C> <C>
Classified as investments:
Tax exempt bonds..................... $ 499,591 $ 239 $ 499,830
Corporate bonds...................... 2,068,275 5,209 2,073,484
---------- ------ ----------
$2,567,866 $5,448 $2,573,314
========== ====== ==========
Classified as cash equivalents:
Commercial paper..................... $3,387,799 $ -- $3,387,799
---------- ------ ----------
$3,387,799 $ -- $3,387,799
========== ====== ==========
</TABLE>

(4) PURCHASE OF THERAGEN, INC.

Pursuant to an agreement effective August 8, 1994, the Company acquired
Theragen, Inc., ("Theragen") a gene therapy company incorporated under the
laws of the state of Michigan. This acquisition transferred all of Theragen's
technology, know-how and licenses to the Company. The purchase was effected
through an exchange of all shares of Theragen stock outstanding immediately
prior to the acquisition for up to 964,940 shares of the Company's capital
stock which was comprised of common stock, Class B convertible preferred stock
and options to purchase common stock. This included contingent shares of
253,932 that were to be issued or vested upon the achievement of certain
milestones. The cost of the acquisition was $2,580,798 in 1994, which
consisted of the fair value of the Company's capital stock contributed on the
purchase date as well as other direct transaction-related costs. These costs
were recorded as purchase of in-process technology expense since no
capitalizable technology was purchased. The acquisition was accounted for
using the purchase method. Accordingly, the results of operations of the
acquired company were included with those of the Company for periods
subsequent to the date of acquisition.

In 1995, the terms for the issuance or vesting of the contingent shares were
modified. Instead of issuing these shares upon the achievement of certain
milestones, shares and options were issued or vested in 1995 in an amount
equal to approximately 55.1% of the original issuable contingent shares in
lieu of all contingent

F-10
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996
rights of former Theragen stockholders. As a result, shares of stock totaling
132,071 were issued at fair market value, as determined by the Company's Board
of Directors, while options totaling 7,759 were vested, and 14,091 were
canceled. The cost of the stock transaction is deemed to be part of the
acquisition cost, and is reflected in the accompanying statements of
operations as purchase of in-process technology expense.

(5) RESEARCH AND DEVELOPMENT AGREEMENTS

Fuso Pharmaceuticals Industries, Ltd.

In September 1997, the Company and Fuso established a collaboration to
conduct research and to identify, evaluate and develop gene therapy products
for the treatment of cancer. If the research program continues for its full
term, Fuso is required to provide $1.0 million in research funding annually
for five years, of which $750,000 will be paid to the Company each year. Fuso
has the right to terminate the collaboration after the second anniversary of
the collaboration upon 90 days prior written notice. In connection with
establishment of the collaboration, Fuso purchased shares of the Company's
capital stock for $1.0 million. The Company recognized contract revenues from
Fuso of $187,500 for the year ended December 31, 1997 and $187,500 for the
three months ended March 31, 1998.

As part of the collaboration, the Company granted Fuso an exclusive,
royalty-bearing license to develop and commercialize products developed under
the collaboration for the treatment of cancer in Japan and at Fuso's option,
Korea and Taiwan. Fuso will be responsible for the development and
commercialization of any products in its territory. The Company will receive
additional payments for the achievement by Fuso of specified product
development and regulatory milestones, and royalties on the sale of any such
products commercialized by Fuso. The Company has retained all rights to
develop and commercialize such products for the treatment of cancer in the
rest of the world, and for all other uses worldwide, subject to certain
restrictions, independently and with third parties.

Warner-Lambert Company

In July 1997, Warner-Lambert, a stockholder then owning 7,487 shares of the
Company's common stock and 187,405 shares of the Company's Class B preferred
stock, entered into a collaboration agreement and a stock purchase agreement
with the Company to develop and commercialize gene therapy products
incorporating the VEGF gene for therapeutic angiogenesis ("Collaboration
Products"). Under the agreements, the Company may receive more than $100
million in milestone payments, research funding, equity purchases and
technology access fees, if specified milestones are achieved. Pursuant to the
collaboration agreement, Warner-Lambert had paid to the Company an aggregate
of $13.5 million through April 20, 1998, of which the Company recognized
revenues of $10.0 million for the year ended December 31, 1997, and $3.5
million for the three months ended March 31, 1998.

Pursuant to the stock purchase agreement, Warner-Lambert purchased $2.0
million of the Company's capital stock in December 1997, consisting of 154,963
shares of the Company's Class E1 preferred stock at a price of approximately
$12.91 per share. In addition, Warner-Lambert has agreed to purchase $5.0
million of the Company's common stock in a private transaction concurrent with
an IPO at 125% of the price at which a share of common stock is sold to the
public.

F-11
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

Genentech, Inc.

In May 1993, Genentech, Inc., ("Genentech") a stockholder owning 56,610
shares of the Company's Class A preferred stock, and 338,983 shares each of
the Company's Class B and Class C preferred stock as of December 31, 1997 and
March 31, 1998, executed a research and development agreement with the
Company. Under this agreement, the Company performed research and development
activities with respect to gene therapy products for cystic fibrosis.
Genentech was required to make certain research and development payments and
certain milestone payments to the Company aggregating up to $12.75 million, in
exchange for the right to develop, manufacture, and sell potential products in
the cystic fibrosis field. Effective September 12, 1996, the research and
development agreement between the Company and Genentech terminated due to a
change in research focus. Contract revenues of $1,000,000, $698,370 and $0
were recognized from Genentech in 1995, 1996 and 1997, respectively.

Varian Associates, Inc.

(6) COMMITMENTS

Lease Agreements

In January 1994, the Company entered into a capital lease agreement allowing
it to fund the acquisition of up to $1.5 million of furniture and equipment
purchases. Lease terms of new purchases were 42 months with an interest rate
of 9.6%. In connection with this agreement, the Company granted the lessor
warrants to purchase approximately 23,800 shares of Class B convertible
preferred stock at a purchase price of approximately $5.90 per share. Pursuant
to this lease agreement, in May 1994, the Company entered into a sale lease-
back transaction whereby it sold and subsequently leased-back furniture and
equipment to which it held title. Additional equipment purchases have been
funded under extensions made to this agreement through 1996.

Included in property and equipment at December 31, 1996 and 1997 and March
31, 1998, are assets recorded under this agreement of $1,404,620, $813,552 and
$732,155, respectively. Accumulated depreciation and amortization at December
31, 1996 and 1997 and March 31, 1998, includes amounts for the capital lease
of $906,311, $716,565 and $693,277, respectively.

F-12
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

Future minimum lease payments due under this capital lease at December 31,
1997, are as follows:

<TABLE>
<S> <C>
1998............................................................... $186,007
1999............................................................... 47,988
--------
Total minimum lease payments....................................... 233,995
Less amounts representing interest at 9.6%......................... 12,821
--------
Present value of minimum capital lease payments.................... 221,174
Less current installments.......................................... 174,611
--------
Obligations under capital lease, net of current installments....... $ 46,563
========
</TABLE>

During 1997, portions of the Company's capital lease expired. The Company
has continued leasing assets under the expired leases on a month-to-month
basis.

In addition to the aforementioned capital lease, the Company leases office
and laboratory space under month-to-month operating leases. The Company may
terminate the office and laboratory space leases, one at a time, over a
minimum period of 210 days. Rent expense under operating leases was
approximately $156,000, $167,000 and $240,000 for the years ended December 31,
1995, 1996 and 1997, and approximately $50,000 and $117,000 for the three
months ended March 31, 1997 and 1998, respectively.

Research and Development Agreements

The Company has agreed to provide grants for certain research projects under
agreements with several universities and research organizations. Under the
terms of these agreements, the Company has received exclusive licenses to the
resulting technology. Total grants paid by the Company were $2,598,000,
$2,277,000 and $2,734,000 for the years ended December 31, 1995, 1996 and
1997, and $711,000 and $608,000 for the three months ended March 31, 1997 and
1998, respectively. The Company has commitments to pay up to approximately
$6,968,000 related to these grants through 1999.

(7) STOCKHOLDERS' EQUITY

Capital Changes

Effective in December 1995, the Company amended its Certificate of
Incorporation which effected the authorization of a total of 7,848,321 shares
of common stock and 3,570,332 shares of Class C convertible preferred stock,
each having a par value of $0.001 per share.

Effective in June 1996, the Company restated its Certificate of
Incorporation which effected the authorization of a total of 8,814,423 shares
of common stock and 338,983 shares of Class D convertible preferred stock,
each having a par value of $0.001 per share.

Effective in December 1997, the Company amended its Certificate of
Incorporation which effected the authorization of a total of 9,553,191 shares
of common stock, 75,329 shares of Class E convertible preferred stock and
154,963 shares of Class E1 convertible preferred stock, each having a par
value of $0.001 per share.

Convertible Preferred Stock

In September 1995, the Company issued an additional 2,095,763 shares of
Class C convertible preferred stock in a private placement. In May 1996, the
Company issued 96,852 shares of Class D convertible preferred stock. In
December 1997, the Company issued 75,329 shares of Class E convertible
preferred stock and 154,963 shares of Class E1 convertible preferred stock.

F-13
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

Since its inception, the Company has issued 6,042,263 shares of convertible
preferred stock (Class A, B, C, D, E and E1) for aggregate cash consideration
of $34,482,000. Preferred stockholders participate in the dividends declared
to common stockholders, if any, in an amount proportionate to the number of
shares of common stock into which the preferred stock is convertible.
Preferred holders are entitled to one vote for each share of common stock into
which the preferred shares can be converted.

In the event of any voluntary or involuntary liquidation of the Company,
before any distribution can be made to the holders of common stock, the
preferred stockholders are entitled to receive payment of $2.95 for each share
of Class A convertible preferred stock, $5.90 for each share of Class B and C
convertible preferred stock, $10.33 for each share of Class D convertible
preferred stock, $13.28 for each share of Class E convertible preferred stock
and $12.91 for each share of Class E1 convertible preferred stock plus any
declared but unpaid dividends. No dividends were declared for the years ended
December 31, 1995, 1996 and 1997, or for the three months ended March 31,
1998.

Holders of Class A, B, C, D, E and E1 convertible preferred stock have the
right at any time, at their option, to convert without the payment of
additional consideration, each preferred stock share into an equivalent number
of common stock shares. Holders of Class A, B, C, D, E and E1 convertible
preferred stock convert at a one-for-one basis; all Class A, B and C shares of
convertible preferred stock are subject to certain antidilution adjustments.
The Company has reserved 6,042,263 shares of common stock for issuance upon
conversion of the Class A, B, C, D, E and E1 convertible preferred stock. Upon
the occurrence of an initial public offering of GenVec stock which yields the
Company at least $15 million, all preferred stock shares will convert to
common stock shares. The preferred stockholders have voting rights equal to
the common shares they would own upon conversion.

Treasury Stock

Outstanding shares of common stock totaling 47,300 were repurchased by the
Company in 1996 at $0.59 per share. The shares were purchased from two
employees who left the Company in 1996.

Restricted Common Stock

In 1993, the Company issued a total of 185,939 shares of restricted common
stock at a purchase price equal to the fair market value on the date of grant
in 1993, and recorded notes receivable as a reducing component of equity. As
of March 31, 1998, 135,092 shares are still restricted and the Company has a
note receivable with a former officer for $79,704 plus accrued interest of
$27,760 related to this restricted common stock.

Stock Incentive Plan

The Company adopted its 1993 Stock Incentive Plan (the "Stock Plan") in
October 1993. The Stock Plan was amended and restated in October 1997 and
April 1998. An aggregate of 1,846,218 shares of common stock has been reserved
for issuance, which number will be increased on each anniversary date of the
adoption of the Stock Plan, beginning in 1999, by a number of shares equal to
the number of shares needed to restore the maximum aggregate number of shares
reserved for issuance under the Stock Plan to 1,846,218 or a lesser amount
determined by the Board of Directors. The Stock Plan will continue in effect
for a term of ten years, unless terminated by the Board at an earlier date.

Options to purchase common stock under the Stock Plan are exercisable at the
rate of 12.5% of the shares six months from the vesting commencement date and
approximately 1/48th of the shares monthly thereafter, such that the option is
fully exercisable four years from the vesting commencement date.

F-14
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

The maximum term for options granted under the Stock Plan is ten years,
except that if, at the time of the grant, the optionee possesses more than ten
percent of the combined voting power of the Company, the maximum term of the
option is five years. Exercise prices of the options approximates fair value
on the date of grant, however, for options granted to a ten percent
stockholder, then the exercise price must be equal to at least 110% of the
fair value of the stock on the date of grant. Options granted under the Stock
Plan expire three months after the termination of an optionee's service to the
Company.

The Company applies Statement 123 for options granted to consultants. In
adopting Statement 123 for options granted to consultants, $105,060 and
$84,898 for the years ended December 31, 1996 and 1997, and $19,000 for the
three months ended March 31, 1998, was recognized for compensation expense to
consultants.

The Company applies APB Opinion No. 25 in accounting for its stock option
plan for options granted to employees and accordingly, no compensation expense
has been recognized in the financial statements. Had the Company determined
compensation expense based on the fair value at the grant date for its stock
options issued to employees under Statement 123, the Company's net loss would
have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
1995 1996 1997 MARCH 31, 1998
----------- ----------- ----------- ---------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net loss................ As reported $(7,549,172) $(8,108,161) $(1,255,258) $(29,088)
=========== =========== =========== ========
Pro forma (7,571,594) (8,179,600) (1,381,997) (29,088)
=========== =========== =========== ========
Basic net loss per
common share........... As reported $ (13.45) $ (10.11) $ (1.31) $ (0.03)
=========== =========== =========== ========
Pro forma (13.49) (10.20) (1.44) (0.03)
=========== =========== =========== ========
</TABLE>

Pro forma net loss reflects compensation expense under Statement 123 only
for options granted for the years ended December 31, 1995, 1996 and 1997, and
for the three months ended March 31, 1998. Therefore, the full impact of
calculating compensation expense for stock options under Statement 123 is not
reflected in the pro forma net loss amounts presented above because
compensation expense is reflected over the options' vesting period and
compensation expense for options granted prior to January 1, 1995, is not
considered.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
1995 1996 1997 MARCH 31, 1998
---------- ---------- ---------- --------------
(unaudited)
<S> <C> <C> <C> <C>
Dividend yield.............. -- -- -- --
Expected volatility......... 63% 63% 60% 60%
Risk free interest rate..... 5.8% 5.8% 5.78% 5.78%
Expected life............... 4.25 years 4.25 years 4.25 years 4.25 years
</TABLE>

F-15
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

A summary of the status of the Company's stock options as of December 31,
1995, 1996 and 1997 and March 31, 1998 and changes during the period ending on
those dates is presented below:

<TABLE>
<CAPTION>
1995 1996 1997 MARCH 31, 1998
---------------- ---------------- ---------------- ----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000)'S PRICE (000)'S PRICE (000)'S PRICE (000)'S PRICE
------- -------- ------- -------- ------- -------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 382 $0.59 863 $0.71 860 $1.06 1,114 $1.95
Granted................. 507 0.77 617 1.12 335 4.01 -- --
Cancelled............... (18) 0.18 (304) (0.59) (47) 0.53 -- --
Exercised............... (8) 0.65 (316) 0.59 (34) 0.65 (8) 0.59
--- ----- ---- ----- ----- ----- ----- -----
Outstanding at end of
period................. 863 $0.71 860 $1.06 1,114 $1.95 1,106 $1.95
Options exercisable at
end of period.......... 318 $0.59 326 $0.89 562 $1.18 614 $1.30
Weighted average fair
value of options
granted during the
period................. $0.30 $0.65 $2.18 $ --
</TABLE>

The following table summarizes information about stock options outstanding at
March 31, 1998 (unaudited):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ----------------------
RANGE WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF REMAINING AVERAGE AVERAGE
EXERCISE PRICES NUMBER CONTRACTUAL LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
- --------------- --------- ---------------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$0.06 1,700 7.63 years $0.06 1,700 $0.06
0.59 570,377 6.89 0.59 418,353 0.59
0.65-1.00 8,648 6.25 1.00 8,648 0.94
1.48 90,672 8.25 1.48 50,957 1.48
3.54 193,209 8.59 3.54 101,945 3.54
4.13 238,129 9.50 4.13 28,979 4.13
5.90 3,220 7.08 5.90 3,220 5.90
---------- --------- ---- ----- ------- -----
$0.06-5.90 1,105,955 7.84 $1.95 613,802 $1.30
========= =======
</TABLE>

F-16
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

Warrants

Warrants to purchase common and preferred stock are granted to organizations
and institutions in conjunction with certain research activities. The warrants
vest according to a combination of time and events as prescribed in the
agreements. The Company applies the provisions of APB Opinion No. 25 to
warrants issued prior to 1996. No warrants were granted during the year ended
December 31, 1997, or for the three months ended March 31, 1998. During the
year ended December 31, 1997, 33,898 warrants expired. At December 31, 1996
and 1997 and March 31, 1998, the Company had the following warrants
outstanding.

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997 MARCH 31, 1998
EXERCISE ------------------ ------------------- -------------------
PRICE OUTSTANDING VESTED OUTSTANDING VESTED OUTSTANDING VESTED
-------- ----------- ------ ----------- ------- ----------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Class B preferred stock
warrants............... $ 5.90 40,756 23,807 40,756 23,807 40,756 23,807
====== ======= ====== ======= ======= ======= =======
Common stock warrants... $14.75 101,694 16,949 67,796 33,898 67,796 33,898
$13.28 211,864 -- 211,864 158,898 211,864 158,898
------ ------- ------ ------- ------- ------- -------
Total common stock
warrants............... 313,558 16,949 279,660 192,796 279,660 192,796
======= ====== ======= ======= ======= =======
</TABLE>

(8) INCOME TAXES

A reconciliation of tax credits computed at the statutory federal tax rate
on loss from operations before income taxes to the actual income tax expense
is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- -------------------
1995 1996 1997 1997 1998
----------- ----------- --------- --------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Tax provision computed
at the statutory rate.. $(2,642,000) $(2,838,000) $(439,300) $(731,400) $(10,200)
State income taxes, net
of federal income tax
provision.............. (284,000) (324,000) (50,200) (83,600) (1,200)
Purchase of in-process
technology............. 155,000 -- -- -- --
Book expenses not
deductible for tax
purposes............... 5,000 6,000 8,100 2,000 5,200
Research and
experimentation tax
credit................. (263,000) 41,000 (144,900) (36,200) (36,200)
Change in the beginning
of the period valuation
allowance for deferred
tax assets allocated to
tax expense............ 3,032,000 3,086,000 624,900 847,700 43,900
Other, net.............. (3,000) 29,000 1,400 1,500 (1,500)
----------- ----------- --------- --------- --------
Income tax expense...... $ -- $ -- $ -- $ -- $ --
=========== =========== ========= ========= ========
</TABLE>

F-17
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

Deferred income taxes reflect the net effects of net operating loss
carryforwards and the temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's deferred tax
assets as of December 31, 1996 and 1997 and March 31, 1998, are as follows:

<TABLE>
<CAPTION>
1996 1997 MARCH 31, 1998
----------- ----------- --------------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.... $ 9,703,000 $10,031,000 $10,684,000
Research and experimentation tax
credit............................. 541,000 686,000 722,000
Cumulative effect of using cash
basis method of accounting for
income tax purposes................ 364,000 433,000 (229,000)
Property and equipment, principally
due to differences in
depreciation....................... 66,000 115,000 131,000
Other............................... 41,000 75,000 76,000
----------- ----------- -----------
Total deferred tax assets............. 10,715,000 11,340,000 11,384,000
Valuation allowance................... (10,715,000) (11,340,000) (11,384,000)
----------- ----------- -----------
Net deferred tax asset................ $ -- $ -- $ --
=========== =========== ===========
</TABLE>

The valuation allowance for deferred tax assets increased approximately
$3,032,000, $3,086,000 and $625,000 for the years ended December 31, 1995,
1996 and 1997, respectively and increased approximately $44,000 for the three
months ended March 31, 1998.

At March 31, 1998, the Company has net operating loss carryforwards of
approximately $27.4 million for federal income tax purposes of which $25.7
million expire at various dates through 2012, and $1.7 million expire in 2018,
including $1,493,000 which were acquired from the purchase of Theragen (note
4). The Company also has research and experimentation tax credit carryforwards
of $722,000 at March 31, 1998, of which $686,000 expire through 2012 and
$36,000 expire in 2018. These carryforwards may be significantly limited under
the Internal Revenue Code as a result of ownership changes experienced by the
Company.

(9) DEFINED CONTRIBUTION PLAN--401(K)

The Company has a defined contribution plan (the "Plan") under Internal
Revenue Code Section 401(k) which became effective on January 1, 1995. All
full-time employees who have completed six months of service and are over age
21 are eligible for participation in the Plan. Participants may elect to have
up to 15% of compensation contributed to the Plan. Under the Plan, the
Company's contributions are discretionary. During the years ended December 31,
1995, 1996 and 1997, and for the three months ended March 31, 1998, no
discretionary contributions were made.

(10) SUBSEQUENT EVENTS

Reverse Stock Split (unaudited)

On April 28, 1998, the Company's Board of Directors approved a 5.9 for 1
reverse stock split, subject to stockholder approval. All common and preferred
share, per share and pro forma amounts in the accompanying financial
statements have been retroactively adjusted for all periods presented to
reflect this reverse stock split for all periods presented.

F-18
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

Capital Changes (unaudited)

Effective in May 1998, the Company amended and restated its Certificate of
Incorporation which effected the authorization of a total of 50,000,000 shares
of common stock, and 5,000,000 shares of undesignated preferred stock, each
having a par value of $0.001 per share.

Initial Public Offering (unaudited)

On April 27, 1998, the Board of Directors authorized the filing of a
registration statement for the offering with the Securities and Exchange
Commission for the sale of 2,500,000 shares of common stock. If the offering
is consummated under the terms presently anticipated, all 6,042,263 shares of
the convertible preferred stock outstanding as of the closing date of the
offering will be automatically converted into 6,042,263 shares of common stock
on a 1 for 1 basis. No dividends will be payable with respect to such
preferred stock. The deferred offering costs associated with the offering will
be recorded as a reduction of stockholders' equity if the offering is
consummated. If the offering is not consummated, the deferred offering costs
will be charged to operations.

1998 Employee Stock Purchase Plan

In April 1998, the Company adopted the 1998 Employee Stock Purchase Plan
(the "Purchase Plan") covering an aggregate of 350,000 shares of common stock.
Under the Purchase Plan, the Board may authorize participation by eligible
employees, including officers, in periodic offerings following the
commencement of the Purchase Plan. The initial offering under the Purchase
Plan will commence on the effective date of the prospectus and terminate on
April 30, 2000.

Unless otherwise determined by the Board, employees are eligible to
participate in the Purchase Plan only if they are employed by the Company for
at least 20 hours per week and for at least five months per calendar year.
Employees who participate in an offering may have up to ten percent of their
earnings withheld pursuant to the Purchase Plan. The amount withheld is then
used to purchase shares of the common stock on specified dates determined by
the Board. The price of common stock purchased under the Purchase Plan will be
equal to 85% of the lower of the fair market value of the common stock at the
commencement date of each offering or the relevant purchase date. Employees
may end their participation in an offering at any time during the offering,
and participation ends automatically on termination of employment with the
Company.

In the event of a merger, reorganization, consolidation or liquidation
involving the Company, the Board has the discretion to provide that each right
to purchase common stock will be assumed or an equivalent right substituted by
the successor corporation or the Board may shorten this offering, and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such merger or other transaction. The Board has the
authority to amend or terminate the Purchase Plan, provided, however, that no
such action may adversely affect any outstanding rights to purchase common
stock.

1998 Director Option Plan

In April 1998, the Company adopted the 1998 Director Option Plan (the
"Director Plan") to provide for the automatic grant of options to purchase
shares of common stock to non-employee directors of the Company.

The maximum number of shares of common stock that may be issued pursuant to
options granted under the Director Plan is 130,000 shares. Each person who
becomes an outside director is automatically granted, on the date of such
person's election or appointment, an option to purchase 10,000 shares of
common stock.

F-19
<PAGE>

GENVEC, INC.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

DECEMBER 31, 1997 AND 1996

In addition, each outside director shall be granted an option to purchase
5,000 shares of common stock on (i) the effective date of this offering and
(ii) the date of each of the Company's annual meetings of stockholders
provided such person is still an outside director and that such a person shall
have served on the date of the grant on the board for at least the preceding
six months. Each option granted under the Director Plan has a term of ten
years. The options vest over a four-year period. The exercise price per share
of options shall be 100% of the fair market value per share on the date of the
grant. Options granted under the Director Plan are generally non-transferable.
Unless otherwise terminated by the Board of Directors, the Director Plan
terminates automatically in April 2008. As of March 31, 1998, no options to
purchase shares of common stock had been granted under the Director Plan.

(11) NEW FINANCIAL ACCOUNTING STANDARDS

Statement 130

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income.
Statement 130 establishes standards for the required reporting and display of
comprehensive income and its components in equal prominence with other
financial statements. Statement 130 was issued to address concerns over the
practice of reporting elements of comprehensive income directly in equity.

Statement 130 is effective for both interim and annual periods beginning
after December 15, 1997. Comparative financial statements provided for earlier
periods are required to be reclassified to reflect the provisions of this
Statement. On January 1, 1998, the Company adopted Statement 130. Statement
130 did not affect the current or prior period financial statement displays
presented by the Company.

Statement 131

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information. Statement 131 establishes standards for
the way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.

Statement 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated, unless it is impracticable to
do so. Statement 131 need not be applied to interim financial statements in
the initial year of its application, but comparative information for interim
periods in the initial year of application shall be reported in financial
statements for interim periods in the second year of application. It is not
anticipated that Statement 131 will have any material effect on current or
prior period disclosures presented by the Company.

F-20
<PAGE>

TREATMENT OF RESTENOSIS WITH GENE THERAPY

Restenosis, or re-narrowing of blood vessels, associated with angioplasty
and stent placement is a major problem in cardiovascular medicine. Vascular
damage caused by these procedures often produces proliferation of smooth
muscle cells and the inhibition of endothelial cell layer regrowth, leading to
vessel narrowing and impaired blood flow. The Company is currently developing
Ad.iNOS, an adenovirus vector containing the inducible nitric oxide synthase
gene, for the treatment of vascular damage associated with angioplasty and
other applications, such as arteriovenous grafts.

[PICTURE: CROSS SECTIONAL IMAGES OF ANIMAL BLOOD VESSELS: CONTROL AND AD.INOS]

The Company's Ad.iNOS product candidate was evaluated using an animal model
of restenosis. Vascular injury was induced in a major blood vessel of the
animal through the introduction of a catheter, followed immediately by an
infusion of either Ad.iNOS or a control directly to the site of damage.
Examination several weeks later revealed evidence of smooth muscle cell
proliferation and significant vessel re-narrowing in the control group (figure
1). In contrast, vessel re-narrowing in Ad.iNOS-treated animals was inhibited
(figure 2). See "Risk Factors--Uncertainties Related to Clinical Development."
<PAGE>

[LOGO OF GENVEC APPEARS HERE]

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of Common Stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC registration fee......................................... $ 11,025.63
NASD filing fee.............................................. 4,237.50
Printing and engraving costs................................. 130,000
Legal fees and expenses...................................... 400,000
Accounting fees and expenses................................. 150,000
Blue Sky fees and expenses................................... 10,000
Transfer Agent and Registrar fees............................ 10,000
Miscellaneous expenses....................................... 184,736.87
-----------
Total...................................................... $ 900,000
===========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in the terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). The Registrant's Restated
Certificate of Incorporation to be filed upon the closing of the offering to
which this Registration Statement relates (Exhibit 3.3 hereto) and the
Registrant's Bylaws (Exhibit 3.5 hereto) provides for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the Delaware General Corporation Law. The
Registrant has also entered into agreements with its directors and executive
officers that require the Registrant among other things to indemnify them
against certain liabilities that may arise by reason of their status or
service as directors to the fullest extent not prohibited by Delaware law.

The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant, its directors and officers, and by the Registrant of the
Underwriters, for certain liabilities, including liabilities arising under the
Act, and affords certain rights of contribution with respect thereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since April 1995, the Registrant has issued and sold the following
unregistered securities (as adjusted to reflect the 5.9 to 1 reverse stock
split anticipated to be consummated immediately prior to the closing of the
offering contemplated hereby):

(1) From April 1, 1995 to March 31, 1998, Registrant granted options to
purchase 1,261,281 shares of Common Stock pursuant to its Amended and
Restated 1993 Stock Incentive Plan at exercise prices ranging from $.59 per
share to $4.13 per share.

(2) From April 1, 1995 to March 31, 1998, Registrant issued and sold an
aggregate of 363,159 shares of Common Stock to its employees, directors and
consultants upon exercise of stock options granted pursuant to Registrant's
Amended and Restated 1993 Stock Incentive Plan at exercise prices ranging
from $0.059 to $0.59 for an aggregate consideration of $1,266,994 .

(3) In September 1995, Registrant issued and sold an aggregate of
2,095,763 shares of Class C Preferred Stock to private investors for
aggregate cash consideration of $12,365,000.

II-1
<PAGE>

(4) In May 1996, Registrant issued and sold an aggregate of 96,852 shares
of Class D Preferred Stock for $1,000,000 to one investor.

(5) In October 1997, Registrant issued and sold an aggregate of 75,329
shares of Series E Preferred Stock to one investor for an aggregate cash
consideration of approximately $1.0 million.

(6) In December 1997, Registrant issued and sold an aggregate of 154,963
shares of Class E-1 Preferred Stock to one investor an aggregate cash
consideration of approximately $2.0 million.

There were no underwriters employed in connection with any of the above
transactions. See "Certain Transactions" in the form of the Prospectus
included herein.

The sales of the securities described in Items 15(1) and 15(2) were deemed
to be exempt from registration under the Securities Act in reliance on Rule
701 promulgated under Section 3(b)of the Securities Act as transactions
pursuant to compensatory benefit plans and contracts relating to compensation
as provided under such Rule 701. The sale of securities described in Items 15
(3) through 15 (6) were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, as transactions by an issuer not
involving a public offering. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about the Registrant or had access,
through employment or other relationships, to such information.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.10* +Commercialization Agreement dated September 26, 1997 between Fuso
Pharmaceutical Industries Ltd. and the Registrant.
10.11* +License Agreement dated February 1, 1998 between Asahi Chemical
Industry Co., Ltd. and the Registrant.
10.12* +Sponsored Research Agreement dated April 1, 1998 between Cornell
University and the Registrant.
10.13* +Amended and Restated Exclusive License Agreement dated April 1, 1993
between Cornell University and the Registrant.
10.14* Lease Agreement between Trizechahn Twinbrook Metro Limited
Partnership, a Maryland limited partnership.
10.15* Lease Agreement dated September 1, 1997 between Biomedical Institute
and Registrant.
10.16 Letter Agreement dated March 9, 1995 between the Registrant and Paul
H. Fischer.
10.17 Letter Agreement dated June 6, 1993 between the Registrant and Imre
Kovesdi.
10.18 Letter Agreement dated March 9, 1995 between the Registrant and Thomas
E. Smart.
10.19 Consulting Agreement dated April 28, 1998 between the Registrant and
Herbert J. Conrad.
10.20* Registration Rights Agreement dated April 22, 1998 among the
Registrant and certain stockholders.
23.1 Consent of KPMG Peat Marwick LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
23.3 Consent of Leydig, Voit & Mayer, Ltd.
24.1 Power of Attorney (see page II-5 of Registration Statement filed on
April 30, 1998).
27.1 Financial Data Schedule (available in EDGAR format only).
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested.

(b) FINANCIAL STATEMENT SCHEDULES

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes that:

(a) It will provide to the Underwriters at the closing as specified in
the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

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

II-3
<PAGE>

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

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

The undersigned Registrant hereby undertakes:

(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

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

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

(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;

(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide Offering thereof;

(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN ROCKVILLE, MARYLAND, ON THE 30TH
DAY OF APRIL, 1998.

GenVec, Inc.

/s/ Paul H. Fischer
By___________________________________
Paul H. Fischer, President and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul H. Fischer and Thomas E. Smart, and each
of them, his attorneys-in-fact, each with the power of substitution, for him
and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto in all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

SIGNATURE TITLE DATE

/s/ Paul H. Fischer Director, President April 30, 1998
- ------------------------------------- and Chief Executive
(PAUL H. FISCHER) Officer (Principal
Executive Officer;
Principal Financial
and Accounting
Officer)

/s/ Hal S. Broderson Director April 30, 1998
- -------------------------------------
(HAL S. BRODERSON)

/s/ Herbert J. Conrad Director April 30, 1998
- -------------------------------------
(HERBERT J. CONRAD)

/s/ Harry T. Rein Director April 30, 1998
- -------------------------------------
(HARRY T. REIN)

/s/ Wendell Wierenga Director April 30, 1998
- -------------------------------------
(WENDELL WIERENGA)

/s/ Gregory Zaic Director April 30, 1998
- -------------------------------------
(GREGORY ZAIC)

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant, as currently
in effect.
3.2* Restated Certificate of Incorporation of the Registrant, to be filed
prior to the closing of the offering.
3.3 Restated Certificate of Incorporation, to be filed immediately
following the offering.
3.4 Restated Bylaws of the Registrant as currently in effect.
3.5* Restated Bylaws, to be effective upon the closing of the offering.
4.1* Specimen Common Stock Certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement for Directors and Officers.
10.2* Amended and Restated 1993 Stock Incentive Plan and forms of agreements
thereunder.
10.3* 1998 Employee Stock Purchase Plan.
10.4* 1998 Director Option Plan.
10.5* +Research, Development and Collaboration Agreement dated July 21, 1997
between the Warner-Lambert Company and the Registrant.
10.6* +Stock Purchase Agreement dated July 21, 1997 between the Warner-
Lambert Company and the Registrant.
10.7* +License Agreement dated May 31, 1996 between Scios, Inc. and the
Registrant.
10.8* +Stock Purchase Agreement dated September 26, 1997 between Fuso
Pharmaceutical Industries, Ltd. and the Registrant.
10.9* +Collaboration Agreement dated September 26, 1997 between Fuso
Pharmaceutical Industries, Ltd. and the Registrant.
10.10* +Commercialization Agreement dated September 26, 1997 between Fuso
Pharmaceutical Industries Ltd. and the Registrant.
10.11* +License Agreement dated February 1, 1998 between Asahi Chemical
Industry Co., Ltd. and the Registrant.
10.12* +Sponsored Research Agreement dated April 1, 1998 between Cornell
University and the Registrant.
10.13* +Amended and Restated Exclusive License Agreement dated April 1, 1993
between Cornell University and the Registrant.
10.14* Lease Agreement between Trizechahn Twinbrook Metro Limited
Partnership, a Maryland limited partnership.
10.15* Lease Agreement dated September 1, 1997 between Biomedical Institute
and Registrant.
10.16 Letter Agreement dated March 9, 1995 between the Registrant and Paul
H. Fischer.
10.17 Letter Agreement dated June 6, 1993 between the Registrant and Imre
Kovesdi.
10.18 Letter Agreement dated March 9, 1995 between the Registrant and Thomas
E. Smart.
10.19 Consulting Agreement dated April 28, 1998 between the Registrant and
Herbert J. Conrad.
10.20* Registration Rights Agreement dated April 22, 1998 among the
Registrant and certain stockholders.
23.1 Consent of KPMG Peat Marwick LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
23.3 Consent of Leydig, Voit & Mayer, Ltd.

24.1 Power of Attorney (see page II-5 of Registration Statement filed on
April 30, 1998).
27.1 Financial Data Schedule (available in EDGAR format only).
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested.

<PAGE>

EXHIBIT 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

GENVEC, INC.

The undersigned, Paul Fischer, President of GenVec, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), does hereby certify as follows:

1. The present name of the Corporation is GenVec, Inc.

2. The original Certificate of Incorporation of the Corporation was
filed in the Office of the Secretary of State of the State of Delaware on
December 7, 1992.

3. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the
Delaware General Corporation Law by the Board of Directors of the Corporation.

4. This Amended and Restated Certificate of Incorporation was approved by
written consent of the stockholders pursuant to Section 228 of the Delaware
General Corporation Law.

5. The Certificate of Incorporation of the Corporation is hereby amended
and restated in its entirety as follows:

FIRST: The name of the Corporation is:

GENVEC, INC.

SECOND: The address of its registered office in the State of Delaware is:
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. The name of its registered agent at such address is: THE
CORPORATION TRUST COMPANY.

THIRD: The nature of the business or purposes to be conducted or
promoted is:

To have unlimited power to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
<PAGE>

FOURTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
make, alter or repeal the Bylaws of the Corporation.

FIFTH: Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.

SIXTH:

A. Elimination of Certain Liabilities of Directors. A director of
-----------------------------------------------
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that this shall not exempt a director from liability (i) for
- -----------------
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which a director derived an improper personal benefit. If the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be eliminated or limited to the fullest extent permitted
by the Delaware General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal of modification.

B. Indemnification and Insurance.
-----------------------------

(1) Right to Indemnification. Each person who was or is made a
------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "Proceeding"), by reason of the fact that he or she, or a person
for whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, the rights of
indemnification provided hereby shall continue as theretofore notwithstanding
such amendment unless such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent

-2-
<PAGE>

and shall inure to the benefit of his or her heirs, executors, administrators
and personal representatives; provided, however, that, except as provided in
-----------------
Section (B)(2) of this Article, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
authorized by the board of directors of the Corporation.

The right to indemnification conferred in this section shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
-----------------
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall he made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this section or
otherwise. The Corporation may, by action of its board of directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.

(2) Right of Claimant to Bring Suit. A claimant may bring suit
-------------------------------
against the Corporation under Section (B)(1) of this Article only if the
Corporation fails to pay in full within thirty days of its receipt of a written
claim for payment hereunder. If successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim
(including, but not limited to, attorneys' fees). It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct that make it
permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of providing such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.

(3) Non-Exclusivity of Rights. The right to indemnification and
--------------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this section shall not be exclusive of any other
right that any person may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.

-3-
<PAGE>

(4) Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.

C. Amendment. Notwithstanding the provisions of this Certificate of
---------
Incorporation and any provisions of the by-laws of the Corporation, no amendment
to this Certificate of Incorporation shall amend, modify or repeal any or all of
this Article SIXTH unless adopted by the affirmative vote of the consent of
holders of not less than three-fourths of the outstanding shares of stock of the
Corporation entitled to vote in elections of directors, considered for purposes
of this Article as a class.

SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.

EIGHTH: The aggregate number of shares which the Corporation shall have
authority to issue is 93,922,023 of which 56,363,825 shall be designated as
Common Stock, par value $0.01 per share ("Common Stock"), 1,334,000 shall be
designated as Class A Convertible Preferred Stock, par value $.01 per share
("Class A Preferred Stock"), 11,800,468 shall be designated as Class B
Convertible Preferred Stock, par value $0.01 per share, ("Class B Preferred
Stock"), 21,065,000 shall be designated as Class C Convertible Preferred Stock,
par value $.01 per share ("Class C Preferred Stock"), 2,000,000 shall be
designated as Class D Convertible Preferred Stock, par value $.01 per share
("Class D Preferred Stock"), 444,445 shall be designated as Class E Convertible
Preferred Stock, par value $.01 per share ("Class E Preferred Stock") and
914,285 shall be designated as Class E1 Convertible Preferred Stock, par value
$.01 per share ("Class E1 Preferred Stock") (the Class A Preferred Stock, Class
B Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class E
Preferred Stock and Class E1 Preferred Stock, unless otherwise indicated, are
hereinafter referred to collectively as the "Preferred Stock") .

-4-
<PAGE>

The following is a statement of the designations, preferences,
limitations and relative rights in respect of the shares of each class of stock
of the Corporation:

A. Common Stock.
------------

(1) Voting Rights. Each holder of record of Common Stock shall
-------------
have the right to one vote for each share of Common Stock standing in the name
of such holder on the books of the Corporation.

(2) Dividends. Subject to the rights of the holders of the
---------
Preferred Stock, each holder of record of Common Stock will be entitled to
dividends in such amounts and at such times as may be declared by the Board of
Directors.

B. Preferred Stock.
---------------

(1) Dividends. In the event that the Corporation declares or
---------
pays any dividend on the Common Stock or makes, directly or indirectly, any
other distribution in respect to the Common Stock, the holders of Preferred
Stock shall be entitled to participate with the holders of Common Stock in any
such dividends paid or set aside for payment, such that the holders of Preferred
Stock shall receive, with respect to each share of Preferred Stock, an amount
equal to (a) the dividend payable with respect to each share of Common Stock
multiplied by (b) the number of shares (and fraction of a share, if any) of
Common Stock into which such share of Preferred Stock is convertible as of the
record date for such dividend.

(2) Voting Rights.
-------------

(a) Except as otherwise provided herein or by law, the
holders of Preferred Stock shall have full voting rights and powers, they shall
be entitled to vote on all matters as to which holders of the Common Stock shall
be entitled to vote, they shall vote together with the holders of the Common
Stock as a single class, and they shall be entitled to one vote for each share
of Common Stock which would be held by them if all of their shares of Preferred
Stock would be converted into shares of Common Stock under Section B(5) of this
Article.

(b) Except as otherwise provided herein or by law, the vote
or consent of at least two-thirds of the outstanding shares of the Class C
Preferred Stock voting as a separate class shall be required for the following
actions:

(i) any change in the rights, preferences, or
privileges of the Class C Preferred Stock;

-5-
<PAGE>

(ii) any amendment, repeal or addition of any
provision of or to the By-Laws, if such action would
adversely affect the preferences, rights, privileges or
powers of, or restrictions provided for the benefit of, the
Class C Preferred Stock;

(iii) the authorization of any class of equity
securities ranking prior to or having preference over the
Class C Preferred Stock with respect to dividends,
redemption or assets of the Corporation;

(iv) the reclassification of any shares of Common
Stock into shares of any class of equity securities ranking
prior to or having preference over the Class C Preferred
Stock with respect to dividends, redemption or assets of the
Corporation;

(v) the merger or consolidation of the Corporation
into or with any other corporation, the sale of all or
substantially all of the Corporation's assets, or the
liquidation of the assets of the Corporation, provided,
--------
however, that no such vote or consent under this Section
-------
B(2)(b)(v) shall be required if the aggregate price to be
paid to the Corporation's stockholders in the merger,
consolidation, sale or liquidation is equal to or greater
than an amount determined by multiplying (X) $1.50 per
share, as adjusted to reflect any change in the number of
shares of the Corporation's Common Stock as a result of a
stock split, stock dividend, distribution payable in shares
of the Corporation's Common Stock or other reclassification
after September 19, 1995, by (y) the number of outstanding
shares of the Corporation's Common Stock (for purposes of
this determination only, a securityholder holding capital
stock of the Corporation convertible into the Corporation's
Common Stock shall be treated as having converted all such
convertible stock into the Corporation's Common Stock at the
applicable conversion rate, pursuant to Section B(5) of this
Article, in effect at the time of this determination); and

(vi) The acquisition by the Corporation of any
corporation or other business entity if such a transaction
involves (A) the issuance of equity securities of the
Corporation resulting in the new securityholders having more
than 25 percent of the voting power pursuant to Sections
A(1) and B(2) (a) of this Article or (B) the payment of cash
consideration equivalent to 25% of the product of (x) the
sum of the number of shares of Common Stock and Preferred
Stock then outstanding and the number of such shares
underlying options and other rights to acquire such shares
(irrespective of

-6-
<PAGE>

whether such shares, options or other rights are conditional
or unvested) times (y) the then most recent price per share
at which the Corporation sold any shares of Preferred Stock
in an offering that yielded gross proceeds of not less than
$5,000,000 to the Corporation.

(c) Whenever holders of the Preferred Stock or Common
Stock, separately or as a single class , are required or permitted to take any
action, such action may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.

(3) Rights of Liquidation.
---------------------

(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation (any such event being
hereinafter referred to as a "Liquidation"), before any distribution of assets
of the Corporation shall be made to or set apart for the holders of the Common
Stock, the holders of the Preferred Stock shall be entitled to receive payment
out of such assets of the Corporation in an amount per share equal to $0.50 per
share for each share of Class A Preferred Stock held by such holder, $1.00 per
share for each share of Class B Preferred Stock or Class C Preferred Stock held
by such holder, $1.75 per share for each share of Class D Preferred Stock held
by such holder, $2.25 per share for each share of Class E Preferred Stock held
by such holder and $2.1875 per share for each share of Class E1 Preferred Stock
held by such holder (such amounts being referred to herein as "Liquidation
Preference") plus any declared but unpaid dividends on such shares of Preferred
Stock. If the assets of the Corporation available for distribution to the
holders of the Preferred Stock shall not be sufficient to make in full the
payments required by this Section B(3)(a), such assets shall be distributed
ratably among the holders of the Preferred Stock based upon the aggregate
Liquidation Preferences of the shares of Preferred Stock held by each such
holder.

(b) If the assets of the Corporation available for
distribution to stockholders exceed the aggregate amounts payable pursuant to
Section B(3)(a) of this Article above, the remainder of such assets shall be
distributed to the holders of Preferred Stock and Common Stock on a pro rata
basis, with the amount distributable to the holders of Preferred Stock to be
computed on the basis of the number of shares of Common Stock which would be
held by them if immediately prior to the Liquidation all of the outstanding
shares of such Preferred Stock had been converted into shares of Common Stock
under Section B(5)(a) of this Article.

(c) A merger or consolidation involving the Corporation in
which the Corporation is not the surviving entity and a sale, lease or transfer
of all or substantially all of the assets of the Corporation shall, at the
option of holders representing a majority of the Preferred Stock voting as a
single class, be deemed a Liquidation, unless in connection with such
transaction, each holder of Preferred

-7-
<PAGE>

Stock receives a preferred stock having terms and conditions which are no less
favorable than the terms and conditions of the Preferred Stock held by such
holder prior to the transaction.

(d) Notwithstanding the provisions contained in Section
B(3)(c) of this Article above, in the event of a merger or consolidation
involving the Corporation in which the Corporation is not the surviving entity,
or a sale, lease or transfer of all or substantially all of the assets of the
Corporation, in which a holder of Preferred Stock would receive cash and/or
marketable securities (i.e., securities registered under the Securities Act of
----
1933, as amended, at the time of delivery, or securities committed to be so
registered within 60 days after delivery) in an amount less than the aggregate
Liquidation Preference of the shares of Preferred Stock held by such holder,
then holders of a majority of the Preferred Stock then outstanding, voting as a
single class, may elect, in lieu of all other rights under the terms of the
transaction or this Article, to receive an amount equal to their aggregate
Liquidation Preference for such shares of Preferred Stock. If the holders make
such an election, each such holder shall have a priority on such holder's pro
rata portion of all cash and marketable securities received in such transaction
to the extent of the aggregate Liquidation Preference for such holder's shares
of Preferred Stock. Such election shall be made by the holders by written notice
to the Corporation within 30 days after the date of stockholder approval of the
transaction (or within 30 days after receiving notice of such transaction from
the Corporation if the transaction is not submitted for stockholder approval).

(e) In the event that the Corporation shall, at any time,
issue any shares of Preferred Stock (i) by stock dividend or any other
distribution upon any stock of the Corporation payable in shares of Preferred
Stock, or (ii) by a subdivision of its shares of outstanding Preferred Stock, by
reclassification or otherwise, the Liquidation Preference then in effect shall
be reduced proportionately, and, in like manner, in the event of any combination
of shares of Preferred Stock, by reclassification or otherwise, the Liquidation
Preference then in effect shall be proportionately increased.

(4) Actions Requiring the Consent of the Holders of the
---------------------------------------------------
Preferred Stock. As long as any shares of Preferred Stock remain outstanding,
- ---------------
the consent of the holders of at least a majority of the votes which holders of
Preferred Stock are entitled to cast, given in person or by proxy, either in
writing without a meeting or by vote at a meeting called for such purpose, shall
be necessary for effecting or validating any amendment, alteration or repeal of
any of the provisions of the Certificate of Incorporation or the By-Laws of the
Corporation which (a) increases the number of authorized shares of any class of
capital stock, (b) adversely affects the rights, preferences or powers of any
class of Preferred Stock or of the holders thereof or (c) decreases the required
time for the giving of any notice to which the holders of Preferred Stock may be
entitled.

(5) Conversion.
----------

(a) Right To Convert. A holder of record of any share or
----------------
shares of Class A Preferred Stock shall have the right at any time, at such
holder's option, to convert, without the payment of any additional
consideration, each share of Class A Preferred Stock held by such holder into

-8-
<PAGE>

that number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (i) .50 by (ii) the Conversion Factor (as defined in
Section B(5)(d) of this Article below) then in effect for the Class A Preferred
Stock. A holder of record of any share or shares of Class B Preferred Stock,
Class C Preferred Stock, Class D Preferred Stock, Class E Preferred Stock or
Class E1 Preferred Stock shall have the right at any time, at such holder's
option, to convert, without the payment of any additional consideration, each
share of Class B Preferred Stock, Class C Preferred Stock, Class D Preferred
Stock, Class E Preferred Stock or Class E1 Preferred Stock held by such holder
into that number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (i) 1.00 by (ii) the Conversion Factor (as defined in
Section B(5)(d) of this Article below) then in effect for the Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock, Class E Preferred Stock
or Class E1 Preferred Stock, as applicable. Notwithstanding the foregoing, the
provisions of B(5)(d)(i) shall not apply to the Conversion Factor for Class D
Preferred Stock, Class E Preferred Stock or Class E1 Preferred Stock. No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of any Preferred Stock. With respect to any fraction of a share
of Common Stock called for upon any conversion after completion of the
calculation of the aggregate number of shares of Common Stock to be issued to
such holder, the Corporation shall pay to such holder an amount in cash equal to
any fractional share to which such holder would be entitled, multiplied by the
current market value of a share, as determined in good faith by the Board of
Directors of the Corporation.

(b) Mechanics of Conversion. If the holder of shares of Preferred
-----------------------
Stock desires to exercise such right of conversion, such holder must give
written notice to the Corporation (the "Conversion Notice") of the election by
such holder to convert a stated number of shares of Preferred Stock (the
"Conversion Shares") into shares of Common Stock on the date specified in the
Conversion Notice (which date shall not be earlier than the date on which the
Corporation receives the Conversion Notice (the "Conversion Date"), and by
surrender of the certificate or certificates representing such Conversion
Shares. The Conversion Notice shall also contain a statement of the name or
names (with addresses) in which the certificate or certificates for Common Stock
shall be issued. Promptly after the Conversion Date and the surrender of the
Conversion Shares, the Corporation shall issue and deliver, or cause to be
delivered, to the holder of the Conversion Shares or such holder's nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
issuable upon the conversion of such Conversion Shares. Such conversion shall
be deemed to have been effected as of the close of business on the Conversion
Date, and the person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the holder or
holders of record of such shares of Common Stock as of the close of business on
such date.

(c) Common Stock Reserved. The Corporation shall at all times reserve
---------------------
and keep available out of its authorized but unissued Common Stock, solely for
issuance upon the conversion of shares of Preferred Stock as herein provided,
such number of shares of Common Stock as shall from time to time be issuable
upon the conversion of all of the shares of Preferred Stock at the time
outstanding.

-9-
<PAGE>

(d) Conversion Factor. The initial conversion factor for the Class A
-----------------
Preferred Stock shall be .50, the initial conversion factor for the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class E Preferred Stock and the Class E1 Preferred Stock shall be 1.00, subject
to adjustment, in each case, in accordance with the provisions in this Section
B(5)(d), except that the provisions of B(5)(d)(i) shall not apply to the
Conversion Factor for Class D Preferred Stock, Class E Preferred Stock or Class
E1 Preferred Stock. Such respective conversion factors in effect from time to
time, as adjusted pursuant to the applicable provisions of this Section B(5)(d),
are referred to herein as the "Conversion Factor" for the Class A Preferred
Stock, the Class B Preferred Stock, the Class C Preferred Stock, the Class D
Preferred Stock, Class E Preferred Stock or Class E1 Preferred Stock, as
applicable. All of the remaining provisions of this Section B(5)(d) shall apply
separately to the respective Conversion Factors in effect from time to time;
provided, however, that the provisions of B(5)(d)(i) shall not apply to the
- -----------------
Conversion Factor for Class D Preferred Stock, Class E Preferred Stock or Class
E1 Preferred Stock.

(i) In the event that the Corporation shall, at any time or from time
to time, issue or sell any shares of the capital stock of the Corporation
(including treasury shares, but excluding (v) 1,334,000 shares of Class A
Preferred Stock, 21,065,000 shares of Class C Preferred Stock, 571,429 shares of
Class D Preferred Stock and 444,445 shares of Class E Preferred Stock, (w) an
aggregate of 20,055,627 shares of Common Stock and an aggregate of 11,800,468
shares of Class B Preferred Stock that have been issued, have been reserved for
issuance or will be issued pursuant to options, warrants or other commitments
which have been granted or executed as of December 23, 1997 or will be granted
or executed pursuant to the Corporation's 1993 Stock Incentive Plan, as amended,
(x) any shares of the capital stock of the Corporation issued pursuant to the
Stock Purchase Agreement, dated July 21, 1997, between the Corporation and
Warner-Lambert Company, as the same may be amended from time to time (including
without limitation 914,285 shares of Class E1 Preferred Stock), (y) any shares
of the capital stock of the Corporation issued in connection with equipment
financing, sponsored research (including, but not limited to, those shares
issuable upon exercise of a warrant being granted to Cornell University in
conjunction with its agreement with the Corporation), collaboration, technology
licensing, development agreements or any other strategic partnerships approved
by the Board of Directors and (z) the shares of Common Stock issuable upon
conversion of the Preferred Stock), then, immediately upon such issuance or
sale, the Conversion Factor shall be reduced as follows:

(A) The Conversion Factor shall be changed to a
number determined by multiplying the Conversion Factor in effect immediately
prior to such issuance by the following fraction:

A + B
---
C
----------
wherein: A + D

-10-
<PAGE>

A = the number of Outstanding Shares (as defined below)
immediately prior to the subject issuance;

B = the aggregate consideration in dollars for the shares
then being issued, expressed as an absolute number;

C = the Conversion Factor in effect immediately prior to
the subject issuance with respect to the applicable
class of Preferred Stock; and

D = the number of shares then being issued.

The applicable Conversion Factor shall be further reduced from time to time
thereafter whenever any shares are so issued or converted for a price per share
lower than the amount of the applicable Conversion Factor, then in effect, as
adjusted prior to that date.

(B) In the event that any shares shall be issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In the event that any shares shall be
issued for a consideration other than cash, the amount of the consideration
other than cash received by the Corporation shall be deemed to be the fair value
of such consideration, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation in
connection therewith. Whenever shares are issued upon the exercise of warrants,
options or other conversion rights, the consideration received therefor shall
include both the consideration paid upon the issuance and upon the exercise of
such warrant, option or other right.

(C) In the event that the Corporation shall in
any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase any Common Stock or securities
convertible into Common Stock ("Convertible Securities"), or any options for the
purchase of any Common Stock or Convertible Securities, whether or not such
rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which shares
of Common Stock issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(I) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the exercise of such rights or options, or plus, in the case of any
Convertible Securities or rights or options to purchase Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (II) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the conversion or
exchange of all such Convertible Securities issuable upon the

-11-
<PAGE>

exercise of such rights or options) shall be less than the Conversion Factor in
effect immediately prior to the time of the granting of such rights or options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon conversion or exchange of all such
Convertible Securities issuable or issuable upon the exercise of such rights or
options shall be deemed to be outstanding as of the date of the granting of such
rights or options and to have been issued for such price per share, with the
effect on the applicable Conversion Factor specified in Section (5)(d)(i) of
this Article. No further adjustment of the applicable Conversion Factor shall be
made upon the actual issue of such Common Stock or upon the actual issue of such
Convertible Securities upon exercise of such rights or options or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.

(D) If the purchase price provided for in any
right or option referred to in Section B(5)(d)(i)(C) of this Article, or the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock shall change (other than under
or by reason of provisions designed to protect against dilution), the Conversion
Factor then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Conversion Factor which would have been in
effect at such time had such rights, options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold.

(E) Notwithstanding the foregoing, upon the
consent of the holders of two-thirds of the applicable class of Preferred Stock
affected and then outstanding, if the Conversion Factor for the applicable class
of Preferred Stock, as set forth in this Section B(5)(d)(i) otherwise would be
reduced, no such reduction in the Conversion Factor for the applicable class of
Preferred Stock, as set forth in this Section B(5)(d)(i), shall occur.

(F) Notwithstanding the foregoing, if any holder
of shares of Preferred Stock is entitled to exercise the preemptive rights (the
"Preemptive Right") set forth in Section 9 of the Second Class C Preferred Stock
Purchase Agreement, dated as of September 19, 1995, as the same may be amended
from time to time, or in Schedule 9 of the Amendment and Waiver Agreement, dated
as of September 19, 1995, as the same may be amended from time to time,
(collectively, the "Purchase Agreement") with respect to any "Issuance" (as
defined in Section 9.2 of the Purchase Agreement) which would, absent the
provisions of this subsection (F), result in a reduction of the Conversion
Factor applicable to shares of such holder's Preferred Stock pursuant to Section
B(5)(d)(i) of this Article, and if such holder (a "Non-Participating Holder")
does not, by exercise of such holder's Preemptive Right, acquire not less than
such holder's "Proportionate Percentage" (as defined in Section 9.2 of the
Purchase Agreement) of the Issuance, then all of such holder's shares of Class A
Preferred Stock, Class B Preferred Stock and Class C Preferred Stock shall
automatically, and without further action on the part of such holder, be
converted effective upon, subject to and concurrently with consummation of the
Issuance (the "Issuance Date") as follows: each share of Class A Preferred Stock
held by such Non-Participating Holder shall be converted into one share of a
newly created series of preferred stock (having such number of shares as the
Board of Directors may by resolution fix) which such class shall be identical in
all respects to the Class A Preferred Stock, except that the Conversion Factor
of such class shall be fixed immediately prior to the Issuance Date and shall be
subject to no further adjustments pursuant to Section B(5)(d)(i) of this
Article; each share of Class B Preferred Stock held by such Non-Participating
Holder shall be converted into one share of a newly created class of preferred
stock (having

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<PAGE>

such number of shares as the Board of Directors may by resolution fix) which
such class shall be identical in all respects to the Class B Preferred Stock,
except that the Conversion Factor of such class shall be fixed immediately prior
to the Issuance Date and shall be subject to no further adjustments pursuant to
Section B(5)(d)(i) of this Article; and each share of Class C Preferred Stock
held by such Non-Participating Holder shall be converted into one share of a
newly created class of preferred stock (having such number of shares as the
Board of Directors may by resolution fix) which such class shall be identical in
all respects to the Class C Preferred Stock, except that the Conversion Factor
of such class shall be fixed immediately prior to the Issuance Date and shall be
subject to no further adjustments pursuant to Section B(5)(d)(i) of this
Article. The Board of Directors of the Corporation shall take all necessary
actions to designate each such new class. Upon such conversion, the shares of
Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock so
converted shall be cancelled and not subject to reissuance, but instead shall be
redesignated by the Board of Directors of the Corporation in accordance with the
terms of this Section B(5)(d)(i)(F) .

(ii) Each adjustment in a Conversion Factor shall be
calculated to the nearest tenth of a cent.

(iii) As used in this Section B(5)(d), the term
"Outstanding Shares" shall be deemed to include the number of issued and
outstanding shares of Common Stock, plus the number of shares of Common Stock
issuable upon the conversion of the issued and outstanding shares of Preferred
Stock, but shall not include the new shares of Common Stock then being issued by
the Corporation.

(iv) In the event that the Corporation shall, at any
time, issue any shares of Common Stock (A) by stock dividend or any other
distribution upon any stock of the Corporation payable in shares of Common Stock
or in shares of Preferred Stock, or (B) by subdivision of its shares of
outstanding Common Stock, by reclassification or otherwise, the Conversion
Factor then in effect shall be reduced proportionately, and, in like manner, in
the event of any combination of shares of Common Stock, by reclassification or
otherwise, the Conversion Factor then in effect shall be proportionately
increased.

(v) If any capital reorganization or reclassification
of the Common Stock of the Corporation, or consolidation or merger of the
Corporation with or into another corporation, or the sale or conveyance of all
or substantially all of its assets to another corporation shall be effected,
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the holders
of the Preferred Stock shall thereafter have the

-13-
<PAGE>

right to receive, in lieu of the shares of Common Stock of the Corporation
immediately theretofore receivable with respect to such shares of Preferred
Stock upon the exercise of their conversion rights, such shares of stock,
securities or assets as would have been issued or payable with respect to or in
exchange for the number of outstanding shares of such Common Stock immediately
theretofore receivable with respect to such shares of Preferred Stock upon the
exercise of such rights had such reorganization, reclassification,
consolidation, merger or sale not taken place. In any such case, appropriate
provision shall be made with respect to the rights and interests of the holders
of the Preferred Stock to the end that such conversion rights (including,
without limitation, provisions for adjustment of the applicable Conversion
Factor) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise thereof. The Corporation shall not effect any such
consolidation, merger or sale, unless it provides the holders of the Preferred
Stock at least 30 days advance notice thereof, and prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Corporation) resulting from such consolidation or merger or the corporation
purchasing such assets, shall assume by written instrument, executed and mailed
or delivered to the holders of the Preferred Stock, the obligation to deliver to
such holders the shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holders may be entitled to receive upon
conversion of the shares of Preferred Stock held by such holder.

(vi) If any event occurs as to which the other
provisions of this Section B(5)(d) are not strictly applicable, or if strictly
applicable would not fairly protect the conversion rights of the Preferred Stock
in accordance with the intent and principles of such provisions, then the Board
of Directors shall make an adjustment in the application of such provisions, in
accordance with such intent and principles, so as to protect such conversion
rights as aforesaid, but in no event shall any such adjustment have the effect
of increasing the applicable Conversion Factor as otherwise determined pursuant
to this Section B(5)(d).

(e) Stock Transfer Taxes. The issuance of stock
--------------------
certificates upon the conversion of the Preferred Stock shall be made without
charge to the converting holder for any tax in respect of such issuance. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of shares in
any name other than that of the holder of such shares of Preferred Stock
converted, and the Corporation shall not be required to issue or deliver any
such stock certificate unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of such tax or
shall have established to the satisfaction of the Corporation that such tax has
been paid.

(f) Certificate as to Adjustments. Upon the occurrence of
-----------------------------
each adjustment or readjustment of the Conversion Factor, the Corporation, at
its expense, promptly shall compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder

-14-
<PAGE>

a like certificate setting forth (i) such adjustments and readjustments, (ii)
the Conversion Factor at the time in effect for the Preferred Stock, and (iii)
the number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of such Preferred Stock
owned by such holder.

(g) Notices of Record Date. In the event of any fixing by
----------------------
the Corporation of a record date for the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any shares of
Common Stock or other securities, or any right to subscribe for, purchase or
otherwise acquire, or any option for the purchase of, any shares of stock of any
class or any other securities or property, or to receive any other right, the
Corporation shall mail to each holder of Preferred Stock at least 30 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.

(h) Notices. Any notice required by the provisions of this
-------
Section B(5) to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, first class postage
prepaid, and addressed to each holder of record at such holder's address
appearing on the books of the Corporation.

(6) Mandatory Conversion.
--------------------

(a) The Corporation shall cause the conversion ("Mandatory
Conversion") of all of the shares of Preferred Stock into fully paid and
nonassessable shares of Common Stock, at the conversion rate then in effect,
upon the occurrence of the Corporation's underwritten public offering of its
Common Stock pursuant to a registration statement (other than a registration
statement relating to an offer and sale of securities to employees of, or other
persons providing services to, the Corporation pursuant to an employee or
similar benefit plan, registered on Form S-8 or a comparable or successor form)
filed under the Securities Act of 1933, as amended, which yields to the
Corporation not less than $15,000,000 before deducting any underwriters' or
brokers' discounts, fees or commissions (a "Qualifying Public Offering").

(b) The Mandatory Conversion shall occur upon the closing
of a Qualifying Public Offering.

(c) Upon Mandatory Conversion, all rights of the holders of
shares of the Preferred Stock as such holders shall cease except their right to
receive payment of any dividends declared and unpaid to such time; such shares
shall no longer be deemed to be outstanding; and the holders thereof shall on
and after such date be conclusively deemed for all purposes to be holders of the
shares of Common Stock into which their shares of Preferred Stock were
converted.

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<PAGE>

(d) The Corporation shall promptly give all holders of
record of shares of Preferred Stock written notice of the date that a Qualifying
Public Offering will occur or is anticipated to occur. Such notice shall also
specify the place designated for exchanging the shares of Preferred Stock for
shares of Common Stock. Such notice shall be sent by first class mail, postage
prepaid, to each holder of record of shares of Preferred Stock at such holder's
address as shown in the records of the Corporation. Each holder of shares of
Preferred Stock shall surrender its certificate or certificates for all such
shares to the Corporation or the transfer agent at the place designated in such
notice and shall, upon surrender, receive certificates for the number of shares
of Common Stock to which such holder is entitled.

(e) For the purpose of calculating the conversion ratio of
Preferred Stock into Common Stock in the event of a Mandatory Conversion, such
calculation shall be made in accordance with Section B(5) of this Article.

-16-
<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Restated Certificate
of Incorporation on behalf of the Corporation and have attested such execution
and do verify and affirm, under penalty of perjury, that this Restated
Certificate of Incorporation is the act and deed of the Corporation and that the
facts stated herein are true as of this 30th day of April, 1998.

GENVEC, INC.

/s/ Paul Fischer
By: ___________________________________
Paul Fischer
President

Attest:

/s/ Thomas Smart
By: ___________________________________
Thomas Smart
Secretary

-17-

<PAGE>

EXHIBIT 3.3

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

GENVEC, INC.

The undersigned, Paul H. Fischer, President of GenVec, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), does hereby certify as follows:

1. The present name of the Corporation is GenVec, Inc.

2. The original Certificate of Incorporation of the Corporation was
filed in the Office of the Secretary of State of the State of Delaware on
December 7, 1992.

4. This Amended and Restated Certificate of Incorporation was approved by
written consent of the stockholders pursuant to Section 228 of the Delaware
General Corporation Law.

5. The Certificate of Incorporation of the Corporation is hereby amended
and restated in its entirety as follows:
<PAGE>

FIRST: The name of the Corporation is: GENVEC, INC.

SECOND: The address of its registered office in the State of Delaware is:
Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. The name of its registered agent
at such address is: THE CORPORATION TRUST COMPANY.

THIRD: The nature of the business or purposes to be conducted or
promoted is:

To have unlimited power to engage in any lawful act or activity
for which corporations may be organized under the General
Corporation Law of Delaware.

FOURTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly
authorized to make, alter or repeal the Bylaws of the
Corporation.

FIFTH: Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.

SIXTH: The Corporation is to have perpetual existence.

SEVENTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of
the Corporation.

EIGHTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended,
no director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director.

Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article, would
accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.

NINTH: At the election of directors of the Corporation, each holder of
stock of any class or series shall be entitled to one vote for
each share held. No stockholder will be permitted to cumulate
votes at any election of directors.

-2-
<PAGE>

TENTH: No action that is required or permitted to be taken by the
stockholders of the corporation at any annual or special meeting
of stockholders may be effected by written consent of
stockholders in lieu of a meeting of stockholders.

ELEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in
the laws of the State of Delaware) outside of the State of
Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the
Corporation.

TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by the
laws of the State of Delaware, and all rights conferred herein
are granted subject to this reservation.

The Corporation is authorized to issue two classes of stock to
be designated respectively Common Stock and Preferred Stock.
The total number of shares of all classes of stock which the
Corporation has authority to issue is 55,000,000, consisting of
50,000,000 shares of Common Stock, $0.001 par value (the
"Common Stock"), and 5,000,000 shares of Preferred Stock,
$0.001 par value (the "Preferred Stock").

The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized subject
to limitations prescribed by law, to fix by resolution or
resolutions the designations, powers, preferences and rights, and
the qualifications, limitations or restrictions thereof, of each
such series of Preferred Stock, including without limitation
authority to fix by resolution or resolutions, the dividend
rights, dividend rate, conversion rights, voting rights, rights
and terms of redemption (including sinking fund provisions),
redemption price or prices, and liquidation preferences of any
wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof,
or any of the foregoing.

The Board of Directors is further authorized to increase (but not
above the total number of authorized shares of the class) or
decrease (but not below the number of shares of any such series
then outstanding) the number of shares of any series, the number
of which was fixed by it, subsequent to the issue of shares of
such series then outstanding, subject to the powers, preferences
and rights, and the qualifications, limitations and restrictions
thereof stated in the resolution of the Board of Directors
originally fixing the number of shares of such series. If the
number of shares of any series is so decreased, then the shares
constituting such

-3-
<PAGE>

decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares
of such series.

-4-
<PAGE>

GENVEC, INC.

By: _____________________________
Paul H. Fischer
President

ATTEST:

By: ____________________________
Thomas E. Smart
Secretary

-5-

<PAGE>

EXHIBIT 3.4

AMENDED AND RESTATED

BYLAWS OF

GENVEC, INC.

(Amended and Restated as of September 12, 1995)

ARTICLE I

OFFICES
-------

Section 1.1. Registered Office and Registered Agent. The Corporation
--------------------------------------
shall maintain a registered office and registered agent within the State of
Delaware, which may be changed by the Board of Directors from time to time.

Section 1.2. Other Offices. The Corporation may also have offices at
-------------
such other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine.

ARTICLE II

STOCKHOLDERS' MEETINGS
----------------------

Section 2.1. Place of Stockholders' Meetings. Meetings of stockholders
-------------------------------
may be held at such place, either within or without the State of Delaware, as
may be designated by the Board of Directors from time to time. If no such place
is designated by the Board of Directors, meetings of the stockholders shall be
held at the registered office of the Corporation in the State of Delaware.

Section 2.2. Annual Meeting. A meeting of the stockholders of the
--------------
Corporation shall be held in each calendar year, commencing with the year 1993,
at such time as the Board of Directors may determine.
<PAGE>

At such annual meeting, there shall be held an election for a Board of
Directors to serve for the ensuing year and until their respective successors
are elected and qualified, or until their earlier resignation or removal.
Subject to the terms of the Corporation's Certificate of Incorporation, the
Board of Directors shall consist of the number of directors determined pursuant
to Section 3.1 hereof, of which the holders of the Corporation's Class A
Convertible Preferred Stock, par value $.01 per share (the "Class A Stock"), the
Corporation's Class B Convertible Preferred Stock, par value $.01 per share (the
"Class B Stock") and the Corporation's Class C Convertible Preferred Stock, par
value $0.01 per share (the "Class C Stock") (the Class A Stock, the Class B
Stock and the Class C Stock being hereinafter collectively referred to as the
"Preferred Stock"), in the aggregate, shall elect at least five directors, of
which Hillman Medical Ventures 1995 L.P. or its successor limited partnership
("Hillman") shall be entitled to elect two such directors and each of Prince
Venture Partners III, L.P. ("Prince III") and Genentech, Inc. ("Genentech")
acting individually and Sierra Ventures IV, L.P. ("Sierra IV") and Sierra
Ventures International IV, L.P. ("Sierra International IV") acting in the
aggregate being entitled to elect one director each; provided, however, that if
-------- -------
the ownership of "Preferred Stock" or shares of the common stock of the Company,
par value $0.01 per share (the "Common Stock"), into which such shares of
"Preferred Stock" are converted (collectively, "Securities") by any of
"Hillman," "Prince III" or "Genentech" individually, or of "Sierra IV" and
"Sierra International IV" in the aggregate, ever becomes less than ten percent
(10%) of the "Common Stock" then outstanding, assuming conversion of all
"Preferred Stock" and issuance of the aggregate maximum number of shares of
"Common Stock" issued, delivered or exchanged therefor and irrespective of
whether any such shares of "Common Stock" or "Preferred Stock" are

-2-
<PAGE>

conditional or unvested (the "Director Entitlement Threshold"), then on the date
on which the ownership of "Securities" by any of "Hillman," "Prince III" or
"Genentech" individually, or of "Sierra IV" and "Sierra International IV" in the
aggregate, falls below the "Director Entitlement Threshold," such applicable
holder or holders of "Preferred Stock" shall no longer be entitled to elect any
particular director and shall only have such rights to exercise the voting power
of the "Preferred Stock" as are set forth in the Corporation's Certificate of
Incorporation; provided, further, that if the Corporation consummates an
-------- -------
underwritten public offering of the Corporation's "Common Stock" pursuant to one
or more registration statements filed under the Securities Act of 1933, as
amended (or any successor statute), yielding gross proceeds to the Corporation
of at least $15,000,000 and under which the offering price to the public is
equal to at least $1.50 per share (adjusted for any stock splits, stock
dividends, recapitalizations, mergers, consolidations or similar events
occurring after September 19, 1995) (a "Qualifying Public Offering"), upon the
closing of the "Qualifying Public Offering," the holders of the "Preferred
Stock" shall not be entitled to elect any particular directors and shall have no
other voting rights with respect to the "Preferred Stock" other than as are set
forth in the Corporation's Certificate of Incorporation; and further provided,
------- --------
that if the director nominated by "Genentech," prior to any "Qualifying Public
Offering" or "Genentech" holding "Securities" in an amount less than the
"Director Entitlement Threshold," is an employee of "Genentech" and if
"Genentech" and the Corporation in good faith and after due and careful
consideration of objective and tangible evidence, agree that the presence of a
"Genentech" employee on the Board substantially, materially and adversely
impedes on an ongoing basis the Corporation's ability to enter into substantial
collaborative agreements with third party biotechnology or pharmaceutical
concerns, then "Genentech" shall be entitled to have an independent individual

-3-
<PAGE>

acceptable to "Genentech," but not a "Genentech" employee, elected as the
representative of "Genentech" on the Corporation's Board of Directors during the
period, as described above, in which "Genentech" has such right to nominate a
director.

Section 2.3. Special Meetings. Except as otherwise specifically provided
----------------
by law, special meetings of the stockholders may be called at any time:

(a) By the Board of Directors; or

(b) By the President of the Corporation; or

Upon the written request of any person entitled to call a special meeting
and who is entitled to do so under these Bylaws or applicable law, which request
shall set forth the purpose for which the meeting is desired, it shall be the
duty of the Secretary to give prompt written notice of such meeting to be held
at such time as the Secretary may fix, subject to the provisions of Section 2.4
hereof. If the Secretary shall fail to fix such date and give notice within 10
days after receipt of such request, the person or persons calling the meeting
may do so.

Section 2.4. Notice of Meetings and Adjourned Meetings. Written notice
-----------------------------------------
stating the place, date and hour of any meeting and, in the case of special
meetings, the purpose or purposes for which the meeting is called, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting, except as provided in Section
230 of the Delaware General Corporation Law, as amended from time to time (the
"Delaware Code"). Such notice may be given by or at the direction of the person
or persons authorized to call the meeting.

-4-
<PAGE>

When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

Section 2.5. Quorum of and Action by Shareholders.
------------------------------------

(a) Unless otherwise provided in the Certificate of Incorporation of
the Corporation (the "Certificate") or in a Bylaw adopted by stockholders, the
presence, in person or by proxy, of stockholders entitled to cast at least a
majority of the votes that all stockholders are entitled to cast on a particular
matter to be acted upon at the meeting shall constitute a quorum, but in no
event shall a quorum consist of less than one-third (1/3) of the shares entitled
to vote at a meeting. If a meeting cannot be organized because of the absence
of a quorum, those present may, except as otherwise provided by law, adjourn the
meeting to such time and place as they may determine.

(b) Whenever any corporate action is to be taken by vote of the
stockholders of the Corporation at a duly organized meeting, unless otherwise
provided in the Certificate or the Delaware Code, such corporate action shall be
authorized by a majority of the votes cast at the meeting by the holders of
shares entitled to vote thereon.

(c) The stockholders present at a duly organized meeting can continue
to do business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.

-5-
<PAGE>

(d) In the case of any meeting for the election of Directors, those
stockholders who attend the second of such adjourned meetings, although less
than a quorum as fixed in this Section, shall nevertheless constitute a quorum
for the purpose of electing Directors.

Section 2.6. Voting List; Proxies. The officer who has charge of the
--------------------
stock ledger of the Corporation shall prepare, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.

Upon the willful neglect or refusal of the Directors to produce such a list
at any meeting for the election of Directors, they shall be ineligible to any
office at such meeting.

Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. All proxies shall
be executed in writing and shall be filed with the Secretary of the Corporation
not later than the day on which exercised. No proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period.

Except as otherwise specifically provided by law, all matters coming before
the meeting shall be determined by a vote by shares. All elections of Directors
shall be by written ballot unless

-6-
<PAGE>

otherwise provided in the Certificate. Except as otherwise specifically provided
by law, all other votes may be taken by voice unless a stockholder demands that
it be taken by ballot, in which latter event the vote shall be taken by written
ballot.

Section 2.7. Informal Action by Stockholders. Unless otherwise provided
-------------------------------
in the Certificate, any action required to be taken at any annual or special
meeting of stockholders, or any action which may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted.

Prompt notice of the taking of corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders or members,
who have not consented in writing.

ARTICLE III

BOARD OF DIRECTORS
------------------

Section 3.1. Number. The business and affairs of the Corporation shall
------
be managed by or under the direction of a Board of Directors which shall be
composed of not less than five (5) and not more than twelve (12) Directors, the
precise number to be determined from time to time by the Board of Directors.

Section 3.2. Place of Meeting. Meetings of the Board of Directors may be
----------------
held at such place either within or without the State of Delaware, as a majority
of the Directors may from time to time designate or as may be designated in the
notice calling the meeting.

-7-
<PAGE>

Section 3.3. Regular Meetings. A regular meeting of the Board of
----------------
Directors shall be held annually, immediately following the annual meeting of
stockholders, at the place where such meeting of the stockholders is held or at
such other place, date and hour as a majority of the newly elected Directors may
designate. At such meeting the Board of Directors shall elect officers of the
Corporation. In addition to such regular meeting, a majority of the Board of
Directors shall have the power to fix, by resolution, the place, date and hour
of other regular meetings of the Board to occur at least once a month and to
convene one meeting a month of the company's executive officers. The Board of
Directors also shall invite the "Primary Investigator" (as defined in that
certain Preferred Stock Purchase Agreement dated as of December 8, 1992, as
Amended and Restated as of May 19, 1993 (as so amended and restated, the
"Purchase Agreement")) to attend any and all meetings of the Board of Directors,
to participate in discussions and express views on matters before the Board, but
without any right to vote; and provided that the "Primary Investigator" shall
--------
withdraw from such meeting upon any discussion of the terms of his engagement or
continuing engagement by the Corporation.

Section 3.4. Special Meetings. Special meetings of the Board of
----------------
Directors shall be held whenever ordered by the President, by a majority of the
members of the executive committee, if any, or by a majority of the Directors in
office. The "Primary Investigator" (as defined in the Purchase Agreement) shall
be invited to attend such special meetings, under the same terms and conditions
as a regular meeting of the Board of Directors as set forth in Section 3.3.

Section 3.5. Notices of Meetings of Board of Directors.
-----------------------------------------

(a) Regular Meetings. No notice shall be required to be given of any
----------------
regular meeting, unless the same be held at other than the time or place for
holding such meetings as fixed in

-8-
<PAGE>

accordance with Section 3.3, in which event one day's notice shall be given of
the time and place of such meeting.

(b) Special Meetings. At least one day's notice shall be given of the
----------------
time, place and purpose for which any special meeting of the Board of Directors
is to be held.

Section 3.6. Quorum. A majority of the total number of Directors shall
------
constitute a quorum for the transaction of business, and the vote of a majority
of the Directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. If there be less than a quorum present, a
majority of those present may adjourn the meeting from time to time and place to
place and shall cause notice of each such adjourned meeting to be given to all
absent Directors.

Section 3.7. Informal Action by the Board of Directors. Any action
-----------------------------------------
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.

Section 3.8. Powers.
------

(a) General Powers. The Board of Directors shall have all powers
--------------
necessary or appropriate to the management of the business and affairs of the
Corporation and, in addition to the power and authority conferred by these
Bylaws, may exercise all powers of the Corporation and do all such lawful acts
and things as are not by statute, these Bylaws or the Certificate directed or
required to be exercised or done by the stockholders.

(b) Specific Powers. Without limiting the general powers conferred by
---------------
subparagraph (a) above and the powers conferred by the Certificate of
Incorporation and Bylaws of

-9-
<PAGE>

the Corporation, it is hereby expressly declared that the Board of Directors
shall have the following powers:

(i) To confer upon any officer or officers of the
Corporation the power to choose, remove or suspend assistant officers, agents
or servants.

(ii) To appoint any person, firm or corporation to accept and
hold in trust for the Corporation any property belonging to the Corporation or
in which it is interested, and to authorize any such person, firm or corporation
to execute any documents and perform any duties that may be requisite in
relation to any such trust.

(iii) To appoint a person or persons to vote shares of another
corporation held and owned by the Corporation.

(iv) By resolution adopted by a majority of the full Board of
Directors, to designate one or more of its members to constitute an executive
committee which, to the extent provided in such resolution and subject to the
Delaware code, shall have and may exercise the power of the Board of Directors
in the management of the business and affairs of the corporation and may
authorize the seal of the Corporation to be affixed.

(v) By resolution passed by a majority of the whole Board of
Directors, to designate one or more additional committees, each to consist of
one or more Directors, to have such duties, powers and authority as the Board of
Directors shall determine. All committees of the Board of Directors, including
the executive committee, shall have the authority to adopt their own rules of
procedure. Absent the adoption of specific procedures, the procedures
applicable to the Board of Directors shall also apply to committees thereof.

(vi) To fix the place, time and purpose of meetings of
stockholders.

-10-
<PAGE>

(vii) To purchase or otherwise acquire for the Corporation any
property, rights or privileges which the Corporation is authorized to acquire,
at such prices, on such terms and conditions and for such consideration as it
shall from time to time see fit, and, at its discretion, to pay any property or
rights acquired by the Corporation, either wholly or partly in money or in
stocks, bonds, debentures or other securities of the Corporation.

(viii) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgage or otherwise, and to do every other act and
thing necessary to effectuate the same.

(ix) To appoint and remove or suspend such subordinate
officers, agents or servants, permanently or temporarily, as it may from time to
time think fit, and to determine their duties, and fix, and from time to time
change, their salaries or emoluments, and to require security in such instances
and in such amounts as it thinks fit.

(x) To determine who shall be authorized on the
Corporation's behalf to sign bills, notes, receipts, acceptances, endorsements,
checks, releases, contracts and documents.

Section 3.9. Compensation of Directors. Compensation of Directors and
-------------------------
reimbursement of their expenses incurred in connection with the business of the
Corporation, if any, shall be as determined from time to time by resolution of
the Board of Directors.

Section 3.10. Removal of Directors by Stockholders. Any individual
------------------------------------
Director may be removed from office without assigning any cause by the
affirmative vote of the holders of a majority of the outstanding shares entitled
to elect such Director. In case any one or more Directors are so removed, new
Directors may be elected at the same time.

-11-
<PAGE>

Section 3.11. Resignations. Any Director may resign at any time by
------------
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation unless another time be
fixed in the resignation, in which case it shall become effective at the time so
fixed. The acceptance of a resignation shall not be required to make it
effective.

Section 3.12. Vacancies. Except as otherwise set forth in the Certificate,
---------
any vacancies on the Board of Directors, including vacancies resulting from a
removal of Directors under Section 3.10 and newly created directorships
resulting from any increase in the authorized number of Directors, may be filled
by a majority vote of the remaining Directors then in office, although less than
a quorum, or by a sole remaining Director, and each person so elected shall be a
Director until his successor is elected and qualified or until his earlier
resignation or removal.

Section 3.13. Participation by Conference Telephone. Directors may
-------------------------------------
participate in regular or special meetings of the Board by telephone or similar
communications equipment by means of which all other persons participating in
the meeting can hear each other, and such participation shall constitute
presence at the meeting.

ARTICLE IV

OFFICERS
--------

Section 4.1. Election and Office. The Corporations shall have a President,
-------------------
a Secretary and a Treasurer who shall be elected by the Board of Directors. The
Board of Directors may elect such additional officers as it may deem proper,
including a Chairman and Vice Chairman of the Board of Directors, one or more
Vice Presidents, and one or more assistant or honorary officers. Any number of
offices may be held by the same person.

-12-
<PAGE>

Section 4.2. Term. The President, Secretary and Treasurer shall each serve
----
for a term of one year and until their respective successors are chosen and
qualified, unless removed from office by the Board of Directors during their
respective tenures. The term of office of any other officer shall be as
specified by the Board of Directors.

Section 4.3. Powers and Duties of the President. Unless otherwise
----------------------------------
determined by the Board of Directors, the President shall have the usual duties
of an executive officer with general supervision over and direction of the
affairs of the Corporation. In the exercise of these duties and subject to the
limitations set forth in the Delaware Code, these Bylaws, and the actions of the
Board of Directors, the President may appoint, suspend and discharge employees,
agents and assistant officers, fix the compensation of all officers and
assistant officers, shall preside at all meetings of the stockholders at which
he or she shall be present, shall, unless there is a Chairman of the Board of
Directors, preside at all meetings of the Board of Directors and, unless
otherwise specified by the Board of Directors, shall be a member of all
committees. The President shall also do and perform such other duties as from
time to time may be assigned to him or her by the Board of Directors. Unless
otherwise designated by the Board of Directors, the President shall be the Chief
Executive Officer of the Corporation.

Section 4.4. Powers and Duties of the Secretary. Unless otherwise
----------------------------------
determined by the Board of Directors, the Secretary shall record all proceedings
of the meetings of the Corporation, the Board of Directors and all committees,
in books to be kept for that purpose, and shall attend to the giving and serving
of all notices for the Corporation. The Secretary shall have charge of the
corporate seal, the certificate books, transfer books and stock ledgers, and
such other books and papers as the Board of Directors may direct. The Secretary
shall perform all other duties ordinarily

-13-
<PAGE>

incident to the office of Secretary and shall have such other powers and perform
such other duties as may be assigned to him or her by the Board of Directors.

Section 4.5. Powers and Duties of the Treasurer. Unless otherwise
----------------------------------
determined by the Board of Directors, the Treasurer shall have charge of all the
funds and securities of the Corporation which may come into his or her hands.
When necessary or proper, unless otherwise ordered by the Board of Directors,
the Treasurer shall endorse for collection on behalf of the Corporation checks,
notes and other obligations, and shall deposit the same to the credit of the
Corporation in such banks or depositories as the Board of Directors may
designate and shall sign all receipts and vouchers for payments made to the
Corporation. The Treasurer shall enter regularly, in books of the Corporation
to be kept by him or her for that purpose, a full and accurate account of all
moneys received and paid by him or her on account of the Corporation. Whenever
required by the Board of Directors, the Treasurer shall render a statement of
the financial condition of the Corporation. The Treasurer shall at all
reasonable times exhibit the Corporation's books and accounts to any Director of
the Corporation, upon application at the office of the Corporation during
business hours. The Treasurer shall have such other powers and shall perform
such other duties as may be assigned to him or her from time to time by the
Board of Directors.

Section 4.6. Powers and Duties of the Chairman of the Board of Directors.
-----------------------------------------------------------
Unless otherwise determined by the Board of Directors, the Chairman of the Board
of Directors, if any, shall preside at all meetings of Directors and shall serve
ex officio as a member of every committee of the Board of Directors. The
- -- -------
Chairman shall have such other powers and perform such further duties as may be
assigned to him or her by the Board of Directors.

-14-
<PAGE>

Section 4.7. Powers and Duties of Vice Presidents and Assistant Officers.
-----------------------------------------------------------
Unless otherwise determined by the Board of Directors, each Vice President and
each assistant officer shall have the powers and perform the duties of his or
her respective superior officer. Vice Presidents and assistant officers shall
have such rank as shall be designated by the Board of Directors and each, in the
order of rank, shall act for such superior officer in his or her absence or
disability or when so directed by such superior officer or by the Board of
Directors. Vice Presidents may be designated as having responsibility for a
specific aspect of the Corporation's affairs, in which event each such Vice
President shall be superior to the other Vice Presidents in relation to matters
within his aspect. The President shall be the superior officer of the Vice
Presidents. The Treasurer and the Secretary shall be the superior officers of
the Assistant Treasurers and Assistant Secretaries, respectively.

Section 4.8. Delegation of Office. The Board of Directors may delegate
--------------------
the powers or duties of any officer of the Corporation to any other officer or
to any Director from time to time.

Section 4.9. Vacancies. The Board of Directors shall have the power to
---------
fill any vacancies in any office occurring from whatever reason.

Section 4.10. Resignations. Any officer may resign at any time by
------------
submitting his or her written resignation to the Corporation. Such resignation
shall take effect at the time of its receipt by the Corporation, unless another
time be fixed in the resignation, in which case it shall become effective at the
time so fixed. The acceptance of a resignation shall not be required to make it
effective.

ARTICLE V

CAPITAL STOCK
-------------

-15-
<PAGE>

Section 5.1. Stock Certificates. Shares of the Corporation shall be
------------------
represented by certificates signed by or in the name of the Corporation by (a)
the Chairman or Vice Chairman of the Board of Directors, the President or a Vice
President, and (b) the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, representing the number of shares registered in
certificate form, and may be countersigned by a transfer agent or registrar
other than the Corporation or its employee. Any or all of the signatures on the
share certificates may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.

If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in the Delaware Code, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.

-16-
<PAGE>

Section 5.2. Determination of Stockholders of Record. The Board of
---------------------------------------
Directors may fix, in advance, a record date to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action. Such date shall not be less than 10 nor more than 60 days
before the date of any such meeting, nor more than 60 days prior to any other
action.

If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held.

The record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

Section 5.3. Transfer of Shares. Except as provided in Section 5.4,
------------------
transfer of shares shall be made on the books of the Corporation only upon
surrender of the share certificate, duly endorsed and otherwise in proper form
for transfer, which certificate shall be cancelled at the time of the transfer;
no transfer of shares shall be made on the books of this Corporation if such
transfer is in violation of a lawful restriction noted conspicuously on the
certificate.

-17-
<PAGE>

Section 5.4. Lost, Stolen or Destroyed Share Certificates. The Corporation
--------------------------------------------
may issue a new certificate of stock in place of any certificate therefore
issued by it, alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen, or destroyed certificate,
or his legal representative to give the Corporation a bond sufficient to
indemnify it against claim that may be made against it on account of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.

ARTICLE VI

NOTICES
-------
Section 6.1. Contents of Notice. Whenever any notice of a meeting is
------------------
required to be given pursuant to these Bylaws, the Certificate or otherwise, the
notice shall specify the place, day and hour of the meeting; in the case of a
special meeting or where otherwise required by law, the general nature of the
business to be transacted at such meeting; and any other information required by
the Delaware Code.

Section 6.2. Method of Notice. All notices shall be given to each person
----------------
entitled thereto, either personally or by sending a copy thereof by first class
or express mail, postage prepaid, or by telegram (with messenger service
specified), telex or TWX (with answer back received) or courier service, charges
prepaid, or by telecopier, with confirmation of receipt, to such person's
address (or their telex, TWX, telecopier or telephone number) as it appears on
the records of the Corporation, or supplied by such person to the Corporation
for the purpose of notice. If notice is sent by mail, telegraph or courier
service, it shall be deemed to have been given to the person entitled thereto
when deposited in the United States Mail, with the telegraph office or with the
courier service, as the case may be, for delivery to that person or, in the case
of telex, TWX or telecopier, when dispatched.

-18-
<PAGE>

If no address for a stockholder appears on the books of the Corporation and such
stockholder has not supplied the Corporation with an address for the purpose of
notice, notice deposited in the United States Mail addressed to such stockholder
care of General Delivery in the city in which the principal office of the
Corporation is located shall be sufficient.

Section 6.3. Waiver of Notice. Whenever notice is required to be given
----------------
under any provision of the Delaware Code, the Certificate or these Bylaws, a
written waiver, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
Directors, or members of a committee of Directors need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation.

ARTICLE VII

INDEMNIFICATION OF DIRECTORS
----------------------------
AND OFFICERS AND OTHER PERSONS
------------------------------

Section 7.1. Indemnification. The Corporation shall have the power to
---------------
indemnify any Director, officer, employee or agent of the Corporation against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him, to the fullest extent now
or hereafter permitted by law in connection with and including, but not limited
to, those instances in which such indemnification, although greater in scope or
degree than that expressly provided by Section 145 of the Delaware Code, as
deemed by a majority of a quorum of

-19-
<PAGE>

disinterested Directors (which may consist of only one Director if there is only
one independent Director) or by independent legal counsel, after due
investigation, to be in the best interests of the Corporation, with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, brought or threatened to be brought
against him or her by reason of his or her performance as a Director, officer,
employee or agent of the Corporation, its parent or any of its subsidiaries, or
in any other capacity on behalf of the Corporation, its parent or any of its
subsidiaries. The Board of Directors by resolution adopted in each specific
instance may similarly indemnify any person other than a Director, officer,
employee or agent of the Corporation for liabilities incurred by him or her in
connection with services rendered by him or her for or at the request of the
Corporation, its parent or any of its subsidiaries.

The provisions of this Section shall be applicable to all actions, suits or
proceedings commenced after its adoption, whether such arise out of acts or
omissions which occurred prior or subsequent to such adoption and shall continue
as to a person who has ceased to be a Director, officer, employee or agent or to
render services for or at the request of the Corporation or as the case may be,
its parent, or subsidiaries and shall inure to the benefit of the heirs,
executors and administrators of such a person. The rights of indemnification
provided for herein shall not be deemed exclusive of any other rights to which
any Director, officer, employee or agent of the Corporation may be entitled
under these bylaws, agreement, vote of stockholders or disinterested Directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.

-20-
<PAGE>

Section 7.2. Advances. Expenses (including attorney's fees) incurred by
--------
any officer or Director in defending any civil, criminal, administrative or
investigative action, suit or proceeding, whether threatened, pending or
completed, may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking, by or on behalf of such Director
or officer, to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation as authorized by law.
Such expenses including attorney's fees incurred by other employees and agents
may be paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.

Section 7.3. Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would have the power
to indemnify him or her against such liability under law.

ARTICLE VIII

SEAL
----
The form of the seal of the Corporation, called the corporate seal of the
Corporation, shall be as impressed adjacent hereto. (Form of Seal)

ARTICLE IX

FISCAL YEAR
-----------

-21-
<PAGE>

The Board of Directors shall have the power by resolution to fix the fiscal
year of the Corporation. If the Board of Directors shall fail to do so, the
President shall fix the fiscal year.

ARTICLE X

AMENDMENTS
----------

The original or other Bylaws may be adopted, amended or repealed by the
stockholders entitled to vote thereon at any regular or special meeting or, if
the Certificate of Incorporation so provides, by the Board of Directors. The
fact that such power has been so conferred upon the Board of Directors shall not
divest the stockholders of the power nor limit their power to adopt, amend or
repeal Bylaws.

ARTICLE XI

INTERPRETATION OF BYLAWS
------------------------
All words, terms and provisions of these Bylaws shall be interpreted and
defined by and in accordance with the Delaware Code.

-22-

<PAGE>

EXHIBIT 10.1

INDEMNIFICATION AGREEMENT
-------------------------

THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this ___day of
April, 1998 by and between GenVec, Inc., a Delaware corporation (the "Company"),
and ______________ ("Indemnitee").

WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;

WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;

WHEREAS, the Company and Indemnitee desire to have in place the additional
protection provided by an indemnification agreement, to provide indemnification
and advancement of expenses to the Indemnitee to the maximum extent permitted by
Delaware law; and

WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

1. INDEMNIFICATION.
---------------

(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director,
by reason of the fact that Indemnitee is or was a director or officer of the
Corporation or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action or proceeding if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe Indemnitee's conduct
was unlawful. The termination of any action or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---------------
shall not, of

<PAGE>

itself, create a presumption that (i) Indemnitee did not act in good faith and
in a manner which Indemnitee reasonably believed to be in, or not opposed to,
the best interests of the Company, or (ii) with respect to any criminal action
or proceeding, Indemnitee had reasonable cause to believe that Indemnitee's
conduct was unlawful.

(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Company, and its stockholders, except that no indemnification shall be
made in respect of any claim, issue or matter as to which Indemnitee shall have
been adjudged to be liable to the Company in the performance of Indemnitee's
duty to the Company and its stockholders unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.

2. EXPENSES; INDEMNIFICATION PROCEDURE.
-----------------------------------

(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action or proceeding referenced in Section
1(a) or (b) hereof (but not amounts actually paid in settlement of any such
action or proceeding, which shall be governed by Section 1(a)). Indemnitee
hereby undertakes to repay such amounts advanced only if, and to the extent
that, it shall ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to Indemnitee within twenty (20) days
following delivery of a written request therefor by Indemnitee to the Company.

(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement, provided however, that a delay in giving such notice shall not
-------- -------
deprive Indemnitee of any right to be indemnified under this Agreement unless,
and then only to the extent that, such delay is materially prejudicial to the
defense of such claim. Notice to the Company shall be directed to the Chief
Executive

-2-
<PAGE>

Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indem nitee). Notice shall be deemed received three business days after the
date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.

(c) Procedure. Any indemnification provided for in Section 1 shall be
---------
made no later than forty-five (45) days after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or under any
provision of the Company's Certificate of Incorporation or Bylaws providing for
indemnification, is not paid in full by the Company within forty-five (45) days
after a written request for payment thereof has first been received by the
Company, Indemnitee may, but need not, at any time thereafter bring an action
against the Company to recover the unpaid amount of the claim and, subject to
Section 13 of this Agreement, Indemnitee shall also be entitled to be paid for
the expenses (including attorneys' fees) of bringing such action. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in connection with any action or proceeding in advance of its
final disposition) that Indemnitee has not met the standards of conduct which
make it permissible under applicable law for the Company to indemnify Indemnitee
for the amount claimed, but the burden of proving such defense shall be on the
Company, and Indemnitee shall be entitled to receive interim payments of
expenses pursuant to Subsection 2(a) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the parties' intention that if the Company contests
Indemnitee's right to indemnification, the question of Indemnitee's right to
indemnification shall be for the court to decide, and neither the failure of the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.

(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 2(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.

(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, which approval shall
not be unreasonably withheld, upon the delivery to Indemnitee of written notice

-3-
<PAGE>

of its election so to do. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.

3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
-------------------------------------------------

(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute or rule
which expands the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes shall be, ipso facto, within the
---- -----
purview of Indemnitee's rights and Company's obligations, under this Agreement.
In the event of any change in any applicable law, statute or rule which narrows
the right of a Delaware corporation to indemnify a member of its Board of
Directors or an officer, such changes, to the extent not otherwise required by
such law, statute or rule to be applied to this Agreement shall have no effect
on this Agreement or the parties' rights and obligations hereunder.

(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action or
other covered proceeding.

4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount there
of, the Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.

-4-
<PAGE>

5. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.

6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall, from
--------------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among
other considerations, the Company will weigh the costs of obtaining such
insurance coverage against the protection afforded by such coverage. In all
policies of directors' and officers' liability insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the Company's
directors, if Indemnitee is a director; or of the Company's officers, if
Indemnitee is not a director of the Company but is an officer. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.

7. SEVERABILITY. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.

8. EXCEPTIONS. Any other provision herein to the contrary
-----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

(a) Excluded Acts. To indemnify Indemnitee for any acts or omissions
-------------
or transactions from which a director may not be indemnified under applicable
law.

(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under

-5-
<PAGE>

this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or

(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or

(d) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Company; or

(e) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits inuring to and recoverable by the Company pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar
successor statute.

9. EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification
--------------------------
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification provided for in the Delaware General Corporation
Law, such provisions shall not be effective unless and until the Company's
Certificate of Incorporation authorize such additional rights of
indemnification. In all other respects, the balance of this Agreement shall be
effective as of the date set forth on the first page and may apply to acts or
omissions of Indemnitee which occurred prior to such date if Indemnitee was an
officer, director, employee or other agent of the Company, or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the time
such act or omission occurred.

10. CONSTRUCTION OF CERTAIN PHRASES.
-------------------------------

(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a con stituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that if
Indemnitee is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.

-6-
<PAGE>

(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries.

11. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.

12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.

13. ATTORNEYS' FEES. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.

14. NOTICE. All notices, requests, demands and other communications under
-------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.

15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
------------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.

-7-
<PAGE>

16. CHOICE OF LAW. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.

17. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
--------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.

18. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
---------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.

-8-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

GENVEC, INC.

By:

Title:

Address: 12111 Parklawn Drive
Rockville, MD 20852

AGREED TO AND ACCEPTED:

INDEMNITEE:

______________

Address:

-9-

<PAGE>

EXHIBIT 10.16

March 1, 1995

Paul H. Fischer, Ph.D.
15310 Kwanzan Court
N. Potomac, Maryland 20878

Dear Paul:

It is with great pleasure that I extend an offer of employment to you for the
position of Vice President of Research and Development, a position which reports
directly to the President of GenVec, Inc. We were all very impressed with your
background and experience and have every confidence that you would be an
extremely valuable addition to our Management Team.

The specific terms of this offer are detailed in the enclosed schedule. I
believe that you will find these terms to be consistent with those discussed
during our recent conversations. As you will see, I have listed your start date
as "To be determined". We would be anxious for you to join us as soon as
possible, but the exact start date can be agreed upon later.

I have also enclosed two (2) copies of the GenVec Confidentiality, Invention,
and Non-Compete Agreement that must be signed by each GenVec employee. Please
feel free to review this document and call me with any questions.

I know that you are as excited about the opportunities at GenVec as I am. We
are all looking forward to working with you and gaining the benefit of your
extensive experience. Together, we will certainly be able to build a stronger,
more valuable company.

If the terms of this offer are acceptable to you, please sign and date both
copies of this letter and the Confidentiality, Invention and Non-Compete
Agreement, keep one of each for yourself and return the other to me.

Sincerely,

/s/ Thomas W. D'Alonzo

Thomas W. D'Alonzo
President & Chief Executive Officer

enclosures

AGREED TO AND ACCEPTED BY:

/s/ Paul H. Fischer March 9, 1995
_________________________ __________________
Paul H. Fischer, Ph.D. Date

<PAGE>

Paul H. Fischer, Ph.D. Date

GENVEC, INC.

TERMS OF EMPLOYMENT

Employee
Name: Paul H. Fischer, Ph.D.

Position: Vice President of Research and Development

Start Date: March 1, 1995

Salary: $170,000 per annum, to be paid in semi-monthly installments

Equity: You will be awarded options to purchase 475,000 shares of common
stock at a price of $0.10 per share, as follows:

. 425,000 shares vesting equally over a four year period

. 25,000 shares for each of your first two years of
employment at GenVec, vesting based on the achievement of
agreed upon milestones during those time periods.

Salary
Continuation: Should your employment be terminated for any reason other than
for cause, your salary shall continue to be paid for a period of
nine (9) months from the effective date of such termination.
Payments made hereunder would cease if you become permanently
employed at the same or greater salary during the nine month
period.

Vacation: Three (3) weeks annual vacation

Holidays: Seven paid holidays plus three paid floating holidays.

Medical
Insurance: The Company will provide health and dental insurance through its
group policy with Aetna. The Company splits the cost of this
plan 80/20 with the employee. A family plan currently costs the
employee $112.33 per month through payroll deductions.

Disability
<PAGE>

Insurance: The first 90 days of short term disability is covered by the
Company at 80% of pay until after two years of service. After
two years, the first 90 days will be paid at 100% of salary.
After 90 days, long term disability will pay 60% of salary, with
a maximum monthly payment of $5,000.

401(k)
Plan: The Company allows all employees with six months of service and
21 years of age to participate in its 40 1 (k) plan. Employees
may contribute, on a pretax basis, the lesser of 15% of their
salary or $9,240. The plan is subject to all IRS compliance
regulations.

Other
Benefits: The Company will insure you when traveling on business up to
$250,000. Basic life insurance of $50,000 is also provided. You
will be included in oth er benefit programs which may be
established by the Company, consistent with your position within
the Company.

<PAGE>

EXHIBIT 10.17

PRINCE VENTURES

June 3, 1993

Imre Kovesdi, Ph.D.
160A South Main Street
Pearl River, NY 10965-2433

VIA FEDERAL EXPRESS

Dear Imre:

I very much enjoyed having dinner with you last night at Aria in Manhattan. The
fact that you enjoy opera as much as I do perhaps made the restaurant an ideal
choice. I was pleased to describe the financial aspects of venture capital,
IPOs, stock options, etc. I was also pleased to introduce you to my firm and
our Scientific Advisory Board. I am extremely excited about the opportunity
GenVec represents, as you know, and feel that you will be a strong contributor
to the eventual success of GenVec. I especially would like you to join us as
soon as possible so that our scientific recruiting can embody some of the
staffing concepts you and I discussed over dinner.

I am pleased to be able to significantly improve our offer to you for the
position of Director - Vector Biology and Development.

In simplistic terms, the near term goals of the company are:

1. Construct a 2nd generation CF adenovector system which is enough of an
improvement over the existing design to:

a. warrant use of this vector in follow-on human CF trials

b. justify patent filings and be FDA approved based on improved
efficacy/safety profile

2. Prioritize clinical targets for applications beyond CF

3. Construct next generation proprietary generic vectors which confer
significant advantages over existing designs preferably optimized for
use in the applications identified in #2. A partial list of areas to
be explored would include
<PAGE>

a. immune blunting
b. increasing longevity of expression
c. tropism
d. tissue specific promotion and radiation inducible promotion
e. improved production methods to increase safety
f. others

You would be expected to significantly contribute to growing an organization
capable of reaching the above goals. Input is also desired and expected on
organization design, identification and recruitment of new hires and laboratory
set-up and design.

The expectations are to have a scientific staff (scientists and research
associates) of approximately 12 people within 12-18 months and a total of 25
within 24-30 months. Additional scientific support will come from Ron Crystal's
academic lab at Cornell and from the collaboration with Genentech in the CF
area.

Details of Offer
- ----------------

Annual salary: $100,000 per year, guaranteed for 12 months

Sign-on Bonus: $10,000, paid upon acceptance of offer

Incentive stock options: 60,000 shares with 4 year vesting schedule, at
$.10/share exercise price

Benefits: medical and dental insurance for you and your wife

Relocation package:

- up to $6,420 to cover the cost of being released from you current
lease in Pearl River (depending on your best efforts negotiation
with your present landlord)

- mortgage points and closing costs should you and your wife decide
to purchase a house in the Rockville/Gaithersburg area

- temporary living expenses up to three months

- out of pocket moving expenses
<PAGE>

Professional enhancements:

- personal research may be done at GenVec (up to 10% of workday)

- an adjunct professorship will be arranged if possible at the NIH
or other suitable institution

Offer expiration: June 10, 1993

Imre, I hope this offer meets with your approval. Please call me at my office
(203-227-8332) or my home (203-431-0649) if you or your wife have any questions.

As we discussed, I would like to invite you and your wife to visit the D.C. area
at our expense to give you a sense of the many benefits and attractions of the
area. We are working with relocation experts who would be please to give you
detailed tours and provide you with a wealth of information about the area. Ron
Crystal and his wife Janet would be pleased to have dinner with you and your
wife while you are there.

Again, I welcome you to join us in what I know will be a very exciting,
challenging, and rewarding opportunity, both professionally and financially. I
look forward to hearing from you. Please signify your acceptance of our offer by
signing and returning to me one copy of this letter.

Sincerely,

/s/ Gregory F. Zaic

Gregory F. Zaic
Chairman, GenVec Inc.

ACCEPTED

/s/ Imre Kovesdi
__________________________
Imre Kovesdi, Ph.D.

June 6, 1993

cc: John Ruhmann

<PAGE>

EXHIBIT 10.18

March 7, 1995

Thomas E. Smart
3748 Bret Harte Drive
Redwood City, CA 94061

Dear Tom:

It is with great pleasure that I extend an offer of employment to you for the
position of Executive Director, Corporate Development at GenVec, Inc. We were
all very impressed with your background and experience and have every confidence
that you would be an extremely valuable addition to our Management Team.

Sincerely,

/s/ Thomas W. D'Alonzo

Thomas W. D'Alonzo
President & Chief Executive Officer

enclosures

AGREED TO AND ACCEPTED BY:

/s/ Thomas E. Smart 3/9/95
_________________________ ____________________
<PAGE>

Thomas E. Smart Date

GENVEC, INC.

TERMS OF EMPLOYMENT

Employee
Name: Thomas E. Smart

Position: Executive Director, Corporate Development
(Vice President title will immediately follow the execution of an
additional corporate collaboration)

Start Date: To be determined

Salary: $110,000 per annum, to be paid in semi-monthly installments

Bonus: $10,000 upon the signing of a corporate collaboration agreement
within 12 months of employment and an additional $10,000 upon the
signing of a second corporate collaboration agreement within 18
months of employment. Each of these corporate collaborations is
expected to include material up front payments, annual research
support, milestones and royalties on future product sales.

Equity: You will be awarded options to purchase 225,000 shares of common
stock at a price of $0.10 per share, as follows:

. 180,000 shares vesting equally over a four year period

. 10,000 shares vesting upon the signing each of the two
significant corporate partnerships described above in the
"Bonus" section.

. 25,000 shares vesting over four years beginning on the date
of your promotion to Vice President.

Should a "change in control", as described in the attached
definition, occur at GenVec during your employment, all options
which are not yet vested will immediately become fully vested.

Relocation: The Company will reimburse you for moving expenses up to a
maximum of $40,000, which are incurred during the first twelve
(12) months of your employment, including the following:

. Estimated closing fee on your California residence of
$15,000.
<PAGE>

. Transfer taxes on your California residence of $5,000.

. One house hunting trip, if necessary.

. Temporary housing costs for up to 30 days, if necessary.

. Transportation of all personal property.

. Other mutually agreed upon misc. relocation expenses.

(It is expected that expenses will not exceed $30,000.) To the
extent that these expenses are not tax deductible, the Company
will gross them up for all federal and state personal income
taxes.

Salary
Continuation: Should your employment be terminated for any reason other than
for cause, your salary shall continue to be paid for a period of
six (6) months from the effective date of such termination.
Payments made hereunder would cease if you become permanently
employed at the same or greater salary during the nine month
period.

Vacation: Three (3) weeks annual vacation

Holidays: Seven paid holidays plus three paid floating holidays.

Medical
Insurance: The Company will provide health and dental insurance through its
group policy with Aetna. The Company splits the cost of this plan
80/20 with the employee. A family plan currently costs the
employee $112.33 per month through payroll deductions.

Disability
Insurance: The first 90 days of short term disability is covered by the
Company at 80% of pay until after two years of service. After two
years, the first 90 days will be paid at 100% of salary. After 90
days, long term disability will pay 60% of salary, with a maximum
monthly payment of $5,000.

401(k)
Plan: The Company allows all employees with six months of service and
21 years of age to participate in its 401(k) plan. Employees may
contribute, on a pretax basis, the lesser of 15% of their salary
or $9,240. The plan is subject to all IRS compliance regulations.

Other
Benefits: The Company will insure you when traveling on business up to
$250,000. Basic life insurance of $50,000 is also provided. You
will be included in other benefit programs which may be
established by the Company, consistent with your position within
the Company.
<PAGE>

DEFINITION OF "CHANGE IN CONTROL"

A "Change in Control" shall mean the earliest to occur of the following
events:

(i) the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) approve a plan or other arrangement pursuant
to which the Company will be dissolved or liquidated; or

(ii) the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) and the stockholders of the other
constituent corporation, if applicable, (or its board of directors, if
stockholder action is not required) have approved a definitive agreement to sell
or otherwise dispose of substantially all of the assets of the Company, other
than in a transaction in which shareholders of the Company will maintain voting
control of the purchasing entity after the transaction; or

(iii) the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) and the stockholders of the other
constituent corporation, if applicable, (or its board of directors, if
stockholder action is not required) have approved a definitive agreement to
reorganize, merge or consolidate the Company with or into such other
corporation, other than, in either case, a reorganization, merger, or
consolidation of the Company, in a transaction in which shareholders of the
Company will maintain voting control of the surviving entity after the
transaction; or

(iv) The date any entity, person or group, other than the Company or any of
its subsidiaries and other than an entity which is not engaged in the operation
of a trade or business involving research and development or the sale of goods
and services, shall have become the beneficial owner of, or shall have obtained
voting control over more than fifty percent (50%) of the outstanding shares of
the Company's common stock.

<PAGE>

EXHIBIT 10.19

GENVEC, INC.

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (the "Agreement"), effective as of April 28,
1998 (the "Effective Date"), is entered into between Herbert J. Conrad,
residing at 134 Lowell Road, Glen Rock, New Jersey 07452 ("Consultant"), and
GenVec, Inc., a Delaware corporation having a principal place of business at
12111 Parklawn Drive, Rockville, MD 20852 ("GenVec").

BACKGROUND
----------

A. Consultant currently is serving as the Chairman of the Board of
Directors of GenVec.

B. GenVec desires to retain the services of Consultant in a consulting
capacity with respect to certain activities as described in this Agreement.

NOW, THEREFORE, Consultant and GenVec agree as follows:

1. Description of Services. GenVec hereby retains Consultant and
-----------------------
Consultant hereby agrees to consult regarding GenVec's activities. Such
consulting services may take place between GenVec's management, scientists, or
other consultants, in the form of formal meetings, review of written materials,
informal consultation over the telephone, or otherwise, as agreed by the
parties.

2. Compensation. As consideration for Consultant's performance of the
------------
Agreement, GenVec shall pay Consultant One Thousand Five Hundred U.S. Dollars
($1,500.00) per day of consulting service requested by GenVec, and rendered by
Consultant. For purposes of this Agreement, eight (8) hours shall constitute
one day of consulting service. Consultant agrees to make himself available to
GenVec to provide consulting services for a minimum of five (5) business days
and up to ten (10) business days per month. Consulting services rendered for
any portion of one day hereunder shall be compensated on an hourly basis at the
rate of One Hundred Eighty-Seven U.S. Dollars ($187.00) per hour. GenVec shall
pay such consideration within 30 (thirty) days of receiving a written document
from Consultant, in a form reasonably acceptable to GenVec, stating the number
of days (or hours, if applicable) of consulting services provided during the
prior calendar month. Such statement shall be sent to the attention of the
Accounts Payable Department at GenVec. Consultant acknowledges that no amount
will be withheld from his consulting fees hereunder for payment of any federal,
national, state, or local taxes, and that Consultant has sole responsibility to
pay such taxes, if any, and to file such returns as may be required by
applicable laws and regulations.

3. Expenses. GenVec will reimburse Consultant for reasonable, documented
--------
expenses incurred by Consultant while rendering services under this Agreement,
subject to approval and
<PAGE>

customary verification by GenVec. Such expenses shall include reasonable
necessary travel, lodging, and meal expenses. Requests for reimbursement shall
be in a reasonable form acceptable to GenVec and shall include an itemized
accounting of such expenses supported by documentation.

4. Proprietary Information and Inventions.
--------------------------------------

4.1 Proprietary Information. Consultant acknowledges that his
-----------------------
relationship with GenVec is one of high trust and confidence and that in the
course of his service to GenVec he will have access to and contact with
Proprietary Information. The Consultant agrees that he will not, during the
Term (as defined in Section 7 below) of the Agreement or at any time within five
(5) years thereafter, disclose to others, or use for his benefit or the benefit
of others, any Proprietary Information or Inventions (as defined in Section 4.3
below).

4.1.1 For purposes of this Agreement, "Proprietary Information"
shall mean all information (whether or not patentable and whether or not
copyrightable) owned, possessed or used by GenVec, including, without
limitation, any Invention, formula, trade secret, process, research, report,
technical data, know-how, technology or information with respect to employee
compensation, or any marketing plan or business plan, or forecasts, customer
lists or information regarding finances, marketing, pricing, or costs that is
communicated to, learned of, developed or otherwise acquired by Consultant as a
direct result of the services performed by Consultant for GenVec under the
Agreement.

4.1.2 Consultant's obligations under this Section 4.1 shall not
apply to any information that (i) is or becomes known to the general public
under circumstances involving no breach by the Consultant or others of the terms
of this Section 4.1, or (ii) is in Consultant's possession at the time of
disclosure, as shown by contemporaneous written evidence.

4.2 Ownership and Return of Property. All documents, data, records,
--------------------------------
apparatus, equipment and other physical property, whether or not pertaining to
Proprietary Information, furnished to Consultant by GenVec or produced by
Consultant or others in connection with Consultant's services shall be and
remain the sole property of GenVec and shall be returned promptly to GenVec as
and when requested by GenVec. Should GenVec not so request, Consultant shall
promptly return and deliver all such materials and property upon termination of
this Agreement for any reason, and Consultant will not retain any such property
or any reproduction or extract thereof following any termination.

4.3 Inventions.
----------

4.3.1 Ownership. All inventions, discoveries, data, technology,
---------
designs. innovations, and improvements related to the business of GenVec which
are made, conceived, reduced to practice or otherwise developed by the
Consultant, solely or jointly with others, as a direct result of services
performed under the terms of this Agreement (collectively, "Inventions") or

-2-
<PAGE>

GenVec's Proprietary Information received by the Consultant under the terms of
this Agreement shall be the property of GenVec. Consultant hereby assigns to
GenVec any right, title and interest he may have in any and all Inventions and
any and all related patents, copyrights, trademarks, trade names, and other
industrial and intellectual property rights and applications therefor, in the
United States and elsewhere, and appoints the Chief Executive Officer of GenVec
as his duly authorized attorney to execute, file, prosecute and protect the same
before any government agency, court or authority.

4.3.2 Disclosure. During the term of this Agreement and within
----------
one (1) year thereafter, Consultant will promptly disclose to GenVec all
Inventions.

4.3.3 Cooperation. Upon the request of GenVec and at GenVec's
-----------
expense, Consultant shall execute such further assignments, documents and other
instruments as may be necessary or desirable to fully and completely assign all
Inventions to GenVec and to assist GenVec in applying for, obtaining, defending
and enforcing patents and/or copyrights or other rights in the United States and
in any foreign country with respect to any Inventions.

4.4 Relevant Developments. In the event that Consultant invents or
---------------------
discovers, or participates in the invention or discovery, of technology or
information relevant to the business of GenVec, Consultant agrees to use his
best efforts to notify GenVec of such invention or discovery and to assist
GenVec with the possible purchase or licensing of such invention or discovery.

5. Other Consultant Obligations.
----------------------------

5.1 Consultant will not disclose to GenVec any information that
Consultant is obligated to keep secret pursuant to an existing agreement with a
third party or consistent with his duties or obligations to such third party and
nothing in this Agreement win impose any obligation on Consultant to the
contrary.

5.2 The consulting services provided by Consultant hereunder will not
be conducted on time that is required to be devoted to any third party.
Consultant shall not use the funding, resources or facilities of any other third
party to perform consulting services hereunder and shall not perform such
services in any manner that would give any third party rights to any result of
such services.

5.3 Subject to written waivers that may be provided by GenVec upon
Consultant's request, which waivers shall not be unreasonably withheld,
Consultant agrees that during the term of this Agreement he will not directly or
indirectly (i) provide any consulting services in the field of gene therapy to
any other business or commercial entity, (ii) participate in the formation of
any business or commercial entity in the field of gene therapy, or (iii) solicit
or hire away, or assist a third party to solicit or hire away, any employee or
consultant of GenVec. Consultant shall promptly

-3-
<PAGE>

notify GenVec of all other consulting agreements which Consultant has entered
into, or any consulting services which Consultant may provide to any third party
relating to gene therapy.

6. Nature of Relationship. At all times while acting pursuant to this
----------------------
Agreement, Consultant shall be deemed an independent contractor and will not be
deemed to be an employee of GenVec for any purpose, including without
limitation, for the purposes of any employee benefit program, tax withholding,
unemployment benefits, or otherwise. Consultant acknowledges and agrees and it
is the intent of the parties hereto that Consultant receive no GenVec-sponsored
benefits from GenVec either as a Consultant or employee. Such benefits include,
but are not limited to, paid vacation, sick leave, medical insurance, and 401(k)
participation. If Consultant is reclassified by a state or federal agency or
court as an employee, Consultant will become a reclassified employee and will
receive no benefits except those mandated by state or federal law, even if by
the terms of GenVec's benefit plans in effect at the time of such
reclassification Consultant would otherwise be eligible for such benefits.
Consultant shall not enter into any agreement or incur any obligations on
GenVec's behalf, or commit GenVec in any manner. Consultant further agrees to
indemnify and hold harmless GenVec and its directors, officers, and employees
from and against all taxes, losses, damages, liabilities, costs and expenses,
including attorney's fees and other legal expenses, arising directly or
indirectly from (i) any negligent, reckless or intentionally wrongful act of
Consultant or Consultant's assistants, employees or agents, (ii) a determination
by a court or agency that the Consultant is not an independent contractor, or
(iii) any breach by Consultant or Consultant's assistants, employees or agents
of any covenants contained in this Agreement

7. Term. This Agreement shall become effective as of the Effective Date
----
and remain in effect until the first anniversary of the Effective Date, unless
terminated earlier pursuant to Section 8 (the "Term"), and, if mutually agreed,
may be extended on a month to month basis, on the same terms and conditions
herein.

8. Termination. Each of GenVec and Consultant may terminate this
-----------
Agreement for any reason upon thirty (30) days written notice to the other
party. This Agreement shall automatically terminate upon death of Consultant.
Termination or expiration of this Agreement or any mutually agreed extension
shall not relieve a party with respect to any obligation accrued hereunder prior
to such expiration or termination. Sections 4, 5 and 9 through 13 shall survive
any expiration or termination of this Agreement.

9. Remedies. Consultant acknowledges that GenVec will suffer irreparable
--------
harm and have no adequate remedy at law if Consultant violates the terms of
Sections 4 or 5. In such event, GenVec shall have the right, in addition to any
other rights it may have, to obtain in any court of competent jurisdiction
injunctive or other relief to restrain any breach or threatened breach of this
Agreement without the obligation of posting any bond.

10. Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Maryland, U.S.A., and the exclusive
venue for any dispute between the

-4-
<PAGE>

parties regarding the subject manner of this Agreement shall be the state and
federal courts located in the State of Maryland, U.S.A., and the parties hereby
consent to the personal jurisdiction of such courts.

11. No Conflict. Consultant represents that his retention as a consultant
-----------
with GenVec and his performance under this Agreement does not, and shall not,
breach any agreement that obligates him to keep in confidence any trade secrets
or confidential or proprietary information of his or of any other party or to
refrain from competing, directly or indirectly, with the business of any other
party. Consultant shall not disclose to GenVec any trade secrets or confidential
or proprietary information of any other party.

12. Assignment. GenVec shall have the right to assign its rights under
----------
this Agreement to any person, partnership, corporation, or other entity,
provided that any assignee, transferee, or other successor agrees to be bound by
the terms hereof. Consultant shall not assign this Agreement without GenVec's
prior written consent. This Agreement shall be binding on GenVec, its
successors and assigns, and on Consultant, his heirs and assigns.

13. Notices. Any notice required or permitted hereunder shall be in
-------
writing and considered given when personally delivered or sent by certified or
registered mail, postage paid, or overnight delivery service, if to Consultant,
at his residence listed above, and if to GenVec, at the address listed above,
attention: President.

14. Entire Agreement; Counterparts. This Agreement constitutes the entire
------------------------------
agreement between the parties and supersedes all prior written and oral
agreements between the parties with respect to the subject matter herein. No
change, amendment, or other modification of this Agreement shall be effective
unless signed by Consultant and an authorized representative of GenVec. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which shall constitute one instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written above.

GENVEC, INC. CONSULTANT

/s/ Paul H. Fischer /s/ Herbert J. Conrad
By:_______________________________ By:________________________________
Paul H. Fischer Herbert J. Conrad

Title: President and Chief
Executive Officer

-5-

<PAGE>

[LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE]

EXHIBIT 23.1

The Board of Directors
GenVec, Inc.:

We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.

/s/ KPMG Peat Marwick LLP

McLean, Virginia
April 30, 1998

<PAGE>
EXHIBIT 23.3

April 30, 1998

BancAmerica Robertson Stephens
J.P. Morgan & Co. Incorporated
Salomon Smith Barney
c/o BancAmerica Robertson Stephens
As Representatives of the Several Underwriters
555 California Street, Suite 2600
San Francisco, CA 94104

Re: GenVec, Inc.
------------

Gentlemen:

Leydig, Voit & Mayer, Ltd. hereby consents to the use of its name
under the caption "Experts" in the Registration Statement of GenVec, on Form
S-1 filed with the Securities and Exchange Commission on April 30, 1998.

As stated under the caption, Leydig, Voit & Mayer, Ltd. has reviewed
and approved certain statements in the Prospectus under the captions "Risk
Factors", "Business Technology" and "Business-Intellectual Property". These
statements are limited specifically to the following:

A. Under Risk Factors
- Intellectual Property
First paragraph, sentence 1
Second paragraph, sentences 1 and 2
Third paragraph, sentence 3
Fourth paragraph, sentences 1, 2 and 3
Seventh paragraph, sentence 1

B. Under Business
- Strategy
Sixth paragraph, sentence 2

C. Under Business
- Intellectual Property
First paragraph, sentence 1
Second paragraph, sentences 1, 2 and 5
Third paragraph, sentences 1 and 2
Fourth paragraph, sentence 3
Fifth paragraph, sentences 1, 2 and 3
Eighth paragraph, sentence 1

Sincerely,

LEYDIG, VOIT & MAYER, LTD.

By: /s/ Leydig, Voit & Mayer, Ltd.
____________________________

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,694,205
<SECURITIES> 2,567,866
<RECEIVABLES> 2,000,000
<ALLOWANCES> 0
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<CURRENT-ASSETS> 9,896,838
<PP&E> 2,558,111
<DEPRECIATION> 1,800,612
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0
6,042
<COMMON> 1,030
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<SALES> 0
<TOTAL-REVENUES> 3,687,500
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