COULTER PHARMACEUTICALS INC, S-1/A, 1997-01-16

COULTER PHARMACEUTICALS INC
S-1/A, 1997-01-16
PHARMACEUTICAL PREPARATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1997

REGISTRATION NO. 333-17661
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COULTER PHARMACEUTICAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 2834 94-3219075
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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550 CALIFORNIA AVENUE, SUITE 200

PALO ALTO, CALIFORNIA 94306-1440
(415) 842-7300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MICHAEL F. BIGHAM

PRESIDENT AND CHIEF EXECUTIVE OFFICER
COULTER PHARMACEUTICAL, INC.
550 CALIFORNIA AVENUE, SUITE 200
PALO ALTO, CALIFORNIA 94306-1440
(415) 842-7300
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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COPIES TO:

<TABLE>
<S> <C>
JAMES C. KITCH, ESQ. ALAN K. AUSTIN, ESQ.
JOHN A. DADO, ESQ. ELIZABETH R. FLINT, ESQ.
COOLEY GODWARD LLP WILSON SONSINI GOODRICH & ROSATI
FIVE PALO ALTO SQUARE PROFESSIONAL CORPORATION
3000 EL CAMINO REAL 650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94306 PALO ALTO, CALIFORNIA 94304
</TABLE>

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
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If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

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

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

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

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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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 JANUARY 16, 1997

PROSPECTUS
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2,500,000 SHARES

COULTPHARM.LOGO

COMMON STOCK

All of the 2,500,000 shares of Common Stock offered hereby are being sold
by Coulter Pharmaceutical, Inc. ("Coulter Pharmaceutical" 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 $12.00 and $14.00 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. The Company has applied to have the Common Stock approved for quotation
on the Nasdaq National Market under the symbol CLTR.

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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.

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

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

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $665,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock solely to cover over-allotments,
if any. If all such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
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The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1997, at the office of the agent of
Hambrecht & Quist LLC in New York, New York.

HAMBRECHT & QUIST

ALEX.BROWN & SONS
INCORPORATED

PACIFIC GROWTH EQUITIES, INC.

, 1997
<PAGE> 3

Depicted above is a computer screen display from the interactive database
of clinical trial data which the Company intends to submit to the FDA in
connection with its application for marketing approval of its B-1 Therapy. The
four medical images represent a time sequence response of a non-Hodgkin's
lymphoma patient treated with the Company's B-1 Therapy. This patient had failed
three prior regimens of chemotherapy and was treated with the B-1 Therapy as
part of the Company's completed Phase I/II clinical trial. The lymph nodes of
the patient's upper chest (outlined in yellow) are depicted (1) immediately
prior to B-1 Therapy, (2) three months and (3) six months after treatment as the
malignancy disappears, as well as (4) 28 months after treatment where the lymph
nodes have returned to normal or have become residual scar tissue. The images
depicted represent the results of treatment for only one patient and are not
necessarily indicative of results that will be obtained from extensive clinical
testing. See "Risk Factors -- Uncertainties Related to Product Development and
"Business -- Clinical Results and Development Plan." The Company's B-1 Therapy
has not been approved for sale in the United States or elsewhere. The Company
will be required to conduct additional clinical trials prior to submitting an
application to the FDA for marketing approval of the B-1 Therapy. The Company
expects to submit an application to the FDA for the treatment of non-Hodgkin's
lymphoma in low-grade and transformed low-grade patients refractory to
chemotherapy in the second half of 1998, although no assurance can be given that
it will be able to do so.

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, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby involves
a high degree of risk. See "Risk Factors."

THE COMPANY

Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company currently is
developing a family of cancer therapeutics based upon two platform technologies:
conjugated antibodies and tumor-activated peptide ("TAP") pro-drugs. The
Company's most advanced product candidate, the "B-1 Therapy," consists of a
monoclonal antibody conjugated with a radioisotope. In a Phase I/II clinical
trial of the B-1 Therapy, 40 patients with low-grade or transformed low-grade
non-Hodgkin's lymphoma ("NHL") who had relapsed from previous chemotherapy
regimens achieved an 82% overall response rate and a 45% complete response rate.
The Company has commenced a pivotal Phase II/III clinical trial for the
treatment of NHL in low-grade and transformed low-grade patients refractory to
chemotherapy. The Company intends to file for U.S. Food and Drug Administration
("FDA") marketing approval of its B-1 Therapy for this indication in the second
half of 1998. The Company believes that the B-1 Therapy, if successfully
developed, could become the first radioimmunotherapy approved in the United
States for the treatment of people with cancer. The Company's TAP pro-drug
program is designed to broaden significantly the therapeutic windows of
conventional chemotherapies. The Company currently is developing a pro-drug
version of doxorubicin to treat certain solid tumor cancers with the objective
of commencing clinical trials in early 1998.

Cancer is a family of more than one hundred diseases that can be
categorized into two broad groups: hematologic ("blood-borne") malignancies and
solid tumor cancers. The Company's B-1 Therapy addresses NHL, a blood-borne
cancer of the immune system affecting B-cells that is categorized as low-,
intermediate- or high-grade disease. In the United States, the Company estimates
that approximately 140,000 patients have low-grade or transformed low-grade NHL.
While patients with low-grade and transformed low-grade NHL often can achieve
one or more remissions with chemotherapy, eventually these patients relapse and
ultimately die from the disease or from complications of treatment.

The B-1 Therapy is designed to optimize therapeutic benefit for each
patient without the debilitating side effects typically associated with
conventional cancer treatments. The Company's B-1 Therapy consists of a
radioisotope, (131)Iodine ("(131)I"), combined with a monoclonal antibody (the
"B-1 Antibody") which recognizes and binds to the CD20 antigen, an antigen
commonly expressed on the surface of B-cells primarily during that stage of
their life cycle when NHL arises. The B-1 Therapy is administered to patients
pursuant to a proprietary therapeutic protocol consisting of a single, two-dose
regimen that the Company believes can be administered primarily on an outpatient
basis.

The Company's strategy includes seeking expedited initial approval of the
B-1 Therapy for the treatment of low-grade and transformed low-grade NHL in
patients who are refractory to chemotherapy, while simultaneously pursuing
trials to broaden the initial label indication. For its initial indication, the
Company will pursue approval under the "Clinton-Kessler Cancer Initiative," a
regulatory initiative intended to accelerate the testing, review and approval of
therapies for patients suffering from life-threatening or disabling cancers who
have limited treatment options. Based on this initiative and on guidance from
FDA staff, the Company has designed its pivotal Phase II/III trial to include 60
patients and a post-treatment follow-up period of six months. The Company
intends to seek approval for other NHL indications and, accordingly, is planning
to commence a Phase III/IV "post-approval" clinical trial during the second half
of 1997 in patients with low-grade or transformed low-grade NHL in first or
second relapse. The Company also has commenced a Phase II trial of the B-1
Therapy as a stand-alone, first-line treatment for patients newly diagnosed with
low-grade NHL. The

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<PAGE> 5

Company believes that this Phase II trial is the first clinical trial of a
radioimmunotherapy as a stand-alone, first-line treatment for people with
cancer.

In its second technology platform, the Company is developing TAP pro-drug
versions of cytotoxic drugs designed to be activated preferentially in the
proximity of metastatic cancer cells, yet stable in circulation and normal
tissues. Accordingly, relatively larger quantities of cytotoxic agents are
expected to reach and enter malignant cells as opposed to normal cells, which
could permit a significant increase in maximum tolerated dosages, potentially
overcoming drug resistance in cancer cells.

The Company is engaged in preclinical development of "Super-Leu-Dox," a
pro-drug version of doxorubicin, with the objective of commencing clinical
trials in early 1998. In vitro studies have shown that Super-Leu-Dox is 40 times
more likely to be absorbed and chemically activated by tumor cells than by
normal cells. An earlier leucine-doxorubicin conjugate was tested as a
stand-alone therapy in the treatment of solid tumors in two separate dose
escalation trials in Europe in a total of 59 patients. Patients in these trials
safely tolerated doses well in excess of those associated with unmodified
doxorubicin.

The Company intends to market and sell its products in the United States
through a direct sales force and, where appropriate, in collaboration with
marketing partners. The Company believes that an established sales and marketing
capability will enable it to compete effectively for opportunities to license or
distribute later-stage product candidates and even approved products.
Internationally, the Company intends to distribute its products through
marketing partners.

The Company's conjugated antibody program is based upon the antibody
therapeutics program which originated in the late 1970s at Coulter Corporation,
a recognized leader in the field of hematology. Upon its formation in February
1995, the Company acquired worldwide rights to the B-1 Therapy and related
intellectual property, know-how and other assets from Coulter Corporation.
Coulter Corporation will own 16.6% of the Company's stock subsequent to the
offering.

The Company was incorporated under the laws of Delaware in February 1995.
The Company's executive offices are located at 550 California Avenue, Suite 200,
Palo Alto, California 94306, and its telephone number is (415) 842-7300.

4
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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,500,000 shares
Common Stock to be outstanding after the
offering................................... 10,010,268 shares (1)
Use of proceeds.............................. For funding of clinical trials,
manufacturing, initial prelaunch marketing of
the B-1 Therapy; and for other research and
development, working capital and general
corporate purposes
Proposed Nasdaq National Market symbol....... CLTR
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
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1992 1993 1994 1995 1995 1996
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<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Research and development
expenses......................... $ 1,574 $ 1,838 $ 2,798 $ 2,739 $ 1,688 $ 9,896
Net loss........................... $(1,701) $(2,016) $(3,086) $(3,229) $(2,031) $(10,821)
Pro forma net loss per share....... $ (1.40)
Shares used in computing pro forma
net loss per share(2)............ 7,736
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments............ $18,835 $ 52,883
Working capital.............................................. 13,497 47,545
Total assets................................................. 20,484 54,532
Deficit accumulated during the development stage............. (13,814) (13,814)
Total stockholders' equity................................... 14,806 48,854
</TABLE>

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(1) Based on the number of shares outstanding at September 30, 1996, after
giving effect to the automatic conversion of all outstanding shares of
Preferred Stock into Common Stock and the assumed cash exercise of warrants
to purchase 498,705 shares of Common Stock prior to the closing of this
offering. Excludes 548,604 shares which were subject to outstanding options
at such date at a weighted average exercise price of $0.62 per share. As of
December 6, 1996, 802,305 shares were subject to outstanding options at such
date at a weighted average exercise price of $1.38 per share, and an
additional 24,666 shares were subject to an outstanding warrant at such date
at an exercise price of $9.75 per share. See "Capitalization,"
"Management -- Stock Option Plans" and Note 8 of Notes to Consolidated
Financial Statements.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing pro forma net loss per
share.
(3) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $13.00 per
share and the receipt of the estimated proceeds therefrom and after giving
effect to the assumed cash exercise of warrants to purchase 498,705 shares
of Common Stock prior to the closing of this offering. See "Use of Proceeds"
and "Capitalization."

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

Except in the consolidated financial statements of the Company or as
otherwise noted, all information in this Prospectus (a) assumes no exercise of
the Underwriters' over-allotment option, (b) reflects a one-for-three reverse
split of capital stock of the Company effected prior to the effectiveness of
this offering and (c) reflects the conversion of all outstanding Preferred Stock
of the Company into Common Stock upon the closing of this offering. See
"Description of Capital Stock," "Underwriting" and Notes to Consolidated
Financial Statements.

5
<PAGE> 7

RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
Prospectus before purchasing the shares of Common Stock offered hereby.

Uncertainties Related to Product Development. The Company's product
candidates are generally in early stages of development, with only one in
clinical trials. The development of safe and effective therapies for the
treatment of people with cancer is highly uncertain and subject to numerous
risks. Product candidates that may appear to be promising at early stages of
development may not reach the market for a number of reasons. Product candidates
may be found ineffective or cause harmful side effects during clinical trials,
may take longer to progress through clinical trials than had been anticipated,
may fail to receive necessary regulatory approvals, may prove impracticable to
manufacture in commercial quantities at reasonable cost and with acceptable
quality or may fail to achieve market acceptance.

The results of initial preclinical and clinical testing of the products
under development by the Company are not necessarily indicative of results that
will be obtained from subsequent or more extensive preclinical studies and
clinical testing. The Company's clinical data gathered to date with respect to
its B-1 Therapy are primarily from a Phase I/II dose escalation trial which was
designed to develop and refine the therapeutic protocol, to determine the
maximum tolerated dose of total body radiation and to assess the safety and
efficacy profile of treatment with a radiolabeled antibody. Further, the data
from this Phase I/II dose escalation trial were compiled from testing conducted
at a single site and with a relatively small number of patients per NHL
histology and disease stage. Substantial additional development and clinical
testing and investment will be required prior to seeking any regulatory approval
for commercialization of this potential product. There can be no assurance that
clinical trials of the B-1 Therapy or other product candidates under development
will demonstrate the safety and efficacy of such products to the extent
necessary to obtain regulatory approvals for the indications being studied, or
at all. Companies in the pharmaceutical and biotechnology industries have
suffered significant setbacks in advanced clinical trials, even after obtaining
promising results in earlier trials. The failure to demonstrate adequately the
safety and efficacy of the B-1 Therapy or any other therapeutic product under
development could delay or prevent regulatory approval of the product and would
have a material adverse effect on the Company's business, financial condition
and results of operations.

Furthermore, the timing and completion of current and planned clinical
trials of the B-1 Therapy, as well as clinical trials of other products, are
dependent upon, among other factors, the rate at which patients are enrolled,
which is a function of many factors, including the size of the patient
population, the proximity of patients to the clinical sites, the eligibility
criteria for the study and the existence of competing clinical trials. There can
be no assurance that delays in patient enrollment in clinical trials will not
occur, and any such delays may result in increased costs, program delays or
both, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

Early Stage of Development. Since its inception in 1995, the Company has
been engaged in the development of drugs and related therapies for the treatment
of people with cancer. The Company's product candidates are generally in early
stages of development, with only one in clinical trials. No revenues have been
generated from product sales or product royalties; and products resulting from
the Company's research and development efforts, if any, are not expected to be
available commercially for at least the next few years. No assurance can be
given that the Company's product development efforts, including clinical trials,
will be successful, that required regulatory approvals for the indications being
studied can be obtained, that its products can be manufactured at acceptable
cost and with appropriate quality or that any approved products can be
successfully marketed. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

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Government Regulation; No Assurance of Regulatory Approvals. All new drugs
and biologics, including the Company's products under development, are subject
to extensive and rigorous regulation by the federal government, principally the
FDA under the Food, Drug and Cosmetic Act and other laws including, in the case
of biologics, the Public Health Services Act, and by state and local
governments. Such regulations govern, among other things, the development,
testing, manufacture, labeling, storage, premarket clearance or approval,
advertising, promotion, sale and distribution of such products. If drug products
are marketed abroad, they also are subject to extensive regulation by foreign
governments.

The regulatory process, which includes preclinical studies and clinical
trials of each potential product, is lengthy, expensive and uncertain. Prior to
commercial sale in the United States, most new drugs and biologics, including
the Company's products under development, must be cleared or approved by the
FDA. Securing FDA marketing clearances and approvals often requires the
submission of extensive preclinical and clinical data and supporting information
to the FDA. Product clearances and approvals, if granted, can be withdrawn for
failure to comply with regulatory requirements or upon the occurrence of
unforeseen problems following initial marketing. Moreover, regulatory clearances
or approvals for products such as new drugs and biologics, even if granted, may
include significant limitations on the uses for which such products may be
marketed.

There can be no assurance that the Company will be able to obtain necessary
regulatory clearances or approvals on a timely basis, if at all, for any of its
product candidates, and delays in receipt or failures to receive such clearances
or approvals or failures to comply with existing or future regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations. Certain material manufacturing
changes to new drugs and biologics also are subject to FDA review and clearance
or approval. There can be no assurance that any clearances or approvals that are
required, once obtained, will not be withdrawn or that compliance with other
regulatory requirements can be maintained. Further, failure to comply with
applicable FDA and other regulatory requirements can result in sanctions being
imposed on the Company or the manufacturers of its products, including warning
letters, fines, product recalls or seizures, injunctions, refusals to permit
products to be imported into or exported out of the United States, refusals of
the FDA to grant premarket clearance or premarket approval of drugs and
biologics or to allow the Company to enter into government supply contracts,
withdrawals of previously approved marketing applications and criminal
prosecutions.

Manufacturers of drugs and biologics also are required to comply with the
applicable FDA good manufacturing practice ("GMP") regulations, which include
requirements relating to quality control and quality assurance as well as the
corresponding maintenance of records and documentation. Manufacturing facilities
are subject to inspection by the FDA, including unannounced inspection, and must
be licensed before they can be used in commercial manufacturing of the Company's
products. There can be no assurance that the Company or its suppliers will be
able to comply with the applicable GMP regulations and other FDA regulatory
requirements. Such failure could have a material adverse effect on the Company's
business, financial condition and results of operations.

An important part of the Company's strategy is to obtain expedited
marketing approval for its B-1 Therapy based upon policy changes in the
regulatory environment broadly referred to as the Clinton-Kessler Cancer
Initiative, announced in March 1996. Significant uncertainty exists as to the
extent to which such initiative will result in accelerated review and approval.
Further, the FDA has not made available comprehensive guidelines with respect to
this initiative, retains considerable discretion to determine eligibility for
accelerated review and approval and is not bound by discussions that an
applicant may have had with FDA staff. Accordingly, the FDA could employ such
discretion to deny eligibility of the B-1 Therapy as a candidate for accelerated
review or to require additional clinical trials or other information before
approving the B-1 Therapy. A determination that the B-1 Therapy is not eligible
for accelerated review or delays and additional expenses associated with
generating a response to any such request for additional trials could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Government Regulation."

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<PAGE> 9

Dependence on Suppliers; Manufacturing and Scale-up Risk. The Company has
no existing capacity or experience with respect to manufacturing products for
large-scale clinical trials or commercial purposes. The Company is supplying the
B-1 Antibody to clinical trial sites from an existing, finite inventory produced
by Coulter Corporation. There can be no assurance that existing supplies of B-1
Antibody are sufficient to meet the Company's clinical trial requirements or
that supplies can be obtained from a third-party supplier on a timely basis, if
at all. To achieve the levels of production necessary to support ongoing
clinical trials and for early commercialization of its B-1 Therapy, the Company
has contracted with a third-party manufacturer, LONZA Biologics plc ("Lonza"),
to produce unlabeled B-1 Antibody for use in clinical trials and intends to
enter into a commercial supply agreement. However, in order to begin using
Lonza-produced material in clinical trials, the Company must seek an FDA
clearance of an Investigational New Drug ("IND") supplement showing that the
Lonza-produced material is biologically equivalent to the material currently in
use in clinical trials. There can be no assurance that the FDA will provide such
clearance in a timely manner, if at all, and that clinical trials will not be
delayed or disrupted as a result of the planned transition to the Lonza-produced
material. Lonza has limited experience producing the B-1 Antibody on a
commercial scale, and there can be no assurance that Lonza will be able to
produce the Company's requirements at commercially reasonable prices or with
acceptable quality.

The Company also has contracted with MDS Nordion Inc. ("Nordion") to
develop a process for radiolabeling the B-1 Antibody with (131)I at a
centralized site. Further, the Company is in negotiations with Nordion to
establish a centralized radiolabeling facility and to supply radiolabeled B-1
Antibody. Radiolabeling of the B-1 Antibody currently is conducted at individual
clinical trial sites, but the Company plans to switch to centrally radiolabeled
antibody from Nordion in mid-1997, for both completion of clinical trials and
commercial supplies. However, before using Nordion-labeled material, an IND
supplement must be cleared by the FDA. There can be no assurance that the FDA
will provide such clearance in a timely manner, if at all, and that clinical
trials will not be delayed or disrupted as a result. Furthermore, if the B-1
Therapy is approved and is successful in the market, Nordion's initial capacity
to radiolabel antibodies would not be sufficient to meet all of the Company's
commercial requirements, and additional capacity would have to be developed.
There can be no assurance that Nordion would be able to complete any such
expansion scale-up in a timely or cost effective manner, if at all, or that the
Company could obtain such capacity from others.

The Company is aware of only a limited number of manufacturers capable of
producing the B-1 Antibody in commercial quantities or radiolabeling the
antibody with (131)I on a commercial scale. Should either of the Company's
existing or planned contractual relationships for production or radiolabeling of
the B-1 Antibody cease or be interrupted, or if its existing suppliers are
unable to meet the Company's requirements for any reason, there can be no
assurance that any additional or alternative third parties could be engaged to
carry out said production or radiolabeling on a timely basis or on commercially
acceptable terms, if at all. To establish and qualify a new facility to
centrally radiolabel antibodies could take as long as two years. Further,
radiolabeled antibody cannot be stockpiled against future shortages due to the
eight-day half-life of the (131)I radioisotope. Accordingly, any change in the
Company's existing contractual relationships with, or interruption in supply
from, its producer of unlabeled antibody or its radiolabeler could affect
adversely the Company's ability to complete its ongoing clinical trials and to
market the B-1 Therapy, if approved. Any such change or interruption would have
a material adverse effect on the Company's business, financial condition and
results of operations.

Third-party manufacturers must comply with GMP regulations prescribed by
the FDA and other standards prescribed by various federal, state and local
regulatory agencies in the United States and any other relevant country. Failure
to comply with these regulations could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"-- Government Regulation; No Assurance of Regulatory Approvals" and
"Business -- Government Regulation."

8
<PAGE> 10

Future Capital Needs; Uncertainty of Additional Funding. The Company's
operations to date have consumed substantial and increasing amounts of cash. The
negative cash flow from operations is expected to continue and to accelerate in
the foreseeable future. The development of the Company's technology and
potential products will require a commitment of substantial funds. The Company
expects that its existing capital resources, including the net proceeds of this
offering and interest thereon, will be adequate to satisfy the requirements of
its current and planned operations through 1998. However, the rate at which the
Company expends its resources is variable, may be accelerated and will depend on
many factors, including the scope and results of preclinical studies and
clinical trials, continued progress of the Company's research and development of
product candidates, the cost, timing and outcome of regulatory approvals, the
expenses of establishing a sales and marketing force, the timing and cost of
establishment or procurement of requisite production, radiolabeling and other
manufacturing capacities, the cost involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims, the acquisition of
technology licenses, the status of competitive products and the availability of
other financing.

The Company will need to raise substantial additional capital to fund its
operations. The Company intends to seek such additional funding through public
or private equity or debt financings from time to time, as market conditions
permit. There can be no assurance that additional financing will be available on
acceptable terms, if at all. If additional funds are raised by issuing equity
securities, substantial dilution to stockholders may result. If adequate funds
are not available, the Company may be required to delay, reduce the scope of, or
eliminate one or more of its research and development programs or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would otherwise seek to develop or commercialize.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Uncertainty of Market Acceptance of the B-1 Therapy. Even if the Company's
product candidates are approved for marketing by the FDA and other regulatory
authorities, there can be no assurance that the Company's products will be
commercially successful. If the Company's most advanced product candidate, the
B-1 Therapy, is approved, it would represent a significant departure from
currently approved methods of treatment for NHL and would require the handling
of radioactive materials. Accordingly, the B-1 Therapy may experience
under-utilization by oncologists and hematologists who are unfamiliar with the
application of the B-1 Therapy in the treatment of NHL. Further, oncologists and
hematologists are not typically licensed to administer radioimmunotherapies such
as the Company's B-1 Therapy and will need to engage a nuclear medicine
physician or receive specialty training to administer the B-1 Therapy. Market
acceptance of the B-1 Therapy also could be affected adversely if recently
enacted regulations of the Nuclear Regulatory Commission are not interpreted in
a manner to permit the B-1 Therapy to be administered on an outpatient basis in
most cases as is currently contemplated by the Company. Furthermore, market
acceptance could be affected adversely because some hospitals may be required to
administer the therapeutic dose of the B-1 Therapy on an inpatient basis under
applicable state or local or individual hospital regulations. As with any new
drug, doctors may be inclined to continue to treat patients with conventional
therapies, in this case chemotherapy. Market acceptance also could be affected
by the availability of third-party reimbursement. Failure of the B-1 Therapy to
achieve significant market acceptance would have a material adverse effect on
the Company's business, financial condition and results of operations. See "--
Uncertainty Related to Health Care Reform and Third-Party Reimbursement,"
"-- Hazardous and Radioactive Materials," and "Business -- Radioactive and Other
Hazardous Materials."

Absence of Commercialization Resources and Experience. The Company intends
to sell its products in the United States through a direct sales force and,
where appropriate, in collaboration with marketing partners, and internationally
through marketing partners. The Company currently does not possess the resources
and experience necessary to commercialize any of its product candidates. If and
when the FDA approves the Company's B-1 Therapy, the Company's ability to market
the product will be contingent upon recruitment, training and deployment of a
sales and marketing force. Development of an effective sales force will require
significant financial resources and time. There can be no

9
<PAGE> 11

assurance that the Company will be able to establish such a sales force in a
timely or cost effective manner, if at all, or that such a sales force will be
capable of generating demand for the Company's B-1 Therapy or other product
candidates. The Company has no arrangements for the international distribution
of its B-1 Therapy, and there can be no assurance that the Company will be able
to enter into any such arrangements in a timely manner or on commercially
favorable terms, if at all. See "Business -- Marketing and Sales."

Dependence Upon Proprietary Technology; Uncertainty of Patents and
Proprietary Technology. The pharmaceutical and biotechnology fields are
characterized by a large number of patent filings. A substantial number of
patents have already been issued to other pharmaceutical and biotechnology
companies. Research has been conducted for many years in the monoclonal antibody
field by pharmaceutical and biotechnology companies and other organizations.
Competitors may have filed applications for or have been issued patents and may
obtain additional patents and proprietary rights related to products or
processes competitive with or similar to those of the Company. Patent
applications are maintained in secrecy for a period after filing. Publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries and the filing of related patent applications. The Company may not
be aware of all of the patents potentially adverse to the Company's interests
that may have been issued to other companies, research or academic institutions,
or others. No assurance can be given that such patents do not exist, have not
been filed, or could not be filed or issued, which contain claims relating to
the Company's technology, products or processes.

To date, no consistent policy has emerged regarding the breadth of claims
allowed in pharmaceutical and biotechnology patents. If patents have been or are
issued to others containing preclusive or conflicting claims and such claims are
determined ultimately to be valid, the Company may be required to obtain
licenses to one or more of such patents or to develop or obtain alternative
technology. The Company is aware of various patents that have been issued to
others that pertain to a portion of the Company's prospective business; however,
the Company believes that it does not infringe any patents that ultimately would
be determined to be valid. There can be no assurance that patents do not exist
in the United States or in other foreign countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to the B-1 Therapy or any of the Company's other product candidates or
programs. Commercialization of monoclonal antibody-based products may require
licensing and/or cross-licensing of one or more patents with other organizations
in the field. There can be no assurance that the licenses that might be required
for the Company's processes or products would be available on commercially
acceptable terms, if at all.

The Company's breach of an existing license or failure to obtain a license
to technology required to commercialize its product candidates may have a
material adverse effect on the Company's business, financial condition and
results of operations. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome could subject the Company to significant
liabilities to third parties and require the Company to license disputed rights
from third parties or to cease using such technology.

The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. The Company protects its proprietary technology and processes, in
part, by confidentiality agreements with its employees, consultants,
collaborators and certain contractors. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets or those of its
collaborators or contractors will not otherwise become known or be discovered
independently by competitors.

10
<PAGE> 12

or in the future will not file applications for, or have not received or in the
future will not receive, patents or obtain additional proprietary rights
relating to products or processes used or proposed to be used by the Company.
Moreover, there is certain subject matter which is patentable in the United
States and not generally patentable outside of the United States. Statutory
differences in patentable subject matter may limit the protection the Company
can obtain on some of its inventions outside of the United States. For example,
methods of treating humans are not patentable in many countries outside of the
United States. These and/or other issues may prevent the Company from obtaining
patent protection outside of the United States which would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Patents and Other Intellectual Property."

History of Operating Losses; Anticipated Future Losses. The Company has a
limited history of operations and has experienced significant losses since
inception. As of September 30, 1996, the Company's accumulated deficit was
approximately $13.8 million. The Company expects to incur significant additional
operating losses over the next several years and expects cumulative losses to
increase substantially due to expanded research and development efforts,
preclinical studies and clinical trials and development of manufacturing,
marketing and sales capabilities. The Company expects that losses will fluctuate
from quarter to quarter and that such fluctuations may be substantial. All of
the Company's product candidates are in development in preclinical studies and
clinical trials, and no revenues have been generated from product sales. To
achieve and sustain profitable operations, the Company, alone or with others,
must develop successfully, obtain regulatory approval for, manufacture,
introduce, market and sell its products. The time frame necessary to achieve
market success is long and uncertain. The Company does not expect to generate
product revenues for at least the next few years. There can be no assurance that
the Company will ever generate sufficient product revenues to become profitable
or to sustain profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Highly Competitive Industry; Risk of Technological Obsolescence. The
pharmaceutical and biotechnology industries are intensely competitive. Any
product candidate developed by the Company would compete with existing drugs and
therapies. There are many pharmaceutical companies, biotechnology companies,
public and private universities and research organizations actively engaged in
research and development of products for the treatment of people with cancer.
Many of these organizations have financial, technical, manufacturing and
marketing resources greater than those of the Company. Several of them may have
developed or are developing therapies that could be used for treatment of the
same diseases targeted by the Company. One competitor known to the Company
currently is conducting Phase III clinical trials of a chimeric antibody
treatment for NHL. If a competing company were to develop or acquire rights to a
more efficacious or safer cancer therapy for treatment of the same diseases
targeted by the Company, or one which offers significantly lower costs of
treatment, the Company's business, financial condition and results of operations
could be materially adversely affected. The Company believes that its product
development programs will be subject to significant competition from companies
utilizing alternative technologies as well as to increasing competition from
companies that develop and apply technologies similar to the Company's
technologies. Other companies may succeed in developing products earlier than
the Company, obtaining approvals for such products from the FDA more rapidly
than the Company or developing products that are safer and more effective than
those under development or proposed to be developed by the Company. There can be
no assurance that research and development by others will not render the
Company's technology or product candidates obsolete or non-competitive or result
in treatments superior to any therapy developed by the Company, or that any
therapy developed by the Company will be preferred to any existing or newly
developed technologies. See "Business -- Competition."

Dependence on Management and Other Key Personnel. The Company is dependent
upon a limited number of key management and technical personnel. The loss of the
services of one or more of such key employees could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company's success will be dependent upon its ability to attract
and retain additional highly qualified sales, management, manufacturing and
research and develop-

11
<PAGE> 13

ment personnel. The Company faces intense competition in its recruiting
activities, and there can be no assurance that the Company will be able to
attract and/or retain qualified personnel.

Exposure to Product Liability. The manufacture and sale of human
therapeutic products involve an inherent risk of product liability claims and
associated adverse publicity. The Company has only limited product liability
insurance for clinical trials and no commercial product liability insurance.
There can be no assurance that the Company will be able to maintain existing
insurance or obtain additional product liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms, if at all. An inability to obtain sufficient insurance
coverage on reasonable terms or to otherwise protect against potential product
liability claims brought against the Company in excess of its insurance
coverage, if any, or a product recall could have a material adverse effect upon
the Company's business, financial condition and results of operations. See
"Business -- Product Liability and Insurance."

Uncertainty Related to Health Care Reform and Third-Party
Reimbursement. Political, economic and regulatory influences are subjecting the
health care industry in the United States to fundamental change. Recent
initiatives to reduce the federal deficit and to reform health care delivery are
increasing cost-containment efforts. The Company anticipates that Congress,
state legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price controls on
pharmaceuticals and other fundamental changes to the health care delivery
system. Any such proposed or actual changes could cause the Company to limit or
eliminate spending on development projects and affect the Company's ultimate
profitability. Legislative debate is expected to continue in the future, and
market forces are expected to drive reductions of health care costs. The Company
cannot predict what impact the adoption of any federal or state health care
reform measures or future private sector reforms may have on its business.

In both domestic and foreign markets, sales of the Company's proposed
products will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations.
Third-party payors 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. The Company's B-1
Therapy, as potentially the first radioimmunotherapy for cancer, faces
particular uncertainties due to the absence of a comparable, approved therapy to
serve as a model for pricing and reimbursement decisions. Further, if the B-1
Therapy is not administered in most cases on an outpatient basis, as is
contemplated currently by the Company, the projected cost of the therapy will be
higher than anticipated. In addition, there can be no assurance that products
can be manufactured on a commercial scale for a cost that will enable the
Company to price its products within reimbursable rates. Consequently, 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. If adequate coverage and reimbursement
rates are not provided by the government and third-party payors for the
Company's products, the market acceptance of these products could be adversely
affected, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Pharmaceutical
Pricing and Reimbursement."

Hazardous and Radioactive Materials. The manufacturing and use of the
Company's B-1 Therapy requires the handling and disposal of (131)I, a
radioactive isotope of iodine. The radiolabeling of the B-1 Antibody currently
is performed by radiopharmacies at the individual clinical trial sites. These
sites must comply with various state and federal regulations regarding the
handling and use of radioactive materials. Violation of these state and federal
regulations by a clinical trial site could delay significantly completion of
such trials. For the continuation of its ongoing clinical trials and for
commercial-scale

12
<PAGE> 14

production, the Company plans to rely on a contract manufacturer, Nordion, to
radiolabel the B-1 Antibody with (131)I, initially at a single location in
Canada. Violations of safety regulations could occur with this manufacturer,
and, therefore, there is a risk of accidental contamination or injury. In the
event of any such noncompliance or accident, the supply of radiolabeled B-1
Antibody for use in clinical trials or commercially could be interrupted, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company also expects to use hazardous chemicals and radioactive
compounds in its ongoing research activities. The Company could be held liable
for any damages that result from such an accident, contamination or injury from
the handling and disposal of these materials, as well as for unexpected remedial
costs and penalties that may result from any violation of applicable
regulations, which could result in a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company may incur substantial costs to comply with environmental regulations.
See "Business -- Radioactive and Other Hazardous Materials."

Control By Officers, Directors and Principal Stockholders. Following
completion of this offering, directors, executive officers and principal
stockholders of the Company will beneficially own approximately 52.1% of the
outstanding shares of the Company's Common Stock. Further, two of the Company's
stockholders, InterWest Partners and Coulter Corporation together with
associated persons, will beneficially own approximately 37.9% of the outstanding
shares of the Company's Common Stock. Accordingly, these stockholders,
individually and as a group, may be able to control the Company and direct its
affairs and business, including any determination with respect to a change in
control of the Company, future issuances of Common Stock or other securities by
the Company, declaration of dividends on the Common Stock and the election of
directors. See "Principal Stockholders."

No Prior Public Market for Common Stock; Potential Volatility of Stock
Price. Prior to this offering, there has been no public market for the
Company's Common Stock, and there can be no assurance that an active trading
market for the Common Stock will develop or continue after this offering. The
initial public offering price will be determined through negotiations between
the Company and the Underwriters. In addition, the securities markets have from
time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. The market
prices of the common stock of many publicly held biotechnology and
pharmaceutical companies have in the past been, and can in the future be
expected to be, especially volatile. Announcements of technological innovations
or new products by the Company or its competitors, release of reports by
securities analysts, developments or disputes concerning patents or proprietary
rights, regulatory developments, changes in regulatory or medical reimbursement
policies, economic and other external factors, as well as period-to-period
fluctuations in the Company's financial results, may have a significant and
adverse impact on the market price of the Common Stock. See "Underwriting."

Potential Adverse Impact of Shares Eligible for Future Sale. Sales of
shares of Common Stock (including shares issued upon the exercise of outstanding
options) in the public market after this offering could adversely affect the
market price of the Common Stock. Such sales also might make it more difficult
for the Company to sell equity securities or equity-related securities in the
future at a time and price that the Company deems appropriate. Upon completion
of this offering, the Company will have outstanding an aggregate of 10,035,604
shares of Common Stock, assuming no exercise of the Underwriters' over-allotment
option and no exercise of options outstanding as of December 6, 1996. Of these
shares, the 2,500,000 shares of Common Stock sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless held by affiliates of the Company as that term is defined in Rule
144 under the Securities Act ("Affiliates"). The remaining 7,535,604 shares of
Common Stock held by existing stockholders are restricted securities as that
term is defined in Rule 144 under 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 Rules 144 or 701, promulgated
under the Securities Act. As a result of agreements not to sell such shares (the

13
<PAGE> 15

"Lock-up Agreements") and the provisions of Rules 144 and 701, additional shares
will be available in the public market as follows: (i) no Restricted Shares will
be eligible for immediate sale on the effective date of this offering; (ii)
2,937,608 Restricted Shares (plus 154,794 shares of Common Stock issuable to
employees and consultants pursuant to stock options that are then vested) will
be eligible for sale upon expiration of Lock-up Agreements 180 days after the
date of this Prospectus; and (iii) the remainder of the Restricted Shares will
be eligible for sale from time to time thereafter upon expiration of their
respective two-year holding periods. However, proposals currently under
consideration by the Securities and Exchange Commission ("SEC") would permit
shares to be sold under Rule 144 upon completion of a one-year holding period.
Upon completion of this offering, the holders of 7,097,994 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradable without restriction under the Securities Act (except for shares
purchased by Affiliates) immediately upon the effectiveness of such
registration.

Dilution. Purchasers of the shares of Common Stock offered hereby will
experience immediate dilution of $8.12 in net tangible book value per share
after deducting the underwriting discounts and estimated offering expenses. Such
investors will experience additional dilution upon the exercise of outstanding
options. See "Dilution."

Adverse Impact of Possible Issuances of Preferred Stock; Anti-Takeover
Effect of Certain Charter and Bylaw Provisions. Upon completion of this
offering, the Board of Directors will have authority to issue up to 3,000,000
shares of Preferred Stock and to fix the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the stockholders. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock could affect adversely the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation. Additionally, the issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of the
Company, may discourage bids for the Common Stock at a premium over the market
price of the Common Stock and may affect adversely the market price of and the
voting and other rights of the holders of the Common Stock. In addition, the
Company's Bylaws provide that special meetings of stockholders may be called
only by the Chairman of the Board of Directors, the Chief Executive Officer or
the Board of Directors pursuant to a resolution approved by a majority of the
Board of Directors. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibits the Company from engaging in a "business combination" 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. These provisions, along
with certain provisions of California law applicable to the Company, could have
the effect of discouraging certain attempts to acquire the Company which could
deprive the Company's stockholders of the opportunity to sell their shares of
Common Stock at prices higher than prevailing market prices. See "Description of
Capital Stock."

Forward-looking Statements. This prospectus contains forward-looking
statements, which may be deemed to include the Company's plans to continue
development of its B-1 Therapy, conduct clinical trials with respect to the B-1
Therapy and other product candidates, seek regulatory approvals, engage
third-party manufacturers to supply its clinical trials and commercial
requirements, establish a sales and marketing capability, evaluate additional
product candidates for subsequent clinical and commercial development and expend
the proceeds of this offering. Actual results could differ materially from those
projected in any forward-looking statements for a variety of reasons, including
those detailed in the other sections of this "Risk Factors" portion of the
Prospectus or elsewhere in this Prospectus.

14
<PAGE> 16

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $13.00 per share are estimated to be $29,560,000 ($34,093,750 if the
Underwriters' over-allotment option is exercised in full).

The Company anticipates that approximately $24 million of the proceeds of
this offering will be used to support the development of its B-1 Therapy,
including clinical trials, manufacturing and initial prelaunch marketing. The
balance of the net proceeds of this offering, including interest earned thereon,
is expected to be used primarily in the Company's other research and development
programs such as its TAP pro-drug program and for working capital and other
general corporate purposes. The Company may also use a portion of the net
proceeds to acquire technologies or products complementary to its business,
although no material expenditures in connection with any such acquisitions
currently are anticipated. Pending application as described above, the Company
intends to invest the net proceeds of this offering in short-term,
investment-grade, interest-bearing securities.

The amounts and timing of the Company's actual expenditure for the purposes
described above will depend upon a number of factors, including: the scope and
results of preclinical studies and clinical trials; continued progress of the
Company's research and development of potential products; the cost, timing and
outcome of regulatory approvals; the expenses of establishing a sales and
marketing force; the timing and cost of establishment or procurement of
requisite production, radiolabeling and other manufacturing capacities; the cost
involved in preparing, filing, prosecuting, maintaining, defending and enforcing
patent claims; the acquisition of technology licenses; the status of competitive
products and the availability of other financing. The Company will require
substantial additional funds to conduct its operations in the future, and there
can be no assurance that such funding will be available on acceptable terms, if
at all. The Company expects that its existing capital resources, including the
net proceeds of this offering and interest thereon, will be adequate to satisfy
the requirements of its current and planned operations through 1998.

DIVIDEND POLICY

The Company has never paid a cash dividend on its capital stock and does
not anticipate paying any cash dividends in the foreseeable future.

15
<PAGE> 17

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1996 (i) on an actual basis (adjusted to reflect the conversion of
all outstanding Preferred Stock of the Company into Common Stock), (ii) on a pro
forma basis to give effect to the issuance of 498,705 shares of Common Stock
upon the assumed cash exercise of certain outstanding warrants for aggregate
proceeds to the Company of approximately $4,488,000 and (iii) as adjusted to
give effect to the sale by the Company of the 2,500,000 shares of Common Stock
offered hereby at an assumed offering price of $13.00 per share and the
application of the estimated proceeds therefrom. This table should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------
PRO FORMA
ACTUAL (1) ACTUAL AS ADJUSTED (2)
---------- --------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Preferred Stock, $0.001 par value, 3,000,000 shares
authorized; no shares issued or outstanding....... $ -- $ -- $ --
Common Stock, $0.001 par value, 30,000,000 shares
authorized; 7,011,563 shares issued and
outstanding actual; 7,510,268 shares issued and
outstanding pro forma actual; 10,010,268 shares
issued and outstanding as adjusted................ 7 8 11
Additional paid-in capital........................... 29,135 33,622 63,179
Net unrealized loss on securities
available-for-sale................................ (24) (24) (24)
Deferred compensation................................ (498) (498) (498)
Deficit accumulated during the development stage..... (13,814) (13,814) (13,814)
-------- --------
Total stockholders' equity........................ 14,806 19,294 48,854
-------- --------
Total capitalization......................... $ 14,806 $ 19,294 $ 48,854
======== ========
</TABLE>

- ---------------
(1) Excludes 548,604 shares reserved for issuance upon exercise of stock options
outstanding at September 30, 1996, at a weighted average exercise price of
$0.62 per share and 498,705 shares issuable upon the assumed cash exercise
of warrants outstanding at the same date at a weighted average exercise
price of $9.00 per share. At September 30, 1996, options to purchase 65,148
shares and warrants to purchase 498,705 shares were immediately exercisable.
At December 6, 1996, the Company had 802,305 shares reserved for issuance
upon exercise of outstanding stock options, at a weighted average price of
$1.38 per share, and 523,371 shares issuable upon exercise of warrants
outstanding at a weighted average price of $9.04 per share. At December 6,
1996, options to purchase 58,897 shares and warrants to purchase 523,371
shares were immediately exercisable, including warrants to purchase 498,705
shares which warrants terminate upon the closing of the offering if not
exercised prior thereto. See "Management -- Equity Incentive Plans" and Note
8 of Notes to Consolidated Financial Statements.

(2) Reflects the sale of 2,500,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $13.00 per share and
the receipt of the estimated proceeds therefrom and includes the issuance of
498,705 shares of Common Stock upon the assumed cash exercise of certain
outstanding warrants for aggregate proceeds to the Company of approximately
$4,488,000.

16
<PAGE> 18

DILUTION

As of September 30, 1996, the Company had a net tangible book value of
approximately $19,282,000 or $2.57 per share of Common Stock (including
approximately $4,488,000 from the assumed cash exercise of warrants to purchase
498,705 shares of Common Stock). Net tangible book value represents the amount
of total tangible assets less total liabilities divided by the number of shares
of Common Stock outstanding. Without taking into account any other changes in
the net tangible book value after September 30, 1996, other than to give effect
to the receipt by the Company of the net proceeds from the sale of the 2,500,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $13.00 per share, the pro forma net tangible book value
of the Company as of September 30, 1996 would have been approximately
$48,842,000 or $4.88 per share. This represents an immediate increase in net
tangible book value of $2.31 per share to existing stockholders and an immediate
dilution of $8.12 per share to new investors. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $13.00
Net tangible book value before the offering....................... $2.57
Increase per share attributable to new investors.................. 2.31
-----
Pro forma net tangible book value per share after the offering...... 4.88
-----
Dilution per share to new investors................................. $ 8.12
=====
</TABLE>

The following table summarizes, on a pro forma basis as of September 30,
1996, the difference between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
TOTAL CASH
SHARES PURCHASED CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 7,510,268 75.0% $33,093,553 50.5% $ 4.41
New investors............ 2,500,000 25.0 32,500,000 49.5 13.00
---------- --- ---------- ---
Total.......... 10,010,268 100.0% $65,593,553 100.0%
========== === ========== ===
</TABLE>

Other than as noted above, the foregoing computations assume the exercise
of no stock options or warrants after September 30, 1996. As of September 30,
1996 options were outstanding to purchase 548,604 shares of Common Stock at a
weighted average exercise price of $0.62 per share. As of December 6, 1996,
options were outstanding to purchase 802,305 shares of Common Stock at a
weighted average exercise price of $1.38 per share and warrants were outstanding
to purchase 523,371 shares of Common Stock at a weighted average exercise price
of $9.04 per share, including warrants to purchase 498,705 shares which warrants
terminate upon the closing of the offering if not exercised prior thereto. See
"Management -- Equity Incentive Plans" and Note 8 of Notes to Consolidated
Financial Statements.

17
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of December 31, 1993,
1994 and 1995 and September 30, 1996 and for each of the two years in the period
ended December 31, 1994, the periods from January 1, 1995 to February 15, 1995
and from inception (February 16, 1995) to December 31, 1995, for the nine months
ended September 30, 1996, and for the period from inception (February 16, 1995)
to September 30, 1996 are derived from the Consolidated Financial Statements of
Coulter Pharmaceutical, Inc. and the Financial Statements of the Antibody
Therapeutics Business Operations of Coulter Corporation that have been audited
by Ernst & Young LLP, independent auditors, which are included elsewhere in this
Prospectus. The statement of operations data for the period from inception
(February 16, 1995) to September 30, 1995 are derived from unaudited financial
statements of the Company included elsewhere herein and the statement of
operations data for the year ended December 31, 1992 are derived from unaudited
financial statements of the Antibody Therapeutics Business Operations of Coulter
Corporation not included herein which, in the opinion of management of the
Company and the management of Coulter Corporation, respectively, reflect all
adjustments, consisting only of normal recurring adjustments, that the Company
and Coulter Corporation consider necessary for a fair presentation of the
results of operations for these periods. The operating results of the nine
months ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the entire year.
<TABLE>
<CAPTION>
FIRST NINE
MONTHS 1995
------------
ANTIBODY
THERAPEUTICS
BUSINESS
FULL YEAR 1995
-----------------------------
ANTIBODY THERAPEUTICS BUSINESS OPERATIONS
OPERATIONS
OF COULTER CORPORATION COMPANY OF COULTER
--------------------------------------------- ------------ CORPORATION
INCEPTION ------------
YEAR ENDED DECEMBER 31, JANUARY 1, (FEBRUARY JANUARY 1,
1995 TO 16, 1995) TO 1995 TO
----------------------------- FEBRUARY 15, DECEMBER 31, FEBRUARY 15,
1992 1993 1994 1995 1995 1995
------- ------- ------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating expenses:
Research and development........ $ 1,574 $ 1,838 $ 2,798 $ 200 $ 2,539 $ 200
General and administrative...... 127 178 288 36 581 36
---- ---- ------ ---- ------ ----
Total operating expenses.... 1,701 2,016 3,086 236 3,120 236
Interest income................. -- -- -- -- 127 --
---- ---- ------ ---- ------ ----
Net loss........................ $(1,701) $(2,016) $(3,086) $ (236) $ (2,993) $ (236)
==== ==== ====== ==== ====== ====
Pro forma net loss per share.... $ (0.44)
======
Shares used in computing pro
forma net loss per share...... 6,798
======

COMPANY
-------------------------------------------------
INCEPTION INCEPTION
(FEBRUARY 16, NINE MONTHS (FEBRUARY 16,
1995) TO ENDED 1995) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1996
------------- ------------- -------------

<S> <<C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating expenses:
Research and development........ $ 1,488 $ 9,896 $ 12,435
General and administrative...... 380 1,453 2,034
------ ------- -------
Total operating expenses.... 1,868 11,349 14,469
Interest income................. 73 528 655
------ ------- -------
Net loss........................ $(1,795) $ (10,821) $ (13,814)
====== ======= =======
Pro forma net loss per share.... $ (1.40)
=======
Shares used in computing pro
forma net loss per share...... 7,736
=======
</TABLE>

<TABLE>
<CAPTION>
ANTIBODY THERAPEUTICS
BUSINESS OPERATIONS OF
COULTER CORPORATION COMPANY
------------------------------ -------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
------------ ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments....... $ -- $ -- $ 3,438 $18,835
Working capital (deficit)............................... (124) (50) 2,878 13,497
Total assets............................................ 109 135 3,628 20,484
Deficit accumulated during the development stage........ -- -- (2,993) (13,814)
Total stockholders' equity.............................. -- -- 2,997 14,806
Coulter Corporation's net investment.................... (15) 85 -- --
</TABLE>

18
<PAGE> 20

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

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. Except for
the historical information contained herein, the discussion in this Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.

OVERVIEW

Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company's first product
candidate, the B-1 Therapy, is based upon the antibody therapeutics program
which originated in the late 1970s at Coulter Corporation. Coulter Corporation
conducted research and development on the potential therapeutic applications of
the B-1 Antibody as part of a broader antibody therapeutics program. To
accelerate the pace of development of the B-1 Therapy and to obtain external
sources of capital for the program, Coulter Corporation decided to create a
separate Company into which it placed its conjugated antibody therapeutics
assets. Thus, in February 1995, Coulter Pharmaceutical was incorporated and
acquired worldwide rights to the B-1 Therapy and related intellectual property,
know-how and other assets from Coulter Corporation.

To date, the Company has devoted substantially all of its resources to its
research and development programs. No revenues have been generated from product
sales, and products resulting from the Company's research and development
efforts, if any, are not expected to be available commercially for at least the
next few years. The Company has a limited history of operations and has
experienced significant operating losses to date. The Company expects to incur
significant additional operating losses over the next several years and expects
cumulative losses to increase substantially due to expanded research and
development efforts, preclinical studies and clinical trials and development of
manufacturing, marketing and sales capabilities. The Company expects that losses
will fluctuate from quarter to quarter and that such fluctuations may be
substantial. There can be no assurance that the Company will successfully
develop, manufacture and commercialize its products or ever achieve or sustain
product revenues or profitability. As of September 30, 1996, the Company's
accumulated deficit was approximately $13.8 million.

RESULTS OF OPERATIONS

The following table consists of operating data for the years ended December
1993 and 1994 for the Antibody Therapeutics Business Operations of Coulter
Corporation. The table combines data for the Antibody Therapeutics Business
Operations of Coulter Corporation (for the period January 1, 1995 to February
15, 1995) and the Company (for the period from February 16, 1995 to December 31,
1995) in order to facilitate management's discussion of financial results.
Certain costs and expenses presented in the statements of operations of the
Antibody Therapeutics Business Operations of Coulter Corporation represent
allocations and Coulter Corporation's management's estimates. As a result, the
statements of operations presented for periods prior to February 16, 1995 are
not strictly comparable to those of subsequent periods and may not be indicative
of the results of operations that would have been achieved had the Antibody
Therapeutics Business Operations of Coulter Corporation operated as a
non-affiliated entity during such period.

19
<PAGE> 21

<TABLE>
<CAPTION>
ANTIBODY THERAPEUTICS
BUSINESS OPERATIONS OF
COULTER CORPORATION COMBINED COMPANY
-------------------------- -------------------------------- -----------------
YEAR ENDED YEAR ENDED YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development... $ 1,838 $ 2,798 $ 2,739 $ 1,688 $ 9,896
General and administrative... 178 288 617 416 1,453
----- ------- ------- ------- --------
Total operating expenses... 2,016 3,086 3,356 2,104 11,349
Interest income............ -- -- 127 73 528
----- ------- ------- ------- --------
Net loss................... $ (2,016) $ (3,086) $ (3,229) $ (2,031) $ (10,821)
===== ======= ======= ======= ========
</TABLE>

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 AND COMBINED NINE MONTHS
ENDED SEPTEMBER 30, 1995

Operating Expenses. Research and development expenses were $9.9 million
for the nine months ended September 30, 1996, compared to $1.7 million for the
combined nine month period ended September 30, 1995, an increase of $8.2
million. This increase was due primarily to increases in staffing and
expenditures associated with the development of the B-1 Therapy, including costs
of clinical trials and manufacturing expenses. These manufacturing expenses
included certain expenses associated with scaled-up production of monoclonal
antibodies and the establishment of a centralized radiolabeling capability. The
Company expects its research and development expenses to grow during the
remainder of 1996 and in 1997, reflecting anticipated increased costs related to
additions to staffing, preclinical studies, clinical trials and manufacturing.

General and administrative expenses were $1.5 million for the nine months
ended September 30, 1996, compared to $0.4 million for the combined nine month
period ended September 30, 1995, an increase of $1.1 million. This increase was
incurred to support the Company's facilities expansion, increased research and
development efforts, and related legal and patent activities. The Company
expects its general and administrative expenses to continue to increase during
the remainder of 1996 and in 1997, in support of its increased research and
development, patent and corporate development activities, as well as increasing
commercialization efforts in anticipation of potential product sales.

Interest Income. Interest income was $0.5 million for the nine months
ended September 30, 1996, compared to $0.1 million for the combined nine month
period ended September 30, 1995, an increase of $0.4 million. This increase was
due to higher average cash, cash equivalent and short-term investment balances
as a result of the Company's sale of Preferred Stock in August 1995 and April
1996.

COMPARISON OF COMBINED YEAR ENDED DECEMBER 31, 1995 AND THE ANTIBODY
THERAPEUTICS BUSINESS OPERATIONS OF COULTER CORPORATION FOR THE YEARS ENDED
DECEMBER 31, 1994 AND 1993

Operating Expenses. Research and development expenses were $2.7 million
for the combined year ended December 31, 1995, compared to $2.8 million and $1.8
million for the years ended December 31, 1994 and 1993, respectively. The $0.1
million decrease in expenses from the year ended December 31, 1994 to the
combined year ended December 31, 1995 was due primarily to the net effect of
decreased expenses resulting from the elimination of payments to the Dana-Farber
Cancer Institute for prepaid royalties and sponsored research, primarily offset
by increases in staffing and in expenditures associated with the development of
the B-1 Therapy, including costs of clinical trials and manufacturing expenses.
The $1.0 million increase in expenses from 1993 to 1994 was due primarily to
increased clinical development costs associated with the B-1 Therapy.

General and administrative expenses were $0.6 million for the combined year
ended December 31, 1995, compared to $0.3 million and $0.2 million for the years
ended December 31, 1994 and 1993, respectively. The $0.3 million increase in
expenses for the combined year ended December 31, 1995

20
<PAGE> 22

from the year ended December 31, 1994 primarily represents expenses associated
with the formation of the Company and investment in infrastructure. The $0.1
million increase in expenses from 1993 to 1994 was incurred to support
increasing research and development activities of Coulter Corporation's antibody
therapeutics program.

Interest Income. The Company first reported interest income of $0.1
million for the combined year ended December 31, 1995, which resulted from
investment of the net proceeds from the sale of the Company's Preferred Stock in
1995.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations primarily
through private placements of equity securities totaling $28.4 million through
September 30, 1996. In December 1996, the Company entered into a $3.8 million
equipment financing agreement, all of which is currently available.

Cash, cash equivalents and short-term investments totaled $18.8 million at
September 30, 1996. The negative cash flow from operations is expected to
continue and to accelerate in the foreseeable future. The Company expects to
incur substantial and increasing research and development expenses, including
expenses related to additions to personnel, preclinical studies, clinical
trials, manufacturing and commercialization efforts. The Company will need to
raise substantial additional capital to fund its operations. The Company intends
to seek such additional funding through public or private equity or debt
financings from time to time, as market conditions permit. There can be no
assurance that additional financing will be available on acceptable terms, if at
all. If adequate funds are not available, the Company may be required to delay,
reduce the scope of, or eliminate one or more of its research and development
programs or obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company would otherwise
seek to develop or commercialize.

Net cash used in operations was $6.3 million for the nine months ended
September 30, 1996, compared to $1.4 million for the combined nine month period
ended September 30, 1995. This increase is primarily the net result of the
increased net loss for the period ended September 30, 1996, partially offset by
an increase in accrued liabilities. The Company's capital expenditures increased
to $0.8 million for the nine months ended September 30, 1996 from $0.1 million
for the combined nine month period ended September 30, 1995, primarily
representing investment in equipment associated with the centralized
radiolabeling capability. Net cash provided by financing activities increased to
$22.6 million for the nine months ended September 30, 1996 from $6.1 million for
the combined nine month period ended September 30, 1995, resulting from the sale
of the Company's Preferred Stock in April 1996.

The Company expects that its existing capital resources, including the net
proceeds of this offering and interest thereon, will be adequate to satisfy the
requirements of its current and planned operations through 1998. The Company's
future capital requirements will depend on a number of factors, including: the
scope and results of preclinical studies and clinical trials; continued progress
of the Company's research and development of potential products; the cost,
timing and outcome of regulatory approvals; the expenses of establishing a sales
and marketing force; the timing and cost of establishment or procurement of
requisite production, radiolabeling and other capacities; the cost involved in
preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims; the need to acquire licenses to new technology; the status of
competitive products; and the availability of other financing.

FOURTH QUARTER 1996 RESULTS

Research and development expenses increased to $3.8 million for the three
months ended December 31, 1996 compared to research and development expenses of
$1.1 million for the three months ended December 31, 1995. General and
Administrative expenses increased to $1.0 million for the three months ended
December 31, 1996 compared to $0.2 million for the three months ended December
31, 1995. These increases in expenses reflect the continued impact of the
factors discussed

21
<PAGE> 23

in "Results of Operations -- Comparison of Nine Months Ended September 30, 1996
and Combined Nine Months Ended September 30, 1995." Net loss for the three
months ended December 31, 1996 was $4.5 million compared to a net loss of $1.2
million for the three months ended December 31, 1995.

BUSINESS

OVERVIEW

Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company currently is
developing a family of cancer therapeutics based upon two platform technologies
(i.e., the technologies upon which it intends to base product development):
conjugated antibodies and tumor-activated peptide pro-drugs. The Company's most
advanced product candidate, the "B-1 Therapy," consists of a monoclonal antibody
conjugated with a radioisotope. In a Phase I/II clinical trial of the B-1
Therapy, 40 patients with low-grade or transformed low-grade non-Hodgkin's
lymphoma who had relapsed from previous chemotherapy regimens achieved an 82%
overall response rate and a 45% complete response rate. The Company has
commenced a pivotal Phase II/III clinical trial for the treatment of NHL in
low-grade and transformed low-grade patients refractory to chemotherapy. The
Company intends to file for U.S. Food and Drug Administration marketing approval
of its B-1 Therapy for this indication in the second half of 1998. The Company
believes that the B-1 Therapy, if successfully developed, could become the first
radioimmunotherapy approved in the United States for the treatment of people
with cancer. The Company has commenced and plans additional clinical trials to
broaden the label indication of the B-1 Therapy. The Company's TAP pro-drug
program is designed to broaden significantly the therapeutic windows of
conventional chemotherapies. The Company currently is developing a pro-drug
version of doxorubicin to treat certain solid tumor cancers with the objective
of commencing clinical trials in early 1998.

The Company was incorporated under the laws of Delaware in February 1995.
The Company's conjugated antibody program is based upon the antibody
therapeutics program which originated in the late 1970s at Coulter Corporation,
a recognized leader in the field of hematology. Upon its formation in February
1995, the Company acquired worldwide rights to the B-1 Therapy and related
intellectual property, know-how and other assets from Coulter Corporation.

BACKGROUND

Cancer: The Disease and Its Treatment

Cancer afflicts millions of people worldwide. It is currently the second
leading cause of death in the United States and was projected to account for
more than 550,000 deaths in 1996 alone. Some forty percent of Americans are
expected to develop cancer and, despite noteworthy success in the treatment of
some cancers, half of these cancer patients will die from the disease.

Cancer is a family of more than one hundred diseases that can be
categorized into two broad groups: (i) hematologic or blood-borne malignancies
(e.g., lymphomas and leukemias) and (ii) solid tumor cancers (e.g., lung,
prostate, breast and colon cancers). Both groups are generally characterized by
a breakdown of the cellular mechanisms that regulate cell growth and cell death
("apoptosis") in normal tissues.

Blood-borne cancers involve a disruption of the developmental processes of
blood cell formation, preventing these cells from functioning normally in the
blood and lymph systems. Death from blood-borne cancers ultimately is caused by
infection, organ failure or bleeding. While chemotherapy is the primary
treatment for blood-borne malignancies, many such malignancies are
radiosensitive and some localized lymphomas can be treated with radiation
therapy. Nonetheless, radiation therapy cannot be used in the treatment of most
blood-borne malignancies because the levels of radiation necessary to destroy
diseases that are widely disseminated within the body would result in severe
damage to the bone marrow of the patient, leading to life-threatening
suppression of the immune system, and other serious side effects.

22
<PAGE> 24

In solid tumor cancers, malignant tumors invade and disrupt nearby tissues
and can also spread throughout the body or "metastasize." The impact of these
tumors on vital organs such as the lungs and the liver frequently leads to
death. Surgery is used to remove solid tumors that are accessible to the surgeon
and can be effective if the cancer has not metastasized. Radiation therapy also
can be employed to irradiate a solid tumor and surrounding tissues and is a
first-line therapy for inoperable tumors, but side effects are a limiting factor
in treatment. Radiation therapy is used frequently in conjunction with surgery
either to reduce the tumor mass prior to surgery or to destroy tumor cells that
may remain at the tumor site after surgery. However, radiation therapy cannot
assure that all tumor cells will be destroyed and has only limited utility for
treating widespread metastases. While surgery and radiation therapy are the
primary treatments for solid tumors, chemotherapy and hormonal treatments often
are used as adjunctive therapies and also are used as primary therapies for
inoperable or metastatic cancers.

Chemotherapy, which typically involves the intravenous administration of
drugs designed to destroy malignant cells, is used for the treatment of both
solid tumors and blood-borne malignancies. Chemotherapeutic drugs generally
interfere with cell division and are therefore more toxic to rapidly dividing
cancer cells. Since cancer cells can often survive the effect of a single drug,
several different drugs usually are given in a combination therapy designed to
target overlapping mechanisms of cellular metabolism to overwhelm the ability of
cancer cells to develop resistance to chemotherapy. Combination chemotherapy is
used widely as first-line therapy for leukemias and lymphomas and has had
considerable success in the treatment of some forms of these cancers.
Nevertheless, partial and even complete remissions obtained through chemotherapy
often are not durable, and the cancer may reappear and/or resume its progression
within a few months or years of treatment. The relapsed patient's response
typically becomes shorter and shorter with each successive treatment regimen as
the cancer becomes resistant to the chemotherapy. Eventually, patients may
become "refractory" to chemotherapy, meaning that the length of their response,
if any, to treatment is so brief as to lead to the conclusion that further
chemotherapy regimens would be of little or no benefit.

Chemotherapeutic drugs are not sufficiently specific to cancer cells to
avoid affecting normal cells, especially those that are growing rapidly. As a
result, patients often experience debilitating side effects such as nausea,
vomiting, hair loss, anemia and fatigue, as well as life-threatening side
effects such as immune system suppression. Such side effects can limit the
effectiveness of therapy because the clinician must avoid exceeding the maximum
dose of drug that the patient can tolerate. Since dosages must be limited to
avoid unacceptable side effects, it may not be possible to administer
sufficiently high doses of chemotherapeutic drugs to overcome the natural
ability of cancer cells to become resistant. A number of chemotherapeutic agents
originally thought to have promise as cancer drugs have failed in the clinic
because the minimum effective dose exceeded the maximum tolerable dose. Ideally,
a chemotherapeutic agent would have a minimum effective dose well below the
maximum tolerable dose, thereby providing physicians with a wide "therapeutic
window" or a range of doses within which all patients could be treated
effectively.

In cases of certain severe blood-borne malignancies and metastatic solid
tumor cancers, bone marrow transplants ("BMT") may be performed to treat
patients who typically have exhausted all other treatment options. Transplants
generally are performed in connection with regimens of aggressive chemotherapy
and/or radiation therapy. While techniques are improving, BMTs are associated
with significant mortality and high rates of morbidity and remain a very
expensive alternative.

Emerging Methods of Treatment

Scientific progress in the elucidation of the underlying molecular biology
of cancer in recent years has yielded a number of promising treatment
approaches. These approaches generally are designed to enhance the specificity
and potency of cancer therapeutics, to improve overall efficacy and to reduce
side effects. The Company believes that two of the most promising of these
approaches are (i) monoclonal antibodies that bind to targeted cells to
stimulate the body's immune system and/or to

23
<PAGE> 25

deliver cytotoxic agents to destroy malignant cells and (ii) modifications of
conventional chemotherapeutic drugs and drug formulations to improve efficacy by
expanding their therapeutic windows.

Monoclonal Antibodies

The human immune system is composed of specialized cells, including B-cells
and T-cells, that function in the recognition, destruction and elimination of
disease-causing foreign substances and of virally infected or malignant cells.
Human antibodies, which are produced by the B-cells, play a vital role in the
proper functioning of the immune system. They have predetermined functions based
primarily upon their ability to recognize specific antigens, which are molecular
structures on the surface of disease-causing substances or diseased cells. Each
antigen serves as a binding site for the antibody specific to that antigen, and
each disease-causing substance or diseased cell can be identified by its
antigens.

The ability of specific antibodies to bind to specific antigens that are
expressed on the surface of targeted cells, and to trigger an immune system
attack on those cells, provides the theoretical basis for the development of
cancer immunotherapeutics. In the 1970s, researchers discovered techniques to
produce unlimited supplies of identical murine (mouse-derived) antibodies,
referred to as monoclonal antibodies, by cloning antibody producing cells that
were derived from hybridization of a single B-cell. These techniques provided
researchers with the tools to identify and study specific antigens and to
produce potential therapeutics. In principle, once an antigen expressed by
malignant cells has been identified, a monoclonal antibody specific to that
antigen can be created. If an antibody could be produced that binds to an
antigen expressed exclusively by human cancer cells, the antibody would be
specific to only those cells. As a result, the use of such a monoclonal antibody
as a therapeutic would have few, if any, side effects. However, the development
of such a therapy has proven to be more problematic than originally hoped.
Immunotherapies based solely upon monoclonal antibodies have had only limited
clinical effectiveness, particularly in solid tumors where the uneven supply of
blood throughout such tumors prevents adequate exposure of monoclonal antibodies
to malignant cells.

The effectiveness of a particular monoclonal antibody in the treatment of
cancer fundamentally is linked to the characteristics of the antigen to which it
binds. For example, while researchers have identified numerous antigens on
cancer cells that can be recognized by monoclonal antibodies, most of these
antigens are also expressed to some degree by other types of cells. An antibody
to such an antigen may not be sufficiently specific to the cancer cells to avoid
or minimize unintended side effects caused by damage to normal cells. Moreover,
the behavior of antigens following binding with an antibody is quite variable:
the bound antibody-antigen complex can remain on the cell surface, can be
internalized into the cell or can be released from the cell surface. Thus, the
identification of suitable antigens to serve as targets for therapeutic
monoclonal antibodies must account for these and other complexities.

Once a suitable antigen has been identified, researchers have found that
different antibodies binding to different sites on the antigen may not have the
same biological activity, introducing another element of variability. Antibodies
also differ in the degree to which they stimulate an immune system response and
in the extent to which they have other effects on the cell. Even the most
effective antibodies have limited biological activity. In addition, research
conducted since the late 1970s has revealed the importance of selecting the
proper type of antibody for use in the intended therapy. Murine antibodies are
appropriate in treatments involving a single dose or other short treatment
regimen where it is beneficial that the antibodies, together with any
therapeutic conjugate, are metabolized and cleared from the body fairly quickly.
Chimerized or humanized antibodies are desirable for multi-dose or chronic
treatment regimens as they reduce the risk of a human immune response to the
antibodies themselves. While these manipulations of the antibodies have
permitted more extended therapeutic regimens in some circumstances, they do not
overcome the inherent limitations in the biological activity of the underlying
antibodies. Thus, despite early expectations, no monoclonal antibody has yet
been shown to be effective as a stand-alone, first-line therapy in the treatment
of cancer.

24
<PAGE> 26

Researchers have attempted to increase the effectiveness of antibodies by
attaching radioisotopes or other cytotoxic agents for use in
"radioimmunotherapy" or "chemoimmunotherapy," respectively. By using an antibody
to deliver a radioisotope or other cytotoxic agent to the targeted cells, the
effect of the radiation or cytotoxic agent can be concentrated in the immediate
vicinity of malignant cells. Development of effective radioimmunotherapies,
however, presents an additional set of challenges, including the need to select
an appropriate radioisotope for the intended therapy, to develop a reliable
means of linking the radioisotope to the antibody and to devise a therapeutic
protocol that optimizes therapeutic effect while minimizing undesirable side
effects. The development of effective chemoimmunotherapies presents similar
challenges.

Enhancements of Conventional Chemotherapies

A number of organizations have explored methods of improving the delivery
of cytotoxic drugs to tumor cells, with the objective of expanding the
therapeutic window for these drugs in the treatment of cancer. Approaches that
have been commercialized include encapsulation of the drug in a liposome to
regulate the rate at which it is released and impregnation of an implantable
matrix with the drug to enable its delivery locally over time as the matrix
dissolves. Sustained release of cytotoxic drugs using liposomal formulations has
modestly enhanced the therapeutic window for these compounds, but instability of
the formulations and accumulations in the skin have produced undesirable side
effects. Surgical implantation of a matrix is limited inherently to the
treatment of localized tumor masses and is not applicable to blood-borne or
metastatic cancers.

Another approach, the development of pro-drugs, involves the chemical
modification of cytotoxic drugs to render them inactive until they are delivered
to, or into the proximity of, targeted cancer cells. The pro-drug is transformed
into its active form only in the presence of enzymes or other chemicals produced
by the tumor cells. The preferential activation of a pro-drug in the tumor
milieu increases its lethal effect on tumor cells while limiting side effects to
non-malignant tissues. Pro-drug versions of cytotoxic drugs offer the potential
to broaden significantly the therapeutic windows of such drugs beyond that which
can be achieved using existing approaches such as liposomal formulations.
Challenges that have constrained the development of effective pro-drugs to date
have included the inability to construct or identify suitable tumor-specific
activation mechanisms and difficulties in designing pro-drugs that will have
adequate stability in circulation.

COULTER PHARMACEUTICAL'S APPROACH

Coulter Pharmaceutical is developing a family of cancer therapeutics to
address the shortcomings of current therapies based upon two platform
technologies: (i) conjugated antibodies (primarily radioimmunotherapies) and
(ii) tumor-activated peptide pro-drugs.

The Company is developing conjugated antibody therapies to overcome the
inherent limitations of monoclonal antibodies when used as stand-alone
therapeutics and to provide advantages over current chemotherapy and radiation
therapy treatments. The Company believes that the B-1 Therapy, its first product
candidate, incorporates each of the principle attributes of an effective
radioimmunotherapy for the treatment of NHL: (i) an antigen specific to B-cells,
(ii) a therapeutically active monoclonal antibody, (iii) the radioisotope
appropriate for the disease profile and (iv) an optimized therapeutic protocol.
In a Phase I/II clinical trial conducted at the University of Michigan Medical
Center, 40 patients with low-grade and transformed low-grade NHL, who on average
had failed more than three prior treatment regimens with chemotherapy, achieved
an 82% overall response rate and a 45% complete response rate. The B-1 Therapy
is currently the subject of a pivotal Phase II/III trial for the treatment of
low-grade and transformed low-grade NHL patients refractory to chemotherapy as
its initial indication. To broaden this initial label indication, the Company
currently is planning to commence a Phase III/IV "post-approval" clinical trial
in patients in first or second relapse and also has commenced a Phase II
clinical trial of its B-1 Therapy in patients newly diagnosed with low-grade
NHL. The Company believes that this Phase II trial is the first clinical trial
of a radioimmunotherapy as

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<PAGE> 27

a stand-alone, first-line treatment for people with cancer. See " -- Clinical
Results and Development Plan."

The Company believes that radioimmunotherapies will emerge as important
treatments for blood-borne cancers due to the radiosensitivity of these
malignancies and the ready accessibility of the blood and lymph systems to
monoclonal antibodies. Radioimmunotherapy also may become an important
adjunctive therapy for the treatment of certain solid tumor cancers following
surgery, radiation therapy or chemotherapy, where it may be useful in
eliminating circulating and other undetected malignant cells missed by primary
therapies. In the future, the Company intends to use its expertise in conjugated
antibodies to expand beyond radioimmunotherapy to develop effective
chemoimmunotherapies for the treatment of certain cancers.

The Company's second technology platform, its TAP pro-drug technology, has
the potential to broaden significantly the therapeutic windows of conventional
chemotherapies based on the Company's understanding of biochemical mechanisms
involved in metastasis and the identification of a potential means for
exploiting these mechanisms. TAP pro-drug versions of existing cytotoxic drugs
are designed to be activated preferentially in the proximity of metastatic
cancer cells, yet stable in circulation and in normal tissues. Accordingly,
relatively larger quantities of cytotoxic agents are expected to reach and enter
malignant cells as opposed to normal cells, which could permit a significant
increase in maximum tolerated dosages, potentially overcoming drug resistance in
cancer cells. The Company also believes that cytotoxic agents currently
considered too toxic to be used in their unmodified forms may be suitable
candidates to become TAP pro-drugs.

COULTER PHARMACEUTICAL'S STRATEGY

The Company's goal is to develop and commercialize novel drugs and drug
therapies for the treatment of people with cancer based on selected insights
from the emerging understanding of the molecular biology of malignant cells. The
Company's conjugated antibody program is based upon the antibody therapeutics
program which originated in the late 1970s at Coulter Corporation, a recognized
leader in the field of hematology. Upon its formation, Coulter Pharmaceutical
obtained worldwide rights to the B-1 Therapy and related intellectual property,
as well as a significant body of expertise pertaining to the selection and
development of suitable antibodies and appropriate radioisotopes (and other
cytotoxic agents) and methods for devising optimized therapies. The Company's
TAP pro-drug program is based upon technology that has been under development at
Catholique Universite de Louvain, Belgium, since 1986 and which was exclusively
licensed to the Company in 1996. Based on this foundation, the Company has
established a strategy comprised of the following primary elements:

Pursue Expedited Initial Approval of the B-1 Therapy. The Company intends
to seek expedited FDA marketing approval for its B-1 Therapy for the treatment
of low-grade and transformed low-grade NHL in patients who are refractory to
chemotherapy, while simultaneously pursuing studies to broaden the initial label
indication. The recently commenced pivotal Phase II/III clinical trial of the
B-1 Therapy has been designed to comply with the guidelines of the
Clinton-Kessler Cancer Initiative, which is intended to accelerate the testing,
review and approval of therapies for patients suffering from life-threatening or
disabling cancers who have limited treatment options. Based on this initiative
and on guidance from FDA staff, the Company is focusing on chemotherapy
refractory patients in this pivotal Phase II/III clinical trial. The trial will
include 60 patients and a post-treatment follow-up period of six months. The
Company intends to file for FDA marketing approval for this indication in the
second half of 1998. The Company also intends to seek approval for other NHL
indications and, accordingly, is currently planning to commence a Phase III/IV
"post-approval" clinical trial during the second half of 1997 in patients with
low-grade or transformed low-grade NHL in first or second relapse. The Company
also has commenced a Phase II clinical trial of the B-1 Therapy as a
stand-alone, first-line treatment for patients newly diagnosed with low-grade
NHL.

Establish Sales and Marketing Capability. The Company intends to market
and sell its products in the United States through a direct sales force and,
where appropriate, in collaboration with marketing

26
<PAGE> 28

partners. This strategy is intended to enable the Company to establish a
commercial presence in the cancer therapeutics market with its B-1 Therapy, if
approved, and to create the capability to sell other products that it may
develop or in-license. The Company believes that an established sales and
marketing capability will enable it to compete effectively for opportunities to
license or distribute later-stage product candidates and even approved products.
Internationally, the Company intends to distribute its products through
marketing partners.

Leverage Existing Technology Platforms. The Company intends to develop
additional products based on the lead compounds being generated in its TAP
pro-drug program and by leveraging its expertise in conjugated antibodies to
develop other immunotherapies. In its TAP pro-drug program, the Company
currently is engaged in preclinical development of Super-Leu-Dox, a pro-drug
version of doxorubicin, with the objective of commencing clinical trials in
early 1998. The Company also intends to apply its TAP pro-drug technology to
other classes of cytotoxic drugs, including the vinca alkaloids, to broaden
significantly the therapeutic windows of such agents. The Company is evaluating
potential conjugated antibody therapies for the treatment of other blood-borne
malignancies and selected solid tumor cancers.

Leverage Development Expertise. The Company believes that it has built
substantial product development capabilities and expertise in the cancer field
due in part to the advanced stage of the B-1 Therapy program at the time that it
was obtained from Coulter Corporation. The Company believes it can leverage this
development expertise to accelerate the development of other products in the
cancer therapeutics field. The Company intends to pursue other product
candidates derived from sponsored research or available for in-licensing in both
blood-borne malignancies and solid tumor cancers, particularly in areas that may
be complementary to its existing technology platforms.

Utilize Contract Manufacturers. The Company intends to manufacture its
commercial products through contract manufacturers. This strategy is expected to
(i) accelerate the scale-up of manufacturing processes to commercial scale, (ii)
reduce initial capital investment, (iii) result in competitive manufacturing
costs and (iv) provide access to a wide range of manufacturing technologies.

B-1 RADIOIMMUNOTHERAPY FOR NON-HODGKIN'S LYMPHOMA

The Company's first product candidate, the B-1 Therapy, is in clinical
trials for the treatment of NHL. The Company believes that the B-1 Therapy, if
successfully developed, could become the first radioimmunotherapy approved in
the United States for the treatment of people with cancer.

Non-Hodgkin's Lymphoma and Its Current Treatment

Non-Hodgkin's lymphomas are blood-borne cancers of the immune system, all
sharing the common feature of a proliferation of malignant B-cells. According to
statistics from the National Cancer Institute, approximately 270,000 people are
afflicted with NHL in the United States. More than 52,000 new cases were
expected to be diagnosed in 1996. NHL is currently the sixth leading cause of
death among cancers in the United States and has the second fastest growing
mortality rate.

NHL is categorized by histology as either low-, intermediate- or high-grade
disease. These classifications differ significantly with respect to the speed of
disease progression, the pattern of response to and relapse after conventional
chemotherapy and the average life expectancy. In the United States, the Company
estimates that approximately 140,000 patients have low-grade or transformed
low-grade, 100,000 have intermediate-grade and 30,000 have high-grade NHL.
Initially, the Company is pursuing clinical development of its B-1 Therapy for
the treatment of patients with low-grade and transformed low-grade NHL. Patients
with low-grade NHL have a fairly long life expectancy from the time of diagnosis
with a median survival of more than six years. While patients with low-grade and
transformed low-grade NHL can often achieve one or more remissions with
chemotherapy, eventually these patients relapse. Relapsed patients are more
difficult to treat as remissions are harder to achieve and, if achieved, last
for shorter periods of time as the disease becomes more resistant to
chemotherapy and/or transforms to an intermediate- or high-grade histology.
Patients ultimately die

27
<PAGE> 29

from the disease or from complications of treatment. Intermediate- and
high-grade NHL are more rapidly growing forms of the disease. However,
approximately one-half of all intermediate- and high-grade cases can be treated
effectively with conventional chemotherapy.

Description of the B-1 Therapy

The Company's B-1 Therapy consists of a radioisotope, (131)I, combined
with a monoclonal antibody that recognizes and binds to the CD20 antigen, an
antigen commonly expressed on the surface of B-cells primarily during that stage
of their life cycle when NHL arises. The B-1 Therapy is administered to patients
in a proprietary therapeutic protocol consisting of a single, two-dose regimen.
The Company believes that the potential benefits of its B-1 Therapy result from
the following four constituent elements:

Proprietary Protocol

The B-1 Therapy is administered intravenously in a single, two-dose regimen
consisting of an imaging dose, three gamma camera scans and a therapeutic dose.
The proprietary protocol is flexible: the timing of the gamma camera scans and
of the therapeutic dose can be adjusted to some extent to accommodate the
schedules of clinicians and patients. The chart below depicts an example of the
B-1 Therapy protocol as proposed for use in the Company's current Phase II/III
pivotal trial. The imaging dose consists of 50 mg of B-1 Antibody trace-labeled
with 5 millicuries ("mCi") of (131)I. Immediately after the imaging dose, the
patient is scanned with a gamma camera to provide an image of the initial
distribution of radiolabeled antibody in the patient's body. The patient returns
for additional gamma camera scans on the third and eighth days of the therapy to
show how much of the radiolabeled antibody is bound to targeted cells and how
much has been eliminated from the body at each point in time. This information
is used to calculate the correct therapeutic dose to achieve a total body
radiation of 75 centigray ("cGy"). The amount of radiolabeled antibody needed to
achieve this optimal radiation level ranges from approximately 50 to 180 mCi of
(131)I due to wide patient-to-patient variability in the rates at which the
antibody is eliminated. Both the imaging dose and the therapeutic dose
immediately are preceded by a 450 mg dose of unlabeled B-1 Antibody to improve
the targeting of malignant B-cells by the radiolabeled B-1 Antibody. These
pre-doses of unlabeled B-1 Antibody serve to protect the spleen, liver and other
vital organs from excessive radiation exposure by binding to some of the CD20
antigens on circulating B-cells which naturally accumulate in these organs.
Additionally, the patient takes non-radioactive iodine drops orally during the
course of the therapy to prevent uptake of (131)I into the thyroid gland.

[DIAGRAM OF STEPS OF PROPRIETARY PROTOCOL]

Relying upon the imaging properties of (131)I to account for critical
patient-to-patient variability in the rate at which the antibody is cleared
makes it possible to deliver predictably a total body radiation dose that has
been determined to maximize therapeutic benefit with manageable side effects and
without the need for bone marrow rescue. Because the B-1 Therapy is administered
in a single, two-dose regimen and is well tolerated, it is expected to require
relatively little patient follow-up and

28
<PAGE> 30

physician intervention. In contrast, chemotherapy requires administration of
several cytotoxic agents in repeated cycles of therapy over a six- to
eight-month period during which the patient must be monitored carefully and/or
treated for side effects. Although patients to date have been kept in the
hospital to monitor radiation levels for up to three days following the
therapeutic dose, under recently enacted regulations of the Nuclear Regulatory
Commission, the Company believes that the B-1 Therapy can be administered
primarily on an outpatient basis. However, some hospitals may be required to
administer the therapeutic dose on an inpatient basis under their own or under
applicable state or local regulations. See "-- Radioactive and Other Hazardous
Materials."

CD20 Antigen

The CD20 antigen is a highly selective cell surface marker found on
B-cells: expression of the CD20 antigen is limited to B-cells, is found on 95%
of such cells and occurs on B-cells primarily during that stage of their life
cycle when NHL arises. The CD20 antigen is not expressed by stem cells, B-cell
progenitor cells or plasma cells; thus, these cells are not targeted by the B-1
Therapy. As a result, while the B-1 Therapy targets and destroys both normal and
malignant B-cells, unaffected plasma cells continue to function in the immune
system and B-cell populations can be regenerated after therapy by unaffected
B-cell progenitor cells.

[DIAGRAM OF LIFE-CYCLE OF A B-CELL]

In addition, the CD20 antigen is neither internalized by the B-cell nor
released into circulation after it has been bound to the B-1 Antibody, ensuring
that the antibody-radioisotope conjugate will remain in place to destroy the
B-cell.

The B-1 Antibody

The B-1 Antibody exhibits very high specificity for the CD20 antigen and,
because it is a murine sub-class IgG(2)a antibody, is capable of recruiting an
immune response to those B-cells to which it binds. Further, the B-1 Antibody
directly affects cell function, triggering apoptosis in a portion of the B-cells
to which it binds. The use of a murine antibody promotes rapid clearance of
unbound radiolabeled antibody from circulation, which reduces radiotoxicity. Due
to the impaired state of the NHL patient's immune system and the short course of
therapy, the human immune response to the murine antibody ( the "HAMA response")
has been minimal to date and has not been a limiting factor in treatment under
the protocol.

The B-1 Antibody used in the Company's B-1 Therapy was generated in 1978 by
the Dana-Farber Cancer Institute in collaboration with Coulter Corporation. The
B-1 Antibody has been available commercially from Coulter Corporation as a
diagnostic reagent since 1982 and is generally accepted as the reference
standard for the identification of B-cells. Rights to the antibody for
therapeutic applications were transferred to Coulter Pharmaceutical from Coulter
Corporation in February 1995.

29
<PAGE> 31

(131)Iodine Radioisotope

The (131)I radioisotope was selected over other radioisotopes for use in
the B-1 Therapy because it (i) produces both gamma emissions which permit
imaging for dose optimization and compact beta emissions for a concentrated
therapeutic effect, (ii) provides additional commercial and clinical benefits
based on its relatively long half-life, (iii) has characteristics which reduce
the risk of bone marrow damage without sacrificing efficacy and (iv) has
long-established medical uses in other cancer treatments.

Gamma emissions from (131)I permit dose optimization by enabling clinicians
to calculate the actual clearance rate of radiolabeled antibody for each
patient. Use of the same radioisotope for both the imaging and the therapeutic
dose provides assurance that the clearance rates observed in imaging also will
apply for the therapeutic dose. Having established the patient's actual
clearance rate, the clinician can determine reliably the therapeutic dose which
will deliver the optimized level of total body radiation.

The lower relative energy and short path length of the beta emission of
(131)I concentrate the destructive energy of the radioisotope on the B-cell to
which the antibody is bound and, in a so-called bystander effect, on adjacent
B-cells in the microscopic clusters of malignant cells which are common to NHL.
Moreover, (131)I causes minimal damage to nearby normal tissues in contrast to
other radioisotopes that have longer path length beta emissions which extend too
far beyond the targeted area.

The relatively long half-life of (131)I, approximately eight days, permits
radiolabeling at a centralized facility to ensure consistent quality, increase
the number of clinical sites capable of administering this radioimmunotherapy
and reduce overall manufacturing costs. The eight-day half-life also provides
the therapeutic advantage of exposing bound malignant cells to radiation over a
longer period of time.

When bound to a B-cell, (131)I's lower relative energy and short path
length, together with its relatively long half-life, minimize bone marrow damage
while optimizing the therapeutic effect of the radiation. Further, as the B-1
Antibody is metabolized, the released (131)I radioisotope is eliminated rapidly
and unlike other radioisotopes does not concentrate naturally in the bone
matrix.

(131)Iodine is an inexpensive radioisotope that has long-established
medical uses in other cancer treatments. Hence, medical facilities and
clinicians are accustomed to its handling, use and disposal and already have
developed the appropriate procedures and facilities for its safe therapeutic
application.

Clinical Results and Development Plan

The B-1 Therapy was developed in the course of an extended Phase I/II dose
escalation clinical trial at the University of Michigan Medical Center which
completed patient enrollment in early 1996. This trial was used to develop and
refine the proprietary therapeutic protocol, to determine the maximum tolerated
dose of total body radiation and to assess the safety and efficacy profile of
treatment with the radiolabeled B-1 Antibody in patients representing a full
range of NHL histologies. Based on the data generated in this clinical trial,
the Company has decided to pursue clinical development of the B-1 Therapy for
the treatment of low-grade and transformed low-grade NHL.

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<PAGE> 32

Phase I/II Trial Results

A total of 59 patients were enrolled in the Phase I/II dose escalation
clinical trial. Preliminary data from this clinical trial were first published
in August 1993 in the New England Journal of Medicine and updated, interim
clinical results were reported in July 1996 in the Journal of Clinical Oncology.

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
RELAPSED AND REFRACTORY RELAPSED PATIENTS ONLY REFRACTORY PATIENTS ONLY
PATIENTS
- ------------------------------------------------------------------------------------------------------------------
LOW-GRADE AND
TRANSFORMED No. of Overall Complete No. of Overall Complete No. of Overall Complete
LOW-GRADE NHL PATIENTS Patients Response Response Patients Response Response Patients Response Response
- ------------------------------------------------------------------------------------------------------------------
- All Patients 40 82% 45% 17 94% 64% 23 73% 30%
- Treated Patients Only 36 86% 50% 14 100% 78% 22 77% 31%
- Treated Patients 28 92% 46% 9 100% 66% 19 89% 36%
Excluding Prior
BMT Recipients
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

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

"Overall response" is the sum of complete and partial responses.

"Complete response" is defined as the disappearance of all detectable
disease and all signs and symptoms of the disease. A complete response
must be verified by two measurements no less than four weeks apart and
by a bone marrow biopsy. A complete response classification also
requires that the measurements detect no progression at any disease
site and no new sites of disease.

"Partial response" is defined as a 50% or greater reduction in
detectable disease, as verified by two measurements no less than four
weeks apart. A partial response classification also requires that the
measurements detect no progression at any disease site and no new
sites of disease.

"Relapsed patients" are patients who have failed previous regimens of
chemotherapy but who experienced a response duration that lasted six
months or longer after their last treatment regimen.

"Refractory patients" are patients who received two or more previous
regimens of chemotherapy and who experienced no response or a response
duration that lasted less than six months after their last treatment
regimen.

Of the 59 patients enrolled in this trial, 40 had low-grade or transformed
low-grade NHL, which are the histologies the Company is pursuing in its clinical
trials. These 40 patients had failed on average more than three prior treatment
regimens with chemotherapy. These patients exhibited an 82% overall response
rate and a 45% complete response rate. This 40-patient cohort included eight
patients who previously had received and failed an autologous bone marrow
transplant prior to participation in the clinical trial. The 40 patients in this
cohort received total body radiation doses of up to 85 cGy in this dose
escalation trial. Of these patients, 17 have been classified as relapsed and 23
as refractory to chemotherapy. The overall response rate in relapsed patients
was 94% and the complete response rate was 64%. The overall response rate in
refractory patients was 73% and the complete response rate was 30%. Four out of
the 40 patients did not receive the therapeutic dose of radiolabeled antibody
due to their rapidly deteriorating medical condition or the presence of a HAMA
response, which arose prior to May 1993 in the early stages of the Phase I/II
dose escalation clinical trial under a non-optimized treatment protocol. Of the
36 patients who received a therapeutic dose, 50% experienced a complete response
with an average duration of response of 18.1 months, with a range of two to 44
months as of October 1996. As of such date, nine of these patients were still in
complete response.

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<PAGE> 33

On an intent-to-treat basis, which includes all enrolled patients whether
treated or not, the 59 enrolled patients achieved an overall response rate of
71% and a complete response rate of 32%. Of the 19 patients who had
intermediate- or high-grade NHL, the overall response rate was 47% and the
complete response rate was 5%. While response rates in these histologies were
encouraging, the Company currently is pursuing clinical development of the B-1
Therapy in low-grade and transformed low-grade NHL patients.

The B-1 Therapy was generally well tolerated by patients. Dose limiting
side effects were hematologic, consisting primarily of reversible declines in
blood cell counts. These toxicities were generally mild to moderate, with no
patient requiring a bone marrow transplant. Other side effects observed were
mild and consisted primarily of temporary flu-like symptoms.

Results presented are based upon interim data which have been submitted to
the FDA, certain portions of which have not yet been published in a peer
reviewed publication. No assurance can be given that the Company's future
clinical results will be consistent with the results of the Phase I/II dose
escalation trial, which was conducted at a single site with a relatively small
number of patients per NHL histology and disease stage and had different
clinical objectives than the Company's current or planned clinical trials. See
"Risk Factors -- Uncertainties Related to Product Development."

Clinical Development of the B-1 Therapy

Based on the foregoing results of the Phase I/II clinical trial, the
Company is conducting three additional clinical trials to support an application
to the FDA for the initial marketing approval of the B-1 Therapy: (i) a pivotal
Phase II/III clinical trial for the treatment of patients refractory to
chemotherapy, (ii) a Phase II dosimetry validation clinical trial and (iii) a
Phase II clinical trial to evaluate the extent to which the therapeutic benefit
of the B-1 Therapy is derived from the combination of the B-1 Antibody and the
radioisotope, in comparison to the B-1 Antibody alone. To broaden the initial
label indication, the Company also has commenced a Phase II clinical trial of
its B-1 Therapy in patients newly diagnosed with low-grade NHL and plans to
commence a Phase III/IV "post-approval" clinical trial in patients with
low-grade or transformed low-grade NHL in first or second relapse.

Pivotal Phase II/III Clinical Trial. The Company's pivotal Phase II/III
clinical trial, which commenced in December 1996, is designed to enroll a total
of 60 patients who have low-grade and transformed low-grade NHL, who have proven
refractory to chemotherapy and who have not received prior bone marrow
transplants. This clinical trial, to be conducted at six to eight clinical
sites, is focused on the refractory segment of this NHL population in an effort
to qualify for expedited FDA approval of the B-1 Therapy under the
Clinton-Kessler Cancer Initiative. Based on this initiative and on guidance from
FDA staff, the Company designed this clinical trial with a relatively short
post-treatment follow-up period of six months. Because of the limited
alternative treatment options for refractory patients, each patient's response
to the B-1 Therapy will be measured against his or her own response to the
previous regimen of chemotherapy, rather than by comparison to patients in a
separate control arm.

Phase II Dosimetry Validation Clinical Trial. Prior to commencing the
pivotal Phase II/III clinical trial, the Company conducted a dosimetry
validation clinical trial in a total of 47 patients, designed to demonstrate
that the B-1 Therapy's treatment protocol could be implemented consistently at
multiple clinical sites. In connection with this clinical trial, the Company
also was able to refine its proprietary protocol to streamline the therapeutic
dose calculation, establishing that accurate antibody elimination rates could be
determined from three gamma camera scans. Based upon interim data from this
clinical trial showing consistent implementation of the treatment protocol, the
FDA agreed in September 1996 that this clinical trial could be ended. The
Company then was able to commence its pivotal Phase II/III clinical trial in
December 1996.

Phase II Unlabeled Versus Labeled Antibody Clinical Trial. In August 1996,
the Company commenced a Phase II clinical trial at a single site in 28 patients
with relapsed, low-grade NHL. One-

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<PAGE> 34

half of the patients will receive two 500 mg doses of unlabeled B-1 Antibody
eight days apart in a treatment regimen that is parallel to the B-1 Therapy; the
other half will receive the B-1 Therapy in a treatment protocol equivalent to
that used in the pivotal Phase II/III clinical trial. The objective of this
clinical trial is to assess the incremental clinical activity from radiolabeling
the B-1 Antibody as compared to the clinical activity of the unlabeled B-1
Antibody alone. Administration of the unlabeled B-1 Antibody has not been
designed for use as a stand-alone therapy, nor has the treatment regimen been
optimized for such use. The Company is evaluating the possibility of expanding
this study to other sites. The Company's objective is to complete enrollment of
patients in this clinical trial in the second half of 1997.

Phase III/IV "Post-Approval" Clinical Trial. To comply with the
Clinton-Kessler Cancer Initiative and to broaden the label indication, the
Company plans to carry out a randomized, controlled Phase III/IV"post-approval"
clinical trial in patients with low-grade or transformed low-grade NHL in first
or second relapse. To evaluate the efficacy and safety of the B-1 Therapy versus
conventional chemotherapy, the Phase III/IV clinical trial will be conducted
with a control arm in which a portion of the patients in the trial will be
treated with a further regimen of conventional chemotherapy. The Company
currently expects to commence this clinical trial during the second half of
1997.

Phase II First-Line, Stand-Alone Treatment Clinical Trial. In June 1996,
the Company has also commenced a 60-patient Phase II clinical trial at a single
site to evaluate the safety and efficacy of the B-1 Therapy as a first-line,
stand-alone treatment of patients with newly diagnosed low-grade NHL. This
single-arm clinical trial includes a planned interim analysis after 14 patients
have been treated. The Company's objective is to complete patient enrollment for
this clinical trial by early 1998.

The ability of the Company to conduct and complete its ongoing and planned
clinical trials in a timely manner is subject to a number of uncertainties and
risks, including the rate at which patients can be accrued in each clinical
trial, the Company's ability to obtain necessary regulatory approvals, the
capacity of the Company's contract manufacturers to supply unlabeled and
radiolabeled B-1 Antibody as needed for patient treatment and the occurrence of
unanticipated adverse events. Any suspension or delay of one or more of such
clinical trials could have a material adverse effect on the Company's business,
financial condition and results of operation. See "Risk Factors -- Uncertainties
Related to Product Development," "-- Government Regulation; No Assurance of
Regulatory Approvals," and "-- Dependence on Suppliers; Manufacturing and
Scale-up Risk."

Other Clinical Trials

The radiolabeled B-1 Antibody has been the subject of other clinical trials
to assess the efficacy of using the radiolabeled B-1 Antibody to deliver the
high levels of radiation necessary to prepare patients for autologous bone
marrow transplants. The conventional preparation for autologous bone marrow
transplants is chemotherapy and total body irradiation. These clinical trials
were designed to demonstrate improved tolerability, response rate and duration
of response.

The first of two clinical trials conducted at the University of Washington
Cancer Center and the Fred Hutchinson Cancer Research Center tested radiolabeled
B-1 Antibody as a single agent to prepare patients for an autologous bone marrow
transplant by achieving a total body radiation level of up to 570 cGy (over
seven times the B-1 Therapy's dose). As reported in The Lancet in August 1995,
of the 21 patients receiving the full radiotherapeutic regimen, the overall
response rate was 86% and the complete response rate was 73%. High incidences of
radiotoxicity-related side effects were reported due to the extreme dosages
employed. Interim data from this clinical trial were published in the New
England Journal of Medicine in October 1993.

The second clinical trial, currently ongoing, is designed to test the
combination of similarly high doses of radiolabeled B-1 Antibody and standard
doses of chemotherapy in preparation for autologous bone marrow transplant. This
clinical trial has enrolled 23 patients since its commencement in January 1995.
Data from this clinical trial have not yet appeared in a peer reviewed
publication.

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<PAGE> 35

The Company intends to commence a dose refinement clinical trial in the
second half of 1997 for the combined use of lower doses of radiolabeled B-1
Antibody and standard chemotherapy as preparation for autologous bone marrow
transplant.

TAP PRO-DRUG PLATFORM

The Company's second technology platform, its tumor-activated peptide
pro-drug technology, has the potential to broaden significantly the therapeutic
window of cytotoxic agents. The TAP pro-drug technology is based upon an
understanding of the biochemical mechanisms utilized by cancer cells to
metastasize and the identification of a potential means for exploiting these
mechanisms and is being developed in collaboration with the Catholique
Universite de Louvain, Belgium. TAP pro-drugs are designed to be (i) activated
preferentially at the tumor site by enzymes secreted by the tumor, (ii) stable
in circulation and in normal tissues and (iii) unable to penetrate normal cells
or malignant cells until activated. As a result, relatively larger quantities of
cytotoxic agents are expected to reach and enter malignant cells as opposed to
normal cells, which could permit a significant increase in maximum tolerated
dosages, potentially overcoming drug resistance in cancer cells.

The Company's lead preclinical pro-drug candidate is a pro-drug version of
doxorubicin known as Super-Leu-Dox. Doxorubicin is an off-patent
chemotherapeutic drug which currently is used in the treatment of a number of
solid tumor cancers, including breast, prostrate, ovarian and soft-tissue
sarcoma cancers. Super-Leu-Dox is based on a proprietary peptide of four amino
acids (a "tetrapeptide") that can be linked to doxorubicin's active site. In the
first step of a two-step activation process, the extracellular tumor enzyme
cleaves three amino acids from the tetrapeptide leaving a leucine amino
acid-doxorubicin conjugate that is able to penetrate cells. Since this first
activation step occurs in the immediate vicinity of tumor cells that are
secreting the enzyme, the probability that the cytotoxic drug will enter tumor
cells as opposed to normal cells is increased. Moreover, the conjugate remains
inactive inside the cell until the remaining leucine is removed from
doxorubicin's active site by an intracellular enzyme. Although it is expressed
in both normal and tumor cells, this intracellular enzyme is present in tumor
cells in concentrations three to five times higher than in normal cells. As a
result, the doxorubicin is activated to a greater extent in tumor cells relative
to normal cells.

This two-step activation process is designed to produce a significantly
higher ratio of active to inactive doxorubicin in cancer cells relative to
normal cells. In in vitro studies of Super-Leu-Dox, researchers have found that
the concentration of activated to inactivated doxorubicin in tumor cells was 40
times higher than in normal cells. These results, if confirmed in clinical
trials, offer the potential to improve significantly the therapeutic window of
doxorubicin. The Company currently plans to complete preclinical development of
Super-Leu-Dox during 1997 and to commence clinical trials during early 1998.

Prior to the licensing of the TAP pro-drug technology by Coulter
Pharmaceutical, an earlier generation leucine-doxorubicin conjugate was tested
as a stand-alone therapy for the treatment of solid tumors in two separate dose
escalation clinical trials in Europe. A total of 59 patients were enrolled in
these clinical trials, and patients safely tolerated doses well in excess of
those associated with unmodified doxorubicin. Results from these clinical
trials, along with data from preclinical studies, will be used by the Company to
select the initial indication to pursue in clinical trials of Super-Leu-Dox.
Selection of the particular indication or indications to be evaluated in such
clinical trials has not been finalized.

While the Company will focus initially on previously approved
chemotherapeutic drugs, it also plans to evaluate TAP pro-drug versions of
cytotoxic agents currently considered too toxic to be used in their unmodified
forms. The Company believes that the TAP pro-drug technology potentially can be
applied to several classes of cytotoxic agents, including the vinca alkaloids,
which are used commonly to treat blood-borne malignancies and some solid tumors.
The Company also plans to develop and evaluate other peptide structures for
possible use in pro-drug versions of cytotoxic agents and other cancer
therapeutics.

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<PAGE> 36

MANUFACTURING

The Company intends to utilize contract manufacturers for most of the
preclinical and clinical requirements for its potential products and for all of
its commercial needs. This strategy is expected to (i) accelerate the scale-up
of manufacturing processes to commercial scale, (ii) reduce initial capital
investment, (iii) result in competitive manufacturing costs, and (iv) provide
access to a wide range of manufacturing technologies. For its clinical trials of
the B-1 Therapy, the Company currently is supplying B-1 Antibody to clinical
trial sites from an existing, finite inventory of the antibody produced by
Coulter Corporation from the B-1 Antibody cell line originally developed by the
Dana-Farber Cancer Institute in 1978. Labeling with (131)I currently is
performed by radiopharmacies at the individual clinical trial sites.

Pursuant to a development contract with the Company, Lonza has re-cloned
the B-1 Antibody cell line to improve the productivity of the cell line in
intermediate-scale production and currently is preparing to supply the B-1
Antibody for use in ongoing clinical trials and to meet initial commercial
requirements. The Company's contract with Lonza was structured on a staged
basis, with specified payments due upon Lonza's satisfactory completion of
particular steps in the re-cloning and production scale-up process. In order to
begin using Lonza-produced material in clinical trials, the Company must seek an
FDA clearance of an IND supplement showing that the Lonza-produced material is
biologically equivalent to the material currently in use in clinical trials. To
date, Lonza has produced three batches of the B-1 Antibody under GMP conditions.
Lonza-produced B-1 Antibody has been tested to confirm biological equivalency to
the existing inventory of B-1 Antibody. Subject to clearance by the FDA, the
Company plans to start using Lonza-produced antibody in its clinical trials of
the B-1 Therapy in early 1997. There can be no assurance that the FDA will
provide such clearance in a timely manner, if at all, and that clinical trials
will not be delayed or disrupted as a result of the planned transition to
Lonza-produced material.

While radiolabeling of the B-1 Antibody at the individual trial sites has
been sufficient to date to support clinical trials, the Company believes that
radiolabeling should be performed at a central site to supply clinics that do
not have requisite radiolabeling capability, to ensure consistency and to reduce
cost. To this end, the Company has contracted with Nordion to develop a process
for radiolabeling the B-1 Antibody centrally. This development contract is
structured on a cost-plus-a-percentage-of-cost basis and provides a framework
for the negotiation of separate facilities and supply agreements. This
development work is near completion, and the parties are currently negotiating
the terms of agreements pursuant to which Nordion will supply radiolabeled B-1
Antibody from the facility being constructed at Nordion. The Company plans to
switch to centrally radiolabeled antibody from Nordion in mid-1997, for both
completion of clinical trials and commercial supplies. However, before using
Nordion-labeled material, an IND supplement must be cleared by the FDA. There
can be no assurance that contracts with Nordion will be entered into in a timely
manner, if at all, or that the FDA will provide such clearance in a timely
manner, if at all, and that clinical trials will not be delayed or disrupted as
a result.

Thus, if the B-1 Therapy is developed successfully and is approved for
marketing by the FDA, the Company expects that production for commercialization
will consist of (i) production of bulk B-1 Antibody by Lonza, (ii) the filling
and labeling of individual product vials with B-1 Antibody by another
third-party supplier, and (iii) radiolabeling of B-1 Antibody at Nordion. While
the Company plans to develop additional suppliers of these services, it expects
to rely on its current suppliers for all or a significant portion of its
requirements for the B-1 Therapy for the foreseeable future. Radiolabeled
antibody cannot be stockpiled against future shortages due to the eight-day
half-life of the (131)I radioisotope. Accordingly, any change in the Company's
existing or planned contractual relationships with, or interruption in supply
from, its third-party suppliers could adversely affect the Company's ability to
complete its ongoing clinical trials and to market the B-1 Therapy, if approved.
Any such change or interruption would have a material adverse effect on the
Company's business, financial condition and results of operators. See "Risk
Factors -- Dependence on Suppliers; Manufacturing and Scale-up Risk."

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<PAGE> 37

The Company believes that the products it expects to develop in its TAP
pro-drug program can be produced with standard chemical synthesis processes and
expects to utilize third parties to meet clinical trial and any commercial
requirements for these products. The Company currently intends to produce these
products in Belgium in order to take advantage of local government research
grants that are providing support for the TAP pro-drug program. The Company is
in early discussions with potential manufacturers of Super-Leu-Dox, its initial
pro-drug product candidate.

MARKETING AND SALES

The Company intends to market its products in the United States through its
own sales force and, where appropriate, in collaboration with marketing
partners. This strategy is intended to enable the Company to establish a
commercial presence in the cancer therapeutics market with its B-1 Therapy, if
approved, and to create the capability to sell other products that it may
develop or in-license. The sales force is expected to initially call upon
oncologists, hematologists and nuclear medicine physicians in connection with
the sale of the Company's B-1 Therapy. The Company initially will focus its
sales force on those physicians who treat the largest volume of NHL patients.
These physicians generally are concentrated in large metropolitan areas. Because
of the characteristics of the B-1 Therapy, the target physician must have access
to a facility with radiopharmaceutical and gamma camera scan capabilities. The
Company believes such facilities generally are available in large metropolitan
areas such that a significant portion of physicians who treat NHL patients will
be able to prescribe the B-1 Therapy. The Company intends to distribute its
products internationally through marketing partners. The Company has not yet
identified or entered into any agreements with any such partners, and there is
no assurance that it will be able to do so in a timely manner, if at all. The
Company has not yet established a sales and marketing capability in North
America, and there is no assurance that it will be able to do so in a timely or
cost effective manner, if at all.

The current purchasers of cancer therapeutics are hospitals, clinics,
physicians, pharmacies, large HMOs and state and federal governments.
Historically, physicians made treatment decisions and prescribed therapeutics
which then were dispensed through the clinic, hospital or pharmacy. However, the
United States health care system is undergoing significant changes and the
decision-making authority of the physician varies. These changes may make it
necessary for the Company to alter its strategy prior to launch of the B-1
Therapy or even after launch and could affect adversely the ability of the
Company to generate revenues.

The Company's ability to market effectively the B-1 Therapy may be affected
adversely by a number of factors including physicians' resistance to change from
established methods of treatment such as chemotherapy or radiation therapy and
the special handling and administration requirements of a radioimmunotherapy.
Further, the Company can provide no assurance as to whether its B-1 Therapy will
be priced competitively compared to existing methods of treatment such as
chemotherapy and radiation therapy. See "Risk Factors -- Uncertainty of Market
Acceptance of the B-1 Therapy."

PHARMACEUTICAL PRICING AND REIMBURSEMENT

Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Recent initiatives to
reduce the federal deficit and to reform health care delivery are increasing
cost-containment efforts. The Company anticipates that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price controls on
pharmaceuticals and other fundamental changes to the health care delivery
system. Any such proposed or actual changes could cause the Company to limit or
eliminate spending on development projects and affect the Company's ultimate
profitability. Legislative debate is expected to continue in the future, and
market forces are expected to drive reductions of health care costs. The Company
cannot predict what impact that adoption of any federal or state health care
reform measures or future private sector reforms may have on its business.

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<PAGE> 38

In both domestic and foreign markets, sales of the Company's proposed
products will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations. In
addition, other third-party payors increasingly are 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.
The Company's B-1 Therapy, as potentially the first radioimmunotherapy for
cancer, faces particular uncertainties due to the absence of a comparable,
approved therapy to serve as a model for pricing and reimbursement decisions.
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. Further, there
can be no assurance that products can be manufactured on a commercial scale, for
a cost that will enable the Company to price its products within reimbursable
rates. Legislation and regulations affecting the pricing of pharmaceuticals may
change before the Company's proposed products are approved for marketing.
Adoption of such legislation could further limit reimbursement for medical
products. If adequate coverage and reimbursement rates are not provided by the
government and third-party payors for the Company's 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.

GOVERNMENT REGULATION

The testing, manufacturing, labeling, advertising, promotion, export and
marketing, among other things, of the Company's proposed products are subject to
extensive regulation by governmental authorities in the United States and other
countries. In the United States, pharmaceutical products are regulated by the
Food and Drug Administration under the Federal Food, Drug and Cosmetic Act and
other laws, including, in the case of biologics, the Public Health Service Act.
At the present time, the Company believes that its B-1 Therapy and other
immunotherapeutics that it may develop will be regulated by the FDA as biologics
and that other products to be developed by the Company, including Super-Leu-Dox
and other TAP pro-drugs, are likely to be regulated as drugs.

The steps required before a drug or biologic may be approved for marketing
in the United States generally include (i) preclinical laboratory tests and
animal tests, (ii) the submission to the FDA of an IND for human clinical
testing, which must become effective before human clinical trials may commence,
(iii) adequate and well-controlled human clinical trials to establish the safety
and efficacy of the product, (iv) in the case of a biologic, the submission to
the FDA of a biologic license application ("BLA"), or in the alternative a
Product License Application ("PLA") for the product and an Establishment License
Application ("ELA") for the facility at which the product is manufactured, or in
the case of a drug, a New Drug Application ("NDA"), (v) FDA review of the BLA
(or PLA/ELA) or NDA and (vi) satisfactory completion of an FDA inspection of the
manufacturing facilities at which the product is made to assess compliance with
GMP. The testing and approval process requires substantial time, effort and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all.

Preclinical studies include laboratory evaluation of the product, as well
as animal studies to assess the potential safety and efficacy of the product.
The results of the preclinical studies, together with manufacturing information
and analytical data, are submitted to the FDA as part of the IND, which must
become effective before clinical trials may be commenced. The IND automatically
will become effective thirty days after receipt by the FDA, unless the FDA
before that time raises concerns or questions about the conduct of the trials as
outlined in the IND. In such case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can proceed. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials.

Clinical trials involve the administration of the investigational products
to healthy volunteers or patients under the supervision of a qualified principal
investigator. Further, each clinical trial must be reviewed and approved by an
independent Institutional Review Board ("IRB") at each institution at

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<PAGE> 39

which the study will be conducted. The IRB will consider, among other things,
ethical factors, the safety of human subjects and the possible liability of the
institution.

Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is usually tested for safety (adverse effects), dosage
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase II clinical trials usually involve studies in a limited patient population
to (i) evaluate the efficacy of the drug for specific, targeted indications,
(ii) determine dosage tolerance and optimal dosage and (iii) identify possible
adverse effects and safety risks. Phase III clinical trials generally further
evaluate clinical efficacy and test further for safety within an expanded
patient population. Phase IV clinical trials are conducted after approval to
gain additional experience from the treatment of patients in the intended
therapeutic indication and to document a clinical benefit in the case of drugs
approved under accelerated approval regulations. If the FDA approves a product
while a company has ongoing clinical trials that were not necessary for
approval, a company may be able to use the data from these clinical trials to
meet all or part of any Phase IV clinical trial requirement. These clinical
trials are often referred to as "Phase III/IV post-approval clinical trials."
Failure to conduct promptly Phase IV clinical trials could result in withdrawal
of approval for products approved under accelerated approval regulations.

In the case of products for severe or life-threatening diseases, the
initial clinical trials are sometimes done in patients rather than in healthy
volunteers. Since these patients are afflicted already with the target disease,
it is possible that such clinical trials may provide evidence of efficacy
traditionally obtained in Phase II clinical trials. These trials are referred to
frequently as Phase I/II trials. There can be no assurance that Phase I, Phase
II or Phase III testing will be completed successfully within any specific time
period, if at all, with respect to any of the Company's product candidates.
Furthermore, the FDA may suspend clinical trials at any time on various grounds,
including a finding that the subjects or patients are being exposed to an
unacceptable health risk.

The results of the preclinical studies and clinical trials, together with
detailed information on the manufacture and composition of the product, are
submitted to the FDA in the form of a BLA requesting approval to market the
product. Before approving a BLA or NDA, the FDA will inspect the facilities at
which the product is manufactured and will not approve the product unless the
manufacturing facility is in GMP compliance. The FDA may delay a BLA or NDA if
applicable regulatory criteria are not satisfied, require additional testing or
information, and/or require postmarketing testing and surveillance to monitor
safety or efficacy of a product. There can be no assurance that FDA approval of
any BLA or NDA submitted by the Company will be granted on a timely basis, if at
all. Also, if regulatory approval of a product is granted, such approval may
entail limitations on the indicated uses for which such product may be marketed.

The Company also will be subject to a variety of foreign regulations
governing clinical trials and sales of its products. Whether or not FDA approval
has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing of the product in those countries. The approval process varies from
country to country and the time needed to secure approval may be longer or
shorter than that required for FDA approval.

Clinton-Kessler Cancer Initiative

In March 1996, the FDA announced a new policy intended to accelerate the
approval process for cancer therapies addressing disease conditions in which
patients have limited treatment options. The Company believes that the B-1
Therapy may qualify for this accelerated approval process and designed its Phase
II/III clinical trial of the B-1 Therapy with the objective of securing
accelerated approval. Significant uncertainty exists as to the extent to which
such initiative will result in accelerated review and approval. Further, the FDA
has not made available comprehensive guidelines with respect to this initiative,
and it retains considerable discretion in determining eligibility for
accelerated review and approval and is not bound by discussions that an
applicant may have with FDA staff. Accordingly, the

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<PAGE> 40

FDA could employ such discretion to deny eligibility of the B-1 Therapy as a
candidate for accelerated review or require additional clinical trials or other
information before approving the B-1 Therapy. The Company cannot predict the
ultimate impact, if any, of the new approval process on the timing or likelihood
of FDA approval of its B-1 Therapy or any of its other potential products.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a "rare disease or condition," which is generally a
disease or condition that affects fewer than 200,000 individuals in the United
States. Orphan drug designation must be requested before submitting a BLA. After
the FDA grants orphan drug designation, the generic identity of the therapeutic
agent and its potential orphan use are disclosed publicly by the FDA. Orphan
drug designation does not convey any advantage in, or shorten the duration of,
the regulatory review and approval process. If a product that has orphan drug
designation subsequently receives FDA approval for the indication for which it
has such designation, the product is entitled to orphan exclusivity, i.e., the
FDA may not approve any other applications to market the same drug for the same
indication, except in very limited circumstances, for seven years. The Company's
B-1 Therapy has received orphan drug designation from the FDA. Although the FDA
recently decided to remove NHL from the list of diseases for which orphan drug
designation may be obtained, the previous designation of the Company's B-1
Therapy will not be affected. In any event, there can be no assurance that
competitors will not receive approval of other, different drugs or biologics for
low-grade NHL. Thus, although obtaining FDA approval to market a product with
orphan drug exclusivity can be advantageous, there can be no assurance that it
would provide the Company with a material commercial benefit.

RADIOACTIVE AND OTHER HAZARDOUS MATERIALS

The manufacturing and use of the Company's B-1 Therapy requires the
handling and disposal of 131)I, a radioactive isotope of iodine. The
radiolabeling of the B-1 Antibody currently is performed by radiopharmacies at
the individual clinical trial sites. These sites must comply with various state
and federal regulations regarding the handling and use of radioactive materials.
Violation of these state and federal regulations by a clinical trial site could
significantly delay completion of such trials. For the continuation of its
ongoing clinical trials and for commercial-scale production, the Company plans
to rely on a contract manufacturer, Nordion, to radiolabel the B-1 Antibody with
(131)I, initially at a single location in Canada. Although this vendor is
experienced in the handling and use of radioactive materials, violation of
safety regulations could occur and the risk of accidental contamination or
injury cannot be eliminated completely. In the event of any such noncompliance
or accident, the supply of radiolabeled B-1 Antibody for use in clinical trials
or commercially could be interrupted, which could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"-- Manufacturing."

The administration of the B-1 Therapy entails the introduction of
radioactive materials into patients. These patients emit radioactivity at levels
that pose a safety concern to others around them, especially healthcare workers
for whom the cumulative effect of repeated exposure to radioactivity is of
particular concern. These concerns are addressed in regulations promulgated by
the Nuclear Regulatory Commission, as well as by various state and local
governments and individual hospitals. Generally, patients who emit radioactivity
above specified levels must be admitted to the hospital, where they can be
isolated from others, until radiation falls to acceptable levels. The NRC
recently enacted revised regulations that are likely to make it easier for
hospitals to treat patients with radioactive materials on an outpatient basis.
Under these regulations, the Company believes that its B-1 Therapy could be
administered on an outpatient basis in most cases. Although state and local
governments often follow the lead of the NRC, there can be no assurance that
they will do so or that patients receiving the B-1 Therapy will not have to
remain in the hospital for one to three days following administration of the
therapeutic dose, adding to the overall cost of the therapy.

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<PAGE> 41

The Company also expects to use hazardous chemicals and radioactive
compounds in its ongoing research activities. Although the Company believes that
safety procedures for handling and disposing of such materials will comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. The Company could be held liable for any damages that result from
such an accident, as well as for unexpected remedial costs and penalties that
may result from any violation of applicable regulations, which could result in a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company may incur substantial costs to
comply with environmental regulations.

PATENTS AND OTHER INTELLECTUAL PROPERTY

The Company believes that patent and trade secret protection is important
to its business and that its future will depend in part on its ability to
maintain its technology licenses, protect its trade secrets, secure additional
patents and operate without infringing the proprietary rights of others. The
Company currently holds exclusive rights to an allowed United States patent
application that relates to a therapeutic protocol used in the B-1 Therapy. The
Company also holds an exclusive license to patent applications filed in Europe
relating to its TAP pro-drug program.

The pharmaceutical and biotechnology fields are characterized by a large
number of patent filings. A substantial number of patents have already been
issued to other pharmaceutical and biotechnology companies. Research has been
conducted for many years in the monoclonal antibody field by pharmaceutical and
biotechnology companies and other organizations. Competitors may have filed
applications for or have been issued patents and may obtain additional patents
and proprietary rights related to products or processes competitive with or
similar to those of the Company. Patent applications are maintained in secrecy
for a period after filing. Publication of discoveries in the scientific or
patent literature tends to lag behind actual discoveries and the filing of
related patent applications. The Company may not be aware of all of the patents
potentially adverse to the Company's interest that may have been issued to other
companies, research or academic institutions, or others. No assurances can be
given that such patents do not exist, have not been filed, or could not be filed
or issued, which contain claims relating to the Company's technology, products
or processes.

To date, no consistent policy has emerged regarding the breadth of claims
allowed in pharmaceutical and biotechnology patents. If patents have been or are
issued to others containing preclusive or conflicting claims and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to one or more patents or to develop or obtain alternative technology.
The Company is aware of various patents that have been issued to others that
pertain to a portion of the Company's prospective business; however, the Company
believes that it does not infringe any patents that ultimately would be
determined to be valid. There can be no assurance that patents do not exist in
the United States or in other foreign countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to the B-1 Therapy or any of the Company's other product candidates or
programs. Commercialization of monoclonal antibody-based products may require
licensing and/or cross-licensing of one or more patents with other organizations
in the field. There can be no assurance that the licenses that might be required
for the Company's processes or products would be available on commercially
acceptable terms, if at all.

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<PAGE> 42

Company, even if the eventual outcome is favorable to the Company. An adverse
outcome could subject the Company to significant liabilities to third parties
and require the Company to license disputed rights from third parties or to
cease using such technology.

Patents issued and patent applications filed internationally relating to
biologics are numerous and there can be no assurance that current and potential
competitors and other third parties have not filed or in the future will not
file applications for, or have not received or in the future will not receive,
patents or obtain additional proprietary rights relating to products or
processes used or proposed to be used by the Company. Moreover, there is certain
subject matter which is patentable in the United States and not generally
patentable outside of the United States. Statutory differences in patentable
subject matter may limit the protection the Company can obtain on some of its
inventions outside of the United States. For example, methods of treating humans
are not patentable in many countries outside of the United States. These and/or
other issues may prevent the Company from obtaining patent protection outside of
the United States which would have a material adverse effect on the Company's
business, financial condition and results of operations.

Rights to use the name "Coulter Pharmaceutical, Inc." are licensed from
Coulter Corporation.

COMPETITION

The pharmaceutical and biotechnology industries are intensely competitive.
Any product candidate developed by the Company would compete with existing drugs
and therapies. There are many pharmaceutical companies, biotechnology companies,
public and private universities and research organizations actively engaged in
research and development of products for the treatment of people with cancer.
Many of these organizations have financial, technical, manufacturing and
marketing resources greater than those of the Company. Several of them have
developed or are developing therapies that could be used for treatment of the
same diseases targeted by the Company. One competitor known to the Company is
currently conducting Phase III clinical trials of a chimeric antibody treatment
for NHL. If a competing company were to develop or acquire rights to a more
efficient or safer cancer therapy for treatment of the same diseases targeted by
the Company, or one which offers significantly lower costs of treatment, the
Company's business, financial condition and results of operations could be
materially adversely affected.

The Company believes that competition in the development and marketing of
new cancer therapies will be based primarily on product efficacy and safety,
time to market and price. To the extent the Company's product programs are
successful, it also intends to rely to some degree on patents and other
intellectual property and orphan drug designations to protect its products from
competition.

The Company believes that its product development programs will be subject
to significant competition from companies utilizing alternative technologies as
well as to increasing competition from companies that develop and apply
technologies similar to the Company's technologies. Other companies may succeed
in developing products earlier than the Company, obtaining approvals for such
products from the FDA more rapidly than the Company or developing products that
are safer and more effective than those under development or proposed to be
developed by the Company. There can be no assurance that research and
development by others will not render the Company's technology or potential
products obsolete or non-competitive or result in treatments superior to any

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<PAGE> 43

therapy developed by the Company, or that any therapy developed by the Company
will be preferred to any existing or newly developed technologies.

PRODUCT LIABILITY AND INSURANCE

The manufacture and sale of human therapeutic products involve an inherent
risk of product liability claims and associated adverse publicity. The Company
has only limited product liability insurance for clinical trials and no
commercial product liability insurance. There can be no assurance that the
Company will be able to maintain existing insurance or obtain additional product
liability insurance on acceptable terms or with adequate coverage against
potential liabilities. Such insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms, if at all. An inability to
obtain sufficient insurance coverage on reasonable terms or to otherwise protect
against potential product liability claims brought against the Company in excess
of its insurance coverage, if any, or a product recall could have a material
adverse effect upon the Company's business, financial condition and results of
operations.

HUMAN RESOURCES

The Company currently has 27 employees, 17 of whom are engaged in product
development activities. Fourteen of the Company's current employees hold
post-graduate degrees, including four with medical degrees and eight with
Ph.D.s. The Company's employees are not represented by a collective bargaining
agreement. The Company believes its relations with its employees are good.

FACILITIES

The Company currently leases approximately 9,000 square feet of office
space located in Palo Alto, California, under a short-term lease agreement.
Management is looking currently for a larger facility and expects to relocate
during 1997.

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MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company, and
their ages as of December 6, 1996, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -------------------------------------------
<S> <C> <C>
Michael F. Bigham................. 39 President, Chief Executive Officer and
Director
William G. Harris................. 38 Vice President and Chief Financial Officer
Peter J. Langecker, M.D., 45 Vice President, Clinical Research
Ph.D.(1)........................
Arlene M. Morris(1)............... 44 Vice President, Business Development
Linda L. Nardone, Ph.D.(1)........ 51 Vice President, Regulatory Affairs
Dan Shochat, Ph.D. ............... 56 Vice President, Research and Development
Bobbie F. Wallace(1).............. 64 Vice President, Operations
James C. Kitch, J.D.(1)........... 49 Secretary
Arnold Oronsky, Ph.D.(2).......... 56 Chairman of the Board
Brian G. Atwood(3)................ 44 Director
Joseph R. Coulter, III............ 37 Director
Donald L. Lucas(2)(3)............. 66 Director
Robert Momsen(2).................. 49 Director
George J. Sella, Jr............... 68 Director
Sue Van(2)(3)..................... 50 Director
</TABLE>

- ------------------------------
(1) Non-executive officer or key employee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.

Michael F. Bigham has served as President, Chief Executive Officer and a
director of the Company since July 1996. During June 1996, Mr. Bigham provided
consulting services to the Company. Mr. Bigham served as Executive Vice
President of Operations from April 1994 to June 1996 and Chief Financial Officer
from April 1989 to June 1996 at Gilead Sciences, Inc., a biotechnology company.
While at Gilead, he also served as Vice President of Corporate Development from
July 1988 to March 1992. Mr. Bigham was Co-head of Healthcare Investment Banking
for Hambrecht & Quist LLC, an investment banking firm where he was employed from
1984 to 1988. Mr. Bigham is a member of the Board of Directors of Datron
Systems, Inc., a publicly-held electronics company, and two privately-held
companies. Mr. Bigham received a B.S. degree in Commerce with distinction from
the University of Virginia and an M.B.A. from the Stanford University Graduate
School of Business.

William G. Harris has served as Vice President, Finance and Chief Financial
Officer of the Company since July 1996. From July 1992 to July 1996, Mr. Harris
served as Director of Finance at Gilead Sciences, Inc., a biotechnology company.
While at Gilead, Mr. Harris also served as Controller and Manager of
Administration from July 1991 to July 1992, and as Assistant Controller and
Manager of Administration from October 1990 to July 1992. From July 1988 to
October 1990, he was a Staff Accountant at Ernst & Young, LLP. Mr. Harris
received a B.A. degree in Economics from the University of California, San
Diego, and an M.B.A. from the University of Santa Clara Leavey School of
Business and Administration.

Peter J. Langecker, M.D., Ph.D. has served as Vice President, Clinical
Research of the Company since August 1995. From March 1992 to July 1995, Dr.
Langecker served as Director of Clinical Research in Oncology at Schering-Plough
Corp., a pharmaceutical and biologics company, where he was responsible for the
worldwide clinical program for several oncology products. From July 1988 to
February 1992, Dr. Langecker served as Central Medical Adviser in Clinical
Research and Development, Oncology at Ciba-Geigy Corporation, a Swiss chemical
and pharmaceutical company, where he

43
<PAGE> 45

was responsible for the clinical development of several oncology products. From
March 1984 to June 1988, he served as a physician in the Oncology Department at
the University of Munich Hospital. Dr. Langecker received M.D. and Ph.D. degrees
from the University of Munich in Germany and is the author of more than 30
scientific papers on clinical drug development in oncology.

Arlene M. Morris has served as Vice President, Business Development of the
Company since October 1996. From April 1993 to October 1996, Ms. Morris served
as Vice President, Business Development at Scios, Inc., a biotechnology company.
From November 1988 to April 1993, she served as Vice President, Business
Development at McNeil Pharmaceutical, a subsidiary of Johnson & Johnson, where
she was responsible for new product planning and business development. Ms.
Morris received a B.A. degree from Carlow College.

Linda L. Nardone, Ph.D. has served as Vice President, Regulatory Affairs of
the Company since August 1995. From September 1989 to July 1995, Dr. Nardone
served as Vice President of Drug Regulatory Affairs at Sterling
Winthrop/Nycomed, a pharmaceutical company, where she was responsible for
strategy, operations and FDA interactions for drugs in development and marketed
drugs including three new drug applications and multiple supplemental approvals.
From 1986 to 1989, Dr. Nardone worked for Immunomedics, Inc., a biotechnology
company, where she had regulatory responsibility for three monoclonal
antibody-based diagnostic and therapeutic agents for cancer, and held various
positions, including Vice President, Regulatory Affairs. Dr. Nardone received a
B.S. degree from Fairleigh Dickinson University, M.S. and Ph.D. degrees from
Pennsylvania State University and held a post-doctoral fellowship at Yale
University School of Medicine.

Dan Shochat, Ph.D. has served as Vice President, Research and Development
of the Company since March 1995. From July 1988 to April 1995, Dr. Shochat
served as Director of Biotechnology Development at Lederle Laboratories, a
pharmaceutical division of American Cyanamid, Inc., where he was responsible for
the worldwide program in monoclonal antibodies for the treatment of cancer. He
received B.S. and M.S. degrees from Hebrew University in Israel and a Ph.D. in
Biochemistry from L.S.U. Medical School in New Orleans. Dr. Shochat is the
author of 25 scientific papers on tumor antigens and on antibodies for
diagnostic and therapeutic use in cancer.

Bobbie F. Wallace has served as Vice President, Operations for the Company
since its inception in February 1995. From February 1995 to December 1996, she
served as a director of the Company. Ms. Wallace is an employee of Coulter
Corporation, a research, development and manufacturing company of precision
medical devices, and has served as a liaison between the Company and Coulter
Corporation. Since 1982, Ms. Wallace has served as Director of Pharmaceutical
Programs and Immunology Research at Coulter Corporation where she was
responsible for the Anti-B1 research and development. Ms. Wallace received a
B.A. in Pre-Med and completed specialized post-graduate courses in hematology at
the University of Texas in Denton.

James C. Kitch, J.D. has served as the Secretary of the Company since
December 1996. He has been a partner for more than ten years of Cooley Godward
LLP, a law firm which has provided legal services to the Company. Mr. Kitch is a
director of Lynx Therapeutics, Inc., a life sciences company.

Arnold Oronsky, Ph.D. has served as Chairman of the Board of Directors of
the Company since its inception in February 1995. From February 1995 to July
1996, Dr. Oronsky also served as President and Chief Executive Officer of the
Company. Since March 1994, Dr. Oronsky has been a general partner at InterWest
Partners, a private venture capital firm. From 1984 to 1994, Dr. Oronsky served
as Vice President for Discovery Research at Lederle Laboratories, a
pharmaceutical division of American Cyanamid, Inc., where he was responsible for
the research of new drugs. Dr. Oronsky has won numerous grants and awards and
has published over 125 scientific articles. Since 1988, Dr. Oronsky has served
as a senior lecturer in the Department of Medicine at John Hopkins Medical
School.

Brian Atwood has served as a director of the Company since April 1996. From
March to December 1995, Mr. Atwood was a consultant on business development to
the Company. Since November 1995, Mr. Atwood has been a Venture Partner of
Brentwood Venture Capital, a private venture capital firm,

44
<PAGE> 46

and since June 1995 has served as the acting President and Chief Executive
Officer of gene/Networks, Inc., a genomics company. He was a founder and served
as President and Chief Executive Officer from December 1993 to May 1995 and Vice
President, Operations from July 1988 to November 1993 of Glycomed Incorporated,
a company dedicated to the discovery and development of novel drugs based on
complex carbohydrates. From January 1986 to June 1987, Mr. Atwood was a Director
at Perkin-Elmer/Cetus Instrument Systems, a joint venture formed by Perkin-Elmer
Corp. and Cetus Corporation, where he oversaw the development and launch of
three biotechnology instrument research systems.

Joseph R. Coulter, III has served as a director of the Company since
December 1996. Mr. Coulter has been employed by Coulter Corporation, a research,
development and manufacturing company of precision medical devices, since 1979.
Since November 1996, he has been Executive Vice President and since February
1995, he has served as Director of Information Systems. From June 1992 to
January 1995, Mr. Coulter served as Director of Operations, and from January
1988 to June 1992, he served as Program Manager for Research and Development.
Mr. Coulter currently serves as a director of Coulter Corporation.

Donald L. Lucas has served as a director of the Company since April 1996.
Since 1967, Mr. Lucas has been actively engaged in venture capital activities as
a private individual. Mr. Lucas currently serves as a board member of Amati
Communications Corporation, Cadence Design Systems, Inc., Macromedia, Inc.,
Oracle Corporation, Racotek, Inc., Transcend Services, Inc. and Tricord Systems,
Inc.

Robert Momsen has served as a director of the Company since its inception
in February 1995. Since August 1982, Mr. Momsen has been a General Partner at
InterWest Partners, a private venture capital firm. From 1977 to 1981, Mr.
Momsen served as General Manager and Chief Financial Officer of Life Instruments
Corporation, a medical diagnostic imaging company that he co-founded. Mr. Momsen
currently serves as a director of ArthroCare Corp., COR Therapeutics, Inc.,
Cornerstone Physicians Corp., Employee Managed Care Corp., First Medical, Inc.,
Innovasive Devices, Inc., Integ, Inc., Interventional Technologies, Inc.,
Mercator Genetics, Inc., Urologix, Inc. and Ventritex, Inc.

George J. Sella, Jr. has served as a director of the Company since December
1996. From January 1983 to his retirement in April 1993, Mr. Sella served as
Chief Executive Officer of American Cyanamid Company, a chemical, agricultural
and medical products company. From September 1979 to January 1991, Mr. Sella
served as President of American Cyanamid. From May 1984 to April 1993, he served
as Chairman of the Board of Directors of American Cyanamid. Mr. Sella currently
serves as a director of Union Camp Corporation, the Equitable Companies
Incorporated and Bush Boake Allen, Inc.

Sue Van has served as a director of the Company since its inception in
February 1995. Since November 1996, she has been Executive Vice President of
Coulter Corporation, a research, development and manufacturing company of
precision medical devices. Since May 1992, Ms. Van has served as the Chief
Financial Officer of Coulter Corporation and since January 1984, Ms. Van has
served as the Corporate Treasurer of Coulter Corporation.

Certain of the current directors of the Company were nominated and elected
in accordance with voting rights which terminate upon the closing of this
offering.

BOARD COMMITTEES

The Audit Committee of the Board of Directors was formed in October 1996 to
review the internal accounting procedures of the Company and consult with and
review the services provided by the Company's independent auditors. The
Compensation Committee of the Board of Directors was formed in October 1996 to
establish salaries, incentives and other forms of compensation paid to officers
and employees of the Company. The Compensation Committee also administers the
issuance of stock options and other awards under the Company's stock plans.

45
<PAGE> 47

DIRECTOR COMPENSATION

Directors currently do not receive any cash compensation from the Company
for their services as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. In December 1995, Mr. Sella was granted options to purchase
20,000 shares of the Company's Common Stock under the 1995 Equity Incentive
Plan. Upon completion of the offering, directors will be eligible to participate
in the 1996 Equity Incentive Plan. See "-- Equity Incentive Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to the formation of the Compensation Committee in October 1996, the
Board of Directors made all determinations with respect to executive officer
compensation. Of the directors who participated in deliberations concerning
executive officer compensation, either prior to the formation of the
Compensation Committee or in their capacity as a member of the Compensation
Committee, Dr. Oronsky served as acting President and Chief Executive Officer of
the Company from February 1995 to June 1996, Ms. Wallace has served as Vice
President, Operations of the Company since February 1995 and Mr. Bigham has
served as President and Chief Executive Officer of the Company since July 1996.
Each of the Company's directors has purchased securities of the Company
individually or through an affiliated entity. See "Certain Transactions" and
"Principal Stockholders."

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the
compensation earned by the Company's Chief Executive Officer and the other
executive officer who earned in excess of $100,000 during the fiscal year ended
December 31, 1996 (collectively, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
SECURITIES
-------------------- OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)
- ----------------------------------------------- --------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Michael F. Bigham(1)........................... 150,000 50,000 57,000(1) 0
President and Chief Executive Officer
Arnold Oronsky, Ph.D.(2) ...................... 0 0 0 0
President and Chief Executive Officer
Dan Shochat, Ph.D. ............................ 160,008 8,750 11,084(3) 41,666
Vice President, Research and Development
</TABLE>

- ---------------
(1) Mr. Bigham joined the Company as its President and Chief Executive Officer
in July 1996. During June 1996, Mr. Bigham provided consulting services to
the Company and received compensation for those services.

(2) Dr. Oronsky, Chairman of the Company's Board of Directors, served as acting
President and Chief Executive Officer from February 1995 to June 1996.

(3) Represents reimbursement for moving expenses.

46
<PAGE> 48

EQUITY INCENTIVE PLANS

Equity Incentive Plans. In March 1995, the Company adopted the 1995 Equity
Incentive Plan (the "1995 Plan") under which an aggregate of 866,666 shares of
Common Stock have been reserved for issuance upon exercise of options granted to
employees, directors of and consultants to the Company. As of December 6, 1996,
options to purchase an aggregate of 802,305 shares of Common Stock were
outstanding under the 1995 Plan. In December 1996, the Board of Directors
determined that upon the closing of the offering, no additional options would be
granted under the 1995 Plan and the 1995 Plan would be terminated.

In December 1996, the Company adopted the 1996 Equity Incentive Plan (the
"1996 Plan" and, together with the 1995 Plan, the "Incentive Plans"). A total of
1,400,000 shares of Common Stock have been reserved under the 1996 Plan. As of
December 6, 1996, no options have been granted under the 1996 Plan. The 1996
Plan will terminate in December 2006, unless sooner terminated by the Board of
Directors.

The Incentive Plans provide for the granting to employees (including
officers and employee directors) of incentive stock options within the meaning
of Section 422 of the Internal Revenue Code, as amended (the "Code"), and for
the granting of nonstatutory stock options, restricted stock purchase awards,
and stock bonuses (collectively, "Stock Awards") to employees, directors of and
consultants to the Company. The Company's Board of Directors has delegated
administration of the Incentive Plans to the Compensation Committee (the
"Committee"). The Committee membership is intended to satisfy the provisions of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended,
and Code section 162(m), in each case to the extent applicable. The Committee
has the authority, subject to the terms of the Incentive Plans, to determine the
recipients and types of awards to be granted, the terms of the awards granted,
including the exercise price, number of shares subject to the award the
exercisability thereof, and the form of consideration payable upon exercise.

The terms of stock options granted under the Incentive Plans generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plans is determined by the Board of Directors, provided that the exercise price
for an incentive stock option cannot be less than 100% of the fair market value
of the Common Stock on the date of the option grant and the exercise price for a
nonstatutory stock option cannot be less than 85% of the fair market value of
the Common Stock on the date of option grant. The exercise price of options
under the 1995 Plan or incentive stock options under the 1996 Plan granted to
any person who at the time of grant owns stock possessing more than 10% of the
total combined voting power of all classes of stock must be at least 110% of the
fair market value of such stock on the date of grant and the terms of these
options cannot exceed five years. The aggregate fair market value, determined at
the time of grant, of the shares of Common Stock with respect to which incentive
stock option are exercisable for the first time by an optionee during any
calendar year (under all such plans of the Company and its affiliates) may not
exceed $100,000. No optionee shall be eligible for option grants under the 1996
Plan covering more than 280,000 shares of Common Stock in any calendar year at
such time as Section 162(m) of the Code becomes applicable to the Plan.

Options granted under the Incentive Plans vest at the rate specified in the
option agreement; provided, however, that options granted under the 1995 must
vest at least 20% per year. No stock option granted under the Incentive Plans
may be transferred by the optionee other than by will or the laws of descent or
distribution or, for a nonstatutory option, pursuant to a domestic relations
order, provided that an optionee may designate a beneficiary who may exercise
the option following the optionee's death, and, provided further, that the
Compensation Committee may grant a nonstatutory stock option that is
transferable under the 1996 Plan.

47
<PAGE> 49

An optionee under the 1995 Plan whose relationship with the Company or any
affiliate ceases for any reason (other than by death or disability) may exercise
options in the thirty-day period following such cessation (unless such options
terminate or expire sooner or later by their terms). An optionee under the 1996
Plan whose relationship with the Company or any affiliate ceases for any reason
(other than by death or disability) may exercise options in the three-month
period following such cessation (unless such options terminate or expire sooner
or later by their terms). Options granted under the Incentive Plans may be
exercised for up to twelve months after an Optionee's relationship with the
Company and its affiliates ceases due to disability and for up to eighteen
months after an Optionee's relationship with the Company and its affiliates
ceases due to death (unless such options expire sooner or later by their terms).

Shares subject to stock options under the 1996 Plan that have expired or
otherwise terminated without having been exercised in full become available for
the grant of options under the 1996 Plan. Furthermore, the Board of Directors
may offer to exchange new options for existing options under the 1996 Plan, with
the shares subject to the existing options again becoming available for grant
under the 1996 Plan. The Board of Directors has the authority to reprice
outstanding options and to offer optionees the opportunity to replace
outstanding options with new options for the same or a different number of
shares.

Restricted stock purchase awards granted under the 1996 Plan may be granted
pursuant to a repurchase option in favor of the Company in accordance with a
service vesting schedule determined by the Board. The purchase price of such
awards will be at least 85% of the fair market value of the Common Stock on the
date of grant. Stock bonuses may be awarded in consideration for past services
without a purchase payment.

Upon certain changes in control of the Company, all outstanding awards
under the Incentive Plans shall be continued, assumed or substituted by the
surviving entity. If the surviving entity determines not to continue, assume or
substitute such awards, then the vesting of such awards shall be accelerated and
shall be terminated if not exercised prior to such event. In the event of a
dissolution or liquidation of the Company, outstanding, unexercised awards shall
be terminated.

Employee Stock Purchase Plan. In December 1996, the Company's Board of
Directors adopted the Employee Stock Purchase Plan (the "Purchase Plan")
covering an aggregate of 350,000 shares of Common Stock. 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 of Directors may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. The offering period for
any offering will be no more than 27 months. The Board has currently authorized
an offering period to begin with the effectiveness of this offering and ending
December 31, 1998 and additional 24-month offering periods to begin each July 1
and January 1 thereafter.

Employees are eligible to participate if they are employed by the Company
or an affiliate of the Company designated by the Board of Directors, provided
that under the currently authorized offerings an employee's customary employment
must be for at least 20 hours per week and five months per calendar year.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the Purchase Plan and applied, on specified dates
determined by the Board of Directors, to the purchase of shares of Common Stock.
Under the currently authorized offerings, the purchase dates are each June 30
and December 31. 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
on 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 or, under the currently authorized offerings, when the employee
elects to enroll in another offering.

In the event of certain changes of control, the Board of Directors has
discretion to provide that each right to purchase Common Stock may be assumed or
an equivalent right substituted by the

48
<PAGE> 50

successor corporation, or the Board may shorten the offering period and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to the change in control. The Board has the authority to amend
or terminate the Purchase Plan, subject to the limitation that no such action
may adversely affect any outstanding rights to purchase Common Stock.

401(k) Plan. As of October 31, 1996, the Company adopted a tax-qualified
employee savings and retirement plan (the "401(k) Plan") covering the Company's
employees. Pursuant to the 401(k) Plan, eligible employees may elect to reduce
their current compensation by up to the lesser of 20% of their annual
compensation or the statutorily prescribed annual limit ($9,500 in 1996 and
1997) and have the amount of such reduction contributed to the 401(k) Plan.
Although the Company does not currently match contributions by employees, the
401(k) Plan allows for matching contributions to be made by the Company in an
amount determined by the Company. The trustees under the 401(k) Plan, at the
direction of each participant, invest the assets of the 401(k) Plan in
designated investment options. The 401(k) Plan is intended to qualify under
Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"), so
that contributions to the 401(k) Plan, and income earned on the 401(k) Plan
contributions, are not taxable until withdrawn, and so that the contributions by
the Company will be deductible when made.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth for each of the Named Executive Officers
each grant of stock options granted during the fiscal year ended December 31,
1996:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED ANNUAL RATES OF STOCK
UNDERLYING IN FISCAL EXERCISE PRICE APPRECIATION
OPTIONS 1996 PRICE EXPIRATION FOR OPTION TERM(4)
NAME GRANTED(1) (%)(2) ($/SH)(3) DATE 5% $ 10% $
- ------------------------------------ ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Bigham................... -- -- -- -- -- --
Arnold Oronsky, Ph.D. .............. -- -- -- -- -- --
Dan Shochat, Ph.D. ................. 25,000 3.7% $ .75 06/13/06 $11,792 $29,883
16,666(5) 2.5% $2.25 10/31/06 $23,585 $59,763
</TABLE>

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

(1) Options granted in 1996 generally vest over four years, with 25% of the
option shares becoming fully vested one year from the grant date and 1/48th
vesting in each successive month, with full vesting occurring on the fourth
anniversary date.

(2) Based on an aggregate of 678,492 options granted to employees and directors
of and consultants to the Company in 1996, including the Named Executive
Officers.

(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant, as determined by the Board
of Directors.

(4) The potential realizable value is calculated by assuming that the stock
price on the date of grant as determined by the Board of Directors
appreciates at the indicated annual rate compounded annually for the entire
term of the option (ten years) and the option is exercised and sold on the
last day of its term for the appreciated stock price. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price.

(5) Twenty-five percent of these option shares vest annually commencing October
31, 2000, with full vesting October 31, 2004.

49
<PAGE> 51

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

The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on the exercise of stock options during
the fiscal year ended December 31, 1996 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1996:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Bigham................ -- -- -- -- -- --
Arnold Oronsky, Ph.D. ........... -- -- -- -- -- --
Dan Shochat, Ph.D. .............. 21,874 $157,493 2,431 75,694 $28,445 $ 841,872
</TABLE>

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

(1) Based on the fair market value of $12.00 per share on December 31, 1996, as
determined by the Company's Board of Directors minus the exercise price
multiplied by the number of shares underlying the option.

LIMITATION OF LIABILITY AND INDEMNIFICATION

As permitted by the Delaware General Corporation Law (the "Delaware Law"),
the Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except (i) for any
breach of the directors' duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or involving intentional misconduct
or a knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions, or (iv) for any transaction from which the
director derives any improper personal benefit. In addition, the Company's
Bylaws provide that the Company shall indemnify any director and may indemnify
any officer, to the fullest extent permitted by the Delaware Law, who was or is
a party or is threatened to be made a party to any action or proceeding by
reason of his or her services to the Company.

The Company has entered into indemnification agreements with each of its
directors and executive officers pursuant to which the Company has indemnified
each of them against expenses and losses incurred for claims brought against
them by reason of their being a director or executive officer of the Company. In
addition, the Company intends to purchase directors' and officers' liability
insurance.

There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or executive officer.

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<PAGE> 52

CERTAIN TRANSACTIONS

The Company was incorporated in February 1995. In connection with its
formation, the Company issued 5,000,000 shares of its Series A Preferred Stock
(the "Series A Stock") to Coulter Corporation in exchange for rights to certain
intellectual property, know-how, contractual rights and other assets pertaining
to the Company's B-1 Therapy pursuant to an assignment agreement dated February
24, 1995, and issued 2,500,000 shares of Series A Stock to InterWest Partners V,
L.P. ("InterWest") and certain parties related thereto in exchange for
$2,500,000 in cash. In connection with such transaction, the Company assumed
certain obligations to pay minimum annual license fees and royalties due upon
sales of the B-1 Therapy.

Coulter Corporation has also supplied B-1 Antibody and certain services at
its cost to support the Company's ongoing development of the B-1 Therapy. See
Note 7 of Notes to Financial Statements. The need for such services is
declining, and the Company believes that this arrangement will be ended during
1997. In addition, the Company has agreed to reimburse Coulter Corporation for
royalties (payable upon sales of the B-1 Therapy, if any) due to a third party
for certain intellectual property rights sublicensed to the Company. Coulter
Corporation has the right to convert the initial reimbursements of royalties, up
to a maximum of $4,500,000, into Common Stock of the Company at the fair market
value thereof at the time such reimbursements are due. Additionally, in April
1995, the Company reimbursed Coulter Corporation $100,000 for a one-time license
issue fee previously paid by Coulter Corporation in connection with certain
intellectual property rights assigned to the Company. Joseph Coulter, III and
Sue Van, directors of the Company, are executive officers of Coulter Corporation
and Mr. Coulter is a director of and beneficial stockholder of Coulter
Corporation.

In August and September 1995, the Company issued 2,333,333 shares of its
Series B Preferred Stock (the "Series B Stock") for aggregate consideration of
$3,500,000 in cash, including: (i) 2,266,667 shares of Series B Stock to
InterWest and certain parties related thereto, (ii) 16,667 shares of Series B
Stock to the Richard M. Lucas Foundation, of which Donald L. Lucas, a director
of the Company, is the Chairman of the Board and (iii) 16,666 shares of Series B
Stock to the Donald L. Lucas Profit Sharing Trust of which Mr. Lucas is the
successor trustee.

In April 1996, the Company issued 9,964,607 shares of its Series C
Preferred Stock (the "Series C Stock") and warrants to purchase 498,705 shares
of its Common Stock (after giving effect to the one-for-three reverse stock
split), at an exercise price of $9.00 per share (the "Warrants") for aggregate
consideration of $22,420,366 in cash, including: (i) 888,889 shares of Series C
Stock and Warrants to purchase 44,488 shares of Common Stock to InterWest and
certain parties related thereto, (ii) 1,111,111 shares of Series C Stock and
Warrants to purchase 55,611 shares of Common Stock to BankAmerica Ventures and
certain parties related thereto, (iii) 1,122,222 shares of Series C Stock and
Warrants to purchase 56,167 shares of Common Stock to Brentwood Associates VII,
L.P. ("Brentwood") and certain parties related thereto, (iv) 948,884 shares of
Series C Stock and Warrants to purchase 47,490 shares of Common Stock to certain
entities affiliated with Donald L. Lucas, a director of the Company, (v) 102,222
shares of Series C Stock and Warrants to purchase 5,116 shares of Common Stock
to a charitable trust formed by Michael F. Bigham, Chief Executive Officer,
President and a director of the Company, (vi) 100,000 shares of Series C Stock
and Warrants to purchase 5,005 shares of Common Stock to Sue Van, a director of
the Company, (vii) 11,111 shares of Series C Stock and Warrants to purchase 566
shares of Common Stock to Brian Atwood, a director of the Company and (viii)
11,111 shares of Series C Stock and Warrants to purchase 1,668 shares of Common
Stock to Joseph R. Coulter, III, a director of the Company.

Each share of Preferred Stock will automatically convert into one-third of
a share of Common Stock upon completion of this offering.

Pursuant to a letter dated March 9, 1995 from the Company to Dr. Dan
Shochat, Vice President, Research and Development of the Company, if the Company
terminates Dr. Shochat's employment for any reason prior to March 1997, the
Company will pay Dr. Shochat, a sum equal to six months annual salary.

51
<PAGE> 53

In August 1995 and February 1996, in connection with consulting services
provided to the Company, the Company granted Mr. Atwood, a director of the
Company, options to purchase 2,059 and 4,021 shares of Common Stock,
respectively, at an exercise price of $.30 per share. Such options were
immediately exercisable and fully vested. Mr. Atwood received compensation of
$94,863 for such consulting services.

In March 1996, Michael F. Bigham, Chief Executive Officer and President of
the Company, purchased 400,000 shares of Common Stock at $0.45, the fair market
value of such shares, and purchased the shares by delivering a promissory note
in the amount of $180,000. The Company has a right to repurchase these shares in
the event Mr. Bigham's employment is terminated. Such repurchase right lapses
over a four year period which may be accelerated if Mr. Bigham's employment is
involuntarily terminated for a reason other than gross misconduct. If the
Company terminates Mr. Bigham's employment for any reason, other than gross
misconduct, the Company will continue to pay his salary and provide full
benefits for one year after such termination and the Company's stock repurchase
rights will continue to expire during such period. In the event of a change in
control of the Company, Mr. Bigham will receive severance equal to at least two
years salary plus a 30% bonus and full benefits for two years. In addition, all
repurchase right expirations will be accelerated in full. During June 1996, Mr.
Bigham provided consulting services to the Company for which he was paid
$57,000. In July 1996, the Company entered into an agreement with Mr. Bigham
pursuant to which he repaid an outstanding loan to the Company in the amount of
$180,000 and obtained from the Company a home loan in the amount of $280,000,
which new loan is secured by a second deed of trust on his principal residence.
This loan will be forgiven semiannually at the rate of 12.5% per semiannual
period so long as Mr. Bigham remains employed by the Company. If Mr. Bigham's
employment is terminated, interest shall commence and begin to accrue at the
prime rate plus two percentage points and will become due and payable within 60
days of his termination. If Mr. Bigham's employment is terminated for other than
gross misconduct or death, the principal of such loan shall become due upon the
earlier of Mr. Bigham securing other employment or the date 60 days from the
date of his termination. In the event of a change in control of the Company, the
remaining balance on the home loan will be forgiven.

In June 1996 and October 1996, the Company granted Mr. Harris, Vice
President and Chief Financial Officer of the Company, options to purchase 58,333
shares of Common Stock at $0.75 per share and 8,333 shares of Common Stock at
$2.25 per share, respectively. Such options vest over a four-year period. In
October, the Company also granted Mr. Harris an option to purchase 16,666 shares
of Common Stock at $2.25 per share which will begin vesting in October 2000. If
the Company terminates Mr. Harris' employment for any reason other than good
cause prior to July 1997, the Company will continue to pay his salary for six
months after such termination.

52
<PAGE> 54

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 6, 1996 for (i) each
stockholder who is known by the Company to own beneficially more than five
percent of the Company's Common Stock; (ii) each Named Executive Officer; (iii)
each director of the Company and (iv) all executive officers and directors of
the Company as a group. Except as otherwise provided below, the address of each
person listed is c/o the Company, 550 California Avenue, Suite 200, Palo Alto,
California 94306.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED(1)
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ------------------------------------------------------------- --------------------- -------- --------
<S> <C> <C> <C>
Entities Affiliated with InterWest Partners(2)............... 1,811,143 24.0% 18.0%
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
Robert Momsen(2)............................................. 1,811,143 24.0 18.0
Arnold Oronsky(2)............................................ 1,799,824 23.9 17.9
Joseph R. Coulter, III(3).................................... 1,675,184 22.2 16.7
Coulter Corporation.......................................... 1,666,666 22.1 16.6
Coulter Technology Center
11800 SW 147th Avenue
Miami, FL 33196
Michael F. Bigham(4)......................................... 439,190 5.8 4.4
Brian G. Atwood(5)........................................... 436,320 5.8 4.3
Brentwood Associates VII, L.P.(6)............................ 430,240 5.7 4.3
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
Entities Affiliated with BankAmerica Ventures(7)............. 425,981 5.7 4.2
950 Tower Lane, #700
Foster City, CA 94404
Donald L. Lucas(8)........................................... 374,894 5.0 3.7
Sue Van(9)................................................... 38,338 * *
Dan Shochat(10).............................................. 26,736 * *
George J. Sella, Jr. ........................................ 0 * *
All executive officers and directors as a
group (8 persons)(11)...................................... 4,801,805 63.7 47.8
</TABLE>

- ---------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of the Company's Common Stock.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange 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
Company believes, based on information furnished by such persons, that 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 7,535,604 shares of Common
Stock outstanding as of December 6, 1996 (including 498,705 shares to be
issued upon the exercise of outstanding warrants prior to the closing of
this offering), and 10,035,604 shares of Common Stock outstanding after
completion of this offering. Beneficial ownership of Common Stock issuable
pursuant to outstanding warrants is calculated on a cash exercise basis.

(2) Includes 1,766,666 shares held by InterWest Partners V, L.P., 11,111 shares
held by InterWest Investors V, 33,158 shares to be issued to InterWest
Partners V, L.P. upon the exercise of an outstanding warrant prior to the
closing of this offering and 208 shares to be issued to InterWest Investors
V upon the exercise of an outstanding warrant prior to the closing of this
offering; provided that shares attributable to Dr. Oronsky do not include
any shares owned or warrants held by InterWest Investors V. Mr. Momsen and
Dr. Oronsky,

53
<PAGE> 55

directors of the Company, are general partners of InterWest Management Partners
V, L.P. which is the general partner of InterWest Partners V, L.P. Mr. Momsen is
a general partner of InterWest Investors V. Mr. Momsen and Dr. Oronsky disclaim
beneficial ownership of the shares held by InterWest Partners V, L.P. and
InterWest Investors V, except to the extent of their respective pecuniary
interest therein.

(3) Includes 1,666,666 shares held by Coulter Corporation, 3,703 shares held by
his wife Susan Sekman Coulter, 556 shares to be issued to Mr. Coulter upon
the exercise of an outstanding warrant prior to the closing of this
offering and 556 shares to be issued to Ms. Coulter upon the exercise of an
outstanding warrant prior to the closing of this offering. Mr. Coulter is a
director, officer and beneficial stockholder of Coulter Corporation.

(4) Includes 375,000 shares that were issued pursuant to a restricted stock
purchase agreement 341,666 of which will be subject to repurchase by the
Company as of February 6, 1997. Also includes 34,074 shares held by a
charitable trust formed by Michael F. Bigham and 5,116 shares to be issued
to such trust upon the exercise of an outstanding warrant prior to the
closing of this offering and 25,000 shares held by an irrevocable trust
formed for members of Mr. Bigham's family. Mr. Bigham disclaims beneficial
ownership of the shares held in each such trust except to the extent of his
pecuniary interest therein.

(5) Includes 556 shares to be issued to Mr. Atwood upon the exercise of an
outstanding warrant prior to the closing of this offering. Also includes
the shares owned and a warrant held by Brentwood Associates VII, L.P.
identified in footnote (6) below. Mr. Atwood, a director of the Company, is
a venture partner of Brentwood VII Ventures, L.P., which is the general
partner of Brentwood Associates VII, L.P. Mr. Atwood disclaims beneficial
ownership of the shares held by Brentwood Associates VII, L.P., except to
the extent of his pecuniary interest therein.

(6) Includes 370,370 shares held by Brentwood Associates VII, L.P., 3,703
shares held by the Brentwood Associates Venture Capital 1982 Profit Sharing
Trust (the "BAVC Profit Sharing Trust"), 55,611 shares to be issued to
Brentwood Associates VII, L.P. upon the exercise of an outstanding warrant
prior to the closing of this offering and 556 shares to be issued to the
BAVC Profit Sharing Trust upon the exercise of an outstanding warrant prior
to the closing of this offering.

(7) Includes 333,333 shares held by BankAmerica Ventures, 37,037 shares held by
BA Venture Partners II, 50,050 shares to be issued to BankAmerica Ventures
upon the exercise of an outstanding warrant prior to the closing of this
offering and 5,561 shares to be issued to BA Venture Partners II upon the
exercise of an outstanding warrant prior to the closing of this offering.

(8) Includes 5,555 shares held by the Donald Lucas Profit Sharing Trust, 31,850
shares held by the Donald L. Lucas & Lygia S. Lucas Trust, 37,407 shares
held by the Richard M. Lucas Foundation, 74,074 shares held by Sand Hill
Financial Company, and 178,519 shares held by Teton Capital Company. Also
includes 4,782 shares to be issued to the Donald L. Lucas & Lygia S. Lucas
Trust upon the exercise of an outstanding warrant prior to the closing of
this offering, 4,782 shares to be issued to the Richard M. Lucas Foundation
upon the exercise of an outstanding warrant prior to the closing of this
offering, 11,122 shares to be issued to Sand Hill Financial Company upon
the exercise of an outstanding warrant prior to the closing of this
offering and 26,804 shares to be issued to Teton Capital Company upon the
exercise of an outstanding warrant prior to the closing of this offering.
Donald L. Lucas, a director of the Company, is trustee of the Donald Lucas
Profit Sharing Trust, trustee of the Donald L. Lucas & Lygia S. Lucas
Trust, Chairman of the Board of the Richard M. Lucas Foundation, a general
partner of the Sand Hill Financial Company and the general partner of Teton
Capital Company. Mr. Lucas disclaims beneficial ownership of the shares,
except to the extent of his pecuniary interest therein.

(9) Includes 14,333 shares held by the Sue Van Revocable Trust, 2,853 shares to
be issued to Ms. Van upon the exercise of an outstanding warrant prior to
the closing of this offering and 2,152 shares to be issued to the Sue Van
Revocable Trust upon the exercise of an outstanding warrant prior to the
closing of this offering.

(10) Includes 4,861 shares of Common Stock subject to options exercisable within
60 days of December 1, 1996.

(11) Includes 4,219,328 shares held by entities and persons affiliated with
certain directors and executive officers as described above, 148,256 shares
to be issued upon the exercise of outstanding warrants prior to the closing
of this offering and 4,861 shares of Common Stock subject to options
exercisable within 60 days of December 6, 1996.

54
<PAGE> 56

DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Common Stock, $.001 par value, and
3,000,000 shares of Preferred Stock, $.001 par value.

COMMON STOCK

As of December 6, 1996, there were 7,535,604 shares of Common Stock
outstanding (after giving effect to the conversion of all Preferred Stock and
the one-for-three reverse stock split and the exercise of all warrants that
would otherwise terminate upon completion of the offering) held of record by 80
stockholders. The holders of Common Stock are entitled to one vote per share on
all matters to be voted on by the stockholders. Subject to preferences that may
be applicable to outstanding shares of Preferred Stock, if any, the holders of
Common Stock are entitled to receive ratably such dividends as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy". In the event of the liquidation, dissolution of
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
liquidation rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive conversion rights or other subscription rights. There
are no redemption or sinking funds 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 outstanding upon completion of this offering
will be fully paid and non-assessable.

PREFERRED STOCK

Upon completion of this offering, no shares of Preferred Stock will be
outstanding. The Board of Directors will have the authority to issue up to
3,000,000 shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon such
Preferred Stock, including dividend rights, conversion rights, terms of
redemption, liquidation preference sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by the stockholders. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock. The
issuance of Preferred Stock could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock.

WARRANTS

Upon the completion of this offering, the Company will have a warrant
outstanding to purchase 24,666 shares of the Company's Common Stock at a
purchase price of $9.75 per share, subject to adjustment in certain
circumstances. This warrant expires in December 2002.

REGISTRATION RIGHTS

The holders (or their permitted transferees) of approximately 7,097,994
shares of Common Stock ("Holders") are entitled to certain rights with respect
to the registration of such shares under the Securities Act of 1933, as amended
(the "Securities Act"). Under the terms of an agreement between the Company and
such holders, if the Company proposes to register any of its Common Stock,
subject to certain exceptions, under the Securities Act, the Holders are
entitled to notice of the registration and are entitled to include, at the
Company's expense, shares of such Common Stock therein. The Holders have waived
their registration right with respect to this offering. In addition, the Holders
of sufficient shares with registration rights may require the Company at its
expense on no more than two occasions to file a registration statement under the
Securities Act with respect to their shares of Common Stock. Such rights may not
be exercised until 180 days after the effective date of this offering. Further,
Holders of sufficient shares with registration rights may require the Company to
register their

55
<PAGE> 57

shares on Form S-3 when such form becomes available to the Company, subject to
certain conditions and limitations. Such registration rights expire seven years
after the completion of this offering.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of Section 203 of the Delaware
Law. In general, Section 203 prohibits a public Delaware corporation from
engaging in a "business combination" 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. Generally, a "business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's voting stock. The statute could have the effect of delaying,
deferring or preventing a change in control of the Company.

The Company's Certificate of Incorporation and Bylaws which will become
effective upon the closing of this offering also require 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 the stockholders and may
not be effected by a consent in writing. In addition, special meetings of the
stockholders of the Company may be called only by the Board of Directors, the
Chairman of the Board or the Chief Executive Officer of the Company. The
Company's Certificate of Incorporation also specifies that the authorized number
of directors may be changed only by resolution of the Board of Directors. These
provisions may have the effect of deterring hostile takeovers or delaying
changes in control or management of the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is
ChaseMellon Shareholder Services.

56
<PAGE> 58

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 the market price of the Common Stock
prevailing from time to time. Furthermore, since only a limited number of shares
will be available for sale shortly after this 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
the 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 this offering, the Company will have outstanding an
aggregate of 10,035,604 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of options outstanding as of
December 6, 1996. Of these shares, the 2,500,000 shares of Common Stock sold in
this offering will be freely tradable without restriction or further
registration under the Securities Act, unless held by Affiliates of the Company.
The remaining 7,535,604 shares of Common Stock held by existing stockholders are
Restricted Shares. Restricted Shares may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules 144
or 701 promulgated under the Securities Act, which rules are summarized below.
As a result of Lock-up Agreements and the provisions of Rules 144 and 701,
additional shares will be available for sale in the public market as follows:
(i) no Restricted Shares will be eligible for immediate sale on the effective
date of this offering; (ii) 2,937,608 Restricted Shares (plus 154,794 shares of
Common Stock issuable to employees and consultants pursuant to stock options
that are then vested) will be eligible for sale upon expiration of the Lock-up
Agreements 180 days after the date of this Prospectus; and (iii) the remainder
of the Restricted Shares will be eligible for sale from time to time thereafter
upon expiration of their respective two-year holding periods.

Upon completion of this offering, the holders of 7,097,994 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. See "Description of
Capital Stock -- Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by Affiliates,
if any) immediately upon the effectiveness of such registration.

The Company's officers, directors and certain stockholders, who will own in
the aggregate 7,480,228 shares of Common Stock after the offering, have agreed
that they will not, without the prior written consent of Hambrecht & Quist LLC,
offer, sell, or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into Shares of Common Stock owned by them during the 180-day period
following the date of this Prospectus. The Company has agreed that it will not,
without the prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities exchangeable for or convertible into shares
of Common Stock during the 180-day period following the date of this Prospectus,
except that the Company may issue shares upon the exercise of options granted
and warrants outstanding prior to the date hereof, and may grant additional
options under its stock option plans, provided that, without the prior written
consent of Hambrecht & Quist LLC, such additional options shall not be
exercisable during such period. Any shares subject to the Lock-up Agreements may
by released at any time without notice by Hambrecht & Quist LLC.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years will be entitled to sell in 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 (approximately 100,356 shares
immediately after the offering) 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 notice of

57
<PAGE> 59

the sale is filed with the SEC. Sales pursuant to Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
current public information about the Company. A person (or persons whose shares
are aggregated) who is not deemed to have been an Affiliate of the Company at
any time during the 90 days immediately preceding the sale and who has
beneficially owned the shares proposed to be sold for at least three years is
entitled to sell such shares under Rule 144(k) without regard to the limitations
described above.

The SEC is currently considering a proposal to reduce the initial Rule 144
holding period to one year and the Rule 144(k) holding period to two years. This
proposal, if adopted, would substantially increase the number of shares of
Restricted Shares eligible for sale upon expiration of the Lock-up Agreements.
No assurance can be given concerning whether or when the proposal will be
adopted by the SEC.

An employee, officer or director of or consultant to the Company who
purchased shares or was granted options to purchase shares pursuant to a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701 under the Securities Act, which permits Affiliates and non-Affiliates
to sell their Rule 701 shares without having to comply with Rule 144's holding
period restrictions, 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.

The Company intends to file a registration statement under the Securities
Act covering shares of Common Stock reserved for issuance under the Company's
1995 Plan, 1996 Plan and Purchase Plan. Based on the number of options
outstanding and options and shares reserved for issuance at December 6, 1996,
such registration statement would cover approximately 2,579,057 shares. Such
registration statement is expected to be filed and to become effective as soon
as practicable after the closing 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 upon expiration of the
Lock-up agreements or contractual restrictions and any vesting restrictions. As
of December 6, 1996, options to purchase 802,306 shares of Common Stock were
issued and outstanding under the 1995 Plan, and no options to purchase shares
had been granted under the 1996 Plan and Purchase Plan. See
"Management -- Equity Incentive Plans."

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<PAGE> 60

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC,
Alex. Brown & Sons Incorporated and Pacific Growth Equities, Inc., have
severally agreed to purchase from the Company the following respective number of
shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
------------------------------------------------------------------ ---------
<S> <C>
Hambrecht & Quist LLC.............................................
Alex. Brown & Sons Incorporated...................................
Pacific Growth Equities, Inc......................................

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

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly 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 not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the Representatives of the Underwriters.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 375,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the 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 offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.

59
<PAGE> 61

The Company's officers, directors and certain stockholders, who will own in
the aggregate 7,480,228 shares of Common Stock after the offering, have agreed
that they will not, without the prior written consent of Hambrecht & Quist LLC,
offer, sell or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into Shares of Common Stock owned by them during the 180-day period
following the date of this Prospectus. The Company has agreed that it will not,
without the prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities exchangeable for or convertible into shares
of Common Stock during the 180-day period following the date of this Prospectus,
except that the Company may issue shares upon the exercise of options granted
and warrants outstanding prior to the date hereof, and may grant additional
options under its stock option plans, provided that, without the prior written
consent of Hambrecht & Quist LLC, such additional options shall not be
exercisable during such period.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, 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.

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward LLP, Palo Alto, California ("Cooley Godward"). Certain
legal matters will be passed upon for the Underwriters by Wilson Sonsini
Goodrich & Rosati, Palo Alto, California. As of the date of this Prospectus, a
total of 4,444 shares of Common Stock and a warrant to purchase 667 shares of
Common Stock were beneficially owned by Cooley Godward.

EXPERTS

The Consolidated Financial Statements of Coulter Pharmaceutical, Inc. at
December 31, 1995 and September 30, 1996, and for the period from inception
(February 16, 1995) to September 30, 1996 appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

The Financial Statements of the Antibody Therapeutics Business Operations
of Coulter Corporation at December 31, 1993 and 1994, and for each of the two
years in the period ended December 31, 1994 and for the period from January 1,
1995 to February 15, 1995, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

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<PAGE> 62

ADDITIONAL INFORMATION

A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered by the Company has been filed with the SEC,
Washington, D.C. 20549. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to 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. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules thereto. A copy of the
Registration Statement may be inspected by anyone without charge at the public
reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC'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, and copies of all or any part thereof may be obtained from such offices,
upon payment of certain fees prescribed by the SEC. The SEC maintains a World
Wide Web site that contains reports, proxy and information statements and other
information filed electronically with the SEC. The address of the SEC's World
Wide Website is http://www.sec.gov.

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<PAGE> 63

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COULTER PHARMACEUTICAL, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statement of Stockholders' Equity........................................ F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF COULTER CORPORATION
Report of Ernst & Young LLP, Independent Auditors..................................... F-15
Balance Sheets........................................................................ F-16
Statements of Operations.............................................................. F-17
Statements of Cash Flows.............................................................. F-18
Notes to Financial Statements......................................................... F-19
</TABLE>

F-1
<PAGE> 64

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Coulter Pharmaceutical, Inc.

We have audited the accompanying consolidated balance sheets of Coulter
Pharmaceutical, Inc. (a development stage company) (the "Company") as of
December 31, 1995 and September 30, 1996, and the related consolidated
statements of operations and cash flows for the periods from inception (February
16, 1995) to December 31, 1995 and September 30, 1996 and for the nine months
ended September 30, 1996, and the related consolidated statement of
stockholders' equity for the period from inception (February 16, 1995) to
September 30, 1996. 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 consolidated financial position of Coulter
Pharmaceutical, Inc. at December 31, 1995 and September 30, 1996, and the
consolidated results of its operations and its cash flows for the periods from
inception (February 16, 1995) to December 31, 1995 and September 30, 1996 and
for the nine months ended September 30, 1996, in conformity with generally
accepted accounting principles.

Palo Alto, California
October 31, 1996, except
for Note 10, as to which
the date is January , 1997
- --------------------------------------------------------------------------------

The foregoing report is in the form that will be signed upon completion of the
one-for-three reverse common stock split described in Note 10 to the
consolidated financial statements.

/s/ Ernst & Young LLP

Palo Alto, California

January 15, 1997

F-2
<PAGE> 65

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

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

<TABLE>
<CAPTION>
UNAUDITED PRO
FORMA
STOCKHOLDERS'
EQUITY AT
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1996
------------ ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 3,438 $ 15,101
Short-term investments............................... -- 3,734
Prepaid expenses and other current assets............ 40 285
Current portion of employee loans receivable......... 31 55
------- --------
Total current assets......................... 3,509 19,175
Property and equipment, net............................ 93 900
Other assets........................................... 26 115
Employee loans receivable.............................. -- 294
------- --------
$ 3,628 $ 20,484
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 341 $ 1,485
Payable to Coulter Corporation....................... 25 63
Accrued liabilities.................................. 265 4,130
------- --------
Total current liabilities.................... 631 5,678
Commitments
Stockholders' equity:
Preferred stock, issuable in series, $.001 par value,
20,000,000 shares authorized: 9,833,333 and
19,797,940 shares issued and outstanding at
December 31, 1995 and September 30, 1996,
respectively; at amounts paid in; aggregate
liquidation preference of $33,420 at September 30,
1996 (pro forma: $.001 par value, 3,000,000 shares
authorized, none outstanding)..................... 5,989 28,355 $ --
Common stock, $.001 par value: 25,000,000 shares
authorized; 2,059 and 412,274 shares issued and
outstanding at December 31, 1995 and September 30,
1996, respectively (pro forma: $.001 par value,
30,000,000 shares authorized, 7,011,563 shares
issued and outstanding at September 30, 1996)..... -- 1 7
Additional paid-in capital........................... 1 786 29,135
Net unrealized loss on securities
available-for-sale................................ -- (24) (24)
Deferred compensation................................ -- (498) (498)
Deficit accumulated during the development stage..... (2,993) (13,814) (13,814)
------- -------- --------
Total stockholders' equity................... 2,997 14,806 $ 14,806
======= ======== ========
$ 3,628 $ 20,484
======= ========
</TABLE>

See accompanying notes.

F-3
<PAGE> 66

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

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

<TABLE>
<CAPTION>
FOR THE PERIODS FROM FOR THE PERIOD
INCEPTION FROM INCEPTION
(FEBRUARY 16, 1995) TO NINE MONTHS (FEBRUARY 16,
---------------------------- ENDED 1995) TO
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1996
------------ SEPTEMBER 30, ------------- --------------
1995
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operating expenses:
Research and development................ $ 2,539 $ 1,488 $ 9,896 $ 12,435
General and administrative.............. 581 380 1,453 2,034
------- ------- -------- --------
Total operating expenses........ 3,120 1,868 11,349 14,469
Interest income........................... 127 73 528 655
------- ------- -------- --------
Net loss.................................. $ (2,993) $(1,795) $ (10,821) $(13,814)
======= ======= ======== ========
Pro forma net loss per share.............. $ (0.44) $ (1.40)
------- --------
Shares used in computing pro forma net
loss per share.......................... 6,798 7,736
======= ========
</TABLE>

See accompanying notes.

F-4
<PAGE> 67

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NET DEFICIT
CONVERTIBLE UNREALIZED LOSS ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL ON SECURITIES DURING THE TOTAL
-------------------- ------------------ PAID-IN AVAILABLE-FOR- DEFERRED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SALE COMPENSATION STAGE EQUITY
---------- ------- --------- ------ ---------- --------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance
of
Series A
convertible
preferred
stock to
founders
at $1.00
per
share
for cash
and
technology
in
February
1995.... 7,500,000 $ 2,500 -- $-- $ -- $ -- $ -- $ -- $ 2,500
Issuance
of
Series B
convertible
preferred
stock to
a
founder
at $1.50
per
share
for cash
in
August
and
October
1995,
less
issuance
costs of
$11..... 2,333,333 3,489 -- -- -- -- -- -- 3,489
Exercise
of
common
stock
options
by a
consultant
at $0.30
per
share
for cash
in
November
1995.... -- -- 2,059 -- 1 -- -- -- 1
Net loss.. -- -- -- -- -- -- -- (2,993) (2,993)
---------- ------- --------- --- ---- ---- ----- -------- --------
BALANCES
AT
DECEMBER
31,
1995.... 9,833,333 5,989 2,059 -- 1 -- -- (2,993) 2,997
Issuance
of
Series C
convertible
preferred
stock
and
warrants
for
498,705
shares
of
common
stock to
investors
at $2.25
per
share
for cash
in April
1996,
less
issuance
costs of
$55..... 9,964,607 22,366 -- -- -- -- -- -- 22,366
Issuance
of
common
stock to
a
prospective
officer at
$0.45 per
share
for cash
in March
1996.... -- -- 400,000 1 179 -- -- -- 180
Exercise
of
common
stock
options
by a
director
and a
consultant
at $0.30
and
$0.75
per
share
for cash
in March
1996 and
August
1996.... -- -- 10,215 -- 4 -- -- -- 4
Unrealized
loss on
securities
available-for-sale,
net..... -- -- -- -- -- (24) -- -- (24)
Deferred
compensation
related to
grants
of
certain
stock
options... -- -- -- -- 602 -- (602) -- --
Amortization
of
deferred
compensation... -- -- -- -- -- -- 104 -- 104
Net
loss.... -- -- -- -- -- -- -- (10,821) (10,821)
---------- ------- --------- --- ---- ---- ----- -------- --------
BALANCES
AT
SEPTEMBER
30,
1996.... 19,797,940 $28,355 412,274 $1 $786 $ (24) $ (498) $ (13,814) $ 14,806
========== ======= ========= === ==== ==== ===== ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 68

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE PERIODS FROM FOR THE PERIOD
INCEPTION (FEBRUARY 16, FROM INCEPTION
1995) TO NINE MONTHS (FEBRUARY 16,
---------------------------- ENDED 1995) TO
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1996
------------ SEPTEMBER 30, ------------- --------------
1995
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................. $ (2,993) $(1,795) $ (10,821) $(13,814)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization........... 15 8 34 49
Amortization of deferred compensation... -- -- 104 104
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets............................. (40) (95) (245) (285)
Employee loans receivable............ (31) (30) (318) (349)
Other assets......................... (29) (26) (92) (121)
Accounts payable..................... 341 417 1,144 1,485
Payable to Coulter Corporation....... 25 41 38 63
Accrued liabilities.................. 265 232 3,865 4,130
------- ------- -------- --------
Net cash used in operating activities..... (2,447) (1,248) (6,291) (8,738)
------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments........ -- -- (3,758) (3,758)
Purchases of property and equipment....... (105) (74) (838) (943)
------- ------- -------- --------
Net cash used in investing activities..... (105) (74) (4,596) (4,701)
------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuances of convertible
preferred stock, net.................... 5,989 5,942 22,366 28,355
Proceeds from issuance of common stock.... 1 -- 184 185
------- ------- -------- --------
Net cash provided by financing
activities.............................. 5,990 5,942 22,550 28,540
------- ------- -------- --------
Net increase in cash and cash
equivalents............................. 3,438 4,620 11,663 15,101
Cash and cash equivalents at beginning of
period.................................. -- -- 3,438 --
------- ------- -------- --------
Cash and cash equivalents at end of
period.................................. $ 3,438 $ 4,620 $ 15,101 $ 15,101
======= ======= ======== ========
</TABLE>

See accompanying notes.

F-6
<PAGE> 69

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE PERIOD FROM INCEPTION (FEBRUARY 16, 1995) TO
SEPTEMBER 30, 1995 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

Coulter Pharmaceutical, Inc. (the "Company" or "Coulter") was incorporated
in the State of Delaware on February 16, 1995 to engage in the research and
development of products for the treatment of cancer. The Company's principal
activities to date have involved conducting research and development, recruiting
management and technical personnel, obtaining financing and securing operating
facilities. Therefore, the Company is classified as a development stage company.

In the course of its development activities, the Company has sustained
continuing operating losses and expects such losses to continue over the next
several years. The Company plans to continue to finance the Company with a
combination of stock sales, such as the initial public offering contemplated by
this Prospectus and, in the longer term, revenues from product sales and
technology licenses. The Company's ability to continue as a going concern is
dependent upon successful execution of financings and, ultimately, upon
achieving profitable operations. If the public offering contemplated herein is
not consummated, the Company will have to seek other sources of capital or
adjust its operating plans.

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Coulter Pharma Belgium, SA which was formed
under the laws of Belgium in June 1996. Intercompany balances and transactions
have been eliminated.

In connection with its formation, the Company issued 5,000,000 shares of
its Series A preferred stock to Coulter Corporation in exchange for rights to
certain intellectual property, contractual rights and other assets pertaining to
the Company's B-1 Therapy (convertible into 1,666,666 shares of common stock).
Under the terms of this assignment agreement, royalties are payable to Coulter
Corporation upon commercial sale of product, if any, derived from these
licenses. Coulter Corporation also has the right, in lieu of receiving cash, to
purchase additional shares of the Company's equity securities at the then
current fair market value of such securities with respect to the first $4.5
million payable to Coulter Corporation under this assignment agreement. This
transaction was accounted for as an acquisition of assets from an affiliate with
the amounts brought over at their historical basis of $0.

INTERIM FINANCIAL DATA

The interim financial data for the period from inception (February 16,
1995) to September 30, 1995 is unaudited; however, in the opinion of management,
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
period ended September 30, 1995.

The consolidated financial statements and related notes for the nine months
ended September 30, 1996 are audited. The results of operations for the nine
months ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1996.

NET LOSS PER SHARE

Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
from outstanding stock options, convertible preferred stock and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued during the period beginning 12 months
prior

F-7
<PAGE> 70

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to the proposed initial filing of the Company's Registration Statement at prices
below the assumed public offering price have been included in the calculation as
if they were outstanding for all periods presented (using the treasury stock
method and the assumed public offering price for stock options and warrants and
the if-converted method for convertible preferred stock).

Historical net loss per share information is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(FEBRUARY 16, 1995) ENDED
TO DECEMBER 31, SEPTEMBER 30,
1995 1996
------------------- -------------
<S> <C> <C>
Net loss per share..................................... $ (0.67) $ (2.43)
Share used in computing historical net loss per share
(in thousands)....................................... 4,456 4,458
</TABLE>

Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of convertible preferred shares not included
above that will automatically convert upon completion of the Company's initial
public offering (using the if-converted method). Such shares are included from
the original date of issuance.

USE OF ESTIMATES

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

CURRENT VULNERABILITY TO CERTAIN CONCENTRATIONS

The Company is supplying the B-1 Antibody to clinical trial sites from an
existing, finite inventory produced by Coulter Corporation, a related party.
This inventory is not sufficient to meet most of the Company's clinical trial
requirements in 1997. To achieve the levels of production necessary to support
on-going clinical trials of its B-1 Therapy, the Company has contracted with a
third-party manufacturer, LONZA Biologics plc ("Lonza"), to produce the B-1
Antibody. To date, Lonza has completed the production of three batches of the
B-1 Antibody; however, the Company must seek FDA clearance to use Lonza-produced
material and should such clearance not be obtained in a timely manner, certain
research and development activities may be delayed.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company considers all highly liquid investments with maturities of
three months or less from the date of purchase to be cash equivalents.
Short-term investments consist of investments with original maturities greater
than three months, but less than one year.

The Company accounts for its cash equivalents and short-term investments
under Statement of Financial Accounting Standards No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). Under the
provisions of SFAS No. 115, the Company has classified its cash equivalents and
short-term investments as "available-for-sale." Such investments are recorded at
fair value and unrealized gains and losses, which are considered to be
temporary, are recorded as a separate component of Stockholders' equity until
realized. The Company classifies all investments in its available-for-sale
portfolio as current assets.

F-8
<PAGE> 71

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FOREIGN CURRENCY TRANSLATION

The functional currency of Coulter Pharma Belgium, SA is the U.S. Dollar.
Assets and liabilities of Coulter Pharma Belgium, SA are translated at current
exchange rates, and the related revenues and expenses are translated at average
exchange rates in effect during the period. The resulting translation adjustment
is recorded in other (income) expense in the accompanying consolidated
statements of operations and has been immaterial since the formation of the
subsidiary in June 1996.

PROPERTY AND EQUIPMENT

Purchased property and equipment are stated at cost less accumulated
depreciation which is calculated using the straight-line method over the
estimated useful lives of the respective assets of three to five years.

SPONSORED RESEARCH AND LICENSE FEES

Research and development expenses paid to third parties under sponsored
research arrangements are recognized as the related services are performed,
generally ratably over the period of service. License fees are expensed when the
related obligation is incurred.

STOCK-BASED COMPENSATION

In accordance with the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock option plans. Under APB 25,
if the exercise price of the Company's employee stock options equals or exceeds
the fair value of the underlying stock on the date of grant as determined by the
Company's Board of Directors, no compensation expense is recognized.

2. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

As of December 31, 1995, the Company had no short-term investments and all
cash equivalents were invested in a money market mutual fund with a single
institution. The difference between cost and fair value was immaterial at
December 31, 1995. The Company's cash equivalents and short-term investments as
of September 30, 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Money market funds..................... $ 1,624 $ -- $ -- $ 1,624
U.S. government and federal agency
bonds................................ 1,892 -- (3) 1,889
Commercial paper....................... 14,378 -- (21) 14,357
------- ---- -------
--
Total........................ 17,894 (24) 17,870
--
Less amounts classified as cash
equivalents.......................... (14,136) -- (14,136)
--
------- ---- -------
--
Total short-term
investments................ $ 3,758 $ (24) $ 3,734
$ --
======= ==== =======
==
</TABLE>

Realized gains or losses on sales of available-for-sale securities in the
nine months ended September 30, 1996 were not significant. There were no
realized gains or losses in 1995.

F-9
<PAGE> 72

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Machinery and equipment.................................... $ 66 $ 125
Furniture and fixtures..................................... 39 75
Construction in process.................................... -- 743
---- ----
105 943
Less accumulated depreciation.............................. (12) (43)
---- ----
Property and equipment, net................................ $ 93 $ 900
==== ====
</TABLE>

4. SPONSORED RESEARCH AND LICENSE AGREEMENTS

The Company has entered into numerous agreements with research
institutions, universities, and other entities for the performance of research
and development activities and for the acquisition of licenses related to those
activities. As of September 30, 1996, noncancelable commitments under these
arrangements were not material. In order to maintain certain of these licenses,
the Company must pay specified annual license fees. Certain of the licenses
provide for the payment of royalties by the Company on future product sales, if
any.

5. ACCRUED LIABILITIES

Accrued liabilities consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Accrued research and development expenses.................. $ 83 $ 3,309
Accrued clinical trial costs............................... 21 515
Other...................................................... 161 306
---- ----
Total...................................................... $265 $ 4,130
==== ====
</TABLE>

6. LEASE COMMITMENTS

The Company leases its offices under operating leases which expire on
December 31, 2000. Future minimum lease payments under all noncancelable leases
are as follows: (in thousands)

<TABLE>
<CAPTION>
OPERATING LEASES
----------------
<S> <C>
Year ending December 31, 1996 (remaining 3 months)................... $ 72
1997............................................................... 285
1998............................................................... 285
1999............................................................... 158
2000............................................................... 68
----
Total................................................................ $868
====
</TABLE>

The above minimum payments include a lease executed in October 1996 for
additional office space.

Rent expense for the period from inception (February 16, 1995) to December
31, 1995 and for the nine months ended September 30, 1996 was $71,000 and
$122,000, respectively.

F-10
<PAGE> 73

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. RELATED PARTY TRANSACTIONS

During 1995 and 1996, the Company issued loans to employees totaling
$30,000 and $455,000, respectively. Interest rates on these loans range from
6.0% to prime plus 2.0% (10.25% at September 30, 1996). The total loan amount
issued during 1996 includes imputed interest of $106,000. At December 31, 1995
and September 30, 1996, the receivable due from employee loans outstanding was
$31,000 and $349,000, respectively. These loans plus accrued interest are to be
repaid (less any amounts forgiven) at the end of their respective terms. The
loans mature at dates ranging from December 1996 to December 2000.

The Company has a continuing relationship with Coulter Corporation, an
affiliate. Coulter Corporation has supplied the B-1 antibody and certain other
services at its cost in support of the Company's ongoing development of the B-1
therapy. In addition, pursuant to a sublicense assignment agreement, the Company
has agreed to reimburse Coulter Corporation for royalties due to third parties
with respect to certain intellectual property rights sublicensed to the Company.
Coulter Corporation also has the right, in lieu of receiving cash, to purchase
additional shares of the Company's equity securities at the then current market
value of such securities with respect to the first $4.5 million payable under
the assignment agreement for royalties due upon commercial sale of product, if
any, derived from these licenses. Further, Coulter Corporation has nominated and
elected two of the Company's Board of Directors members in accordance with a
voting rights agreement which terminates upon closing of the Company's Series C
preferred stock offering. Included in research and development expense is
$291,000 and $206,000 for the period from inception (February 16, 1995) to
December 31, 1995 and for the nine months ended September 30, 1996,
respectively, related to services provided by Coulter Corporation and
reimbursements to Coulter Corporation for license fees and supplies.

8. STOCKHOLDERS' EQUITY

PREFERRED STOCK

Preferred stock authorized and outstanding at September 30, 1996 is as
follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------------- SHARES OF COMMON AGGREGATE
ISSUED AND STOCK ISSUABLE UPON LIQUIDATION
AUTHORIZED OUTSTANDING CONVERSION AMOUNT PREFERENCE
---------- ----------- -------------------- ------- -----------
(IN THOUSANDS, EXCEPT SHARES)
<S> <C> <C> <C> <C> <C>
Designated:
Series A........ 7,500,000 7,500,000 2,499,999 $ 2,500 $ 7,500
Series B........ 2,500,000 2,333,333 777,776 3,489 3,500
Series C........ 10,000,000 9,964,607 3,321,514 22,366 22,420
---------- ---------- ------- -------
20,000,000 19,797,940 6,599,289 $28,355 $33,420
========== ========== ======= =======
</TABLE>

All currently designated series of preferred stock are convertible at the
stockholders' option at any time into common stock on a three-for-one (preferred
shares-for-common shares) basis, subject to adjustment for antidilution.
Conversion is automatic immediately upon the closing of a firm commitment
underwritten public offering with gross proceeds of at least $5,000,000 and an
offering price of at least $9.00 per share (appropriately adjusted for any stock
splits, stock dividends, recapitalization or similar events) or upon the written
election of more than three-fifths of the holders of outstanding shares of the
Series A, B and C preferred stock. Each outstanding share of preferred stock has
voting rights equal to the voting rights of the common stock obtainable upon
conversion.

F-11
<PAGE> 74

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Holders of Series A, B and C preferred stock are entitled to noncumulative
cash dividends at the rate of 8% of the "Original Purchase Price" per annum on
each outstanding share, as adjusted, if and when declared by the Board of
Directors. The Original Issue Price of the Series A preferred stock is $1.00 and
the Series B preferred stock is $1.50 and the Series C preferred stock is $2.25.
These dividends are to be paid in advance of any distributions to common
stockholders. No dividends have been declared through September 30, 1996.

In the event of a liquidation or winding up of the Company, holders of
Series A, B and C preferred stock shall have a liquidation preference of $1.00
and $1.50 and $2.25 per share respectively, together with any declared but
unpaid dividends, over holders of common shares.

1995 EQUITY INCENTIVE PLAN

The 1995 Equity Incentive Plan (the "Plan") was adopted in 1995 by the
Board of Directors and allows for the granting of options for up to 733,333
shares of common stock to employees, consultants and directors.

Stock options granted under the Plan may be either incentive stock options
or nonqualified stock options. Incentive stock options may be granted to
employees with exercise prices not less than the fair market value at the date
of grant and nonqualified stock options may be granted at exercise prices of no
less than 85% of the fair market value of the common stock on the date of grant,
as determined by the Board of Directors. All options are to have a term not
greater than 10 years from the date of grant. Options vest as determined by the
Board of Directors, generally at the rate of 25% at the end of the first year
with the remaining balance vesting ratably over the next three years (but not
less than 20% of the total number of shares granted per year).

Activity under the Plan was as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
OPTIONS ---------------------------- WEIGHTED-
AVAILABLE NUMBER OF EXERCISE PRICE AVERAGE
FOR GRANT SHARES PER SHARE EXERCISE PRICE
---------- --------- -------------- --------------
<S> <C> <C> <C> <C>
Shares authorized............... 333,333 -- $ -- $ --
Options granted................. ( 220,756) 220,756 $ 0.30 $ 0.30
Options exercised............... -- (2,059) $ 0.30 $ 0.30
---------- --------- -------------- --------------
Balance at December 31, 1995.... 112,577 218,697 $ 0.30 $ 0.30
Additional shares authorized.... 400,000 -- $ -- --
Options granted................. ( 341,121) 341,121 $ 0.30-$1.20 $ 0.81
Options exercised............... -- (10,215) $ 0.30-$0.75 $ 0.41
Option canceled................. 999 (999) $ 0.30 $ 0.37
---------- --------- -------------- --------------
Balance at September 30, 1996... 172,455 548,604 $ 0.30-$1.20 $ 0.62
========= ======== =========== ===========
</TABLE>

At December 31, 1995 options were exercisable to purchase 11,104 shares at
a weighted-average exercise price of $0.30 per share. At September 30, 1996
options were exercisable to purchase 65,148 shares at a weighted-average
exercise price of $0.35 per share.

Exercise prices for options outstanding as of September 30, 1996 ranged
from $0.30 to $1.20 per share. The weighted-average remaining contractual life
of those options is 9.4 years.

F-12
<PAGE> 75

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING WEIGHTED- EXERCISABLE OPTIONS
-------------------------- AVERAGE -------------------------
WEIGHTED- REMAINING WEIGHTED-
EXERCISE PRICE AVERAGE CONTRACTUAL LIFE AVERAGE
RANGE NUMBER EXERCISE PRICE (IN YEARS) NUMBER EXERCISE PRICE
- -------------- ------- -------------- ---------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$0.30-$0.45 240,078 $ 0.30 8.9 59,870 $ 0.30
$0.75-$1.00 232,331 0.75 9.7 3,250 0.75
$1.01-$1.20 76,195 1.20 9.9 2,028 1.20
------- ----- - ---- ------ -
548,604 $ 0.62 9.4 65,148 $ 0.35
======= ====== ==== =======
</TABLE>

The Company has reserved sufficient shares of its common stock for issuance
upon conversion of the Series A, B and C preferred stock and options to purchase
common shares which may be issued under the Plan.

The Company recorded deferred compensation expense for the difference
between the exercise price and the deemed fair value for financial statement
presentation purposes of the Company's common stock, as determined by the Board
of Directors, for common stock issued and common stock options granted in 1996.
Through September 30, 1996, such shares and options were granted at exercise
prices ranging from $0.30 to $1.20 per share. The compensation expense
aggregates to a maximum of $602,000, and is being amortized over the
corresponding vesting period of each respective share purchase or option,
generally four years. In October 1996, options to purchase an additional 225,707
shares were granted at exercise prices of $2.25 per share, resulting in
approximately $1,200,000 of additional deferred compensation.

Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value of these options was estimated at the date of grant using the
minimum value method with weighted average risk-free assumptions for 1995 and
1996 of 5.94% and 6.01%, respectively. The weighted average expected life of the
options was approximately 56 months for both periods.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options. The
Company's pro forma information follows (in thousands, except for earnings per
share information):

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(FEBRUARY 16, 1995) ENDED
TO DECEMBER 31, SEPTEMBER 30,
1995 1996
------------------- -------------
<S> <C> <C>
Pro forma net loss..................................... $(2,994) $ (10,836)
Pro forma net loss per share........................... $ (0.67) $ (2.43)
</TABLE>

The weighted-average fair value per share of options granted in the period
from inception (February 16, 1995) to December 31, 1995 and the nine months
ended September 30, 1996 was $0.08 and $0.63, respectively.

WARRANTS

As of September 30, 1996, warrants to purchase 498,705 shares of common
stock were outstanding at an exercise price of $9.00 per share. At September 30,
1996, the Company has reserved 498,705 shares of authorized common stock
pursuant to these warrants. All warrants are exercisable at the option of the
holders on or before dates ranging from April 19, 1996 through April 30, 2001,
or earlier upon effectiveness of an initial public offering.

F-13
<PAGE> 76

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES

As of September 30, 1996, the Company had federal and state net operating
loss carryforwards of approximately $13,300,000 and $1,400,000, respectively.
The federal net operating loss carryforwards will expire at various dates
beginning on 2010 through 2011.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes.

Significant components of the Company's deferred tax assets are as follows
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Net operating loss carryforwards........................... $ 1,000 $ 4,600
Capitalized research and development....................... 100 400
------- -------
Total deferred tax assets.................................. 1,100 5,000
Valuation allowance for deferred tax assets................ (1,100) (5,000)
------- -------
Net deferred tax assets.................................... $ -- $ --
======= =======
</TABLE>

Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $1,100,000 and $3,900,000 for the period from inception (February
16, 1995) to December 31, 1995 and for the nine months ended September 30, 1996,
respectively.

Utilization of the net operating loss may be subject to an annual
limitation due to the ownership change limitations provided by the Internal
Revenue Code of 1986. The annual limitation may result in the expiration of net
operating losses before utilization.

10. SUBSEQUENT EVENTS

On October 31, 1996, the Board of Directors approved, subject to
stockholder approval, an increase of 133,333 shares of common stock available
for grant under the 1995 Equity Incentive Plan.

In December 1996, the Company entered into a $3,827,000 equipment lease
financing facility with a financing company. The Company will make monthly
payments plus interest on amounts borrowed over the 48-month term. In connection
with this arrangement the Company issued the lender a warrant to purchase 24,666
shares of the Company's common stock at an exercise price of the lower of $9.75
per share or the per-share price of the Company's next round of equity
financing.

Subsequent to September 30, 1996 and through December 5, 1996, in addition
to the October 1996 option grants, the Company granted options to purchase
71,664 shares of common stock at $4.50 per share, resulting in approximately
$506,500 of additional deferred compensation.

Subsequent to September 30, 1996 and through December 5, 1996 options were
exercised for 25,070 shares of common stock at prices from $0.30 to $1.20. One
option for 18,333 shares of common stock at an exercise price of $0.75 was
cancelled.

On December 5, 1996, the Board of Directors approved the following actions:

- - A one-for-three reverse common stock split, subject to stockholder approval,
to become effective prior to the commencement of the offering contemplated by
this Prospectus. All common share and per share amounts have been
retroactively restated to reflect the reverse stock split.

- - The filing of a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. If the offering is consummated under terms presently anticipated,
19,797,940 shares of currently outstanding preferred stock will automatically
convert to shares of common stock on a one-for-three basis. The pro forma
effect of these

F-14
<PAGE> 77

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

conversions has been reflected in the accompanying unaudited pro forma balance
sheet assuming they had occurred at September 30, 1996.

- - The adoption of the 1996 Employee Stock Purchase Plan under which a total of
350,000 shares of the Company's authorized but unissued common stock has been
reserved for issuance thereunder.

- - The adoption of the 1996 Equity Incentive Plan under which a total of
1,400,000 shares of the Company's authorized but unissued common stock has
been reserved for issuance thereunder. At the same meeting, the Board of
Directors determined that upon closing of the offering contemplated by this
Prospectus the 1995 Equity Incentive Plan would be terminated.

F-15
<PAGE> 78

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
Coulter Pharmaceutical, Inc.

We have audited the accompanying balance sheets of the Antibody
Therapeutics Business Operations of Coulter Corporation (the "Business") as of
December 31, 1993 and 1994, and the related statements of operations and cash
flows for the years ended December 31, 1993 and 1994 and for the period from
January 1, 1995 to February 15, 1995. These financial statements are the
responsibility of the management of the Business. Our responsibility is to
express an opinion on these financial statements based on our audits.

Certain costs and expenses presented in the accompanying financial
statements represent allocations of the estimated cost of services provided to
the Antibody Therapeutics Business by Coulter Corporation. As a result, the
financial statements presented may not be indicative of the financial position
or results of operations that would have been reported had the Antibody
Therapeutics Business Operations of Coulter Corporation operated as an
independent entity.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Antibody Therapeutics
Business Operations of Coulter Corporation at December 31, 1993 and 1994, and
the results of its operations and its cash flows for the years ended December
31, 1993 and 1994 and for the period from January 1, 1995 to February 15, 1995,
in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Palo Alto, California
November 27, 1996

F-16
<PAGE> 79

ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF
COULTER CORPORATION

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1993 1994
---- ----
<S> <C> <C>
ASSETS
Property and equipment, net................................................... $109 $135
---- ----
$109 $135
==== ====

LIABILITIES AND NET INVESTMENT
Current liabilities -- Accounts payable....................................... $124 $ 50

Commitments

Coulter Corporation's net investment in the Antibody Therapeutics (15) 85
Business Operations.........................................................
---- ----
$109 $135
==== ====
</TABLE>

See accompanying notes.

F-17
<PAGE> 80

ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF
COULTER CORPORATION

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE PERIOD
YEARS ENDED FROM JANUARY 1,
DECEMBER 31, 1995 TO
------------------- FEBRUARY 15,
1993 1994 1995
------- ------- ---------------
<S> <C> <C> <C>
Operating expenses:
Research and development............................... $ 1,838 $ 2,798 $ 200
General and administrative............................. 178 288 36
------- ------- -------
Total operating expenses................................. 2,016 3,086 236
------- ------- -------
Net loss................................................. $(2,016) $(3,086) $(236)
======= ======= ============
</TABLE>

See accompanying notes.

F-18
<PAGE> 81

ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF
COULTER CORPORATION

STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED FOR THE PERIOD
DECEMBER 31, FROM
------------------- JANUARY 1, 1995 TO
1993 1994 FEBRUARY 15, 1995
------- ------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss................................................ $(2,016) $(3,086) $ (236)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization......................... 11 27 5
Changes in operating assets and liabilities:
Accounts payable................................... 98 (74) 62
----- ------- -----
Net cash used in operating activities................... (1,907) (3,153) (169)
----- ------- -----

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment..................... (96) (66) --
----- ------- -----
Net cash used in investing activities................... (96) (66) --
----- ------- -----

CASH FLOWS FROM FINANCING ACTIVITIES
Coulter Corporation's investment in the Antibody
Therapeutics Business................................. 2,003 3,199 169
----- ------- -----
Net cash provided by financing activities............... 2,003 3,199 169
----- ------- -----
Net increase in cash and cash equivalents............... -- -- --
Cash and cash equivalents at beginning of period........ -- -- --
----- ------- -----
Cash and cash equivalents at end of period.............. $ -- $ -- $ --
===== ======= =====
</TABLE>

See accompanying notes.

F-19
<PAGE> 82

ANTIBODY THERAPEUTICS BUSINESS OPERATIONS
OF COULTER CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

Coulter Corporation (the "Corporation" or "Coulter") is incorporated in the
State of Delaware and is engaged in the business of manufacturing, distributing,
financing, and servicing certain medical equipment (predominantly hematology
instruments) and related consumable products used in the health care industry,
research centers and universities. The Company's principal markets are North
American, Europe and the Far East. The Corporation has also conducted extensive
research and development programs in the area of human therapeutics as discussed
in Note 3. The antibody therapeutics research and development activities,
including various license agreements, were acquired by Coulter Pharmaceutical,
Inc. in exchange for preferred stock on February 24, 1995, pursuant to an
assignment agreement between the two parties.

The financial statements of the Antibody Therapeutics Business Operations
of Coulter Corporation (the "Business") include all direct materials and
personnel costs in addition to pro rata allocations of overhead costs from
Coulter to the Business. Such overhead costs are represented based on
management's estimate of the level of overhead required to support the Business
relative to the overhead cost requirements for the Corporation. Management
believes such estimates represent a reasonable allocation of such costs. These
charges comprise Coulter's net investment in the Business. Coulter has been
performing research and development activities under its antibody therapeutics
programs for several years.

PROPERTY AND EQUIPMENT

Purchased property and equipment are stated at cost less accumulated
depreciation and amortization which is calculated using the straight-line method
over the estimated useful lives of the respective assets of three to eight
years.

INCOME TAXES

The Business operations have historically been included in the consolidated
income tax returns filed by Coulter. Income taxes in the accompanying financial
statements have been computed based on the stand-alone operations of the
Business as if such operations had filed separate income tax returns. Any net
operating loss carryforwards from the Business would not be available for use by
the Business for federal or state income tax purposes.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31 (in
thousands):

<TABLE>
<CAPTION>
1993 1994
----- -----
<S> <C> <C>
Equipment............................................................. $ 511 $ 561
Leasehold improvements................................................ 379 289
----- -----
890 850
Less accumulated depreciation and amortization........................ (781) (715)
----- -----
Property and equipment, net........................................... $ 109 $ 135
===== =====
</TABLE>

3. SUBSEQUENT EVENT

On February 24, 1995, Coulter and Coulter Pharmaceutical, Inc. entered into
an assignment agreement. Pursuant to this agreement, Coulter received 5,000,000
shares of Series A preferred stock from Coulter Pharmaceutical, Inc.
(convertible into 1,666,666 shares of common stock) in exchange for sublicensed
rights to various license agreements and patents and confidential information
relating to the Business.

F-20
<PAGE> 83

Super-Leu-Dox, a TAP pro-drug version of the approved chemotherapeutic drug
doxorubicin, consists of a proprietary peptide of four amino acids, a
"tetrapeptide", linked to the active site on doxorubicin. Stable in circulation
and in normal tissues, Super-Leu-Dox undergoes its first activation step when
(1) an enzyme secreted by metastatic tumor cells cleaves three of the amino
acids leaving a leucine doxorubicin conjugate that is able to penetrate cells.
This activation step occurs in the immediate vicinity of tumor cells, increasing
the probability that the doxorubicin will (2) enter tumor cells as opposed to
normal cells. Once inside the cell, the leucine-doxorubicin conjugate undergoes
the second activation step when (3) the leucine is cleaved from the doxorubicin
by an intracellular enzyme found in much higher concentrations in tumor cells
than in normal cells. Once the leucine is cleaved, the doxorubicin is (4)
activated within the cell. This two-step activation process leads to a
significantly higher concentration of activated doxorubicin in tumor cells than
in normal cells. Super-Leu-Dox is in preclinical development. The Company will
be required to conduct clinical trials prior to submitting Super-Leu-Dox to
regulatory authorities for marketing approval. See "TAP Pro-drug Platform."

<PAGE> 84
APPENDIX

DESCRIPTION OF GRAPHICS

INSIDE FRONT COVER GRAPHIC DESCRIPTION

[Photograph of a computer screen displaying four medical images of a tumor,
representing a time-sequence response of a non-Hodgkin's lymphoma patient
treated with the Company's B-1 Therapy.]

INSIDE BACK COVER GRAPHIC DESCRIPTION

[Illustration of the steps involved in the activation of the Company's
Super-Leu-Dox product candidate as it moves from the blood stream into the
vicinity of, and then into, a metastatic tumor cell where doxorubicin, an
approved cytotoxic agent, is activated to destroy the tumor cell.]

<PAGE> 85

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS 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 THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 6
Use of Proceeds................... 15
Dividend Policy................... 15
Capitalization.................... 16
Dilution.......................... 17
Selected Consolidated Financial
Data............................ 18
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 19
Business.......................... 22
Management........................ 43
Certain Transactions.............. 51
Principal Stockholders............ 53
Description of Capital Stock...... 55
Shares Eligible for Future Sale... 57
Underwriting...................... 59
Legal Matters..................... 60
Experts........................... 60
Additional Information............ 61
Index to Consolidated Financial
Statements...................... F-1
</TABLE>

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

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

2,500,000 SHARES

LOGO

COMMON STOCK

-----------------------
PROSPECTUS
-----------------------
HAMBRECHT & QUIST

ALEX.BROWN & SONS
INCORPORATED

PACIFIC GROWTH EQUITIES, INC.
, 1997
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 86

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

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

<TABLE>
<S> <C>
SEC Registration fee...................................................... $ 12,197
NASD filing fee........................................................... 4,525
Nasdaq National Market application fee.................................... 46,028
Blue sky qualification fee and expenses................................... 1,000
Printing and engraving expenses........................................... 140,000
Legal fees and expenses................................................... 300,000
Accounting fees and expenses.............................................. 150,000
Transfer agent and registrar fees......................................... 4,500
Miscellaneous fees........................................................ 6,750
----------
Total........................................................... $665,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Registrant's Bylaws also
provide that the Registrant will indemnify its directors and executive officers
and may indemnify its other officers, employees and other agents to the fullest
extent not prohibited by Delaware law.

The Registrant's Certificate of Incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.

The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of the
Registrant or any of its affiliated enterprises, provided such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.

II-1
<PAGE> 87

The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act or otherwise.

The Registrant intends to purchase a general liability insurance policy
which covers certain liabilities of directors and officers of the Registrant
arising out of claims based on acts or omissions in their capacity as directors
or officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since its inception in February 1995, the Registrant has sold and issued
the following unregistered securities:

(1) In February 1995, the Registrant sold and issued an aggregate of
7,500,000 shares of Series A Preferred Stock to two accredited investors
for cash in the aggregate amount of $2,500,000 and the assignment of
certain intellectual property rights.

(2) In August 1995, the Registrant sold and issued an aggregate of
2,333,333 shares of Series B Preferred Stock to six accredited investors
for cash in the aggregate amount of $3,500,000.

(3) In March 1996, the Registrant sold and issued 1,200,000 shares of
Common Stock to one accredited investor in exchange for a promissory note
in the amount of $180,000.

(4) In April 1996, the Registrant sold and issued an aggregate of
9,964,607 shares of Series C Preferred Stock and Warrants to purchase
1,496,182 shares of Common Stock to a group of accredited investors for
$22,420,363.74.

(5) From March 1995 to December 6, 1996, the Registrant granted
incentive stock options and nonstatutory stock options to employees,
directors and consultants covering an aggregate of 2,362,803 shares of the
Registrant's Common Stock, at a weighted average exercise price of $.36 per
share. As of December 6, 1996, the Registrant has sold 112,038 shares of
its Common Stock to employees, directors and consultants pursuant to
exercise of stock options.

(6) In December 1996, the Registrant issued a warrant to purchase
74,000 shares of Common Stock to one accredited investor in connection with
an equipment lease financing.

The share amounts set forth above do not take into account the
one-for-three reverse stock split that will be effected prior to the closing of
this offering.

The sale and issuance of securities in the transactions described in
paragraphs (1), (2), (4) and (6) above were deemed to be exempt from
registration under the Securities Act by virtue of Section 4(2) adopted
thereunder. The purchasers in each case represented their intention to acquire
the securities for investment only and not with a view to distribution thereof.
Appropriate legends are affixed to the stock certificates or warrants issued in
such transactions. All recipients either received adequate information about the
Registrant or had access, through employment or other relationships, to such
information.

The sale and issuance of securities in the transactions described in
paragraph (3) and (5) above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder, in that they were
issued either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701.

II-2
<PAGE> 88

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ---------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation of the Registrant.
3.2** Form of Amendment to Certificate of Incorporation to be filed prior to the
offering.
3.3 Form of Amended and Restated Certificate of Incorporation of the Registrant to be
filed upon the closing of the offering.
3.4 Bylaws of the Registrant.
3.5 Bylaws of the Registrant to be effective upon the closing of the offering.
4.1 Reference is made to Exhibits 3.1 through 3.5.
4.2** Specimen stock certificate.
4.3** Amended and Restated Investors' Rights Agreement, dated April 18, 1996, between
the Registrant and certain investors.
4.4** Warrant Agreement to purchase Common Stock, dated December 6, 1996, between the
Registrant and Lease Management Services, Inc.
5.1 Opinion of Cooley Godward LLP.
10.1** Form of Indemnity Agreement to be entered into between the Registrant and its
officers and directors.
10.2** 1996 Equity Incentive Stock Option Plan.
10.3** Form of Equity Incentive Stock Option.
10.4** Form of Nonstatutory Stock Option.
10.5** 1996 Employee Stock Purchase Plan.
10.6 +** Assignment Agreement, dated February 24, 1995, between the Registrant, Coulter
Corporation and certain investors.
10.7 +** Manufacturing Agreement, dated August 20, 1996, between Lonza Biologics PLC and
the Registrant.
10.8** Equipment Lease Financing Agreement, dated December 6, 1996, between the
Registrant and Lease Management Services, Inc.
10.9 +** First Amendment to Manufacturing Agreement, dated November 21, 1996, by and
between Lonza Biologics PLC and the Registrant.
10.10+** Development Agreement, dated November 15, 1995, by and between Nordion
International, Inc. and the Registrant.
10.11+** Patent License Agreement, dated March 15, 1996, by and between the Region
Wallone, the Universite Catholoique de Louvain and Coulter Pharma Belgium, SA.
11.1** Statement regarding computation of loss per share.
21.1** Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP. Reference is made to page II-6.
23.2** Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-5.
27.1** Financial Data Schedule.
</TABLE>

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

** Previously filed.

+ Portions omitted pursuant to a request of confidentiality filed separately
with the Commission.

(b) FINANCIAL STATEMENT SCHEDULES.

All other schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.

II-3
<PAGE> 89

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide the Underwriters at
the closing 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.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus as filed as part of the 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, and (2) 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 this offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 90

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto,
County of Santa Clara, State of California, on the sixteenth day of January,
1997.

COULTER PHARMACEUTICAL, INC.

By: /s/ MICHAEL F. BIGHAM

------------------------------------
Michael F. Bigham
President and Chief Executive
Officer
(Principal Executive Officer)

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

II-5
<PAGE> 91

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- ------------------
<C> <S> <C>
/s/ MICHAEL F. BIGHAM President, Chief Executive Officer January 16, 1997
- ------------------------------------- and Director (Principal
Michael F. Bigham Executive Officer)
/s/ WILLIAM G. Vice President and Chief Financial January 16, 1997
HARRIS* Officer (Principal Financial and
- ------------------------------------- Accounting Officer)
William G. Harris
/s/ BRIAN ATWOOD* Director January 16, 1997
- -------------------------------------
Brian Atwood
/s/ DONALD L. Director January 16, 1997
LUCAS*
- -------------------------------------
Donald L. Lucas
/s/ ROBERT Director January 16, 1997
MOMSEN*
- -------------------------------------
Robert Momsen
/s/ ARNOLD ORONSKY* Director January 16, 1997
- -------------------------------------
Arnold Oronsky
/s/ SUE Director January 16, 1997
VAN*
- -------------------------------------
Sue Van
/s/ GEORGE J. SELLA, Director January 16, 1997
JR.*
- -------------------------------------
George J. Sella, Jr.
/s/ JOSEPH R. Director January 16, 1997
COULTER*
- -------------------------------------
Joseph R. Coulter, III
*By: MICHAEL F. BIGHAM
- -------------------------------------
Michael F. Bigham
Attorney-in-Fact
</TABLE>

II-6
<PAGE> 92

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
October 31, 1996 (except for Note 10, as to which the date is January , 1997)
with respect to the consolidated financial statements of Coulter Pharmaceutical,
Inc. and our report dated November 27, 1996 with respect to the Antibody
Therapeutics Business Operations of Coulter Corporation, in Amendment No. to
the Registration Statement (Form S-1) and related Prospectus of Coulter
Pharmaceutical, Inc. for the registration of 2,875,000 shares of its common
stock.

Palo Alto, California

January , 1997

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

The foregoing consent is in the form that will be signed upon completion of
the one-for-three reverse common stock split as described in Note 10 to the
consolidated financial statements of Coulter Pharmaceutical, Inc.

/s/ Ernst & Young LLP

Palo Alto, California

January 15, 1997

II-7
<PAGE> 93

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------------------------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement........................................
3.1** Amended and Restated Certificate of Incorporation of the Registrant...
3.2** Form of Amendment to Certificate of Incorporation to be filed prior to
the offering..........................................................
3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant to be filed upon the closing of the offering...............
3.4 Bylaws of the Registrant..............................................
3.5 Bylaws of the Registrant to be effective upon the closing of the
offering..............................................................
4.1 Reference is made to Exhibits 3.1 through 3.5.........................
4.2** Specimen stock certificate............................................
4.3** Amended and Restated Investors' Rights Agreement, dated April 18,
1996, between the Registrant and certain investors....................
4.4** Warrant Agreement to purchase Common Stock, dated December 6, 1996,
between the Registrant and Lease Management Services, Inc. ...........
5.1 Opinion of Cooley Godward LLP.........................................
10.1** Form of Indemnity Agreement to be entered into between the Registrant
and its officers and directors........................................
10.2** 1996 Equity Incentive Stock Option Plan...............................
10.3** Form of Equity Incentive Stock Option.................................
10.4** Form of Nonstatutory Stock Option.....................................
10.5** 1996 Employee Stock Purchase Plan.....................................
10.6 +** Assignment Agreement, dated February 24, 1995, between the Registrant,
Coulter Corporation and certain investors.............................
10.7 +** Manufacturing Agreement, dated August 20, 1996, between Lonza
Biologics PLC and the Registrant......................................
10.8** Equipment Lease Financing Agreement, dated December 6, 1996, between
the Registrant and Lease Management Services, Inc. ...................
10.9 +** First Amendment to Manufacturing Agreement, dated November 21, 1996,
by and between Lonza Biologics PLC and the Registrant.................
10.10+** Development Agreement, dated November 15, 1995, by and between Nordion
International, Inc. and the Registrant................................
10.11+** Patent License Agreement, dated March 15, 1996, by and between the
Region Wallone, the Universite Catholoique de Louvain and Coulter
Pharma Belgium, SA....................................................
11.1** Statement regarding computation of loss per share.....................
21.1** Subsidiaries of the Registrant........................................
23.1 Consent of Ernst & Young LLP. Reference is made to page II-6..........
23.2** Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.......
24.1 Power of Attorney. Reference is made to page II-5.....................
27.1** Financial Data Schedule...............................................
</TABLE>

- ------------------------------
** Previously filed.

+ Portions omitted pursuant to a request of confidentiality filed separately
with the Commission.

<PAGE> 1

COULTER PHARMACEUTICAL, INC.
SHARES(1)
COMMON STOCK

UNDERWRITING AGREEMENT

January , 1997

HAMBRECHT & QUIST LLC
ALEX. BROWN & SONS INCORPORATED
PACIFIC GROWTH EQUITIES, INC.
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104

Ladies and Gentlemen:

Coulter Pharmaceutical, Inc., a Delaware corporation (herein called the
Company), proposes to issue and sell shares of its authorized but
unissued Common Stock, $0.001 par value (herein called the Common Stock) (said
shares of Common Stock being herein called the Underwritten Stock).
The Company proposes to grant to the Underwriters (as hereinafter defined) an
option to purchase up to additional shares of Common Stock (herein
called the Option Stock and with the Underwritten Stock herein collectively
called the Stock). The Common Stock is more fully described in the Registration
Statement and the Prospectus hereinafter mentioned.

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

1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-1 (No. 333-17661), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
Securities Act), of the Stock. Copies of such registration statement and of each
amendment thereto, if any, including the related preliminary prospectus (meeting
the requirements of Rule 430A of the rules and regulations of the Commission)
heretofore filed by the Company with the Commission have been delivered to you.

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

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

(1) Plus an option to purchase from the Company up to additional
shares to cover over- allotments.
<PAGE> 2

or the effectiveness of such amendment) such prospectus as so supplemented or
amended. The term Preliminary Prospectus as used in this Agreement shall mean
each preliminary prospectus included in such registration statement prior to the
time it becomes effective.

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

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

(a) The Company hereby represents and warrants as follows:

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

(ii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
materially adverse change in the business, properties, financial condition
or results of operations of the Company and its subsidiary, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, other than as set forth in the Registration Statement and the
Prospectus, and since such dates, except in the ordinary course of
business, neither the Company nor its subsidiary has entered into any
material transaction not referred to in the Registration Statement and the
Prospectus.

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

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

(v) Prior to the Closing Date the Stock to be issued and sold by the
Company will be authorized for listing by The Nasdaq National Market upon
official notice of issuance.

(vi) There are no legal or governmental proceedings pending relating
to patent rights, trade secrets, trademarks, service marks or other
proprietary information or materials of the Company

2
<PAGE> 3

or its subsidiary, and, to the best of the Company's knowledge no such
proceedings are threatened or contemplated by governmental authorities or
others.

(vii) There are no contracts or other documents, relating to
governmental regulation affecting the Company or the Company's patents,
trade secrets, trademarks, service marks or other proprietary information
or materials, of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus that are not filed or described as required.

(viii) The Company is not infringing or otherwise violating any
patents, trade secrets, trademarks, service marks or other proprietary
information or materials, of others, and to the best of the Company's
knowledge there are no infringements by others of any of the Company's
patents, trade secrets, trademarks, service marks or other proprietary
information or materials which could affect materially the use thereof by
the Company.

(ix) To the Company's knowledge, the Company owns or possesses
sufficient licenses or other rights to use all patents, trade secrets,
trademarks, service marks or other proprietary information or materials
necessary to conduct the business now being or proposed to be conducted by
the Company as described in the Prospectus.

(x) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to
conduct, its affairs in such manner as to ensure that it will not become an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the 1940 Act and such rules and regulations.

3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.

(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
shares of the Underwritten Stock to the several Underwriters and each
of the Underwriters agrees to purchase from the Company the respective aggregate
number of shares of Underwritten Stock set forth opposite its name in Schedule
I. The price at which such shares of Underwritten Stock shall be sold by the
Company and purchased by the several Underwriters shall be $ per share.
In making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.

(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for
the number of shares of the Stock agreed to be purchased by such Underwriter or
Underwriters, the Company shall immediately give notice thereof to you, and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon between you
and such purchasing Underwriter or Underwriters and upon the terms herein set
forth, all or any part of the shares of the Stock which such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail to make such arrangements with respect to all such shares and
portion, the number of shares of the Stock which each non-defaulting Underwriter
is otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis to absorb the remaining shares and portion which
the defaulting Underwriter or Underwriters agreed to purchase; provided,
however, that the non-defaulting Underwriters shall not be obligated to purchase
the shares and portion which the defaulting Underwriter or Underwriters agreed
to purchase if the aggregate number of such shares of the Stock exceeds 10% of
the total number of shares of the Stock which all Underwriters agreed to
purchase hereunder. If the total number of shares of the Stock which the
defaulting Underwriter or Underwriters agreed to purchase shall not be purchased
or absorbed in accordance with the two preceding sentences, the

3
<PAGE> 4

Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such shares and portion on the terms herein
set forth. In any such case, either you or the Company shall have the right to
postpone the Closing Date determined as provided in Section 5 hereof for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to said Section 5 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If neither the non-defaulting Underwriters nor the Company shall
make arrangements within the 24-hour periods stated above for the purchase of
all the shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase hereunder, this Agreement shall be terminated without further
act or deed and without any liability on the part of the Company to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.

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

4. OFFERING BY UNDERWRITERS.

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

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

5. DELIVERY OF AND PAYMENT FOR THE STOCK.

(a) Delivery of certificates for the shares of the Underwritten Stock and
the Option Stock (if the option granted by Section 3(c) hereof shall have been
exercised not later than 7:00 A.M., San Francisco time, on the date two business
days preceding the Closing Date), and payment therefor, shall be made at the
office of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo
Alto, CA 94304, at 7:00 a.m., San Francisco time, on the [fourth] business day
after the date of this Agreement, or at such time on such other day, not later
than seven full business days after such [fourth] business day, as shall be
agreed upon in writing by the Company and you. The date and hour of such
delivery and payment (which may be postponed as provided in Section 3(b) hereof)
are herein called the Closing Date.

4
<PAGE> 5

(b) If the option granted by Section 3(c) hereof shall be exercised after
7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of Cooley, Godward LLP, Five Palo
Alto Square, 3000 El Camino Real, Palo Alto, CA 94304, at 7:00 a.m., San
Francisco time, on the third business day after the exercise of such option.

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

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

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

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

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

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

5
<PAGE> 6

amended prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act.

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

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

(f) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to
stockholders of the Company and of all information, documents and reports
filed with the Commission.

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

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

(i) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements
(including counsel fees and disbursements and cost of printing memoranda
for the Underwriters) paid by or for the account of the Underwriters or
their counsel in qualifying the Stock under state securities or blue sky
laws and in the review of the offering by the NASD, which shall not exceed
$5,000.

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<PAGE> 7

(j) The Company hereby agrees that, without the prior written consent
of Hambrecht & Quist LLC on behalf of the Underwriters, the Company will
not, for a period of 180 days following the commencement of the public
offering of the Stock by the Underwriters, directly or indirectly, (i)
sell, offer, contract to sell, make any short sale, pledge, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of
any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any rights to purchase or acquire Common
Stock or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences or ownership of Common
Stock, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the Stock
to be sold to the Underwriters pursuant to this Agreement, (B) shares of
Common Stock issued by the Company upon the exercise of options granted
under the 1995 Equity Incentive Plan, the 1996 Equity Incentive Plan and
the Employee Stock Purchase Plan of the Company (the "Option Plans") or
upon the exercise of warrants outstanding as of the date hereof, all as
described in footnote (1) to the table under the caption "Capitalization"
in the Preliminary Prospectus, and (C) options to purchase Common Stock
granted under the Option Plans.

(k) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after
written notice from you advising the Company to the effect set forth above,
forthwith prepare, consult with you concerning the substance of, and
disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication
or event.

7. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (herein called
the Exchange Act), or the common law or otherwise, and the Company agrees to
reimburse each such Underwriter and controlling person for any legal or other
expenses (including, except as otherwise hereinafter provided, reasonable fees
and disbursements of counsel) reasonably incurred by the respective indemnified
parties in connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of any Underwriter
for use in any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment

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<PAGE> 8

thereof or supplement thereto and (2) the indemnity agreement contained in this
paragraph (a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the Stock which is the
subject thereof (or to the benefit of any person controlling such Underwriter)
if at or prior to the written confirmation of the sale of such Stock a copy of
the Prospectus (or the Prospectus as amended or supplemented) was not sent or
delivered to such person and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented) unless the failure is the result of
noncompliance by the Company with paragraph (c) of Section 6 hereof. The
indemnity agreements of the Company contained in this paragraph (a) and the
representations and warranties of the Company contained in Section 2 hereof
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.

(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Statement on his own
behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, from and against any and all losses, claims, damages
or liabilities, joint or several, to which such indemnified parties or any of
them may become subject under the Securities Act, the Exchange Act, or the
common law or otherwise and to reimburse each of them for any legal or other
expenses (including, except as otherwise hereinafter provided, reasonable fees
and disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, if such statement
or omission was made in reliance upon and in conformity with information
furnished as herein stated or otherwise furnished in writing to the Company by
or on behalf of such indemnifying Underwriter for use in the Registration
Statement or the Prospectus or any such amendment thereof or supplement thereto.
The indemnity agreement of each Underwriter contained in this paragraph (b)
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.

(c) Each party indemnified under the provision of paragraphs (a) and (b) of
this Section 7 agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against, it in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (herein called the Notice) of such service or notification to the
party or parties from whom indemnification may be sought hereunder. No
indemnification provided for in such paragraphs shall be available to any party
who shall fail so to give the Notice if the party to whom such Notice was not
given was unaware of the action, suit, investigation, inquiry or proceeding to
which the Notice would have related and was prejudiced by the failure to give
the Notice, but the omission so to notify such indemnifying party or parties of
any such service or notification shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an

8
<PAGE> 9

indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(herein called the Notice of Defense) to the indemnified party, to assume (alone
or in conjunction with any other indemnifying party or parties) the entire
defense of such action, suit, investigation, inquiry or proceeding, in which
event such defense shall be conducted, at the expense of the indemnifying party
or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided, however,
that (i) if the indemnified party or parties reasonably determine that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled to have counsel chosen by such
indemnified party or parties participate in, but not conduct, the defense. If,
within a reasonable time after receipt of the Notice, an indemnifying party
gives a Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) through
(c) of this Section 7 for any legal or other expenses subsequently incurred by
the indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the indemnifying
party or parties shall bear the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the proviso to
the preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.

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

The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,

9
<PAGE> 10

preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.

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

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

8. TERMINATION. This Agreement may be terminated by you at any time prior
to the Closing Date by giving written notice to the Company if after the date of
this Agreement trading in the Common Stock shall have been suspended, or if
there shall have occurred (i) the engagement in hostilities or an escalation of
major hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change in economic or political conditions in the financial markets of
the United States would, in the Underwriters' reasonable judgment, make the
offering or delivery of the Stock impracticable, (iii) suspension of trading in
securities generally or a material adverse decline in value of securities
generally on the New York Stock Exchange, the American Stock Exchange, The
Nasdaq Stock Market, or limitations on prices (other than limitations on hours
or numbers of days of trading) for securities on either such exchange or system,
(iv) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of, or commencement of any proceeding
or investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company to the
Underwriters and no liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all reasonable costs or
expenses incident to the performance of the obligations of the Company under
this Agreement, including all reasonable costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof.

9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all its

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<PAGE> 11

obligations to be performed hereunder at or prior to the Closing Date or any
later date on which Option Stock is to be purchased, as the case may be, and to
the following further conditions:

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

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

(c) You shall have received from Cooley Godward LLP, counsel for the
Company, an opinion, addressed to the Underwriters and dated the Closing
Date, covering the matters set forth in Annex A hereto, and if Option Stock
is purchased at any date after the Closing Date an additional opinion from
such counsel, addressed to the Underwriters and dated such later date,
confirming that the statements expressed as of the Closing Date in such
opinion remains valid as of such later date.

(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true
and correct and neither the Registration Statement nor the Prospectus
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, respectively, not
misleading, (ii) since the Effective Date, no event has occurred which
should have been set forth in a supplement or amendment to the Prospectus
which has not been set forth in such a supplement or amendment, (iii) since
the respective dates as of which information is given in the Registration
Statement in the form in which it originally became effective and the
Prospectus contained therein, there has not been any material adverse
change or any development involving a prospective material adverse change
in or affecting the business, properties, financial condition or results of
operations of the Company and its subsidiary, taken as a whole, whether or
not arising from transactions in the ordinary course of business, and,
since such dates, except in the ordinary course of business, neither the
Company nor its subsidiary has entered into any material transaction not
referred to in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, (iv)
neither the Company nor its subsidiary has any material contingent
obligations which are not disclosed in the Registration Statement and the
Prospectus, (v) there are not any pending or known threatened legal
proceedings to which the Company or its subsidiary is a party or of which
property of the Company or its subsidiary is the subject which are material
and which are not disclosed in the Registration Statement and the
Prospectus, (vi) there are not any franchises, contracts, leases or other
documents which are required to be filed as exhibits to the Registration
Statement which have not been filed as required, (vii) the representations
and warranties of the Company herein are true and correct in all material
respects as of the Closing Date or any later date on which Option Stock is
to be purchased, as the case may be, and (viii) there has not been any
material change in the market for securities in general or in political,
financial or economic conditions from those reasonably foreseeable as to
render it impracticable in your reasonable judgment to make a public
offering of the Stock, or a material adverse change in market levels for
securities in general (or those of companies in particular) or financial or
economic conditions which render it inadvisable to proceed.

(e) You shall have received on the Closing Date and on any later date
on which Option Stock is purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the
Chief Financial Officer of the Company on behalf of the Company, stating
that the respective signers of said certificate have carefully examined the
Registration Statement in the form in which it originally became effective
and the Prospectus contained

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<PAGE> 12

therein and any supplements or amendments thereto, and that to their
knowledge the statements included in clauses (i) through (vii) of paragraph
(d) of this Section 9 are true and correct.

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

(g) You shall have received from Ernst & Young, LLP a letter stating
that their review of the Company's system of internal accounting controls,
to the extent they deemed necessary in establishing the scope of their
examination of the Company's financial statements as at , 1996, did
not disclose any weakness in internal controls that they considered to be
material weaknesses.

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

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

(j) On or prior to the Closing Date, you shall have received from all
directors, officers, and beneficial holders of at least one percent (1%) of
the Company's outstanding Common Stock stockholders agreements, in form
reasonably satisfactory to Hambrecht & Quist LLC, stating that without the
prior written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, such person or entity will not, for a period of 180 days
following the commencement of the public offering of the Stock by the
Underwriters, directly or indirectly, (i) sell, offer, contract to sell,
make any short sale, pledge, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to purchase or otherwise transfer or dispose of any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (ii) enter into any swap
or other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise.

(k) You shall have received from Dehlinger & Associates, Outside
counsel for the Company, an opinion, addressed to the Underwriters and
dated the Closing Date, and if Option Stock is purchased at any date after
the Closing Date an additional opinion from such counsel, addressed to the
Underwriters and dated such later date, confirming that the statements
expressed as of the Closing Date in such opinion remains valid as of such
later date that:

(i) To the best of such counsel's knowledge, the Company is not
infringing or otherwise violating any of the patents reviewed by such
counsel (the "Reviewed Patents").

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<PAGE> 13

(ii) To the best of such counsel's knowledge and belief, the
statements in the Registration Statement and the Prospectus under the
captions "Risk Factors -- Dependence upon Proprietary Technology;
Uncertainty of Patents and Proprietary Technology" and
"Business -- Patents and Other Intellectual Property" as they pertain to
the Reviewed Patents are accurate and complete statements or summaries
of the matters set forth therein, and nothing has come to our attention
that causes us to believe that the above-described portions of the
Registration Statement and the Prospectus contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.

All the agreements, opinions, certificates and letters mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance
with the provisions hereof only if Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Underwriters, shall be
reasonably satisfied that they comply in form and scope.

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

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

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

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

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<PAGE> 14

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

13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 550 California Avenue, Suite 200,
Palo Alto, CA 94306, Attention: Michael F. Bigham with a copy to James C. Kitch,
Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto, CA
94306. All notices given by telegraph shall be promptly confirmed by letter.

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

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

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

14
<PAGE> 15

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

Very truly yours,

COULTER PHARMACEUTICAL, INC.

By:

------------------------------------
Michael F. Bigham
President and
Chief Executive Officer

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

HAMBRECHT & QUIST LLC
ALEX. BROWN & SONS INCORPORATED
PACIFIC GROWTH EQUITIES, INC.
By Hambrecht & Quist LLC

By:

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

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

15
<PAGE> 16

SCHEDULE I

UNDERWRITERS

<TABLE>
<CAPTION>
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC.............................................................
Alex. Brown & Sons Incorporated...................................................
Pacific Growth Equities, Inc. ....................................................

-------
Total...................................................................
=======
</TABLE>

16
<PAGE> 17

ANNEX A

MATTERS TO BE COVERED IN THE OPINION OF COOLEY, GODWARD LLP
COUNSEL FOR THE COMPANY

(i) Each of the Company, its subsidiary and , a corporation
organized under the Laws of Belgium (the "Subsidiary") has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, to the knowledge of such counsel,
is duly qualified as a foreign corporation and in good standing in each state of
the United States of America in which its ownership or leasing of property
requires such qualification (except where the failure to be so qualified would
not have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and the Subsidiary, taken as a
whole), and has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
all the issued and outstanding capital stock of the Subsidiary has been duly
authorized and validly issued and is fully paid and nonassessable, and is owned
of record by the Company free and clear of all liens, encumbrances and security
interests and to the best of such counsel's knowledge, no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiary are outstanding;

(ii) the authorized capital stock of the Company consists of
shares of Common Stock, $0.001 par value, of which there are outstanding
shares (including the Underwritten Stock plus the number of shares of
Option Stock issued on the date hereof); proper corporate proceedings have been
taken validly to authorize such authorized capital stock; all of the outstanding
shares of such capital stock (including the Underwritten Stock and the shares of
Option Stock issued, if any) have been duly and validly issued and are fully
paid and nonassessable; and no preemptive rights of, or rights of refusal in
favor of, stockholders exist with respect to the Stock, or the issue and sale
thereof, pursuant to the Certificate of Incorporation or Bylaws of the Company
and, to the knowledge of such counsel, there are no contractual preemptive
rights that have not been waived, rights of first refusal or rights of co-sale
which exist with respect to the issue and sale of the Stock;

(iii) the Registration Statement has become effective under the Securities
Act and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission;

(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data and statistical data
derived from such financial information, as to which such counsel need express
no opinion) comply as to form in all material respects with the requirements of
the Securities Act and with the rules and regulations of the Commission
thereunder (the "Act and Rules");

(v) the information required to be set forth in the Registration Statement
in answer to Items 9 (under the caption "Description of Capital Stock"), 10
(insofar as it relates to such counsel) and 11(c) of Form S-1 is, to the best of
such counsel's knowledge, accurately and adequately set forth therein in all
material respects to the extent required under the Act and Rules or no response
is required with respect to such Items, and, to the best of such counsel's
knowledge, the description of the Company's stock option plan and the options
granted and which may be granted thereunder and the options granted otherwise
than under such plan set forth in the Prospectus under the captions
"Management -- Equity Incentive Plans" accurately and fairly presents the
information required to be shown with respect to said plan and options to the
extent required by the Act and Rules;

(vi) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion of
such counsel are of a character required under the Act and Rules to be described
in the Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement, which are not described and filed as required;
<PAGE> 18

(vii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company;

(viii) the issue and sale by the Company of the Stock will not conflict
with, or result in a breach of, the Certificate of Incorporation or Bylaws of
the Company or the Subsidiary or any agreement or instrument known to such
counsel to which the Company or the Subsidiary is a party which is required to
be filed as an exhibit to the Registration Statement or any applicable law or
regulation, or so far as is known to such counsel, any order, writ, injunction
or decree, of any jurisdiction, court or governmental instrumentality binding
upon the Company;

(ix) so far as is known to such counsel, all holders of securities of the
Company having rights to the registration of shares of Common Stock, or other
securities, have waived such rights with respect to the Registration Statement
or such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;

(x) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been obtained
under the Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Stock by
the Underwriters;

(xi) the Stock issued and sold by the Company will been duly authorized for
listing by the Nasdaq National Market upon official notice of issuance;

(xii) the statements in the Prospectus under the captions "Risk
Factors -- Dependence on Proprietary Technology; Uncertainty of Patents and
Proprietary Technology," "Patents and Proprietary Technology" and "Government
Regulation," insofar as such statements constitute matters of United States law
or legal conclusions thereunder, accurately describe such matters of law and
legal conclusions to the extent required under the Act and the Rules;

(xiii) to the best of such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company is a party relating to
patent rights, trade secrets or other proprietary information or materials of
the Company or the Subsidiary, and, to the best of such counsel's knowledge, no
such proceedings are threatened by governmental authorities or others;

(xiv) no facts have come to such counsel's attention to cause such counsel
to believe that the Company is infringing or otherwise violating any valid
patents of others; and to the best of such counsel's knowledge, the Company has
not received any notice that it is infringing or otherwise violating or
misappropriating any trade secrets, trademarks, service marks or other
proprietary information or materials of others.

In addition to the matters set forth above, counsel rendering the foregoing
opinion shall also include a statement to the effect that nothing has come to
the attention of such counsel in connection with the preparation of the
Registration Statement that leads them to believe that the Registration
Statement (except as to the financial statements and schedules, other financial
information and statistical data derived from such financial information, as to
which such counsel need not express any belief) at the Effective Date contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, that the Prospectus (except as to the financial statements and
schedules, other financial information and statistical data derived from such
financial information, as to which such counsel need not express any belief) as
of its date or at the Closing Date (or any later date on which Option Stock is
purchased), contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or of the States of California and
Delaware, upon opinions of local counsel

2
<PAGE> 19

satisfactory in form and scope to counsel for the Underwriters. Furthermore,
counsel rendering the foregoing opinion shall not be required to opine as to
matters addressed in the Dehlinger and Associates opinion referred to in Section
9(k). Copies of any opinions so relied upon shall be delivered to the
Representative and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel.

<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
COULTER PHARMACEUTICAL, INC.

Michael J. Bigham and James C. Kitch hereby certify that:

1. The date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware is February 16,
1995.

2. They are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of Coulter Pharmaceutical, Inc., a Delaware
corporation.

3. The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:

The name of the Corporation is Coulter Pharmaceutical, Inc. (the
"Corporation" or the "Company").

II.

The address of the registered office of the Corporation in the State of
Delaware is:

The Prentice-Hall Corporation System, Inc.
1013 Centre Road
Wilmington, DE 19805
County of New Castle

The name of the Corporation's registered agent at said address is The
Prentice-Hall Corporation System, Inc.

III.

The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.

IV.

A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Thirty-Three Million
(33,000,000) shares, Thirty Million (30,000,000) shares of which shall be Common
Stock (the "Common Stock") and Three Million (3,000,000) shares of which shall
be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par
value of one-tenth of one cent ($.001) per share and the Common Stock shall have
a par value of one-tenth of one cent ($.001) per share.

1.
<PAGE> 2

B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate, to fix or alter the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices, the
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 them; and to increase or decrease the number of shares of any series
subsequent to the issue of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.

A. A director of the corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for 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 Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.

B. Any repeal or modification of this Article V shall be prospective
and shall not affect the rights under this Article V in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.

VI.

For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:

2.
<PAGE> 3

1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.

2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, directors
shall be elected at each annual meeting of stockholders for a term of one year.
Each director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

3. Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the Corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all the
then-outstanding shares of the Voting Stock.

4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.

1. Subject to paragraph (i) of Section 42 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.

2. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.

3. No action shall be taken by the stockholders of the Corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws. No action shall be taken by the stockholders of the Corporation by
written consent following the effectiveness of the registration of any class of
securities of the Corporation under the Securities Act of 1934, as amended.

3.
<PAGE> 4

4. Special meetings of the stockholders of the Corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption).

5. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.

VII.

A. 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 statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this right."

B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.

3. Thereafter, pursuant to a resolution of the Board of Directors, this
Certificate of Amendment was submitted to the stockholders of the Company for
their approval and was duly approved by the holders of the necessary number of
shares of the Company's voting securities in accordance with the provisions of
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
Written notice of such action has been given to the remaining stockholders in
accordance with Section 228 of the General Corporation Law of Delaware.

4.
<PAGE> 5

IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Incorporation to be signed by the Chief Executive Officer and the
Secretary in Palo Alto, California this _______ day of ___________, 1997.

COULTER PHARMACEUTICAL, INC.

______________________________
Michael J. Bigham
President and Chief
Executive Officer

ATTEST:

By:________________________________
James C. Kitch
Secretary

<PAGE> 1
EXHIBIT 3.4

BYLAWS

COULTER PHARMACEUTICAL, INC.
(A DELAWARE CORPORATION)

<PAGE> 2

TABLE OF CONTENTS

PAGE
----

ARTICLE I

OFFICES....................... 1
Section 1. Registered Office............................... 1
Section 2. Other Offices................................... 1

ARTICLE II

CORPORATE SEAL.................... 1
Section 3. Corporate Seal.................................. 1

ARTICLE III

STOCKHOLDERS' MEETINGS................ 1
Section 4. Place of Meetings............................... 1
Section 5. Annual Meeting.................................. 2
Section 6. Special Meetings................................ 3
Section 7. Notice of Meetings.............................. 4
Section 8. Quorum.......................................... 4
Section 9. Adjournment and Notice of Adjourned Meetings.... 5
Section 10. Voting Rights................................... 5
Section 11. Beneficial Owners of Stock...................... 5
Section 12. List of Stockholders............................ 6
Section 13. Action without Meeting.......................... 6
Section 14. Organization.................................... 7

ARTICLE IV

DIRECTORS...................... 8
Section 15. Number and Term of Office....................... 8
Section 16. Powers.......................................... 8
Section 17. Vacancies....................................... 8
Section 18. Resignation..................................... 8
Section 19. Removal......................................... 9
Section 20. Meetings........................................ 9
(a) Annual Meetings................................. 9
(b) Regular Meetings................................ 9
(c) Special Meetings................................ 9
(d) Telephone Meetings.............................. 9
(e) Notice of Meetings.............................. 9
(f) Waiver of Notice................................ 9

<PAGE> 3

TABLE OF CONTENTS
(CONTINUED)
PAGE
----

Section 21. Quorum and Voting.............................. 10
Section 22. Action without Meeting......................... 10
Section 23. Fees and Compensation.......................... 10
Section 24. Committees..................................... 10
(a) Executive Committee............................ 10
(b) Other Committees............................... 11
(c) Term........................................... 11
(d) Meetings....................................... 11
Section 25. Organization................................... 12

ARTICLE V

OFFICERS...................... 12
Section 26. Officers Designated............................ 12
Section 27. Tenure and Duties of Officers.................. 12
(a) General........................................ 12
(b) Duties of Chairman of the Board of Directors... 12
(c) Duties of President............................ 12
(d) Duties of Vice Presidents...................... 13
(e) Duties of Secretary............................ 13
(f) Duties of Chief Financial Officer or Treasurer. 13
Section 28. Delegation of Authority........................ 13
Section 29. Resignations................................... 13
Section 30. Removal........................................ 14

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION... 14
Section 31. Execution of Corporate Instruments............. 14
Section 32. Voting of Securities Owned by the Corporation.. 14

ARTICLE VII

SHARES OF STOCK.................. 15
Section 33. Form and Execution of Certificates............. 15
Section 34. Lost Certificates.............................. 15
Section 35. Transfers...................................... 15
Section 36. Fixing Record Dates............................ 16

ii.

<PAGE> 4

TABLE OF CONTENTS
(CONTINUED)
PAGE

Section 37. Registered Stockholders.......................... 16

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION.......... 17
Section 38. Execution of Other Securities.................... 17

ARTICLE IX

DIVIDENDS....................... 17
Section 39. Declaration of Dividends......................... 17
Section 40. Dividend Reserve................................. 17

ARTICLE X

FISCAL YEAR...................... 18
Section 41. Fiscal Year...................................... 18

ARTICLE XI

INDEMNIFICATION.................... 18
Section 42. Indemnification of Directors, Officers,
Employees and Other Agents....................... 18
(a) Directors........................................ 18
(b) Officers, Employees and Other Agents............. 18
(c) Good Faith....................................... 18
(d) Expenses......................................... 19
(e) Enforcement...................................... 19
(f) Non-Exclusivity of Rights........................ 20
(g) Survival of Rights............................... 20
(h) Insurance........................................ 20
(i) Amendments....................................... 20
(j) Saving Clause.................................... 20
(k) Certain Definitions.............................. 20

ARTICLE XII

NOTICES........................ 21
Section 43. Notices.......................................... 21

iii.

<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)

(a) Notice to Stockholders.......................... 21
(b) Notice to Directors............................. 22
(c) Address Unknown................................. 22
(d) Affidavit of Mailing............................ 22
(e) Time Notices Deemed Given....................... 22
(f) Methods of Notice............................... 22
(g) Failure to Receive Notice....................... 22
(h) Notice to Person with Whom Communication
Is Unlawful................................... 22
(i) Notice to Person with Undeliverable Address..... 23

ARTICLE XIII

AMENDMENTS...................... 23
Section 44. Amendments...................................... 23

ARTICLE XIV

Section 45. Right of First Refusal.......................... 23

ARTICLE XV

LOANS TO OFFICERS.................. 26
Section 46. Loans to Officers............................... 26

ARTICLE XVI

MISCELLANEOUS.................... 27
Section 47. Annual Report................................... 27

iv.

<PAGE> 6

BYLAWS

COULTER PHARMACEUTICAL, INC.

(A DELAWARE CORPORATION)

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.

SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business, at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.

ARTICLE II

CORPORATE SEAL

SECTION 3. CORPORATE SEAL. The corporate seal, if adopted by the Board
of Directors, shall consist of a die bearing the name of the corporation and the
inscription, "Corporate Seal-Delaware." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE III

STOCKHOLDERS' MEETINGS

SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.

<PAGE> 7

SECTION 5. ANNUAL MEETING.

(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of Directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.

(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the date of the corporation's proxy
statement released to stockholders in connection with the previous year's annual
meeting of stockholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time of
the previous year's proxy statement, notice by the stockholder to be timely must
be so received a reasonable time before the solicitation is made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a stockholder proposal in the proxy statement and
form of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the Securities and Exchange Act of
1934, as amended. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.

<PAGE> 8

notice procedures set forth in this paragraph (c). Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the corporation in
accordance with the provisions of paragraph (b) of this Section 5. Such
stockholder's notice shall set forth (i) as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as a Director: (A)
the name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the corporation which are beneficially owned by such person, (D) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such person's written consent to being
named in the proxy statement, if any, as a nominee and to serving as a Director
if elected); and (ii) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 5. At the
request of the Board of Directors, any person nominated by a stockholder for
election as a Director shall furnish to the Secretary of the corporation that
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph (c). The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting and the defective nomination shall
be disregarded.

SECTION 6. SPECIAL MEETINGS.

(a) Special meetings of the stockholders of the corporation
may be called, for any purpose or purposes, by (i) the Chairman of the Board,
(ii) the President, (iii) the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board for adoption) or (iv) by the
holders of shares entitled to cast not less than ten percent (10%) of the votes
at the meeting, and shall be held at such place, on such date, and at such time
as they or he shall fix; provided, however, that following registration of any
of the classes of equity securities of the corporation pursuant to the
provisions of the Securities Exchange Act of 1934, as amended, special meetings
of the stockholders may only be called by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized Directors.

(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the time of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to the Chairman of the Board, the
President, any Vice President, or the Secretary of the corporation. No business
may be transacted at such special meeting otherwise than specified in such
notice. The officer receiving

<PAGE> 9

the request shall cause notice to be promptly given to the stockholders entitled
to vote, in accordance with the provisions of Section 7 of these Bylaws, that a
meeting will be held not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after the receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph (b) shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.

SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.

SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason cannot be
lawfully voted at such meeting, shall not be counted to determine a quorum at
such meeting. In the absence of a quorum any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting at which a
quorum is present shall be valid and binding upon the corporation; provided,
however, that Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of Directors. Where a separate vote by a class or classes
is required, a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum entitled to
take action with respect to that vote on that matter and the affirmative vote of
the majority (plurality, in the case of the election of Directors) of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class.

<PAGE> 10

SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
represented thereat. 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. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(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 10. VOTING RIGHTS.

(a) For the purpose of determining those stockholders entitled
to vote at any meeting of the stockholders, except as otherwise provided by law,
only persons in whose names shares stand on the stock records of the corporation
on the record date, as provided in Section 12 of these Bylaws, shall be entitled
to vote at any meeting of stockholders. Except as may be otherwise provided in
the Certificate of Incorporation or these Bylaws, each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder.
Every person entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a written proxy executed
by such person or his duly authorized agent, which proxy shall be filed with the
Secretary at or before the meeting at which it is to be used. An agent so
appointed need not be a stockholder. No proxy shall be voted after three (3)
years from its date of creation unless the proxy provides for a longer period.
All elections of Directors shall be by written ballot, unless otherwise provided
in the Certificate of Incorporation.

(b) Every stockholder entitled to vote in any election of
Directors of this corporation may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of Directors to be elected
multiplied by the number of votes to which the stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, may cumulate such stockholder's votes for one or more candidates unless
(i) the names of such candidates have been properly placed in nomination, in
accordance with these Bylaws, prior to the voting, (ii) the stockholder has
given advance notice to the corporation of the intention to cumulate votes
pursuant to paragraph (c) of Section 5 of these Bylaws, and (iii) the
stockholder has given proper notice to the other stockholders at the meeting,
prior to voting, of such stockholder's intention to cumulate such stockholder's
votes for any candidates who have been properly placed in nomination. The
candidates receiving the highest number of votes of the shares entitled to be
voted for them up to the number of Directors to be elected by such shares shall
be declared elected.

SECTION 11. BENEFICIAL OWNERS OF STOCK.

(A) If shares or other securities having voting power stand of
record in the names of two (2) or more persons, whether fiduciaries, members of
a partnership, joint tenants,

<PAGE> 11

tenants in common, tenants by the entirety, or otherwise, or if two (2) or more
persons have the same fiduciary relationship respecting the same shares, unless
the Secretary is given written notice to the contrary and is furnished with a
copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (a) if only one (1) votes, his act binds all; (b) if more than
one (1) votes, the act of the majority so voting binds all; (c) if more than one
(1) votes, but the vote is evenly split on any particular matter, each faction
may vote the securities in question proportionally, or may apply to the Delaware
Court of Chancery for relief as provided in the General Corporation Law of
Delaware, Section 217(b). If the instrument filed with the Secretary shows that
any such tenancy is held in unequal interests, a majority or even-split for the
purpose of this subsection (c) shall be a majority or even-split in interest.

(b) Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
corporation he has expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his proxy, may represent such stock and vote thereon.

SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, 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 ten (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
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

SECTION 13. ACTION WITHOUT MEETING.

(a) Any action required by statute to be taken at any annual
or special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, 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, are 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.

(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the Corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation

6.
<PAGE> 12

having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested.

(c) Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.

(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the effectiveness of the registration of any
class of securities of the corporation under the Securities Exchange Act of
1934, as amended.

SECTION 14. ORGANIZATION.

(a) At every meeting of stockholders, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.

(b) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies, and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless, and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.

<PAGE> 13

ARTICLE IV

DIRECTORS

SECTION 15. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of not less than four (4) and not more than eight (8) members, the
number thereof to be determined from time to time by resolution of the Board of
Directors. The number of directors is currently set at eight (8). The number of
authorized Directors may be modified from time to time by amendment of this
Section 15 in accordance with the provisions of Section 44 hereof. Except as
provided in Section 17, the Directors shall be elected by the stockholders at
their annual meeting in each year and shall hold office until the next annual
meeting and until their successors shall be duly elected and qualified.
Directors need not be stockholders unless so required by the Certificate of
Incorporation. If for any cause, the Directors shall not have been elected at an
annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws. No reduction of the authorized number of Directors
shall have the effect of removing any Director before the Director's term of
office expires, unless such removal is made pursuant to the provisions of
Section 19 hereof.

SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.

SECTION 17. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office for the
unexpired portion of the term of the Director whose place shall be vacant and
until his successor shall have been duly elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Section 17 in the case of
the death, removal or resignation of any Director, or if the stockholders fail
at any meeting of stockholders at which Directors are to be elected (including
any meeting referred to in Section 19 below) to elect the number of Directors
then constituting the whole Board of Directors.

SECTION 18. RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.

<PAGE> 14

SECTION 19. REMOVAL. At a special meeting of stockholders called for
the purpose in the manner hereinabove provided, subject to any limitations
imposed by law of the Certificate of Incorporation, the Board of Directors, or
any individual Director, may be removed from office, with or without cause, and
a new Director or Directors elected by a vote of stockholders holding a majority
of the outstanding shares entitled to vote at an election of Directors.

SECTION 20. MEETINGS.

(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.

(b) REGULAR MEETINGS. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the office
of the corporation required to be maintained pursuant to Section 2 hereof.
Unless otherwise restricted by the Certificate of Incorporation, regular
meetings of the Board of Directors may also be held at any place within or
without the State of Delaware which has been determined by the Board of
Directors.

(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the President or a majority of the Directors.

(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.

(e) NOTICE OF MEETINGS. Written notice of the time and place
of all special meetings of the Board of Directors shall be given at least one
(1) day before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends the 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.

(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the Directors not present shall sign a written
waiver of notice, or a consent to holding such meeting, or an approval of the
minutes thereof. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in
any written waiver of notice or consent

<PAGE> 15

unless so required by the Certificate of Incorporation or these Bylaws. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.

SECTION 21. QUORUM AND VOTING.

(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
Directors fixed from time to time in accordance with Section 15 hereof, but not
less than one (1), a quorum of the Board of Directors shall consist of a
majority of the exact number of Directors fixed from time to time in accordance
with Section 15 of these Bylaws, but not less than one (1); provided, however,
at any meeting whether a quorum be present or otherwise, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.

(b) At each meeting of the Board of Directors at which a
quorum is present all questions and business shall be determined by a vote of a
majority of the Directors present, unless a different vote be required by law,
the Certificate of Incorporation or these Bylaws.

SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, 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 of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.

SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.

SECTION 24. COMMITTEES.

10.

<PAGE> 16

adopt an agreement of merger or consolidation, to recommend to the stockholders
the sale, lease or exchange of all or substantially all of the corporation's
property and assets, to recommend to the stockholders of the corporation a
dissolution of the corporation or a revocation of a dissolution or to amend
these Bylaws.

(b) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors, and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall such committee have the powers denied to the
Executive Committee in these Bylaws.

(c) TERM. The members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee. The Board of Directors, subject to
the provisions of subsections (a) or (b) of this Section 24, may at any time
increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall terminate
on the date of his death or voluntary resignation from the committee or from the
Board of Directors. The Board of Directors may at any time for any reason remove
any individual committee member and the Board of Directors may fill any
committee vacancy created by death, resignation, removal or increase in the
number of members of the committee. The Board of Directors may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.

(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any Director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any Director by attendance thereat, except when the Director
attends such special 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. A majority of the authorized number of
members of any such committee shall

11.

<PAGE> 17

constitute a quorum for the transaction of business, and the act of a majority
of those present at any meeting at which a quorum is present shall be the act of
such committee.

SECTION 25. ORGANIZATION. At every meeting of the Directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the Directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.

ARTICLE V

OFFICERS

SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
be the Chairman of the Board of Directors, the President, one or more Vice
Presidents, the Secretary and the Chief Financial Officer or Treasurer, all of
whom shall be elected at the annual organizational meeting of the Board of
Directors. The order of the seniority of the Vice Presidents shall be in the
order of their nomination, unless otherwise determined by the Board of
Directors. The Board of Directors may also appoint one or more Assistant
Secretaries, Assistant Treasurers, and such other officers and agents with such
powers and duties as it shall deem necessary. The Board of Directors may assign
such additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the corporation at
any one time unless specifically prohibited therefrom by law. The salaries and
other compensation of the officers of the corporation shall be fixed by or in
the manner designated by the Board of Directors.

SECTION 27. TENURE AND DUTIES OF OFFICERS.

(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.

(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.

12.

<PAGE> 18

of the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and officers of
the corporation. The President shall perform other duties commonly incident to
his office and shall also perform such other duties and have such other powers
as the Board of Directors shall designate from time to time.

(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the
order of their seniority, may assume and perform the duties of the President in
the absence or disability of the President or whenever the office of President
is vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.

(e) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors, and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders, and of all meetings of the Board of Directors and any
committee thereof requiring notice. The Secretary shall perform all other duties
given him in these Bylaws and other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. The President may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.

(f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors or the President. The Chief Financial
Officer or Treasurer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.

SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.

13.

<PAGE> 19

Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.

SECTION 30. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the vote or written consent of a majority
of the Directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION

SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.

Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.

All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.

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person authorized so to do by resolution of the Board of Directors, or, in the
absence of such authorization, by the Chairman of the Board of Directors, the
President, or any Vice President.

ARTICLE VII

SHARES OF STOCK

SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Where such certificate is countersigned by a transfer agent
other than the corporation or its employee, or by a registrar other than the
corporation or its employee, any other signature on the certificate may be a
facsimile. 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 with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the designations,
preferences, limitations, restrictions on transfer and relative rights of the
shares authorized to be issued.

SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.

SECTION 35. TRANSFERS.

(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.

(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.

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SECTION 36. FIXING RECORD DATES.

(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors, 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. 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.

(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
(10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.

(c) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty (60) days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.

SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive

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<PAGE> 22

dividends, and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.

ARTICLE IX

DIVIDENDS

SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.

SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves

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to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
Board of Directors shall think conducive to the interests of the corporation,
and the Board of Directors may modify or abolish any such reserve in the manner
in which it was created.

ARTICLE X

FISCAL YEAR

SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

ARTICLE XI

INDEMNIFICATION

SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.

(a) DIRECTORS. The corporation shall indemnify its Directors
to the fullest extent not prohibited by the Delaware General Corporation Law;
provided, however, that the corporation shall not be required to indemnify any
Director in connection with any proceeding (or part thereof) initiated by such
person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the corporation or (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the Delaware General Corporation Law.

(b) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its officers, employees and other agents as set
forth in the Delaware General Corporation Law.

(1) For purposes of any determination under this
Bylaw, a Director or executive officer shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe that his conduct was
unlawful, if his action is based on information, opinions, reports and
statements, including financial statements and other financial data, in each
case prepared or presented by:

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<PAGE> 24

(i) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;

(ii) counsel, independent accountants or
other persons as to matters which the Director or executive officer believed to
be within such person's professional competence; and

(iii) with respect to a Director, a
committee of the Board upon which such Director does not serve, as to matters
within such Committee's designated authority, which committee the Director
believes to merit confidence; so long as, in each case, the Director or
executive officer acts without knowledge that would cause such reliance to be
unwarranted.

(2) The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal proceeding, that he had reasonable cause to believe that his conduct
was unlawful.

(3) The provisions of this paragraph (c) shall not be
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth by
the Delaware General Corporation Law.

(d) EXPENSES. The corporation shall advance, prior to the
final disposition of any proceeding, promptly following request therefor, all
expenses incurred by any Director or executive officer in connection with such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay said amounts if it should be determined ultimately that such person is not
entitled to be indemnified under this Bylaw or otherwise.

(e) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a Director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. The corporation shall be entitled to raise as a
defense to any such action 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. 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

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<PAGE> 25

because he 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 claimant has not
met the applicable standard of conduct.

(f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, 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 office. The corporation is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.

(g) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

(h) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.

(i) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.

(j) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.

(k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:

(1) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving of
testimony in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.

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(2) The term "expenses" shall be broadly construed
and shall include, without limitation, court costs, attorneys' fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.

(3) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who 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, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

(4) References to a "director," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.

(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation 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; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.

ARTICLE XII

NOTICES

SECTION 43. NOTICES.

(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.

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(b) NOTICE TO DIRECTORS. Any notice required to be given to
any Director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such Director shall have
filed in writing with the Secretary, or, in the absence of such filing, to the
last known post office address of such Director.

(c) ADDRESS UNKNOWN. If no address of a stockholder or
Director be known, notice may be sent to the office of the corporation required
to be maintained pursuant to Section 2 hereof.

(d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.

(e) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by facsimile, telex or telegram shall be deemed to have been
given as of the sending time recorded at time of transmission.

(f) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.

(g) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.

(h) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.

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(i) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.

ARTICLE XIII

AMENDMENTS

SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and new
Bylaws adopted by the stockholders entitled to vote. The Board of Directors
shall also have the power, if such power is conferred upon the Board of
Directors by the Certificate of Incorporation, to adopt, amend or repeal Bylaws
(including, without limitation, the amendment of any Bylaw setting forth the
number of Directors who shall constitute the whole Board of Directors.

ARTICLE XIV

RIGHT OF FIRST REFUSAL

SECTION 45. RIGHT OF FIRST REFUSAL. No stockholder shall sell, assign,
pledge,or in any manner transfer any of the shares of common stock of the
corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this Bylaw:

(a) If the stockholder receives from anyone a bona fide offer
acceptable to the stockholder to purchase any of his shares of common stock,
then the stockholder shall first give written notice thereof to the corporation.
The notice shall name the proposed transferee and state the number of shares to
be transferred, the price per share and all other terms and conditions of the
offer.

(b) For fifteen (15) days following receipt of such notice,
the corporation shall have the option to purchase all or any lesser part of the
shares specified in the notice at the price

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and upon the terms set forth in such bona fide offer. In the event the
corporation elects to purchase all the shares, it shall give written notice to
the selling stockholder of its election and settlement for said shares shall be
made as provided below in paragraph (d).

(c) In the event the corporation does not elect to acquire all
of the shares specified in the selling stockholder's notice, the Secretary of
the corporation shall, within fifteen (15) days of receipt of said selling
stockholder's notice, give written notice thereof to the stockholders of the
corporation other than the selling stockholder. Said written notice shall state
the number of shares that the corporation has elected to purchase and the number
of shares remaining available for purchase (which shall be the same as the
number contained in said selling stockholder's notice, less any such shares that
the corporation has elected to purchase). Each of the other holders of common
stock shall have the option to purchase that proportion of the shares available
for purchase as the number of shares owned by each of said other holders of
common stock bears to the total issued and outstanding shares of common stock of
the corporation, excepting those shares owned by the selling stockholder. A
stockholder electing to exercise such option shall, within ten (10) days after
mailing of the corporation's notice, give notice to the corporation specifying
the number of shares such stockholder will purchase. Within such ten-day period,
each of said other stockholders shall give written notice stating how many
additional shares such stockholder will purchase if additional shares are made
available. Failure to respond in writing within said ten-day period to the
notice given by the Secretary of the corporation shall be deemed a rejection of
such stockholder's right to acquire a proportionate part of the shares of the
selling stockholder. In the event one or more stockholders do not elect to
acquire the shares available to them, said shares shall be allocated on a pro
rata basis to the stockholders who requested shares in addition to their pro
rata allotment.

(d) In the event the corporation and/or stockholders, other
than the selling stockholder, elect to acquire any of the shares of the selling
stockholder as specified in said selling stockholder's notice, the Secretary of
the corporation shall so notify the selling stockholder and settlement thereof
shall be made in cash within thirty (30) days after the Secretary of the
corporation receives said selling stockholder's notice; provided that if the
terms of payment set forth in said selling stockholder's notice were other than
cash against delivery, the corporation and/or its other stockholders shall pay
for said shares on the same terms and conditions set forth in said selling
stockholder's notice.

(e) In the event the corporation and/or its other stockholders
do not elect to acquire al of the shares specified in the selling stockholder's
notice, said selling stockholder may, within the sixty-day period following the
expiration of the option rights granted to the corporation and other
stockholders herein, sell elsewhere the shares specified in said selling
stockholder's notice which were not acquired by the corporation and/or its other
stockholders, in accordance with the provisions of paragraph (d) of this bylaw,
provided that said sale shall not be on terms and conditions more favorable to
the purchaser that those contained in the bona fide offer set forth in said
selling stockholder's notice. All shares so sold by said selling stockholder
shall continue to be subject to the provisions of this Bylaw in the same manner
as before said transfer.

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(f) Anything to the contrary contained herein notwithstanding,
the following transactions shall be exempt from the provisions of this Bylaw:

(1) A stockholder's transfer of any or all shares
held either during such stockholder's lifetime or on death by will or
intestacy to such stockholder's immediate family. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother,
brother, or sister of the stockholder making such transfer and shall
include any trust established primarily for the benefit of the
stockholder or his immediate family.

(2) A stockholder's bona fide pledge or mortgage of
any shares with a commercial lending institution, provided than any
subsequent transfer of said shares by said institution shall be
conducted in the manner set forth in this Section 45.

(3) A stockholder's transfer of any or all of such
stockholder's shares to the corporation or to any other stockholder of
the corporation.

(4) A stockholder's transfer of any or all of such
stockholder's shares to a person who, at the time of such transfer, is
an officer or director of the corporation.

(5) A corporate stockholder's transfer of any or all
of its shares pursuant to and in accordance with the terms of any
merger, consolidation, reclassification of shares or capital
reorganization of the corporate stockholder, or pursuant to a sale of
all or substantially all of the stock or assets of a corporate
stockholder.

(6) A corporate stockholder's transfer of any or all
of its shares to any or all of its stockholders.

(7) A transfer by a stockholder which is a limited or
general partnership to any or all of its partners.

(8) A transfer which is in compliance with any other
agreement which provides for a right of first refusal, including
without limitation, that certain Investors' Rights Agreement by and
between the Corporation and certain purchasers of its Preferred Stock,
dated on or about February 24, 1995.

In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock subject to the provisions of this Bylaw, and
there shall be no further transfer of such stock except in accordance with this
Bylaw.

(g) The provisions of this Section 45 may be waived with
respect to any transfer either by the corporation, upon duly authorized action
of its Board of Directors, or by the stockholders, upon the express written
consent of the owners of a majority of the voting power of the corporation
(excluding the votes represented by those shares to be sold by the selling
stockholder). This Section 45 may be amended or repealed either by a duly
authorized

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action of the Board of Directors or by the stockholders, upon the express vote
or written consent of the owners of a majority of the voting power of the
corporation.

(h) Any sale or transfer, or purported sale or transfer, of
common stock of the corporation shall be null and void unless the terms,
conditions, and provisions of this Bylaw are strictly observed and followed.

(i) The foregoing right of first refusal shall terminate on
either of the following dates, whichever shall first occur:

(1) On February __, 2005; or

(2) Upon the date securities of the corporation are
first offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.

(j) The certificates representing shares of common stock of
the corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:

"The shares represented by this certificate are subject to a
right of first refusal option in favor of the corporation and its other
stockholders, as provided in the bylaws of the corporation."

ARTICLE XV

LOANS TO OFFICERS

SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this Section 46 shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.

26.

<PAGE> 32

ARTICLE XVI

MISCELLANEOUS

SECTION 47. ANNUAL REPORT.

(a) Subject to the provisions of Section 47(b) below, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the United States Securities Exchange Act of
1934, that Act shall take precedence. Such report shall be sent to stockholders
at least fifteen (15) days prior to the next annual meeting of stockholders
after the end of the fiscal year to which it relates.

(b) If and so long as there are fewer than 100 holders of
record of the corporation's shares, the requirement of sending of an annual
report to the stockholders of the corporation is hereby expressly waived.

27.

<PAGE> 1
EXHIBIT 3.5

BYLAWS

COULTER PHARMACEUTICAL, INC.
(A DELAWARE CORPORATION)

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I

OFFICES................................................... 1
Section 1. Registered Office........................................................... 1
Section 2. Other Offices............................................................... 1

ARTICLE II

CORPORATE SEAL................................................ 1
Section 3. Corporate Seal.............................................................. 1

ARTICLE III

STOCKHOLDERS' MEETINGS............................................ 1
Section 4. Place of Meetings........................................................... 1
Section 5. Annual Meeting.............................................................. 2
Section 6. Special Meetings............................................................ 3
Section 7. Notice of Meetings.......................................................... 4
Section 8. Quorum...................................................................... 4
Section 9. Adjournment and Notice of Adjourned Meetings................................ 5
Section 10. Voting Rights............................................................... 5
Section 11. Beneficial Owners of Stock.................................................. 5
Section 12. List of Stockholders........................................................ 6
Section 13. Action without Meeting...................................................... 6
Section 14. Organization................................................................ 7

ARTICLE IV

DIRECTORS.................................................. 7
Section 15. Number and Term of Office................................................... 7
Section 16. Powers...................................................................... 8
Section 17. Vacancies................................................................... 8
Section 18. Resignation................................................................. 8
Section 19. Removal..................................................................... 8
Section 20. Meetings.................................................................... 8
(a) Annual Meetings.............................................................. 8
(b) Regular Meetings............................................................. 9
(c) Special Meetings............................................................. 9
(d) Telephone Meetings........................................................... 9
(e) Notice of Meetings........................................................... 9
(f) Waiver of Notice............................................................. 9
</TABLE>

<PAGE> 3

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 21. Quorum and Voting........................................................... 9
Section 22. Action without Meeting...................................................... 10
Section 23. Fees and Compensation....................................................... 10
Section 24. Committees.................................................................. 10
(a) Executive Committee......................................................... 10
(b) Other Committees............................................................ 10
(c) Term........................................................................ 11
(d) Meetings.................................................................... 11
Section 25. Organization................................................................ 11

ARTICLE V

OFFICERS................................................... 12
Section 26. Officers Designated......................................................... 12
Section 27. Tenure and Duties of Officers............................................... 12
(a) General..................................................................... 12
(b) Duties of Chairman of the Board of Directors................................ 12
(c) Duties of President......................................................... 12
(d) Duties of Vice Presidents................................................... 12
(e) Duties of Secretary......................................................... 13
(f) Duties of Chief Financial Officer or Treasurer.............................. 13
Section 28. Delegation of Authority..................................................... 13
Section 29. Resignations................................................................ 13
Section 30. Removal..................................................................... 13

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION................................ 14
Section 31. Execution of Corporate Instruments.......................................... 14
Section 32. Voting of Securities Owned by the Corporation............................... 14

ARTICLE VII

SHARES OF STOCK............................................... 15
Section 33. Form and Execution of Certificates.......................................... 15
Section 34. Lost Certificates........................................................... 15
Section 35. Transfers................................................................... 15
Section 36. Fixing Record Dates......................................................... 16
</TABLE>

ii.

<PAGE> 4

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 37. Registered Stockholders..................................................... 16

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION..................................... 17
Section 38. Execution of Other Securities............................................... 17

ARTICLE IX

DIVIDENDS.................................................. 17
Section 39. Declaration of Dividends.................................................... 17
Section 40. Dividend Reserve............................................................ 17

ARTICLE X

FISCAL YEAR................................................. 18
Section 41. Fiscal Year................................................................. 18

ARTICLE XI

INDEMNIFICATION............................................... 18
Section 42. Indemnification of Directors, Officers, Employees and Other
Agents...................................................................... 18
(a) Directors.................................................................... 18
(b) Officers, Employees and Other Agents......................................... 18
(c) Good Faith................................................................... 18
(d) Expenses..................................................................... 19
(e) Enforcement.................................................................. 19
(f) Non-Exclusivity of Rights.................................................... 20
(g) Survival of Rights........................................................... 20
(h) Insurance.................................................................... 20
(i) Amendments................................................................... 20
(j) Saving Clause................................................................ 20
(k) Certain Definitions.......................................................... 20

ARTICLE XII

NOTICES................................................... 21
Section 43. Notices..................................................................... 21
</TABLE>

iii.

<PAGE> 5

<TABLE>
<S> <C>
(a) Notice to Stockholders...................................................... 21
(b) Notice to Directors......................................................... 22
(c) Address Unknown............................................................. 22
(d) Affidavit of Mailing........................................................ 22
(e) Time Notices Deemed Given................................................... 22
(f) Methods of Notice........................................................... 22
(g) Failure to Receive Notice................................................... 22
(h) Notice to Person with Whom Communication Is Unlawful........................ 22
(i) Notice to Person with Undeliverable Address................................. 23

ARTICLE XIII

AMENDMENTS.................................................. 23
Section 44. Amendments.................................................................. 23

ARTICLE XV

LOANS TO OFFICERS.............................................. 23
Section 45. Loans to Officers........................................................... 23

ARTICLE XVI

MISCELLANEOUS................................................ 24
Section 46. Annual Report............................................................... 24
</TABLE>

iv.

<PAGE> 6

BYLAWS

COULTER PHARMACEUTICAL, INC.

(A DELAWARE CORPORATION)

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.

ARTICLE II

CORPORATE SEAL

ARTICLE III

STOCKHOLDERS' MEETINGS

1.
<PAGE> 7

SECTION 5. ANNUAL MEETING.

(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.

2.
<PAGE> 8

(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including without limitation such person's written consent to being named in
the proxy statement, if any, as a nominee and to serving as a Director if
elected); and (ii) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 5. At the
request of the Board of Directors, any person nominated by a stockholder for
election as a Director shall furnish to the Secretary of the corporation that
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph (c). The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting and the defective nomination shall
be disregarded.

(d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.

SECTION 6. SPECIAL MEETINGS.

(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board, (ii)
the President or (iii) the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption).

(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the time of such meeting and the general

3.
<PAGE> 9

nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board, the President, any Vice President, or
the Secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Section 7 of these Bylaws, that a
meeting will be held not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after the receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph (b) shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.

4.
<PAGE> 10

majority (plurality, in the case of the election of Directors) of shares of such
class or classes present in person or represented by proxy at the meeting shall
be the act of such class.

SECTION 10. VOTING RIGHTS.

SECTION 11. BENEFICIAL OWNERS OF STOCK.

(a) If shares or other securities having voting power stand of
record in the names of two (2) or more persons, whether fiduciaries, members of
a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only one (1) votes, his act
binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the General Corporation Law of Delaware, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this subsection
(c) shall be a majority or even-split in interest.

5.
<PAGE> 11

SECTION 13. ACTION WITHOUT MEETING.

(a) Any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, 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, are 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.

(c) Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.

6.
<PAGE> 12

SECTION 14. ORGANIZATION.

(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.

(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless, and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.

ARTICLE IV

DIRECTORS

SECTION 15. NUMBER AND TERM OF OFFICE. The Board of Directors shall be
eight (8). This number may be changed by one or more resolutions duly adopted by
the Board of Directors. The number of authorized Directors may be modified from
time to time by amendment of this Section 15 in accordance with the provisions
of Section 44 hereof. Except as provided in Section 17, the Directors shall be
elected by the stockholders at their annual meeting in each year and shall hold
office until the next annual meeting and until their successors shall be duly
elected and qualified. Directors need not be stockholders unless so required by
the Certificate of Incorporation. If for any cause, the Directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws. No reduction of the authorized number of
Directors shall have the effect of removing any Director

7.
<PAGE> 13

before the Director's term of office expires, unless such removal is made
pursuant to the provisions of Section 19 hereof.

SECTION 19. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the Corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.

SECTION 20. MEETINGS.

8.
<PAGE> 14

(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been determined by the Board of Directors.

(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.

(e) NOTICE OF MEETINGS. Written notice of the time and place of
all special meetings of the Board of Directors shall be given at least one (1)
day before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends the 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.

SECTION 21. QUORUM AND VOTING.

9.
<PAGE> 15

adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.

(b) At each meeting of the Board of Directors at which a quorum
is present all questions and business shall be determined by a vote of a
majority of the Directors present, unless a different vote be required by law,
the Certificate of Incorporation or these Bylaws.

SECTION 24. COMMITTEES.

(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors, appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and
specifically granted by the Board of Directors, shall have and may exercise when
the Board of Directors is not in session all powers of the Board of Directors in
the management of the business and affairs of the corporation, including,
without limitation, the power and authority to declare a dividend or to
authorize the issuance of stock, except such committee shall not have the power
or authority to amend the Certificate of Incorporation, to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
to recommend to the stockholders of the corporation a dissolution of the
corporation or a revocation of a dissolution or to amend these Bylaws.

(b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors, and shall have such powers and perform such duties as
may be prescribed by the resolution or resolutions creating such committees, but
in no event shall such committee have the powers denied to the Executive
Committee in these Bylaws.

10.
<PAGE> 16

11.
<PAGE> 17

ARTICLE V

OFFICERS

SECTION 27. TENURE AND DUTIES OF OFFICERS.

(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
The President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.

12.
<PAGE> 18

SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.

SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.

13.
<PAGE> 19

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION

SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the President, or any Vice President.

14.
<PAGE> 20

ARTICLE VII

SHARES OF STOCK

SECTION 35. TRANSFERS.

15.
<PAGE> 21

SECTION 36. FIXING RECORD DATES.

SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive

16.
<PAGE> 22

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

ARTICLE IX

DIVIDENDS

17.
<PAGE> 23

ARTICLE X

FISCAL YEAR

SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

ARTICLE XI

INDEMNIFICATION

SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.

(a) DIRECTORS. The corporation shall indemnify its Directors to
the fullest extent not prohibited by the Delaware General Corporation Law;
provided, however, that the corporation shall not be required to indemnify any
Director in connection with any proceeding (or part thereof) initiated by such
person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the corporation or (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the Delaware General Corporation Law.

(b) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its officers, employees and other agents as set forth in
the Delaware General Corporation Law.

(1) For purposes of any determination under this Bylaw, a
Director or executive officer shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe that his conduct was unlawful, if his action
is based on information, opinions, reports and statements, including financial
statements and other financial data, in each case prepared or presented by:

18.
<PAGE> 24

(i) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;

(ii) counsel, independent accountants or other
persons as to matters which the Director or executive officer believed to be
within such person's professional competence; and

(iii) with respect to a Director, a committee of the
Board upon which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director believes to merit
confidence; so long as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.

(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
he had reasonable cause to believe that his conduct was unlawful.

(3) The provisions of this paragraph (c) shall not be deemed
to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth by the
Delaware General Corporation Law.

(d) EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.

19.
<PAGE> 25

(j) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.

(k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:

(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

20.
<PAGE> 26

(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.

(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who 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, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

(4) References to a "director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.

(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation 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; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.

ARTICLE XII

NOTICES

SECTION 43. NOTICES.

21.
<PAGE> 27

(b) NOTICE TO DIRECTORS. Any notice required to be given to any
Director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such Director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such Director.

(c) ADDRESS UNKNOWN. If no address of a stockholder or Director
be known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 2 hereof.

(d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.

(g) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.

22.
<PAGE> 28

ARTICLE XIII

AMENDMENTS

SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and new
Bylaws adopted by the affirmative vote of at least sixty-six and two-thirds
percent (66-2/3%) of the voting power of all of the then-outstanding shares of
the Voting Stock. The Board of Directors shall also have the power, if such
power is conferred upon the Board of Directors by the Certificate of
Incorporation, to adopt, amend or repeal Bylaws (including, without limitation,
the amendment of any Bylaw setting forth the number of Directors who shall
constitute the whole Board of Directors).

ARTICLE XV

LOANS TO OFFICERS

SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this Section 45 shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.

23.
<PAGE> 29

ARTICLE XVI

MISCELLANEOUS

SECTION 46. ANNUAL REPORT.

(a) Subject to the provisions of Section 46(b) below, the Board
of Directors shall cause an annual report to be sent to each stockholder of the
corporation not later than one hundred twenty (120) days after the close of the
corporation's fiscal year. Such report shall include a balance sheet as of the
end of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the United States Securities Exchange Act of
1934, that Act shall take precedence. Such report shall be sent to stockholders
at least fifteen (15) days prior to the next annual meeting of stockholders
after the end of the fiscal year to which it relates.

24.
<PAGE> 30

CERTIFICATE OF ASSISTANT SECRETARY

I hereby certify that:

I am the duly elected and acting Assistant Secretary of
COULTER PHARMACEUTICAL, INC., a Delaware corporation (the "Company"); and

Attached hereto is a complete and accurate copy of the Bylaws
of the Company as duly adopted by the Board of Directors by Unanimous Written
Consent dated as of February 24, 1995 and said Bylaws are presently in effect.

IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of the Company as of February 24, 1995.

/s/ John A. Dado
-----------------------------------
John A. Dado, Assistant Secretary

<PAGE> 1
[COOLEY GODWARD LLP LETTERHEAD]

January 16, 1997

Coulter Pharmaceutical, Inc.
550 California Avenue, Suite 200
Palo Alto, California 94306-1440

Ladies and Gentlemen:

You have requested our opinion with respect to certain matters in connection
with the filing by Coulter Pharmaceutical, Inc. (the "Company") of a
Registration Statement on Form S-1 on December 11, 1996, as amended (the
"Registration Statement") with the Securities and Exchange Commission covering
the offering of up to Two Million Eight Hundred Seventy Five Thousand
(2,875,000) shares of the Company's Common Stock, $.001 par value
(the "Shares").

In connection with this opinion, we have examined the Registration Statement
and related Prospectus, your Restated Certificate of Incorporation and Bylaws,
as amended, and such other documents, records, certificates, memoranda and
other instruments as we deem necessary as a basis for this opinion. We have
assumed the genuineness and authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies thereof, and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness thereof.

On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the shares, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid, and
nonassessable.

We consent to the filing of this opinion as an exhibit to the Registration
Statement.

Very truly yours,

COOLEY GODWARD LLP

/s/ James C. Kitch
- ------------------------
James C. Kitch