ANSAN PHARMACEUTICALS INC, 10QSB, 1997-05-05

ANSAN PHARMACEUTICALS INC
10QSB, 1997-05-05
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarter ended March 31, 1997.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _________to __________

Commission File No. 0-26422
----------

ANSAN PHARMACEUTICALS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)

DELAWARE 94-3171943
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)

400 OYSTER POINT BLVD. SUITE 435
SOUTH SAN FRANCISCO, CALIFORNIA 94080
--------------------------------------
(Address of Principal Executive Offices)

(415) 635-0200
--------------
(Issuer's Telephone Number, Including Area Code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
------ ------

State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 5, 1997: 2,851,954 shares of Common Stock outstanding, $0.001
par value.

Transitional Small Business Disclosure Format Yes No X
----- -----

1
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INDEX TO FORM 10-QSB

PAGE

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Financial Statements:

Condensed Balance Sheets as of March 31, 1997 and
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 3

Condensed Statements of Operations for the Three Months ended
March 31, 1997 and 1996 and period from
incorporation (November 6, 1992) to March 31, 1997 . . . . . . 4

Condensed Statements of Cash Flows for the Three
Months ended March 31, 1997 and 1996 and period from
incorporation (November 6, 1992) to March 31, 1997 . . . . . . 5

Notes to Condensed Financial Statements . . . . . . . . . . . . . 6

Item 2. Management's Discussion and Analysis
or Plan of Operation . . . . . . . . . . . . . . . . . . . . . 8

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 11

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2
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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
ANSAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS

March 31, December 31,
1997 1996
------------ -------------
(Unaudited) (Note A)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,188,816 $ 245,778
Short-term investments 1,000,000 1,500,000
Prepaid expenses and other current assets 59,758 83,760
------------ ------------
Total current assets 2,248,574 1,829,538
Furniture and equipment, net 96,603 93,936
------------ ------------
$ 2,345,177 $ 1,923,474
------------ ------------
------------ ------------

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 181,375 $ 91,041
Payable to Titan Pharmaceuticals, Inc. 136,915 117,881
Accrued sponsored research expense 25,620 36,330
Accrued legal expense 7,100 26,327
Other accrued liabilities 13,547 62,457
------------ ------------
Total current liabilities 364,557 334,036

Noncurrent debenture payable to Titan Pharmaceuticals, Inc. 1,000,000 --

Stockholders' equity
Common stock, at amounts paid in, $0.001 par value;
20,000,000 shares authorized, 2,849,887 and 2,845,108
shares issued and outstanding at March 31, 1997 and
December 31, 1996, respectively 10,699,996 10,850,017
Deferred compensation -- (180,561)
Deficit accumulated during the development stage (9,719,376) (9,080,018)
------------ ------------
Total stockholders' equity 980,620 1,589,438
------------ ------------
$ 2,345,177 $ 1,923,474
------------ ------------
------------ ------------
</TABLE>

Note A: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.

3
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ANSAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

Period from
Incorporation
Three Months Ended (November 6,
March 31, 1992) to
------------------------- March 31,
1997 1996 1997
------------------------- --------------

COSTS AND EXPENSES:

Research and development $ 382,945 $ 257,362 $ 5,966,798
Sponsored research and development
and license fees- stockholder -- -- 396,689
General and administrative 271,779 199,581 3,185,976
----------- ---------- -------------
Loss from operations (654,724) (456,943) (9,549,463)

Other income/(expenses)
Interest income 18,507 49,008 268,377
Interest expense (3,141) -- (438,290)
----------- ---------- -------------

Net loss $ (639,358) $ (407,935) $(9,719,376)
----------- ---------- -------------
----------- ---------- -------------
Net loss per share $ (0.26) $ (0.17)
----------- ----------
----------- ----------
Shares used in computation 2,483,904 2,404,404
----------- ----------
----------- ----------

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.

4
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ANSAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION
(NOVEMBER 6,
THREE MONTHS ENDED 1992) TO
MARCH 31, MARCH 31,
1997 1996 1997
------------- ------------- --------------
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (639,358) $(407,935) $(9,719,376)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation expense 8,096 5,288 32,079
Amortization of debt discount -- -- 400,000
Write off deferred compensation 26,718 26,718
Amortization of deferred compensation -- 13,890 97,223
Forgiveness of stockholder receivable -- -- 205
Issuance of common stock in exchange for consulting
services -- -- 19,984
Grant of common stock to employee -- -- 155,000
Changes in operating assets and liabilities:
Prepaid expenses and sponsored research 24,002 32,519 (59,758)
Accounts payable 90,334 25,001 181,375
Accrued legal (19,227) -- 17,103
Accrued sponsored research (10,710) -- 15,617
Other accrued liabilities (48,910) 13,767 13,547
------------- ------------- --------------
Net cash used in operating activities (569,055) (317,470) (8,820,283)
------------- ------------- --------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of furniture and equipment (10,763) (64,343) (128,682)
Purchases of short-term investments (1,200,000) (53,168) (9,950,000)
Proceeds from sale of short-term investments 1,700,000 500,000 8,950,000
------------- ------------- --------------
Net cash provided by (used in) investing activities 489,237 382,489 (1,128,682)
------------- ------------- --------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of series A preferred stock -- -- 992,592
Proceeds from issuance of common stock, net 3,822 -- 5,976,058
Proceeds from related party notes -- -- 220,000
Proceeds from issuance of debenture to Titan
Pharmaceuticals, Inc. 1,000,000 -- 1,000,000
Payment on note from related party -- -- (190,000)
Issuance of notes payable -- -- 1,025,000
Repayment of note payable -- -- (1,425,000)
Issuance of warrants to purchase common stock -- -- 400,000
Proceeds from stockholder receivable -- -- 1,900
Payable to Titan Pharmaceuticals, Inc. 19,034 8,557 3,137,231
------------- ------------- --------------
Net cash provided by financing activities 1,022,856 8,557 11,137,781
------------- ------------- --------------
Net increase in cash and cash equivalents 943,038 73,576 1,188,816
Cash and cash equivalents, beginning of period 245,778 45,202 --
------------- ------------- --------------
Cash and cash equivalents, end of period $ 1,188,816 $ 118,778 $ 1,188,816
------------- ------------- --------------
------------- ------------- --------------

SUPPLEMENTAL CASH FLOW DISCLOSURE AND NONCASH
FINANCING ACTIVITIES
Forgiveness of note payable to related party $ -- $ -- $ 30,000
------------- ------------- --------------
------------- ------------- --------------
Interest paid on related party notes $ -- $ -- $ 4,409
------------- ------------- --------------
------------- ------------- --------------
Conversion of payable to parent into Series A
Preferred Stock $ -- $ -- $ 1,449,064
------------- ------------- --------------
------------- ------------- --------------
Interest paid on bridge notes $ -- $ -- $ 29,694
------------- ------------- --------------
------------- ------------- --------------
Conversion of payable to parent into Common Stock $ -- $ -- $ 1,551,252
------------- ------------- --------------
------------- ------------- --------------
</TABLE>

SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.

5
<PAGE>

1. Organization and Summary of Significant Accounting Policies

THE COMPANY

Ansan Pharmaceuticals, Inc. ("Ansan" or the "Company") was incorporated
in the State of Delaware on November 6, 1992 to engage in the development of
analogs of butyric acid for the treatment of cancer, blood disorders and
other serious diseases. The Company is in the development stage.

RELATIONSHIP WITH TITAN PHARMACEUTICALS, INC

Titan Pharmaceuticals, Inc. ("Titan"), a biopharmaceutical company
engaged, through the operations of its subsidiaries and affiliates, in the
development of new proprietary therapeutic products for use in the fields of
cancer, immunology, viral diseases, and disorders of the central nervous
system, was the Company's parent until the Company's initial public offering
(the "IPO") in August 1995. Subsequent to the IPO, Titan's ownership
interest was reduced to approximately 43%.

In March 1997, Ansan and Titan entered into an agreement for financing
pursuant to which Titan advanced Ansan $1,000,000 in return for a debenture
(the "Debenture") which is convertible at any time prior to June 21, 1997
into 333,333 shares of common stock. The Debenture bears interest at prime
plus 2% and is due in April 1998. In connection with the issuance of the
Debenture, Ansan granted Titan an option (the "First Option") to acquire an
additional 333,333 shares of Ansan common stock for an aggregate purchase
price of $1,000,000. The First Option expires on June 21, 1997.

In the event the Debenture is converted to equity, Ansan will grant
Titan two additional options (respectively, the "Second Option" and the
"Third Option"). The Second Option will be exercisable for two years from
the date of grant to purchase up to 1,630,000 shares of Ansan common stock at
an exercise price of $3.75 per share. The Third Option will be exercisable
through August 8, 2000 to purchase up to 500,000 shares of Ansan common stock
at an exercise price of $6.50 per share. Titan will be obligated to exercise
the Second Option for the purchase of specified numbers of shares in the
event Titan's outstanding Class A Warrants are exercised, provided Ansan has
not completed public or private equity financings resulting in specified
gross proceeds prior to the date such a purchase obligation arises.

The Company contracts with Titan for limited financial and
administrative services. Titan has previously supplied working capital
financing to the Company and may in the future provide such financing. As
part of its affiliation with Titan, the Company and Titan have a number of
members in common of their respective boards of directors.

BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do

6
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not include all of the information and footnotes required by generally
accepted accounting principals for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered for fair presentation have been included. Operating
results for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's 1996 Annual Report
on Form 10-KSB.

The Company's activities since incorporation have consisted primarily of
conducting research and development, performing business and financial
planning and raising capital. Accordingly, the Company is considered to be
in the development stage and expects to incur increasing losses and require
additional financial resources to achieve commercialization of its products.
The Company also depends on third parties to conduct certain research on the
Company's behalf through various research arrangements. All of the Company's
current products under development are the subject of license agreements that
may require the payment of future royalties.

NET LOSS PER SHARE

Net loss per share for the three months ended March 31, 1997 and 1996 is
computed using the weighted average number of common shares outstanding,
reduced by the number of shares held in escrow (see Release of Escrowed
Shares and Options below). Common equivalent shares are excluded from the
calculation as their effect is antidilutive.

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share", which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact is
not expected to result in a change in primary earnings per share for the
quarters ended March 31, 1997 and March 31, 1996 as the Company incurred net
losses in those periods and, accordingly, the calculation of earnings per
share for those periods excluded stock options as their effect was
antidilutive.

RELEASE OF ESCROWED SHARES AND OPTIONS

In connection with the IPO, certain stockholders of the Company placed
an aggregate of 365,983 shares of Common Stock (the "Escrow Shares"), and the
current holders of certain options which are exercisable at less than the
initial public offering price of $5.00 placed options to purchase 34,017
shares (the "Escrow Options"), into escrow pending the Company's attainment
of certain revenue or share price goals. The Securities and Exchange
Commission has taken the position with respect to the release of securities
from escrow that in the event any of the Escrow Shares or Escrow Options are
released from escrow to directors, officers, employees or consultants of the
Company, the release will be treated, for financial reporting purposes, as a
compensation expense to the Company. Accordingly, the Company will, in the
event of the release of the Escrow Shares and Escrow Options, recognize
during the period in which the earnings or market price targets are met what
could be a substantial one-time charge which would substantially increase the
Company's loss or reduce or eliminate earnings, if any, at such time. The
amount of compensation expense recognized by the Company will not affect the
Company's total stockholders' equity.

7
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

This Form 10-QSB contains forward-looking statements. These
forward-looking statements are subject to risks and uncertainties which may
cause actual results to differ materially from stated expectations. These
risks and uncertainties include but are not limited to: timeliness of
completion, if at all, of IND filings; FDA approval of IND's if filed;
timeliness of commencement, if ever, of clinical trials; timeliness of
completion, if ever, of clinical trials; changing requirements for regulatory
approval; technological uncertainties; the impact of competitive products and
pricing; future availability of capital; uncertainties arising from patents;
and a number of other risks, including those described above, those set forth
in the Company's 1996 annual report on form 10-KSB and other reports filed
with the Securities and Exchange Commission; and those which may not be
identifiable as yet.

RESULTS OF OPERATIONS

The Company is in the development stage. Since its inception in
November 1992, the Company's efforts have been principally devoted to
research and development, securing patent protection and raising capital.
From inception through March 31, 1997, the Company has sustained cumulative
losses of approximately $9,719,000. These losses have resulted from
expenditures in connection with research and development and general and
administrative activities, including legal and professional activities.

Through March 31, 1997, research and development expenses since
inception have been approximately $6,363,000 and general and administrative
expenses since inception have been approximately $3,186,000. Research and
development expenses for the three months ended March 31, 1997 (the "1997
quarter") were approximately $383,000 compared with $257,000 for the three
months ended March 31, 1996 (the "1996 quarter"), an increase of 49%. The
increase is due to expenditures associated with the development of Ansan's
newly acquired drug, Apafant, and the establishment of new development
initiative for AN10 topical. Such expenditures include, but are not limited
to, formulation development, chemistry, manufacturing and controls,
pharmacology, and toxicology.

General and administrative expenses for the 1997 quarter were
approximately $272,000 compared with approximately $200,000 for the 1996
quarter, a increase of 36%. The increase is due to additional overhead needed
to support the Company's additional development programs.

Interest income was approximately $19,000 during the 1997 quarter as
compared to approximately $49,000 during the 1996 quarter. The decrease is
the result of the Company having less capital available for investment during
the 1997 Quarter.

The Company expects to continue to incur substantial research and
development costs in the future due to ongoing and new research and
development programs, manufacturing of

8
<PAGE>

products for use in clinical trials, patent and regulatory activities, and
preclinical and clinical testing of the Company's products. In May of 1996,
the Company signed a licensing agreement with Boehringer Ingelheim GmbH to
acquire the rights in the United States and the European Union to develop a
new intravenous formulation of the drug Apafant for all clinical indications.
The Company expects to incur substantial research and development costs
related to this acquisition. The Company also expects that general and
administrative costs necessary to support clinical trials, research and
development, manufacturing and the creation of a marketing and sales
organization, if warranted, will increase in the future. Accordingly, the
Company expects to incur increasing operating losses for the foreseeable
future. There can be no assurance that the Company will ever achieve
profitable operations.

LIQUIDITY AND CAPITAL RESOURCES

In August and September 1995, the Company completed an IPO which
resulted in net proceeds to the Company, after deduction of underwriting
discounts and commissions and other expenses of the IPO, of approximately
$5,950,000. As of March 31, 1997, the Company had working capital of
approximately $1,884,000.

Titan is a party to a master capital equipment lease, and the Company
and three other majority-owned subsidiaries of Titan have entered into a
sublease and assignment with Titan under such lease for which the Company is
jointly and severally liable. At March 31, 1997, the amount outstanding
under the equipment lease was $684,644 with current monthly payments of
$30,459.

9
<PAGE>

The Company believes that it has the necessary capital to sustain
planned operations through the March 1998. In the event that the Company's
internal estimates relating to its planned expenditures prove materially
inaccurate, the Company may be required to reallocate funds among its planned
activities or to curtail certain planned expenditures. In any event, the
Company anticipates that it will require substantial additional financing
after such time in order to continue its research and development
capabilities, fund operating expenses, pursue regulatory approval, and build
production, sales, and marketing activities, as necessary. There can be no
assurance as to the availability or terms of any additional financing, when
and if needed. In the event that the Company fails to raise any funds it
requires, it may be necessary for the Company to curtail its activities
significantly or to cease operations altogether.

10
<PAGE>

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.12 Financing agreement between the Registrant and Titan
Pharmaceuticals, Inc. dated March 21, 1997

11.1 Statement of Computation of Net Loss Per Share

(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
March 31, 1997.

11
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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunder duly authorized.

ANSAN PHARMACEUTICALS, INC.

May 5, 1997 By: /s/ Vaughan H.J. Shalson
------------------------------
Vaughan H.J. Shalson
President and Chief Executive Officer
(Principal Executive Officer and Principal
Financial Officer)

<PAGE>

AGREEMENT FOR FINANCING

THIS AGREEMENT FOR FINANCING is made and entered into as of this 21st day
of March, 1997, by and between Titan Pharmaceuticals, Inc., ("Titan") and Ansan
Pharmaceuticals, Inc. ("Ansan").

THE PARTIES AGREE AS FOLLOWS:

1. CONVERTIBLE DEBENTURE

Titan has advanced $1 million to Ansan in return for a convertible
debenture (the "Debenture") of even date herewith. The Debenture is convertible
at the option of Titan at any time prior to June 21, 1997 for the purchase of
333,333 shares of Ansan's Common Stock, $0.001 par value (the "Ansan Common
Stock"), reflecting a conversion price of $3.00 per share.

2. INITIAL OPTION

Ansan has granted to Titan an option of even date herewith (the
"Initial Option") exercisable at any time prior to June 21, 1997 to purchase
333,333 shares of Ansan Common Stock at a purchase price of $3.00 per share
payable in cash.

3. ANCILLARY DOCUMENTS

In the event Titan converts the Debenture, Ansan and Titan shall enter
into a Debenture Conversion Agreement, a First Option Agreement, a Second Option
Agreement, a Shareholders Agreement, and a Corporate Services Agreement in
substantially the forms attached to this Agreement.

<PAGE>

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

ANSAN PHARMACEUTICALS, INC.

By: /s/Vaughan H.J. Shalson

Title: President and Chief Executive Officer

TITAN PHARMACEUTICALS, INC.

By: /s/Louis R. Bucalo

Title: President and Chief Executive Officer

<PAGE>

Optionee: Titan Pharmaceuticals, Inc.

Address: 400 Oyster Point Blvd.
South San Francisco, California 94080

ANSAN PHARMACEUTICALS, INC.
INITIAL OPTION AGREEMENT

INITIAL OPTION AGREEMENT dated March 21, 1997 between Ansan
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and Titan
Pharmaceuticals, Inc. (the "Optionee").

1. GRANT OF OPTION. Pursuant to the provisions of Section 2 of
the Agreement for Financing dated March 21, 1997 (the "Agreement for
Financing"), the Company hereby grants to the Optionee on the date hereof the
right and option to purchase Three Hundred Thirty-Three Thousand Three
Hundred Thirty-Three (333,333) of its shares of Common Stock, $.001 par value
(the "Initial Option Shares"), at an option price equal to $3.00 per Initial
Option Share (the "Initial Option").

2. OPTION PERIOD. The option granted hereby shall expire on June
21, 1997.

3. EXERCISE OF OPTION.

B. The Optionee may exercise the option hereby in whole
only, at any time, from and after the date hereof, up to its expiration date.

B. The Optionee may exercise the option hereby granted by
delivering to the Company a written notice duly signed by the Optionee
accompanied by payment of an amount

<PAGE>

equal to the full purchase price for the Initial Option Shares to be
purchased. Within seven days after receipt by the Company of such notice and
payment, the Company shall issue the Initial Option Shares in the name of the
Optionee and deliver the certificates therefor to the Optionee.

C. The Optionee shall execute and deliver to the Company
upon purchase of the Initial Option Shares a "lock-up" agreement in the form
attached hereto as Appendix A.

4. NON-TRANSFERABILITY OF OPTION. This option shall not be
transferable and may be exercised only by the Optionee, except that it may be
transferred to and exercised by a wholly-owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Act,
controlling, controlled by or under common control with the Optionee (other
than the Company); provided that such transferee assumes in writing all of
the obligations of the Optionee hereunder.

5. TAX STATUS. The option hereby granted is a non-statutory
stock option i.e., one not intended to qualify as an incentive stock option
within the meaning of Section 422A of the Code.

6. PURCHASE FOR INVESTMENT. As a condition to the exercise of
the option hereby granted, the written notice of election in the form
attached hereto as Exhibit A shall include a representation by the Optionee
that the Initial Option Shares are being purchased for investment and not for
distribution or resale.

7. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by facsimile transmission, overnight courier, or certified, registered
or express mail, postage prepaid. Any such notice shall be deemed given when
so delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), or, if sent by overnight
courier, one (1) day after deposit with an overnight courier, or, if mailed,
three (3) days after the date of deposit in the

<PAGE>

United States mails, as follows:

To the Optionee: Titan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 505
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 244-4956

To the Company: Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 635-0201

Either party may, by notice given in accordance with this Section to the other
party, designate another address or person for receipt of notices hereunder.

8. GOVERNING LAW. The parties hereto hereby acknowledge and
agree that the option granted hereby is granted in the State of California
and any shares issued upon exercise of the option will be issued in the State
of California. This Agreement, as well as the grant of such option and
issuance of such Shares, is and shall be governed by and construed in
accordance with the laws of the State of California applicable to the
agreements made and to be performed entirely within such state.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

ANSAN PHARMACEUTICALS, INC.

By: /s/Vaughan H.J. Shalson

TITAN PHARMACEUTICALS, INC., Optionee

By: /s/Louis R. Bucalo

<PAGE>
Exhibit A

PURCHASE FORM

(To be signed and delivered to
Ansan Pharmaceuticals, Inc. upon
exercise of the Initial Option)

The undersigned, the holder of the foregoing Initial Option, hereby
irrevocably elects to exercise the Nonstatutory Option for the purchase
of shares of Common Stock (the "Initial Shares") of Ansan
Pharmaceuticals, Inc. and herewith makes payment of $ ($3.00 per
share) therefor, plus $ ($ per share) for withholding
tax, if any, required in connection with the exercise of the Nonstatutory
Option, and requests that the Certificates for the Shares be issued in the
name(s) of, and delivered to ___________ whose address(es) is/are
_______________________.

The undersigned represents that the Shares are being purchased for
investment and not for distribution or resale.

________________________________________
Signature

Dated:

<PAGE>

APPENDIX A
LOCK-UP
<PAGE>
LOCK-UP AGREEMENT

Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, CA 94080

Gentlemen:

Pursuant to Section 3.C of the Initial Option Agreement dated March ,
1997 (the "Initial Option Agreement") between Ansan Pharmaceuticals, Inc.
("Ansan") and Titan Pharmaceuticals, Inc. ("Titan"), the undersigned hereby
represents that:

1. For the period commencing on the date hereof and expiring on the
second anniversary of the exercise date of the Initial Option (as such term is
defined in the Initial Option Agreement), the undersigned will not sell, assign,
or transfer any of the Initial Shares Option Shares purchased by Titan pursuant
to the terms of the Initial Option Agreement without the prior written consent
of Ansan, (which consent will require the approval of a majority of the non-
Titan members of Ansan's Board of Directors) except as otherwise provided
herein.

2. In order to enforce the foregoing covenant, Ansan may impose
stop-transfer instructions with respect to such shares until the end of such
period.

3. The restrictions on transfer set forth herein shall not apply to
(i) any third-party acquisitions of Ansan's securities by means of a tender
offer, merger or otherwise or (ii) any private sale or transfer, provided the
recipient of the shares agrees to be bound by this Lock-Up Agreement.

_________________________________________

_________________________________________
Print Name

_________________________________________
Date

<PAGE>

THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED WITHOUT THE CONSENT OF ANSAN PHARMACEUTICALS, INC., AND UNTIL (i)
A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY
THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO
THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES
LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY DEBENTURE ISSUED IN EXCHANGE FOR
THIS DEBENTURE.

ANSAN PHARMACEUTICALS, INC.

MARCH 21, 1997 $1,000,000

CONVERTIBLE DEBENTURE

ANSAN PHARMACEUTICALS, INC., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to Titan Pharmaceuticals, Inc. (the
"Payee") at the offices of the Company, the principal sum of One Million Dollars
($1,000,000) (the "Principal Amount"). Interest on the Debenture shall accrue
on the Principal Amount outstanding at a rate equal to two percent above the
prime rate of Citibank, N.A. in New York, New York computed on a daily basis and
as adjusted as announced from time to time. Principal and interest on this
Debenture shall be payable on April 30, 1998 (the "Maturity Date"), subject to
the provisions of Sections 1 and 2 herein. Principal and interest on the
Debenture shall be payable in (i) such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts or (ii) such securities of the Company as determined in
accordance with and subject to the provisions of Section 6 hereof.

1. INTEREST ON THE DEBENTURE. In the event that this Debenture is
converted pursuant to the provisions of section 5(A) hereof prior to the
Maturity Date, the Payee hereby waives any interest due on this Debenture.

2. PREPAYMENT. The Principal Amount may be prepaid by the Company
at any time after the expiration of the Conversion Termination Date (as defined
herein), together with accrued interest, in whole or in part, without penalty.

3. COVENANTS OF COMPANY. The Company covenants and agrees that, so
long as this Debenture shall be outstanding, it will:

<PAGE>

(i) Promptly pay and discharge all lawful taxes, assessments, and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its property, before the same shall become in default,
as well as all lawful claims for labor, materials and supplies which, if unpaid,
might become a lien or charge upon such properties or any part thereof,
provided, however, that the Company shall not be required to pay and discharge
any such tax, assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings and the Company
shall set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim so contested;

(ii) Do or cause to be done all things reasonably necessary to preserve and
keep in full force and effect its corporate existence, rights and franchises and
comply with all laws applicable to the Company;

(iii) At all times reasonably maintain, preserve, protect and keep its
property used or useful in the conduct of its business in good repair, working
order and condition, and from time to time make all needed and proper repairs,
renewals, replacements, betterments and improvements thereto as shall be
reasonably required in the conduct of its business;

(iv) To the extent necessary for the operation of its business, keep
adequately insured by financially sound reputable insurers, all property of a
character usually insured by similar corporations in the Company's industry and
carry such other insurance as is usually carried by similar corporations in the
Company's industry;

(v) At all times keep true and correct books, records and accounts. Such
books and records shall be open at reasonable times and upon reasonable notice
for the inspection of Payee or its agents; and

(vi) Except for the incurrence of any indebtedness (including without
limitation, the incurrence of any guarantee or contingent payment obligation
with respect thereto) secured by a lien, mortgage or guarantee on the property
(whether real or personal) or equipment of the Company and any refinancings or
replacements thereto or trade debt or other current liabilities incurred in the
ordinary course of business, nor incur any indebtedness whatsoever which
indebtedness does not expressly provide that it is wholly subordinated in right
of payment to the indebtedness evidenced by this Debenture.

4. EVENTS OF DEFAULT

A. This Debenture shall become due and payable upon written
demand made by the Payee if one or more of the following events, herein called
events of default, shall happen and be continuing:

(i) Default in the payment of the principal and accrued interest on this
Debenture when and as the same shall become due and payable;

<PAGE>

(ii) Default in the due observance or performance of any material covenant,
condition or agreement on the part of the Company to be observed or performed
pursuant to the terms hereof and such default shall continue uncured for ten
(10) business days after receipt of written notice thereof, specifying such
default, shall have been given to the Company by the holder of the Debenture;

(iii) Application for, or consent to, the appointment of a receiver, trustee
or liquidator of the Company or of its property;

(iv) Admission in writing of the Company's inability to pay its debts as
they mature;

(v) General assignment by the Company for the benefit of creditors;

(vi) Filing by the Company of a voluntary petition in bankruptcy or a
petition or an answer seeking reorganization, or an arrangement with creditors;

(vii) Entering against the Company of a court order approving a petition
filed against it under the Federal bankruptcy laws, which order shall not have
been vacated or set aside or otherwise terminated within sixty (60) days;

(viii) Default (other than a default existing on the date of this Debenture)
in the payment of any outstanding indebtedness in excess of $125,000 principal
amount or is the due observance or performance of any material covenant,
condition or agreement on the part of the Company with respect to any
outstanding indebtedness in excess of $125,000 with the result that such
outstanding indebtedness shall become due and payable prior to the due date
otherwise specified therefor and such default shall continue uncured or such
acceleration shall not be rescinded or annulled within thirty (30) days after
written notice thereof to the Company from the Payee of this Debenture;

(ix) The sale by the Company of substantiality all of its assets; or

(x) The merger by the Company with or into another corporation, other than
for purposes of changing domicile, where the Company is not the surviving
corporation.

B. The Company agrees that notice of the occurrence of any
event of default will be promptly given to the Payee at its registered address
by certified mail.

C. In case of any one or more of the events of default
specified above shall happen and be continuing, the Payee may proceed to protect
and enforce its rights by suit in the specific performance of any covenant or
agreement contained in this Debenture or in aid of the exercise of any power
granted in this Debenture or may proceed to enforce the payment of this
Debenture or to enforce any other legal or equitable rights as such holder.

<PAGE>

5. CONVERSION OF DEBENTURE

A. At any time prior to 5:00 p.m. California time on June 20,
1997 (the "Conversion Termination Date"), the Principal Amount may be converted
at the option of the Payee (the "Optional Conversion") into 333,333 shares of
Common Stock (the "Optional Conversion Securities'), reflecting a conversion
price of $3.00 per share.

B. The Payee desiring to exercise its option to convert this
Debenture pursuant to clause (A) hereof shall deliver this Debenture to the
Company at its principal executive office, accompanied by a written request to
convert, specifying the name or names in which the certificate or certificates
for the Optional Conversion Securities are to be issued. The foregoing
notwithstanding, no holder of this Debenture shall be entitled to transfer this
Debenture by conversion without first complying with all applicable restrictions
on the transfer of this Debenture. For the purposes of clause (A) hereof, the
Conversion Date will be the date of delivery of this Debenture to the Company
and the person entitle to receive certificates evidencing the Optional
Conversion Securities shall be regarded for all corporate purposes from and
after such date as the record holder of the Optional Conversion Securities to
which it is entitled upon the conversion. The Optional Conversion Securities
shall be delivered to the Payee within five days after the Conversion Date. The
Company may rely on record ownership of this Debenture for all corporate
purposes, notwithstanding any contrary notice.

C. The Company shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of the Optional
Conversion Securities provided, however, that the Company shall not be required
to pay any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name or other than
that of the holder of this Debenture, and the Company shall not be required to
issue or delivery any such certificate unless and until the person requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the Company's satisfaction that such tax has been paid.

D. The Optional Conversion Securities will upon issuance by the
Company in accordance with the terms of this Debenture be validly issued, free
from all taxes and liens with respect to the issuance thereof and fully paid and
non-assessable.

<PAGE>

6. RESERVATION OF SHARES

The Company covenants and agrees that, during the period within
which this Debenture remains outstanding, the Company will at all times have
authorized and reserved, solely for the purpose of the Optional Conversion, out
of its authorized but unissued shares, a sufficient number of shares of its
Common Stock to provide for such conversion.

7. NON-TRANSFERABILITY

This Debenture is non-negotiable and is not transferable without
the prior written consent of the Company.

8. MISCELLANEOUS

A. The Company may consider and treat the person in whose name
this Debenture shall be registered as the absolute owner thereof for all
purposes whatsoever (whether or not this Debenture shall be overdue) and the
Company shall not be affected by any notice to the contrary. In case of
transfer by operation of law, the transferee agrees to notify the Company of
such transfer and of his address, and to submit appropriate evidence regarding
the transfer so that this Debenture may be registered in the name of the
transferee. This Debenture is transferable only on the books of the Company by
the holder hereof, in person or by attorney, on the surrender hereof, duly
endorsed. Communications sent to any registered owner shall be effective as
against all holders or transferees of the Debenture not registered at the time
of sending the communication.

B. Payment of the Principal Amount, together with accrued
interest thereon, shall be made to the registered owner of this Debenture upon
presentation of this Debenture upon or after the Maturity Date, unless
previously converted in accordance with the provisions of Section 4 herein.

C. This Debenture shall be construed and enforced in accordance
with the laws of the State of Delaware.

D. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
facsimile transmission, overnight courier, or certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission (provided that a confirmation copy
is sent by overnight courier), or, if sent by overnight courier, one (1) day
after deposit with an overnight courier, or, if mailed, three (3) days after the
date of deposit in the United States mails, as follows:

<PAGE>

To Titan: Titan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 505
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 244-4956

To Ansan: Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, CA 94080
Attention: President
Telecopy No.: (415) 635-0201

Either party may, by notice given in accordance with this Section to the other
party, designate another address or person for receipt of notices hereunder.

IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
in its name by an authorized officer.

ANSAN PHARMACEUTICALS, INC.

By:/s/Vaughan Shalson
Vaughan Shalson
President and Chief Executive Officer

<PAGE>

DEBENTURE CONVERSION AGREEMENT

DEBENTURE CONVERSION AGREEMENT ("Agreement"), dated as of June __,
1997 (the "Initial Closing"), by and between Titan Pharmaceuticals, Inc., a
Delaware corporation (the "Company") and Ansan Pharmaceuticals, Inc., a Delaware
corporation ("Ansan").

The Company and Ansan are parties to an agreement for financing (the
"Agreement for Financing") and a convertible debenture (the "Debenture") both
dated March __, 1997.

In consideration of the premises and the mutually dependent covenants
and agreements herein contained, and of other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:

SECTION 1. DEBENTURE CONVERSION; GRANT OF OPTIONS

1.1 TERMS OF INITIAL SHARE PURCHASE. At the Initial Closing, subject
to the terms and conditions of the Agreement for Financing and the Debenture and
in reliance upon the representations, warranties and agreements contained
herein, the Company will purchase from Ansan 333,333 shares (the "Initial
Shares") of Ansan's Common Stock, $.001 par value (the "Ansan Common Stock") for
an aggregate purchase price of $1,000,000 or $3.00 per share. The Company shall
execute and deliver to Ansan at the Initial Closing a "lock-up" agreement with
respect to the Initial Shares in the form attached hereto as Appendix A.

1.2 TERMS OF FIRST OPTION GRANT. At the Initial Closing, Ansan shall
grant to Titan an option in the form attached hereto as Appendix B (the "First
Option"), exercisable for the two-year period commencing on the date of the
Initial Closing, to purchase up to 1,630,000 shares of Ansan Common Stock (the
"First Option Shares") for a purchase price of $3.75 per share. The Company's
right to exercise the First Option may be suspended by Ansan during any period
(not to exceed 90 days) in which Ansan is negotiating, or is under contract for,
a third-party acquisition of Ansan.

1.2(a) MANDATORY EXERCISE OF FIRST OPTION. The Company shall,
within 30 days after the receipt of at least $20,000,000 in aggregate gross
proceeds from the exercise of the Company's outstanding Class A Warrants (the
"Titan Warrants"), exercise the First Option for the purchase of not less than
545,000 of the First Option Shares (inclusive of First Option Shares previously
purchased). The Company shall, within 180 days after the receipt of at least
$35,000,000 in aggregate gross proceeds from the exercise of the Titan Warrants,
exercise the First Option for the purchase of not less than 1,090,000 of the
First Option Shares (inclusive of First Option Shares previously purchased). The
Company shall, within 270 days after the receipt of at least $35,000,000 in
aggregate gross proceeds from the exercise of the Titan Warrants, exercise the
First Option for all of the First Option Shares (inclusive of First Option
Shares previously purchased). The Company shall execute and deliver to Ansan
upon each purchase of First Option Shares pursuant to this Section 1.2 a "lock-
up" agreement in the form attached hereto as

<PAGE>

Appendix A.

1.2(b) REDUCTION IN MANDATORY EXERCISE OBLIGATION. Under the terms
of the Agreement for Financing, Ansan granted to the Company the Initial Option
to purchase 333,333 shares of Ansan Common Stock prior to June __, 1997.

Notwithstanding anything to the contrary contained in Section
1.2(a), the Company's obligations to exercise the First Option shall be modified
according to whether or not they exercised the Initial Option, as follows:

i) In the event that the Company has exercised the Initial
Option, if Ansan completes any public or private equity
financings for an aggregate amount in excess of $1,000,000
prior to the date a stock purchase obligation of the Company
under this Debenture Conversion Agreement arises, then the
Company shall be under no obligation to exercise the First
Option;

ii) In the event that the Company has not exercised the Initial
Option, if Ansan completes any public or private equity
financings for an aggregate amount in excess of $2,000,000
prior to the date a stock purchase obligation of the Company
under this Debenture Conversion Agreement arises, then the
Company shall be under no obligation to exercise the First
Option.

1.3. TERMS OF SECOND OPTION GRANT. At the Initial Closing, Ansan shall
grant to Titan an option in the form attached hereto as Appendix C (the "Second
Option"), exercisable at any time until August 8, 2000, to purchase up to
500,000 shares of Ansan Common Stock (the "Second Option Shares") for a purchase
price of $6.50 per share. The expiration date of the Second Option will be
extended if, and to the same extent as, Ansan extends the expiration date of its
outstanding Class A Warrants. The Company's right to exercise the Second Option
may be suspended by Ansan during any period (not to exceed 90 days) in which
Ansan is negotiating, or is under contract for, a third-party acquisition of
Ansan.

SECTION 2. CLOSING, PAYMENT AND DELIVERY

2.1 INITIAL CLOSING DATE AND PLACE OF CLOSING. The Initial Closing
shall be held as soon as practicable, and in no event later than the fifth
business day, following the execution of this Agreement on such date as the
parties may agree to and shall be held at the offices of Ansan or such other
place as the parties may agree to.

2.2 INITIAL PAYMENT AND DELIVERY. The Initial Purchase Price shall
be payable as follows: at the Initial Closing, the Company will pay or cause to
be paid to Ansan by certified or bank check or by wire funds transfer
$1,000,000. Ansan shall deliver at the Initial Closing certificates,
registered in such name or names as the Company may designate at least 24 hours
prior to the Initial Closing Date, representing the Initial Shares so purchased.

<PAGE>

2.3 COVENANT OF REASONABLE BEST EFFORTS AND GOOD FAITH. Ansan and
the Company agree to use their respective reasonable best efforts and to act in
good faith to cause to occur all conditions to closing the transactions
contemplated by this Agreement which are in their respective control.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF ANSAN

Ansan represents and warrants to the Company that:

3.1 CORPORATE POWER QUALIFICATION AND STANDING. Ansan is validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is qualified to transact business in each jurisdiction in
which its ownership of property or conduct of activities requires such
qualification, except where the failure to so qualify would not materially
adversely affect the operations of Ansan. Ansan has all requisite corporate
power and authority to enter into and to carry out and perform its obligations
under this Agreement.

3.2 SEC REPORTS; FINANCIAL STATEMENTS. The Ansan Common Stock and
Ansan's Class A and Class B Warrants are registered under Section 12(b) or (g)
of the Securities Exchange Act of 1934. The Company has received Ansan's Annual
Report on Form 10-KSB for its fiscal year ended December 31, 1995 and its
quarterly reports on Form 10-QSB and definitive proxy statement filed with the
SEC since the filing of such Form 10-KSB (collectively, the "SEC Reports"). The
SEC Reports did not (as of their respective dates) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited and
unaudited financial statements of Ansan included in the SEC Reports (the
"Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as stated in such
Financial Statements or the notes thereto) and fairly present the financial
position of Ansan and its consolidated subsidiaries as of the dates thereof and
the results of their operations and changes in financial position for the
periods then ended.

3.3 AUTHORIZATION; NO CONFLICT. Execution and delivery of this
Agreement, issuance and sale of the Initial Shares and the issuance of the First
Option and Second Option have been duly authorized and the Initial Shares, when
issued and paid for at the Initial Closing, will be validly issued, fully paid
and non-assessable. Performance by Ansan of its obligations under this
Agreement will not conflict with or violate (i) the charter documents or bylaws
of Ansan, (ii) any indenture, loan agreement, lease, mortgage or other material
agreement binding on Ansan, (iii) any order of a court or administrative agency
binding on Ansan, or (iv) any applicable law or governmental regulation; except
in each case for any such conflicts or violations which would not have a
material adverse affect on Ansan; and such performance does not and will not
require the permission or approval of any governmental agency, and will not
result in the imposition or creation of any lien or charge against any assets of
Ansan.

<PAGE>

3.4 MATERIAL AGREEMENTS; NO DEFAULTS. No material default on the
part of Ansan (including any event which, with notice or the passage of time,
would constitute a default) exists under any material indenture, loan agreement,
lease, mortgage or other material agreement to which Ansan is a party (the
"Material Agreements")

3.5 MATERIAL LIABILITIES. Except for liabilities or obligations
disclosed in or contemplated by the Financial Statements or the SEC Reports, and
obligations under the Material Agreements, Ansan has no material liabilities or
obligations other than liabilities arising in the ordinary course of business,
subsequent to the date of the most recent Financial Statements or SEC Reports.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Ansan that:

4.1 CORPORATE POWER AND AUTHORITY. The Company is validly existing
and in good standing with all requisite power and authority to enter into this
Agreement and carry out its obligations hereunder and has taken all actions
necessary to authorize it to enter into this Agreement and carry out such
obligations.

4.2 INVESTMENT. The Company is acquiring the Initial Shares and will
acquire the First Option Shares and the Second Option Shares for its own account
for investment and not with the view to, or for resale in connection with, any
distribution thereof. The Company has no present intention to sell the Initial
Shares, the First Option Shares or the Second Option Shares and has no
arrangement to sell such shares to or through any person or entity. The
Company understands that the Initial Shares, the First Option, The Second
Option, the First Option Shares or the Second Option Shares have not been
registered under the Securities Act of 1933, as amended (the "Act") nor
qualified under any State blue sky law by reason of specified exemptions
therefrom which depend upon, among other things, the bona fide nature of its
investment intent as expressed herein.

4.3 NO CONFLICT. Performance by the Company under this Agreement
will not conflict with or violate (i) the Company's certificate of
incorporation or by-laws, (ii) any indenture, loan agreement, lease, mortgage or
other material agreement binding on the Company, (iii) any order of a court or
administrative agency binding on the Company, or (iv) any applicable law or
governmental regulation; and such performance does not and will not require the
permission or approval of any governmental agency.

4.4 RULE 144. The Company acknowledges that the Initial Shares must
be held indefinitely unless they are subsequently registered under the Act or an
exemption from such registration is available. The Company is aware of the
provisions of Rule 144 promulgated under the Act and that the Initial Shares,
the First Option, the Second Option, the First Option

<PAGE>

Shares and the Second Option Shares are "restricted" securities under Rule
144. The Company acknowledges that Ansan is under no obligation to effect the
registration of the Initial Shares.

SECTION 5. CONDITIONS TO OBLIGATIONS OF THE COMPANY

The obligation of the Company to purchase the Initial Shares is
subject to the fulfillment on or prior to the Initial Closing of each of the
following conditions:

5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Ansan shall be true and correct in all material respects on the
date of the Initial Closing.

5.2 PERFORMANCE. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by Ansan on or prior to the
Initial Closing shall have been performed or complied with in all material
respects.

5.3 OPINION OF ANSAN'S COUNSEL. The Company shall have received from
counsel to Ansan an opinion confirming the representations set forth in the
first sentence of Section 3.3 hereof, and on the basis of such counsel's review
of the Material Agreements and certificates of officers of Ansan as to factual
matters, confirming the representations set forth in the second sentence of
Section 3.3 hereof.

5.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in form and
substance to the Company and its counsel.

5.5 ANCILLARY AGREEMENTS. Ansan shall have executed a Shareholders
Agreement and a Corporate Services Agreement with the Company substantially in
the forms attached hereto as Appendix D and E, respectively.

SECTION 6. CONDITIONS TO OBLIGATIONS OF ANSAN

Ansan's obligation to sell the Initial Shares is subject to the
fulfillment on or prior to the Initial Closing of each of the following
conditions:

6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Company shall be true and correct in all material
respects on the date of the Initial Closing.

6.2 LEGAL ISSUANCE. At the time of the Initial Closing, the issuance
and purchase of the Initial Shares shall be legally permitted by all laws and
regulations to which the Company and Ansan are subject.

6.3 PAYMENT. Ansan shall concurrently receive payment for the
Initial Shares as provided in Section 2 hereof.

<PAGE>

SECTION 7. LEGEND ON SECURITIES

Each certificate representing the Initial Shares, the First Option
Shares and the Second Option Shares (collectively, the "Shares") shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required under any applicable state securities laws
and the legend set forth in the Lock-Up Agreement):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.

Upon request of a holder of Shares, Ansan shall remove the foregoing
legend or issue to such holder a new certificate therefor free of any such
legend, if Ansan shall have received either an opinion of counsel or a
"no-action" letter of the SEC, in either case reasonably satisfactory in
substance to Ansan and its counsel, to the effect that such legend is no longer
required.

SECTION 8. NOTICES

All notices and other communications hereunder shall be in writing and
shall be delivered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice) and shall be deemed
given on the date on which such notice is received:

To the Company: Titan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 505
South San Francisco, CA 94080
Attn: President
Telecopy No. (415) 244-4956

To Ansan: Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, CA 94080
Attn: President
Telecopy No. (415) 635-0201

Either party may by notice given in accordance with this section to
the other party designate another address or person for receipt of notices
hereunder.

SECTION 9. GOVERNING LAW

<PAGE>

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

SECTION 10. HEADINGS

The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

SECTION 11. AMENDMENTS

This Agreement may not be modified or amended except by an agreement
in writing signed by the parties.

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

TITAN PHARMACEUTICALS, INC. ANSAN PHARMACEUTICALS, INC.

By: ________________________________ By: _______________________________
Louis R. Bucalo, M.D., President Vaughan Shalson, President

<PAGE>
APPENDIX A
LOCK-UP

<PAGE>

LOCK-UP AGREEMENT

Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, CA 94080

Gentlemen:

Pursuant to Sections 1.1 and 1.2(a) of the Debenture Conversion
Agreement dated June , 1997 (the "Debenture Conversion Agreement") between
Ansan Pharmaceuticals, Inc. ("Ansan") and Titan Pharmaceuticals, Inc. ("Titan"),
the undersigned hereby represents that:

1. For the period commencing on the date hereof and expiring on the
second anniversary of the [Initial Closing] [exercise date of the First Option]
(as such term is defined in the Debenture Conversion Agreement), the undersigned
will not sell, assign, or transfer any of [the Initial Shares][the First Option
Shares] purchased by Titan pursuant to the terms of the Debenture Conversion
Agreement without the prior written consent of Ansan, (which consent will
require the approval of a majority of the non-Titan members of Ansan's Board of
Directors) except as otherwise provided herein.

2. In order to enforce the foregoing covenant, Ansan may impose
stop-transfer instructions with respect to such shares until the end of such
period.

_________________________________________

_________________________________________
Print Name

_________________________________________
Date
<PAGE>

APPENDIX B
FIRST OPTION AGREEMENT
<PAGE>

Optionee: Titan Pharmaceuticals, Inc.

Address: 400 Oyster Point Blvd.
South San Francisco, California 94080

ANSAN PHARMACEUTICALS, INC.

FIRST OPTION AGREEMENT

FIRST OPTION AGREEMENT dated June ,1997 between Ansan
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and Titan
Pharmaceuticals, Inc. (the "Optionee").

1. GRANT OF OPTION. Pursuant to the provisions of Section 1.2 of
the Debenture Conversion Agreement dated March , 1997 (the "Debenture
Conversion Agreement"), the Company hereby grants to the Optionee on the date
hereof the right and option to purchase an aggregate of One Million Six Hundred
Thirty Thousand (1,630,000) of its shares of Common Stock, $.001 par value (the
"First Option Shares"), at an option price equal to $3.75 per First Option
Share.

2. OPTION PERIOD. The option granted hereby shall expire on the
second anniversary of the date hereof.

3. EXERCISE OF OPTION.

A. The Optionee may exercise the option hereby, in whole or in
part, from and after the date hereof, subject to the Company's right, in
accordance with Section 1.2 of the Debenture Conversion Agreement, to suspend
exercise for a period not to exceed 90 days.

B. The Optionee shall be obligated to exercise the option
hereby granted as provided in Sections 1.2(a) and 1.2(b) of the Debenture
Conversion Agreement.

<PAGE>

C. The Optionee may exercise the option hereby granted by
delivering to the Company a written notice duly signed by the Optionee
accompanied by payment of an amount equal to the full purchase price for the
First Option Shares to be purchased. Within seven days after receipt by the
Company of such notice and payment, the Company shall issue the First Option
Shares in the name of the Optionee and deliver the certificates therefor to the
Optionee.

4. NON-TRANSFERABILITY OF OPTION. This option shall not be
transferable and may be exercised only by the Optionee, except that it may be
transferred to and exercised by a wholly-owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with the Optionee (other than the
Company); provided that such transferee assumes in writing all of the
obligations of the Optionee hereunder.

5. TAX STATUS. The option hereby granted is a non-statutory stock
option i.e., one not intended to qualify as an incentive stock option within the
meaning of Section 422A of the Code.

6. PURCHASE FOR INVESTMENT. As a condition to the exercise of the
option hereby granted, the written notice of election in the form attached
hereto as Exhibit A shall include a representation by the Optionee that the
First Option Shares are being purchased for investment and not for distribution
or resale.

<PAGE>

confirmation copy is sent by overnight courier), or, if sent by overnight
courier, one (1) day after deposit with an overnight courier, or, if mailed,
three (3) days after the date of deposit in the United States mails, as
follows:

To the Optionee: Titan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 505
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 244-4956

To the Company: Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 635-0201

Either party may, by notice given in accordance with this Section to the other
party, designate another address or person for receipt of notices hereunder.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

ANSAN PHARMACEUTICALS, INC.

By:__________________________________________

TITAN PHARMACEUTICALS, INC., Optionee

By:__________________________________________

<PAGE>

Exhibit A

PURCHASE FORM

(To be signed and delivered to
Ansan Pharmaceuticals, Inc. upon
exercise of the First Option)

The undersigned, the holder of the foregoing First Option, hereby
irrevocably elects to exercise the Nonstatutory Option for the purchase
of shares of Common Stock ("Shares") of Ansan Pharmaceuticals,
Inc. and herewith makes payment of $ ($3.75 per
share) therefor, plus $ ($ per share) for withholding tax, if
any, required in connection with the exercise of the Nonstatutory Option, and
requests that the Certificates for the Shares be issued in the name(s) of,
and delivered to _________________________ whose address(es) is/are
_____________________.

The undersigned represents that the Shares are being purchased for
investment and not for distribution or resale.

__________________________________________
Signature

Dated:

<PAGE>

APPENDIX C
SECOND OPTION AGREEMENT
<PAGE>

Optionee: Titan Pharmaceuticals, Inc.

Address: 400 Oyster Point Blvd.
South San Francisco, California 94080

ANSAN PHARMACEUTICALS, INC.

SECOND OPTION AGREEMENT

SECOND OPTION AGREEMENT dated June , 1997 between Ansan
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and Titan
Pharmaceuticals, Inc. (the "Optionee").

1. GRANT OF OPTION. Pursuant to the provisions of Section 1.3 of
the Debenture Conversion Agreement dated March , 1997 (the "Debenture
Conversion Agreement"), the Company hereby grants to the Optionee on the date
hereof the right and option to purchase an aggregate of Five Hundred Thousand
(500,000) of its shares of Common Stock, $.001 par value (the "Second Option
Shares"), at an option price equal to $6.50 per Second Option Share.

2. OPTION PERIOD. The option granted hereby shall expire on August
8, 2000 unless extended pursuant to the provisions of Section 1.3 of the
Debenture Conversion Agreement.

3. EXERCISE OF OPTION.

A. The Optionee may exercise the option hereby, in whole or in
part, from and after the date hereof, subject to the Company's right, in
accordance with Section 1.3 of the Debenture Conversion Agreement, to suspend
exercise for a period not to exceed 90 days.

<PAGE>

B. The Optionee may exercise the option hereby granted by
delivering to the Company a written notice duly signed by the Optionee
accompanied by payment of an amount equal to the full purchase price for the
Second Option Shares to be purchased. Within seven days after receipt by the
Company of such notice and payment, the Company shall issue the Second Option
Shares in the name of the Optionee and deliver the certificates therefor to the
Optionee.

4. NON-TRANSFERABILITY OF OPTION. This option shall not be
transferable and may be exercised only by the Optionee, except that it may be
transferred to and exercised by a wholly-owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with the Optionee (other than the
Company); provided that such transferee assumes in writing all of the
obligations of the Optionee hereunder.

5. TAX STATUS. The option hereby granted is a non-statutory stock
option i.e., one not intended to qualify as an incentive stock option within the
meaning of Section 422A of the Code.

6. PURCHASE FOR INVESTMENT. As a condition to the exercise of the
option hereby granted, the written notice of election in the form attached
hereto as Exhibit A shall include a representation by the Optionee that the
Second Option Shares are being purchased for investment and not for distribution
or resale.

<PAGE>

To the Optionee: Titan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 505
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 244-4956

To the Company: Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 635-0201

Either party may, by notice given in accordance with this Section to the other
party, designate another address or person for receipt of notices hereunder.

8. GOVERNING LAW. The parties hereto hereby acknowledge and agree
that the option granted hereby is granted in the State of California and any
shares issued upon exercise of the option will be issued in the State of
California. This Agreement, as well as the grant of such option and issuance of
such Shares, is and shall be governed by and construed in accordance with the
laws of the State of California applicable to the agreements made and to be
performed entirely within such state.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

ANSAN PHARMACEUTICALS, INC.

<PAGE>

By:__________________________________________

TITAN PHARMACEUTICALS, INC., Optionee

By:__________________________________________

<PAGE>
Exhibit A

PURCHASE FORM

(To be signed and delivered to
Ansan Pharmaceuticals, Inc. upon
exercise of the Second Option)

The undersigned, the holder of the foregoing Second Option, hereby
irrevocably elects to exercise the Nonstatutory Option for the purchase
of shares of Common Stock ("Shares") of Ansan Pharmaceuticals,
Inc. and herewith makes payment of $ ($6.50 per
share) therefor, plus $ ($ per share) for withholding tax, if
any, required in connection with the exercise of the Nonstatutory Option, and
requests that the Certificates for the Shares be issued in the name(s) of,
and delivered to _________________ whose address(es) is/are ________________
________________________.

The undersigned represents that the Shares are being purchased for
investment and not for distribution or resale.

__________________________________________
Signature

Dated:

<PAGE>

APPENDIX D
SHAREHOLDER'S AGREEMENT
<PAGE>

SHAREHOLDER'S AGREEMENT

SHAREHOLDER'S AGREEMENT ("Agreement"), dated as of June __, 1997, by
and between Titan Pharmaceuticals, Inc., a Delaware corporation ("Titan") and
Ansan Pharmaceuticals, Inc., a Delaware corporation ("Ansan").

R E C I T A L S:

WHEREAS, Titan currently owns approximately 44% of the issued and
outstanding capital stock of Ansan;

WHEREAS, Titan and Ansan have entered into a Debenture Conversion
Agreement of even date herewith (the " Debenture Conversion Agreement") pursuant
to which Titan will provide certain financing to Ansan, a portion of which will
be contingent upon the exercise of Titan's outstanding Class A Warrants;

WHEREAS, the parties agree that as a condition to such financing,
Titan and Ansan must provide for certain protections for Titan's equity interest
in Ansan.

NOW, THEREFORE, in consideration of the premises and the mutually
dependent covenants and agreements herein contained, and of other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:

SECTION 1. RIGHT TO PURCHASE SHARES

Subject to the terms and conditions specified in this Agreement, Ansan
hereby grants to Titan a right to purchase Shares (as hereinafter defined) of
Ansan in connection with future issuances by Ansan of its Shares. Each time
Ansan proposes to offer (an "Offer") any shares of, or securities convertible
into or exchangeable for any shares of, any class of its capital stock
("Shares"), Ansan shall offer Shares to Titan in accordance with the following
provisions:

(a) Ansan shall deliver a notice by hand delivery or certified mail
("Notice") to Titan stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any upon which it proposes to offer such Shares.

(b) By written notification received by Ansan, within twenty (20)
business days after receipt of the Notice, Titan may elect to purchase or
obtain, at the price and on the terms specified in the Notice (or, in the event
of a Transaction Issuance, as defined below, at Fair Market Value, as defined
below), up to that portion of such Shares as is necessary to preserve Titan's
Equity Interest in Ansan (calculated as hereinafter set forth) in Ansan at
greater than fifty percent (50%) (the "Majority Interest"). Titan's Equity
Interest shall be a fraction the numerator of which shall be the number of
shares of Common Stock of Ansan held by the Company, and the denominator of
which shall be the total number of shares of Ansan Common Stock

<PAGE>

outstanding plus the total number of shares of Ansan Common Stock issuable
upon exercise of all outstanding securities convertible into or exercisable
for shares of Ansan Common Stock without payment of any additional
consideration. Notwithstanding the foregoing, subject to the termination
provisions contained in Section 6, if Ansan delivers a Notice at any time
after Titan has failed to exercise its right to maintain the Majority
Interest, Titan may elect to purchase or obtain, at the price and on the
terms specified in the Notice, one half of the Shares proposed to be sold in
the Notice.

(c) If all Shares referred to in the Notice which Titan is entitled
to purchase pursuant to Section 1(b) are not elected to be purchased as provided
in Section 1(b) hereof, Ansan may, during the ninety (90) day period following
expiration of the period provided in Section 1(b) hereof, offer the same number
of Shares offered to Titan to any person or persons at a price not less than,
and upon terms no more favorable to the offeree than those specified in the
Notice. In the event of any change in the number of Shares offered, or in the
price or other material terms of any Offer, Ansan shall provide a new notice to
Titan and the same procedures with respect to such revised Offer shall be
followed. If Ansan does not enter into an agreement for the sale of the Shares
within the specified period, or if such agreement is not consummated within one
hundred eighty (180) days following the expiration of the period provided in
Section 1(b) hereof, the right provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to Titan in
accordance herewith.

(d) In the event of a proposed offer or issuance by Ansan of any
Shares in connection with a bona fide research, licensing, or corporate
collaboration or partnership, or in connection with an equipment lease financing
(a "Transaction Issuance"), Ansan shall offer Titan the right to purchase such
number of Shares as is necessary to preserve the Majority Interest, at a
purchase price equal to the fair market value of Ansan's Common Stock (the "Fair
Market Value") on the date of the Transaction Issuance, Fair Market Value shall
mean the average of the closing bid and asked prices on the Nasdaq SmallCap
Market (or the average of the last sale prices on the Nasdaq National Market or
a national securities exchange) of Ansan's Common Stock for the ten (10)
business days immediately preceding the date of the Transaction Issuance. In
the event of a Transaction Issuance, the same procedures set forth in
Sections 1(a) and (b) hereof shall be followed.

(e) If on any date (the "Trigger Date"), Titan's Equity Interest
falls below the Majority Interest either because of its failure to exercise its
rights under this Agreement or its failure to maintain the Majority Interest
through open market stock purchases, Titan shall have the option, exercisable
one time only for a period of ninety (90) days from the Trigger Date, to
purchase from Ansan such number of shares of Common Stock at the then Fair
Market Value as will enable Titan to reestablish the Majority Interest.

(f) The right to purchase Shares pursuant to this Section 1 shall not
be applicable to Shares issuable or issued to employees, advisors, consultants
or outside directors of Ansan pursuant to a stock option plan, stock purchase
plan or other employee benefit plan approved by

<PAGE>

the Board of Directors and stockholders of Ansan.

(g) The rights set forth in this Section 1 may not be assigned or
transferred without the prior written consent of Ansan, except that such rights
are assignable by Titan to a wholly-owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Securities Act of 1933,
as amended, (the "Act") controlling, controlled by or under common control with
Titan.

(h) In consideration of the rights granted to Titan pursuant to this
Section 1, Titan hereby agrees that until this Agreement is terminated, it will
not, either directly or indirectly (including by acting in concert with any
other party) allow its Equity Interest in Ansan to exceed 70%. In the event
Titan's Equity Interest in Ansan shall exceed 70% at any time (other than as a
result of (i) a stock repurchase or any other action by Ansan or (ii) any
purchase of equity securities of Ansan by Titan pursuant to the terms of the
Purchase Agreement), Titan shall promptly inform Ansan and, upon the request of
Ansan or the Independent Directors (as defined below), promptly sell or cause to
be sold those Shares constituting such excess.

SECTION 2. GOING PRIVATE TRANSACTION

(a) Titan agrees that neither Titan nor any of its Affiliates
(provided, that for the purposes of this Section 2(a), Ansan shall not be deemed
to be an Affiliate of Titan) will sponsor, support or participate in, directly
or indirectly, any transaction which is subject to or required to be disclosed
on Schedule 13E-3 and the rules and regulations promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), related thereto, unless
such transaction has first been approved by a vote of the majority of the
Independent Directors (as defined herein) following their receipt of an opinion
from a nationally recognized and independent investment banking firm, that the
subject transaction is fair, from a financial point of view, to the stockholders
of Ansan other than Titan.

(b) Notwithstanding Subsection 2(a) hereof, in the event that Titan
proposes a "Rule 13E-3 transaction" as defined in Rule 13E-3 promulgated under
the Exchange Act, Titan hereby agrees that it will comply with all of the
requisite requirements of such Rule.

SECTION 3. VOTING AGREEMENT

(a) The parties agree that the number of members of the Board of
Directors of Ansan shall be fixed at seven in accordance with the By-Laws of
Ansan. The parties agree that the Board of Directors of Ansan shall include
(i) no more than four (4) directors designated by Titan and (ii) three (3)
directors who are not affiliated with Titan (the "Independent Directors") and
have been designated by the members of the Board of Directors of Ansan then in
office, which members may change from time to time. The parties further agree
that the Board of Directors shall maintain a Nominating Committee consisting of
four (4) people, no more than two (2) of whom shall be designated by Titan.

<PAGE>

(b) Titan agrees not to take any action to amend the Certificate of
Incorporation of Ansan unless such amendment is first approved by a majority of
the Board of Directors of Ansan and a majority of the Independent Directors.

(c) Titan agrees to cause its Shares to be voted in favor of the
current Independent Directors at the annual meeting of shareholders held by
Ansan during 1997.

SECTION 4. TRANSACTIONS WITH TITAN AND ITS AFFILIATES

Titan agrees that it will not, and will use its best efforts to cause
its Affiliates not to, enter into or be a party to any transaction with Ansan
without the prior approval of a majority of the Independent Directors and that
such transaction shall have fair and reasonable terms which are no less
favorable to Ansan than Ansan would obtain in a comparable arm's-length
transaction with an unaffiliated party. For purposes of this Agreement,
"Affiliate" shall mean any person controlling, controlled by or under direct or
indirect common control with Titan Pharmaceuticals, Inc., the term "control"
meaning the power to direct the management and policies.

SECTION 5. REMEDY FOR BREACH

The parties hereby acknowledge that in the event of any breach of
Sections 1, 2, 3 and 4 of this Agreement, the non-breaching party would have no
adequate remedy at law and could suffer substantial and irreparable damages.
Accordingly, the parties agree that, in such event, the non-breaching party
shall be entitled, without the necessity of proving damages or posting bond, and
notwithstanding any election by the non-breaching party to claim damages, to
obtain a temporary and/or permanent injunction (without providing a breach
therefor) to restrain any such provision, all without prejudice to any and all
other remedies which the non-breaching party may have at law or equity.

SECTION 6. TERM

The term of this Agreement shall commence upon the closing of the
Debenture Conversion Agreement and shall continue indefinitely unless terminated
by mutual consent of the parties hereto; provided, however, that this Agreement
shall terminate at such time as Titan's Equity Interest is less than 33_% for a
period of not less than ninety (90) consecutive calendar days.

SECTION 7. LEGEND ON SECURITIES

Each certificate representing the Shares shall be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under any applicable state securities laws):

<PAGE>

SECTION 8. COMPLETE AGREEMENT; CONSTRUCTION

This Agreement shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter.

SECTION 9. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the principles of conflicts
of laws thereof.

SECTION 10. NOTICES

Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally or sent by facsimile
transmission, overnight courier, or certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission (provided that a confirmation copy
is sent by overnight courier), or, if sent by overnight courier, one (1) day
after deposit with an overnight courier, or, if mailed, three (3) days after the
date of deposit in the United States mails, as follows:

To Titan: Titan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 505
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 244-4956

<PAGE>

To Ansan: Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 635-0201

Either party may, by notice given in accordance with this Section to the other
party, designate another address or person for receipt of notices hereunder.

SECTION 11. SHARE OWNERSHIP

For purposes of this Agreement, Titan shall be deemed to own, and
Titan's Equity Interest shall include, all Ansan Shares owned beneficially,
directly and indirectly, by Titan, its wholly-owned subsidiaries, parent and any
corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with Titan.

SECTION 12. HEADINGS

The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

SECTION 13. AMENDMENTS

This Agreement may not be modified or amended except by an agreement
in writing signed by the parties.

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

TITAN PHARMACEUTICALS, INC.

By: ________________________________
Louis R. Bucalo, M.D., President

ANSAN PHARMACEUTICALS, INC.

By: _______________________________
Vaughan Shalson, President

<PAGE>

APPENDIX E
CORPORATE SERVICES AGREEMENT
<PAGE>

CORPORATE SERVICES AGREEMENT

CORPORATE SERVICES AGREEMENT (this "Agreement"), dated as of June
, 1997, by and between Titan Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and Ansan Pharmaceuticals, Inc., a Delaware corporation
("Ansan").

WHEREAS, prior to the execution hereof, the Company provided certain
managerial, administrative and financial services to Ansan, including, among
other things, financial and treasury functions, tax services, administration of
employee benefit plans and human resources (as more fully described in Section
1(a) hereof, the "Services"); and

WHEREAS, to facilitate the Company's and Ansan's separate ongoing
businesses and to reduce unnecessary additional overhead and personnel costs,
the Company and Ansan desire to enter into this Agreement to set forth the terms
upon which the Company will continue to provide the Services to Ansan.

NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1 SERVICES.

(a) Ansan hereby engages to provide, and the Company agrees to
provide, to Ansan in a timely and acceptable manner in conformity with the
service requirements of Ansan and standards of the Company, as of the date
hereof, the following services, which shall be provided throughout the term of
the Agreement, without specific request, unless otherwise indicated:

(i) FINANCIAL/ACCOUNTING. The Company shall process bi-
weekly and special payroll checks and shall prepare and file related bi-weekly,
monthly, quarterly and annual payroll tax returns for Ansan. Ansan shall use
the Company's accounts payable system for processing vendor invoices and check
requests and the Company shall process payments of accounts payable based upon
the due dates Ansan provides in the Company's accounts payable system. The
Company shall maintain the general ledger for Ansan and issue financial
statements as necessary. The Company shall review tax computations and prepare
for Ansan tax filings for excise tax, property tax and sales tax, income tax,
franchise tax and business licenses. Ansan hereby authorizes and appoints the
Company as its attorney-in-fact solely for the purpose of filing any necessary
returns or filings required to be filed by Ansan pursuant to this Agreement.
Ansan shall, no later than two (2) days prior to the due date for any tax
payment, excluding payroll taxes, fund the amount of the tax liability
previously communicated in writing to Ansan by the Company. Ansan shall use the
Company's software to process routing, billing and records, and the Company
shall provide related support as needed.

(ii) HEALTHCARE CLAIMS PROCESSING. The Company shall
coordinate

<PAGE>

healthcare claims processing and premium billing and shall process periodic
monthly enrollments for Ansan. Ansan shall, no later than the tenth (10th)
day of each month, fund the amount of all healthcare insurance premiums as
previously communicated in writing to Ansan by the Company by the fifth day
of each month. The Company shall assist Ansan in its open enrollment
process. The Company shall process documentation with respect to any Ansan
benefit plan. The Company shall prepare necessary filings for governmental
agencies related to Ansan benefit plans.

(iii) HUMAN RESOURCES. The Company shall provide human
resource support services, including payroll and related compliance tasks,
employee benefits administration, reporting requirements for federal and state
agencies and compensation survey information.

(iv) CORPORATE AND BUSINESS DEVELOPMENT. The Company shall
assist Ansan in seeking and negotiating technology licenses, corporate
partnerships arrangements and equity investments.

(b) The foregoing list of services shall not be deemed
exhaustive and may be changed upon the mutual agreement of Ansan and the
Company.

2 FEES.

(a) In consideration of the Company providing the Services to
Ansan, Ansan shall pay to the Company, or to any of its subsidiaries as the
Company shall designate, $7,000.00 per month during the first year of this
Agreement (the "Management Fee").

(b) The Management Fee shall be adjusted as of each subsequent
anniversary date of this Agreement and will be based upon services requested by
Ansan and the expected cost to the Company of providing such services.

3 INDEMNIFICATION.

(a) Ansan agrees to indemnify the Company and/or its
subsidiaries (collectively, the "Titan Group") and the employees of the Company
who provide services hereunder (the "Titan Providers," individually, a "Titan
Indemnitee" and collectively, the "Titan Indemnitees"), if a Titan Indemnitee is
made, or threatened to be made, a party to any action, claim or proceeding,
whether civil or criminal, including any action by or in the right of Ansan, by
reason of the provision of services by the Company and/or the Titan Providers to
Ansan pursuant to the terms of this Agreement (other than any action by Ansan
against the Company by reason of a breach of this Agreement by the Company)
against judgments, fines, amounts paid in settlement and reasonable expenses,
including reasonable attorneys' fees (collectively, "Losses"); provided,
however, that the foregoing indemnity shall not apply to any Losses to the
extent such Losses resulted primarily from the willful misconduct, gross
negligence or bad faith of a Titan

<PAGE>

Indemnitee.

(b) The Company shall be liable for, and agrees to indemnify
Ansan against, any claim, damage or loss incurred by Ansan resulting from or
arising out of any act or omission by the Company or a Titan Provider in
connection with the performance or non-performance of any of the Company's
duties under this Agreement to the extent that such act or omission resulted
from the willful misconduct, gross negligence or bad faith of the Company or a
Titan Provider.

4 RESPONSIBILITY FOR PROVIDING COMPENSATION AND FRINGE BENEFITS TO
SERVICE PROVIDERS. The Company shall bear all of the costs and expenses of the
personal compensation, fringe benefits and perquisites, including, without
limitation, pension, life insurance, health insurance, hospitalization and other
forms of insurance, of the Titan Providers, and such persons shall not be
entitled to any compensation or benefit from Ansan for services performed for
Ansan in any capacity pursuant to this Agreement.

5 STATUS AS INDEPENDENT CONTRACTOR. It is expressly understood
between the parties hereto that all of the Titan Providers shall be independent
contractors with respect to services provided by the Titan Providers to Ansan
hereunder, unless and to the extent that such Titan Providers are employed
separately by Ansan. It is also expressly agreed that, unless and to the extent
that such Titan Providers are employed separately by Ansan, the Company shall be
solely responsible for the withholding and payment of any and all taxes and
other sums required to be withheld or paid by an employer pursuant to any and
all state, federal or other laws with respect to all Titan Providers rendering
services hereunder.

6 WORK PRODUCT; CONFIDENTIALITY. The Company agrees, on behalf of
itself and its employees, representatives and agents, including, without
limitation, the Titan Providers, that all memoranda, notes, records or other
documents made or compiled by the Company and its employees, representatives and
agents (including, without limitation, the Titan Providers) in the fulfillment
of the Company's obligations under this Agreement or otherwise, or made
available to any of them concerning any Company Information (as defined below)
shall be Ansan's property and shall be delivered to Ansan upon the termination
of this Agreement or at any other time upon Ansan's request. None of the
Company or its employees, representatives and agents (including, without
limitation, the Titan Providers) shall, directly or indirectly, knowingly use,
for themselves or others, or divulge to others, other than in the ordinary
course and in furtherance of the Services to be provided hereunder, any secret
or confidential information, non-public information, knowledge, or data of Ansan
or its collaborators (collectively, the "Company Information") obtained by any
of them as a result of the Company's performance of this Agreement, unless
authorized by Ansan. The provisions of this Section do not extend to any
portion of such Company Information which becomes generally available to the
public other than as a result of a disclosure by the recipient or its
representatives, subsidiaries or affiliates, and will not be deemed to restrict
the recipient from complying with any order, request or decree of any court,
government or other regulatory body to produce any such information, but upon
receiving

<PAGE>

notice that any such order, request or decree is being sought, the recipient
will promptly give Ansan notice thereof and agree to cooperate with Ansan's
efforts, if any, to contest the issuance of such order, request or decree.
The provisions of this Section shall survive the termination or expiration of
this Agreement.

7 TERM. This Agreement will commence on the date hereof (the
"Commencement Date") and continue for one year from the Commencement Date. This
Agreement shall be extended automatically for additional one year terms unless
terminated by either party hereto upon prior written notice given as provided
herein to the other party hereto at least 60 days prior to the anniversary of
the Commencement Date. Notwithstanding the foregoing, Ansan shall have the
right to terminate any of the Services provided by the Company and receive a
corresponding pro rata reduction in the Management Fee with good reason upon
thirty (30) days prior written notice to the Company.

8 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
facsimile transmission, overnight courier, or certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission (provided that a confirmation copy
is sent by overnight courier), or, if sent by overnight courier, one (1) day
after deposit with an overnight courier, or, if mailed, three (3) days after the
date of deposit in the United States mails, as follows:

To the Company: Titan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 505
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 244-4956

To Ansan: Ansan Pharmaceuticals, Inc.
400 Oyster Point Boulevard, Suite 435
South San Francisco, California 94080
Attention: President
Telecopy No.: (415) 635-0201

Either party may, by notice given in accordance with this Section to the other
party, designate another address or person for receipt of notices hereunder.

9 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all previous negotiations, oral agreements, commitments and writings
with respect to such subject matter.

10 AMENDMENTS. This Agreement may not be modified or amended except
by an agreement in writing signed by both parties.

<PAGE>

11 GOVERNING LAW. This Agreement and the rights and remedies of the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware applicable to agreements made and to be wholly performed
within such State, without regard to the conflicts of laws principles of such
State. Any legal action, suit or proceeding arising out of or relating to this
Agreement may be instituted in any state or federal court located within the
County of New Castle, State of Delaware, and each party hereto agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action, suit
or proceeding, any claim that it is not subject personally to the jurisdiction
of such court, that the venue of the action, suit or proceeding is improper or
that this Agreement or the subject matter hereof may not be enforced in or by
such court.

12 ASSIGNMENT. Neither the Company nor Ansan may assign any of its
rights, benefits or duties under this Agreement without the prior written
consent of the other, which consent will not be unreasonably withheld or
delayed. This Agreement is binding on and will inure to the benefit of the
parties and their respective permitted successors and assigns.

13 NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto (and the Titan Indemnitees), and should not be
deemed to confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference to
this Agreement.

14 CAPTIONS. Captions and section headings are used for convenience
of reference only and are not part of this Agreement and may not be used in
construing it.

15 ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction will not invalidate or render unenforceable
such provision or remedies otherwise available to any party hereto.

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

<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.

TITAN PHARMACEUTICALS, INC.

By:__________________________________
Name: Louis R. Bucalo
Title: President and Chief Executive Officer

ANSAN PHARMACEUTICALS, INC.

By:____________________________________
Name: Vaughan Shalson
Title: President

<PAGE>

ANSAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF COMPUTATION OF NET LOSS PER SHARE

EXHIBIT 11.1

THREE MONTHS ENDED
MARCH 31,
---------------------------------
1997 1996

Net Loss $ (639,358) $ (407,935)
----------- -----------
----------- -----------

Weighted average shares of
Common Stock outstanding 2,849,887 2,768,164

Shares related to staff accounting
bulletin topic 4D:
Stock Options
Conversion of payable to parent
Escrow Shares (365,983) (363,760)
----------- -----------
Shares used in calculating net loss per share 2,483,904 2,404,404
----------- -----------
----------- -----------

Net loss per share $ (0.26) $ (0.17)
----------- -----------
----------- -----------

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and statement of operations and is qualified in its entirety by reference
to such financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,188,816
<SECURITIES> 1,000,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,248,574
<PP&E> 96,603
<DEPRECIATION> 8,096
<TOTAL-ASSETS> 2,345,177
<CURRENT-LIABILITIES> 364,557
<BONDS> 0
0
0
<COMMON> 10,699,996
<OTHER-SE> (9,719,376)
<TOTAL-LIABILITY-AND-EQUITY> 2,345,177
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 654,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,141
<INCOME-PRETAX> (639,358)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (639,358)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> 0

</TABLE>