AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 2002

                                                 REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
                                    FORM S-4
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------

                                 EXEGENICS INC.
             (Exact name of registrant as specified in its charter)
                             ---------------------


                                                                        
               DELAWARE                                 2834                                75-2402409
   (State or other jurisdiction of          (Primary Standard Industrial                 (I.R.S. Employee
    incorporation or organization)          Classification Code Number)               Identification Number)


                               2110 RESEARCH ROW
                              DALLAS, TEXAS 75235
                                  214-358-2000
  (Address, including zip code, and telephone number, including area code, of
                   registrants' principal executive offices)
                             ---------------------

                             RONALD L. GOODE, PH.D.
                      PRESIDENT & CHIEF EXECUTIVE OFFICER
                               2110 RESEARCH ROW
                              DALLAS, TEXAS 75235
                                  214-358-2000
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                                   COPIES TO:


                                                      
                 JOEL I. PAPERNIK, ESQ.                                    BRUCE A. RICH, ESQ.
          MINTZ, LEVIN, COHN, FERRIS, GLOVSKY                            THELEN REID & PRIEST LLP
                    AND POPEO, P.C.                                        40 WEST 57TH STREET
                    666 THIRD AVENUE                                     NEW YORK, NEW YORK 10019
                NEW YORK, NEW YORK 10017                                    TEL: 212-603-2000
                   TEL: 212-935-3000


                             ---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:  As soon as practicable after this registration statement becomes
effective and upon completion of the transactions described in the enclosed
prospectus.

    If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.  [ ]

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

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

                        CALCULATION OF REGISTRATION FEE



-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
                                                                   PROPOSED MAXIMUM     PROPOSED MAXIMUM
          TITLE OF EACH CLASS OF                AMOUNT TO BE        OFFERING PRICE     AGGREGATE OFFERING       AMOUNT OF
        SECURITIES TO BE REGISTERED            REGISTERED(1)           PER UNIT             PRICE(2)         REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------------------
                                                                                               
Common Stock, $.01 par value per share.....      64,798,420         Not applicable         $5,015.11              $0.46
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------


(1) Represents the maximum number of shares of common stock, $0.01 par value per
    share, of eXegenics Inc. ("eXegenics"), that may be issued in connection
    with the merger described herein, including 4,712,196 shares of eXegenics
    common stock that will be issued and placed in escrow for the benefit of
    IDDS.
(2) Estimated solely for purposes of calculating the registration fee required
    by the Securities Act of 1933, as amended, and computed pursuant to Rule
    457(f)(2) under the Securities Act, as one-third of the aggregate par value
    of outstanding Innovative Drug Delivery Systems, Inc. ("IDDS") capital
    stock, which aggregate par value is $15,045.33 as of October 29, 2002, the
    latest practicable date prior to the date of filing of this registration
    statement. IDDS is a privately held corporation with no market for its
    securities and it has an accumulated capital deficit.

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.

    The information in this joint proxy statement/prospectus is not complete and
may be changed. eXegenics may not issue these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
joint proxy statement/prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


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

                 SUBJECT TO COMPLETION, DATED OCTOBER 31, 2002

                                [EXEGENICS LOGO]

                        JOINT PROXY STATEMENT/PROSPECTUS

     eXegenics Inc. and Innovative Drug Delivery Systems, Inc. have entered into
a merger agreement pursuant to which a newly-formed, wholly-owned subsidiary of
eXegenics will merge with and into IDDS and the stockholders of IDDS will become
stockholders of eXegenics. eXegenics, under the new name Accel Pharmaceuticals,
Inc., will continue to conduct its own business and the business currently
conducted by IDDS. The closing of this merger is subject to the approval of the
stockholders of both eXegenics and IDDS and certain other closing conditions.

     In the merger, eXegenics will issue up to 47,121,963 shares of its common
stock in exchange for all of the outstanding common stock of IDDS and may issue
up to an additional 12,964,261 shares of its common stock upon the exercise by
IDDS option holders and warrant holders of eXegenics options and warrants issued
to them in the merger in exchange for their currently outstanding IDDS options
and warrants. Immediately prior to the effective time of the merger, all of the
outstanding shares of IDDS preferred stock will have been converted into IDDS
common stock. When the merger is completed, IDDS stockholders will receive 3.132
shares of eXegenics common stock for each share of IDDS common stock that they
own.

     Based on this exchange ratio and the capitalization of eXegenics as of
[          ], 2002, the shares of eXegenics common stock expected to be issued
in the merger would represent approximately 74% of the shares of eXegenics
common stock outstanding immediately following the merger (including eXegenics
series A preferred stock on an as-converted basis).

     eXegenics common stock is listed on the Nasdaq SmallCap under the symbol
"EXEG." On [          ], 2002, the closing sales price of eXegenics common stock
was $[     ] per share.

     A special meeting of the stockholders of eXegenics will be held at the
Embassy Suites, 3880 W. Northwest Highway, Dallas, Texas 75220, on [Date], 2002,
at [10:00 a.m.], local time, at which the stockholders of eXegenics will be
asked to consider and vote upon a proposal to approve the issuance of eXegenics
common stock in connection with the proposed merger, a proposal to amend the
certificate of incorporation of eXegenics to increase the number of authorized
shares of common stock of eXegenics, a proposal to authorize the board of
directors, in its discretion, to effect a reverse split of eXegenics' issued and
outstanding common stock, a proposal to amend the certificate of incorporation
of eXegenics to change the name of the corporation to Accel Pharmaceuticals,
Inc., a proposal to amend the certificate of incorporation of eXegenics to
create a staggered board of directors, a proposal to approve a new stock
incentive plan and a proposal to approve a new employee stock purchase plan. A
special meeting of the stockholders of IDDS will be held at [Location] at
[Address], [Zip] on [Date], 2002, at [Time], local time, at which the holders of
IDDS capital stock will be asked to consider and vote upon a proposal to approve
the merger and adopt the merger agreement. Enclosed are notices of the special
meetings of eXegenics stockholders and IDDS stockholders.

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

     THIS JOINT PROXY STATEMENT/PROSPECTUS PROVIDES YOU WITH DETAILED
INFORMATION ABOUT THE MERGER, A DESCRIPTION OF WHICH BEGINS ON PAGE [   ]. WE
STRONGLY URGE YOU TO READ AND CAREFULLY CONSIDER THIS JOINT PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY, INCLUDING THE MATTERS REFERRED TO UNDER
"RISK FACTORS" BEGINNING ON PAGE [   ].
                             ---------------------

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE EXEGENICS COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED IF THIS JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE
OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

     The date of this joint proxy statement/prospectus is [          ], 2002,
and this joint proxy statement/prospectus and the accompanying proxy cards are
first being mailed to the stockholders of eXegenics and IDDS on or about
[          ], 2002.


                                [EXEGENICS LOGO]

                                 EXEGENICS INC.
                               2110 RESEARCH ROW
                                   SUITE 621
                              DALLAS, TEXAS 75235

                                                                          , 2002

Dear Stockholder,

     You are cordially invited to attend a special meeting of the stockholders
of eXegenics to be held at [10:00 a.m.] local time on [          ],
[          ], 2002 at the Embassy Suites, 3880 W. Northwest Highway, Dallas,
Texas.

     Important information concerning the matters to be acted upon at the
special meeting is contained in the accompanying notice of special meeting of
stockholders and a joint proxy statement/prospectus.

     AFTER CAREFUL CONSIDERATION, OUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE PROPOSALS DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS, HAS
CONCLUDED THAT SUCH PROPOSALS ARE ADVISABLE AND FAIR TO YOU AND IN YOUR BEST
INTERESTS AND RECOMMENDS THAT YOU VOTE FOR THOSE PROPOSALS.

     We hope you will be able to attend the special meeting. Whether you plan to
attend the special meeting or not, it is important that your shares are
represented. Therefore, you are urged to complete, sign, date and return the
enclosed proxy card promptly in accordance with the instructions set forth on
the card. This will ensure your proper representation at the special meeting.

                                          Sincerely,

                                              /s/ RONALD L. GOODE, Ph.D.
                                          --------------------------------------
                                                  Ronald L. Goode, Ph.D.
                                          President and Chief Executive Officer

                            YOUR VOTE IS IMPORTANT.
                    PLEASE RETURN YOUR PROXY CARD PROMPTLY.

Dallas, Texas
[Date], 2002


                                 EXEGENICS INC.

                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                        TO BE HELD ON [          ], 2002

To the Stockholders of eXegenics Inc.:

     NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of
eXegenics Inc., a Delaware corporation, will be held at [10:00 a.m.], local
time, on [Date], 2002, at the Embassy Suites, 3880 W. Northwest Highway, Dallas,
Texas, to consider and vote upon the following proposals:

          1. To approve, for purposes of NASD Marketplace Rule 4350(i)(1)(B),
     the issuance of up to 60,086,224 shares of eXegenics common stock in
     connection with the proposed merger of a newly-formed, wholly-owned
     subsidiary of eXegenics, IDDS Merger Corp., a Delaware corporation, with
     and into Innovative Drug Delivery Systems, Inc., a Delaware corporation, as
     contemplated by the Agreement and Plan of Merger and Reorganization, dated
     as of September 19, 2002, by and among eXegenics, IDDS Merger Corp., IDDS,
     Ronald L. Goode, Ph.D., as the representative of the holders of the common
     stock of eXegenics, and Mark C. Rogers, M.D., as the representative of the
     holders of the common stock of IDDS.

          2. To approve an amendment to our certificate of incorporation to
     increase the number of authorized shares of common stock from 30,000,000 to
     90,000,000;

          3. To authorize the board of directors, in its discretion, to effect a
     1-for-[5] reverse split of our issued and outstanding shares of common
     stock without further approval or authorization of our stockholders at any
     time prior to the next annual meeting of our stockholders;

          4. To approve an amendment to our certificate of incorporation to
     change the name of eXegenics Inc. to Accel Pharmaceuticals, Inc.;

          5. To approve an amendment to our certificate of incorporation to
     provide that our board of directors will be divided into three classes,
     each consisting of one-third of such directors, as nearly as may be,
     designated Class I, Class II and Class III;

          6. To approve the 2002 Omnibus Stock Incentive Plan;

          7. To approve the 2002 Employee Stock Purchase Plan; and

          8. To transact any other business that properly comes before the
     special meeting or any adjournments or postponements thereof.

     If proposals 1, 2, 3 and 6, to approve the issuance of shares of eXegenics
common stock in connection with the merger, the amendment of the eXegenics
certificate of incorporation to increase the number of shares of eXegenics
common stock authorized for issuance, the authorization of the board of
directors, in its discretion, to effect a reverse split of eXegenics' issued and
outstanding common stock, and the adoption of a new stock incentive plan, are
not approved, the merger will not be consummated. If the merger is not
consummated, none of the foregoing proposals, except proposal 3 to authorize the
board to effect a reverse stock split, will be implemented. In addition,
proposals 4 and 7, to amend the certificate of incorporation to change the name
of eXegenics and approve the employee stock purchase plan, will also not be
implemented if the merger is not consummated. eXegenics may, however, effect the
reverse stock split or amend its certificate of incorporation to provide for a
staggered board if either proposal 3 or 5, respectively, is approved, even if
none of the other proposals are approved and the merger is not consummated.

     ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. EVEN
IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE REQUEST THAT YOU
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY AND THUS ENSURE THAT
YOUR SHARES WILL BE REPRESENTED AT THE SPECIAL MEETING IF YOU ARE UNABLE TO
ATTEND. AN ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING THE
SPECIAL MEETING MAY WITHDRAW HIS PROXY AND VOTE IN PERSON.


     The merger and related transactions are more fully described in the joint
proxy statement/prospectus and the annexes, including the Agreement and Plan of
Merger and Reorganization, accompanying this notice.

     Any action may be taken on any of the foregoing proposals at the special
meeting on the date specified above or on any date to which the special meeting
may properly be postponed or adjourned. The eXegenics board of directors has
fixed the close of business on [Record Date], 2002 as the record date for the
determination of stockholders entitled to notice of, and to vote at, the special
meeting. Only stockholders of record on the record date are entitled to notice
of and to vote at the special meeting or any adjournment or postponement of the
meeting.

                                          By Order of the Board of Directors,

                                                  /s/ JOAN H. GILLETT
                                          --------------------------------------
                                                     Joan H. Gillett
                                                   Corporate Secretary

Dallas, Texas
[Date], 2002


                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                         787 SEVENTH AVENUE, 48TH FLOOR
                            NEW YORK, NEW YORK 10019

                                                                          , 2002

Dear Stockholder,

     You are cordially invited to attend a special meeting of the stockholders
of Innovative Drug Delivery Systems, Inc. ("IDDS") to be held at [10:00 a.m.]
local time on [          ], [            ], 2002.

     Important information concerning the matters to be acted upon at the
special meeting is contained in the accompanying notice of special meeting of
stockholders and a joint proxy statement/prospectus.

     AFTER CAREFUL CONSIDERATION, OUR BOARD OF DIRECTORS HAS APPROVED THE
PROPOSAL FOR IDDS TO MERGE WITH EXEGENICS INC., A DELAWARE CORPORATION, AS MORE
FULLY DESCRIBED IN THE JOINT PROXY STATEMENT/ PROSPECTUS, AND BELIEVES THAT SUCH
PROPOSAL IS ADVISABLE AND FAIR TO YOU AND IN YOUR BEST INTERESTS AND RECOMMENDS
THAT YOU VOTE FOR THAT PROPOSAL.

     We hope you will be able to attend the special meeting. Whether you plan to
attend the special meeting or not, it is important that your shares are
represented. Therefore, you are urged to complete, sign, date and return the
enclosed proxy card promptly in accordance with the instructions set forth on
the card. This will ensure your proper representation at the special meeting.

                                          Sincerely,

                                               /s/ MARK C. ROGERS, M.D.
                                          --------------------------------------
                                                   Mark C. Rogers, M.D.
                                          President and Chief Executive Officer

                            YOUR VOTE IS IMPORTANT.
                    PLEASE RETURN YOUR PROXY CARD PROMPTLY.

New York, New York
[Date], 2002


                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                       TO BE HELD ON [            ], 2002

     To the holders of Innovative Drug Delivery Systems, Inc. Common Stock,
Series A Preferred Stock and Series B Preferred Stock:

     NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of
Innovative Drug Delivery Systems, Inc., a Delaware corporation, will be held at
[Time], local time, on [Date], 2002, at [          ], to consider and vote upon
the following proposal:

          1. To approve the proposed merger of a newly-formed, wholly-owned
     subsidiary of eXegenics Inc., a Delaware corporation, IDDS Merger Corp., a
     Delaware corporation, with and into Innovative Drug Delivery Systems, Inc.,
     a Delaware corporation, as contemplated by the Agreement and Plan of Merger
     and Reorganization, dated as of September 19, 2002, by and among eXegenics,
     IDDS Merger Corp., IDDS, Ronald L. Goode, Ph.D., as the representative of
     the holders of the common stock of eXegenics, and Mark C. Rogers, M.D., as
     the representative of the holders of the common stock of IDDS, and to
     approve the merger agreement and related transactions; and

          2. To transact any other business that properly comes before the
     special meeting or any adjournments or postponements thereof.

     ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. EVEN
IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE REQUEST THAT YOU
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY AND THUS ENSURE THAT
YOUR SHARES WILL BE REPRESENTED AT THE SPECIAL MEETING IF YOU ARE UNABLE TO
ATTEND. AN ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING THE
SPECIAL MEETING MAY WITHDRAW HIS PROXY AND VOTE IN PERSON.

     The proposed merger and related transactions are more fully described in
the joint proxy statement/ prospectus and the annexes, including the Agreement
and Plan of Merger and Reorganization, accompanying this notice.

     Any action may be taken on the foregoing proposal at the special meeting on
the date specified above or on any date to which the special meeting may
properly be postponed or adjourned. The IDDS board of directors has fixed the
close of business on [Record Date], 2002 as the record date for the
determination of stockholders entitled to notice of, and to vote at, the special
meeting. Only stockholders of record on the record date are entitled to notice
of and to vote at the special meeting or any adjournment or postponement of the
meeting.

                                          By Order of the Board of Directors,

                                                 /s/ FRED MERMELSTEIN
                                          --------------------------------------
                                                     Fred Mermelstein
                                                   Corporate Secretary

New York, New York
[Date], 2002


                               TABLE OF CONTENTS



                                                              PAGE
                                                              -----
                                                           
FORWARD-LOOKING STATEMENTS..................................      v
SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS.............      1
  The Companies.............................................      1
  Summary of the Merger.....................................      1
QUESTIONS AND ANSWERS ABOUT THE MERGER......................      8
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
  INFORMATION...............................................     12
COMPARATIVE PER SHARE DATA..................................     13
MARKET PRICE INFORMATION....................................     14
  Recent Share Price Data...................................     14
  Dividend Policy...........................................     15
RISK FACTORS................................................     16
  Risks Related to the Merger...............................     16
  Risks Related to eXegenics and the Combined Company.......     20
  Risks Related to eXegenics' Business in the Event the
     Merger is Not Completed................................     31
THE MERGER..................................................     33
  Background of the Merger..................................     33
  eXegenics' Reasons for Entering into the Merger...........     34
  IDDS' Reasons for Entering into the Merger................     36
  Business of the Combined Company..........................     37
  Opinion of eXegenics' Financial Advisor...................     38
  Interests of Certain Persons in the Merger................     42
  Regulatory Approvals......................................     43
  Accounting Treatment of the Merger........................     43
  Restrictions on Sales of eXegenics Common Stock by
     Affiliates of IDDS.....................................     43
  Listing on the Nasdaq Stock Market of eXegenics Common
     Stock to be Issued in the Merger.......................     44
THE MERGER AGREEMENT........................................     45
  The Merger; Closing; Effective Time.......................     45
  Merger Consideration; Exchange Ratio......................     45
  Exchange of Shares........................................     45
  No Fractional Shares......................................     46
  Distributions with Respect to Unexchanged Shares..........     46
  Lost, Stolen or Destroyed Certificates....................     46
  Shares to be Issued in Another Name.......................     46
  Stock Options and Warrants................................     46
  Representations and Warranties............................     47
  Covenants.................................................     49
  Meetings of Stockholders..................................     50
  Boards of Directors of eXegenics and IDDS After the
     Merger.................................................     50
  Conditions to Closing.....................................     50
  Escrow Arrangements.......................................     52
  Stockholder Representatives...............................     52
  Termination of the Merger Agreement.......................     53


                                        i




                                                              PAGE
                                                              -----
                                                           
  Effect of Termination.....................................     53
  Break-up Fee..............................................     53
  Expenses..................................................     54
AGREEMENTS RELATED TO THE MERGER AGREEMENT..................     55
  Voting Agreements.........................................     55
  Affiliate Lock-Up Agreements..............................     55
STATUTORY APPRAISAL RIGHTS OF DISSENTING IDDS
  STOCKHOLDERS..............................................     56
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE
  MERGER....................................................     59
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA.......     61
INFORMATION REGARDING EXEGENICS.............................     68
EXEGENICS SELECTED FINANCIAL DATA...........................     77
MANAGEMENT'S DISCUSSION AND ANALYSIS OF EXEGENICS' FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS.......................     78
EXEGENICS' MANAGEMENT.......................................     84
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
  OF EXEGENICS..............................................     92
DIVIDEND POLICY OF EXEGENICS................................     94
INFORMATION REGARDING IDDS..................................     94
IDDS SELECTED FINANCIAL DATA................................    109
MANAGEMENT'S DISCUSSION AND ANALYSIS OF IDDS' FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS.......................    111
MANAGEMENT OF IDDS AND THE EXECUTIVE OFFICERS AND DIRECTORS
  OF IDDS JOINING EXEGENICS.................................    117
  Directors and Executive Officers..........................    117
  Executive Compensation....................................    119
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
  OF IDDS...................................................    128
INFORMATION REGARDING IDDS MERGER CORP. ....................    130
THE SPECIAL MEETING OF EXEGENICS STOCKHOLDERS...............    131
  General...................................................    131
  Date, Time and Place......................................    131
  Voting Procedures.........................................    131
  Record Date and Outstanding Shares........................    132
  Stockholders Entitled to Vote.............................    132
  Quorum; Abstentions; Broker Non-Votes.....................    132
  Vote Required.............................................    133
  Expenses of Proxy Solicitation............................    133
  Voting of Proxies.........................................    133
  How to Revoke Your Proxy..................................    134
THE SPECIAL MEETING OF IDDS STOCKHOLDERS....................    150
DESCRIPTION OF EXEGENICS CAPITAL STOCK......................    151
COMPARISON OF RIGHTS OF HOLDERS OF IDDS COMMON STOCK BEFORE
  AND AFTER THE MERGER......................................    154
LEGAL MATTERS...............................................    158
EXPERTS.....................................................    158


                                        ii




                                                              PAGE
                                                              -----
                                                           
OTHER MATTERS...............................................    158
STOCKHOLDER PROPOSALS.......................................    158
WHERE YOU CAN FIND MORE INFORMATION.........................    159
INDEX TO EXEGENICS FINANCIAL STATEMENTS.....................    F-1
INDEX TO IDDS FINANCIAL STATEMENTS..........................   F-23
EXHIBITS
EXHIBIT A-1 -- FORM OF IDDS VOTING AND LOCK-UP AGREEMENT....  A-1-1
EXHIBIT A-2 -- FORM OF LOCK-UP AGREEMENT....................  A-2-1
EXHIBIT A-3 -- 2002 OMNIBUS STOCK INCENTIVE PLAN............  A-3-1
EXHIBIT A-4 -- 2002 EMPLOYEE STOCK PURCHASE PLAN............  A-4-1
ANNEXES
ANNEX A -- AGREEMENT AND PLAN OF MERGER AND
  REORGANIZATION............................................    A-1
ANNEX B -- OPINION OF PETKEVICH & PARTNERS, LLC.............    B-1
ANNEX C -- SECTION 262 OF THE DELAWARE GENERAL CORPORATION
  LAW.......................................................    C-1


                                       iii


                                   IMPORTANT

     As permitted under the rules of the U.S. Securities and Exchange
Commission, or the SEC, this joint proxy statement/prospectus incorporates
important business and financial information about eXegenics and IDDS that is
contained in documents filed with the SEC that are not included in or delivered
with this joint proxy statement/prospectus. You may obtain copies of these
documents, without charge, from the website maintained by the SEC at
www.sec.gov, as well as other sources. See "Where You Can Find More Information"
beginning on page [  ]. You may also obtain copies of these documents, without
charge, from us by writing or calling:


                                        
              eXegenics Inc.                 Innovative Drug Delivery Systems, Inc.
            2110 Research Row                    787 Seventh Avenue, 48th floor
              Dallas, Texas                         New York, New York 10019
              (214) 358-2000                             (212) 554-4328
          Attention: Controller                Attn: Manager, Investor Relations


     IN ORDER TO OBTAIN DELIVERY OF THIS INFORMATION PRIOR TO THE CLOSING OF THE
MERGER, YOU SHOULD REQUEST SUCH INFORMATION NO LATER THAN [DATE 15 DAYS AFTER
FIRST MAILING].

                                        iv


                           FORWARD-LOOKING STATEMENTS

     This joint proxy statement/prospectus contains forward-looking statements.
Such statements are valid only as of the date hereof, and we disclaim any
obligation to update this information. These statements are based on our current
beliefs and expectations as to such future outcomes. Drug discovery and
development involve a high degree of risk. These statements, which include, but
are not limited to, the successful completion of the proposed merger between
eXegenics and IDDS and the benefits expected to be derived therefrom, are
subject to known and unknown risks and uncertainties that may cause actual
future experience and results to differ materially from the statements made.
Factors that might cause such a material difference include, among others,
uncertainties related to the ability to attract and retain partners for our
technologies, products or product candidates, the identification of lead
compounds, the successful preclinical development thereof, the completion of
clinical trials, the FDA review process and other governmental regulation, our
ability to successfully develop and commercialize, acquire or in-license drug
candidates, competition from other pharmaceutical companies, product pricing and
third party reimbursement, and other factors relating to our financial resources
and the trading market for our securities described in our filings with the
Securities and Exchange Commission.

     This joint proxy statement/prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth of certain markets. Forward-looking statements are not guarantees and are
subject to known and unknown risks, uncertainties and other factors that may
cause eXegenics', IDDS' and the drug development industry's actual results,
levels of activity, performance, achievements and prospects to be materially
different from those expressed or implied by such forward-looking statements.
These risks, uncertainties and other factors include, among others, those
identified in the section entitled "Risk Factors" on page   , and elsewhere in
this joint proxy statement/prospectus.

                                        v


                SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS

     This joint proxy statement/prospectus pertains to the merger of a
wholly-owned subsidiary of eXegenics with and into IDDS and it is being sent to
the holders of eXegenics common stock and preferred stock and the holders of
IDDS common stock and preferred stock. This summary highlights selected
information from this joint proxy statement/prospectus and may not contain all
the information that is important to you. To better understand the merger, you
should read this entire document carefully, including the Agreement and Plan of
Merger and Reorganization, which is attached as Annex A, the opinion of
Petkevich & Partners, LLC, which is attached as Annex B, and the other documents
to which we refer.

THE COMPANIES

eXegenics Inc.
2110 Research Row
Dallas, Texas 75235
(214) 358-2000
http://www.exegenicsinc.com

     eXegenics is a post-genomics drug creation enterprise engaged in the
discovery of drugs for the treatment of cancers and drug-resistant bacterial
diseases. Employing Quantum Core Technology (QCT(TM)), a suite of proprietary
technologies, eXegenics' scientists create novel small molecular weight "core
inhibitor" molecules of disease-causing enzymes and proteins. These "core
inhibitor" candidate drug leads are optimized into novel potential clinical drug
candidates for further preclinical and clinical development, after which they
would be advanced towards clinical drug candidates and pharmaceutical products.
eXegenics' other proprietary research platform is Optimized Anti-Sense
Inhibitory Sequence (OASIS(TM)), which is used to create antisense molecules
that can potentially be developed into novel drugs. eXegenics, incorporated in
Delaware, was founded in 1991, and is based in Dallas, Texas. eXegenics held the
initial public offering of its common stock on November 7, 1995. Its common
stock is currently traded on the Nasdaq SmallCap Market System under the symbol
"EXEG." Please see the Risk Factors relating to our Nasdaq listing on pages [  ]
and [  ].

Innovative Drug Delivery Systems, Inc.
787 Seventh Avenue, 48th Floor
New York, New York 10019
(212) 554-4550
http://www.idds.com

     IDDS is a development stage pharmaceutical company dedicated to the
development and commercialization of innovative treatments for pain management.
IDDS has initiated a program strategically positioned to develop proprietary
drugs that are administered by various routes to treat the moderate to severe
pain syndromes associated with a range of maladies and disease states. IDDS,
incorporated in Delaware, was founded in April 1999, as Alchemy Pharmaceuticals,
Inc. In September 2000, the company merged with Pain Management, Inc., a
Delaware corporation organized in February 1998 and changed its name to
Innovative Drug Delivery Systems, Inc. IDDS is based in New York, New York and
is a privately held company.

SUMMARY OF THE MERGER

  STRUCTURE OF THE TRANSACTION (SEE PAGE   )

     The merger will combine the businesses of eXegenics and IDDS. Upon
completion of the merger, IDDS will become a wholly-owned subsidiary of
eXegenics and eXegenics, under the new name Accel Pharmaceuticals, Inc., will
continue to conduct its own business and the business currently being conducted
by IDDS.

                                        1


  MERGER CONSIDERATION; FIXED EXCHANGE RATIO (SEE PAGE   )

     In connection with the merger, all outstanding shares of IDDS common stock
will be exchanged for a total of up to 47,121,963 shares of eXegenics common
stock and eXegenics may issue up to an additional 12,964,261 shares of its
common stock upon the exercise by IDDS option holders and warrant holders of
eXegenics options and warrants issued to them in the merger in exchange for
their currently outstanding IDDS options and warrants. Immediately prior to the
merger, all IDDS preferred stock will have been converted into common stock of
IDDS. As a holder of IDDS common stock, you will be entitled to receive 3.132
shares of eXegenics common stock for each share of IDDS common stock that you
own. You will not receive any fractional shares. Instead, cash will be paid in
lieu of fractional shares, based upon the median price per share of eXegenics
common stock over a 20-day period, determined in accordance with a formula set
forth in the merger agreement. Based on this exchange ratio and the
capitalization of eXegenics as of [          ], 2002, the shares of eXegenics
common stock expected to be issued in the merger would represent approximately
74% of the shares of eXegenics common stock outstanding immediately following
the merger (including eXegenics' series A preferred stock on an as-converted
basis).

     Furthermore, pursuant to the merger agreement, an aggregate of 4,712,196
shares of eXegenics common stock that are issuable in the merger to holders of
IDDS capital stock will be placed in an escrow fund for a period of six months
following completion of the merger. The escrow fund will be the sole source of
reimbursement to eXegenics for, among other things, losses arising from a breach
by IDDS of any of its representations and warranties in the merger agreement or
any failure by IDDS to perform its covenants and obligations under the merger
agreement. If eXegenics does not assert any claim for indemnification, after the
end of the six-month escrow period those shares will be distributed pro rata to
the former IDDS stockholders. In addition, an aggregate of 4,712,196 shares of
eXegenics common stock will be issued and placed in the escrow fund for the same
six-month escrow period to serve as the sole source of reimbursement to the
former holders of IDDS common stock for, among other things, losses arising from
a breach by eXegenics of any of its representations and warranties in the merger
agreement or any failure by eXegenics to perform its covenants and obligations
under the merger agreement. If IDDS does not assert any claim for
indemnification, after the end of the six-month escrow period those shares will
be cancelled.

     The exchange ratio for IDDS' common stock set forth above is fixed except
for adjustments to reflect any reclassification, stock split, stock dividend or
other similar change with respect to eXegenics or IDDS capital stock occurring
before the effective time of the merger. As a result, except for any such
adjustments, the number of shares of eXegenics common stock that you are
entitled to receive in the merger will not change between now and the date the
merger is completed, regardless of fluctuations in the market price of eXegenics
common stock. We encourage you to obtain current quotations of the market price
of eXegenics common stock.

     At the special meeting of eXegenics stockholders, stockholders are being
asked to authorize the eXegenics board of directors, in its discretion, to
effect a 1-for-[5] reverse split of the common stock of eXegenics. If approved
by the eXegenics stockholders, the board of directors will not effect the
reverse stock split until after the merger has closed and eXegenics common stock
is issued to the former IDDS stockholders or the merger agreement has been
terminated. Accordingly, the reverse stock split will not affect the pro rata
share ownership of eXegenics and former IDDS stockholders immediately after the
merger.

  STOCKHOLDER APPROVALS (SEE PAGES   AND   )

     The affirmative vote of at least a majority of the outstanding shares of
eXegenics common stock and series A preferred stock is required to amend the
eXegenics certificate of incorporation to increase the number of shares of
eXegenics common stock authorized for issuance, change the name of the
corporation and create a staggered board of directors, and to authorize the
board of directors, in its discretion, to effect a reverse split of eXegenics'
issued and outstanding common stock. In addition, the affirmative vote of

                                        2


holders of a majority of the eXegenics common stock and series A preferred stock
represented at the eXegenics special meeting at which a quorum is present is
required to approve the issuance of eXegenics common stock in connection with
the merger and to approve a new stock incentive plan and employee stock purchase
plan.

     The affirmative vote of holders of a majority of the outstanding shares of
IDDS common stock and preferred stock, voting as a single class, is required for
IDDS stockholders to approve the merger agreement and related transactions.

  RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF EXEGENICS AND IDDS (SEE PAGES
  AND   )

     After careful consideration, eXegenics' board of directors unanimously
recommends that eXegenics stockholders vote in favor of the proposals to issue
eXegenics common stock in connection with the merger, to amend the eXegenics
certificate of incorporation to increase the number of shares common stock
authorized for issuance, change the name of the corporation and create a
staggered board of directors, to authorize the board of directors, in its
discretion, to effect a reverse split of eXegenics' issued and outstanding
common stock, and to approve a new stock incentive plan and employee stock
purchase plan.

     After careful consideration, IDDS' board of directors unanimously
recommends that IDDS stockholders vote in favor of the proposal to approve the
merger agreement and related transactions.

  OPINION OF EXEGENICS' FINANCIAL ADVISOR (SEE PAGE   )

     In deciding to approve the merger, the eXegenics board of directors
considered the opinion of its financial advisor, Petkevich & Partners, as to the
fairness, from a financial point of view, of the exchange ratio in the merger.
The full text of the written opinion of Petkevich & Partners is attached to this
joint proxy statement/prospectus as Annex B. You should read the opinion
carefully and completely for a description of the assumptions made, matters
considered and the limitations of the review the advisor conducted. The opinion
is directed to the eXegenics board of directors. The opinion is not a
recommendation as to how to vote on any matter relating to the proposed merger.

  VOTING AGREEMENTS (SEE PAGE   )

     On or prior to September 19, 2002, the principal stockholders of IDDS
entered into voting agreements. The holders of more than      % of the voting
power of IDDS' capital stock (consisting of both IDDS common stock and preferred
stock) entered into a voting agreement under which they agreed to vote in favor
of approval of the merger and adoption of the merger agreement.

     The form of voting agreement is attached within Exhibit A-1 to this joint
proxy statement/prospectus. We encourage you to read the form of voting
agreement carefully.

  AFFILIATE LOCK-UP AGREEMENTS (SEE PAGE   )

     As a condition to eXegenics' and IDDS' willingness to enter into the merger
agreement, each executive officer, director and certain significant stockholders
of eXegenics and IDDS executed lock-up agreements with eXegenics, whereby such
persons, subject to certain conditions and exceptions, agreed to limit the sale
or transfer of shares of eXegenics common stock. Those persons have agreed not
to sell or otherwise transfer any shares of eXegenics common stock previously
owned or received in connection with the proposed merger for a period of six
months following the completion of the merger. After the six-month anniversary
of the completion of the merger, they are no longer subject to the limitations
imposed by the lock-up agreements, but may be subject to other limitations and
restrictions on resales as a result of federal and state securities laws.

     The forms of lock-up agreements are attached as Exhibits A-1 and A-2 to
this joint proxy statement/ prospectus. We encourage you to read the forms of
lock-up agreements carefully.

                                        3


  INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (SEE PAGE   )

     When considering the recommendations of the eXegenics board of directors
and the IDDS board of directors, you should be aware that certain of eXegenics'
and IDDS' directors and officers have interests in the merger that are different
from, or are in addition to, your interests. In particular, upon consummation of
the merger, both Drs. Rogers and Goode will be granted an option to purchase
2,349,000 shares of eXegenics common stock (approximately 2.9% of the combined
company on a fully-diluted basis), at an exercise price equal to [the fair
market value of the stock on the fifth day after the consummation of the
merger]. As a result of these interests, these directors and officers of
eXegenics and IDDS may be more likely to vote to adopt the merger agreement and
approve the issuance of the shares of eXegenics common stock to the IDDS
stockholders pursuant to the merger agreement than if they did not hold these
interests. eXegenics' and IDDS' stockholders should consider whether these
interests might have influenced these directors and officers to support or
recommend the merger.

  SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN PRINCIPAL STOCKHOLDERS (SEE PAGES
  AND   )

     As of           , 2002, directors, officers and affiliates of eXegenics as
a group beneficially owned           shares of common stock, which represents
approximately      % of the total voting power represented by eXegenics'
outstanding capital stock.

     As of           , 2002, directors, officers and affiliates of IDDS as a
group beneficially owned           shares of IDDS common stock and
shares of preferred stock, which represents approximately      % of the total
voting power represented by IDDS' outstanding capital stock.

  CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE   )

     eXegenics' and IDDS' obligations to complete the merger are subject to the
satisfaction or waiver of certain closing conditions. The conditions that must
be satisfied or waived before the completion of the merger include the
following, subject to exceptions and qualifications:

     - both eXegenics and IDDS must receive the requisite stockholder approvals
       of the matters described in the notices of the special meetings;

     - the registration statement, of which this joint proxy
       statement/prospectus is a part, must have been declared effective by the
       Securities and Exchange Commission; and

     - no court order or other legal restraint or prohibition preventing the
       consummation of the merger may be in effect or pending.

     For further detail regarding the closing conditions to the merger, see
Article VII of the merger agreement, which is attached to this joint proxy
statement/prospectus as Annex A.

 TERMINATION OF THE MERGER AGREEMENT (SEE PAGE   )

     The merger agreement may be terminated prior to the effectiveness of the
merger under the following conditions:

     - by mutual consent of eXegenics and IDDS;

     - subject to certain conditions, by either eXegenics or IDDS if the merger
       has not occurred before February 14, 2003;

     - subject to certain conditions, by eXegenics or IDDS if any application
       for regulatory or governmental approval necessary to consummate the
       merger is denied;

     - subject to certain conditions, by eXegenics or IDDS, if the other party
       approves or enters into an agreement providing for it to engage in a
       superior acquisition proposal, in that the acquisition, if consummated,
       would result in a transaction more favorable to stockholders;

                                        4


     - by eXegenics or IDDS if a final, non-appealable order of a court prevents
       consummation of the merger or if a law is enacted which would make
       consummation of the merger illegal;

     - by eXegenics, if (i) the stockholders of IDDS fail to approve the merger
       agreement or (ii) the requisite approval of the conversion of all
       outstanding shares of IDDS preferred stock into shares of IDDS common
       stock is not obtained from the stockholders of IDDS;

     - by eXegenics, if (i) IDDS materially breaches a representation, warranty,
       covenant or other provision of the merger agreement and fails to cure
       such breach within 30 days of receiving notice of the breach or (ii) any
       of the conditions precedent to eXegenics' obligation to close the merger
       has not been satisfied or satisfaction is or becomes impossible;

     - by IDDS if the stockholders of eXegenics fail to approve any of the
       proposals to (i) issue shares of eXegenics common stock in connection
       with the merger, (ii) increase the number of shares of eXegenics common
       stock authorized for issuance, (iii) authorize the board of directors, in
       its discretion, to effect a reverse split of the issued and outstanding
       shares of eXegenics common stock or (iv) adopt a new stock incentive plan
       of eXegenics;

     - by IDDS if, as of the effective time of the merger, eXegenics does not
       have cash or cash equivalents in the amount of at least $16.5 million, or
       eXegenics' current liabilities exceed $1.1 million; and

     - by IDDS, if (i) eXegenics materially breaches a representation, warranty,
       covenant or other provision of the merger agreement and fails to cure
       such breach within 30 days of receiving notice of the breach or (ii) any
       of the conditions precedent to IDDS' obligation to close the merger has
       not been satisfied or satisfaction is or becomes impossible.

     In the event of the termination of the merger agreement by either eXegenics
or IDDS, the merger agreement will become void and have no effect. However, if
eXegenics terminates the merger agreement because it has approved a superior
acquisition proposal, or IDDS terminates the merger agreement because (i) the
stockholders of eXegenics have failed to approve the necessary proposals, (ii)
there has been a material breach of eXegenics' representations or covenants,
(iii) eXegenics has not satisfied its closing conditions, (iv) eXegenics has
approved a superior acquisition proposal or (v) ten business days have elapsed
since eXegenics deemed an acquisition proposal to be a superior proposal and
such determination has not been withdrawn, then eXegenics must pay to IDDS a
termination fee equal to $2.0 million in cash. In addition, if IDDS terminates
the merger agreement because it has approved a superior acquisition proposal, or
eXegenics terminates the merger agreement because (i) the stockholders of IDDS
have failed to approve the necessary proposals, (ii) there has been a material
breach of IDDS' representations or covenants, (iii) IDDS has not satisfied its
closing conditions, (iv) IDDS has approved a superior acquisition proposal or
(v) ten business days have elapsed since IDDS deemed an acquisition proposal to
be a superior proposal and such determination has not been withdrawn, then IDDS
must, at the option of IDDS, either pay to eXegenics a termination fee equal to
$2.0 million in cash or deliver to eXegenics shares of IDDS having a value of
$4.0 million.

  STOCK OPTIONS AND WARRANTS (SEE PAGE   )

     All options outstanding under eXegenics' stock option plan prior to the
merger will remain in full force and effect upon the merger on the same terms as
are in effect immediately prior to the merger, except that (i) all options held
by a person who is, immediately prior to the merger, an officer or director of
eXegenics but who is not continuing as an officer or director of eXegenics after
the merger will immediately vest and such officers and directors will have the
term of their original option grants in which to exercise their options, (ii)
all options held by a person who is, immediately prior to the merger, an
employee of eXegenics will immediately vest, and (iii) each holder of options
who is, immediately prior to the merger, an employee of eXegenics will have
three years from and after the termination of his active service with eXegenics
in which to exercise his options.

                                        5


     IDDS' stock option plan will be cancelled upon the merger. Upon the merger,
eXegenics will adopt a new stock incentive plan with substantially the same
terms as the IDDS stock option plan. eXegenics will issue, under and pursuant to
the terms of the newly adopted stock incentive plan, to the holders of
outstanding IDDS stock options immediately prior to the merger, options with the
same terms as the IDDS stock options issued except that (i) such options will
remain exercisable for the time period set forth in the applicable option grant
agreement, subject to clause (iv) below, (ii) each such option will be
exercisable for such number of shares of eXegenics common stock as equals the
number of shares of IDDS common stock into which the IDDS stock options were
exercisable multiplied by the exchange ratio, (iii) the per share exercise price
for each such option will equal the applicable per share exercise price under
the IDDS plan divided by the exchange ratio, and (iv) all options held by a
person who is, immediately prior to the merger, an employee, officer or director
of IDDS but who is terminated without cause within six months of the closing of
the merger, will vest upon such termination and such option holder will have the
term of his original option grants in which to exercise his options.

     Upon the effective time of the merger, eXegenics will honor all outstanding
IDDS warrants. The IDDS warrants will thereupon be exercisable in accordance
with the terms thereof for such number of shares of eXegenics common stock as
equals (i) the number of shares of IDDS stock for which the IDDS warrants were
exercisable multiplied by (ii) the exchange ratio. The exercise price for the
IDDS warrants will thereupon be the exercise price for the IDDS warrants prior
to the effective time of the merger divided by the exchange ratio.

  ESTABLISHMENT OF AN ESCROW FUND (SEE PAGE   )

     Pursuant to the terms of the merger agreement, at the effective time of the
merger an aggregate of 4,712,196 shares of eXegenics common stock, representing
10% of the shares of eXegenics common stock issuable in the merger to holders of
IDDS' capital stock, will be placed in an escrow fund for the benefit of
eXegenics. An additional 4,712,196 shares of eXegenics common stock will be
issued and placed in the escrow fund for the benefit of IDDS. The escrow fund
will be held by U.S. Trust Company as the escrow agent. These shares will be
held in the escrow fund for a period of six months following the effective time
of the merger and will serve as the exclusive source of reimbursement to
eXegenics and the former holders of IDDS common stock, as the case may be, for,
among other things: (i) any losses arising from any breach by IDDS or eXegenics
of its representations and warranties in the merger agreement; or (ii) any
failure by IDDS or eXegenics to perform its covenants and obligations under the
merger agreement.

     The terms and provisions of the escrow arrangement are contained in Article
VIII of the merger agreement, which is attached to this joint proxy
statement/prospectus as Annex A. We encourage you to read the provisions of
Article VIII of the merger agreement carefully.

  BOARDS OF DIRECTORS OF EXEGENICS AND IDDS FOLLOWING THE MERGER (PAGE   )

     Upon completion of the proposed merger, pursuant to the terms of the merger
agreement, the board of directors of each of eXegenics and IDDS will consist of
four directors designated by IDDS (who will be Mark C. Rogers, M.D., Peter Kash,
Edward Miller, M.D. and Mark Siegel), four directors designated by eXegenics
(who will be Ronald L. Goode, Ph.D., Gary Frashier, Ira J. Gelb, M.D. and Robert
Easton) and one independent director mutually agreed upon by IDDS and eXegenics
(who will be Douglas Watson). As of the effective time of the merger, Mark C.
Rogers, M.D. will serve as the executive chairman of each of the board of
directors of eXegenics and of IDDS and Ronald L. Goode, Ph.D., will serve as
president and chief executive officer.

     As of the effective time of the merger, the board of directors of eXegenics
will be divided into three classes, the first class to be comprised of Peter
Kash, Robert Easton and Douglas Watson, the second class to be comprised of
Edward Miller, M.D., Gary Frashier and Ira J. Gelb, M.D., and the third class to
be comprised of Mark C. Rogers, M.D., Ronald L. Goode, Ph.D. and Mark Siegel.
The term of the directors in the first class will expire at the annual meeting
of eXegenics' stockholders in year 2003; the term of the directors in the second
class will expire at the annual meeting of eXegenics' stockholders in year 2004;
and

                                        6


the term of the directors in the third class will expire at the annual meeting
of eXegenics' stockholders in year 2005. The term of each of such directors
thereafter will be three years. None of such directors may be removed from
eXegenics' board of directors, except for cause.

  APPRAISAL RIGHTS OF DISSENTING IDDS STOCKHOLDERS (SEE PAGE   )

     Under Delaware law, IDDS stockholders are entitled to appraisal rights,
subject to certain conditions discussed more fully elsewhere in this joint proxy
statement/prospectus. Appraisal rights entitle dissenting stockholders, under
certain conditions, to receive a valuation of their shares and a payment of that
value in cash. Failure to follow the steps required by law for perfecting
appraisal rights may lead to the loss of those rights, in which case the
dissenting stockholder will be treated in the same manner as a non-dissenting
stockholder.

     See Annex C for a reproduction of Section 262 of the Delaware General
Corporation Law, which relates to the appraisal rights of dissenting
stockholders. IN VIEW OF THE COMPLEXITY OF LAW RELATING TO APPRAISAL RIGHTS,
IDDS STOCKHOLDERS WHO ARE CONSIDERING OBJECTING TO THE MERGER SHOULD CONSULT
THEIR OWN LEGAL ADVISORS.

     Pursuant to the terms of the merger agreement, eXegenics will be released
from its obligation to effect the merger if the shares of IDDS common stock held
by stockholders who have exercised and perfected appraisal rights exceed 5% of
the outstanding shares of IDDS capital stock.

  MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE   )

     The merger has been structured as a reorganization for U.S. federal income
tax purposes. In general, IDDS stockholders will not recognize gain or loss for
U.S. federal income tax purposes, except to the extent of cash received in lieu
of fractional shares or pursuant to appraisal rights. However, the tax
consequences to you will depend upon your particular circumstances. Accordingly,
IDDS stockholders are urged to consult with their own tax advisors to determine
the tax consequences of the merger to them.

  REGULATORY APPROVALS REQUIRED TO COMPLETE THE MERGER (SEE PAGE   )

     Neither IDDS nor eXegenics is aware of the need to obtain any regulatory
approvals in order to consummate the merger other than the following:

     - effectiveness of the registration statement of which this joint proxy
       statement/prospectus is a part; and

     - approval to list the shares of eXegenics common stock to be issued in
       connection with the proposed merger on the Nasdaq National Market or the
       Nasdaq SmallCap Market if then so listed. See the Risk Factors relating
       to our Nasdaq listing on pages   and   .

     eXegenics and IDDS intend to obtain these approvals and any additional
regulatory approvals that may be required. However, neither party can assure you
that all of the approvals will be obtained.

  ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE   )

     For accounting purposes, the merger of eXegenics and IDDS will be accounted
for as a reverse merger under the purchase method of accounting in accordance
with generally accepted accounting principles in the United States of America.
Accordingly, IDDS will be deemed, for accounting purposes, to be the acquirer.
Therefore, IDDS will record the fair value of eXegenics' assets purchased and
liabilities assumed based on the fair market value of eXegenics' outstanding
equity securities, including stock options and warrants, at the date of
acquisition. It is expected that the consideration will be less than the fair
market value of the net assets purchased. Accordingly, we will have negative
goodwill which will result in a non-recurring extraordinary gain.

                                        7


                     QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: WHAT IS THE MERGER?

A: The merger will combine the businesses of eXegenics and IDDS. Upon completion
   of the merger, IDDS will become a wholly-owned subsidiary of eXegenics and
   eXegenics, under the new name Accel Pharmaceuticals, Inc., will continue to
   conduct its own business and the business currently being conducted by IDDS.

Q: DOES THE EXEGENICS BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE
   ISSUANCE OF EXEGENICS COMMON STOCK IN CONNECTION WITH THE PROPOSED MERGER AND
   THE OTHER RELATED PROPOSALS?

A: Yes. After careful consideration, eXegenics' board of directors unanimously
   determined that the merger is advisable and is fair to, and in the best
   interests of, eXegenics and its stockholders. eXegenics' board of directors
   unanimously recommends that eXegenics stockholders vote FOR the proposals to
   issue shares of eXegenics common stock in connection with the merger, amend
   the eXegenics certificate of incorporation to increase the number of shares
   common stock authorized for issuance, change the name of the corporation and
   create a staggered board of directors, authorize the board of directors, in
   its discretion, to effect a reverse split of eXegenics' issued and
   outstanding common stock, and approve a new stock incentive plan and employee
   stock purchase plan.

   For a description of the factors considered by the eXegenics board of
   directors in making its determination, see the section entitled "The
   Merger-eXegenics' Reasons for Entering into the Merger" on page   .

Q: WHAT VOTE IS REQUIRED BY EXEGENICS STOCKHOLDERS TO COMPLETE THE MERGER?

A: The closing of the merger is conditioned upon eXegenics' stockholders voting
   to approve proposals to approve the issuance of shares of eXegenics common
   stock in connection with the merger, the amendment of the eXegenics
   certificate of incorporation to increase the number of shares of eXegenics
   common stock authorized for issuance, the authorization of the board of
   directors, in its discretion, to effect a reverse split of eXegenics' issued
   and outstanding common stock, and the adoption of a new stock incentive plan.
   In addition, eXegenics stockholders are being asked to approve an amendment
   to the eXegenics certificate of incorporation to change the name of eXegenics
   and create a staggered board of directors, and to approve a new employee
   stock purchase plan. The affirmative vote of at least a majority of the
   outstanding shares of eXegenics common stock and series A preferred stock,
   voting together as a class, is required to amend the eXegenics certificate of
   incorporation to increase the number of shares of eXegenics common stock
   authorized for issuance, change the name of the corporation and create a
   staggered board of directors, and to authorize the board of directors, in its
   discretion, to effect a reverse split of eXegenics' issued and outstanding
   common stock. In addition, the affirmative vote of holders of a majority of
   the eXegenics common stock and series A preferred stock, voting together as a
   class, represented at the eXegenics special meeting at which a quorum is
   present is required to approve the issuance of eXegenics common stock in
   connection with the merger and to approve the new stock incentive plan and
   the employee stock purchase plan.

Q: WILL EXEGENICS STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?

A: No. eXegenics stockholders will continue to hold the eXegenics shares they
   currently own, subject to the reverse stock split.

Q: WHAT WILL IDDS STOCKHOLDERS RECEIVE IN THE MERGER?

A: If we complete the merger, eXegenics will issue up to 47,121,963 shares of
   its common stock in exchange for all of the outstanding common stock of IDDS,
   subject to the indemnification escrow, and may issue up to an additional
   12,964,261 shares of its common stock upon the exercise by IDDS option
   holders and warrant holders of eXegenics options and warrants issued to them
   in the merger in exchange for their currently outstanding IDDS options and
   warrants. Immediately prior to the merger, all IDDS preferred stock will have
   been converted into common stock of eXegenics. As a holder of IDDS common
   stock, you will be entitled to receive 3.132 shares of eXegenics common stock
   for each

                                        8


   share of IDDS common stock that you own. You will not receive any fractional
   shares. Instead, cash will be paid in lieu of fractional shares, based upon
   the median price per share of eXegenics common stock over a 20-day period,
   determined in accordance with a formula set forth in the merger agreement.
   Based on this exchange ratio and the capitalization of eXegenics as of
   [          ], 2002, the shares of eXegenics common stock expected to be
   issued in the merger would represent approximately 74% of the shares of
   eXegenics common stock outstanding immediately following the merger
   (including eXegenics series A preferred stock on an as-converted basis).

   Furthermore, pursuant to the merger agreement, an aggregate of 4,712,196
   shares of eXegenics common stock that are issuable in the merger to holders
   of IDDS capital stock will be placed in an escrow fund for a period of six
   months following completion of the merger. The escrow fund will be the sole
   source of reimbursement to eXegenics for, among other things, losses arising
   from a breach by IDDS of any of its representations and warranties in the
   merger agreement or any failure by IDDS to perform its covenants and
   obligations under the merger agreement.

   The exchange ratio for IDDS' common stock set forth above is fixed except for
   adjustment to reflect any reclassification, stock split, stock dividend or
   other similar change with respect to eXegenics or IDDS capital stock
   occurring before the effective time of the merger. As a result, except for
   any such adjustments, the number of shares of eXegenics common stock that you
   are entitled to receive in the merger will not change between now and the
   date the merger is completed, regardless of fluctuations in the market price
   of eXegenics common stock. We encourage you to obtain current quotations of
   the market price of eXegenics common stock.

   At the special meeting of eXegenics stockholders, stockholders are being
   asked to authorize the eXegenics board of directors, in its discretion, to
   effect a 1-for-[5] reverse split of the common stock of eXegenics. If
   approved by the eXegenics stockholders, the board of directors will not
   effect the reverse stock split until after the merger has closed and
   eXegenics common stock is issued to the former IDDS stockholders or the
   merger agreement has been terminated. Accordingly, the reverse stock split
   will not affect the pro rata ownership of eXegenics and IDDS stockholders
   immediately after the merger.

Q: DOES IDDS' BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE MERGER?

A: Yes. After careful consideration, IDDS' board of directors unanimously
   determined that the merger is advisable and is fair to, and in the best
   interests of, IDDS and its stockholders. IDDS' board of directors unanimously
   recommends that IDDS stockholders vote FOR the proposals to approve the
   merger agreement and related transactions.

   For a description of the factors considered by the IDDS board of directors in
   making its determination, see the section entitled "The Merger -- IDDS'
   Reasons for Entering into the Merger" on page   .

Q: WHAT VOTE IS REQUIRED BY IDDS STOCKHOLDERS TO COMPLETE THE MERGER?

A: The affirmative vote of holders of a majority of the outstanding shares of
   IDDS common stock and preferred stock, voting as a single class, is required
   to approve the merger agreement and related transactions. IDDS stockholders
   who collectively hold approximately      % of the outstanding capital stock
   of IDDS as of           , 2002, have agreed to vote all of their shares in
   favor of approval of the merger agreement and related transactions.

Q: WILL IDDS STOCKHOLDERS RECOGNIZE GAIN OR LOSS FOR U.S. FEDERAL INCOME TAX
   PURPOSES AS A RESULT OF THE MERGER?

A: The merger has been structured as a tax-free reorganization for U.S. federal
   income tax purposes. In general, IDDS stockholders will not recognize gain or
   loss for U.S. federal income tax purposes, except to the extent of cash
   received in lieu of fractional shares or pursuant to appraisal rights.
   However, IDDS stockholders are urged to consult with their own tax advisors
   to determine their particular tax consequences.

                                        9


   For a more complete description of the tax consequences of the merger, see
   the section entitled "Material U.S. Federal Income Tax Consequences of the
   Merger" on page   .

Q: WILL I HAVE DISSENTERS' OR APPRAISAL RIGHTS?

A: Under Delaware law, IDDS stockholders who do not vote in favor of the merger
   have the right to have the fair market value of their IDDS shares determined
   by the Delaware Chancery Court. In order to qualify for this right, a
   stockholder must fully comply with the provisions of Section 262 of the
   Delaware General Corporation Law. See the section entitled "Appraisal Rights
   of Dissenting IDDS Stockholders" on page   and Annex C for a description of
   those procedures. eXegenics stockholders do not have appraisal rights on any
   of the proposals being submitted to eXegenics stockholders at the special
   meeting.

Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?

A: We are working to complete the merger as quickly as possible. We currently
   expect to complete the merger promptly after receipt of approval from both
   eXegenics' and IDDS' stockholders.

   For a description of the conditions precedent to completion of the merger,
   see the section entitled "The Merger Agreement -- Conditions to Closing" on
   page   .

Q: WHAT DO I NEED TO DO NOW?

A: We urge you to carefully read and consider the information contained in this
   joint proxy statement/ prospectus, including the exhibits and annexes, and to
   consider how the merger will affect you as a stockholder. You are also
   encouraged to review the documents referenced under the section entitled
   "Where You Can Find More Information" on page   and to obtain current
   quotations of the market price of eXegenics common stock. You should then
   vote as soon as possible in accordance with the procedures provided in this
   joint proxy statement/prospectus and on the enclosed proxy card.

Q: HOW DO I VOTE?

A: Please complete and sign your proxy card and return it in the enclosed
   envelope as soon as possible so that your shares may be represented at your
   special meeting. eXegenics stockholders may also vote their shares by calling
   (866) 206-4936 at any time prior to 5:00 p.m. eastern standard time on
             , 2002. If you return your proxy card but do not include
   instructions on how to vote your proxy, eXegenics or IDDS will vote your
   shares FOR the proposals being made at your special meeting unless your
   shares are held in "street name" in a brokerage account. You may also attend
   your special meeting and vote in person instead of submitting a proxy.

Q: IF MY EXEGENICS SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
   VOTE MY SHARES FOR ME?

A: Your broker cannot vote your shares unless your broker has discretionary
   voting authority or you provide instructions on how to vote in accordance
   with the information and procedures provided to you by your broker. If your
   broker cannot vote your shares, this is considered a broker non-vote and
   those shares will not be considered present or represented with respect to a
   particular proposal at the special meeting. Broker non-votes will have the
   same effect as a vote against the proposals to amend eXegenics' certificate
   of incorporation to increase the number of shares of eXegenics common stock
   authorized for issuance, change the name of the corporation and create a
   staggered board of directors, and to authorize the board of directors, in its
   discretion, to effect a reverse split of eXegenics' issued and outstanding
   common stock. Broker non-votes will, however, have no effect on the outcome
   of the proposals to approve the issuance of shares of eXegenics common stock
   in connection with the merger or approve a new stock incentive plan or an
   employee stock purchase plan.

   For a more complete description of voting shares held in "street name," see
   the section entitled "The Special Meeting of eXegenics Stockholders" on page
     .

                                        10


Q: WHAT HAPPENS IF I DO NOT VOTE?

A: If you are an eXegenics stockholder and you do not submit a proxy card or
   vote at your special meeting, your shares will not be counted as present for
   the purpose of determining a quorum. This will have the same effect as a vote
   against the proposals to amend eXegenics' certificate of incorporation to
   increase the number of shares of eXegenics common stock authorized for
   issuance, change the name of the corporation and create a staggered board of
   directors, and to authorize the board of directors, in its discretion, to
   effect a reverse split of eXegenics' issued and outstanding common stock.
   This will not have any effect, however, on the outcome of the proposals to
   approve the issuance of shares of eXegenics common stock in connection with
   the merger and to approve the new stock incentive plan and the employee stock
   purchase plan.

   If you submit a proxy card and affirmatively elect to abstain from voting,
   your proxy will be counted as present for the purpose of determining the
   presence of a quorum but will not be voted at the special meeting. As a
   result, your abstention from voting on a particular proposal will have the
   same effect as a vote against that proposal.

   If you are an IDDS stockholder and you do not submit a proxy card or vote at
   your special meeting, your proxy will not be counted as present for the
   purpose of determining the presence of a quorum, but will have the same
   effect as a vote against approval of the merger and adoption of the merger
   agreement. If you submit a proxy and affirmatively elect to abstain from
   voting, your proxy will be counted as present for the purpose of determining
   the presence of a quorum but will not be voted at the special meeting. As a
   result, your abstention will have the same effect as a vote against approval
   of the merger and adoption of the merger agreement.

Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?

A: Yes. If you want to change your vote, send the Manager of Investor Relations
   of IDDS or the Controller of eXegenics, as applicable, a later-dated, signed
   proxy card before your special meeting or, if you hold your stock in street
   name, attend your special meeting and vote in person. You may also revoke
   your proxy by sending written notice to the relevant corporate officer before
   your special meeting. If you have instructed your broker to vote your shares,
   you must follow your broker's directions in order to change those
   instructions.

Q: SHOULD STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?

A: No. IDDS stockholders should not send in their stock certificates now. After
   the merger is completed, eXegenics will arrange for the delivery to IDDS
   stockholders of a letter of transmittal with written instructions for
   exchanging their IDDS stock certificates. eXegenics stockholders should not
   submit their stock certificates because their shares will not be exchanged in
   the merger.

Q: WHOM SHOULD I CALL WITH QUESTIONS?

A: If you have any questions about the merger or if you need additional copies
   of this joint proxy statement/ prospectus or the enclosed proxy, you should
   contact:


                                              
              EXEGENICS STOCKHOLDERS:                         IDDS STOCKHOLDERS:
       Georgeson Shareholder Communications         Innovative Drug Delivery Systems, Inc.
                  17 State Street                       787 Seventh Avenue, 48th floor
             New York, New York 10004                      New York, New York 10019
                  (866) 206-4936                                (212) 554-4328
             Attn: eXegenics Inquiries                 Attn: Manager, Investor Relations


     YOU MAY ALSO OBTAIN ADDITIONAL INFORMATION ABOUT EXEGENICS FROM DOCUMENTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY FOLLOWING THE INSTRUCTIONS
IN THE SECTION ENTITLED "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE   .

                                        11


      SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     The following selected unaudited pro forma financial information should be
read in conjunction with the section entitled "Unaudited Pro Forma Condensed
Combined Financial Statements" included elsewhere in this joint proxy
statement/prospectus. The unaudited pro forma condensed combined statement of
operations gives effect to the merger and to reflect the termination of
sponsored research funding received by eXegenics from Bristol-Myers Squibb as if
they had occurred on January 1, 2001. The IDDS and eXegenics unaudited balance
sheets as of June 30, 2002 have been combined as if the merger had occurred on
June 30, 2002. The unaudited pro forma condensed combined financial information
is presented for illustrative purposes only and is not necessarily indicative of
the financial position or operating results that would have actually occurred
had the merger been consummated and Bristol-Myers Squibb sponsored research
funding terminated at the beginning of the period indicated, nor is it
necessarily indicative of future financial position or operating results.



                                                              SIX MONTHS ENDED      YEAR ENDED
                                                               JUNE 30, 2002     DECEMBER 31, 2001
                                                              ----------------   -----------------
                                                                           
STATEMENT OF OPERATIONS DATA:
Revenues:
  Government grants.........................................      $   191            $    882
                                                                  -------            --------
     Total revenue..........................................          191                 882
                                                                  -------            --------
Operating expenses:
  Research and development..................................        3,786              11,030
  General and administrative................................        5,880               8,541
                                                                  -------            --------
       Total operating expenses.............................        9,666              19,571
                                                                  -------            --------
       Operating loss.......................................       (9,475)            (18,689)
Other income, net...........................................          416               2,081
Preferred stock dividend....................................         (169)             (3,739)
                                                                  -------            --------
Net loss attributable to common shareholders................      $(9,228)           $(20,347)
                                                                  =======            ========
Net loss per share available to common stockholders.........      $ (0.15)           $  (0.35)
                                                                  =======            ========
Supplemental net loss per share available to common
  stockholders assuming a one-for-five reverse stock
  split.....................................................      $ (0.74)           $  (1.73)
                                                                  =======            ========




                                                              JUNE 30, 2002
                                                              -------------
                                                           
BALANCE SHEET DATA:
Cash and cash equivalents...................................    $ 15,749
Working capital.............................................      23,475
Total assets................................................      26,966
Stockholders' equity........................................      23,701


                                        12


                           COMPARATIVE PER SHARE DATA

     The following table sets forth certain per share data of eXegenics and IDDS
on a historical basis, a historical book value basis, a pro forma basis, a pro
forma book value basis, a supplemental pro forma basis, and a supplemental pro
forma book value per share basis.

     The historical per share data have been computed by dividing the historical
net loss available to common shareholders for the year ended December 31, 2001
and the six months ended June 30, 2002 by the historical weighted average shares
outstanding for the respective period. The book value per share has been
computed by dividing historic stockholders' equity (deficit) as of December 31,
2001 and June 30, 2002 by the actual common shares outstanding as of December
31, 2001 and June 30, 2002, respectively. The pro forma per share data has been
computed by dividing the pro forma net loss available to common stockholders for
the year ended December 31, 2001 and the six months ended June 30, 2002 by the
pro forma weighted average shares outstanding for the respective periods. The
pro forma book value per share has been computed by dividing the pro forma
stockholders' equity as of June 30, 2002 by the pro forma common shares
outstanding as of June 30, 2002. The supplemental pro forma per share data has
been computed by adjusting the pro forma per share data for the proposed
1-for-[5] reverse stock split.

     The following selected unaudited pro forma financial information should be
read in conjunction with the section entitled "Unaudited Pro Forma Condensed
Combined Financial Statements" included elsewhere in this joint proxy
statement/prospectus. The unaudited pro forma condensed combined statement of
operations gives effect to the merger and to reflect the termination of
sponsored research funding received by eXegenics from Bristol-Myers Squibb as if
they each had occurred on January 1, 2001. The IDDS and eXegenics unaudited
balance sheets as of June 30, 2002 have been combined as if the merger had
occurred on June 30, 2002. The unaudited pro forma condensed combined financial
information is presented for illustrative purposes only and is not necessarily
indicative of the financial position or operating results that would have
actually occurred had the merger been consummated and Bristol-Myers Squibb
sponsored research funding terminated at the beginning of the period indicated,
nor is it necessarily indicative of future financial position or operating
results.



                                                               YEAR ENDED
                                                              DECEMBER 31,   SIX MONTHS ENDED
                                                                  2001        JUNE 30, 2002
                                                              ------------   ----------------
                                                                       
HISTORICAL -EXEGENICS:
Net loss available to common stockholders per share.........     $(0.57)          $(0.24)
Book value per share at the end of the period...............     $ 1.67           $ 1.44




                                                               YEAR ENDED
                                                              DECEMBER 31,   SIX MONTHS ENDED
                                                                  2001        JUNE 30, 2002
                                                              ------------   ----------------
                                                                       
HISTORICAL -IDDS:
Net loss available to common stockholders per share.........     $(1.20)          $(0.58)
Book value per share at the end of the period...............     $(1.12)          $(1.55)




                                                               YEAR ENDED
                                                              DECEMBER 31,   SIX MONTHS ENDED
                                                                  2001        JUNE 30, 2002
                                                              ------------   ----------------
                                                                       
EXEGENICS AND IDDS PRO FORMA CONDENSED COMBINED
Pro forma net loss available to common stockholders per
  share.....................................................     $(0.35)          $(0.15)
Pro forma book value per share..............................                      $ 0.38
Supplemental pro forma net loss available to common
  stockholders per share....................................     $(1.73)          $(0.74)
Supplemental pro forma book value per share.................                      $ 1.89


                                        13


                            MARKET PRICE INFORMATION

     Prior to October   , 2002, the common stock of eXegenics was listed on the
Nasdaq National Market under the symbol "EXEG." As of October   , 2002, however,
the common stock of eXegenics began trading on the Nasdaq SmallCap Market under
the same symbol. The following table sets forth the high and low sales prices
for one share of eXegenics common stock for the periods indicated:



                                                               HIGH     LOW
                                                              ------   -----
                                                                 
FISCAL YEAR 2002:
First Quarter...............................................  $ 3.50   $1.50
Second Quarter..............................................  $ 1.77   $0.75
Third Quarter...............................................  $ 0.92   $0.46
Fourth Quarter (through         , 2002).....................  $        $
FISCAL YEAR 2001:
First Quarter...............................................  $ 8.25   $2.66
Second Quarter..............................................  $ 4.85   $3.00
Third Quarter...............................................  $ 4.50   $2.22
Fourth Quarter..............................................  $ 4.09   $2.00
FISCAL YEAR 2000:
First Quarter...............................................  $19.00   $7.06
Second Quarter..............................................  $12.50   $4.12
Third Quarter...............................................  $12.69   $7.69
Fourth Quarter..............................................  $ 9.63   $6.25


     There is no established trading market for IDDS capital stock.

     According to the records of the transfer agent for eXegenics, there were
     stockholders of record of eXegenics common stock as of           . Because
many shares of eXegenics common stock are held by brokers and other institutions
on behalf of stockholders, eXegenics is unable to estimate the total number of
beneficial holders represented by these stockholders of record.

RECENT SHARE PRICE DATA

     On September 19, 2002, the last completed trading day prior to the signing
and announcement of the merger agreement, the closing sales price of eXegenics
common stock on the Nasdaq National Market was $.76 per share. See the Risk
Factors relating to our Nasdaq Listing on pages   and   , specifically with
regard to our move from the National Market to the SmallCap Market. The table
below sets forth the implied equivalent value of one share of IDDS common stock
on September 19, 2002, based on the exchange ratio:



                                                                         PER SHARE
                                                              EXCHANGE   EQUIVALENT
CLASS OR SERIES OF IDDS STOCK                                  RATIO       VALUE
-----------------------------                                 --------   ----------
                                                                   
Common Stock................................................   3.132      $2.3803


     On           , the closing sales price of eXegenics common stock on the
Nasdaq SmallCap Market was $     per share. The table below sets forth the
implied equivalent value of one share of IDDS common stock on           , based
on the exchange ratio:



                                                                         PER SHARE
                                                              EXCHANGE   EQUIVALENT
CLASS OR SERIES OF IDDS STOCK                                  RATIO       VALUE
-----------------------------                                 --------   ----------
                                                                   
Common Stock................................................   3.132      $


     The foregoing tables show only historical comparisons. These comparisons
may not provide meaningful information to you in determining whether to vote in
favor of approval of the proposals to be

                                        14


considered at the special meetings. Because the exchange ratio is fixed, the
exchange ratio will not be adjusted to compensate IDDS stockholders for
decreases in the market price of eXegenics common stock that could occur before
the merger becomes effective. In the event the market price of eXegenics common
stock decreases or increases prior to the consummation of the merger, the value
of the eXegenics common stock to be received in the merger in exchange for IDDS
common stock would correspondingly decrease or increase. IDDS stockholders are
urged to obtain current market quotations for eXegenics common stock and to
review carefully the other information contained in this joint proxy
statement/prospectus. No assurance can be given as to the market prices of
eXegenics common stock at any time before the consummation of the merger or at
any time after consummation of the merger.

DIVIDEND POLICY

     eXegenics has never declared or paid cash dividends on its common stock and
does not anticipate paying cash dividends on its common stock in the foreseeable
future. eXegenics presently expects that it will retain all future earnings, if
any, for use in its operations and the expansion of its business.

     To date, IDDS has not declared or paid cash dividends on its common stock
and does not intend paying cash dividends in the foreseeable future. IDDS
presently anticipates that it will retain all future earnings, if any, for use
in its operations and the expansion of its business.

     The merger agreement prohibits both eXegenics and IDDS from declaring or
paying a dividend on its common stock prior to the closing of the merger.

                                        15


                                  RISK FACTORS

     This joint proxy statement/prospectus contains forward-looking statements
that involve known and unknown risks and uncertainties. The actual results of
the combined company may differ materially from those anticipated in these
forward-looking statements. eXegenics and IDDS will operate as a combined
company in a market environment that is difficult to predict and that involves
significant risks and uncertainties, many of which will be beyond the combined
company's control. When voting on the merger, you should carefully consider the
risks described below, elsewhere in this document, and in the documents
incorporated by reference into this document. Additional risks and uncertainties
not presently known to eXegenics and IDDS, or that are not currently believed to
be important to you, if they materialize, also may adversely affect the merger
and the combined company.

RISKS RELATED TO THE MERGER

  EXEGENICS AND IDDS EXPECT TO INCUR SIGNIFICANT COSTS ASSOCIATED WITH THE
  MERGER.

     IDDS estimates that it will incur direct transaction costs of approximately
$          associated with the merger, which will be included as a part of the
total purchase cost for accounting purposes. In addition, eXegenics estimates
that it will incur direct transaction costs of approximately $          that
will be expensed as incurred. eXegenics and IDDS believe the combined company
may incur charges to operations, which they cannot currently reasonably
estimate, in the quarter in which the merger is completed or the following
quarters, to reflect costs associated with integrating the two companies. IDDS
expects to incur an in-process research and development charge in the quarter in
which the merger is completed. There can be no assurance that the combined
company will not incur additional merger charges in subsequent periods that may
have a material adverse effect on the combined company's financial position,
results of operations or liquidity.

  DIFFICULTIES ENCOUNTERED IN INTEGRATING THE OPERATIONS OF EXEGENICS AND IDDS
  MAY PREVENT THE COMPANIES FROM REALIZING BENEFITS FROM THE MERGER.

     The combined company's long-term strategic plan depends upon the successful
development and introduction of products in the prescription drug market. In
order for the combined company to succeed in this market, it must align
strategies and objectives and successfully integrate the business operations of
eXegenics and IDDS.

     The challenges involved in this integration include the following:

     - coordinating research and development operations in a rapid and efficient
       manner to ensure timely release of products to market;

     - diversion of management resources in order to facilitate the integration;

     - potential delay or disruption of one or more of eXegenics' or IDDS'
       planned research and development programs or a research and development
       program of the combined company;

     - increased difficulty of integrating operations and business cultures due
       to the presence of employees and operations in both New York and Texas;

     - ability to, and costs and delays involved in, implementing compatible
       information communication systems, common operating procedures,
       compatible financial controls and comparable human resources practices;

     - impairment of relationships with employees and consultants or strategic
       partners as a result of any integration of new personnel; and

     - retaining key alliances.

                                        16


     The failure of eXegenics and IDDS to successfully integrate their
operations would significantly harm the business of the combined company and
could prevent it from realizing the anticipated benefits of the merger.

  IDDS STOCKHOLDERS WILL RECEIVE A FIXED NUMBER OF SHARES OF EXEGENICS COMMON
  STOCK, REGARDLESS OF THE MARKET PRICE OF EXEGENICS COMMON STOCK. DECLINES IN
  THE MARKET PRICE OF EXEGENICS COMMON STOCK WILL REDUCE THE VALUE RECEIVED BY
  IDDS STOCKHOLDERS IN THE MERGER. INCREASES IN THE MARKET PRICE OF EXEGENICS
  COMMON STOCK WILL INCREASE THE VALUE PAID BY EXEGENICS AS CONSIDERATION IN THE
  MERGER.

     Pursuant to the terms of the merger agreement, the ratio of each share of
IDDS capital stock to be exchanged for eXegenics common stock has been fixed
(other than adjustments for any reclassification, stock split, stock dividend or
other similar change with respect to eXegenics' or IDDS' capital stock occurring
before the effective time of the merger) and there is no mechanism to adjust the
exchange ratio based on changes in the market price of eXegenics common stock.
As a result, there will be no adjustment for changes in the market price of
eXegenics common stock. Furthermore, neither IDDS nor eXegenics is permitted to
withdraw from the merger because of changes in the market price of eXegenics
common stock. As a result of the fixed exchange ratio, the specific dollar value
of eXegenics common stock received by IDDS stockholders upon completion of the
merger will depend on the market value of eXegenics common stock at the time of
completion of the merger.

  IT IS UNCERTAIN WHETHER WE WILL BE ABLE TO MAINTAIN OUR LISTING ON NASDAQ.

     The Nasdaq staff may determine that the proposed merger would constitute a
"reverse merger" under NASD Marketplace Rule 4330(f). If, after reviewing the
factors that the Nasdaq staff considers relevant, Nasdaq deems the transaction a
reverse merger, the combined company will be required to satisfy the
requirements for initial inclusion on either the Nasdaq National Market or the
Nasdaq SmallCap Market in order to maintain its Nasdaq listing. Currently,
eXegenics would not satisfy the minimum bid price required for initial listing
on either the Nasdaq National Market or the Nasdaq SmallCap Market, and it is
uncertain whether such requirements will be satisfied following the consummation
of the merger, even if the reverse split of our issued and outstanding common
stock, as described in the eXegenics stockholder proposals, is approved by our
stockholders and effected by our board of directors. If the combined company
does not meet these requirements upon completion of the merger, eXegenics and
IDDS anticipate that the combined company's common stock will be delisted from
Nasdaq following the completion of the merger. If the combined company's common
stock were to be delisted, trading, if any, in the common stock may then
continue to be conducted on the OTC Bulletin Board upon application by the
requisite market makers.

     The foregoing may adversely impact the combined company's stock price, as
well as its liquidity and the ability of the combined company's stockholders to
purchase and sell their shares in an orderly manner, or at all. Furthermore, a
delisting of eXegenics' shares could damage the combined company's general
business reputation and impair its ability to raise additional funds. Any of the
foregoing events could have a material adverse effect on the combined company's
business, financial condition and operating results.

     See the risk factor entitled "The liquidity of eXegenics common stock could
be adversely affected if it is delisted from Nasdaq" on p.   for a discussion of
additional risks related to possible loss of our Nasdaq listing.

  THE MARKET PRICE OF EXEGENICS' COMMON STOCK MAY DECLINE AS A RESULT OF THE
  MERGER.

     The market price of eXegenics' common stock may decline as a result of the
merger for a number of reasons, including if:

     - the integration of eXegenics and IDDS is not completed in a timely and
       efficient manner;

     - the combined company does not achieve the perceived benefits of the
       merger as rapidly or to the extent anticipated by financial or industry
       analysts;

                                        17


     - the effect of the merger on the combined company's financial results is
       not consistent with the expectations of financial or industry analysts;
       or

     - significant eXegenics or IDDS stockholders decide to dispose of their
       shares following completion of the merger.

  CERTAIN OFFICERS AND DIRECTORS OF IDDS AND EXEGENICS HAVE CONFLICTS OF
  INTEREST THAT MAY INFLUENCE THEM TO SUPPORT OR APPROVE THE MERGER.

     Some of the directors and officers of IDDS have interests in the merger
that are different from, or in addition to, your interests, including the
following:

     - eXegenics and Mark C. Rogers, M.D., IDDS' current Chief Executive
       Officer, have agreed on terms under which Dr. Rogers will continue to be
       employed by the combined company after consummation of the proposed
       merger. If the merger is consummated, Dr. Rogers will be employed as the
       Executive Chairman of the combined company; and

     - upon consummation of the merger, the stock options of those IDDS officers
       and directors who are not continuing on as officers or directors of the
       combined company will immediately vest and such individuals shall have
       the term of their original option grants in which to exercise such
       options.

     Some of the officers and directors of eXegenics have interests in the
merger that are different from, or are in addition to, your interests, including
the following:

     - eXegenics and Ronald L. Goode, Ph.D., eXegenics' current President and
       Chief Executive Officer, have agreed on terms under which Dr. Goode will
       continue to be employed by the combined company after consummation of the
       merger. If the merger is consummated, Dr. Goode will be employed as
       President and Chief Executive Officer of the combined company;

     - upon consummation of the merger, the stock options of those eXegenics
       officers and directors who are not continuing on as officers or directors
       of the combined company will immediately vest and such individuals shall
       have the term of their original option grants in which to exercise such
       options; and

     - at or prior to the effective time of the merger, eXegenics must obtain,
       and IDDS may obtain, "tail" coverage or other insurance coverage for
       their respective officers and directors who will cease their officerships
       and/or directorships as of the effective time of the merger, to continue
       for a period of up to six years after the effective time of the merger,
       if available at commercially reasonable rates.

     For the above reasons, the directors and officers of eXegenics and IDDS
could be more likely to favor the merger than if they did not hold these
interests. Dr. Rogers and Dr. Lindsay Rosenwald have entered into voting
agreements in which they have, among other things, agreed to vote in favor of
the merger. Both the eXegenics and IDDS stockholders should consider whether
these interests may have influenced these directors and officers to support or
recommend the merger.

  THE MERGER MAY RESULT IN LOSS OF KEY EMPLOYEES.

     Despite eXegenics' and IDDS' efforts to retain key employees, the combined
company might lose some key employees following the merger. Competition for
qualified technical and management employees in the drug development industry is
intense. Competitors and other companies may recruit employees prior to the
merger and during the integration process following the closing of the merger,
which has become a common practice in mergers in the drug development industry.
In addition, any real or perceived differences in the policies, career
prospects, compensation levels or cultures between IDDS and eXegenics may cause
key employees to leave. As a result, employees could leave with little or no
prior notice, which could cause delays and disruptions in the effort to
integrate the two companies and result in expenses associated with finding
replacement employees.

                                        18


  THERE MAY BE SALES OF SUBSTANTIAL AMOUNTS OF EXEGENICS COMMON STOCK AFTER THE
  MERGER, WHICH COULD CAUSE ITS STOCK PRICE TO FALL.

     A substantially large number of shares of eXegenics common stock may be
sold into the public market within short periods of time at various dates
following the closing of the merger. As a result, eXegenics' stock price could
fall. Of the approximately 47,121,963 shares of eXegenics common stock to be
issued in connection with this merger, approximately           shares will be
immediately available for resale by the former stockholders of IDDS and
          shares of eXegenics common stock will be subject to "lock-up
agreements" that restrict the timing of the resale of these shares and escrow
arrangements. Under the lock-up agreements,           shares will be released
and available for sale in the public market six months after the closing date of
the merger. Additionally, those shares subject to escrow may be released from
the escrow fund under the merger agreement and available for sale six months
from the closing date of the merger. In comparison, the average daily trading
volume of eXegenics common stock for the five-day period ending on           ,
2002, was           shares. While Rule 145 under the Securities Act may impose
some limitations on the number of shares certain IDDS stockholders may sell,
sales of a large number of newly released shares of eXegenics common stock could
occur and that could result in a sharp decline in eXegenics' stock price. In
addition, the sale of these shares could impair the combined company's ability
to raise capital through the sale of additional stock. See the sections entitled
"Restriction on Sales of eXegenics Common Stock by Affiliates of IDDS" on page
  and "IDDS Affiliate Lockup Agreements" on page   .

  FAILURE TO COMPLETE THE MERGER COULD HARM EXEGENICS' AND IDDS' BUSINESSES.

     Failure to complete the merger could harm the businesses of eXegenics and
IDDS in a number of ways. Many of the transaction costs, including accounting,
legal and certain financial advisory fees, must still be paid, without any
offsetting benefits from the merger. Customers and strategic partners may delay
or defer decisions concerning either company until the merger is completed or
abandoned. In the event that either eXegenics or IDDS elects to seek another
merger or business combination, the other party may not be able to find another
party willing to pay an equal or greater price than the price to be paid in the
merger. During the time that the merger agreement is in effect, both eXegenics
and IDDS are prohibited from soliciting, initiating, encouraging or entering
into certain transactions, such as a merger, sale of assets or other business
combination with a party other than IDDS or eXegenics, as the case may be. This
uncertainty could cause eXegenics or IDDS employees to leave their respective
employers. In addition, if the merger is not completed, the market price of
eXegenics common stock could decline, to the extent that the market price of
eXegenics common stock prior to the merger reflected a market belief that the
merger would be completed and its potential benefits would be realized.

  FAILURE TO COMPLETE THE MERGER MAY REQUIRE, UNDER SPECIFIED CIRCUMSTANCES,
  PAYMENT OF TERMINATION FEES.

     The merger is subject to stockholder approval of both eXegenics and IDDS
and other customary conditions. Neither eXegenics nor IDDS can assure its
stockholders that they will be able to satisfy their obligations under the
merger agreement and consummate the merger. If eXegenics and IDDS fail to
consummate the merger, under certain circumstances, either party may be required
to pay a break-up fee to the other party. This payment would be $2 million in
cash for eXegenics, or $2 million in cash or shares of IDDS having a value of $4
million for IDDS.

                                        19


RISKS RELATED TO EXEGENICS AND THE COMBINED COMPANY

     In the following section discussing risks facing eXegenics and the combined
company following the merger of eXegenics and IDDS, references to "we," "us,"
"our" and "ours" refers to eXegenics and its wholly owned subsidiary, IDDS,
following the merger.

  EACH OF EXEGENICS AND IDDS HAS INCURRED SIGNIFICANT LOSSES SINCE INCEPTION,
  AND EXPECT LOSSES TO CONTINUE IN THE FUTURE, WHICH MAY ADVERSELY AFFECT THE
  TRADING PRICE OF EXEGENICS COMMON STOCK.

     Since inception, each of eXegenics and IDDS has devoted significant
financial resources to the research and development of their respective products
and, as a result, have generated operating losses. As of June 30, 2002,
eXegenics had an accumulated deficit of approximately $41.8 million, and as of
June 30, 2002, IDDS had an accumulated deficit of approximately $15.4 million.
We expect to incur significant losses in the near-term as we continue to devote
significant financial resources to product development and, as a result, we
expect to continue to incur operating losses and negative cash flow from
operations for the foreseeable future. Our ability to achieve profitability will
depend on a number of factors, including:

     - the ability to realize the benefits of the merger while minimizing the
       costs of integrating both companies' business operations and products;

     - the ability to advance product candidates through the clinical
       development process;

     - the ability to successfully commercialize products once developed;

     - the ability to generate sufficient revenues and control expenses;

     - delays in the development and introduction of new products;

     - announcements or introductions of new products by our competitors;

     - the ability to partner or out-license certain technologies; and

     - the emergence of new technologies, industry standards and government
       regulations.

  OUR STOCK PRICE IS VOLATILE AND COULD DECLINE IN THE FUTURE.

     The price of eXegenics common stock has been volatile in the past and will
likely continue to fluctuate in the future. The stock market in general and the
market for shares of biotechnology and drug development companies in particular
has experienced extreme stock price fluctuations. In some cases, these
fluctuations have been unrelated to the operating performance of the affected
companies. Many companies in the biotechnology, drug-development and related
industries, including eXegenics, have experienced dramatic volatility in the
market prices of their common stock. We believe that a number of factors, both
within and outside our control, could cause the price of our common stock to
fluctuate, perhaps substantially. These factors include:

     - announcements of developments related to our business or our competitors'
       businesses;

     - delays or setbacks in our research and development programs in connection
       with our potential products;

     - fluctuations in our financial results;

     - potential sales of our common stock into the marketplace by us and/or our
       stockholders;

     - announcements of technological innovations or new and/or enhanced
       products by us or our competitors;

     - a shortfall in revenue, gross margin, earnings or other financial results
       or changes in research analysts' expectations; and

     - the limited number of shares of our common stock traded on a daily basis.

                                        20


     We cannot be certain that the market price of our common stock will not
experience significant fluctuations in the future, including fluctuations that
are material, adverse and unrelated to our performance. Information regarding
the market price of our common stock, including our historical trading range and
the last reported trading price on a recent date is set forth under the section
entitled "Market Price Information," as well as information regarding
fluctuations in the value to be received by IDDS stockholders as a result of the
merger.

  THE LIQUIDITY OF EXEGENICS COMMON STOCK COULD BE ADVERSELY AFFECTED BY CHANGES
  IN ITS NASDAQ LISTING.

     eXegenics common stock is currently listed on the Nasdaq SmallCap Market.
On July 25, 2002, eXegenics received notification from Nasdaq that its common
stock failed to comply with Nasdaq's minimum bid price requirement of $1.00 per
share for continued listing on the Nasdaq National Market. Pursuant to the
notification from Nasdaq, eXegenics common stock was to be delisted from the
Nasdaq National Market on October 23, 2002. eXegenics, however, successfully
applied to Nasdaq to have its listing transferred from the Nasdaq National
Market to the Nasdaq SmallCap Market. eXegenics common stock began trading on
the Nasdaq SmallCap Market on October   , 2003. It is anticipated that, subject
to stockholder approval, we will effect a reverse split of our issued and
outstanding common stock that will enable eXegenics to regain compliance with
Nasdaq's minimum bid price requirement. eXegenics now has until January 21,
2003, to regain compliance with Nasdaq's minimum bid price requirement. In
addition, assuming eXegenics is in compliance with the core initial listing
criteria for the Nasdaq SmallCap Market on January 21, 2003, eXegenics will be
granted an additional 180 calendar day grace period to regain compliance with
Nasdaq's minimum bid price requirement.

     Any of the foregoing factors may adversely impact eXegenics' stock price,
as well as its liquidity and the ability of eXegenics' stockholders to purchase
and sell their shares in an orderly manner, or at all. Furthermore, a delisting
of eXegenics' shares could damage eXegenics' general business reputation and
impair its ability to raise additional funds. Any of the foregoing events could
have a material adverse effect on eXegenics' business, financial condition and
operating results.

     See the risk factor entitled "It is uncertain whether we will be able to
maintain our listing on Nasdaq" on p.   for a discussion of additional risks
related to our Nasdaq listing.

  IF THE EXEGENICS COMMON STOCK IS DELISTED FROM NASDAQ, THE EXEGENICS COMMON
  STOCK COULD BECOME SUBJECT TO "PENNY STOCK" RULES AND ADDITIONAL REGULATIONS.

     Regulations of the SEC define "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions, including for an issuer that has been in continuous operation for at
least three years and has net tangible assets in excess of $2 million. For any
transaction involving a penny stock, unless exempt, the penny stock rules
require delivery, prior to any transaction involving penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market. The
SEC also requires disclosure about commissions payable to both the broker/dealer
and its registered representative and information regarding current quotations
of the securities. Finally, the SEC requires that monthly statements be sent
disclosing recent price information for the penny stock and information on the
limited market in penny stocks. These requirements could severely limit the
market liquidity of eXegenics common stock and the ability to sell the eXegenics
common stock in the secondary market. We anticipate that the combined company
will have net tangible assets in excess of $2 million upon completion of the
merger.

     If Nasdaq delists eXegenics common stock, it could become subject to Rule
15g-9 under the Exchange Act, which imposes additional sales practice
requirements on broker/dealers that sell such securities to persons other than
established customers and "accredited investors" (generally, an individual with
a net worth in excess of $1,000,000 or an annual income exceeding $200,000, or
$300,000 together with his or her spouse's income). For transactions covered by
this rule, a broker/dealer must make a special suitability determination for the
purchaser and receive the purchaser's written consent to the

                                        21


transaction prior to the sale. Consequently, the rule may adversely affect the
ability of the holders of eXegenics common stock to sell their shares in the
secondary market.

  WE WILL HAVE NO PRODUCT REVENUES IN THE NEAR TERM AND MAY NEED TO RAISE
  ADDITIONAL CAPITAL TO OPERATE OUR BUSINESS.

     The combined company will be focused on clinical product development.
Until, and if, we receive approval from the FDA and other regulatory authorities
for our product candidates, we cannot sell our drugs and will not have product
revenues. Therefore, for the foreseeable future, we will have to fund all of our
operations and capital expenditures from cash on hand. We assume that upon
consummation of the merger we will have cash on hand in the amount of
approximately $17.0 million, which will be sufficient to meet our working
capital and capital expenditure needs through at least December 31, 2003.
Thereafter, we will require substantial funds to conduct research and
development activities, preclinical studies, clinical trials and other
activities prior to the commercialization of any potential products. We
anticipate that such funds will be obtained from external sources and intend to
seek additional equity, debt or lease financing or collaborative agreements with
corporate partners to fund future operations. However, our actual capital
requirements will depend on many factors. If we experience unanticipated cash
requirements, we may need to seek additional sources of funding, which may not
be available on favorable terms, if at all. If we do not succeed in raising
additional funds on acceptable terms, we may be unable to complete planned
preclinical studies and clinical trials or obtain approval of our product
candidates from the FDA and other regulatory authorities. In addition, we could
be forced to discontinue product development, reduce or forego sales and
marketing efforts and attractive business opportunities or discontinue
operations.

  SINCE THE DEVELOPMENT OF OUR CLINICAL PRODUCT CANDIDATES WILL TAKE SEVERAL
  MORE YEARS, WE CANNOT BE CERTAIN THAT THESE PRODUCTS WILL EVER BE SUCCESSFULLY
  MARKETED OR MANUFACTURED.

     All of eXegenics' and IDDS' product candidates under development are in the
research or clinical trial stage. Accordingly, revenues from the sale of
products of the combined company will not be realized for several years, if at
all. The medical, regulatory and commercial environment for pharmaceutical
products changes quickly and often in ways that the combined company may be
unable to accurately predict. We will develop our products based upon current
policy and the current marketplace for pharmaceutical products, as well as our
prediction of future policy and the future marketplace for such products. Our
business will be subject to substantial risks because these policies and markets
change quickly and unpredictably and in ways that could have a material adverse
impact on our ability to obtain regulatory approval and commercial acceptance of
our product candidates. We cannot be certain that any of our product candidates
will be approved as safe and effective or that we will obtain regulatory
approvals. In addition, any product that we develop may not be economical to
manufacture on a commercial scale. Even if we develop a product that becomes
available for commercial sale, we cannot be certain that consumers will accept
the product.

     In addition, even after our product candidates are marketed, the products
and our manufacturers are subject to continual review by applicable regulatory
authorities. Later discovery of previously unknown problems with our product
candidates, our own manufacturing or the manufacture by third-party
manufacturers may result in restrictions on our products or the manufacture of
our products, including withdrawal of the product from the market.

  IF WE FAIL TO OBTAIN OR MAINTAIN NECESSARY REGULATORY APPROVALS FOR OUR
  PRODUCT CANDIDATES, OR IF APPROVALS ARE DELAYED OR WITHDRAWN, WE WILL BE
  UNABLE TO COMMERCIALIZE OUR PRODUCT CANDIDATES.

     Government regulation in the U.S. and other countries has a significant
impact on our business and affects the research and development, manufacture and
marketing of our products. In the U.S., the FDA has broad authority to regulate
the distribution, manufacture and sale of drugs. Foreign sales of drugs are
subject to foreign governmental regulation and restrictions, which vary from
country to country. In order to obtain FDA approval of any of our product
candidates, we must submit to the FDA a new drug application demonstrating that
the product candidate is safe for humans and effective for its intended use.
                                        22


This demonstration requires significant research and animal tests, which are
referred to as preclinical studies, as well as human tests, which are referred
to as clinical trials. The process of obtaining FDA and other regulatory
clearances and approvals is lengthy and expensive. We may not be able to obtain
or maintain necessary approvals for clinical trials or for the manufacturing or
marketing of our products. Failure to comply with applicable regulatory
approvals can, among other things, result in fines, suspension or withdrawal of
regulatory approvals, product recalls, operating restrictions, and criminal
prosecution. In addition, governmental regulations may be established which
could prevent, delay, modify or rescind regulatory approval of our products. Any
of these actions by the FDA, or any changes in FDA regulations, would adversely
impact our business and financial condition.

  RESULTS OF CLINICAL TRIALS AND APPROVAL OF PRODUCTS ARE UNCERTAIN, AND WE MAY
  BE DELAYED IN OR PROHIBITED FROM SELLING OUR PRODUCTS.

     The combined company will have a number of potential product candidates
that have reached the clinical development stage. These potential products
include IDDS' intranasal ketamine, intranasal morphine, and intravenous
diclofenac, which are still in various stages of clinical development. In
addition, the combined company will have a preclinical product candidate,
intranasal fentanyl, and several discovery research programs. We will be
required to demonstrate the safety and effectiveness of these and any other
product candidates that we develop in each intended use through extensive
preclinical studies and clinical trials in order to obtain regulatory approval.
The results from preclinical and early clinical studies do not always accurately
predict results in later, large-scale clinical trials for several reasons,
including:

     - preliminary results may not be indicative of effectiveness;

     - further clinical trials may not achieve the desired result; and

     - further clinical trials may reveal unduly harmful side effects or may
       show the product candidates to be less effective than other drugs or
       delivery systems for the desired indications.

     Even successfully completed large-scale clinical trials may not result in
marketable products for several reasons, including:

     - the potential product candidates are not demonstrated to be safe and
       effective;

     - regulatory authorities disagree with the results of the combined
       company's studies and trials;

     - required regulatory approvals are not obtained or a lack of efficacy or
       unacceptable toxicity is found during preclinical studies or clinical
       trials;

     - the inability to develop manufacturing methods that are efficient,
       cost-effective and capable of meeting stringent regulatory standards;

     - the product candidates do not obtain market acceptance; and

     - existence of proprietary rights of third parties.

     A number of companies in the biotechnology and drug development industry
have suffered significant setbacks in advanced clinical trials despite promising
results in earlier trials. In the end, we may be unable to develop marketable
products.

                                        23


  EVEN IF WE OBTAIN FDA APPROVAL TO MARKET OUR PRODUCT CANDIDATES, THEY MAY NOT
  BE ACCEPTED BY PHYSICIANS AND PATIENTS.

     Our product candidates will not become commercially accepted unless
physicians and patients determine that our drugs are clinically useful,
cost-effective and safe. Acceptance and use of our drugs will also depend upon a
number of factors including:

     - the cost of our drugs as compared to competing products;

     - the availability of adequate coverage and reimbursement levels from
       government health administration authorities, private or other health
       insurers and other organizations; and

     - the effectiveness of our marketing and distribution efforts.

     Because we expect sales of our current product candidates, if approved, to
generate substantially all of our product revenues for the foreseeable future,
the failure of any of these drugs to find market acceptance would harm our
business and could require us to seek additional financing.

  OUR PRECLINICAL STUDIES AND CLINICAL TRIALS DEPEND UPON THIRD-PARTY
  RESEARCHERS WHO ARE OUTSIDE OUR CONTROL.

     We will depend upon third parties, such as independent investigators,
collaborators and medical institutions, to conduct our preclinical studies and
clinical trials under agreements with the combined company. These third parties
are not our employees and we cannot control the amount of time or resources that
such third parties devote to our programs. These investigators may not assign as
high a priority to our programs or pursue them as diligently as we would if we
were undertaking such programs ourselves. If our third party researchers fail to
devote sufficient time and resources to our preclinical studies and clinical
trials, or if their performance is substandard, the approval of our FDA
applications, if any, and our introduction of new drugs, if any, will be
delayed. These collaborators may also have relationships with other commercial
entities, some of which may compete with us. If our collaborators assist our
competitors at our expense, our competitive position would be harmed.

  DELAYS IN PATIENT ENROLLMENT FOR CLINICAL TRIALS COULD INCREASE COSTS AND
  DELAY REGULATORY APPROVALS.

     The rate of completion of our clinical trials will depend on the rate of
patient enrollment. There may be substantial competition to enroll patients in
clinical trials for our products in development. This competition has delayed
the clinical trials of other biotechnology and drug development companies in the
past. In addition, recent improvements in existing drug therapy, particularly
for pain management drugs, may make it more difficult for us to enroll patients
in our clinical trials as the patient population may choose to enroll in
clinical trials sponsored by other companies or choose alternative therapies.
Delays in planned patient enrollment can result in increased development costs
and delays in regulatory approvals.

  WE RELY EXCLUSIVELY ON A LIMITED NUMBER OF MANUFACTURERS TO SUPPLY RAW
  MATERIALS AND FINISHED GOODS FOR OUR PRODUCT CANDIDATES AND THE LOSS OF THESE
  PARTIES COULD HARM OUR BUSINESS.

     We currently have contracted two manufacturing firms to formulate and
provide intranasal morphine, intranasal ketamine and intravenous diclofenac for
our clinical trials. If any of our product candidates receives FDA approval, we
expect to rely on one or more third-party contractors to supply our drugs. If
our current or future third-party suppliers cease to supply the drugs in the
quantity and quality we need to manufacture our product candidates or if they
are unable to comply with good manufacturing practice and other government
regulations, the qualification of additional or replacement suppliers could be a
lengthy process and there may not be adequate alternatives to meet our needs,
which would negatively affect our business. We may not be able to obtain the
necessary drugs used in our products in the future on a timely basis, if at all.

                                        24


  IF OUR SOLE SUPPLIER OF CHITOSAN FAILS TO PROVIDE US SUFFICIENT QUANTITIES, WE
  MAY NOT BE ABLE TO OBTAIN AN ALTERNATIVE SUPPLY ON A TIMELY OR ACCEPTABLE
  BASIS.

     We currently rely on a sole source for our supply of chitosan, a principal
component of our intranasal morphine product candidate. There are relatively few
alternative sources of supply for chitosan and we may not be able to obtain a
sufficient supply of chitosan from our current supplier or other suppliers, or
at all. We may also not be able to find alternative suppliers in a timely manner
that would provide chitosan at acceptable quantities and prices. Any
interruption in the supply of chitosan would disrupt our ability to manufacture
intranasal morphine and could have a material adverse effect on our business.

  INTERNATIONAL COMMERCIALIZATION OF OUR PRODUCT CANDIDATES FACES SIGNIFICANT
  OBSTACLES.

     In the future, we may plan to commercialize some of our products
internationally through collaborative relationships with foreign partners. We
have limited foreign regulatory, clinical and commercial resources. Future
partners are critical to our international success. We may not be able to enter
into collaboration agreements with appropriate partners for important foreign
markets on acceptable terms, or at all. Future collaborations with foreign
partners may not be effective or profitable for us.

     We will need to obtain approvals from the appropriate regulatory, pricing
and reimbursement authorities to market any of our proposed products
internationally, and we may be unable to obtain foreign regulatory approvals.
Pursuing foreign regulatory approvals will be time-consuming and expensive. The
regulations can vary among countries and foreign regulatory authorities may
require different or additional clinical trials than we will conduct to obtain
FDA approval for our product candidates. In addition, adverse clinical trial
results, such as death or injury due to side effects, could jeopardize not only
foreign regulatory approval, but may also lead to marketing restrictions in the
U.S. Our product candidates may also face foreign regulatory requirements
applicable to controlled substances.

  WE HAVE NO CURRENT INTERNAL CAPABILITIES TO SELL, MARKET OR DISTRIBUTE
  PHARMACEUTICAL PRODUCTS.

     We currently have no sales, marketing or distribution capabilities. In
order to commercialize our products, if any are approved, we intend to develop
internal sales, marketing and distribution capabilities to target particular
markets for our products, as well as make arrangements with third parties to
perform these services for us with respect to other markets for our products. We
may not be able to establish these capabilities internally or hire marketing and
sales personnel with appropriate expertise to market and sell our products, if
approved. In addition, even if we are able to identify one or more acceptable
collaborators to perform these services for us, we may not be able to enter into
any collaborative arrangements on favorable terms, or at all.

     In addition, our existing product candidates, and the products we may
develop are likely to compete, with products of other companies that currently
have extensive and well-funded marketing and sales operations. Because these
companies are capable of devoting significantly greater resources to their
marketing efforts, our marketing or sales efforts may not compete successfully
against the efforts of these other companies.

  WE MAY UNDERESTIMATE DEVELOPMENT COSTS, ADVERSELY AFFECTING OUR BUSINESS.

     Due to uncertainties that are part of the development process, we may
underestimate the costs associated with the development of our potential
products. Delays or unanticipated increases in costs of development or failure
to obtain regulatory approval or market acceptance for the combined company's
products could adversely affect our operating results. In addition, the
combination of eXegenics' and IDDS' research and development organizations may
result in greater competition for resources and elimination of development
programs that might otherwise be successfully completed.

                                        25


  WE MAY DEPEND ON RELATIONSHIPS WITH OTHER COMPANIES FOR CLINICAL DEVELOPMENT,
  SALES AND MARKETING PERFORMANCE AND REVENUES. FAILURE TO MAINTAIN OR CONTINUE
  TO DEVELOP THESE RELATIONSHIPS WOULD NEGATIVELY IMPACT OUR BUSINESS.

     We may rely on a number of significant collaborative relationships with
other biotechnology and pharmaceutical companies for our clinical development
and/or sales and marketing performance. Reliance on collaborative relationships
poses a number of risks, including:

     - we will not be able to control whether our corporate partners will devote
       sufficient resources to our programs or products;

     - disputes may arise in the future with respect to the ownership of rights
       to technology developed with corporate partners;

     - disagreements with corporate partners could lead to delays in or
       termination of the research, development or commercialization of our
       product candidates, or result in litigation or arbitration;

     - contracts with corporate partners may fail to provide significant
       protection or may fail to be effectively enforced if one of these
       partners fails to perform;

     - corporate partners have considerable discretion in electing whether to
       pursue the development of any additional products and may pursue
       alternative technologies or products either on their own or in
       collaboration with the combined company's competitors; and

     - corporate partners with marketing rights may choose to devote fewer
       resources to the marketing of our products than they do to products of
       their own development.

     Given these risks, there is a great deal of uncertainty regarding the
success of our future collaborative efforts. If these efforts fail, our product
development or commercialization of new products could be delayed or revenue
from existing products could decline.

  WE WILL BE FACED WITH INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE,
  WHICH MAY MAKE IT MORE DIFFICULT FOR US TO ACHIEVE SIGNIFICANT MARKET
  PENETRATION.

     Intense competition and rapid technological advances characterize the
market for our product candidates. If our product candidates receive FDA
approval, they will compete with a number of existing and future pain management
drugs and therapies developed, manufactured and marketed by others. If our
competitors' existing products or new products are more effective than or
considered superior to our future products, the commercial opportunity for our
product candidates will be reduced or eliminated. Existing or future competing
products may provide greater therapeutic convenience or clinical or other
benefits for a specific indication than our products, or may offer comparable
performance at a lower cost. We face competition from fully integrated
pharmaceutical companies and smaller companies that are collaborating with
larger pharmaceutical companies, academic institutions, government agencies and
other public and private research organizations. If we are successful in
penetrating the market for pain treatment with our product candidates, other
companies may be attracted to our market. Many of our competitors have opioid or
non-steroidal anti-inflammatory drugs, or NSAID, pain management drugs already
approved or in development. In addition, many of these competitors, either alone
or together with their collaborative partners, are larger than eXegenics and
IDDS combined and have substantially greater financial, technical, research,
marketing, sales, distribution and other resources. Our competitors may develop
or market products that are more effective or commercially attractive than any
that we are developing or marketing. Our competitors may obtain regulatory
approvals, and introduce and commercialize products before we do. These
developments could have a significant negative effect on our financial
condition. Even if we are able to compete successfully, we may not be able to do
so in a profitable manner.

                                        26


  WE MAY NOT BE ABLE TO OBTAIN EFFECTIVE PATENTS TO PROTECT OUR TECHNOLOGIES
  FROM USE BY COMPETITORS, AND PATENTS OF OTHER COMPANIES COULD REQUIRE US TO
  STOP USING OR PAY FOR THE USE OF REQUIRED TECHNOLOGY.

     Our success will depend to a significant degree on our ability to:

     - obtain patents and licenses to patent rights;

     - preserve trade secrets; and

     - operate without infringing on the proprietary rights of others.

     The combined company will have licenses to certain patent rights, including
rights under U.S. patents and patent applications and under foreign patents and
patent applications, related to certain product candidates. We plan to file
patent applications in the U.S. and abroad relating to our technologies. There
is a risk, however, that patents may not issue from any of these applications or
that the patents will not be sufficient to protect our technology. Patent
applications in the U.S. are confidential until a patent is granted. As a
result, we would not know if our competitors filed patent applications for
technology covered by our pending applications. We could also not be certain
that we were the first to reduce to practice the technology that is the subject
of our patent applications. Competitors may have filed patent applications or
received patents and may obtain additional patents and proprietary rights that
block or compete with our patents.

     We may obtain patents for certain products many years before marketing
approval is obtained for those products. Because patents have a limited life,
which may begin to run prior to commercial sale, the commercial value of the
product may be limited.

     Our competitors may file patent applications covering our technology. If
so, we may have to participate in interference proceedings or litigation to
determine the right to a patent. Litigation and interference proceedings are
expensive even if successful.

     Our success depends in large part on our ability to operate without
infringing upon the patents or other proprietary rights of third parties. If we
infringe patents of others, we may be prevented from commercializing products or
may be required to obtain licenses from these third parties. We cannot be
certain that we would be able to obtain alternative technologies or any required
license. Even if we were to obtain such technologies or licenses, we cannot be
certain that the terms would be reasonable. If we fail to obtain such licenses
or alternative technologies, we may be unable to develop some or all of our
products.

     In addition, we will use significant unpatented proprietary technology and
rely on unpatented trade secrets and proprietary know-how to protect certain
aspects of our production and other technologies. Our trade secrets may become
known or independently discovered by our competitors.

  IF WE FAIL TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS
  OR SECURE RIGHTS TO PATENTS OF OTHERS, WE MAY BE UNABLE TO COMPETE
  EFFECTIVELY.

     Our success, competitive position and future revenues will depend in part
on our ability and the abilities of our third-party licensors to obtain and
maintain patent protection for our products, methods, processes and other
technologies and to preserve our trade secrets.

     To date, we have licenses to certain patent rights, including rights under
U.S. patents and patent applications and under foreign patents and patent
applications, related to our product candidates. We anticipate filing additional
patent applications both in the U.S. and in other countries, as appropriate. The
procedures for obtaining an issued patent in the U.S. and in most foreign
countries are complex. These procedures require an analysis of the scientific
technology related to the invention and many legal issues. Accordingly, we
expect that the examination of our patent applications will be complex and time
consuming. We do not know when, or if, we will obtain additional issued patents
for our technologies.

                                        27


     We cannot predict whether or not:

     - any additional patents will issue and the degree and range of protection
       they will afford us against competitors;

     - others will obtain patents claiming aspects similar to those covered by
       our patents and patent applications;

     - we will need to initiate litigation or administrative proceedings
       regarding our patents, which may be costly whether we win or lose; or

     - third parties will find ways to challenge, invalidate or otherwise
       circumvent our patent rights that we currently hold or license.

     The degree and range of protection afforded by any of our licensed patents,
as with all patents, is defined by the breadth of the claims of the patent. As
the components of our product candidates are commercially available to third
parties, it is possible that competitors may design formulations, propose
dosages, or develop methods or routes of administration with respect to these
components that would be outside the scope of the claims of one or more, or of
all, of our licensed patents. This would enable their products to effectively
compete with our product candidates.

     We may have to institute costly legal action to protect our intellectual
property rights. We may not be able to afford the costs of enforcing our
intellectual property rights. Consequently, we do not know how much, if any,
protection our patents will provide. A third party might request a court to rule
that our patents are invalid or unenforceable. In such a case, even if the
validity and enforceability of our patents were upheld, a court might hold that
the third party's actions do not infringe our patent.

     The laws of some countries may not protect our intellectual property rights
to the same extent as U.S. laws. For example, methods of treating humans are not
patentable subject matter in many countries outside of the U.S. It may be
necessary or useful for us to participate in proceedings to determine the
validity of our foreign patents or those of our competitors, which could result
in substantial cost and divert our efforts and attention from other aspects of
our business. These and other issues may limit the patent protection we will be
able to secure outside of the U.S.

     Our success also depends upon the skills, knowledge and experience of our
scientific and technical personnel, our consultants and advisors as well as our
licensors and contractors. To help protect our proprietary know-how and our
inventions, we also rely on trade secret protection and confidentiality
agreements, in addition to patents. However, trade secrets are difficult to
protect. To this end, we require all of our employees, consultants, advisors and
contractors to enter into agreements that prohibit the disclosure of our trade
secrets and other confidential information and, where applicable, require
disclosure and assignment to us of the ideas, developments, discoveries and
inventions important to our business. These agreements may not provide adequate
protection for our trade secrets, know-how or other proprietary information in
the event of any unauthorized use or disclosure or the lawful development by
others of such information. If any of our trade secrets, know-how or other
proprietary information is disclosed, or if third parties independently discover
our trade secrets or proprietary information, the value of our trade secrets,
know-how and other proprietary rights would be significantly impaired and our
business and competitive position would suffer.

     Technology licensed to us by others, or in-licensed technology, is
important to our business. We may not control the patent prosecution,
maintenance or enforcement of some of our in-licensed technology. Accordingly,
we may be unable to exercise the same degree of control over this intellectual
property as we would over our internally developed technologies. Moreover, our
rights to in-licensed technology could be terminated under the terms of our
license agreements, including upon a default by us. If such a default were to
occur under any of these agreements, we could lose our rights to the in-licensed
technologies or other products that are the subject of that agreement, including
our rights to continue to develop that technology. The loss of these
technologies, products or rights could harm our business.

                                        28


  A DISPUTE REGARDING THE INFRINGEMENT OR MISAPPROPRIATION OF OUR PROPRIETARY
  RIGHTS OR THE PROPRIETARY RIGHTS OF OTHERS COULD BE COSTLY AND RESULT IN
  DELAYS IN OUR RESEARCH AND DEVELOPMENT ACTIVITIES.

     Our success, competitive position and future revenues will also depend in
part on our ability to operate without infringing on or misappropriating the
proprietary rights of others. Since our product candidates contain components
that are well known and that have been in use by other companies, our product
candidates could infringe the proprietary rights of third parties. We are aware
of one third party who could allege that certain uses of our product candidates
infringe its proprietary rights. We do not intend to market our products for
such uses, nor are we aware of any such uses currently in practice, but we may
not be able to avoid claims or liability with respect thereto because we cannot
prevent others from using our products for such uses in the future.

     Many of our employees and consultants were, and many of our consultants may
currently be, parties to confidentiality agreements with other companies. While
our confidentiality agreements with these employees and consultants require that
they do not bring to us, or use without proper authorization, any third party's
proprietary technology, if they violate their agreements, we could suffer claims
or liabilities.

     If our products, methods, processes and other technologies infringe the
proprietary rights of other parties, we could incur substantial costs and we may
have to:

     - obtain licenses, which may not be available on commercially reasonable
       terms, if at all;

     - redesign our products or processes to avoid infringement;

     - stop using the subject matter claimed in the patents held by others;

     - pay damages; or

     - defend litigation or administrative proceedings, which may be costly,
       whether we win or lose, and which could result in a substantial diversion
       of our valuable management resources.

  OUR BUSINESS MAY GIVE RISE TO PRODUCT LIABILITY CLAIMS NOT COVERED BY
  INSURANCE OR INDEMNITY AGREEMENTS.

     The testing of products in development, involves substantial risk of
product liability claims. These claims may be made directly by consumers,
healthcare providers, pharmaceutical companies or others. Although we will
maintain product liability insurance, a single product liability claim could
exceed the coverage limits, and multiple claims are possible. If that happens,
the insurance coverage we plan on procuring may not be adequate. A successful
product liability claim in excess of our coverage could require us to pay
substantial amounts. This could adversely affect our results of operations.
Moreover, the amount and scope of any coverage may be inadequate to protect us
in the event of a successful product liability claim. In the future such
insurance may not be renewed at an acceptable cost or at all. If liability
insurance becomes unobtainable, our ability to clinically test and market our
products could be significantly impaired.

     Additionally, we will be required by governmental regulations to test our
products even after they have been sold and used by patients. As a result of
such tests, we may be required to, or may determine that, we should recall
products already in the market. Subsequent testing and product recalls may
increase our potential exposure to product liability claims.

  WE MAY INCUR SUBSTANTIAL LIABILITIES AND MAY BE REQUIRED TO LIMIT
  COMMERCIALIZATION OF OUR PRODUCTS IN RESPONSE TO PRODUCT LIABILITY LAWSUITS.

     The testing and marketing of medical products entail an inherent risk of
product liability. Although side effects from our clinical trials thus far have
been limited to symptoms known to be associated with these medications, such as
dysphoria, which is a feeling of malaise, and nausea, we may be held liable if
any more serious adverse reactions from the use of our product candidates
occurs. Our product candidates involve a new method of delivery for potent drugs
that require greater precautions to prevent unintended use, especially since
they are designed for patients' self-use rather than being administered by
medical

                                        29


professionals. For example, the FDA may require us to develop a comprehensive
risk management program for our product candidates to reduce the risk of
improper patient selection and abuse. The failure of these measures could result
in harmful side effects or death. As a result, consumers, regulatory agencies,
pharmaceutical companies or others might make claims against us. If we cannot
successfully defend ourselves against product liability claims, we may incur
substantial liabilities or be required to limit commercialization of our product
candidates. Our inability to obtain sufficient product liability insurance at an
acceptable cost to protect against potential product liability claims could
prevent or inhibit the commercialization of pharmaceutical products we develop,
alone or with corporate collaborators. We currently carry clinical trial
insurance but do not carry product liability insurance. We, or any corporate
collaborators, may not be able to obtain insurance at a reasonable cost, if at
all. Even if our agreements with any future corporate collaborators entitle us
to indemnification against losses, such indemnification may not be available or
adequate if any claim arises.

  WE MAY BE EXPOSED TO LIABILITY CLAIMS ASSOCIATED WITH THE USE OF HAZARDOUS
  MATERIALS AND CHEMICALS.

     Our research and development activities will involve the controlled use of
hazardous materials and chemicals. Although we will adopt safety procedures for
using, storing, handling and disposing of these materials that we believe will
comply with federal, state and local laws and regulations, we cannot completely
eliminate the risk of accidental injury or contamination from these materials.
In the event of such an accident, we could be held liable for any resulting
damages and any liability could materially adversely affect our business,
financial condition and results of operations. In addition, the federal, state
and local laws and regulations governing the use, manufacture, storage, handling
and disposal of hazardous or radioactive materials and waste products may
require us to incur substantial compliance costs that could materially adversely
affect our business and financial condition.

  SOME OF THE PRODUCT CANDIDATES OF THE COMBINED COMPANY WILL CONTAIN CONTROLLED
  SUBSTANCES, THE SUPPLY OF WHICH MAY BE LIMITED BY U.S. GOVERNMENT POLICY AND
  THE USE OF WHICH MAY GENERATE PUBLIC CONTROVERSY.

     The active ingredients in some of IDDS' current product candidates,
including morphine, ketamine and fentanyl, are listed by the U.S. Drug
Enforcement Agency, or DEA, as Schedule II or III substances under the
Controlled Substances Act of 1970. The DEA regulates chemical compounds as
Schedule I, II, III, IV or V substances, with Schedule I substances considered
to present the highest risk of substance abuse and Schedule V substances the
lowest risk. Our product candidates are subject to DEA regulations relating to
manufacturing, storage, distribution and physician prescription procedures. For
example, all regular Schedule II drug prescriptions must be signed by a
physician and may not be refilled. Furthermore, the amount of Schedule II
substances that we can obtain for clinical trials and commercial distribution is
limited by the DEA and our quota may not be sufficient to complete clinical
trials or meet commercial demand, if any.

     Products containing controlled substances may generate public controversy.
Opponents of these products may seek restrictions on marketing and withdrawal of
any regulatory approvals. In addition, these opponents may seek to generate
negative publicity in an effort to persuade the medical community to reject
these products. Political pressures and adverse publicity could lead to delays
in, and increased expenses for, and limit or restrict the introduction and
marketing of the combined company's product candidates. The FDA may require the
combined company to develop a comprehensive risk management program to reduce
the inappropriate use of our products and product candidates, including the
manner in which they are marketed and sold, so as to reduce the risk of improper
patient selection and diversion or abuse of the product. Developing such a
program in consultation with the FDA may be a time-consuming process and could
delay approval of any of our product candidates. Such a program or delays of any
approval from the FDA could limit market acceptance of the product.

                                        30


  IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE EXEGENICS, EVEN IF DOING SO
  WOULD BE BENEFICIAL TO ITS STOCKHOLDERS.

     Provisions in eXegenics' amended certificate of incorporation and amended
and restated bylaws may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or changes in management, including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices. eXegenics' board of directors has the
authority to issue up to 10 million shares of preferred stock and to determine
the price, rights, preferences and privileges of those shares without any
further vote or action by its stockholders. The rights of the holders of common
stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. While eXegenics
has no present intention to issue shares of preferred stock, the issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of its
outstanding voting stock. Further, eXegenics is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibits it from engaging in a business combination with an interested
stockholder for three years after the date of the transaction pursuant to which
the person became an interested stockholder, unless the business combination is
approved in a prescribed manner. The application of Section 203 could have the
effect of delaying or preventing a change of control. In addition, in connection
with the proxy statement being filed for the merger, eXegenics is seeking
stockholder approval to stagger its board of directors. If approved, such
staggered board of directors will make it difficult for eXegenics' stockholders
to change the composition of the board of directors in any one year.

RISKS RELATED TO EXEGENICS' BUSINESS IN THE EVENT THE MERGER IS NOT COMPLETED

  FAILURE TO COMPLETE THE MERGER WITH IDDS COULD HAVE AN ADVERSE IMPACT ON
  EXEGENICS AND ITS STOCK PRICE.

     Since entering into the merger agreement on September 19, 2002, eXegenics
has made planning and operations decisions on the basis that the merger will be
completed. These planning and operating decisions would have been different had
eXegenics not entered into the merger agreement. For example, if eXegenics had
not entered into the merger agreement, it may have been appropriate for
eXegenics to have pursued collaborative or licensing transactions in order to
ensure that eXegenics had additional products in the clinical development stage
as an independent company, rather than relying on IDDS' potential products
assuming the merger would be consummated. If the merger is not completed
eXegenics will have no product candidates in the clinical development phase. In
addition, eXegenics also will have incurred a significant amount of
non-operating expenses associated with the merger that it otherwise would not
have incurred. Consequently, if the merger is not consummated, eXegenics'
financial condition likely will be worse than it would have been had it never
entered into the merger agreement.

     In addition, if the merger is terminated and eXegenics' board of directors
determines to seek another merger or business combination, there can be no
assurance that eXegenics will be able to find a partner willing to agree to
equivalent or more attractive terms than those which have been negotiated for in
the merger.

  THE THEORETICAL BASES OF EXEGENICS PLATFORM TECHNOLOGIES HAVE YET TO BE
  REDUCED TO THE SUCCESSFUL CREATION OF POTENTIAL DRUG CANDIDATES THAT CAN BE
  TESTED IN HUMANS.

     The drug creation methods eXegenics employs are relatively new and may not
lead to drug candidates that can be successfully developed into pharmaceutical
products. The expectation that drugs designed by quantum mechanism-based drug
design techniques will have improved efficacy, bioavailability and less
resistance build-up has not yet been verified by testing any drug candidate in
human clinical trials. Likewise, antisense compounds designed by eXegenics'
techniques have not led to testing in human clinical trials. Furthermore,
eXegenics' anti-sense drug discovery efforts are focused on a number of target

                                        31


genes for which the functions have not yet been fully identified. As a result,
the potential for creating drugs that inhibit these enzymes or their translation
has not yet been established.

     eXegenics expects to continue to in-license or acquire additional product
candidates to augment the results of its internal research activities. There can
be no assurance that eXegenics will be successful in these efforts.
Additionally, in-licensed candidates may not result in commercially viable
products.

     Any potential drug candidate must undergo extensive preclinical and
clinical testing prior to submission to any of the regulatory agencies for
approval for commercial use. Such testing will likely require significant
additional funding.

     If these methods are successful in creating pharmaceutical products,
eXegenics cannot be sure that the pharmaceutical products it creates will be
commercially successful. Therefore, eXegenics cannot make assurances that its
research and development activities will result in any commercially viable
products.

  EXEGENICS EXPECTS THAT ADDITIONAL FINANCING WILL BE REQUIRED IN THE FUTURE TO
  FUND OPERATIONS.

     eXegenics does not know whether additional financing will be available when
needed, or that, if available, it will obtain financing on terms favorable to
its stockholders or eXegenics. eXegenics has used substantial amounts of cash to
date and expects capital outlays and operating expenditures to increase over the
next several years as it expands its infrastructure and research and development
activities.

     eXegenics believes that its existing cash and investment securities will be
sufficient to support its current operating plan for at least the next 12
months. However, eXegenics' expectations are premised on its current operating
plan, which does not include development of potential products. eXegenics'
funding requirements may change as a result of many factors if the merger is not
completed and eXegenics begins looking for new potential product opportunities
including the initiation of development of new potential products, future
product opportunities with collaborators, future licensing opportunities and
future business combinations. Consequently, eXegenics may need additional
funding sooner than anticipated.

     eXegenics may raise additional financing through public or private equity
offerings, debt financings or additional corporate collaboration and licensing
arrangements. To the extent eXegenics raises additional capital by issuing
equity securities, its stockholders may experience dilution. To the extent that
eXegenics raises additional capital by issuing debt securities, eXegenics may
incur substantial costs relating to interest payments, may be required to pledge
assets as security for the debt and may be constrained by restrictive financial
and/or operational covenants. To the extent that eXegenics raises additional
funds through collaboration and licensing arrangements, it may be necessary to
relinquish some rights to its technologies or product candidates, or grant
licenses on terms that are not favorable to eXegenics. If adequate funds are not
available, eXegenics will not be able to continue developing its programs and
products.

                                        32


                                   THE MERGER

     The following discussion summarizes the proposed merger and related
transactions. The discussion is not, however, a complete statement of all
provisions of the merger agreement and related agreements. Detailed terms of the
conditions to the merger and related transactions are contained in the merger
agreement, a copy of which is attached to this joint proxy statement/prospectus
as Annex A. Statements made in this joint proxy statement/prospectus with
respect to the terms of the merger and related transactions are qualified in
their entirety by reference to the merger agreement, and you are urged to read
the more detailed information set forth in the merger agreement and the other
documents attached to this joint proxy statement/prospectus prior to casting a
vote.

BACKGROUND OF THE MERGER

     On April 24, 2002 eXegenics announced that it had engaged Petkevich &
Partners, LLC as its financial advisor to assist, among other things, in its
exploration of acquisition and merger opportunities.

     On July 31, 2002, Dr. Randi Albin, Chief Scientific Officer of IDDS,
contacted Petkevich & Partners, indicating interest in combining with eXegenics.
Dr. Shehnaaz Suliman, a Vice President of Petkevich & Partners, returned Dr.
Albin's telephone call. During their phone conversation, publicly available
information about both companies was exchanged.

     On August 2, 2002, Mark Rogers, M.D., Chairman and Chief Executive Officer
of IDDS, held a conference call with Dr. Misha Petkevich, Chairman and Chief
Executive Officer of Petkevich & Partners, Dr. Suliman and Dr. Ronald Goode,
President and Chief Executive Officer of eXegenics, on which Dr. Rogers provided
additional details regarding IDDS' business plan and financials. Dr. Rogers made
additional inquiries concerning a business combination of the two companies.

     On August 8, 2002, Dr. Goode, Dr. Suliman and Dr. Rogers held a meeting at
which both companies entered into a bilateral confidentiality agreement. Dr.
Goode presented an overview of eXegenics and Dr. Rogers presented an overview of
IDDS. The parties discussed possible structures for a business combination of
the two companies. It was decided that eXegenics would send a due diligence
request list to IDDS. Andrew Singer, a Managing Director of Petkevich &
Partners, participated in this meeting by telephone.

     On August 16, 2002, Dr. Goode, Mr. Singer, Dr. Suliman and Harry Arader, a
consultant to eXegenics, met with a group of IDDS employees to conduct a
diligence review of IDDS.

     On August 20, 2002, Dr. Goode, Dr. Suliman, Dr. Rogers, Arthur P. Bollon,
Ph.D., Executive Vice President of eXegenics, and Dorit Arad, Ph.D., Vice
President of Drug Design of eXegenics, held a meeting at which Dr. Rogers
presented additional information regarding IDDS' programs and technology and at
which Dr. Rogers conducted further due diligence on eXegenics.

     On August 21 and 22, 2002, Sylvia Sironi, an associate of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., eXegenics' outside legal counsel, met
with representatives of IDDS to conduct a further diligence review of IDDS.

     On August 26, 2002, Joan Gillett, Vice President and Controller of
eXegenics, Dr. Rogers, Douglas Hamilton, Chief Operating Officer of IDDS,
Christopher Donald, Controller of IDDS, Dr. Albin, Dr. Petkevich, Dr. Suliman,
Matthew Fix, an associate at Petkevich & Partners, as well as the legal advisors
and auditors for both eXegenics and IDDS, held a conference call to discuss the
terms of the potential business combination.

     On August 28, 2002, Dr. Suliman, Ms. Gillett, WaLisa Davenport, Assistant
Director, Human Resources & Administration of eXegenics, Dr. Bollon, Robert
Rousseau, Vice President of Licensing of eXegenics, Mr. Hamilton, Mr. Donald and
Joseph Favuzza, of PricewaterhouseCoopers LLP, IDDS' auditors, held a meeting to
conduct a diligence review of eXegenics.

                                        33


     On August 29, 2002, Mr. Favuzza met with representatives of Ernst & Young
LLP, eXegenics' auditors, to conduct additional diligence.

     On September 9, 2002, a meeting of the eXegenics board of directors was
held to review a number of potential strategic alternatives, including the
proposed business combination with IDDS. Joel Papernik, a member of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Dr. Petkevich were in
attendance at the meeting, and Dr. Suliman participated by telephone. Also, on
September 9, 2002, Dr. Rogers made a presentation to the board of directors of
eXegenics regarding the potential business combination.

     On September 11, 2002, representatives of IDDS, Dr. Goode, Dr. Petkevich,
Mr. Singer, Dr. Suliman and the legal advisors and auditors for both eXegenics
and IDDS held a conference call to discuss IDDS' comments to the draft merger
agreement.

     On September 16, 2002, Dr. Suliman met with Messrs. Hamilton and Donald to
conduct a further diligence review of IDDS.

     On September 17 and 18, 2002, Richard Gervase, a member, and Flora Feng, an
associate, of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., held
conference calls with Paul F. Fehlner, Ph.D. of Darby & Darby P.C., IDDS'
outside legal patent counsel, to conduct a diligence review of IDDS'
intellectual property.

     Later on September 18, 2002, the board of directors of eXegenics held a
meeting to discuss the status of the merger agreement and related diligence
issues. Mr. Papernik and representatives of Petkevich & Partners attended this
meeting.

     Also on September 18, 2002, IDDS' board of directors held a telephonic
meeting, which was also attended by Messrs. Hamilton and Donald and Bruce A.
Rich and Melanie Stapp of Thelen Reid & Priest LLP, IDDS' outside counsel. The
directors present at the meeting discussed and unanimously approved the merger.

     On the morning of September 19, 2002, the eXegenics board of directors held
a special meeting at which outside legal counsel reported on the finalized terms
of the merger agreement and related agreements. Representatives of Petkevich &
Partners reviewed their financial analyses with respect to the proposed merger
and delivered an oral opinion (subsequently confirmed in writing) that the
exchange ratio in the merger was fair to eXegenics from a financial point of
view. After consideration of these presentations, the eXegenics board of
directors unanimously approved the merger and the merger agreement, concluding
that the business combination with IDDS was in the best interests of the
eXegenics stockholders.

     On the evening of September 19, 2002, eXegenics and IDDS executed the
definitive merger agreement.

     On September 20, 2002, eXegenics and IDDS issued a press release announcing
the proposed transaction and held a webcast to discuss the terms of the proposed
transaction, which was open to the public.

EXEGENICS' REASONS FOR ENTERING INTO THE MERGER

     eXegenics was initially founded and has operated as a drug discovery
company. Changing market conditions have led the eXegenics board of directors
and management to consider and implement strategies to accelerate the company's
forward integration into clinical drug development for the purpose of building
stockholder value. Beginning in March of this year, the eXegenics board of
directors and management, with the assistance of Petkevich & Partners, has
considered a number of alternatives for achieving the objective of enhancing
eXegenics' competitive position and moving the company closer to drug
commercialization.

     The eXegenics board of directors believes that combining with IDDS presents
a significant opportunity to achieve the goal of acquiring clinical product
candidates that have the potential to generate

                                        34


drug product sales revenue in the future, thereby building stockholder value.
Leading to this belief are the following facts about IDDS:

     - IDDS has three product candidates in clinical trials, two of which are in
       late phase II clinical development, and one of which is in early phase II
       clinical development.

     - IDDS has an additional product candidate in preclinical development.

     - The active ingredients of each of the four IDDS product candidates are
       all approved by the FDA for other uses or methods of delivery, and
       therefore, have demonstrated safety and efficacy profiles.

     - The markets addressed by the IDDS product candidates are large (greater
       than $3.4 billion).

     - IDDS has retained exclusive worldwide marketing rights to each of the
       four clinical product candidates.

     - The IDDS product candidates have strong proprietary patent protection.

     - IDDS has received a research grant in the amount of $1.2 million from the
       U.S. Department of Defense.

     - IDDS management team has demonstrated the ability to acquire clinical
       product candidates and advance them through development.

     The eXegenics board of directors unanimously approved the merger agreement
and recommends that the eXegenics stockholders approve the issuance of common
stock in connection with the merger. The decision by the eXegenics board of
directors was based on several potential benefits of the merger that it believes
will contribute to the future success of the combined company and to the value
received by stockholders of eXegenics. These potential benefits include:

     - IDDS' ability to acquire and develop new clinical product candidates will
       be strengthened by the addition of eXegenics' management's experience in
       advancing products through FDA approval.

     - The combined company will have complementary leadership, a strong
       combined board, an experienced management team, extensive big
       pharmaceutical company experience and numerous academic associations that
       will enhance the conduct of its business.

     - The cash from eXegenics balance sheet can be used immediately after the
       closing of the merger to advance IDDS' compounds further in clinical
       testing.

     In the course of its deliberations regarding the merger, the eXegenics
board of directors reviewed with eXegenics' management and outside advisors a
number of factors relevant to the merger, including the strategic overview and
prospects for eXegenics. The eXegenics board of directors also considered the
following factors, among others, in connection with its review and analysis of
the merger. The conclusions of the eXegenics board of directors with respect to
each of these factors supported its determination that the merger is fair to,
and in the best interests of, the eXegenics stockholders:

     - historical information concerning IDDS' and eXegenics' respective
       businesses, financial performance and condition, operations, technology,
       management and competitive position;

     - the belief that the terms of the merger agreement, including the parties'
       representations, warranties and covenants, and the conditions to the
       parties' respective obligations, are reasonable;

     - the financial analysis and opinion of Petkevich & Partners, dated
       September 19, 2002, to the eXegenics board of directors, to the effect
       that, as of that date and based on and subject to the matters described
       in its opinion, the exchange ratio in the merger was fair, from a
       financial point of view, to eXegenics; and

     - the results of the due diligence review of IDDS conducted by eXegenics'
       management and its financial and legal advisors.

                                        35


     The eXegenics board of directors also considered a number of potentially
negative factors in its deliberations concerning the merger. The potentially
negative factors considered by the eXegenics board of directors included:

     - the risk that, because the exchange ratio provides for no adjustment for
       changes in the market price of eXegenics common stock, the per share
       value of the consideration to be received by IDDS stockholders on the
       date of closing might be more than the price immediately before the
       announcement of the merger due to fluctuations in the market value of
       eXegenics common stock;

     - the risk that the merger might not be completed in a timely manner or at
       all;

     - the challenges relating to the integration of the two companies;

     - the possibility of management and employee disruption associated with the
       proposed merger and integrating the operations of the companies, and the
       risk that, despite the efforts of the combined company, key management,
       marketing, technical and administrative personnel of IDDS might not
       continue with the combined company;

     - the risks relating to IDDS' business and how they would affect the
       operations of the combined company;

     - the risk of increasing eXegenics' rate of cash burn; and

     - the other risks and uncertainties set forth in the section entitled "Risk
       Factors" beginning on p.   .

     The foregoing discussion of information and factors considered by the
eXegenics board of directors is not intended to be exhaustive but is believed to
include many material factors considered by the eXegenics board of directors. In
view of the wide variety of factors considered by the eXegenics board of
directors, the eXegenics board of directors did not find it practicable to
quantify or otherwise assign relative weight to the specific factors considered.
In addition, the eXegenics board of directors did not reach any specific
conclusion on each factor considered, or any aspect of any particular factor,
but conducted an overall analysis of these factors. Individual members of the
eXegenics board may have given different weight to different factors. However,
after taking into account all of the factors set forth above, the eXegenics
board of directors unanimously agreed that the merger is fair to, and in the
best interests of, the eXegenics stockholders and that eXegenics should proceed
with the proposed merger.

     In considering the recommendation of the eXegenics board of directors with
respect to the merger agreement, eXegenics stockholders should be aware that the
directors and officers of eXegenics have interests in the merger that are
different from, or are in addition to, the interests of the eXegenics
stockholders generally. For further detail see the section entitled "The
Merger -- Interests of Certain Persons in the Merger" on page   .

IDDS' REASONS FOR ENTERING INTO THE MERGER

     In evaluating the proposed merger, the board of directors of IDDS
considered a variety of factors, including financial and operating information
relating to eXegenics and IDDS. The following material factors were considered
by IDDS' board of directors:

     - the possibility of raising additional capital while affording investors
       the potential liquidity of a public market;

     - the opportunity for IDDS' stockholders to participate in the future
       performance of a public company;

     - the difficulty of conducting an initial public offering of IDDS' stock
       based on prior efforts by IDDS and the current market conditions;

                                        36


     - the allocation of ownership in the combined companies as between IDDS'
       stockholders and eXegenics' stockholders; and

     - the expectation that the merger will be tax-free to IDDS and its
       stockholders.

     For these reasons, IDDS' board of directors concluded that the merger is in
the best interests of IDDS and its stockholders. IDDS' board of directors
unanimously recommends that IDDS' stockholders approve the merger agreement.
Approval of the merger agreement will constitute approval of all transactions
that it contemplates, including the exchange of all outstanding shares of IDDS
common stock for eXegenics common stock and the applicable exchange ratio.

     In considering the recommendation of the IDDS board of directors with
respect to the merger agreement, IDDS stockholders should be aware that the
directors and officers of IDDS have interests in the merger that are different
from, or are in addition to the interests of the IDDS stockholders generally.
For further detail see the section entitled "The Merger -- Interests of Certain
Persons in the Merger" on page   .

BUSINESS OF THE COMBINED COMPANY

     The combined company to be created by the merger of eXegenics and IDDS,
combines a drug discovery company, eXegenics, and a drug development company,
IDDS. The goal of the combined company is to become a leading specialty
pharmaceutical company that rapidly develops and commercializes drugs for the
management of pain and, ultimately, for other major medical indications.

     Strategies to accomplish this goal include the following:

     - Focus.  Our focus will be the marketplace, and our intent is to maintain
       a portfolio of pharmaceutical drug product candidates, constantly
       advancing to the marketplace, that address important medical needs in
       large markets.

     - Reduce Risk in Clinical Product Development.  The active ingredients in
       our initial four clinical product candidates have all been approved by
       the FDA and other regulatory bodies, and thus have profiles with known
       safety, pharmacology and efficacy. Our intent is to fully cooperate with
       the FDA and conduct clinical programs with the highest probabilities of
       success.

     - Reserve Rights to Products.  We currently retain exclusive global
       commercialization rights to all of our pain management product candidates
       in all markets. In general, we intend to independently develop our
       current and future product candidates through late-stage clinical trials
       before consideration of partnering them in the marketplace. We believe
       this will allow us to maximize returns on our investment by capturing a
       greater percentage of the profits from marketplace sales of these drug
       products.

     - Pipeline.  We intend to continue building a robust clinical pipeline by
       in-licensing additional products, leveraging our broad network of
       contacts in the pharmaceutical industry and academic centers worldwide to
       enable the acquisition of clinical products that fit the profile of our
       current clinical development strategy of pursuing product candidates that
       we believe have an increased likelihood of being approved by the FDA.
       Further, we believe our unique formulation technologies can be utilized
       to create proprietary drugs from other currently approved pain management
       drugs.

     - Outsource.  We intend to use outsourcing as a strategy to expedite
       development in a cost efficient manner. Thus, we intend to engage and
       manage third party vendors who will conduct preclinical studies and
       clinical trials. Furthermore, as opposed to building and operating
       formulation and manufacturing facilities ourselves, these functions will
       also be outsourced obviating the need to hire personnel specifically for
       these activities. Further, we currently intend to both contract with
       outside sales organizations and enter into distribution agreements with
       pharmaceutical partners to sell our products.

                                        37


     - Out-license and/or Partner Early-Stage Discovery.  We will seek to
       partner our discovery technologies and to out-license our earlier stage
       preclinical new chemical entities for cancer and infectious diseases to
       other pharmaceutical or biotechnology companies in order to mitigate the
       additional risk and cost associated with early development of new
       chemical entities.

     Assets to be used to implement these strategies include:

     - Sufficient post-merger cash to sustain operations at least through
       December 31, 2003

     - Three clinical product candidates in or through Phase II clinical testing

     - Strong management and governance

     - Discovery research technologies

OPINION OF EXEGENICS' FINANCIAL ADVISOR

     On March 5, 2002, eXegenics and Petkevich & Partners executed an engagement
letter pursuant to which Petkevich & Partners was engaged to act as eXegenics'
financial advisor in connection with the merger. Pursuant to the engagement
letter, eXegenics retained Petkevich & Partners to provide financial advisory
services in connection with a possible strategic transaction, including a
potential strategic combination, and to render an opinion as to the fairness of
any such transaction, from a financial point of view, to eXegenics. See
"-- Background of the Merger" on page [  ].

     At a meeting of the eXegenics board held on September 19, 2002, Petkevich &
Partners gave a presentation on the financial terms of the merger and rendered
its oral opinion, which opinion was subsequently confirmed in writing, that, as
of September 19, 2002 and based on the matters described therein, the exchange
ratio in the merger was fair, from a financial point of view, to eXegenics.
Petkevich & Partners does not admit that it is an "expert" within the meaning of
the term "expert" as used in the Securities Act or the rules and regulations
promulgated thereunder, or that its opinion constitutes a report or valuation
within the meaning of Section 11 of the Securities Act and the rules and
regulations promulgated thereunder.

     The full text of the opinion, which sets forth, among other things,
assumptions made, matters considered and limitations on the review undertaken,
is attached hereto as Annex B and is incorporated herein by reference. Holders
of capital stock of eXegenics are urged to read the opinion in its entirety. The
opinion was prepared for the benefit and use of the eXegenics board in its
consideration of the merger and does not constitute a recommendation to holders
of capital stock of eXegenics as to how they should vote at the special meeting
in connection with the merger. The opinion does not address the relative merits
of the merger and any other transactions or business strategies discussed by the
eXegenics board as alternatives to the merger or the underlying business
decision of the eXegenics board of directors to proceed with or effect the
merger. The summary of the opinion set forth in this proxy statement/ prospectus
is qualified in its entirety by reference to the full text of the opinion.

     In connection with arriving at the opinion set forth in Annex B, Petkevich
& Partners, among other things:

     - reviewed certain information, including financial forecasts, relating to
       the business, earnings, cash flow, assets, liabilities and prospects of
       IDDS and eXegenics, which were furnished to or discussed with Petkevich &
       Partners by IDDS and eXegenics, including certain potential revenue and
       cost synergies projected by the senior management of eXegenics to result
       from the transaction;

     - reviewed certain publicly available business and financial information
       concerning IDDS and eXegenics;

     - held discussions with members of senior management and representatives of
       IDDS and eXegenics concerning the businesses, past and current business
       operations, financial conditions and future prospects of both companies,
       independently and combined, including discussions with the

                                        38


       managements of eXegenics and IDDS concerning their views regarding the
       strategic rationale of the merger;

     - reviewed a draft of the merger agreement, dated September 18, 2002, and
       drafts of other related agreements;

     - reviewed the stock prices and trading history of eXegenics;

     - reviewed the valuations of companies that it deemed comparable to IDDS;

     - compared the financial terms of the merger with other transactions that
       it deemed relevant; and

     - made such other studies and inquiries, and reviewed such other data, as
       it deemed relevant.

     In its review and analysis, and in arriving at its opinion, Petkevich &
Partners assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to Petkevich & Partners or publicly
available and neither attempted independently to verify nor assumed
responsibility for verifying any such information. Petkevich & Partners relied
upon the assurances of the managements of eXegenics and IDDS, that they were not
aware of any facts that would make such information inaccurate or misleading.
Furthermore, Petkevich & Partners did not obtain or make, or assume
responsibility for obtaining or making, any independent evaluation or appraisal
of any of the properties or assets and liabilities (contingent or otherwise) of
eXegenics or IDDS, nor were any such evaluations or appraisals furnished to
Petkevich & Partners. Petkevich & Partners did not conduct any evaluation or
analyses of the technology underlying the products of eXegenics or IDDS. With
respect to the financial information (and the assumptions and bases therefor) of
eXegenics and IDDS that Petkevich & Partners discussed with the managements of
eXegenics and IDDS, upon the advice of eXegenics and IDDS, Petkevich & Partners
assumed that such information was reasonably prepared in good faith on the basis
of reasonable assumptions, reflected the best currently available estimates and
judgments of the managements of eXegenics and IDDS and that the forecasts
contained in such information will be realized in the amounts and in the time
periods currently estimated by the managements of eXegenics and IDDS. Petkevich
& Partners assumed that the merger will be consummated upon the terms set forth
in the Merger Agreement without material alterations thereof and that the merger
will qualify as a tax-free reorganization for U.S. federal income tax purposes.
Petkevich & Partners has relied as to all legal matters relevant to rendering
its opinion on the advice of counsel.

     Without limiting the generality of the foregoing, Petkevich & Partners did
not undertake any independent analysis of any pending or threatened litigation,
possible unasserted claims or other contingent liabilities, to which eXegenics,
IDDS or any of their respective affiliates was a party or may be subject and, at
eXegenics' direction and with its consent, the opinion made no assumption
concerning and therefore did not consider, the possible assertion of claims,
outcomes or damages arising out of any such matters. Although developments
following the date of the opinion may affect the opinion, Petkevich & Partners
assumed no obligation to update, revise or reaffirm the opinion.

     The following is a summary of the material financial analyses performed by
Petkevich & Partners in connection with rendering the opinion.

     Comparable Company Analysis.  Petkevich & Partners compared certain
financial information relating to IDDS to corresponding publicly-available data
and ratios from a group of selected publicly traded companies it deemed
comparable to IDDS. The comparable companies selected were eight publicly traded
companies involved in the development and manufacture of pain therapy
pharmaceutical products or specializing in drug delivery, including:

     - Pain Therapeutics, Inc.

     - Adolor Corporation

     - POZEN Inc.

     - GW Pharmaceuticals plc

                                        39


     - Aradigm Corporation

     - DURECT Corporation

     - Inhale Therapeutic Systems Inc.

     - Nastech Pharmaceutical Company Inc.

     The analysis, with respect to IDDS, produced enterprise values based upon
closing stock prices of the comparable companies as of September 17, 2002, which
were then used to calculate a range of implied exchange ratios, which were
compared to the exchange ratio used in this transaction of 3.132. The following
table summarizes the results of this analysis. "Stripped Mean" figures remove
the highest and lowest data points from each set of data.


                                                           
Stripped Mean of Pain Therapy Comparable Companies
  Enterprise Values.........................................       $114.1M
Stripped Mean of Drug Delivery Comparable Companies
  Enterprise Values.........................................       $111.0M
Implied Aggregate Value Range with 40% Illiquidity
  Discount..................................................  $66.6-$68.5M
Implied Exchange Ratio......................................     4.4x-4.5x
Exchange Ratio..............................................        3.132x


     Precedent Transaction Analysis.  The precedent transaction analysis was
based on five acquisitions involving publicly traded companies engaged in
development of pain therapy pharmaceutical products or specializing in drug
delivery, including BML Pharmaceuticals Inc./Endo Pharmaceuticals Inc.,
ShearWater Corp./Inhale Therapeutics, Southern BioSystems Inc./DURECT Corp.,
Anesta/Cephalon and Advanced Inhalation Research, Inc./Alkermes, Inc. An
analysis of the precedent transactions produced aggregate consideration values
which were then used to calculate a range of implied exchange ratios, which were
compared to the exchange ratio of 3.132. The following table summarizes the
results of this analysis.


                                                           
Mean of Aggregate Consideration in Precedent Transactions...       $120.4M
Implied Aggregate Value Range less 50%-100% Control
  Premium...................................................  $60.2-$80.3M
Implied Exchange Ratio......................................     4.0x-5.2x
Exchange Ratio..............................................        3.132x


     Discounted Cash Flow Analysis.  Petkevich & Partners used financial cash
flow forecasts of IDDS for calendar years 2003 through 2007, as estimated by
eXegenics' management, to perform a discounted cash flow analysis. In conducting
this analysis, Petkevich & Partners assumed that IDDS would perform in
accordance with these forecasts. Petkevich & Partners first estimated the
terminal value of the forecasted cash flows by applying multiples to IDDS'
estimated 2007 sales, which multiples ranged from 2.0 to 3.0. Petkevich &
Partners then discounted the cash flows projected through 2007 and the terminal
values to present values using rates ranging from 30% to 40%. This analysis
indicated a range of equity values from $46.3 million to $103.2 million. This
range was used to calculate a range of implied exchange ratios of 2.9 to 6.5
which compared to the exchange ratio of 3.132.

     No company, transaction or business used in the comparable company analysis
or comparable transaction analysis as a comparison is identical to eXegenics,
IDDS or the merger. Accordingly, an analysis of the results of the foregoing
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition, public trading and other values of the comparable companies,
comparable transactions or the business segment, company or transactions to
which they are being compared. In evaluating the comparable companies and
transactions, Petkevich & Partners made judgments and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of eXegenics
and IDDS, such as the impact of competition on eXegenics or IDDS and the
industry generally, industry growth and/or technological change and the absence
of any adverse material change in the financial conditions and prospects of
eXegenics and IDDS or the industry or financial markets in general. Mathematical
analysis (such as determining the mean or median) is not, in itself, necessarily
a meaningful method of using comparable company or transaction data.

                                        40


     While the foregoing summary describes certain analyses and factors that
Petkevich & Partners deemed material in its presentation to the eXegenics board
of directors, it is not a comprehensive description of all analyses and factors
considered by Petkevich & Partners. The preparation of a fairness opinion is a
complex process that involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Petkevich & Partners believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, would create an incomplete view of the evaluation process
underlying its opinion. Several analytical methodologies were employed and no
one method of analysis should be regarded as critical to the overall conclusion
reached by Petkevich & Partners. Each analytical technique has inherent
strengths and weaknesses, and the nature of the available information may
further affect the value of particular techniques. The conclusions reached by
Petkevich & Partners are based on all analyses and factors taken as a whole and
also on application of Petkevich & Partners' own experience and judgment. Such
conclusions may involve significant elements of subjective judgment and
qualitative analysis. Petkevich & Partners therefore gave no opinion as to the
value or merit standing alone of any one or more parts of the analysis it
performed. In performing its analyses, Petkevich & Partners considered general
economic, market and financial conditions and other matters, many of which are
beyond the control of eXegenics and IDDS. The analyses performed by Petkevich &
Partners are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than those suggested by such
analyses. Accordingly, analyses relating to the value of a business do not
purport to be appraisals or to reflect the prices at which the business actually
may be purchased. Furthermore, no opinion was expressed as to the price at which
the common stock of eXegenics may trade at any future time.

     eXegenics engaged Petkevich & Partners pursuant to the engagement letter on
March 5, 2002. The engagement letter provides that, for its services, Petkevich
& Partners is entitled to receive, contingent upon consummation of the merger, a
fee equal to 3% of the aggregate consideration paid in connection with the
merger, with a minimum payment of $500,000. In addition, eXegenics has agreed to
pay a fee of $150,000 to Petkevich & Partners upon delivery of its fairness
opinion to the eXegenics board of directors. eXegenics has also agreed to
reimburse Petkevich & Partners for its out of pocket expenses and to indemnify
and hold harmless Petkevich & Partners and its affiliates and any person,
director, employee or agent acting on behalf of Petkevich & Partners or any of
its affiliates, or any person controlling Petkevich & Partners or its affiliates
for certain losses, claims, damages, expenses and liabilities relating to or
arising out of services provided by Petkevich & Partners as financial advisor to
eXegenics. The terms of the fee arrangement with Petkevich & Partners, which
eXegenics and Petkevich & Partners believe are customary in transactions of this
nature, were negotiated at arm's length between eXegenics and Petkevich &
Partners, and the eXegenics board was aware of such fee arrangements.

     Petkevich & Partners was retained based on Petkevich & Partners' experience
as a financial advisor in connection with mergers and acquisitions, as well as
Petkevich & Partners' investment banking relationship with eXegenics and
familiarity with eXegenics' business and its market.

     Petkevich & Partners is an investment banking firm with significant
relevant industry experience. As part of its investment banking business,
Petkevich & Partners is frequently engaged in the valuation of businesses in
connection with mergers and acquisitions, private placements and other purposes.

     THE OPINION OF PETKEVICH & PARTNERS IS ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT/PROSPECTUS. EXEGENICS STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY. PETKEVICH & PARTNERS' OPINION IS DIRECTED
TO EXEGENICS' BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE
RATIO TO EXEGENICS FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION.
PETKEVICH & PARTNERS' OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF CAPITAL STOCK OF
EXEGENICS AS TO HOW TO VOTE AT THE EXEGENICS SPECIAL MEETING. THE
                                        41


SUMMARY OF THE OPINION OF PETKEVICH & PARTNERS SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS, ALTHOUGH MATERIALLY COMPLETE, IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT/PROSPECTUS.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

     When considering the recommendations of the boards of directors of
eXegenics and IDDS, you should be aware that certain executive officers and
directors of eXegenics and IDDS have interests in the merger and have
arrangements that are different from, or are in addition to, those of the
stockholders of eXegenics and IDDS, generally. The boards of directors of
eXegenics and IDDS were aware of these interests and considered them, among
other matters, in approving the principal terms of the merger, the merger
agreement and the transactions contemplated thereby.

  NEWLY-APPOINTED MEMBERS OF THE EXEGENICS BOARD OF DIRECTORS

     Following the merger, the board of directors of the combined company will
consist of (i) four directors designated by IDDS, who will initially be Mark C.
Rogers, M.D., Peter Kash, Edward Miller, M.D. and Mark Siegel; (ii) four
directors designated by eXegenics, who initially will be Ronald L. Goode, Ph.D.,
Gary Frashier, Ira J. Gelb, M.D. and Robert Easton; and (iii) one independent
director mutually agreed upon by IDDS and eXegenics, who will initially be
Douglas Watson. All of these persons currently serve as directors of IDDS or
eXegenics. Upon consummation of the merger, Mark C. Rogers, M.D. will serve as
the executive chairman of the combined company.

  STOCK OPTIONS OF OFFICERS AND DIRECTORS

     Upon consummation of the merger, the stock options of those eXegenics
officers and directors who are not continuing on as officers or directors of the
combined company will immediately vest and such individuals will have the term
of their original option grants in which to exercise their options. In addition,
options held by officers or directors of IDDS prior to the effective time of the
merger will remain exercisable for the time period set forth in the applicable
option grant agreement, regardless of whether the holders of such options
continue as officers or directors of the combined company after the merger,
except for a person who is terminated without cause within six months of the
closing of the merger whose options will vest upon termination and such
individuals will have the term of their original option grants in which to
exercise his options.

  EMPLOYMENT AGREEMENTS

     eXegenics and Mark C. Rogers, M.D., IDDS' current Chief Executive Officer,
have agreed on terms of a new employment agreement under which Dr. Rogers will
be employed by the combined company as our executive chairman after consummation
of the proposed merger. Dr. Rogers' base annual salary will be $290,000 with
standard benefits and additional perquisites such as a company car. Dr. Rogers
will retain all of his options under the same terms granted to him by IDDS. In
addition, concurrently with the closing of the merger, Dr. Rogers will be
granted an option to purchase 750,000 shares of IDDS common stock, or 2,349,000
shares of eXegenics common stock post-merger (approximately 2.9% of the combined
company on a fully diluted basis), at an exercise price equal to the fair market
value of the stock on the fifth day after the consummation of the merger. The
option will vest as to one-third immediately and as to each remaining one-third
upon each of August 15, 2003 and August 15, 2004. Dr. Rogers' current employment
agreement with IDDS will terminate upon the consummation of the merger, and the
new employment agreement will supercede and replace in its entirety his existing
employment agreement.

     eXegenics and Ronald L. Goode, Ph.D., eXegenics' current President and
Chief Executive Officer, have agreed on terms of a new employment agreement
under which Dr. Goode will continue to be employed by the combined company as
our President and Chief Executive Officer after consummation of the proposed
merger. Dr. Goode's salary on an annual basis will be reduced from his current
salary of

                                        42


$375,000 to $290,000, and he will receive standard benefits and additional
perquisites such as a company car. Dr. Goode and will retain all of his options
under the same terms granted to him by eXegenics. In addition, Dr. Goode will
receive an option to purchase 2,349,000 shares of our common stock
(approximately 2.9% of the combined company on a fully diluted basis) upon
consummation of the merger at an exercise price equal to the fair market value
of the stock on the fifth day after the consummation of the merger. The option
will vest as to one-third immediately and as to each remaining one-third upon
each of the first and second anniversaries of the consummation of the merger.
Dr. Goode's current employment agreement with eXegenics will terminate upon the
consummation of the merger, and the new employment agreement will supercede and
replace in its entirety his existing employment agreement.

  INDEMNIFICATION

     Directors and executive officers of eXegenics and IDDS have customary
rights to indemnification against losses incurred as a result of actions or
omissions occurring prior to the effective time of the merger and we intend to
maintain such customary rights to indemnification for the foreseeable future
following the effective time of the merger. In addition, eXegenics will obtain
customary "tail" insurance coverage for the directors and officers of eXegenics
and may obtain this insurance for officers and directors of IDDS that will not
become directors and officers of the combined company for a period of six years
after consummation of the merger. For more information regarding indemnification
of the directors and officers of the combined company, see "Executive Officers
and Directors of IDDS joining eXegenics."

     As a result of these various arrangements, certain directors and executive
officers of eXegenics and IDDS may be more likely to vote in favor of
recommending the approval of the issuance of eXegenics common stock in
connection with the merger or the approval of the merger and the adoption of the
merger agreement than if they did not hold these interests.

REGULATORY APPROVALS

     Neither eXegenics nor IDDS is aware of the need to obtain any regulatory
approvals in order to consummate the merger other than the following:

     - effectiveness of the registration statement of which this joint proxy
       statement/prospectus is a part; and

     - approval to list the shares of eXegenics common stock to be issued in
       connection with the proposed merger on the Nasdaq National or SmallCap
       Market, upon the consummation of the merger if then so listed.

     eXegenics and IDDS intend to obtain these approvals and any additional
regulatory approvals that may be required. However, neither party can assure you
that all approvals will be obtained.

ACCOUNTING TREATMENT OF THE MERGER

     For accounting purposes, the merger of eXegenics and IDDS will be accounted
for as a reverse merger under the purchase method of accounting in accordance
with generally accepted accounting principles in the United States of America.
Accordingly, IDDS will be deemed for accounting purposes to be the acquirer.
Therefore, IDDS will record the fair value of eXegenics assets purchased and
liabilities assumed based on the fair market value of eXegenics' outstanding
equity securities, including stock options and warrants, at the date of
acquisition. It is expected that the consideration will be less than the fair
value of the net assets purchased. Accordingly, negative goodwill will arise
which will result in a non-recurring extraordinary gain.

RESTRICTIONS ON SALES OF EXEGENICS COMMON STOCK BY AFFILIATES OF IDDS

     The shares of eXegenics common stock to be issued in connection with the
proposed merger will be registered under the Securities Act. Subject to the
lock-up agreements between eXegenics and certain of IDDS' principal
stockholders, these shares will be freely transferable under the Securities Act,
except for
                                        43


shares of eXegenics common stock issued to any person who is an affiliate of
IDDS at the time the merger is submitted to the stockholders for vote or consent
or who becomes an affiliate of eXegenics after the merger. Persons who may be
deemed to be affiliates include individuals or entities that control, are
controlled by, or are under common control of IDDS, and may include some of the
officers and directors, as well as their respective principal stockholders.
Affiliates generally include directors, executive officers, and beneficial
owners of 10% or more of the common stock of a company. Persons who are
affiliates at the time the merger is submitted to the stockholders for vote or
consent may not sell their shares of eXegenics common stock acquired in
connection with the merger except pursuant to an effective registration
statement under the Securities Act covering the resale of those shares, an
exemption under paragraph (d) of Rule 145 under the Securities Act, or any other
applicable exemption under the Securities Act. Pursuant to the terms of the
merger agreement, eXegenics will be entitled to place appropriate legends on the
certificates evidencing any eXegenics common stock to be received by the
affiliates and to issue stop transfer instructions to the transfer agent for the
eXegenics common stock received by the affiliates.

LISTING ON THE NASDAQ STOCK MARKET OF EXEGENICS COMMON STOCK TO BE ISSUED IN THE
MERGER

     If eXegenics common stock is listed on either the Nasdaq National Market or
the Nasdaq SmallCap Market at the time of the merger, the shares of eXegenics
common stock to be issued in the merger must be approved for listing on either
the Nasdaq National Market or Nasdaq SmallCap Market, subject to official notice
of issuance prior to the effective time of the merger. See Risk Factors relating
to our Nasdaq listing on pages   and   .

                                        44


                              THE MERGER AGREEMENT

     The following is a summary of the material terms of the merger agreement. A
copy of the merger agreement is attached as Annex A to this joint proxy
statement/prospectus. The following is not a complete statement of all of the
terms of the merger agreement. Statements made in this joint proxy
statement/prospectus are qualified in their entirety by reference to the more
detailed information and terms found in the merger agreement. You are encouraged
to read the entire merger agreement before voting your shares.

THE MERGER; CLOSING; EFFECTIVE TIME

     The merger agreement provides that IDDS Merger Corp., a newly-formed,
wholly-owned subsidiary of eXegenics, will merge with and into IDDS. IDDS will
survive the merger as a wholly-owned subsidiary of eXegenics.

     The closing of the merger will occur as soon as practicable after the last
of the conditions to the merger have been satisfied or waived, but in no event
later than three business days thereafter, or at another time as eXegenics and
IDDS agree. At the time of the closing, eXegenics and IDDS will file a
certificate of merger with the Secretary of State of the State of Delaware. The
merger will become effective upon the filing of the certificate or at another
time as eXegenics and IDDS agree. We currently expect that the closing of the
merger will take place late in the fourth calendar quarter of 2002. However,
because the merger is subject to stockholder approvals and other customary
conditions, including the effectiveness of the registration statement of which
this joint proxy statement/prospectus is a part, we cannot predict exactly when
the closing will occur.

MERGER CONSIDERATION; EXCHANGE RATIO

     In consideration for the merger, eXegenics will issue up to 47,121,963
shares of its common stock in exchange for all of the outstanding common stock
of IDDS and may issue up to an additional 12,964,261 shares of its common stock
upon the exercise by IDDS option holders and warrant holders of eXegenics
options and warrants issued to them in the merger in exchange for their
currently outstanding IDDS options and warrants. Immediately prior to the
effective time of the merger, all issued and outstanding shares of preferred
stock of IDDS will have been converted into shares of common stock of IDDS. If
you are a holder of IDDS common stock at the effective time of the merger, you
will be entitled to receive approximately 3.132 shares of eXegenics common stock
for each share of IDDS common stock that you then own.

     eXegenics will adjust the exchange ratio to reflect any reclassification,
stock split, stock dividend, reorganization or other similar change with respect
to eXegenics common stock or IDDS capital stock occurring before the effective
time of the merger. Otherwise, the exchange ratio for IDDS' common stock set
forth above is fixed. As a result, the number of shares of eXegenics common
stock that you are entitled to receive in the merger will not change between now
and the date the merger is completed, regardless of fluctuations in the market
price of eXegenics common stock. In addition, neither eXegenics nor IDDS has the
right to terminate the merger agreement or renegotiate the exchange ratio as a
result of market price fluctuations.

EXCHANGE OF SHARES

     On the closing of the merger, eXegenics will deposit with American Stock
Transfer and Trust Company, eXegenics' exchange agent, or such other institution
as eXegenics may select, for the benefit of the holders of shares of IDDS stock,
certificates representing the shares of eXegenics common stock to be issued in
the merger and an amount of cash for payment in lieu of any fractional shares,
except with respect to stockholders who properly sought their statutory
appraisal rights.

     Promptly after the closing of the merger, the exchange agent will mail to
each IDDS stockholder a letter of transmittal and instructions for effecting the
exchange of IDDS stock certificates for stock

                                        45


certificates representing shares of eXegenics common stock. Upon surrender of an
IDDS stock certificate for cancellation to the exchange agent, together with the
letter of transmittal, the IDDS stockholder will receive a certificate
representing the number of shares of eXegenics common stock to which the
stockholder is entitled, together with an amount of cash in lieu of any
fractional shares, if applicable, less the portion placed in the escrow fund.
Should the reverse stock split occur immediately after the closing of the
merger, the certificate would be for shares on a post-split basis. For further
detail regarding the escrow fund, see the section entitled "Escrow Arrangements"
beginning on page   . Surrendered IDDS stock certificates will be canceled.

     IDDS STOCKHOLDERS SHOULD NOT FORWARD IDDS STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A LETTER OF TRANSMITTAL. IDDS
STOCKHOLDERS SHOULD NOT RETURN IDDS STOCK CERTIFICATES WITH THEIR PROXY.

NO FRACTIONAL SHARES

     eXegenics will not issue any fractional shares of common stock in the
merger. Instead, cash will be paid in lieu of fractional shares of eXegenics
common stock, based upon the median price per share of eXegenics common stock
over a 20-day period, determined in accordance with a formula set forth in the
merger agreement.

DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES

     No dividends or other distributions declared or made after the effective
time of the merger with respect to eXegenics common stock will be paid to the
holders of any unsurrendered IDDS stock certificates with respect to the shares
of eXegenics common stock represented by such IDDS stock certificates until the
holders of the stock certificates surrender them in accordance with the letter
of transmittal.

LOST, STOLEN OR DESTROYED CERTIFICATES

     If any IDDS stock certificate is lost, stolen or destroyed, an IDDS
stockholder must provide an appropriate affidavit certifying that fact.
eXegenics may require an IDDS stockholder to deliver a bond as indemnity against
any claim that may be made against eXegenics with respect to any lost, stolen or
destroyed certificate.

SHARES TO BE ISSUED IN ANOTHER NAME

     If any certificate for shares of eXegenics common stock is to be issued in
a name other than the name in which the IDDS stock certificate being exchanged
is registered, the IDDS stock certificate must be properly endorsed and
otherwise in proper form for transfer. Furthermore, the person requesting the
exchange will have to pay eXegenics any transfer or other taxes required by
reason of the issuance of the eXegenics certificate in any name other than that
of the registered holder of the IDDS stock certificate surrendered, or establish
to the satisfaction of eXegenics or its agent that the tax has been paid or is
not payable.

STOCK OPTIONS AND WARRANTS

     All options outstanding under eXegenics' stock option plan prior to the
merger will remain in full force and effect upon the merger on the same terms as
are in effect immediately prior to the merger, except that (i) all options held
by a person who is, immediately prior to the merger, an officer or director of
eXegenics but who is not continuing as an officer or director of eXegenics after
the merger will immediately vest and such officer or director will have the term
of his original option grants in which to exercise his options, (ii) all options
held by a person who is, immediately prior to the merger, an employee of
eXegenics will immediately vest, and (iii) each holder of options who is,
immediately prior to the merger, an employee of eXegenics will have three years
from and after the termination of his active service with eXegenics in which to
exercise his options.
                                        46


     IDDS' stock option plan will be cancelled upon the merger. Upon the merger,
eXegenics will adopt a new stock incentive plan with substantially the same
terms as the IDDS stock option plan. eXegenics will issue to the holders of
stock options outstanding under the IDDS plan immediately prior to the merger
options with the same terms as the options issued under the IDDS plan, except
that (i) such options will remain exercisable for the time period set forth in
applicable option grant agreement, subject to clause (iv) below, (ii) each such
option will be exercisable for such number of shares of eXegenics common stock
as equals the number of shares of IDDS common stock into which the IDDS stock
options were exercisable multiplied by the exchange ratio, (iii) the per share
exercise price for each such option will equal the applicable per share exercise
price under the IDDS plan divided by the exchange ratio, and (iv) all options
held by a person who is, immediately prior to the merger, an employee, officer
or director of IDDS but who is terminated without cause within six months of the
closing of the merger, will vest upon such termination and such option holder
will have the term of his original option grants in which to exercise his
options.

     Upon the effective time of the merger, eXegenics will honor all outstanding
IDDS warrants. The IDDS warrants will thereupon be exercisable in accordance
with the terms thereof for such number of shares of eXegenics common stock as
equals (i) the number of shares of IDDS stock for which the IDDS warrants were
exercisable multiplied by (ii) the exchange ratio. The exercise price for the
IDDS warrants will thereupon be the exercise price for the IDDS warrants prior
to the effective time of the merger divided by the exchange ratio.

REPRESENTATIONS AND WARRANTIES

     The merger agreement contains customary representations and warranties made
by IDDS and eXegenics.

  IDDS' REPRESENTATIONS AND WARRANTIES

     The representations and warranties made by IDDS relate to various aspects
of IDDS' business, including:

     - organization and good standing as a corporation;

     - capital structure;

     - authorization, execution, delivery and enforceability of the merger
       agreement and related agreements, receipt of board approval and
       stockholder voting requirements;

     - accuracy of financial statements and corporate books and records and
       absence of undisclosed liabilities;

     - absence of certain changes in the business;

     - absence of litigation;

     - tax matters;

     - employee benefit plans;

     - compliance with laws;

     - certain types of agreements, contracts and commitments;

     - intellectual property matters;

     - title to properties and absence of liens and encumbrances;

     - insurance matters;

     - compliance with environmental laws and regulations;

     - employee matters;
                                        47


     - absence of certain types of transactions with related parties;

     - brokers' and finders' fees and third party expenses incurred in
       connection with the merger;

     - accuracy and completeness of portions of this joint proxy
       statement/prospectus; and

     - completeness of representations made.

     The representations and warranties of IDDS terminate upon the effective
time of the merger. An aggregate of 10% of the shares of eXegenics common stock
issuable in connection with the merger will be placed in an escrow fund and
serve as the exclusive source of reimbursement to eXegenics for, among other
things, losses arising from any breach by IDDS of its representations and
warranties in the merger agreement. For a more detailed description of the
escrow fund and IDDS' reimbursement obligations, see the section entitled
"Escrow Arrangements" beginning on page   .

  REPRESENTATIONS AND WARRANTIES OF EXEGENICS AND IDDS MERGER CORP.

     The representations and warranties made by eXegenics and IDDS Merger Corp.
relate to various aspects of eXegenics' and IDDS Merger Corp.'s business,
including:

     - organization and good standing as a corporation;

     - capital structure;

     - authorization, execution, delivery and enforceability of the merger
       agreement and related agreements, receipt of board approval and
       stockholder voting requirements;

     - accuracy of financial statements and corporate books and records and
       absence of undisclosed liabilities;

     - accuracy and completeness of filings and reports with the Securities and
       Exchange Commission;

     - absence of certain changes in the business;

     - absence of litigation;

     - tax matters;

     - employee benefit plans;

     - compliance with laws;

     - certain types of agreements, contracts and commitments;

     - intellectual property matters;

     - title to properties and absence of liens and encumbrances;

     - insurance matters;

     - compliance with environmental laws and regulations;

     - employee matters;

     - absence of certain types of transactions with related parties;

     - brokers' and finders' fees and third party expenses incurred in
       connection with the merger;

     - accuracy and completeness of portions of this joint proxy
       statement/prospectus; and

     - completeness of representations made.

     The representations and warranties of eXegenics terminate upon the
effective time of the merger. An additional number of shares of eXegenics common
stock equal to 10% of the shares issuable in connection with the merger will be
placed in an escrow fund and serve as the exclusive source of reimbursement to
the former holders of IDDS common shares for, among other things, losses arising
from any breach by
                                        48


eXegenics of its representations and warranties in the merger agreement. For a
more detailed description of the escrow fund and eXegenics' reimbursement
obligations, see the section entitled "Escrow Arrangements" beginning on page
  .

     The representations and warranties contained in the merger agreement are
complicated and not easily summarized. You are urged to carefully read Articles
III and IV of the merger agreement entitled "Representations and Warranties of
the Company," relating to IDDS, and "Representations and Warranties of Parent
and Merger Sub," relating to eXegenics and IDDS Merger Corp.

COVENANTS

  CONDUCT OF EXEGENICS' AND IDDS' BUSINESS PRIOR TO THE MERGER

     Each of eXegenics and IDDS has agreed in the merger agreement that, while
the merger is pending, it will carry on its business in its usual and customary
manner. Furthermore, each of eXegenics and IDDS has committed to conduct its
business during the pendency of the merger in compliance with specific
restrictions relating to the following:

     - amendment to its charter documents;

     - issuance of securities;

     - incurrence of indebtedness;

     - mortgage and encumbrance or properties;

     - modification, amendment or termination of material contracts;

     - issuance of dividends or other distributions;

     - employees and employee benefits;

     - sale, lease, license and disposition of properties and assets;

     - assumption or guarantee of obligations of other parties;

     - actions that would prevent, delay or impede the consummation of the
       merger;

     - payment of finders' or investment bankers' fees; and

     - actions which would breach representations and warranties contained in
       the merger agreement.

     A complete list of these actions is set forth in Section 5.2 of the merger
agreement entitled "Prohibited Actions Pending Closing," which is included as
Annex A to this joint proxy statement/ prospectus.

  NO SOLICITATION BY EXEGENICS OR IDDS OF OTHER OFFERS

     Each of eXegenics and IDDS has agreed that, while the merger is pending, it
will not solicit or initiate any inquiries or proposals from any other entities
regarding the sale of eXegenics' or IDDS' business or assets, any of its capital
stock or any merger, consolidation, business combination or similar transaction.
In the event of a violation of this covenant by IDDS or eXegenics, certain
termination fees may be payable to the other party. See section entitled
"Termination of the Merger Agreement," page   .

  CONVERSION OF IDDS PREFERRED STOCK

     IDDS is obligated under the merger agreement to take all steps necessary to
obtain the requisite elections from the holders of IDDS preferred stock to
effect the conversion of all shares of IDDS preferred stock into IDDS common
stock prior to the effective time of the merger.

                                        49


  FINANCIAL POSITION OF EXEGENICS

     eXegenics is obligated under the merger agreement to have, as of the
effective time of the merger, cash or cash equivalents in the amount of at least
$16.5 million and current liabilities of not more than $1.1 million.

  LISTING OF EXEGENICS COMMON STOCK ON NASDAQ

     eXegenics has agreed to authorize the listing of the eXegenics common stock
to be issued in connection with the merger on the Nasdaq National or SmallCap
Market upon official notice of issuance prior to the effective time of the
merger if then so listed. In addition, eXegenics and IDDS have agreed to
cooperate to pursue all necessary documentation to maintain the listing of the
eXegenics common stock on Nasdaq, including an initial listing application, if
required, and an appeal of any decision by Nasdaq to delist the eXegenics common
stock, if applicable. Please see the Risk Factors relating to our Nasdaq listing
on pages [  ] and [  ].

MEETINGS OF STOCKHOLDERS

     eXegenics is obligated under the merger agreement to hold and convene a
special meeting of its stockholders for purposes of the consideration of and
voting on the issuance of shares of eXegenics common stock in connection with
the merger, the amendment to the eXegenics certificate of incorporation to
increase the number of shares of eXegenics common stock authorized for issuance,
the authorization of the board of directors, in its discretion, to effect a
reverse split of eXegenics' issued and outstanding common stock, and the
adoption of a new stock incentive plan and an employee stock purchase plan.

     IDDS is obligated under the merger agreement to hold and convene a special
meeting of its stockholders for purposes of approval of the proposed merger
agreement and related transactions.

BOARDS OF DIRECTORS OF EXEGENICS AND IDDS AFTER THE MERGER

     Upon completion of the proposed merger, pursuant to the terms of the merger
agreement, the board of directors of each of eXegenics and IDDS will consist of
four directors designated by IDDS (who will be Mark C. Rogers, M.D., Peter Kash,
Edward Miller, M.D. and Mark Siegel), four directors designated by eXegenics
(who will be Ronald L. Goode, Ph.D., Gary Frashier, Ira J. Gelb, M.D. and Robert
Easton) and one independent director mutually agreed upon by IDDS and eXegenics
(who will be Douglas Watson). As of the effective time of the merger, Mark C.
Rogers, M.D. will serve as the executive chairman of the board of directors of
eXegenics and of IDDS.

     As of the effective time of the merger and after receipt of stockholder
approval, the board of directors of eXegenics will be divided into three
classes, the first class to be comprised of Peter Kash, Robert Easton and
Douglas Watson, the second class to be comprised of Edward Miller, M.D., Gary
Frashier and Ira J. Gelb, M.D., and the third class to be comprised of Mark C.
Rogers, M.D., Ronald L. Goode, Ph.D. and Mark Siegel. The term of the directors
in the first class will expire at the annual meeting of eXegenics' stockholders
in year 2003; the term of the directors in the second class will expire at the
annual meeting of eXegenics' stockholders in year 2004; and the term of the
directors in the third class will expire at the annual meeting of eXegenics'
stockholders in year 2005. The term of each of such directors thereafter will be
three years. None of such directors may be removed from eXegenics' board of
directors, except for cause.

CONDITIONS TO CLOSING

     There are numerous conditions that have to be satisfied or waived before
the merger can be completed. These conditions are divided into three categories
and are summarized below.

                                        50


     The obligations of each party to complete the merger are subject to the
following conditions:

     - the merger agreement and related transactions must have been adopted by
       the requisite vote of the IDDS stockholders;

     - the issuance of shares of eXegenics common stock to IDDS stockholders,
       the amendment of the eXegenics certificate of incorporation to increase
       the number of shares of eXegenics common stock authorized for issuance,
       the authorization of the board of directors, in its discretion, to effect
       a reverse split of eXegenics' issued and outstanding common stock, and
       the adoption of a new stock incentive plan must have been approved by the
       requisite vote of the eXegenics stockholders;

     - the registration statement, of which this joint proxy
       statement/prospectus is a part, must have been declared effective by the
       Securities and Exchange Commission; and

     - no court order or other legal restraint or prohibition preventing the
       consummation of the merger may be in effect or pending.

     The obligations of eXegenics to complete the merger are subject to the
following additional conditions:

     - with certain exceptions, the representations and warranties of IDDS must
       be accurate in all material respects as of the date of the merger
       agreement and as of the closing date of the merger;

     - IDDS must have performed or complied in all material respects with all of
       its agreements and covenants required by the merger agreement to be
       performed or complied with by IDDS at or before the completion of the
       merger;

     - eXegenics shall have received an opinion from IDDS' legal counsel
       regarding certain corporate legal matters;

     - eXegenics shall have received certificates of officers of IDDS with
       respect to the accuracy of IDDS' representations and warranties and
       performance by IDDS of its covenants and obligations pursuant to the
       merger agreement;

     - certain consents, waivers and approvals required to consummate the merger
       shall have been obtained;

     - shares of IDDS capital stock held by stockholders who have exercised and
       perfected appraisal rights in accordance with the applicable provisions
       of Delaware law shall not comprise greater than 5% of the total number of
       shares of IDDS capital stock outstanding immediately prior to the closing
       of the merger;

     - certain of IDDS' principal stockholders shall have entered into lock-up
       agreements with eXegenics;

     - Mark C. Rogers, M.D. must have executed an employment agreement with
       eXegenics;

     - a comfort letter from PricewaterhouseCoopers LLP must have been delivered
       to eXegenics; and

     - as of the effective time of the merger, Ronald L. Goode, Ph.D. must have
       been elected to be president and chief executive officer of eXegenics and
       IDDS, and four directors designated by eXegenics must have been elected
       to be members of the boards of directors of eXegenics and IDDS.

     The obligations of IDDS to complete the merger are subject to the following
additional conditions:

     - with certain exceptions, the representations and warranties of eXegenics
       must be accurate in all material respects as of the date of the merger
       agreement and as of the closing date of the merger;

     - eXegenics must have performed or complied in all material respects with
       all of its agreements and covenants required by the merger agreement to
       be performed or complied with by eXegenics at or before the completion of
       the merger;

                                        51


     - IDDS shall have received an opinion from eXegenics' legal counsel
       regarding certain corporate legal matters;

     - IDDS shall have received certificates of officers of eXegenics with
       respect to the accuracy of eXegenics' representations and warranties and
       performance by eXegenics of its covenants and obligations pursuant to the
       merger agreement;

     - certain consents, waivers and approvals required to consummate the merger
       shall have been obtained;

     - certain of eXegenics' principal stockholders shall have entered into
       lock-up agreements with eXegenics;

     - Ronald L. Goode, Ph.D. must have executed an employment agreement with
       eXegenics;

     - a comfort letter from Ernst & Young LLP must have been delivered to IDDS;
       and

     - as of the effective time of the merger, Mark C. Rogers, M.D. must have
       been elected as executive chairman of eXegenics and IDDS, and four
       directors designated by IDDS must have been elected to be members of the
       boards of directors of eXegenics and IDDS.

     Each of the conditions listed in the previous two paragraphs is waivable by
the party or parties whose obligations to complete the merger are so
conditioned.

ESCROW ARRANGEMENTS

     An aggregate of 10% of the shares of eXegenics common stock issuable in the
merger to holders of IDDS capital stock will automatically be deposited in an
escrow fund upon the consummation of the merger. The escrow fund will be held by
U.S. Trust Company as the escrow agent. The escrowed shares will be held in the
escrow fund for a period of six months following the effective time of the
merger and will serve as the exclusive source of reimbursement to eXegenics for,
among other things: (i) any losses arising from any breach by IDDS of its
representation and warranties in the merger agreement; or (ii) any failure by
IDDS to perform its covenants and obligations under the merger agreement.

     Upon the consummation of the merger, eXegenics will issue and deliver into
escrow an additional number of shares of its common stock equal to the number of
shares described above. The escrow fund will be held by U.S. Trust Company as
the escrow agent. The escrowed shares will be held in the escrow fund for a
period of six months following the effective time of the merger and will serve
as the exclusive source of reimbursement to the former holders of IDDS common
shares for, among other things: (i) any losses arising from any breach by
eXegenics of its representation and warranties in the merger agreement; or (ii)
any failure by eXegenics to perform its covenants and obligations under the
merger agreement.

     Subject to any unresolved claims, the escrow fund will terminate on the
six-month anniversary of the closing date of the merger. The remaining escrow
shares, if any, will be distributed to the former holders of IDDS capital stock
that contributed such shares of eXegenics common stock to the escrow fund or to
eXegenics for cancellation, as applicable. For more information regarding the
escrow arrangements, we encourage you to review Article VIII of the merger
agreement, which is attached as Annex A to this joint proxy
statement/prospectus.

STOCKHOLDER REPRESENTATIVES

     Mark C. Rogers, M.D. will serve as the representative of IDDS stockholders
and Ronald L. Goode, Ph.D. will serve as the representative of eXegenics
stockholders to authorize delivery of the escrow shares for reimbursement of
claims, to object to such deliveries, to negotiate and enter into settlements
and compromises with respect to such claims and to take certain other actions
with respect to claims made on the shares of eXegenics common stock in the
escrow fund.

                                        52


TERMINATION OF THE MERGER AGREEMENT

     Under the following conditions, the merger agreement may be terminated at
any time before the completion of the merger, whether before or after the
stockholder approvals have been obtained at the special meetings:

     - by mutual consent of eXegenics and IDDS;

     - subject to certain conditions, by either eXegenics or IDDS if the merger
       has not been completed before February 14, 2003;

     - subject to certain conditions, by eXegenics or IDDS if any application
       for regulatory or governmental approval necessary to consummate the
       merger is denied;

     - by eXegenics or IDDS if a final, non-appealable order of a court prevents
       consummation of the merger or if a law is enacted which would make
       consummation of the merger illegal;

     - by eXegenics, if (i) the stockholders of IDDS fail to approve the merger
       agreement or (ii) the requisite approval of the conversion of all
       outstanding shares of IDDS preferred stock into shares of IDDS common
       stock is not obtained from the stockholders of IDDS;

     - by IDDS, if the stockholders of eXegenics fail to approve any of the
       proposals to (i) issue shares of eXegenics common stock in connection
       with the merger, (ii) increase the number of shares of eXegenics common
       stock authorized for issuance, (iii) authorize the board of directors, in
       its discretion, to effect a reverse split of the issued and outstanding
       shares of eXegenics common stock or (iv) adopt a new employee stock
       incentive plan of eXegenics;

     - by IDDS if, as of the effective time of the merger, eXegenics does not
       have cash or cash equivalents in the amount of at least $16.5 million, or
       eXegenics' current liabilities exceed $1.1 million;

     - by eXegenics, if (i) IDDS materially breaches a representation, warranty,
       covenant or other provision of the merger agreement and fails to cure
       such breach within 30 days of receiving notice of the breach or (ii) any
       of the conditions precedent to eXegenics' obligation to close the merger
       has not been satisfied or satisfaction is or becomes impossible;

     - by IDDS, if (i) eXegenics materially breaches a representation, warranty,
       covenant or other provision of the merger agreement and fails to cure
       such breach within 30 days of receiving notice of the breach or (ii) any
       of the conditions precedent to IDDS' obligation to close the merger has
       not been satisfied or satisfaction is or becomes impossible; or

     - subject to certain conditions, by eXegenics or IDDS, if the other party
       approves or enters into an agreement providing for it to engage in a
       superior acquisition proposal in that the acquisition proposal, if
       consummated would result in a transaction more favorable to stockholders.

EFFECT OF TERMINATION

     If the merger agreement is terminated pursuant to the conditions set forth
above, all further obligations of the parties under the merger agreement will
terminate, except that any obligations with respect to payment of the break-up
fee described below will survive.

BREAK-UP FEE

     If IDDS terminates the merger agreement because eXegenics has not obtained
the requisite vote of its stockholders, because of a material breach of
representations or covenants by eXegenics, because of failure of eXegenics to
satisfy conditions to closing or because eXegenics has approved or entered into
an agreement relating to a superior acquisition proposal, or eXegenics
terminates the merger agreement because it has received a superior acquisition
proposal, or because ten business days have elapsed since

                                        53


eXegenics deemed an acquisition proposal to be superior and such determination
has not been withdrawn, then eXegenics will pay to IDDS a termination fee equal
to $2 million in cash.

     If eXegenics terminates the merger agreement because IDDS has not obtained
the requisite vote of its stockholders, because of a material breach of
representations or covenants by IDDS, because of failure of IDDS to satisfy
conditions to closing or because IDDS has approved or entered into an agreement
relating to a superior acquisition proposal, or IDDS terminates the merger
agreement because it has received a superior acquisition proposal, or because
ten business days have elapsed since eXegenics deemed an acquisition proposal to
be a superior and such determination has not been withdrawn, then IDDS will pay
or deliver to eXegenics, at IDDS' option, either a termination fee equal to $2
million in cash or shares of IDDS having a value of $4 million (based on a
valuation prepared by Thomas Weisel Partners LLC, C. E. Unterberg, Towbin, Inc.,
Wells Fargo Securities LLC or such other firm as is mutually agreed to by
eXegenics and IDDS or, if they cannot mutually agree on a firm, the valuation
will be prepared by Wells Fargo Securities, LLC.

EXPENSES

     Whether or not the merger is completed, all fees and expenses incurred in
connection with the merger, the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring such
fees or expenses, including fees and expenses of agents, representatives,
counsel and accountants, except that eXegenics and IDDS will each pay 50% of all
expenses and fees related to filing of the registration statement of which this
joint proxy statement/prospectus is a part and related documents with the SEC.

                                        54


                   AGREEMENTS RELATED TO THE MERGER AGREEMENT

     This section of the joint proxy statement/prospectus describes agreements
related to the merger agreement. While eXegenics and IDDS believe that these
descriptions cover the material terms of these agreements, these summaries may
not contain all of the information that is important to you. Forms of these
agreements are attached as exhibits to this joint proxy statement/prospectus as
Exhibits A-1 and A-2.

VOTING AGREEMENTS

     As a condition to eXegenics' willingness to enter into the merger
agreement, the following significant IDDS stockholders entered into voting
agreements: Mark C. Rogers, M.D. and Lindsey A. Rosenwald, M.D. By entering into
the voting agreements, these IDDS stockholders have agreed to vote the shares of
IDDS capital stock that they beneficially own in favor of the approval of the
merger and the adoption of the merger agreement. These IDDS stockholders may
vote their shares of IDDS capital stock on all unrelated matters.

     On or prior to September 19, 2002, these IDDS stockholders entered into
voting agreements with respect to approximately [          ] shares of IDDS
capital stock beneficially owned by them which represented approximately
[     ]% of the total IDDS capital stock. None of the IDDS stockholders who are
parties to the voting agreements were paid additional consideration in
connection with the voting agreements.

     The IDDS voting agreements will terminate upon the earlier to occur of the
termination of the merger agreement or the completion of the merger. The form of
IDDS voting agreement is contained within Exhibit A-1 to this joint proxy
statement/prospectus. We encourage you to read the form of IDDS voting and
lock-up agreement carefully.

AFFILIATE LOCK-UP AGREEMENTS

     As a condition to eXegenics' willingness to enter into the merger
agreement, the following significant IDDS stockholders entered into lock-up
agreements: Mark C. Rogers, M.D. and Lindsay Rosenwald, M.D. In addition, each
director and executive officer of IDDS has entered into a lock-up agreement. By
entering into the lock-up agreements with eXegenics, these IDDS stockholders,
subject to certain conditions and exceptions, agreed to limit the sale or
transfer of the shares of eXegenics common stock that these stockholders may
receive in connection with the proposed merger. These stockholders have agreed
not to sell or otherwise transfer any shares of eXegenics common stock received
in connection with the proposed merger for a period of six months following the
completion of the merger.

     As a condition to IDDS' willingness to enter into the merger agreement,
each director and executive officer of eXegenics has entered into a lock-up
agreement. By entering into the lock-up agreements with IDDS, these eXegenics
stockholders, subject to certain conditions and exceptions, agreed to limit the
sale or transfer of the shares of eXegenics common stock that these stockholders
own. These stockholders have agreed not to sell or otherwise transfer any shares
of eXegenics common stock for a period of six months following the completion of
the merger.

     The form of lock-up agreement for Drs. Rogers and Rosenwald is attached
within Exhibit A-1 to this joint proxy statement/prospectus and the form of
lock-up agreement for all other directors and executive officers of IDDS and
eXegenics is attached as Exhibit A-2 to this joint proxy statement/prospectus.
We encourage you to read the forms of lock-up agreements carefully.

                                        55


           STATUTORY APPRAISAL RIGHTS OF DISSENTING IDDS STOCKHOLDERS

     If the merger agreement is approved by the required vote of IDDS
stockholders and is not abandoned or terminated, holders of IDDS capital stock
who did not vote in favor of the merger may have the right to demand in cash the
fair value of all their IDDS shares (and not in part) instead of receiving
shares of eXegenics common stock. Holders of options or warrants to purchase
IDDS stock will not be entitled to appraisal rights. Shares of IDDS stock will
not be exchanged for eXegenics common stock if the holder of the shares validly
exercises and perfects statutory appraisal rights with respect to the shares by
complying with Section 262 of the Delaware General Corporation Law, or DGCL, a
copy of which is attached to this joint proxy statement/prospectus as Annex C.
When and if the holder of those shares withdraws the demand for appraisal or
otherwise becomes ineligible to exercise appraisal rights, the shares will be
automatically exchanged for shares of eXegenics common stock on the same basis
as all other IDDS shares are exchanged on in the merger.

     A summary of Delaware law regarding dissenting stockholders' appraisal
rights is provided below. HOWEVER, IN VIEW OF THE COMPLEXITY OF LAW RELATING TO
APPRAISAL RIGHTS, IDDS STOCKHOLDERS CONSIDERING OBJECTING TO THE MERGER ARE
URGED TO CONSULT THEIR OWN LEGAL COUNSEL.

     Pursuant to the terms of the merger agreement, eXegenics will be released
from its obligation to effect the merger if appraisal rights have been exercised
by IDDS stockholders holding more than 5% of IDDS' outstanding voting shares.

APPRAISAL RIGHTS PROCEDURES

     If you are an IDDS stockholder and you wish to exercise your appraisal
rights, you must satisfy the provisions of Section 262 of the Delaware General
Corporation Law. Section 262 requires the following:

     You Must Make a Written Demand for Appraisal.  You must deliver a written
demand for appraisal to IDDS before the vote on the merger agreement and the
merger is taken at the special meeting. This written demand for appraisal must
be provided to IDDS separately from your proxy. In other words, a vote against
the IDDS merger agreement and the merger will not alone constitute a valid
demand for appraisal. Additionally, this written demand must reasonably inform
IDDS of your identity and of your intention to demand the appraisal of your
shares of IDDS stock.

     You Must Refrain from Voting for Approval of the Merger.  You must not vote
for approval of the merger agreement and the merger. If you vote, by proxy or in
person, in favor of the merger agreement and the merger, this will terminate
your right to appraisal. You can also terminate your right to appraisal if you
return a signed proxy and (1) fail to vote against approval of the merger
agreement and the merger or (2) fail to note that you are abstaining from
voting. Your appraisal rights will be terminated even if you previously filed a
written demand for appraisal.

     You Must Continuously Hold Your IDDS Shares.  You must continuously hold
your shares of IDDS stock, from the date you make the demand for appraisal
through the effective date of the merger. If you are the record holder of IDDS
stock on the date the written demand for appraisal is made but thereafter
transfer the shares prior to the effective date of the merger, you will lose any
right to appraisal in respect of those shares. You should read the paragraphs
below for more details on making a demand for appraisal.

     A written demand for appraisal of IDDS stock is effective only if it is
signed by, or for, the stockholder of record who owns such shares at the time
the demand is made. The demand must be signed as the stockholder's name appears
on his/her/its stock certificate(s). If you are the beneficial owner of IDDS
stock, but not the stockholder of record, you must have the stockholder of
record sign a demand for appraisal.

     If you own IDDS stock in a fiduciary capacity, such as a trustee, guardian
or custodian, you must disclose the fact that you are signing the demand for
appraisal in that capacity.

     If you own IDDS stock together with one or more persons, such as in a joint
tenancy or tenancy in common, all of the owners must sign, or have signed for
them, the demand for appraisal. An authorized
                                        56


agent, which could include one or more of the joint owners, may sign the demand
for appraisal for a stockholder of record; however, the agent must expressly
disclose the identity of the stockholder of record and the fact that the agent
is signing the demand as that stockholder's agent.

     If you are an IDDS stockholder who elects to exercise appraisal rights, you
should mail or deliver a written demand to:

        Innovative Drug Delivery Systems, Inc.
        787 Seventh Avenue
        48th Floor
        New York, New York 10019

     It is important that IDDS receive all written demands for appraisal before
the vote concerning the merger agreement and the merger is taken at the special
meeting. As explained above, this written demand should be signed by, or on
behalf of, the stockholder of record. The written demand for appraisal should
specify the stockholder's name and mailing address, the number of shares of
stock owned, and that the stockholder is thereby demanding appraisal of that
stockholder's shares.

     If you fail to comply with any of these conditions and the merger becomes
effective, you will only be entitled to receive the merger consideration
provided in the merger agreement.

     Written Notice.  Within ten days after the effective date of the merger,
IDDS must give written notice that the merger has become effective to each
stockholder who has fully complied with the conditions of Section 262 of the
DGCL.

     Petition with the Chancery Court.  Within 120 days after the effective date
of the merger, either IDDS or any IDDS stockholder who has complied with the
conditions of Section 262 of the DGCL, may file a petition in the Delaware Court
of Chancery. This petition should request that the chancery court determine the
value of the shares of stock held by all of the stockholders who are entitled to
appraisal rights. If you intend to exercise your rights of appraisal, you should
file such a petition in the chancery court. IDDS has no intention at this time
to file such a petition. Because IDDS has no obligation to file such a petition,
if you do not file such a petition within 120 days after the effective date of
the merger, you will lose your rights of appraisal.

     Withdrawal of Demand.  If you change your mind and decide you no longer
want appraisal rights, you may withdraw your demand for appraisal rights at any
time within 60 days after the effective date of the merger. You may also
withdraw your demand for appraisal rights after 60 days after the effective date
of the merger, but only with the written consent of IDDS. If you effectively
withdraw your demand for appraisal rights, you will receive the merger
consideration provided in the merger agreement.

     Request for Appraisal Rights Statement.  If you have complied with the
conditions of Section 262 of the DGCL, you are entitled to receive a statement
from IDDS. This statement will set forth the number of shares that have demanded
appraisal rights, and the number of stockholders who own those shares. In order
to receive this statement, you must send a written request to IDDS within 120
days after the effective date of the merger. After the merger, IDDS has 10 days
after receiving a request to mail the statement to you.

     Chancery Court Procedures.  If you properly file a petition for appraisal
in the chancery court and deliver a copy to IDDS, IDDS will then have 20 days to
provide the chancery court with a list of the names and addresses of all
stockholders who have demanded appraisal rights and have not reached an
agreement with IDDS as to the value of their shares. The chancery court will
then send notice to all of the stockholders who have demanded appraisal rights.
If the chancery court thinks it is appropriate, it has the power to conduct a
hearing to determine whether the stockholders have fully complied with Section
262 of the DGCL and whether they are entitled to appraisal rights under that
section. The chancery court may also require you to submit your stock
certificates to the Registry in Chancery so that it can note on the certificates
that an appraisal proceeding is pending. If you do not follow the chancery
court's directions, you may be dismissed from the proceeding.

                                        57


     Appraisal of Shares.  After the chancery court determines which
stockholders are entitled to appraisal rights, the chancery court will appraise
the shares of stock. To determine the fair value of the shares, the chancery
court will consider all relevant factors except for any appreciation or
depreciation due to the anticipation or accomplishment of the merger. After the
chancery court determines the fair value of the shares, it will direct IDDS to
pay that value to the stockholders who are entitled to appraisal rights. The
chancery court can also direct IDDS to pay interest, simple or compound, on that
value if the chancery court determines that the payment of interest is
appropriate. In order to receive the fair value of your shares, you must then
surrender your IDDS stock certificates to IDDS.

     The chancery court could determine that the fair value of your shares of
IDDS stock is more than, the same as, or less than the merger consideration. In
other words, if you demand appraisal rights, you could receive less
consideration than you would under the merger agreement. You should also be
aware that an opinion of an investment banking firm that the merger is fair is
not an opinion that the merger consideration is the same as the fair value under
Section 262 of the DGCL.

     In determining fair value, the chancery court is to take into account all
relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court
discussed the factors that could be considered in determining fair value in an
appraisal proceeding, stating that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that, in making this determination
of fair value, the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which could
be ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy.

     Costs and Expenses of Appraisal Proceeding.  The costs and expenses of the
appraisal proceeding may be assessed against IDDS and the stockholders
participating in the appraisal proceeding, as the chancery court deems equitable
under the circumstances. You can request that the chancery court determine the
amount of interest, if any, IDDS should pay on the value of stock owned by
stockholders entitled to the payment of interest. You may also request that the
chancery court allocate the expenses of the appraisal action incurred by any
stockholder pro rata against the value of all of the shares entitled to
appraisal.

     Loss of Stockholder's Rights.  If you demand appraisal rights, from and
after the effective date of the merger you will not be entitled to:

     - vote your shares of IDDS stock, for any purpose, for which you have
       demanded appraisal rights;

     - receive payment of dividends or any other distribution with respect to
       such shares, except for dividends or distributions, if any, that are
       payable to holders of record as of a record date prior to the effective
       time of the merger; or

     - receive the payment of the consideration provided for in the merger
       agreement (unless you properly withdraw your demand for appraisal).

     If no petition for an appraisal is filed within 120 days after the
effective date of the merger, your right to an appraisal will cease. You may
withdraw your demand for appraisal and accept the merger consideration by
delivering to IDDS a written withdrawal of your demand, except that (1) any
attempt to withdraw your demand for appraisal made more than 60 days after the
effective date of the merger will require the written approval of IDDS, and (2)
an appraisal proceeding in the chancery court cannot be dismissed unless the
chancery court approves such dismissal.

                                        58


     FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
EXERCISING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH
EVENT AN IDDS STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE APPLICABLE MERGER
CONSIDERATION WITH RESPECT TO SUCH DISSENTING SHARES IN ACCORDANCE WITH THE
MERGER AGREEMENT). IN VIEW OF THE COMPLEXITY OF THE PROVISIONS OF SECTION 262 OF
THE DGCL, IDDS STOCKHOLDERS WHO ARE CONSIDERING OBJECTING TO THE MERGER ARE
URGED TO CONSULT THEIR OWN LEGAL ADVISORS.

          MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     The following is a summary of the material U.S. federal income tax
consequences of the merger applies to IDDS stockholders. This summary is based
on the Internal Revenue Code, applicable U.S. Treasury Regulations, judicial
authority, and administrative rulings and practice, all as of the date of this
joint proxy statement/prospectus, all of which are subject to change, possibly
with retroactive effect, and to differing interpretations. This summary does not
purport to be a complete discussion of all U.S. federal income tax consequences
of the merger. The discussion below does not address any state, local or foreign
tax consequences of the merger. Your tax treatment may vary depending on your
particular situation. For example, the discussion may not apply, in whole or in
part, to you if you hold options in IDDS capital stock or acquired IDDS capital
stock under a compensatory or other employment-related arrangement, or if you
are an insurance company, a tax-exempt organization, a financial institution or
broker-dealer, a person who is neither a citizen nor a resident of the U.S., a
trader in securities that elects to mark-to-market, a person who holds IDDS
capital stock as part of a hedge, straddle or conversion transaction or if you
otherwise are a person subject to special treatment under the U.S. federal
income tax laws. The following discussion assumes that you held your IDDS
capital stock as a capital asset at the effective time of the merger, and only
summarizes the consequences of receiving eXegenics common stock in exchange for
IDDS capital stock. The following discussion does not describe the consequences
of receiving eXegenics common stock for other reasons, such as in consideration
for the performance of services.

     YOU ARE URGED TO CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
U.S. FEDERAL, STATE, LOCAL OR FOREIGN LAWS, AND THE EFFECT OF POSSIBLE CHANGES
IN APPLICABLE TAX LAWS.

     The obligation of IDDS to complete the merger is conditioned upon the
receipt by IDDS of the opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., counsel to eXegenics, that the merger will qualify as a "reorganization",
within the meaning of Section 368(a) of the Internal Revenue Code. The
obligation of eXegenics to complete the merger is also conditioned upon the
receipt by eXegenics of the opinion of Thelen Reid & Priest LLP, counsel to
IDDS, that the merger will be a reorganization, as described in Section 368(a)
of the Internal Revenue Code. However, neither IDDS nor eXegenics has requested
nor will request an advance ruling from the Internal Revenue Service as to the
tax consequences of the merger to you, and there can be no assurance that the
Internal Revenue Service or a court will agree with the conclusions set forth in
this joint proxy statement/prospectus or the opinions of counsel. Moreover, the
tax opinions will be based upon certain facts, representations and assumptions
set forth or referred to in the opinions and the continued accuracy and
completeness of certain representations made by eXegenics, IDDS and IDDS Merger
Corp. Provided the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, the merger will result in the
following U.S. federal income tax consequences to you:

     - You will recognize no gain or loss upon your receipt of eXegenics common
       stock solely in exchange for the shares of IDDS capital stock you
       surrender in the merger.

     - Your aggregate tax basis for the shares of eXegenics common stock you
       receive pursuant to the merger will equal your aggregate tax basis in the
       shares of IDDS capital stock you surrender in the merger reduced by the
       basis allocated to any fractional shares for which you receive cash in
       lieu of shares.

                                        59


     - Your holding period for the shares of eXegenics common stock you receive
       pursuant to the merger will include the period during which you held your
       shares of IDDS capital stock.

     - If you exercise your dissenters' rights and receive cash for your IDDS
       capital stock, you will generally recognize capital gain or loss measured
       by the difference, if any, between the amount of cash you receive and
       your basis in the IDDS capital stock you surrender for the cash, provided
       that the cash payment may be treated under certain circumstances as a
       dividend if you own, actually or constructively, stock in eXegenics after
       the payment. If you are a non-corporate stockholder, you may be subject
       to backup withholding at a rate of 30% on the cash you receive. Backup
       withholding will not apply to you, however, if you (a) furnish a correct
       taxpayer identification number and certify that you are not subject to
       backup withholding on the substitute Form W-9 or successor form included
       in the letter of transmittal to be delivered to you following the date of
       the merger, (b) provide a certification of foreign status on Form W-8 or
       successor form or (c) otherwise establish an exemption from backup
       withholding. Any amount withheld under these rules will be credited
       against your U.S. federal income tax liability.

     - If you receive cash in lieu of fractional shares as a result of the
       merger, you will generally recognize capital gain or loss measured by the
       difference, if any, between the amount of cash received and your basis in
       the fractional shares.

     - Although the matter is not free from doubt, for federal income tax
       purposes, you should be treated as having received the escrow shares upon
       consummation of the merger. Accordingly, (i) until the escrow shares are
       released, the interim basis of the eXegenics common stock received by you
       will be determined as though the maximum number of shares of eXegenics
       common stock were received by you, (ii) no gain or loss should result
       from your receipt of escrow shares upon termination of the escrow fund,
       and (iii) upon the return to eXegenics of any escrowed shares treated as
       previously received by you, no gain or loss should result to you but the
       basis in your remaining eXegenics shares should be increased by the basis
       of the shares returned to eXegenics. In the event the IRS prevails in
       asserting a different view of the treatment of escrowed shares, a
       fraction of the value of shares delivered to you upon termination of the
       escrow may be treated as imputed interest calculated from the time of
       consummation of the merger until the time the shares are delivered to
       you.

     - For federal income tax purposes, eXegenics currently has net operating
       losses, or NOLs, available for carry forward of approximately $35 million
       expiring in years 2006 through 2022 that may be used to offset possible
       future taxable income. As a consequence of the merger, eXegenics' ability
       to utilize the NOLs will be limited under section 382 of the Internal
       Revenue Code to approximately $400,000 per year.

     - For federal income tax purposes, IDDS currently has NOLs available for
       carry forward of approximately $18 million expiring in years 2018 through
       2022 that may be used to offset possible future taxable income.

     THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL RELEVANT TAX EFFECTS TO YOU. THUS, YOU ARE URGED TO
CONSULT YOUR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE
MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY AND
EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF
ANY PROPOSED CHANGES IN THE TAX LAWS.

                                        60


             UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     The following unaudited pro forma condensed combined financial statements
are presented to illustrate the effects of the merger on the historical
financial position and operating results of eXegenics and IDDS and to reflect
the termination of sponsored research funding to eXegenics from Bristol-Myers
Squibb, or BMS. As discussed further below, for accounting purposes the merger
will be accounted for as a reverse acquisition whereby IDDS is assumed to be the
accounting acquirer. The pro forma statements were prepared as if the merger had
been completed and the BMS funding had terminated as of January 1, 2001 for
statement of operations purposes and as of June 30, 2002 for balance sheet
purposes. The pro forma statements have been derived from, and should be read in
conjunction with, the historical financial statements, including the notes
thereto, of each of eXegenics and IDDS included in this proxy statement/
prospectus. For eXegenics, those financial statements are also included in
eXegenics' Quarterly Report on Form 10-Q for the quarter ended June 30, 2002,
and its Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

     In addition, unaudited supplemental pro forma per share data has been
provided to illustrate the effect of the proposed reverse common stock split of
1-for-[5]. The supplemental pro forma per share data was prepared as if the
reverse common stock split had been completed as of January 1, 2001.

     The unaudited pro forma condensed combined financial data does not reflect
cost savings, synergies or other financial benefits which may be achieved from
the merger, nor do they purport to be indicative of the operating results or the
financial position that would have been realized had the merger been consummated
as of the date and for the periods for which the pro forma data is presented.
The unaudited pro forma adjustments described in the notes are based upon
preliminary estimates and contain assumptions that eXegenics' and IDDS'
management believe are reasonable in such circumstances. The estimates used for
the purpose of preparing these pro forma financial statements are based on
current facts, circumstances, assumptions and estimates and the expectation that
the merged company will remain a development stage enterprise. The determination
of the fair value of assets acquired and liabilities assumed will be finalized
subsequent to the consummation of the merger and could be materially different
from amounts disclosed herein.

     The following pro forma data is provided:

          1. Unaudited pro forma condensed combined balance sheet as of June 30,
     2002.

          2. Unaudited pro forma condensed combined statement of operations,
     including supplemental pro forma per share data, for the year ended
     December 31, 2001.

          3. Unaudited pro forma condensed combined statement of operations,
     including supplemental pro forma per share data, for the six months ended
     June 30, 2002.

          4. Unaudited notes to pro forma condensed combined financial data.

                                        61


              UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
                              AS OF JUNE 30, 2002



                                          HISTORICAL          PRO FORMA ADJUSTMENTS
                                     --------------------     ---------------------      PRO FORMA
                                     EXEGENICS     IDDS        DEBIT        CREDIT      COMBINED(4)
                                     ---------   --------     --------     --------     -----------
                                                             (IN THOUSANDS)
                                                                         
Current assets:
  Cash, cash equivalents and
     restricted cash...............  $ 12,170    $  3,579     $    --      $    --       $ 15,749
  Investments......................    10,027          --                                  10,027
  Other current assets.............       421         395                                     816
                                     --------    --------                                --------
          TOTAL CURRENT ASSETS.....    22,618       3,974                                  26,592
  Property, plant and equipment,
     net...........................       708          48                      708(1)          48
  Notes
receivable -- officer/stockholder..       278          --                                     278
  Other assets.....................        63          40                       55(1)          48
                                     --------    --------                                --------
          TOTAL ASSETS.............  $ 23,667    $  4,062                                $ 26,966
                                     ========    ========                                ========
Current liabilities:
  Accounts payable and accrued
     expenses......................  $    827    $    699                    1,500(1)    $  3,026
  Current portion of capital lease
     obligations...................        91          --                                      91
                                     --------    --------                                --------
          TOTAL CURRENT
            LIABILITIES............       918         699                                   3,117
Capital lease obligations, less
  current portion..................       148          --                                     148
                                     --------    --------                                --------
          TOTAL LIABILITIES........     1,066         699                                   3,265
                                     --------    --------                                --------
Redeemable preferred stock.........        --      18,795      18,795(3)                       --
                                     --------    --------                                --------
Stockholders' equity (deficit):
  Common stock, preferred stock and
     additional paid-in capital....    67,315      23,392      67,315(2)    19,599(1)      61,786
                                                                            18,795(3)
  Subscriptions receivable.........      (352)         --                       50(1)        (302)
  Unearned compensation............        --        (453)                                   (453)
  Accumulated deficit..............   (41,792)    (38,371)                   1,041(1)     (37,330)
                                                                            41,792(2)
  Treasury stock...................    (2,570)         --                    2,570(2)          --
                                     --------    --------                                --------
          TOTAL STOCKHOLDERS'
            EQUITY (DEFICIT).......    22,601     (15,432)                                 23,701
                                     --------    --------                                --------
                                     $ 23,667    $  4,062                                $ 26,966
                                     ========    ========                                ========


   See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
                                  Statements.
                                        62


   UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS, INCLUDING
                     SUPPLEMENTAL PRO FORMA PER SHARE DATA,
                      FOR THE YEAR ENDED DECEMBER 31, 2001



                                               EXEGENICS     IDDS     ADJUSTMENTS   COMBINED(4)(7)
                                               ---------   --------   -----------   --------------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                        
REVENUES:
  Licensing and research fees................  $  1,333                 $(1,333)(5)    $     --
  Government grants..........................        --    $    882                         882
                                               --------    --------                    --------
     Total revenue...........................     1,333    $    882                         882
                                               --------    --------                    --------
OPERATING EXPENSES:
  Research and development...................     5,321       7,010      (1,094)(5)      11,030
                                                                           (207)(6)
  General and administrative.................     6,530       2,289        (199)(5)       8,541
                                                                            (79)(6)
                                               --------    --------                    --------
          Total operating expenses...........    11,851       9,299                      19,571
                                               --------    --------                    --------
Operating loss...............................   (10,518)     (8,417)                    (18,689)
Other income, net............................     1,733         348                       2,081
                                               --------    --------                    --------
          NET LOSS...........................    (8,785)     (8,069)                    (16,608)
Preferred stock dividend.....................      (180)     (3,559)                     (3,739)
                                               --------    --------                    --------
          NET LOSS AVAILABLE TO COMMON
            STOCKHOLDERS.....................  $ (8,965)   $(11,628)                   $(20,347)
                                               ========    ========                    ========
NET LOSS PER SHARE AVAILABLE TO COMMON
  STOCKHOLDERS
  Basic and diluted..........................  $   (.57)   $  (1.20)                   $   (.35)(8)
                                               ========    ========                    ========
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING....    15,749       9,725                      58,920 (8)
                                               ========    ========                    ========
Supplemental pro forma per share data
  assuming a one-for-five reverse stock split
NET LOSS PER SHARE AVAILABLE TO COMMON
  STOCKHOLDERS
  Basic and diluted(9).......................  $  (2.85)   $  (5.98)                   $  (1.73)(10)
                                               ========    ========                    ========
WEIGHTED AVERAGE COMMON STOCK
  OUTSTANDING(9).............................     3,150       1,945                      11,784 (10)
                                               ========    ========                    ========


   See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
                                  Statements.
                                        63


        UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS,
                INCLUDING SUPPLEMENTAL PRO FORMA PER SHARE DATA,
                     FOR THE SIX MONTHS ENDED JUNE 30, 2002



                                                     HISTORICAL
                                                 -------------------    PRO FORMA      PRO FORMA
                                                 EXEGENICS    IDDS     ADJUSTMENTS   COMBINED(4)(7)
                                                 ---------   -------   -----------   --------------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                         
REVENUES:
  Licensing and research fees..................   $   556                 $(556)(5)     $    --
  Government grants............................        --    $   191                        191
                                                  -------    -------                    -------
     Total revenue.............................       556    $   191                        191
                                                  -------    -------                    -------
OPERATING EXPENSES:
  Research and development.....................     2,476      1,940       (472)(5)       3,786
                                                                           (158)(6)
  General and administrative...................     2,109      3,894        (71)(5)       5,880
                                                                            (52)(6)
                                                  -------    -------                    -------
          Total operating expenses.............     4,585      5,834                      9,666
                                                  -------    -------                    -------
Operating loss.................................    (4,029)    (5,643)                    (9,475)
Other income, net..............................       376         40                        416
                                                  -------    -------                    -------
          NET LOSS.............................    (3,653)    (5,603)                    (9,059)
Preferred stock dividend.......................      (169)        --                       (169)
                                                  -------    -------                    -------
          NET LOSS AVAILABLE TO COMMON
            STOCKHOLDERS.......................   $(3,822)   $(5,603)                   $(9,228)
                                                  =======    =======                    =======
NET LOSS PER SHARE AVAILABLE TO COMMON
  STOCKHOLDERS Basic and diluted...............   $  (.24)   $  (.58)                   $  (.15)(8)
                                                  =======    =======                    =======
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING......    15,671      9,737                     62,101 (8)
                                                  =======    =======                    =======
Supplemental pro forma per share data assuming
  a one-for-five reverse stock split
NET LOSS PER SHARE AVAILABLE TO COMMON
  STOCKHOLDERS
  Basic and diluted(9).........................   $ (1.22)   $ (2.88)                   $ (0.74)(10)
                                                  =======    =======                    =======
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING(9)...     3,134      1,947                     12,420 (10)
                                                  =======    =======                    =======


   See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
                                  Statements.
                                        64


         UNAUDITED NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

 (1) In accordance with Statement of Financial Accounting Standards No. 141
     Business Combinations, the merger will be accounted for as a reverse
     acquisition using the purchase method whereby IDDS is deemed to be the
     accounting acquirer. The purchase price of $19,599 will be allocated to the
     fair value of eXegenics' assets acquired and liabilities assumed. Based on
     preliminary estimates, the fair value of acquired assets and assumed
     liabilities will be in excess of the purchase price. Accordingly, for the
     purposes of preparing the accompanying pro forma data, such excess has been
     initially applied to reduce fixed and intangible assets to zero and the
     remaining excess of $1,041 has been reflected herein as an extraordinary
     gain. The table below summarizes the estimated fair value of the assets
     purchased and the liabilities assumed and the corresponding balance sheet
     adjustments:

      ESTIMATED FAIR VALUE OF ASSETS PURCHASED AND LIABILITIES ASSUMED:



                                                            ESTIMATED
                                                            FAIR VALUE   EXEGENICS
                                                             ASSIGNED    BOOK VALUE     ADJUSTMENT
                                                            ----------   ----------   --------------
                                                                                      DEBIT (CREDIT)
                                                                             
     Current assets, primarily cash and investments.......   $22,618      $22,618        $    --
     Property, plant and equipment........................        --          708           (708)
     Notes receivable -- officer/stockholders.............       278          278             --
     Other assets.........................................         8           63            (55)
     Total liabilities, including transaction costs of
       $1,500.............................................    (2,566)      (1,066)        (1,500)
     Stock subscription receivable........................       302          352            (50)
     Extraordinary gain(a)................................    (1,041)          --         (1,041)
                                                             -------
                                                             $19,599
                                                             =======


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

     (a) The extraordinary gain represents the excess of fair value of acquired
         net assets over cost. For accounting purposes, such amount will be
         recorded as a non-recurring extraordinary gain upon consummation of the
         merger and has been reflected in the pro forma condensed combined
         balance sheet as a decrease to accumulated deficit.

        The equity securities to be issued in consideration for the purchased
        assets and assumed liabilities of eXegenics includes shares of common
        stock, preferred stock, stock options and warrants. The table below
        summarizes the securities to be issued and the estimated fair value
        assuming: (i) the reverse stock split is not approved and (ii) if the
        reverse stock split is approved.



                                                    ASSUMING NO 1-FOR-5            ASSUMING 1-FOR-5
                                                    REVERSE STOCK SPLIT           REVERSE STOCK SPLIT
                                                ----------------------------   -------------------------
                                    ESTIMATED               WEIGHTED AVERAGE   NUMBER   WEIGHTED AVERAGE
                                      FAIR       NUMBER      EXERCISE PRICE      OF      EXERCISE PRICE
                                    VALUE(B)    OF SHARES      PER SHARE       SHARES      PER SHARE
                                    ---------   ---------   ----------------   ------   ----------------
                                                                         
         Common stock.............   $12,695     15,673              NA        3,135             NA
         Preferred stock..........     1,573        828              NA           (c)            NA
         Stock options............     3,600      3,305          $ 4.41          661         $22.05
         Warrants.................       231      1,130          $10.81          226         $54.05
         Transaction costs........     1,500
                                     -------
           TOTAL..................   $19,599
                                     =======


        NA -- Not applicable

                                        65

                UNAUDITED NOTES TO PRO FORMA CONDENSED COMBINED
                         FINANCIAL DATA -- (CONTINUED)

     (b) The fair values were determined as follows:

         (i)  Common stock was determined based on the per share closing price
              of $0.81 on June 30, 2002.

         (ii)  Preferred stock was based on publicly-traded comparables with
               similar terms and conditions.

         (iii) Stock options and warrants were based on the Black-Scholes option
               pricing model.

      (c) The number of outstanding shares of preferred stock will not change if
          the reverse stock split is approved; however the conversion ratio of
          preferred stock into common stock will change from 1-for-1 to 1-for-5.
          Therefore, if the reverse stock split is approved, outstanding shares
          of preferred stock would convert into 166 shares of common stock.

         Included in the above table are options to be granted to individuals
         who: (i) are employed by eXegenics prior to consummation of the merger
         and, (ii) who are expected to continue in employment with the combined
         company upon consummation of the merger. The number, terms and
         conditions of these grants will be identical to those held by eXegenics
         employees prior to the merger consummation date. For the purposes of
         preparing these pro forma statements, the exercise price of these
         options is currently estimated to be in excess of the fair value of the
         underlying common stock on the grant date and accordingly, no
         compensation expense will result from such grant. In the event that the
         exercise price of these options is below the fair value of the
         underlying common stock on the grant date, then there will be
         compensation expense recognized in operations pro rata over the options
         vesting period equal to the difference between exercise price and the
         fair market value of the common stock.

 (2) Adjustment to eliminate eXegenics' common stock, preferred stock, paid-in
     capital, treasury stock and stockholders' deficit.

 (3) Upon consummation of the merger, all outstanding shares of IDDS' preferred
     stock will convert into shares of common stock.

 (4) The impact of income taxes on the pro forma condensed combined balance
     sheet and statements of operations is immaterial.

 (5) For the year ended December 31, 2001 and the six months ended June 30,
     2002, all of eXegenics license and research fee revenue was derived from
     BMS. During the six months ended June 30, 2002, BMS made their last payment
     under a research agreement and, therefore, eXegenics does not expect future
     revenues from BMS. Adjustments reflect the elimination of revenue and
     direct incremental cost related to the BMS sponsored research funding as if
     the funding terminated effective January 1, 2001.

 (6) Eliminate eXegenics' historical depreciation and amortization expense
     related to fixed and intangible assets that were adjusted to zero as part
     of the purchase price allocation.

 (7) As discussed in Note 1, upon the consummation of the merger, there will be
     a non-recurring extraordinary gain of $1,041 recorded as the result of the
     excess of fair value of the acquired net assets over cost. Such amount has
     been intentionally omitted from the pro forma condensed combined statements
     of operation.

 (8) Pro forma per share data has been computed assuming that the historical
     weighted average shares outstanding of IDDS is adjusted to reflect the
     following:

      (i)   Adjust the outstanding shares of common stock to effectuate the
            merger exchange ratio. Each share of common stock held by IDDS
            stockholders before the merger consummation date will be exchanged
            for 3.132 shares of common stock upon the consummation of the
            merger.

      (ii)  Issuance of 15,673 shares of common stock to eXegenics stockholders.

                                        66

                UNAUDITED NOTES TO PRO FORMA CONDENSED COMBINED
                         FINANCIAL DATA -- (CONTINUED)

      (iii) Issuance of 15,928 shares of common stock upon the assumed
            conversion of all outstanding shares of IDDS' preferred stock.

     The table below summarizes the pro forma adjustments:



                                                          YEAR ENDED       SIX MONTHS ENDED
                                                       DECEMBER 31, 2001    JUNE 30, 2002
                                                       -----------------   ----------------
                                                                     
Weighted average shares outstanding for the period...        9,725               9,737
Adjustment to effectuate the merger..................       20,737              20,763
                                                            ------              ------
                                                            30,462              30,500
Shares issued to eXegenics stockholders..............       15,673              15,673
Shares issued in connection with conversion of all
  outstanding shares of IDDS's preferred stock(d)....       12,785              15,928
                                                            ------              ------
                                                            58,920              62,101
                                                            ======              ======


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

     (d) As of December 31, 2001, there were 5,004 shares of preferred stock
         outstanding that converts into 15,928 shares of common stock as the
         result of the exchange ratio. Included therein are 990 shares of Series
         B convertible preferred stock that was issued on December 31, 2001,
         which converts into 3,151 shares of common stock adjusted for the
         exchange ratio. For purposes of computing the weighted average effect
         on pro forma per share data the Series B preferred stock was deemed to
         be outstanding for only one day during the year ended December 31, 2001
         and for the full period during the six months ended June 30, 2002.

 (9) The historical per share data of eXegenics and IDDS has been adjusted to
     reflect a reverse stock split of 1-for-5.

(10) The supplemental pro forma per share data has been computed assuming the
     pro forma per share data is adjusted to reflect the 1-for-5 reverse stock
     split as summarized below:



                                                          YEAR ENDED       SIX MONTHS ENDED
                                                       DECEMBER 31, 2001    JUNE 30, 2002
                                                       -----------------   ----------------
                                                                     
Pro forma weighted average shares outstanding (Note
  8).................................................       58,920              62,101
Reverse stock split..................................           /5                  /5
                                                            ------              ------
                                                            11,784              12,420
                                                            ======              ======


                                        67


                        INFORMATION REGARDING EXEGENICS

     In this section, "Information Regarding eXegenics," references to "we,"
"us," and "our" refer to eXegenics.

GENERAL

     We were organized under the laws of the State of Delaware as
BioPharmaceuticals, Inc. and commenced operations in 1991 and changed our name
to Cytoclonal Pharmaceuticals Inc. in 1992. During October 2001, we changed our
name to eXegenics Inc. Prior to 2001, our efforts were principally devoted to
research activities including efforts to discover therapeutic products for human
diseases. Beginning in 2001, we repositioned ourselves as a post-genomics drug
creation enterprise with a goal of building a development pipeline of
commercially viable drug leads and pharmaceutical products for the treatment of
cancers and drug-resistant bacterial diseases. In addition, we increased our
efforts to obtain and develop clinical drug candidates and to identify
opportunities for financial and operational synergies, specifically to identify
acquisition and merger opportunities that would provide pharmaceutical compounds
in or close to human clinical trials. We engaged Petkevich & Partners in March
of 2002 to assist us in this endeavor, and on September 20, 2002, we announced
that we had executed a definitive merger agreement with IDDS, a private company
with a portfolio of product candidates in Phase II clinical development. We are
currently involved in activities related to the pending business combination,
including regulatory filings and a stockholders' meeting while continuing work
on our internal scientific programs.

     We utilize our proprietary research technologies, Quantum Core Technology
(QCT(TM)) and Optimized Anti-Sense Inhibitory Sequence (OASIS(TM)), in attempts
to create novel compounds that may be advanced towards clinical drug candidates
and pharmaceutical products. QCT is a computer-assisted drug design technology
platform primarily targeted to the inhibition of proteins involved in disease
processes. OASIS is a patented technology platform that uses computers to design
"anti-sense sequences" -- molecules capable of blocking the expression of
specific genes. By targeting both proteins and genes, we believe we have the
capability to produce chemical molecules that can be developed into drugs
effective against a variety of cancers and infectious diseases. If such
compounds are successfully synthesized, they must undergo additional testing. If
they are successfully tested and optimized in vitro, they will then be tested in
animals and ultimately in humans. Successful development of such drugs could
provide a broad range of business opportunities between us and other
pharmaceutical and biotechnology companies.

     During the first quarter of 2002, we announced the discovery of a series of
novel chemical entities, or NCEs. These NCEs demonstrated in-vitro activity
against Gram-positive bacterial pathogens, including Staphylococcus aureus, that
are resistant to ordinary antibiotics. We filed a provisional U.S. patent
application regarding the structure and use of these agents. Using our
proprietary research technology QCT, we are endeavoring to create clinical drug
candidates based on these agents, although we must first overcome a number of
hurdles, such as increased activity and less toxicity, before we are ready to
begin clinical trials. There can be no assurance that we will overcome these
hurdles or otherwise be successful in producing clinical drug candidates.

     We are engaged in a Master License Agreement with Bristol-Myers Squibb, or
Bristol-Myers. The technology that is the basis for the license agreement
concerns genetically engineered fermentation technology that has been under
development for the creation of an improved production system for paclitaxel,
the active ingredient in Taxol(R), and its precursor taxane, baccatin. We
obtained the rights to patents covering this technology from the Research and
Development Institute at Montana State University, or RDI, and Washington State
University Research Foundation, or WSU. A sponsored research program had been
actively funded by Bristol-Myers since 1998; we received their final payment in
February of this year and, as of June 12, 2002, we had no further research
obligations to Bristol-Myers. However, our Master License Agreement with
Bristol-Myers remains in effect. We have initiated discussions with
Bristol-Myers with the objective of negotiating an agreement to reacquire
exclusive rights to the WSU paclitaxel gene technology for eXegenics.

                                        68


     As a result of the completion of funding related to our Sponsored Research
Agreement with Bristol-Myers, we initiated efforts to renegotiate several
scientific collaborations, including agreements with RDI and WSU. The agreement
with RDI was terminated in June 2002, relieving the Company of future annual
minimum royalty payments and neither party has any further obligation to the
other with respect to any terminated licenses or their respective technologies.
We have requested a renegotiation of our current agreement with WSU.

     We continue to search for a party willing to outlicense our production
system for manufacturing a recombinant form of glucocerebrosidase that is
intended for use as an enzyme replacement therapy for Type 1 Gaucher's Disease.
Our production system for the enzyme could result in a more cost-effective means
of producing the enzyme as compared to those production systems currently in
commercial use.

     Our overall business strategy has been to:

     - Acquire, via merger or acquisition, later-stage pharmaceutical compounds
       that complement our strategy to accelerate the development of proprietary
       drugs;

     - Establish a partner relationship to advance and leverage our QCT and
       OASIS research platforms;

     - Continue development of on our anti-bacterial NCEs; and

     - Advance our research related to enzyme targets that are central to the
       development of antibiotic resistance in Mycobacterium tuberculosis, the
       causative agent of tuberculosis. Using QCT, we are in the preclinical
       discovery stage of creating "core inhibitors" of the specific enzyme
       targets.

QUANTUM CORE TECHNOLOGY(TM) (QCT(TM))

     QCT is a proprietary, drug creation methodology that is based on a
combination of quantum chemistry, proprietary computational software and
molecular modeling. Unlike the traditional and more common structural-based drug
design techniques, QCT is a Quantum Mechanism-Based drug creation technique that
combines quantum mechanical calculations and physical organic chemistry to
understand essential biochemical reactions at the level of the atom. The
insights we gain into "quantum core mechanisms" in this way may produce a wide
range of drug leads.

     This approach to drug creation rises from fundamental concepts in the
quantum mechanics pioneered by Dr. John Pople, a Nobel Prize winner in Chemistry
in 1998 and Chairman of our Scientific Advisory Board. Dr. Dorit Arad, our
Vice-President of Drug Design, developed QCT and currently leads a team of
scientists who systematically apply these principles to our drug discovery
efforts.

     By gaining a deep understanding of how enzymes work at the level of the
atom, we believe that we can custom-design novel, small molecules that can be
developed into therapeutic drug candidates. Because the approach is
computational in nature, our scientists can use computers to predict how to
fine-tune the molecular design of a new molecule to optimize its potential
therapeutic effect. We can also use computers to make virtual searches of large
chemical libraries to find core and lead molecules that will work well with the
core quantum mechanism. In addition, our synthetic and medicinal chemistry
capabilities allow us to produce appropriate quantities of the lead drug
compounds for testing and research development. There can be no assurance,
however, that we will be successful in our endeavors to produce clinical drug
candidates using QCT.

     We have utilized outside experts to evaluate, guide and supplement our
research efforts. Included among those experts is Dr. Andrew Kende, C.F.
Houghton Professor of Chemistry, Emeritus, at the University of Rochester,
Associate Editor of the Journal of Organic Chemistry, and a member of the
editorial advisory board of the Journal of the American Chemical Society. Dr.
Kende has been a scientific advisor to us since 1999 and has served as a member
of the team comprising our office of the chief scientific officer.

     We are using QCT to design inhibitors to a system of enzymes present in
mycobacteria that is involved in drug resistance of this organism. Mycobacteria
make a chemical called mycothiol that allows

                                        69


the bacteria to modify and inactivate antibiotics, rendering drugs ineffective,
and thereby resulting in antibiotic resistance and increased incidence of
tuberculosis. We have obtained a worldwide, exclusive license to use the enzymes
that are involved in the synthesis and use of mycothiol as targets for
antibiotic drugs. These enzymes have been isolated by researchers at the
University of British Columbia, or UBC, and University of California, San Diego,
or UCSD. Further work on the mycothiol enzymes is continuing at UBC and UCSD
under sponsored research agreements by eXegenics. Such inhibitors potentially
could be prescribed along with existing antibiotics to overcome the mechanism by
which the organisms achieve resistance and thereby render other antibiotics
effective and useful against these otherwise resistant and dangerous
microorganisms.

OPTIMIZED ANTI-SENSE INHIBITORY SEQUENCE(TM) (OASIS(TM))

     OASIS is a patented technology platform that uses computers to design
"anti-sense sequences" -- molecules capable of blocking the expression of
specific genes. OASIS may eliminate the trial and error work traditionally
involved in finding anti-sense sequences and may efficiently predict the most
potent anti-sense molecules in a gene sequence. Thus, anti-sense sequences
predicted by OASIS should be optimal in location and size in that they are
designed to block gene expression at the site that will have the highest impact
and are the minimum size required to achieve an effective blocking.

     The OASIS technology has been licensed from the University of Texas at
Dallas, or UTD. Further development of the technology is ensuing at UTD under a
sponsored research agreement. Our scientists have used OASIS to create a library
of optimal inhibitor sequences (for which we have a filed patent application) to
100% of the genes of mycobacterium tuberculosis -- the infectious organism that
causes tuberculosis. Another library consists of optimal inhibitors for 25% of
human genes, and patent applications are in process. To take advantage of these
libraries, we are seeking corporate partners who have identified novel gene
targets for which they want inhibitors to knockout gene function.

TAXANES PROGRAM

     We have obtained an exclusive worldwide license from WSU to use gene-based
technology to synthesize taxanes (the chemical class to which Taxol(R) belongs).
Taxol(R) is expensive to manufacture since it is derived from hard-to-obtain
natural products: the bark and needles of the Pacific Yew tree. This license
from WSU covers families of patents giving broad protection to our technology. A
genetically engineered production system for baccatin could potentially be used
to manufacture an improved second-generation paclitaxel. In the absence of
external funding for this program, there can be no assurance that we will
continue our research in this area.

OTHER PROGRAMS

     We are seeking to outlicense our program to produce glucocerebrosidase for
use in Gaucher's disease. However, there is no assurance that we will be
successful in this endeavor. We have previously announced that certain programs
that we pursued in the past, such as vaccine engineering, telomerase, polycystic
kidney disease, estrogen peptide, and monoclonal antibodies, have not achieved
sufficient progress to merit continuation.

COLLABORATIVE AND LICENSE AGREEMENTS

  QCT

     In June 2000, we entered into an exclusive worldwide license agreement with
UCSD and UBC to use or sublicense patent rights disclosed in a pending U.S.
patent titled "A New Anti-tuberculosis Drug Target." Pursuant to the agreement,
we paid a license issue fee and we are obligated to pay license maintenance
fees, milestone and royalties payments. Also in June 2000, we agreed to a
three-year collaborative research agreement with UBC and Vancouver Hospital to
fund research under the direction of Dr. Yossef Av-Gay of the Department of
Medicine at UBC. In August 2000, we entered into a three-year collaborative
research agreement with the Regents of the University of California to fund
research
                                        70


performed under the direction of Dr. Robert Fahey of the Department of Chemistry
and Biochemistry at the UCSD. We are currently renegotiating our license
agreement with UCSD.

  OASIS

     In June 1992, we entered into an agreement with the UTD, pursuant to which
the University is to perform certain research and development activities
relating to antisense compounds and related technology for use in humans. The
agreement has been extended through August 31, 2003 in consideration for our
agreement to increase the original funding commitment.

     In June 1996, we entered into a patent license agreement with the Board of
Regents of UTD whereby we obtained an exclusive royalty-bearing license to
manufacture, have manufactured, use, sell and sublicense products related to a
U.S. patent application entitled, "A Method for Ranking Sequences to Select
Target Sequence Zones of Nucleus Acids." The OASIS technology has identified
optimum regions within genes to bind antisense products. We are required to pay
royalty and sublicensing fees under this agreement.

PACLITAXEL PROGRAM

     In June 1993, we entered a license agreement with RDI. Pursuant to this
agreement, we were granted worldwide exclusive rights to fungal technology to
produce paclitaxel. This agreement was terminated by our request on June 19,
2002.

     In July 1996, we entered into an agreement with WSU whereby we received an
exclusive, worldwide license to use or sublicense the foundation's technology
for gene-based synthesis of paclitaxel. We have requested a renegotiation of our
current agreement with WSU.

     In June 1998, we entered into a license agreement and a research and
development agreement with Bristol-Meyers in which we granted them exclusive
worldwide sublicenses under our agreements with RDI and WSU. The research and
development agreement between Bristol-Myers and eXegenics terminated on June 12,
2002. We have initiated discussions with Bristol-Myers with the objective of
negotiating an agreement to reacquire exclusive rights to the WSU paclitaxel
gene technology for eXegenics.

OTHER PROGRAMS

     In February 1996, we entered into two license agreements with UCLA. One of
these license agreements gave us exclusive rights to a pending patent entitled,
"Inhibition of Cyst Formation By Cytoskeletal Specific Drugs," that makes use of
various drugs, one of which is paclitaxel. The other license agreement gave us
exclusive rights to technology in the field of pharmacological treatment for
polycystic kidney disease. In August of 2002, we terminated these agreements for
lack of progress.

     In December 1998, we obtained an exclusive license to technology for the
fungal production of telomerase, the so-called "immortality enzyme," from RDI
for a term based on the useful life of the pending patent or related patents. In
September 2000, we obtained an exclusive license for gene technology for
telomerase reverse transcriptase from RDI. These licenses were terminated at our
request on June 19, 2002.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

     We own or have rights to 12 U.S. patents and 4 foreign patents. We have
numerous pending U.S. patent applications and several pending foreign patent
applications.

     Our policy is to protect our technology by, among other things, filing
patent applications for technology we consider important in the development of
our business. In addition to filing patent applications in the U.S., we have
filed and intend to file, patent applications in foreign countries on a
selective basis. Although a patent has a statutory presumption of validity in
the U.S., the issuance of a patent is not conclusive as to such validity or as
to the enforceable scope of the claims of the patent.

                                        71


There can be no assurance that our issued patents or any patents subsequently
issued to us, or licensed by us, will not be successfully challenged in the
future. The validity or enforceability of a patent after its issuance by the
U.S. Patent and Trademark Office can be challenged in litigation. If the outcome
of the litigation is adverse to the owner of the patent, third parties may then
be able to use the invention covered by the patent, in some cases without
payment. There can be no assurance that patents in which we have rights will not
be infringed or successfully avoided through design innovation.

     There can be no assurance that patent applications owned by us or licensed
to us will result in patents being issued or that any such patents will afford
protection against competitors with similar technology. It is also possible that
third parties may obtain patent or other proprietary rights that may be needed
by us. In cases where third parties are the first to invent a particular product
or technology, it is possible that those parties will obtain patents that will
be sufficiently broad so as to prevent us from using certain technology or from
further developing or commercializing certain products. If licenses from third
parties are necessary but cannot be obtained, commercialization of the related
products would be delayed or prevented. We are aware of patent applications and
issued patents belonging to competitors but we are uncertain whether any of
these, or patent applications filed of which we may not have any knowledge, will
require us to alter our potential products or processes, pay licensing fees or
cease certain activities.

     We also rely on unpatented technology as well as trade secrets and
information. No assurance can be given that others will not independently
develop substantially equivalent information and techniques or otherwise gain
access to our technology or disclose such technology, or that we can effectively
protect our rights in such unpatented technology, trade secrets and information.
We require each of our employees to execute a confidentiality agreement at the
commencement of their employment with us. The agreements generally provide that
all inventions conceived by the individual in the course of employment or in the
providing of services to us and all confidential information developed by, or
made known to, the individual during the term of the relationship shall be our
exclusive property and shall be kept confidential and not disclosed to third
parties except in limited specified circumstances. There can be no assurance,
however, that these agreements will provide us with meaningful protection in the
event of unauthorized use or disclosure of such confidential information.

COMPETITION

     All of our proposed products will face competition from existing therapies.
The development by others of novel treatment methods for those indications for
which we are developing compounds could render our compounds non-competitive or
obsolete. This competition potentially includes all of the pharmaceutical
concerns in the world that are developing pharmaceuticals for the diagnosis and
treatment of cancer. Competition in pharmaceuticals is generally based on
performance characteristics as well as price and timing of market introduction
of competitive products. Acceptance by hospitals, physicians and patients is
crucial to the success of a product. Price competition may become increasingly
important as a result of an increased focus by insurers and regulators on the
containment of health care costs. In addition, the various federal and state
agencies have enacted regulations requiring rebates of a portion of the purchase
price of many pharmaceutical products.

     Most of our existing or potential competitors have substantially greater
financial, technical and human resources than us and may be better equipped to
develop, manufacture and market products. In addition, many of these companies
have extensive experience in preclinical testing, human clinical trials and the
regulatory approval process. These companies may develop and introduce products
and processes competitive with, or superior to, ours.

     Our competition also will be determined in part by the potential
indications for which our compounds are developed. For certain potential
products, an important factor in their success may be the lack of competitive
products at the time of their market introductions. For example, a generic
version of Taxol(R) was recently approved for sale in the U.S. If this generic
version of Taxol(R) is able to achieve market acceptance, it may erode the sales
of Taxol(R), which could, in turn, decrease the value of our paclitaxel program.
Accordingly, the relative speed with which we can develop products, complete the
clinical trials

                                        72


and regulatory approval processes, and supply commercial quantities of the
products to the market are expected to be important competitive factors. We
expect that competition among products approved for sale will be based on, among
other things, product efficacy, safety, reliability, availability, price and
patent position.

     Our competitive position also depends upon our ability to attract and
retain qualified personnel, obtain patent protection or otherwise develop
proprietary products or processes and secure sufficient capital resources for
the often-lengthy period between technological conception and commercial sales.

GOVERNMENT REGULATION

     At the current time, the FDA does not regulate us. However, our partners
and licensees may be subject to regulation depending on the type of products or
services they provide. The FDA and comparable regulatory agencies in foreign
countries impose substantial requirements on the clinical development,
manufacture and marketing of pharmaceuticals and in vitro diagnostic products.
These agencies regulate research and development activities and the testing,
manufacture, quality control, safety, effectiveness, labeling, storage, record
keeping, advertising and promotion of these products and services. Different
centers within the FDA are responsible for regulating these products, depending
on whether the product is considered a pharmaceutical, biologic, medical device
or combination product.

     The process required by the FDA before a new product may be marketed in the
US generally requires substantial time, effort and financial resources.
Satisfaction of FDA requirements or similar requirements of foreign regulatory
agencies typically takes several years and the actual time required may vary
substantially based upon the type, complexity and novelty of the product or
disease. Even if a product receives regulatory approval, later discovery of
previously unknown problems with a product may result in restrictions on the
product or even complete withdrawal of the product from the market.

     We are also subject to numerous environmental and safety laws and
regulations, including those governing the use and disposal of hazardous
materials. Any violation of, and the cost of compliance with, these regulations
could have a material adverse effect on our business and results of operations.

MANUFACTURING AND MARKETING

     We have no marketed pharmaceutical products. In addition, we have never
commercially manufactured any products, and we do not have the resources to
manufacture any products on a commercial scale. For the foreseeable future, we
will be required to rely upon corporate partners or others to manufacture and
market products developed by us, if any. No assurance can be given that we will
be able to enter into any such arrangements on acceptable terms, if at all.

  MANUFACTURING

     While we intend to select manufacturers that comply with regulatory
standards, there can be no assurance that these manufacturers will comply with
such standards, that they will give our orders the highest priority or that we
will be able to find substitute manufacturers, if our selected manufacturers
prove to be unsatisfactory. In order for us to establish a manufacturing
facility, we would require substantial additional funds, would be required to
hire and retain significant additional personnel and comply with the extensive
regulations of the FDA applicable to such a facility. No assurance can be given
that we will be able to make the transition successfully to commercial
production, should we choose to do so.

  MARKETING

     Despite our strategy to develop products for sale to concentrated markets,
significant additional expenditures and management resources would be required
to develop an internal sales force, and there can be no assurance that we will
be successful in penetrating the markets for any products developed. For certain
products under development, we may seek to enter into development and marketing
agreements

                                        73


that grant exclusive marketing rights to our corporate partners in return for
royalties to be received on sales, if any. Under certain agreements, our
marketing partner may have the responsibility for all or a significant portion
of the development and regulatory approval. In the event that our marketing and
development partners fail to develop a marketable product or to successfully
market a product, our business may be materially adversely affected. The sale of
certain products outside the U.S. will also be dependent on the successful
completion of arrangements with future partners, licensees or distributors in
each territory. There can be no assurance that we will be successful in
establishing any additional collaborative arrangements, or that, if established,
such future partners will be successful in commercializing products.

INSURANCE

     The testing, marketing and sale of human health care products entail an
inherent risk of allegations of product liability, and there can be no assurance
that product liability claims will not be asserted against us. We intend to
obtain clinical trial liability insurance prior to conducting any clinical
trials. Such coverage may not be adequate as and when we develop our products.
There can be no assurance that we will be able to obtain, maintain or increase
our insurance coverage in the future on acceptable terms or that any claims
against us will not exceed the amount of such coverage.

EMPLOYEES

     As of September 30, 2002, we had 13 full-time employees (including five
Ph.D.s), of whom seven were engaged directly in research and development
activities and six were in executive and administrative positions. Although we
believe that we have been successful to date in attracting skilled scientific
personnel, competition for personnel is intense and we cannot assure that we
will continue to be able to attract and retain personnel of high scientific
caliber. Our employees are not governed by any collective bargaining agreement,
and we believe that our relationship with them is good.

PROPERTIES

     We occupy approximately 19,300 square feet of office and laboratory space
at 2110 Research Row, Dallas, Texas, pursuant to a lease assigned to us by the
Wadley/Phillips Partnership, which lease term has been extended until December
2003. Our lease payments for the fiscal year ended December 31, 2001, of
approximately $294,000, included $30,000 in payments related to an
office/laboratory space lease agreement that was terminated in December 2001,
effective March 31, 2002. We believe that our current facilities are suitable
for our present needs and for the foreseeable future.

LEGAL PROCEEDINGS

     We are not a party to any litigation in any court, and management is not
aware of any contemplated proceeding by any governmental authority against us.

                                        74


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

                      EQUITY COMPENSATION PLAN INFORMATION
                            AS OF DECEMBER 31, 2001



                                                                                       NUMBER OF SECURITIES
                                                                                      REMAINING AVAILABLE FOR
                                 NUMBER OF SECURITIES TO BE     WEIGHTED-AVERAGE       FUTURE ISSUANCE UNDER
                                  ISSUED UPON EXERCISE OF      EXERCISE PRICE OF     EQUITY COMPENSATION PLANS
                                    OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,     (EXCLUDING SECURITIES
                                    WARRANTS AND RIGHTS       WARRANTS AND RIGHTS    REFLECTED IN COLUMN (A))
PLAN CATEGORY                               (a)                       (b)                       (c)
-------------                    --------------------------   --------------------   -------------------------
                                                                            
Equity compensation plans
  approved by security
  holders......................          2,858,155                   $ 4.94                  1,600,845
Equity compensation plans not
  approved by security
  holders......................            830,354                   $12.23                          0


     We have authorized the issuance of equity securities under the compensation
plans described below without the approval of stockholders. No additional
options, warrants or rights are available for issuance under any of these plans,
except for additional shares which may become purchasable under warrants with
anti-dilution protection as noted below. We have either already registered or
agreed to register for resale the common stock underlying all of these plans.

     - Roan-Meyers UPO (1998) warrants, dated April 1998: provided common stock
       purchase warrants to our placement agent in connection with a private
       placement of our securities, to purchase an aggregate of 201,300 shares
       of our common stock at a weighted average purchase price of $9.75 per
       share, with an expiration date of April 2, 2003.

     - The Synergy Group/Seavey Funds warrants, dated April 7, 1998: provided
       common stock purchase warrants in connection with financial advisory
       services, to purchase an aggregate of 75,000 shares of our common stock
       at a weighted average purchase price of $7.66 per share, with an
       expiration date of August 6, 2003.

     - Gruntal & Co. warrants, dated February 23, 2000: provided common stock
       purchase warrants to Gruntal & Co., L.L.C. ("Gruntal") and various
       Gruntal employees in connection with financial advisory services, to
       purchase an aggregate of 300,000 shares of our common stock at a purchase
       price of $15.00 per share, with an expiration date of February 23, 2005.
       These warrants were issued as a result of a re-issuance of a common stock
       purchase warrant, dated February 1, 2000, to Gruntal for the purchase of
       300,000 shares of our common stock.

     - Dominick & Dominick Financial Services Advisory Letter Agreement
       warrants, dated July 9, 1999: provided common stock purchase warrants to
       Dominick & Dominick LLC, a financial consultant, to purchase 150,000
       shares of our common stock for a purchase price of $7.00 per share, with
       an expiration date of July 15, 2004.

     - Southwest Securities warrants, dated February 23, 2000: provided common
       stock purchase warrants in connection with financial advisory services,
       to purchase 21,250 shares of our common stock at a purchase price of
       $12.00 per share, with an expiration date of February 23, 2003.

     - Darrell Todd warrants, dated February 23, 2000: provided common stock
       purchase warrants in connection with financial advisory services, to
       purchase 3,750 shares of our common stock at a purchase price of $12.00
       per share, with an expiration date of February 23, 2003.

     - Roan-Meyers warrants, dated November 2, 2001: provided common stock
       purchase warrants in connection with financial advisory services, to
       purchase 125,000 shares of our common stock at a purchase price of $7.00
       per share, with an expiration date of November 2, 2003.

                                        75


     - Roan-Meyers warrants, dated August 13, 2002: provided common stock
       purchase warrants in connection with financial advisory services, to
       purchase 125,000 shares of our common stock at a purchase price of $1.00
       per share, with an expiration date of August 13, 2007.

     - Roan-Meyers warrants, dated August 13, 2002: provided common stock
       purchase warrants in connection with financial advisory services to
       purchase 125,000 shares of our common stock at a purchase price of $0.55
       per share, with an expiration date of August 13, 2007.

                                        76


                       EXEGENICS SELECTED FINANCIAL DATA

     The following selected financial data should be read in conjunction with
eXegenics' Financial Statements and related Notes and "Management's Discussion
and Analysis of eXegenics' Financial Condition and Results of Operations"
included elsewhere in this joint proxy statement/prospectus. The selected
statements of operations data for the fiscal years ended December 31, 1999 and
2000 and the selected balance sheet data as of December 31, 2000 are derived
from eXegenics' audited financial statements which have been audited by Eisner
LLP (formerly Richard A. Eisner & Company, LLP), independent auditors, as stated
in their reports included elsewhere herein, and are included elsewhere in this
joint proxy statement/prospectus. The selected statements of operations data for
the fiscal year ended December 31, 2001 and the selected balance sheet data as
of December 31, 2001 are derived from eXegenics' audited financial statements
which have been audited by Ernst & Young LLP, independent auditors, as stated in
their reports included elsewhere herein, and are included elsewhere in this
joint proxy statement/prospectus. The selected statements of operations data for
the six months ended June 30, 2001 and 2002 and the selected balance sheet data
as of June 30, 2002 are derived from unaudited financial statements included
elsewhere in this joint proxy statement/prospectus. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals the
Company considers necessary for a fair presentation of the financial position
and results of operations for these periods. Results for the year ending
December 31, 2002 may materially differ from the results for the six months
ended June 30, 2002.

                     EXEGENICS INC. SELECTED FINANCIAL DATA



                                                                                                       SIX MONTHS ENDED
                                                  YEAR ENDED DECEMBER 31,                                  JUNE 30,
                            --------------------------------------------------------------------   -------------------------
                                2001          2000          1999          1998          1997          2002          2001
                            ------------   -----------   -----------   -----------   -----------   -----------   -----------
                                                                                            
STATEMENT OF OPERATION
  DATA:
Revenue...................  $  1,333,000   $   865,000   $ 1,375,000   $ 1,183,000   $        --   $   556,000   $   667,000
                            ------------   -----------   -----------   -----------   -----------   -----------   -----------
Research and
  development.............     5,321,000     3,681,000     2,332,000     1,692,000     1,469,000     2,476,000     3,006,000
General and administrative
  expenses................     6,530,000     5,788,000     3,194,000     2,500,000     1,888,000     2,109,000     2,708,000
                            ------------   -----------   -----------   -----------   -----------   -----------   -----------
Total operating
  expenses................    11,851,000     9,469,000     5,526,000     4,192,000     3,357,000     4,585,000     5,714,000
                            ------------   -----------   -----------   -----------   -----------   -----------   -----------
Operating loss............   (10,518,000)   (8,604,000)   (4,151,000)   (3,009,000)   (3,357,000)   (4,029,000)   (5,047,000)
Other income (expense)....    (1,651,000)   (1,534,000)     (216,000)     (281,000)     (105,000)     (364,000)     (827,000)
Provision (benefit) for
  taxes...................       (82,000)       95,000            --            --            --       (12,000)       68,000
                            ------------   -----------   -----------   -----------   -----------   -----------   -----------
Net loss before cumulative
  effect of a change in
  accounting principle....    (8,785,000)   (7,165,000)   (3,935,000)   (2,728,000)   (3,252,000)   (3,653,000)   (4,288,000)
                            ------------   -----------   -----------   -----------   -----------   -----------   -----------
Cumulative effect on prior
  years of changing method
  of revenue
  recognition.............            --            --      (422,000)           --            --            --            --
                            ------------   -----------   -----------   -----------   -----------   -----------   -----------
Net loss..................  $ (8,785,000)  $(7,165,000)  $(4,357,000)  $(2,728,000)  $(3,252,000)  $(3,653,000)  $(4,288,000)
                            ============   ===========   ===========   ===========   ===========   ===========   ===========
Basic and diluted loss per
  common share............  $      (0.57)  $     (0.51)  $     (0.44)  $     (0.30)  $     (0.42)  $     (0.24)  $     (0.28)
                            ============   ===========   ===========   ===========   ===========   ===========   ===========
Weighted average number of
  shares outstanding basic
  and diluted.............    15,749,000    14,452,000    10,333,000     9,742,000     8,268,000    15,671,000    16,160,000
                            ============   ===========   ===========   ===========   ===========   ===========   ===========
BALANCE SHEET DATA:
Total assets..............  $ 27,625,000   $37,378,000   $ 4,491,000   $ 7,746,000   $ 2,802,000   $23,667,000   $32,977,000
Working capital...........    24,949,000    35,050,000     2,324,000     6,227,000     1,330,000    21,700,000    29,738,000
Royalties payable-less
  current portion.........            --       750,000       875,000     1,000,000     1,125,000            --       687,000
Shareholders' equity......    26,121,000    35,775,000     2,592,000     6,062,000     1,123,000    22,601,000    30,812,000


                                        77


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

     In this section, "Management's Discussion and Analysis of eXegenics'
Financial Condition and Results of Operations," references to "we," "us," "our,"
and "ours" refer to eXegenics and its consolidated subsidiaries.

     You should read the following discussion and analysis in conjunction with
"eXegenics Selected Financial Data" and our Consolidated Financial Statements
and related Notes included elsewhere in this joint proxy statement/prospectus.
In addition to historical information, the following discussion contains certain
forward-looking statements that involve known and unknown risks and
uncertainties, such as statements of our plans, objectives, expectations and
intentions. You should read the cautionary statements made in this joint proxy
statement/prospectus as being applicable to all related forward-looking
statements wherever they appear in this joint proxy statement/prospectus. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences, include, but are not limited to, those discussed below and in the
section entitled "Risk Factors" as well as those discussed elsewhere in this
joint proxy statement/prospectus. See the section entitled "Forward-Looking
Statements" at page 1. You should not rely on these forward-looking statements,
which reflect only our opinion as of the date of this joint proxy
statement/prospectus. We do not assume any obligation to revise forward-looking
statements.

     We were organized and commenced operations in 1991. Prior to 2001, our
efforts were principally devoted to research activities including efforts to
discover therapeutic products for human diseases. Beginning in 2001, we
repositioned ourselves as a post-genomics drug creation enterprise with a goal
of building a development pipeline of commercially viable drug leads and
pharmaceutical products for the treatment of cancers and drug-resistant
bacterial diseases. In addition, we increased our efforts to obtain and develop
clinical drug candidates and to identify opportunities for financial and
operational synergies, specifically to identify acquisition and merger
opportunities that would provide pharmaceutical compounds in or close to human
clinical trials. We engaged Petkevich & Partners in March of 2002 to assist us
in this endeavor, and on September 20, 2002 we announced that we had executed a
definitive merger agreement with Innovative Drug Delivery Systems, Inc., or
IDDS, a private company with product candidates ready to enter Phase III
clinical trials. We are currently involved in activities related to the pending
business combination, including regulatory filings and a stockholders' meeting
while continuing work on our internal scientific programs.

     We utilize our proprietary research technologies, Quantum Core Technology,
or QCT(TM), and Optimized Anti-Sense Inhibitory Sequence, or OASIS(TM), in
attempts to create novel compounds that may be advanced towards clinical drug
candidates and pharmaceutical products. QCT is a computer-assisted drug design
technology platform, primarily targeted to the inhibition of proteins involved
in disease processes. OASIS is a patented technology platform that uses
computers to design "anti-sense sequences" -- molecules capable of blocking the
expression of specific genes. By targeting both proteins and genes, we believe
we have the capability to produce chemical molecules that can be developed into
drugs effective against a variety of cancers and infectious diseases. If such
compounds are successfully synthesized, they must undergo additional testing. If
they are successfully tested and optimized in vitro, they will then be tested in
animals and ultimately in humans. Successful development of such drugs could
provide a broad range of business opportunities between us and other
pharmaceutical and biotechnology companies.

     During the first quarter of 2002, we announced the discovery of a series of
novel chemical entities, or NCEs. These NCEs demonstrated in-vitro activity
against Gram-positive bacterial pathogens, including Staphylococcus aureus, that
are resistant to ordinary antibiotics. We filed a provisional U.S. patent
application regarding the structure and use of these agents. Using our
proprietary research technology QCT, we are endeavoring to create clinical drug
candidates based on these agents, although we must first overcome a number of
hurdles, such as increased activity and less toxicity, before we are ready to
begin

                                        78


clinical trials. There can be no assurance that we will overcome these hurdles
or otherwise be successful in producing clinical drug candidates.

     We are engaged in a Master License Agreement with Bristol-Myers Squibb, or
Bristol-Myers. The technology that is the basis for the license agreement
concerns genetically engineered fermentation technology that has been under
development for the creation of an improved production system for paclitaxel,
the active ingredient in Taxol(R), and its precursor taxane, baccatin. We
obtained the rights to patents covering this technology from Research and
Development Institute, or RDI, and Washington State University Research
Foundation, or WSU. A sponsored research program had been actively funded by
Bristol-Myers since 1998; we received their final payment in February of this
year; and as of June 12, 2002, we had no further research obligations to
Bristol-Myers. However, our Master License Agreement with Bristol-Myers remains
in effect. We have initiated discussions with Bristol-Myers with the objective
of negotiating an agreement to reacquire exclusive rights to the WSU paclitaxel
gene technology for eXegenics.

     As a result of the completion of funding related to the Sponsored Research
Agreement with Bristol-Myers, we initiated efforts to renegotiate several
scientific collaborations, including agreements with the RDI and WSU. The
agreement with RDI was terminated in June 2002, relieving us of future annual
minimum royalty payments and neither party has any further obligation to the
other with respect to any terminated licenses or their respective technologies.
We have requested a renegotiation of our current agreement with WSU.

     We have initiated efforts to find a party willing to outlicense our
production system for manufacturing a recombinant form of glucocerebrosidase
that is intended for use as an enzyme replacement therapy for Type 1 Gaucher's
disease. Our production system for the enzyme could result in a more
cost-effective means of producing the enzyme as compared to those production
systems currently in commercial use.

     Our overall business strategy has been to:

     - Acquire, via merger or acquisition, later-stage pharmaceutical compounds
       that complement our strategy to accelerate the development of proprietary
       drugs;

     - Establish a partner relationship to advance and leverage our QCT and
       OASIS research platforms;

     - Continue development of our anti-bacterial NCEs into anti-infective
       candidate drug leads; and

     - Advance our research related to enzyme targets that are central to the
       development of antibiotic resistance in Mycobacterium tuberculosis, the
       causative agent of tuberculosis. Using QCT, we are in the preclinical
       discovery stage of creating core inhibitors of the specific enzyme
       targets.

     Our actual research and development and related activities may vary
significantly from current plans depending on numerous factors, including
changes in the costs of such activities from current estimates, the results of
our research and development programs, the results of clinical studies, the
timing of regulatory submissions, technological advances, determinations as to
commercial potential and the status of competitive products. The focus and
direction of our operations will also be dependent upon the establishment of
collaborative arrangements with other companies, the availability of financing
and other factors.

                                        79


                             RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001

  REVENUE

     Revenues were $556,000 and $667,000 for the six months ended June 30, 2002
and 2001, respectively. Revenues were attributable to license and research and
development payments from our agreements with Bristol-Myers Squibb.

  RESEARCH AND DEVELOPMENT EXPENSES

     We incurred research and development expenses of $2,476,000 for the six
months ended June 30, 2002 and $3,006,000 for the six months ended June 30,
2001, a decrease of $530,000 or 18%. The decrease in research and development
expenses for the six months ended June 30, 2002 as compared to the same period
in 2001 was due to a $420,000 decrease for research salaries due to
discontinuation of non-strategic research projects, a $420,000 decrease in
expenses for contract research, licenses and royalties, partially offset by a
$174,000 increase in research consultant costs related to the creation of drug
leads, a $54,000 increase in equipment and depreciation expenses as well as
costs associated with the closing of one location and a $72,000 increase in
research operating costs previously charged to general and administrative
expenses.

  GENERAL AND ADMINISTRATIVE EXPENSES

     We incurred general and administrative expenses of $2,109,000 for the six
months ended June 30, 2002 and $2,708,000 for the six months ended June 30,
2001, a decrease of $599,000 or 22 %. The decrease in general and administrative
expenses for the six months ended June 30, 2002 as compared to the same period
in 2001 was attributable to a $200,000 decrease in administrative salary
expense, a decrease of $325,000 in professional fees for general corporate legal
activities, an $86,000 decrease in travel related expenses, a $93,000 decrease
in corporate governance fees, a $95,000 decrease in research operating costs now
charged to research and development expenses offset by a $49,000 increase in
legal services related to intellectual property, a $132,000 increase in
professional consulting and audit services and a $20,000 increase in other
operating expenses.

  INTEREST INCOME

     Interest income was $371,000 and $828,000 for the six months ended June 30,
3002 and June 30, 2001, respectively, a decrease of $457,000 or 55%. The
decrease was due primarily to lower interest rates in 2002 and also to lower
principal balances.

  NET LOSS

     In the six months ended on June 30, 2002, we incurred a net loss
attributable to common stockholders of $3,822,000, or 14% less than the
$4,468,000 loss for the six months ended June 30, 2001. The decrease in net loss
of $646,000 was primarily the result of the aforementioned changes in our
operations. Net loss per common share was $0.24 for the six months ended June
30, 2002 and $0.28 for the six months ended June 30, 2001.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000

  REVENUE

     Revenues for 2001 and 2000 were primarily attributable to license and
research and development payments, including those from our agreements with
Bristol-Myers. We recognized revenues of $1,333,000 during fiscal 2001, compared
to $865,000 for fiscal 2000, an increase of $468,000 or 54.1%. The increase was
a result of the extension of our research and development agreement with
Bristol-Myers.

                                        80


  RESEARCH AND DEVELOPMENT EXPENSES

     We incurred research and development expenses of $5,321,000 during fiscal
2001 and $3,681,000 during fiscal 2000, an increase of $1,640,000 or 45%. The
increase in research and development expenses in 2001 from 2000 was due to the
hiring of additional scientific staff in 2001, severance payments related to
restructuring of operations, additional expenses for research services including
a non-cash charge related to options granted to consultants, additional
commitments to fund external research, increased depreciation expense, and an
increase in office and laboratory supplies required to support our increased
activities. Expenses in 2001 primarily include $643,000 for research
consultants, $1,311,000 for contract research and $344,000 for lab supplies and
other research services and materials.

  GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses for fiscal 2001 were $6,530,000
compared to $5,788,000 for fiscal 2000, an increase of $742,000 or 13%. General
and administrative expenses increased as a result of higher salary costs,
additional travel and lodging expenses including relocation reimbursements,
increases in legal and professional fees, including a $765,000 charge for a
dispute settlement, and a non-cash expense for the issuance of options. These
expenses were substantially offset by a decrease in public and financial
relations expenses, as well as a decrease in tax expenses. Expenses in 2001
include $836,000 for expense related to our corporate restructuring activities,
$207,000 for audit fees and other accounting related services, $667,000 for
legal fees related to patents and intellectual property, $400,000 for company
and employee insurance and $803,000 for legal services, of which the consulting
and legal services were mainly due to assistance with our restructuring and
reorganization.

  OTHER INCOME

     Other income for fiscal 2001 was $274,000 as compared to $0 during fiscal
2000. The increase was due to recognizing a gain for the relinquishment of
patent rights.

  INTEREST INCOME

     Interest income for fiscal 2001 was $1,383,000 compared to $1,543,000 for
fiscal 2000, a decrease of $160,000 or 10.4%. The decrease in interest income
was due to lower interest rates and declining balances as disbursements were
made.

  NET LOSSES

     We incurred net losses of $8,785,000 during fiscal 2001 and $7,165,000
during fiscal 2000. The increase in net losses of $1,620,000 or 22.6%, is a
result of the aforementioned changes in our operations. Net loss per common
share for fiscal 2001 was $0.57 and for fiscal 2000 was $0.51.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999

  REVENUE

     Revenues for 2000 and 1999 were primarily attributable to license and
research and development payments, including those from our agreements with
Bristol-Myers. We recognized revenues of $865,000 during fiscal 2000, compared
to $1,375,000 during fiscal 1999, a decrease of $510,000 or 37.0%. The decrease
was a result of the schedule of payments under our license and research and
development agreements.

  RESEARCH AND DEVELOPMENT EXPENSES

     We incurred research and development expenses of $3,681,000 during fiscal
2000 and $2,332,000 during fiscal 1999, an increase of $1,349,000 or 58%. The
increase was due to the hiring of additional scientific staff in 2000, increased
expenses for research consultants including a non-cash charge related to options
granted to consultants, additional commitments to fund external research, higher
rent, an increase
                                        81


in depreciation expense, an increase in contract labor expenses, additional fees
paid for conference and seminar attendance, and an increase in office and
laboratory supplies required to support our increased activities.

  GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses for fiscal 2000 were $5,788,000,
compared to $3,194,000 for fiscal 1999, an increase of $2,594,000 or 81%.
General and administrative expenses increased as a result of additional public
and financial relations costs including a non-cash charge related to the value
assigned to warrants granted to our financial advisors and consultants, higher
insurance premiums, relocation reimbursements, increased legal and professional
fees including a non-cash expense for the issuance of options, as well as
expenses related to our growth in operations. These expenses were partially
offset by a decrease in expenses associated with the acquisition of QCT, as well
as decreases in consulting and contract labor expenses.

  INTEREST INCOME

     Interest income for fiscal 2000 was $1,543,000, compared to $222,000 for
fiscal 1999, an increase of $1,321,000 or 595%. The increase in interest income
was due to an increase in available cash balances resulting from the receipt of
proceeds from the exercise of warrants during 2000.

  NET LOSSES

     We incurred net losses of $7,165,000 during fiscal 2000 and $4,357,000
during fiscal 1999. The increase in net losses of $2,808,000, or 64.4%, is a
result of the aforementioned changes in our operations. Net loss per common
share for fiscal 2000 was $0.51 and for fiscal 1999 was $0.44.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 2002, we had cash, cash equivalents and investments of
approximately $22,200,000. Since inception we have financed our operations from
debt and equity financings as well as fees received from licensing and research
and development agreements. During the six months ended June 30, 2002, net cash
used in operating activities was $3,462,000, the largest element of which was
the net loss of $3,654,000. In addition, during the six months ended June 30,
2002 we used $46,000 in financing activities and received $133,000 from
investing activities, primarily from the sale of equipment. As a result of the
decision by Bristol-Myers to discontinue funding of our paclitaxel research
efforts, we have lost our previous sole source of revenue. We cannot make any
assurance as to when, if ever, we will generate revenue again.

     We have scheduled payments to fund scientific research at academic
institutions and to make minimum royalty payments for licensing and
collaborative agreements of approximately $300,000 during the remainder of 2002.
We do not expect these arrangements to have a significant impact on our
liquidity and capital resources. We intend to continue to maintain and develop
relationships with academic institutions and to establish licensing and
collaborative agreements. We have no material capital commitments for the year
ending December 31, 2002.

     We believe that we have sufficient cash and cash equivalents on hand to
finance our plan of operation for the next twelve months. However, there can be
no assurance that we will generate sufficient revenues, if any, to fund our
operations after such period or that any required financings will be available,
through bank borrowings, debt or equity offerings, or otherwise, on acceptable
terms or at all.

     If we are successful with our efforts to combine the operations of
eXegenics and IDDS, the combined company will have several products that have
reached the development stage. We will have to fund all of our operations and
capital expenditures from the cash on hand at the time of the merger. We expect
that our operating expenses and capital expenditures will increase in future
periods as a result of increased preclinical studies and clinical trial
activity, research and development and the anticipated commercialization of our
product candidates, assuming we receive the necessary regulatory approvals. The
initiation of

                                        82


commercial activities will require the hiring of additional staff, among other
activities, to coordinate contract manufacturing services at multiple locations.
Our capital expenditure requirements will depend on numerous factors, including
the progress of our research and development programs, the time required to file
and process regulatory approval applications, the ability to obtain additional
licensing arrangements, and the demand for our product candidates, if and when
approved by the FDA or other regulatory authorities.

     We assume that cash on hand after the merger in the amount of approximately
$17,000,000 will be sufficient to meet working capital and capital expenditure
needs of the combined company for at least the next twelve months. Thereafter,
we will require substantial funds to conduct research and development
activities, preclinical studies, clinical trials and other activities prior to
the commercialization of any potential products. We anticipate that such funds
will be obtained from external sources and intend to seek additional equity,
debt or lease financing to fund future operations. We also expect to seek
additional collaborative agreements with corporate partners to fund our research
and development programs. However, our actual capital requirements will depend
on many factors. If we experience unanticipated cash requirements, we may need
to seek additional sources of funding, which may not be available on favorable
terms, if at all. If we do not succeed in raising additional funds on acceptable
terms, we may be unable to complete planned preclinical studies and clinical
trials or obtain approval of our product candidates from the FDA and other
regulatory authorities. In addition, we could be forced to discontinue product
development, reduce or forego sales and marketing efforts and attractive
business opportunities or discontinue operations.

     As our common stock has not maintained a bid price of greater than $1.00
under Nasdaq's listing guidelines, our common stock was due to be delisted from
the Nasdaq National Market on October 23, 2001. Prior to that date, however, we
successfully applied to have the listing of our common stock transferred to the
Nasdaq SmallCap Market. Transferring to the Nasdaq SmallCap Market provides us
with a grace period until January 21, 2003 to comply with Nasdaq's $1.00 minimum
bid price requirement. In the event that we do not meet the minimum bid price
requirement by January 21, 2003, Nasdaq can grant us an additional 180-day grace
period to comply, if we meet the "core" initial listing standards for the Nasdaq
SmallCap Market as of that date. If we fail to qualify for this additional grace
period or if our common stock should otherwise be delisted from the Nasdaq
SmallCap Market, this would likely have an adverse impact on the trading price
and liquidity of our common stock. If our common stock were to be delisted,
trading, if any, in the common stock may continue to be conducted on the OTC
Bulletin Board upon application by the requisite market makers.

RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets." The objective of FAS 143
is to provide accounting guidance for legal obligations associated with the
retirement of tangible long-lived assets. The retirement obligations included
within the scope of FAS 143 are those that an entity cannot avoid as a result of
either the acquisition, construction or normal operation of a long-lived asset.
Components of larger systems also fall under FAS 143, as well as tangible
long-lived assets with indeterminable lives. FAS 143 is required to be adopted
on January 1, 2003.

     In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, "Rescission of FAS Nos. 4, 44, and 64, amendment of FASB 13, and
Technical Corrections as of April 2002." As a result, the accounting for gains
and losses from extinguishment of debt and sale-leaseback transactions will be
effected by FAS 145. The provisions of FAS 145 related to the rescission of
Statements 4, 44 and 64 shall be applied in fiscal years beginning after May 15,
2002. The provisions of FAS 145 related to Statement 13 shall be effective for
transactions occurring after May 15, 2002.

     In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". FAS
146 nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit

                                        83


an Activity (including Certain Costs Incurred in a Restructuring)." FAS 146
requires a liability for a cost associated with an exit or disposal activity to
be recognized when the liability is incurred rather than on the date of an
entity's commitment to an exit plan and establishes that fair value is the
objective for initial measurement of the liability. The provisions of FAS 146
shall be effective for exit or disposal activities initiated after December 31,
2002. The provisions of Issue 94-3 shall continue to apply for an exit activity
initiated under an exit plan that met the criteria of Issue 94-3 prior to FAS
146's initial application.

     We believe that the adoption of these accounting standards will not have a
material impact on our financial statements.

     Effective January 1, 2002, eXegenics adopted the provisions of Financial
Accounting Standards No. 141 "Business Combinations", No. 142 "Goodwill and
Other Intangible Assets" and No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets". The impact of adopting these standards on the financial
position and results of operations of eXegenics was immaterial.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our exposure to financial market risk, including changes in interest rates,
relates primarily to our marketable security investments. We generally place our
marketable security investments in high credit quality instruments, primarily
U.S. government obligations. We do not believe that a 100 basis point increase
or decrease in interest rates would significantly impact our business. We do not
have any derivative instruments. We operate only in the U.S. and all sales have
been made in U.S. dollars. We do not have any material exposure to changes in
foreign currency exchange rates.

                             EXEGENICS' MANAGEMENT

     In this section, "eXegenics' Management," references to "we," "us," and
"our" refers to eXegenics.

BOARD OF DIRECTORS

     Our board of directors currently consists of Arthur P. Bollon, Robert J.
Easton, Gary E. Frashier, Ira J. Gelb, M.D., Irwin C. Gerson, Ronald L. Goode,
Ph.D., and Walter M. Lovenberg. Upon the consummation of the merger and as
authorized by our bylaws, however, our board of directors has voted to increase
the size of the board of directors to nine and has appointed Robert J. Easton,
Gary E. Frashier, Ira J. Gelb, M.D., Peter Kash, Ronald L. Goode, Ph.D., Edward
Miller, M.D., Mark C. Rogers, M.D., Mark Siegel and Douglas Watson to serve on
the board of directors. Assuming eXegenics stockholders approve the amendment to
the certificate of incorporation to establish a "staggered board," the board of
directors will be divided into three classes, with the classes serving for
staggered, three-year terms. The first class, whose term will expire at our 2003
annual meeting of stockholders, will be comprised of Peter Kash, Robert Easton
and Douglas Watson; the second class, whose term will expire at our 2004 annual
meeting of stockholders, will be comprised of Edward Miller, M.D., Gary Frashier
and Ira J. Gelb, M.D. and the third class, whose term will expire at our 2005
annual meeting of stockholders, will be comprised of Mark C. Rogers, M.D.,
Ronald L. Goode, Ph.D., and Mark Siegel.

     Set forth below are the names of each our current directors who have been
nominated to continue to serve as a director after the merger, their ages, their
offices in eXegenics, if any, their principal occupations or employment for the
past five years, the length of their tenure as directors and the names of other
public companies in which such persons hold directorships. For a discussion of
such information as it

                                        84


relates to Messrs. Kash, Miller, Siegel, Watson and Dr. Rogers, please see the
section entitled "IDDS' Management" on page   .



NAME                                   AGE              POSITION WITH THE COMPANY
----                                   ---              -------------------------
                                       
Robert J. Easton.....................  58    Director
Gary E. Frashier.....................  66    Director and Chairman of the Board
Ira J. Gelb, M.D. ...................  74    Director
Ronald L. Goode, Ph.D. ..............  58    President, Chief Executive Officer and Director


     The following information is furnished as to each of the above individuals:

     Robert J. Easton, was elected to our board of directors in December 2000.
Mr. Easton founded a health care consulting practice named Easton Associates LLC
in May 2000. Prior to this latest venture, he spent 18 years as a management
consultant, most recently as Managing Director with IBM Healthcare Consulting.
Prior to IBM, Mr. Easton served as President of the Wilkerson Group, also a
health care consulting concern. Mr. Easton has executed proprietary studies in a
wide variety of medical products and service fields. His areas of expertise
include pharmaceuticals, biotechnology and in vitro diagnostics. Mr. Easton is a
frequent speaker for medical industry and investment groups in the U.S. and
Europe. He is a Director of CollaGenex Pharmaceuticals and Cepheid, Inc., Nasdaq
listed companies and two private companies, the former President of the
Biomedical Marketing Association, and Special Limited Partner of Advanced
Technology Ventures. Mr. Easton received an M.B.A. from Harvard Graduate School
of Business Administration and undergraduate degrees in Chemical Engineering
from Rice University.

     Gary E. Frashier commenced serving as one of our directors on June 28, 1999
and was elected to Chairman in a non-executive capacity in December 2000. Mr.
Frashier serves as President and Principal of Management Associates, which
provides strategic consulting services to entrepreneurial companies in the life
sciences field. Mr. Frashier previously served as Chairman of the Board and
Chief Executive Officer of OSI Pharmaceuticals, Inc., a Nasdaq listed company,
from January 1997 through September 1998, and as Chairman of the Board through
September 2000. He previously served as CEO and Vice-Chairman of OSI during
1996, and as President and CEO of OSI from March 1990 through December 1995.
From March 1987 through February 1990, Mr. Frashier served as President and CEO
of Genex Corporation, which specialized in protein engineering. Previously, Mr.
Frashier served as Executive Vice President of Millipore Corporation, where he
was also President of Waters Associates, Inc., a leader in liquid
chromatography. At Millipore, Mr. Frashier also served as President,
International Operations. In 1984, Mr. Frashier organized a management buy-out
of Millipore's ultra high-purity and laboratory water systems business,
Continental Water Systems, Inc., which was later sold to Olin Corporation. Mr.
Frashier has a B.S. in chemical engineering from Texas Technological University,
where he was honored in 1985 as a Distinguished Engineer of the University. In
1970, he received his M.S. degree in Management from the Massachusetts Institute
of Technology, where he was selected as a Sloan Fellow in Management. He was
also selected as the "Long Island Businessman of the Year" in 1993 by the
Wharton Club. He is a registered Professional Engineer in chemical engineering,
a member of the society of Sloan Fellows (MIT) and a former member of the Young
President's Organization. Mr. Frashier serves on the board of another public
biopharmaceutical firm, Maxim Pharmaceuticals, Inc., which is a Nasdaq listed
company and three private companies: Aderis Pharmaceuticals, Inc., Merrimack
Pharmaceuticals, Inc. and Helicon Therapeutics.

     Ira J. Gelb, M.D. has been one of our directors since April 1994. Dr. Gelb
received his M.D. from New York University School of Medicine in 1951. After
finishing his training in cardiology at the Mount Sinai Hospital in New York
City in 1957, Dr. Gelb continued his association with that institution until his
retirement from private practice in 1992. During this period, he was appointed
Attending Cardiologist and Associate Clinical Professor at the Mount Sinai
School of Medicine. Other appointments included Adjunct Associate Clinical
Professor of Cardiology at Cornell Medical School, Adjunct Clinical Professor of
Cardiology at New York Medical College, Cardiology Consultant at Lawrence
Hospital in Bronxville, New York and United Hospital, Portchester, New York. Dr.
Gelb is a former President of the American

                                        85


Heart Association, Westchester-Putnam Chapter, and was a Senior Assistant Editor
with the American Journal of Cardiology from 1968 to 1983, when he became a
founding editor of the Journal of the American College of Cardiology, or JACC.
Dr. Gelb continued as a Senior Assistant Editor of JACC until his retirement in
1992. Since that time, he has served on the boards of various pharmaceutical
companies. He was appointed Adjunct Clinical Professor of Medicine at the Mount
Sinai School of Medicine in 2002 where he had been an Honorary Lecturer since
1992. Dr. Gelb has also served as the Clinical Coordinator of Biomedical
Programs and Professor of Chemistry & Biochemistry at Florida Atlantic
University, or FAU since 1998, an Adjunct Professor and a member of FAU's
Foundation board since October 1996 and of FAU's Steering Committee since 1997.
Dr. Gelb has served as a member of the Board of directors of the American Heart
Association, Boca Raton Division, since December 1996 and was appointed
President in June 1999 for a two-year term. In 1998, Boca Raton Community
Hospital added Dr. Gelb as a member to its Foundation Board. In November 1998,
Dr. Gelb was appointed Voluntary Professor of Medicine at the University of
Miami School of Medicine. At present he is Director of Clinical Programs and
Clinical Professor, Biomedical Science, Charles E. Schmidt College of Science,
Florida Atlantic University. He was appointed to the advisory board of Cleveland
Clinic, Florida in 1999.

     Ronald L. Goode, Ph.D. was named President and Chief Executive Officer and
elected to the board of directors on March 21, 2001. Dr. Goode has held key
management positions at G. D. Searle & Co. (Corporate Senior Vice President and
President of Asia/Pacific World Area from 1995 to 1997, President of Searle
International from 1991 to 1995, and Senior Vice President of Commercial
Development from 1986 to 1989) and before that at Pfizer Pharmaceuticals (Vice
President of Clinical Research and Scientific Affairs from 1985 to 1986 and
Director of Marketing Research in 1980). He was responsible for many of Searle's
acquisitions, including DayPro(TM) that became Searle's largest selling drug.
Dr. Goode has supervised clinical development programs that led to the filing of
over a dozen New Drug Approval applications, including Procardia XL(TM) and
Ambien(TM). After his tenure at Searle, Dr. Goode was President and CEO of
Unimed Pharmaceuticals, Inc. from 1997 to 1999. He also positioned the company
for sale to Solvay Et Cie, a Belgium-based conglomerate. He formed the
consulting company Pharma-Links in 1999 with the mission of being the "link"
between pharmaceutical companies to help them create alliances, form joint
ventures and effect various transactions. In 2000 Dr. Goode and his wife spent a
sabbatical with his "charity of choice", Mercy Ships. Dr. Goode also serves on
the board of directors of several not-for-profit organizations. Dr. Goode
received his Ph.D. in Microbiology from the University of Georgia.

COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS

     Audit Committee.  The audit committee reviews the engagement of our
independent accountants, reviews annual financial statements, considers matters
relating to accounting policy and internal controls and reviews the scope of
annual audits. The audit committee, which met four times in fiscal 2001,
currently has three members, Irwin C. Gerson (Chairman), Ira J. Gelb and Walter
Lovenberg. Upon consummation of the merger, the audit committee will be
reconstituted and will consist of three independent, non-employee directors.

     Compensation and Organization Committee.  The compensation and organization
committee, which met four times during fiscal 2001, currently has three members,
Gary E. Frashier (Chairman), Robert J. Easton and Irwin C. Gerson. The
compensation and organization committee reviews, approves and makes
recommendations on our compensation policies, practices and procedures to ensure
that legal and fiduciary responsibilities of the board of directors are carried
out and that such policies, practices and procedures contribute to our success.
Upon consummation of the merger, the compensation and organization committee
will be reconstituted and will consist of three independent, non-employee
directors.

     Nominating and Governance Committee.  We do not have a standing nominating
and governance committee. Upon consummation of the merger, however, we intend to
form a nominating and governance committee, which will consist of two
independent, non-employee directors.

     Compensation and Organization Committee Interlocks and Insider
Participation.  None of our executive officers serves as a member of the board
of directors or compensation committee of any entity

                                        86


that has one or more executive officers serving as a member of our board of
directors or compensation and organization committee.

COMPENSATION OF DIRECTORS

     We pay each non-employee director a monthly fee of $1,500 for service as a
director, plus $1,500 for each day of a board of directors meeting attended,
$1,000 for each board of directors conference call meeting attended, $750 for
each committee meeting attended and $750 for each committee conference call
meeting attended. We reimburse directors for all expenses incurred in attending
our board of director meetings and committee meetings.

     Directors are eligible to participate in our Amended and Restated 2000
Stock Option Plan, or the Plan. The board of directors previously approved an
option grant schedule for non-employee directors that provides for an option to
purchase 50,000 shares of our common stock upon first joining the board and then
annual grants to be awarded at the beginning of each calendar year as follows:
an option to purchase 25,000 shares of our common stock until a total of 150,000
options is reached, an option to purchase 15,000 shares of our common stock
until a total of 200,000 options is reached, and then an option to purchase
10,000 shares of our common stock every year thereafter. The initial grant of an
option to purchase 50,000 shares of our common stock has an exercise price
equivalent to the fair market value of our common stock on the date of issuance,
while each annual option grant has an exercise price equivalent to the fair
market value of our common stock on the second Friday of January of the year in
which it was granted. In addition, directors are eligible to receive other
periodic grants of options from time to time under the Plan. Options granted
under the Plan to non-employee directors are immediately exercisable on the date
of grant. Options to purchase a total of 225,000 shares were granted under this
formula during fiscal 2001 to Robert J. Easton, Gary E. Frashier, Ira J. Gelb,
M.D., Irwin C. Gerson and Walter M. Lovenberg. Options granted during fiscal
2001 to Arthur P. Bollon and Ronald L. Goode, Ph.D. are reported under
"Executive Compensation -- Option Grants in Last Fiscal Year" on page   .

     We paid Easton Associates L.L.C., of which Robert J. Easton, one of our
directors, is the Chairman, $125,000 during fiscal 2001 for consulting services
for strategy and market planning services. This payment is in addition to the
remuneration Mr. Easton receives as a director.

     Gary E. Frashier is also employed as a consultant by us in addition to his
responsibilities as a director. Mr. Frashier's total remuneration for consulting
services during fiscal 2001 was $80,250.

EXECUTIVE OFFICERS

     Other than Ronald L. Goode, Ph.D., none of our executive officers will
continue to serve as executive officers for the combined company. Dr. Goode will
serve as President and Chief Executive Officer of the combined company.

                                        87


EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

     The following Summary Compensation Table sets forth summary information as
to compensation received by our Chief Executive Officer and each of our other
most highly compensated executive officers who were employed by us at the end of
fiscal 2001 for services rendered to us in all capacities during the three
fiscal years ended December 31, 1999, 2000 and 2001, and who earned in excess of
$100,000 for services rendered to us during fiscal 2001. Collectively, the CEO
and the most highly compensated executive officers are referred to herein as the
"named executive officers."



                                                                                       LONG-TERM
                                                                                      COMPENSATION
                                                     ANNUAL COMPENSATION              ------------
                                          -----------------------------------------    SECURITIES
                                                                       OTHER ANNUAL    UNDERLYING
NAME AND PRINCIPAL POSITION               YEAR    SALARY     BONUS     COMPENSATION    OPTIONS(#)
---------------------------               ----   --------   --------   ------------   ------------
                                                                       
Ronald L. Goode, Ph.D...................  2001   $203,362   $105,000     $81,312(1)     400,000
  President, CEO and Director             2000         --         --          --             --
                                          1999         --         --          --             --
Arthur P. Bollon, Ph.D..................  2001   $254,487   $ 25,000     $ 6,038(2)     100,000
  Executive Vice President and            2000   $220,769         --     $ 6,000(2)      75,000
  Director(3)                             1999   $205,988         --     $ 6,000(2)      25,000
Joan H. Gillett.........................  2001   $133,667   $ 14,000     $ 4,884(2)          --
  Vice President and Controller(4)        2000   $ 24,000         --          --         35,000
                                          1999         --         --          --             --
Robert J. Rousseau, Ph.D................  2001   $111,873         --     $27,668(6)      50,000
  Vice President of Business              2000         --         --          --             --
  Development and Licensing(5)            1999         --         --          --             --


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

(1) Other annual compensation for Dr. Goode during fiscal 2001 consisted of
    $70,812 toward relocation expenses and $10,500 toward car expenses.

(2) Other annual compensation for these named executive officers consisted of a
    car allowance.

(3) Although Dr. Bollon will not serve as an executive officer of the combined
    company after the consummation of the merger, we will continue to pay Dr.
    Bollon pursuant to the terms of his employment agreement, which is described
    in this section under the subheading "Employment Contracts, Termination of
    Employment and Change-in-Control Arrangements" on page [  ].

(4) Although we expect Ms. Gillett will continue to serve the combined company
    after the consummation of the merger, she will not do so as an executive
    officer.

(5) Although we expect Dr. Rousseau will continue to serve the combined company
    after the consummation of the merger, he will not do so as an executive
    officer.

(6) Other annual compensation for Dr. Rousseau consisted of $22,691 toward
    relocation expenses and $4,977 toward car expenses.

                                        88


OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information regarding each stock option
granted during fiscal year 2001 to each of the named executive officers.



                                                          INDIVIDUAL GRANTS
                                         ----------------------------------------------------    POTENTIAL REALIZABLE
                                         NUMBER OF                                                 VALUE AT ASSUMED
                                         SECURITIES    % OF TOTAL                                ANNUAL RATES OF STOCK
                                         UNDERLYING     OPTIONS                                 PRICE APPRECIATION FOR
                                          OPTIONS      GRANTED TO    EXERCISE OR                    OPTION TERM(3)
                                          GRANTED     EMPLOYEES IN   BASE PRICE    EXPIRATION   -----------------------
NAME                                        (#)       FISCAL YEAR     ($/SHARE)       DATE         5%           10%
----                                     ----------   ------------   -----------   ----------   ---------   -----------
                                                                                          
Ronald L. Goode, Ph.D.(1)..............   400,000         68.71%        $3.25       03/21/11    $818,000    $2,072,000
Joan Gillett...........................        --             --           --             --          --            --
Arthur P. Bollon, Ph.D.(2).............   100,000         17.18%        $5.11       06/03/11    $321,000    $  814,000
Robert J. Rousseau, Ph.D.(1)...........    50,000          8.59%        $4.84       03/01/11    $152,000    $  386,000


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

(1) The options were granted pursuant to our Amended and Restated 2000 Stock
    Option Plan, and vest annually in two equal installments commencing one year
    from the date of grant.

(2) The options were granted pursuant to our Amended and Restated 2000 Stock
    Option Plan. Options to purchase 75,000 shares of common stock vest annually
    in three equal installments commencing one year from the date of grant.
    Options to purchase 25,000 shares of common stock vested at the time of the
    grant.

(3) The amounts shown in this table represent hypothetical gains that could be
    achieved for the respective options if exercised at the end of the option
    term. These gains are based on assumed rates of stock appreciation of 5% and
    10% compounded annually from the date the respective options were granted to
    their expiration date. The gains shown are net of the option exercise price,
    but do not include deductions for taxes or other expenses associated with
    the exercise. Actual gains, if any, on stock option exercises will depend on
    the future performance of our commons stock, the optionee's continued
    employment through the option period and the date on which the options are
    exercised.

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

     The following table provides information regarding the exercises of options
by each of the named executive officers during fiscal 2001. In addition, this
table includes the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 2001 and the values of
"in-the-money" options, which values represent the positive spread between the
exercise price of any such option and the fiscal year-end value of our common
stock.



                                                               NUMBER OF SECURITIES
                                                              UNDERLYING UNEXERCISED       VALUE OF THE UNEXERCISED
                                                                 OPTIONS AT FISCAL           IN-THE-MONEY OPTIONS
                                  SHARES                             YEAR-END                AT FISCAL YEAR-END(2)
                                ACQUIRED ON      VALUE      ---------------------------   ---------------------------
NAME                             EXERCISE     REALIZED(1)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                            -----------   -----------   -----------   -------------   -----------   -------------
                                                                                      
Ronald L.Goode, Ph.D..........      --            $0          200,000        200,000       $ 16,000        $16,000
Arthur P. Bollon, Ph.D........      --            $0          627,500        117,500       $504,600        $     0
Joan H. Gillett...............      --            $0           17,500         17,500       $      0        $     0
Robert J. Rousseau, Ph.D......      --            $0           25,000         25,000       $      0        $     0


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

(1) Amounts shown in this column do not necessarily represent actual value
    realized from the sale of the shares acquired upon exercise of the option
    because in many cases the shares are not sold on exercise but continue to be
    held by the executive officer exercising the option. The amounts shown
    represent the difference between the option exercise price and the market
    price on the date of exercise, which is the amount that would have been
    realized if the shares had been sold immediately upon exercise.

                                        89


(2) The value of unexercised in-the-money options at fiscal year end assumes a
    fair market value for our common stock of $3.33, the closing sale price per
    share of our common stock as reported in the Nasdaq National Market on
    December 31, 2001.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

     Ronald L. Goode, Ph.D. entered into an employment agreement with us on
March 21, 2001 to serve as our President and Chief Executive Officer until March
20, 2004. The employment agreement provides for the payment to Dr. Goode of a
base salary of $375,000 per year with an annual bonus payment of up to 60% of
Dr. Goode's base salary, at the discretion of the board of directors. The
employment agreement provides that in the event Dr. Goode's employment is
terminated by us without cause, Dr. Goode terminates his employment for good
reason, or upon a change of control, Dr. Goode shall receive severance payments
of equal monthly installments at the base rate until either (i) the expiration
of 24 months following the date of termination, if such date is prior to March
21, 2003, or (ii) the expiration of 18 months following the date of termination,
if such date is after March 21, 2003. In addition, we granted to Dr. Goode an
option to purchase up to 400,000 shares of our common stock at an exercise price
of $3.25 per share. Dr. Goode also receives a car expense allowance of $1,000
per month under the employment agreement. The employment agreement contains a
two-year post-termination non-compete, non-solicitation and non-disclosure
agreement. Upon the consummation of the merger, Dr. Goode will enter into a new
employment agreement with eXegenics, which will supersede and replace in its
entirety his current employment agreement. The new employment agreement is
described in "Interests of Certain Persons in the Merger" on page [  ].

     Arthur P. Bollon, Ph.D. is employed by us under an employment agreement
extended through November 6, 2003. The employment agreement provides for the
payment to Dr. Bollon of a base salary of $250,000 per year. In addition, in the
event Dr. Bollon is terminated without cause or due to a disability, the
employment agreement provides that Dr. Bollon shall receive severance payments
of equal monthly installments at his base rate until the expiration of the term.
Dr. Bollon also receives a car expense allowance of approximately $600 per month
under the employment agreement. The employment agreement contains a one year
post-termination non-compete and non-solicitation agreement. It is expected that
we will enter into a revised employment agreement with Dr. Bollon, the terms of
which have yet to be determined.

     Dorit Arad, Ph.D. is employed by us under an employment agreement dated
July 1, 2002. The employment agreement renews each year on December 31 unless
either party provides notice of termination 90 days prior to the expiration, and
provides for the payment to Dr. Arad of a base salary of $190,000 subject to
annual reviews and adjustments in accordance with our compensation plan and
practices and approval by the compensation committee of our board of directors.
The agreement also provides for an annual performance bonus, at the discretion
of the board of directors, of not more that 30% per year of her annual salary.
An additional payment of $9,750 as a one-time cash bonus was paid to Dr. Arad
upon execution of the agreement. In the event we terminate Dr. Arad's employment
without cause, the agreement requires us to pay her salary for twelve months
following the date of termination. In addition, we granted to Dr. Arad an option
to purchase up to 150,000 shares of our common stock at an exercise price of
$0.81 per share. The agreement provides for additional option grants to purchase
up to 160,000 shares of our common stock based on achievement of milestones
related to the development of certain products. The employment agreement
contains an assignment of certain patents and a post-termination non-compete,
non-solicitation and non-disclosure agreement that extends for a period of one
year following the expiration or termination of employment. Certain conditions
existing in Dr. Arad's previous employment agreement, dated December 31, 1998,
obligated us to make royalty payments of 3% of sales and 10% of sublicense fees
related to products developed from her technology as a potential payment, pay on
her behalf a sum of up to $200,000 to Saturi Medical Research, Ltd., and
reimburse her for certain business expenses related to her research for us while
she was resident in Israel. In lieu of our making direct cash payments to Dr.
Arad or making payments on her behalf to Saturi Medical Research,

                                        90


in settlement of our obligations (amounting to approximately $355,000), Dr. Arad
agreed to accept termination of her liabilities to us under the loans we
previously issued to her.

     Each of our officers and principal scientists has entered into
confidentiality and patent assignment agreements with us.

     The outstanding option agreements issued under the Plan provide for
acceleration of the vesting of the options granted upon or in connection with a
change in control.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  EASTON ASSOCIATES L.L.C.

     In December 2000, we entered into an agreement with Easton Associates
L.L.C. for strategy and market planning services. Under this agreement, Easton
Associates receives an annual fee of $125,000. Mr. Easton, one of our directors,
is the chairman of Easton Associates.

  GARY E. FRASHIER

     In December 2000, we entered into an agreement with Gary E. Frashier,
chairman of our board of directors, for consulting services. Mr. Frashier was
paid $80,250 for his consulting services during fiscal 2001 and as of June 30,
2002, has been paid $24,750 during fiscal 2002.

  RONALD L. GOODE, PH.D.

     In May 2001, we sold 100,000 shares of common stock to our president and
chief executive officer, Ronald L. Goode, Ph.D., for a purchase price of $3.25
per share, the fair market value at the time of the transaction. Dr. Goode paid
the purchase price of $325,000 with $25,000 in cash and $300,000 by issuing a
five-year promissory note to us bearing interest at a rate of 4.71% per annum,
payable semi-annually. To date, Dr. Goode is current on all loan payments and
has made $15,165.32 in interest payments as of June 30, 2002.

  ROAN/MEYERS ASSOCIATES, L.P.

     On August 13, 2002 we entered into an agreement with Roan/Meyers
Associates, L.P. for financial advisory services. Pursuant to the terms of this
agreement, we paid Roan/Meyers Associates a retainer of $50,000 and must pay
them $6,500 per month through July 2003. In addition, we issued them warrants to
purchase 125, 000 shares of our common stock at a purchase price of $1.00 per
share, with an expiration date of August 13, 2007, and additional warrants to
purchase 125,000 shares of our common stock at a purchase price of $0.55 per
share, with an expiration date of August 13, 2007. Roan/Meyers Associates is
also entitled to reimbursement for reasonable out-of-pocket expenses.

                                        91


                        SECURITY OWNERSHIP OF MANAGEMENT
                    AND PRINCIPAL STOCKHOLDERS OF EXEGENICS

     The table below shows the number of shares of eXegenics common stock and
series A preferred stock beneficially owned as of November 30, 2002 by the
following persons:

     - each stockholder known by eXegenics to beneficially own more than 5% of
       the outstanding shares of either the common stock or series A preferred
       stock;

     - each current member of the board of directors,

     - each named executive officer; and

     - and all directors and named executive officers as a group.

     To the knowledge of eXegenics and unless otherwise indicated, each person
in the table has sole voting power and investment power, or shares such power
with his or her spouse, with respect to all shares of capital stock listed as
owned by such person.

     The number of shares beneficially owned by each stockholders is determined
under the rules promulgated by the SEC. The information is not necessarily
indicative of beneficial ownership for any other purpose. Under these rules,
beneficial ownership includes any shares as to which the individual has sole or
shared voting power or investment power and any shares as to which the
individual has the right to acquire beneficial ownership within 60 days after
September 30, 2002 through the exercise of any option, warrant or other right.
The inclusion in the following table of those shares, however, does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares.


                                                    COMMON STOCK
                                         ----------------------------------

                                                        PERCENT OF CLASS
                                                     ----------------------
                                                     BEFORE THE   AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER(1)   NUMBER     MERGER(2)     MERGER
---------------------------------------  ---------   ----------   ---------
                                                         
Bruce Meyers(5).......................   2,002,859     10.90%       2.82%
Roan/Meyers Associates, L.P.(6).......   1,967,059     10.71%       2.77%
Arthur P. Bollon, Ph.D.(7)............     834,375      4.54%       1.18%
Robert J. Easton(8)...................      66,650         *           *
Gary E. Frashier(9)...................     199,000      1.08%          *
Ira J. Gelb, M.D.(10).................     185,000      1.01%          *
Irwin C. Gerson(11)...................     186,000      1.01%          *
Ronald L. Goode, Ph.D.(12)............     511,700      2.79%          *
Walter M. Lovenberg, Ph.D.(13)........     185,500      1.01%          *
Directors and executive officers as a
  group (7 persons)(14)...............   2,168,225     11.80%       3.06%


                                                         SERIES A PREFERRED STOCK
                                         --------------------------------------------------------
                                                                           PERCENT OF ALL VOTING
                                                     PERCENT OF CLASS            SECURITIES
                                                  ----------------------   ----------------------
                                                  BEFORE THE   AFTER THE   BEFORE THE   AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER(1)  NUMBER   MERGER(3)     MERGER     MERGER(4)     MERGER
---------------------------------------  ------   ----------   ---------   ----------   ---------
                                                                         
Bruce Meyers(5).......................   29,282      3.54%       3.54%       10.58%       2.74%
Roan/Meyers Associates, L.P.(6).......   29,282      3.54%       3.54%       10.40%       2.69%
Arthur P. Bollon, Ph.D.(7)............       --        --          --         4.35%       1.13%
Robert J. Easton(8)...................       --        --          --            *           *
Gary E. Frashier(9)...................       --        --          --            *           *
Ira J. Gelb, M.D.(10).................       --        --          --            *           *
Irwin C. Gerson(11)...................       --        --          --            *           *
Ronald L. Goode, Ph.D.(12)............       --        --          --         2.67%          *
Walter M. Lovenberg, Ph.D.(13)........       --        --          --            *           *
Directors and executive officers as a
  group (7 persons)(14)...............       --        --          --        11.29%       2.92%


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

 *  Less than 1%

Except as otherwise indicated, each of the persons named has sole voting and
investment power with respect to the shares shown below.

(1) Except as otherwise indicated, the address of each beneficial owner is c/o
    eXegenics Inc., 2110 Research Row, Dallas, Texas 75235.

(2) Calculated on the basis of 16,184,486 shares of common stock outstanding
    except that shares of common stock underlying options or warrants
    exercisable within 60 days of the date hereof are deemed to be outstanding
    for purposes of calculating the beneficial ownership of securities of the
    holder of such options or warrants. This calculation excludes shares of
    common stock issuable upon the conversion of series A preferred stock.

                                        92


(3) Calculated on the basis of 828,023 shares of series A preferred stock
    outstanding.

(4) Calculated on the basis of an aggregate of 16,184,486 shares of common stock
    and 828,023 shares of series A preferred stock outstanding except that
    shares of common stock underlying options and warrants exercisable within 60
    days of the date hereof are deemed to be outstanding for purposes of
    calculating beneficial ownership of securities of the holder of such options
    or warrants. This calculation excludes shares of common stock issuable upon
    the conversion of series A preferred stock.

(5) Mr. Meyers' address is c/o Roan/Meyers Associates, L.P., 17 State Street,
    New York, New York 10004. Mr. Meyers is the sole stockholder, officer and
    director of the corporate general partner of Roan/Meyers Associates, L.P.,
    or RMA (formerly, Janssen-Meyers Associates, L.P.). Mr. Meyers beneficial
    ownership consists of the securities beneficially owned by RMA, which are
    described in note (6) below, and 35,800 shares of common stock held by The
    Meyers Foundation of which Mr. Meyers has voting control. This information
    was obtained from the last Schedule 13D filed by Mr. Meyers, which was filed
    with the SEC on June 1, 2000.

(6) RMA's address is 17 State Street, New York, New York 10004. Ownership
    consists of (i) 1,444,470 shares of common stock, (ii) 33,987 shares of
    common stock issuable upon the exercise of a currently exercisable unit
    purchase option and underlying class E warrants granted to RMA for placement
    agent services in connection with eXegenics' April 1998 private placement,
    (iii) 1,510 shares of common stock issuable upon the exercise of 377.5 unit
    purchase options and underlying class C and D warrants originally granted to
    RMA for underwriting services in connection with eXegenics' initial public
    offering, (iv) 30,563 shares of common stock issuable upon the exercise of
    currently exercisable class E warrants, (v) 81,529 shares of common stock
    issuable upon the exercise of a unit purchase option and underlying class E
    warrants granted to RMA for placement agent services in connection with
    eXegenics' April 1998 private placement, (vi) 125,000 shares of common stock
    issuable upon the exercise of currently exercisable two-year warrants issued
    in 2001 to RMA, and (vii) 250,000 shares of common stock issuable upon the
    exercise of currently exercisable five-year warrants issued in 2002 to RMA.
    Does not include 29,282 shares of common stock issuable upon the conversion
    of 29,282 shares of series A preferred stock. This information was obtained
    from the last Schedule 13D filed by Mr. Meyers, which was filed with the SEC
    on June 1, 2000.

(7) Ownership consists of 169,400 shares of common stock and options to purchase
    664,975 shares of common stock that are currently exercisable or exercisable
    within 60 days of the date hereof. Does not include options to purchase
    105,025 shares of common stock not exercisable within 60 days of the date
    hereof.

(8) Ownership consists of options to purchase 66,650 shares of common stock
    currently exercisable or exercisable within 60 days of the date hereof. Does
    not include options to purchase 33,350 shares of common stock not
    exercisable within 60 days of the date hereof.

(9) Ownership consists of options to purchase 199,000 shares of common stock
    currently exercisable or exercisable within 60 days of the date hereof. Does
    not include options to purchase 41,000 shares of common stock not
    exercisable within 60 days of the date hereof.

(10) Ownership consists of options to purchase 185,000 shares of common stock
     that are currently exercisable or exercisable within 60 days of the date
     hereof. Does not include options to purchase 9,000 shares of common stock
     not exercisable within 60 days of the date hereof.

(11) Ownership consists of 1,000 shares of common stock and options to purchase
     185,000 shares of common stock that are currently exercisable or
     exercisable within 60 days of the date hereof. Does not include options to
     purchase 9,000 shares of common stock not exercisable within 60 days of the
     date hereof.

(12) Ownership consists of 111,700 shares of common stock and options to
     purchase 400,000 shares of common stock that are currently exercisable or
     exercisable within 60 days of the date hereof.

(13) Ownership consists of 4,500 shares of common stock and options to purchase
     181,000 shares of common stock currently exercisable or exercisable within
     60 days of the date hereof. Does not

                                        93


     include options to purchase 9,000 shares of common stock not exercisable
     within 60 days of the date hereof.

(14) Ownership consists of 286,,600 shares of common stock and options to
     purchase an aggregate of 1,881,625 shares of common stock which are
     currently exercisable or exercisable within 60 days of the date hereof.
     Does not include options to purchase 306,375 shares of common stock not
     exercisable within 60 days of the date hereof.

                            DIVIDEND POLICY OF EXEGENICS

     We have never declared nor paid any cash dividends on our common stock. We
do not intend to pay cash dividends on our common stock in the foreseeable
future. We presently intend to retain future earnings, if any, to finance the
expansion and growth of our business. Any future determination to pay dividends
will be at the discretion of our board of directors and will depend on our
financial condition, results of operations, capital requirements and other
factors that our board of directors deems relevant.

                           INFORMATION REGARDING IDDS

     In this section, "Information Regarding IDDS," references to "we," "us,"
and "our," refer to IDDS.

                                BUSINESS OF IDDS

     We are a specialty pharmaceutical company that applies proprietary
technologies to develop new drugs and improved formulations of existing drugs
for the prescription pain management market. We believe that our product
candidates address unmet medical needs for breakthrough cancer pain,
postoperative pain, lower-back pain, pain due to orthopedic injury, dental pain
and pain due to other indications. We believe our product candidates, if
approved, will offer a combination of enhanced pain relief, with profiles of
reduced side effects, and faster onset of pain relief compared to currently
available treatments. Our lead product candidates have demonstrated safety and
effectiveness in early-stage and mid-stage clinical trials.

OUR OPPORTUNITY

     Drugs are a key element in the treatment of pain. The worldwide market for
therapeutics to manage pain is expected to grow from $22 billion in 2000 to $30
billion in 2007 according to Front Line Strategic Management, Inc. Our product
candidates target a $3.4 billion subsegment of the worldwide pain management
market.

PAIN MANAGEMENT MARKET

     Because of the increasing awareness of the importance of pain management by
the healthcare industry, growth in the pain management market has been
significant in recent years and is expected to continue. Additional factors that
are contributing to the growth of the pain management market include:

     - population demographic shifts expanding the target market population;

     - new therapies that have increased survival times for patients with
       chronic conditions;

     - increasing recognition of the therapeutic and economic benefits of
       effective pain management by physicians, healthcare providers and payors;

     - rapid market acceptance of new products with novel mechanisms of action;
       and

     - targeted markets that permit cost-effective selling and marketing.

     The drugs most commonly used to treat acute, moderate-to-severe pain
include strong opioids, such as morphine, and in the case of moderate pain,
weaker opioids such as hydrocodone and oxycodone or

                                        94


stronger nonsteroidal anti-inflammatory drugs, or NSAIDs, such as ketorolac.
Patients suffering from chronic, moderate-to-severe pain syndromes, such as
cancer pain, often require long-term use of opioids that are typically
prescribed in sustained-release or extended-release formulations. Chronic pain
is often treated with a combination of drugs, including sustained-release
products, such as the fentanyl patch or sustained-release morphine, to treat the
underlying baseline pain and immediate-release products, such as transmucosal
fentanyl, or immediate-release or intravenous morphine to treat episodic
breakthrough pain.

     Despite advances in medicine and the development of new drugs, we believe
pain management remains a critical area of unmet medical need. Increasingly,
patients, advocacy groups and the media are highlighting the shortcomings of
pain management and are demanding changes to the current standards of care
provided by the medical system. To address these inadequacies, clinicians and
the pharmaceutical industry are creating a variety of different pain control
products that can provide the flexibility and versatility required to close the
gap in the current practice of pain management. These gaps include:

     - Slow onset of action.  Commercially available oral pain medications can
       take 20 to 40 minutes to provide detectable levels of pain relief. Drugs
       delivered through a transdermal patch can take several hours to reach
       effective blood levels, and prolonged drug absorption can occur after
       patch removal.

     - Insufficient dose-to-intensity control.  It is difficult to match the
       doses of drugs that are administered orally or by transdermal patch to
       the patient's level of pain. This mismatch can result in either
       under-treatment or over-treatment.

     - Costly to administer.  Although intravenous administration provides rapid
       entry of drugs into the bloodstream, delivery by this route requires both
       trained personnel and, in some cases, specialized equipment. This adds to
       the overall cost of therapy.

     - Invasive route of delivery.  Intravenous or intramuscular delivery of
       drugs can cause pain to patients when administered. Consequently, some
       patients are adverse to receiving injections.

     - Poor side-effect profile.  Opioids, such as morphine, are associated with
       a number of side-effects, including nausea, vomiting, constipation,
       respiratory depression and sedation. In addition, some patients are
       unable to use opioid medications.

OUR SOLUTION

     We believe that our product candidates, if approved, have the potential to
address many of the limitations of existing pain treatment therapies by
providing one or all of the following characteristics:

     - Rapid onset of pain relief.  Our intranasal ketamine and morphine product
       candidates rapidly enter the bloodstream following administration and
       appear to provide detectable pain relief within two to five minutes after
       administration.

     - Appropriate dose-to-intensity control.  Our intranasal product candidates
       should allow the patient to administer an amount of drug that is
       appropriate for that individual's level of pain and to discontinue
       administration once a desired level of pain relief is obtained. This
       ability to self-regulate the dose of drugs avoids doses that are higher
       than necessary to achieve safe and effective management of pain.

     - Low cost to administer.  Our intranasal product candidates should permit
       patients to self-administer and self-regulate the dose of drugs. This may
       eliminate the need for the personnel and equipment necessary to establish
       an intravenous line and we anticipate that it will be more affordable for
       hospitals and home care settings.

     - Non-invasive route of delivery.  Our intranasal product candidates are
       non-invasive, eliminating the need for injections. In addition, a
       non-invasive route of delivery reduces the incidence of needle stick
       injuries and the potential for transmission of blood-borne viruses.

                                        95


     - Improved side-effect profile.  We believe our intranasal ketamine and
       intravenous diclofenac product candidates will have improved side-effect
       profiles over comparable products in their category. For example, initial
       studies indicate that they are non-sedating and do not affect a patient's
       blood pressure or heart rate. In addition, when used in combination with
       other opioids, ketamine and diclofenac have been reported to reduce the
       amount of opioids required to produce an equal level of pain relief,
       which reduces the requirement for narcotics. This reduction in the
       requirement for opioids has the potential to enhance the patient's
       overall quality of life.

OUR STRATEGY

     Our goal is to become a leading specialty pharmaceutical company that
develops and commercializes new drugs for the management of pain in order to
fulfill unmet medical needs. Key elements of our strategy to accomplish this
goal are to (i) develop new products with reduced clinical and regulatory risk,
(ii) focus on large markets where our product candidates can address unmet
clinical needs, (iii) focus on clinical development and late-stage product
candidates, (iv) retain significant rights to our product candidates, (v) use
our technology platforms to develop new product candidates and (vi) outsource
key functions.

OUR PRODUCT CANDIDATES

     We are developing prescription drugs comprised of a number of well-known
analgesic drugs for the treatment of a variety of moderate-to-severe pain
syndromes. We selected our product candidates based on our belief that they
offer significantly lower clinical, regulatory and commercial risk profiles as
compared to new chemical entities. All of our product candidates contain drugs
approved for other uses by the U.S. Food and Drug Administration, or FDA. We are
developing proprietary formulations for these drugs, which are designed to
deliver fast and effective therapeutic levels directly into the bloodstream.

     We are evaluating each of our product candidates in several clinical models
of pain in order to seek approval by the FDA for use in the treatment of acute
and chronic moderate-to-severe pain indications. The guidelines established by
the FDA recommend that we demonstrate effectiveness in more than one clinical
model of pain. Acceptable clinical models of pain include dental pain,
postoperative pain, cancer pain and pain due to various types of trauma.
Typically, our clinical trials are designed as randomized, double-blind,
placebo-controlled and, where appropriate, comparator-controlled studies. A
randomized study is one in which the patient is randomly assigned to receive a
study drug or placebo based on a pre-determined ratio. A double-blind study is
one in which the patient, the physician and the sponsor are unaware if the
patient is receiving a placebo or drug in order to preserve the integrity of the
trial and prevent observer bias. A placebo-controlled study is one in which a
subset of patients is purposefully not administered the study drug. A
comparator-controlled study is one in which a subset of patients is administered
a medication that is currently prescribed to treat the condition in order to
directly compare the study drug to approved therapies.

     All of our product candidates offer the potential to deliver an approved
drug into the bloodstream through a fast and effective route of administration.
Three of our product candidates are administered by a nasal spray, and one is
administrated intravenously. Nasal delivery is an ideal route for drug
administration as it does not require intravenous or intramuscular injections.
The large surface area, uniform temperature, high permeability and high density
of blood vessels in the lining of the nasal cavity all contribute to the rapid
absorption of drugs into the bloodstream. The nasal route of delivery is also a
good alternative for patients who have difficulty swallowing oral products.

     Drugs that are administered orally are absorbed from the blood vessels that
line the stomach and pass through the liver where they may be metabolized to an
inactive form. This process is referred to as first pass metabolism. By
contrast, our product candidates enter the bloodstream directly through
intravenous administration or through the blood vessels of the nasal cavity and
avoid the phenomenon of first pass metabolism. By avoiding first pass
metabolism, it is possible to achieve higher concentrations of the active drug
circulating in the bloodstream.

                                        96


     The following table identifies our current product candidates according to
clinical indication and stage of development in the U.S. and the U.K.:



PRODUCT CANDIDATE                            CLINICAL INDICATION              DEVELOPMENT STAGE
-----------------                            -------------------              -----------------
                                                                        
Intranasal Ketamine              Acute Pain and Acute Episodes of Chronic       Phase II
                                 Moderate-to-Severe Pain
Intranasal Morphine              Acute Pain and Acute Episodes of Chronic       Phase II
                                 Moderate-to-Severe Pain
Intravenous Diclofenac           Acute Moderate-to-Severe Pain                  Phase II
Intranasal Fentanyl              Acute Episodes of Chronic                      Preclinical
                                 Moderate-to-Severe Pain


INTRANASAL KETAMINE

  BACKGROUND

     Our intranasal ketamine product candidate is in clinical development for
the treatment of syndromes associated with acute and acute episodes of chronic
moderate-to-severe pain. Ketamine is an FDA-approved drug that has been in
clinical use for over 25 years for general anesthesia. At lower doses than that
approved for use as an anesthetic, ketamine has been reported to be an effective
analgesic for the treatment of breakthrough pain, postoperative pain and pain
associated with emergency medical procedures. We have licenses to two U.S.
patents and their foreign counterparts directed towards the use of ketamine to
manage pain and the administration of ketamine through the nasal passage.

     The use of ketamine as an analgesic is gaining acceptance by clinicians in
view of its effectiveness and minimal impact on cardiovascular and respiratory
functions. Since ketamine is not approved for use as a pain reliever, physicians
have resorted to using the drug off-label. We believe that an FDA-approved
formulation of ketamine for the treatment of moderate-to-severe pain will
provide physicians with an accepted and regulated alternative to off-label use.
In addition, in 1999, ketamine was labeled by the Drug Enforcement Agency, or
DEA, as a Schedule III controlled substance. The scheduling of ketamine by the
DEA provides additional protection with respect to controlling potential misuse
by placing restrictions on the ability to prescribe and distribute the drug.

  CLINICAL RESULTS

     Our intranasal ketamine product is in clinical development for the
treatment of a heterogeneous group of syndromes associated with acute pain and
acute episodes of chronic pain. All of our clinical trials for intranasal
ketamine are being performed in the U.S. under a company-sponsored
investigational new drug application, or IND. We have successfully completed
three Phase II clinical trials and one Phase I clinical trial of intranasal
ketamine in a total of 118 patients and volunteers. We have completed a Phase I
pharmacokinetic and safety study, two phase II post-operative pain trials and a
Phase II breakthrough pain trial. After the study reports are completed and
submitted to the FDA, we will request a formal End-of-Phase II meeting where we
will seek feedback regarding the trial design of our future clinical trials. We
anticipate initiating Phase III clinical trials shortly thereafter.

  ACUTE INDICATIONS

     In the second quarter of 2001, we completed a placebo-controlled Phase II
randomized, double-blind trial evaluating the safety and effectiveness of three
dose levels of intranasal ketamine for the treatment of moderate-to-severe
postoperative pain in 40 patients undergoing the removal of two to four wisdom
teeth. In this trial, we observed the following results:

     - compared to a placebo, all three dose levels of intranasal ketamine
       provided significant postoperative pain relief;

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     - intranasal ketamine is fast-acting, with onset of pain relief generally
       occurring within two to ten minutes following administration;

     - both analgesic effectiveness and duration of effect depended on the dose
       of intranasal ketamine; and

     - intranasal ketamine appears to be safe and well-tolerated by patients.

     Patients enrolled in this trial received either placebo or one of three
doses of intranasal ketamine upon the onset of moderate-to-severe pain following
dental surgery. Both pain intensity and pain relief were evaluated at specific
time intervals over a three-hour period following the administration of
intranasal ketamine. In this trial, the onset of pain relief was rapid in each
of the three dose groups of intranasal ketamine. Maximum pain relief was
attained 30 minutes following dose administration. No harmful effects on heart
rate or blood pressure were found and assessment of patient vital signs and the
results of physical and nasal examinations indicated that intranasal ketamine
was well-tolerated. Based on the results of this study, we believe that
intranasal ketamine may offer a safe, non-opioid alternative for the treatment
of moderate-to-severe postoperative pain. These data were presented at the
American Society for Clinical Pharmacology and Therapeutics in Atlanta, Georgia
in April 2002.

     In the third quarter of 2001, we initiated, and successfully completed, a
second 40-patient Phase II clinical trial of intranasal ketamine for the
treatment of acute pain. This trial was designed to confirm the safety and
effectiveness and determine the minimum effective dose of intranasal ketamine
required by patients suffering from moderate-to-severe postoperative pain.

     In this trial, we observed the following results:

     - intranasal ketamine generally provides pain relief within two to ten
       minutes following administration;

     - the amount and duration of pain relief depends on the dose of intranasal
       ketamine;

     - intranasal ketamine appears to be safe and well-tolerated by patients;
       and

     - at very low doses, intranasal ketamine provides minimum and limited pain
       relief.

     Our clinical trial results suggest that intranasal ketamine provides rapid
onset of pain relief with dose-related effectiveness and duration of effect. In
the fourth quarter of 2001, we initiated a Phase II clinical trial conducted at
multiple clinical sites of intranasal ketamine for the treatment of
moderate-to-severe pain associated with orthopedic injury. We currently have
enrolled half of the planned patients for this study.

  ACUTE EPISODES OF CHRONIC PAIN

     In the fourth quarter of 2001, we completed a Phase II clinical trial
conducted at multiple clinical sites that evaluated the safety and effectiveness
of intranasal ketamine for the treatment of moderate-to-severe episodes of
breakthrough pain. Patients who enrolled in this trial had a documented history
of chronic debilitating malignant pain and most were considered opioid tolerant.
The trial was designed as a placebo-controlled, double-blind crossover trial in
20 patients experiencing severe breakthrough pain episodes. In this trial, we
observed the following results:

     - compared to placebo, intranasal ketamine provided statistically
       significant relief for breakthrough pain;

     - intranasal ketamine is fast-acting with measurable pain relief obtained
       within five minutes of administration;

     - intranasal ketamine provided significant pain relief over the one-hour
       treatment period; and

     - intranasal ketamine appears to be safe and well tolerated by patients.

     Patients enrolled in this trial were given either placebo or intranasal
ketamine upon inception of their first breakthrough pain episode and instructed
to administer a fixed dose of up to five sprays until adequate
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pain relief was achieved. The results of our clinical trial suggests that
intranasal ketamine provides rapid onset of relief for breakthrough pain
syndromes. Compared to placebo, intranasal ketamine demonstrated a significant
reduction in breakthrough pain intensity over the duration of the breakthrough
pain episode. The onset of action of intranasal ketamine was rapid and
statistically different from the placebo, occurring within four minutes after
administration of the fifth, and final, spray. No harmful effects on heart rate
or blood pressure were found and assessment of patient vital signs and the
results of physical and nasal examinations indicated that intranasal ketamine
was well-tolerated. Based on the results of this study, we believe that
intranasal ketamine may offer a safe, non-opioid alternative for the treatment
of moderate-to-severe breakthrough pain. These data were presented at the
American Society of Clinical Oncology in Orlando, Florida in May 2002.

INTRANASAL MORPHINE

     Our intranasal morphine product candidate is in clinical development for
the treatment of syndromes associated with acute pain and acute episodes of
chronic moderate-to-severe pain. Morphine, the analgesic standard to which all
other opioids are usually compared, is used for the relief of acute and chronic
moderate-to-severe pain and is the drug of choice for pain associated with
cancer. Orally delivered morphine products may not provide rapid relief of pain
and demonstrate considerable patient-to-patient variability in absorption.
Injectable formulations of morphine provide rapid and effective pain relief, but
administration often requires professional assistance or hospitalization.
Therefore, alternative formulations of morphine that are easy to administer by a
patient or caregiver and afford rapid onset of action and high levels of active
drug in the bloodstream would provide significant medical benefit.

     We have licensed a proprietary drug delivery technology that should allow
us to achieve therapeutic blood levels of drugs that were previously
unattainable when they were administered through the nasal route. The key to
this technology is chitosan, a naturally occurring carbohydrate polymer that,
while pharmaceutically inert by itself, appears to enhance the absorption of
compounds across mucosal membranes, such as those found in the nasal cavity, and
provides the potential to deliver drugs through alternative routes. This is
particularly important for compounds such as morphine that are poorly absorbed
across mucosal barriers and, in particular, the nasal membrane. The contribution
of chitosan to enhancing mucosal drug absorption appears to be due to several
factors, including its potent mucoadhesive property, which we believe prevents
drug washout. We believe that intranasal morphine will represent an alternative
formulation that combines patient convenience, ease of use and
cost-effectiveness with the rapid onset of pain relief and the well-accepted
potency of injectable delivery routes.

     - We have completed two Phase I clinical trials and one Phase II clinical
       trial of our intranasal morphine product candidate. Our single- and
       multiple-dose Phase I clinical trials suggest that:

     - intranasal morphine is rapidly absorbed, achieving blood levels typically
       associated with analgesic effectiveness in as early as five to ten
       minutes following administration;

     - the safety profile of intranasal morphine was comparable to other
       formulations of morphine;

     - blood levels of intranasal morphine varied depending on the dose
       administered; and

     - intranasal morphine was well tolerated by the mucous membranes of the
       nasal cavity.

     Based on the results of both the single- and multiple-dose Phase I clinical
trials, we initiated a placebo and comparator-controlled Phase II randomized
double-blind single dose postoperative pain trial in the first quarter of 2002.
This study compared two dose levels of intranasal morphine with placebo and with
both intravenous and oral morphine in a total of 225 patients suffering moderate
to severe pain following dental surgery. In this trial we demonstrated that both
doses of intranasal morphine were statistically superior to placebo and
statistically similar to the positive comparators. Intranasal morphine was well
tolerated in this patient population and there were no serious adverse events
and no withdrawals due to adverse events or other safety concerns.

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INTRAVENOUS DICLOFENAC

  BACKGROUND

     In December 2001, we acquired the rights to develop a proprietary
intravenous formulation of diclofenac from Shimoda Biotech, Ltd. and Farmarc.
Diclofenac belongs to the class of NSAIDs and is widely prescribed as an
anti-inflammatory agent due to its combination of effectiveness and
tolerability. The exact mechanism action of diclofenac and other NSAIDs has not
been fully determined but appears to be associated with inhibiting the body's
ability to synthesize prostaglandins, which the body produces in response to
tissue injury which in turn results in inflammation and pain.

     The key to the intravenous formulation of diclofenac that we have
in-licensed is hydroxypropyl-SS-cyclodextrin, or HPBCD. Cyclodextrins, such as
HPBCD, are donut-shaped carbohydrate molecules that can improve the solubility
of poorly soluble drugs such as diclofenac. By improving the solubility of
diclofenac, HPBCD provides a means to create an intravenous formulation that can
efficiently deliver the drug to the patient's bloodstream. While there are many
types of cyclodextrins, only modified cyclodextrins such as HPBCD are regarded
as safe for injection.

     NSAIDs offer several advantages over the more traditional opioid narcotics
for the management of postoperative pain. NSAIDs have limited effect on the
central nervous system, do not depress respiration and are non-sedating. This
latter attribute is of special importance in intermediate, ambulatory surgery
since NSAIDs can provide analgesia without delaying discharge from the hospital
or outpatient setting. In addition, NSAIDs are also useful in patients who
cannot take opioids.

     There exists an unmet medical need for a safe and effective injectable
NSAID in the hospital setting. Diclofenac is currently approved for use in the
U.S. in a variety of oral formulations as well as a topical and ophthalmic
formulation. An intramuscular formulation of diclofenac is commercially
available in Europe. The development of injectable formulations of diclofenac
have been limited by the drug's poor solubility in water and susceptibility to
breakdown. We believe that the proprietary formulation of diclofenac that we
have in-licensed has the potential to overcome these issues and may provide an
effective and safe treatment of moderate-to-severe acute pain.

  CLINICAL RESULTS

     Our intravenous diclofenac product candidate has been evaluated in over 300
human subjects in Phase I clinical trials performed in South Africa and Phase II
clinical trials performed in the U.K., with both sets of trials conducted on
behalf of a third party. In addition, we filed an IND with the FDA and may
initiate clinical trials in the US at any time.

     A 269-patient Phase II clinical trial has been completed in the U.K.
evaluating the safety and effectiveness of intravenous diclofenac for the
treatment of acute postoperative pain. This trial was a randomized,
double-blind, placebo-controlled study conducted at multiple clinical sites to
evaluate the safety, effectiveness and tolerability of three dose levels of
intravenous diclofenac for the treatment of pain following removal of one or
more impacted wisdom teeth. This trial demonstrated that: (i) as compared to
placebo, all three dose levels of intravenous diclofenac provided statistically
significant pain relief and delayed the need for rescue medication; and (ii) at
all three dose levels, intravenous diclofenac appears to be safe and
well-tolerated. Upon onset of moderate to severe pain following surgery,
patients were treated with either intravenous diclofenac or placebo. By
comparison to placebo, there was a rapid drop in pain intensity with all three
dose levels of intravenous diclofenac. This drop in pain intensity is
characteristic of effective pain medications when delivered by the intravenous
route. This trial suggests that:

     - compared to placebo, all three dose levels of intravenous diclofenac
       provide statistically significant pain relief and delayed the need for
       rescue medication; and

     - at all three dose levels, intravenous diclofenac appear to be safe and
       well-tolerated.

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INTRANASAL FENTANYL

     Our intranasal fentanyl product candidate is currently in preclinical
development for the treatment of acute episodes of chronic moderate-to-severe
pain. The actions of fentanyl are similar to those of morphine, although
fentanyl is much more potent and has a more rapid onset of action. By
comparison, while the analgesic potency of fentanyl is some 75 to 100 times that
of morphine, its duration of effect is shorter. When administered using a
transdermal patch that provides a controlled rate of delivery, fentanyl is
effective in controlling the chronic pain associated with cancer. Fentanyl was
originally approved by the FDA in 1968 and is commercially available in
formulations for transdermal, transmucosal and injectable delivery.

     Fentanyl is a widely-used and effective opioid analgesic for treating
chronic moderate-to-severe pain, including cancer pain. A fentanyl drug matrix
in a lollipop format, Actiq(R), was approved in 1998 for the treatment of
breakthrough pain in cancer patients who are already receiving and tolerating
opioid therapy for their pain. This oral, transmucosal formulation of fentanyl
is the first opioid approved specifically for this indication and is frequently
used as an adjunct to the fentanyl patch to control these flare-up pain
episodes.

     We believe that an intranasal formulation of fentanyl could also be used to
complement the fentanyl transdermal patch, as well as oral morphine
controlled-release formulations, to effectively treat episodes of breakthrough
pain. Intranasal fentanyl may offer several advantages over existing
fentanyl-based products for the management of breakthrough pain, including rapid
and consistent onset of action, coupled with certain cost and safety advantages.
Nasal delivery of fentanyl could provide an advantage for cancer patients who,
as a side effect of chemotherapy, have difficulty swallowing due to oral
ulcerations.

     Intranasal fentanyl is currently in preclinical development using our
chitosan delivery platform technology.

COMPETITIVE GRANTS

     We have received the following grants that provide both financial and
development support for several of our clinical programs:

  U.S. MILITARY

     We were awarded a grant of approximately $1.2 million in the third quarter
of 2000 to be paid over a three-year period from the U.S. Department of Defense
to develop intranasal ketamine for the treatment of acute moderate-to-severe
pain associated with traumatic orthopedic injury. This award, entitled "A
Non-Opiate, Nasally Administered Alternative to Injection of Morphine Sulfate
For the Treatment of Pain in Military Casualties," is based on the desire of the
military for a fast-acting, non-invasive and non-sedating alternative to the
intravenous and oral medications commonly used today for treating combat related
injuries such as burns, bullet wounds and blunt trauma associated with mass
casualty management. We began enrolling patients for clinical trials of
intranasal ketamine in the first quarter of 2002.

  NATIONAL INSTITUTES OF HEALTH/NATIONAL CANCER INSTITUTE

     In the third quarter of 2000, we were awarded a Phase I grant from the
National Institutes of Health/National Cancer Institute Small Business
Innovation Research Award for "The Development of Transnasal Ketamine for
Breakthrough Pain." This award provided approximately $298,000 of funding for a
period of one year from the National Cancer Institute for the development of
intranasal ketamine as an analgesic for intractable malignant pain, such as
breakthrough cancer pain, based on its potential to provide a substantial
medical benefit in an area of unmet medical need.

STRATEGIC AGREEMENTS

     We have entered into a license agreement with Dr. Stuart Weg, a number of
strategic agreements with West Pharmaceutical related to its proprietary
chitosan intranasal delivery technology for the
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administration of morphine, fentanyl and other compounds and an agreement with
Shimoda Biotech, Ltd. and the Farmarc companies.

  KETAMINE LICENSE

     We assumed a license agreement with Dr. Stuart Weg upon the closing of our
merger with Pain Management in September 2000. The license grants us the
exclusive worldwide rights, including the right to grant sublicenses, for the
intellectual property surrounding intranasal ketamine. In connection with the
license agreement, we made an initial payment to Dr. Weg, Dr. Herbert Brotspies
and Calgar & Associates and issued each shares of our common stock, a portion of
which is currently held in escrow and will be released to them upon the
successful completion of a Phase III clinical trial for ketamine, if at all. Dr.
Weg, one of our principal stockholders, was issued 757,983 shares of our common
stock in February 1998. An additional 189,495 shares are held in escrow as
described above. We also reimbursed Dr. Weg, Dr. Brotspies and Calgar &
Associates for patent and other costs. The license requires that we pay semi-
annual royalty payments to Dr. Weg, Dr. Brotspies and Calgar & Associates based
on a percentage of net sales of intranasal ketamine we or our sublicensees sell,
if any. In addition, we will pay Dr. Weg, Dr. Brotspies and Calgar & Associates
a defined percentage of all sublicensing fees or other lump sum payments. Under
this agreement, we have made aggregate payments to Dr. Weg, Dr. Brotspies and
Calgar & Associates of $300,000 in cash as of June 30, 2002. We are obligated to
make aggregate future payments of approximately $1.3 million upon the earlier of
certain defined dates ranging from August 2003 to November 2004 or satisfaction
of certain clinical and regulatory milestones, which include the filing of an
NDA with the FDA, the approval of an NDA by the FDA and the first commercial
sale of a licensed product. Although defined percentages of such milestone
payments will be creditable against the royalties earned, in no event will the
royalties earned be reduced by more than a certain percentage in any applicable
semi-annual period. At our option, we may satisfy a portion of the milestone
payments as they accrue through the issuance of shares of our common stock, if
and when, we become a publicly traded company. Dr. Weg will have the right to
terminate this agreement upon 60 days notice to us if we fail to pay him
royalties due under the agreement or in the event we breach the agreement and
fail to cure the breach within the 60-day period. The agreement may also be
terminated by mutual agreement or on the date the last patent under the
agreement expires. In addition, we may terminate the agreement in whole or in
part as to any portion of the patent rights upon 60 days prior notice.

  WEST PHARMACEUTICAL AGREEMENTS

     In August 2000, we entered into a license agreement, which was amended in
October 2001, with West Pharmaceutical under which we have a worldwide exclusive
right to develop and commercialize products, including intranasal morphine and
intranasal fentanyl under patents held by West Pharmaceutical, for the
transmucosal delivery to humans and animals of morphine and fentanyl for the
treatment of pain. The most significant of these patents expire between 2014 and
2016. As consideration for the license, we paid West Pharmaceutical initial
license fees in the amount of approximately $2.3 million. In addition, under the
license agreement for morphine, fentanyl and other products, we are obligated to
make royalty payments to West Pharmaceutical based upon our net sales of these
products, if any. We are also obligated to pay West Pharmaceutical a minimum
annual royalty for each licensed product that receives approval by a regulatory
agency to be marketed in any major market country. We are also obligated to pay
West Pharmaceutical a defined amount of any license fee in the event we
sublicense any such rights to any third party.

     The term of the license agreement expires in 2020, which is the date the
last patent expires, unless terminated earlier by the parties. The license
agreement can be terminated by mutual agreement or by either party upon default
by the other party under any one of several agreements contained in the license,
but only if the breaching party fails to remedy the default within 30 days of
receiving notice from the non-defaulting party. We can also terminate the
license agreement with respect to specific compounds if the FDA does not allow
chitosan in the products contemplated by the agreement. If the license agreement
is terminated for any reason other than West Pharmaceutical's breach, we must
grant to West

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Pharmaceutical perpetual, exclusive, worldwide, royalty-free rights to what we
develop under the agreement.

     In connection with the license agreement, in September 2000, we entered
into an intranasal morphine development milestone and option agreement with West
Pharmaceutical. The parties meet regularly to discuss the status of the
development programs and we submit biannual revised product plans to West
Pharmaceutical, the scope of which we believe are consistent with industry
standards. Under this agreement, we made aggregate milestone payments to West
Pharmaceutical of approximately $2.3 million in cash in November 2001. We are
obligated to make future payments totaling $5.0 million upon reaching certain
defined development milestones, which include the filing of an NDA with the FDA
and the approval of an NDA by the FDA of a licensed product. Milestone payments
can be paid in cash or stock upon the satisfaction of certain clinical and
regulatory milestones and provided that we are publicly traded at the time the
milestone payment accrues. In addition, we granted West Pharmaceutical a right
of first refusal to enter into a commercial manufacturing agreement for nasal
morphine. The development milestone and option agreement remains in effect until
our intranasal morphine product is launched in all specified major country
markets, unless earlier terminated for failure of a defaulting party to remedy
its breach within 30 days notice by the non-defaulting party, within five days
notice from West Pharmaceutical to us in the event we breach the payment terms
of this agreement or by mutual agreement.

     In October 2000, we entered into a research and development and option
agreement with West Pharmaceutical for the development of a product for the
intranasal administration of fentanyl, based upon the intranasal delivery
technology licensed from West Pharmaceutical. Under this agreement, West
Pharmaceutical will conduct preclinical development activities related to
intranasal fentanyl. As of June 30, 2002, we have made no payments to West
Pharmaceutical. We are obligated to make future aggregate payments totaling
approximately $6.3 million payable in cash, or if agreed by both parties, in
stock, upon the attainment of specified clinical and regulatory milestones,
including the filing of an NDA and the receipt of the first approval letter of
an NDA in a major market. Additionally, we have granted to West Pharmaceutical a
right of first negotiation with respect to the manufacturing and packaging of
commercial quantities of the licensed fentanyl products. This agreement remains
in effect until our product covered by the agreement is launched in all
specified major markets. The agreement, however, may be terminated earlier for
failure of a defaulting party to remedy its breach within 30 days notice by the
non-defaulting party, within five days notice from West Pharmaceutical in the
event we breach the payment terms in that agreement or by mutual agreement.

  SHIMODA AGREEMENT

     In December 2001, we entered into a license agreement with Shimoda Biotech,
Ltd. and its wholly-owned subsidiaries, Farmarc N.A.N.V. (Netherlands Antilles)
and Farmarc Netherlands B.V. under which we received certain worldwide exclusive
rights to develop and commercialize products related to a proprietary
formulation of the intramuscular and intravenous delivery of diclofenac. Under
the terms of this agreement, we agreed to use our commercially reasonable
efforts to bring to market products that use the technology we licensed from
Farmarc and Shimoda, continue active marketing efforts for those products and
comply with the commercialization timelines imposed on Shimoda by the company
that licensed some of this technology to Shimoda. Shimoda agreed that, during
the first three years of the agreement, it will not grant to any third party any
right or license under any of Shimoda's intellectual property rights involving
the use of any cyclodextrin product related to pain management, anesthesia or
sedation without first offering us the right on the same terms and conditions.

     Upon entering into the agreement with Shimoda and its subsidiaries, we made
certain payments on Shimoda's behalf to third parties. As of June 30, 2002 we
have made aggregate payments of $1,625,000 in cash to Shimoda or on its behalf.
Under the terms of this Agreement, we are obligated to make future payments to
Shimoda and Farmarc, and on Shimoda's behalf, to certain third parties, for a
license fee and other milestone and reimbursement payments which have an
aggregate amount of $6.1 million, and if we commercialize products using the
technology under this agreement, we are obligated to pay Shimoda and
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Farmarc, on a country-by-country basis, a royalty on the sales, net of various
customary cash discounts, attributable to these products. Our obligation to make
milestone payments occurs upon specified developmental milestones, including the
filing of an IND for diclofenac, the filing of an NDA for diclofenac, the
approval of an NDA by the FDA and the first commercial sale of a product.

     Shimoda may terminate our agreement upon 15 days written notice if we fail
to maintain a minimum amount of certain types of insurance and do not produce
written proof of any such insurance within 14 days of Shimoda's request, and
Shimoda or Farmarc may terminate the agreement upon 60 days written notice if we
fail to make royalty payments on a timely basis. We and Shimoda have the right
to terminate the agreement upon 60 days written notice if the other party
materially breaches the agreement in any other way. In each case, however, the
defaulting party will have the opportunity to cure a payment default or breach
of the agreement in order to prevent termination of the agreement. We also have
the right to terminate the agreement upon 90 days written notice to the Shimoda
parties. If we terminate the agreement under this provision, or if the agreement
is terminated due to our breach, we have agreed to assign to Shimoda (at no cost
to Shimoda) all clinical information and other data developed by us in
furtherance of the development of the products licensed to us.

COMPETITION

     Our success will depend, in part, upon our ability to achieve market share
at the expense of existing, established and future products in our target
markets. Existing and future products, therapies, technological innovations and
delivery systems will compete directly with our products. Competing products and
technologies may provide greater therapeutic benefit for a specific indication,
or may offer comparable performance at a lower cost. Alternative technologies
are being developed to improve the delivery of drugs within the pain management
industry, several of which may be in the clinical trials stage or are awaiting
FDA approval.

     We compete with fully integrated pharmaceutical companies, smaller
companies that are collaborating with larger pharmaceutical companies, academic
institutions, government agencies and other public and private research
institutions. We believe that our competitors include, but are not limited to,
Cephalon, Inc., Merck & Co., Inc., Nastech Pharmaceutical Company Inc., Pain
Therapeutics, Inc. and Pharmacia Corporation. Such competitors may also have
access to more resources, financial and otherwise, which may allow these
institutions to develop and market competing products more rapidly and more
effectively than we do.

INTELLECTUAL PROPERTY

     Our goal is to obtain, maintain and enforce patent protection for our
products, formulations, processes, methods and other proprietary technologies,
preserve our trade secrets, and operate without infringing on the proprietary
rights of other parties, both in the U.S. and in other countries. Our policy is
to actively seek to obtain, where appropriate, the broadest intellectual
property protection possible for our product candidates, proprietary information
and proprietary technology through a combination of contractual arrangements and
patents, both in the U.S. and elsewhere in the world.

     We currently have licenses to five U.S. patents and a number of foreign
counterpart patents and applications. We have licensed two U.S. patents and
their foreign counterparts from Dr. Stuart Weg, M.D., which are directed toward
the use of ketamine to manage pain and the administration of ketamine through
the nasal route. We have licensed two U.S. patents and their foreign
counterparts from West Pharmaceutical, which are directed toward the use of
chitosan and pectin for the transmucosal delivery of morphine and fentanyl. We
have licensed one U.S. patent and its foreign counterparts under the Shimoda
license agreement, which are directed toward intravenous diclofenac formulations
and methods of preparing the same. Under each of these patents, the remaining
patent projection period ranges from 2005 to 2020.

     We also depend upon the skills, knowledge and experience of our scientific
and technical personnel, as well as that of our advisors, consultants and other
contractors, none of which is patentable. To help protect
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our proprietary know-how that is not patentable, and for inventions for which
patents may be difficult to enforce, we rely on trade secret protection and
confidentiality agreements to protect our interests. To this end, we require all
employees, consultants, advisors and certain other contractors to enter into
confidentiality agreements which prohibit the disclosure of confidential
information and, where applicable, require disclosure and assignment to us of
the ideas, developments, discoveries and inventions important to our business.
Additionally, these confidentiality agreements require that our employees,
consultants and advisors do not bring to us, or use without proper
authorization, any third party's proprietary technology.

MANUFACTURING

     We own no manufacturing facilities. However, we contract with qualified
third parties for the manufacture of bulk active pharmaceutical ingredients and
production of clinical supplies. The contract manufacturers comply with current
good manufacturing practices and procedures Intravenous diclofenac clinical
supplies were provided by Baxter Pharmaceutical Solutions (formerly Cook
Pharmaceutical Solutions).

GOVERNMENT REGULATION

     The FDA and comparable regulatory agencies in state and local jurisdictions
and in foreign countries impose substantial requirements upon the clinical
development, manufacture and marketing of pharmaceutical products. These
agencies and other federal, state and local entities regulate research and
development activities and the testing, manufacture, quality control, safety,
effectiveness, labeling, storage, record keeping, approval, advertising and
promotion or our products.

     The process required by the FDA under the drug provisions of the federal
Food, Drug and Cosmetics Act before our initial products may be marketed in the
U.S. generally involves the following:

     - performance of preclinical laboratory and animal tests;

     - submission of an IND which must become effective before human clinical
       trials may begin;

     - completion of adequate and well-controlled human clinical trials to
       establish the safety and efficacy of the product candidate in our
       intended use;

     - submission to the FDA of an NDA; and

     - FDA approval of an NDA.

     The testing and approval process requires substantial time, effort, and
financial resources and we cannot be certain that any approval will be granted
on a timely basis, if at all.

     Preclinical studies include laboratory evaluation of the product candidate,
its chemistry, formulation and stability, as well as animal studies to assess
the potential safety and efficacy of the product candidate. We then submit the
results of the preclinical studies, together with manufacturing information and
analytical data, to the FDA as part of an IND, which must become effective
before we may begin human clinical trials. The IND automatically becomes
effective 30 days after receipt by the FDA, unless the FDA, within the 30-day
time period, raises concerns or questions about the conduct of the trials as
outlined in the IND and imposes a clinical hold. In such a case, the IND sponsor
and the FDA must resolve any outstanding concerns before clinical trials can
begin. Our submission of an IND may not result in FDA authorization to commence
clinical trials. Further, an independent institutional review board, or IRB, at
each medical center proposing to conduct the clinical trials must review and
approve any clinical study.

     Human clinical trials are typically conducted in three sequential phases
that may overlap:

     - Phase I: The drug is initially introduced into healthy human subjects or
       patients and tested for safety, dosage tolerance, absorption, metabolism,
       distribution and excretion.

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     - Phase II: The drug is studied in a limited patient population to identify
       possible adverse effects and safety risks, to determine the efficacy of
       the product for specific targeted diseases and to determine dosage
       tolerance and optimal dosage.

     - Phase III: When Phase II evaluations demonstrate that a dosage range of
       the drug is effective and has an acceptable safety profile, Phase III
       clinical trials are undertaken to further evaluate dosage, clinical
       efficacy and to further test for safety in an expanded patient
       population, often at geographically dispersed clinical study sites.

     We cannot be certain that we will successfully complete Phase I, Phase II
or Phase III testing of our product candidates within any specific time period,
if at all. Furthermore, the FDA or IRB or the IND sponsor may suspend clinical
trials at any time on various grounds, including a finding that the subjects or
patients are being exposed to an unacceptable health risk.

     The results of product development, preclinical studies and clinical trials
are submitted to the FDA as part of an NDA for approval of the marketing and
commercial shipment of the product. The FDA reviews each NDA submitted, and may
request additional information, before accepting the NDA for filing. Once the
FDA accepts the NDA for filing, the FDA has 180 days in which to review the NDA
and respond to the applicant. The review process may be significantly extended
by FDA requests for additional information or clarification regarding
information already provided. The FDA may deny an NDA if the applicable
regulatory criteria are not satisfied or may require additional clinical data.
Even if these data are submitted, the FDA may ultimately decide that the NDA
does not satisfy the criteria for approval. Once issued, the FDA may withdraw
product approval if compliance with regulatory standards is not maintained or if
safety problems occur after the product reaches the market. In addition, the FDA
requires surveillance programs to monitor approved products that have been
commercialized, and the agency has the power to require changes in labeling or
to prevent further marketing of a product based on the results of these
post-marketing programs.

     Satisfaction of the above FDA requirements or similar requirements of
state, local and foreign regulatory agencies typically takes several years and
the actual time required may vary substantially, based upon the type, complexity
and novelty of the pharmaceutical product. Government regulation may delay or
prevent marketing of potential products for a considerable period of time and
impose costly procedures upon our activities. We cannot be certain that the FDA
or any other regulatory agency will grant approval for any of our products under
development on a timely basis, if at all. Success in preclinical studies or
early-stage clinical trials does not assure success in later-stage clinical
trials. Data obtained from preclinical and clinical activities are not always
conclusive and may be susceptible to varying interpretations that could delay,
limit or prevent regulatory approval. Even if a product receives regulatory
approval, the approval may be significantly limited to specific indications.
Further, even after regulatory approval is obtained, later discovery of
previously unknown problems with a product may result in restrictions on the
product or even complete withdrawal of the product from the market. Delays in
obtaining, or failures to obtain regulatory approvals, would have a material
adverse effect on our business.

     Any products manufactured or distributed by us pursuant to FDA clearances
or approvals are subject to pervasive and continuing regulation by the FDA,
including record-keeping requirements and reporting of adverse experiences with
the drug. Drug manufacturers and their subcontractors are required to register
their facilities with the FDA and state agencies, and are subject to periodic
unannounced inspections by the FDA with good manufacturing practices, which
impose procedural and documentation requirements upon us and our third-party
manufacturers. Failure to comply with these regulations could result, among
other things, in suspension of regulatory approval, recalls, injunctions or
civil or criminal sanctions. We cannot be certain that we or our present or
future subcontractors will be able to comply with these regulations and other
FDA regulatory requirements.

     The FDA regulates drug labeling and promotion activities. The FDA has
actively enforced regulations prohibiting the marketing of products for
unapproved uses. Under the FDA Modernization Act of 1997, the FDA will permit
the promotion of an approved drug for an unapproved use in certain
circumstances, but subject to very stringent requirements. We and our product
candidates are also subject to a variety of
                                       106


state laws and regulations in those states or localities where our products are
or will be marketed. Any applicable state or local regulations may hinder our
ability to market our products in those states or localities. In addition,
whether or not FDA approval has been obtained, approval of a pharmaceutical
product by comparable governmental regulatory authorities in foreign countries
must be obtained prior to the commencement of clinical trials and subsequent
sales and marketing efforts in those countries. The approval procedure varies in
complexity from country to country, and the time required may be longer or
shorter than that required for FDA approval. We may incur significant costs to
comply with these laws and regulations now or in the future.

     The FDA's policies may change and additional government regulations may be
enacted which could prevent or delay regulatory approval of our potential
products. Moreover, increased attention to the containment of health care costs
in the U.S. and in foreign markets could result in new government regulations
that could have a material adverse effect on our business. We cannot predict the
likelihood, nature or extent of adverse governmental regulation that might arise
from future legislative or administrative action, either in the U.S. or abroad.

OTHER REGULATORY REQUIREMENTS

     The Controlled Substances Act imposes various registration, record-keeping
and reporting requirements, procurement and manufacturing quotas, labeling and
packaging requirements, security controls and a restriction on prescription
refills on certain pharmaceutical products. A principal factor in determining
the particular requirements, if any, applicable to a product is its actual or
potential abuse profile. A pharmaceutical product may be "scheduled" as a
Schedule I, II, III, IV or V substance, with Schedule I substances considered to
present the highest risk of substance abuse and Schedule V substances the
lowest. Ketamine, morphine and fentanyl are classified as Schedule II and III
substances. In addition, any of our products that contain one of our product
candidates in combination with narcotics will be subject to DEA regulations
relating to manufacturing, storage, distribution and physician prescribing
procedures.

     We are also subject to numerous federal, state and local laws relating to
such matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control and disposal of hazardous or potentially
hazardous substances. We may incur significant costs to comply with these laws
and regulations now or in the future. The regulatory framework under which we
currently operate may change and any change could have a material adverse effect
on our current and anticipated operations.

EMPLOYEES

     As of June 30, 2002, we had eighteen full-time employees, including five
employees with Ph.D. or M.D. degrees. Most members of our senior management have
had prior experience in pharmaceutical or biotechnology companies. None of our
employees is covered by collective bargaining agreements. We believe that our
relations with our employees are good.

FACILITIES

     We maintained our executive offices on a rent-free basis in premises of
approximately 2,500 square feet that we shared with Paramount Capital
Investments, or Paramount, and will continue to do so until November 2002. We
currently have an agreement in place with Paramount under which Paramount has
waived any claim for reimbursement for any rent or similar payments for this
arrangement and will continue to waive any claim for reimbursement for any
similar payments through the end of the third quarter of 2002. Paramount has
assessed a commercial market rate of rent for our continued use of these offices
during the month of October and part of November 2002. See section entitled
"Relationships and Related Party Transactions" on page   .

     As of November 2002, we will move our executive offices to Tower 49, 12
East 49th Street, New York, N.Y. 10017. We entered into a sublease agreement
with Paradigm Capital Management, Inc and Paradigm Investment Advisors, Inc.
commencing on or about November 22, 2002 and ending on

                                       107


December 30, 2003 for premises of approximately 7,000 square feet of office
space, at a rental of $31,000 per month.

     We believe that our existing facilities and new facilities are adequate for
our current needs and that suitable additional or alternative space will be
available without material disruption of our business and that such space will
be available to us in the future on commercially reasonable terms.

LEGAL PROCEEDINGS

     We are not a party to any legal proceedings.

                                       108


                          IDDS SELECTED FINANCIAL DATA

     You should read the following selected financial data in conjunction with
"Management's Discussion and Analysis of IDDS' Financial Condition and Results
of Operations" and the financial statements and related notes included elsewhere
in this joint proxy statement/prospectus. The selected financial data presented
below as of December 31, 2000 and 2001 and for each of the three years in the
period ended December 31, 2001 are derived from IDDS' financial statements,
which are included elsewhere in this joint proxy statement/prospectus and which
have been audited by PricewaterhouseCoopers LLP. The selected financial data
presented below as of December 31, 1998 and 1999 and for the period from
February 23, 1998 (inception) to December 31, 1998 have been derived from IDDS'
audited financial statements that are not included in this joint proxy
statement/prospectus. The selected financial data presented below as of June 30,
2002, for the six months ended June 30, 2001 and 2002 and for the period from
February 23, 1998 (inception) to June 30, 2002 are derived from our unaudited
financial statements, which are included elsewhere in this joint proxy
statement/prospectus and, in the opinion of IDDS' management, reflect all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of our financial position and results of operations. Operating
results for the six months ended June 30, 2002 are not necessarily indicative of
results that may be expected for any other interim period or for the year ending
December 31, 2002.



                            PERIOD FROM                                      SIX MONTHS ENDED     CUMULATIVE FROM
                         FEBRUARY 23, 1998      YEAR ENDED DECEMBER 31,          JUNE 30,        FEBRUARY 23, 1998
                          (INCEPTION) TO     -----------------------------   -----------------    (INCEPTION) TO
                         DECEMBER 31, 1998    1999       2000       2001      2001      2002       JUNE 30, 2002
                         -----------------   -------   --------   --------   -------   -------   -----------------
                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                            
STATEMENT OF OPERATIONS
  DATA:
Revenues:
  Government grants....       $   --         $    --   $    306   $    882   $   394   $   191       $  1,379
Operating expenses:
  Research and
    development(1).....          207             665     21,833      7,010     1,129     1,940         31,654
  General and
   administrative(2)...          257             312      1,353      2,286       638     3,891          8,099
  Depreciation and
    amortization.......           --              --          1          3         1         3              7
                              ------         -------   --------   --------   -------   -------       --------
    Total operating
       expenses........          464             977     23,187      9,299     1,768     5,834        (39,760)
                              ------         -------   --------   --------   -------   -------       --------
    Operating loss.....         (464)           (977)   (22,881)    (8,417)   (1,374)   (5,643)       (38,381)
Interest (expense),
  income net...........           (6)           (229)      (143)       349       236        41             11
                              ------         -------   --------   --------   -------   -------       --------
Net loss attributable
  to common
  stockholders.........       $ (470)        $(1,206)  $(23,024)  $(11,627)  $(1,138)  $(5,602)      $(41,929)
                              ======         =======   ========   ========   =======   =======       ========
Net loss per share:
  Basic and diluted....       $(0.11)        $ (0.28)  $  (3.93)  $  (1.20)  $ (0.12)  $ (0.58)
                              ======         =======   ========   ========   =======   =======


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

(1) Includes non-cash expense, related to in-kind payments from Paramount and a
    license fee of $18.6 million in 2000, of $3 for the period from February 23,
    1998 (inception) to December 31, 1998, $29 for the year ended December 31,
    1999, $18,614 for the year ended December 31, 2000, and $72 for the year
    ended December 31, 2001. $40 for the six months ended June 30, 2001 and $36
    for the six months ended June 30,2002.

(2) Includes non-cash expense, related to in-kind payments from Paramount and
    stock options and warrants granted to non-employee consultants, of $87 for
    the period from February 23, 1998

                                       109


    (inception) to December 31, 1998, $220 for the year ended December 31, 1999,
    $857 for the year ended December 31, 2000 and $409 for the year ended
    December 31, 2001, $228 for the six months ended June 30, 2001 and $1,277
    for the six months ended June 30, 2002.



                                                      AS OF DECEMBER 31,
                                             ------------------------------------       AS OF
                                             1998     1999      2000       2001     JUNE 30, 2002
                                             -----   -------   -------   --------   -------------
                                                                (IN THOUSANDS)
                                                                     
Balance Sheet Data:
Cash and cash equivalents..................  $  49   $   253   $10,084   $  7,744     $  3,579
Working capital (deficit)..................  $(379)  $(1,268)  $10,175   $  6,805     $  3,275
Total assets...............................  $  49   $   398   $10,498   $  8,845     $  4,062
Convertible preferred stock................  $  --   $    --   $13,775   $ 18,795     $ 18,795
Stockholders' deficit......................  $(379)  $(1,136)  $(3,556)  $(11,142)    $(15,432)


                                       110


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

     You should read the following discussion in conjunction with our financial
statements, the related notes and other financial information appearing
elsewhere in this joint proxy statement/prospectus. This discussion may contain
forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results and the timing of selected events could
differ materially from those anticipated in these forward-looking statements as
a result of many factors, including those set forth under "Risk Factors" and
elsewhere in this joint proxy statement/prospectus.

OVERVIEW

     We have devoted substantially all of our resources since we began our
operations in February 1998 to the development of proprietary pharmaceutical
products for the treatment of pain. We are a development stage pharmaceutical
company and have not generated any revenues from product sales. We have not been
profitable and, since our inception, we have incurred an accumulated net loss
attributable to our common stockholders of approximately $41.9 million through
June 30, 2002. These losses have resulted principally from costs incurred in
research and development activities, including acquisition of technology rights
and general and administrative expenses. We expect to incur additional operating
losses until such time as we generate sufficient revenue to offset expenses and
may never achieve profitable operations.

     Research and development, manufacturing and marketing costs will continue
to increase as we advance our product candidates and prepare for the
commercialization of our products pending regulatory approval.

     Since our inception, we have incurred approximately $31.7 million of
research and development costs. The major research projects undertaken by us
include intranasal ketamine, morphine, fentanyl and intravenous diclofenac.
Total research and development costs incurred to date for each of these products
was approximately $3.5 million, $6.8 million, $1.0 million and $1.8 million,
respectively. In addition, we incurred a charge of approximately $18.6 million
related to our merger with Pain Management, Inc. and the related acquisition of
a licensing agreement. For various reasons, many of which are outside our
control, including timing and results of our clinical trials, obtaining
regulatory approval and dependence on third parties, we cannot estimate the
total remaining costs to be incurred to commercialize our products, nor can we
estimate when, if ever, any of our products will be approved by regulatory
agencies for commercial sale. In addition, we may experience adverse results in
the development of our products, which could result in significant delays in
obtaining approval to sell our products, additional costs to be incurred to
obtain regulatory approval or failure to obtain regulatory approval. In the
event any of our product candidates were to experience setbacks, it would have a
material adverse effect on our financial position and operating results. Even if
we successfully complete developments and obtain regulatory approval of one or
more of our products, failure of physicians and patients to accept our products
as a safe, cost-effective alternative compared to existing products would have a
material adverse effect on our business.

     In June 2000, we issued 5,080,717 shares of our common stock to our
founders. In September 2000, in connection with our merger with Pain Management,
Inc., we issued an aggregate of 4,648,220 shares of our common stock for the
outstanding shares of Pain Management's common stock. At the time of the merger
with Pain Management, the only asset held by us was a license agreement with
West Pharmaceutical Services, Inc. We remained dormant until the merger with
Pain Management and the execution of the license agreement. This merger was
accounted for financial reporting purposes as the acquisition of a license
agreement by the predecessor company, Pain Management, and a reorganization with
IDDS as the surviving entity. As a result, our assets, liabilities and historic
operating results prior to September 2000 are those of Pain Management. The fair
value of the license agreement was determined to be approximately $18.6 million
based on the then fair value of the common stock we issued. Since the licensed
technology had not reached technological feasibility and had no alternative
future use, the fair value of the consideration issued to obtain the license
agreement was expensed as research and development at the time the merger with
Pain Management closed.

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     In the future, we may be required to pay West Pharmaceutical an aggregate
of $11.25 million for research and development milestones if certain defined
events occur, which include the filing of an NDA with the FDA, the approval of
an NDA by the FDA and the first commercial sale of an intranasal morphine and
intranasal fentanyl licensed product. As of June 30, 2002, we had paid West in
aggregate $5.6 million in cash since the inception of this agreement. The timing
of the remaining milestones is dependent upon factors that are beyond our
control, including our ability to recruit patients, the outcome of future
clinical trials and any requirements imposed on our clinical trials by the FDA.
If the FDA imposes more stringent requirements on our clinical trials, the
length and number of such trials may be increased resulting in additional
research and development expenses.

     In addition, under our license agreement with Shimoda Biotech (Proprietary)
Ltd., we were obligated to pay a license fee of $1.5 million to Shimoda, which
was paid in full as of June 30, 2002. Under this agreement, we are also
obligated to pay to Shimoda an aggregate of $6.0 million upon the occurrence of
specified developmental milestones, which include the filing of an NDA with the
FDA for diclofenac, the approval of an NDA by the FDA and the first commercial
sale of a licensed product and pay a royalty based upon our and our
sublicensees' sales of products. The timing of the remaining milestones is
dependent upon factors that are beyond our control, including our ability to
recruit patients, the outcome of future clinical trials and any requirements
imposed on our clinical trials by the FDA. If the FDA imposes more stringent
requirements on our clinical trials, the length and number of such trials may be
increased resulting in additional research and development expenses.

     In addition, under our license agreement with Dr. Stuart Weg, we are
obligated to make aggregate milestone payments of approximately $1.6 million, of
which $300,000 was paid as of June 30, 2002, upon the earlier of certain defined
dates ranging from August 2003 to November 2004 or satisfaction of certain
clinical and regulatory milestones, which include the filing of an NDA with the
FDA for ketamine, the approval of an NDA by the FDA and the first commercial
sale of a licensed product. The timing of the remaining milestones, which total
approximately $1.3 million, is dependent upon factors that are beyond our
control, including our ability to recruit patients, the outcome of future
clinical trials and any requirements imposed on our clinical trials by the FDA.
If the FDA imposes more stringent requirements on our clinical trials, the
length and number of such trials may be increased resulting in additional
research and development expenses.

NON-CASH EXPENSE, BENEFICIAL CONVERSION FEATURE OF PREFERRED STOCK AND FINANCIAL
SUPPORT PROVIDED BY A PRINCIPAL STOCKHOLDER

     Since our inception, we have issued stock or granted stock options or
warrants to non-employee lenders, consultants and members of the board of
directors for which we recorded non-cash expense of approximately $93,000 for
the year ended December 31, 1999, $708,000 for the year ended December 31, 2000,
none for the year ended December 31, 2001 and approximately $1.2 million for the
six months ended June 30, 2002.

     In December 2001, we issued 989,991 shares of series B preferred stock in
consideration of gross proceeds of approximately $5.5 million. The series B
conversion price represented a discount from the estimated fair value of our
common stock at the time of issuance. Accordingly, the discount amount is
considered incremental yield to the preferred stockholders and has been
accounted for as a deemed dividend to preferred stockholders. Based on the
conversion terms of the series B stock, a deemed dividend of approximately $3.6
million was added to the net loss applicable to common stockholders in the year
ended December 31, 2001.

     From our inception until June 30, 2002, Paramount Capital Investments, LLC
provided us with office space, industry expertise, financial support and certain
administrative and legal assistance at no cost to us. Paramount Capital
Investments is an affiliate of Paramount Capital, Inc., which, in turn, is
affiliated with Lindsay A. Rosenwald, M.D., one of our principal stockholders.
Paramount Capital is an integrated, privately held, full-service investment
banking firm specializing in private placements of equity and debt securities
for publicly traded and privately held biotechnology and biopharmaceutical
companies.

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Paramount's assistance has allowed us to focus our available cash resources
almost exclusively on product development and has reduced our cash burn rate
through in-kind overhead contributions.

     The estimated fair value of Paramount's assistance has been reflected in
the accompanying financial statements as an expense in the period benefited with
a corresponding deemed capital contribution. The estimated fair value of the
financial assistance totaled approximately $156,000 for the year ended December
31, 1999, approximately $163,000 for the year ended December 31, 2000,
approximately $481,000 for the year ended December 31, 2001 and approximately
$155,000 for the six months ended June 30, 2002.

RESULTS OF OPERATIONS

     Revenues.  With the exception of revenues derived from government grants,
we have generated no operating revenues since our inception and do not expect
operating revenues for the foreseeable future. In the second half of 2000, we
were awarded a $1.2 million research and development grant for intranasal
ketamine from the U.S. Department of Defense, or DOD, payable monthly from
October 1, 2000 to October 31, 2003, subject to an annual maximum not to exceed
$400,000. Also in 2000, we were awarded a $298,000 research and development
grant from the National Institutes of Health, or NIH, for intranasal ketamine
which was exhausted in August 2001. The funds under the DOD grant are billed
monthly as costs are incurred.

     Research and Development Expenses.  Research and development expenses
consist primarily of salaries and related expenses for personnel, materials and
supplies used to develop our product candidates. Other research and development
expenses include compensation paid to consultants and outside service providers
and the costs to license acquired technologies that have no alternative future
use. We expense research and development costs as incurred. We expect that we
will continue to incur significant research and development expenses in the
future.

     General and Administrative Expenses.  General and administrative expenses
consist primarily of salaries and other related costs for personnel in
executive, finance, accounting, information technology and human resource
functions. Other costs include facility costs and professional fees for legal
and accounting services.

     Interest Income and Expense.  Interest income consists of interest earned
on our cash and cash equivalent balances. Interest expense consists of interest
incurred on loans.

SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001

     Revenues.  Grant revenue decreased from $394,096 for the six months ended
June 30, 2001 to $190,797 for the six month ended June 30, 2002. The decrease is
attributable to a decrease in resources dedicated to fulfilling our obligations
under the DOD grant and the expiry of the NIH grant in August 2001.

     Research and Development Expenses.  Research and development expenses
increased from approximately $1.1 million for the six months ended June 30, 2001
to approximately $1.9 million for the six months ended June 30, 2002. The
increase in research and development expense resulted primarily from the costs
associated with the Shimoda license and initial milestone payments for
intravenous diclofenac. Two human clinical trials were active during the first
six months of 2002, including a Phase II intranasal ketamine and Phase II
intranasal morphine clinical study. Our consulting expenses also increased as a
result of increased clinical activity associated with protocol development,
regulatory management and report finalization.

     General and Administrative Expenses.  General and administrative expenses
increased from approximately $0.6 million for the six months ended June 30, 2001
to approximately $3.9 million for the six months ended June 30, 2002. This
increase resulted from approximately $1.3 million in expenses incurred in
connection with our withdrawn registration statement on Form S-1, which was
withdrawn in the third quarter of 2002. In addition, higher general and
administrative expenses were due to an increase of
                                       113


approximately $1.2 million for non-cash compensation charge in connection with
stock options granted at below fair value, and approximately $0.8 million from
the hiring of additional personnel and increased professional service fees.
Excluding non-recurring charges of $2.5 million, we expect the general and
administrative expenses of $1.4 million incurred during the six months ended
June 30, 2002 to increase further as we lease our own facilities. Such increase
will be offset by a decline in personnel cost, if necessary, to preserve cash
until the completion of this merger or we may be required to raise additional
funding from the sale of our equity securities. In addition, we have already
reduced certain activities, such as initiation of new clinical trials and all
discretionary expenses in order to preserve cash.

     Interest Income.  Interest income decreased from $236,304 for the six
months ended June 30, 2001 to $40,537 for the six months ended June 30, 2002.
The decrease in interest income was primarily due to lower interest rates and
lower cash balances.

YEARS ENDED DECEMBER 31, 2000 AND 2001

     Revenues.  Grant revenue increased from $306,035 for the year ended
December 31, 2000 to $882,358 for the year ended December 31, 2001. The increase
is attributable to grant revenue resulting from an increase in resources
dedicated to fulfilling our obligations under the DOD and NIH grants.

     Research and Development Expenses.  Research and development expenses
decreased from approximately $21.8 million for the year ended December 31, 2000
to approximately $7.0 million for the year ended December 31, 2001. The decrease
in research and development expense resulted primarily from an $18.6 million
noncash charge we recorded for the year ended December 31, 2000 for the fair
value of the license agreement purchased in connection with the merger with Pain
Management. Excluding the non-cash charge, research and development expenses
increased from approximately $3.2 million for the year ended December 31, 2000
to $7.0 million for the year ended December 31, 2001.

     This increase resulted from increased costs associated with the clinical
development of our lead product candidates, intranasal ketamine and intranasal
morphine. Four human clinical trials were active during the period, including
two intranasal ketamine Phase II clinical trials and two intranasal morphine
Phase I clinical trials. Our consulting expenses also increased as a result of
increased clinical activity associated with protocol development, regulatory
management and report finalization.

     General and Administrative Expenses.  General and administrative expenses
increased from approximately $1.4 million for the year ended December 31, 2000
to approximately $2.3 million for the year ended December 31, 2001. This
increase resulted from the hiring of additional personnel and increased
professional service fees. We expect general and administrative expenses to
increase further as we hire additional personnel, lease our own facilities and
separate our operations from Paramount.

     Interest Expense.  Interest expense decreased from $320,533 for the year
ended December 31, 2000 to zero for the year ended December 31, 2001. The
decrease in interest expense was due to the repayment of $475,000 of bank notes
and $1.0 million of bridge notes during 2000 from the net proceeds of our
September 2000 series A convertible preferred stock financing. We had no debt
outstanding during 2001.

     Interest Income.  Interest income increased from $177,490 for the year
ended December 31, 2000 to $348,475 for the year ended December 31, 2001. The
increase in interest income was primarily due to interest earned on the net
proceeds raised from our September 2000 series A convertible preferred stock
financing.

THE YEARS ENDED DECEMBER 31, 1999 AND 2000

     Revenues.  We generated no operating revenues during 1999. We generated
revenues of $306,035 in 2000 due to the commencement of projects funded by
grants from the DOD in July 2000 and the NIH in September 2000.

     Research and Development Expenses.  Research and development expenses
increased from $664,636 in 1999 to $21.8 million in 2000. The increase in
research and development expenses from 1999 to 2000

                                       114


resulted primarily from costs associated with acquisition of a license agreement
valued at approximately $18.6 million in connection with the merger with Pain
Management.

     General and Administrative Expenses.  General and administrative expenses
increased from $312,079 in 1999 to $1.4 million in 2000. The increase in general
and administrative expenses resulted primarily from non-cash compensation
expenses of approximately $708,000 relating to options granted to non-employees
and from an increase in the number of personnel from three employees in the
first quarter of 1999 to seven employees in the fourth quarter of 2000 and
related expenses necessary to support our growth.

     Interest Expense.  Interest expense increased from $239,092 in 1999 to
$320,533 in 2000. The increase in interest expense resulted from interest
accrued on the bridge notes. Between April 1999 and July 2000, the bridge notes
accrued interest at a rate of 12% per annum for the first 12 months and 15% per
annum thereafter.

     Interest Income.  Interest income increased from $10,572 in 1999 to
$177,490 in 2000. The increase in interest income from 1999 to 2000 reflected
higher invested balances during 2000 due primarily to interest earned on the
proceeds of our September 2000 series A convertible preferred stock financing.

LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 2002, we had cash and cash equivalents of approximately $3.6
million, and working capital was approximately $3.3 million.

     From inception through June 30, 2002, net cash used in operating activities
was approximately $16.1 million. From inception through June 30, 2002, net cash
used in investing activities was $95,560, primarily due to the acquisition of
products, furniture and fixtures and office equipment. From inception through
June 30, 2002, net cash provided by financing activities was $19.8 million. The
principal source of cash was from equity and debt financings.

     As a development stage enterprise, our primary efforts to date have been
devoted to raising capital, forming collaborations, conducting research and
development and recruiting staff. We have limited capital resources and revenues
and have experienced net operating losses and negative cash flows from
operations since inception and expects these conditions to continue for the
foreseeable future. Management has adopted a plan to conserve liquid assets
which to date has entailed reducing or eliminating certain discretionary
spending and provides for additional reductions in operating activities if
needed to ensure we continue as a going concern. Management believes that cash
and cash equivalents on hand at June 30, 2002 will be sufficient to fund
operations beyond one year. We will be required to raise additional funds to
meet long-term planned goals. We are in the process of obtaining financing
through this merger and would consider other alternatives including public or
private equity financings. There can be no assurance that the merger will be
successful or that such additional financing, if at all available, can be
obtained on terms acceptable to us. If we are unable to obtain such additional
financing, future operations will need to be scaled back further or
discontinued.

INCOME TAXES

     As of June 30, 2002, we had approximately $18.0 million of net operating
loss carry forwards available to offset future taxable income. These carry
forwards will begin to expire in 2018.

RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets." The objective of FAS 143
is to provide accounting guidance for legal obligations associated with the
retirement of tangible long-lived assets. The retirement obligations included
within the scope of FAS 143 are those that an entity cannot avoid as a result of
either the acquisition, construction or normal

                                       115


operation of a long-lived asset. Components of larger systems also fall under
FAS 143, as well as tangible long-lived assets with indeterminable lives. FAS
143 is required to be adopted on January 1, 2003.

     In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, "Rescission of FAS Nos. 4, 44, and 64, amendment of FASB 13, and
Technical Corrections as of April 2002." As a result, the accounting for gains
and losses from extinguishment of debt and sale-leaseback transactions will be
effected by FAS 145. The provisions of FAS 145 related to the rescission of
Statements 4, 44 and 64 shall be applied in fiscal years beginning after May 15,
2002. The provisions of FAS 145 related to Statement 13 shall be effective for
transactions occurring after May 15, 2002.

     In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". FAS
146 nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." FAS 146 requires a
liability for a cost associated with an exit or disposal activity to be
recognized when the liability is incurred rather than on the date of an entity's
commitment to an exit plan and establishes that fair value is the objective for
initial measurement of the liability. The provisions of FAS 146 shall be
effective for exit or disposal activities initiated after December 31, 2002. The
provisions of Issue 94-3 shall continue to apply for an exit activity initiated
under an exit plan that met the criteria of Issue 94-3 prior to FAS 146's
initial application.

     We believe that the adoption of these accounting standards will not have a
material impact on our financial statements.

     Effective January 1, 2002 IDDS adopted the provisions of Financial
Accounting Standards No. 141 "Business Combinations", No. 142 "Goodwill and
Other Intangible Assets" and No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets". The impact of adopting these standards on the financial
position and results of operations of IDDS was immaterial.

DISCLOSURE ABOUT MARKET RISK

     Our exposure to market risk is principally confined to our cash
equivalents, all of which currently have maturities of less than three months.
We maintain a non-trading investment portfolio of investment grade, liquid debt
securities that limits the amount of credit exposure to any one issue, issuer or
type of instrument. The fair value of these securities approximates their cost.

     The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from investments without
significantly increasing risk. Some of the securities that we may invest in may
be subject to market risk. This means that a change in prevailing interest rates
may cause the value of the investment to fluctuate. For example, if we purchase
a security that was issued with a fixed interest rate and the prevailing
interest rate later rises, the value of our investment will probably decline. To
minimize this risk, we intend to maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including commercial paper,
money market funds and government and non-government debt securities. In
general, money market funds are not subject to market risk because the interest
paid on such funds fluctuates with the prevailing interest rate. As of June 30,
2002, we neither had any holding of derivative financial or commodity
instruments, nor any foreign currency denominated transactions, and all of our
cash and cash equivalents were in money market and checking funds.

                                       116


                             MANAGEMENT OF IDDS AND
         THE EXECUTIVE OFFICERS AND DIRECTORS OF IDDS JOINING EXEGENICS

DIRECTORS AND EXECUTIVE OFFICERS

     Set forth below are the names of each of our current directors who have
been nominated to continue to serve as directors after the merger, their ages,
their offices in IDDS, if any, their principal occupations or employment for the
past five years, the length of their tenure as directors and officers and the
names of other public companies in which they hold directorships, and the names
of each current executive officer who shall be appointed as an officer after the
merger in such capacity as the newly constituted board of directors deems
appropriate, their ages, their offices in IDDS, their principal occupations or
employment for the past five years, the length of their tenure as directors and
officers and the names of other public companies in which they hold
directorships. Except for executive officers who have employment agreements with
us, the executive officers shall serve at the pleasure of the newly constituted
board of directors of the combined company.



NAME                                   AGE                        TITLE
----                                   ---                        -----
                                       
Mark C. Rogers, M.D. ................  60    Chairman of the Board and Chief Executive
                                             Officer
Douglas A. Hamilton..................  37    Chief Operating Officer and Chief Financial
                                             Officer
J. Christopher Donald................  37    Controller
Randi Albin, Ph.D. ..................  43    Chief Scientific Officer
Fred H. Mermelstein, Ph.D. ..........  43    President and Secretary
Peter M. Kash........................  40    Director
Edward Miller, M.D. .................  58    Director
Mark S. Siegel.......................  50    Director
Douglas G. Watson....................  56    Director


     Mark C. Rogers, M.D.  Dr. Rogers has served as the Chairman of our board of
directors since August 1999 and Chief Executive Officer since August, 2002. Dr.
Rogers has served as President and Chief Executive Officer of Paramount Capital,
Inc., Paramount Capital Investments, LLC and Paramount Capital Asset Management,
Inc. from July 1998 to August 2002. Paramount Capital Asset Management serves as
the general partner of each of the Aries Domestic Fund, L.P. and the Aries
Domestic Fund II, L.P., and as the managing member of each of Aries Select I,
LLC, Aries Select II, LLC, Aries Select Domestic, LLC and Aries Select Domestic
II, LLC. Dr. Rogers is also a member of Orion Biomedical GP, LLC, which serves
as the general partner to the Orion BioMedical Funds. In addition, Dr. Rogers
also serves as a director of Genta Incorporated and Discovery Laboratories, Inc,
as well as several privately held corporations. Prior to his position with
Paramount, Dr. Rogers was Senior Vice President, Corporate Development and
Technology for the Perkin-Elmer Corporation. Dr. Rogers holds a M.D. from
Downstate Medical Center and a M.B.A. from The Wharton School of Business.

     Douglas A. Hamilton.  Mr. Hamilton has served as our Chief Financial
Officer since March 1999 and also as our Chief Operating Officer since April
2001. Mr. Hamilton concurrently served as Chief Financial Officer and Project
Manager for Trisenox(R) at PolaRx BioPharmaceuticals from March 1999 to October
2000. Mr. Hamilton also concurrently served from March 1999 to August 2002 as
Director, Business Development at Paramount Capital Investments, LLC a
biotechnology venture capital firm. From October 1997 to March 1999, Mr.
Hamilton served as Project Manager for Zithromax(R) and Voriconazole(R) in
addition to a member of the Strategic Asset Management (SAM) task force in
Central Research at Pfizer, Inc. From August 1993 to October 1997, Mr. Hamilton
served as Project Manager at Amgen Inc. for EPOGEN(R), Aranesp(TM) and
STEMGEN(R), among other products and assumed responsibility for developing and
leading a research and development portfolio management system. Mr. Hamilton has
also served in various capacities at other Biopharmaceutical companies
including; sales and marketing at Pharmacia, business development at NPS Allelix
Bipharmaceuticals, Inc. and research at Pasteur Merieux Connaught. Mr. Hamilton
holds a M.B.A. from the Richard Ivey School of Business and a B.S. in

                                       117


Molecular Biology and Molecular Genetics from the Department of Medical Genetics
at the University of Toronto.

     J. Christopher Donald, CFA.  Mr. Donald has served as our Controller since
he joined in April 2002. Prior to IDDS, Mr. Donald worked as a consultant with
Deutsche Bank AG in the Equity Prime Services & Derivatives groups based in New
York and Hong Kong from 2000 to 2002. He has also held several management
positions within the Hazelton Partners & Metfin Group of companies including
President, CFO, & COO of several of the investment companies from 1996 through
1999. He was a co-founder of the Canadian Storage Investment Trust and currently
serves as a trustee. From January 1994 to April 1995, Mr. Donald served as a
management consultant to a major real estate hospitality chain and assumed
responsibility for creating their asset management and investment capabilities.
Mr. Donald has also worked for Lehman Brothers in London as a sales associate in
their Equity Finance Group and as a consultant in Hong Kong to the Equities
Division from 1993 to 1994. He was awarded the Chartered Financial Analyst
designation in 1997 by AIMR and received his M.B.A. from the Richard Ivey School
of Business.

     Randi Albin, Ph.D.  Dr. Albin has served as our Chief Scientific Officer
since inception. From August 1998 to December 2001, Dr. Albin also served as an
Investment Strategist at Paramount Capital Investments, LLC. From August 1988 to
August 1998, Dr. Albin held positions of increasing responsibility at the
Schering-Plough Research Institute of Schering-Plough Corporation. Dr. Albin
holds a M.S. and a Ph.D. in Molecular Biology from Albert Einstein College of
Medicine. She completed her post-doctoral training as a Visiting Research Fellow
in the Department of Molecular Biology at Princeton University where she was
supported by grants from the National Institutes of Health and the Leukemia
Society of America.

     Fred H. Mermelstein, Ph.D.  Dr. Mermelstein has served as a member of our
board of directors and has been our President since inception. Dr. Mermelstein
concurrently serves as Director of Venture Capital at Paramount Capital
Investments, LLC, a biotechnology, biomedical and biopharmaceutical merchant
banking firm, since April 1996. Dr. Mermelstein is also a member of Orion
Biomedical GP, LLC. Dr. Mermelstein has concurrently served as a director and
the Chief Science Officer of PolaRx BioPharmaceuticals, an oncology based
biopharmaceutical company, from February 1997 until January 2000. Dr.
Mermelstein holds a dual Ph.D. in Pharmacology and Toxicology from Rutgers
University and University of Medicine and Dentistry of New Jersey (UMDNJ) Robert
Wood Johnson Medical School. He completed his post-doctoral training supported
by two grant awards, a National Institutes of Health fellowship and a Howard
Hughes Medical Institute fellowship in the Department of Biochemistry at UMDNJ
Robert Wood Johnson Medical School.

     Peter M. Kash.  Mr. Kash has served as a member of our board of directors
since February 2001. He has served as vice chairman of Keryx BioPharmaceuticals,
Inc. and as a member of its board of directors since February 2001 and as a
director of Paramount Capital Asset Management, Inc. and Senior Managing
Director of Paramount Capital, Inc. since September 1991. In addition, Mr. Kash
has served as an Adjunct Professor at The Wharton School of Business since 1996
and is currently a Visiting Professor. Mr. Kash also serves as a director of The
Aries Master Fund, The Aries Master Fund II and Aries Select, Ltd., for each of
which Paramount Capital Asset Management serves as general partner, and Gemini
Management Partners, LLC. Mr. Kash is also a member of Orion Biomedical GP, LLC.
Mr. Kash holds a M.B.A. in Finance and Banking from Pace University.

     Edward Miller, M.D.  Dr. Miller has served as a member of our board of
directors since February 2001. He has served as the Dean and Chief Executive
Officer of the Johns Hopkins School of Medicine since January 1997. From July
1986 until June 1994, he was Professor and Chairman of the Department of
Anesthesiology at Columbia Presbyterian Medical Center. From July 1994 to May
1999, Dr. Miller served as Professor and Chairman of the Department of
Anesthesiology and Critical Care Medicine at Johns Hopkins University. Dr.
Miller holds a M.D. from the University of Rochester School of Medicine. He was
a resident in anesthesiology at the Peter Bent Brigham Hospital and completed
post-doctoral training in physiology at Harvard Medical School.

                                       118


     Mark S. Siegel.  Mr. Siegel has served as a member of our board of
directors since September 2000. He has served as the President of Remy Investors
& Consultants Inc., a private investment and financial management company, since
1993. He also serves as Chairman of the board of directors of Patterson-UTI
Energy, Inc., and Chairman of the board of directors of Variflex, Inc., and as a
member of the board of directors of Discovery Laboratories, Inc. Mr. Siegel
holds a J.D. from the University of California at Berkeley (Boalt Hall) School
of Law.

     Douglas G. Watson.  Mr. Watson has served as a member of our board of
directors since April 1, 2002. He is the Chief Executive Officer of Pittencrieff
Glen Associates, a consulting company, which Mr. Watson founded in June 1999.
From January 1997 to June 1999, Mr. Watson served as President, Chief Executive
Officer and a director of Novartis Corporation, the U.S. subsidiary of Novartis
A.G. Mr. Watson serves as a director of Engelhard Corporation and Dendreon
Corporation as well as several privately held companies. Mr. Watson is a member
of the Fleet Bank-New Jersey Advisory Board and serves on the President's
Advisory Council of Drew University. Mr. Watson holds a M.A. in Mathematics from
Churchill College, Cambridge University. He is also a member of the Chartered
Institute of Management Accountants.

EXECUTIVE COMPENSATION

     The following tables summarizes the total compensation earned by our Chief
Executive Officer and each of our most highly compensated executive officers,
other than the Chief Executive Officer, who earned more than $100,000 during
each of the fiscal years ended December 31, 1999, 2000 and 2001.

     Annual compensation of an executive officer listed in the following table
excludes other compensation in the form of perquisites and other personal
benefits that constitute the lesser of $50,000 or 10% of the total annual salary
and bonus for that officer in the applicable year. The options listed in the
following table for the years prior to December 31, 2001 were granted outside
our Amended and Restated 2000 Omnibus Stock Incentive Plan.

                           SUMMARY COMPENSATION TABLE



                                            ANNUAL      OTHER ANNUAL                  SECURITIES
                                         COMPENSATION   COMPENSATION    LONG-TERM     UNDERLYING    ALL OTHER
NAME AND PRINCIPAL POSITION       YEAR    SALARY($)       BONUS($)     COMPENSATION   OPTIONS(#)   COMPENSATION
---------------------------       ----   ------------   ------------   ------------   ----------   ------------
                                                                                 
Leonard L. Firestone, M.D.(1)...  2001           --                                                  $339,341(2)
  Chief Executive                 2000           --
  Officer and                     1999           --
  Chief Medical Officer
Fred H. Mermelstein, Ph.D.(3)...  2001     $165,000(3)    $16,500                                          --
  President,                      2000     $140,000(3)                                                     --
                                  1999     $100,000(3)
Douglas A. Hamilton(4)..........  2001     $135,000(4)    $25,000                                          --
  Chief Operating                 2000     $120,000(4)                                                     --
  Officer and                     1999     $120,000(4)                                                     --
  Chief Financial Officer
Randi Albin, Ph.D.(5)...........  2001     $110,000(5)    $11,100              --            --            --
  Chief Scientific Officer        2000     $ 95,000(5)                                                     --
                                  1999     $ 85,000(5)                                                     --


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

(1) Compensation paid to Dr. Firestone was paid to Experimed Ltd., a company
    wholly owned by Dr. Firestone, with which we contracted for Dr. Firestone's
    services. Dr. Firestone resigned his positions with IDDS effective August 1,
    2002. He will remain a director of IDDS until consummation of the merger.

                                       119


(2) Of this amount, $325,000 represented payment for salary and approximately
    $14,341 for benefits. Of these amounts, $121,875 of salary was paid by
    Paramount Capital and approximately $3,785 of benefits was paid by Paramount
    Capital.

(3) Dr. Mermelstein devotes approximately one-third of his business time to us.
    In 2001, of the $165,000, $45,000 was paid by Paramount Capital, in 2000, of
    the $140,000, $70,000 was paid by Paramount Capital and in 1999, of the
    $100,000, $94,750 was paid by Paramount Capital.

(4) Mr. Hamilton is Chief Operating Officer and Chief Financial Officer of IDDS.
    In 2001, of the $135,000, $67,500 was paid by Paramount Capital, in 2000, of
    the $120,000, $58,625 was paid by Paramount Capital and in 1999, of the
    $120,000, $80,308 was paid by Paramount Capital.

(5) In 2001, of the $110,000, $55,000 was paid by Paramount Capital, in 2000, of
    the $95,000, $47,500 was paid by Paramount Capital and in 1999, the full
    $85,000 was paid by Paramount Capital.

OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 2001

     The following table contains information concerning stock options granted
in 2001 to each of the executive officers named in the summary compensation
table. The potential realizable value is calculated assuming the fair market
value of our common stock appreciates at the indicated rate for the entire term
of the option and that the option is exercised and sold on the last day of its
term at the appreciated price. These gains are based on assumed rates of
appreciation compounded annually from the dates the respective options were
granted to their expiration date based on eXegenics closing stock price on June
30, 2002 of $0.81 divided by the exchange ratio of 3.132 to give effect to the
merger, minus the applicable per share exercise price. Annual rates of stock
price appreciation of 5% and 10% from the eXegenics closing stock price on June
30, 2002 of $0.81 divided by the exchange ratio of 3.132 to give effect to the
merger are assumed pursuant to the rules of the Securities and Exchange
Commission. The actual stock price will appreciate over the term of the options
at the assumed 5% and 10% levels or any other defined level. Actual gains, if
any, on exercised stock options will depend on the future performance of our
common stock.



                                                 INDIVIDUAL GRANTS
                                 --------------------------------------------------
                                              PERCENTAGE                              POTENTIAL REALIZABLE VALUE AT
                                 NUMBER OF     OF TOTAL                                  ASSUMED ANNUAL RATES OF
                                 SECURITIES    OPTIONS                                STOCK PRICE APPRECIATION FOR
                                 UNDERLYING   GRANTED TO    EXERCISE                           OPTION TERM
                                  OPTIONS     EMPLOYEES       PRICE      EXPIRATION   -----------------------------
NAME                              GRANTED      IN 2001     (PER SHARE)      DATE           5%              10%
----                             ----------   ----------   -----------   ----------   -------------   -------------
                                                                                    
Leonard L. Firestone, M.D. ....  1,113,896       100%         $1.26       02/2011      $1,814,419      $2,889,159
Fred H. Mermelstein, Ph.D. ....         --        --             --
Douglas A. Hamilton............         --        --             --
Randi Albin, Ph.D. ............         --        --             --


OPTION GRANTS SINCE DECEMBER 31, 2001

     The following describes the stock options granted to each of the executive
officers named in the summary compensation table from December 31, 2001 through
September 30, 2002.

     Dr. Firestone, for serving as a director, received an option to purchase
50,807 shares of common stock in February 2002 at an exercise price of $5.46 per
share, of which 33,871 shares are currently exercisable. This option will expire
in February 2012.

     Dr. Rogers was named the Chairman and Chief Executive Officer of IDDS in
September 2002. Dr. Rogers received an option to purchase an additional 50,807
shares of common stock in February 2002 at an exercise price of $5.46 per share,
of which 33,871 shares are currently exercisable for serving as a director of
IDDS. This option will expire in February 2012. Additionally, upon the effective
date of the merger, Dr. Rogers will receive an option to purchase 750,000 shares
of common stock, or 2,349,000 shares of eXegenics common stock post-merger
(approximately 2.9% of the combined company

                                       120


on a fully diluted basis), at an exercise price equal to the fair market value
of the stock on the fifth day after the consummation of the merger of which
250,000 would be immediately exercisable. This option will expire ten years from
the date of grant.

     Dr. Mermelstein, for serving as a director, received an option to purchase
50,807 shares of common stock in February 2002 at an exercise price of $5.46 per
share, of which 33,871 shares are currently exercisable. This option will expire
in February 2012. Additionally, Dr. Mermelstein received an option to purchase
50,000 shares of common stock in September 2002 at an exercise price of $3.94
per share, all of which are currently exercisable. This option will expire in
September 2012.

     In April 2002, J. Christopher Donald was hired as Controller of IDDS and
received an option to purchase 150,000 shares of common stock at an exercise
price equal to the fair market value of the stock on the fifth day after the
consummation of the merger, of which 50,000 are currently exercisable. This
option will expire in April 2012.

OPTION VALUES AS OF DECEMBER 31, 2001

     The following table contains information concerning stock options to
purchase common stock held as of December 31, 2001 by each of the officers named
in the summary compensation table who have stock options. There was no public
trading market for our common stock as of December 31, 2001. Accordingly, the
values set forth below have been calculated on the basis of the closing stock
price of eXegenics common stock on June 30, 2002 divided by the exchange ratio
of 3.132, less the applicable exercise price per share, multiplied by the number
of shares underlying the options.



                                                                 NUMBER OF SECURITIES        VALUE OF UNEXERCISED IN-
                                                                UNDERLYING UNEXERCISED         THE-MONEY OPTIONS AT
                                    SHARES                    OPTIONS AT FISCAL YEAR END          FISCAL YEAR-END
                                  ACQUIRED ON      VALUE      ---------------------------   ---------------------------
NAME                              EXERCISE(#)   REALIZED($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                              -----------   -----------   -----------   -------------   -----------   -------------
                                                                                        
Leonard L. Firestone(1).........                               1,113,896                       $  --          $  --
Mark C. Rogers, M.D.(2).........       --            --          238,693                       $  --          $  --
Fred H. Mermelstein, Ph.D.(3)...       --            --          318,255                       $  --          $  --
Douglas A. Hamilton.............       --            --          477,386                       $  --          $  --
Randi Albin, Ph.D. .............       --            --          477,386                       $  --          $  --


EMPLOYEE BENEFIT PLANS

     Amended and Restated 2000 Omnibus Stock Incentive Plan.  Our Amended and
Restated 2000 Omnibus Stock Incentive Plan was adopted by our board of directors
on February 5, 2001 and approved by our stockholders on February 15, 2001. Our
plan was subsequently amended by our board of directors on March 12, 2002 and
approved by our stockholders on April 29, 2002. On September 18, 2002, our board
of directors approved the amendment and restatement of this plan to incorporate
the prior amendment. Upon consummation of the merger, and pursuant to the merger
agreement, this plan will be canceled and, subject to stockholder approval, a
similar stock incentive plan will be adopted by eXegenics that will replace the
existing IDDS option grants with grants to purchase eXegenics common stock on
the same terms as the IDDS option grants. See the section entitled "eXegenics
Proposal 6" on page [  ] for a description of the new plan to be adopted by
eXegenics upon the receipt of stockholder approval.

     We have reserved 4,200,000 shares of our common stock for issuance under
our stock incentive plan. The number of shares of common stock reserved for
issuance under our stock incentive plan will automatically increase on the first
trading day in January of each calendar year, beginning in calendar year 2003,
by an amount equal to 3% of the total number of shares of our common stock
outstanding on the last trading day in December of the preceding calendar year,
but in no event will any annual increase exceed 1,000,000 shares. No participant
in our stock incentive plan may be granted awards with respect to more than
1,000,000 shares of our common stock per calendar year.

                                       121


     The individuals eligible to participate in our stock incentive plan include
our officers and other employees, our non-employee board members and any
consultants we hire. Our stock incentive plan provides for the grant of stock
options, stock appreciation rights, or SARs, and direct stock grants. Stock
options are the right to purchase shares of our common stock at a specified
price, which may be less than, equal to or greater than the fair market value
per share on the date of grant. SARs may be granted alone or in connection with
another award, such as a stock option or grant of restricted stock, and provide
for an appreciation distribution from us equal to the increase in the fair
market value per share of common stock from a price specified on the grant date.
If granted in connection with another award, exercise of the SAR will generally
require the surrender of the related award. This appreciation distribution may
be made in cash or in shares of common stock. Direct stock grants include the
grant of performance shares which are distributable to the holder based on the
achievement of specified performance targets, stock which may be purchased at a
price less than, equal to or greater than the fair market value on the date of
purchase, and grants of bonus stock which do not require purchase by the award
recipient. Any of the direct stock grants may be restricted stock, which is
subject to forfeiture by the holder (or repurchase by us) upon the occurrence of
specified events, such as the holder's cessation of service prior to a specified
date.

     The stock incentive plan includes an automatic option grant program for
non-employee directors, under which option grants will automatically be made at
periodic intervals to our non-employee board members to purchase shares of
common stock at an exercise price equal to 100% of the fair market value of
those shares on the grant date.

     Under this program, each individual who first becomes a non-employee board
member will automatically receive an option grant for 12,500 shares of our
common stock on the date such individual joins the board, if such individual has
not been in our prior employ, except for our chairman who shall receive an
option grant for 25,000 shares of our common stock. In addition, on the date of
each annual stockholders meeting each non-employee board member who is to
continue to serve as a non-employee board member, including each of our current
non-employee board members, will automatically be granted an option to purchase
12,500 shares of our common stock, except for our chairman who shall receive an
option grant for 25,000 shares of our common stock, if such individual has
served on our board for at least six months.

     The stock incentive plan will be administered by the compensation
committee, except for automatic option grants. This committee will determine
which eligible individuals are to receive option grants, SARs or stock
issuances, the time or times when such awards are to be made, the number of
shares subject to each such award, the status of any granted option as either an
incentive stock option or a non-statutory stock option under the federal tax
laws, the vesting schedule to be in effect for the award and the maximum term
for which any award is to remain outstanding.

     The exercise price for the shares of the common stock subject to option
grants made under our stock incentive plan may be paid in cash or, with approval
of the committee, in shares of common stock, including restricted shares, valued
at the fair market value on the exercise date; however, such shares must have
been held for at least six months prior to the date of exercise, valued at fair
market value. The option may also be exercised through a same-day sale program
without any cash outlay by the optionee. In addition, the plan administrator may
provide financial assistance to one or more optionees, other than officers and
directors, in the exercise of their outstanding options or the purchase of their
unvested shares by allowing the individuals to deliver a full-recourse,
interest-bearing promissory note in payment of the exercise price and any
associated withholding taxes incurred in connection with the exercise or
purchase.

     In the event that we are acquired by merger or an asset sale in which we
will not be the surviving entity or in which we will survive as a wholly owned
subsidiary of another entity, each outstanding option will be assumed by the
successor corporation unless the compensation committee determines that the
options will accelerate and vest in full prior to such transaction.
Alternatively, the committee may cancel the options and pay each holder cash or
securities equal, for each cancelled option share, to the per share
consideration received by our stockholders in the transaction less the exercise
price of the option share. The compensation committee will have complete
discretion to structure one or more awards so those

                                       122


awards will vest in full or in part in connection with such a transaction, upon
the holder's cessation of service within a specified period following such a
transaction or under other circumstances as determined by the compensation
committee in its discretion.

     The compensation committee may also grant awards subject to accelerated
vesting in connection with a successful tender offer for more than 50% of our
outstanding voting stock or a change in the majority of our board through one or
more contested elections for board membership. Such accelerated vesting may
occur either at the time of such transaction or upon the subsequent termination
of the individual's service.

     Each automatic grant will have an exercise price per share equal to the
fair market value per share of our common stock on the grant date and will have
a term of ten years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the lower of the exercise
price paid per share and the fair market value at the time of repurchase, any
shares purchased under the option which are not vested at the time of the
optionee's cessation of board service. The shares subject to each initial 12,500
or 25,000 share automatic option grant, as applicable, will vest in a series of
successive annual installments upon the optionee's completion of each year of
board service. The shares subject to each annual automatic option grant will
vest upon the optionee's completion of one year of board service measured from
the grant date.

     The board may amend or modify the stock incentive plan at any time, subject
to any required stockholder approval. The stock incentive plan will terminate no
later than February 4, 2011.

EMPLOYEE STOCK PURCHASE PLAN

     Upon consummation of the merger, our stock purchase plan will be canceled
and, subject to stockholder approval, eXegenics will adopt a substantially
similar plan according employees rights that are substantially equivalent to
their rights under the existing plan. As of June 30, 2002, no share purchases
have been made under this plan. See the section entitled "eXegenics Proposal 7"
on page [  ] for a description of the new plan to be adopted by eXegenics upon
receipt of stockholder approval.

EMPLOYMENT AGREEMENTS

     In August 2002, we entered into an employment agreement with Dr. Mark
Rogers, our Chief Executive Officer, which commenced on September 16, 2002. This
agreement has been Amended and Restated as of September 19, 2002 to become
effective only upon the consummation of the merger with eXegenics whereupon
eXegenics shall assume the obligations under this agreement with Dr. Rogers
becoming the Executive Chairman of eXegenics. The amended and restated
employment agreement has an initial term of two years, subject to automatic
two-year renewal terms, unless terminated by us at least six months prior to the
end of the then-current term. Dr. Rogers will receive an initial annual base
salary of $290,000, subject to appropriate increases at the discretion of our
board of directors. In addition, concurrently with the closing of the merger,
Dr. Rogers has been granted an option to purchase 750,000 shares of our common
stock, or 2,349,000 shares of eXegenics common stock post-merger (approximately
2.9% of the combined company on a fully diluted basis), at an exercise price
equal to the [the fair market value of the stock on the fifth day after the
consummation of the merger]. These options vest with respect to one-third of the
shares on the date of the grant and then in two equal installments on the first
and second annual anniversaries of the date of grant, as long as he remains
employed with us.

     If Dr. Rogers is terminated without cause, we are required to continue to
pay his salary for 12 months or until the expiration of the agreement, whichever
is longer, any bonuses and incentives accrued but unpaid prior to the date his
employment is terminated, his health benefits for 12 months and accelerate the
vesting of all his unvested stock options. In the event of a change of control
or similar event, Dr. Rogers may terminate his employment and we will be
obligated to continue to pay to him his salary for 18 months and any accrued but
unpaid bonuses and incentives and accelerate the vesting of all his unvested
options.
                                       123


     None of our other executive officers has entered into employment agreements
with us. See the section entitled "Transactions with Directors and Executive
Officers" below for information with regard to the prior employment agreement
with our former CEO, Leonard Firestone.

RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     We believe that we have executed all of the transactions set forth below on
terms no less favorable to us than we could have obtained from unaffiliated
third parties. Our intention is to ensure that all future transactions, between
us and our officers, directors and principal stockholders and their affiliates,
are approved by a majority of our board of directors, including a majority of
the independent and disinterested members of the board of directors, and are on
terms no less favorable to us than those that we could obtain from unaffiliated
third parties.

OFFICE SPACE, ADMINISTRATIVE SERVICES AND FINANCIAL SUPPORT

     We presently maintain our executive offices on a rent-free basis in
premises of approximately 2,500 square feet that we share with Paramount Capital
Investments, LLC. We do not have a lease agreement with Paramount Capital
Investments and consequently our use of this space may be terminated at any
time. We have leased suitable alternative space and anticipate moving our
offices in November 2002.

     In addition, Paramount Capital Investments provides us with back office and
financial support and management services free of charge. We do not have a
management services agreement with Paramount Capital Investments and
consequently our use of their services may be terminated at any time. For the
year ended December 31, 2001, the estimated fair value of the financial
assistance Paramount has provided to us totaled $481,299, which has been
reflected in the accompanying financial statements as an expense in that period
with a corresponding deemed capital contribution and for the interim period
ended June 30, 2002, the estimated fair value of the financial assistance
Paramount has provided to us totaled $155,086, which has been reflected in the
accompanying financial statements as an expense in that period with a
corresponding deemed capital contribution.

PRIVATE PLACEMENT OF SECURITIES

     In April and July 1999, our predecessor corporation, Pain Management, Inc.,
issued promissory notes to purchasers in the total principal amount of
$1,040,000 bearing interest at a rate of 12% per annum for the first year in
which they were outstanding and 15% per annum thereafter. It also issued
warrants to purchase a total of 260,000 shares of its common stock at an
exercise price of $0.01, exercisable on or prior to September 22, 2005.
Immediately upon the closing of our series A convertible preferred stock
financing, the principal amount and the accrued interest on the notes became due
and payable. We repaid the notes in full, and, following our merger with Pain
Management, the warrants to purchase shares of Pain Management were exchanged
for warrants to purchase an aggregate of 231,859 shares of our common stock.

     In June 2000, we issued to our founders 5,080,717 shares of our common
stock for an aggregate purchase price of $5,000 pursuant to stock purchase
agreements between us and our founders. In connection with this transaction, we
issued approximately 127,018 shares to Peter M. Kash, 254,035 shares to Fred H.
Mermelstein, Ph.D., 1,162,164 shares to Mark C. Rogers, M.D., 2,224,084 shares
to Lindsay A. Rosenwald, 227,098 shares to David Tanen, 253,517 shares to
Michael Weiser, 254,035 shares to Douglas A. Hamilton and 254,035 shares to
Randi Albin, Ph.D.

     In September and October 2000, we issued a total of 4,014,125 shares of our
series A convertible preferred stock at a purchase price of $4.00 per share and
warrants to purchase 407,893 shares of our common stock at an exercise price of
$3.94 per share. Paramount Capital, Inc., an NASD member broker-dealer, acted as
our finder in connection with our sale of the series A convertible preferred
stock. As compensation for acting as our placement agent in connection with this
financing, Paramount Capital's designees received a cash commission plus
expenses equal to $1,157,572. In addition, Paramount Capital's
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designees received unit purchase options to purchase 395,788 shares of series A
convertible preferred stock (convertible into 402,177 shares of common stock)
and warrants to purchase 40,218 shares of our common stock. Peter M. Kash, a
member of our board of directors, received a unit purchase option to acquire
164,655 shares of series A convertible preferred stock (convertible into 167,313
shares of common stock) and warrants to purchase 16,732 shares of common stock.
Mark C. Rogers, M.D., our Chairman, received a unit purchase option to acquire
16,665 shares of series A convertible preferred stock (convertible into 16,935
shares of common stock) and warrants to purchase 1,693 shares of common stock.
Mark S. Siegel, one of our directors, is the President of Remy Investors &
Consultants, which purchased 500,000 shares of our series A convertible
preferred stock in the offering for an aggregate purchase price of $2,000,000.

     In September 2000, in connection with our merger with Pain Management, we
issued an aggregate of 4,648,220 shares of our common stock, or 0.89174482
shares of common stock for each outstanding share of common stock of Pain
Management. We also exchanged warrants to purchase 485,000 shares of Pain
Management common stock with a weighted average exercise price of $0.01 with
warrants to purchase 432,496 shares of our common stock with a weighted average
exercise price of approximately $0.01. In connection with this transaction, we
issued approximately 111,463 shares to Peter M. Kash, 222,936 shares to Fred H.
Mermelstein, Ph.D., 1,666,349 shares to Lindsay A. Rosenwald, 103,944 shares to
David Tanen, 113,544 shares to Michael Weiser, 127,840 shares to Douglas A.
Hamilton and 127,840 shares to Randi Albin, Ph.D.

     In December 2001, we issued a total of 989,991 shares of series B
convertible preferred stock at a purchase price of approximately $5.55 per
share. Paramount Capital and Wells Fargo Securities, LLC, both NASD member
broker-dealers, acted as our placement agents in connection with the sale of our
series B convertible preferred stock. In connection with the financing,
Paramount Capital's designees received a cash commission equal to $169,943,
Wells Fargo's designees received a cash commission of $182,603 and we have paid
other expenses of $121,771.

TRANSACTIONS WITH STOCKHOLDERS

     In February 1998, Pain Management entered into a license agreement with Dr.
Stuart Weg. We assumed the license agreement upon the closing of our merger with
Pain Management. The license grants us the exclusive worldwide rights, including
the right to grant sublicenses, for the intellectual property surrounding
intranasal ketamine. In connection with the license agreement, we made an
upfront payment to Dr. Weg, Dr. Herbert Brotspies and Calgar & Associates and
issued to them shares of our common stock, a portion of which is currently held
in escrow and will be released to them upon the successful completion of the
Phase III clinical trial, if at all. Dr. Weg, one of our principal stockholders
was issued 757,983 shares of our common stock in February 1998. An additional
189,495 shares are held in escrow. We also reimbursed Dr. Weg, Dr. Brotspies and
Calgar for patent and other costs. We will pay semi-annual royalty payments to
them based on a percentage of net sales of intranasal ketamine sold by us or our
sublicensees, if any. In addition, we will pay Dr. Weg, Dr. Brotspies and Calgar
a defined percentage of all sublicensing fees or other lump sum payments. Under
this agreement, we have made aggregate payments to Dr. Weg, Dr. Brotspies and
Calgar of $100,000 in 1999, $50,000 in 2000 and $150,000 in 2001. We are
obligated to make aggregate future payments of approximately $1.3 million upon
defined dates ranging from August 2003 to November 2004 or satisfaction of
certain clinical and regulatory milestones, which includes the filing of an NDA
with the FDA, the approval of an NDA by the FDA and the first commercial sale of
a licensed product and an aggregate payment of $750,000 before March 31, 2003
relating to ketamine. A defined percentage of such milestone payments will be
creditable against royalties earned, provided that in no event will royalties
earned be reduced by more than a certain percentage in any applicable
semi-annual period.

     In connection with the license agreement, in February 1998, Pain Management
entered into a stockholders agreement with Dr. Lindsay A. Rosenwald, Dr. Stuart
Weg, Herbert Brotspies and Calgar & Associates. We assumed the obligations under
the stockholders agreement upon the closing of our merger with Pain Management.
The stockholders agreement provides the parties with two piggyback registrations

                                       125


any time we file a registration statement after our initial public offering.
These registration rights will terminate on February 25, 2003.

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

     In January 2002, we entered into a lease agreement with Experimed Ltd., a
wholly-owned entity of Dr. Leonard L. Firestone, pursuant to which Dr. Firestone
became employed by us as our Chief Executive Officer on January 1, 2001. Dr.
Firestone resigned from his positions with IDDS effective as of August 1, 2002
and presently continues to receive his salary of $339,341 and benefits on a
month to month basis at the discretion of the board of directors.

     In August 2002, we entered into an employment agreement with Mark C.
Rogers, M.D. to replace Dr. Firestone as the Chief Executive Officer effective
September 16, 2002. See section entitled "Employment Agreements" above.

     We have included in our certificate of incorporation and By-laws provisions
to eliminate the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty to the fullest extent permitted
by the Delaware General Corporation Law and indemnify our directors and officers
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law, including circumstances in which indemnification is otherwise
discretionary. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.

RELATIONSHIP WITH PARAMOUNT

     Dr. Randi Albin, our Chief Scientific Officer, also served as Investment
Strategist at Paramount Capital Investments, LLC until December 2001.

     Mr. Peter M. Kash, a member of our board of directors, is also a Senior
Managing Director of Paramount Capital, Inc. and a director of Paramount Capital
Asset Management. He also serves as a director to The Aries Master Fund, Aries
Master Fund II and Aries Select, Ltd., each a Cayman Island company for which
Paramount Capital Asset Management serves as general partner.

     Dr. Fred H. Mermelstein, our President and Secretary and a member of our
board of directors, is also the Director of Venture Capital of Paramount Capital
Investments, LLC and spends approximately two-thirds of his business time with
Paramount and one-third of his business time with us.

     Dr. Mark C. Rogers, the chairman of our board of directors, also serves as
President and Chief Executive Officer of Paramount Capital, Inc., Paramount
Capital Asset Management and Paramount Capital Investments, LLC. He also serves
as the general partner of each of the Aries Domestic Fund, L.P. and The Aries
Domestic Fund II, L.P., and as managing member of each of Aries Select I, LLC,
Aries Select II, LLC, Aries Select Domestic LLC and Aries Select Domestic II,
LLC, each a Cayman Island company for which Paramount Capital Asset Management
serves as general partner. Dr. Rogers resigned from Paramount in August 2002 and
now devotes all of his time to us.

     Lindsay A. Rosenwald, one of our principal stockholders, is also the
chairman of Paramount Capital, Inc., Paramount Capital Asset Management, Inc.
and Paramount Capital Investments, LLC. Dr. Rosenwald has in the past guaranteed
certain of our bank loans totaling $475,000 in the aggregate and the obligations
securing these guarantees have been fulfilled.

     On July 22, 2002, we entered into an employment agreement with Dr.
Elizabeth Rogers, the wife of Dr. Mark C. Rogers, our chairman. Under the
employment agreement, Dr. Rogers provides 60% of her professional time to our
clinical product development team. In consideration for these services, we have
agreed to pay to Dr. E. Rogers a salary equal to $145,000 per year, payable in
equal bi-monthly installments. In addition, we have agreed to reimburse Dr. E.
Rogers for all pre-approved, out-of-pocket expenses incurred on our behalf. Dr.
E. Rogers has also been granted options to purchase 75,000 shares of our common
stock at an exercise price of $5.46.

                                       126


     Paramount Capital previously paid a portion of the compensation of our
executive officers. Of the $339,341 Dr. Firestone received in 2001, Paramount
Capital paid $125,661. Of the $165,000 Dr. Mermelstein received in 2001,
Paramount Capital paid $45,000. Of the $135,000 Mr. Hamilton received in 2001,
Paramount Capital paid $67,500. Of the $110,000 Dr. Albin received in 2001,
Paramount Capital paid $55,000. Our executive officer's respective salaries have
been paid solely by us since August 15, 2002.

LICENSE AGREEMENT GUARANTEE

     In August 2000, we entered into a license agreement with West
Pharmaceutical under which we received certain worldwide-exclusive rights to
develop and commercialize products including intranasal morphine and intranasal
fentanyl under patents held by West Pharmaceutical. The agreement required us to
pay West Pharmaceutical up-front license fees, milestone payments upon the
successful completion of certain defined events, a portion of any up-front
license fees that we may receive from our sub-licensees, a royalty based upon
our or our sub-licensees' sales of products and minimum annual royalty payments
for each licensed product that receives regulatory approval. Paramount Capital
Investments guaranteed our ability to pay the up-front license fees to West
Pharmaceutical. The guarantee expired upon the payments by us of the amounts we
owed to West Pharmaceutical.

                                       127


                        SECURITY OWNERSHIP OF MANAGEMENT
                       AND PRINCIPAL STOCKHOLDERS OF IDDS

     Except as otherwise set forth below, the following table sets forth certain
information regarding beneficial ownership of our common stock as of September
30, 2002, by (i) each person (or group of affiliated persons) who is known by us
to own more than five percent of the outstanding shares of our common stock,
(ii) each of our directors, (iii) executive officers named in the summary
compensation table, and (iv) all of our executive officers and directors as a
group.

     Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. The principal address of each of the
stockholders listed below is c/o Innovative Drug Delivery Systems, Inc., 787
Seventh Avenue, 48th Floor, New York, New York 10019. We believe that all
persons named in the table have sole voting and sole investment power with
respect to all shares beneficially owned by them. All figures include shares of
common stock issuable upon the exercise of options or warrants exercisable
within 60 days of September 30, 2002 and, which are deemed to be outstanding and
to be beneficially owned by the person holding those options or warrants for the
purpose of computing the percentage ownership of that person, but are not deemed
to be outstanding for the purpose of computing the percentage ownership of any
other person. All figures also assume conversion of all outstanding shares of
our series A and series B convertible preferred stock.



                                         NUMBER OF SHARES      PERCENT OF SHARES OUTSTANDING
                                           BENEFICIALLY     ------------------------------------
NAME OF BENEFICIAL OWNERS                    OWNED**        BEFORE THE MERGER   AFTER THE MERGER
-------------------------                ----------------   -----------------   ----------------
                                                                       
Lindsay A. Rosenwald(1)................      3,890,504            20.3%               16.0%
Mark C. Rogers(2)......................      1,672,894             8.7%                6.7%
Leonard L. Firestone(3)................        389,521             2.0%                1.6%
Stuart Weg(4)..........................        762,441             4.0%                3.1%
Fred H. Mermelstein(5).................        628,586             3.3%                2.6%
Peter M. Kash(6).......................        544,642             2.8%                2.2%
Douglas A. Hamilton(7).................        473,334             2.5%                1.9%
Randi Albin(8).........................        356,478             1.9%                1.5%
Michael Weiser(9)......................        404,350             2.1%                1.7%
Mark S. Siegel(10).....................        600,952             3.1%                2.5%
Edward Miller(11)......................         33,871               *                   *
Christopher Donald(12).................         14,177               *                   *
Douglas G. Watson(13)..................         50,000               *                   *
All directors and executive officers as
  a group (10 persons).................      9,821,750            51.2%               40.3%


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

  *  less than one percent

 **  Assumes the conversion of all preferred stock into common stock. The
     preferred stock converts on a 1.0-to-1.016143 basis and has one vote per
     share.

***  Calculated on the basis of an aggregate of 19,184,618 shares of IDDS common
     stock on a fully diluted basis plus 16,184,486 shares of eXegenics common
     stock outstanding except that shares of common stock underlying options and
     warrants exercisable within 60 days of the date hereof are deemed
     outstanding for the purpose of calculating the beneficial ownership of the
     holders after the merger.

 (1) Includes 486,313 shares of common stock owned by each of Donni Rosenwald,
     Joshi Rosenwald, David Rosenwald and Demi Rosenwald, affiliates of Lindsay
     A. Rosenwald. Dr. Rosenwald disclaims beneficial ownership of these shares
     except to the extent of his pecuniary interest therein.

 (2) Includes a unit purchase option to acquire 16,934 shares of series A
     convertible preferred stock (convertible into 17,207 shares of common
     stock) and warrants to purchase 1,693 shares of common stock and 385,082
     shares of common stock obtainable upon exercise of stock options
     exercisable within 60 days of September 30, 2002. Includes 25,000 shares of
     common stock obtainable upon

                                       128


     exercise of stock options exercisable within 60 days of September 30, 2002
     granted to Dr. Elizabeth Rogers, an affiliate of Dr. Rogers. Excludes
     50,000 shares of common stock obtainable upon exercise of stock options not
     currently exercisable within 60 days of September 30, 2002 granted to Dr.
     Elizabeth Rogers. Excludes 750,000 shares of common stock obtainable upon
     exercise of stock options not currently exercisable within 60 days of
     September 30, 2002 to be granted to Dr. Rogers solely upon consummation of
     the merger and excludes 16,936 shares of common stock obtainable upon
     exercise of stock options not currently exercisable within 60 days of
     September 30, 2002.

 (3) Includes 389,521 shares of common stock obtainable upon exercise of stock
     options exercisable within 60 days of September 30, 2002. Also excludes an
     additional 16,936 shares of common stock obtainable upon exercise of stock
     options not exercisable within 60 days of September 30, 2002.

 (4) Excludes 189,495 shares of common stock held in escrow over which Dr. Weg
     exercises no voting or dispositive control. Includes warrants to purchase
     2,229 shares of common stock and warrants owned by Pain Treatment
     Specialist, an affiliate of Dr. Weg, to purchase 2,229 shares of common
     stock.

 (5) Includes 151,614 shares of common stock obtainable upon exercise of stock
     options exercisable within 60 days of September 30, 2002. Excludes 50,807
     shares of common stock obtainable upon exercise of stock options not
     currently exercisable within 60 days of September 30, 2002.

 (6) Includes, in the aggregate, 60,968 shares, 15,242 shares of which are owned
     by each of Shantal Kash, Colby Kash, Jared Kash and the Kash Family Trust,
     affiliates of Peter Kash, a unit purchase option to acquire 167,313 shares
     of series A convertible preferred stock (convertible into 170,014 shares of
     common stock) and warrants to purchase 16,731 shares of common stock and
     119,412 shares of common stock obtainable upon exercise of stock options
     exercisable within 60 days of September 30, 2002. Mr. Kash disclaims
     beneficial ownership of the shares held by Shantal Kash, Colby Kash, Jared
     Kash and the Kash Family Trust except to the extent of his pecuniary
     interest therein. Excludes 16,936 shares of common stock obtainable upon
     exercise of stock options not currently exercisable within 60 days of
     September 30, 2002.

 (7) Includes 101,615 shares of common stock obtainable upon exercise of stock
     options exercisable within 60 days of September 30, 2002. Excludes 50,807
     shares of common stock obtainable upon exercise of stock options not
     currently exercisable within 60 days of September 30, 2002.

 (8) Includes 101,615 shares of common stock obtainable upon exercise of stock
     options exercisable within 60 days of September 30, 2002. Excludes 50,807
     shares of common stock obtainable upon exercise of stock options not
     currently exercisable within 60 days of September 30, 2002.

 (9) Includes a unit purchase option to acquire 3,048 shares of series A
     convertible preferred stock (convertible into 3,097 shares of common stock)
     and warrants to purchase 305 shares of common stock and 33,871 shares of
     common stock obtainable upon exercise of stock options exercisable within
     60 days of September 30, 2002. Excludes 16,936 shares of common stock
     obtainable upon exercise of stock options not currently exercisable within
     60 days of September 30, 2002.

(10) Includes 508,072 shares of series A convertible preferred stock
     (convertible into 516,274 shares of common stock) and warrants to purchase
     50,807 shares of common stock owned by Remy Investors & Consultants, Inc.,
     of which Mr. Siegel is the President and 33,871 shares of common stock
     obtainable upon exercise of stock options exercisable within 60 days of
     September 30, 2002. Mr. Siegel disclaims beneficial ownership of such
     shares except to the extent of his pecuniary interest therein. Excludes
     16,936 shares of common stock obtainable upon exercise of stock options not
     currently exercisable within 60 days of September 30, 2002.

(11) Includes 33,871 shares of common stock obtainable upon exercise of stock
     options exercisable within 60 days of September 30, 2002. Excludes 16,936
     shares of common stock obtainable upon exercise of stock options not
     currently exercisable within 60 days of September 30, 2002.

(12) Includes 12,702 shares of Series A convertible preferred stock (convertible
     into 12,907 shares of common stock) and warrants to purchase 1,250 shares
     of common stock. Excludes 150,000 shares of common stock obtainable upon
     exercise of stock options not currently exercisable within 60 days of
     September 30, 2002.

(13) Includes 50,000 shares of common stock obtainable upon exercise of stock
     options exercisable within 60 days of September 30, 2002.

                                       129


                    INFORMATION REGARDING IDDS MERGER CORP.

     IDDS Merger Corp. is a newly-formed, wholly-owned subsidiary of eXegenics,
which was incorporated in Delaware for the sole purpose of effecting the merger
by merging with and into IDDS. It engages in no other business. Its principal
executive offices are presently located at 2110 Research Row, Dallas, Texas
75235 and its telephone number is (214) 358-2000.

                                       130


                 THE SPECIAL MEETING OF EXEGENICS STOCKHOLDERS

     In this section, "The Special Meeting of eXegenics Stockholders,"
references to "we," "us," "our" and "ours" refer to eXegenics.

GENERAL

     eXegenics is furnishing this joint proxy statement/prospectus to holders of
eXegenics common stock and series A preferred stock in connection with the
solicitation of proxies by the eXegenics board of directors for use at the
special meeting of stockholders to be held on [          ], 2002, and any
adjournment or postponement thereof.

     The Agreement and Plan of Merger and Reorganization is attached to this
joint proxy statement/ prospectus as Annex A-1. For further information, you can
also refer to the sections entitled "The Merger" on page [  ] and "The Merger
Agreement" on page [  ].

DATE, TIME AND PLACE

     The date, time and place of the special meeting of eXegenics stockholders
are as follows:

                                  [Date], 2002
                            [10:00 a.m.], local time
                                 Embassy Suites
                           3880 W. Northwest Highway
                              Dallas, Texas, 75235

VOTING PROCEDURES

     Shares represented by valid proxies in the form enclosed or for which
voting instructions have been given to us over the telephone in accordance with
the instructions outlined below, received in time for use at the special meeting
and not revoked at or prior to the special meeting, will be voted at the special
meeting. Where you specify a choice as to how your shares are to be voted on a
particular matter, the shares will be voted accordingly. If no choice is
specified, the shares will be voted:

     - FOR Proposal 1 to approve, for purposes of NASD Marketplace Rule
       4350(i)(1)(B), the issuance of up to 60,086,224 shares of eXegenics
       common stock in connection with the proposed merger of a newly-formed,
       wholly-owned subsidiary of eXegenics, IDDS Merger Corp., a Delaware
       corporation, with and into Innovative Drug Delivery Systems, Inc., a
       Delaware corporation, as contemplated by the Agreement and Plan of Merger
       and Reorganization, dated as of September 19, 2002, by and among
       eXegenics, IDDS Merger Corp., IDDS, Ronald L. Goode, Ph.D., as the
       representative of the holders of the common stock of eXegenics, and Mark
       C. Rogers, M.D., as the representative of the holders of the common stock
       of IDDS.

     - FOR Proposal 2 to approve an amendment to our certificate of
       incorporation to increase the number of authorized shares of common stock
       from 30,000,000 to 90,000,000;

     - FOR Proposal 3 to authorize the board of directors, in its discretion, to
       effect a 1-for-[5] reverse split of our issued and outstanding shares of
       common stock without further approval or authorization of our
       stockholders at any time prior to the next annual meeting of our
       stockholders;

     - FOR Proposal 4 to approve an amendment to our certificate of
       incorporation to change the name of eXegenics Inc. to Accel
       Pharmaceuticals, Inc.;

     - FOR Proposal 5 to approve an amendment to our certificate of
       incorporation to provide that our board of directors will be divided into
       three classes, each consisting of one-third of such directors, as nearly
       as may be, designated Class I, Class II and Class III;

                                       131


     - FOR Proposal 6 to approve the 2002 Omnibus Stock Incentive Plan; and

     - FOR Proposal 7 to approve the 2002 Employee Stock Purchase Plan.

     If proposals 1, 2, 3 and 6, to approve the issuance of shares of eXegenics
common stock in connection with the merger, the amendment of the eXegenics
certificate of incorporation to increase the number of shares of eXegenics
common stock authorized for issuance, the authorization of the board of
directors, in its discretion, to effect a reverse split of eXegenics' issued and
outstanding common stock, and the adoption of a new employee stock incentive
plan, are not approved, the merger will not be consummated. If the merger is not
consummated, none of the foregoing proposals, except the proposal to authorize
the board to effect a reverse stock split, will be implemented. In addition,
proposals 4 and 7, to amend the certificate of incorporation to change the name
of eXegenics and approve the employee stock purchase plan, will also not be
implemented if the merger is not consummated. eXegenics may, however, effect the
reverse stock split or amend its certificate of incorporation to provide for a
staggered board if either proposal 3 or 5, respectively, is approved, even if
none of the other proposals are approved and the merger is not consummated.

     THE BOARD OF DIRECTORS HAS NOT YET MADE A DETERMINATION TO PROCEED WITH A
REVERSE SPLIT OF OUR ISSUED AND OUTSTANDING SHARES OF COMMON STOCK. SUCH
DETERMINATION WILL BE BASED ON A NUMBER OF FACTORS, INCLUDING MARKET CONDITIONS,
EXISTING AND EXPECTED TRADING PRICES OF OUR COMMON STOCK AND THE LIKELY EFFECT
OF BUSINESS DEVELOPMENTS ON THE MARKET PRICE OF OUR COMMON STOCK.

RECORD DATE AND OUTSTANDING SHARES

     eXegenics has fixed the close of business on [          ], 2002, as the
record date for the special meeting. Only holders of record of eXegenics' common
stock and series A preferred stock at the close of business on the record date
are entitled to notice of and to vote at the meeting.

STOCKHOLDERS ENTITLED TO VOTE

     As of the close of business on [          ], 2002, there were [          ]
shares of eXegenics common stock outstanding and entitled to vote [held by
[          ] stockholders of record] and [          ] shares of series A
preferred stock outstanding and entitled to vote [held by [          ]
stockholders of record]. Because many of eXegenics shares of common stock are
held in "street name" by brokers and other institutions on behalf of
stockholders, eXegenics is unable to estimate the total number of stockholders
represented by these holders of record.

     Holders of eXegenics common stock and series A preferred stock are entitled
to one vote for each share held as of the record date. The holders of series A
preferred stock vote together with the holders of common stock as one class.

QUORUM; ABSTENTIONS; BROKER NON-VOTES

     The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of our common stock and series A preferred stock is necessary
to constitute a quorum at the special meeting. Votes of stockholders of record
who are present at the meeting in person or by proxy, abstentions and broker
non-votes (as defined below) are counted as present or represented at the
meeting. If a quorum is not present at the eXegenics special meeting, we expect
that the meeting will be adjourned or postponed to solicit additional proxies.

     Any abstentions will be counted for purposes of determining a quorum and
will have the same effect as votes against the approval of the proposals
considered at the special meeting.

     If you hold your shares of common stock through a broker, bank or other
representative, generally the broker or your representative may only vote the
common stock that it holds for you in accordance with your instructions.
However, if it has not timely received your instructions, the broker or your
representative may vote on certain matters for which it has discretionary voting
authority. If a broker or your

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representative cannot vote on a particular matter because it does not have
discretionary voting authority, this is a "broker non-vote" on the matter. Those
shares subject to a broker non-vote will not be considered for purposes of
determining the number of shares entitled to vote with respect to a particular
proposal on which the broker has expressly not voted, but will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business.

VOTE REQUIRED

     To approve Proposal 1, the issuance of up to 60,086,224 shares of our
common stock in connection with the merger, Proposal 6, the adoption of the 2002
Omnibus Stock Incentive Plan and Proposal 7, the adoption of the 2002 Employee
Stock Purchase Plan, we require the affirmative vote of a majority of the common
stock and series A preferred stock present or represented by proxy and entitled
to vote on the matter. Broker non-votes are not deemed to be present or
represented and are not entitled to vote, and therefore will have no effect on
the outcome of the vote on Proposals 1, 6 or 7. Abstentions are treated as
shares present or represented and entitled to vote and have the same effect as a
vote against these proposals.

     To approve Proposal 2, the amendment of our certificate of incorporation to
increase our authorized common stock, Proposal 3, a reverse split of our common
stock, Proposal 4, the amendment of our certificate of incorporation to change
our name, and Proposal 5, the amendment to our certificate of incorporation to
create a staggered board of directors, we require the affirmative vote of
holders of at least a majority of the outstanding shares of our common stock.
Abstentions and broker non-votes, because they are not affirmative votes, will
have the same effect as a vote against Proposals 2, 3, 4 and 5.

EXPENSES OF PROXY SOLICITATION

     eXegenics will pay the expenses of soliciting proxies to be voted at the
meeting. Following the original mailing of the proxies and other soliciting
materials, eXegenics will request brokers, custodians, nominees and other record
holders of eXegenics common stock to forward copies of the proxy and other
soliciting materials to persons for whom they hold shares of eXegenics common
stock and to request authority for the exercise of proxies. In such cases, upon
the request of the record holders, eXegenics will reimburse such holders for
their reasonable expenses.

     In addition to solicitation by mail, directors, officers and key employees
of eXegenics may solicit proxies in person or by telephone, telegram or other
means of communication. These persons will receive no additional compensation
for solicitation of proxies but may be reimbursed for reasonable out-of-pocket
expenses.

     eXegenics has also engaged Georgeson Shareholder Communications Inc. to
solicit proxies on its behalf. It is expected that the fees of Georgeson
Shareholder Communications Inc. will be approximately $10,000 plus the
reimbursement of reasonable out-of-pocket expenses.

VOTING OF PROXIES

     The proxy accompanying this joint proxy statement/prospectus is being
solicited on behalf of our board of directors for use at the special meeting.
You may instruct us on how to vote your shares by either attending our special
meeting in person, mailing the enclosed proxy card back to us or calling the
appropriate toll-free phone number.

  VOTING BY MAIL

     If you wish to instruct us how to vote your shares by mail, please
complete, date and sign the accompanying proxy and promptly return it in the
enclosed envelope or otherwise mail it to us. All properly signed proxies that
we receive prior to the vote at the special meeting and that are not revoked
will be voted at the special meeting according to the instructions indicated on
the proxies or, if no

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direction is indicated, such proxies will be voted to approve each of the
proposals to be considered at the special meeting.

  VOTING BY TELEPHONE

     Instead of submitting your vote by attending the meeting in person or by
mail on the enclosed proxy card, you may instruct us how to vote your shares by
telephone. Please note that there are separate telephone voting arrangements
depending on whether shares registered in our records are in your name or in the
name of a broker, bank or other representative, which are discussed below. The
telephone voting procedures are designed to authenticate stockholders'
identities, to allow stockholders to vote their shares and to confirm that their
instructions have been properly recorded. Stockholders who vote by telephone
will be able to utilize a toll-free telephone number, the cost of which is borne
by the Company. Votes submitted by telephone must be received by 5:00 p.m.
eastern standard time on           , 2002. All votes properly received by
telephone and that are not revoked will be voted at the special meeting
according to the instructions given on the telephone.

     Stockholders with shares registered directly in their name in our stock
records maintained by our transfer agent, American Stock Transfer and Trust Co.,
may vote their shares by calling (toll-free) 866-206-4936 and following the
instructions listed on the enclosed proxy card.

     For shares registered in the name of a broker or bank, a number of
brokerage firms and banks participate in separate programs that offer telephone
voting options. Such programs are different from the program provided by
American Stock Transfer for shares registered directly in the name of the
stockholder. If your shares are held in an account at a brokerage firm or bank
participating in any such program, you may vote those shares by telephone in
accordance with instructions set forth on the voting form provided to you by the
brokerage firm or bank that holds your shares.

HOW TO REVOKE YOUR PROXY

     You may revoke your proxy at any time before it is exercised at the meeting
by taking any of the following actions:

     - delivering a written notice to the Corporate Secretary of eXegenics by
       any means, including facsimile, bearing a date later than the date of the
       proxy, stating that the proxy is revoked;

     - signing and delivering a proxy relating to the same shares and bearing a
       later date prior to the vote at the meeting; or

     - attending the meeting and voting in person, although attendance at the
       meeting will not, by itself, revoke a proxy. Please note, however, that
       if your shares are held of record by a broker, bank or other nominee and
       you wish to vote at the meeting, you must bring to the meeting a letter
       from the broker, bank or other nominee confirming your beneficial
       ownership of the shares.

     eXegenics' board of directors does not know of any matter that is not
referred to in this joint proxy statement/prospectus to be presented for action
at the meeting. If any other matters are properly brought before the meeting,
the persons named in the proxies will have discretion to vote on such matters in
accordance with their best judgment.

                              EXEGENICS PROPOSAL 1

                  APPROVAL OF ISSUANCE OF SHARES IN THE MERGER

BACKGROUND

     The merger will be consummated on the terms and subject to the conditions
set forth in the Agreement and Plan of Merger and Reorganization. As a result of
the merger, a wholly-owned subsidiary of eXegenics will be merged with and into
IDDS, with IDDS being the surviving corporation. eXegenics

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will issue 3.132 shares of common stock in exchange for each share of
outstanding common stock of IDDS and upon the exercise of outstanding IDDS
options and warrants, subject to adjustment only in the event of a
reclassification, stock split, stock dividend or other similar change with
respect to eXegenics or IDDS capital stock occurring before the effective time
of the merger. Based on this exchange ratio and the capitalization of eXegenics
as of [            ], 2002, the shares of eXegenics common stock expected to be
issued in the merger would represent approximately 74% of the shares of
eXegenics common stock outstanding immediately following the merger (including
eXegenics series A preferred stock on an as-converted basis).

     Because the merger would result in issuances that would likely be deemed to
result in a change of control for Nasdaq purposes, NASD Marketplace Rule
4350(i)(1)(B) requires that we obtain stockholder approval of the issuance of
our shares of common stock to maintain our listing on the Nasdaq SmallCap
Market.

PROPOSAL

     We are seeking your approval of the issuance of up to 60,086,224 shares of
our common stock in connection with the merger of eXegenics and IDDS, of which
47,121,963 shares will be issued in exchange for the outstanding IDDS common
stock and 12,964,261 shares will be reserved for issuance upon exercise by IDDS
option holders and warrant holders of eXegenics options and warrants issued to
them in the merger in exchange for their currently outstanding IDDS options and
warrants.

     Approval of this proposal constitutes approval of the issuance of eXegenics
common stock as described in the merger agreement.

     You are encouraged to read the sections of this joint proxy
statement/prospectus entitled "The Merger" on page   and "The Agreement and Plan
of Merger and Reorganization" on page   .

REQUIRED VOTE

     The approval of the issuance of shares in the merger requires the
affirmative vote of a majority of the votes cast, in person or by proxy, at the
special meeting. Abstentions are treated as shares present or represented and
entitled to vote at the special meeting and will have the same effect as a vote
against this proposal. Broker non-votes are not deemed to be present and
represented and are not entitled to vote, and therefore will have no effect on
the outcome of this proposal.

RECOMMENDATION

     Our board of directors has unanimously approved, and believes that it is in
the best interests of eXegenics that the stockholders approve, the proposal to
approve the issuance of shares in connection with the merger.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 1 TO APPROVE
THE ISSUANCE OF UP TO 60,086,224 SHARES OF OUR COMMON STOCK IN CONNECTION WITH
THE MERGER WITH IDDS.

                              EXEGENICS PROPOSAL 2

                APPROVAL OF INCREASE OF AUTHORIZED COMMON STOCK

BACKGROUND

     We are seeking your approval to amend our certificate of incorporation to
increase the number of shares of common stock we are authorized to issue from
30,000,000 to 90,000,000, which will result in an increase of the total number
of authorized shares of capital stock from 40,000,000 to 100,000,000.

     Of the 30,000,000 shares of common stock currently authorized, as of
            ,2002,      shares were issued and outstanding,      shares were
reserved for issuance upon conversion of our series A

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preferred stock (assuming each shares of series A preferred stock converts at a
conversion price of $2.50),           were reserved for issuance under our
Amended and Restated 2000 Stock Option Plan and other stock option plans and
     shares were reserved for issuance upon the exercise of outstanding
warrants. As a result, only      shares of common stock remain available for
future issuance. It is anticipated that we will issue approximately      shares
of our common stock in connection with merger, as described in Proposal 1.

PROPOSAL

     Under the proposed amendment, paragraph A of Article Fourth of our
certificate of incorporation would be amended and restated as follows:

          "A. Ninety Million (90,000,000) shares of Common Stock, having a par
     value of $.01 per share."

     The proposed amendment would provide a sufficient number of available
shares to enable us to close the transaction discussed in Proposal 1, to reserve
15,200,000 shares of common stock for issuance under the 2002 Omnibus Stock
Incentive Plan described in Proposal 6, to reserve      shares of common stock
for issuance under the 2002 Employee Stock Purchase plan described in Proposal 7
and provide the board of directors with the ability to issue additional shares
of common stock without requiring stockholder approval of such issuances except
as otherwise may be required by applicable law or rules of any stock exchange or
trading system on which the securities may be listed or traded, including the
Nasdaq Stock Market. Our board of directors does not intend to issue any common
stock except on terms that the board deems to be in the best interests of
eXegenics and its stockholders or as required by the merger agreement.

     The proposed amendment does not change the number of authorized shares of
preferred stock.

REQUIRED VOTE

     The approval of the amendment to the certificate of incorporation requires
the affirmative vote of holders of at least a majority of the outstanding shares
of our common stock and series A preferred stock voting together as a class.
Abstentions and broker non-votes, because they are not affirmative votes, will
have the same effect as a vote against this proposal.

RECOMMENDATION

     Our board of directors has unanimously approved, and believes that it is in
the best interests of eXegenics that the stockholders approve the proposal to
amend the certificate of incorporation.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 2 TO AMEND OUR
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 30,000,000 TO 90,000,000.

                              EXEGENICS PROPOSAL 3

                   APPROVAL OF 1-FOR-[5] REVERSE STOCK SPLIT

GENERAL

     We are seeking your approval of a 1-for-[5] reverse split of our common
stock. The board of directors has adopted a resolution (i) declaring the
advisability of a 1-for-[5] reverse split of our common stock, subject to
stockholder approval, (ii) approving a corresponding amendment of our
certificate of incorporation to effect the reverse split, subject to stockholder
approval, and (iii) authorizing any other action it deems necessary to effect
the reverse split without further approval or authorization of our stockholders,
at any time prior to the next annual meeting of our stockholders. The board of
directors may subsequently effect, in its sole discretion, the reverse split as
approved by the stockholders.
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     If approved by our stockholders, the 1-for [5] reverse split would become
effective on any date selected by the board of directors on or prior to the next
annual meeting of our stockholders. The board of director will not, however,
effect a reverse split until after the merger has closed and eXegenics common
stock has been issued to the former IDDS stockholders or the merger agreement
has been terminated. Accordingly, the reverse stock split will not affect the
pro rata share ownership of eXegenics and former IDDS stockholders immediately
after the merger. The board of directors reserves the right, even after
stockholder approval, to forego or postpone filing of the amendment to our
certificate of incorporation to effect the reverse split if such action is
determined not to be in the best interests of eXegenics and our stockholders. If
the reverse split adopted by the stockholders is not subsequently implemented by
the board of directors and effected prior to the next annual meeting of
stockholders, the reverse split will be deemed abandoned, without any further
effect. In such case, the board of directors may again seek stockholder approval
at a future date for a reverse stock split if it deems a reverse stock split to
be advisable at that time.

PROPOSAL

     In Proposal 3, our stockholders are being asked to authorize the board of
directors, in its discretion, to effect the 1-for-[5] reverse split, including
the filing of an amendment to our certificate of incorporation, without further
approval or authorization of our stockholders, at any time prior to the next
meeting of our stockholders.

     Under the proposed amendment, Article Fourth of our certificate of
incorporation would be amended by inserting a new paragraph D., which will read
in its entirety as follows:

          "Effective as of 5:00 p.m. on the date of the filing of this Second
     Certificate of Amendment to the Certificate of Incorporation (the
     "Effective Time"), each five shares of the Corporation's outstanding Common
     Stock will be converted and reconstituted into one share of Common Stock
     (the "Reverse Split"). No fractional shares shall be issued upon such
     conversion and reconstitution. Instead, the Corporation will pay cash equal
     to such fraction multiplied by the average of the high and low trading
     prices of the Corporation's Common Stock on the Nasdaq SmallCap Market
     during regular trading hours for the five trading days immediately
     preceding the Effective Time, which amount is hereby determined to equal
     the fair market value of the Corporation's Common Stock upon the Effective
     Time of the Reverse Split.

REASONS FOR THE REVERSE SPLIT

     The reason for the 1-for-[5] reverse split is to satisfy one of the
requirements to maintain our listing on the Nasdaq Stock Market and to increase
investor interest in our company. Our common stock is currently listed on the
Nasdaq SmallCap Market, however, as previously disclosed, Nasdaq Marketplace
Rule 4450(a)(5) requires that as a condition to the continued listing of a
company's securities on the SmallCap Market, the company must satisfy certain
requirements, including maintaining a minimum bid price equal to or greater than
$1.00 per share. We do not currently satisfy this requirement. A company's
failure to meet Nasdaq's minimum bid price requirement for 30 consecutive
business days normally results in delisting proceedings, unless the company can
demonstrate compliance with those requirements for ten consecutive days during a
90-day grace period that immediately follows the initial 30-day period of
non-compliance. On February 12, 2002, however, Nasdaq announced a pilot program
that extends the minimum bid price grace period to 180 days. The pilot program
is scheduled to terminate on December 31, 2003. If a company still fails to
satisfy the minimum bid price requirement by the conclusion of the 180-day grace
period, a company listed on the SmallCap Market that demonstrates compliance
with the core initial listing standards of the SmallCap Market, either net
income of $750,000, stockholders' equity of $5 million or a market
capitalization of $50 million, may be afforded an additional 180-day grace
period within which to regain compliance.

     Our board of directors believes that a delisting could adversely affect our
ability to attract the interest of investors and to maximize stockholder value.
In addition, the board of directors believes that the

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delisting may result in decreased liquidity for the holders of outstanding
shares of common stock. We believe that, if the 1-for-[5] reverse split is
approved, there is a greater likelihood that the minimum bid price of the common
stock will be increased to and maintained at a level over $1.00 per share.
However, should Nasdaq deem the proposed merger to be a "change of control"
transaction pursuant to NASD Marketplace Rule 4330(f), we would be subject to
the Nasdaq initial listing requirements. One requirement for initial listing is
a bid price of at least $4.00 per share. If Nasdaq makes such a determination,
we will seek to adjust the proposed reverse stock split ratio to a level
sufficient for us to satisfy the $4.00 per share bid price requirement.

     An increase in the per share price of our common stock, which we expect as
a result of the 1-for-[5] reverse split, may heighten the interest of the
financial community in eXegenics and broaden the pool of investors that may
consider investing in eXegenics, potentially increasing the trading volume and
liquidity of our common stock. As a matter of policy, many institutional
investors are prohibited from purchasing stocks below minimum price levels. For
the same reason, brokers often discourage their customers from purchasing such
stocks. To the extent that the price per share of our common stock increases as
a result of the reverse split, some of these concerns may be ameliorated.
However, many investors will not invest in securities that have a trading price
below $5.00 per share, and there can be no assurance that the 1-for[5] reverse
split will increase the price above that level.

     The reduction in the number of outstanding shares of common stock caused by
the 1-for-[5] reverse split is anticipated initially to increase the market
price of the common stock. However, because some investors may view the
1-for-[5] reverse split negatively, there can be no assurance that the market
price of the common stock after the proposed 1-for-[5] reverse split will adjust
to reflect the conversion ratio (e.g. if the market price is $[          ]
before the 1-for-[5] reverse split and the ratio is one new share for every five
shares outstanding there can be no assurance that the market price immediately
after the 1-for-[5] reverse split will be $[          ] ([5] x $.[          ])
or that any price gain will be sustained in the future.

     In addition, if we do not satisfy the core initial listing standards of the
Nasdaq SmallCap Market, of which the most applicable to us is maintenance of
stockholders' equity of at least $[     ] million, our common stock could still
be delisted. As of [                    ], 2003, we had stockholders' equity of
approximately $[          ] million.

     If our common stock were delisted from Nasdaq, this could adversely affect
the liquidity of our common stock and our ability to raise capital. In the event
of delisting, the common stock would probably be traded in the over-the-counter
market maintained by the NASD Electronic Bulletin Board and the spread between
the bid price and ask price of the shares of common stock is likely to be
greater than at present. Stockholders may also experience a greater degree of
difficulty in obtaining accurate, timely information concerning pricing and
trading volume and in executing trades of our common stock.

     In addition, if the common stock were to be delisted from trading on Nasdaq
and the trading price of the common stock were to remain below $5.00 per share,
trading in the common stock would be subject to the requirements of certain
rules promulgated under the Securities Exchange Act of 1934, as amended, which
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as a "penny stock" (generally, any non-Nasdaq equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions, including for an issuer in continuous operation for at least
three years who has net tangible assets in excess of $2 million). The additional
burdens imposed upon broker-dealers by such requirements could discourage
broker-dealers from executing transactions in the common stock, which could
limit the market liquidity of the common stock and the ability of investors to
trade our common stock. We anticipate, however, that the combined company will
have net tangible assets in excess of $2 million upon completion of the merger.

     There is no guarantee that the 1-for-[5] reverse split will result in
compliance with the Nasdaq minimum bid price requirement or that we will
continue to meet all of the other requirements for continued listing.
Consequently, our securities may be delisted even after the 1-for-[5] reverse
split.

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PRINCIPAL EFFECTS OF THE 1-FOR-[5] PROPOSED REVERSE SPLIT

     If the proposed 1-for-[5] reverse split is approved at the special meeting
and the board of directors elects to effect the reverse split, each outstanding
share of our common stock as of the record date of the 1-for-[5] reverse split
will immediately and automatically be changed, as of the effective date of the
amendment to our certificate of incorporation, into one fifth of a share of
common stock. In addition, the number of shares of our common stock subject to
outstanding options and warrants issued by us, and the number of shares reserved
for future issuances upon conversion of our preferred stock and under our stock
plans, will be reduced by a factor of five. No fractional shares of our common
stock will be issued in connection with the proposed reverse split. Holders of
our common stock who would otherwise receive a fractional share of common stock
pursuant to the reverse split will receive cash in lieu of the fractional share
as explained more fully below.

     If the 1-for-[5] reverse split is approved at the special meeting and the
board of directors, in its discretion, decides to effect such reverse split, the
board of directors will fix a record date for determination of shares subject to
the reverse split. As of the date of this joint proxy statement/prospectus, the
board of directors had not fixed a record date for the 1-for-[5] reverse split.
As of [          ], 2002, the record date for the special meeting, there were
[     ] shares of our common stock issued and outstanding, [     ] shares of our
common stock subject to warrants and options granted by us and [     ] issuable
upon conversion of our outstanding preferred stock. If additional shares of our
common stock are issued or redeemed prior to the record date for the reverse
split, the actual number of shares issued and outstanding before and after the
reverse split will increase or decrease accordingly.

     Because the reverse split will apply to all issued and outstanding shares
of our common stock and outstanding rights to purchase our common stock or to
convert other securities into our common stock, the proposed reverse split will
not alter the relative rights and preferences of our existing stockholders. The
reverse split will, however, effectively increase the number of shares of our
common stock available for future issuances by the board of directors.

     If the proposed 1-for-[5] reverse split is approved at the special meeting
and effected by the board of directors, some of our stockholders may
consequently own less than one hundred shares of our common stock. A purchase or
sale of less than one hundred shares (an "odd lot" transaction) may result in
incrementally higher trading costs through certain brokers, particularly "full
service" brokers. Therefore, those stockholders who own less than one hundred
shares following the 1-for-[5] reverse split may be required to pay higher
transaction costs should they then determine to sell their shares.

CASH PAYMENT IN LIEU OF FRACTIONAL SHARES

     In lieu of any fractional shares to which a holder of our common stock
would otherwise be entitled as a result of the reverse split, we will pay cash
equal to such fraction multiplied by the average of the high and low trading
prices of our common stock on Nasdaq during regular trading hours for the five
trading days immediately preceding the effective time of the reverse split,
which amount is hereby determined to equal the fair market value of our common
stock at the effective time of the reverse split. In the event that a
stockholder owns less than twenty shares of our common stock upon the effective
time of the reverse split, such stockholder will only be entitled to a cash
payment.

FEDERAL INCOME TAX CONSEQUENCES

     THE FOLLOWING DESCRIPTION OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES
OF ANY OF THE REVERSE STOCK SPLITS IS BASED ON THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, APPLICABLE TREASURY REGULATIONS PROMULGATED THEREUNDER,
JUDICIAL AUTHORITY AND CURRENT ADMINISTRATIVE RULINGS AND PRACTICES AS IN EFFECT
ON THE DATE OF THIS PROXY STATEMENT. CHANGES TO THE LAWS COULD ALTER THE TAX
CONSEQUENCES DESCRIBED BELOW, POSSIBLY WITH RETROACTIVE EFFECT. WE HAVE NOT
SOUGHT AND WILL NOT SEEK AN OPINION OF COUNSEL OR A RULING FROM THE INTERNAL
REVENUE SERVICE
                                       139


REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT. THIS
DISCUSSION IS FOR GENERAL INFORMATION ONLY AND DOES NOT DISCUSS THE TAX
CONSEQUENCES THAT MAY APPLY TO SPECIAL CLASSES OF TAXPAYERS (E.G., NON-RESIDENT
ALIENS, BROKER/DEALERS OR INSURANCE COMPANIES). THE STATE AND LOCAL TAX
CONSEQUENCES OF THE REVERSE STOCK SPLIT MAY VARY AS TO EACH STOCKHOLDER,
DEPENDING UPON THE JURISDICTION IN WHICH SUCH STOCKHOLDER RESIDES. STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR
CONSEQUENCES TO THEM.

     We believe stockholders will recognize no gain or loss as a result of
receiving a reduced number of shares of common stock in the reverse stock split.
Stockholders receiving cash in lieu of fractional shares as a result of the
reverse stock split will generally recognize capital gain or loss measured by
the difference between the amount of cash received and the basis for the
fractional shares. A stockholder's basis in the reduced number of shares
received in the reverse stock split will equal the stockholder's basis in its
old shares of stock reduced by the basis allocated to the fractional shares for
which cash is received in lieu of shares. A stockholder's holding period for the
reduced number of shares received in the reverse stock split will include the
period during which the old shares were held.

     We will not recognize any gain or loss as a result of the reverse split.

BOARD DISCRETION TO IMPLEMENT THE 1-FOR-[5] REVERSE SPLIT

     If the proposed 1-for-[5] reverse split is approved at the special meeting,
the board of directors may, in its sole discretion, at any time prior to our
next annual meeting of stockholders, authorize the reverse split and file an
amendment to our certificate of incorporation with the Secretary of State of the
State of Delaware. The determination by the board of directors will be based on
a number of factors, including market conditions, existing and expected trading
prices for the our common stock and the likely effect of business developments
on the market price for our common stock.

     THE BOARD OF DIRECTORS HAS NOT YET MADE A DETERMINATION TO PROCEED WITH THE
REVERSE SPLIT OF OUR ISSUED AND OUTSTANDING SHARES OF COMMON STOCK.
NOTWITHSTANDING APPROVAL OF THE 1-FOR-[5] REVERSE SPLIT AT THE SPECIAL MEETING,
THE BOARD OF DIRECTORS MAY, IN ITS SOLE DISCRETION, DETERMINE NOT TO IMPLEMENT
SUCH 1-FOR-[5] REVERSE SPLIT.

REQUIRED VOTE

     To be approved by the stockholders, the proposal to implement the 1-for-[5]
reverse split must receive the affirmative vote of holders of at least a
majority of the outstanding shares of our common stock and series A preferred
stock voting together as a class. Abstentions and broker non-votes, because they
are not affirmative votes, will have the same effect as a vote against this
proposal.

RECOMMENDATION

     Our board of directors has unanimously approved, and believes it is in the
best interests of eXegenics that the stockholders approve, the proposal to amend
the certificate of incorporation to effect a 1-for-[5] reverse split of our
common stock at any time prior to the next annual meeting of stockholders.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 3 TO AUTHORIZE
THE BOARD OF DIRECTORS, IN ITS DISCRETION, TO AMEND THE CERTIFICATE OF
INCORPORATION TO EFFECT A 1-FOR-[5] REVERSE SPLIT OF OUR COMMON STOCK AT ANY
TIME PRIOR TO THE NEXT ANNUAL MEETING OF STOCKHOLDERS.

                                       140


                              EXEGENICS PROPOSAL 4

                      APPROVAL OF AMENDMENT TO CERTIFICATE
                         OF INCORPORATION CHANGING NAME

BACKGROUND

     In connection with the merger described in Proposal 1, eXegenics intends to
change its name to Accel Pharmaceuticals, Inc. Our board of directors has
determined that a change in the eXegenics name is advisable to reflect the
combined company's business following completion of the merger.

PROPOSAL

     Under the proposed amendment, Article First of our certificate of
incorporation will be amended to read in its entirety as follows:

          "The name of the corporation is Accel Pharmaceuticals, Inc. (the
     "Corporation")."

     This amendment to change the name of eXegenics, if approved by the
stockholders, will become effective on the date the amendment is filed with the
Secretary of State of the State of Delaware. We anticipate that the filing to
effect the name change will be made upon the closing of the merger and we would
simultaneously change our ticker symbol to ["          "].

     The name change will not affect the validity of currently outstanding
certificates and you will not be required to tender or exchange any stock
certificates that you now hold. YOU SHOULD NOT SEND ANY STOCK CERTIFICATES TO
EXEGENICS OR OUR TRANSFER AGENT.

REQUIRED VOTE

     The approval of the amendment to the certificate of incorporation requires
the affirmative vote of holders of at least a majority of the outstanding shares
of our common stock and series A preferred stock voting together as a class.
Abstentions and broker non-votes, because they are not affirmative votes, will
have the same effect as a vote against this proposal.

RECOMMENDATION

     Our board of directors has unanimously approved, and believes it is in the
best interests of eXegenics that the stockholders approve, the proposal to amend
the certificate of incorporation to change the name of eXegenics to Accel
Pharmaceuticals, Inc.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 4 TO AUTHORIZE
THE BOARD OF DIRECTORS, IN ITS DISCRETION, TO CHANGE THE NAME OF EXEGENICS TO
ACCEL PHARMACEUTICALS, INC.

                              EXEGENICS PROPOSAL 5

                      APPROVAL OF AMENDMENT TO CERTIFICATE
                OF INCORPORATION ESTABLISHING A STAGGERED BOARD

BACKGROUND

     Our by-laws provide that our board of directors will have no less than
three members and that the number of directors will be fixed from time to time
by our board of directors. Our certificate of incorporation does not currently
contain any provisions regarding the number or the term of service of our
directors. The number of members of our board is currently set at seven and the
directors serve in office until the next annual meeting of stockholders and
their respective successors have been elected and qualified.

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     We are seeking your approval to amend our certificate of incorporation to
provide that our board of directors will be divided into three classes, each
consisting of one-third of such directors, as nearly as may be, designated Class
I, Class II and Class III. Class I directors shall initially serve until the
2003 annual meeting of stockholders, Class II directors shall initially serve
until the 2004 annual meeting of stockholders, and Class III directors shall
initially serve until the 2005 annual meeting of stockholders. Commencing with
the annual meeting of stockholders in 2003, and at each succeeding annual
stockholders' meeting, successors to the class of directors whose term expires
at such annual stockholders' meeting shall be elected for a three-year term. If
the number of directors is changed, an increase or decrease in such directors
shall be apportioned among the classes so as to maintain the number of directors
comprising each class as nearly equal as possible. In addition, the proposed
amendment would provide that the provisions in our certificate of incorporation
regarding the staggered board may only be amended or repealed by an affirmative
vote of the holders of at least two-thirds of the outstanding shares of our
common stock and series A preferred stock.

     In the event that this Proposal 5 is approved, thereby creating a staggered
board, the class to which each director will be assigned will be determined by
our board of directors. Our board of directors has already determined that if we
consummate the merger, there will be nine directors, and Class I will be
comprised of Peter Kash, Robert Easton and Douglas Watson; Class II will be
comprised of Edward Miller, Gary Frashier and Ira J. Gelb, M.D.; and Class III
will be comprised of Mark C. Rogers, M.D., Ronald L. Goode, Ph.D., and Mark
Siegel. For a discussion of the biographical information for these individuals,
please see the sections entitled eXegenics' Management on p. [     ] and IDDS'
Management on p. [     ].

POSSIBLE BENEFITS OF A STAGGERED BOARD

     Our board of directors believes that a staggered system of electing
directors would provide important benefits to eXegenics, including:

     - A staggered board will help to assure the continuity and stability of our
       business strategies and policies and management of our business because a
       majority of the board of directors at any given time will have prior
       experience as directors of eXegenics, and for the immediate future will
       have prior experience as directors of IDDS.

     - In the event of an unfriendly or unsolicited proposal to purchase a
       significant or controlling interest in eXegenics, a staggered board would
       give us the time necessary to effectively evaluate and negotiate the
       proposal; to study alternative proposals; to assure that stockholder
       value is maximized; and to assure that the interests of the stockholders
       are protected to the maximum extent possible.

     - A staggered board is designed to reduce the vulnerability of a company to
       an unsolicited takeover proposal, particularly a proposal that does not
       contemplate the acquisition of all of the outstanding shares, or an
       unsolicited proposal for the restructuring or sale of all or part of
       eXegenics.

POSSIBLE ANTI-TAKEOVER EFFECTS OF A STAGGERED BOARD

     Establishing a staggered board has anti-takeover implications by making it
more difficult for an unsolicited takeover attempt to succeed, as obtaining
control of a company through changing the composition of the board is more
difficult. The proposed staggered board amendment will significantly extend the
time required to effect a change of control of our board of directors and may
discourage a hostile takeover bid for eXegenics. Currently, stockholders holding
a plurality of the votes at a single annual meeting can effect a change in
control. If we implement a staggered board of directors, a possible acquirer
would be unable to obtain majority control of our board of directors for a
period of at least two years, because a majority of directors cannot be elected
at a single meeting. No more than one-third of the sitting board of directors
would be up for election at any one annual meeting. These effects are somewhat
mitigated by the ability of stockholders to remove any and all directors, with
cause, at a meeting or by written consent.

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     Delaware law provides that unless our certificate of incorporation proves
otherwise (which it does not), directors serving on a staggered or classified
board of directors may be removed by the stockholders only for cause. Currently,
under our by-laws, all of our directors may be removed with or without cause by
the holders of a majority of our outstanding common stock and Series A preferred
stock.

     In addition, if the proposed amendment is adopted, the provision regarding
a staggered board in our certificate of incorporation may only be amended or
repealed by an affirmative vote of the holders of at least two-thirds of the
outstanding shares of our common stock and series A preferred stock.

     Because of the additional time required to change control of the board of
directors, the staggered board amendment will tend to perpetuate present
management. Without the ability to obtain immediate control of our board of
directors, a takeover bidder will not be able to take action to remove other
impediments to its acquisition of eXegenics. Because the staggered board
amendment will increase the amount of time required for a takeover bidder to
obtain control of eXegenics without cooperation of the board of directors, even
if the takeover bidder were to a acquire a majority of our outstanding stock, it
will tend to discourage some tender offers, perhaps including some tender offers
that stockholders may feel would be in their best interests. The staggered board
amendment will also make it more difficult for our stockholders to change the
composition of our board of directors even if the stockholders believe that such
change would be desirable.

PROPOSAL

     Under the proposed amendment, our certificate of incorporation would be
amended by adding a new Article ELEVENTH, which will read in its entirety as
follows:

          "ELEVENTH: The Board of Directors shall be divided into three classes,
     each consisting of one-third of such directors, as nearly as may be,
     designated Class I, Class II and Class III. Class I directors shall
     initially serve until the 2003 annual meeting of stockholders, Class II
     directors shall initially serve until the 2004 annual meeting of
     stockholders, and Class III directors shall initially serve until the 2005
     annual meeting of stockholders. Commencing with the annual meeting of
     stockholders in 2003, and at each succeeding annual stockholders' meeting,
     successors to the class of directors whose term expires at such annual
     stockholders' meeting shall be elected for a three-year term. If the number
     of directors is changed, an increase or decrease in such directors shall be
     apportioned among the classes so as to maintain the number of directors
     comprising each class as nearly equal as possible. A director shall hold
     office until the annual stockholders' meeting for the year in which his
     term expires and until his successor shall be elected and shall qualify,
     subject, however, to prior death, resignation, disqualification, or removal
     from office.

          The nomination for election of directors, resignations and removal of
     directors and filling of vacancies of the Board of Directors shall be
     governed by the terms of the Corporation's By-laws.

          Notwithstanding anything contained in this Certificate of
     Incorporation to the contrary, this Article ELEVENTH shall not be altered,
     amended or repealed except by an affirmative vote of at least two-thirds of
     the outstanding shares of all capital stock entitled to vote at a
     stockholders' meeting duly called for such purpose."

REQUIRED VOTE

     The approval of the amendment to the certificate of incorporation requires
the affirmative vote of holders of at least a majority of the outstanding shares
of our common stock and series A preferred stock. Abstentions and broker
non-votes, because they are not affirmative votes, will have the same effect as
a vote against this proposal.

                                       143


RECOMMENDATION

     Our board of directors has unanimously approved, and believes it is in the
best interests of eXegenics that the stockholders approve, the proposal to amend
the certificate of incorporation to provide for a staggered board of directors.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 5 TO AMEND OUR
CERTIFICATE OF INCORPORATION TO PROVIDE THAT OUR BOARD OF DIRECTORS WILL BE
DIVIDED INTO THREE CLASSES, EACH CONSISTING OF ONE-THIRD OF SUCH DIRECTORS, AS
NEARLY AS MAY BE, DESIGNATED CLASS I, CLASS II AND CLASS III.

                              EXEGENICS PROPOSAL 6

               APPROVAL OF THE 2002 OMNIBUS STOCK INCENTIVE PLAN

BACKGROUND

     We are seeking stockholder approval of the eXegenics 2002 Omnibus Stock
Incentive Plan. A copy of the 2002 Omnibus Stock Incentive Plan is attached
hereto as Exhibit A-3 and should be consulted for detailed information. All
statements made herein regarding the 2002 Omnibus Stock Incentive Plan are only
intended to summarize it and are qualified in their entirety by reference to the
stock incentive plan itself.

PURPOSE OF THE PLAN

     The eXegenics 2002 Omnibus Stock Incentive Plan is designed to promote
eXegenics' long-term growth and profitability by providing eXegenics with the
discretion to make stock awards to our employees, directors and consultants, and
thereby to attract, retain and motivate such persons. Upon consummation of the
merger and subject to stockholder approval, IDDS' stock option plan will be
cancelled and we will issue, under and pursuant to the terms of the 2002 Omnibus
Stock Incentive Plan, options to purchase up to 12,964,261 shares of our common
stock to IDDS option holders and warrant holders in exchange for their currently
outstanding IDDS options and warrants.

DESCRIPTION OF THE PLAN

     The 2002 Omnibus Stock Incentive Plan was adopted by our board of directors
on September 19, 2002 subject to stockholder approval.

     We have reserved 15,200,000 (or 3,040,000 assuming the reverse stock split
described in Proposal 3 is effectuated) shares of common stock for issuance
under the stock incentive plan. The number of shares of common stock reserved
for issuance under the stock incentive plan will automatically increase on the
first trading day in January of each calendar year, beginning in calendar year
2004, by an amount equal to 3% of the total number of shares of our common stock
outstanding on the last trading day in December of the preceding calendar year,
but in no event will any annual increase exceed 1,000,000 shares. No participant
in our stock incentive plan may be granted awards with respect to more than
1,000,000 shares of our common stock per calendar year.

     The individuals eligible to participate in our stock incentive plan include
our officers and other employees, our non-employee board members and any
consultants hired by us. The stock incentive plan provides for the grant of
stock options, stock appreciation rights, or SARs, and direct stock grants.
Stock options are the right to purchase shares of our common stock at a
specified price, which may be less than, equal to or greater than the fair
market value per share on the date of grant. SARs may be granted alone or in
connection with another award, such as a stock option or grant of restricted
stock, and provide for an appreciation distribution from us equal to the
increase in the fair market value per share of common stock from a price
specified on the grant date. If granted in connection with another award,
exercise of the SAR will generally require the surrender of the related award.
This appreciation distribution may be made in cash or in shares of common stock.
Direct stock grants include the grant of performance shares which are

                                       144


distributable to the holder based on the achievement of specified performance
targets, stock which may be purchased at a price less than, equal to or greater
than the fair market value on the date of purchase, and grants of bonus stock
which do not require purchase by the award recipient. Any of the direct stock
grants may be restricted stock, which is subject to forfeiture by the holder (or
repurchase by us) upon the occurrence of specified events, such as the holder's
cessation of service prior to a specified date.

     The stock incentive plan includes an automatic option grant program for
non-employee directors, under which option grants will automatically be made at
periodic intervals to our non-employee board members to purchase shares of
common stock at an exercise price equal to 100% of the fair market value of
those shares on the grant date.

     The stock incentive plan will be administered by the compensation committee
or the full board of directors, except for automatic option grants. This
committee will determine which eligible individuals are to receive option
grants, SARs or stock issuances, the time or times when such awards are to be
made, the number of shares subject to each such award, the status of any granted
option as either an incentive stock option or a non-statutory stock option under
the federal tax laws, the vesting schedule to be in effect for the award and the
maximum term for which any award is to remain outstanding.

     The exercise price for the shares of the common stock subject to option
grants made under our stock incentive plan may be paid in cash or, with approval
of the committee, in shares of common stock, including restricted shares, valued
at the fair market value on the exercise date; however, such shares must have
been held for at least six months prior to the date of exercise, valued at fair
market value. The option may also be exercised through a same-day sale program
without any cash outlay by the optionee other than for our executive officers
and directors. In addition, the plan administrator may provide financial
assistance to one or more optionees, other than our directors or executive
officers, in the exercise of their outstanding options or the purchase of their
unvested shares by allowing the individuals to deliver a full-recourse,
interest-bearing promissory note in payment of the exercise price and any
associated withholding taxes incurred in connection with the exercise or
purchase.

     The compensation committee will have the authority to cancel outstanding
options under the stock incentive plan in return for the grant of new options
for the same or a different number of option shares with an exercise price per
share based upon the fair market value of our common stock on the new grant
date.

     In the event that we are acquired by merger or an asset sale in which we
will not be the surviving entity or in which we will survive as a wholly owned
subsidiary of another entity, each outstanding option will be assumed by the
successor corporation unless the compensation committee determines that the
options will accelerate and vest in full prior to such transaction.
Alternatively, the committee may cancel the options and pay each holder cash or
securities equal, for each cancelled option share, to the per share
consideration received by our stockholders in the transaction less the exercise
price of the option share. The compensation committee will have complete
discretion to structure one or more awards so those awards will vest in full or
in part in connection with such a transaction, upon the holder's cessation of
service within a specified period following such a transaction or under other
circumstances as determined by the compensation committee in its discretion.

     The compensation committee may also grant awards subject to accelerated
vesting in connection with a successful tender offer for more than 50% of our
outstanding voting stock or a change in the majority of our board through one or
more contested elections for board membership. Such accelerated vesting may
occur either at the time of such transaction or upon the subsequent termination
of the individual's service.

     [Under the automatic option grant program, each individual who first
becomes a non-employee board member at any time after the closing of this
offering will automatically receive an option grant for 12,500 shares of our
common stock on the date such individual joins the board, if such individual has
not been under our prior employ, except for our chairman who shall receive an
option grant for 25,000 shares of our common stock. In addition, on the date of
each annual stockholders meeting held after the closing of this offering, each
non-employee board member who is to continue to serve as a non-employee board

                                       145


member, including each current non-employee board member, will automatically be
granted an option to purchase 12,500 shares of our common stock, except for our
chairman who shall receive an option grant for 25,000 shares of our common
stock, if such individual has served on the board for at least six months.]

     [Each automatic grant will have an exercise price per share equal to the
fair market value per share of our common stock on the grant date and will have
a term of ten years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the lower of the exercise
price paid per share and the fair market value at the time of repurchase, any
shares purchased under the option which are not vested at the time of the
optionee's cessation of board service. The shares subject to each initial 12,500
or 25,000 share automatic option grant, as applicable, will vest in a series of
four successive annual installments upon the optionee's completion of each year
of board service over the four-year period measured from the grant date. The
shares subject to each annual share automatic option grant will vest upon the
optionee's completion of one year of board service measured from the grant date.
However, the shares subject to each automatic option grant will immediately vest
in full upon certain changes in control or ownership or upon the optionee's
death or disability while a board member.]

     The board may amend or modify the stock incentive plan at any time, subject
to any required stockholder approval. The stock incentive plan will terminate no
later than September 18, 2012.

FEDERAL INCOME TAX CONSEQUENCES

     BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE VARIED
APPLICABILITY OF STATE, LOCAL AND FOREIGN INCOME TAX LAWS, THE FOLLOWING
DISCUSSION OF TAX CONSEQUENCES IS GENERAL IN NATURE AND RELATES SOLELY TO
FEDERAL INCOME AND EMPLOYMENT TAX MATTERS. [PARTICIPANTS ARE ADVISED TO CONSULT
THEIR PERSONAL TAX ADVISORS BEFORE PURCHASING ANY STOCK UNDER THE TERMS OF THE
PLAN]. IN ADDITION, THE FOLLOWING SUMMARY IS BASED UPON AN ANALYSIS OF THE
INTERNAL REVENUE CODE OF 1986, AS CURRENTLY IN EFFECT, JUDICIAL DECISIONS,
ADMINISTRATIVE RULINGS, REGULATIONS AND PROPOSED REGULATIONS, ALL OF WHICH ARE
SUBJECT TO CHANGE.

     Options granted under the 2002 Omnibus Stock Incentive Plan may be either
incentive stock options or non-qualified stock options. The recipient of an
incentive stock option does not incur ordinary taxable income at the time of
grant or exercise of the option provided that the recipient exercise such
incentive stock option in accordance with the applicable provisions of the
Internal Revenue Code of 1986. However, the optionee may incur alternative
minimum tax upon exercise of the option. We are not entitled to a tax deduction
at the time of exercise of an incentive stock option regardless of the
applicability of the alternative minimum tax. Upon the sale or exchange of the
shares at least one year after receipt of shares by the optionee and two years
after grant of the incentive stock option, any gain is generally taxed as a
long-term capital gain. If these holding periods are not satisfied, the optionee
recognizes ordinary taxable income upon exercise equal to the difference between
the exercise price and the lower of the fair market value of the stock at the
date of the option exercise or the sale price of the stock. In turn, we are
entitled to a tax deduction for the amount of the ordinary income recognized by
the optionee.

     Options which do not qualify as incentive stock option are non-qualified
stock options. An optionee generally does not recognize taxable income at the
time of grant of a non-qualified stock option. However, upon exercise, the
optionee does recognize ordinary taxable income equal to the excess of the fair
market value of the shares at the time of exercise over the exercise price. The
income recognized by an optionee who is also an employee of eXegenics is subject
to income tax withholding.

PROPOSAL

     In Proposal 6, our stockholders are being asked to approve the eXegenics
2002 Omnibus Stock Incentive Plan.
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     You are urged to read the 2002 Omnibus Stock Incentive Plan, which is
attached hereto as Exhibit A-3, in its entirety.

REQUIRED VOTE

     The approval of eXegenics 2002 Omnibus Stock Incentive Plan requires the
affirmative vote of a majority of the votes cast, in person or by proxy, at the
special meeting. Abstentions are treated as shares present or represented and
entitled to vote at the special meeting and will have the same effect as a vote
against this proposal. Broker non-votes are not deemed to be present and
represented and are not entitled to vote, and therefore will have no effect on
the outcome of this proposal.

RECOMMENDATION

     Our board of directors has unanimously approved, and believes that it is in
the best interests of eXegenics that the stockholders approve, the proposal to
approve the eXegenics 2002 Omnibus Stock Incentive Plan.

     THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL 6 TO APPROVE THE EXEGENICS 2002 OMNIBUS STOCK INCENTIVE PLAN.

                              EXEGENICS PROPOSAL 7

          APPROVAL OF THE EXEGENICS 2002 EMPLOYEE STOCK PURCHASE PLAN

BACKGROUND

     We are seeking stockholder approval of the eXegenics 2002 Employee Stock
Purchase Plan. A copy of the 2002 Employee Stock Purchase Plan is attached
hereto as Exhibit A-4 and should be consulted for detailed information. All
statements made herein regarding the 2002 Employee Stock Purchase Plan are only
intended to summarize it and are qualified in their entirety by reference to the
2002 Employee Stock Purchase Plan itself.

PURPOSE OF THE PLAN

     The 2002 Employee Stock Purchase Plan is designed to promote eXegenics'
long-term growth and profitability by allowing our eligible employees to
purchase shares of our common stock, at regular intervals, with their
accumulated payroll deductions, and thereby to attract, retain and motivate such
persons.

DESCRIPTION OF THE PLAN

     The 2002 Employee Stock Purchase Plan was adopted by our board of directors
on           , 2002, subject to stockholder approval.

     A specific number of shares will be made available for issuance over the
term of the plan, subject to periodic adjustment for changes in the outstanding
common stock occasioned by stock splits, stock dividends, recapitalizations or
other similar changes affecting the outstanding common stock. We will initially
reserve           shares of our common stock for issuance under the plan. The
reserve will automatically increase on the first trading day in January of each
calendar year, beginning in calendar year 2003, by an amount equal to      % of
the total number of shares of our common stock outstanding on the last trading
day in December in the prior calendar year. In no event will any such annual
increase exceed           shares.

     The plan will have a series of successive overlapping offering periods,
with a new offering period beginning on the first business day of [May] and
[November] of each year. Each offering period will have a duration of 24 months,
unless otherwise determined by the [compensation committee]. However, the
initial offering period may have a duration in excess of 24 months and will
start on the date [Insert
                                       147


Effective Date] and will end on the last business day in [          ]. The next
offering period will start on the first business day in           and will also
end on the last business day of           .

     Individuals scheduled to work more than eight hours per week for more than
five calendar months per year may join an offering period on the start date of
that period. However, employees may participate in only one offering period at a
time.

     A participant may contribute up to 15% of his or her cash earnings through
payroll deductions, and the accumulated deductions will be applied to the
purchase of shares on each semi-annual purchase date. The purchase price per
share will be equal to 85% of the fair market value per share on the start date
of the offering period in which the participant is enrolled or, if lower, 85% of
the fair market value per share on the semi-annual purchase date. Semi-annual
purchase dates will occur on the last business day of [April] and [October] of
each year. However, a participant may not purchase more than [          ] shares
on any purchase date, and not more than           shares may be purchased in
total by all participants on any purchase date. Our compensation committee or
board of directors will have the authority to change these limitations for any
subsequent offering period.

     Participation will terminate immediately upon the individual's cessation of
employment or loss of eligibility status, and the payroll deductions collected
for the period will be immediately refunded.

     If the fair market value per share of our common stock on any semi-annual
purchase date within a particular offering period is less than the fair market
value per share on the start date of that offering period, then the participants
in that offering period will automatically be transferred and enrolled in the
new two-year offering period which will begin on the next business day following
such purchase date.

     If we are acquired by merger or a sale of substantially all of our assets
or more than 50% of our outstanding voting securities, then all outstanding
purchase rights will automatically be exercised immediately prior to the
effective date of the acquisition. The purchase price in effect for each
participant will be equal to 85% of the market value per share on the start date
of the offering period in which the participant is enrolled at the time the
acquisition occurs or, if lower, 85% of the fair market value per share
immediately prior to the acquisition.

     The plan will terminate no later than ten years after the date it becomes
effective. The board may at any time following the close of any six-month
purchase interval amend, suspend or discontinue the plan, subject to any
required stockholder approval.

FEDERAL INCOME TAX CONSEQUENCES

     BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE VARIED
APPLICABILITY OF STATE, LOCAL AND FOREIGN INCOME TAX LAWS, THE FOLLOWING
DISCUSSION OF TAX CONSEQUENCES IS GENERAL IN NATURE AND RELATES SOLELY TO
FEDERAL INCOME AND EMPLOYMENT TAX MATTERS. PARTICIPANTS ARE ADVISED TO CONSULT
THEIR PERSONAL TAX ADVISORS BEFORE PURCHASING ANY STOCK UNDER THE TERMS OF THE
2002 EMPLOYEE STOCK PURCHASE PLAN. IN ADDITION, THE FOLLOWING SUMMARY IS BASED
UPON AN ANALYSIS OF THE INTERNAL REVENUE CODE OF 1986, AS CURRENTLY IN EFFECT,
JUDICIAL DECISIONS, ADMINISTRATIVE RULINGS, REGULATIONS AND PROPOSED
REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE.

     The plan is designed to qualify as an employee stock purchase plan under
Internal Revenue Code Section 423. Under the plan, no taxable income is
reportable by the participant upon either the grant of the purchase right or the
periodic purchase of common stock pursuant to that right. For participants who
sell their shares within two years after the start date of the offering period
in which those shares were

                                       148


purchased or within one year after the actual purchase date of the shares, the
gain realized upon such sale will be taxed, in general, as follows:

     - ordinary income equal to the excess of (i) the market price of the shares
       on the purchase date over (ii) the purchase price paid for such shares.

     - capital gain equal to the appreciation in value of the shares between the
       purchase date and the sale date, with such gain to be long-term if the
       shares are held for more than one year.

     For participants who sell shares more than two years after the start date
of the offering period in which those shares were purchased and more than one
year after the actual purchase date, the profit realized upon subsequent sale of
the shares will be taxed as follows:

     - ordinary income equal to 15% of the market price of the shares on the
       start date of the offering period.

     - long-term capital gain equal to the amount by which the selling price of
       the shares exceeds the sum of (i) the purchase price paid for such shares
       plus (ii) the ordinary income recognized above.

PROPOSAL

     In Proposal 7, our stockholders are being asked to approve the eXegenics
Employee Stock Purchase Plan.

     You are urged to read the 2002 Employee Stock Purchase Plan, which is
attached hereto as Exhibit A-4, in its entirety.

REQUIRED VOTE

     The approval of the eXegenics 2002 Employee Stock Purchase Plan requires
the affirmative vote of a majority of the votes cast, in person or by proxy, at
the special meeting. Abstentions are treated as shares present or represented
and entitled to vote at the special meeting and will have the same effect as a
vote against this proposal. Broker non-votes are not deemed to be present and
represented and are not entitled to vote, and therefore will have no effect on
the outcome of this proposal.

RECOMMENDATION

     Our board of directors has unanimously approved, and believes that it is in
the best interests of eXegenics that the stockholders approve, the proposal to
approve the eXegenics 2002 Employee Stock Purchase Plan

     THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL 7 TO APPROVE THE EXEGENICS 2002 EMPLOYEE STOCK PURCHASE PLAN.

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                    THE SPECIAL MEETING OF IDDS STOCKHOLDERS

     In this section, "The Special Meeting of IDDS Stockholders," references to
"we," "us," "our" and "ours" refer to Innovative Drug Delivery Systems, Inc.
(IDDS)

     General.  The IDDS board of directors is using this document to solicit
proxies from the holders of IDDS common stock and Series A and Series B
convertible preferred stock for use at the special meeting of IDDS stockholders
and any adjournment or postponement thereof. We are mailing this document and
accompanying form of proxy to IDDS stockholders on or about           , 2002.

     The Agreement and Plan of Merger and Reorganization, including some of the
exhibits thereto, is attached to this joint proxy statement/prospectus as Annex
A. For further information, you can also refer to the sections entitled "The
Merger" on page   and "The Merger Agreement" on page   .

     Date, Time and Place.  The accompanying proxy is solicited by the IDDS
board of directors for use at the special meeting of IDDS stockholders to be
held on           , 2002, at   a.m., local time, or at any adjournment thereof,
for the purposes set forth in this document and in the accompanying Notice of
Special Meeting of Stockholders. The special meeting will be held at           ,
located at           . These proxy solicitation materials are being mailed on or
about           , 2002 to all stockholders entitled to vote at the special
meeting.

     Matters to be considered at the Meeting.  To approve the merger, the merger
agreement and related transactions; and transact such other business as may
properly come before the meeting, and any adjournment or postponement thereof.

     Record Date; Outstanding Shares.  IDDS stockholders of record at the close
of business on           , 2002 (as the record date for such meeting) are
entitled to notice of and to vote at the special meeting. As of the record date,
IDDS had outstanding 9,960,427 shares of common stock, 4,014,125 shares of
Series A convertible preferred stock, and 989,991 shares of Series B convertible
preferred stock.

     Stockholders Entitled to Vote.  When the common stock and preferred stock
vote together as a single class, each share of IDDS common stock has one vote
and each share of IDDS preferred stock has the number of votes that the holder
of such share would have if the shares were converted into shares of IDDS common
stock.

     Quorum; Abstentions.  The required quorum, in person or by proxy, for the
transaction of business at the special meeting of IDDS is a majority of the
votes eligible to be cast by the holders of IDDS common stock and preferred
stock issued and outstanding on the record date. Shares that are voted "For,"
"Against" or "Abstain" on a matter are treated as being present at the meeting
for purposes of establishing a quorum and are also treated as shares entitled to
vote at the special meeting with respect to such matter. Abstentions will have
the same effect as a vote against the merger and the merger agreement.

     Vote Required.  Approval of the proposal to approve the merger and merger
agreement requires the affirmative vote of at least a majority of the
outstanding voting power of the IDDS common stock and preferred stock voting
together as a single class.

     Share Ownership of IDDS Management and Certain Principal
Stockholders.  IDDS directors, officers and principal stockholders beneficially
owned      shares of IDDS common stock and preferred stock on an as converted
basis on the record date, including exercisable options. These shares represent
in total approximately of   % of the voting securities.

     Expenses of Proxy Solicitation.  The cost of soliciting proxies will be
borne by IDDS. Proxies may be solicited by IDDS' directors, officers and regular
employees, without additional compensation, personally or by telephone, telefax,
e-mail or otherwise. None of the directors, officers or employees of IDDS will
be directly compensated for such services.

     Voting of Proxies.  Holders of IDDS common stock and preferred stock may
vote in person by ballot at the IDDS special meeting or by submitting a proxy.
We recommend you submit your proxy even if you plan to attend the IDDS special
meeting. If you attend the special meeting, you may vote by ballot,
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thereby canceling any proxy previously submitted. Voting instructions are
included on your proxy card. If you properly give your proxy and submit it to
IDDS in time to vote, one of the individuals named as your proxy will vote your
shares as you have directed. You may vote for or against the proposals or
abstain from voting.

     How to Vote by Proxy.  To submit your proxy, simply mark your proxy, date
and sign it, and return it by U.S. mail to Michelle Carroll, Manager of Investor
Relations in the postage-paid envelope provided. If the envelope is missing,
please address your completed proxy card to Innovative Drug Delivery Systems,
Inc., Proxy Solicitation, [          ].

     DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.  The exchange
agent will mail transmittal forms with instructions for the surrender of stock
certificates for IDDS common stock and preferred stock to former IDDS
stockholders as soon as practicable after the completion of the merger.

     Revocability of Proxies.  Any proxy given pursuant to this solicitation may
be revoked by the person giving it at any time before it is voted:

          (i) by timely delivering to IDDS a duly executed proxy bearing a later
     date;

          (ii) by timely delivering to IDDS a written notice to the IDDS
     Secretary of revocation before the special meeting; or

          (iii) by attending the special meeting and voting in person by ballot.

     IDDS' board of directors does not know of any other matters that are not
referred to in this joint proxy statement/prospectus to be presented for action
at the special meeting. If any other matters are properly brought before the
meeting, the persons named in the proxies will have discretion to vote on such
matters in accordance with their best judgment.

     Recommendation of the IDDS Board of Directors.  The IDDS board of directors
believes the merger is advisable, fair to you and in your best interests. The
IDDS board of directors recommends that you vote FOR the proposal to approve the
merger and adopt the merger agreement.

                     DESCRIPTION OF EXEGENICS CAPITAL STOCK

AUTHORIZED STOCK

     The authorized capital stock of eXegenics consists of 30,000,000 shares of
common stock, par value $.01 per share, and 10,000,000 shares of preferred
stock, par value $.01 per share.

COMMON STOCK

     Of the authorized common stock, 15,673,286 shares are currently outstanding
and are held by [          ] record holders [excluding 511,200 shares of
treasury stock]. Subject to the prior rights of the holders of any shares of
preferred stock currently outstanding or which may be issued in the future, the
holders of the common stock are entitled to receive dividends from funds of
eXegenics legally available therefor when, as and if declared by our board of
directors, and are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon the liquidation, dissolution or
winding-up of the affairs of eXegenics subject to the liquidation preference, if
any, of any then outstanding shares of preferred stock of eXegenics. Holders of
the common stock do not have any preemptive, subscription, redemption or
conversion rights. Holders of the common stock are entitled to one vote per
share on all matters which they are entitled to vote upon at meetings of
stockholders or upon actions taken by written consent pursuant to Delaware
corporate law. The holders of common stock do not have cumulative voting rights,
which means that the holders of a plurality of the outstanding shares can elect
all of our directors although one proposal at the meeting is to seek approval to
stagger the board terms. All of the shares of the common stock currently issued
and outstanding are, and any shares of common stock to be issued upon the
consummation of the merger, when paid for in accordance with the terms hereof
will be, fully-

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paid and nonassessable. No dividends have been paid to holders of the common
stock since our incorporation, and no, cash dividends are anticipated to be
declared or paid in the reasonably foreseeable future. See section entitled
"Dividend Policy" on page   .

PREFERRED STOCK

     Our board of directors has the authority, without further action by the
holders of the outstanding common stock, to issue preferred stock from time to
time in one or more classes or series, to fix the number of shares constituting
any class or series and the stated value thereof, if different from the par
value, as to fix the terms of any such series or class, including dividend
rights, dividend rates, conversion or exchange rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price
and the liquidation preference of such class or series. eXegenics presently has
one series of preferred stock outstanding, designated as eXegenics series A
convertible preferred stock (the "series A preferred stock"). We have no present
plans to issue any other series or class of preferred stock. The designations,
right and preferences of the series A preferred stock is set forth in the
certificate of designations of series A convertible preferred stock, which has
been filed with the Secretary of State of the State of Delaware.

     Series A Preferred Stock.  Of the authorized preferred stock, 828,023
shares have been designated series A preferred stock, all of which are currently
issued and outstanding and held by [          ] stockholders. Dividends are
payable on the series A preferred stock in the amount of $.25 per share, payable
annually arrears. At the option of our board of directors, dividends will be
paid either (i) wholly or partially in cash or (ii) in newly issued shares of
series A preferred stock valued at $2.50 per share to the extent cash dividend
is not paid.

     Holders of series A preferred stock have the right to convert their shares,
at their option exercisable at any time, into shares of common stock of
eXegenics on a one-for-one basis subject to anti-dilution adjustments. These
anti-dilution adjustments are triggered in the event of any subdivision or
combination of our outstanding common stock, any payment by us of a stock
dividend to holders of our common stock or other occurrences specified in the
certificate of designations relating to the series A preferred stock. We may
elect to convert the series A preferred stock into common stock or a
substantially equivalent preferred stock in the case of a merger or
consolidation in which eXegenics does not survive, a sale of all or
substantially all of our assets or a substantial reorganization of us.

     Each share of series A preferred stock is entitled to one vote on all
matters on which the common stock has the right to vote. Holders of series A
preferred stock are also entitled to vote as a separate class on any proposed
adverse change in the rights, preferences or privileges of the series A
preferred stock and any increase in the number of authorized shares of series A
preferred stock. In the event of any liquidation or winding up of eXegenics, the
holders of the series A preferred stock will be entitled to receive $2.50 per
share plus any accrued and unpaid dividends before any distribution to the
holders of the common stock.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION,
OUR BY-LAWS AND DELAWARE LAW

     Delaware Statute.  We are subject to Section 203 of the Delaware General
Corporation law, which prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless:

     - prior to such date, our board of directors approves either the business
       combination or the transaction that resulted in the stockholder's
       becoming an interested stockholder;

     - upon consummation of the transaction that resulted in the stockholder
       becoming an interested stockholder, the interested stockholder owns at
       least 85% of our outstanding voting stock, excluding shares held by
       directors, officers and certain employee stock plans; or

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     - on or after the consummation date, the business combination is approved
       by our board of directors and by the affirmative vote at an annual or
       special meeting of eXegenics stockholders holding of at least two-thirds
       of the outstanding voting stock that is not owned by the interested
       stockholder.

     For purposes of Section 203, a "business combination" includes, among other
things, a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is
generally a person who, together with affiliates and associates of such person:

     - owns 15% or more of outstanding voting stock; or

     - is an affiliate or associate of eXegenics and was the owner of 15% or
       more of our outstanding voting stock at any time within the prior three
       years.

     Certificate of Incorporation and By-laws Provisions.  Our amended and
restated certificate of incorporation and amended and restated By-laws include
provisions that, among others, could have the effect of delaying, deferring, or
discouraging potential acquisition proposals and could delay or prevent a change
of control of eXegenics. The provisions in our certificate of incorporation and
By-laws that may have such effect include:

     - Preferred Stock.  As noted above, our board of directors, without
       stockholder approval, has the authority under our certificate of
       incorporation to issue preferred stock with rights superior to the rights
       of the holders of common stock. As a result, we could issue preferred
       stock quickly and easily, which could adversely affect the rights of
       holders of our common stock and could be issued with terms calculated to
       delay or prevent a change of control or make removal of management more
       difficult.

     - Election and Removal of Directors.  Directors may be removed by the
       affirmative vote of the holders of at least a majority of the voting
       power of all of the outstanding shares of capital stock of the
       corporation entitled to vote thereon, voting together as a single class.
       Upon receipt of stockholder approval, we plan to institute a staggered
       board, see the section entitled "eXegenics Management -- Board of
       Directors" beginning on page   .

     - Stockholder Meetings.  Under our certificate of incorporation and
       By-laws, special meetings of our stockholders may be called only by the
       vote of a majority of the entire board. Our stockholders may not call a
       special meeting of the stockholders.

     - Requirements for Advance Notification of Stockholder Nominations and
       Proposals.  Our By-laws establish advance notice procedures with respect
       to stockholder proposals and the nomination of candidates for election as
       directors, other than nominations made by or at the direction of our
       board of directors or a committee thereof.

TRANSFER AGENT AND WARRANT AGENT

     The transfer agent for our common stock is the American Stock Transfer and
Trust Company.

NASDAQ SMALLCAP MARKET LISTING

     Our common stock is listed on the Nasdaq SmallCap Market under the symbol
"EXEG." See the Risk Factors relating to our Nasdaq listing on pages      and
     .

                                       153


              COMPARISON OF RIGHTS OF HOLDERS OF IDDS COMMON STOCK
                          BEFORE AND AFTER THE MERGER

     eXegenics and IDDS are each incorporated under the laws of the state of
Delaware. If the merger is completed, holders of IDDS common stock and preferred
stock will become holders of eXegenics' common stock, and the rights of these
former IDDS stockholders will be governed by Delaware law, and eXegenics'
certificate of incorporation and bylaws, as respectively amended. However, since
both eXegenics and IDDS are incorporated under Delaware law, the rights of
holders of IDDS common stock will not be materially altered by the merger with
respect to Delaware law. Therefore, this section only describes material
differences between the rights of holders of eXegenics common stock and IDDS
common stock under the companies' respective certificates of incorporation and
bylaws. While eXegenics and IDDS believe that these descriptions address the
material differences, this summary may not contain all of the information that
is important to IDDS stockholders. This summary does not purport to be a
complete statement of the rights of holders of shares of eXegenics common stock
under applicable Delaware law or eXegenics' certificate of incorporation or
bylaws or a comprehensive comparison with the rights of the holders of shares of
IDDS common stock under applicable Delaware law or IDDS' certificate of
incorporation or bylaws, or a complete description of the specific provisions
referred to herein. These stockholders should carefully read this entire
document and the documents referred to in this summary for a more complete
understanding of the differences between the rights of eXegenics stockholders
and those of IDDS stockholders.

     Although the material terms of the bylaws of eXegenics and IDDS are
summarized below, you are encouraged to read in its entirety the text of
eXegenics' and IDDS' bylaws that are included in this document as           .
eXegenics' and IDDS' stockholders should also refer to the section entitled "The
Special Meeting of eXegenics Stockholders" and each of the stockholder proposals
numbered 2, 4 and 5 for a description of the amendments to eXegenics certificate
of incorporation which will occur at or immediately before the effective date.

AUTHORIZED CAPITAL STOCK

     eXegenics is currently authorized to issue up to 30,000,000 shares of
common stock and 10,000,000 shares of preferred stock. Upon the merger and
stockholder approval, the number of authorized shares of eXegenics common stock
will be increased to 90,000,000. For detailed description of the rights of the
holders of eXegenics common stock, please refer to the section entitled
"Description of eXegenics Capital Stock" beginning on page           .

     IDDS is authorized to issue up to 28,000,000 shares of common stock and
6,500,000 shares of preferred stock, of which 4,500,000 shares of preferred
stock have been designated as Series A Convertible Preferred Stock, and
1,351,350 shares of preferred stock have been designated as Series B Convertible
Preferred Stock.

COMPARISON OF RIGHTS OF HOLDERS OF IDDS COMMON STOCK AND EXEGENICS COMMON STOCK

     Pursuant to the merger agreement, the holders of each series of IDDS
preferred stock will be required to convert their shares of preferred stock for
IDDS common stock upon the election of a majority of such preferred holders
notifying IDDS of their election for conversion. A majority of preferred
stockholders of IDDS are expected to seek to convert their shares of IDDS
preferred stock to common stock. Therefore, the holders of preferred stock will
become holders of IDDS common stock immediately prior to or simultaneously with
the consummation of the merger and upon consummation of the merger, will receive
eXegenics common stock in exchange for their shares of IDDS common stock.

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COMPARISON OF CERTIFICATE OF INCORPORATION AND BYLAWS OF EXEGENICS AND IDDS

  DATE OF ANNUAL STOCKHOLDER MEETINGS

     Under eXegenics' amended and restated bylaws and IDDS' bylaws,
respectively, the annual meeting of stockholders is required to be held on such
date and at such time as may be designated from time to time by the board of
directors.

  SPECIAL MEETINGS

     Special meetings of eXegenics' stockholders may only be called by a
majority of the whole board of directors of eXegenics. Stockholders may not call
a special meeting.

     Under IDDS' bylaws, the board of directors or a committee of the board or
an officer of IDDS so designated and authorized by resolution of the board or
the bylaws may call special meetings of stockholders at any time.

  NOTICE REQUIREMENTS FOR MEETINGS

     Under eXegenics bylaws written notice shall be given to each stockholder
entitled to vote of the date, time and place and the general nature of the
business to be considered at the meeting not less than ten nor more than sixty
days before the date of the meeting.

     Under IDDS' bylaws, notice shall be given to each stockholder of the date,
time and place of the meeting, and in the case of a special meeting, the purpose
for which the meeting is being called, not less than ten nor more than sixty
days prior to the date of the meeting.

  Business and Nominations Properly Brought Before the Annual or Special Meeting
  of Stockholders.

     eXegenics' bylaws require its stockholders to provide timely written notice
to eXegenics' secretary to bring business or nominations before an annual
meeting or for nominations to be brought before a special meeting. To be timely,
a stockholder's notice pertaining to an annual meeting will need to be delivered
to or mailed and received at eXegenics' principal executive offices not later
than the close of business on the fifty-fifth day nor earlier than the close of
business on the seventy-fifth day prior to the first anniversary of the date on
which eXegenics' first mailed its proxy materials for the preceding year's
annual meeting, or the Anniversary Date; provided, however, that in the event
that the date of the annual meeting is more than thirty days before or more than
sixty days after the Anniversary Date, notice must be delivered (1) not later
than the close of business on the fifty-fifth day nor earlier than the close of
business on the seventy-fifth day prior to the Anniversary Date or (2) by the
close of business on the tenth day following the day eXegenics makes a public
announcement of the date of such annual meeting will be held. To be timely, a
stockholder's notice pertaining to a special meeting held for the purpose of
electing one or more directors to the Board must be delivered to the eXegenics'
secretary at the principal executive offices not later than the close of
business on the fifty-fifth day nor earlier than the close of business on the
seventy-fifth day prior to such special meeting date or by the close of business
on the tenth day following the day eXegenics makes a public announcement of the
date of such special meeting will be held and of the nominees proposed by the
Board for election at such meeting. The stockholder's notice to eXegenics'
secretary will need to include:

     - a brief description of the business to be brought and the reasons for
       conducting such business;

     - the name and address, as they appear in eXegenics' records, of the
       stockholder proposing the business;

     - the class and number of shares of eXegenics' stock beneficially owned by
       the stockholder;

     - any material interest of the stockholder in such business;

                                       155


     - for each person whom a stockholder proposes to nominate for election or
       re-election, all information relating to such person as required to be
       provided in solicitation of proxies for election of directors, or other
       required pursuant to Regulation 14A under the Exchange Act; and

     - whether such stockholder or beneficial owner intends to deliver a proxy
       statement or form of proxy to holders of, in the case of a proposal, at
       least the percentage of eXegenics' voting shares required under
       applicable law to carry the proposal or, in case of a nomination, a
       sufficient number of holder of eXegenics' voting shares to elect such
       nominee.

     In addition, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders will need to provide notice as required by the regulations under
the Exchange Act if those regulations require notice that is different from the
notice described above.

     IDDS' bylaws do not contain a specific notice provision regarding
stockholders bringing business before a meeting or with respect to director
nominations.

  CONSENT OF STOCKHOLDERS WITHOUT A MEETING

     Any eXegenics stockholder of record seeking to have stockholders authorize
or take corporate action by written consent shall upon written notice to the
eXegenics' secretary, request the board of directors to fix a record date. The
board shall set a record date within ten days after the date of the request or
if the board shall fail to do so, the record date shall be the first date on
which a signed written consent setting forth the action taken or proposed is
delivered to eXegenics through its registered office in the State of Delaware,
its principal office or an officer of eXegenics.

     Under IDDS' bylaws, any action required or permitted to be taken at an
annual or special meeting of stockholders may be taken without a meeting, if a
consent in writing setting forth the action so taken is signed by the holders
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote were
present and voted.

  SIZE OF THE BOARD

     eXegenics' bylaws provide that the size of eXegenics' board of directors
shall not be less than three and shall be fixed from time to time exclusively by
action of the whole board of directors. Upon the merger, eXegenics' board will
consist of nine directors and subject to stockholder approval, such board will
be divided into three classes with different expiry terms.

     Under IDDS' bylaws, the board shall consist of one or more members, which
may be changed from time to time by resolution of the board. Currently, IDDS'
board of directors consists of eight directors.

  REMOVAL OF DIRECTORS

     eXegenics' bylaws provide that the entire board or any individual member of
the board may be removed from office at any time by the affirmative vote of the
holders of at least a majority of eXegenics' outstanding shares entitled to
vote, voting as a single class.

     Under IDDS' bylaws, IDDS directors or the entire board may be removed with
or without cause by a vote of a majority of the holders of shares then entitled
to vote at an election of directors.

  VACANCIES ON THE BOARD

     eXegenics' bylaws provides that vacancies on the board of directors or any
committee or office, may be filled by a majority of the directors then in
office, even if less than a quorum.

     Under IDDS' bylaws, vacancies on IDDS' board of directors, including any
vacancies created by an increase in the number of directors, may be filled by a
vote of the majority of remaining directors then in office, even if less than a
quorum, or by a sole remaining director.

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  MEETINGS OF DIRECTORS

     eXegenics' bylaws provide that the board of directors must hold an annual
meeting immediately following the annual meeting of stockholders.

     IDDS' bylaws provide for regular meetings of the board of directors, but do
not require the board to hold an annual meeting.

  SPECIAL MEETINGS OF DIRECTORS

     eXegenics' bylaws provide that a special meeting of the board of directors
may be called by or at the request of the president or any two directors of
eXegenics, and that notice must be given at least 48 hours prior to the time
fixed for the special meeting.

     Under IDDS' bylaws, a special meeting may be called by or at the request of
the chairman of the board, the president or two directors of IDDS, and that
notice must be given at least 48 hours prior to the time of the holding of such
meeting, regardless of the form of notice.

  QUORUM OF THE BOARD FOR THE TRANSACTION OF BUSINESS

     The respective bylaws of eXegenics and IDDS provide that a majority of
directors in office constitutes a quorum for the transaction of business at any
meeting of the board of directors.

  AMENDMENT OF THE BYLAWS

     The bylaws of eXegenics may be amended by the affirmative vote of a
majority of the whole board of directors or by the affirmative vote of at least
sixty-six and two-thirds percent of the voting power of all of the outstanding
shares of capital stock of eXegenics entitled to vote, voting together as a
single class.

     The bylaws of IDDS may be amended by a vote of a majority of the directors
then in office or by a majority of the holders of the outstanding shares of
voting stock of IDDS, at an annual meeting of stockholders or at a special
meeting of stockholders. Any bylaw made or altered by the stockholders may be
altered or repealed by the board or may be altered or repealed by the
stockholders.

  INDEMNIFICATION AND DIRECTOR'S LIABILITY

     Under eXegenics' current certificate of incorporation and bylaws, eXegenics
is required to indemnify all persons whom it may indemnify pursuant to Section
145 of the Delaware General Corporation Law to the fullest extent permitted by
such section. In addition, under eXegenics current certificate of incorporation
and bylaws, the personal liability of eXegenics' directors is eliminated to the
fullest extent permitted by law, except for (1) any breach of a director's duty
of loyalty, (2) under section 174 of the Delaware General Corporation Law, (3)
or any acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, or (4) any transaction from which
the director derived an improper personal benefit.

     Under IDDS' certificate of incorporation and bylaws, IDDS is required to
indemnify all persons whom it may indemnify pursuant to Section 145 of the
Delaware General Corporation Law to the fullest extent permitted by such
section. In addition, under IDDS' current certificate of incorporation and
bylaws, the personal liability of IDDS' directors is eliminated to the fullest
extent permitted by paragraph 7 of subsection (b) of Section 102 of the Delaware
General Corporation Law. Under IDDS' bylaws, IDDS may purchase and maintain
insurance on behalf of each director and officer against any liability asserted
against or incurred by such director or officer whether or not IDDS would have
the power to indemnify such director or officer against such liability.

                                       157


                                 LEGAL MATTERS

     The validity of the shares of eXegenics common stock offered by this joint
proxy statement/ prospectus will be passed upon for eXegenics by Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., New York, New York. Thelen Reid & Priest,
LLP, New York, New York is acting as counsel to the board of directors of IDDS
in connection with certain legal matters relating to the merger, the merger
agreement and the transactions contemplated thereby. Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. and Thelen Reid & Priest, LLP will deliver opinions
concerning the qualification of the merger as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.

                                    EXPERTS

     The financial statements of eXegenics at December 31, 2001, and for the
year ended December 31, 2001, included in the proxy statement of eXegenics,
which is referred to and made a part of this prospectus and registration
statement, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report appearing elsewhere herein, and are included in reliance
upon such report given on the authority of such firm as experts in accounting
and auditing.

     The financial statements of eXegenics at December 31, 2000, and for the
years ended December 31, 1999 and 2000, included in the proxy statement of
eXegenics, which is referred to and made a part of this prospectus and
registration statement, have been audited by Eisner LLP (formerly Richard A.
Eisner & Company, LLP), independent auditors, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.

     The financial statements of IDDS as of December 31, 2001 and 2000 and for
each of the three years in the period ended December 31, 2001 included in this
joint proxy statement/prospectus, have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on
authority of said firm as experts in auditing and accounting.

                                 OTHER MATTERS

     Representatives of Ernst & Young LLP are expected to be present at the
special meeting of eXegenics stockholders with the opportunity to make
statements if they so desire. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the special meeting of IDDS stockholders with the
opportunity to make statements if they so desire. In each case, such
representatives are also expected to be available to respond to appropriate
questions.

     We know of no matters to be presented at either special meeting other than
the matters described in this document. However, if any other matters do come
before the meetings, it is intended that the holders of the proxies will vote on
such matters in their discretion.

                             STOCKHOLDER PROPOSALS

     Pursuant to Rule 14a-8 under the Exchange Act of 1934, as amended,
stockholders may present proper proposals for inclusion in eXegenics' proxy
statement and for consideration at the 2003 annual meeting of stockholders by
submitting their proposals to eXegenics in a timely manner. The deadline for
timely receipt of stockholder proposals is December 13, 2002.

     If eXegenics does not receive notice of any matter to be considered for
presentation at the 2003 meeting, although not included in the proxy statement,
by February 26, 2003, management proxies may confer discretionary authority to
vote on the matters presented at the annual meeting by a stockholder in
accordance with Rule 14a-4 under the Securities Exchange Act of 1934, as
amended. All stockholder proposals should be marked for the attention of
Controller, eXegenics Inc., 2110 Research Row, Dallas, Texas 75235.

                                       158


                      WHERE YOU CAN FIND MORE INFORMATION

     eXegenics files reports, proxy statements and other information with the
SEC. Copies of these reports, proxy statements and other information may be
inspected and copied at the following public reference facility maintained by
the SEC:

     Judiciary Plaza
     Room 1024
     450 Fifth Street, N.W.
     Washington, D.C. 20549

     Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding each of us. The address of the SEC website is
http://www.sec.gov.

     Reports, proxy statements and other information concerning eXegenics may
also be inspected at: The National Association of Securities Dealers, 1735 K
Street N.W., Washington, D.C. 20006.

     eXegenics has filed a registration statement under the Securities Act with
the SEC with respect to the eXegenics common stock to be issued to IDDS
stockholders in the merger. This joint proxy statement/prospectus constitutes
the prospectus of eXegenics filed as part of the registration statement. This
joint proxy statement/prospectus does not contain all of the information set
forth in the registration statement because certain parts of the registration
statement are omitted as provided by the rules and regulations of the SEC. You
may inspect and copy the registration statement at any of the addresses listed
above.

     You should rely only on the information contained in this joint proxy
statement/prospectus to vote on the proposals related to the merger. eXegenics
and IDDS have not authorized anyone to provide you with information that is
different from what is contained in this joint proxy statement/prospectus. This
joint proxy statement/prospectus is dated [          ], 2002. You should not
assume that the information contained in this joint proxy statement/prospectus
is accurate as of any date other than [          ], 2002, and neither the
mailing of the joint proxy statement/prospectus to eXegenics and IDDS
stockholders nor the issuance of eXegenics common stock in the merger shall
create any implication to the contrary.

INFORMATION ON eXEGENICS' WEB SITE

     Information on any eXegenics internet web site is not part of this document
and you should not rely on that information in deciding whether to approve the
issuance of shares of eXegenics common stock in connection with the merger,
unless that information is also in this document.

INFORMATION ON IDDS WEB SITE

     Information on any IDDS internet web site is not part of this document and
you should not rely on that information in deciding whether to approve the
merger and adopt the merger agreement, unless that information is also in this
document.

                                       159


                         INDEX TO FINANCIAL STATEMENTS



                                                              PAGE
                                                              ----
                                                           
EXEGENICS
Report of Ernst & Young LLP, Independent Auditors...........   F-2
Report of Eisner LLP, formerly Richard A. Eisner & Company,
  LLP, Independent Auditors.................................   F-3
Balance sheets as of December 31, 2001 and 2000 and June 30,
  2002 (unaudited)..........................................   F-4
Statements of operations for the years ended December 31,
  2001, 2000 and 1999 and the six months ended June 30, 2002
  and 2001 (unaudited)......................................   F-5
Statements of changes in stockholders' equity for the years
  ended December 31, 2001, 2000 and 1999 and the six months
  ended June 30, 2002 (unaudited)...........................   F-6
Statements of cash flows for the years ended December 31,
  2001, 2000 and 1999 and the six months ended June 30, 2002
  and 2001 (unaudited)......................................   F-7
Notes to eXegenics financial statements.....................   F-8

IDDS
Report of PricewaterhouseCoopers LLP, Independent
  Accountants...............................................  F-23
Balance sheets as of December 31, 2000 and 2001 and June 30,
  2002 (unaudited)..........................................  F-24
Statements of operations for the years ended December 31,
  1999, 2000 and 2001, the six months ended June 30, 2001
  and 2002, and the cumulative period from February 23, 1998
  (inception) to June 30, 2002 (unaudited)..................  F-25
Statements of redeemable convertible preferred stock and
  stockholders' deficit for the period from February 23,
  1998 (inception) to June 30, 2002 (unaudited), including
  the period from February 23, 1998 (inception) to December
  31, 1998, and the years ended December 31, 1999, 2000 and
  2001 and the six months ended June 30, 2002 (unaudited)...  F-26
Statements of cash flows for the years ended December 31,
  1999, 2000, and 2001, the six months ended June 30, 2001
  and 2002 (unaudited) and the cumulative period from
  February 23, 1998 (inception) to June 30, 2002
  (unaudited)...............................................  F-27
Notes to IDDS financial statements..........................  F-28


                                       F-1


               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors and Stockholders
EXEGENICS INC.

     We have audited the accompanying balance sheet of EXEGENICS INC. (the
Company), formerly known as Cytoclonal Pharmaceutics Inc., as of December 31,
2001, and the related statements of operations, changes in stockholders' equity
and cash flows for the year ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EXEGENICS INC. as of
December 31, 2001, and the results of its operations and its cash flows for the
year ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

                                                 /s/ ERNST & YOUNG LLP
                                          --------------------------------------

Dallas, Texas
March 18, 2002

                                       F-2


                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
EXEGENICS INC.
Dallas, Texas

     We have audited the accompanying balance sheets of EXEGENICS INC. (formerly
known as Cytoclonal Pharmaceutics Inc.), as of December 31, 2000, and the
related statements of operations, changes in stockholders' equity and cash flows
for each of the years in the two-year period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of EXEGENICS INC. as of
December 31, 2000, and the results of its operations and its cash flows for each
of the years in the two-year period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.

     As discussed in Note B to the financial statements, the Company changed its
method of revenue recognition in 1999.

                                                    /s/ EISNER LLP
                                          --------------------------------------
                                          (Formerly Richard A. Eisner & Company,
                                                           LLP)

New York, New York

                                       F-3


                                 EXEGENICS INC.

                                 BALANCE SHEETS



                                                            DECEMBER 31,
                                                     ---------------------------
                                                         2001           2000       JUNE 30, 2002
                                                     ------------   ------------   -------------
                                                                                    (UNAUDITED)
                                                                          
                                             ASSETS
Current assets:
  Cash and cash equivalents........................  $ 14,995,000   $ 35,408,000   $ 11,620,000
  Restricted cash..................................       550,000             --        550,000
  Investments......................................    10,050,000             --     10,027,000
  Prepaid expenses and other current assets........       656,000        495,000        421,000
                                                     ------------   ------------   ------------
       Total current assets........................    26,251,000     35,903,000     22,618,000
Equipment, net.....................................     1,009,000        512,000        708,000
Patent rights, less accumulated amortization of
  $111,000, $764,000, and $129,000 at December 31,
  2001 and 2000 and June 30, 2002, respectively....        74,000        670,000         55,000
Notes receivable -- officer/stockholder............       278,000        278,000        278,000
Other assets.......................................        13,000         15,000          8,000
                                                     ------------   ------------   ------------
       Total.......................................  $ 27,625,000   $ 37,378,000   $ 23,667,000
                                                     ============   ============   ============
                                          LIABILITIES
Current liabilities:
  Accounts payable and accrued expenses............  $  1,163,000   $    633,000   $    827,000
  Taxes payable....................................            --         95,000             --
  Deferred revenue.................................        56,000             --             --
  Current portion of capital lease obligations.....        83,000             --         91,000
  Current portion of royalties payable.............            --        125,000             --
                                                     ------------   ------------   ------------
       Total current liabilities...................     1,302,000        853,000        918,000
Capital lease obligations, less current portion....       202,000             --        148,000
Royalties payable, less current portion............            --        750,000             --
                                                     ------------   ------------   ------------
       Total liabilities...........................     1,504,000      1,603,000      1,066,000
                                                     ------------   ------------   ------------
Commitments and contingencies
                                      STOCKHOLDERS' EQUITY
Preferred stock -- $.01 par value, 10,000,000
  shares authorized; 755,950, 718,353, and 828,023
  shares of Series A convertible preferred issued
  and outstanding (liquidation value $1,890,000,
  $1,796,000, and $2,070,000) at December 31, 2001
  and 2000 and June 30, 2002, respectively.........         8,000          7,000          8,000
Common stock -- $.01 par value, 30,000,000 shares
  authorized; 16,180,935, 16,146,730, and
  16,184,486 shares issued at December 31, 2001 and
  2000 and June 30, 2002, respectively.............       162,000        162,000        162,000
Additional paid-in capital.........................    67,025,000     67,083,000     67,145,000
Subscriptions receivable...........................      (360,000)       (51,000)      (352,000)
Unearned compensation..............................        (5,000)       (70,000)            --
Accumulated deficit................................   (38,139,000)   (29,354,000)   (41,792,000)
Treasury stock, 511,200, 260,600, and 511,200
  shares of common stock, at December 31, 2001 and
  2000 and June 30, 2002, respectively.............    (2,570,000)    (2,002,000)    (2,570,000)
                                                     ------------   ------------   ------------
       Total stockholders' equity..................    26,121,000     35,775,000     22,601,000
                                                     ------------   ------------   ------------
       Total.......................................  $ 27,625,000   $ 37,378,000   $ 23,667,000
                                                     ============   ============   ============


                       See notes to financial statements
                                       F-4


                                 EXEGENICS INC.

                            STATEMENTS OF OPERATIONS



                                      YEAR ENDED DECEMBER 31,
                              ---------------------------------------    JUNE 30,      JUNE 30,
                                 2001          2000          1999          2002          2001
                              -----------   -----------   -----------   -----------   -----------
                                                                        (UNAUDITED)   (UNAUDITED)
                                                                       
Revenue:
  License and research
     fees...................  $ 1,333,000   $   865,000   $ 1,375,000   $   556,000   $   667,000
                              -----------   -----------   -----------   -----------   -----------
Operating expenses:
  Research and
     development............    5,321,000     3,681,000     2,332,000     2,476,000     3,006,000
  General and
     administrative.........    6,530,000     5,788,000     3,194,000     2,109,000     2,708,000
                              -----------   -----------   -----------   -----------   -----------
                               11,851,000     9,469,000     5,526,000     4,585,000     5,714,000
Other (income) expenses:
  Gain on disposition.......     (274,000)           --            --        (4,000)           --
  Interest income...........   (1,383,000)   (1,543,000)     (222,000)     (371,000)     (828,000)
  Interest expense..........        6,000         9,000         6,000        11,000         1,000
                              -----------   -----------   -----------   -----------   -----------
                               (1,651,000)   (1,534,000)     (216,000)     (364,000)     (827,000)
                              -----------   -----------   -----------   -----------   -----------
Loss before items shown
  below.....................   (8,867,000)   (7,070,000)   (3,935,000)   (3,665,000)   (4,220,000)
Provision (benefit) for
  taxes.....................      (82,000)       95,000            --       (12,000)       68,000
                              -----------   -----------   -----------   -----------   -----------
Loss before cumulative
  effect of a change in
  accounting principle......   (8,785,000)   (7,165,000)   (3,935,000)   (3,653,000)   (4,288,000)
Cumulative effect on prior
  years of changing method
  of revenue recognition....           --            --      (422,000)           --            --
                              -----------   -----------   -----------   -----------   -----------
Net loss....................   (8,785,000)   (7,165,000)   (4,357,000)   (3,653,000)   (4,288,000)
Preferred stock dividend....     (180,000)     (180,000)     (182,000)     (169,000)     (180,000)
                              -----------   -----------   -----------   -----------   -----------
Net loss attributable to
  common stockholders.......  $(8,965,000)  $(7,345,000)  $(4,539,000)  $(3,822,000)  $(4,468,000)
                              ===========   ===========   ===========   ===========   ===========
Basic and diluted loss per
  common share:
  Loss before cumulative
     effect of a change in
     accounting principle...  $     (0.57)  $     (0.51)  $     (0.40)  $     (0.24)  $     (0.28)
  Cumulative effect on prior
     years of changing
     method of revenue
     recognition............           --            --         (0.04)           --            --
                              -----------   -----------   -----------   -----------   -----------
  Net loss..................  $     (0.57)  $     (0.51)  $     (0.44)  $     (0.24)  $     (0.28)
                              ===========   ===========   ===========   ===========   ===========
Weighted average number of
  shares outstanding --basic
  and diluted...............   15,749,000    14,452,000    10,333,000    15,671,000    16,160,000
                              ===========   ===========   ===========   ===========   ===========


                       See notes to financial statements
                                       F-5


                                 EXEGENICS INC.

                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


                                        CONVERTIBLE
                                      PREFERRED STOCK        COMMON STOCK        ADDITIONAL
                                     -----------------   ---------------------     PAID IN     SUBSCRIPTIONS     UNEARNED
                                     SHARES    AMOUNT      SHARES      AMOUNT      CAPITAL      RECEIVABLE     COMPENSATION
                                     -------   -------   ----------   --------   -----------   -------------   ------------
                                                                                          
BALANCE -- DECEMBER 31, 1999.......  728,903   $ 7,000   10,377,453   $104,000   $24,670,000     $      --       $     --
Preferred dividend (stock).........   72,856     1,000           --         --        (1,000)           --             --
Preferred stock converted to common
 stock.............................  (83,406)   (1,000)      83,406      1,000            --            --             --
Exercise of warrants, net of
 related expenses of $1,999,000....       --        --    5,519,111     55,000    39,313,000       (51,000)            --
Exercise of options and units......       --        --      166,760      2,000       605,000            --             --
Value assigned to warrants and
 options issued for professional
 services..........................       --        --           --         --     2,360,000            --             --
Compensation related to grant of
 options to employees..............       --        --           --         --       130,000            --        (70,000)
Purchase of Treasury stock.........       --        --           --         --            --            --             --
Sale of Treasury stock.............       --        --           --         --         6,000            --             --
Net loss for the year..............       --        --           --         --            --            --             --
                                     -------   -------   ----------   --------   -----------     ---------       --------
BALANCE -- DECEMBER 31, 2000.......  718,353     7,000   16,146,730    162,000    67,083,000       (51,000)       (70,000)
Preferred stock converted to common
 stock.............................  (34,205)       --       34,205         --            --            --             --
Preferred dividend (stock).........   71,802     1,000           --         --        (1,000)           --             --
Proceeds from sale of Treasury
 stock.............................       --        --           --         --      (442,000)     (300,000)            --
Interest accrual on Subscription
 Receivable........................       --        --           --         --            --        (9,000)            --
Purchase of Treasury stock.........       --        --           --         --            --            --             --
Compensation related to grant of
 options to employees..............       --        --           --         --       385,000            --         65,000
Net loss for the year..............       --        --           --         --            --            --             --
                                     -------   -------   ----------   --------   -----------     ---------       --------
BALANCE -- DECEMBER 31, 2001.......  755,950     8,000   16,180,935    162,000    67,025,000      (360,000)        (5,000)
Preferred stock converted to common
 stock.............................   (3,551)       --        3,551         --            --            --             --
Preferred dividend (stock).........   75,624        --           --         --            --            --             --
Interest accrual on Subscription
 Receivable........................       --        --           --         --            --         8,000             --
Compensation and other expense
 related to grant of options.......       --        --           --         --       120,000            --          5,000
Net loss for the period............       --        --           --         --            --            --             --
                                     -------   -------   ----------   --------   -----------     ---------       --------
BALANCE -- JUNE 30, 2002
 (UNAUDITED).......................  828,023   $ 8,000   16,184,486   $162,000   $67,145,000     $(352,000)      $     --
                                     =======   =======   ==========   ========   ===========     =========       ========



                                                        TREASURY STOCK
                                     ACCUMULATED    ----------------------
                                       DEFICIT       SHARES      AMOUNT         TOTAL
                                     ------------   --------   -----------   -----------
                                                                 
BALANCE -- DECEMBER 31, 1999.......  $(22,189,000)        --   $        --   $ 2,592,000
Preferred dividend (stock).........            --         --            --            --
Preferred stock converted to common
 stock.............................            --         --            --            --
Exercise of warrants, net of
 related expenses of $1,999,000....            --         --            --    39,317,000
Exercise of options and units......            --         --            --       607,000
Value assigned to warrants and
 options issued for professional
 services..........................            --         --            --     2,360,000
Compensation related to grant of
 options to employees..............            --         --            --        60,000
Purchase of Treasury stock.........            --    263,600    (2,023,000)   (2,023,000)
Sale of Treasury stock.............            --     (3,000)       21,000        27,000
Net loss for the year..............    (7,165,000)        --            --    (7,165,000)
                                     ------------   --------   -----------   -----------
BALANCE -- DECEMBER 31, 2000.......   (29,354,000)   260,600    (2,002,000)   35,775,000
Preferred stock converted to common
 stock.............................            --         --            --            --
Preferred dividend (stock).........            --         --            --            --
Proceeds from sale of Treasury
 stock.............................            --   (100,000)      767,000        25,000
Interest accrual on Subscription
 Receivable........................            --         --            --        (9,000)
Purchase of Treasury stock.........            --    350,600    (1,335,000)   (1,335,000)
Compensation related to grant of
 options to employees..............            --         --            --       450,000
Net loss for the year..............    (8,785,000)        --            --    (8,785,000)
                                     ------------   --------   -----------   -----------
BALANCE -- DECEMBER 31, 2001.......   (38,139,000)   511,200    (2,570,000)   26,121,000
Preferred stock converted to common
 stock.............................            --         --            --            --
Preferred dividend (stock).........            --         --            --            --
Interest accrual on Subscription
 Receivable........................            --         --            --         8,000
Compensation and other expense
 related to grant of options.......            --         --            --       125,000
Net loss for the period............    (3,653,000)        --            --    (3,653,000)
                                     ------------   --------   -----------   -----------
BALANCE -- JUNE 30, 2002
 (UNAUDITED).......................  $(41,792,000)   511,200   $(2,570,000)  $22,601,000
                                     ============   ========   ===========   ===========


                       See notes to financial statements
                                       F-6


                                 EXEGENICS INC.

                            STATEMENTS OF CASH FLOWS



                                                           YEAR ENDED DECEMBER 31,            SIX MONTHS ENDED JUNE 30,
                                                   ----------------------------------------   --------------------------
                                                       2001          2000          1999          2002           2001
                                                   ------------   -----------   -----------   -----------   ------------
                                                                                              (UNAUDITED)   (UNAUDITED)
                                                                                             
Cash flows from operating activities:
  Net loss.......................................  $ (8,785,000)  $(7,165,000)  $(4,357,000)  $(3,653,000)  $ (4,288,000)
                                                   ------------   -----------   -----------   -----------   ------------
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Depreciation and amortization................       286,000       290,000       200,000       210,000        136,000
    Value assigned to warrants, options and
      compensatory stock.........................       450,000     2,420,000       619,000       125,000        234,000
    Gain on disposition of patent rights.........      (274,000)           --            --            --             --
    Interest accrual on subscriptions
      receivable.................................        (9,000)           --            --            --             --
    Payment of royalty liability.................        (5,000)     (135,000)     (146,000)           --             --
Changes in:
  Prepaid expenses and other current assets......      (159,000)     (371,000)      (50,000)      248,000         47,000
  Accounts payable and accrued expenses..........       530,000       (49,000)      221,000      (336,000)       340,000
  Tax payable....................................       (95,000)       95,000            --            --             --
  Deferred revenue...............................        56,000      (207,000)      140,000       (56,000)       222,000
                                                   ------------   -----------   -----------   -----------   ------------
         Net cash used in operating activities...    (8,005,000)   (5,122,000)   (3,373,000)   (3,462,000)    (3,309,000)
                                                   ------------   -----------   -----------   -----------   ------------
Cash flows from investing activities:
  Notes receivable -- officer/shareholder........            --      (204,000)      (74,000)           --             --
  Sale (purchases) of equipment..................      (498,000)     (407,000)     (250,000)      110,000       (461,000)
  Purchases of investment securities.............   (10,050,000)           --            --        23,000    (20,070,000)
                                                   ------------   -----------   -----------   -----------   ------------
         Net cash (used in) provided by investing
           activities............................   (10,548,000)     (611,000)     (324,000)      133,000    (20,531,000)
                                                   ------------   -----------   -----------   -----------   ------------
Cash flows from financing activities:
  Proceeds from sale of common stock through
    exercise of options and warrants.............            --    39,924,000        84,000            --             --
  Increase in restricted cash....................      (550,000)           --            --            --             --
  Purchase of treasury stock.....................    (1,335,000)   (2,023,000)           --            --             --
  Payment of capital lease.......................            --            --            --       (46,000)            --
  Proceeds from sale of treasury stock...........        25,000        27,000            --            --       (936,000)
                                                   ------------   -----------   -----------   -----------   ------------
         Net cash provided by (used in) financing
           activities............................    (1,860,000)   37,928,000        84,000       (46,000)      (936,000)
                                                   ------------   -----------   -----------   -----------   ------------
Net increase (decrease) in cash and cash
  equivalents....................................   (20,413,000)   32,195,000    (3,613,000)   (3,375,000)   (24,776,000)
Cash and cash equivalents at beginning of year...    35,408,000     3,213,000     6,826,000    14,995,000     35,408,000
                                                   ------------   -----------   -----------   -----------   ------------
Cash and cash equivalents at end of period.......  $ 14,995,000   $35,408,000   $ 3,213,000   $11,620,000   $ 10,632,000
                                                   ============   ===========   ===========   ===========   ============
Supplemental disclosures of cash flow
  information:
  Cash paid for interest.........................  $      6,000   $     8,000   $     6,000   $     7,000   $         --
  Noncash investing activities:
    Common stock issued for technology...........            --            --       184,000            --             --
    Taxes paid...................................        95,000                                        --             --
    Property acquired through capital lease
      arrangements...............................       285,000            --            --            --             --


                       See notes to financial statements
                                       F-7


                                 EXEGENICS INC.

                         NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
         (INFORMATION AS OF JUNE 30, 2002 AND FOR THE SIX-MONTH PERIODS
                   ENDED JUNE 20, 2002 AND 2001 IS UNAUDITED)

NOTE A -- THE COMPANY

  DESCRIPTION OF THE COMPANY

     EXEGENICS INC., formerly known as Cytoclonal Pharmaceutics Inc. (the
"Company"), is involved in the research, creation, and development of drugs for
the treatment and/or prevention of cancer and infectious diseases. To date, the
Company's efforts have been principally devoted to R&D, capital formation and
organizational development.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  EQUIPMENT

     Equipment is stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, which range
from 3 to 5 years. Leasehold improvements are amortized over the lesser of the
economic useful life of the improvement or term of the lease.

  PATENT RIGHTS AND COSTS

     Certain patents acquired in October 1991 were stated at cost and amortized
to research and development expense using the straight-line method over the
17-year life of the patents. During August 2001, the Company decided to
terminate the subject agreement and, after the required three months notice,
wrote off the related patents and the accumulated amortization. (see Note C)

     Patents and technology acquired during 1999 are being amortized over an
estimated useful life of 5 years (see Note J).

     The Company reviews its patents for impairment whenever events or changes
in circumstances indicate that the carrying amount of the patents may not be
recoverable. In performing the review, the Company estimates undiscounted cash
flows from products under development that are covered by these patents.
Impairment based on the estimated fair value of the patents would be recognized
if those estimated cash flows were less than the unamortized costs. Related
patents are grouped in estimating future cash flows to determine whether patents
are impaired and in measuring the amount of the impairment. There were no
impairment indicators relating to patent rights and costs at December 31, 2001.

  RESEARCH AND DEVELOPMENT

     Research and development costs are charged to expense as incurred.

  LOSS PER COMMON SHARE

     Basic and diluted loss per common share is based on the net loss increased
by dividends on preferred stock divided by the weighted average number of common
shares outstanding during the year. No effect has been given to outstanding
options, warrants or convertible preferred stock in the diluted computation as
their effects would be antidilutive. The number of potentially dilutive
securities excluded from the computation of diluted loss per share was
approximately 5,125,000, 4,697,000 and 10,069,000 for the years ended December
31, 2001, 2000 and 1999, respectively.

                                       F-8

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  CASH EQUIVALENTS, RESTRICTED CASH, INVESTMENTS AND CONCENTRATION OF CREDIT
  RISK

     The Company considers all non-restrictive, highly liquid short-term
investments purchased with an original maturity of three months or less to be
cash equivalents. Cash, cash equivalents, and investments totaled $22,197,000 at
June 30, 2002 and consisted of $12,170,000 on deposit with a financial
institution and an investment security issued by the Federal National Mortgage
Agency. The security, purchased in May 2001, matures in March 2003 and has a
carrying value of $10,027,000 at June 30, 2002. Interest at 5% per annum is
received semi-annually in February and August.

     Cash equivalents, which amount to $14,995,000 and $35,408,000 at December
31, 2001 and 2000, respectively, consist principally of interest bearing cash
deposits placed with a single financial institution. Restricted cash, which
amounts to $550,000 and $0 at December 31, 2001 and 2000, respectively, consists
of certificates of deposits that are used as collateral for equipment leases.
Investments, which amount to $10,050,000 and $0 at December 31, 2001 and 2000,
respectively, consists of investments with a maturity greater than three months
net of unamortized premiums paid on investments.

  STOCK-BASED COMPENSATION

     The Company has elected to continue to account for its stock-based
compensation plans using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25") and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants as if the fair-value based method
defined in SFAS No. 123 had been applied.

     Under the provisions of APB No. 25, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
common stock at the date of the grant over the amount an employee must pay to
acquire the stock.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying value of cash equivalents, accounts payable and accrued
expenses approximates their fair value due to the short period to maturity of
these instruments. It is not practicable to estimate the fair value of royalties
payable due to payment terms varying based on sales of products by the Company
and the lack of such sales during the years ended December 31, 2001, 2000 and
1999.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

  UNAUDITED INTERIM FINANCIAL STATEMENT PRESENTATION

     The unaudited financial statements of the Company, included herein have
been prepared in accordance with the rules and regulations promulgated by the
Securities and Exchange Commission and, in the opinion of management, reflect
all adjustments (consisting only of normal recurring accruals) necessary to
present fairly the results of operations for the interim periods presented. The
results for the interim periods are not necessarily indicative of the results
for the full fiscal year.

                                       F-9

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  REVENUE RECOGNITION AND CHANGE IN ACCOUNTING PRINCIPLE

     Revenue from research support agreements is recognized ratably over the
length of the agreements. Revenue resulting from the achievement of milestones
is recognized when the milestone is achieved. Amounts received in advance of
services to be performed are recorded as deferred revenue. In December 1999, the
staff of the Securities and Exchange Commission issued an accounting bulletin on
revenue recognition that provides, among other matters, that nonrefundable
license fees should be recognized over the period of performance of related
research and development activities. Accordingly, the Company changed its
accounting policy from recognizing revenue from nonrefundable license fees at
signing of the agreement to deferring and recognizing such fees over the period
of performance of related research and development activities. Effective January
1, 1999, the Company reflected this change in accounting principle as a
cumulative effect on prior years of $422,000, which is shown in the statement of
operations. Payments to third parties in connection with nonrefundable license
fees are being recognized over the period of performance of related research and
development activities.

     Pro forma amounts assuming the change in accounting for revenue recognition
had been applied retroactively is as follows:



                                                               DECEMBER 31,
                                                                   1999
                                                               ------------
                                                            
Net loss....................................................   $(3,935,000)
Net loss per common share -- basic and dilutive.............   $     (0.40)


  RECLASSIFICATIONS

     Certain items have been reclassified in the prior years' financial
statements to conform to current year presentation.

NOTE C -- ROYALTIES PAYABLE

     On October 10, 1991, the Company entered into an agreement to acquire
certain patent rights, technology and know-how (the "Technology") from Wadley
Technologies, Inc. ("Wadtech") for the fixed sum of $1,250,000 and ongoing
royalties.

     The agreement provided for the payment of royalties of up to 6.25% of gross
selling price of products incorporating the Technology and up to 50% of all
compensation received by the Company for sales by sublicensees of any products
covered by the Technology, which will be applied to reducing the fixed sum of
$1,250,000, until the fixed sum is paid. Thereafter, the agreement provided for
the payment of royalties of up to 3.75% of gross selling price of products
incorporating the Technology and up to 50% of all compensation received by the
Company for sales by sublicensees of any products covered by the Technology. The
agreement also provided for minimum annual royalty payments of $31,250, $62,500
and $125,000 payable quarterly during each twelve-month period beginning October
1, 1996, 1997 and 1998, respectively. Thereafter, during each twelve-month
period beginning October 1, 1999, the agreement provided for minimum annual
royalty payments of $125,000 payable yearly. Through October 31, 2001, the
Company has made payments of approximately $480,000.

     The Company granted Wadtech a security interest in the Technology until
payment of the fixed sum. The agreement was to continue for 99 years from
October 10, 1991 and the Company had the option to terminate the agreement
without cause on three months notice to Wadtech. The Company decided to
terminate the agreement in August of 2001 and notified Wadtech of its intent.
The agreement was terminated at the end of October 2001, resulting in a
recognized gain on disposition of $274,000, the excess of prior amortized
royalty expense over the actual royalty payments made. No additional payments
were required under this agreement.

                                       F-10

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE D -- LICENSE AND RESEARCH AGREEMENT

     In June 1998, the Company entered into an agreement with Bristol-Myers
Squibb ("BMS") whereby the Company agreed to sublicense to BMS two technologies,
related to production of paclitaxel, the active ingredient in BMS's largest
selling cancer product, Taxol(R). The agreement, which is for a term of ten
years, subject to earlier termination at the option of BMS, provides for fees,
milestone payments and minimum and sales-based royalties to be paid to the
Company. Subsequently, the Company and BMS entered into a separate 2-year term
research and development support agreement that provided for BMS to pay the
company $2,000,000 in support of the Company's research efforts related to
development of a production system for paclitaxel. Subsequently, the term of the
research and development agreement was extended for an additional two years for
an additional payment of $2,000,000.

     For the year ended December 31, 2001, revenues of $0 and $1,333,000 for the
license fee and research support, respectively, were recognized under the
agreements. For the year ended December 31, 2000, revenues of $187,000 and
$678,000 for the license fee and research support, respectively, were recognized
under the agreements. For the year ended December 31, 1999, revenues of $375,000
and $1,000,000 for the license fee and research support, respectively, were
recognized under the agreements (see Note B).

     The final payment due under an R&D development funding provision of this
agreement was made in February 2002. The Company has thus curtailed its R&D
spending on this project. Discussions are ongoing with BMS as to their
intentions to commercialize this production process

NOTE E -- EQUIPMENT

     Equipment is summarized as follows:



                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2001         2000
                                                              ----------   ----------
                                                                     
Office equipment............................................  $  151,000   $   85,000
Furniture and fixtures......................................      99,000       65,000
Computers and laboratory equipment..........................   1,298,000      820,000
Laboratory software.........................................     209,000       72,000
Leasehold improvements......................................      76,000        8,000
                                                              ----------   ----------
          Total.............................................   1,833,000    1,050,000
Less accumulated depreciation...............................     824,000      538,000
                                                              ----------   ----------
          Net...............................................  $1,009,000   $  512,000
                                                              ==========   ==========


                                       F-11

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE F -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following:



                                                                  DECEMBER 31,
                                                              ---------------------
                                                                 2001        2000
                                                              ----------   --------
                                                                     
Professional fees...........................................  $  275,000   $174,000
Accrued restructure expense.................................     210,000         --
Payroll and related expenses................................     182,000    254,000
Licensors and contractors...................................     377,000    139,000
Occupancy costs.............................................      44,000         --
Real estate taxes...........................................      28,000         --
Other.......................................................      47,000     66,000
                                                              ----------   --------
                                                              $1,163,000   $633,000
                                                              ==========   ========


NOTE G -- CAPITAL LEASE OBLIGATIONS

     Included in equipment at December 31, 2001, is lab equipment and software
totaling $285,000 under capital lease obligations. The related annual interest
rates range from 6.0% to 6.2% throughout the lease terms, which expire in 2005.
The leased equipment collateralizes these leases and is amortized over the
useful life. The commencement date of these leases was December 28, 2001.

     The Company has a lease line of credit of $1,000,000, of which
approximately $500,000 remains unused.

     The following represents future minimum rental payments due under the
noncancellable capital leases:


                                                            
2002........................................................   $ 97,000
2003........................................................    103,000
2004........................................................    103,000
2005........................................................      9,000
                                                               --------
                                                                312,000
Less amounts representing interest..........................     27,000
                                                               --------
Present value of minimum lease payments.....................    285,000
Less current portion of capital lease obligations...........     83,000
                                                               --------
Capital lease obligations, less current portion.............   $202,000
                                                               ========


NOTE H -- STOCKHOLDERS' EQUITY

  PRIVATE PLACEMENT

     In April and May 1998, the Company completed a private placement for an
aggregate of 671,026 shares of common stock and 335,538 Class E warrants and
received net proceeds of approximately $4,837,000.

  PREFERRED STOCK

     On January 6, 1992, the Board of Directors designated 4,000,000 shares of
preferred stock as Series A convertible preferred stock. The holders of Series A
preferred stock are entitled to (i) convert on a

                                       F-12

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

one-for-one basis to common stock subject to adjustment, as defined, (ii) voting
rights equivalent to voting rights of common stockholders, (iii) receive
dividends equal to $.25 per share payable on or about January 15 each year in
cash or newly-issued shares of Series A preferred or a combination thereof (iv)
liquidation preferences of $2.50 per preferred share and (v) certain demand and
piggyback registration rights with respect to the common shares issuable upon
conversion.

     The Company, at its option, has the right to redeem all or any portion of
the Series A convertible preferred stock at $2.50 per share plus accrued and
unpaid dividends.

     During January 2001, the Company elected to pay the required yearly
dividend by issuing additional shares of Series A convertible preferred. The
Company issued 71,802 shares to satisfy the 10% dividend. In addition, during
2001, 34,205 shares of Series A convertible preferred were converted into 34,205
shares of common stock.

  COMMON STOCK

     During 1999 the Company acquired certain technology for 25,000 shares of
common stock.

     In addition, during 1999, in conjunction with the employment of the Vice
President for Drug Design and the acquisition of technology, the Company paid a
fee of $75,000 and issued to third parties an aggregate of 28,000 shares of
common stock, which were valued at market value at date of grant.

     In February and March 2000, the Company gave notice to the holders of its
Class C and D Warrants that it was exercising its right of redemption at $.05
per warrant effective March 9 and April 12, 2000. Subsequent to the notice, the
Company received approximately $13,001,000 from the exercise of 2,000,135 Class
C warrants and approximately $25,742,000 from the exercise of 2,941,905 Class D
warrants. In connection therewith the Company incurred expenses of $1,999,000.
In addition, during 2000, certain Class A, B, E and other warrants were
exercised for 577,071 common shares and the Company received proceeds of
$2,573,000. Further, during 2000, warrants to acquire 14,268 common shares
expired.

     In addition, during 2000, outstanding options to purchase 506,250 warrants
at $.10 per warrant were exercised and the acquired warrants were then exercised
for 202,500 shares of common stock at a price of $3.75 per share.

     In April 2000, the Company announced a stock buy-back program under which
the Board of Directors authorized the purchase of up to $2,000,000 of its common
stock. During the year ended December 31, 2000, the Company had purchased
263,600 shares of common stock at a cost of approximately $2,023,000.

     In February 2001, the Company extended its stock buy-back program under
which the Board of Directors authorized the purchase of up to an additional
$1,000,000 of its common stock. During the year ended December 31, 2001 the
Company had purchased 250,600 shares of common stock at a cost of approximately
$935,000.

     In May of 2001, the Company sold 100,000 shares of its Treasury Stock to
its CEO for $325,000 or $3.25 per share, the then current market value. The
Company received $25,000 cash and a note receivable of $300,000, bearing
interest at a rate of 5% per annum. The weighted average method was used to
determine the cost basis of $7.67 per share of the Treasury Stock.

     In October 2001, the Company purchased 100,000 shares of its common stock
and warrants to purchase 40,605 shares of its common stock for $1,165,000
pursuant to a settlement agreement. Of this amount, $765,000 was recognized as
expense in the third quarter of 2001 and $400,000 as the purchase of treasury
stock.

                                       F-13

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     In addition, during 2001, 34,205 shares of Series A convertible preferred
stock were converted into 34,205 shares of common stock.

  WARRANTS AND UNIT PURCHASE OPTIONS

     At December 31, 2001, outstanding warrants to acquire shares of the
Company's common stock are as follows:



                                                                              NUMBER OF
                                                                               SHARES
       WARRANT TYPE         EXERCISE PRICE         EXPIRATION DATES           RESERVED
       ------------         ---------------   --------------------------   ---------------
                                                                  
Class E...................  $9.82 to $11.35   April 2003                           326,554(a)
Other.....................   $4.25 to $9.00   July 2002 -- July 2004               513,500(b)
                                                                           ---------------
                                                                                   840,054
                                                                           ===============


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

     (a) See Note J

     (b) See Note J

     In connection with its initial public offering, the Company sold to the
underwriter, at a nominal amount, a unit purchase option to purchase up to an
aggregate of 200,000 additional units at $8.25 per unit. The units purchasable
upon exercise of the unit purchase option are comprised of one share of common
stock, one Class C warrant and one Class D warrant. Each Class C warrant
entitles the holder to purchase a unit consisting of one share of common stock
and one redeemable Class D detachable warrant. Each Class D warrant entitles the
holder to purchase one share of common stock. The exercise price of Class C and
D warrants is $6.50 and $8.75, respectively. The unit purchase options became
exerciseable in November 1998 for a two-year period. During 2000, the exercise
period was extended to November 2001. Upon expiration in November 2001, it was
determined to be in the best interest of the Company to replace the expiring
unit purchase options with two year warrants to purchase 125,000 shares of
common stock at $7.00 per share, expiring in November of 2003. The Company
evaluated the transaction using the Black-Scholes model and determined that the
cost was de minimis.

     See Note J for unit purchase option issued in connection with private
placement in 1998.

  STOCK OPTIONS

     During 1992, the Board of Directors and the stockholders of the Company
approved a Stock Option Plan (the "1992 Plan") which provides for the granting
of options to purchase up to 520,000 shares of common stock, pursuant to which
officers, directors, key employees and the Company's Scientific Advisory Board
are eligible to receive incentive and/or nonstatutory stock options. At December
31, 2001, no more options were available for future grant under the 1992 Plan.

     During 1996, the Board of Directors and the stockholders of the Company
approved the 1996 Stock Option Plan (the "1996 Plan") which provides for the
granting of incentive and nonstatutory options for up to 750,000 shares of
common stock to officers, employees, directors and consultants of the Company.
During 1998, the Board of Directors and the stockholders of the Company approved
an amendment to the Plan to allow for the granting of an additional 750,000
options. At December 31, 2001, no more options were available for future grant
under the 1996 Plan.

     During 2000, the Board of Directors and the stockholders of the Company
approved the 2000 Stock Option Plan (the "2000 Plan"), which provides for the
granting of incentive and nonstatutory options for up to 1,500,000 shares of
common stock to officers, employees, directors, independent contractors,
advisors and consultants of the Company. The Company subsequently amended the
2000 plan to increase the

                                       F-14

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

options available by 1,250,000 shares and to change the vesting period. At
December 31, 2001, 1,600,845 options are available under the 2000 Plan.

     Options granted under the Plans are exercisable for a period of up to 10
years from date of grant at an exercise price which is not less than the fair
value of the common stock on date of grant, except that the exercise period of
options granted to a stockholder owning more than 10% of the outstanding capital
stock may not exceed five years and their exercise price may not be less than
110% of the fair value of the common stock at date of grant. For the 1992 Plan
and the 1996 Plan options generally vest 40% after six months of employment and
thereafter 20% annually on the anniversary date of the grant. For the 2000 Plan,
options generally vest 50% annually on the anniversary date of the grant.

     An amendment approved by the stockholders in 2001, for the 2000 plan,
changed the vesting period from 50% annually on the anniversary date of the
grant, to 33 1/3% annually on the anniversary date of the grant.

     Stock option activity under the Plans are summarized as follows:



                                              YEAR ENDED DECEMBER 31,
                        -------------------------------------------------------------------
                                2001                   2000                    1999
                        --------------------   ---------------------   --------------------
                                    WEIGHTED                WEIGHTED               WEIGHTED
                                    AVERAGE                 AVERAGE                AVERAGE
                                    EXERCISE                EXERCISE               EXERCISE
                         SHARES      PRICE       SHARES      PRICE      SHARES      PRICE
                        ---------   --------   ----------   --------   ---------   --------
                                                                 
Options outstanding at
  beginning of year...  2,080,600    $5.01      1,635,300    $4.16     1,310,300    $3.50
Granted...............    812,155     4.87        492,000(a)   7.69      335,000     6.62
Exercised.............         --                 (46,700)    3.57        (7,000)    3.55
Canceled..............    (34,600)    7.32             --       --        (3,000)    4.31
                        ---------              ----------              ---------
Options outstanding at
  end of year.........  2,858,155     4.94      2,080,600     5.01     1,635,300     4.16
                        =========              ==========              =========
Options exercisable at
  end of year.........  2,150,320     4.68      1,394,380     3.94     1,141,340     3.53
                        =========              ==========              =========


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

(a)  In January and April 2000, respectively, options to acquire 106,000 and
     10,000 shares were granted, subject to stockholder approval, to employees
     and directors of the Company at an exercise price equal to the market price
     at date of grant. At date of stockholder approval the market price exceeded
     the exercise price by $1.06 and $1.75 per share, respectively, such excess
     is being charged to operations over the vesting period.

                                       F-15

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The following table presents information relating to stock options
outstanding under the plans as of December 31, 2001:



                                         OPTIONS OUTSTANDING          OPTIONS EXERCISABLE
                                   --------------------------------   --------------------
                                                          WEIGHTED
                                               WEIGHTED    AVERAGE                WEIGHTED
                                               AVERAGE    REMAINING               AVERAGE
                                               EXERCISE    LIFE IN                EXERCISE
RANGE OF EXERCISE PRICE             SHARES      PRICE       YEARS      SHARES      PRICE
-----------------------            ---------   --------   ---------   ---------   --------
                                                                   
$1.65 - $3.9375..................  1,012,155    $2.75       6.00        812,155    $2.63
$3.94 - $4.995...................    749,000     4.45       6.26        620,000     4.43
$5.00 - $7.437...................    414,000     6.69       7.44        308,000     6.63
$7.4375 - $9.875.................    683,000     7.67       8.56        410,165     7.64
                                   ---------                          ---------
                                   2,858,155     4.94       6.89      2,150,320     4.68
                                   =========                          =========


     At December 31, 2001, no more options were available for future grant under
the 1992 Plan and the 1996 Plan and 1,600,845 options are available under the
2000 Plan.

     In addition to options granted under the plans, in February 1996, the
Company granted options to purchase 100,000 shares of common stock at $4.25 as
compensation for professional services. These options were exercised during
2000.

     Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if we accounted for our
stock option grants under the fair market value method as prescribed by such
statement. The fair market value of our stock options was estimated at the date
of grant using a Black-Scholes option pricing model with the following
assumptions.



                                                 2001           2000           1999
                                             ------------   ------------   ------------
                                                                  
Risk-free interest rates...................  4.8% to 6.7%   5.0% to 6.7%   4.7% to 6.2%
Expected option life in years..............       5              5              10
Expected stock price volatility............  78% to 120%     85% to 94%     34% to 52%
Expected dividend yield....................       0%             0%             0%


     The weighted average fair value at date of grant for options granted during
2001, 2000 and 1999 was $1.21, $6.33 and $4.34 per option, respectively. Had the
Company elected to recognize compensation cost based on the fair value of the
options at the date of grant as prescribed by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," net loss in 2001,
2000 and 1999 would have been $9,950,000, $8,007,000 and $5,379,000 or $.62,
$.57 and $.54 per share, respectively.

     The Black-Scholes option valuation model was developed for use in
estimating the fair market value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock
price volatility. Because our stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair market value estimates, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair market value of our stock options.

     During the six months ended June 30, 2002, the Company granted 10,000,
25,000, 10,000 and 25,000 options to purchase shares of common stock at $7.13,
$3.28, $3.20 and $1.67 per share, respectively, in return for consulting
services. During the six months ended June 30, 2001, the Company granted 5,000
options to purchase shares of common stock at $7.188 per share in return for
consulting services. The

                                       F-16

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Company valued these options using the Black-Scholes option pricing model. As a
result, the Company recorded a charge of $60,100 and $2,800 during the six
months ended June 30, 2002 and 2001, respectively, related to these grants. In
connection with other option grants to consultants in previous years, the
Company recorded a charge of $65,000 and $231,400 during the six months ended
June 30, 2002 and 2001, respectively.

NOTE I -- INCOME TAXES

     At December 31, 2001 and 2000, the Company had approximately $34,747,000
and $26,682,000 of net operating loss carryforwards of $415,000 and $320,000 of
research and development credit carryforwards, respectively, for federal income
tax purposes that expire in years 2006 through 2021.

     At December 31, 2001 and 2000, the Company had a deferred tax asset of
approximately $13,453,000 and $10,438,000, respectively, representing the
benefits of its net operating loss and research and development credit
carryforwards and certain expenses not currently deductible for tax purposes,
principally related to the granting of stock options and warrants. The Company's
deferred tax asset has been fully reserved by a valuation allowance since
realization of its benefit is uncertain. The difference between the statutory
tax rate of 34% and the Company's effective tax rate is due to the increase in
the valuation allowance of $3,015,000 (2001), $3,018,000 (2000) and $1,520,000
(1999). The Company's ability to utilize its carryforwards may be subject to an
annual limitation in future periods pursuant to Section 382 of the Internal
Revenue Code of 1986, as amended. For the year ended December 31, 2000 the
Company recognized a provision of $95,000 for state income taxes and in 2001 the
Company recognized a benefit for taxes of $82,000 representing a refund of the
state income taxes previously expensed.

NOTE J -- COMMITMENTS AND OTHER MATTERS

  LEASES

     The Company occupies office and laboratory space under two leases expiring
through December 31, 2003. Minimum future annual rental payments are $290,000
and $273,000 for the years ended December 31, 2002 and 2003, respectively.

     Rent expense was approximately $299,000, $269,000 and $235,000 for the
years ended December 31, 2001, 2000 and 1999, respectively.

  EMPLOYMENT AGREEMENTS

     The Company has an employment agreement with one of its officers, which
provides for an annual base salary of $200,000 (subject to annual increases of
not less than 5% per year and bonuses at the discretion of the Board of
Directors), for a period of five years, commencing November 1998. In September
2000, the annual base salary was adjusted to $250,000.

     On December 31, 1998, the Company entered into an employment agreement with
its Vice President for Drug Design. In connection with the employment agreement,
the employee assigned to the Company certain technology. The agreement is for a
period of three years commencing January 4, 1999 and shall be extended for
successive twelve-month periods unless terminated by either party. The
agreement, as amended provides for an annual base salary of $125,000 (subject to
annual increases of 5% at the beginning of each calendar year, commencing on
January 1, 2000) and the employee received 25,000 shares of the Company's common
stock, which was valued at market value on the date of grant, in full
consideration for the assignment of technology. In September 2000, the base
salary was increased to $145,000. During 1999, the Company granted the employee
options to purchase 75,000 shares of the Company's common stock. The Company
also agreed to grant the employee bonus options to purchase up to 160,000 shares
of the Company's common stock exercisable only upon reaching a certain
milestone. As
                                       F-17

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

of December 31, 2000, no such bonus options were granted. The Company further
agreed to pay royalties based on net revenues received from the sales of
products that incorporate the technology and on net sublicense fees received
from sublicensing the technology. The Company also agreed to reimburse the
employee for certain expenses and to assume liability for certain payments upon
the realization of profit from the technology. In July 2002, a new employment
agreement was executed (See Note O).

     On March 21, 2001, the Company entered into an employment agreement with
its President and Chief Executive Officer. The agreement is for a period of
three years commencing March 21, 2001 and shall be extended for successive
twelve-month periods unless terminated by either party. The agreement provides
for an annual base salary of $350,000 per year with an annual bonus of up to 60%
of base pay as determined by the Board's discretion. In addition, the Company
granted the employee an option to purchase 400,000 shares of the Company's
common stock at an exercise price of $3.25 per share. The Company also agreed to
reimburse the employee for certain expenses.

  CONSULTING AGREEMENTS

     During 1996, the Company entered into an agreement with a consulting firm
whereby the Company agreed to pay a fee of $3,000 per month, until the agreement
is terminated by either party and to grant warrants to purchase 75,000 shares of
common stock at $4.25 per share in return for financial advisory services. The
warrants will be granted and become exercisable in the event a transaction
introduced to the Company by the consulting firm is consummated, at which time
the Company will record a noncash charge representing the fair market value of
the warrants.

     In August 1998, the Company entered into an agreement with a consulting
firm whereby the Company agreed to pay a fee of $35,000 in return for financial
advisory services. In connection with the agreement, the Company issued
five-year warrants to purchase 75,000 shares of common stock. Warrants for
50,000 shares vested on December 31, 1998 of which 37,500 have an exercise price
of $7.00 per share and 12,500 have an exercise price of $8.00 per share. The
Company determined the fair value based on the Black-Scholes Option Pricing
Model of these warrants to be approximately $181,000, which was charged to
operations. During 2000, 22,500 warrants at $7.00 per share were exercised. The
remaining 25,000 warrants have an exercise price of $9.00 per share and vest
only if a transaction introduced to the Company by the consulting firm is
consummated, at which time the Company will record a noncash charge representing
the fair value of the warrants.

     In July 1999, the Company entered into an agreement with a consulting firm
whereby the Company paid an engagement fee of $25,000 and agreed to pay $5,000
per month, until the agreement was terminated in 1999. For a nominal amount, the
Company sold to the consulting firm a warrant to purchase 150,000 common shares
at $7.00 per share expiring on July 15, 2004. Warrants for 50,000 common shares
which vested immediately were granted upon signing the agreement; the Company
determined the fair value based on the Black-Scholes Option Pricing Model of
these warrants to be approximately $169,000, which was charged to operations.
These warrants were exercised during 2000. The remaining 100,000 warrants become
exercisable and a cash fee of less than $200,000 will be paid upon consummation
of a transaction, as defined in the agreement.

     In February 2000, the Company entered into an agreement with a consulting
firm whereby the Company issued warrants to purchase 300,000 shares of common
stock at $15 per share expiring on February 7, 2005. These warrants vested
during 2000; the Company determined the fair value based on the Black-Scholes
Option Pricing Model of these warrants to be approximately $1,852,000, which was
charged to operations during 2000.

                                       F-18

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  COLLABORATION AGREEMENTS

  Agreements With Research and Development Institute, Inc. ("RDI")

     During June 1993, the Company entered into a research and license agreement
with RDI of Montana State University pursuant to which the Company finances, and
RDI conducts, research and development at Montana State University in the field
of Taxol(R)-producing organisms. In connection with the agreement, RDI has
granted the Company an exclusive license and licensing rights to its patents and
know-how throughout the world to develop and market products relating to the
technology.

     The Company has agreed to finance research to be conducted under the
agreement and paid RDI an aggregate fixed fee of $250,000 per annum for four
years commencing in 1993. In July 1998, the Company agreed to finance research
for an additional year for $250,000. In addition, the Company has agreed to pay
RDI royalties of up to 6% of net sales of products derived under the agreement
with varying minimum royalty payments through June 1996 and $100,000 annually
thereafter. The agreement was amended during May 1998 to require the Company to
pay a percentage of royalties received with respect to the manufacture, use or
sale of the inventions by sublicensees and a percentage of all up-front,
milestone, and royalty payments which may be received under the agreement with
Bristol-Myers Squibb (see Note D). Under the agreement, the minimum royalties
shall be credited against royalties paid in connection with the amendment.

  Agreements with Washington State University Research Foundation ("WSURF")

     In July 1996, the Company entered into an agreement with WSURF whereby the
Company received an exclusive, worldwide license to use and/or sublicense
patented technology or prospective patented technology (the "WSURF Technology").
In June 1998, the agreement was amended to cover additional patents. The Company
was required to pay WSURF license fees of $7,500 per year commencing on July 1,
1997. The agreement was amended during May 1998 to require the Company to pay a
percentage of royalties received with respect to the manufacture, use or sale of
the inventions by sublicensees and a percentage of all up-front, milestone and
royalty payments which may be received under the agreement with Bristol-Myers
Squibb (see Note D). In addition, the Company agreed to pay minimum royalties of
$50,000 per year payable on July 1, 1999, $75,000 payable on July 1, 2000, and
$100,000 payable on July 1, 2001 and annually thereafter. This agreement will
remain in effect until the last to expire of the patents licensed under the
WSURF Technology, subject to termination by either party. In conjunction with
this agreement, the Company granted WSURF warrants to purchase 36,000 shares of
common stock at $4.25 per share. An aggregate of 12,000 warrants per annum are
exercisable commencing July 1999 and expire July 2002.

     In July 1996, the Company entered into a research agreement with WSURF, as
amended, for research to be conducted on behalf of the Company through July 2002
providing for funding of approximately $1,207,000. During 2001, 2000 and 1999,
respectively, the Company incurred approximately $166,000, $269,000 and $288,000
of research costs under the agreement.

  Agreements with the Regents of the University of California

     In February 1996, the Company entered into two license agreements
("Agreements") with the Regents of the University of California, granting to the
Company exclusive rights to certain technology and patent rights. Pursuant to
the Agreements, the Company paid license fees of $10,000 and $15,000 upon
issuance of the patents. In addition, the Company must pay a yearly license
maintenance fee for these licenses, aggregating $2,000 in the initial year,
increasing by $4,000 in the second year and increasing by $6,000 per year until
it reaches a maximum of $36,000, until the Company is commercially selling a

                                       F-19

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

product based on the technology derived from these license agreements, at which
time a royalty based on net sales will be due.

     In August 1998, the Company entered into an additional license agreement
with the Regents of the University of California, granting to the Company
exclusive rights to certain technology and patent rights. Pursuant to the
agreement, the Company paid license fees of $20,000 and has agreed to pay
$25,000 upon issuance of a patent. In addition, the Company must pay a yearly
license maintenance fee of $2,000, increasing by $2,000 per year until it
reaches a maximum of $12,000, until the Company is commercially selling a
product based on the technology derived from these license agreements, at which
time a royalty based on net sales will be due.

     In July 2000, the Company entered into a license agreement with the Regents
of the University of California, granting to the Company exclusive rights to
certain technology and patent rights. Pursuant to the agreement, the Company
paid license fees of $15,000 and has agreed to pay all past and future patent
costs plus a 15% patent service fee. In addition, the Company must pay a yearly
license maintenance fee of $10,000 until the Company is commercially selling a
product based on the technology derived from the license agreement, at which
time a royalty based on net sales will be due. Pursuant to this agreement the
Company entered into two sponsored research agreements with third parties
whereby the Company agreed to fund research for the period July 2000 through
June 2003 and August 2000 to July 2003 in the amounts of $99,360 and $109,320,
respectively, per annum.

  Agreements with Molecular Simulations Incorporated ("MSI")

     In June 2000, the Company entered into two, three year participation
agreements with MSI in which the Company will participate with MSI and others in
a project with the purpose of developing software to be used in the assignment
and understanding of protein function and a project with the purpose to develop
and validate rapid computer-based methods for x-ray structure determination and
model building and provide a scientific forum for research of x-ray
crystallographic methods for structure determination. Pursuant to the
agreements, the Company is to pay $125,000 per year for membership in the
software project and a total of $127,000 during the three years for membership
in the x-ray project. Each participation agreement requires that the Company
appoint at least one staff member to be an active participant in each project,
act as liaison between MSI and the Company, provide non-proprietary input
material in its possession which may be beneficial to the project and throughout
the term of the projects, the Company is to be a valid licensee of the most
recent version of certain commercially released software, as defined in the
agreement. Under such software license agreements the Company is to pay
approximately $174,000 over the three year term.

  RELATED PARTY TRANSACTIONS

     Effective December 1996, the Company entered into a one-year agreement,
which was extended in January 1998 for an additional year, with a stockholder of
the Company, whereby the Company will receive financial and investment banking
services for a consulting fee of $5,000 per month plus commissions, as defined.
The Company paid approximately $10,000, $339,000 and $96,000 during 2001, 2000
and 1999, respectively, under this agreement, including reimbursable expenses.
The stockholder acted as placement agent for the Company's 1998 private
placement and, in consideration for its services as such, received a sales
commission equal to 10% of the $5,633,675 gross proceeds, or $563,368, plus
approximately $229,000 as an expense allowance together with other costs. The
stockholder also received a unit purchase option, exercisable for a five-year
period commencing April 2, 1998, to purchase 134,199 shares of Common Stock at
prices ranging from $8.18 to $9.46 and Class E Warrants to purchase 67,101
shares of Common Stock exercisable at prices ranging from $9.82 to $11.35. In
connection with the

                                       F-20

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

redemption of the Company's C and D warrants during 2000, the Company paid
solicitation fees of approximately $1,921,000 which was charged to additional
paid-in capital.

     At December 31, 2001, the Company has two notes outstanding from its Vice
President of drug design in the principal amounts of $138,195 plus accrued
interest, due on April 30, 2002, and $140,000 plus accrued interest due on
September 1, 2003. Both notes which arose in connection with loans made to the
officer bear interest at 9.75% per annum and accrued interest at December 31,
2001 and December 31, 2000 was approximately $51,000 and $23,000 (included in
prepaid expenses and other current assets), respectively.

     In December 2000, the Company entered into a consulting agreement with a
company owned by one of its Directors. The agreement calls for an annual
retainer of $125,000, paid quarterly in advance, and is automatically renewed
each year unless terminated by either party on 3 months notice.

     In May of 2001, the Company received a note receivable from the CEO for
$300,000 from the sale of Treasury Stock. The note bears interest at 4.71% per
annum and accrued interest receivable is approximately $9,000 at December 31,
2001.

     In 2001, a Director was employed as a consultant and payments for these
services was $80,250.

NOTE K -- 401(k) PLAN

     The Company maintains a defined contribution 401(k) plan available to
eligible employees. Employee contributions are voluntary and are determined on
an individual basis, limited to the maximum amount allowable under federal tax
regulations. The Company made no contributions during 2001, 2000 and 1999.

NOTE L -- QUARTERLY RESULTS (UNAUDITED)



                                                  QUARTER ENDED
                              ------------------------------------------------------
                               MARCH 31       JUNE 30     SEPTEMBER 30   DECEMBER 31   TOTAL YEAR
                              -----------   -----------   ------------   -----------   -----------
                                                                        
2001
Revenues....................  $   333,000   $   334,000   $   333,000    $   333,000   $ 1,333,000
Net loss....................   (1,520,000)   (2,999,000)   (2,752,000)    (1,514,000)   (8,785,000)
Loss per share -- basic and
  diluted(a)................        (0.10)        (0.19)        (0.17)         (0.11)        (0.55)
2000
Revenues....................  $   344,000   $   343,000   $    67,000    $   111,000   $   865,000
Net loss....................   (2,419,000)   (1,295,000)   (1,958,000)    (1,493,000)   (7,165,000)
Loss per share -- basic and
  diluted(a)................        (0.22)        (0.09)        (0.13)         (0.09)        (0.51)


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

(a)  Per common share amounts for the quarters and full year have been
     calculated separately. Accordingly, quarterly amounts do not add to the
     annual amount because of differences in the weighted average common shares
     outstanding during each period due to the effect of the Company's issuing
     shares of its common stock during the year.

NOTE M -- DEFERRED REVENUE

     The Company recognizes revenue from development agreements over the stated
life of the agreement. Amounts received in advance of the services to be
performed are recorded as deferred revenue. Accordingly, funds of $500,000
received during the six months ended June 30, 2002, net of $556,000 in

                                       F-21

                                 EXEGENICS INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

revenues recognized cumulatively through June 30, 2002, and including $56,000 in
deferred revenue outstanding as of December 31, 2001, eliminate deferred
revenues at June 30, 2002.

NOTE N -- RESERVE FOR RESTRUCTURE

     The Company generally recognizes operating expenses as incurred. As part of
its reorganization efforts in June 2001, the Company terminated several
employees, remodeled facilities and moved equipment. During the second quarter
of 2002, due to the Company's decision to concentrate on its strategic drug
discovery and development programs, as well as the completion of funding related
to the "Sponsored Research Agreement" with BMS, the Company terminated
additional employees. The Company recognized approximately $560,000 related to
those activities through June 30, 2002. Cash payments of $166,000 were charged
against the account during the six months ended June 30, 2002. Accrued expenses
relating to restructuring are $44,000 at June 30, 2002. As a result of the
Company's decision to concentrate on its strategic drug discovery and
development programs, as well as the completion of funding related to the
"Sponsored Research Agreement" with BMS, the Company recently began the process
of renegotiating several scientific collaborations, including agreements with
the Research and Development Institute, or RDI, and Washington State University
Research Foundation. The agreement with RDI was terminated, relieving the
Company of future annual minimum royalty payments. The Company has initiated
discussions with Bristol-Myers with the objective of negotiating an agreement to
reacquire exclusive rights to the WSU paclitaxel gene technology for eXegenics.

NOTE O -- SUBSEQUENT EVENTS

     On September 20, 2002, the Company announced that it had executed a
definitive merger agreement with Innovative Drug Delivery Systems, Inc., or
IDDS, a private company with products ready to enter Phase III clinical trials.

     On August 13, 2002, the Company issued warrants to purchase 125,000 shares
of its common stock at a purchase price of $1.00 per share, with an expiration
date of August 13, 2007, and additional warrants to purchase 125,000 shares of
our common stock at a purchase price of $0.55 per share, with an expiration date
of August 13, 2007, to Roan/Meyers Associates, L.P. in exchange for financial
advisory services. The Company valued these warrants at $90,600.

     In July 2002, the Company entered into a one-year agreement with an
employee that called for an increase in annual salary and payment of certain
research expenses owed to the employee. In lieu of making direct cash payments
in settlement of these obligations of approximately $355,000, the employee
agreed to accept termination of previously incurred liabilities to the Company.

                                       F-22


                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Innovative Drug Delivery Systems,
Inc.:

     In our opinion, the accompanying balance sheets and the related statements
of operations, of redeemable preferred stock and stockholders' deficit and of
cash flows present fairly, in all material respects, the financial position of
Innovative Drug Delivery Systems, Inc. (the "Company") (a development stage
enterprise) at December 31, 2000 and 2001, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2001
in conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

                                          PRICEWATERHOUSECOOPERS LLP

New York, New York

January 30, 2002, except for Note 9, paragraph 2 of
Note 1 and paragraph 3 of Note 1 as to which the dates are
April 29, 2002, May 1, 2002 and September 10, 2002, respectively

                                       F-23


                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                                 BALANCE SHEETS



                                                                     DECEMBER 31,
                                                              ---------------------------
                                                                  2000           2001       JUNE 30, 2002
                                                              ------------   ------------   -------------
                                                                                             (UNAUDITED)
                                                                                             SEE NOTE 2
                                                                                   
                                                 ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 10,083,611   $  7,743,840   $  3,579,238
  Grant receivable..........................................       306,035        194,990        280,717
  Prepaid expenses and other current assets.................        64,000         57,912        114,222
                                                              ------------   ------------   ------------
          TOTAL CURRENT ASSETS..............................    10,453,646      7,996,742      3,974,177
Fixed assets, at cost, net of accumulated depreciation......         4,003         11,420         48,129
Restricted cash.............................................        40,000         60,000         40,000
Prepaid offering costs......................................            --        776,819             --
                                                              ------------   ------------   ------------
          TOTAL ASSETS......................................  $ 10,497,649   $  8,844,981   $  4,062,306
                                                              ============   ============   ============
                                   LIABILITIES, REDEEMABLE CONVERTIBLE
                               PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
  Accounts payable and accrued expenses.....................  $    256,214   $  1,153,325   $    668,960
  Due to affiliates.........................................        22,574         38,450         30,318
                                                              ------------   ------------   ------------
          TOTAL CURRENT LIABILITIES.........................       278,788      1,191,775        699,278
                                                              ------------   ------------   ------------
Commitments and contingencies
Redeemable convertible preferred stock, 6,500,000 shares
  authorized;
  Series A convertible preferred stock, $0.001 par value;
     4,500,000 shares designated; 4,014,125 shares issued
     and outstanding at December 31, 2000, 2001 and June 30,
     2002; (liquidation value $16,056,500 in 2000, 2001 and
     2002)..................................................    13,774,952     13,774,952     13,774,952
  Series B convertible preferred stock, $0.001 par value;
     1,351,350 shares designated; no shares issued and
     outstanding at December 31, 2000, 989,991 shares issued
     and outstanding at December 31, 2001 and June 30, 2002;
     (liquidation value $5,494,450 in 2001 and 2002)........            --      5,020,032      5,020,032
                                                              ------------   ------------   ------------
          TOTAL REDEEMABLE CONVERTIBLE PREFERRED STOCK......    13,774,952     18,794,984     18,794,984
                                                              ------------   ------------   ------------
STOCKHOLDERS' (DEFICIT):
Common stock, $0.001 par value; 21,500,000 shares
  authorized; 9,929,579 shares issued and outstanding at
  December 31, 2000 and 9,960,427 shares issued and
  outstanding at December 31, 2001 and June 30, 2002........         9,930          9,960          9,960
Additional paid-in capital..................................    21,134,234     21,615,672     23,382,113
Unearned compensation.......................................            --             --       (453,328)
Subscription receivable.....................................          (654)          (110)          (110)
Deficit accumulated during the development stage............   (24,699,601)   (32,767,300)   (38,370,591)
                                                              ------------   ------------   ------------
          TOTAL STOCKHOLDERS' (DEFICIT).....................    (3,556,091)   (11,141,778)   (15,431,956)
                                                              ------------   ------------   ------------
          TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE
            PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT).....  $ 10,497,649   $  8,844,981   $  4,062,306
                                                              ============   ============   ============


    The accompanying notes are an integral part of the financial statements.
                                       F-24


                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            STATEMENTS OF OPERATIONS



                                                                                SIX MONTHS ENDED         CUMULATIVE FROM
                                         YEAR ENDED DECEMBER 31,                    JUNE 30,            FEBRUARY 23, 1998
                                -----------------------------------------   -------------------------    (INCEPTION) TO
                                   1999           2000           2001          2001          2002         JUNE 30, 2002
                                -----------   ------------   ------------   -----------   -----------   -----------------
                                                                            (UNAUDITED)   (UNAUDITED)      (UNAUDITED)
                                                                                      
Revenues:
  Government grants...........                $    306,035   $    882,358   $   394,096   $   190,797     $  1,379,190
                                              ------------   ------------   -----------   -----------     ------------
Operating expenses:
  Research and development....  $   664,636     21,832,641      7,009,543     1,128,861     1,940,383       31,653,821
  General and
     administrative...........      312,079      1,353,445      2,285,779       638,353     3,891,093        8,099,376
  Depreciation and
     amortization.............          324            748          3,210         1,357         3,149            7,431
                                -----------   ------------   ------------   -----------   -----------     ------------
       TOTAL OPERATING
          EXPENSES............      977,039     23,186,834      9,298,532     1,768,571     5,834,625       39,760,628
                                -----------   ------------   ------------   -----------   -----------     ------------
Operating loss................     (977,039)   (22,880,799)    (8,416,174)   (1,374,475)   (5,643,828)     (38,381,438)
                                -----------   ------------   ------------   -----------   -----------     ------------
Other income (expense):
  Interest expense............     (239,092)      (320,533)            --            --            --         (566,227)
  Interest income.............       10,572        177,490        348,475       236,304        40,537          577,074
                                -----------   ------------   ------------   -----------   -----------     ------------
                                   (228,520)      (143,043)       348,475       236,304        40,537           10,847
                                -----------   ------------   ------------   -----------   -----------     ------------
       NET LOSS...............   (1,205,559)   (23,023,842)    (8,067,699)   (1,138,171)   (5,603,291)     (38,370,591)
Deemed dividend related to
  beneficial conversion
  feature of Series B
  redeemable convertible
  preferred stock.............           --             --     (3,559,305)           --            --       (3,559,305)
                                -----------   ------------   ------------   -----------   -----------     ------------
Net loss attributable to
  common stockholders.........  $(1,205,559)  $(23,023,842)  $(11,627,004)  $(1,138,171)  $(5,603,291)    $(41,929,896)
                                ===========   ============   ============   ===========   ===========     ============
Net loss per share
  attributable to common
  stockholders
  Basic and diluted...........  $     (0.28)  $      (3.93)  $      (1.20)  $     (0.12)  $     (0.58)
                                ===========   ============   ============   ===========   ===========
  Weighted average shares.....    4,309,510      5,859,105      9,725,376     9,715,902     9,737,490
                                ===========   ============   ============   ===========   ===========


    The accompanying notes are an integral part of the financial statements.
                                       F-25


                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

       STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM FEBRUARY 23, 1998 (INCEPTION) TO JUNE 30, 2002 (UNAUDITED),
  INCLUDING THE YEARS ENDED DECEMBER 31, 1999, 2000, AND 2001 AND FOR THE SIX
                     MONTHS ENDED JUNE 30, 2002 (UNAUDITED)


                                            SERIES A                 SERIES B
                                           REDEEMABLE               REDEEMABLE
                                         PREFERRED STOCK         PREFERRED STOCK         COMMON STOCK      ADDITIONAL
                                     -----------------------   --------------------   ------------------     PAID-IN
                                      SHARES       AMOUNT      SHARES      AMOUNT      SHARES     AMOUNT     CAPITAL
                                     ---------   -----------   -------   ----------   ---------   ------   -----------
                                                                                      
Sale of Common Stock to founders at
 inception for cash ($0.001 per
 share)............................                                                   4,458,724   $4,459   $      539
Fair value of services provided by
 an affiliate (see Note 11)........                                                                            89,531
Net loss for the period February
 23, 1998 (inception) to December
 31, 1998..........................
                                                                                      ---------   ------   -----------
   BALANCE AT DECEMBER 31, 1998....                                                   4,458,724   4,459        90,070
Issuance of 231,859 warrants in
 June in connection with bridge
 financing (see Note 6)............                                                                           101,564
Issuance of Common Stock to
 consultant in June for services
 (see Note 5)......................                                                     189,496     189        93,267
Issuance of 200,642 warrants to
 consultants in August for
 services..........................                                                                            98,598
Fair value of services provided by
 an affiliate (see Note 11)........                                                                           155,917
Net loss for the year ended
 December 31, 1999.................
                                                                                      ---------   ------   -----------
   BALANCE AT DECEMBER 31, 1999....                                                   4,648,220   4,648       539,416
Issuance of 15,242 warrants to an
 advisor for services in connection
 with sale of Series A redeemable
 preferred stock in August (see
 Note 5)...........................              $   (55,790)                                                  55,790
Exercise of warrants by
 consultants.......................                                                     200,642     201            (3)
Issuance of Common Stock in
 connection with acquisition of a
 license in September (see Note
 1)................................                                                   5,080,717   5,081    18,599,919
Sale of 160.565 Units for cash in
 September ($100,000 per Unit), net
 of offering expenses of
 $1,157,572........................  4,014,125    14,898,928
Issuance of Preferred A warrants in
 September (see Note 5)............                 (960,361)                                                 960,361
Issuance of Preferred A Finders
 Units for services in September
 (see Note 5)......................                 (107,825)                                                 107,825
Payment of stock subscription
 receivable........................
Non-cash compensation in connection
 with issuance of stock options to
 non-employees in August and
 November (see Note 9).............                                                                           707,550
Fair value of services provided by
 an affiliate (see Note 11)........                                                                           163,376
Net loss for the year ended
 December 31, 2000.................
                                     ---------   -----------   -------   ----------   ---------   ------   -----------
   BALANCE AT DECEMBER 31, 2000....  4,014,125    13,774,952                          9,929,579   9,930    21,134,234
Sale of 10.9887 Units with
 beneficial conversion feature for
 cash in December ($500,000 per
 Unit) (see Note 5)................                            989,991   $1,935,044                         3,559,305
Expenses in connection with sale of
 Series B stock....................                                        (474,317)
Deemed dividend related to
 beneficial conversion feature of
 Series B stock (see Note 5).......                                       3,559,305                        (3,559,305)
Payment of stock subscription
 receivable........................
Exercise of warrants by a
 consultant........................                                                      15,242      15
Exercise of bridge warrants........                                                      15,606      15           139
Fair value of services provided by
 an affiliate (see Note 11)........                                                                           481,299
Net loss for the year ended
 December 31, 2001.................
                                     ---------   -----------   -------   ----------   ---------   ------   -----------
   BALANCE AT DECEMBER 31, 2001....  4,014,125    13,774,952   989,991    5,020,032   9,960,427   9,960    21,615,672
Issuance of compensatory stock
 options to members of the board of
 directors (unaudited).............                                                                         1,611,355
Amortization of unearned
 compensation (unaudited)..........
Fair value of services provided by
 an affiliate (see Note 11)
 (unaudited).......................                                                                           155,086
Net loss for the period ended June
 30, 2002 (unaudited)..............
                                     ---------   -----------   -------   ----------   ---------   ------   -----------
   BALANCE AT JUNE 30, 2002
    (UNAUDITED)....................  4,014,125   $13,774,952   989,991   $5,020,032   9,960,427   $9,960   $23,382,113
                                     =========   ===========   =======   ==========   =========   ======   ===========


                                                                     DEFICIT
                                                                   ACCUMULATED
                                                       STOCK        DURING THE        TOTAL
                                       UNEARNED     SUBSCRIPTION   DEVELOPMENT    STOCKHOLDERS'
                                     COMPENSATION    RECEIVABLE       STAGE          DEFICIT
                                     ------------   ------------   ------------   -------------
                                                                      
Sale of Common Stock to founders at
 inception for cash ($0.001 per
 share)............................                   $(3,749)                    $      1,249
Fair value of services provided by
 an affiliate (see Note 11)........                                                     89,531
Net loss for the period February
 23, 1998 (inception) to December
 31, 1998..........................                                $  (470,200)       (470,200)
                                                      -------      ------------   ------------
   BALANCE AT DECEMBER 31, 1998....                    (3,749)        (470,200)       (379,420)
Issuance of 231,859 warrants in
 June in connection with bridge
 financing (see Note 6)............                                                    101,564
Issuance of Common Stock to
 consultant in June for services
 (see Note 5)......................                      (106)                          93,350
Issuance of 200,642 warrants to
 consultants in August for
 services..........................                                                     98,598
Fair value of services provided by
 an affiliate (see Note 11)........                                                    155,917
Net loss for the year ended
 December 31, 1999.................                                 (1,205,559)     (1,205,559)
                                                      -------      ------------   ------------
   BALANCE AT DECEMBER 31, 1999....                    (3,855)      (1,675,759)     (1,135,550)
Issuance of 15,242 warrants to an
 advisor for services in connection
 with sale of Series A redeemable
 preferred stock in August (see
 Note 5)...........................                                                     55,790
Exercise of warrants by
 consultants.......................                                                        198
Issuance of Common Stock in
 connection with acquisition of a
 license in September (see Note
 1)................................                                                 18,605,000
Sale of 160.565 Units for cash in
 September ($100,000 per Unit), net
 of offering expenses of
 $1,157,572........................                                                         --
Issuance of Preferred A warrants in
 September (see Note 5)............                                                    960,361
Issuance of Preferred A Finders
 Units for services in September
 (see Note 5)......................                                                    107,825
Payment of stock subscription
 receivable........................                     3,201                            3,201
Non-cash compensation in connection
 with issuance of stock options to
 non-employees in August and
 November (see Note 9).............                                                    707,550
Fair value of services provided by
 an affiliate (see Note 11)........                                                    163,376
Net loss for the year ended
 December 31, 2000.................                                (23,023,842)    (23,023,842)
                                                      -------      ------------   ------------
   BALANCE AT DECEMBER 31, 2000....                      (654)     (24,699,601)     (3,556,091)
Sale of 10.9887 Units with
 beneficial conversion feature for
 cash in December ($500,000 per
 Unit) (see Note 5)................                                                  3,559,305
Expenses in connection with sale of
 Series B stock....................
Deemed dividend related to
 beneficial conversion feature of
 Series B stock (see Note 5).......                                                 (3,559,305)
Payment of stock subscription
 receivable........................                       544                              544
Exercise of warrants by a
 consultant........................                                                         15
Exercise of bridge warrants........                                                        154
Fair value of services provided by
 an affiliate (see Note 11)........                                                    481,299
Net loss for the year ended
 December 31, 2001.................                                 (8,067,699)     (8,067,699)
                                                      -------      ------------   ------------
   BALANCE AT DECEMBER 31, 2001....                      (110)     (32,767,300)    (11,141,778)
Issuance of compensatory stock
 options to members of the board of
 directors (unaudited).............   (1,611,355)                                           --
Amortization of unearned
 compensation (unaudited)..........    1,158,027                                     1,158,027
Fair value of services provided by
 an affiliate (see Note 11)
 (unaudited).......................                                                    155,086
Net loss for the period ended June
 30, 2002 (unaudited)..............                                 (5,603,291)     (5,603,291)
                                     -----------      -------      ------------   ------------
   BALANCE AT JUNE 30, 2002
    (UNAUDITED)....................  $  (453,328)     $  (110)     $(38,370,591)  $(15,431,956)
                                     ===========      =======      ============   ============


    The accompanying notes are an integral part of the financial statements.

                                       F-26


                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            STATEMENTS OF CASH FLOWS



                                                                                       FOR THE SIX MONTHS        CUMULATIVE FROM
                                                 YEAR ENDED DECEMBER 31,                 ENDED JUNE 30,         FEBRUARY 23, 1998
                                         ----------------------------------------   -------------------------    (INCEPTION) TO
                                            1999           2000          2001          2001          2002         JUNE 30, 2002
                                         -----------   ------------   -----------   -----------   -----------   -----------------
                                                                                    (UNAUDITED)   (UNAUDITED)      (UNAUDITED)
                                                                                              
Cash flows from operating activities:
  Net loss.............................  $(1,205,559)  $(23,023,842)  $(8,067,699)  $(1,138,171)  $(5,603,291)    $(38,370,591)
  Adjustments to reconcile net loss to
    net cash used in operating
    activities:
    Depreciation.......................          324            748         3,210        1,357         3,149             7,431
    Amortization of deferred financing
      costs............................       96,314        131,003                                                    227,317
    Amortization of original issue
      discount.........................       41,820         59,744                                                    101,564
    Issuance of Common Stock in
      connection with acquisition of a
      license..........................                  18,600,000                                                 18,600,000
    Stock and warrants issued in
      consideration for services
      rendered.........................       93,350        707,550                                1,158,027         1,958,927
    Non-cash expense contributed by
      affiliate........................      155,917        163,376       481,299      267,898       155,086         1,045,209
    Changes in assets and liabilities:
      (Increase) decrease in grant
        receivable.....................                    (306,035)      111,045       64,916       (85,727)         (280,717)
      (Increase) decrease in prepaid
        expenses, other current assets
        and other assets...............      (12,565)       (51,435)        6,088       31,074       (56,310)         (114,222)
      Increase (decrease) in accounts
        payable, accrued expenses and
        due to affiliates..............      124,973        (49,796)      912,987       97,341      (492,497)          699,278
                                         -----------   ------------   -----------   -----------   -----------     ------------
        NET CASH USED IN OPERATING
          ACTIVITIES...................     (705,426)    (3,768,687)   (6,553,070)    (675,585)   (4,921,563)      (16,125,804)
                                         -----------   ------------   -----------   -----------   -----------     ------------
Cash flows from investing activities:
  Capital expenditures.................       (1,825)        (3,250)      (10,627)      (5,286)      (39,858)          (55,560)
  Restricted cash......................           --        (40,000)      (20,000)     (20,000)       20,000           (40,000)
                                         -----------   ------------   -----------   -----------   -----------     ------------
        NET CASH USED IN INVESTING
          ACTIVITIES...................       (1,825)       (43,250)      (30,627)     (25,286)      (19,858)          (95,560)
                                         -----------   ------------   -----------   -----------   -----------     ------------
Cash flows from financing activities:
  Proceeds from exercise of warrants...                         198           544           15                             742
  Proceeds from sale of common stock...                       8,201           169           44                           9,619
  Proceeds from sale of Preferred
    Stock..............................                  16,056,500     5,494,349                                   21,550,849
  Expenses associated with sale of
    Preferred Stock....................                  (1,157,572)     (474,317)                                  (1,631,889)
  (Increase) decrease in prepaid
    offering costs.....................                                  (776,819)                   776,819                --
  Proceeds from notes payable..........    1,040,000        250,000                                                  1,515,000
  Expenses associated with notes
    payable............................     (128,719)                                                                 (128,719)
  Repayment of notes payable...........                  (1,515,000)                                                (1,515,000)
                                         -----------   ------------   -----------   -----------   -----------     ------------
        NET CASH PROVIDED BY FINANCING
          ACTIVITIES...................      911,281     13,642,327     4,243,926           59       776,819        19,800,602
                                         -----------   ------------   -----------   -----------   -----------     ------------
        NET INCREASE (DECREASE) IN CASH
          AND CASH EQUIVALENTS.........      204,030      9,830,390    (2,339,771)    (700,812)   (4,164,602)        3,579,238
Cash and cash equivalents at beginning
  of period............................       49,191        253,221    10,083,611   10,083,611     7,743,840                --
                                         -----------   ------------   -----------   -----------   -----------     ------------
Cash and cash equivalents at end of
  period...............................  $   253,221   $ 10,083,611   $ 7,743,840   $9,382,799    $3,579,238      $  3,579,238
                                         ===========   ============   ===========   ===========   ===========     ============
Supplemental disclosures:
  Cash paid for interest...............  $    16,003   $    215,542   $        --   $       --    $       --      $    237,346
                                         ===========   ============   ===========   ===========   ===========     ============
Supplemental disclosure of noncash
  investing and financing activities:
  Original issue discount on note
    payable............................  $   101,564                                                              $    101,564
  Options and warrants issued for
    services and financings............  $    98,598   $  1,123,976                                               $  2,833,928


    The accompanying notes are an integral part of the financial statements.
                                       F-27


                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         NOTES TO FINANCIAL STATEMENTS
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

1.  ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION

     Innovative Drug Delivery Systems, Inc. (the "Company" or "IDDS") is a
development stage enterprise engaged in the research, development and
commercialization of innovative treatments for the relief of moderate to severe
pain. The Company is incorporated in the State of Delaware with operations in a
single segment in the United States of America.

     On March 12, 2002, the Company's Board of Directors approved a
1.0161-for-one split of the outstanding shares of common stock which was
effectuated as a stock dividend. All common share and per share data included
herein have been adjusted as if the stock dividend had occurred at inception.
The stock dividend became effective on May 1, 2002.

     As a development stage enterprise, the Company's primary efforts, to date,
have been devoted to raising capital, forming collaborations, conducting
research and development and recruiting staff. The Company has limited capital
resources and revenues and has experienced net operating losses and negative
cash flows from operations since inception and expects these conditions to
continue for the foreseeable future. Management has adopted a plan to conserve
liquid assets which to date has entailed reducing or eliminating certain
discretionary spending and provides for additional reductions in operating
activities if needed to ensure the Company continues as a going concern. At June
30, 2002, the Company has approximately $3.6 million in cash and cash
equivalents. Management believes that cash and cash equivalents on hand at June
30, 2002 will be sufficient to fund operations beyond one year. The Company will
be required to raise additional funds to meet long-term planned goals. The
Company is in the process of obtaining additional financing through a merger and
would consider other alternatives including public or private equity financings.
There can be no assurance that the merger will be successful or that such
additional financing, if at all applicable, can be obtained on terms acceptable
to the Company. If the Company is unable to obtain such additional financing,
future operations will need to be scaled back further or discontinued.

     In addition to the normal risks associated with a new business venture,
there can be no assurance that the Company's research and development will be
successfully completed or that any approved product will be commercially viable.
In addition, the Company operates in an environment of rapid change in
technology, and is dependent upon the services of its employees, collaborators
and consultants. The Company is solely dependent upon a supplier to supply a key
component in connection with the Company's clinical trials of morphine.

     Pain Management, Inc. (the "Predecessor Company") was incorporated in the
State of Delaware on February 23, 1998. On August 14, 2000, the Predecessor
Company agreed to merge with IDDS. The terms of the merger provided for each
share of the Predecessor Company's common stock to convert into approximately
..892 share of IDDS common stock as adjusted for a 0.0161-for-one stock dividend
on March 12, 2002. Accordingly, the stockholders of the Predecessor Company
exchanged 5,212,500 shares of the Predecessor Company's common stock for
4,648,220 shares of IDDS common stock. Prior to the merger, IDDS had outstanding
5,080,717 shares of common stock. At the time the merger closed on September 22,
2000, the only asset held by IDDS was a licensing agreement with West
Pharmaceutical Services, Inc. (see Note 7) executed on August 25, 2000. IDDS was
incorporated on April 8, 1999, however, it remained dormant until executing the
merger and licensing agreements noted above. The Predecessor Company's Board of
Directors and management assumed similar roles in the Company after the merger
closed. For financial reporting purposes, the merger was accounted for as the
acquisition of a licensing agreement by the Predecessor Company and a
reorganization with the Company becoming the surviving entity. Consequently, the
assets, liabilities and historic operating results of the Company prior to
                                       F-28

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

the merger are those of the Predecessor Company. The fair value of the licensing
agreement was determined to be approximately $18.6 million based on the fair
value of the common stock issued. The rights obtained under the licensing
agreement related to an unproven technology that would require significant
research and development effort to commercialize a product. There is also a
significant uncertainty as to whether the research and development effort will
be successful. Since the licensed technology has no alternative future use, the
fair value of the consideration issued to obtain the licensing agreement was
expensed as research and development at the time the merger closed.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  REVENUE RECOGNITION

     The Company has been awarded government grants from the Department of
Defense (the "DoD") and the National Institutes of Health (the "NIH"), which are
used to subsidize the Company's research and development projects ("Projects").
DoD and NIH revenue is recognized as subsidized Project costs for each period as
incurred. For the years ended December 31, 2000 and 2001 and the six months
ended June 30, 2002, all of the Company's research grant revenue came from the
DoD and the NIH.

     Interest income is recognized as earned.

  RESEARCH AND DEVELOPMENT COSTS

     The Company expenses all research and development costs as incurred for
which there is no alternative future use. Such expenses include licensing and
upfront fees paid in connection with collaborative agreements.

  CONCENTRATIONS OF CREDIT RISK

     Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash, cash equivalents, and receivables
from the DoD and the NIH. The Company has established guidelines that relate to
credit quality and diversification and that limit exposure to any one issue of
securities.

  FIXED ASSETS

     Furniture and fixtures, and computer equipment are stated at cost.
Furniture, fixtures, and computer equipment are depreciated on a straight-line
basis over their estimated useful lives. Expenditures for maintenance and
repairs which do not materially extend the useful lives of the assets are
charged to expense as incurred. The cost and accumulated depreciation of assets
retired or sold are removed from the respective accounts and any gain or loss is
recognized in operations.

     The estimated useful lives of fixed assets are as follows:


                                                           
Furniture and fixtures......................................  5 years
Computer equipment..........................................  3 years


                                       F-29

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

  PATENTS

     As a result of research and development efforts conducted by the Company,
it has applied, or is applying, for a number of patents to protect proprietary
inventions. All costs associated with patents are expensed as incurred.

  CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid investments which have maturities
of three months or less, when acquired, to be cash equivalents. The carrying
amount reported in the balance sheet for cash and cash equivalents approximates
its fair value. Cash and cash equivalents subject the Company to concentrations
of credit risk. At December 31, 2001 and 2000 and June 30, 2002, the Company had
invested approximately $7.7 million, $10.1 million and $3.6 million (unaudited),
respectively, in funds with a single commercial bank.

  NET LOSS PER SHARE

     The Company prepares its per share data in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
Basic net loss per share is computed on the basis of net loss for the period
divided by the weighted average number of shares of common stock outstanding
during the period. Since the Company has incurred net losses since inception,
diluted net loss per share does not include the number of shares issuable upon
exercise of outstanding options and warrants and the conversion of preferred
stock since such inclusion would be anti-dilutive. Disclosures required by SFAS
No. 128 have been included in Note 8.

  DEFERRED FINANCING COSTS

     Costs incurred in connection with issuance of notes payable are deferred
and amortized using the interest method, which approximates the straight-line
method, as interest expense over the term of the debt instrument.

  INCOME TAXES

     The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). SFAS No. 109 requires that the Company recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined on the basis of
the difference between the tax basis of assets and liabilities and their
respective financial reporting amounts ("temporary differences") at enacted tax
rates in effect for the years in which the temporary differences are expected to
reverse.

  COMPREHENSIVE LOSS

     Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", established standards for reporting and display of
comprehensive loss and its components in the financial statements.
Implementation of this statement has not had an impact on the Company's
financial statements as the Company has no other comprehensive items to report
other than net loss.

                                       F-30

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

  IMPAIRMENT OF LONG-LIVED ASSETS

     For all periods ending during the year ended December 31, 2001 and prior,
impairment of long-lived assets were accounted for in accordance with the
provisions of Statement of Financial Accounting Standards No. 121, "Accounting
for Impairment of Long-Lived Assets and Long Lived Assets to be Disposed Of"
("SFAS 121") long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows is less
than the carrying amount of the asset, a loss is recognized for the difference
between the fair value and carrying value of the asset. For all periods
presented there have been no impairment losses incurred.

  EQUITY ISSUANCE COSTS

     Costs associated with the issuance of the Company's common or preferred
stock are initially recorded as prepaid offering costs. Upon issuance of the
securities, those costs are reclassified as a reduction of the offering
proceeds. In the event that the offering is not completed, those costs would be
expensed in the period the offering is determined to be unsuccessful. During the
six months ended June 30, 2002, the Company expensed prepaid offering costs of
$776,819 that were deferred as of December 31, 2001 related to the Company's
terminated public offering.

  RISKS AND UNCERTAINTIES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Significant estimates relate to the valuation of equity
instruments issued for services rendered, recoverability of fixed assets and
deferred taxes. Actual results could differ from those estimates.

  STOCK-BASED COMPENSATION

     The Company accounts for stock-based compensation to employees in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"). Under APB No. 25, generally, no compensation expense is
recognized in the financial statements in connection with the awarding of stock
option grants to employees provided that, as of the grant date, all terms
associated with the award are fixed and the fair value of the Company's stock,
as of the grant date, is equal to or less than the amount an employee must pay
to acquire the stock. The Company will recognize compensation expense in
situations where the terms of an option grant are not fixed or where the fair
value of the Company's common stock on the grant date is greater than the amount
an employee must pay to acquire the stock.

     Disclosures required by Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), including pro
forma operating results had the Company prepared its financial statements in
accordance with the fair-value-based method of accounting for stock-based
compensation, have been included in Note 9.

     The fair value of options and warrants granted to non-employees for
financing, goods or services are included in the financial statements and
expensed over the life of the debt, as the goods are utilized or the services
performed, respectively. The fair value of options and warrants issued to
non-employees has been calculated using the Black-Scholes option pricing model,
based on the following assumptions: risk free interest rate of 6%; expected life
of 5 to 7 years; zero dividend yield; and volatility of 75%. Securities

                                       F-31

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

issued in connection with services or financings were valued based upon the
estimate of fair value of the securities issued as determined by the Company's
Management.

  IMPACT OF FUTURE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS

     The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards No. 141 (FAS 141), "Business Combinations" and
Statement of Financial Accounting Standards No. 142 (FAS 142), "Goodwill and
Other Intangible Assets". FAS 141 requires that all business combinations be
accounted for under the purchase method and that certain acquired intangible
assets in a business combination be recognized as assets apart from goodwill.
FAS 142 requires that ratable amortization of goodwill and certain intangible
assets be replaced with periodic tests of the goodwill's impairment and that
other intangible assets be amortized over their useful lives. FAS 141 is
effective for all business combinations initiated after June 30, 2001. The
provisions of FAS 142 will be effective for fiscal years beginning after
December 15, 2001 and will thus be adopted by the Company in fiscal year 2002.

     In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 (FAS 143), "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets." The objective of FAS 143
is to provide accounting guidance for legal obligations associated with the
retirement of tangible long-lived assets. The retirement obligations included
within the scope of this project are those that an entity cannot avoid as a
result of either the acquisition, construction or normal operation of a
long-lived asset. Components of larger systems also fall under this project, as
well as tangible long-lived assets with indeterminable lives. FAS 143 is
required to be adopted on January 1, 2003.

     The Financial Accounting Standards Board issued FASB Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. The objectives
of FAS 144 are to address significant issues relating to the implementation of
FASB Statement No. 121 (FAS 121), Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and to develop a single
accounting model, based on the framework established in FAS 121, for long-lived
assets to be disposed of by sale, whether previously held and used or newly
acquired. The provisions of FAS 144 are effective for financial statements
issued for fiscal years beginning after December 15, 2001.

     Management believes that the future adoption of these accounting standards
will not have a material impact on the Company's financial statements.

  UNAUDITED INTERIM FINANCIAL DATA AS OF JUNE 30, 2002 AND FOR THE SIX MONTHS
  ENDED JUNE 30, 2001 AND 2002

     a. Basis of Presentation

     The unaudited financial data as of June 30, 2002 and for the six months
ended June 30, 2001 and 2002 have been prepared by management and includes all
adjustments, consisting of normal recurring accruals, considered necessary for a
fair presentation of the Company's results of operations and cash flows.
Operating results for any interim period are not necessarily indicative of the
results for the full year.

     b. The Company entered into a one-year lease for office space beginning
November 2002. Rent expense for the lease is $371,000 per year.

     c. Impact of Future Adoption of Recently Issued Accounting Standards

                                       F-32

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

     During the six months ended June 30, 2002, the Company adopted FAS 141, FAS
142 and FAS 144, which did not have a material impact on the Company's financial
statements.

     In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 145 ("FAS 145"), "Rescission of FAS Nos. 4,
44, and 64, amendment of FASB, and Technical Corrections as of April 2002." As a
result, the accounting for gains and losses from extinguishment of debt and
sale-leaseback transactions will be effected by FAS 145. The provisions of this
Statement related to the rescission of Statements 4, 44 and 64 shall be applied
in fiscal years beginning after May 15, 2002. The provisions of this Statement
related to Statement 13 shall be effective for transactions occurring after May
15, 2002.

     In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146 ("FAS 146"), "Accounting for Costs
Associated with Exit or Disposal Activities". FAS 146 nullifies Emerging Issues
Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." FAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred rather than on the date of an entity's commitment to an
exit plan and establishes that fair value is the objective for initial
measurement of the liability. The provisions of this Statement shall be
effective for exit or disposal activities initiated after December 31, 2002. The
provisions of Issue 94-3 shall continue to apply for an exit activity initiated
under an exit plan that met the criteria of Issue 94-3 prior to this Statement's
initial application.

     Management believes that the future adoption of these accounting standards
will not have a material impact on the Company's financial statements.

3.  FIXED ASSETS

     Fixed assets consist of the following:



                                                          DECEMBER 31,
                                                        -----------------    JUNE 30,
                                                         2000      2001        2002
                                                        -------   -------   -----------
                                                                            (UNAUDITED)
                                                                   
Office equipment and computers........................  $ 5,075   $15,702     $55,560
Less, Accumulated depreciation........................   (1,072)   (4,282)     (7,431)
                                                        -------   -------     -------
                                                        $ 4,003   $11,420     $48,129
                                                        =======   =======     =======


4.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following:



                                                        DECEMBER 31,
                                                    ---------------------    JUNE 30,
                                                      2000        2001         2002
                                                    --------   ----------   -----------
                                                                            (UNAUDITED)
                                                                   
Accounts payable..................................  $100,706   $  361,471    $373,651
Accrued professional fees.........................    47,794      573,935     240,725
Accrued research and development..................    59,910      196,174      42,995
Accrued expenses..................................    47,804       21,745      11,589
                                                    --------   ----------    --------
                                                    $256,214   $1,153,325    $668,960
                                                    ========   ==========    ========


                                       F-33

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

     The Company has agreements to spend approximately $3.5 million for future
clinical and development programs. However, such agreements may be cancelled
upon written notice to the other party.

5.  STOCKHOLDERS' (DEFICIT) EQUITY

     The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 21.5 million shares of common stock (the "Common Stock"),
$0.001 par value, and 6.5 million shares of preferred stock (the "Preferred
Stock"), $0.001 par value. The Company's Board of Directors (the "Board") has
the authority to issue preferred stock, in series, with rights and privileges
determined by the Board. The Board designated 4.5 million shares of preferred
stock as Series A stock and approximately 1.4 million shares of Preferred Stock
as Series B stock. In September 2000 and December 2001, investors purchased
4,014,125 shares of Series A stock and 989,991 shares of Series B stock,
respectively.

     Dividends may be declared and paid on Common Stock and Preferred Stock as
determined by the Board, provided that (i) concurrently with the declaration of
dividends on Common Stock, the Company declares and pays a dividend to the
holders of Preferred Stock equal to that which would be payable to them if their
Preferred Stock had been converted into Common Stock on the date of
determination of holders of Common Stock to receive such dividend and (ii)
dividends declared on Series A stock are subject to prior rights of holders of
any superior class of stock.

     In the event of liquidation, dissolution or winding up of the Company,
holders of Series A stock will be entitled to be paid the greater of (i) $4.00
per share subject to adjustment for stock dividends, stock splits, mergers or
other recapitalization, as defined, plus all dividends accrued or declared but
unpaid, out of the assets of the Company (the "Liquidation Amount") or (ii) the
Shared Allocation Amount. The Shared Allocation Amount is that portion of the
Company's assets available for distribution to stockholders allocated based on
percentage of outstanding shares held by that class of stockholders. The order
of preference of payments will be to holders of Series A Stock and then Common
Stock.

     Each share of Series A stock is convertible into the number of shares of
Common Stock determined by dividing the Series A Conversion Price into $4.00.
The Series A Conversion Price of the Series A stock is initially $3.94 per share
adjusted for certain dilutive events, as defined. Accrued but unpaid dividends
are forfeited upon conversion of Series A stock. As of December 31, 2000 and
2001, the Series A Conversion Price was $3.94 and the outstanding Series A stock
is convertible into 4,078,927 shares of Common Stock.

     Shares of Series A stock will automatically convert into shares of Common
Stock based upon the Series A Conversion Price in effect at the time upon (i)
the closing of an initial public offering of the Company's Common Stock, within
defined terms or (ii) written election of the holders of a majority of Series A
stock.

     In the event of consolidation, merger or other reorganization of the
Company in which the Company is not the surviving entity, the holders of Series
A stock will be entitled to be paid, out of the assets of the Company available
for distribution before any payment to holders of junior stock of the Company,
the greater of (i) the Liquidation Amount or (ii) the Shared Allocation Amount,
as defined. Such payment will be made by redemption of such shares by the
Company or by the surviving company. Accordingly, the Series A stock is
presented as redeemable preferred stock.

     Holders of Series A stock have the number of votes equal to the number of
shares of Common Stock into which the shares of Series A stock convert into at
the date on which the vote is held. Holders of Common Stock have one vote per
share.
                                       F-34

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

     At the option of the Company, shares of Series A stock may be redeemed at a
redemption price per share of $4.00 plus dividends accrued or declared but
unpaid (the "Redemption Price") up to and including the redemption date. The
Redemption Price is subject to adjustment for stock dividends, stock splits,
mergers or recapitalizations, as defined.

     In September 2000, the Company sold 160.565 units ("Units" or "Series A
Financing") to investors at a per Unit price of $100,000. Each Unit consisted of
25,000 shares of Series A stock (convertible into 25,404 shares of common stock)
and 2,540 warrants (the "A Preferred Warrants"). Each A Preferred Warrant
entitles the holder to purchase one share of Common Stock at an exercise price
of $3.94 per share. The A Preferred Warrants contain certain antidilution
provisions, as defined. The A Preferred Warrants expire in October 2005. The
fair value of the A Preferred Warrants at issuance was $960,361. At December 31,
2001, none of the A Preferred Warrants had been exercised (see Note 10).

     As partial consideration for the sale of the Units, an option to purchase
15.83 units (the "Finders Units") was issued to members of the firm responsible
for obtaining the financing. Each Finders Unit entitles the holder to purchase
25,000 shares of Series A stock (convertible into 25,404 shares of common stock)
and 2,540 A Preferred warrants (the "Finders Warrants") for $110,000 per Finders
Unit. The fair value of the Series A stock, which was accounted for as a cost of
the Series A Financing, totaled $1,071,331. Each Finders Warrant entitles the
holder to purchase one share of Common Stock at a per share price of $3.94. The
Finders Warrants expire in September 2007. The fair value of the Finders
Warrants at the date of issue was $107,825.

     During 1999, a consultant (the "Consultant") was issued 189,496 shares of
Common Stock for services rendered and a subscription receivable of $106. The
fair value of the Consultant shares was $93,244.

     In 2000, another consultant, acting as an advisor to the Series A
Financing, received 15,242 warrants to purchase shares of Common Stock at an
exercise price of approximately $0.001 per share. The warrants expire in August,
2007. The fair value of the warrants, which has been accounted for as a cost of
the Series A Financing, at the issuance date was $55,790. All of the warrants
were exercised in 2001.

     In December, 2001, the Company's Board of Directors designated 1,351,350
shares of preferred stock, $0.001 par value, as Series B Convertible Preferred
Stock ("Series B stock"). The Company then closed a $5.5 million private
financing consisting of the sale of 10.9887 units of Series B stock (the "Series
B Unit") at $500,000 per Series B Unit. Each Series B Unit consists of 90,090
shares of Series B stock with a stated value of $5.55 per share, subject to
adjustment for stock dividends, stock splits, mergers and recapitalizations, as
defined. The preferences and rights of Series B stock are the same as those of
Series A stock regarding conversion, redemption, voting and liquidation of the
Company, except that the stated value and the conversion price used in
calculating those preferences is $5.55 and $5.46 for Series B stock,
respectively, rather than $4.00 and $3.94 for Series A stock respectively. As of
December 31, 2001, the Series B stock converts into 1,005,973 shares of common
stock. Series B stock is considered to be mandatorily redeemable preferred stock
since it is redeemable upon events of consolidation, merger or other
reorganization of the Company.

     The Series B conversion price represented a discount from the estimated
fair value of the Common Stock at the time of issuance. Accordingly, the
discount amount is considered incremental yield ("the beneficial conversion
feature") to the preferred stockholders and has been accounted for as a deemed
dividend to preferred stockholders. Based on the conversion terms of the Series
B stock, a deemed

                                       F-35

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

dividend of approximately $3.6 million has been added to the net loss in the
calculation of net loss applicable to common stockholders in the year ended
December 31, 2001.

6.  NOTES PAYABLE

     a. During 1998, the Company issued two notes payable to two banks with
principal amounts of $145,000 and $80,000, respectively (the "Notes"). The Notes
were due in September 2000 and bear interest of 1% over the Eurodollar rate and
the bank's prime rate, respectively. The Notes were guaranteed by one of the
Company's investors. At December 31, 1999, the outstanding balances on the Notes
were $145,000 and $80,000, respectively, accrued interest totaled $1,400 and the
weighted average interest rate was 7.5%. During 2000, the $145,000 Note was
increased to $245,000.

     Both Notes were repaid in October 2000, following the issuance of Series A
stock (see Note 5).

     b. During 1999, the Company raised $1.04 million by issuing notes payable
(the "Bridge Notes") and warrants (the "Bridge Warrants"). The Bridge Notes
accrued interest at 12% per annum for the first twelve months and 15% per annum
for up to an additional year. At December 31, 1999, accrued interest on the
Bridge Notes was approximately $86,000. At December 31, 1999, the fair value of
the Bridge Notes approximated their face value. In November, 2000, after
issuance of Series A stock, the principal plus accrued interest totaling
approximately $1,238,000 was repaid.

     In connection with the Bridge Notes, 231,859 Bridge Warrants to purchase an
equal number of shares of Common Stock, with an exercise price of approximately
$0.01, were issued to the Bridge Noteholders. The Bridge warrants contain
anti-dilution provisions and expire in September, 2005. The fair value of the
Bridge Warrants at the date of issue was $101,564. Accordingly, the Bridge Notes
were recorded at an original issue discount of $101,564, which was amortized to
interest expense over the term of the Bridge Notes. At December 31, 1999, the
Bridge Notes were recorded at $980,256. During the year ended December 31, 2001,
Bridge Warrants to purchase 15,606 shares of common stock were exercised (see
Note 10).

     Professional fees incurred in connection with the Bridge Notes, amounting
to $128,719, were accounted for as deferred financing costs.

     In 1999, three consultants, who had arranged the sale of Bridge Notes
received a total of 200,642 warrants, exercise price of approximately $0.001, to
purchase shares of Common Stock. The warrants expire in August 2007. The fair
value of the warrants, which were accounted for as deferred financing costs, at
the issuance date was $98,598. All of the warrants were exercised in 2000.

     c. In July 2000, the Company entered into a note (the "Second Note") with a
commercial bank with principal amount of $150,000 and bearing interest, payable
monthly, based on the Eurodollar rate plus 1% due in July, 2001. The Second Note
was guaranteed by one of the Company's investors. In October 2000, following the
closing of the sale of Series A stock, the Second Note was repaid.

                                       F-36

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

     Notes payable transactions are summarized as follows:



                                                                 SECOND
                                        NOTES     BRIDGE NOTE     NOTE         TOTAL
                                      ---------   -----------   ---------   -----------
                                                                
Issuance of Notes...................  $ 145,000                             $   145,000
Issuance of Notes...................     80,000                                  80,000
                                      ---------                             -----------
Balance at December 31, 1998........    225,000                                 225,000
Issuance of Bridge Notes............              $ 1,040,000                 1,040,000
Discount on Bridge Notes............                 (101,564)                 (101,564)
Amortization of Discount............                   41,820                    41,820
                                      ---------   -----------               -----------
Balance at December 31, 1999........    225,000       980,256                 1,205,256
Issuance of Notes...................    100,000                                 100,000
Issuance of Second Note.............                            $ 150,000       150,000
Amortization of Discount............                   59,744                    59,744
Repayment...........................   (325,000)   (1,040,000)   (150,000)   (1,515,000)
                                      ---------   -----------   ---------   -----------
Balance at December 31, 2000 and
  2001..............................  $      --   $        --   $      --   $        --
                                      =========   ===========   =========   ===========


7.  COMMITMENTS AND CONTINGENCIES

  RESEARCH COLLABORATION, LICENSING AND CONSULTING AGREEMENTS

     a. As part of the formation of the Company, the Company entered into a
license agreement with Stuart Weg, M.D. The license granted the Company
exclusive worldwide rights, including the right to grant sublicenses, for the
intellectual property surrounding transnasal ketamine. In connection therewith,
the Company made an upfront payment to Dr. Weg, Herbert Brotspies, and Calgar &
Associates (collectively the "Founders") and issued the Founders shares of
Common Stock, of which a portion is held in escrow and will be released to the
Founders, if at all, upon the successful completion of the Phase III trial. The
issuance of the shares from escrow is not contingent on the Founders'
performance. The Company also reimbursed the Founders for patent and other
costs. The Company will pay semi-annual royalty payments to the Founders based
on a percentage of net sales of transnasal ketamine by the Company or its
sublicensees. In addition, the Company shall pay the Founders a defined
percentage of all sublicensing fees or other lump sum payments. The Company is
also obligated to make aggregate future payments of approximately $1.3 million
upon the earlier of certain defined dates ranging from August 2003 to November
2004 or satisfaction of certain clinical and regulatory milestones, which
includes the filing of a New Drug Application ("NDA") with the Food & Drug
Administration ("FDA"), the approval of an NDA by the FDA and the first
commercial sale of a licensed product. A defined percentage of such milestone
payments shall be creditable against royalties earned; provided, however, that
in no event shall royalties earned be reduced by more than a certain percentage
in any applicable semi-annual period. The Company may satisfy a portion of the
milestone payments through the issuance of shares of Common Stock of the
Company; provided that the Company is publicly traded at the time such milestone
payment accrues.

     In connection with the above license agreement, in February 1998 the
Company entered into a three year Consulting Agreement, renewable upon mutual
consent, with each of Dr. Weg and Herbert Gary. Pursuant to such Consulting
Agreements, both Dr. Weg and Mr. Gary will provide the Company with

                                       F-37

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

such consulting services as the Company may reasonably request. In consideration
for such services the Company has agreed to pay to each of Dr. Weg and Mr. Gary
a consulting fee equal to $75,000 per year, payable in equal monthly
installments. These agreements expired March 2001 and were not renewed.

     b. On August 25, 2000, the Company entered into a license agreement with
West Pharmaceutical Services, Inc. ("West") for rights to develop and
commercialize intranasal morphine, fentanyl and other products. Under the terms
of the agreement, the Company was granted an exclusive, worldwide, royalty
bearing license, including the right to grant sublicenses, for the rights to the
intellectual property covering these products. The license agreement will expire
with the last to expire of the license patents in 2016. In consideration of the
license, the Company paid and expensed on September 22, 2000 an up front fee. In
addition, under the license agreement for morphine, fentanyl and other products
the Company is obligated to make royalty payments to West based upon net sales
of products by the Company or its sublicensees, if any, as defined. The Company
is also obligated to pay West a minimum annual royalty for each licensed product
that receives approval by a regulatory agency to be marketed in any major market
country, as defined. The Company is also obligated to pay West a defined amount
of any up-front license fees in the event that the Company sublicenses any
rights to any third party. In addition, under a Development Milestone and Option
Agreement entered into by the Company and West in connection with the license
agreement, the Company is obligated to make aggregate future payments totaling
$5.0 million upon reaching certain defined development milestones, which
includes the filing of an NDA with the FDA, the approval of an NDA by the FDA of
a licensed product. Milestone payments can be paid in cash or equity upon the
satisfaction of certain clinical and regulatory milestones and provided that the
Company is publicly traded at the time such milestone payment accrues. The
Company's ability to pay the upfront payment for the license agreement and the
M-6-G fee (see below) was guaranteed by an affiliate of the Company. The
guarantee expired upon the payments by the Company of amounts owed to West. In
addition, the Company granted West the right of first refusal to enter into a
clinical manufacturing agreement for nasal morphine (see c. (i), below).

     The license agreement and related agreements (see c. (i) to c. (iv) below)
may be terminated by mutual consent of the parties at any time or by either
party upon written notice of default, including non-performance, by the other
party that is not cured within 30 days.

     c. In connection with the West license agreement, the Company entered into
the following additional agreements:

          (i) A clinical manufacturing agreement, whereby the Company will buy
     from West 100% of the nasal morphine product required for conducting the
     clinical trials subject to West's ability to supply 100% of the required
     product. West will manufacture and package the clinical product for the
     Company. This agreement will be in effect until the earlier of (a) a period
     of 2 years or (b) the last to occur launch date after the clinical product
     has been launched in all major market countries.

          (ii) An option agreement, whereby the Company was granted an option to
     include morphine-6-glucuronide ("M-6-G") as an identified compound under
     the license agreement. The Company paid and expensed a non-refundable fee
     in consideration of the option, which expired unexercised on December 22,
     2000.

          (iii) On October 24, 2000, the Company expanded its license agreement
     to include an additional development agreement with West for rights to
     develop and commercialize intranasal fentanyl. The Company will undertake a
     development program for intranasal fentanyl with West. The parties will
     endeavor to complete the development program within the defined time table.
     However, the Company

                                       F-38

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

     can use other suppliers should West be unable to either provide competitive
     cost bids or complete the program within a reasonable timeframe. In
     addition, under the development agreement, the Company is obligated to make
     aggregate future payments totaling $6.3 million upon reaching certain
     defined development milestones, which includes completion of
     proof-of-principle studies, successful completion of a phase I/II clinical
     trial, commencement of a phase III clinical trial, filing of an NDA with
     the FDA and the approval of an NDA by the FDA of a licensed product. These
     milestone payments can be paid in cash or equity upon the satisfaction of
     certain clinical and regulatory milestones and provided that the Company is
     publicly traded at the time such milestone payment accrues.

          (iv) On November 17, 2000, the Company entered into a clinical
     manufacturing agreement with West to manufacture, package, purchase and
     sell to the Company nasal ketamine clinical product according to agreed
     upon clinical product specifications and price schedule. The agreement
     expired in November 2001.

     d. On December 14, 2001 (the "Effective Date"), the Company entered into an
agreement (the "Shimoda Agreement") with Shimoda Biotech (Proprietary) Ltd. and
certain affiliated entities ("Shimoda"), for an exclusive worldwide license to
commercialize formulations of pharmaceutical products containing diclofenac. The
Company will pay: (i) a license fee to Shimoda and reimbursement for expenses,
if certain defined events occur; (ii) two percent of the net proceeds, as
defined, of the Company's initial public offering to Shimoda, but not less than
$1 million or in excess of $2 million; (iii) aggregate future milestone payments
of $6.0 million payable upon the satisfaction of certain clinical and regulatory
milestones which includes submission of an NDA with the FDA, approval of an NDA
by the FDA and one year following the date of first sale of a licensed product;
and (iv) royalty payments to Shimoda based upon the sales of products by the
Company or its sublicensees, if any, as defined. Upon achievement of a
milestone, Shimoda has the option to receive payment in cash or shares of common
stock. In the event Shimoda elects to receive common stock, the number of shares
to be issued is based on a formula whereby the defined milestone payment is
divided by the per share price of the Company's common stock in an initial
public offering as defined. Should common stock be issued in satisfaction of
milestones, the Company will record a non-cash charge based on the fair value of
the consideration paid at the date the milestone is achieved. Such charge could
be material and could result in a material dilution to per share amounts. The
Shimoda Agreement may be terminated (i) by either party due to breach by the
other party that is not cured within 60 days of written notice; (ii) by Shimoda
in the event of default by the Company for non-payment of amounts due that is
not cured with 60 days of written notice; (iii) by the Company, if certain
defined initial activities are not completed by Shimoda within 90 days of the
Effective Date, in which case all payments to Shimoda other than the initial
payment will be refunded to the Company or (iv) by the Company at any time by
giving 90 days written notice to Shimoda.

8.  NET LOSS PER SHARE

     The Company's basic net loss per share amounts have been computed by
dividing net loss by the weighted-average number of common shares outstanding
during the period. For all periods presented, the Company reported a net loss
and, therefore, common stock equivalents were not included since such inclusion
would have been anti-dilutive. In addition, for all periods presented, 222,937
shares of Common Stock were held in escrow and have been excluded from the
calculation of basic and diluted earnings per share.

                                       F-39

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

     The calculation of net loss per share, basic and diluted, is as follows:



                                                                  WEIGHTED
                                                                   AVERAGE
                                                                   COMMON
                                                   NET LOSS        SHARES       PER SHARE
                                                 (NUMERATOR)    (DENOMINATOR)    AMOUNT
                                                 ------------   -------------   ---------
                                                                       
The six months ended June 30, 2002 (unaudited)
  Basic and diluted............................  $ (5,603,291)    9,737,490      $(0.58)
                                                 ============     =========      ======
The six months ended June 30, 2001 (unaudited)
  Basic and diluted............................  $ (1,138,171)    9,715,902      $(0.12)
                                                 ============     =========      ======
The year ended December 31, 2001
  Basic and diluted............................  $(11,627,004)    9,725,376      $(1.20)
                                                 ============     =========      ======
The year ended December 31, 2000
  Basic and diluted............................  $(23,023,842)    5,859,105      $(3.93)
                                                 ============     =========      ======
The year ended December 31, 1999
  Basic and diluted............................  $ (1,205,559)    4,309,510      $(0.28)
                                                 ============     =========      ======


     For all periods presented common stock equivalents which have been excluded
from diluted per share amounts because their effect would have been
anti-dilutive, include the following:


                                       FOR THE YEARS ENDED DECEMBER 31,
                       -----------------------------------------------------------------
                              1999                   2000                   2001
                       -------------------   --------------------   --------------------

                                  WEIGHTED               WEIGHTED               WEIGHTED
                       WEIGHTED   AVERAGE    WEIGHTED    AVERAGE    WEIGHTED    AVERAGE
                       AVERAGE    EXERCISE    AVERAGE    EXERCISE    AVERAGE    EXERCISE
                        NUMBER     PRICE      NUMBER      PRICE      NUMBER      PRICE
                       --------   --------   ---------   --------   ---------   --------
                                                              
Options..............       --                 127,744    $3.93     1,365,152    $3.94
Warrants.............  209,966     $0.006      616,040    $1.56     1,078,656    $3.25
Convertible Preferred
  Stock..............       --               1,117,514              4,081,682
                       -------               ---------              ---------
    Total............  209,966               1,861,298              6,525,490
                       =======               =========              =========


                            FOR THE SIX MONTHS ENDED JUNE 30,
                       -------------------------------------------
                               2001                   2002
                       --------------------   --------------------
                           (UNAUDITED)            (UNAUDITED)
                                   WEIGHTED               WEIGHTED
                       WEIGHTED    AVERAGE    WEIGHTED    AVERAGE
                        AVERAGE    EXERCISE    AVERAGE    EXERCISE
                        NUMBER      PRICE      NUMBER      PRICE
                       ---------   --------   ---------   --------
                                              
Options..............  1,363,171    $3.94     1,672,940    $4.21
Warrants.............  1,088,126    $3.22     1,066,542    $3.29
Convertible Preferred
  Stock..............  4,078,927              5,084,900
                       ---------              ---------
    Total............  6,530,224              7,824,382
                       =========              =========


9.  STOCK INCENTIVE PLAN

     In February 2001, the Board and stockholders approved the adoption of the
2000 Omnibus Stock Incentive Plan (the "Plan"), which was amended in March 2002
and approved by the Stockholders in April 2002. The Plan provides for the
issuance of 4,200,000 shares of Common Stock to be awarded to employees,
consultants, directors and other individuals who render services to the Company
(collectively, "Awardees"). The number of shares of common stock reserved for
issuance under the Plan will automatically increase on the first trading day in
January of each calendar year, beginning in calendar year 2003, by an amount
equal to 5% of the total number of shares of Common Stock outstanding on the
last trading day in December of the preceding calendar year, but in no event
will any annual increase exceed a defined number of shares. Awards include
options, restricted shares, bonus shares, stock appreciation rights and
performance shares (the "Awards"). The Plan contains certain anti-dilution
provisions in the event of a stock split, stock dividend or other capital
adjustment, as defined. The Plan includes an automatic option

                                       F-40

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

grant program for non-employee directors, under which option grants will
automatically be made at periodic intervals to non-employee board members to
purchase shares of common stock as defined. The Plan provides for a Committee of
the Board of Directors (the "Committee") to grant Awards to Awardees and to
determine the exercise price, vesting term, expiration date and all other terms
and conditions of the Awards, including acceleration of the vesting of an Award
at any time. All options granted under the Plan are intended to be non-qualified
("NQO") unless specified by the Committee to be incentive stock options ("ISO"),
as defined by the Internal Revenue Code. NQO's may be granted to employees,
consultants or other individuals at an exercise price, equal to, below or above
the fair value of the Common Stock on the date of grant. ISO's may only be
granted to employees of the Company and may not be granted at exercise prices
below fair value of the Common Stock on the date of grant (110% of fair value
for employees who own 10% or more of the Company). The period during which an
option may be exercised may not exceed ten years from the date of grant (five
years for grants of ISO's to employees who own 10% or more of the Company).
Under the Plan, for a period of one year following the termination of an
Awardee's employment or active involvement with the Company, the Company has the
right, should certain contingent events occur, to repurchase any or all shares
of Common Stock acquired upon exercise of an Award held by the Awardee at a
purchase price defined by the Plan. The Plan will terminate at the earliest of
(i) its termination by the Committee, (ii) February 4, 2011 or (iii) the date on
which all of the shares of Common Stock available for issuance under the Plan
have been issued and all restrictions on such shares have lapsed. Awards granted
before termination of the Plan will continue under the Plan until exercised,
cancelled or expired.

     As of December 31, 2001, no options have been granted under the Plan;
however, options to purchase 1,367,101 shares of the Company's common stock have
been granted outside of the Plan.

     The following table summarizes non-plan stock option information for the
options as of December 31, 2001:



                               OPTIONS OUTSTANDING
                      -------------------------------------     OPTIONS EXERCISABLE
                                     WEIGHTED-                -----------------------
                                      AVERAGE     WEIGHTED-                 WEIGHTED-
                                     REMAINING     AVERAGE                   AVERAGE
RANGE OF                NUMBER      CONTRACTUAL   EXERCISE      NUMBER      EXERCISE
EXERCISE PRICES       OUTSTANDING      LIFE         PRICE     EXERCISABLE     PRICE
---------------       -----------   -----------   ---------   -----------   ---------
                                                             
$0.01..............        1,219      8.7 yrs       $0.01         1,219       $0.01
$3.94..............    1,365,882      8.9 yrs       $3.94       976,360       $3.94
                       ---------                                -------
$0.01-$3.94........    1,367,101      8.9 yrs       $3.93       977,579       $3.93
                       =========                                =======


     Transactions involving options during the years ended December 31, 2000 and
2001 are summarized as follows:



                                                              AVERAGE                        AVERAGE
                                               NUMBER OF     WEIGHTED-        NUMBER        WEIGHTED-
                                                SHARES     EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
                                               ---------   --------------   -----------   --------------
                                                                              
2000: Granted................................  1,011,451       $3.93
                                               ---------
Balance outstanding, December 31, 2000.......  1,011,451       $3.93          427,168         $3.93
2001: Granted(1).............................    355,560       $3.94
                                               ---------
Balance outstanding, December 31, 2001.......  1,367,011       $3.93          977,579         $3.93
                                               =========


                                       F-41

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

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

(1) In addition to the above, the Committee has or has agreed to grant: 850,000
    options to three employees and 75,000 options to a related party consultant
    with an exercise price equal to that of the Company's common stock at an
    initial public offering. The Committee also agreed to grant 406,456 options
    to the Company's directors. The Committee originally intended that the
    measurement date of these options would be the date of the Company's initial
    public offering and that the options' exercise price would be equal to the
    initial public offering price. On February 25, 2002 the Committee granted
    such options fixing the exercise price at $5.46 per share. The exercise
    price is below the estimated fair value of the Company's common stock on the
    date of grant and accordingly the Company will incur a non-cash expense. The
    aggregate intrinsic value of the option grants to the directors at the
    measurement date total approximately $1.4 million. Such amount will be
    expensed over the vesting period with approximately $1.36 million recognized
    during 2002 and the balance pro rata through February 2003.

     On April 1, 2002, the Committee granted 50,000 options (unaudited) to a new
director, with an exercise price of $5.50 per share (unaudited). The exercise
price is below the estimated fair value of the Company's common stock on the
date of grant and, accordingly, the Company will incur a non-cash expense. The
aggregate intrinsic value of the option grant to the new director at the
measurement date totals approximately $0.2 million. Such amount will be expensed
over the vesting period with approximately $54,000 recognized during the six
months ended June 30, 2002.

     Included in the options above, during the year ended December 31, 2000, the
Company granted 300,150 fully vested stock options to non-employees
("Non-employee Options") with an average exercise price of $3.94, which are
accounted for in accordance with EITF 96-18. The estimated fair value of the
Non-employee Options on the grant date totaling $707,550 was recognized as
compensation expense in the year ended December 31, 2000.

     The following table summarizes the pro forma operating results of the
Company had compensation costs for non-plan options been determined in
accordance with the fair value based method of accounting for stock based
compensation as prescribed by SFAS No. 123. Since option grants awarded during
2000 and 2001 vest over several years and additional awards are expected to be
issued in the future, the pro forma results shown below are not likely to be
representative of the effects on future years of the application of the fair
value based method. Since no stock options were granted prior to September 1,
2000, the pro forma net loss and net loss per share for the year ended December
31, 1999 is equal to the amount as presented in the Statement of Operations.



                                                             YEAR ENDED DECEMBER 31,
                                                           ---------------------------
                                                               2000           2001
                                                           ------------   ------------
                                                                    
Pro Forma Net Loss.......................................  $(23,379,852)  $(12,921,587)
                                                           ============   ============
Pro Forma Net Loss per Share (Basic and Diluted).........  $      (3.99)  $      (1.33)
                                                           ============   ============


     For the purpose of the above pro forma calculation, the fair value of each
option granted was estimated on the date of grant using the Black-Scholes option
pricing method. The weighted-average fair value of the options granted during
2000 and 2001 was $2.39. The following assumptions were used in computing the
fair value of option grants: expected volatility of 75%, expected life of 5
years; zero dividend yield and risk-free interest rate of 6.0%.

     The Company intends to adopt an employee stock purchase plan ("ESPP"),
which will become effective upon the completion of an initial public offering of
the Company's Common Stock. Under the

                                       F-42

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

ESPP, eligible employees may set aside up to 15% of their eligible compensation
to be applied to the purchase of shares of the Company's Common Stock. The per
share price the employee must pay to acquire each share of Common Stock will be
equal to 85% of the lower of the quoted market price of the Company's Common
Stock at the start date of the offering period or the semi-annual purchase date.
The ESPP will be implemented in a series of overlapping periods, each with a
duration of 24 months. The initial offering period will begin at the time of the
initial public offering. Subsequent offering periods will begin at 6-month
intervals and each such offering period will have 4 semi-annual purchase dates.
The ESPP has been designed to qualify as a non-compensatory plan under Section
423 of the Internal Revenue Code. Upon completion of an initial public offering,
the Company will finalize various terms and conditions including the number of
shares of Common Stock available under the ESPP.

10.  WARRANTS AND UNITS

     The following table summarizes warrant and unit activity for the period
from February 23, 1998 (inception) to December 31, 2001:



                                                     BRIDGE    PREFERRED A   CONSULTANTS   FINDERS
                                                    WARRANTS    WARRANTS      WARRANTS      UNITS
                                                    --------   -----------   -----------   -------
                                                                               
Issuance of Bridge Warrants (see Note 6)..........   231,859
Issuance of Consultants Warrants (see Note 6).....                             200,642
                                                    --------     -------      --------      -----
Balance outstanding, December 31, 1999............   231,859          --       200,642         --
Issuance of Preferred A Warrants (see Note 5).....               401,413
Exercise of Consultants Warrants..................                            (200,642)
Issuance of Finders Units (see Note 5)............                                          15.83(1)
Issuance of Consultants Warrants (see Note 5).....                              15,242
                                                    --------     -------      --------      -----
Balance outstanding, December 31, 2000............   231,859     401,413        15,242      15.83
Exercise of Bridge Warrant........................   (15,606)
Exercise of Consultants Warrants..................                             (15,242)
                                                    --------     -------      --------      -----
Balance outstanding, December 31, 2001 and June
  30, 2002 (unaudited)............................  (216,253)    401,413            --      15.83
                                                    ========     =======      ========      =====


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

(1) Each Finders Unit entitles the holder to purchase 25,000 shares of Series A
    stock and 2,540 Preferred A Warrants. Total issuance entitles holders to
    purchase 395,788 shares of Series A stock (convertible into 402,177 shares
    of common stock) and 40,218 A Preferred Warrants.

11.  RELATED PARTY TRANSACTIONS

     The Company, since its inception, has received financial assistance from a
principal stockholder in the form of office space and management and legal
assistance provided at no cost. In accordance with the Securities and Exchange
Commission Staff Accounting Bulletin No. 79, the estimated fair value of such
assistance has been reflected in the accompanying financial statements as an
expense in the period benefited with a corresponding deemed capital
contribution. The estimated fair value of the financial assistance totaled
$155,917, $163,376 and $481,299 for the years ended December 31, 1999, 2000 and
2001, respectively, and $267,898 (unaudited) and $155,086 (unaudited) for the
six months ended June 30,

                                       F-43

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                       (UNAUDITED AS OF JUNE 30, 2002 AND
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002)

2001 and 2002, respectively, and $1,045,209 (unaudited) for the cumulative
period from February 23, 1998 (inception) to June 30, 2002.

12.  INCOME TAXES

     There is no provision (benefit) for federal or state income taxes for the
years ended December 31, 1999, 2000 and 2001 since the Company has incurred
operating losses and has established valuation allowances equal to the total
deferred tax asset due to the uncertainty with respect to achieving taxable
income in the future.

     The tax effect of temporary differences and net operating losses as of
December 31, 2000 and 2001 are as follows:



                                                                   DECEMBER 31,
                                                             -------------------------
                                                                2000          2001
                                                             -----------   -----------
                                                                     
Deferred tax assets and liabilities and valuation
  allowance:
  Net operating loss carry-forwards........................  $ 2,229,328   $ 5,624,080
  Deferred charges.........................................          482           362
  Valuation allowance......................................   (2,229,810)   (5,624,442)
                                                             -----------   -----------
                                                             $        --   $        --
                                                             ===========   ===========


     As of December 31, 2000 and 2001, the Company has available, for tax
purposes, unused net operating loss carryforwards of approximately $5.0 million
and $12.6 million which will expire between 2018 and 2021. As of December 31,
2001, the Company had aggregate permanent differences of $20.2 million including
$18.6 million for the license acquired in connection with the merger. Future
ownership changes may limit the Company's ability to utilize these net operating
loss carryforwards as defined by the federal and state tax codes.

                                       F-44


                                  EXHIBIT A-1
                          VOTING AND LOCK-UP AGREEMENT

                                                                          , 2002

eXegenics Inc.
9000 Harry Hines Blvd., Suite 621
Dallas, Texas 75235

     RE: VOTING AND LOCK-UP AGREEMENT (THIS "AGREEMENT")

Ladies and Gentlemen:

     The undersigned is an officer, director and/or an owner of record or
beneficially of certain shares of Common Stock, par value $0.001 per share (the
"Company Common Stock"), of Innovative Drug Delivery Systems, Inc., a Delaware
corporation (the "Company"), or securities convertible into or exchangeable or
exercisable for Company Common Stock. The undersigned understands that the
Company has entered into discussions with eXegenics Inc. ("eXegenics") regarding
a possible merger ("Merger") of the Company with a newly-formed wholly owned
subsidiary of eXegenics pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"). Upon consummation of such Merger, the undersigned would exchange
his Company Common Stock, based upon an exchange ratio, for shares of the common
stock of eXegenics ("eXegenics Common Stock"). The Board of Directors of the
Company has adopted resolutions approving the Merger and transactions
contemplated by such Merger, subject to stockholder approval, and are
recommending that the Company's stockholders vote to approve such Merger. The
undersigned acknowledges that eXegenics is relying on my representations and
agreements herein in entering into the Merger Agreement and related documents
and in carrying out the Merger.

     1.  Voting.  To induce eXegenics to continue negotiating the contemplated
Merger and to enter into the Merger Agreement and related documents thereto and
to consummate the Merger, the undersigned hereby agrees to vote all of his
Company Common Stock, held as of the record date set for a stockholders' meeting
called to vote on the Merger, in favor of approving the Merger.

     2.  Lock-up.  The undersigned hereby agrees that, without the prior written
consent of eXegenics (which consent may be withheld in its sole discretion), he
will not, during the period commencing on the effective date of the Merger (the
date the Merger is consummated by the filing of a Certificate of Merger with the
State of Delaware) and ending six (6) months thereafter, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of
eXegenics Common Stock or any securities convertible into or exercisable or
exchangeable for eXegenics Common Stock.

     3.  Permitted Transfers.  Notwithstanding anything herein to the contrary,
the undersigned may transfer shares of Common Stock (i) as a bona fide gift or
gifts or by will or intestacy, provided that the transferee or transferees
thereof agree to be bound by the restrictions set forth herein, (ii) to any
trust for the direct or indirect benefit of the undersigned or the immediate
family of the undersigned, provided that the trustee of the trust agrees to be
bound by the restrictions set forth herein, and provided further that any such
transfer shall not involve a disposition for value, or (iii) in transactions
relating to shares of eXegenics Common Stock acquired by the undersigned in open
market transactions after the completion of the Merger. For purposes of this
Agreement, "immediate family" shall mean any relationship of mine by blood,
marriage or adoption, not more remote than first cousin.

     4.  Stop Order.  The undersigned also agrees that stop transfer
instructions may be placed by the transfer agent against the transfer of shares
of eXegenics Common Stock receivable by the undersigned upon the Merger in
compliance with the foregoing restrictions in this Agreement.

                                    Exh. A-1-1


     5.  Miscellaneous.  This Agreement is irrevocable and will be binding on
the undersigned and his successors, heirs, personal representatives, and
assigns. This Agreement set forth the entire Agreement between the parties
hereto as to the subject matter herein, and cannot be amended or modified except
by a writing executed by the parties hereto. This Agreement shall be governed by
the laws of the State of Delaware without giving effect to the principles of
conflicts of law.

     6.  Termination.  This Agreement shall automatically terminate upon the
termination of the Merger Agreement.

                                          Very truly yours,

                                          --------------------------------------
                                          (Name)

                                          --------------------------------------
                                          (Address)

Agreed to:

EXEGENICS INC.

By:
    --------------------------------------------------------
    Name:
    Title:

                                    Exh. A-1-2


                                                                     EXHIBIT A-2

                               LOCK-UP AGREEMENT

                                                                          , 2002

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

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

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

     RE: LOCK-UP AGREEMENT (THIS "AGREEMENT")

Ladies and Gentlemen:

     The undersigned is an officer, director and/or an owner of record or
beneficially of certain shares of common stock of either Innovative Drug
Delivery Systems, Inc., a Delaware corporation ("IDDS"), or eXegenics Inc., a
Delaware corporation ("eXegenics"), or securities convertible into or
exchangeable or exercisable for common stock of IDDS or eXegenics. The
undersigned understands that IDDS and eXegenics have entered into that certain
Agreement and Plan of Merger and Reorganization, dated as of September 19, 2002
(the "Merger Agreement"), regarding a possible merger ("Merger") of IDDS with a
newly-formed wholly owned subsidiary of eXegenics pursuant to the Merger
Agreement. Upon consummation of such Merger, the outstanding shares of IDDS
common stock will be exchanged for shares of the common stock of eXegenics
("eXegenics Common Stock"). The Board of Directors of both eXegenics and IDDS
have adopted resolutions approving the Merger and transactions contemplated by
such Merger, subject to stockholder approval, and are recommending that the
stockholders vote to approve such Merger. The undersigned acknowledges that IDDS
and eXegenics are relying on my representations and agreements herein in
carrying out the Merger.

     1.  Lock-up.  The undersigned hereby agrees that, without the prior written
consent of           (which consent may be withheld in its sole discretion), he
will not, during the period commencing on the effective date of the Merger (the
date the Merger is consummated by the filing of a Certificate of Merger with the
State of Delaware) and ending six (6) months thereafter, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of
eXegenics Common Stock or any securities convertible into or exercisable or
exchangeable for eXegenics Common Stock.

     2.  Permitted Transfers.  Notwithstanding anything herein to the contrary,
the undersigned may transfer shares of eXegenics Common Stock (i) as a bona fide
gift or gifts or by will or intestacy, provided that the transferee or
transferees thereof agree to be bound by the restrictions set forth herein, (ii)
to any trust for the direct or indirect benefit of the undersigned or the
immediate family of the undersigned, provided that the trustee of the trust
agrees to be bound by the restrictions set forth herein, and provided further
that any such transfer shall not involve a disposition for value, or (iii) in
transactions relating to shares of eXegenics Common Stock acquired by the
undersigned in open market transactions after the completion of the Merger. For
purposes of this Agreement, "immediate family" shall mean any relationship of
mine by blood, marriage or adoption, not more remote than first cousin.

     3.  Stop Order.  The undersigned also agrees that stop transfer
instructions may be placed by the transfer agent against the transfer of shares
of eXegenics Common Stock receivable by the undersigned upon the Merger in
compliance with the foregoing restrictions in this Agreement.

     4.  Miscellaneous.  This Agreement is irrevocable and will be binding on
the undersigned and his successors, heirs, personal representatives, and
assigns. This Agreement set forth the entire Agreement between the parties
hereto as to the subject matter herein, and cannot be amended or modified except
by
                                    Exh. A-2-1


a writing executed by the parties hereto. This Agreement shall be governed by
the laws of the State of Delaware without giving effect to the principles of
conflicts of law.

     5.  Termination.  This Agreement shall automatically terminate upon the
termination of the Merger Agreement.

                                          Very truly yours,

                                          --------------------------------------
                                          (Name)

                                          --------------------------------------
                                          (Address)

Agreed to:

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

By:
    --------------------------------------------------------
    Name:
    Title:

                                    Exh. A-2-2


                                                                     EXHIBIT A-3

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

                                    Exh. A-3-1


                                                                     EXHIBIT A-4

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

                                    Exh. A-4-1


                                                                         ANNEX A

                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
                                  by and among
                                 EXEGENICS INC.
                                  ("PARENT"),

                     INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
                                (THE "COMPANY"),

                               IDDS MERGER CORP.
                                ("MERGER SUB"),

                    THE PARENT STOCKHOLDERS' REPRESENTATIVE
                                  NAMED HEREIN

                                      and

                    THE COMPANY STOCKHOLDERS' REPRESENTATIVE
                                  NAMED HEREIN

                                     dated:
                               September 19, 2002

                                     Ann. A-1


                               TABLE OF CONTENTS



                                                                             PAGE
                                                                             ----
                                                                       
ARTICLE I -- THE MERGER....................................................   A-5
  1.1.         The Merger..................................................   A-5
  1.2.         Effect of the Merger........................................   A-5
  1.3.         Approval of Stockholders....................................   A-6
  1.4.         Registration Statement; Proxy Statement; Comfort Letters....   A-6
  1.5.         Organizational Documents....................................   A-7
  1.6.         Officers and Directors......................................   A-7
  1.7.         Corporate Offices...........................................   A-8
  1.8.         Effective Time and Closing..................................   A-8

ARTICLE II -- CONVERSION OF COMPANY SHARES.................................   A-8
  2.1.         Conversion of Shares........................................   A-8
  2.2.         Exchange of Certificates....................................   A-9
  2.3.         Adjustments to Exchange Ratio...............................  A-10
  2.4.         Closing of the Company Transfer Books.......................  A-10
  2.5.         Stock Options; Warrants.....................................  A-11
  2.6.         Merger Sub Common Stock.....................................  A-11
  2.7.         Dissenters' Rights..........................................  A-11

ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............  A-12
  3.1.         Corporate Organization......................................  A-12
  3.2.         Capitalization..............................................  A-12
  3.3.         Authority; No Violation.....................................  A-13
  3.4.         Financial Statements........................................  A-14
  3.5.         Absence of Certain Changes or Events........................  A-14
  3.6.         Legal Proceedings...........................................  A-14
  3.7.         Taxes and Tax Returns.......................................  A-14
  3.8.         Employee Benefit Plans......................................  A-15
  3.9.         Compliance With Applicable Law..............................  A-16
  3.10.        Certain Contracts...........................................  A-17
  3.11.        Intellectual Property.......................................  A-17
  3.12.        Properties..................................................  A-18
  3.13.        Insurance...................................................  A-18
  3.14.        Environmental Matters.......................................  A-18
  3.15.        Employees...................................................  A-19
  3.16.        Transactions With Affiliates................................  A-19
  3.17.        Broker's and Other Fees.....................................  A-19
  3.18.        The Company Proxy Statement Information.....................  A-19
  3.19.        Disclosure..................................................  A-20

ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......  A-20
  4.1.         Corporate Organization......................................  A-20
  4.2.         Capitalization..............................................  A-20
  4.3.         Authority; No Violation.....................................  A-21
  4.4.         Financial Statements........................................  A-22


                                     Ann. A-2




                                                                             PAGE
                                                                             ----
                                                                       
  4.5.         SEC Filings.................................................  A-22
  4.6.         Absence of Certain Changes or Events........................  A-22
  4.7.         Legal Proceedings...........................................  A-23
  4.8.         Taxes and Tax Returns.......................................  A-23
  4.9.         Employee Benefit Plans......................................  A-23
  4.10.        Compliance With Applicable Law..............................  A-24
  4.11.        Certain Contracts...........................................  A-25
  4.12.        Intellectual Property.......................................  A-25
  4.13.        Properties..................................................  A-26
  4.14.        Insurance...................................................  A-26
  4.15.        Environmental Matters.......................................  A-26
  4.16.        Employees...................................................  A-26
  4.17.        Transactions With Affiliates................................  A-26
  4.18.        Broker's and Other Fees.....................................  A-26
  4.19.        Parent Proxy Statement Information..........................  A-27
  4.20.        Parent Common Stock.........................................  A-27
  4.21.        Disclosure..................................................  A-27

ARTICLE V -- COVENANTS OF THE PARTIES......................................  A-27
  5.1.         Conduct of Business.........................................  A-27
  5.2.         Prohibited Actions Pending Closing..........................  A-27
  5.3.         Litigation..................................................  A-28
  5.4.         Current Information.........................................  A-28
  5.5.         Due Diligence; Access to Properties and Records.............  A-29
  5.6.         Governmental Consents.......................................  A-29
  5.7.         Further Assurances..........................................  A-29
  5.8.         Public Announcements........................................  A-29
  5.9.         Retention of Employees, Officers; Benefits..................  A-30
  5.10.        Disclosure Supplements......................................  A-30
  5.11.        Affiliates..................................................  A-30
  5.12.        Tax-Free Merger Status......................................  A-30
  5.13.        Nasdaq Listing..............................................  A-30
  5.14.        Notice of Certain Matters...................................  A-30
  5.15.        Cash; Liabilities...........................................  A-31
  5.16.        Stockholders Meetings.......................................  A-31
  5.17.        Conversion of Company Preferred Stock.......................  A-31

ARTICLE VI -- CLOSING CONDITIONS...........................................  A-31
  6.1.         Conditions of Each Party's Obligations Under This
               Agreement...................................................  A-31
  6.2.         Conditions To the Obligations of Parent and Merger Sub Under
               This Agreement..............................................  A-31
  6.3.         Conditions To the Obligations of the Company Under This
               Agreement...................................................  A-32

ARTICLE VII -- NO SOLICITATION; TERMINATION, AMENDMENT AND WAIVER..........  A-33
  7.1.         No Solicitation.............................................  A-33
  7.2.         Termination.................................................  A-35
  7.3.         Break-Up Fee................................................  A-36
  7.4.         Effect of Termination.......................................  A-37


                                     Ann. A-3




                                                                             PAGE
                                                                             ----
                                                                       

ARTICLE VIII -- ADJUSTMENT FOR LOSSES; ESCROW OF SHARES....................  A-37
  8.1.         Escrow of Shares............................................  A-37
  8.2.         Stockholders' Representatives...............................  A-37
  8.3.         Adjustment for Losses.......................................  A-38

ARTICLE IX -- MISCELLANEOUS................................................  A-40
  9.1.         Expenses....................................................  A-40
  9.2.         Survival....................................................  A-40
  9.3.         Notices.....................................................  A-40
  9.4.         Parties In Interest.........................................  A-41
  9.5.         Entire Agreement............................................  A-41
  9.6.         Amendment...................................................  A-41
  9.7.         Extension; Waiver...........................................  A-41
  9.8.         Descriptive Headings........................................  A-41
  9.9.         Governing Law...............................................  A-41
  9.10.        Waiver of Jury Trial........................................  A-41
  9.11.        Severability................................................  A-41
  9.12.        Enforcement.................................................  A-42
  9.13.        Remedies Cumulative.........................................  A-42
  9.14.        Counterparts................................................  A-42


                                     Ann. A-4


     THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated September 19,
2002 (this "Agreement"), is by and among eXegenics Inc., a Delaware corporation
("Parent"), Innovative Drug Delivery Systems, Inc., a Delaware corporation (the
"Company"), IDDS Merger Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), the Parent Stockholders' Representative (as
hereinafter defined) and the Company Stockholders' Representative (as
hereinafter defined).

     WHEREAS, the respective Boards of Directors of the Company and Parent have
each determined that it is in the best interests of their respective companies
and stockholders that Parent acquire the Company pursuant to the terms and
conditions set forth in this Agreement;

     WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company, and Parent acting as the sole stockholder of Merger Sub, have all
approved, inter alia, the merger of Merger Sub into the Company (the "Merger"),
pursuant and subject to the terms and conditions of this Agreement;

     WHEREAS, the respective Boards of Directors of the Company and Parent have
each determined that the Merger is fair to, and in the best interests of, their
respective companies and stockholders and have approved the Merger, and the
respective Boards of Directors of the Company and Parent have each recommended
the approval and adoption of this Agreement by their respective stockholders;
and

     WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Sections
368(a)(1) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder (the "Code").

     NOW, THEREFORE, intending to be legally bound, the parties hereto hereby
agree as follows:

                                   ARTICLE I

                                   THE MERGER

     1.1.  The Merger.  Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereafter defined), Merger Sub shall be merged with
and into the Company in accordance with the Delaware General Corporation Law
(the "GCL") and the Company shall be the surviving corporation (the "Surviving
Corporation") and shall be a subsidiary of Parent. The name of the Surviving
Corporation shall be the name of the Company.

     1.2.  Effect of the Merger.  At the Effective Time, the Surviving
Corporation shall be considered the same business and corporate entity as each
of the Company and Merger Sub and, thereupon and thereafter, all the property,
rights, privileges, powers and franchises of each of the Company and Merger Sub
shall vest in the Surviving Corporation and the Surviving Corporation shall be
subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of the Company and Merger Sub and shall have
succeeded to all of each of their relationships, as fully and to the same extent
as if such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationships had been originally acquired, incurred or entered into
by the Surviving Corporation. In addition, any reference to either of the
Company or Merger Sub in any contract or document, whether executed or taking
effect before or after the Effective Time, shall be considered a reference to
the Surviving Corporation if not inconsistent with the other provisions of the
contract or document; and any pending action or other judicial proceeding to
which either of the Company or Merger Sub is a party shall not be deemed to have
abated or to have discontinued by reason of the Merger, but may be prosecuted to
final judgment, order or decree in the same manner as if the Merger had not been
made; or the Surviving Corporation may be substituted as a party to such action
or proceeding, and any judgment, order or decree may be rendered for or against
it that might have been rendered for or against either of the Company or Merger
Sub if the Merger had not occurred.

                                     Ann. A-5


     1.3.  Approval of Stockholders.

     (a) Company Stockholders Meeting.  The Company shall (i) take all steps
necessary to duly call, give notice of, convene and hold a meeting of the
stockholders of Company (the "Company Stockholders Meeting") for the purpose of
securing the approval of the Company's stockholders of this Agreement, (ii)
recommend to the Company's stockholders the approval of this Agreement and the
transactions contemplated hereby and use reasonable efforts to obtain, as
promptly as practicable, such approvals, and (iii) cooperate and consult with
Parent with respect to each of the foregoing matters.

     (b) Parent Stockholders Meeting.  Parent shall (i) take all steps necessary
to duly call, give notice of, convene and hold a meeting of the stockholders of
Parent (the "Parent Stockholders Meeting" and, together with the Company
Stockholders Meeting, the "Stockholders Meetings") for the purpose of securing
the approval of Parent's stockholders of (1) the issuance of the shares of
common stock, par value $.01 per share, of Parent ("Parent Common Stock") in
connection with the Merger contemplated by this Agreement, (2) an increase in
the number of shares of common stock that Parent is authorized to issue to a
total of 100,000,000 and the number of shares of preferred stock that Parent is
authorized to issue to a total of 20,000,000, (3) a reverse stock split of the
issued and outstanding shares of Parent Common Stock, of 1-for-5 or such other
ratio as Parent and the Company shall mutually agree upon, (4) a change of
Parent's name to such name as the Company and Parent mutually agree, (5) the
creation of a staggered Board of Directors of Parent as provided under Section
1.6(c) hereof, and (6) the adoption of a new employee stock option plan by
Parent sufficient to cover the grant of the stock options contemplated by
Section 2.5(b) hereof (collectively, the "Parent Stockholder Proposals"); (ii)
recommend to the stockholders of Parent the approval of the Proposals and the
transactions contemplated hereby and use reasonable efforts to obtain, as
promptly as practicable, such approvals, and (iii) cooperate and consult with
the Company with respect to each of the foregoing matters.

     (c) Stockholders' Approval.  Parent, in its capacity as the sole
stockholder of Merger Sub has approved and adopted this Agreement and the
transactions contemplated hereby by the execution of a consent of sole
stockholder in lieu of a meeting. Each holder of ten percent (10%) or more of
the common stock, par value $0.001 per share, of the Company ("Company Common
Stock"), in each of their capacities as stockholders of the Company, has
executed and delivered to Parent letters setting forth their agreement to vote
their shares of the Company's capital stock in favor of this Agreement and the
transactions contemplated hereby.

     1.4.  Registration Statement; Joint Proxy Statement; Comfort Letters.

     (a) Joint Proxy Statement/Prospectus; Registration Statement.  As promptly
as practicable after the execution of this Agreement, the Company and Parent
will prepare a Joint Proxy Statement/Prospectus (the "Proxy Statement"), and
Parent will prepare and file with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-4 (the "Registration Statement") in
which the Proxy Statement will be included as a prospectus. Parent will respond
to any comments of the SEC; the Company will cooperate with Parent in responding
to any such comments; each of the Company and Parent will use its best efforts
to have the Proxy Statement cleared by the SEC and the Registration Statement
declared effective under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (collectively, the "1933 Act"), as
promptly as practicable after its filing, and the Company and Parent will cause
the Proxy Statement to be mailed to their respective stockholders at the
earliest practicable time after the Registration Statement is declared effective
by the SEC. As promptly as practicable after the date of this Agreement, each of
the Company and Parent will prepare and file any other filings required to be
filed by it under the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (collectively, the "1934 Act"), the 1933
Act or any other federal, foreign or blue sky or related laws relating to the
Merger and the transactions contemplated by this Agreement (the "Other
Filings"). Each of the Company and Parent will notify the other promptly upon
the receipt of any comments from the SEC or its staff or any other government
officials and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Registration Statement, the Proxy
Statement or any Other Filing or for additional information and will

                                     Ann. A-6


supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement, the Proxy Statement, the Merger or any Other Filing. Each of the
Company and Parent will cause all documents that it is responsible for filing
with the SEC or other regulatory authorities under this Section 1.4(a) to comply
in all material respects with all applicable requirements of law and the rules
and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy Statement,
the Registration Statement or any Other Filing, the Company or Parent, as the
case may be, will promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of the Company and stockholders of Parent, such
amendment or supplement.

     (b) Letter of the Company Accountants.  The Company shall use all
reasonable efforts to cause to be delivered to Parent a "comfort" letter (the
"Company Comfort Letter") of PricewaterhouseCoopers LLP ("PwC"), dated a date
within two business days before the date on which the Registration Statement
shall become effective and as of the date of Closing and addressed to Parent, in
form and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.

     (c) Letter of Parent Accountants.  Parent shall use all reasonable efforts
to cause to be delivered to the Company a "comfort" letter (the "Parent Comfort
Letter") of Ernst & Young LLP ("E&Y"), dated a date within two business days
before the date on which the Registration Statement shall become effective and
as of the date of Closing and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.

     1.5.  Organizational Documents.

     (a) Certificate of Incorporation.  The Certificate of Incorporation of the
Surviving Corporation shall be in substantially the form attached hereto as
Exhibit A. The Certificate of Incorporation of Parent shall, as of the Effective
Time, be amended and restated (the "Revised Parent Certificate") to incorporate
the relevant provisions set forth in this Agreement.

     (b) By-Laws.  The By-Laws of Merger Sub as in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation. The
By-Laws of Parent shall, as of the Effective Time, be amended and restated to
incorporate the relevant provisions set forth in this Agreement.

     1.6.  Officers and Directors.

     (a) Officers.  As of the Effective Time, Parent and the Company shall use
their respective best efforts to cause the officers of Parent and of the
Surviving Corporation to be as follows:


                                                       
Mark C. Rogers, M.D.....................................  Executive Chairman
Ronald L. Goode, Ph.D...................................  President and Chief Executive
                                                          Officer


and such other officers to be as the Company and Parent shall mutually agree
upon prior to the Effective Time.

     (b) Directors.  As of the Effective Time, Parent and the Company shall use
their respective best efforts to cause the Board of Directors of Parent and of
the Surviving Corporation to be comprised of the following: (i) four directors
designated by the Company, who shall be Mark C. Rogers, M.D., Peter Kash, Edward
Miller and Mark Siegel; (ii) four directors designated by Parent; who shall be
Ronald L. Goode, Ph.D., Gary Frashier, Ira J. Gelb and Robert Easton; and one
independent director mutually agreed upon by the Company and Parent, who shall
be Douglas Watson. As of the Effective Time, Mark

                                     Ann. A-7


C. Rogers, M.D. shall serve as the Chairman of the Board of Directors of Parent
and of the Surviving Corporation.

     (c) Staggered Board.  As of the Effective Time, the Board of Directors of
Parent shall be divided into three classes, the first class ("Class A") to be
comprised of Peter Kash, Robert Easton and Douglas Watson, the second class
("Class B") to be comprised of Edward Miller, Gary Frashier and Ira J. Gelb, and
the third class ("Class C") to be comprised of Mark C. Rogers, M.D., Ronald L.
Goode, Ph.D. and Mark Siegel. The term of the directors in Class A shall expire
at the annual meeting of Parent's stockholders in year 2003; the term of the
directors in Class B shall expire at the annual meeting of Parent's stockholders
in year 2004; and the term of the directors in Class C shall expire at the
annual meeting of Parent's stockholders in year 2005. The term of each of such
directors thereafter shall be three years. None of such directors shall be
removed from the Parent's Board of Directors, except for cause.

     (d) D&O Insurance.  At or prior to the Effective Time, Parent shall obtain,
and the Company may obtain, and pay for "tail" or other coverage for their
respective officers and directors of the Company and Parent who will cease their
officerships and/or directorships as of the Effective Time under a directors and
officers' liability insurance policy, to continue for a period of six (6) years
after the Effective Time or for such time as Parent and the Company, as the case
may be, are able to obtain such coverage at commercially reasonable rates..

     1.7.  Corporate Offices.  As of the Effective Time, the offices of Parent
and of the Surviving Corporation shall, in each case, be Parent's present
facilities in Dallas, Texas and the Company's present facilities in New York,
New York (the "Present New York Office") and the office in New York, New York to
which the Company has contracted to move at or around October 1, 2002.

     1.8.  Effective Time and Closing.  A closing (the "Closing") shall take
place as soon as practicable after satisfaction or waiver of the conditions set
forth in Article VI (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), but in no event later
than three (3) business days thereafter (the "Closing Date") at the offices of
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Chrysler Center, 666 Third
Avenue, New York, New York 10017, or at such later time as is mutually agreed
upon and set forth in the Certificate of Merger (as hereinafter defined). At the
Closing, Parent and the Company shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware a certificate of
merger (the "Certificate of Merger") in such form as is required by, and
executed in accordance with, this Agreement and the relevant provisions of the
GCL (the date and time of such filing being referred to herein as the "Effective
Time").

                                   ARTICLE II

                          CONVERSION OF COMPANY SHARES

     2.1.  Conversion of Shares.  By virtue of the Merger and without any action
on the part of the holders thereof:

          (a) Conversion of Preferred Shares.  Immediately prior to the
     Effective Time, all shares of the series A preferred stock, par value
     $0.001 per share, of the Company ("Company Series A Preferred Stock") and
     the series B convertible preferred stock, par value $0.001 per share, of
     the Company ("Company Series B Preferred Stock") shall be converted into
     Company Common Stock at the Conversion Price (as defined in the
     Certificates of Designations, Preferences and Rights (the "Company
     Certificates of Designation") of the Company Series A Preferred Stock and
     the Company Series B Preferred Stock, respectively).

          (b) Cancelled Treasury Shares.  At the Effective Time, each share of
     Company Common Stock and each share of preferred stock, par value $0.001
     per share, of the Company ("Company Preferred Stock") which are held by the
     Company as treasury shares, and each share of Company Common Stock and
     Company Preferred Stock which is owned by Parent or the Company or by any
     direct or indirect wholly-owned subsidiary of Parent or the Company, shall
     be cancelled.

                                     Ann. A-8


          (c) Common Shares To Be Exchanged; Exchange Ratio.  Subject to
     Sections 2.1(b) and 2.7 hereof, each outstanding share of Company Common
     Stock shall be converted into the right to receive 3.132 shares (as the
     same may be adjusted as provided herein, the "Exchange Ratio") of Parent
     Common Stock. No fractional shares of Parent Common Stock shall be issued,
     in accordance with Section 2.2(e).

          (d) Shares of Merger Sub.  Each issued and outstanding share of
     capital stock of Merger Sub shall be converted into one validly issued,
     fully paid and non-assessable share of capital stock of the Surviving
     Corporation.

     2.2.  Exchange of Certificates.

     (a) Exchange Agent.  As of the Effective Time, Parent shall deposit, or
shall cause to be deposited, with American Stock Transfer and Trust Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article II, through the Exchange
Agent, certificates evidencing shares of Parent Common Stock and cash in such
amount that the Exchange Agent possesses such number of shares of Parent Common
Stock and such amount of cash as are required to provide all of the
consideration required to be exchanged by Parent pursuant to the provisions of
this Article II and subject to the reverse stock split referred to in Section
1.3(b) hereof (such certificates for shares of Parent Common Stock, together
with any dividends or distributions with respect thereto, and cash being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Parent Common Stock out of the
Exchange Fund in accordance with Section 2.1. Except as contemplated by Section
2.2(f) hereof, the Exchange Fund shall not be used for any other purpose.

     (b) Exchange Procedures.  As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (the
"Certificates"): (i) a letter of transmittal (which is reasonably agreed to by
Parent and the Company and shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to and receipt by the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify); and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates evidencing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates evidencing that number
of whole shares of Parent Common Stock which such holder has the right to
receive in respect of the shares of Company Common Stock formerly evidenced by
such Certificate in accordance with Section 2.1, (B) cash in lieu of fractional
shares of Parent Common Stock to which such holder may be entitled pursuant to
Section 2.2(e) and (C) any dividends or other distributions to which such holder
is entitled pursuant to Section 2.2(c) (the shares of Parent Common Stock,
dividends, distributions and cash described in clauses (A), (B) and (C) being
collectively, the "Merger Consideration"), and the Certificates so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of shares
of Company Common Stock which is not registered in the transfer records of the
Company, a certificate evidencing the proper number of shares of Parent Common
Stock may be issued in accordance with this Article II to a transferee if the
Certificate evidencing such shares of Company Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent or the
Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen destroyed Certificate the Merger Consideration
deliverable in respect thereof pursuant to this Agreement. Until surrendered as
contemplated by this

                                     Ann. A-9


Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to evidence only the right to receive upon such surrender the Merger
Consideration.

     (c) Distributions with Respect to Unexchanged Shares.  No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock evidenced thereby, and no other part of the Merger Consideration
shall be paid to any such holder, until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates evidencing shares of Parent Common Stock issued in exchange
therefor, without interest, (i) promptly, the amount of any cash payable with
respect to a fractional share of Parent Common Stock to which such holder may
have been entitled pursuant to Section 2.2(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such shares of Parent Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such shares of Parent Common Stock. No
interest shall be paid on the Merger Consideration.

     (d) No Further Rights in Company Stock.  All shares of Parent Common Stock
(and other Merger Consideration) issued upon conversion of the shares of Company
Common Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock.

     (e) No Fractional Shares.  No certificates or scrip evidencing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. Cash shall be paid
in lieu of fractional shares of Parent Common Stock, based upon the Median
Pre-Closing Price (as defined in Section 8.3(g) hereof) per whole share of
Parent Common Stock.

     (f) Termination of Exchange Fund.  Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for six months
after the Effective Time shall be delivered to Parent, upon demand, and, subject
to Section 2.2(g), any holders of Company Common Stock who have not theretofore
complied with this Article II shall thereafter look only to Parent for the
Merger Consideration to which they are entitled.

     (g) No Liability.  Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock for any such shares of Parent Common
Stock (or dividends or distributions with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.

     (h) Withholding Rights.  Parent shall be entitled to deduct and withhold,
or cause the Exchange Agent to deduct and withhold, from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock the minimum amounts (if any) that Parent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent.

     2.3.  Adjustments to Exchange Ratio.  If between the date of this Agreement
and the Effective Time the outstanding shares of Parent Common Stock or Company
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares, the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares.

     2.4.  Closing of the Company Transfer Books.  Upon the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock (other than shares
                                    Ann. A-10


into which the capital stock of Merger Sub is to be converted pursuant to the
Merger) shall thereafter be made. After the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason shall be converted into
the Merger Consideration.

     2.5.  Stock Options; Warrants.

     (a) The Amended and Restated 2000 Stock Option Plan of Parent, and all
options outstanding thereunder prior to the Merger, shall remain in full force
and effect upon the Merger on the same terms as are in effect immediately prior
to the Merger; provided, however, that (i) all of such options held by a person
who is, immediately prior to the Merger, an officer or director of Parent but
who is not continuing as an officer or director of Parent after the Merger shall
immediately vest, (ii) each holder of such options who is, immediately prior to
the Merger, an officer or director of Parent but who is not continuing as an
officer or director of Parent after the Merger shall have three (3) years from
and after the Closing Date in which to exercise his options, and (iii) each
holder of such options who is, immediately prior to the Merger, an employee of
Parent shall have three (3) years from and after the termination of his active
service with Parent in which to exercise his options.

     (b) The 2000 Omnibus Stock Incentive Plan, as amended, of the Company (the
"Company Plan"), shall be cancelled upon the Merger. Upon the Merger, Parent
shall adopt a new stock option plan (the "New Parent Plan") with substantially
the same terms as the Company Plan. Parent shall issue to the holders of stock
options outstanding under the Company Plan immediately prior to the Merger (the
"Company Stock Options") options with the same terms as the options issued under
the Company Plan; provided, however, that (i) such options shall remain
exercisable for the time period set forth in applicable option grant agreement,
regardless of whether any holder of such options does not continue as an
officer, director or employee of the Company or Parent immediately after the
Merger, (ii) each such option issued under the New Parent Plan shall be
exercisable for such number of shares of Parent Common Stock as equals the
number of shares of Company Common Stock into which the Company Stock Options
were exercisable multiplied by the Exchange Ratio, and (iii) the per share
exercise price for each such option issued under the New Parent Plan shall equal
the applicable per share exercise price under the Company Plan divided by the
Exchange Ratio.

     (c) Upon the Effective Time, Parent shall honor all Company Warrants (as
defined in Section 3.2 hereof). The Company Warrants shall thereupon be
exercisable in accordance with the terms thereof for such number of shares of
Parent Common Stock as equals (i) the number of shares of Company Stock for
which the Company Warrants were exercisable multiplied by (ii) the Exchange
Ratio. The exercise price for the Company Warrants shall thereupon be the
exercise price for the Company Warrants prior to the Effective Time divided by
the Exchange Ratio and the number of underlying securities shall be
proportionately adjusted. The Company agrees to use commercially reasonable
efforts to cause, prior to the Effective Time, (i) all rights of holders of
warrants that are exercisable for securities of the Company other than Company
Common Stock (the "Company Preferred Warrants") to be terminated or (ii) the
Company Preferred Warrants to be exercisable for Parent Common Stock at the same
exchange rate as the Company Warrants.

     2.6.  Merger Sub Common Stock.  The shares of Merger Sub Common Stock
outstanding or held in treasury immediately prior to the Effective Time shall
not be affected by the Merger but shall be converted into the same number of
shares of the Surviving Corporation without further action.

     2.7.  Dissenters' Rights.  Notwithstanding any provision of this Agreement
to the contrary, if required by the GCL, but only to the extent required
thereby, Company shares that are issued and outstanding immediately prior to the
Effective Time and that are held by stockholders of the Company who have
properly exercised appraisal rights with respect thereto in accordance with
Section 262 of the GCL (the "Dissenting Company Shares") will not be exchanged
as provided in Section 2.2, and holders of such Dissenting Company Shares will
be entitled to receive payment of the appraised value of such Dissenting Company
Shares in accordance with the provisions of such Section 262 unless and until
the holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the GCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such right,
                                    Ann. A-11


such Company shares will thereupon be treated as if they had been converted into
and become exchangeable for, at the Effective Time, the consideration set forth
in Section 2.1 hereof, without any interest thereon. The Company will promptly
provide Parent with notice of any demands received by the Company for appraisal
of Company shares. The Company shall not, except with the prior written consent
of Parent, make any payment with respect to any demands for appraisal or settle
any such demands.

                                  ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     References herein to the "Company Disclosure Schedule" shall mean all of
the disclosure schedules required by this Article III, dated as of the date
hereof and referenced to the specific sections and subsections of Article III of
this Agreement, and any other sections or subsections to which it is readily
apparent from a reading of such disclosure, which have been delivered on the
date hereof by the Company to Parent.

     The Company hereby represents and warrants to Parent as follows:

     3.1.  Corporate Organization.

     (a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of the Company. The Company Disclosure
Schedule lists each state in which the Company is qualified to do business as a
foreign corporation.

     (b) The Company does not, directly or indirectly, own any stock or other
equity interests in, or act as a general partner or managing member of, any
corporation, limited liability company, partnership, joint venture or other
legal entity.

     3.2.  Capitalization.  The authorized capital stock of the Company consists
of 21,500,000 shares of Company Common Stock and 6,500,000 shares of Company
Preferred Stock. As of the date hereof, there are 9,960,427 shares of Company
Common Stock issued and outstanding and 5,004,116 shares of the Company
Preferred Stock, (4,014,125 shares of which have been designated as Series A
Convertible Preferred Stock and 989,991 shares of which have been designated as
Series B Convertible Preferred Stock) issued and outstanding. As of the date
hereof, there are 1,705,649 shares of Company Common Stock issuable upon
exercise of outstanding stock options under the Company's 2000 Omnibus Stock
Incentive Plan, as amended, there are no shares of Company Common Stock issuable
upon exercise of outstanding stock options under the Company's Employee Stock
Purchase Plan, and there are 1,367,101 shares of Company Common Stock issuable
upon exercise of outstanding stock options granted outside of any Company stock
option plan. As of the date hereof, there are 664,364 shares of Company Common
Stock issuable upon exercise of outstanding warrants to purchase shares of
Company Common Stock and 395,788 shares of Company Stock issuable upon exercise
of outstanding warrants to purchase shares of Company Series A Convertible
Preferred Stock. The Company Disclosure Schedule 3.2 sets forth all options
which may be exercised for issuance of Company Common Stock and the terms upon
which the options may be exercised (the "Company Stock Options") and all
warrants which may be exercised for issuance of Company Common Stock or Company
Preferred Stock and the terms upon which the warrants may be exercised (the
"Company Warrants"). The Company Disclosure Schedule sets forth true and
complete copies of the option plans, grant agreements and warrant agreements
pursuant to which the Company Stock Options and Company Warrants were granted
and a true and complete list of each outstanding Company Stock Option and
Company Warrant. All issued and outstanding shares of Company Common Stock have
been duly authorized and validly issued, are fully paid, nonassessable and
                                    Ann. A-12


free of preemptive rights. Except as disclosed in the Company Disclosure
Schedule, the Company has not granted and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the transfer, purchase, subscription or issuance of any
shares of capital stock of the Company or any securities representing the right
to purchase, subscribe or otherwise receive any shares of such capital stock or
any securities convertible into any such shares, and there are no agreements or
understandings with respect to voting of any such shares.

     3.3.  Authority; No Violation.

     (a) Except for (i) approval by the affirmative vote of the holders of a
majority of Company Common Stock and Company Preferred Stock voting together as
a class, in accordance with the GCL and the terms of the Company Preferred
Stock, (ii) if applicable, the pre-merger notification requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
(iii) filing of the Certificate of Merger as required by the GCL (collectively,
the "Company Approvals") and (iv) the consents and approvals disclosed in the
Company Disclosure Schedule, no consents or approvals of or filings or
registrations with or notices to any third party or any public body or authority
are necessary on behalf of the Company in connection with (x) the execution and
delivery by the Company of this Agreement and (y) the consummation by the
Company of the Merger and the other transactions contemplated hereby. Subject to
receipt of the Company Approvals, the Company has the full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company in accordance with the Certificate of
Incorporation of the Company and applicable laws and regulations. Except for the
Company Approvals, no other corporate proceedings on the part of the Company are
necessary to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and constitutes
valid and binding obligations of the Company enforceable against the Company in
accordance with its terms.

     (b) The Board of Directors of the Company also has approved the
transactions contemplated by this Agreement and the Proxy Statement so as to
render inapplicable thereto the provisions of Section 203 of the GCL or any
other "business combination," "moratorium," "control share" or other
antitakeover statute or regulation or provision of the Company's Certificate of
Incorporation or By-Laws.

     (c) Neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated hereby in
accordance with the terms hereof, nor compliance by the Company with any of the
terms or provisions hereof, will (i) assuming the Company Approvals are duly
obtained, violate any provision of the Company's Certificate of Incorporation or
By-Laws, (ii) assuming that the Company Approvals are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its properties or assets, or
(iii) except as set forth in the Company Disclosure Schedule, violate, conflict
with, result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of the Company under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Company
is a party or by which the Company any of its properties or assets may be bound
or affected except, with respect to (ii) and (iii) above, such as individually
or in the aggregate will not have a material adverse effect on the business,
operations, assets, financial condition or prospects of the Company and which
will not prevent or delay the consummation of the transactions contemplated
hereby.

     (d) The Board of Directors of the Company has duly adopted a resolution
approving this Agreement and declaring its advisability and stating that this
Agreement will be submitted to the Company's stockholders with a recommendation
that they accept it.

                                    Ann. A-13


     3.4.  Financial Statements.

     (a) The Company Disclosure Schedule sets forth copies of: (i) the balance
sheets of the Company as of December 31, 2000 and December 31, 2001, and the
statements of operations, redeemable preferred stock and stockholders' deficit
and cash flows for the years ended December 31, 2001, December 31, 2000 and
December 31, 1999, in each case accompanied by the audit report of PwC,
independent accountants with respect to the Company, and (ii) the unaudited
balance sheets of the Company as of June 30, 2002 (the "Company June Balance
Sheets") and the unaudited statements of operations, redeemable preferred stock
and stockholders' deficit and cash flows for the six-month period ended June 30,
2002 (collectively, the "Company Financial Statements"). The Company Financial
Statements (including the related notes) have been prepared in accordance with
United States generally accepted accounting principles consistently applied
("GAAP") during the periods involved (except as may be indicated therein or in
the notes thereto), and present fairly the consolidated financial position of
the Company as of the respective dates set forth therein, and the consolidated
results of the Company's operations and its cash flows for the respective
periods set forth therein in accordance with GAAP (subject, in case of any
unaudited interim financial statements, to normal year-end adjustments).

     (b) The books and records of the Company are being maintained in material
compliance with applicable legal and accounting requirements.

     (c) Except as and to the extent reflected, disclosed or reserved against in
the Company Financial Statements (including the notes thereto), as of June 30,
2002, the Company had no liabilities, whether absolute, accrued, contingent or
otherwise, material to the business, operations, assets, financial condition or
prospects of the Company which were required by GAAP (consistently applied) to
be disclosed in the Company's consolidated financial statements as of June 30,
2002 or the notes thereto. The Company has not incurred any liabilities except
in the ordinary course of business and consistent with past practice, except as
related to the transactions contemplated by this Agreement.

     3.5.  Absence of Certain Changes or Events.

     (a) Except as disclosed in the Company Disclosure Schedule, there has not
been any material adverse change in the business, operations, assets or
financial condition of the Company since December 31, 2001 and, to the best of
the Company's knowledge, no facts or condition exists which the Company believes
will cause such a material adverse change in the future.

     (b) Except as set forth in the Company Disclosure Schedule, the Company has
not taken or permitted any of the actions set forth in Section 5.2 hereof
between December 31, 2001 and the date hereof and, except for execution of this
Agreement, the Company has conducted its business only in the ordinary course,
consistent with past practice.

     3.6.  Legal Proceedings.  Except as disclosed in the Company Disclosure
Schedule, the Company is not a party to any, and there are no pending or, to the
best of the Company's knowledge, threatened legal, administrative, arbitral or
other proceedings, claims, actions or governmental investigations of any nature
against the Company or any officer or director of the Company in his or her
capacity as such. Except as disclosed in the Company Disclosure Schedule, the
Company is not a party to any order, judgment or decree entered in any lawsuit
or proceeding.

     3.7.  Taxes and Tax Returns.

     (a) Filing of Tax Returns and Payment of Taxes.  The Company has timely
filed all Tax Returns (as hereinafter defined) required to be filed by it, each
such Tax Return has been prepared in compliance with all applicable laws and
regulations, and all such Tax Returns are true, accurate and complete in all
respects. All Taxes (as hereinafter defined) that have become due and payable by
the Company have been timely paid, and the Company will not be liable for any
additional Taxes in respect of any taxable period or any portion thereof ending
on or before the date of this Agreement in an amount that exceeds the
corresponding reserve therefor separately identified in the Company Disclosure
Schedule, if any, as reflected in the accounting records of the Company, and any
Taxes of the Company arising after such date

                                    Ann. A-14


will be incurred in the ordinary course of the Company's business. The Company
has made available to Parent true, correct and complete copies of all Tax
Returns with respect to income taxes filed by or with respect to it with respect
to taxable periods ended on or after December 31, 1998, and has delivered or
made available to Parent all relevant documents and information with respect
thereto, including without limitation work papers, records, examination reports,
and statements of deficiencies assessed against or agreed to by the Company.

     (b) Deficiencies.  No deficiency or proposed adjustment in respect of Taxes
has been proposed, asserted or assessed by any Taxing authority against the
Company.

     (c) Liens.  There are no liens for Taxes (other than current Taxes not yet
due and payable) on the assets of the Company.

     (d) Extensions to Statute of Limitations for Assessment of Taxes.  The
Company has not consented to extend the time in which any Tax may be assessed or
collected by any Taxing authority.

     (e) Extensions of the Time for Filing Tax Returns.  Except as set forth in
the Company Disclosure Schedule, the Company has not requested or been granted
an extension of the time for filing any Tax Return to a date on or after the
date of this Agreement.

     (f) Pending Proceedings.  There is no action, suit, Taxing authority
proceeding, or audit with respect to any Tax now in progress, pending, or, to
the knowledge of the Company, threatened, against or with respect to the
Company. There are no outstanding adjustments, deficiencies, additional
assessments or refund claims proposed or outstanding with respect to any Tax or
Tax Return of the Company.

     (g) No Failures to File Tax Returns.  No claim has ever been made by a
Taxing authority in a jurisdiction where the Company does not pay Tax or file
Tax Returns that the Company is or may be subject to Taxes assessed by such
jurisdiction.

     (h) Tax Sharing, Allocation, or Indemnity Agreements.  The Company is not a
party to or bound by any Tax sharing or allocation agreement and has no current
or potential contractual obligation to indemnify any other person with respect
to Taxes.

     (i) Withholding Taxes.  The Company has timely withheld and timely paid all
Taxes which are required to have been withheld and paid by it in connection with
amounts paid or owing to any employee, independent contractor, creditor or other
person.

     (j) Tax-Free Merger.  The Company has not taken any action, nor does the
Company know of any fact, that is reasonably likely to prevent the Merger from
qualifying as a "reorganization" within the meaning of Code Section 368.

     (k) Certain Defined Terms.  As used in this Agreement:

          (i) "Tax" or "Taxes" (and with correlative meaning, "Taxable" and
     "Taxing") means any federal, state, local, or foreign income, gross
     receipts, franchise, estimated, alternative minimum, add-on minimum, sales,
     use, transfer, registration, value added, excise, natural resources,
     severance, stamp, occupation, premium, windfall profit, environmental,
     customs, duties, real property, personal property, capital stock, net
     worth, intangibles, social security, unemployment, disability, payroll,
     license, employee, or other tax or similar levy, of any kind whatsoever,
     including any interest, penalties, or additions to tax in respect of the
     foregoing.

          (ii) "Tax Return" means any return, declaration, report, claim for
     refund, information return, or other document (including any related or
     supporting estimates, elections, schedules, statements, or information)
     filed or required to be filed in connection with the determination,
     assessment, or collection of any Tax or the administration of any laws,
     regulations, or administrative requirements relating to any Tax.

     3.8.  Employee Benefit Plans.  The Company does not maintain or contribute
to any "employee pension benefit plan" (the "Company Pension Plans"), as such
term is defined in Section 3 of the

                                    Ann. A-15


Employee Retirement Income Security Act of 1974, as amended ("ERISA"), "employee
welfare benefit plan" (the "Company Welfare Plans"), as such term is defined in
Section 3 of ERISA, stock option plan, stock purchase plan, deferred
compensation plan, cafeteria plan, severance plan, bonus plan, employment
agreement or other similar plan, program or arrangement. The Company has not
contributed to, or been required to contribute to, any "Multiemployer Plan", as
such term is defined in Section 3(37) of ERISA.

     3.9.  Compliance With Applicable Law.

     (a) Except as set forth in the Company Disclosure Schedule, the Company
holds all material Licenses from, and has submitted notices to, all governmental
entities (including, without limitation, all authorizations under the Federal
Food, Drug and Cosmetic Act of 1938, as amended (the "FDCA") and all regulations
of the United States Food and Drug Administration (the "FDA") necessary for the
lawful conduct of its respective business as described in the Company Overview
dated July 2002 (a copy of which the Company has provided to Parent), and has
complied with and is not in default in any material respect under any applicable
law, statute, order, rule, regulation, policy and/or guideline of any federal,
state or local governmental authority relating to the Company (other than where
such default or noncompliance will not result in a material adverse effect on
the business, operations, assets, financial condition or prospects of the
Company) and the Company has not received written notice of violation of, and
does not know of any violations of, any of the above.

     (b) To the Company's knowledge, all biological and drug products being
manufactured, distributed, or developed by the Company ("Company Pharmaceutical
Products") that are subject to the jurisdiction of the FDA are being
manufactured, labeled, stored, tested, distributed, and marketed in compliance
with all applicable requirements under the FDCA and the Public Health Service
Act, and their applicable implementing regulations.

     (c) To the Company's knowledge, all preclinical trials and clinical trials
conducted by or on behalf of the Company have been, and are being conducted in
material compliance with the applicable requirements of "Good Clinical
Practice", Informed Consent, and all applicable requirements relating to
protection of human subjects contained in 21 C.F.R. Parts 50, 54, and 56.

     (d) All manufacturing operations conducted by or for the benefit of the
Company have been and are being conducted in compliance with the FDA's
applicable current "Good Manufacturing Practice" regulations for drug and
biological products. In addition, the Company is in compliance in all material
respects with all applicable registration and listing requirements set forth in
21 U.S.C. Section 360 and 21 C.F.R. Part 207 and all similar applicable laws.

     (e) No Company Pharmaceutical Product has been recalled, suspended or
discontinued as a result of any action by the FDA or any other similar foreign
governmental entity by the Company or, to the knowledge of the Company, any
licensee, distributor or marketer of any Company Pharmaceutical Product, in the
United States or outside of the United States.

     (f) The Company has not received any written notice that the FDA or any
other governmental entity has commenced, or threatened to initiate, any action
to withdraw approval, place marketing or sale restrictions, or request the
recall of any Company Pharmaceutical Product, or commenced, or threatened to
initiate, any action to enjoin or place restrictions on the production, sale,
marketing or reimbursement of any Company Pharmaceutical Products.

     (g) The Company has not committed any act, made any statement or failed to
make any statement that would reasonably be expected to provide a basis for the
FDA to invoke its policy with respect to "Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities" set forth in 56 Fed. Reg. 46191
(September 10, 1991) and any amendments thereto. Additionally, neither the
Company, nor, to the knowledge of the Company, any officer, key employee or
agent of the Company has been convicted of any crime or engaged in any conduct
that would reasonably be expected to result in (i) debarment under 21 U.S.C.
Section 335a or any similar state law or regulation or (ii) exclusion under 42
U.S.C. Section 1320a-7 or any similar state law or regulation.

                                    Ann. A-16


     (h) For purposes of this Agreement, "Licenses" means all licenses, permits,
certificates of authority, authorizations, approvals, registrations, franchises,
clearances and similar consents granted or issued by any governmental or
regulatory authority.

     3.10.  Certain Contracts.

     (a) The Company is in full compliance with, and has not been and is not in
default under, any of the provisions of either (i) the License Agreement dated
February 25, 1998, by and between Pain Management, Inc. and Dr. Stuart Weg, (ii)
the License Agreement dated August 25, 2000, as amended October 9, 2001, by and
between the Company and West Pharmaceuticals, Inc., or (iii) the License
Agreement dated December 12, 2001 (the "Farmarc License Agreement"), by and
among the Company, Farmarc N.A.N.V. (Netherlands Antilles), Farmarc Netherlands
B.V., and Shimoda Biotech (Proprietary) Ltd. All of such agreements are in full
force and effect.

     (b) Except for the plans referenced in Section 3.8 or as disclosed in the
Company Disclosure Schedule, the Company is not a party to or bound by any
contract or understanding (whether written or oral) with respect to the
employment of any officers, employees, directors or consultants, and the
consummation of the transactions contemplated by this Agreement will not (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from the Company to
any of its officers, employees, directors or consultants. The Company Disclosure
Schedule sets forth true and correct copies of all severance or employment
agreements with officers, directors, employees, agents or consultants to which
the Company is a party.

     (c) Except as disclosed in the Company Disclosure Schedule, (i) as of the
date of this Agreement, the Company is not a party to or bound by any
commitment, agreement or other instrument which is material to the business,
operations, assets, financial condition or prospects of the Company, (ii) no
commitment, agreement or other instrument to which the Company is a party or by
which any of them is bound limits the freedom of the Company to compete in any
line of business or with any person, and (iii) the Company is not a party to any
collective bargaining agreement.

     (d) Except as disclosed in the Company Disclosure Schedule, neither the
Company nor, to the best knowledge of the Company, any other party thereto, is
in default in any material respect under any material lease, contract, mortgage,
promissory note, or other commitment or arrangement, except for defaults which
individually or in the aggregate would not have a material adverse effect on the
business, operations, assets, financial condition or prospects of the Company.

     (e) Except as disclosed in the Company Disclosure Schedule, no payments
shall be due or payable under the Farmarc License Agreement or any other
agreement to which the Company is a party upon or as a result of this Agreement
or the Merger.

     3.11.  Intellectual Property.

     (a) The Company owns, or has the right to use pursuant to valid license,
sublicense, agreement, or permission, all intellectual property rights used in
or necessary for the operation of the Company's business as presently conducted.
Except as set forth in the Company Disclosure Schedule, (i) such intellectual
property rights are owned free and clear of royalty obligations, liens and
encumbrances, (ii) the execution and delivery of this Agreement and the closing
of the transaction contemplated hereby will not alter or impair any such rights,
(iii) the use of all such intellectual property by the Company does not infringe
or violate the intellectual property rights of any person or entity, and (iv)
the Company has not granted any person or entity any rights, pursuant to written
license agreement or otherwise, to use such intellectual property. The Company
has taken, and shall continue to take through the Closing Date, all necessary
action to maintain and protect each item of intellectual property that it owns
or uses.

     (b) The Company Disclosure Schedule identifies (i) each patent, trademark,
trade name, service name or copyright with respect to any of the Company's
intellectual property, all applications and registration statements therefor and
renewals thereof (and sets forth correct and complete copies of all such
patents, registrations and applications (as amended to date)); and (ii) all
intellectual property that

                                    Ann. A-17


the Company uses pursuant to license, sublicense, agreement, or permission, all
of which are valid and in full force and effect, and the execution and delivery
of this Agreement and the closing of the transaction contemplated hereby will
not alter or impair any such rights.

     (c) The Company has at all times used reasonable efforts to protect all
trade secrets related to its intellectual property.

     (d) To the Company's knowledge, the Company has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of third parties, nor does the practice of any of
the intellectual property owned by or licensed to the Company interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
intellectual property rights of third parties. The Company has not received any
written complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including but not limited to any
claim that the Company must license or refrain from using any intellectual
property rights of any third party), nor to the Company's knowledge is there any
reasonable basis therefor. To the knowledge of the Company, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict in any material respect with any intellectual property rights of the
Company.

     3.12.  Properties.  The Company has good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, listed on the Company Disclosure Schedule,
subject to no encumbrances, liens, mortgages, security interests or pledges,
except (i) those items that secure liabilities that are reflected in said
balance sheet or the notes thereto or that secure liabilities incurred in the
ordinary course of business after the date of the Company June Balance Sheet,
(ii) statutory liens for amounts not yet delinquent or which are being contested
in good faith and (iii) such title imperfections that are not in the aggregate
material to the business, operations, assets, financial condition or prospects
of the Company. Except as affected by the transactions contemplated hereby, the
Company as lessee has the right under valid and subsisting leases to occupy,
use, possess and control all real property listed on the Company Disclosure
Schedule in all material respects as presently occupied, used, possessed and
controlled by the Company.

     3.13.  Insurance.  The business operations and all insurable properties and
assets of the Company are insured for their benefit against all risks which, in
the reasonable judgment of the management of the Company, should be insured
against (including, without limitation, products liability for human clinical
trials, professional liability for insureds and employees and professional
liability for clinical sites and clinical investigators), in each case under
policies or bonds issued by insurers of recognized responsibility, in such
amounts with such deductibles and against such risks and losses as are in the
opinion of the management of the Company adequate for the business engaged in by
the Company. As of the date hereof, the Company has not received any notice of
cancellation or notice of a material amendment of any such insurance policy or
bond or is in default under any such policy or bond, no coverage thereunder is
being disputed and all material claims thereunder have been filed in a timely
fashion, and a list of all pending claims and coverage disputes is set forth in
the Company Disclosure Schedule. Except as set forth in the Company Disclosure
Schedule, the Company has received no "reservation of rights" letters with
respect to pending claims or coverage disputes.

     3.14.  Environmental Matters.

     (a) The Company is not required to obtain any Licenses under applicable
Environmental Laws in connection with the conduct of the business and assets and
properties of the Company. Except as disclosed in the Company Disclosure
Schedule, no oral or written notification of a Release of a Hazardous Material
in connection with the operation of the Company's business has been filed by or
on behalf of the Company, and no site or facility now or previously owned,
operated, or leased by the Company is listed or proposed for listing on the
"National Priorities List" under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or any similar
state or local list of sites requiring investigation or clean-up.

                                    Ann. A-18


     (b) For purposes hereof:

          (i) "Environmental Law" means any law or order relating to the
     regulation or protection of human health, safety or the environment or to
     emissions, discharges, releases or threatened releases of pollutants,
     contaminants, chemicals or industrial, toxic or hazardous substances or
     wastes into the environment (including, without limitation, ambient air,
     soil, surface water, ground water, wetlands, land or subsurface strata), or
     otherwise relating to the manufacture, processing, distribution, use,
     treatment, storage, disposal, transport or handling of pollutants,
     contaminants, chemicals or industrial, toxic or hazardous substances or
     wastes.

          (ii) "Release" means any release, spill, emission, leaking, pumping,
     injection, deposit, disposal, discharge, dispersal, leaching or migration
     into the indoor or outdoor environment, including, without limitation, the
     movement of Hazardous Materials through ambient air, soil, surface water,
     ground water, wetlands, land or subsurface strata.

          (iii) "Hazardous Material" means (A) any petroleum or petroleum
     products, flammable explosives, radioactive materials, asbestos in any form
     that is or could become friable, urea formaldehyde foam insulation and
     transformers or other equipment that contain dielectric fluid containing
     levels of polychlorinated biphenyls (PCBs); (B) any chemicals or other
     materials or substances which are now or hereafter become defined as or
     included in the definition of "hazardous substances," "hazardous wastes,"
     "hazardous materials," "extremely hazardous wastes," "restricted hazardous
     wastes," "toxic substances," "toxic pollutants" or words of similar import
     under any Environmental Law; and (C) any other chemical or other material
     or substance, exposure to which is now or hereafter prohibited, limited or
     regulated by any governmental or regulatory authority under any
     Environmental Law.

     3.15.  Employees.  Except as set forth in the Company Disclosure Schedule,
to the knowledge of the Company, no executive, key employee, independent
contractor, or group of employees has any plans to terminate employment or
association with the Company. The Company is not subject to any strike,
grievance, claim of unfair labor practices, or other collective bargaining
dispute, and the Company has no knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company.

     3.16.  Transactions With Affiliates.  Except as disclosed in the Company
Disclosure Schedule, no affiliate, as such term is defined in Rule 405
promulgated under the 1933 Act, of the Company (i) has any material direct or
indirect interest in any entity which transacts business with the Company, (ii)
has any direct or indirect interest in any property, asset or right which is
used by the Company in the conduct of its business, (iii) has any other
contractual relationship with the Company in respect of its business, (iv) owns
any asset used by the Company in connection with its business or (v) has made or
received any loans or other financings [other than equity financings] to or from
the Company other than compensation described in the Company Disclosure Schedule
or the documents listed therein.

     3.17.  Broker's and Other Fees.  Neither the Company nor any of its
directors or officers has employed any broker or finder or incurred any
liability for any broker's or finder's fees or commissions in connection with
any of the transactions contemplated by this Agreement. Without limiting the
foregoing, except as set forth in the Company Disclosure Schedule, no payments
shall be due or payable under the Farmarc License Agreement or any other
agreement to which the Company is a party upon or as a result of this Agreement
or the Merger. There are no fees (other than time charges billed at usual and
customary rates) payable to any consultants, including lawyers and accountants,
in connection with this transaction or which would be triggered by consummation
of this transaction or the termination of the services of such consultants by
the Company.

     3.18.  The Company Proxy Statement Information.  The information relating
to the Company to be contained in the Proxy Statement to be delivered to
stockholders of Parent in connection with the solicitation of their approval of
the Merger, as of the date the Proxy Statement is mailed to stockholders of
Parent, and up to and including the date of the meeting of stockholders to which
such Proxy Statement

                                    Ann. A-19


relates, will not 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.

     3.19.  Disclosure.  No representation or warranty contained in Article III
of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein not misleading.

                                   ARTICLE IV

            REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     References herein to the "Parent Disclosure Schedule" shall mean all of the
disclosure schedules required by this Article IV, dated as of the date hereof
and referenced to the specific sections and subsections of Article IV of this
Agreement, and any other sections or subsections to which it is readily apparent
from a reading of such disclosure, which have been delivered on the date hereof
by Parent to the Company.

     Parent hereby represents and warrants to the Company as follows (and as to
Sections 4.1(c) and 4.3(c) hereof, Parent and Merger Sub jointly and severally
represent and warrant to the Company as follows):

     4.1.  Corporate Organization.

     (a) Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Parent has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing would
not have a material adverse effect on the business, operations, assets or
financial condition of Parent. The Parent Disclosure Schedule lists each state
in which Parent is qualified to do business as a foreign corporation.

     (b) Parent does not, directly or indirectly, own any stock or other equity
interests in, or act as a general partner or managing member of, any
corporation, limited liability company, partnership, joint venture or other
legal entity, except for Merger Sub.

     (c) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.

     4.2.  Capitalization.  The authorized capital stock of Parent consists of
30,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $0.01 per share ("Parent Preferred Stock"). As of the date
hereof, there are 15,673,286 shares of Parent Common Stock issued and
outstanding (excluding 511,200 shares of treasury stock) and 831,547 shares of
Parent Preferred Stock, all of which have been designated Series A Convertible
Preferred Stock, issued and outstanding. As of the date hereof, there are
3,304,755 shares of Parent Common Stock issuable upon exercise of outstanding
stock options under its Amended and Restated 2000 Stock Option Plan and
1,080,354 shares of Parent Common Stock issuable upon exercise of outstanding
warrants to purchase shares of Parent Common Stock. The Parent Disclosure
Schedule sets forth all options which may be exercised for issuance of Parent
Common Stock and the terms upon which the options and the warrants may be
exercised ("Parent Stock Options"). The Parent Disclosure Schedule sets forth
true and complete copies of the option plans and grant agreements pursuant to
which the Parent Stock Options were granted and a true and complete list of each
outstanding Parent Stock Option. All issued and outstanding shares of Parent
Common Stock have been duly authorized and validly issued, are fully paid,
nonassessable and free of preemptive rights. Except for the Parent Stock Options
disclosed in the Parent Disclosure Schedule, Parent has not granted and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of
                                    Ann. A-20


any character calling for the transfer, purchase, subscription or issuance of
any shares of capital stock of Parent or any securities representing the right
to purchase, subscribe or otherwise receive any shares of such capital stock or
any securities convertible into any such shares, and there are no agreements or
understandings with respect to voting of any such shares.

     4.3.  Authority; No Violation.

     (a) Except for (i) the approval by the affirmative vote of the holders of a
majority of Parent Common Stock and Parent Preferred Stock voting together as a
class and by the affirmative vote of the holders of a majority of Parent
Preferred Stock in accordance with the GCL, (ii) if applicable, the pre-merger
notification requirements of the HSR Act, (iii) filing of the Certificate of
Merger as required by the GCL (collectively, the "Parent Approvals") and (iv)
the consents and approvals disclosed in the Parent Disclosure Schedule, no
consents or approvals of or filings or registrations with or notices to any
third party or any public body or authority are necessary on behalf of Parent in
connection with (x) the execution and delivery by Parent of this Agreement and
(y) the consummation by Parent of the Merger and the other transactions
contemplated hereby. Subject to receipt of Parent Approvals, Parent has the full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Parent in accordance with the Certificate of Incorporation
of Parent and applicable laws and regulations. Except for Parent Approvals, no
other corporate proceedings on the part of Parent are necessary to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and constitutes valid and binding obligations
of Parent enforceable against Parent in accordance with its terms.

     (b) The Board of Directors of Parent has approved the transactions
contemplated by this Agreement and the Proxy Statement so as to render
inapplicable thereto the restrictions set forth in Section 203 of the GCL or any
other "business combination," "moratorium," "control share" or other
antitakeover statute or regulation or provision of Parent's Certificate of
Incorporation or By-Laws.

     (c) Neither the execution and delivery of this Agreement by Parent, nor the
consummation by Parent of the transactions contemplated hereby in accordance
with the terms hereof, nor compliance by Parent with any of the terms or
provisions hereof, will (i) assuming Parent Approvals are duly obtained, violate
any provision of Parent's Certificate of Incorporation or By-Laws, (ii) assuming
that Parent Approvals are duly obtained, violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
Parent or any of its properties or assets, or (iii) except as set forth in the
Parent Disclosure Schedule, violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of Parent under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent is a party or by which Parent any of
its properties or assets may be bound or affected except, with respect to (ii)
and (iii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operations, assets, financial condition
or prospects of Parent and which will not prevent or delay the consummation of
the transactions contemplated hereby.

     (d) Subject to receipt of the Parent Approvals, Merger Sub has the full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors and the sole stockholder of Merger Sub in accordance with the
Certificate of Incorporation of Merger Sub and applicable laws and regulations.
No other corporate proceedings on the part of Merger Sub are necessary to
consummate the transactions so contemplated. This Agreement has been duly and
validly

                                    Ann. A-21


executed and delivered by Merger Sub and constitutes valid and binding
obligations of Merger Sub enforceable against Merger Sub in accordance with its
terms.

     (e) The Board of Directors of Parent has duly adopted and approved this
Agreement and the Merger and has determined that it is in the best interests of
Parent and its stockholders that Parent acquire the business of the Company
pursuant to the terms and conditions set forth herein.

     4.4.  Financial Statements.

     (a) The Parent Disclosure Schedule sets forth copies of: (i) the balance
sheets of Parent as of December 31, 2000 and December 31, 2001, and the
consolidated statements of income, shareholders' equity and cash flows for the
years ended December 31, 2001, December 31, 2000 and December 31, 1999, in each
case accompanied by the audit report of E&Y, independent public accountants with
respect to Parent, and (ii) the unaudited balance sheets of Parent as of June
30, 2002 (the "Parent June Balance Sheet") and the unaudited statements of
income, shareholders' equity and cash flows for the six-month period ending June
30, 2002 (collectively, the "Parent Financial Statements"). Parent Financial
Statements (including the related notes) have been prepared in accordance with
GAAP during the periods involved (except as may be indicated therein or in the
notes thereto), and present fairly the consolidated financial position of Parent
as of the respective dates set forth therein, and the consolidated results of
Parent's operations and its cash flows for the respective periods set forth
therein in accordance with GAAP (subject, in case of any unaudited interim
financial statements, to normal year end adjustments).

     (b) The books and records of Parent are being maintained in material
compliance with applicable legal and accounting requirements.

     (c) Except as and to the extent reflected, disclosed or reserved against in
Parent Financial Statements (including the notes thereto), as of June 30, 2002,
Parent had no liabilities, whether absolute, accrued, contingent or otherwise,
material to the business, operations, assets, financial condition or prospects
of Parent which were required by GAAP (consistently applied) to be disclosed in
Parent's consolidated financial statements as of June 30, 2002 or the notes
thereto. Parent has not incurred any liabilities except in the ordinary course
of business and consistent with past practice, except as related to the
transactions contemplated by this Agreement.

     4.5.  SEC Filings.  Parent has previously made available to the Company a
complete copy of each filing by Parent with the SEC since December 31, 1999
pursuant to the 1933 Act or the 1934 Act (collectively, the "Parent SEC
Filings"). Since January 1, 2000, Parent has timely filed all reports, proxy
statements, registration statements and filings that each of them was required
to file with the SEC under the 1933 Act and the 1934 Act, all of which complied
in all material respects with all applicable requirements of the 1933 Act or the
1934 Act, as the case may be, and the rules and regulations adopted thereunder,
including Regulation S-X. As of their respective dates, each such report, proxy
statement, registration statement, form or other document, including without
limitation, any financial statements or schedules included therein, did not
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 made therein,
in light of the circumstances under which they were made, not misleading.

     4.6.  Absence of Certain Changes or Events.

     (a) Except as disclosed in the Parent Disclosure Schedule and the Parent
SEC Filings, there has not been any material adverse change in the business,
operations, assets or financial condition of Parent since December 31, 2001 and,
to the best of Parent's knowledge, no facts or condition exists which Parent
believes will cause such a material adverse change in the future.

     (b) Except as set forth in the Parent Disclosure Schedule, Parent has not
taken or permitted any of the actions set forth in Section 5.2 hereof between
December 31, 2001 and the date hereof and, except for execution of this
Agreement, Parent has conducted its business only in the ordinary course,
consistent with past practice.

                                    Ann. A-22


     4.7.  Legal Proceedings.  Except as disclosed in the Parent Disclosure
Schedule, Parent is not a party to any, and there are no pending or, to the best
of Parent's knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against Parent or any officer or director of Parent in his or her capacity as
such. Except as disclosed in the Parent Disclosure Schedule, Parent is not a
party to any order, judgment or decree entered in any lawsuit or proceeding.

     4.8.  Taxes and Tax Returns.

     (a) Filing of Tax Returns and Payment of Taxes.  Parent has timely filed
all Tax Returns (as hereinafter defined) required to be filed by it, each such
Tax Return has been prepared in compliance with all applicable laws and
regulations, and all such Tax Returns are true, accurate and complete in all
respects. All Taxes (as hereinafter defined) that have become due and payable by
Parent have been timely paid, and Parent will not be liable for any additional
Taxes in respect of any taxable period or any portion thereof ending on or
before the date of this Agreement in an amount that exceeds the corresponding
reserve therefor separately identified in the Parent Disclosure Schedule, if
any, as reflected in the accounting records of Parent, and any Taxes of Parent
arising after such date will be incurred in the ordinary course of Parent's
business. Parent has made available to the Company true, correct and complete
copies of all Tax Returns with respect to income taxes filed by or with respect
to it with respect to taxable periods ended on or after December 31, 1998, and
has delivered or made available to the Company all relevant documents and
information with respect thereto, including without limitation work papers,
records, examination reports, and statements of deficiencies assessed against or
agreed to by Parent.

     (b) Deficiencies.  No deficiency or proposed adjustment in respect of Taxes
has been proposed, asserted or assessed by any Taxing authority against Parent.

     (c) Liens.  There are no liens for Taxes (other than current Taxes not yet
due and payable) on the assets of Parent.

     (d) Extensions to Statute of Limitations for Assessment of Taxes.  Parent
has not consented to extend the time in which any Tax may be assessed or
collected by any Taxing authority.

     (e) Extensions of the Time for Filing Tax Returns.  Except as set forth in
the Parent Disclosure Schedule, Parent has not requested or been granted an
extension of the time for filing any Tax Return to a date on or after the date
of this Agreement.

     (f) Pending Proceedings.  There is no action, suit, Taxing authority
proceeding, or audit with respect to any Tax now in progress, pending, or, to
the knowledge of Parent, threatened, against or with respect to Parent. There
are no outstanding adjustments, deficiencies, additional assessments or refund
claims proposed or outstanding with respect to any Tax or Tax Return of Parent.

     (g) No Failures to File Tax Returns.  No claim has ever been made by a
Taxing authority in a jurisdiction where Parent does not pay Tax or file Tax
Returns that Parent is or may be subject to Taxes assessed by such jurisdiction.

     (h) Tax Sharing, Allocation, or Indemnity Agreements.  Parent is not a
party to or bound by any Tax sharing or allocation agreement and has no current
or potential contractual obligation to indemnify any other person with respect
to Taxes, except in connection with license agreements.

     (i) Withholding Taxes.  Parent has timely withheld and timely paid all
Taxes which are required to have been withheld and paid by it in connection with
amounts paid or owing to any employee, independent contractor, creditor or other
person.

     (j) Tax-Free Merger.  Parent has not taken any action, nor does Parent know
of any fact, that is reasonably likely to prevent the Merger from qualifying as
a "reorganization" within the meaning of Code Section 368.

     4.9.  Employee Benefit Plans.  Except as disclosed in the Parent Disclosure
Schedule and Parent's employee handbook, a copy of which is included in the
Parent Disclosure Schedule, Parent does not
                                    Ann. A-23


maintain or contribute to any "employee pension benefit plan" (the "Parent
Pension Plans"), as such term is defined in Section 3 of ERISA, "employee
welfare benefit plan" (the "Parent Welfare Plans"), as such term is defined in
Section 3 of ERISA, stock option plan, stock purchase plan, deferred
compensation plan, cafeteria plan, severance plan, bonus plan, employment
agreement or other similar plan, program or arrangement. Parent has not
contributed to, or been required to contribute to, any "Multiemployer Plan", as
such term is defined in Section 3(37) of ERISA.

     4.10.  Compliance With Applicable Law.

     (a) Except as set forth in the Parent Disclosure Schedule, Parent holds all
material Licenses from, and has submitted notices to, all governmental entities
(including, without limitation, all authorizations under the FDCA and all
regulations of the FDA necessary for the lawful conduct of its respective
business as described in Parent Company Overview dated July 2002 (a copy of
which Parent has provided to the Company), and has complied with and is not in
default in any material respect under any applicable law, statute, order, rule,
regulation, policy and/or guideline of any federal, state or local governmental
authority relating to Parent (other than where such default or noncompliance
will not result in a material adverse effect on the business, operations,
assets, financial condition or prospects of Parent) and Parent has not received
written notice of violation of, and does not know of any violations of, any of
the above.

     (b) To Parent's knowledge, all biological and drug products being
manufactured, distributed, or developed by Parent ("Parent Pharmaceutical
Products") that are subject to the jurisdiction of the FDA are being
manufactured, labeled, stored, tested, distributed, and marketed in compliance
with all applicable requirements under the FDCA and the Public Health Service
Act, and their applicable implementing regulations.

     (c) To Parent's knowledge, all preclinical trials and clinical trials
conducted by or on behalf of Parent have been, and are being conducted in
material compliance with the applicable requirements of "Good Clinical
Practice", Informed Consent, and all applicable requirements relating to
protection of human subjects contained in 21 C.F.R. Parts 50, 54, and 56.

     (d) All manufacturing operations conducted by or for the benefit of Parent
have been and are being conducted in compliance with the FDA's applicable
current "Good Manufacturing Practice" regulations for drug and biological
products. In addition, Parent is in compliance in all material respects with all
applicable registration and listing requirements set forth in 21 U.S.C. Section
360 and 21 C.F.R. Part 207 and all similar applicable laws.

     (e) No Company Pharmaceutical Product has been recalled, suspended or
discontinued as a result of any action by the FDA or any other similar foreign
governmental entity by Parent or, to the knowledge of Parent, any licensee,
distributor or marketer of any Company Pharmaceutical Product, in the United
States or outside of the United States.

     (f) Parent has not received any written notice that the FDA or any other
governmental entity has commenced, or threatened to initiate, any action to
withdraw approval, place marketing or sale restrictions, or request the recall
of any Parent Pharmaceutical Product, or commenced, or threatened to initiate,
any action to enjoin or place restrictions on the production, sale, marketing or
reimbursement of any Parent Pharmaceutical Products.

     (g) Parent has not committed any act, made any statement or failed to make
any statement that would reasonably be expected to provide a basis for the FDA
to invoke its policy with respect to "Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities" set forth in 56 Fed. Reg. 46191
(September 10, 1991) and any amendments thereto. Additionally, neither Parent,
nor, to the knowledge of Parent, any officer, key employee or agent of Parent
has been convicted of any crime or engaged in any conduct that would reasonably
be expected to result in (i) debarment under 21 U.S.C. Section 335a or any
similar state law or regulation or (ii) exclusion under 42 U.S.C. Section
1320a-7 or any similar state law or regulation.

                                    Ann. A-24


     4.11.  Certain Contracts.

     (a) Except for plans referenced in Section 4.9 or as disclosed in the
Parent Disclosure Schedule, (i) Parent is not a party to or bound by any
contract or understanding (whether written or oral) with respect to the
employment of any officers, employees, directors or consultants, and (ii) the
consummation of the transactions contemplated by this Agreement will not (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from Parent to any
of its officers, employees, directors or consultants. The Parent Disclosure
Schedule sets forth true and correct copies of all severance or employment
agreements with officers, directors, employees, agents or consultants to which
Parent is a party.

     (b) Except as disclosed in the Parent Disclosure Schedule, (i) as of the
date of this Agreement, Parent is not a party to or bound by any commitment,
agreement or other instrument which is material to the business, operations,
assets, financial condition or prospects of Parent, (ii) no commitment,
agreement or other instrument to which Parent is a party or by which any of them
is bound limits the freedom of Parent to compete in any line of business or with
any person, and (iii) Parent is not a party to any collective bargaining
agreement.

     (c) Except as disclosed in the Parent Disclosure Schedule, neither Parent
nor, to the best knowledge of Parent, any other party thereto, is in default in
any material respect under any material lease, contract, mortgage, promissory
note, or other commitment or arrangement, except for defaults which individually
or in the aggregate would not have a material adverse effect on the business,
operations, assets, financial condition or prospects of Parent.

     4.12.  Intellectual Property.

     (a) Parent owns, or has the right to use pursuant to valid license,
sublicense, agreement, or permission, all intellectual property rights used in
or necessary for the operation of Parent's business as presently conducted.
Except as set forth in the Parent Disclosure Schedule, (i) such intellectual
property rights are owned free and clear of royalty obligations, liens and
encumbrances, (ii) the execution and delivery of this Agreement and the closing
of the transaction contemplated hereby will not alter or impair any such rights,
(iii) the use of all such intellectual property by Parent does not infringe or
violate the intellectual property rights of any person or entity, and (iv)
Parent has not granted any person or entity any rights, pursuant to written
license agreement or otherwise, to use such intellectual property. Parent has
taken, and shall continue to take through the Closing Date, all necessary action
to maintain and protect each item of intellectual property that it owns or uses.

     (b) The Parent Disclosure Schedule identifies (i) each patent, trademark,
trade name, service name or copyright with respect to any of Parent's
intellectual property, all applications and registration statements therefor and
renewals thereof (and sets forth correct and complete copies of all such
patents, registrations and applications (as amended to date)); and (ii) all
intellectual property that Parent uses pursuant to license, sublicense,
agreement, or permission, all of which are valid and in full force and effect,
and the execution and delivery of this Agreement and the closing of the
transaction contemplated hereby will not alter or impair any such rights.

     (c) Parent has at all times used reasonable efforts to protect all trade
secrets related to its intellectual property.

     (d) To the knowledge of Parent, Parent has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any intellectual
property rights of third parties, nor does the practice of any of the
intellectual property owned by or licensed to Parent interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any intellectual
property rights of third parties. Parent has not received any written complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including, but not limited to, any claim that
Parent must license or refrain from using any intellectual property rights of
any third party), nor to Parent's knowledge is there any reasonable basis
therefor. To the knowledge of Parent, no third party has interfered with,

                                    Ann. A-25


infringed upon, misappropriated, or otherwise come into conflict in any material
respect with any intellectual property rights of Parent.

     4.13.  Properties.  Parent has good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, listed on the Parent Disclosure Schedule,
subject to no encumbrances, liens, mortgages, security interests or pledges,
except (i) those items that secure liabilities that are reflected in the Parent
June Balance Sheet or the notes thereto or that secure liabilities incurred in
the ordinary course of business after the date of such balance sheet, (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith and (iii) such title imperfections that are not in the aggregate
material to the business, operations, assets, financial condition or prospects
of Parent. Except as affected by the transactions contemplated hereby, Parent as
lessee has the right under valid and subsisting leases to occupy, use, possess
and control all real property listed on the Parent Disclosure Schedule in all
material respects as presently occupied, used, possessed and controlled by
Parent.

     4.14.  Insurance.  The business operations and all insurable properties and
assets of Parent are insured for their benefit against all risks which, in the
reasonable judgment of the management of Parent, should be insured against
(including, without limitation, products liability for human clinical trials,
professional liability for insureds and employees and professional liability for
clinical sites and clinical investigators), in each case under policies or bonds
issued by insurers of recognized responsibility, in such amounts with such
deductibles and against such risks and losses as are in the opinion of the
management of Parent adequate for the business engaged in by Parent. As of the
date hereof, Parent has not received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond or is in default under
any such policy or bond, no coverage thereunder is being disputed and all
material claims thereunder have been filed in a timely fashion, and a list of
all pending claims and coverage disputes is set forth in the Parent Disclosure
Schedule. Except as set forth in the Parent Disclosure Schedule, Parent has
received no "reservation of rights" letters with respect to pending claims or
coverage disputes.

     4.15.  Environmental Matters.  Parent is not required to obtain any
Licenses under applicable Environmental Laws in connection with the conduct of
the business and assets and properties of Parent. Except as disclosed in the
Parent Disclosure Schedule, no oral or written notification of a Release of a
Hazardous Material in connection with the operation of Parent's business has
been filed by or on behalf of Parent, and no site or facility now or previously
owned, operated, or leased by Parent is listed or proposed for listing on the
"National Priorities List" under CERCLA or any similar state or local list of
sites requiring investigation or clean-up.

     4.16.  Employees.  Except as set forth in the Parent Disclosure Schedule,
to the knowledge of Parent, no executive, key employee, independent contractor,
or group of employees has any plans to terminate employment or association with
Parent. Parent is not subject to any strike, grievance, claim of unfair labor
practices, or other collective bargaining dispute, and Parent has no knowledge
of any organizational effort presently being made or threatened by or on behalf
of any labor union with respect to employees of Parent.

     4.17.  Transactions With Affiliates.  Except as disclosed in the Parent
Disclosure Schedule, since January 1, 2001, no affiliate, as such term is
defined in Rule 405 promulgated under the 1933 Act, of Parent (i) has any
material direct or indirect interest in any entity which transacts business with
Parent, (ii) has any direct or indirect interest in any property, asset or right
which is used by Parent in the conduct of its business, (iii) has any other
contractual relationship with Parent in respect of its business, (iv) owns any
asset used by Parent in connection with its business, or (v) has made or
received any loans or other financings (other than equity financings) to or from
Parent other than compensation described in the Parent Disclosure Schedule or
the documents listed therein.

     4.18.  Broker's and Other Fees.  Except for Petkevich & Partners, LLC,
neither Parent nor any of its directors or officers has employed any broker or
finder or incurred any liability for any broker's or finder's fees or
commissions in connection with any of the transactions contemplated by this
Agreement. Parent's agreement with Petkevich & Partners, LLC is set forth in the
Parent Disclosure Schedule. There are no
                                    Ann. A-26


fees (other than time charges billed at usual and customary rates) payable to
any consultants, including lawyers and accountants, in connection with this
transaction or which would be triggered by consummation of this transaction or
the termination of the services of such consultants by Parent.

     4.19.  Parent Proxy Statement Information.  The information relating to
Parent to be contained in the Proxy Statement to be delivered to stockholders of
Parent in connection with the solicitation of their approval of the Merger, as
of the date the Proxy Statement is mailed to stockholders of Parent, and up to
and including the date of the meeting of stockholders to which such Proxy
Statement relates, will not 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 Proxy Statement will comply, as of its mailing date,
as to form, in all material respects with all applicable laws, including the
1933 Act and the 1934 Act.

     4.20.  Parent Common Stock.  At the Effective Time, the Parent Common Stock
to be issued pursuant to the Merger will be duly authorized and validly issued,
fully paid, nonassessable, free of preemptive rights and free and clear of all
liens, encumbrances or restrictions created by or through Parent, with no
personal liability attaching to the ownership thereof. The Parent Common Stock
to be issued pursuant to the Merger will be registered under the 1933 Act and
issued without any legend thereon, except as may be required pursuant to Rule
145 promulgated under the 1933 Act (regardless of whether Company Common Stock
exchanged therefor was legended), in accordance with all applicable state and
federal laws, rules and regulations and, provided the Parent Common Stock is
then included therein, will be included in The Nasdaq Stock Market ("Nasdaq").

     4.21.  Disclosure.  No representation or warranty contained in Article IV
of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein not misleading.

                                   ARTICLE V

                            COVENANTS OF THE PARTIES

     5.1.  Conduct of Business.  During the period from the date of this
Agreement to the Effective Time, each of Parent and the Company shall:

          (i) conduct its business only in the ordinary course and consistent
     with prudent and prior business practice, except for transactions permitted
     hereunder or with the prior written consent of the other party, which
     consent will not be unreasonably withheld;

          (ii) use reasonable efforts to preserve its business organization
     intact, keep available the present services of its employees and preserve
     the goodwill of its customers and employees and others with whom business
     relationships exist; and

          (iii) confer on a reasonable basis with each other regarding
     operational matters and other matters related to the Merger.

     5.2.  Prohibited Actions Pending Closing.  Except as provided in this
Agreement and as disclosed in either the Company Disclosure Schedule or Parent
Disclosure Schedule, during the period from the date of this Agreement to the
Effective Time, neither the Company nor Parent shall:

          (i) amend or otherwise change its Certificate of Incorporation, Bylaws
     or other governing documents;

          (ii) issue or sell or authorize for issuance or sale, or grant any
     options or make other agreements with respect to, any shares of their
     capital stock or any other of their securities (other than (A) the exercise
     of presently outstanding options, (B) the conversion of presently
     outstanding Company Preferred Stock, and (C) the issuance of stock options
     to Ronald L. Goode, Ph.D. and to continuing and non-continuing directors of
     the Company and Parent);

                                    Ann. A-27


          (iii) authorize or incur any debt for money borrowed or incur any
     long-term debt, or make any loans, advances or capital contributions to any
     third parties;

          (iv) mortgage, pledge, grant a security interest in or otherwise
     subject to lien or other encumbrance any of the its properties or agree to
     do so;

          (v) enter into or agree to enter into any agreement, contract or
     commitment, or modify, amend or terminate any agreement, contract or
     commitment, other than any agreement, contract or commitment involving
     aggregate payments of less than $20,000 in any one year where such entry,
     modification, amendment or termination occurs in the ordinary course of
     business consistent with past practice;

          (vi) declare, set aside, make or pay any dividend or other
     distribution to its stockholders, or redeem, purchase or otherwise acquire,
     directly or indirectly, any of their capital stock, or authorize or effect
     any split-up or any recapitalization or make any changes in their
     authorized or issued capital stock;

          (vii) hire or increase or agree to increase, the compensation of any
     of their officers, directors or employees by means of salary increase,
     bonus or otherwise (other than any salary increase, bonus or otherwise of
     less than $20,000 in any one year and which occurs in the ordinary course
     of business consistent with past practice), or hire any employee (full time
     or part time) or retain any consultant;

          (viii) sell, license or otherwise dispose of, or agree to sell,
     license or dispose of, any of its assets or properties, other than any
     assets or properties valued at less than $20,000 where such sale, license
     or disposition occurs or is to occur in the ordinary course of business
     consistent with past practice;

          (ix) amend or terminate any lease (other than the lease for the
     Present New York Office), contract, undertaking or other commitment listed
     in the Company Disclosure Schedule or the Parent Disclosure Schedule, as
     the case may be, or take action or fail to take any action, constituting
     any event of default thereunder;

          (x) assume, guarantee or otherwise become responsible for the
     obligations of any other party or agree to so do;

          (xi) take any action or omit to take any action for the purpose of
     preventing, delaying or impeding the consummation of the Merger or the
     other transactions contemplated hereby;

          (xii) except as disclosed in Sections 3.17 or 4.18, pay any finders or
     investment bankers' fees in connection with the transactions contemplated
     by this Agreement; or

          (xiii) take any action prior to the Effective Time which would breach
     any of the representations and warranties contained in this Agreement.

     5.3.  Litigation.  Each of Parent and the Company shall promptly notify the
other party of any lawsuits, claims, proceedings or investigations of which it
has knowledge which after the date hereof are threatened or commenced against it
or against any of its officers, directors, employees, consultants, agents or
stockholders with respect to or affecting its business.

     5.4.  Current Information.  During the period from the date of this
Agreement to the Effective Time, each of the Company and Parent will cause one
or more of its designated representatives to confer with representatives of the
other party on a monthly basis regarding its business, operations, properties,
assets and financial condition and matters relating to the completion of the
transactions contemplated herein. On a monthly basis, the Company agrees to
provide Parent, and Parent agrees to provide the Company, with internally
prepared profit and loss statements no later than 20 business days after the
close of each fiscal month, including the months of July and August 2002. Parent
shall file its 1934 Act reports with the SEC on a timely basis, and shall
provide a draft report to the Company at least one (1) business day prior to the
proposed filing date.

                                    Ann. A-28


     5.5.  Due Diligence; Access to Properties and Records.

     (a) The Company shall permit Parent and its representatives, and Parent
shall permit the Company and its representatives, reasonable access to their
respective properties, and shall disclose and make available to (and allow
copies to be made of) Parent and its representatives, or the Company and its
representatives as the case may be, all books, papers and records relating to
its assets, stock ownership, properties, operations, obligations and
liabilities, including, but not limited to, all books of account (including the
general ledger), tax records, minute books of directors' and stockholders'
meetings, organizational documents, by-laws, material contracts and agreements,
filings with any regulatory authority, accountants' work papers, litigation
files, plans affecting employees, and any other business activities or prospects
in which Parent and its representatives or the Company and its representatives
may have a reasonable interest. Neither party shall be required to provide
access to or to disclose information where such access or disclosure would
violate or prejudice the rights of any customer, would contravene any law, rule,
regulation, order or judgment or would waive any privilege. The parties will use
reasonable efforts to obtain waivers of any such restriction (other than waivers
of the attorney-client privilege) and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Notwithstanding the foregoing, Parent shall not be
required to disclose to the Company material non-public information concerning
potential acquisitions or other merger candidates.

     (b) All information furnished by the parties hereto previously in
connection with transactions contemplated by this Agreement or pursuant hereto
shall be used solely for the purpose of evaluating the Merger contemplated
hereby and shall be treated as the sole property of the party delivering the
information until consummation of the Merger contemplated hereby and shall, in
all respects, be subject to the Confidentiality Agreement previously entered
into between Parent and the Company.

     5.6.  Governmental Consents.  The parties hereto will cooperate with each
other and use all reasonable efforts to prepare, file and diligently pursue all
necessary documentation, to effect all necessary filings and to obtain all
necessary permits, consents, approvals and authorizations of all third parties
and governmental bodies necessary to consummate the transactions contemplated by
this Agreement as soon as possible. The parties shall each have the right to
review in advance all filings with, including all information relating to the
other, as the case may be, which appears in any filing made with, or written
material submitted to, any third party or governmental body in connection with
the transactions contemplated by this Agreement.

     5.7.  Further Assurances.  Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions to Closing and to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using reasonable
efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement and using reasonable efforts to prevent the
breach of any representation, warranty, covenant or agreement of such party
contained or referred to in this Agreement and to promptly remedy the same. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
Nothing in this section shall be construed to require any party to participate
in any threatened or actual legal, administrative or other proceedings (other
than proceedings, actions or investigations to which it is a party or subject or
threatened to be made a party or subject) in connection with consummation of the
transactions contemplated by this Agreement unless such party shall consent in
advance and in writing to such participation and the other party agrees to
reimburse and indemnify such party for and against any and all costs and damages
related thereto.

     5.8.  Public Announcements.  Parent and the Company shall cooperate with
each other in the development and distribution of all news releases and other
public filings and disclosures with respect to this Agreement or the Merger
contemplated hereby, and Parent and the Company agree that unless approved
mutually by them in advance, they will not issue any press release or written
statement for

                                    Ann. A-29


general circulation relating primarily to the transaction contemplated hereby,
except as may be otherwise required by law or regulation in the opinion of
counsel, provided that the party issuing the release will provide to the other
party a draft of the release prior to issuance.

     5.9.  Retention of Employees, Officers; Benefits.

     (a) Following consummation of the Merger, Parent will use reasonable
efforts to retain the Company's existing officers and employees ("employees")
with levels of aggregate total compensation (salary plus benefits) substantially
equivalent in the aggregate to those currently provided to the employees by the
Company, and with policies substantially equivalent in the aggregate to the
employees as those currently followed by the Company.

     (b) The employee benefit plans, arrangements and related policies of the
Company shall initially be unaffected by the Merger. Following the Merger,
Parent may review such plans, arrangements and policies with a view towards
consolidating them with Parent's plans, arrangements and policies to the extent
feasible and consistent with paragraph (a) above. To the extent current
employees of the Company become participants in or subject to a plan,
arrangement or policy of Parent (including without limitation those pertaining
to medical, vacation, sick leave, disability, and pension matters), they will
receive credit for prior employment by the Company for all purposes in
connection with such plan, arrangement or policy, and no prior existing
condition limitation shall be imposed with respect to any medical coverage plan
of Parent (except to the extent that such limitations have already been
imposed). The foregoing shall not be construed to prevent the termination of any
employment of any Company or Parent employee.

     (c) Parent shall enter into employment agreements (the "Employment
Agreements"), effective as of the Effective Time, with Mark C. Rogers, M.D. and
Ronald L. Goode, Ph.D., on substantially the terms set forth in Exhibits B and
C, respectively.

     5.10.  Disclosure Supplements.  From time to time prior to the Effective
Time, each party hereto will promptly supplement or amend (by written notice to
the other) its respective Disclosure Schedules delivered pursuant hereto with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such Schedules or which is necessary to correct any information in
such Schedules which has been rendered materially inaccurate thereby. For the
purpose of determining satisfaction of the conditions set forth in Article VI
and subject to Sections 6.2(a) and 6.3(a), no supplement or amendment to such
Schedules shall correct or cure any representation, warranty or covenant which
was untrue when made, but shall enable the disclosure of subsequent facts or
events to maintain the truthfulness of any warranty.

     5.11.  Affiliates.  Prior to the filing of the Proxy Statement, the Company
shall deliver to Parent (a) a letter identifying all persons who, to the
knowledge of the Company, may be deemed to be affiliates of the Company, as such
term is defined in Rule 405 promulgated under the 1933 Act, including, without
limitation, all directors and executive officers of the Company and (b) copies
of letter agreements, each substantially in the form of Exhibit D attached
hereto, executed by each such person so identified as an affiliate of the
Company, for whom a signed "affiliate's letter" has not previously been
delivered to Parent.

     5.12.  Tax-Free Merger Status.  The parties hereto shall take (or refrain
from taking) any and all actions necessary to ensure that, for United States
federal income tax purposes, the Merger shall qualify as a reorganization within
the meaning of Sections 368(a)(1) and 368(2)(E) of the Code.

     5.13.  Nasdaq Listing.  The parties hereto will cooperate with each other
and use all reasonable efforts to prepare, file and diligently pursue all
necessary documentation to maintain the listing of the Parent Common Stock on
Nasdaq, including, but not limited to, an initial listing application, if so
required by Nasdaq pursuant to NASD Marketplace Rule 4330(f), and an appeal of a
decision by Nasdaq to delist the Parent Common Stock, if applicable.

     5.14.  Notice of Certain Matters.  Parent shall give prompt notice to the
Company, and the Company shall give prompt notice to Parent, as the case may be,
of (i) the occurrence, or non-occurrence, of any event the respective
occurrence, or non-occurrence, of which would be likely to cause any

                                    Ann. A-30


representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of the Company or Parent, as the case may be, to
comply or satisfy any covenant, condition or agreement to be complied with under
this Agreement; provided, however, that the delivery of any notice pursuant to
this Section 5.14 shall not relieve any party giving such notice of its
obligation hereunder.

     5.15.  Cash; Liabilities.  As of the Effective Time, Parent shall have
cash, cash equivalents, money market accounts or government securities in the
amount of at least $16.5 million and its current liabilities shall not exceed
$1.1 million. As of the Effective Time, Parent will not be delinquent, nor will
it be in default, in the payment of any of its liabilities.

     5.16.  Stockholders Meetings.

     (a) The Company shall take all steps necessary to duly call, give notice
of, convene and hold the Company Stockholders Meeting for the purpose set forth
in Section 1.3(a) hereof.

     (b) Parent shall take all steps necessary to duly call, give notice of,
convene and hold the Parent Stockholders Meeting for the purpose set forth in
Section 1.3(b) hereof.

     5.17.  Conversion of Company Preferred Stock.  The Company shall take all
steps necessary to obtain the requisite elections from the holders of Company
Preferred Stock to effect the conversion of all shares of Company Preferred
Stock into Company Common Stock in accordance with Section 2.1(a) hereof.

                                   ARTICLE VI

                               CLOSING CONDITIONS

     6.1.  Conditions of Each Party's Obligations Under this Agreement.  The
respective obligations of each party under this Agreement to consummate the
Merger shall be subject to the satisfaction, or, where permissible under
applicable law, waiver at or prior to the Effective Time of the following
conditions:

          (a) Approval of Stockholders; SEC Registration.  This Agreement and
     the transactions contemplated hereby shall have been approved by the
     requisite vote of the stockholders of the Company and of Parent, and all of
     the Parent Stockholder Proposals shall have been approved by the requisite
     vote of the stockholders of Parent. The Registration Statement shall have
     been declared effective by the SEC and shall not be subject to a stop order
     or any threatened stop order, and the issuance of the Parent Common Stock
     shall have been qualified in every state where such qualification is
     required under the applicable state securities laws.

          (b) Suits and Proceedings.  No order, judgment or decree shall be
     outstanding against a party hereto or a third party that would have the
     effect of preventing completion of the Merger; and no suit, action or other
     proceeding shall be pending or threatened by any governmental body in which
     it is sought to restrain or prohibit the Merger.

     6.2.  Conditions to the Obligations of Parent and Merger Sub Under this
Agreement.  The obligations of Parent and Merger Sub under this Agreement shall
be further subject to the satisfaction or waiver, at or prior to the Effective
Time, of the following conditions:

          (a) Representations and Warranties; Performance of Obligations of the
     Company.  Except for those representations which are made as of a
     particular date, the representations and warranties of the Company
     contained in this Agreement shall be true and correct in all material
     respects on the Closing Date as though made on and as of the Closing Date.
     The Company shall have performed in all material respects the agreements,
     covenants and obligations to be performed by it prior to the Closing Date.
     With respect to any representation or warranty which as of the Closing Date
     has required a supplement or amendment to the Company Disclosure Schedule
     to render such representation or warranty true and correct in all material
     respects as of the Closing Date, the representation and warranty shall be
     deemed true and correct as of the Closing Date only if (i) the information
     contained in the supplement or amendment to the Disclosure Schedule related
     to events occurring
                                    Ann. A-31


     following the execution of this Agreement and (ii) either (x) the facts
     disclosed in such supplement or amendment would not either alone, or
     together with any other supplements or amendments to the Company Disclosure
     Schedule, materially adversely effect the representation as to which the
     supplement or amendment relates or (y) such supplement or amendment
     remedied any material breach in accordance with Section 7.2.

          (b) Opinion of Counsel.  Parent shall have received an opinion of
     Thelen Reid & Priest LLP, counsel to the Company, dated the Closing Date,
     in form and substance reasonably satisfactory to Parent, as to the matters
     set forth in Sections 3.1, 3.2 and 3.3 of this Agreement, and to the effect
     that for United States federal income tax purposes the Merger will qualify
     as a reorganization within the meaning of Sections 368(a)(1) and
     368(a)(2)(E) of the Code, and such other matters as are reasonably
     requested by Parent and its counsel.

          (c) Certificates.  The Company shall have furnished Parent with such
     certificates of its officers or other documents to evidence fulfillment of
     the conditions set forth in this Section 6.2 as Parent may reasonably
     request.

          (d) Waiver of Option Acceleration.  The holders of Company Stock
     Options shall have waived any acceleration and other provisions thereof
     necessary to effect the terms of Section 2.5 hereof.

          (e) Dissenters' Rights.  Dissenters' or appraisal rights shall not
     have been exercised by Company stockholders holding more than 5% of the
     outstanding voting shares of the Company.

          (f) Regulatory Filings.  All necessary regulatory or governmental
     approvals and consents required to consummate the transactions contemplated
     hereby (other than immaterial government permits) shall have been obtained
     without any term or condition which would materially impair the value of
     the Company. All conditions required to be satisfied prior to the Effective
     Time by the terms of such approvals and consents shall have been satisfied,
     and any and all statutory waiting periods in respect thereof shall have
     expired.

          (g) Lock-Up Agreement.  Each executive officer and director of the
     Company, and each of their respective affiliates, and each stockholder of
     the Company who will be a holder of at least five percent (5%) of the
     outstanding capital stock of Parent upon Closing, shall each have executed
     and delivered to Parent a written lock-up agreement, in form and substance
     acceptable to Parent, whereby each such person shall agree not to offer to
     sell or sell, dispose of, loan, pledge, hypothecate or grant any rights
     with respect to, any shares of Parent Common Stock, or any securities
     convertible into or exchangeable for shares thereof, for a period of six
     (6) months after the Effective Time.

          (h) Employment Agreement.  Mark C. Rogers, M.D. shall have executed
     and delivered to Parent the Employment Agreement, on substantially the
     terms set forth in Exhibit B.

          (i) Comfort Letter.  The Company Comfort Letter shall have been
     delivered to Parent.

          (j) Officers and Directors.  Ronald L. Goode, Ph.D. shall have been
     duly elected, as of the Effective Time, to be President and Chief Executive
     Officer of Parent and the Surviving Company; and four directors designated
     by Parent shall been elected, as of the Effective Time, to be members of
     the Boards of Directors of Parent and the Surviving Company.

     6.3.  Conditions To the Obligations of the Company Under This
Agreement.  The obligations of the Company under this Agreement shall be further
subject to the satisfaction or waiver, at or prior to the Effective Time, of the
following conditions:

          (a) Representations and Warranties; Performance of Obligations of
     Parent.  Except for those representations which are made as of a particular
     date, the representations and warranties of Parent and Merger Sub contained
     in this Agreement shall be true and correct in all material respects on the
     Closing Date as though made on and as of the Closing Date. Parent shall
     have performed in all material respects, the agreements, covenants and
     obligations to be performed by it prior to the Closing Date. With respect
     to any representation or warranty which as of the Closing Date has required
     a

                                    Ann. A-32


     supplement or amendment to the Parent Disclosure Schedule to render such
     representation or warranty true and correct in all material respects as of
     the Closing Date, the representation and warranty shall be deemed true and
     correct as of the Closing Date only if (i) the information contained in the
     supplement or amendment to the Disclosure Schedule related to events
     occurring following the execution of this Agreement and (ii) either (x) the
     facts disclosed in such supplement or amendment would not either alone, or
     together with any other supplements or amendments to the Parent Disclosure
     Schedule, materially adversely effect the representation as to which the
     supplement or amendment relates or (y) such supplement or amendment
     remedied any material breach in accordance with Section 7.1(e)(ii).

          (b) Opinion of Counsel.  The Company shall have received an opinion of
     outside counsel to Parent, dated the Closing Date, in form and substance
     reasonably satisfactory to the Company, as to the matters set forth in
     Sections 4.1, 4.2 and 4.3 of this Agreement and to the effect that for
     United States federal income tax purposes the Merger will qualify as a
     reorganization within the meaning of Section 368(a)(1) and 368(a)(2)(E) of
     the Code, and such other matters as are reasonably requested by the Company
     and its counsel.

          (c) Certificates.  Parent and Merger Sub shall have furnished the
     Company with such certificates of its officers or others and such other
     documents to evidence fulfillment of the conditions set forth in this
     Section 6.3 as the Company may reasonably request.

          (d) Regulatory Filings.  All necessary regulatory or governmental
     approvals and consents required to consummate the transactions contemplated
     hereby (other than immaterial government permits) shall have been obtained
     without any term or condition which would materially impair the value of
     Parent. All conditions required to be satisfied prior to the Effective Time
     by the terms of such approvals and consents shall have been satisfied, and
     any and all statutory waiting periods in respect thereof shall have
     expired.

          (e) Lock-Up Agreement.  Each officer and director of Parent, and each
     of their respective affiliates, and each stockholder of Parent who will be
     a holder of at least five percent (5%) of the outstanding capital stock of
     Parent upon Closing, shall each have executed and delivered to Parent a
     written lock-up agreement, in form and substance acceptable to Parent,
     whereby each such person shall agree not to offer to sell or sell, dispose
     of, loan, pledge, hypothecate or grant any rights with respect to, any
     shares of Parent Common Stock, or any securities convertible into or
     exchangeable for shares thereof, for a period of six (6) months after the
     Effective Time.

          (f) Employment Agreement.  Ronald L. Goode, Ph.D. shall have executed
     and delivered to Parent the Employment Agreement, on substantially the
     terms set forth in Exhibit C.

          (g) Comfort Letter.  The Parent Comfort Letter shall have been
     delivered to the Company.

          (h) Officers and Directors.  Mark C. Rogers, M.D. shall have been duly
     elected, as of the Effective Time, to be Executive Chairman of Parent and
     the Surviving Company; and four directors designated by the Company shall
     been elected, as of the Effective Time, to be members of the Boards of
     Directors of Parent and the Surviving Company.

                                  ARTICLE VII

               NO SOLICITATION; TERMINATION, AMENDMENT AND WAIVER

     7.1.  No Solicitation.

     (a) Unless and until this Agreement shall have been terminated pursuant to
and in compliance with Section 7.2 hereof, neither Parent nor the Company shall
(whether directly or indirectly through its respective advisors, agents or other
intermediaries), nor shall the Company or Parent authorize or permit any of its
respective officers, directors, agents, employees, representatives or advisors
to (i) solicit, initiate, encourage (including by way of furnishing information)
or take any action to facilitate the submission of

                                    Ann. A-33


any inquiries, proposals or offers (whether or not in writing) from any person
(other than Parent or the Company, as the case may be, and its respective
affiliates) relating to (A) any acquisition or purchase of any of the assets of
the Company or Parent, as the case may be, or of any class of equity securities
of the Company or Parent, as the case may be, (B) any tender offer (including a
self tender offer) or exchange offer, (C) any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or Parent, as the case
may be, or (D) any other transaction the consummation of which would or would
reasonably be expected to impede, interfere with, prevent or materially delay
the Merger or which would or would reasonably be expected to materially dilute
the benefits to the other party hereto of the transactions contemplated by this
Agreement (collectively, "Acquisition Proposals"), or agree to, recommend or
endorse any Acquisition Proposal, (ii) enter into or execute any agreement with
respect to any of the foregoing or (iii) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties or assets
in connection with the foregoing, or otherwise cooperate in any way with, or
participate in or assist, facilitate, or encourage, any effort or attempt by any
other person (other than the Company or Parent, as the case may be, and its
respective affiliates) to do or seek any of the foregoing.

     (b) Nothing contained in this Agreement shall prohibit the Company or
Parent (i) from complying with Rule 14e-2 and Rule 14d-9 under the 1934 Act with
respect to a bona fide tender offer or exchange offer, (ii) from making any
disclosure of an Acquisition Proposal to its respective stockholders or
otherwise if its respective Board of Directors concludes in good faith, within
five (5) business days after consultation with its outside legal counsel, that
such disclosure is necessary under applicable law or the failure to make such
disclosure would be inconsistent with its fiduciary duties to its respective
stockholders under applicable law or (iii) from participating in negotiations or
discussions with or furnishing information to any person in connection with an
Acquisition Proposal not solicited after the date hereof in breach of Section
7.1(a) above and which is submitted in writing by such person to the Board of
Directors of the Company or Parent, as the case may be, after the date of this
Agreement; provided, however, that prior to participating in any such
discussions or negotiations or furnishing any information, within five (5)
business days after its receipt of the Acquisition Proposal, the Board of
Directors of Parent or the Company, as the case may be, shall have concluded in
good faith, after consultation with its outside legal counsel and financial
advisors, that such Acquisition Proposal is reasonably likely to lead to a
Superior Proposal (as hereinafter defined) and, after consultation with its
outside legal counsel, that failure to participate in such negotiations or
discussions or furnishing such information would be inconsistent with its
fiduciary duties to the stockholders of Parent or the Company, as the case may
be, under applicable law. The Company or Parent, as the case may be, shall (i)
promptly notify the other party hereto (but in no event later than two (2)
business days thereafter) if any Acquisition Proposal or inquiries regarding a
potential Acquisition Proposal are received by, any information with respect to
an Acquisition Proposal or a potential Acquisition Proposal is requested from,
or any discussions or negotiations with respect to an Acquisition Proposal or a
potential Acquisition Proposal are sought to be initiated or continued with, it
or any of its representatives indicating, in connection with such notice, the
name of the person or entity involved and a copy of any such Acquisition
Proposal, with the intent of enabling such other party to make a matching offer
so that the transactions contemplated hereby may be effected. The Company or
Parent, as the case may be, shall thereafter keep the other party hereto
informed, on a current basis, of the status and terms of any such inquiries or
Acquisition Proposals and the status of any such negotiations or discussions,.
The Company or Parent, as the case may be, shall promptly furnish the other
party hereto with copies of any written information (and advise it orally of any
non-written information) provided to or by any person relating to an Acquisition
Proposal to the extent such information has not previously been provided to such
other party hereto.

     (c) Prior to the Effective Time, in the event the Board of Directors of the
Company or Parent, as the case may be, by majority vote of all its members,
determines in good faith that it has received a Superior Proposal and determines
in good faith that taking the following actions would be inconsistent with its
fiduciary duties to the Company or Parent, as the case may be, under applicable
law, the Company or Parent, as the case may be, and its respective Board of
Directors may (i) withdraw, modify or change the
                                    Ann. A-34


Board of Directors' approval or recommendation of this Agreement or the Merger,
(ii) approve or recommend such Superior Proposal to its stockholders, (iii)
terminate this Agreement and pay the Break-Up Fee (as defined in Section 7.3
hereof) and (iv) publicly announce the Board of Directors' intention to do any
or all of the foregoing.

     (d) The Company and Parent will immediately cease and cause its respective
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Each of the Company and Parent agrees
not to release any third party from or waive any provisions of confidentiality
in any confidentiality agreement to which it is a party.

     (e) "Superior Proposal" means a proposal with respect to any of the
transactions described in clause (A), (B), (C) or (D) of the definition of
Acquisition Proposal which the Board of Directors shall have concluded in good
faith after receiving an opinion from its outside legal counsel and financial
advisor, (i) is reasonably likely to be completed, taking into account all
legal, financial, regulatory and other aspects of the Acquisition Proposal and
the person making the proposal, (ii) if consummated, would result in a
transaction more favorable to the stockholders of the Company or Parent, as the
case may be, from a financial point of view than the transactions contemplated
by this Agreement (taking into account any and all modifications proposed by the
Company or Parent, as the case may be) and (iii) is fully financed (or, based on
a good faith determination of the Board of Directors, is readily financeable).

     7.2.  Termination.  This Agreement may be terminated prior to the Effective
Time:

          (a) by mutual written consent of the parties hereto;

          (b) by Parent or the Company (i) if the Effective Time shall not have
     occurred on or prior to February 14, 2003 (the "Deadline Date") unless the
     failure of such occurrence shall be due to the failure of the party seeking
     to terminate this Agreement to perform or observe its agreements set forth
     herein to be performed or observed by such party at or before the Effective
     Time;

          (c) by Parent or the Company (provided that the party seeking to
     terminate the Agreement shall not be in material breach of any of its
     obligations herein), upon written notice to the other if any application
     for regulatory or governmental approval necessary to consummate the Merger
     and the other transactions contemplated hereby shall have been denied or
     withdrawn at the request or recommendation of the applicable regulatory
     agency or governmental authority despite the reasonable efforts of the
     party seeking to terminate this Agreement to avoid such result, or if a
     court of competent jurisdiction has issued a final, non-appealable order
     prohibiting, restraining or enjoining the Merger and the other transactions
     contemplated hereby;

          (d) by Parent, if (i) a vote of the stockholders of the Company is
     taken and such stockholders fail to approve this Agreement at the meeting
     (or any adjournment thereof) held for such purpose or (ii) the requisite
     approval of the conversion of all shares of Company Preferred Stock into
     Company Common Stock is not obtained from the holders of the Company Series
     A Preferred Stock or the Company Series B Preferred Stock prior to the
     Deadline Date;

          (e) by the Company, if a vote of the stockholders of Parent is taken
     and such stockholders fail to approve any of the Parent Stockholder
     Proposals listed in clauses (1), (2), (3) and (6) of Section 1.3(b) hereof,
     at the meeting (or any adjournment thereof) held for such purpose;

          (f) by Parent, if there was a material breach in any representation,
     warranty, covenant, agreement or obligation of the Company hereunder and
     such breach (provided it is curable and the Company promptly commences its
     effort to cure) shall not have been remedied within 30 days after receipt
     by the Company of notice in writing from Parent to the Company specifying
     the nature of such breach and requesting that it be remedied;

          (g) by the Company, if there was a material breach in any
     representation, warranty, covenant, agreement or obligation of Parent
     hereunder and such breach (provided it is curable and Parent promptly
     commences its effort to cure) shall not have been remedied within 30 days
     after receipt by
                                    Ann. A-35


     Parent of notice in writing from the Company specifying the nature of such
     breach and requesting that it be remedied;

          (h) by Parent, if the conditions set forth in Section 6.2 are not
     satisfied and are not capable of being satisfied by the Deadline Date;

          (i) by the Company, if the conditions set forth in Section 6.3 are not
     satisfied and are not capable of being satisfied by the Deadline Date; or

          (j) by Parent or the Company, if (i) the other party hereto approves
     or enters into an agreement providing for it to engage in a Superior
     Proposal, (ii) the other party has taken any action pursuant to Section
     7.1(c) or (iii) ten (10) business days has elapsed since the Board of
     Directors of the other party has determined that an Acquisition Proposal is
     a Superior Proposal pursuant to Section 7.1(b)(iii) and such Board of
     Directors has not withdrawn its prior determination that such Acquisition
     Proposal was a Superior Proposal nor has it advised management to
     terminate, and caused any representative of the other party to terminate,
     discussions or negotiations with or furnishing information to the person,
     or any of affiliates or representatives of such person, that had made the
     Acquisition Proposal.

     7.3.  Break-Up Fee.

     (a) If the Company terminates this Agreement pursuant to Section 7.2(e),
7.2(g), 7.2(i) or 7.2(j) hereof, or Parent terminates this Agreement pursuant to
Section 7.1(c) hereof, then Parent will immediately (but in any event within
three business days after Parent receives notice of termination) pay to the
Company a termination fee equal to $2.0 million in cash (the "Cash Break-Up
Fee").

     (b) If Parent terminates this Agreement pursuant to Section 7.2(d), 7.2(f),
7.2(h) or 7.2(j) hereof, or the Company terminates this Agreement pursuant to
Section 7.1(c) hereof, then the Company will immediately (but in any event
within three business days after the Company receives notice of termination) pay
or deliver to Parent, at the Company's option, either (i) the Cash Break-Up Fee
or (ii) $4.0 million share value (based on a valuation prepared by Thomas Weisel
Partners LLC, C.E. Unterberg, Towbin, Inc., Wells Fargo Securities, LLC ("Wells
Fargo") or such other firm as is mutually agreed to by Parent and the Company,
it being understand that if Parent and the Company do not mutually agree, the
valuation shall be prepared by Wells Fargo) (the "Break-Up Shares"; the Cash
Break-Up Fee and the Break-Up Shares are also referred to herein as the
"Break-Up Fee").

          (c) (i) If, within six (6) months after the date (the "Termination
     Date") on which this Agreement is terminated by Parent pursuant to Section
     7.2(d), 7.2(f), 7.2(h) or 7.2(j) hereof, all of the Break-Up Shares are not
     listed on Nasdaq or a national securities exchange or market, then, in
     addition to the Break-Up Shares, the Company shall pay to Parent, on a
     monthly basis, a royalty equal to 5% of the gross proceeds from the sale of
     any and all products or services by the Company or 10% of the gross
     proceeds to the Company pursuant to a licensing agreement, joint venture or
     similar agreement, up to a maximum payment (the "Maximum Aggregate
     Royalty") of $4.0 million plus interest at the rate of six percent (6%) per
     annum. Interest expense shall be calculated from the date the Parent
     terminates this Agreement.

          (ii) If, prior to the date on which the Company has paid the full
     amount of the Maximum Aggregate Royalty to Parent, Parent sells any or all
     of the Break-Up Shares, the proceeds of such sale shall be deducted from
     the Maximum Aggregate Royalty due under Section 7.3(c) above.

          (iii) Upon payment by the Company to Parent of the full amount of the
     Maximum Aggregate Royalty, any and all Break-Up Shares then held by Parent
     shall be returned to the Company for cancellation.

     (d) The Company and Parent agree and acknowledge that the cash and/or
shares of capital stock to be paid or delivered pursuant to this Section 7.3 is
sufficient to cover all reasonable out-of-pocket expenses which either party
hereto may incur in connection with this Agreement and the Merger and the
transactions contemplated hereby.
                                    Ann. A-36


     7.4.  Effect of Termination.  In the event of the termination and
abandonment of this Agreement by either Parent or the Company pursuant to
Section 7.2, this Agreement (other than Section 9.1, which shall survive
termination) shall forthwith become void and have no effect, without any
liability on the part of any party or its officers, directors or stockholders,
except pursuant to Section 7.3 above. Nothing contained herein, however, shall
relieve any party from any liability for any breach of this Agreement.

                                  ARTICLE VIII

                    ADJUSTMENT FOR LOSSES; ESCROW OF SHARES

     8.1.  Escrow of Shares.

     (a) Escrowed Shares.  Notwithstanding any contrary provision contained in
this Agreement, at the Effective Time, Parent shall (i) allocate from the shares
of Parent Common Stock to be delivered to the holders of Company Common Stock
pursuant to Article II hereof, and shall deliver to U.S. Trust Company or such
other escrow agent mutually acceptable to Parent and the Company (the "Escrow
Agent"), into escrow, a number of shares of Parent Common Stock equal to 10% of
Parent Common Stock that would otherwise be issuable to the holders of Company
Common Stock (the "Company Escrowed Shares") and (ii) issue and deliver to the
Escrow Agent into escrow an additional number of shares of Parent Common Stock
equal to the number of Company Escrowed Shares (the "Parent Escrowed Shares"
and, together with the Company Escrowed Shares, the "Escrowed Shares"). The
Escrowed Shares shall be allocated from the shares of Parent Common Stock to be
delivered pursuant to Section 2.1(c) hereof to each holder of Company Common
Stock in proportion to each such holder's respective holdings of Company Common
Stock.

     (b) Escrow Agreement.  The Escrowed Shares shall be held by the Escrow
Agent for the period set forth in, and in accordance with the terms of, an
escrow agreement in such form and containing such terms as are agreed upon by
the parties thereto (the "Escrow Agreement") to be entered into among the Escrow
Agent, Parent, the Parent Stockholders' Representative (as hereinafter defined)
and the Company Stockholders' Representative (as hereinafter defined).

     8.2.  Stockholders' Representatives.

     (a) Appointment.  Mark C. Rogers, M.D. is hereby appointed as the
representative (the "Company Stockholders' Representative") of the holders (and,
after the Effective Time, the former holders) of Company Common Stock, and
Ronald L. Goode, Ph.D. is hereby appointed as the representative (the "Parent
Stockholders' Representative") of the holders of Parent Common Stock (other than
the shares of Parent Common Stock issued pursuant to the Merger). (The Parent
Stockholders' Representative and the Company Stockholders' Representative are
collectively referred to herein as the "Stockholders' Representatives".)

     (b) Authority.  The Company Stockholders' Representative is authorized to
act on behalf of the holders (or former holders) of Company Common Stock, and
the Parent Stockholders' Representative is authorized to act on behalf of the
holders of Parent Common Stock (other than the shares issued pursuant to the
Merger), in all matters arising under Section 8.3 of this Agreement and under
the Escrow Agreement.

     (c) Replacement.  The Company Stockholders' Representative may be replaced
by the affirmative vote of the persons or entities that, prior to the Effective
Time, were holders of a majority of the outstanding shares of Company Common
Stock, and the Parent Stockholders' Representative may be replaced by the
affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock (other than the shares of Parent Common Stock issued
pursuant to the Merger).

     (d) No Liability.  The Stockholders' Representatives shall not be liable,
in their capacity as such, to the stockholders they represent by reason of any
error of judgment or for any act done or step taken (including any settlement of
claims pursuant to the terms of the Escrow Agreement) or omitted by the Escrow
Agent in good faith or any mistake of fact or law or for anything which the
Escrow Agent may do
                                    Ann. A-37


or refrain from doing in connection herewith, unless caused by or arising out of
the Escrow Agent's own gross negligence or willful misconduct.

     8.3.  Adjustment for Losses.

     (a) Parent Claims.  If, on or prior to the date six (6) months after the
Closing Date (the "Escrow Termination Date"), it becomes known to Parent or the
Parent Stockholders' Representative that any of the representations and
warranties set forth in Article III of this Agreement were untrue as of the date
hereof or as of the Closing Date, or that any of the Company's covenants set
forth in Article V were not satisfied, Parent or the Parent Stockholders'
Representative shall, prior to the Escrow Termination Date, notify the Company
Stockholders' Representative and the Escrow Agent in writing of the amount of
its good faith estimate of the amount of any claim, loss, liability, damage,
cost or expense resulting from or incurred in connection with the breach of such
representation or warranty (a "Parent Claim"), which notice shall include a
brief description of the facts upon which such Parent Claim is based. No Parent
Claim shall be made unless the alleged value of such Parent Claim equals or
exceeds $50,000 or until the aggregate alleged value of all Parent Claims equals
or exceeds $250,000.

     (b) Proposed Adjustments to Parent Claims.  Upon receipt of the notice of
the Parent Claim, the Company Stockholders' Representative shall have twenty
(20) business days in which to review such Parent Claim and if, in his or her
reasonable judgment, the Company Stockholders' Representative disagrees with the
validity of such Parent Claim or with the amount of such Parent Claim, the
Company Stockholders' Representative may propose an adjustment thereto or
propose that no amount should be paid on account of such Parent Claim within
such twenty (20) business day period. Any proposed adjustment or rejection
thereof shall be in writing and shall be submitted to the Parent Stockholders'
Representative within such twenty (20) business day period. The Parent
Stockholders' Representative shall cooperate fully in responding to questions
and requests for information submitted by the Company Stockholders'
Representative in connection with such review. Unless the Company Stockholders'
Representative notifies the Parent Stockholders' Representative within such
twenty (20) business day period that he object to the Parent Claim, the Parent
Claim shall be binding upon the former holders of the Company Common Shares and
shall be deemed finally determined. The Stockholders' Representatives shall use
their best efforts for ten (10) business days after the submission of any
proposed adjustment or rejection by the Company Stockholders' Representatives to
agree upon any proposed adjustments to the Parent Claim.

     (c) Company Claims.  If, on or prior to the Escrow Termination Date, it
becomes known to the Company Stockholders' Representative that any of the
representations and warranties set forth in Article IV of this Agreement were
untrue as of the date hereof or as of the Closing Date, or that any of Parent's
covenants set forth in Article V were not satisfied, the Company Stockholders'
Representative shall, prior to the Escrow Termination Date, notify the Parent
Stockholders' Representative and the Escrow Agent in writing of the amount of
its good faith estimate of the amount of any claim, loss, liability, damage,
cost or expense (including, without limitation, reasonable attorneys' fees)
resulting from or incurred in connection with the breach of such representation
or warranty (a "Company Claim"; Parent Claims and Company Claims are
collectively and individually referred to herein as "Claims"), which notice
shall include a brief description of the facts upon which such Company Claim is
based. No Company Claim shall be made unless the alleged value of such Company
Claim equals or exceeds $50,000 or until the aggregate alleged value of all
Company Claims equals or exceeds $250,000.

     (d) Proposed Adjustments to Company Claims.  Upon receipt of the notice of
the Company Claim, the Parent Stockholders' Representative shall have twenty
(20) business days in which to review such Company Claim and if, in his
reasonable judgment, he disagrees with the validity of such Company Claim or
with the amount of such Company Claim, the Parent Stockholders' Representative
may propose an adjustment thereto or propose that no amount should be paid on
account of such Company Claim within such twenty (20) business day period. Any
proposed adjustment or rejection thereof shall be in writing and shall be
submitted to the Company Stockholders' Representative within such twenty (20)
business day period. The Company Stockholders' Representative shall cooperate
fully in responding to questions and requests for information submitted by the
Parent Stockholders' Representative in connection with such

                                    Ann. A-38


review. Unless the Parent Stockholders' Representative notifies the Company
Stockholders' Representative within such twenty (20) business day period that he
object to the Company Claim, the Company Claim shall be binding upon the Parent
Stockholders' Representative and shall be deemed finally determined. The Parent
Stockholders' Representative and the Company Stockholders' Representative shall
use their best efforts for ten (10) business days after the submission of any
proposed adjustment or rejection by the Parent Stockholders' Representative to
agree upon any proposed adjustments to the Company Claim.

     (e) Arbitration.  If the Stockholders' Representatives do not resolve a
dispute as to the amount or validity of the Claim within the ten (10) business
day period, such dispute may, at the request of either of the Stockholders'
Representatives, be submitted for resolution to arbitration by a panel of three
arbitrators, one to be selected by the Parent Stockholders' Representative, one
to be selected by the Company Stockholders' Representative and the third to be
selected by the first two arbitrators (collectively, the "Arbitrators"). The
Parent Stockholders' Representative shall provide to the Arbitrators its
estimate of the Claim, and the Company Stockholders' Representatives shall
provide to the Arbitrators their estimate of the Claim. The Arbitrators shall
provide the Stockholders' Representatives with its determination of the Claim
and, for purposes of this Agreement, the Claim shall be deemed to be whichever
of the estimates is closest to the Arbitrators' determination. The decision of
the Arbitrators as to all matters which they are directed hereunder to decide
shall be final and binding upon the Stockholders' Representatives, Parent and
the former holders of the Company Common Shares.

     (f) Costs.  The non- prevailing party shall bear the fees and costs of the
arbitration and the prevailing party (including attorneys' fees and expenses)
incurred in connection with such dispute, such fees to be paid in cash by
Parent, but if borne by the former holders of the Company Common Shares, such
costs and fees shall be added to the amount of the Claim and allocated in the
manner set forth below.

     (g) Cancellation or Delivery of Escrowed Shares.  Upon final determination
of a Company Claim in favor of the Company as set forth above, the Escrow Agent
shall deliver to the former holders of Company Common Shares such number of the
Company Escrowed Shares as equals the amount of the Company Claim divided by the
Median Pre-Closing Price (as hereinafter defined). Upon final determination of a
Parent Claim in favor of Parent as set forth above, the Escrow Agent shall
deliver a number of Company Escrowed Shares to Parent for due cancellation
pursuant to the terms and conditions of the Escrow Agreement equal to the amount
of the Parent Claim divided by the Median Pre-Closing Price. The "Median
Pre-Closing Price" shall mean the Median Price of Parent Common Stock calculated
based upon the Closing Price of Parent Common Stock during the first 20 of the
25 consecutive trading days immediately preceding the date of the Closing. The
"Closing Price" shall mean the last reported sale price of Parent Common Stock
on The Nasdaq Stock Market and published in The Wall Street Journal. The "Median
Price" shall be determined by taking the average of the Closing Prices left
after discarding the seven lowest and seven highest Closing Prices in the 20-day
period. A "trading day" shall mean a day for which a Closing Price is so
published.

     (h) Delivery of Escrowed Shares.  On the Escrow Termination Date, the
Escrow Agent shall deliver (i) any remaining Company Escrowed Shares to the
former holders of the Company Common Shares in proportion to each such holder's
respective holdings of Company Common Stock; and (ii) any remaining Parent
Escrowed Shares to Parent for cancellation; provided, however, if one or more
Claims have been made pursuant to Section 8.3(a) or 8.3(c) above and have not
been resolved pursuant to Section 8.3(e) on or prior to the Escrow Termination,
a number of Escrowed Shares equal to the amount of such unresolved Claim or
Claims divided by the Median Pre-Closing Price shall continue to be held in
escrow pursuant to the Escrow Agreement and shall be cancelled or delivered in
accordance with Section 8.3(g) above and this Section 8.4(h) upon such
resolution of such Claim or Claims.

     (i) Exclusive Remedy.  After the Closing, the remedies set forth in this
Section 8.3 shall be the sole and exclusive recourse of Parent and the Company
for any inaccuracy or breach of any of the representations and warranties or
covenants set forth in this Agreement.

                                    Ann. A-39


                                   ARTICLE IX

                                 MISCELLANEOUS

     9.1.  Expenses.

     (a) Except as otherwise expressly stated herein, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including legal, accounting and investment banking fees and expenses)
shall be borne by the party incurring such costs and expenses. Parent and the
Company shall each pay 50% of all expenses and fees related to filing of the
Registration Statement (including the Proxy Statement included therein) and
related documents with the SEC and filings pursuant to state "blue sky" laws and
regulations in connection with the Merger.

     (b) Notwithstanding any provision in this Agreement to the contrary, in the
event that either of the parties shall willfully default in its obligations
hereunder, the non-defaulting party may pursue any remedy available at law or in
equity to enforce its rights and shall be paid by the willfully defaulting party
for all damages, costs and expenses, including without limitation reasonable
legal, reasonable accounting and reasonable printing expenses, incurred or
suffered by the non-defaulting party in connection herewith or in the
enforcement of its rights hereunder.

     9.2.  Survival.  The respective representations, warranties, covenants and
agreements of the parties to this Agreement shall not survive the Effective
Time, but shall terminate as of the Effective Time.

     9.3.  Notices.  All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or by reputable overnight courier or sent by registered or certified mail,
postage prepaid, as follows:

     If to Parent or Merger Sub, to:

        eXegenics Inc.
        2110 Research Row
        Dallas, Texas 75235
        Attn: Ronald L. Goode, Ph.D.
        President and Chief Executive Officer

     Copy to:

        Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
        Chrysler Center
        666 Third Avenue
        New York, New York 10017
        Attn: Joel I. Papernik, Esq.

     If to the Company, to:

        Innovative Drug Delivery Systems, Inc.
        787 Seventh Avenue, 48th Floor
        New York, New York 10019
        Attn: Mark C. Rogers, M.D.
        Chairman and Chief Executive Officer

     Copy to:

        Thelen Reid & Priest LLP
        40 West 57th Street
        New York, New York 10019-4097
        Attn: Bruce A. Rich, Esq.

                                    Ann. A-40


     If to the Parent Stockholders' Representative, to:

        Ronald L. Goode, Ph.D.
        The Park at Turtle Creek
        3381 Blackburn, Apt. 1308
        Dallas, Texas 75204

     If to the Company Stockholders' Representative, to:

        Mark C. Rogers, M.D.
        88 Lakes Wood Road
        New Canaan, Connecticut 06840

or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to have been given as of the date
actually received.

     9.4.  Parties In Interest.  This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
Nothing in this Agreement is intended to confer, expressly or by implication,
upon any other person any rights or remedies under or by reason of this
Agreement.

     9.5.  Entire Agreement.  This Agreement, which includes the Disclosure
Schedules hereto and the other documents, agreements and instruments executed
and delivered pursuant to or in connection with this Agreement, contains the
entire Agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersedes all prior negotiations,
arrangements or understandings, written or oral, with respect thereto.

     9.6.  Amendment.  Subject to applicable law, this Agreement may be amended
by action taken by the parties hereto at any time before or after adoption of
this Agreement by the stockholders of the Company but, after any such adoption,
no amendment shall be made which reduces the amount or changes the form of the
consideration to be delivered to the stockholders of the Company or adversely
affects the stockholders of Parent, without the approval of the affected
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties hereto.

     9.7.  Extension; Waiver.  The parties may, at any time prior to the
Effective Time of the Merger, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party against which the waiver is
sought to be enforced.

     9.8.  Descriptive Headings.  The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.

     9.9.  Governing Law.  This Agreement shall be governed by the laws of the
State of Delaware, without giving effect to the principles of conflicts of laws
thereof.

     9.10.  Waiver of Jury Trial.  Each party hereto waives any right to trial
by jury with respect to any action related to or arising out of this Agreement
or any transaction contemplated hereby.

     9.11.  Severability.  If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.

                                    Ann. A-41


     9.12.  Enforcement.  The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the state courts in the State of
New York, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties: (a) consents to submit
itself to the personal jurisdiction of the state courts of the State of New York
in the event any dispute arises out of this Agreement or any transaction
contemplated hereby; (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court;
and (c) consents to service of process by delivery pursuant to Section 9.3
hereof.

     9.13.  Remedies Cumulative.  All rights and remedies existing under this
Agreement are cumulative to, and not exclusive to, and not exclusive of, any
rights or remedies otherwise available.

     9.14.  Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the sam