UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934. For the fiscal year ended JULY 31, 1996

                                       or

[    ] Transition report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934: For the transition period from
       __________________________ to ___________________.

Commission file number: 0-27756.

                          ALEXION PHARMACEUTICALS, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         DELAWARE                                                13-3648318
- -------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

            25 SCIENCE PARK, SUITE 360, NEW HAVEN, CONNECTICUT 06511
            --------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                  203-776-1790
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par
Value $0.0001

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                         Yes [X]       No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based upon the last sale price of the Common Stock reported on the
National Association of Securities Dealers Automated Quotation National Market
System on October 21, 1996, was $51,214,970.

The number of shares of Common Stock outstanding as of October 21, 1996 was
7,339,084.



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                       DOCUMENTS INCORPORATED BY REFERENCE

                        (To the Extent Indicated Herein)

Registrant's Proxy Statement to be filed with the Securities and Exchange
Commission in connection with solicitations of proxies for the Registrant's 1996
Annual Meeting of Stockholders on December 13, 1996 is incorporated by reference
in Part III, Item 11 of this Form 10-K.

          When used in this discussion, the words "believes", "anticipates",
     "expects", and similar expressions are intended to identify forward-looking
     statements. Such statements are subject to certain risks and uncertainties,
     to preserve its trade secrets and proprietary rights which could cause
     actual results to differ materially from those projected.

          The risks and uncertainties which could affect actual results include,
     but are not limited to, the Company's past operating losses and lack of
     revenue from product sales, the Company's anticipated need for additional
     funds for its research and product development programs, for operating
     expenses and for other development costs, the early stage of the Company's
     product development, the rapid technological changes and intense
     competition in the pharmaceutical industry, the uncertainty of the
     Company's ability to obtain patent protection for its technology, to
     preserve its trade secrets and proprietary rights and to operate without
     infringing the proprietary rights of third parties, the Company's ability
     to compete successfully in its industry, the ability of the Company to
     obtain required governmental approvals for testing, and thereafter,
     manufacturing and marketing products, the eligibility of the Company's
     products, if developed, for reimbursement from the government and private
     health insurers, the Company's ability to attract and retain qualified
     personnel, the Company's dependence on outside parties and collaborators
     for certain research and development and other product development
     functions, the Company's ability to develop or arrange with third parties
     for manufacturing, marketing, sales, clinical testing and regulatory
     compliance capabilities, and the ability of the Company to obtain
     sufficient liability insurance coverage at an acceptable cost or otherwise
     to protect against potential product liability claims.

          These forward-looking statements speak only as of the date hereof. The
     Company undertakes no obligation to publicly release the result of any
     revisions to these forward-looking statements which may be made to reflect
     events or circumstances after the date hereof or to reflect the occurrence
     of unanticipated events.


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                                     PART I.


ITEM 1. BUSINESS

GENERAL

     Alexion Pharmaceuticals, Inc. ("Alexion" or the "Company") is a
biopharmaceutical company engaged in the research and development of proprietary
immunoregulatory compounds for the treatment of autoimmune and cardiovascular
diseases. The Company is developing C5 Complement Inhibitors ("C5 Inhibitors")
and Apogens ("Apogens"), two classes of potential therapeutic compounds designed
to selectively target specific disease-causing segments of the immune system.
The Company believes that its C5 Inhibitors and Apogens, which are based upon
distinct immunoregulatory technologies, may have the advantage of achieving a
higher level of efficacy with the potential for reduced side effects when
compared to existing therapeutic approaches. The Company will need to undertake
and complete further tests in order to confirm its belief, and there can be no
assurance as to the results of any such tests. Primary therapeutic targets for
the C5 Inhibitor products are cardiovascular disorders, including prevention of
bleeding and inflammation in cardiopulmonary bypass procedures ("CPB") during
open heart surgery and myocardial infarction, and autoimmune disorders including
lupus nephritis and rheumatoid arthritis. Key disease targets for the Apogen
program include the autoimmune disorders multiple sclerosis and diabetes
mellitus.

     As an outgrowth of its core technologies, the Company is developing, in
collaboration with United States Surgical Corporation ("US Surgical"), non-human
UniGraft organ products designed for transplantation into humans.

ALEXION'S DRUG DEVELOPMENT STRATEGY

         Alexion's strategy is to develop novel immunoregulatory therapeutics
for disease states, disorders and clinical indications for which the Company
believes treatment options are either non-existent or inadequate. Consequently,
Alexion's product candidates may represent significant therapeutic advances
which might be expected to afford the Company's products, if successfully
developed, important advantages in achieving market acceptance, third party
reimbursement and support of its products from cost/benefit and health economic
perspectives.

     Currently available therapies for certain autoimmune, cardiovascular and
neurologic diseases, in which the immune system attacks the patient's own
tissue, broadly suppress the entire immune system, thus causing potentially
severe side effects. In contrast, Alexion's proprietary compounds are designed
to be more effective with reduced side effects when compared to currently
available therapies by generally 


                                      -3-

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targeting only the specific disease-causing segments of the immune system,
leaving the remaining segments of the immune system intact to perform their
normal protective functions. The Company is developing two classes of potential
therapeutic compounds, C5 Inhibitors and Apogens. C5 Inhibitors are designed to
specifically block the formation of disease-causing complement proteins, while
Apogens are designed to selectively eliminate disease-causing T-cells. In the
longer term, as an outgrowth of its core technologies and in collaboration with
US Surgical, the Company is developing non-human UniGraft organ products which
are designed for transplantation into humans without clinical rejection.

ALEXION DRUG DEVELOPMENT PROGRAMS

     The Human Immune System. The role of the human immune system is to defend
the body from attack or invasion by infectious agents or pathogens. This is
accomplished through a complex system of proteins and cells, primarily
complement proteins, antibodies and various types of white blood cells, each
with a specialized function. Under normal circumstances, complement proteins,
together with antibodies and white blood cells, act beneficially to protect the
body by removing pathogenic microorganisms, cells containing antigens (foreign
proteins), and disease-causing immune complexes (combinations of antigens and
antibodies). However, any number of stimuli, including antibodies, pathogenic
microorganisms, injured tissue, normal tissue, proteases (inflammatory enzymes)
and artificial surfaces can locally activate complement proteins in a cascade of
enzymatic and biochemical reactions (the "complement cascade") to form
inflammatory byproducts leading, for example, in the case of cardiovascular
disorders such as myocardial infarction (death of heart tissue), to additional
significant damage to the heart tissue and, in the case of rheumatoid arthritis,
to severe joint inflammation. T-cells, a type of white blood cell, play a
critical role in the normal immune response by recognizing cells containing
antigens, initiating the immune response, attacking the antigen-containing
tissue and directing the production of antibodies directed at the antigens, all
of which lead to the elimination of the antigen-bearing foreign organism. When a
T-cell mistakenly attacks host tissue, the T-cell may cause an inflammatory
response resulting in tissue destruction and severe autoimmune disease leading,
for example, in the case of multiple sclerosis to severe and crippling
destruction of nerve fibers in the brain.

C5 Inhibitor Immunotherapeutics

     Alexion is developing specific and potent biopharmaceutical C5 Inhibitors
which are designed to intervene in the complement cascade at what the Company
believes to be the optimal point so that the disease-causing actions of
complement proteins generally are inhibited while the normal disease-preventing
functions of complement proteins generally remain intact. In laboratory and
animal models of human disease, Alexion has shown that C5 Inhibitors are
effective in substantially preventing inflammation during CPB, reducing tissue
damage during myocardial infarction, reducing the incidence and severity of
inflammation and joint damage in rheumatoid 


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arthritis, enhancing survival in lupus and preserving kidney function in
nephritis (kidney inflammation). The Company is developing two C5 Inhibitors, a
short acting humanized (compatible for human use) single chain antibody
(5G1.1-SC) designed for acute therapeutic settings such as in CPB procedures and
in treating myocardial infarctions, and a long acting humanized monoclonal
antibody (5G1.1) designed for treating chronic disorders such as lupus and
rheumatoid arthritis.

Cardiopulmonary Bypass Surgery

     In performing certain complex cardiac surgical procedures, it is necessary
to detour blood from the patient's heart and lungs to a cardiopulmonary
(heart-lung) bypass machine in the operating room which artificially adds oxygen
to the blood and then circulates the oxygenated blood to the organs in the
patient's body. The Company believes that excessive bleeding during and after
surgery and impaired oxygenation after surgery, both significant complications
of CPB, may be the result of an inflammatory process that begins when CPB is
initiated. The CPB related inflammatory response is associated with the rapid
activation of the complement cascade caused when the patient's blood is perfused
through the CPB machine and comes into contact with artificial surfaces. The
inflammation is also characterized by activation of platelets (cells responsible
for clotting) and neutrophils (a type of white blood cell). The Company believes
that platelet activation and subsequent platelet dysfunction during CPB impair
the patient's ability to arrest the bleeding that occurs after extensive surgery
and that neutrophil activation is associated with impaired lung function.

     The short acting humanized single chain antibody C5 Inhibitor (5G1.1-SC) is
designed to inhibit complement activation in patients immediately before and
during CPB in order to prevent the acute bleeding complications and other
morbidities associated with CPB. Those effects might reduce the need for blood
transfusions, the time spent by patients in the intensive care unit, and the
scope of other required treatments associated with CPB. Preliminary studies by
the Company indicate that the Company's C5 Inhibitor can substantially prevent
activation of platelets and neutrophils and the subsequent inflammatory process
that occurs during circulation of human blood in a closed-loop CPB circuit.

     An Investigational New Drug application ("IND") was filed with the United
States ("U.S.") Food and Drug Administration ("FDA") at the end of March 1996
for the C5 Inhibitor, 5G1.1-SC, and after receiving FDA authorization, a Phase I
clinical trial in healthy male volunteers began in June 1996. In September 1996,
the Company received authorization from the FDA to begin its second clinical
trial, a Phase I/II trial, of 5G1.1-SC in patients undergoing CPB.

     The American Heart Association ("AHA") estimates that approximately 450,000
CPB surgical procedures were performed in the United States during 1992 (the
latest year for which AHA data is available).


                                      -5-

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Myocardial Infarction

         Myocardial infarction (heart attack) is an acute cardiovascular
disorder where the coronary arteries (the arteries feeding the heart muscle) are
blocked to such an extent that the flow of blood is insufficient to supply
enough oxygen and nutrients to keep the heart muscle alive. With insufficient
supply of blood, oxygen, and nutrients, the underperfused heart muscle
subsequently infarcts (dies). Myocardial infarction most often occurs due to a
blockage in a coronary artery, caused by atherosclerosis. Upon the reduction in
flow in the coronary artery, a complicated cascade of inflammatory events
commences within the blood vessel involving platelets and leukocytes and their
secreted factors, complement proteins, and endothelial cells. The subsequent
severe inflammatory response targeting the area of the underperfused cardiac
muscle is associated with subsequent necrosis (death) of the heart muscle. In
addition to the high incidence of sudden cardiac death at the onset, severe
complications associated with the initial survival of an acute myocardial
infarction include congestive heart failure, stroke, and death.

         The Company is developing the C5 Inhibitor, 5G1.1-SC (currently being
applied to the treatment of patients undergoing CPB, as discussed above) to
inhibit complement activation in patients suffering an acute myocardial
infarction in order to reduce the extent of infarcted myocardium. The Company
and its collaborators have performed preliminary preclinical studies in rodents
which have demonstrated that administration of a C5 Inhibitor, at the time of
myocardial ischemia (insufficient supply of blood to the heart muscle) and prior
to reperfusion, significantly reduces the extent of subsequent myocardial
infarction compared to control studies.

     The AHA estimates that approximately 1,000,000 Americans survived a heart
attack in 1992 and thus be potentially eligible for such drug treatment.

Rheumatoid Arthritis

     Rheumatoid arthritis is an autoimmune disease directed at various organ and
tissue linings, including the lining of the joints, causing inflammation and
tissue destruction. Clinical signs and symptoms of the disease include weight
loss, joint pain, morning stiffness and fatigue. Further, the joint destruction
can progress to redness, swelling and pain with frequent, severe joint
deformity. Rheumatoid arthritis is generally believed to be due to
antigen-specific T-cells which both directly attack the patient's joints and
also activate B-cells (a type of white blood cell) to produce antibodies which
deleteriously activate complement proteins in the joint, leading to
inflammation, with subsequent tissue and joint destruction.

     Alexion is developing a long acting humanized recombinant monoclonal
antibody (5G1.1), a C5 Inhibitor which is designed to inhibit complement
activation and thereby reduce the severity and frequency of flares of joint
inflammation and arrest progressive tissue damage in joints caused by complement
activation. The Company has performed 


                                      -6-

<PAGE>


preclinical studies in rodent models of rheumatoid arthritis. Treatment with the
Company's specific C5 Inhibitor substantially prevented the onset of
inflammation and pathology in the joints and disease progression, ameliorated
established disease and also substantially prevented the onset of clinical signs
of rheumatoid arthritis. 5G1.1 is currently in the early stages of process
development for the production of material for use in clinical trials.

     In the United States approximately 2,500,000 patients receive treatment
from a physician for rheumatoid arthritis.

Nephritis

     The kidneys are responsible for filtering blood to remove toxic metabolites
and maintain the blood minerals that are required for normal metabolism. Each
kidney consists of millions of individual filtering units, each filtering unit
called a glomerulus. When glomeruli are damaged, the kidney can no longer
adequately maintain its normal filtering function. Clinically severe nephritis,
found in many patients suffering from systemic lupus erythematosus ("lupus" or
"SLE") and other autoimmune diseases, occurs when more than 90% of the kidney is
destroyed by disease. Kidney failure is frequently associated with hypertension,
strokes, infections, anemia, heart inflammation, joint inflammation, coma and
death. Most forms of damage to the glomerulus are mediated by the immune system
and particularly by antibodies and activated complement proteins.

     Alexion is developing the C5 Inhibitor 5G1.1 (also being applied to the
treatment of rheumatoid arthritis, as discussed above) for the prevention and
treatment of inflammation in lupus patients. The Company has performed
preclinical studies in a mouse model of acute nephritis. In this model, the
Company's specific C5 Inhibitor substantially prevented inflammation in the
kidney tissue. Further, in a separate chronic mouse model that spontaneously
develops a disease similar to lupus with concomitant nephritis, substantially
more animals treated with the Company's specific C5 Inhibitor survived as
compared to untreated control animals.

     Alexion's proposed product to treat and prevent nephritis is directed at a
patient population which includes SLE as well as diseases with lower prevalence
such as Goodpastures disease and others. According to the Lupus Foundation, 1.4
million Americans suffer from lupus. Further, an estimated 70% of individuals
afflicted with Lupus suffer nephritis.

Apogen Immunotherapeutics

     The Company's Apogen compounds are based upon discoveries at the National
Institutes of Health ("NIH") which are exclusively licensed to Alexion and upon
further discoveries by Alexion. These discoveries involve a mechanism by which
substantially 


                                      -7-

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all disease-causing T-cells are selectively eliminated in vivo in animal models
of disease. The highly specific recombinant Apogens under development by the
Company are designed to selectively eliminate disease-causing T-cells in
patients with certain autoimmune diseases including multiple sclerosis and
diabetes mellitus. The Company has demonstrated that its lead proprietary
Apogen, MP4, is effective at preventing neurologic disease in animal models of
multiple sclerosis. MP4 is currently in process development and the Company
believes it will file an IND for the multiple sclerosis indication in 1997.

Multiple Sclerosis

     Multiple Sclerosis ("MS") is an autoimmune disease of the central nervous
system which hinders the ability of the brain and spinal cord to control
movement, speech and vision. MS can be severely debilitating with long term
disability a common outcome. In severe cases, the reduced motor strength may
confine the patient to a wheelchair. MS is widely believed to be due to the
attack of a patient's antigen-specific T-cells on the protective myelin sheath
surrounding nerve cells in the central nervous system.

     Preclinical animal studies performed by Alexion in the experimental
autoimmune encephalomyelitis mouse model of MS, have demonstrated that
administration of the Company's proprietary Apogen MS product candidate, MP4, at
the time of disease induction, effectively prevents the development of severe
neurologic disease and administration of MP4 after the onset of disease
ameliorates established disease. In in vitro studies, Alexion and NIH scientists
have observed that MP4 is also capable of eliminating antigen-specific human
T-cells from patients with MS. MP4 is in the later stage of preclinical studies
and process development. The Company anticipates that it will file an IND for
MP4 in 1997. There can be no assurance that an IND will be filed, or that the
Company will be permitted to commence clinical trials on a timely basis.

         According to the National Multiple Sclerosis Society, an estimated
250,000 people in the United States suffer from MS.

Diabetes Mellitus

     Type I Diabetes Mellitus, or Insulin Dependent Diabetes Mellitus ("IDDM"),
is the most severe form of diabetes and is generally believed to be caused by an
autoimmune T-cell attack and destruction of the insulin producing cells in the
pancreas. This process, which usually begins in childhood, causes reduced
production of insulin, which is responsible for the breakdown of glucose,
resulting in uncontrolled elevations in the patient's blood sugar. Without
treatment, IDDM can be fatal.

     Alexion is currently developing Apogen DM which is designed to prevent and
treat IDDM by eliminating antigen-specific T-cells which are responsible for the


                                      -8-

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pancreatic B-cell destruction. Alexion has established animal models of diabetes
and has commenced initial preclinical studies with an Apogen DM prototype.

     According to the American Diabetes Association, up to 800,000 Americans are
insulin dependent diabetics. The Company intends to design its potential product
as a preventative for individuals at high risk of developing the disease and as
a therapy for patients who still have a population of insulin producing cells,
in order to arrest progression of the disease and the subsequent development of
longer term complications.

The UniGraft Program

     As an outgrowth of its core technologies, the Company is also developing,
in collaboration with U.S. Surgical, non-human cell and organ UniGraft products
which are designed for transplantation into humans without clinical rejection.
Rejection of non-human tissue by patients is generally believed to occur in two
stages, a very rapid hyperacute phase extending over minutes to hours and a
somewhat less rapid acute phase, extending from days to months. Hyperacute
rejection is generally believed to be mediated by naturally-occurring antibodies
in the patient, most of which target a carbohydrate antigen uniquely present on
the surface of non-human tissue (but not on the patient's own tissue). After
binding to the foreign tissue, these antibodies activate the cascade of
complement proteins on the surface of the donor tissue with subsequent
destruction of the donor tissue. Subsequently, acute rejection of xenografts
(tissue from different species) is generally believed to be mediated by T-cells,
many of which are specific to the transplanted tissue.

     UniGraft products are being designed to resist both complement/antibody-
mediated hyperacute rejection and T-cell-mediated acute rejection. Alexion has
commenced studies employing the UniGraft technologies during transplantation of
genetically engineered and proprietary porcine cells and organs into primates.
Pigs are a preferred source of organ supply because the anatomy, size, and
physiology of their hearts and other organs are similar to human organs. Alexion
has genetically engineered swine so that the porcine cells are resistant to
lysis (break-up) and activation by human complement proteins. Alexion has also
discovered and designed porcine specific antibodies which have been demonstrated
to selectively and significantly block the human T-cell response to porcine
tissue in in vitro studies.

     Alexion has tested genetically engineered pig hearts, livers and lungs
transplanted into primates and has observed pig organ function for as long as 48
hours, as compared to less than one hour for porcine organs that have not been
genetically engineered. Alexion is currently employing its immunoregulatory and
molecular engineering technologies in order to develop UniGraft hearts, lungs,
livers, pancreases and kidneys.


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     According to the United Network of Organ Sharing, there are approximately
18,000 organ transplants performed annually in the U.S. and there are an
additional 35,000 patients on waiting lists for transplant organs. The Company
believes that the availability and viability of xenograft organs for
transplantation could increase the transplant market significantly.

Gene Transfer Vector Products

     Gene therapy is an emerging field of science based on the delivery of genes
into living cells to produce therapeutic proteins intracellularly. Gene transfer
technology may permit intracellular treatment of cancers, viral infections and
other diseases. Therapeutic genes are carried by vectors, or gene transporters,
into targeted cells. All commonly used clinical gene transfer vectors, including
modified retroviruses, modified adenoviruses, and DNA-liposome conjugates, are
large molecules that, if injected into a patient, are recognized as foreign and
subject to rejection by the human immune system. Certain of these vectors, known
as modified retroviruses, have been particularly useful for ex vivo gene therapy
because of their versatility, efficiency, stability of expression and relative
safety. Retroviral vectors can be modified to deliver genes for a variety of
different therapeutic applications. However, as these vectors are derived from
non-human cells, they are recognized as foreign by the recipient's immune system
and thus are eliminated in human blood prior to having a significant therapeutic
effect.

     The Company is applying its research in, and knowledge of the body's
rejection response to engineer retroviral vector producer cells and particles
which, when employed in gene transfer products, would be able to survive and
function in vivo following implantation or direct injection, respectively. By
protecting retroviral vector producer cells and particles from the initial phase
of rejection, the Company believes that its proprietary gene transfer vectors
will survive in vivo and be able to deliver therapeutic genes to patients'
cells. The Company has developed proprietary retroviral-based gene transfer
vectors, producer cells, and particles which survive in human blood ex vivo. The
Company is currently evaluating various options for commercializing its gene
transfer technologies.

STRATEGIC ALLIANCES, COLLABORATIONS AND LICENSES

     The Company's plan is to develop and commercialize on its own those product
candidates for which the clinical trial and marketing requirements can
realistically be managed by the Company. For certain of the Company's C5
Inhibitor and Apogen products for which greater resource commitments will be
required, a key element of Alexion's strategy is the formation of corporate
partnerships with major pharmaceutical companies for product development and
commercialization. For licensed applications, a corporate partner would be
likely to bear the substantial cost and much of the manpower-intensive effort of
clinical development, scale-up production, FDA approval 


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and marketing. Alexion has entered into a strategic alliance with US Surgical
with respect to the Company's UniGraft program, and intends to develop
additional strategic alliances with major pharmaceutical companies for certain
of its other technologies. There can be no assurance that the Company will enter
into additional strategic alliances, or, if entered into, what the terms of any
strategic alliance will be.

United States Surgical Corporation

     In July 1995, the Company and US Surgical entered into the Joint
Development Agreement, pursuant to which the Company and US Surgical agreed to
collaborate to jointly develop and commercialize the Company's UniGraft
technology for organ transplantation. Pursuant to the Joint Development
Agreement, Alexion has primary responsibility for preclinical development,
clinical trials and regulatory submissions relating to the UniGraft program, and
US Surgical has primary responsibility for production, sales, marketing and
distribution of UniGraft products to the extent developed and approved for
commercialization. Further, US Surgical has committed to exclusively develop
with the Company xenotransplantation products.

     US Surgical agreed to fund preclinical development of UniGraft products by
paying to Alexion up to $6.5 million allocated as follows: (i) up to $4.0
million of the cost of preclinical development in four semi-annual installments
of approximately $1.0 million (the first installment of which was paid in July
1995), and (ii) $2.5 million upon achieving certain milestones involving
development of a genetically engineered pig. Through October 1, 1996, the
Company has received approximately $3.0 million in research and development
support under its collaboration with US Surgical. In addition, US Surgical
agreed to pay $1 million upon achieving a milestone involving the
transplantation of non-primate tissue into primates (the "Primate Milestone").
There can be no assurance that the Company will achieve the agreed upon
milestones, and therefore, there can be no assurance that Alexion will receive
any particular milestone payment from US Surgical. In furtherance of the joint
collaboration, US Surgical also purchased $4.0 million of Common Stock of the
Company, at a price of $8.75 per share. US Surgical also purchased approximately
ten percent of the shares of Common Stock offered at the Company's initial
public offering. US Surgical beneficially owns an aggregate of 657,142 shares of
Common Stock or 9.0% of the outstanding shares.

     If the Primate Milestone is achieved, US Surgical is to advise the Company
whether it intends to exercise its priority right to provide all clinical
funding for the UniGraft product, and the Company and US Surgical are to agree
upon milestone payments to be made by US Surgical to the Company for the first
three UniGraft products. Unless and until US Surgical determines to terminate
clinical funding for a UniGraft product, US Surgical shall have the exclusive
worldwide marketing, sales and distribution rights with respect to such UniGraft
product, including market introduction decisions and control of marketing, sales
and distribution decisions. For inventions made by the Company during the
performance of the preclinical or clinical programs outlined in the Joint
Development Agreement, the Company will own the 


                                      -11-

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inventions and US Surgical is granted (i) a worldwide exclusive license to sell
transplant products derived from the Company's xenotransplantation technology;
(ii) a worldwide exclusive license to sell products (a) in the fields related to
businesses in which US Surgical is engaged and (b) not in the fields in which
the Company is currently developing its products (i.e., anti-inflammatories and
gene therapy systems); and (iii) an option to an exclusive license to sell
products in fields outside those related to businesses which US Surgical is
engaged but excluding fields which the Company is currently developing its
products (i.e., anti-inflamatories and gene therapy systems). US Surgical has
agreed to pay to the Company royalties on net sales of products. The Company has
retained full rights to inventions in fields of gene therapy systems and
anti-inflammatories as well as to inventions in fields for which US Surgical
does not exercise its option.

     The Joint Development Agreement may be terminated by US Surgical, for any
or no reason, effective on or after January 1, 1998, if notice is given by US
Surgical at least six months prior thereto. In the event of a termination by US
Surgical, all rights licensed by Alexion shall revert to Alexion.


Licenses and Other Sponsored Research

     The Company has obtained licenses with respect to certain issued patents
and patent applications, to supplement the research of its own scientists. The
Company has agreed to pay to its licensors royalties on sales of certain
products based on the licensed technologies, as well as, in some instances,
minimum royalty and milestone payments, and patent filing and prosecution costs.
The Company has also agreed to indemnify its licensors and, in certain
instances, the inventors, against certain liabilities, including liabilities
arising out of product liability claims and, in certain instances, under the
securities laws. Because research leading to inventions licensed from domestic
licensors are generally supported by the United States Government, the
Government has retained certain statutory rights, including a non-exclusive,
royalty-free license to use the licensed inventions, and to manufacture and
distribute products based thereon, for Government use only. A summary of certain
of such licenses, as well as the Company's other material licenses and sponsored
research, is presented below.

Yale University/Oklahoma Medical Research Foundation

     The Company has obtained exclusive, worldwide licenses to certain issued
patents and patent applications and related technology from Yale and OMRF with
respect to complement inhibitors and UniGraft technology. Since obtaining the
patent licenses, the Company has made further discoveries relating to complement
inhibitors and the UniGraft technology, resulting in the filing by the Company
of numerous additional U.S. patent applications. In addition, the Company has
provided funding for separate sponsored research by certain of these inventors
and, to the extent that an invention would not be covered by an existing license
from OMRF to the Company, the 


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Company has the first and prior right to license any inventions in the field
arising from the research.

National Institutes of Health

     The Company has obtained an exclusive, worldwide license from NIH for
rights to two patent applications related to the work performed at NIH on
antigen-specific elimination of disease-causing T-cells in patients with certain
inflammatory disorders.
 
     In further support of the Company's Apogen program, the Company and the
National Institute of Allergy and Infectious Diseases ("NIAID") have entered
into a Cooperative Research and Development Agreement (the "NIH CRADA"). The
subject matter of the NIH CRADA includes preclinical and clinical development
based upon discoveries by NIAID regarding the antigen-specific elimination of
disease-causing T-cells in patients with certain inflammatory disorders. The
principal investigator of the NIH CRADA is the principal inventor of the
inventions licensed to the Company by NIH. NIAID has granted the Company the
first and prior right to an exclusive commercialization license for any and all
inventions or products developed pursuant to the NIH CRADA. Pursuant to the NIH
CRADA, the Company committed to pay $159,000 per year for a three-year period.
To date, approximately $477,000 has been paid under such agreement. The NIH is
part of the United States Department of Health and Human Services.

Biotechnology Research and Development Corporation

     The Company has entered into a license agreement with the Biotechnology
Research and Development Corporation ("BRDC"), under which the Company has
become the worldwide, exclusive licensee of the porcine embryonic stem cell
technology developed at the University of Illinois and sponsored by BRDC, and
related patent applications for xenotransplantation purposes. The Company
believes that this technology may assist it in its UniGraft organ
transplantation program.

     In connection with the license agreement with BRDC, the Company became a
common shareholder of BRDC, which is a research management corporation. At the
present time, the Company, American Cyanamid Company, Hewlett Packard Company,
Dow Chemical Company, Mallinckrodt Group Inc. and Agricultural Research and
Development Corporation are common shareholders of BRDC. BRDC is currently
funding numerous research projects in biotechnology, and each of the common
shareholders, including the Company, retains the right to license for commercial
development the technologies resulting from substantially all of these research
programs. The Company has paid $50,000 for the purchase of its common stock of
BRDC and has committed to an annual research contribution to the consortium for
four years. To date, the Company has paid approximately $550,000 under the
agreement. 


                                      -13-

<PAGE>


However, minimum annual royalty payments under the license agreement with BRDC
have been waived so long as the Company remains a shareholder of BRDC.

Tufts University

     In October 1995, Alexion entered into a Research Subcontract Agreement with
Tufts University funded by the ATP/NIST grant referred to below. Under the
research program governed by this one year contract, Tufts has been engaged to
undertake genetically engineered pig production on behalf of the Company, in
support of its UniGraft organ transplantation program.

Grants

Phase II SBIR Grant

     In September 1995, Alexion was awarded a $750,000 Phase II SBIR (Small
Business Innovation Research Program) grant from the National Heart, Lung, and
Blood Institute of the NIH. The award was made in support of the research and
clinical development of the Company's C5 Inhibitor to treat complications of
cardiovascular surgery.

Phase I SBIR Grant

     In July 1995, Alexion was awarded a $100,000 Phase I SBIR grant from the
NIAID of the NIH. The award was made in support of the research and development
of the Company's gene transfer technology.

ATP/NIST

     In August 1995, the Company was awarded cost-shared funding from the
Commerce Department's National Institute of Standards and Technology ("NIST")
under its Advanced Technology Program ("ATP"). Through the ATP, the Company may
receive up to approximately $2.0 million over three years to support the
Company's UniGraft program in universal donor organs for transplantation.

Medical Research Council License

     In March 1996, the Company entered into a license agreement with the
Medical Research Council under which the Company has become the worldwide
non-exclusive 


                                      -14-

<PAGE>


licensee of certain patents related to the humanization and production of
monoclonal antibodies.

Enzon License

In May 1996, the Company licensed from Enzon, Inc. on a worldwide non-exclusive
basis certain patents related to single chain antibodies.

PATENTS AND PROPRIETARY RIGHTS

     The Company believes that patents and other proprietary rights are
important to its business. The Company's policy is to file patent applications
to protect technology, inventions and improvements to its technologies that are
considered important to the development of its business. The Company also relies
upon trade secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain its competitive position.

     The Company has filed several U.S. patent applications and international
(PCT) counterparts of certain of these applications. In addition, the Company
has exclusively licensed several additional United States patent applications
and issued U.S. patents. Amongst the Company's owned and licensed patents and
patent applications, approximately 25% relate to technologies or products in the
C5 Inhibitor program, 11% relate to the Apogen program, 11% relate to the Gene
Transfer program and 53% relate to the UniGraft program.

     The Company's success will depend in part on its ability to obtain United
States and foreign patent protection for its products, preserve its trade
secrets and proprietary rights, and operate without infringing on the
proprietary rights of third parties or having third parties circumvent the
Company's rights. Because of the length of time and expense associated with
bringing new products through development and regulatory approval to the
marketplace, the health care industry has traditionally placed considerable
importance on obtaining patent and trade secret protection for significant new
technologies, products and processes. There can be no assurance that any patents
will issue from any of the patent applications owned by or licensed to the
Company. Further, even if patents were to issue, there can be no assurance that
they will provide the Company with significant protection against competitive
products or otherwise be commercially valuable. In addition, patent law relating
to certain of the Company's fields of interest, particularly as to the scope of
claims in issued patents, is still developing and it is unclear how this
uncertainty will affect the Company's patent rights. Litigation, which could be
costly and time consuming, may be necessary to enforce patents issued to the
Company and/or to determine the scope and validity of others' proprietary
rights, in either case in judicial or administrative proceedings. The Company's
competitive position is also dependent upon unpatented trade secrets which
generally are difficult to protect. There can be no assurance that others will
not 


                                      -15-

<PAGE>


independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets, that the
Company's trade secrets will not be disclosed or that the Company can
effectively protect its rights to unpatented trade secrets. As the biotechnology
industry expands and more patents are issued, the risk increases that the
Company's potential products may give rise to claims that they infringe the
patents of others. Any such infringement litigation would be costly and time
consuming to the Company.

     The Company is aware of broad patents owned by third parties relating to
the manufacture, use, and sale of recombinant humanized antibodies, recombinant
humanized single chain antibodies and genetically engineered animals. The
Company has received notice from certain of these parties regarding the
existence of certain of these patents which the owners claim may be relevant to
the development and commercialization of certain of the Company's proposed
products. With respect to certain of these patents, the Company has acquired
certain licenses which it believes are relevant for the expeditious development
and commercialization of certain of its products as currently contemplated. With
regard to another of these patents, the Company has identified and is testing
various approaches which it believes should not infringe this patent and which
should permit commercialization of its products. There can be no assurance that
the owner of this patent will not seek to enforce the patent against the
Company's so-modified commercial products or against the development activities
related to the non-modified products. Although the Company believes that it can
obtain licenses to the patents necessary for its contemplated commercial
products, there can be no assurance that the Company will be able to obtain
licenses on commercially reasonable terms. If the Company does not obtain
necessary licenses, it could encounter delays in product market introductions
while it attempts to design around such patents, or could find that the
development, manufacture or sale of products requiring such licenses could be
foreclosed. Further, there can be no assurance that owners of patents that the
Company does not believe are relevant to the Company's product development and
commercialization will not seek to enforce their patents against the Company.
Such action could result in litigation which would be costly and time consuming.
There can be no assurance that the Company would be successful in such
litigations. The Company is currently unaware of any such threatened action.

     Certain of the licenses by which the Company obtained its rights in and to
certain technologies require the Company to diligently commercialize or attempt
to commercialize such technologies. There can be no assurance that the Company
will meet such requirements, and failure to do so for a particular technology
could result in the Company losing its rights to that technology.

     Currently, the Company has not sought to register its potential trademarks
and there can be no assurance that the Company will be able to obtain
registration for such trademarks.


                                      -16-

<PAGE>


     It is the Company's policy to require its employees, consultants, members
of its scientific advisory board, and parties to collaborative agreements to
execute confidentiality agreements upon the commencement of employment or
consulting relationships or a collaboration with the Company. These agreements
provide that all confidential information developed or made known during the
course of relationship with the Company is to be kept confidential and not
disclosed to third parties except in specific circumstances. In the case of
employees, the agreements provide that all inventions resulting from work
performed for the Company, utilizing property of the Company or relating to the
Company's business and conceived or completed by the individual during
employment shall be the exclusive property of the Company to the extent
permitted by applicable law. There can be no assurance, however, that these
agreements will provide meaningful protection of the Company's trade secrets or
adequate remedies in the event of unauthorized use or disclosure of such
information.

GOVERNMENT REGULATION

     The preclinical and clinical testing, manufacture, labeling, storage,
record keeping, advertising, promotion, export, and marketing, among other
things, of the Company's proposed products are subject to extensive regulation
by governmental authorities in the United States and other countries. In the
United States, pharmaceutical products are regulated by the FDA under the
Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of
biologics, the Public Health Service Act. At the present time, the Company
believes that its products will be regulated by the FDA as biologics.

     The steps required before a novel biologic may be approved for marketing in
the United States generally include (i) preclinical laboratory tests and in vivo
preclinical studies, (ii) the submission to the FDA of an IND for human clinical
testing, which must become effective before human clinical trials may commence,
(iii) adequate and well-controlled human clinical trials to establish the safety
and efficacy of the product, (iv) the submission to the FDA of a Product License
Application ("PLA") and Establishment License Application ("ELA"), and (v) FDA
review of the PLA and the ELA. The testing and approval process requires
substantial time, effort and financial resources and there can be no assurance
that any approval will be granted on a timely basis, if at all. Following
approval, if granted, the establishment or establishments where the product is
manufactured are subject to inspection by the FDA and must comply with current
good manufacturing practice ("GMP") regulations, enforced by the FDA though its
facilities inspection program. Manufacturers of biologics also may be subject to
state regulation.

     Preclinical tests include laboratory evaluation of the product, as well as
animal studies to assess the potential safety and efficacy of the product.
Compounds must be produced according to applicable GMP regulations and
preclinical safety tests must be conducted in compliance with FDA regulations
regarding Good Laboratory Practices. The results of the preclinical tests,
together with manufacturing information and 


                                      -17-

<PAGE>


analytical data, are submitted to the FDA as part of an IND, which must become
effective before human clinical trials may be commenced. The IND will
automatically become effective 30 days after receipt by the FDA, unless the FDA
before that time raises concerns or questions about the conduct of the trials as
outlined in the IND. In such a case, the IND sponsor and the FDA must resolve
any outstanding concerns before clinical trials can proceed. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials.

     Clinical trials involve the administration of the investigational product
to healthy volunteers or to patients, under the supervision of a qualified
principal investigator. Clinical trials are conducted in accordance with
protocols that detail, inter alia, the objectives of the study, the parameters
to be used to monitor safety and the efficacy criteria to be evaluated. Each
protocol must be submitted to the FDA as part of the IND. Further, each clinical
study must be reviewed and approved by an independent Institutional Review
Board.

     Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is tested for safety (adverse effects), dosage tolerance,
absorption, metabolism, distribution, excretion and pharmacodynamics. Phase II
usually involves studies in a limited patient population to (i) evaluate
preliminarily the efficacy of the drug for specific, targeted indications, (ii)
determine dosage tolerance and optimal dosage and (iii) identify possible
adverse effects and safety risks. Phase III trials are undertaken to further
evaluate clinical efficacy and to test further for safety within an expanded
patient population at geographically dispersed clinical study sites. There can
be no assurance that Phase I, Phase II, or Phase III testing will be completed
successfully within any specific time period, if at all, with respect to any of
the Company's product candidates. Furthermore, the FDA may suspend clinical
trials at any time on various grounds, including a finding that the subjects or
patients are being exposed to an unacceptable health risk.

     The results of the preclinical studies and clinical studies, together with
detailed information on the manufacture and composition of the product, are
submitted to the FDA in the form of a PLA/ELA requesting approval for the
manufacture, marketing and commercial shipment of the product. The FDA may deny
a PLA/ELA if applicable regulatory criteria are not satisfied, require
additional testing or information, or require postmarketing testing and
surveillance to monitor the safety or efficacy of a product. There can be no
assurance that FDA approval of any PLA/ELA submitted by the Company will be
granted on a timely basis or at all. Moreover, if regulatory approval of a
product is granted, such approval may entail limitations on the indicated uses
for which it may be marketed. Finally, product approvals may be withdrawn if
compliance with regulatory standards is not maintained or if problems occur
following initial marketing. Among the conditions for PLA/ELA approval is the
requirement that the prospective manufacturers quality control and manufacturing
procedures conform to GMP regulations, which must be followed at all times in
the manufacture of the approved product. In complying with standards set forth
in these regulations, 


                                      -18-

<PAGE>


manufacturers must continue to expend time, monies and effort in the area of
production and quality control to ensure full compliance.

     Both before and after approval is obtained, a product, its manufacturer,
and the holder or the holders of the PLA/ELA for the product are subject to
comprehensive regulatory oversight. Violations of regulatory requirements at any
stage, including the preclinical and clinical testing process, the review
process, or thereafter (including after approval) may result in various adverse
consequences, including the FDA's delay in approving or refusal to approve a
product, withdrawal of an approved product from the market, and/or the
imposition of criminal penalties against the manufacturer and/or PLA/ELA holder.
In addition, later discovery of previously unknown problems may result in
restrictions on a product, manufacturer, or PLA/ELA holder, including withdrawal
of the product from the market. Also, new government requirements may be
established that could delay or prevent regulatory approval of the Company's
products under development.

     For clinical investigation and marketing outside the United States, the
Company is also subject to foreign regulatory requirements governing human
clinical trials and marketing approval for drugs. The foreign regulatory
approval process includes all of the risks associated with FDA approval set
forth above.

COMPETITION

     The pharmaceutical and biotechnology industries are characterized by
rapidly evolving technology and intense competition. Many companies, including
major pharmaceutical and chemical companies, as well as specialized
biotechnology companies, are engaged in activities similar to those of the
Company. Certain of these companies have substantially greater financial and
other resources, larger research and development staffs, and more extensive
marketing and manufacturing organizations than the Company. Many of these
companies have significant experience in preclinical testing, human clinical
trials, product manufacturing, marketing and distribution and other regulatory
approval procedures. In addition, colleges, universities, governmental agencies
and other public and private research organizations conduct research and may
market commercial products on their own or through joint ventures. These
institutions are becoming more active in seeking patent protection and licensing
arrangements to collect royalties for use of technology that they have
developed. These institutions also compete with the Company in recruiting and
retaining highly qualified scientific personnel.

     The Company competes with large pharmaceutical companies that produce and
market synthetic compounds and with specialized biotechnology firms in the
United States, Europe and elsewhere, as well as a growing number of large
pharmaceutical companies that are applying biotechnology to their operations.
Many biotechnology companies have focused their developmental efforts in the
human therapeutics area, and many major pharmaceutical companies have developed
or acquired internal 


                                      -19-

<PAGE>


biotechnology capabilities or have made commercial arrangements with other
biotechnology companies. A number of biotechnology and pharmaceutical companies
are developing new products for the treatment of the same diseases being
targeted by the Company; in some instances such products have already entered
clinical trials. Other companies are engaged in research and development based
on complement proteins, T-cell therapeutics, gene therapy and
xenotransplantation.

     T-Cell Sciences ("T-Cell Sciences") and Chiron Corporation have both
publicly announced intentions to develop complement inhibitors to treat diseases
related to trauma and inflammation indications and the Company is aware that
SmithKline Beecham PLC, Merck & Co., Inc. and CytoMed Inc. are attempting to
develop similar therapies. T-Cell Sciences has initiated clinical trials for a
proposed complement inhibitor to treat acute respiratory distress syndrome
(ARDS) and myocardial infarction. The Company believes that its potential C5
Inhibitors differ substantially from those of its competitors due to the
Company's compounds' demonstrated ability to intervene in the complement cascade
at what the Company believes to be the optimal point so that the disease-causing
actions of complement proteins generally are inhibited while the normal
disease-preventing functions of complement proteins generally remain intact. The
Company further believes that, under conditions of inflammation, a complement
inhibitor compound which only indirectly addresses the harmful activity of
complement may be bypassed by pathologic mechanisms present in the inflamed
tissue. Each of Bayer, Immunex Corporation, Pharmacia & Upjohn and Rhone-Poulenc
Rorer Inc. sells a product which is used clinically to reduce surgical bleeding
during CPB, but have little effect on other significant inflammatory morbidities
associated with CPB. The Company believes that each of these drugs does not
significantly prevent complement activation and subsequent inflammation that
lead to blood loss during CPB surgery but instead each drug attempts to reduce
blood loss by shifting the normal blood thinning/blood clotting balance in the
blood towards enhanced blood clotting. While Trasylol (Bayer) has been
demonstrated to reduce perioperative blood loss in a subset of high risk
patients, administration of each of these three drugs to patients with heart
disease has been associated with clinical complications of enhanced blood
clotting, including myocardial infarction. The Company is also aware of
announced and ongoing clinical trials of certain companies, including
Autoimmune, Inc., ImmuLogic Pharmaceutical Corporation, Neurocrine Biosciences,
Inc., and Anergen, Inc. employing T-cell specific tolerance technologies and
addressing patients with multiple sclerosis or diabetes mellitus. Baxter
Healthcare Corporation and Sandoz, Inc., in collaboration with Biotransplant
Inc., have publicly announced intentions to commercially develop xenograft
organs and the Company is aware that Diacrin Inc. is also working in this field.

MANUFACTURING, MARKETING, SALES, CLINICAL TESTING AND REGULATORY COMPLIANCE

     Alexion manufactures its requirements for preclinical and clinical
development using both internal and contract manufacturing resources. The
Company, with financial assistance from the State of Connecticut, has
established pilot manufacturing 


                                      -20-

<PAGE>


facilities suitable for the fermentation and purification of certain of its
recombinant compounds for initial clinical studies. The Company's pilot plant
has the capacity to manufacture under GMP specifications. The Company intends to
secure the production of initial clinical supplies of certain other recombinant
products through third party manufacturers. In each case, the Company
anticipates that vial filing, quality assurance and packaging will be contracted
through third parties.

     In the longer term, the Company may develop large-scale manufacturing
capabilities for the commercialization of some of its products. The key factors
which will be given consideration when making the determination of which
products will be manufactured internally and which through contractual
arrangements will include the availability and expense of contracting this
activity, control issues and the expertise and level of resources required for
Alexion to manufacture products.

     The Company has not invested in the development of commercial
manufacturing, marketing, distribution or sales capabilities. Although the
Company has established a pilot manufacturing facility for the production of
material for clinical trials for certain of its potential products, it has
insufficient capacity to manufacture more than one product candidate at a time
or to manufacture its product candidates for later stage clinical development or
commercialization. If the Company is unable to develop or contract for
additional manufacturing capabilities on acceptable terms, the Company's ability
to conduct human clinical testing will be materially adversely affected,
resulting in delays in the submission of products for regulatory approval and in
the initiation of new development programs, which could have a material adverse
effect on the Company's competitive position and the Company's prospects for
achieving profitability. In addition, as the Company's product development
efforts progress, the Company will need to hire additional personnel skilled in
clinical testing, regulatory compliance, and, if the Company develops products
with commercial potential, marketing and sales. There can be no assurance that
the Company will be able to acquire, or establish third-party relationships to
provide, any or all of these resources or be able to obtain required personnel
and resources to manufacture, or perform testing or engage in marketing,
distribution and sales on its own.

HUMAN RESOURCES

     As of October 1, 1996, the Company had 47 full-time employees, of whom 40
were engaged in research, development, and manufacturing, and seven in
administration and finance. Doctorates are held by 16 of the Company's
employees. Each of the Company's employees has signed a confidentiality
agreement.


                                      -21-

<PAGE>



I
TEM 2. PROPERTIES

     The Company's headquarters, research and development facility and pilot
manufacturing facility are located in New Haven, Connecticut, within close
proximity to Yale University. At this facility, the Company leases and occupies
a total of 28,400 square feet of space, which includes approximately 14,900
square feet of research laboratories and 5,200 square feet of space dedicated to
the pilot manufacturing facility. The Company leases its facilities under three
operating leases expiring in June 1998, December 1997, and March 1999,
respectively, each with an option for up to an additional three years. Current
monthly rental on the facilities is approximately $29,000. The Company believes
the laboratory space will be adequate for its existing research and development
activities.


ITEM 3. LEGAL PROCEEDINGS

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


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


                                      -22-

<PAGE>



                                    PART II.


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") National Market System
under the symbol ALXN. The following table sets forth the range of high and low
sales prices for the Common Stock on the Nasdaq National Market Sytem for the
periods indicated since February 29, 1996 when the Company's Common Stock
commenced trading.

Fiscal 1996                                           High             Low
- -----------                                           ----             ---
Third Quarter (February 28  -  April 30, 1996)       $  9.50           $8.38
Fourth Quarter (May 1 - July 31, 1996)               $ 11.75           $6.00


     As of October 21, 1996, the number of stockholders of record of the
Company's Common Stock was approximately 170. The closing sale price of the
Company's Common Stock on October 21, 1996 was $10.00 per share. The Company has
never paid cash dividends and does not anticipate paying any cash dividends in
the foreseeable future.

DIVIDEND POLICY

     The Company does not expect to declare or pay any cash or stock dividends
in the foreseeable future, but instead intends to retain all earnings, if any,
to invest in the Company's operations. The payment of future dividends is within
the discretion of the Board of Directors and will depend upon the Company's
future earnings, if any, its capital requirements, financial condition and other
relevant factors.


                                      -23-

<PAGE>



ITEM 6. SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>

                                                                                                      For the Period
                                                                                                      from Inception
                                        ---------------------------------------------------------       (January 31,
Statements of                                          For the Fiscal Years Ended                          1992) to
Operations Data:                        ---------------------------------------------------------         July 31,
                                            1996           1995           1994            1993             1992
- ----------------                        -----------    -----------     -----------    -----------      ------------
<S>                                     <C>            <C>             <C>             <C>               <C>
Contract research revenues              $ 2,640,239    $   136,091     $      -        $     -           $     -
                                        -----------    -----------     -----------     ----------        ----------
Operating expenses:
   Research and development               6,629,157      5,637,431       5,519,035      2,969,327           399,878
   General and administrative             1,843,093      1,591,886       1,860,887      1,131,114           263,886
                                        -----------    -----------     -----------    -----------         ---------
        Total operating expenses          8,472,250      7,229,317       7,379,922      4,100,441           663,764
                                        -----------    -----------     -----------    -----------         ---------

Operating loss                           (5,832,011)    (7,093,226)     (7,739,922)    (4,100,441)         (663,764)

Other income (expense), net                 397,495        (29,195)         93,770         32,613            -
                                        -----------    -----------     -----------    -----------         ---------

Net loss                                $(5,434,516)   $(7,122,421)    $(7,286,152)   $(4,067,828)        $(663,764)
                                        ===========    ===========     ===========    ===========         =========

Net loss per common share(1)                 $(.95)        $(1.76)        $(1.89)        $(1.77)            $(.38)
                                             =====         ======         ======         ======             =====
Shares used in computing
net loss per common share(1)5,746,697      4,055,966      3,857,044      2,301,179       1,728,093
                                           =========      =========      =========       =========      

<CAPTION>

                                     July 31,          July 31,         July 31,          July 31,         July 31,
Balance Sheet Data:                    1996              1995             1994              1993             1992
- -------------------               --------------     -------------    -------------     -------------    -------------
<S>                                 <C>              <C>              <C>               <C>               <C>    
Cash, cash equivalents,
and marketable securities           $18,597,751      $ 5,701,465      $  4,209,200      $ 6,859,947       $    41,248

Working capital                      17,031,891        3,558,788         3,014,418        6,388,533        (1,055,692)

Total assets                         20,453,980        7,927,276         6,983,361        8,334,274           491,340

Deficit accumulated during
the development stage               (24,574,681)     (19,140,165)      (12,017,744)      (4,731,592)         (663,764)

Stockholders' equity (deficit)       18,284,925        5,119,217         4,699,846        7,224,900          (729,177)
</TABLE>

- ------
(1) Computed as described in Note 2 of Notes to Financial Statements.


                                      -24-

<PAGE>




ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
        OF OPERATIONS

     Since its inception in January 1992, Alexion has devoted substantially all
of its resources to its drug discovery, research and product development
programs. To date, Alexion has not received any revenues from the sale of
products. The Company has been unprofitable since inception, and expects to
incur substantial and increasing operating losses for the next several years due
to expenses associated with product research and development, preclinical and
clinical testing, regulatory activities and manufacturing development and
scale-up. As of July 31, 1996, the Company has incurred a cumulative net loss of
$24.6 million.

     The Company's plan is to develop and commercialize on its own those product
candidates for which the clinical trial and marketing requirements can be funded
by the Company. For certain of the Company's C5 Inhibitor and Apogen products
for which greater resources will be required, Alexion's strategy is to form
corporate partnerships with major pharmaceutical companies for product
development and commercialization. While there can be no assurance as to the
terms of future corporate partnerships, if any, for licensed applications, a
corporate partner would likely be expected to bear the substantial cost and much
of the manpower-intensive effort of clinical development, scale-up production,
seeking FDA approval and marketing. Alexion has entered into a strategic
alliance with US Surgical with respect to the Company's UniGraft program, and
intends to seek additional strategic alliances with major pharmaceutical
companies.

     The Company recognizes research and development revenues when the
development expenses are incurred and the related work is performed under the
terms of the contracts. Any revenue contingent upon future expenditures by the
Company is deferred and recognized as the expenditures are incurred. Any
revenues contingent upon the achievement of milestones will be recognized when
the milestones are achieved.

RESULTS OF OPERATIONS

     Years Ended July 31, 1996, 1995, and 1994

     The Company earned contract research revenues of $2.6 million and $136,000
for the fiscal years ended July 31, 1996 and 1995, respectively, with no
comparable revenue in the fiscal year ended July 31, 1994. The increase in
fiscal 1996 was primarily due to revenues from the Company's collaborative
research and development agreement with US Surgical, the Company's two SBIR
grants from the NIH, and funding received from the NIST's ATP. The revenues in
fiscal 1995 resulted from the receipt of funds from two SBIR grants from the
NIH. See Item 1. "Business--Strategic Alliances, Collaborations and Licenses."


                                      -25-

<PAGE>


     During the fiscal years ended July 31, 1996, 1995 and 1994, the Company
expended $6.6 million, $5.6 million and $5.5 million, respectively, on research
and development activities. Increases in research and development spending are
attributable to expanded preclinical development of the Company's research
programs, manufacturing process development for the Company's C5 Inhibitor
product candidates, and the initiation of clinical trials following
authorization by the FDA of the Company's IND for its lead C5 Inhibitor product
candidate.

     General and administrative expenses increased to $1.8 million in fiscal
1996 from $1.6 million in fiscal 1995, and were $1.9 million in fiscal 1994. The
increase in fiscal 1996 over 1995 resulted primarily from increased outside
professional services related to business development, recruiting, patent and
legal activities. The decline in fiscal 1995 as compared to 1994 was due
primarily to a reduction in costs for outside professional services.

     Other income, net was $397,000 for fiscal 1996 as compared to other
expense, net of $29,000 for the same period a year ago. In fiscal 1994, other
income, net was $94,000. This fluctuation over the past three years was due
primarily to greater interest income from higher cash balances available for
investment and to a more favorable investment market during fiscal 1996 as
compared to the prior two fiscal years .

     As a result of the above factors, the Company incurred net losses of $5.4
million, $7.1 million and $7.3 million for the fiscal years ended July 31, 1996,
1995, and 1994, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     Since its inception, the Company has financed its operations and capital
expenditures primarily through its initial public offering and private
placements of equity securities resulting in aggregate approximately $41.5
million of net proceeds. The Company has financed the purchase of certain
equipment through $1.2 million of secured notes payable to a financing
institution and $378,000 of capital lease obligations. The Company has also
received $3.0 million in research and development support under its
collaboration with US Surgical and has received $582,000 from its SBIR grants
from the NIH and $246,000 under the ATP from NIST.

     The proceeds of the Company's initial public offering, private placements,
notes payable and capital leases and the cash generated from the corporate
collaboration and SBIR and ATP grants have been used to fund operating
activities of approximately $20.8 million and investments of approximately $2.2
million in equipment and approximately $952,000 in licensed technology rights
and patents through July 31, 1996. During the fiscal year ended July 31, 1996,
the Company's capital expenditures totalled $332,000, primarily for the
acquisition of laboratory equipment. As of July 31, 1996, the Company had
working capital of approximately $17.0 million and total cash, 


                                      -26-

<PAGE>


cash equivalents, and marketable securities amounted to approximately $18.6
million.

     The Company leases its administrative and research and development
facilities under three operating leases expiring in June 1998, December 1997 and
March 1999, respectively, each with an option for up to an additional three
years.

     The Company is obligated to make payments pursuant to certain of its
licensing and research and development agreements. The Company is scheduled to
pay (assuming non-termination of these agreements) $453,000, $228,000 and
$228,000 pursuant to its licensing and research and development agreements
during the fiscal years ending July 31, 1997, 1998 and 1999, respectively. See

I
tem 1. "Business--Strategic Alliances, Collaborations and Licenses."

     The Company anticipates that its existing available capital resources and
interest earned on available cash and marketable securities should be sufficient
to fund its operating expenses and capital requirements as currently planned at
least through calendar year 1997. The Company's future capital requirements will
depend on many factors, the progress of the Company's research and development
programs, progress in clinical trials, the time and costs involved in obtaining
regulatory approvals, the costs involved in obtaining and enforcing patents and
any necessary licenses, the ability of the Company to establish development and
commercialization relationships, and the costs of manufacturing scale-up. See
Item 1. "Business--Alexion's Drug Development Strategy."

     The Company expects to incur substantial additional costs, including costs
associated with research, preclinical and clinical testing, manufacturing
process development, and additional capital expenditures associated with
facility expansion and manufacturing requirements in order to commercialize its
products currently under development. The Company will need to raise substantial
additional funds through additional financings including public or private
equity offerings and collaborative research and development arrangements with
corporate partners. There can be no assurance that funds will be available on
terms acceptable to the Company, if at all, or that discussions with potential
collaborative partners will result in any agreements. The unavailability of
additional financing could require the Company to delay, scale back or eliminate
certain of its research and product development programs or to license third
parties to commercialize products or technologies that the Company would
otherwise undertake itself, any of which could have a material adverse effect on
the Company.

     As of July 31, 1996, the Company had approximately $23.0 million and
$1,190,000 of net operating loss and tax credit carryforwards, respectively,
which expire at various dates between fiscal 2008 and 2011. The Tax Reform Act
of 1986 (the "Tax Act") contains certain provisions that may limit the Company's
ability to utilize net operating loss and tax credit carryforwards in any given
year if certain events occur, including cumulative changes in ownership
interests in excess of 50% over a three-year period. There can be no assurance
that ownership changes in future periods will not 


                                      -27-

<PAGE>


significantly limit the Company's use of its existing net operating loss and tax
credit carryforwards.


                                      -28-

<PAGE>



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data of the Company
required by this item are set forth at the pages indicated in Item 14(a)(1).


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
       FINACIAL DISCLOSURE

Not applicable.


                                      -29-

<PAGE>



                                    PART III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND KEY EMPLOYEES

<TABLE>
<CAPTION>

Name                                Age     Position
- ----                                ---     --------
<S>                                 <C>     <C>
John H. Fried, Ph.D.                67      Chairman of the Board of Directors
Leonard Bell, M.D.                  38      President, Chief Executive Officer, Secretary,
                                              Treasurer, Director
David W. Keiser                     45      Executive Vice President, Chief
                                              Operating Officer
Timothy F. Howe                     38      Director
Max Link, Ph.D.                     56      Director
Joseph A. Madri, Ph.D., M.D.        50      Chairman of the Scientific Advisory Board, Director
Leonard Marks, Jr., Ph.D.           75      Director
Eileen M. More                      50      Director
Stephen P. Squinto, Ph.D.           40      Vice President of Research, Molecular Sciences
Louis A. Matis, M.D.                46      Vice President of Research, Immunobiology
Bernadette L. Alford, Ph.D.         47      Vice President of Regulatory Affairs & Project Management
James A. Wilkins, Ph.D.             44      Senior Director of Process Development
Barry P. Luke                       38      Senior Director of Finance and Administration
</TABLE>


     John H. Fried, Ph.D. has been the Chairman of the Board of Directors of the
Company since April 1992. Since 1992, Dr. Fried has been President of Fried &
Co., Inc., a health technology venture firm. Dr. Fried was a director of Syntex
Corp. ("Syntex"), a life sciences and health care company, from 1982 to 1994 and
he served as Vice Chairman of Syntex from 1985 to January 1993 and President of
the Syntex Research Division from 1976 to 1992. Dr. Fried has originated more
than 200 U.S. Patents and has authored more than 80 scientific publications. Dr.
Fried is also a director of Corvas International Incorporated, a development
stage company principally engaged in research in the field of cardiovascular
therapeutics. Dr. Fried received his B.S. in Chemistry and Ph.D. in Organic
Chemistry from Cornell University.


     Leonard Bell, M.D., is the principal founder of the Company, and has been a
Director of the Company since February 1992; the Company's President and Chief
Executive Officer, Secretary and Treasurer since January 1992. From 1991 to
1992, Dr. Bell was an Assistant Professor of Medicine and Pathology and
co-Director of the Program in Vascular Biology at the Yale University School of
Medicine. From 1990 to 1992, Dr. Bell was an attending physician at the Yale-New
Haven Hospital and an Assistant Professor in the Department of Internal Medicine
at the Yale University School of Medicine. Dr. Bell was the recipient of the
Physician Scientist Award from the National Institutes of Health and
Grant-in-Aid from the American Heart 


                                      -30-

<PAGE>


Association as well as various honors and awards from academic and professional
organizations. His work has resulted in more than 20 scientific publications and
three patent applications. Dr. Bell also serves as a Director of the
Biotechnology Research and Development Corporation. Dr. Bell received his A.B.
from Brown University and M.D. from Yale University School of Medicine. Dr. Bell
is currently an Adjunct Assistant Professor of Medicine and Pathology at Yale
University School of Medicine.

     David W. Keiser has been Executive Vice-President and Chief Operating
Officer of the Company since July 1992. From 1990 to 1992, Mr. Keiser was Senior
Director of Asia Pacific Operations for G.D. Searle & Company Limited
("Searle"), a manufacturer of pharmaceutical products. From 1986 to 1990, Mr.
Keiser was successively Licensing Manager, Director of Product Licensing and
Senior Director of Product Licensing for Searle. From 1984 to 1985, Mr. Keiser
was New Business Opportunities Manager for Mundipharma AG, a manufacturer of
pharmaceutical products, in Basel, Switzerland where he headed pharmaceutical
licensing and business development activities in Europe and the Far East. From
1978 to 1983, he was Area Manager for F. Hoffmann La Roche Ltd., a manufacturer
of pharmaceutical products, in Basel, Switzerland. Mr. Keiser received his B.A.
from Gettysburg College.

     Timothy F. Howe has been a Director of the Company since April 1995. Mr.
Howe is a principal of Collinson Howe Venture Partners, Inc. ("CHVP") where he
has been a Vice President since 1990. CHVP is a venture capital management firm
specializing in life sciences investments and as a result of the stock ownership
of certain funds advised by it, CHVP is a principal stockholder of the Company.
From 1985 to 1990, Mr. Howe was employed by Schroders Incorporated specializing
in venture capital investing. Mr. Howe received his B.A. from Columbia College
and M.B.A. from Columbia Graduate School of Business.

     Max Link, Ph.D. has been a Director of the Company since April 1992. From
May 1993 to June 1994, Dr. Link was Chief Executive Officer of Corange U.S.
Holdings, Inc., the parent company of Boehringer Mannheim Therapeutics,
Boehringer Mannheim Diagnostics and DePuy Orthopedics. From 1992 to 1993, Dr.
Link was Chairman of the Board of Sandoz Pharma, Ltd. ("Sandoz"), a manufacturer
of pharmaceutical products. From 1990 to 1992, Dr. Link was the Chief Executive
Officer of Sandoz and from 1987 to 1989, he was head of the Pharmaceutical
Division and a member of the Executive Board of Sandoz, Ltd., Basel. Prior to
1987, Dr. Link served in various capacities with the United States operations of
Sandoz, including as President and Chief Executive Officer. Dr. Link is also a
director of Protein Design Labs, Inc. and Procept, Inc., each a publicly held
pharmaceutical company, and Human Genome Sciences Inc., a gene discovery
company.

     Joseph A. Madri, Ph.D., M.D. is a founder of the Company and has been
Chairman of the Company's Scientific Advisory Board since March 1992 and a
Director of the Company since February 1992. Since 1980, Dr. Madri has been on
the faculty of the Yale University School of Medicine and is currently a
Professor of Pathology and Biology. Dr. Madri serves on the editorial boards of
numerous scientific journals and 


                                      -31-

<PAGE>


he is the author of over 150 scientific publications. Dr. Madri works in the
areas of regulation of angiogenesis, vascular cell-matrix interactions,
cell-cell interactions, lymphocyte-endothelial cell interactions and endothelial
and smooth muscle cell biology. Dr. Madri received his B.S. and M.S. in Biology
from St. John's University and M.D. and Ph.D. in Biological Chemistry from
Indiana University.

     Leonard Marks, Jr., Ph.D. has been a Director of the Company since April
1992. Since 1985 Dr. Marks has served as an independent corporate director and
management consultant. Dr. Marks currently serves as a director of Airlease
Management Services, an aircraft leasing company (a subsidiary of Ford Motor
Company) and Northern Trust Bank of Arizona, a commercial and trust bank
subsidiary of Northern Trust of Chicago. Prior to 1985, Dr. Marks held various
positions in academia and in the corporate sector including Executive Vice
President, Castle & Cooke, Inc. from 1972 to 1985. Dr. Marks received his B.A.
in Economics from Drew University and an M.B.A. and Doctorate in Business
Administration from Harvard University.

     Eileen M. More has been a Director of the Company since December 1993. Ms.
More has been associated since 1978 with Oak Investment Partners ("Oak") and has
been a General Partner of Oak since 1980. Oak is a venture capital firm and a
principal stockholder of the Company. Ms. More is Chairman Emeritus of the
Connecticut Venture Group. Ms. More is currently a director of several private
high technology and biotechnology firms including Pharmacopeia, Inc., Trophix
Pharmaceuticals, Inc., Instream Corporation, Teloquent Communication
Corporation, and Coral Therapeutics, Inc. Ms. More studied mathematics at the
University of Bridgeport and is a Chartered Financial Analyst.

     Stephen P. Squinto, Ph.D. is a founder of the Company and has held the
positions of Vice President of Research, Molecular Sciences since August 1994,
Senior Director of Molecular Sciences from July 1993 to July 1994 and Director
of Molecular Development from April 1992 to July 1993. From 1989 to 1992, Dr.
Squinto held various positions at Regeneron Pharmaceuticals, Inc., most recently
serving as Senior Scientist and Assistant Head of the Discovery Group. From 1986
to 1989, Dr. Squinto was an Assistant Professor of Biochemistry and Molecular
Biology at Louisiana State University Medical Center. Dr. Squinto's work has led
to over 40 scientific papers in the fields of gene regulation, growth factor
biology and gene transfer. Dr. Squinto's work is primarily in the fields of
regulation of eukaryotic gene expression, mammalian gene expression systems and
growth receptor and signal transduction biology. Dr. Squinto received his B.A.
in Chemistry and Ph.D. in Biochemistry and Biophysics from Loyola University of
Chicago.

     Louis A. Matis, M.D. has been the Vice President of Research, Immunobiology
of the Company since August 1994. From January 1993 to July 1994, Dr. Matis
served as the Director of the Company's Program in Immunobiology. Prior to
joining the Company, from 1977 to 1992, Dr. Matis held various appointments at
the NIH and the FDA. From 1990 to 1992, Dr. Matis was a Senior Investigator in
the Laboratory of Immunoregulation at the National Cancer Institute and from
1987 to 1990 he was a 


                                      -32-

<PAGE>


Senior Staff Fellow in the Molecular Immunology Laboratory at the Center for
Biologics Evaluation and Research associated with the FDA. Dr. Matis is the
author of more than 75 scientific papers in the fields of T-cell biology. Dr.
Matis has received numerous awards including the NIH Award of Merit. Dr. Matis
received his B.A. from Amherst College and M.D. from the University of
Pennsylvania Medical School.

     Bernadette L. Alford, Ph.D. has been the Vice President of Regulatory
Affairs and Project Management since joining the Company in September 1994. From
1989 to July 1994, Dr. Alford was a corporate officer and Vice President of
Regulatory and Quality Affairs at Repligen Corporation ("Repligen"), a publicly
held biotechnology company, where she was responsible for the filing of all INDs
with the FDA. From 1987 to 1989, Dr. Alford was Director of Quality Assurance
and Regulatory Affairs at Repligen. From 1978 to 1987, Dr. Alford held various
scientific and management positions at Collaborative Research Inc. Dr. Alford
received a B.S. in Biology from Marywood College and an M.S. in Biology and
Ph.D. in Molecular Biology from Texas University.

     James A. Wilkins, Ph.D. has been Senior Director of Process Development of
the Company since August 1995 and prior thereto was Director of Process
Development from September 1993. From 1989 to 1993, Dr. Wilkins was Group Leader
of the Protein Chemistry Department at Otsuka America Pharmaceutical, Inc. From
1987 to 1989, Dr. Wilkins was a Scientist in Recovery Process Development at
Genentech, Inc. and from 1982 to 1987, he was an Associate Research Scientist in
the Thomas C. Jenkins Department of Biophysics at Johns Hopkins University. He
is the author of more than 25 presentations and scientific articles in the
fields of protein refolding and protein biochemistry. Dr. Wilkins received a
B.A. in Biology from University of Texas and a Ph.D. in Biochemistry from
University of Tennessee.

     Barry P. Luke has been Senior Director of Finance and Administration since
August 1995 and prior thereto was Director of Finance and Administration from
May 1993. From 1989 to 1993, Mr. Luke was Chief Financial Officer, Secretary and
Vice President--Finance and Administration at Comtex Scientific Corporation, a
publicly held distributor of electronic news and business information. From 1985
to 1989, he was Controller and Treasurer of Softstrip, Inc., a manufacturer of
computer peripherals and software. From 1982 to 1985, Mr. Luke was a member of
the Corporate Audit Staff at the General Electric Company. Mr. Luke received a
B.A. in Economics from Yale University and an M.B.A. in management and marketing
from the University of Connecticut.

     The executive officers are appointed and serve at the pleasure of the Board
of Directors.


                                      -33-

<PAGE>



ITEM 11. EXECUTIVE COMPENSATION

         The information required by this item is incorporated by reference from
the information under the captions "Compensation of Executive Officers and
Directors" contained in the Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of October 1,
1996 (except as otherwise noted in the footnotes) regarding the beneficial
ownership (as defined by the Securities and Exchange Commission (the "SEC")) of
the Company's Common Stock of: (i) each person known by the Company to own
beneficially more than five percent of the Company's outstanding Common Stock;
(ii) each director and each named executive officer; and (iii) all directors and
named executive officers as a group.

<TABLE>
<CAPTION>

                                                                   Number of          Percentage of
                                                                    Shares              Outstanding
            Name and Address                                     Beneficially            Shares of
         of Beneficial Owner(1)                                    Owned(2)            Common Stock
         ----------------------                                  ------------         -------------    
<S>                                                               <C>                      <C>
Collinson Howe Venture Partners
     1055 Washington Boulevard, 5th Floor
     Stamford, Connecticut 06901(3)..........................       991,897                13.5%
Biotechnology Investment Group, L.L.C.
     c/o Collinson Howe Venture Partners
     1055 Washington Boulevard, 5th Floor
     Stamford, Connecticut 06901(4)(5)........................      697,575                 9.5%
United States Surgical Corporation
     150 Glover Avenue
     Norwalk, Connecticut 06856...............................      657,142                 9.0%
Oak Investment Partners
     c/o Oak Investment Partners V
     One Gorham Island
     Westport, Connecticut 06880(6)...........................      495,884                 6.7%
INVESCO Global Health Sciences Fund
     c/o INVESCO Trust Company
        attn: Health Care Group
     7800 E. Union Avenue, Ste. 800
     Denver, Colorado 80237(7).................................     366,776                 5.0%
Timothy F. Howe(8).............................................     993,597                13.6%
Eileen M. More(9)..............................................     517,584                 7.0%
Leonard Bell, M.D.(10).........................................     271,100                 3.6%
John H. Fried, Ph.D.(11).......................................      85,236                 1.2%
Stephen P. Squinto, Ph.D(12)...................................      85,450                 1.2%
David W. Keiser(13)............................................      59,800                 *
Joseph Madri, Ph.D., M.D(14)...................................      50,700                 *
Louis A. Matis, M.D.(15).......................................      57,400                 *
Max Link, Ph.D(16).............................................      19,723                 *
Leonard Marks, Jr., Ph.D(17)...................................      10,200                 *
Bernadette L. Alford, Ph.D.(18)................................       8,850                 *
Directors and Executive Officers as a group (11 persons)(19)...   2,158,840                28.1%
</TABLE>



                                      -34-

<PAGE>


- ----------

  *  Less than one percent

 (1) Unless otherwise indicated, the address of all persons is 25 Science Park,
     Suite 360, New Haven, CT 06511.

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

 (3) Collinson Howe Venture Partners, Inc. ("CHVP") is a venture capital
     investment management firm which is the managing member of Biotechnology
     Investment Group, L.L.C. ("Biotechnology Group"), and is the investment
     advisor to Schroders, Inc., Schroder Ventures Limited Partnership
     ("Schroder Partnership") and Schroder Ventures U.S. Trust ("Schroder
     Trust"). As such, CHVP shares beneficial ownership of the shares listed
     above which include (i) 697,575 shares, 133,880 shares, 122,105 and 30,525
     shares of Common Stock owned by Biotechnology Group, Schroders, Inc.,
     Schroder Partnership and Schroder Trust, respectively, and (ii) 7,812
     shares issuable upon the exercise of warrants owned by Schroders, Inc.
     Timothy Howe, a director of the Company, is the Vice President and a
     stockholder of CHVP. As such he has shared investment and voting power over
     the shares beneficially owned by CHVP.

 (4) Biotechnology Group is a limited liability company which invests in and
     otherwise deals with securities of biotechnology and other companies. The
     members of Biotechnology Group are (i) the managing member, CHVP, an
     investment management firm of which Jeffrey J. Collinson is President, sole
     director and majority stockholder and Timothy F. Howe, a director of the
     Company, is a Vice President and a stockholder, (ii) The Edward Blech Trust
     ("EBT"), a trust for the benefit of the minor child of David Blech, a
     principal stockholder of the Company, and (iii) Wilmington Trust Company
     ("WTC"), as voting trustee under a voting trust agreement (the "Voting
     Trust Agreement"), among WTC, Biotechnology Group and BIO Holdings L.L.C.
     ("Holdings"). The managing member of Biotechnology Group is CHVP. Each of
     Citibank, N.A. ("Citibank") and Holdings has the right pursuant to the
     Voting Trust Agreement to direct the actions of WTC as a member of
     Biotechnology Group. WTC, as the member holding a majority interest in
     Holdings, has the right to direct the actions of Holdings under the Voting
     Trust Agreement. Citibank, pursuant to a separate voting trust agreement
     among WTC, David Blech and Holdings, has the right to direct the actions of
     WTC as a member of Holdings with respect to the rights of Holdings under
     the Voting Trust Agreement.

 (5) By virtue of their status as members of the Biotechnology Group, each of
     CHVP and EBT may be deemed the beneficial owner of all shares held of
     record by Biotechnology Group (the "Biotechnology Group Shares"). By virtue
     of his status as the majority owner and controlling person of CHVP, Jeffrey
     J. Collinson may also be deemed the beneficial owner of the Biotechnology
     Group Shares. Each of CHVP, EBT and Jeffrey J. Collinson disclaims
     beneficial ownership of any Biotechnology Group Shares except to the
     extent, if any, of such person's actual pecuniary interest therein.

 (6) Includes 408,571 shares owned by Oak Investment V Partners and 9,189 shares
     owned by Oak Investment V Affiliates, two affiliated limited partnerships
     (collectively, "Oak Investments"). In addition, Oak Investments' beneficial
     ownership includes 78,124 shares which may be acquired upon the exercise of
     warrants.

 (7) Includes 31,250 shares which may be acquired upon the exercise of warrants.
 
 (8) Consists of shares beneficially owned by CHVP (See footnote 3 above).
     Includes 1,700 shares which may be acquired upon the exercise of options
     within 60 days of October 1, 1996. Excludes 5,100 shares obtainable through
     the exercise of options granted to Mr. Howe which are not exercisable
     within 60 days of October 1, 1996. Mr. Howe disclaims beneficial ownership
     of shares held or beneficially owned by funds managed by CHVP.

 (9) Includes 21,700 shares of Common Stock which may be acquired upon the
     exercise of options granted to Eileen More and 495,844 shares owned by Oak
     Investments. Excludes 5,100 shares obtainable through the exercise of
     options granted to Ms. More which are not exercisable within 60 days of
     October 1, 1996. Ms. More is a General Partner at Oak Investments.

(10) Includes 112,500 shares of Common Stock that may be acquired upon the
     exercise of options within 60 days of October 1, 1996 and 300 shares, in
     aggregate, held in the names of Dr. Bell's three minor children. Excludes
     222,500 shares obtainable through the exercise of options which are not
     exercisable within 60 days of October 1, 1996 and 90,000 shares held in
     trust for Dr. Bell's children of which Dr. Bell 


                                      -35-

<PAGE>


     disclaims beneficial ownership. Dr. Bell disclaims beneficial ownership of
     the shares held in the name of his minor children.

(11) Includes 4,686 shares that may be acquired upon the exercise of warrants
     and 9,200 shares that may be acquired on the exercise of options that are
     exercisable within 60 days of October 1, 1996. Excludes 5,100 shares
     obtainable through the exercise of options which are not exercisable within
     60 days of October 1, 1996.

(12) Includes 28,750 shares of Common Stock which may be acquired upon the
     exercise of options granted to Dr. Squinto within 60 days of October 1,
     1996 and 4,200 shares, in aggregate, held in the names of Dr. Squinto's two
     minor children of which 4,000 shares are in two trusts managed by Dr.
     Squinto's wife. Excludes 88,750 shares obtainable through the exercise of
     options granted to Dr. Squinto which are not exercisable within 60 days of
     October 1, 1996. Dr. Squinto disclaims beneficial ownership of the shares
     held in the name of his minor children and the foregoing trusts.

(13) Includes 17,500 shares which may be acquired upon the exercise of options
     within 60 days of October 1, 1996 and 300 shares, in aggregate, held in the
     names of Mr. Keiser's three minor children. Excludes 107,500 shares
     obtainable through the exercise of options granted to Mr. Keiser, which are
     not exercisable within 60 days of October 1, 1996. Mr. Keiser disclaims
     beneficial ownership of the shares held in the name of his minor children.

(14) Includes 5,700 shares that may be acquired upon the exercise of options
     within 60 days of October 1, 1996. Excludes 6,100 shares obtainable through
     the exercise of options which are not exercisable within 60 days of October
     1, 1996.

(15) Includes 38,750 shares of Common Stock which may be acquired upon the
     exercise of options granted to Dr. Matis within 60 days of October 1, 1996
     and 150 shares, in aggregate, held in the names of Dr. Matis' three minor
     children. Excludes 88,750 shares obtainable through the exercise of
     options, granted to Dr. Matis, which are not exercisable within 60 days of
     October 1, 1996. Dr. Matis disclaims beneficial ownership of the shares
     held in the name of his minor children.

(16) Excludes 5,100 shares obtainable through the exercise of options, granted
     to Dr. Link, which are not exercisable within 60 days of October 1, 1996.

(17) Includes 9,200 shares which may be acquired upon the exercise of options
     within 60 days of October 1, 1996. Excludes 5,100 shares obtainable through
     the exercise of options granted to Dr. Marks, which are not exercisable
     within 60 days of October 1, 1996.

(18) Consists of 8,750 shares of Common Stock which may be acquired upon the
     exercise of options granted to Dr. Alford within 60 days of October 1, 1996
     and 100 shares held in the name of Dr. Alford's minor child. Excludes
     71,250 shares obtainable through the exercise of options, granted to Dr.
     Alford, which are not exercisable within 60 days of October 1, 1996.

(19) Consists of shares beneficially owned by Drs. Alford, Bell, Fried, Link,
     Madri, Marks, Matis and Squinto and Mr. Keiser, Mr. Howe and Ms. More.
     Includes 90,622 shares of Common Stock which may be acquired upon the
     exercise of warrants within 60 days of October 1, 1996 and 253,750 shares
     of Common Stock which may be acquired upon the exercise of options within
     60 days of October 1, 1996.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In July 1995, the Company entered into a series of agreements with US
Surgical relating to a collaboration for the development of non-human UniGraft
organ products designed for transplantation into humans. In furtherance of the
joint collaboration, US Surgical also purchased $4.0 million of the Company's
Common Stock, at a price of $8.75 per share and agreed to fund up to $7.5
million for the completion of preclinical research and development of the
UniGraft program, a portion of which is dependent on the achievement of
development milestones. US Surgical, a principal stockholder of the Company,
purchased approximately ten percent of the shares of Common Stock offered at the
Company's initial public offering. US Surgical beneficially owns an aggregate of
657,142 shares of Common Stock or 9.0% of the outstanding shares. Through
October 1, 1996, the 


                                      -36-

<PAGE>

Company has received approximately $3.0 million in research and development
support under its collaboration with US Surgical.

     Between December 1994 and March 1995, the Company consummated the sale of
an aggregate of 1,986,409 shares of Series A Preferred Stock for an aggregate
consideration of $3,774,177. Each two and one-half shares of Series A Preferred
Stock were converted into one share of Common Stock. Certain of the Company's
principal stockholders, directors and relatives of directors purchased shares of
Series A Preferred Stock on the same terms as all of the other purchasers of
Series A Preferred Stock.

     In June and October 1992, the Company entered into certain patent licensing
agreements with Oklahoma Medical Research Foundation ("OMRF") and Yale
University ("Yale"). The agreements provide that the Company agreed to pay such
institutions royalties based on sales of products incorporating technology
licensed thereunder and also license initiation fees, including annual minimum
royalties that increase in amount based on the status of product development and
the passage of time. Under policies of OMRF and Yale, the individual inventors
of patents are entitled to receive a percentage of the royalties and other
license fees received by the licensing institution. Certain founders of and
scientific advisors to the Company are inventors under such patent and patent
applications (including Drs. Bell and Madri, directors of the Company, and Dr.
Squinto, the Vice President of Research, Molecular Sciences of the Company, with
respect to patent applications licensed from Yale) and, therefore, entitled to
receive a portion of such royalties and other fees payable by the Company.

     In June 1992, the Company and OMRF entered into a research agreement with
respect to the development of complement inhibitors, pursuant to which Drs.
Peter Sims and Theresa Wiedmer, scientific advisors to the Company, serve as
principal investigators. Per the research agreement, the Company has paid an
aggregate of $1,000,000 over a four-year period through October 1, 1996. There
can be no assurance that the research agreement will result in discoveries
useful to the Company. As the principal investigators under the sponsored
research programs under the research agreement, Drs. Sims and Wiedmer will
directly benefit from the payments. Dr. Sims is currently the Associate Director
for Research of The Blood Center of Southeastern Wisconsin and the research
operations of Dr. Sims and Dr. Wiedmer are conducted at The Blood Center. OMRF
has assigned to The Blood Center, and The Blood Center has accepted, all rights,
responsibilities and obligations of OMRF under the research and development
agreement. Drs. Sims and Wiedmer are married to each other.


                                      -37-

<PAGE>



                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) (1) Financial Statements

     The financial statements requried by this item are submitted in a separate
section beginning on page F-1 of this report.

         (2) Financial Statement Schedules

     Schedules have been omitted because of the absence of conditions under
which they are required or because the required information is included in the
financial statements or the notes thereto.

(3)  Exhibits with each management contract or compensatory plan or arrangement
     required to be identified. See paragraph (c) below.

     (b)  Reports on Form 8-K

     There were no reports on Form 8-K filed by the Company during the fourth
quarter of the fiscal year ended July 31, 1996.

     (c) Exhibits

3.1      Certificate of Incorporation, as amended.*

3.2      Bylaws.*

4.1      Specimen Common Stock Certificate.*

4.2      Form of Representative's Warrant Agreement including Form of Warrant.*

10.1     Employment Agreement, dated April 1992, between the Company and Dr.
         Leonard Bell, as amended.*

10.2     Employment Agreement, dated June 1992, between the Company and David
         Keiser, as amended.*

10.3     Employment Agreement, dated March 1992, between the Company and Dr.
         Stephen P. Squinto, as amended.*


                                      -38-

<PAGE>


10.4     Employment Agreement, dated September 1992, between the Company and Dr.
         Louis A. Matis, as amended.*

10.5     Employment Agreement, dated July 1993, between the Company and Dr.
         James A. Wilkins, as amended.*

10.6     Employment Agreement, dated July 1994, between the Company and Dr.
         Bernadette Alford, as amended.*

10.7     Administrative Facility Lease, dated August 23, 1995, between the
         Company and Science Park Development Corporation.*

10.8     Research and Development Facility Lease, dated August 23, 1995, between
         the Company and Science Park Development Corporation.*

10.9     Option Agreement, dated April 1, 1992 between the Company and Dr.
         Leonard Bell.*

10.10    Company's 1992 Stock Option Plan, as amended.*

10.11    Company's 1992 Outside Directors Stock Option Plan, as amended.*

10.12    Registration Agreement, dated December 4, 1992, by the Company for the
         benefit of certain individuals listed on schedules thereto, as
         amended.*

10.13    Amendment to Registration Agreement, dated July 31, 1995, between the
         Company and United States Surgical Corporation.*

10.14    Agreement, dated June 15, 1993, by the Company for the benefit of
         certain individuals listed on schedules thereto, as amended.*

10.15    Form of Investor Rights Agreement, dated December 23, 1994, between the
         Company and the purchasers of the Company's Series A Preferred Stock,
         as amended.*

10.16    Stock Purchase Agreement, dated July 31, 1995, between the Company and
         United States Surgical Corporation.*

10.17    Form of Warrant to purchase shares of the Company's Common Stock issued
         pursuant to certain of the Company's private placements.*

10.18    Form of Warrant to purchase shares of the Company's Common Stock issued
         to the Placement Agent of certain of the Company's private placements.*

10.19    Form of Warrant to purchase shares of the Company's Common Stock issued
         to certain warrantholders of the Company in connection with a Warrant
         Exchange.*


                                      -39-

<PAGE>


10.20    License Agreement dated as of May 27, 1992 between the Company and Yale
         University, as amended September 23, 1992.*+

10.21    Exclusive License Agreement dated as of June 19, 1992 among the
         Company, Yale University and Oklahoma Medical Research Foundation.**

10.22    Research & Development Agreement dated as of June 19, 1992 between the
         Company and Oklahoma Medical Research Foundation.*+

10.23    License Agreement dated as of September 30, 1992 between the Company
         and Yale University, as amended July 2, 1993.*+

10.24    License Agreement dated as of August 1, 1993 between the Company and
         Biotechnology Research and Development Corporation ("BRDC"), as amended
         as of July 1, 1995.*+

10.25    Cooperative Research and Development Agreement dated December 10, 1993
         between the Company and the National Institutes of Health.*+

10.26    License Agreement dated January 25, 1994 between the Company and The
         Austin Research Institute.*+

10.27    Exclusive Patent License Agreement dated April 21, 1994 between the
         Company and the National Institutes of Health.*+

10.28    License Agreement dated July 22, 1994 between the Company and The
         Austin Research Institute.*+

10.29    License Agreement dated as of January 10, 1995 between the Company and
         Yale University.*+

10.30    Joint Development Agreement dated as of July 31, 1995 between the
         Company and United States Surgical Corporation.*+

10.31    Advanced Technology Program ("ATP"), Cooperative Agreement 70NANB5H,
         National Institute of Standards and Technology, entitled "Universal
         Donor Organs for Transplantation," dated September 15, 1995.*+

10.32    U.S. Department of Health and Human Services, National Heart, Lung and
         Book Institute, Small Business Research Program, Phase II Grant
         Application, entitled "Role of Complement Activation in Cardiopulmonary
         Bypass," dated December 14, 1994; and Notice of Grant Award dated
         September 21, 1995.*+

10.33    Research Subcontract Agreement dated as of October 1, 1995 between the
         Company and Tufts University.*+


                                      -40-

<PAGE>


10.34    Agreement to be Bound by Shareholders Agreement dated as of August 1,
         1993 between the Company and BRDC.*

10.35    Agreement to be Bound by Master Agreement dated as of August 1, 1993
         between the Company and BRDC.*

10.36    Research and Development Facility Lease, dated April 1, 1996, between
         the Company and Science Park Development Corporation.

10.37    License Agreement dated March 27, 1996 between the Company and Medical
         Research Council.++

10.38    License Agreement dated May 8, 1996 between the Company and Enzon,
         Inc.++

- ------

 *       Incorporated by reference to the Company's Registration Statement on
         Form S-1, (Reg. No. 333-00202).

 +       Confidential treatment was granted for portions of such document.

++       A request for confidential treatment has been made for portions of such
         document, Confidential Portions, have been omitted and filed separately
         with the Commission as required by Rule 24b-2.

(b)      Financial Statement Schedules


                                      -41-

<PAGE>



                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                      ALEXION PHARMACEUTICALS, INC.

                                      /S/   LEONARD BELL, M.D.
                                      -----------------------------------------
                                      By:   LEONARD BELL, M.D.
                                            PRESIDENT, CHIEF EXECUTIVE OFFICER,
                                              SECRETARY AND TREASURER


                                      /S/   DAVID W. KEISER
                                      -----------------------------------------
                                      By:   DAVID W. KEISER
                                            EXECUTIVE VICE PRESIDENT AND
                                              CHIEF OPERATING OFFICER

     Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.


<TABLE>
<S>                           <C>                                              <C>
/S/  LEONARD BELL, M.D.       LEONARD BELL, M.D.                               October 28, 1996
- -----------------------       President, Chief Executive Officer, Secretary
                                and Treasurer (principal executive officer)


/S/   DAVID W. KEISER         DAVID W. KEISER                                  October 28, 1996
- -----------------------       Executive Vice President and Chief Operating
                                Officer (principal financial and accounting
                                officer)


/S/   JOHN H. FRIED           JOHN H. FRIED, PH.D.                             October 28, 1996
- -----------------------       Chairman of the Board of Directors


/S/   TIMOTHY F. HOWE         TIMOTHY F. HOWE                                  October 28, 1996
- -----------------------       Director


/S/   MAX LINK                MAX LINK, PH.D.                                  October 28, 1996
- -----------------------       Director
                              

 /S/ JOSEPH A. MADRI          JOSEPH A. MADRI, PH.D., M.D.                     October 28, 1996
- -----------------------       Director


/S/ LEONARD MARKS, JR.        LEONARD MARKS, JR., PH.D.                        October 28, 1996
- -----------------------       Director


/S/ EILEEN M. MORE            EILEEN M. MORE                                   October 28, 1996
- -----------------------       Director
</TABLE>


                                      -42-

<PAGE>


                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>
Report of Independent Public Accountants                                                 F-2

Balance Sheets as of July 31, 1995 and 1996                                              F-3

Statements of Operations for the Years Ended July 31, 1994, 1995, 1996, and for
   the Period from Inception (January 28, 1992) Through July 31, 1996                    F-4

Statements of Stockholders' Equity for the Period from
  Inception (January 28, 1992) Through July 31, 1996                                     F-5

Statements of Cash Flows for the Years Ended July 31, 1994, 1995, 1996, and for
  the Period from Inception (January 28, 1992) Through July 31, 1996                     F-6

Notes to Financial Statements                                                            F-7
</TABLE>



                                      F-1

<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
     Alexion Pharmaceuticals, Inc.:

We have audited the accompanying balance sheets of Alexion Pharmaceuticals, Inc.
(a Delaware corporation in the development stage) as of July 31, 1995 and 1996,
and the related statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended July 31, 1996, and for the
period from inception (January 28, 1992) through July 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alexion Pharmaceuticals, Inc.
as of July 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended July 31, 1996, and for the
period from inception (January 28, 1992) through July 31, 1996, in conformity
with generally accepted accounting principles.

                                                         ARTHUR ANDERSEN LLP

Hartford, Connecticut
August 30, 1996



                                      F-2

<PAGE>


<TABLE>

                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                                 BALANCE SHEETS

<CAPTION>

                                                                   July 31,
                                                    ------------------------------------
                                                          1995                   1996
                                                     ------------           ------------
<S>                                                  <C>                    <C>         
               ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                          $  5,079,212           $  9,491,217
  Marketable securities                                   622,253              9,106,534
  Prepaid expenses                                        172,462                466,731
                                                     ------------           ------------
         Total current assets                           5,873,927             19,064,482
                                                     ------------           ------------

EQUIPMENT, net                                            970,938                592,271
                                                     ------------           ------------

OTHER ASSETS:
  Licensed technology rights, net                         418,363                330,365
  Patent application costs, net                           198,246                194,004
  Organization costs, net                                  17,986                  5,280
  Security deposits and other assets                      447,816                267,578
                                                     ------------           ------------
                                                        1,082,411                797,227
                                                     ------------           ------------
         Total assets                                $  7,927,276           $ 20,453,980
                                                     ============           ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of notes payable                   $    316,978           $    322,508
  Current obligations under capital leases                103,447                 28,593
  Accounts payable                                        318,517                280,913
  Accrued expenses                                        576,197                400,577
  Deferred revenue                                      1,000,000              1,000,000
                                                     ------------           ------------
         Total current liabilities                      2,315,139              2,032,591
                                                     ------------           ------------
NOTES PAYABLE, less current portion

  included above                                          456,127                128,264
                                                     ------------           ------------
OBLIGATIONS UNDER CAPITAL LEASES,
  less current portion included above                      36,793                  8,200
                                                     ------------           ------------
COMMITMENTS AND CONTINGENCIES
  (Notes 1, 9 and 11)

STOCKHOLDERS' EQUITY:
  Series A convertible preferred stock
    $.0001 par value; 5,000,000 shares
    authorized; 1,986,409 shares
    issued and outstanding at July 31, 1995                   199                    -
  Common stock $.0001 par value; 25,000,000
    shares authorized; 3,996,913 and 7,334,909
    issued at July 31, 1995 and 1996, respectively            400                    733
  Additional paid-in capital                           24,258,885             42,858,975
  Deficit accumulated during the
    development stage                                 (19,140,165)           (24,574,681)
  Treasury stock, at cost, 11,875 shares                     (102)                  (102)
                                                     ------------           ------------
         Total stockholders' equity                     5,119,217             18,284,925
                                                     ------------           ------------
         Total liabilities and
           stockholders' equity                      $  7,927,276           $ 20,453,980
                                                     ============           ============
</TABLE>




                     The accompanying notes are an integral
                      part of these financial statements.


                                      F-3

<PAGE>



<TABLE>
                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

<CAPTION>

                                                                                                           
                                                                                                              For the Period
                                                     For the Years Ended July 31,                            From Inception
                                      --------------------------------------------------------              (January 28, 1992)
                                        1994               1995                    1996                    Through July 31, 1996
                                        ----               ----                    ----                    ---------------------
<S>                                   <C>                 <C>                      <C>                         <C>         
CONTRACT RESEARCH REVENUES            $      -            $   136,091              $ 2,640,239                 $  2,776,330
                                      -----------         -----------              -----------                 ------------
OPERATING EXPENSES:
  Research and development              5,519,035           5,637,431                6,629,157                   21,154,828

  General and administrative            1,860,887           1,591,886                1,843,093                    6,690,866
                                      -----------         -----------              -----------                 ------------
       Total operating
         expenses                       7,379,922           7,229,317                8,472,250                   27,845,694
                                      -----------         -----------              -----------                 ------------

OPERATING LOSS                         (7,379,922)         (7,093,226)              (5,832,011)                 (25,069,364)

OTHER INCOME (EXPENSE), net                93,770             (29,195)                 397,495                      494,683
                                      -----------         -----------              -----------                 ------------
       Net loss                       $(7,286,152)        $(7,122,421)             $(5,434,516)                $(24,574,681)
                                      ===========         ===========              ===========                 ============

NET LOSS PER COMMON SHARE (Note 2)         $(1.89)             $(1.76)                   $(.95)
                                           ======              ======                    =====

SHARES USED IN COMPUTING
  NET LOSS PER COMMON SHARE             3,857,044           4,055,966                5,746,697
                                        =========           =========                =========
</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                      F-4

<PAGE>


<TABLE>
                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<CAPTION>

                                                                                                                          
                                                                                                                   
                                                      Convertible                                                  
                                                   Preferred Stock              Common Stock            Additional 
                                                 -------------------      ------------------------       Paid-In
                                                 Shares       Amount      Shares        Amount           Capital   
                                                 ------       ------      ------        ------           -------   
<S>                                            <C>             <C>        <C>             <C>          <C>
  Initial issuance of common stock                   -          $ -       1,200,000       $120         $     1,080 
  Deferred offering costs                            -            -            -            -                 -    
  Net loss                                           -            -            -            -                 -    
                                               ----------       ----      ---------       ----         ----------- 
BALANCE, July 31, 1992                               -            -       1,200,000        120               1,080 
  Issuance of common stock and
    warrants, net of issuance costs
    of $1,230,362                                    -            -       1,531,399        153          10,755,239 
  Conversion of advances from
    stockholder into common stock
    and warrants                                     -            -         160,000         16           1,199,984 
  Repurchase of common stock and
    warrants                                         -            -            -            -                 -    
  Net loss                                           -            -            -            -                 -    
                                               ----------       ----      ---------       ----         ----------- 
BALANCE, July 31, 1993                               -            -       2,891,399        289          11,956,303 
  Issuance of common stock and warrants,
    net of issuance costs of $296,017                -            -         646,872         65           4,878,918 
  Repurchase of common stock                         -            -            -            -                 -    
  Deferred offering costs                            -            -            -            -                 -    
  Net change in unrealized
    losses on marketable securities                  -            -            -            -              (62,883)
  Net loss                                           -            -            -            -                 -    
                                               ----------       ----      ---------       ----         ----------- 
BALANCE, July 31, 1994                               -            -       3,538,271        354          16,772,338 
  Issuance of common stock
    from exercise of stock options                   -            -           1,500         -               11,250 
  Issuance of Series A convertible
    preferred stock, net of
    issuance costs of $195,241                  1,986,409        199           -            -            3,578,737 
  Issuance of common stock, net
    of issuance costs of $150,000                    -            -         457,142         46           3,849,954 
  Net change in unrealized losses on
    marketable securities                            -            -            -            -               46,606 
  Net loss                                           -            -            -            -                 -    
                                               ----------       ----      ---------       ----         ----------- 
BALANCE, July 31, 1995                          1,986,409        199      3,996,913        400          24,258,885 
  Issuance of common stock in
    initial public offering, net
    of issuance costs of $2,468,940                  -            -       2,530,000        253          18,403,307 
  Conversion of Series A convertible
     preferred stock into common stock         (1,986,409)      (199)       794,554         79                 120 
  Issuance of common stock from
    exercise of stock options                        -            -          13,442          1              70,361 
  Net change in unrealized losses
    on marketable securities                         -            -            -            -                3,802 
  Compensation expense related
    to grant of stock options                        -            -            -            -              122,500 
  Net loss                                           -            -            -            -                 -    
                                               ----------       ----     ----------       ----         -----------  
BALANCE, July 31, 1996                               -          $ -       7,334,909       $733         $42,858,975 
                                               ==========       ====     ==========       ====         =========== 
<CAPTION>

                                               Deficit                                                                         
                                               Accumulated                           Treasury Stock                 Total      
                                               During the         Deferred              at cost                 Stockholders'  
                                              Development        Offering          --------------------           Equity       
                                                 Stage             Costs           Shares        Amount        (Deficiency)    
                                                 -----            -------          ------        ------        ------------    
<S>                                           <C>                 <C>              <C>            <C>           <C>
  Initial issuance of common stock             $      -            $    -             -           $  -          $     1,200    
  Deferred offering costs                             -             (66,613)          -              -              (66,613)   
  Net loss                                        (663,764)            -              -              -             (663,764)   
                                              ------------         --------         ------        -----         -----------    
BALANCE, July 31, 1992                            (663,764)         (66,613)          -              -             (729,177)   
  Issuance of common stock and                                                                                                 
    warrants, net of issuance costs                                                                                            
    of $1,230,362                                     -              66,613           -              -           10,822,005    
  Conversion of advances from                                                                                                  
    stockholder into common stock                                                                                              
    and warrants                                      -                -              -              -            1,200,000    
  Repurchase of common stock and                                                                                               
    warrants                                          -                -            10,000         (100)               (100)   
  Net loss                                      (4,067,828)            -              -              -           (4,067,828)   
                                              ------------         --------         ------        -----         -----------    
BALANCE, July 31, 1993                          (4,731,592)            -            10,000         (100)          7,224,900    
  Issuance of common stock and warrants,                                                                                       
    net of issuance costs of $296,017                 -                -              -              -            4,878,983    
  Repurchase of common stock                          -                -             1,875           (2)                 (2)   
  Deferred offering costs                             -             (55,000)          -              -              (55,000)   
  Net change in unrealized                                                                                                     
    losses on marketable securities                   -                -              -              -              (62,883)   
  Net loss                                      (7,286,152)            -              -              -           (7,286,152)   
                                              ------------         --------         ------        -----         -----------    
BALANCE, July 31, 1994                         (12,017,744)         (55,000)        11,875         (102)          4,699,846    
  Issuance of common stock                                                                                                     
    from exercise of stock options                    -                -              -              -               11,250    
  Issuance of Series A convertible                                                                                             
    preferred stock, net of                                                                                                    
    issuance costs of $195,241                        -              55,000           -              -            3,633,936    
  Issuance of common stock, net                                                                                                
    of issuance costs of $150,000                     -                -              -              -            3,850,000    
  Net change in unrealized losses on                                                                                           
    marketable securities                             -                -              -              -               46,606    
  Net loss                                      (7,122,421)            -              -              -           (7,122,421)   
                                              ------------         --------         ------        -----         -----------    
BALANCE, July 31, 1995                         (19,140,165)            -            11,875         (102)          5,119,217    
  Issuance of common stock in                                                                                                  
    initial public offering, net                                                                                               
    of issuance costs of $2,468,940                   -                -              -              -           18,403,560    
  Conversion of Series A convertible                                                                                           
     preferred stock into common stock                -                -              -              -                 -       
  Issuance of common stock from                                                                                                
    exercise of stock options                         -                -              -              -               70,362    
  Net change in unrealized losses                                                                                              
    on marketable securities                          -                -              -              -                3,802    
  Compensation expense related                                                                                                 
    to grant of stock options                         -                -              -              -              122,500    
  Net loss                                      (5,434,516)            -              -              -           (5,434,516)   
                                             ------------         --------        -------        -----         -----------     
BALANCE, July 31, 1996                        $(24,574,681)        $   -            11,875        $(102)        $18,284,925    
                                              ============         ========        =======        =====         ===========    
                                           
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-5

<PAGE>



                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                                                                  
                                                                                     For the Years Ended July 31,                 
                                                                      ----------------------------------------------------------  
                                                                             1994                  1995                  1996    
                                                                             ----                  ----                  ---- 
<S>                                                                      <C>                   <C>                   <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                               $(7,286,152)          $(7,122,421)          $(5,434,516) 
  Adjustments to reconcile net loss to
    net cash used in operating activities:
      Depreciation and amortization                                          530,495               786,628               811,120  
      Compensation expense related to grant of
        stock options                                                           -                     -                  122,500  
      Net realized loss on marketable securities                               7,278                28,956                 9,156  
      Change in assets and liabilities -
        Prepaid expenses                                                      89,312               (14,361)             (294,269) 
        Accounts payable                                                      73,996               (99,483)              (37,604) 
        Accrued expenses                                                     344,639               (15,411)             (175,620) 
        Deferred revenue                                                        -                1,000,000                  -     
                                                                         -----------           -----------           -----------  
                Net cash used in operating activities                     (6,240,432)           (5,436,092)           (4,999,233) 
                                                                         -----------           -----------           -----------  
CASH FLOWS FROM INVESTING ACTIVITIES:
  (Purchases of) proceeds from marketable securities, net                 (2,470,339)            1,795,575            (8,443,001) 
  Purchases of equipment                                                  (1,007,530)             (356,710)             (332,427) 
  Licensed technology costs                                                 (191,000)              (32,500)                 -     
  Patent application costs                                                  (130,309)              (53,746)              (41,714) 
  Organization costs                                                            -                     -                     -     
                                                                         -----------           -----------           -----------  
                Net cash (used in) provided by investing
                  activities                                              (3,799,178)            1,352,619            (8,817,142) 
                                                                         -----------           -----------           -----------  
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from issuance of preferred and
    common stock                                                           4,878,983             7,440,186            18,473,922  
  Deferred offering costs                                                    (55,000)               55,000                  -     
  Advances from stockholder                                                     -                     -                     -     
  Repayments of capital lease obligations                                    (80,995)              (87,034)             (103,447) 
  Borrowings under notes payable                                             917,220                  -                     -     
  Repayments of notes payable                                               (110,049)             (273,528)             (322,333) 
  Security deposits and other assets                                        (561,472)              219,039               180,238  
  Repurchase of common stock                                                      (2)                 -                     -     
                                                                         -----------           -----------           -----------  
                Net cash provided by financing activities                  4,988,685             7,353,663            18,228,380  
                                                                         -----------           -----------           -----------  
NET INCREASE (DECREASE) IN CASH                                           (5,050,925)            3,270,190             4,412,005  

CASH, beginning of period                                                  6,859,947             1,809,022             5,079,212  
                                                                         -----------           -----------           -----------  
CASH, end of period                                                      $ 1,809,022           $ 5,079,212           $ 9,491,217  
                                                                         ===========           ===========           ===========  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for income taxes                                             $    15,838           $     6,554           $      -     
                                                                         ===========           ===========           ===========  
  Cash paid for interest expense                                         $    89,796           $   176,716           $   108,593  
                                                                         ===========           ===========           ===========  
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
  Conversion of advances from stockholder into common
    stock                                                                $      -              $      -              $      -     
                                                                         ===========           ===========           ===========  
  Equipment acquired pursuant to capital lease obligations               $    29,330           $      -              $      -     
                                                                         ===========           ===========           ===========  

<CAPTION>


                                                                               For the Period     
                                                                               From Inception    
                                                                              (January 28, 1992) 
                                                                             Through July 31, 1996
                                                                             ---------------------
<S>                                                                                <C>           
CASH FLOWS FROM OPERATING ACTIVITIES:                                                            
  Net loss                                                                         $(24,574,681) 
  Adjustments to reconcile net loss to                                                           
    net cash used in operating activities:                                                       
      Depreciation and amortization                                                   2,397,576  
      Compensation expense related to grant of                                                   
        stock options                                                                   122,500  
      Net realized loss on marketable securities                                         45,390  
      Change in assets and liabilities -                                                         
        Prepaid expenses                                                               (466,731) 
        Accounts payable                                                                280,913  
        Accrued expenses                                                                400,577  
        Deferred revenue                                                              1,000,000  
                                                                                   ------------  
                Net cash used in operating activities                               (20,794,456) 
                                                                                   ------------  
CASH FLOWS FROM INVESTING ACTIVITIES:                                                            
  (Purchases of) proceeds from marketable securities, net                            (9,117,765) 
  Purchases of equipment                                                             (2,172,743) 
  Licensed technology costs                                                            (615,989) 
  Patent application costs                                                             (335,804) 
  Organization costs                                                                    (63,530) 
                                                                                   ------------  
                Net cash (used in) provided by investing                                         
                  activities                                                        (12,305,831) 
                                                                                   ------------  
CASH FLOWS FROM FINANCING ACTIVITIES:                                                            
  Net proceeds from issuance of preferred and                                                    
    common stock                                                                     41,549,683  
  Deferred offering costs                                                                  -     
  Advances from stockholder                                                           1,200,000  
  Repayments of capital lease obligations                                              (341,271) 
  Borrowings under notes payable                                                      1,179,135  
  Repayments of notes payable                                                          (728,363) 
  Security deposits and other assets                                                   (267,578) 
  Repurchase of common stock                                                               (102) 
                                                                                   ------------  
                Net cash provided by financing activities                            42,591,504  
                                                                                   ------------  
NET INCREASE (DECREASE) IN CASH                                                       9,491,217  
                                                                                                 
CASH, beginning of period                                                                  -     
                                                                                   ------------  
CASH, end of period                                                                $  9,491,217  
                                                                                   ============  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                
  Cash paid for income taxes                                                       $     30,684  
                                                                                   ============  
  Cash paid for interest expense                                                   $    405,965  
                                                                                   ============  
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:                                         
  Conversion of advances from stockholder into common                                            
    stock                                                                          $  1,200,000  
                                                                                   ============  
  Equipment acquired pursuant to capital lease obligations                         $    378,064  
                                                                                   ============  

</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                     F-6

<PAGE>

                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

1.     Organization and Operations:
       ----------------------------
       Alexion Pharmaceuticals, Inc. (the "Company") was organized in January
       1992 and is engaged in the research and development of proprietary
       immunoregulatory compounds for the treatment of cardiovascular disorders
       (perioperative bleeding associated with cardiopulmonary bypass,
       myocardial infarction, and stroke) and autoimmune diseases (lupus
       nephritis, rheumatoid arthritis, and multiple sclerosis). As an outgrowth
       of its core technologies, the Company is developing, in collaboration
       with a third party (see Note 10), non-human organ ("xenograft" organs)
       products designed for transplantation into humans without clinical
       rejection.

       The Company is in the development stage and is devoting substantially all
       of its efforts toward product research and development. The Company has
       incurred losses since inception and has cumulative net losses of $24.6
       million through July 31, 1996. The Company has made no product sales to
       date and has recognized cumulative revenue from research grants and
       funding of $2.8 million through July 31, 1996. During 1996, the Company
       completed an initial public offering (IPO) of 2,530,000 shares, of common
       stock resulting in net proceeds of approximately $18.4 million (see Note
       12). In addition, the Company has received various grants to fund certain
       research activities (see Note 10).

       The Company will need additional financing to obtain regulatory
       approvals, fund early operating losses, and, if deemed appropriate,
       establish a manufacturing, sales and marketing capability. In addition to
       the normal risks associated with development stage companies, there can
       be no assurance that the Company's research and development will be
       successfully completed, that adequate patent protection for the Company's
       technology will be obtained, that any products developed will obtain
       necessary government regulatory approval or that any approved products
       will be commercially viable. In addition, the Company operates in an
       environment of rapid change in technology, substantial competition from
       pharmaceutical and biotechnology companies and is dependent upon the
       services of its employees and its consultants.

       The Company expects to incur substantial expenditures in the foreseeable
       future for the research and development and commercialization of its
       products. The Company's management believes that, based upon its current
       business plans, the cash and marketable securities aggregating $18.6
       million as of July 31, 1996 will be sufficient to fund operations of the
       Company through at least calendar 1997.


                                      F-7

<PAGE>


       The Company will require funds in addition to those previously described,
       which it will seek to raise through public or private equity or debt
       financings, collaborative or other arrangements with corporate sources,
       or through other sources of financing. The Company has no banking or
       other capital sources and no arrangements or commitments with regard to
       obtaining any further funds.

2.     Summary of Significant Accounting Policies:
       -------------------------------------------
       Cash and cash equivalents -

       Cash and cash equivalents are stated at cost, which approximates market,
       and include short-term highly liquid investments with original maturities
       of less than three months.

       Marketable securities -

       The Company invests in marketable securities of highly rated financial
       institutions and investment-grade debt instruments and limits the amount
       of credit exposure with any one entity.

       The Company follows Statement of Financial Accounting Standards (SFAS)
       No. 115, "Accounting for Certain Investments in Debt and Equity
       Securities." Pursuant to this Statement, the Company has classified its
       marketable securities as "available for sale" and, accordingly, carries
       such securities at aggregate fair value. Unrealized gains or losses are
       included in stockholders' equity as a component of additional paid-in
       capital. At July 31, 1996, the Company's marketable securities had a
       maximum maturity of approximately one year and consisted of U.S.
       government obligations, municipal obligations, and corporate bonds.
       Unrealized losses on the Company's marketable securities aggregated
       approximately $16,000 and $12,000 at July 31, 1995 and 1996,
       respectively.

       The following is a summary of marketable securities at July 31, 1995 and
       1996:

                                        Amortized      Unrealized       Fair
                                          Cost           Losses         Value
                                        ---------      ---------      ---------
U.S. government obligations             $ 450,171      $ (7,893)      $ 442,278
Municipal obligations                      80,000        (1,873)         78,127
Corporate bonds                           108,359        (6,511)        101,848
                                        ---------      --------       ---------
       Total marketable
         securities at
         July 31, 1995                  $ 638,530      $(16,277)      $ 622,253
                                        =========      ========       =========


                                      F-8

<PAGE>

                                        Amortized      Unrealized       Fair
                                          Cost           Losses        Value
                                       ----------      ----------    ----------
U.S. government obligations            $5,268,177      $   (481)     $5,267,696
Municipal obligations                      80,000          (390)         79,610
Corporate bonds                         3,770,832       (11,604)      3,759,228
                                       ----------      --------      ----------
       Total marketable
         securities at
         July 31, 1996                 $9,119,009      $(12,475)     $9,106,534
                                       ==========      ========      ==========

       Equipment -

       Equipment is recorded at cost and is depreciated over estimated useful
       lives of the assets involved. Depreciation commences at the time the
       assets are placed in service and is computed using the straight-line
       method over the useful lives of the equipment of three to four years.
       Maintenance and repairs are charged to expense when incurred.

       Equipment under capital leases is depreciated over the lesser of the
       lease term or the estimated useful life.

       Licensed technology rights -

       Licensed technology rights are amortized over the shorter of the license
       term or seven years, using the straight-line method. The Company reviews
       licensed technology rights on a periodic basis and capitalized costs
       which provide no future benefit are expensed. Accumulated amortization as
       of July 31, 1995 and 1996 amounted to $197,626 and $285,624, respectively
       (see Note 9).

       Patent application costs -

       Costs incurred in filing for patents are capitalized. Capitalized costs
       related to unsuccessful patent applications are expensed when it becomes
       determinable that such applications will not be successful. Capitalized
       costs related to successful patent applications are amortized over a
       seven year period or the remaining life of the patent, whichever is
       shorter, using the straight-line method. Accumulated amortization as of
       July 31, 1995 and 1996 amounted to $95,845 and $141,801, respectively.

       Organization costs -

       Costs incurred in connection with the organization of the Company are
       amortized over a five year period using the straight-line method.
       Accumulated amortization as of July 31, 1995 and 1996 amounted to $45,544
       and $58,250, respectively.


                                      F-9

<PAGE>


       Revenue recognition -

       Contract research revenues are recognized as the related work is
       performed under the terms of the contracts and expenses for development
       activities are incurred. Any revenue contingent upon future funding by
       the Company is deferred and recognized as the future funding is expended.
       Any revenues resulting from the achievement of milestones would be
       recognized when the milestone is achieved.

       Research and development expenses -

       Research and development costs are expensed in the period incurred.

       Reverse stock split -

       In December 1995, the Company effected a two and one-half-for-one reverse
       stock split of its common stock and decreased the authorized number of
       common stock and preferred stock shares. In addition, the Board
       authorized a decrease in the number of authorized shares of common stock
       from 60,000,000 to 25,000,000 shares and preferred stock from 20,000,000
       to 5,000,000 shares, respectively. The accompanying financial statements
       have been restated to reflect this reverse stock split and change in
       authorized shares.

       Use of estimates in the preparation of financial statements -

       The preparation of financial statements in conformity with generally
       accepted accounting principles 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.

       Effect of recent accounting pronouncement -

       In March 1995, the Financial Accounting Standards Board (FASB) issued
       Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
       for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
       Disposed of," which established criteria for the recognition and
       measurement of impairment loss associated with long-lived assets. The
       Company will be required to adopt this standard in fiscal 1997. Based on
       the Company's initial evaluation, adoption is not expected to have a
       material impact on the Company's financial position or results of
       operations.


                                      F-10

<PAGE>


       The Company plans to adopt SFAS No. 123, "Accounting for Stock-Based
       Compensation" in fiscal 1997. SFAS No. 123 was issued by the Financial
       Accounting Standards Board in October 1995 and allows companies to choose
       whether to account for stock-based compensation on a fair value method or
       to continue to account for stock-based compensation under the current
       intrinsic value method as prescribed by APB Opinion No. 25, "Accounting
       for Stock Issued to Employees." Entities electing to remain with the
       accounting in APB Opinion No. 25 must make proforma disclosures of net
       income, as if the fair value based method of accounting defined in the
       statement had been applied. The Company plans to continue to follow the
       provisions of APB Opinion No. 25. Management of the Company believes that
       the impact of adoption will not have a significant effect on the
       Company's financial position or results of operations.

       Net loss per common share -

       Net loss per common share is computed using the weighted average number
       of common shares outstanding during the period. Common equivalent shares
       from stock options and warrants are excluded from the computation as
       their effect is antidulitive, except pursuant to the requirements of the
       SEC. Pursuant to these requirements, common stock issued by the Company
       during the 12 months immediately preceding the initial public offering,
       plus shares of common stock which became issuable during the same period
       pursuant to the grant of common stock options and warrants, have been
       included in the calculation of weighted average number of common shares
       outstanding for the period from August 1, 1993 to April 30, 1996 using
       the treasury stock method. The inclusion of additional shares assuming
       the conversion of Series A convertible preferred stock into common stock
       would have been antidilutive for all periods presented and, accordingly,
       has been excluded from the computation of net loss per common share.

3.     Equipment:
       ----------
       A summary of equipment as of July 31, 1995 and 1996 is as follows:

                                                            July 31,
                                                   -----------------------------
                                                     1995                1996
                                                   ----------         ----------
       Laboratory equipment                        $1,732,840         $2,038,304
       Office equipment                                91,367            112,351
       Furniture                                       16,109             22,088
       Equipment under capital leases                 378,064            378,064
                                                   ----------         ----------
                                                    2,218,380          2,550,807
       Less - Accumulated depreciation
         and amortization                           1,247,442          1,958,536
                                                   ----------         ----------
                                                   $  970,938         $  592,271
                                                   ==========         ==========


                                      F-11

<PAGE>


4.     Security Deposits and Other Assets:
       -----------------------------------
       A summary of security deposits and other assets as of July 31, 1995 and
       1996, is as follows:

                                                             July 31,
                                                    ----------------------------
                                                      1995                1996
                                                     --------           --------
       Amounts held in deposit as
         collateral for notes payable
         (see Note 7)                                $379,932           $183,444
       Other                                           67,884             84,134
                                                     --------           --------
                                                     $447,816           $267,578
                                                     ========           ========

5.     Accrued Expenses:
       -----------------
       A summary of accrued expenses as of July 31, 1995 and 1996, is as
       follows:

                                                             July 31,
                                                    ----------------------------
                                                      1995                1996
                                                     --------           --------

       Professional fees                             $320,914           $225,990
       Research and development
         agreements                                   106,914             86,369
       Other                                          148,369             88,218
                                                     --------           --------
                                                     $576,197           $400,577
                                                     ========           ========


6.     Deferred Revenue:
       -----------------
       Deferred revenue results from cash received in advance of revenue
       recognition under research and development contracts (see Notes 1 and
       10).

7.     Notes Payable:
       --------------
       Notes payable consist of borrowings under a lease financing arrangement
       with a financing company for the purchase of certain laboratory
       equipment. Borrowings against this line of credit are secured by the
       laboratory equipment and related security deposits (cash collateral equal
       to 30%-40% of equipment cost) (see Note 4). The Company has no additional
       borrowing capacity under these agreements as of July 31, 1996. Upon
       certain conditions, the amounts


                                      F-12

<PAGE>


       held as security deposits can be reduced and the funds released to the
       Company. After completion of the Company's IPO, security deposits
       aggregating $180,238, were returned to the Company, including earned
       interest. Under the terms of the financing, the Company is required to
       make monthly payments of principal and interest through fiscal 1998,
       based upon an average interest rate of approximately 15% per annum.

       Payments of principal (as of July 31, 1996) for the next two fiscal years
       are as follows:

       Year Ending July 31,
       --------------------

              1997                                           $322,508
              1998                                            128,264
                                                             --------
                                                             $450,772
                                                             ========

8.     Obligations Under Capital Leases:
       ---------------------------------
       Obligations under capital leases principally represent leases of
       laboratory equipment. Under the terms of the leases the Company is
       required to make monthly payments of principal and interest through
       fiscal 1999, at interest rates ranging from approximately 10%-12% per
       annum.

       The future annual minimum required payments as of July 31, 1996 are as
       follows:

       Year Ending
         July 31,
       -----------

            1997                                              $30,778
            1998                                                8,359
            1999                                                  135
                                                              -------
                Total minimum lease payments                   39,272
                Less - Amounts representing interest            2,479
                                                              -------
                Present value of net minimum                  
                  lease payments                               36,793
                Less - Current portion                         28,593
                                                              -------
                                                              $ 8,200
                                                              =======
                                                              
                                                             
                                      F-13

<PAGE>


9.     License and Research & Development Agreements:
       ----------------------------------------------
       The Company has entered into a number of license and research &
       development agreements since its inception. These agreements have been
       made with various research institutions, universities, and government
       agencies in order to advance and obtain technologies management believes
       important to the Company's overall business strategy.

       License agreements generally call for an initial fee followed by annual
       minimum royalty payments. Additionally, certain agreements call for
       future payments upon the attainment of agreed to milestones, such as, but
       not limited to, Investigational New Drug (IND) application or Product
       License Approval (PLA). These agreements require minimum royalty payments
       based upon sales developed from the applicable technologies, if any. The
       Company's policy is to amortize capitalized licensed technology over a
       seven year period or under the license term, whichever is shorter, using
       the straight-line method.

       Research & development agreements generally call for the Company to fund
       future project research for one to four years. Based upon these
       agreements, the Company may obtain exclusive and non-exclusive rights and
       options to the applicable technologies developed as a result of the
       applicable research. The Company's policy is to expense research and
       development payments as incurred.

       The minimum payments (assuming non-termination of the above agreements)
       as of July 31, 1996, for each of the next four years are as follows:

                  Year                                               Research &
                 Ending                    License                  Development
                July 31,                 Agreements                 Agreements
                -------                  ----------                 ----------
                  1997                    $ 77,500                   $375,000
                  1998                     177,500                     50,000
                  1999                     177,500                     50,000
                  2000                     177,500                     50,000

       Should the Company achieve certain milestones related to product
       development and product license applications and approvals, additional
       payments would be required if the Company elects to continue and maintain
       its licenses. The agreements also require the Company to fund certain
       costs associated with the filing of patent applications.


                                      F-14

<PAGE>


10.    Contract Research Revenues:
       ---------------------------
       Contract research revenues recorded by the Company during the year ended
       July 31, 1995 consist of Small Business Innovation Research ("SBIR")
       grants from the National Institutes of Health ("NIH") and research and
       development support under a collaboration with a third party.

       In July 1995, the Company entered into a research and development
       agreement with a third party. This third party agreed to fund
       pre-clinical development of the Company's xenotransplant products in
       return for exclusive worldwide manufacturing, marketing and distribution
       rights of such products by paying the Company up to $7.5 million
       allocated as follows: (1) up to $4.0 million of the cost of pre-clinical
       development in four semi-annual installments of up to $1.0 million (the
       first installment of which was paid on July 31, 1995), and (2) $3.5
       million upon achieving certain milestones. In furtherance of this joint
       collaboration, the third party also purchased $4.0 million of the
       Company's common stock (see Note 12). No revenue was recognized related
       to this agreement as of July 31, 1995. For the year ended July 31, 1996,
       the Company recognized $1.98 million of revenue related to this
       agreement. During fiscal 1996 the third party purchased an additional
       $1.8 million of common stock offered in the Company's IPO.

       In July 1995, the Company was awarded a $100,000 Phase I SBIR grant from
       the NIH. The award was made in support of the research and development of
       the Company's gene transfer technology. For the year ended July 31, 1996,
       the Company recognized $100,000 of revenue related to this agreement.

       In August 1995, the Company was awarded funding from the Commerce
       Department's National Institute of Standards and Technology under its
       Advanced Technology Program ("ATP"). Through the ATP, the Company may
       receive up to approximately $2 million over three years to support the
       Company's UniGraft(TM) program in universal donor organs for
       transplantation. For the year ended July 31, 1996, the Company recognized
       $246,000 of revenue related to this agreement.

       In September 1995, the Company was awarded a Phase II SBIR grant for
       approximately $750,000 over two years from the NIH to support the
       research and clinical development of the Company's product to treat
       complications of cardiovascular surgery. For the year ended July 31,
       1996, the Company recognized $315,000 of revenue related to this
       agreement.


                                      F-15

<PAGE>


11.    Commitments:
       ------------
       The Company has entered into five-year employment agreements with five
       executives. These agreements provide that these individuals will receive
       aggregate annual base salaries of approximately $710,000 as of July 31,
       1996. These individuals may also receive discretionary bonus awards, as
       determined by the Board of Directors.

       As of July 31, 1996, the Company leases its administrative and research
       and development facilities under three operating leases expiring in June
       1998, December 1997, and March 1999 respectively, each with an option for
       up to an additional three years.

       Future minimum annual rental payments as of July 31, 1996, under these
       leases and other noncancellable operating leases (primarily for
       equipment) are as follows:

                    Year ending
                     July 31,
                    ------------

                       1997                                $365,372
                       1998                                 297,883
                       1999                                  33,333
                                                           --------
                                                           $696,588
                                                           ========


12.    Common Stock and Series A Preferred Stock:
       ------------------------------------------
       Fiscal 1993 Bridge Financing and Private Placements -

       In December 1992, the Company obtained approximately $5.2 million of
       equity financing (the "Bridge Financing") through the issuance of common
       stock and warrants to purchase shares of common stock and the conversion
       of advances from a stockholder. The Company sold Bridge Units (consisting
       of 531,424 shares of common stock and warrants to purchase shares of
       common stock - see Note 13) for gross proceeds of approximately $4.0
       million. In connection with the sale of the Bridge Units by the Company,
       $1.2 million of advances from a stockholder were converted into Bridge
       Units consisting of 160,000 shares of common stock and warrants to
       purchase shares of common stock.

       In June 1993, the Company raised $8 million in a private placement
       through the issuance of Placement Units consisting of an aggregate of
       999,975 shares of common stock and warrants to purchase shares of common
       stock (see Note 13).


                                      F-16

<PAGE>


       Fiscal 1994 Private Placements -

       In October and December 1993, the Company raised $5.2 million in a
       private placement through the sale of Placement Units consisting of an
       aggregate of 646,872 shares of common stock and warrants to purchase
       shares of common stock.

       Fiscal 1995 Private Placements -

       From December 1994 to March 1995, the Company raised approximately $3.8
       million through the sale of 1,986,409 shares of Series A convertible
       preferred stock. Each share of Series A preferred stock had equal voting
       rights with the Company's common stock.

       On July 31, 1995, the Company received gross proceeds of $4.0 million
       through the sale of 457,142 shares of common stock to a corporate partner
       (see Notes 1 and 10). The Company granted exclusive worldwide rights to
       market its xenotransplantation products to this shareholder in an
       exchange for a commitment by this shareholder to contribute to subsequent
       research and development and to pay royalties on any future product
       sales.

       Fiscal 1996 Initial Public Offering -

       During fiscal 1996, the Company completed an IPO of 2,530,000 shares of
       common stock at a price of $8.25 per share of common stock, resulting in
       net proceeds of approximately $18.4 million. In connection with the
       Company's IPO the preferred stockholders converted all of their shares
       into 794,554 shares of common stock.

13.    Stock Options and Warrants:
       ---------------------------
       Stock Options -

       Under the Company's 1992 Stock Option Plan and 1992 Stock Option Plan for
       Directors (the Plans), incentive and nonqualified stock options may be
       granted for up to a maximum of 480,000 shares of common stock to
       directors, officers, key employees and consultants of the Company at no
       less than fair market value on the date of grant. Fair market value is
       determined by the Board of Directors based on an examination of
       comparable companies, consultation with financial advisors and
       consultation with certain large investors in the Company. In March 1995,
       the Plans were amended by shareholders' majority consent to increase the
       number of shares covered by the Plans to 1,320,000. Options generally
       become exercisable in equal proportions over three to four years and
       remain exercisable for up to ten years after the grant date, subject to
       certain conditions.


                                      F-17

<PAGE>


       A summary of stock option activity is as follows:

                                              Number                 Price
                                             of Shares              per Share
                                             ----------         ----------------
       Outstanding at January 28, 1992             -                    -
         Granted                                 80,000               $7.50
                                             ----------        -----------------
       Outstanding at July 31, 1992              80,000               $7.50
         Granted                                176,795               $7.50
         Cancelled                              (10,000)              $7.50
                                             ----------         ---------------
       Outstanding at July 31, 1993             246,795               $7.50
         Granted                                220,074         $8.00  - $ 8.25
         Cancelled                              (18,200)        $7.50  - $ 8.00
                                             ----------         ---------------
       Outstanding at July 31, 1994             448,669         $7.50  - $ 8.25
         Cancelled                             (276,129)        $2.375 - $ 8.25
         Granted/reissued                       671,284               $2.375
         Exercised                               (1,500)              $7.50
                                             ----------         ---------------
       Outstanding at July 31, 1995             842,324         $2.375 - $ 8.00
         Granted                                405,800         $2.50  - $10.00
         Cancelled                              (27,348)        $2.375 - $ 8.00
         Exercised                              (13,442)        $2.375 - $ 7.50
                                             ----------         ---------------
       Outstanding at July 31, 1996           1,207,334         $2.375 - $10.00
                                             ==========         ===============

       Exercisable at July 31, 1996             363,492         $2.375 - $ 8.00
                                             ==========         ===============

       In December 1994, the Company offered certain holders of outstanding
       stock options the opportunity to tender these options in exchange for
       stock options at an exercise price of $2.375 per share which represented
       the then current fair market value at such date, as determined by the
       Board of Directors. As such, these outstanding stock options were
       cancelled and reissued at an exercise price of $2.375 per share.

       The Company recorded compensation expense of $122,500 on certain
       nonqualified stock options which were granted during fiscal 1996 and
       immediately vested. This charge was based on the difference between the
       fair value of the Company's common stock on the date of grant and the
       option exercise price.


                                      F-18

<PAGE>


       Warrants -

       In connection with private placements in fiscal 1993 and 1994, the
       Company had issued warrants to purchase 1,295,363 shares of common stock
       at an exercise price of $15.00 per share ($12.50 in the case of the
       placement agent, comprising 131,249 shares of common stock). In February
       1995, the Company offered warrantholders the opportunity to exchange
       existing warrants for new warrants that could purchase fewer shares at a
       reduced exercise price. Warrantholders were entitled to receive new
       warrants representing the right to purchase one-half the number of shares
       of common stock that the warrantholder was entitled to originally
       purchase at a reduced exercise price of $7.50. In connection with this
       offer, warrantholders with existing warrants to purchase 1,101,028 shares
       of common stock at $15.00 and $12.50 per share exchanged these warrants
       for new warrants to purchase 550,501 shares of common stock at $7.50 per
       share. The remaining original warrants continue to entitle the
       warrantholders to purchase 194,334 shares of common stock at $12.50 to
       $15.00 per share. As of July 31, 1996, no warrants have been exercised.

       All warrants may be redeemed by the Company for $.05 per common share
       following an initial public offering when a share of the Company's common
       stock equals or exceeds 200% of the exercise price. The warrants expire
       on December 4, 1997. No value has been assigned to the warrants in the
       accompanying balance sheets.

       In connection with the Company's public offering, the Company sold to its
       underwriter for nominal consideration, warrants to purchase 220,000
       shares of common stock. These warrants are initially exercisable at a
       price of $9.90 per share for a period of forty-two (42) months commencing
       on August 27, 1997.

14.    401(k) Plan:
       ------------
       The Company has a 401(k) plan. Under the plan, employees may contribute
       up to 12 percent of their compensation with a maximum of $9,500 per
       employee in calendar year 1996. Effective May 1996 Company matching
       contributions of $.25 for each dollar deferred (up to the first 6%
       deferred) have been authorized by the Board of Directors. The Company had
       matching contributions of approximately $6,000 for the year ended July
       31, 1996.

15.    Federal Income Taxes:
       ---------------------
       At July 31, 1996, the Company has available for tax reporting purposes,
       net operating loss carryforwards of approximately $23,000,000 which
       expire commencing in fiscal 2008. The Company also has research and
       development credit carryovers of approximately $1,190,000 which expire
       commencing in fiscal 2008.


                                      F-19

<PAGE>


       The Company follows SFAS No. 109, "Accounting for Income Taxes". This
       statement requires that deferred income tax assets and liabilities
       reflect the impact of "temporary differences" between the amount of
       assets and liabilities for financial reporting purposes and such amounts
       as measured by tax laws and regulations.

       The components of deferred income taxes as of July 31, 1996 are as
       follows:

       Deferred tax assets:
         Net operating loss carryforwards                          $ 10,400,000
         Tax credit carryforwards                                     1,190,000
         Other                                                          160,000
                                                                   ------------
       Total deferred tax assets                                     11,750,000
       Valuation allowance for deferred tax assets                  (11,750,000)
                                                                   ------------
       Net deferred tax assets                                     $       -
                                                                   ============

       The Company has not yet achieved profitable operations. Accordingly,
       management believes the tax benefits as of July 31, 1996 do not satisfy
       the realization criteria set forth in SFAS No. 109 and has recorded a
       valuation allowance for the entire deferred tax asset.


                                      F-20






[Confidential treatment has been requested for portions of this Exhibit. The
confidential portions have been redacted and are denoted [***]. The confidential
portions have been separately filed with the Commission.]

                         NON-EXCLUSIVE LICENSE AGREEMENT

     THIS AGREEMENT, effective as of May 8, 1996, is between Enzon, Inc. a
corporation of the State of Delaware (ENZON) having its principal place of
business at 20 Kingsbridge Road, Piscataway, New Jersey 08854-3969 and Alexion
Pharmaceuticals, Inc., a corporation of the State of Delaware (LICENSEE) having
its principal place of business at 25 Science Park, Suite 360, New Haven,
Connecticut 06511.

                                    RECITALS

     ENZON has conceived and reduced to practice certain inventions relating to
single-chain antigen binding molecules (as hereinafter further defined under SCA
DISCOVERIES);

     LICENSEE has an interest in the non-exclusive development of said SCA
DISCOVERIES into commercially useful products and processes in the field of
complement protein C5-binding proteins (as hereinafter further defined under
FIELD);

     ENZON has certain PATENT RIGHTS and RESEARCH INFORMATION pertaining to the
SCA DISCOVERIES; ENZON is interested in licensing said PATENT RIGHTS and
RESEARCH INFORMATION
 associated with SCA DISCOVERIES;

     LICENSEE is interested in becoming a non-exclusive licensee and desires to
develop, manufacture, use, and sell products and processes in the FIELD related
to said SCA DISCOVERIES throughout the world; and

     Both ENZON and LICENSEE recognize the possibility that said PATENT RIGHTS
may or may not cover products or processes to be commercialized;

     NOW, THEREFORE, in consideration of the premises and of the performance of
the covenants herein contained, the parties agree as follows:

1.   DEFINITIONS

     1.1 The term "AFFILIATE" shall mean:

         1.1.1    Any corporation owning or controlling, directly or indirectly,
                  at least fifty-one percent (51%) of the stock normally
                  entitled to vote for election of directors of a party and



<PAGE>


         1.1.2    Any corporation at least fifty-one percent (51%) of whose
                  stock normally entitled to vote for election of directors is
                  owned or controlled, directly or indirectly, by a party and

         1.1.3    Any other business entity at least fifty-one percent (51%) of
                  the equity interest of which is owned or controlled, directly
                  or indirectly, by a party.

     1.2 The term "EFFECTIVE DATE" shall mean the date first written above.

     1.3 The term "FIELD" shall mean and be limited solely to [***].

     1.4 The term "FIRST COMMERCIAL SALE" shall mean the first sale of any
PRODUCT by LICENSEE or its AFFILIATES.

     1.5 The term "NET SALES" shall mean the gross sales for any quantity of
PRODUCT subject to royalty under this Agreement that is sold by LICENSEE or its
AFFILIATES or sublicensee to any third party, less discounts and allowances
actually given to customers and commissions paid to distributors and other sales
agencies not employees of LICENSEE or its AFFILIATES or sublicensee, that are
included in its gross sales. Except as set forth above, no deduction from the
gross sales shall be made for any item of cost incurred by the seller in its own
operations incident to the research and development, manufacture, sale, or
shipment of the PRODUCT sold. PRODUCT shall be considered sold when billed out
or invoiced.

     1.6 The term "PATENT RIGHTS" shall mean any United States or foreign patent
applications or patents owned by ENZON or its AFFILIATES during the term of this
Agreement, or licensed or sublicensed to ENZON during the term of this Agreement
which ENZON is entitled to license or sublicense on a royalty-free bases to
others, containing one or more claims to SCA DISCOVERIES, any
continuation-in-part, division, or continuation application thereof, any patent
or the equivalent thereof granted thereon, and any reissue, reexamination, or
extension of any of these patent(s). Existing PATENT RIGHTS are listed in
Appendix I which shall be modified by ENZON from time-to-time so that it
accurately reflects those patent applications and patents owned by ENZON or its
AFFILIATES existing during the term of this Agreement relevant to the FIELD.

     1.7 The term "PRODUCT(S)" shall mean an SCA PROTEIN or product
incorporating an SCA PROTEIN whose manufacture, composition, use or sale is
covered in whole or in part by PATENT RIGHTS or utilizes or incorporates
RESEARCH INFORMATION.


                                      -2-

<PAGE>


     1.8 The term "RESEARCH INFORMATION" shall mean only the specific items of
technical know-how or information relating to SCA DISCOVERIES that are owned by
ENZON or its AFFILIATES or in ENZON's or its AFFILIATES' possession on the
EFFECTIVE DATE and are expressly listed in attached Appendix II.

     1.9 The term "SCA DISCOVERIES" shall mean any technology related to the
creation, development, manufacture or use of SCA PROTEIN; PROVIDED, HOWEVER,
that SCA DISCOVERIES shall not include any specific SCA PROTEIN, or any specific
variable region genetic sequence or specific transformed host coding for or
containing such variable region genetic sequence.

     1.10 The term "SCA PROTEIN" shall mean [***].

2    PATENT RIGHT(S)

     2.1 Costs. All future patent costs pertaining to PATENT RIGHT(S) whether or
not such PATENT RIGHT(S) are pending on the EFFECTIVE DATE, including
preparation, filing, and prosecution of patent applications, issuance, taxation,
and maintenance costs, shall be borne by ENZON.

     2.2 Control. All control over PATENT RIGHT(S) will be in ENZON, and all
PATENT RIGHT(S) will be filed and prosecuted by ENZON's attorneys.

3    LICENSE GRANTS TO LICENSEE

     3.1 Non-Exclusive License. As of the EFFECTIVE DATE of this Agreement,
ENZON hereby grants to LICENSEE and its AFFILIATES a non-exclusive, worldwide
license in the FIELD under PATENT RIGHT(S) to make, use, and sell PRODUCTS. The
license includes the right to grant to the purchasers of PRODUCTS from LICENSEE
the right to use such PRODUCTS in the FIELD.

     3.2 Ancillary License. As of the EFFECTIVE DATE of this Agreement and
ancillary to the grants under PATENT RIGHT(S) under Section 3.1, ENZON hereby
grants to LICENSEE and its AFFILIATES a non-exclusive right to use RESEARCH
INFORMATION in the FIELD.


                                      -3-

<PAGE>


     3.3 Sublicense. LICENSEE shall have the right to grant and authorize one
(1) sublicense under the PATENT RIGHT(S) and RESEARCH INFORMATION to make, use,
and sell PRODUCTS in the FIELD, but no such grant or authorization shall permit
further licensing by the sublicensee. Such sublicense shall have no terms that
are inconsistent with this Agreement. LICENSEE shall report to ENZON the
identity of the sublicensee within fifteen (15) days after execution of such
sublicense.

4    PAYMENT BY LICENSEE

     4.1 License Fee. On the EFFECTIVE DATE of this Agreement, LICENSEE shall
pay ENZON a license fee in the sum of [***].

     4.2 Milestone Payments. For each therapeutic PRODUCT, LICENSEE shall pay
ENZON the following sums at the indicated Milestones:

     4.2.1 [***] at the time of filing of the first request for permission to
initiate a clinical trial of said PRODUCT;

     4.2.2 [***] at the time of filing of the first request for permission to
market said PRODUCT;

     4.2.3 [***] one year after the time of filing of the first request for
permission to market said PRODUCT;

     4.2.4 [***] at the time of the first approval to market said PRODUCT;

     4.2.5 [***] one year after the time of the first approval to market said
PRODUCT.

     4.2.6 In the event that a Milestone is reached before the EFFECTIVE DATE,
LICENSEE shall pay ENZON the sum indicated above for such Milestone on the
EFFECTIVE DATE of this Agreement.

     4.3 Royalties. LICENSEE shall pay to ENZON [***] royalty on NET SALES for
each PRODUCT sold by LICENSEE or its AFFILIATES or sublicensee and covered by
PATENT RIGHT(S). If LICENSEE must pay royalties to a third party on NET SALES of
PRODUCT in a country due to an issued patent of any third party, then the
royalty payable by LICENSEE to ENZON on NET SALES in such country shall be
reduced by the amount of the royalty payable by LICENSEE to such third party,
provided that the royalty rate payable by LICENSEE to ENZON shall not be reduced
below [***] of NET SALES.


                                      -4-

<PAGE>


     4.4 RESEARCH INFORMATION Royalties. In consideration of the right granted
LICENSEE in Section 3.2 above to use RESEARCH INFORMATION in the FIELD, LICENSEE
shall pay ENZON a [***] royalty on NET SALES of PRODUCTS not covered by PATENT
RIGHT(S) but made, used or sold using RESEARCH INFORMATION. LICENSEE's
obligation to pay royalties on such NET SALES shall terminate on the twelfth
anniversary of the FIRST COMMERCIAL SALE. No royalty shall accrue or be paid
under this Section 4.4 on the manufacture, sale, or use of any PRODUCT on which
a royalty is due and payable pursuant to Section 4.3.

     4.5 Currency Conversion. Royalties and license fees due on sales made in
currency other than United States dollars shall first be calculated in the
foreign currency and then converted to United States dollars on the basis of the
closing buying rates quoted by the Wall Street Journal for the last business day
of the period for which royalties are due.

     4.6 Currency Restrictions. If restrictions on the transfer of currency
exist in any country such as to prevent LICENSEE from making payments to ENZON
in the United States, LICENSEE shall take all reasonable steps to obtain a
waiver of such restrictions or otherwise to enable LICENSEE to make such
payments, failing which LICENSEE shall make the royalty payments due upon sales
in such country in local currency and deposit such payments in a local bank or
other depository designated by ENZON.

5    ACCOUNTING

     5.1 Reports. LICENSEE shall report in writing to ENZON within thirty (30)
days after the end of each calendar quarter the quantities of PRODUCT subject to
license fees or royalties hereunder that were sold by LICENSEE and its
AFFILIATES and sublicensees during said quarter, and the calculation of the fees
and royalties thereon. With said report LICENSEE shall pay to ENZON the total
amount of said fees and royalties. If no PRODUCT subject to license fees or
royalties hereunder has been sold by LICENSEE or its AFFILIATES or sublicensee
during any given quarter, LICENSEE shall so report in writing to ENZON within
thirty (30) days after the end of such quarter. Reports, notices, license fee
and royalty payments, and other communications hereunder shall be sent to the
appropriate party at the following addresses:

For LICENSEE:
               David W. Keiser
               Executive Vice President and Chief Operating Officer
               Alexion Pharmaceuticals, inc.
               25 Science Park, Suite 360
               New Haven, CT 06511


                                      -5-

<PAGE>


For ENZON:
               John A. Caruso, Esq.
               Vice President Business Development and General Counsel
               ENZON, Inc.
               20 Kingsbridge Road
               Piscataway, NJ 08854-3969

     5.2 Records. LICENSEE shall keep, and require each AFFILIATE and
sublicensee to keep, adequate records in sufficient detail to enable the license
fees and royalties payable by LICENSEE hereunder to be determined, and permit,
and require each AFFILIATE and sublicensee to permit, said records to be
inspected at any time during regular business hours by an independent auditor
appointed by ENZON for this purpose, who shall report to ENZON only the amount
of the fees and royalties payable hereunder.

6    OPTIONS TO LICENSEE

     6.1 Option to Develop SCA PROTEINS. ENZON hereby grants LICENSEE and its
AFFILIATES the option, at any time during the term of this Agreement, to request
from ENZON in writing that ENZON develop for LICENSEE or its AFFILIATES a
specific SCA PROTEIN. If ENZON, in its sole discretion, accepts the request,
then the parties will negotiate in good faith to determine the terms and
conditions of a Development Agreement.

     6.2 Option to Manufacture SCA PROTEINS. ENZON hereby grants LICENSEE and
its AFFILIATES the option, at any time during the term of this Agreement, to
request from ENZON in writing that ENZON manufacture a specific SCA PROTEIN for
LICENSEE or its AFFILIATES under Good Manufacturing Practices. If ENZON, in its
sole discretion, accepts the request, then the parties will negotiate in good
faith to determine the terms and conditions of a Manufacturing Agreement.

7    INFRINGEMENT

     7.1 No Warranty of Non-Infringement. Nothing in this Agreement shall be
construed as a warranty, assurance, or representation by ENZON or its AFFILIATES
that LICENSEE or its AFFILIATES or sublicensee can make, use, or sell PRODUCT
free of any proprietary rights, including third party patent rights, other than
those specifically granted in this Agreement.

     7.2 Infringement by LICENSEE. If LICENSEE or its AFFILIATE(S) or
sublicensee is sued for infringement by reason of making, using, or selling
PRODUCT, LICENSEE shall notify ENZON in writing of the suit and defend such suit
at LICENSEE's or its AFFILIATE's or sublicensee's own expense. ENZON shall have
the right to provide advice and assistance in any such litigation at 


                                      -6-

<PAGE>


its expense, unless such advice and assistance are requested by LICENSEE or its
AFFILIATE or sublicensee, in which case it shall be at LICENSEE's expense. In
the event ENZON is joined in such litigation, ENZON shall have the right to
defend itself with counsel of its choice at its expense.

     7.3 Infringement by Third Party.

         (a)   LICENSEE shall notify ENZON of any infringement by a third
               party of any PATENT RIGHTS or misappropriation by a third
               party of RESEARCH INFORMATION and shall provide ENZON with the
               available evidence, if any, of such infringement or
               misappropriation.

         (b)   ENZON shall have the exclusive right and sole discretion
               during the term of this Agreement to effect termination of
               such infringement, including bringing suit or other
               proceedings against the infringer in its own name and LICENSEE
               shall be kept informed at all times of all such proceedings
               taken by ENZON. If ENZON requests, LICENSEE may, at LICENSEE's
               discretion, join with ENZON as a party to the lawsuit or other
               proceeding at ENZON's expense; however, ENZON shall retain
               control of the prosecution of such suit or proceedings, as the
               case may be.

         (c)   ENZON shall bear all its costs incurred in connection with
               such lawsuit or other proceeding, and consequently shall be
               entitled to collect and retain for its own account any damages
               or profits as may be accrued as a result of such lawsuit or
               other proceeding.

         (d)   Nothing in this Agreement shall be construed as obligating
               ENZON, or giving LICENSEE the right, to proceed against a
               third party infringer or misappropriator.

8    CONFIDENTIALITY, NON-USE AND PUBLICATIONS

     8.1 ENZON's Rights. Nothing in this Agreement shall be construed to
prohibit or limit in any manner the right of ENZON or its AFFILIATES to disclose
RESEARCH INFORMATION or grant any license for PATENT RIGHTS and/or RESEARCH
INFORMATION to any party. ENZON may issue public announcements or press releases
relating to the existence and/or subject matter of this Agreement and to the
identity of LICENSEE or its AFFILIATES. However, ENZON shall not disclose in
such announcements or releases the FIELD or the financial terms of this
Agreement, except as required by law or government regulation.


                                      -7-

<PAGE>


     8.2 LICENSEE's Rights. LICENSEE may issue public announcements or press
releases relating to the existence of this Agreement and to the identity of
ENZON as licensor. However, LICENSEE shall not include in such announcements or
releases any mention or indication, explicitly or implicitly, that ENZON
endorses the manufacture, use, or sale of any PRODUCT.

     8.3 LICENSEE's Obligations. LICENSEE shall hold all information and
proprietary materials received hereunder from ENZON (hereinafter "CONFIDENTIAL
INFORMATION") in strictest confidence and shall not use such CONFIDENTIAL
INFORMATION for any purpose other than under this Agreement, nor for any product
other than PRODUCT, nor outside of the FIELD. CONFIDENTIAL INFORMATION shall not
be disclosed to any persons other than (i) employees or agents of LICENSEE or
independent contractors employed by LICENSEE who have reasonable need for access
to such information in connection with this Agreement and who are bound to
LICENSEE by a written agreement of confidentiality containing terms consistent
with those contained in this paragraph, and (ii) governmental authorities, as
required, to obtain necessary regulatory clearances. LICENSEE shall keep any
CONFIDENTIAL INFORMATION disclosed to LICENSEE by ENZON confidential during the
term of this Agreement and for five (5) years following the termination of this
Agreement for any reason; PROVIDED, HOWEVER, that ENZON may at any time agree in
writing to a waiver of such requirement. Nothing in this Agreement shall prevent
LICENSEE from making any disclosure of CONFIDENTIAL INFORMATION required by law;
PROVIDED, HOWEVER, in the event LICENSEE is so required, LICENSEE shall provide
ENZON with prompt notice so that ENZON may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Agreement. In any event, LICENSEE shall furnish only that portion of the
CONFIDENTIAL INFORMATION which is legally required in the opinion of LICENSEE's
counsel.

     Notwithstanding the above, nothing in this Agreement shall in any way
restrict the right of LICENSEE to use or disclose information that:

     (a)  at the time of disclosure by ENZON to LICENSEE had been published or
          publicly known; or

     (b)  is published, becomes publicly known, or otherwise becomes part of the
          public domain after disclosure by ENZON to LICENSEE through no fault
          of LICENSEE; or

     (c)  was known to LICENSEE prior to the time of disclosure by ENZON, as
          demonstrated by written records.

     The obligation of this Section 8.3 shall apply equally to LICENSEE and its
AFFILIATES and sublicensee.


                                      -8-

<PAGE>


9    INDEMNIFICATION

     LICENSEE shall defend, indemnify, and hold ENZON and its AFFILIATES
harmless from and against any and all claims, suits, and expenses, including
reasonable attorney fees and expenses arising out of or based upon the
manufacture, use, or sale or other distribution of PRODUCTS by LICENSEE or its
AFFILIATES or sublicensee or persons purchasing PRODUCTS from them.

10   TERM AND TERMINATION

     10.1 Default. If either party shall fail to perform any of its obligations
under this Agreement, the nondefaulting party may give written notice of the
default to the defaulting party. Unless such default is corrected within sixty
(60) days after receipt of such notice, the notifying party may thereafter
terminate this Agreement upon thirty (30) days prior written notice.

     10.2 Term. Unless otherwise terminated as provided for in this Agreement,
this Agreement will continue on a country-by-country basis until the expiration
of the last to expire PATENT RIGHT or, if no PRODUCT, its manufacture, or use is
covered by PATENT RIGHT(S), until the expiration of the period for which royalty
payments are required pursuant to Section 4.4.

     10.3 Survivability. Sections 7, 8 and 9 shall survive the expiration or
termination of this Agreement.

11   MISCELLANEOUS

     11.1 DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, ENZON EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR OF NON-INFRINGEMENT.

     11.2 Integration. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof, and supersedes
and replaces all prior agreements, understandings, writings, and discussions
between the parties relating to said subject matter.

     11.3 Amendments. This Agreement may be amended only by a written instrument
executed by the parties.

     11.4 Waiver. The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect its rights at a
later time to enforce the same. No waiver by either party of any condition or
term in any one or more instances shall be construed as a further or continuing
waiver of such condition or term or any other condition or term.


                                      -9-

<PAGE>


     11.5 Successors. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.

     11.6 Assignability. This Agreement shall not be assignable by either party
without the other party's written consent, except for ENZON's right to receive
fees and royalties payable hereunder. Either party, however, shall have the
right to transfer this Agreement to any successor of its entire business or
substantially all of its assets in the line of business related to the Agreement
without the consent of the other party. Such transferee may transfer this
Agreement back to the transferor party without the prior written consent of the
other party.

     11.7 Notices. Any notice and payment of fees or royalties required or
permitted to be given hereunder shall be deemed sufficient if mailed by
overnight service providing evidence of delivery or by registered or certified
mail (return receipt requested), or delivered by hand to the party to whom such
notice is required at the address set forth in Section 5.1 hereof. Any notice
required or permitted to be given hereunder shall be considered given upon the
earlier of: (i) when actually received at the address set forth in Section 5.1;
or (ii) two business days after such notice is properly mailed in accordance
with this Section 11.7.

     11.8 Validity of Provisions. If any provision(s) of this Agreement are or
become invalid, are ruled illegal by any court of competent jurisdiction or are
deemed unenforceable under then current applicable law from time to time in
effect during the term hereof, it is the intention of the parties that the
remainder of this Agreement shall not be affected thereby. It is further the
intention of the parties that in lieu of each such invalid, illegal, or
unenforceable provision, there shall be substituted or added as part of this
Agreement a provision that shall be as similar as possible in economic and
business objectives to such invalid, illegal, or unenforceable provision as was
originally intended by the parties, but that shall be valid, legal, and
enforceable.

     11.9 Titles. All titles and subtitles used in this Agreement are for
purposes of illustration or organization and are not legally binding on the
Parties.

     11.10 Relationship of the Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee, or joint
venture relationship between the Parties, and neither party is authorized or
empowered to act as agent for the other for any purpose or to make any
statement, contract, warranty, representation or commitment on behalf of the
other.


                                      -10-

<PAGE>


     11.11 Further Acts and Instruments. Each party hereto agrees to execute,
acknowledge, and deliver such further instruments and to do all such other acts
as may be necessary or appropriate to effect the purpose and intent of this
Agreement.

     11.12 Export Restrictions. This Agreement, and any products or technical
data supplied during the term of this Agreement, are made subject to any
restrictions concerning the export of products or technical data from the United
States of America that may be imposed upon ENZON or LICENSEE or their respective
AFFILIATES from time to time by the Government of the United States of America.
Furthermore, LICENSEE and its AFFILIATES agree that at no time, either during
the term of this Agreement or thereafter, will they export, directly or
indirectly, any United States source products or technical data acquired from
ENZON or its AFFILIATES under this Agreement or any direct products of that
technical data to any country for which the U.S. Government or any agency
thereof at the time of export requires an export license or other governmental
approval, without first obtaining that license or approval when required by
applicable United States law.

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

     The parties have duly executed this Agreement as of the date first above
written.

Enzon, Inc.                                LICENSEE

By:_______________________                 By:_________________________

Title:____________________                 Title:______________________


                                      -11-

<PAGE>


                                   APPENDIX I

     Constituting part of Section 1.6 of the Non-Exclusive License Agreement
dated May 8, 1996, between LICENSEE and Enzon, Inc.

                                  PATENT RIGHTS

<TABLE>
<CAPTION>

                                                             DATE                                                DATE
TITLE                        INVENTOR        COUNTRY         FILED           SERIAL NO.          PATENT NO.      ISSUED
- -----                        --------        -------         -----           ----------          ----------      ------
<C>                          <C>             <C>             <C>             <C>                 <C>             <C>

[***]
</TABLE>



                                      -12-



<PAGE>

<TABLE>
<CAPTION>

                                                             DATE                                                DATE   
TITLE                        INVENTOR        COUNTRY         FILED           SERIAL NO.          PATENT NO.      ISSUED 
- -----                        --------        -------         -----           ----------          ----------      ------ 
<C>                          <C>             <C>             <C>             <C>                 <C>             <C>    

[***]
</TABLE>


                                      -13-

<PAGE>


                                   APPENDIX II

     Constituting part of Section 1.8 of the Non-Exclusive License Agreement
dated May 8, 1996, between LICENSEE and Enzon, Inc.

                              RESEARCH INFORMATION

     [***]

                                      -14-

<PAGE>


                                  APPENDIX III

     Constituting part of Section 1.3 of the Non-Exclusive License Agreement
dated May 8, 1996, between LICENSEE and Enzon, Inc.

                                 EXCLUDED AREAS

     The following areas are specifically excluded from the FIELD:

[***]




[Confidential treatment has been requested for portions of this Exhibit. The
confidential portions have been redacted and are denoted [***]. The confidential
portions have been separately filed with the Commission.]

                            MEDICAL RESEARCH COUNCIL

                                     - and -

                           ALEXION PHARMACEUTICAL INC.



                                  L I C E N S E

                                       for

                                  Winter Patent



<PAGE>


THIS AGREEMENT is made the 27th day of March One thousand nine hundred and
ninety six between MEDICAL RESEARCH COUNCIL of 20 Park Crescent, London WIN 4AL
(hereinafter called "MRC" which expression includes its successors and assigns)
of the one part and ALEXION PHARMACEUTICALS, INC. of 25, Science Park, Suite
360, New Haven, Connecticut 06511, USA (hereinafter called "THE LICENSEE" which
expression includes its successors and permitted assigns) of the other part.

W H E R E A S:

MRC is the proprietor of certain patent rights in respect of the genetic
engineering of monoclonal antibodies comprising the replacement in whole or in
part of the complementary determining regions of one antibody by those of
another.

NOW IT IS HEREBY AGREED as follows:

1.   Definitions

     (1)  IN this Agreement the following words and expressions shall be
          construed as follows:

     'THE EFFECTIVE DATE' shall mean the date specified above.


                                      -2-

<PAGE>


     "THE
 RESHAPING PROCESS" shall mean the [***].

     "THE PRODUCTS" shall mean end products produced either directly or
     indirectly from antibodies which have been modified using the Reshaping
     Process and which are in a form capable of being marketed or sold upon a
     commercial basis.

     "AFFILIATE" shall mean any corporation, company, partnership or other
     entity which directly or indirectly controls, is controlled by or is under
     common control with either party to this Agreement.

     "CONTROL" means the ownership of more than 50% of issued share capital or
     the legal power to direct or cause the direction of the general management
     and policies of the party in question.

     "FIELDS" [***].

     "NET RECEIPTS" shall mean all monies received by Licensee in respect of the
     sale of the Products, less the following items to the extent that they are
     paid or allowed and included in the invoice price:


                                      -3-

<PAGE>


          normal discounts actually granted;

          credits allowed for Products returned or not accepted by customers;

          packaging, transportation and prepaid insurance charges on shipments
          or deliveries to customers;

          taxes actually incurred and paid by Licensee in connection with the
          sale or delivery of Products to customers.

     "THE WINTER PATENT" shall mean the patents and applications therefor set
     out in Schedule I hereto and any divisions, renewals, continuations,
     extensions or reissues thereof and any patent granted thereon.

     "THE BOSS PATENTS" shall mean the patents and patent applications therefore
     set out in Schedule 3 hereto in [***] and any patent granted on such
     patent applications including but without prejudice to the generality of
     the foregoing author certificates, inventor certificates, improvement
     patents, utility certificates and models and certificates of addition and
     including any divisions, renewals, continuations, extensions or reissues
     thereof.


                                      -4-

<PAGE>


     (2)  IN this Agreement the singular shall where the context so permits
          include the plural and vice versa.

2.   Commencement

     THIS Agreement shall be deemed to have come into force on the Effective
     Date and shall be read and construed accordingly.

3.   Grant of Rights

     (1)  MRC agrees to grant to the Licensee the following licenses under the
          Winter Patent:

          (i)  a non-exclusive world-wide license to exploit the Winter Patent
               commercially in any way whatsoever by the use of the Reshaping
               Process in the Fields and by the commercial exploitation in the
               Fields of any resulting antibodies provided always that any such
               exploitation does not involve the antibodies detailed in the
               Second Schedule hereto;

          (ii) a non-exclusive sub-license under the Boss Patents to the extent
               required to enable the licensee to use the Reshaping Process in


                                      -5-

<PAGE>

               accordance with (i) above to produce Products from mammalian
               cells and for no other purpose.

     (2)  The Licensee shall not be entitled to grant sub-licenses of the rights
          granted to it under this Agreement except with the prior written
          consent of MRC. Such consent shall not be unreasonably withheld or
          delayed to requests to sublicense rights to the Winter Patent in
          respect of antibodies modified by the Licensee itself using the
          Reshaping Process. MRC and Licensee acknowledge that it is not the
          intention that Licensee should offer a contract service to third
          parties in the use of the Reshaping Process. In cases where MRC gives
          consent to the grant of a sublicense under the Winter Patent MRC shall
          also not unreasonably withhold consent from requests by Licensee for
          MRC to grant to the sublicensee a sublicense under the Boss Patent, in
          accordance with the limitations specified in Clause 3 (1) (ii) above
          and restricted to the modified antibodies sublicensed by Licensee. The
          Licensee shall use its best endeavors to ensure that any sub-licensee
          performs its obligations under any such sub-license.

     (3)  The following arrangements shall not require the prior consent of MRC:

          (i)  The appointment of any person as agent or distributor to market
               sell use or otherwise dispose of the Products in any part of the
               world.


                                      -6-

<PAGE>


          (ii) The sub-contracting of the development of new Products for the
               Licensee .

          (iii) The sub-contracting of manufacture for the Licensee of Products
               or intermediates for Products.

4.   Payments

     (1)  IN CONSIDERATION for the non-exclusive license granted pursuant to
          Clause 3.1 hereof the Licensee shall pay to MRC the sum of [***] upon
          signature of this Agreement.

     (2)  IN FURTHER consideration of the licenses granted by MRC to Licensee
          under this Agreement, Licensee shall pay to MRC a royalty at the rate
          of [***] of Net Receipts on all sales of Products by Licensee or any
          Affiliate where the Products are either manufactured and/or sold in a
          country where the Winter and/or the Boss Patent is granted valid and
          subsisting at the date of such sale. The royalty payments shall be
          exclusive of any applicable value added tax ("VAT").

     (3)  If MRC shall hereafter license another party under the Winter Patents
          in the Fields at a lower royalty rate than is payable by Licensee by
          virtue of 


                                      -7-

<PAGE>


          this license agreement, or with another substantial term more
          favorable to such party than the corresponding term of this license
          agreement, then Licensee shall have an option to convert this license
          agreement so that the royalty rate payable thereunder. or other
          corresponding term, is the same as the rate of term that applies to
          the third party; PROVIDED that if the third party's license imposes
          upon that party any other obligation (including any restriction as to
          product or territory) which is associated with that party's operations
          as patent licensee and which is more onerous than an obligation of
          corresponding category on the part of Licensee under this agreement,
          then any exercise of the option by Licensee shall operate so that
          Licensee assumes an obligation as patent licensee corresponding to
          such other obligation of the third party, either as a substitute in
          place of Licensee's obligation(s) of corresponding category, or if
          there is no such obligation or corresponding category, then as an
          additional obligation.

          This clause shall not entitle a Licensee to a license in respect of
          any of the restricted antibodies set out in Schedule 2.

     (4)  Licensee agrees to keep true and accurate records and books of account
          containing all data necessary for the calculation of the royalties
          payable to MRC under Clause 4(2). Such records and books of account
          shall upon reasonable notice having been given by MRC be open at all
          reasonable 


                                      -8-

<PAGE>


          times during business hours for inspection by MRC or its duly
          authorized representative.

     (5)  Licensee shall prepare a statement in respect of each calendar quarter
          of this Agreement which shall show for the calendar quarter in
          question Licensee's Net Receipts on sales by it of the Products on a
          country by country basis. details of the quantities of Products
          manufactured and sold in each country and the royalty and, if
          applicable, VAT due to MRC thereon pursuant to Clause 4(2) above. Such
          statement shall be submitted to MRC within 60 days following the end
          of the calendar quarter or part thereof to which it relates together
          with a remittance for the royalties and, if applicable, VAT due to
          MRC. If MRC shall give notice to Licensee within 30 days of the
          receipt of any such statement that it does not accept the same such
          statement shall be certified by an independent chartered accountant
          appointed by agreement between the parties or, in default of agreement
          within 14 days, by the President for the time being of the Institute
          of Chartered Accountants of England and Wales in London. Licensee
          shall make available all books and records required for the purpose of
          such certification at reasonable times during normal business hours
          and the statement so certified shall be binding between the parties.
          The costs of such certification shall be the responsibility of MRC if
          the certification shows the original statement to have been accurate
          (i.e. the certification shows a deficiency of 5% or less of the total
          amount in fact 


                                      -9-

<PAGE>


          payable by the Licensee) and otherwise shall be the responsibility of
          Licensee. Following any such certification the parties shall make any
          adjustments necessary in respect of the royalties already paid to MRC
          in relation to the year in question.

     (6)  The Licensee shall pay royalties to MRC free and clear of and without
          deduction or deferment in respect of any demand, set-off, counterclaim
          or other dispute and so far as is legally possible such payment shall
          be made free and clear of any taxes imposed by or under the authority
          of any government or public authority and in particular but without
          limitation where any sums due to be paid to MRC hereunder are subject
          to any withholding or similar tax, the Licensee shall pay such
          additional amount as shall be required to ensure that the net amount
          received by MRC hereunder will equal the full amount which would have
          been received by it had not such tax been imposed or withheld. The
          Licensee and, without prejudice to the foregoing, MRC shall use their
          best endeavors to do all such lawful acts and things and to sign all
          such lawful deeds and documents as will enable the Licensee to take
          advantage of any applicable legal provision or any double taxation
          treaties with the object of paying the sums due to MRC without
          imposing or withholding any tax.


                                      -10-

<PAGE>


          Sums are expressed in this agreement as exclusive of VAT. MRC agrees
          to provide Licensee with a VAT invoice in respect of every payment
          affected by VAT.

     (7)  Where MRC does not receive payment of any sums due to it within the
          period specified hereunder in respect thereof interest shall accrue on
          the sum outstanding at the rate of 1% per month calculated on a daily
          basis without prejudice to MRC right to receive payment on the due
          date therefor.

5.   Term and Termination

     (1)  SUBJECT as hereinafter provided this Agreement and the licenses
          granted pursuant thereto shall continue in force in each territory
          during the subsistence of the last to expire of the Winter or Boss
          Patents.

     (2)  MRC may terminate this Agreement and the said licenses forthwith by
          notice to the Licensee to that effect upon the happening of any of the
          following events:

          (A)  if the Licensee fails to perform or observe any of the
               obligations on its part to be performed or observed and if the
               breach is one 


                                      -11-


<PAGE>

               capable of remedy has not been remedied within three (3) months
               of the giving of a notice informing the Licensee of such breach;

          (B)  if the Licensee files a voluntary petition in bankruptcy or
               applies to any Tribunal for a Receiver Trustee or similar officer
               to be appointed by any Court or Executive Department to liquidate
               or conserve the Licensee or any substantial part of its property
               or assets due to insolvency or to the threat thereof or if the
               Licensee suffers any trusteeship or receivership to continue
               undischarged for a period of sixty days or suffers any similar
               procedure for the relief of distressed debtors entered into by
               the Licensee voluntarily or involuntarily or if the Licensee is
               otherwise divested of its assets for a period of sixty days or
               makes a general assignment for the benefit of its creditors;

     (3)  The Licensee may terminate this Agreement and the Licenses granted
          pursuant hereto by giving to MRC 6 months notice to that effect if the
          Licensee considers that substantial unlicensed competition is
          seriously interfering with Licensee's exploitation of the Reshaping
          Process under this Agreement and that MRC is not taking appropriate
          steps to seek to prevent or reduce such unlicensed competition. Such
          termination shall be without prejudice to the right of MRC to enforce
          the Winter Patents in the event of subsequent manufacture of Products
          by the Licensee.


                                      -12-

<PAGE>


     (4)  TERMINATION of this Agreement or of the said Licenses shall be without
          prejudice to any rights of either party against the other which may
          have accrued up to the date of such termination and the Licensee shall
          pay to MRC the appropriate royalties hereunder on all stocks of the
          Products (on which royalties have not already been paid) held at the
          date of termination by the Licensee or any person engaged by the same
          to manufacture the Products and shall thereafter be free to sell such
          products on which royalty has been paid.

6.   Warranties

     (1)  MRC hereby represents and warrants that MRC owns the Winter Patents or
          is otherwise authorized to license the Winter Patents to the Licensee.

     (2)  MRC hereby represents and warrants that MRC is entitled or authorized
          to grant a sub-license under the Boss Patents in conjunction with a
          license to the Licensee to use the Reshaping Process for the
          production of Products from mammalian cells and for no other purpose.

     (3)  NOTHING in this Agreement or in any licenses to be granted pursuant
          thereto shall be construed as a representation or warranty that any of
          the said Patents are valid or that any manufacture use sale or other
          disposal 


                                      -13-

<PAGE>


          of the Products is not an infringement of any patents or other rights
          not vested in the MRC.

     (4)  THE Licensee shall promote the sale of the Products of good marketable
          quality and shall use reasonable endeavors to meet the market demand
          therefore.

7.   Infringement

     IF the Licensee becomes aware of a suspected infringement of the Winter
     Patents it shall notify MRC giving full particulars thereof. If the alleged
     infringement consists of any act which (if done by the Licensee) would be
     within the scope of the licenses granted under this Agreement MRC and the
     Licensee shall (within a reasonable time of the said notification) consult
     together with a view to agreeing upon a course of action to be pursued.

8.   Waiver

     THE waiver by MRC of any breach default or omission in the performance or
     observance of any of the terms of this Agreement by the Licensee shall not
     be deemed to be a waiver of any other such breach default or omission.


                                      -14-

<PAGE>


9.   Notices

     ANY notice consent or other communication authorized or required to be
     given hereunder or for the purposes hereof shall be in writing and be
     deemed to be duly given to MRC if left at or sent by recorded delivery or
     registered post addressed to its principal office and to the Licensee if
     left at or sent by recorded delivery or registered post to its principal
     place of business. Any such notice consent or other communication if served
     by post shall be deemed to have been given at the time when it would have
     been received in due course of the post.

10.  Non-assignability

     Save for an assignment to an Affiliate of the Licensee, the Licensee shall
     not be entitled to assign the benefit of this Agreement or any rights
     granted or to be granted under the Agreement.

11.  Law and Jurisdiction

     THIS Agreement is to be read and construed in accordance with and governed
     by the Laws of England so far as the subject matter allows and the parties
     hereby submit to the jurisdiction of the English courts in relation to any
     dispute arising out of this Agreement.


                                      -15-

<PAGE>


     IN WITNESS whereof the parties hereto have caused this Agreement to be
     executed in the matter legally binding upon them by causing authorized
     representatives to sign this Agreement.


MEDICAL RESEARCH COUNCIL                     ALEXION PHARMACEUTICALS, INC.

Signed:_____________________________         _____________________________

Name and Position:                  

       _____________________________         _____________________________


       _____________________________         _____________________________


Date:  _____________________________         _____________________________


                                      -16-

<PAGE>


                         SCHEDULE ONE above referred to

Inventor:                           [***]

Applicant:                          [***]

Title:                              [***]

UK Priority Application:            [***]


Final Application

Territory                      Application number        Date of filing
                               (Publication number)      (Publication date)
                               *(Patent number)          (Grant date)
                                                       
- --------------------------------------------------------------------------------
[***]
                                      -17-

<PAGE>


                         SCHEDULE TWO above referred to

                      ANTIBODIES EXCLUDED FROM THE LICENSE

[***]

                                      -18-

<PAGE>



                        SCHEDULE THREE above referred to

Title:            [***]

Subject matter:   [***]

Inventors:        [***]

[***]

                                      -19-



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                 THIS STATEMENT CONTAINS SUMMARY FINANCIAL
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