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

                                  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, 1997

                                       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 (NASDAQ)
National Market System on October 22, 1997, was $107,375,000.

     The number of shares of Common Stock outstanding as of October 22, 1997 was
9,107,149 .

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




<PAGE>


                       DOCUMENTS INCORPORATED BY REFERENCE

                        (To the Extent Indicated Herein)


     Portions of the registrant's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with solicitations of proxies
for the Registrant's 1997 Annual Meeting of Stockholders on December 11, 1997
are incorporated by reference in Part III, Item 11 of this Form 10-K.


                                      -2-




<PAGE>



                                     PART I.

     THIS ANNUAL REPORT ON FORM 10-K AND THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE CONTAIN FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE PURSUANT TO THE
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD
LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS
ABOUT THE COMPANY'S INDUSTRY, MANAGEMENT'S BELIEFS, AND CERTAIN ASSUMPTIONS MADE
BY THE COMPANY'S MANAGEMENT, WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS,"
"PLANS," "BELIEVES," "SEEKS," ESTIMATES," VARIATIONS OF SUCH WORDS AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN
RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE,
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN ANY
SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE SET FORTH HEREIN UNDER "IMPORTANT FACTORS REGARDING
FORWARD-LOOKING STATEMENTS," ATTACHED HERETO AS EXHIBIT 99, AS WELL AS THOSE
NOTED IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. UNLESS REQUIRED BY LAW,
THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
HOWEVER, READERS SHOULD CAREFULLY REVIEW THE RISK FACTORS SET FORTH IN OTHER
REPORTS OR DOCUMENTS THE COMPANY FILES FROM TIME TO TIME WITH THE SECURITIES AND
EXCHANGE COMMISSION.



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 and 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 Complement 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
Complement Inhibitor product candidates are cardiovascular disorders, including
prevention of bleeding and inflammation in cardiopulmonary bypass ("CPB") during
open heart surgery, 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.


                                      -3-




<PAGE>


     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 and, in
collaboration with Genetics Therapy Inc. ("GTI/Novartis"), a subsidiary of
Novartis, Inc., immunoprotected retroviral vector particles and producer cells
for use in gene therapy.


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.

     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 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 Complement
Inhibitors ("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, the Company is developing
(i) non-human UniGraft organ products which are designed for transplantation
into humans without clinical rejection and (ii) immunoprotected retroviral
vector particles and producer cells for injectable delivery of therapeutic genes
to patients' cells.


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 


                                      -4-




<PAGE>


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 Complement 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 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 tissue damage during and 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, heart, brain and kidney 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 organ
morbidities associated with CPB. Those effects might reduce the need for blood
transfusions, the incidence of post-operative complications, 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 U.S.
Food and Drug Administration ("FDA") in 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. Results of the Phase I trial
indicated that a single dose administration of 5G1.1-SC was safe and
well-tolerated in the study population. In September 1996, the 


                                      -5-




<PAGE>


Company received FDA authorization for its second clinical trial and in October
1996 commenced a Phase I/II study of 5G1.1-SC in patients undergoing CPB.

     In July 1997, preliminary results from this Phase I/II clinical study of 17
patients undergoing CPB were released. Treatment with 5G1.1-SC reduced the more
than ten-fold increase in the level of activated complement byproducts
experienced by patients on placebo during CPB in a dose-dependent manner. Also,
in July, the Company announced that it was preparing to examine 5G1.1-SC in a
Phase IIa CPB clinical study including an additional 18 patients. There can be
no guarantees that clinical trials of the Company's product candidates will be
completed in a timely manner or will demonstrate sufficient safety and efficacy
to obtain the requisite regulatory approvals or will result in marketable
products.

     The American Heart Association ("AHA") estimates that approximately 450,000
CPB surgical procedures were performed in the United States during 1992.

   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 may subsequently infarct
(die). 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. This severe inflammatory response targeting the
area of the underperfused cardiac muscle is associated with subsequent
infarction 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. There can be no assurance that the
results from preclinical studies will be predictive of results that may be
obtained in clinical trials or will be predictive of safety or efficacy in
humans.

     The AHA estimates that approximately 1,000,000 Americans survived a heart
attack in 1992 and thus are 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, 


                                      -6-




<PAGE>


swelling and pain with frequent, severe joint deformity. Rheumatoid arthritis is
generally believed to be due to 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 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,
the onset of clinical signs of rheumatoid arthritis, as well as ameliorated
established disease. 5G1.1 is currently in the later stages of production for
use in clinical trials. 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, and that the results from preclinical studies will be predictive of
results that may be obtained in clinical trials or will be predictive of safety
or efficacy in humans.

     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, lung and 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 rodent 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 rodent 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. 5G1.1 is currently in the later stages of
production for use in clinical trials. 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, and that the results from preclinical studies will be
predictive of results that may be obtained in clinical trials or will be
predictive of safety or efficacy in humans.

     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 


                                      -7-




<PAGE>


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 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.

   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 (EAE) 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 April 1997, the Company and its
collaborators at the NIH disclosed preliminary results of testing of MP4 in a
non-human primate model of MS. MP4 therapy substantially reduced the severity
and incidence of neurologic symptoms in these preclinical studies. 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
currently in the later stages of production for use in clinical trials. 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, and that the results
from preclinical studies will be predictive of results that may be obtained in
clinical trials or will be predictive of safety or efficacy in humans.

     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.


                                      -8-




<PAGE>


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

     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

     Organ and Tissue Transplantation

     As an outgrowth of its core technologies, the Company is also developing,
in collaboration with US 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 preclinical transplantation of genetically engineered and proprietary
porcine cells and organs. 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 porcine cells that 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 is currently employing
its immunoregulatory and molecular engineering technologies in order to develop
UniGraft hearts, lungs, livers, pancreases and kidneys.

     According to the United Network of Organ Sharing, there are approximately
19,000 organ transplants performed annually in the U.S. and there are more than
50,000 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 Systems

     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 


                                      -9-




<PAGE>


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.

     As an outgrowth of its core technologies, in collaboration with
GTI/Novartis 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. Alexion has entered into strategic alliances with US Surgical
with respect to transplantation applications of the Company's UniGraft program
and with GTI/Novartis with respect to gene therapy applications of the Company's
UniGraft program. The Company 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.

     In the July 1995 Joint Development Agreement, 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 


                                      -10-




<PAGE>


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 July
31, 1997, the Company received $4.0 million in research and development support
under its collaboration with US Surgical. In addition, US Surgical had agreed to
pay $1 million upon achieving a milestone involving the transplantation of
non-primate tissue into primates (the "Primate Milestone"). 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.

     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.

     In September 1997, US Surgical and the Company modified the July 1995 Joint
Development Agreement. As part of the modification, US Surgical made an
additional $6.5 million payment to the Company for equity, exclusive licensing
rights, and certain xenograft manufacturing assets. Under the modified
agreement, the additional $6.5 million payment comprised: (i) a $3 million
equity investment in the Company through the purchase of 166,945 shares of the
Company's Common Stock at a price of $17.97 per share, which represented a 25%
premium over the market price on the day prior to the date of closing and (ii) a
$3.5 million payment to acquire technology and certain xenograft manufacturing
assets. Further, as part of the amended agreement, US Surgical and the Company
agreed that the preclinical milestone payments in the original agreement are
considered to have been satisfied. At October 1, 1997, US Surgical beneficially
owns an aggregate of 824,087 shares of Common Stock or approximately 9.1% of the
Company's outstanding shares.

     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 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 (e.g., anti-inflammatories 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.


                                      -11-




<PAGE>


   Genetic Therapy, Inc.

     In December 1996, Alexion and GTI/Novartis entered into a License and
Collaborative Research Agreement with respect to the Company's gene transfer
technology. Under the Agreement, GTI/Novartis has been granted a worldwide
exclusive license to use the Alexion technology in its gene therapy products.

     GTI/Novartis agreed to pay Alexion an initial upfront payment of $850,000
which consisted of a one-time license fee of $750,000 and a $100,000 research
and development support payment. GTI/Novartis also agreed to fund a minimum of
$400,000 per year for two years for research and development support by Alexion,
make payments to Alexion upon achievement of certain product development
milestones for gene therapy products utilizing the Alexion technology and pay
royalties on net sales, if any.

   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 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


                                      -12-




<PAGE>


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.
Through July 31, 1997, approximately $477,000 has been paid under such
agreement. The NIH is part of the United States Department of Health and Human
Services. In February 1997, the NIH CRADA was amended to extend the term to
December 1997 and the Company committed to pay approximately $168,000 under this
amendment.

   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 Home Products Corporation, Dalgety, plc.,
The Dow Chemical Company, Mallinckrodt Group Inc., McDonald's Corporation, 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 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. Through July 31, 1997, the Company has paid
approximately $633,000 under the agreement. However, minimum annual royalty
payments under the license agreement with BRDC have been waived so long as the
Company remains a shareholder of BRDC.

   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. As of July 31, 1997, the Company has received the full
amount of the above grant payment.

     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


                                      -13-




<PAGE>


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 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. Of the Company's owned and licensed patents and patent
applications as of July 31, 1997, approximately 27% relate to technologies or
products in the C5 Inhibitor program, 15% relate to the Apogen program, 12%
relate to the Gene Transfer program and 46% 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 independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets, that 


                                      -14-

<PAGE>


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 or
is attempting to acquire 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.

     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 


                                      -15-




<PAGE>


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 Biologics
License Application ("BLA") and (v) FDA review and approval of the BLA. 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 ("cGMP")
regulations, enforced by the FDA through 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 cGMP 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 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 requests an extension
to review or raises concerns or questions about the conduct of the trials as
outlined in the IND. In such latter 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) and, as appropriate,
for absorption, metabolism, 


                                      -16-




<PAGE>


distribution, excretion, pharmacodynamics and pharmacokinetics. 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 BLA requesting approval for the
manufacture, marketing and commercial shipment of the product. The FDA may deny
a BLA 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 BLA 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 BLA approval is the requirement that the
prospective manufacturers quality control and manufacturing procedures conform
to cGMP regulations, which must be followed at all times in the manufacture of
the approved product. In complying with standards set forth in these
regulations, 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 BLA 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 BLA holder. In
addition, later discovery of previously unknown problems may result in
restrictions on a product, manufacturer, or BLA 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 


                                      -17-




<PAGE>


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 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, Inc. ("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), myocardial infarction, and lung transplantation. The Company believes
that its potential C5 Inhibitors differ substantially from those of its
competitors due to the Company's compounds' demonstrated ability to specifically
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 as do other aspects of immune
function.

     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 and organ damage 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 


                                      -18-




<PAGE>


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
Novartis, Inc., in collaboration with Biotransplant Inc., have publicly
announced intentions to commercially develop xenograft organs and the Company is
aware that Diacrin Inc. and Genzyme Tissue Repair, Inc. are 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 facilities suitable for the fermentation and
purification of certain of its recombinant compounds for clinical studies. The
Company's pilot plant has the capacity to manufacture under cGMP regulations.
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 product finishing, vial filling, 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, 1997, the Company had 51 full-time employees, of whom 43
were engaged in research, development, and manufacturing, and eight in
administration 


                                      -19-




<PAGE>


and finance. Doctorates are held by 17 of the Company's employees. Each of the
Company's employees has signed a confidentiality agreement.



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 approximately 29,000 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, an
March 1999, respectively, each with an option for up to an additional three
years. Current monthly rental on the facilities is approximately $30,000. 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.


                                      -20-




<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 System for the
periods indicated since February 29, 1996 when the Company's Common Stock
commenced trading.

                                                              High          Low
FISCAL 1996                                                  ------        -----
  Third Quarter
     (February 29, 1996  --  April 30, 1996) ...........     $ 9.50        $8.38
  Fourth Quarter
     (May 1, 1996  --  July 31, 1996) ..................     $11.75        $6.00


                                                              High          Low
FISCAL 1997                                                  ------        -----
  First Quarter
     (August 1, 1996  --  October 31, 1996) ............     $10.50        $6.00
  Second Quarter
     (November 1, 1996  --  January 31, 1997) ..........     $13.00        $8.38
  Third Quarter
     (February 1, 1997  --  April 30, 1997) ............     $12.50        $8.38
  Fourth Quarter
     (May 1, 1997  --  July 31, 1997) ..................     $11.63        $7.69


     As of October 22, 1997, the number of stockholders of record of the
Company's Common Stock was approximately 700. The closing sale price of the
Company's Common Stock on October 22, 1997 was $14.25 per share.


RECENT SALE OF UNREGISTERED SECURITIES

     On July 8, 1997, the Company completed the private placement of 1,450,000
shares of its Common Stock to certain institutional investors. Robertson,
Stephens & Company LLC served as placement agent in the transaction. The
aggregate offering price for the Common Stock sold was $11,237,500, the
aggregate proceeds to the Company was $10,563,250 and the aggregate Placement
Agent's Fee was $674,250. The Company relied on the exemption afforded by
Section 4(2) of, and Regulation D promulgated under, the Securities Act of 1933,
as amended (the "Act").

     On September 8, 1997, the Company completed the private placement of
400,000 shares of Series B Preferred Stock for aggregate consideration of
$10,000,000 to a single institutional investor. Robertson, Stephens & Company
LLC served as an advisor to the Company in connection with this transaction and
earned a $400,000 fee from the Company. The Series B Preferred Stock is
automatically convertible into 935,782 shares of Common Stock on March 4, 1998
or at anytime prior thereto at the election of the holder. The conversion price
of $10.686 per share represented a 3% premium to the closing bid of price
($10.375) on the day of pricing. The Series B Preferred Stock will 


                                      -21-




<PAGE>


pay a dividend of $2.25 per share on March 4, 1998, payable in cash or the
Company's Common Stock at the discretion of the Company. The Company relied on
the exemption afforded by Section 4(2) of, and Regulation D promulgated under,
the Act.

     On September 30, 1997, the Company sold 166,945 shares of its Common Stock
to United States Surgical Corporation ("US Surgical") for aggregate
consideration of $3,000,000 represents a price of $17.97 per share (representing
a 25% premium over the market price on the day prior to the date of closing).
The sale of Common Stock was made in connection with the modification of a joint
development agreement by and between the Company and US Surgical. No entity
acted as placement agent or an advisor in connection with this sale. The Company
relied on the exemption afforded by Section 4(2) under the Act.


DIVIDEND POLICY

     The Company has never paid cash dividends. The Company does not expect to
declare or pay any dividends on the Company's Common Stock 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.


                                      -22-




<PAGE>



<TABLE>

ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>

                                                                   For the Fiscal Years Ended
                                            -----------------------------------------------------------------------
                                                1997           1996          1995           1994           1993
                                            -----------    -----------    -----------    -----------    -----------
<S>                                         <C>            <C>            <C>            <C>            <C>      
STATEMENTS OF OPERATIONS DATA:

Contract research revenues .............    $ 3,810,600    $ 2,640,239    $   136,091    $      --      $      --
                                            -----------    -----------    -----------    -----------    ----------- 
Operating expenses: 
  Research and development .............      9,079,141      6,629,157      5,637,431      5,519,035      2,969,327
  General and administrative ...........      2,826,783      1,843,093      1,591,886      1,860,887      1,131,114
                                            -----------    -----------    -----------    -----------    ----------- 
       Total operating expenses ........     11,905,924      8,472,250      7,229,317      7,379,922      4,100,441
                                            -----------    -----------    -----------    -----------    ----------- 
Operating loss .........................     (8,095,324)    (5,832,011)    (7,093,226)    (7,739,922)    (4,100,441)
Other income (expense), net ............        843,754        397,495        (29,195)        93,770         32,613
                                            -----------    -----------    -----------    -----------    ----------- 
Net loss ...............................    $(7,251,570)   $(5,434,516)   $(7,122,421)   $(7,286,152)   $(4,067,828)
                                            ===========    ===========    ===========    ===========    =========== 
                                                                                                       
Net loss per common share (1) ..........          $(.97)         $(.95)        $(1.76)        $(1.89)        $(1.77)
                                                  =====          =====         ======         ======         ======
Shares used in computing                                                                               
  net loss per common share (1) ........      7,450,762      5,746,697      4,055,966      3,857,044      2,301,179
                                              =========      =========      =========      =========      =========
                                                                                                       
                                                                                                       
                                                                                                       
                                             July 31,       July 31,       July 31,       July 31,       July 31,
                                               1997           1996           1995           1994           1993
                                            -----------    -----------    -----------    -----------    -----------
<S>                                         <C>            <C>            <C>            <C>            <C>      
BALANCE SHEET DATA:                                                                                    
                                                                                                       
Cash, cash equivalents,                                                                                
  and marketable securities ............    $22,748,896    $18,597,751    $ 5,701,465    $ 4,209,200    $ 6,859,947

Working capital ........................     20,567,120     17,031,891      3,558,788      3,014,418      6,388,533

Total assets ...........................     24,260,561     20,453,980      7,927,276      6,983,361      8,334,274

Deficit accumulated during 
  the development stage ................    (31,826,251)   (24,574,681)   (19,140,165)   (12,017,744)    (4,731,592)

Stockholders' equity ...................     21,846,400     18,284,925      5,119,217      4,699,846      7,224,900

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

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

</TABLE>



                                      -23-




<PAGE>



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

     This report contains forward-looking statements which involve risks and
uncertainties. Such statements are subject to certain factors which may cause
the Company's plans and results to differ significantly from plans and results
discussed in forward-looking statements. Factors that might cause or contribute
to such differences include, but are not limited to, those discussed in
"Important Factors Regarding Forward-Looking Statements" attached hereto as
Exhibit 99.

OVERVIEW

     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, 1997, the Company has incurred a cumulative net loss of
$31.8 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. Alexion has entered into a strategic alliance
with US Surgical with respect to the Company's UniGraft program and with
GTI/Novartis with respect to the Company's gene transfer technology, and intends
to seek additional strategic alliances with major pharmaceutical companies
although no assurances can be given that such alliances will be successfully
entered into.

     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, 1997, 1996, and 1995

     The Company earned grant, license, and contract research revenues of $3.8
million, $2.6 million, and $136,000 for the fiscal years ended July 31, 1997,
1996, and 1995, respectively. The increase in fiscal 1997 was primarily due to
the $1.1 million of revenues the Company received from GTI/Novartis which
represented a one-time upfront license fee of $750,000 and contract research and
development revenues of $350,000. The increase in fiscal year 1996 revenues as
compared to fiscal 1995 resulted principally from Company's revenues received
from U.S. Surgical of approximately $2.0 million from a collaborative research
and development agreement and the funding of $246,000 from the NIST's ATP grant.
The revenues in fiscal 1995 resulted from the receipt of 


                                      -24-




<PAGE>


funds from two SBIR grants from the NIH. See "Item 1. Business--Strategic
Alliances, Collaborations and Licenses."

     During the fiscal years ended July 31, 1997, 1996, and 1995, the Company
expended $9.1 million, $6.6 million, and $5.6 million, respectively, on research
and development activities. Increases in research and development spending were
primarily attributable to expanded preclinical development of the company's
research programs which included the manufacturing product development for the
Company's C5 Inhibitor and Apogen 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. See Item 1. "Business--Alexion's Drug
Development Programs, Cardiopulmonary Bypass Surgery".

     The Company's general and administrative expenses were $2.8 million, $1.8
million, and $1.6 million for the fiscal years ended July 31, 1997, 1996 and
1995, respectively. The increase in general and administrative expenses in
fiscal 1997 consisted of $523,000 related to increased expenses associated with
facilities' expansion, employee benefits, and increased travel and
administrative costs attributable to increased clinical, regulatory, and
scientific conference activities. The remaining balance $477,000 of the increase
was related to increased costs for outside professional services and insurance
related to business development, recruiting, patent and legal activities as a
public company.

     Other income (expense), net, representing primarily net investment income
(expenses), was $843,754, $397,495, and ($29,195) for the fiscal years ended
July 31, 1997, 1996, and 1995, respectively. This fluctuation over the past
three years was due primarily to greater investment income from higher cash
balances available for investment and a more favorable investment market during
fiscal year 1997 as compared to the prior two fiscal years.

     As a result of the above factors, the Company had incurred net losses of
$7.3 million, $5.4 million, and $7.1 million for the fiscal years ended July 31,
1997, 1996 and 1995, respectively.


LIQUIDITY AND CAPITAL RESOURCES

     Since its inception through July 31, 1997, the Company has financed its
operations and capital expenditures primarily through its private placements and
initial public offering of equity securities resulting in approximately $52.3
million of aggregate 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. Through July 31, 1997,
the Company has also received approximately $5.2 million in research and
development support under its collaborations with US Surgical and GTI/Novartis.
The Company has also received $1.1 million from its SBIR grants from the NIH and
$660,000 under the ATP grant from NIST.

     All of the foregoing proceeds have been used to fund operating activities
of approximately $26.5 million and investments of approximately $2.9 million and
$975,000 in equipment and licensed technology rights and patents, respectively,
through July 31, 1997. As of July 31, 1997, the Company had working capital of
approximately $20.6 million and total cash, cash equivalents, and marketable
securities amounted to approximately $22.7 million.


                                      -25-




<PAGE>


     The Company increased its cash and cash equivalents by $7.25 million during
the twelve months ended July 31, 1997. This increase resulted principally from
cash flows provided by (i) financing activities which provided $10.79 million
from the net proceeds received from the issuance of common stock and $185,000
from the return of security deposits offset by $320,000 in repayments of notes
payable and (ii) investing activities which generated $3.12 million from the net
proceeds of maturing marketable securities offset by equipment purchases of
$749,000. These cash inflows were offset by the $5.72 million cash outflow used
in operating activities primarily as a result of $7.25 million of operating
losses. At July 31, 1997, approximately $16.74 million of cash is held in
short-term highly liquid investments with original maturities of less than three
months.

     Subsequent to the Company's fiscal year end on July 31, 1997, the Company
received the following significant additional proceeds. In September 1997, the
Company received approximately $9.5 million in net proceeds from the issuance of
shares of Series B Preferred Stock to a single institutional investor. At the
end of September 1997, US Surgical and the Company modified the July 1995 Joint
Development Agreement. As part of the modification, US Surgical made an
additional $6.5 million payment to the Company for equity, exclusive licensing
rights, and certain manufacturing assets. See "Item 1. Strategic Alliances,
Collaborations and Licenses--United States Surgical Corporation". See "Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters--Recent
Sale of Unregistered Securities".

     The Company leases its administrative and research and development
facilities under three operating leases expiring in June 1998, December 1997 and
March 1999 each with a renewal 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 $142,000, $77,000 and $72,000 (assuming no termination of these agreements)
during the fiscal years ending July 31, 1998, 1999 and 2000, respectively. In
addition, the Company is obligated to make certain future milestone payments,
aggregating up to $400,000 to certain of its licensors, with regards to
receiving regulatory approval on the Company's anticipated IND filings as well
as upon certain patent issuances. See "Item 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 for
at least the next eighteen months. While the Company currently has no material
commitments for capital expenditures, the Company's future capital requirements
will depend on many factors, including 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


                                      -26-




<PAGE>


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, 1997, the Company had approximately $13.4 million and $1.1
million of net operating loss and tax credit carryforwards for tax reporting
purposes, respectively, which expire commencing in fiscal 2008. 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 significantly limit
the Company's use of its existing net operating loss and tax credit
carryforwards.




I
TEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements and supplementary data of the Company
required in 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
        FINANCIAL DISCLOSURE

     Not applicable.


                                      -27-




<PAGE>



                                    PART III



ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND KEY EMPLOYEES

       Name                         Age                Position
       ----                         ---                --------
                                  
John H. Fried, Ph.D. .............   68     Chairman of the Board of Directors

Leonard Bell, M.D. ...............   39     President, Chief Executive Officer,
                                               Secretary, Treasurer, Director

David W. Keiser ..................   46     Executive Vice President, Chief
                                               Operating Officer

Timothy F. Howe ..................   39     Director

Max Link, Ph.D. ..................   57     Director

Joseph A. Madri, Ph.D., M.D. .....   51     Chairman of the Scientific Advisory
                                               Board, Director

Leonard Marks, Jr., Ph.D. ........   76     Director

Eileen M. More ...................   51     Director

Stephen P. Squinto, Ph.D. ........   41     Vice President of Research,
                                               Molecular Sciences

Louis A. Matis, M.D. .............   47     Vice President of Research, 
                                               Immunobiology

Bernadette L. Alford, Ph.D. ......   48     Vice President of Regulatory Affairs
                                               & Project Management

James A. Wilkins, Ph.D. ..........   45     Senior Director of Process
                                               Development

Barry P. Luke ....................   39     Senior Director of Finance and
                                               Administration, Assistant
                                               Secretary
                                
     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 and 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 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


                                      -28-




<PAGE>


Corporation and the Connecticut Technology Council. 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
(Bermuda), 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 1987 to 1992, Dr. Link was the Chief Executive
Officer of Sandoz Pharma 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., Cell Therapeutics,
Inc., and Procept, Inc., each a publicly held pharmaceutical company, as well as
Human Genome Sciences Inc., a genomics 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 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 Bank America
Leasing & Capital Corporation) 


                                      -29-




<PAGE>


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 Coral Therapeutics, Inc.,
Instream Corporation, OraPharma, Inc., Pharmacopeia, Inc., and Teloquent
Communication Corporation. 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 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 100 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.


                                      -30-




<PAGE>


     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 Accounting 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 Company and each of the executive officers are parties to employment
agreements.



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.


                                      -31-




<PAGE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information as of October 1, 1997
(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 of the Company as a group.

                                                  Number of        Percentage of
                                               Number of Shares     Outstanding
   Name and Address                              Beneficially        Shares of 
of Beneficial Owner (1)                           Owned (2)         Common Stock
- -----------------------                        ----------------    -------------

BB Biotech AG ...............................        935,782           9.3%
     Vordergrasse 3                                           
     8200 Schaffhausen                            
     CH/Switzerland (3)                         
                                                  
Collinson Howe Venture Partners .............        747,491           8.2%
     1055 Washington Boulevard, 5th floor                       
     Stamford, Connecticut 06901 (4)             
                                                  
Biotechnology Investment Group, L.L.C. ......        697,575           7.7% 
     c/o Collinson Howe Venture Partners                         
     1055 Washington Boulevard, 5th floor         
     Stamford, Connecticut 06901 (5) (6)         
                                                  
United States Surgical Corporation ..........        824,087           9.1% 
     150 Glover Avenue                            
     Norwalk, Connecticut 06856 (7)                   
                                                
Mehta and Isaly Asset Management, Inc. ......        773,500           8.5%  
     41 Madison Avenue -- 40th Floor              
     New York, NY 10010 (8)                      

Pioneering Management Corporation ...........        500,000           5.5%
     60 State Street                              
     Boston, MA 02109 (9)                        
                                                
Oak Investment Partners .....................        495,884           5.4%
     c/o Oak Investment Partners V                               
     One Gorham Island                            
     Westport, Connecticut 06880 (10)             
                                                  
INVESCO Global Health Sciences Fund .........        466,776           5.1%
     c/o INVESCO Trust Company                    
         attn: Health Care Group                
     7800 E. Union Avenue, Ste. 800             
     Denver, Colorado 80237 (11)                  
                                                

                                                


                                      -32-




<PAGE>


                                                    PRELIM            PRELIM
                                                  Number of        Percentage of
                                               Number of Shares     Outstanding
   Name and Address                              Beneficially        Shares of 
of Beneficial Owner (1)                           Owned (2)         Common Stock
- -----------------------                        ----------------    -------------

Timothy F. Howe (12) ........................        750,891           8.3%
                                                
Eileen M. More (13) .........................        519,284           5.7%
                                                
Leonard Bell, M.D. (14) .....................        334,850           3.6%
                                                
John H. Fried, Ph.D. (15) ...................         86,936             *
                                                
Stephen P. Squinto, Ph.D. (16) ..............        111,700           1.2%
                                                
David W. Keiser (17) ........................         89,800             *
                                                
Joseph Madri, Ph.D., M.D. (18) ..............         53,400             *
                                                
Louis A. Matis, M.D. (19) ...................         83,150             *
                                                
Max Link, Ph.D. (20) ........................         21,423             *
                                                
Leonard Marks, Jr., Ph.D. (21) ..............         11,900             *
                                                
Bernadette L. Alford, Ph.D. (22) ............         32,600             *
                                                
Directors and Executive Officers                
   as a group (11 persons) (23) .............      2,095,934           21.8%

- ----------

* Less than one percent                         
                                                
(1)  Unless otherwise indicated, the address of all persons is 25 Science Park,
     Suite 360, New Haven, Connecticut 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)  This figure is based upon information set forth in a Schedule 13D dated
     September 8, 1997, filed jointly by BB Biotech AG and Biotech Target, S.A.
     Includes 935,782 shares of Common Stock which are convertible automatically
     on March 9, 1998, or at the election of the holder at any time after
     September 9, 1997, from the Company's Series B Preferred Stock. Biotech
     Target, S.A., a Panamanian corporation, which purchased the Series B
     Preferred Stock, is a wholly-owned subsidiary of BB Biotech AG. BB Biotech
     AG is a holding company incorporated in Switzerland.

(4)  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, 21,052 shares, 16,842 and 4,210
     shares of Common 


                                      -33-




<PAGE>


     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 F. 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.

(5)  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"), 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.

(6)  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.

(7)  Includes 166,945 shares of Common Stock purchased by United States Surgical
     Corporation from the Company on September 30, 1997. See "Item 5. Market for
     Registrant's Common Equity and Related Stockholder Matters-- Recent Sale of
     Unregistered Securities."

(8)  This figure is based upon information set forth in a Schedule 13D/A dated
     July 8, 1997, filed by a group consisting of Samuel D. Isaly, Viren Mehta
     and certain entities affiliated with these individuals including
     Pharma/Health, M and I Investors, Inc., Caduceus Capital, L.P., Caduceus
     Capital Management, Inc. and Worldwide Health Services Portfolio.

(9)  This figure is based upon information set forth in a Schedule 13G dated
     January 9, 1997, filed by Pioneering Management Corporation.

(10) 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. 

(11) Includes 31,250 shares which may be acquired upon the exercise of warrants.

(12) Consists of shares beneficially owned by CHVP (See footnote 4 above).
     Includes 3,400 shares which may be acquired upon the exercise of options
     within 60 days of October 1, 1997. Excludes 3,400 shares obtainable through
     the exercise of options granted to Mr. Howe which are not exercisable
     within 60 days of October 1, 1997. Mr. Howe disclaims beneficial ownership
     of shares held or beneficially owned by CHVP.


                                      -34-




<PAGE>


(13) Includes 23,400 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 (See note 10). Excludes 3,400 shares obtainable through the
     exercise of options granted to Ms. More which are not exercisable within 60
     days of October 1, 1997. Ms. More is a General Partner at Oak Investments.

(14) Includes 176,250 shares of Common Stock that may be acquired upon the
     exercise of options within 60 days of October 1, 1997 and 300 shares, in
     aggregate, held in the names of Dr. Bell's three minor children. Excludes
     308,750 shares obtainable through the exercise of options granted to Dr.
     Bell which are not exercisable within 60 days of October 1, 1997 and 90,000
     shares held in trust for Dr. Bell's children of which Dr. Bell disclaims
     beneficial ownership. Dr. Bell disclaims beneficial ownership of the shares
     held in the name of his minor children.

(15) Includes 4,686 shares that may be acquired upon the exercise of warrants
     and 10,900 shares that may be acquired on the exercise of options that are
     exercisable within 60 days of October 1, 1997. Excludes 3,400 shares
     obtainable through the exercise of options granted to Dr. Fried which are
     not exercisable within 60 days of October 1, 1997.

(16) Includes 55,000 shares of Common Stock which may be acquired upon the
     exercise of options granted to Dr. Squinto within 60 days of October 1,
     1997 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 his wife.
     Excludes 85,000 shares obtainable through the exercise of options granted
     to Dr. Squinto which are not exercisable within 60 days of October 1, 1997.
     Dr. Squinto disclaims beneficial ownership of the shares held in the name
     of his minor children and the foregoing trusts.

(17) Includes 47,500 shares which may be acquired upon the exercise of options
     within 60 days of October 1, 1997 and 300 shares, in aggregate, held in the
     names of Mr. Keiser's three minor children. Excludes 102,500 shares
     obtainable through the exercise of options granted to Mr. Keiser, which are
     not exercisable within 60 days of October 1, 1997. Mr. Keiser disclaims
     beneficial ownership of the shares held in the name of his minor children.

(18) Includes 8,400 shares that may be acquired upon the exercise of options
     within 60 days of October 1, 1997. Excludes 3,400 shares obtainable through
     the exercise of options granted to Dr. Matis which are not exercisable
     within 60 days of October 1, 1997.

(19) Includes 65,000 shares of Common Stock which may be acquired upon the
     exercise of options granted to Dr. Matis within 60 days of October 1, 1997
     and 150 shares, in aggregate, held in the names of Dr. Matis' three minor
     children. Excludes 85,000 shares obtainable through the exercise of
     options, granted to Dr. Matis, which are not exercisable within 60 days of
     October 1, 1997. Dr. Matis disclaims beneficial ownership of the shares
     held in the name of his minor children.

(20) Excludes 3,400 shares obtainable through the exercise of options, granted
     to Dr. Link, which are not exercisable within 60 days of October 1, 1997.

(21) Includes 10,900 shares which may be acquired upon the exercise of options
     within 60 days of October 1, 1997. Excludes 3,400 shares obtainable through
     the exercise of options granted to Dr. Marks, which are not exercisable
     within 60 days of October 1, 1997.

(22) Consists of 32,500 shares of Common Stock which may be acquired upon the
     exercise of options granted to Dr. Alford within 60 days of October 1, 1997
     and 100 shares held in the 


                                      -35-




<PAGE>


     name of Dr. Alford's minor child. Excludes 73,250 shares obtainable through
     the exercise of options, granted to Dr. Alford, which are not exercisable
     within 60 days of October 1, 1997.

(23) 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, 1997 and 433,250 shares
     of Common Stock which may be acquired upon the exercise of options within
     60 days of October 1, 1997.



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 was 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. Through July 31, 1997, the Company 
received $4.0 million in research and development support under its
collaboration with US Surgical.

     In September 1997, US Surgical and the Company modified the July 1995 Joint
Development Agreement. As part of the modification, US Surgical made an
additional $6.5 million payment to the Company for equity, exclusive licensing
rights, and certain manufacturing assets. Under the modified agreement, the
additional $6.5 million payment comprised: (i) a $3 million equity investment in
the Company through the purchase of 166,945 shares of the Company's Common Stock
at a price of $17.97 per share, which represented a 25% premium over the market
price on the day prior to the date of closing and (ii) a $3.5 million payment to
acquire technology and certain xenograft manufacturing assets. Further, as part
of the amended agreement, US Surgical and the Company agreed that the
preclinical milestone payments in the original agreement are considered to have
been satisfied. At October 1, 1997, US Surgical beneficially owned an aggregate
of 824,087 shares of Common Stock or approximately 9.1% of the Company's
outstanding shares of common stock.

                                      -36-




<PAGE>


     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.
During the fiscal year ended July 31, 1997 the Company was not required to make
any payments pursuant to the above-referenced license agreements.

     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 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. During the fiscal year ended July 31, 1997
the Company was not required to make any payments pursuant to the
above-referenced research agreement.

     In addition, the Company had signed in June 1992 four-year consulting
contracts with Drs. Sims and Wiedmer. For fiscal year ended July 31, 1996, Drs.
Sims and Wiedmer were paid by the Company directly less than $60,000 and in
fiscal year ended July 31, 1997, no payments were made direct to Drs. Sims and
Wiedmer by the Company. As of July 31, 1997, the Company has not renewed the
consulting contracts. Dr. Sims is currently the Associate Director for Research
of The Blood Center of Southeastern Wisconsin and the research operations of
Drs. Sims and 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 required 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 notes thereto.

    (3) Exhibits:

       3.1    Certificate of Incorporation, as amended.*(1)

       3.2    Bylaws.*(1)

       4.1    Specimen Common Stock Certificate.*(1)

       10.1   Employment Agreement, dated April 1, 1997, between the Company and
              Dr. Leonard Bell.(2)

       10.2   Employment Agreement, dated October 22, 1997, between the Company
              and David W. Keiser.

       10.3   Employment Agreement, dated October 22, 1997, between the Company
              and Dr. Stephen P. Squinto.

       10.4   Employment Agreement, dated October 22, 1997 between the Company
              and Dr. Louis A. Matis.

       10.5   Employment Agreement, dated July 1993, between the Company and Dr.
              James A. Wilkins, as amended.*(1)

       10.6   Employment Agreement, dated July 1994, between the Company and Dr.
              Bernadette L. Alford, as amended.*(1)

       10.7   Administrative Facility Lease, dated August 23, 1995, between the
              Company and Science Park Development Corporation.*(1)

       10.8   Research and Development Facility Lease, dated August 23, 1995,
              between the Company and Science Park Development Corporation.*(1)

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


                                      -38-



<PAGE>


       10.10  Company's 1992 Stock Option Plan, as amended.*(1)

       10.11  Company's 1992 Outside Directors Stock Option Plan, as
              amended.*(1)

       10.12  Registration Agreement, dated December 4, 1992, by the Company for
              the benefit of certain individuals listed on schedules thereto, as
              amended.*(1)

       10.13  Amendment to Registration Agreement, dated July 31, 1995, between
              the Company and United States Surgical Corporation.*(1)

       10.14  Agreement, dated June 15, 1993, by the Company for the benefit of
              certain individuals listed on schedules thereto, as amended.*(1)

       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.*(1)

       10.16  Stock Purchase Agreement, dated July 31, 1995, between the Company
              and United States Surgical Corporation.*(1)

       10.17  Form of Warrant to purchase shares of the Company's Common Stock
              issued pursuant to certain of the Company's private
              placements.*(1)

       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.*(1)

       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.*(1)

       10.20  License Agreement dated as of May 27, 1992 between the Company and
              Yale University, as amended September 23, 1992.*(1)+

       10.21  Exclusive License Agreement dated as of June 19, 1992 among the
              Company, Yale University and Oklahoma Medical Research
              Foundation.*(2)

       10.22  Research & Development Agreement dated as of June 19, 1992 between
              the Company and Oklahoma Medical Research Foundation.*(1)+

       10.23  License Agreement dated as of September 30, 1992 between the
              Company and Yale University, as amended July 2, 1993.*(1)+

       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.*(1)+

       10.25  Cooperative Research and Development Agreement dated December 10,
              1993 between the Company and the National Institutes of
              Health.*(1)+


                                      -39-




<PAGE>


       10.26  License Agreement dated January 25, 1994 between the Company and
              The Austin Research Institute.*(1)+

       10.27  Exclusive Patent License Agreement dated April 21, 1994 between
              the Company and the National Institutes of Health.*(1)+

       10.28  License Agreement dated July 22, 1994 between the Company and The
              Austin Research Institute.*(1)+

       10.29  License Agreement dated as of January 10, 1995 between the Company
              and Yale University.*(1)+

       10.30  Joint Development Agreement dated as of July 31, 1995 between the
              Company and United States Surgical Corporation.*(1)+

       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.*(1)+

       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.*(1)+

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

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

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

       10.36  Research and Development Facility Lease, dated April 1, 1996,
              between the Company and Science Park Development Corporation.*(3)

       10.37  License Agreement dated March 27, 1996 between the Company and
              Medical Research Council.*(3)+

       10.38  License Agreement dated May 8, 1996 between the Company and Enzon,
              Inc.*(3)+

       10.39  License and Collaborative Research Agreement between Alexion
              Pharmaceuticals, Inc. and Genetic Therapy, Inc.*(3)+

       10.40  Amended Joint Development Agreement as of September 1997 between
              the Company and United States Surgical Corporation.*(4)++

       10.41  Form Stock Purchase Agreement dated June 1997.

       10.42  Stock Purchase Agreement dated September 9, 1997 by and between
              the Company and BB Biotech.

       10.43  Stock Purchase Agreement dated September 30, 1997 by and between
              the Company and U.S. Surgical.*(4)++

       23.1   Consent of Arthur Andersen LLP

       99     Important Factors Regarding Forward-Looking Statements


                                      -40-




<PAGE>


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

*    Previously filed

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

(2)  Incorporated by reference to the Company's Amendment No. 1 to Registration
     Statement on Form S-1 (Reg. No. 333-19905) filed on April 4, 1997.

(3)  Incorporated by reference to the Company's Annual report on Form 10-K for
     the fiscal year ended July 31, 1996.

(4)  Incorporated by reference to the Company's Current Report on Form 8-K
     dated October 1, 1997.

+    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) Reports on Form 8-K

        Current Report on Form 8-K dated June 17, 1997 relating to the Company's
           sale of 1,450,000 shares of the Company's Common Stock.

        Current Report on Form 8-K dated July 9, 1997 relating to the Company's
           sale of shares referenced above.

        Current Report on Form 8-K dated September 9, 1997 relating to the
           Company's sale of $10,000,000 of Series B Preferred Stock.

        Current Report on Form 8-K dated October 1, 1997 relating to the
           Amendment to the Joint Development Agreement with United States
           Surgical Corporation and the sale of the Company's Common Stock to
           United States Surgical.


(c) Exhibits.

     See (a) (3) above


(d) Financial Statement Schedules

     See (a) (2) above


                                      -41-

<PAGE>



                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities 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.


                                         By: /s/ LEONARD BELL
                                             ----------------------------------
                                             Leonard Bell, M.D.
                                             President, Chief Executive Officer,
                                               Secretary and Treasurer


                                         By: /s/ DAVID W. KEISER
                                             -----------------------------------
                                             David W. Keiser
                                             Executive Vice President and
                                               Chief Operating Officer


     Pursuant to the requirements of the Securities Act of 1934 this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.


/s/ LEONARD BELL              President, Chief Executive        October 24, 1997
- ----------------------------  Officer, Secretary,
Leonard Bell, M.D             Treasurer and Director
                              (principal executive officer)


/s/ DAVID W. KEISER           Executive Vice President and      October 24, 1997
- ----------------------------  Chief Operating Officer      
David W. Keiser               (principal financial officer)
                              

/s/ BARRY P. LUKE             Senior Director of Finance        October 24, 1997
- ----------------------------  and Administration (principal
Barry P. Luke                 accounting officer)          
                              

/s/ JOHN H. FRIED             Chairman of the Board of          October 24, 1997
- ----------------------------  Directors
John H. Fried, Ph.D.          


/s/ TIMOTHY F. HOWE           Director                          October 24, 1997
- ----------------------------
Timothy F. Howe


/s/ MAX LINK                  Director                          October 24, 1997
- ----------------------------
Max Link, Ph.D.


/s/ JOSEPH A. MADRI           Director                          October 24, 1997
- ----------------------------
Joseph A. Madri, Ph.D., M.D.


/s/ LEONARD MARKS             Director                          October 24, 1997
- ----------------------------
Leonard Marks, Jr., Ph.D.


/s/ EILEEN M. MORE            Director                          October 24, 1997
- ----------------------------
Eileen M. More


                                      -42-

<PAGE>

                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----
Report of Independent Public Accountants ................................   F-2

Balance Sheets as of July 31, 1996 and 1997 .............................   F-3

Statements of Operations for the Years Ended July 31, 1995,
  1996, 1997, and for the Period from Inception (January 28, 1992)
  Through July 31, 1997 .................................................   F-4

Statements of Stockholders' Equity for the Period from
  Inception (January 28, 1992) Through July 31, 1997 ....................   F-5

Statements of Cash Flows for the Years Ended July 31, 1995,
  1996, 1997, and for the Period from Inception (January 28, 1992)
  Through July 31, 1997 .................................................   F-6

Notes to Financial Statements ...........................................   F-7

                                       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, 1996 and 1997,
and the related statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended July 31, 1997, and for the
period from inception (January 28, 1992) through July 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alexion Pharmaceuticals, Inc.
as of July 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended July 31, 1997, and for the
period from inception (January 28, 1992) through July 31, 1997, in conformity
with generally accepted accounting principles.

                                                         ARTHUR ANDERSEN LLP

Hartford, Connecticut
August 29, 1997 (except with

respect to the matters discussed 
in Note 16, as to which the date
is September 30, 1997)

                                       F-2



<PAGE>

                          ALEXION PHARMACEUTICALS, INC.

                          (A Development Stage Company)

                                 BALANCE SHEETS

                                                                July 31,
                                                     ---------------------------
                                                         1996              1997
                                                     ------------    -----------
               ASSETS

CURRENT ASSETS:
  Cash and cash equivalents ....................   $ 9,491,217    $ 16,742,516
  Marketable securities ........................     9,106,534       6,006,380
  Prepaid expenses .............................       466,731         232,385
                                                   -----------    ------------
        Total current assets ...................    19,064,482      22,981,281
                                                   -----------    ------------
EQUIPMENT, net .................................       592,271         786,495
                                                   -----------    ------------
OTHER ASSETS:
  Licensed technology rights, net ..............       330,365         242,366
  Patent application costs, net ................       194,004         168,691
  Organization costs, net ......................         5,280            --
  Security deposits and other assets ...........       267,578          81,728
                                                   -----------    ------------
                                                       797,227         492,785
                                                   -----------    ------------
        Total assets ...........................   $20,453,980    $ 24,260,561
                                                   ===========    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of notes payable .............   $   322,508    $    130,000
  Current obligations under capital
    leases .....................................        28,593           7,768
  Accounts payable .............................       280,913         727,553
  Accrued expenses .............................       400,577       1,201,770
  Deferred revenue .............................     1,000,000         347,070
                                                   -----------    ------------
        Total current liabilities ..............     2,032,591       2,414,161
                                                   -----------    ------------
NOTES PAYABLE, less current portion

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

STOCKHOLDERS' EQUITY:
  Convertible preferred stock $.0001 par
    value; 5,000,000 shares authorized;
    no shares are issued or outstanding
    at July 31, 1996 and 1997 ..................          --              --
  Common stock $.0001 par value; 25,000,000
    shares authorized; 7,334,909 and 8,858,012
    issued at July 31, 1996 and 1997,
     respectively ..............................           733             886
  Additional paid-in capital ...................    42,858,975      53,671,867
  Deficit accumulated during the
    development stage ..........................    24,574,681)    (31,826,251)
  Treasury stock, at cost, 11,875 shares .......          (102)           (102)
                                                   -----------    ------------
        Total stockholders' equity .............    18,284,925      21,846,400
                                                   -----------    ------------
        Total liabilities and
          stockholders' equity .................   $20,453,980    $ 24,260,561
                                                   ===========    ============


                 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 Years           For the Period   
                                                        Ended July 31,            From Inception   
                                     -----------------------------------------  (January 28, 1992) 
                                         1995           1996          1997     Through July 31, 1997
                                     -----------    ------------  ------------ ---------------------
<S>                                  <C>             <C>             <C>             <C> 
CONTRACT RESEARCH REVENUES .......   $   136,091    $ 2,640,239    $ 3,810,600    $  6,586,930
                                     -----------    -----------    -----------    ------------
OPERATING EXPENSES:
  Research and development .......     5,637,431      6,629,157      9,079,141      30,233,969

  General and administrative .....     1,591,886      1,843,093      2,826,783       9,517,649
                                     -----------    -----------    -----------    ------------
      Total operating
        expenses .................     7,229,317      8,472,250     11,905,924      39,751,618
                                     -----------    -----------    -----------    ------------

OPERATING LOSS ...................    (7,093,226)    (5,832,011)    (8,095,324)    (33,164,688)

OTHER INCOME (EXPENSE), net ......       (29,195)       397,495        843,754       1,338,437
                                     -----------    -----------    -----------    ------------
      Net loss ...................   $(7,122,421)   $(5,434,516)   $(7,251,570)   $(31,826,251)
                                     ===========    ===========    ===========    ============

NET LOSS PER COMMON SHARE
  (Note 2) .......................   $     (1.76)   $      (.95)   $      (.97)
                                     ===========    ===========    ===========

SHARES USED IN COMPUTING
  NET LOSS PER COMMON SHARE ......     4,055,966      5,746,697      7,450,762
                                     ===========    ===========    ===========
</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   
                                            =========   =========   =========     ========   ============
                                                                                     
                                                        
<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
                                           ============    ==========    =======   =======    ============
                                          
</TABLE>


                             
   The accompanying notes are an integral part of these financial statements.
                                                                             
                                     F-5(a)


<PAGE>


<TABLE>

                                                   ALEXION PHARMACEUTICALS, INC.

                                                   (A Development Stage Company)

                                                 STATEMENTS OF STOCKHOLDERS' EQUITY


<CAPTION> 
          
                                                                                                                  Deficit     
                                                    Convertible                                                 Accumulated   
                                                  Preferred Stock           Common Stock          Additional     During the
                                            -------------------------  ------------------------    Paid-In      Development
                                            Shares           Amount      Shares        Amount       Capital        Stage
                                            ------           ------    ----------     ---------   ----------    ------------
<S>                                         <C>               <C>       <C>            <C>        <C>           <C>
BALANCE, July 31, 1995 ...............      1,986,409       $  199      3,996,913         400     $24,258,885   $(19,140,165) 

  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 ...........................           --            --            --          --              --       (5,434,516) 
                                         ------------       -------    ----------      ------     -----------   ------------  
BALANCE, July 31, 1996 ...............           --            --       7,334,909         733      42,858,975    (24,574,681) 

  Issuance of common stock, net of
    issuance costs of $813,835 .......           --            --       1,450,000         145      10,423,520           --    

  Issuance of common stock from
    exercise of stock options ........           --            --          34,937           4          83,066           --    

  Issuance of common stock from
    exercise of warrants .............           --            --          38,166           4         286,242           --    

  Net change in unrealized losses
    on marketable securities .........           --            --            --          --            20,064           --    

  Net loss ...........................           --            --            --          --             --        (7,251,570) 
                                         ------------       -------     ---------      ------     -----------   ------------  
BALANCE, July 31, 1997 ...............           --         $  --       8,858,012      $  886     $53,671,867   $(31,826,251) 
                                         ============       =======     =========      ======     ===========   ============  

<CAPTION>


                                                                                    
                                                              Treasury Stock,          Total      
                                                Deferred         at cost            Stockholders'   
                                                Offering     -----------------        Equity      
                                                 Costs       Shares     Amount      (Deficiency   
                                               ----------    ------     ------      -------------   
<S>                                             <C>          <C>        <C>        <C>             
BALANCE, July 31, 1995 ...............          $  --         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)  
                                                ------       ------     -----       -----------   
BALANCE, July 31, 1996 ...............            --         11,875      (102)       18,284,925   
                                                                                                  
  Issuance of common stock, net of                                                                
    issuance costs of $813,835 .......            --           --         --         10,423,665   
                                                                                                  
  Issuance of common stock from                                                                   
    exercise of stock options ........            --           --         --             83,070   
                                                                                                  
  Issuance of common stock from                                                                   
    exercise of warrants .............            --           --         --            286,246   
                                                                                                  
  Net change in unrealized losses                                                                 
    on marketable securities .........            --           --         --             20,064   
                                                                                                  
  Net loss ...........................            --            --        --         (7,251,570)  
                                                ------       ------     -----      ------------   
BALANCE, July 31, 1997 ...............          $ --         11,875     $(102)     $ 21,846,400   
                                                ======       ======     =====      ============   
</TABLE>



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

                                     F-5(b)


<PAGE>


<TABLE>

                                                   ALEXION PHARMACEUTICALS, INC.

                                                   (A Development Stage Company)

                                                      STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                                                             
                                                                                                                         
                                                                                                                  For the Period 
                                                                      For the Years Ended July 31,                From Inception  
                                                            ------------------------------------------------    (January 28, 1992)
                                                                1995              1996              1997       Through July 31, 1997
                                                                ----              ----              ----       ---------------------
<S>                                                          <C>               <C>               <C>                <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ................................................  $(7,122,421)      $(5,434,516)      $(7,251,570)       $(31,826,251)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
      Depreciation and amortization .......................      786,628           811,120           698,404           3,095,980
      Compensation expense related to grant of
        stock options .....................................        --              122,500             --                122,500
      Net realized loss (gain) on marketable securities ...       28,956             9,156              (624)             44,766
      Change in assets and liabilities -
        Prepaid expenses ..................................      (14,361)         (294,269)          234,346            (232,385)
        Accounts payable ..................................      (99,483)          (37,604)          446,640             727,553
        Accrued expenses ..................................      (15,411)         (175,620)          801,193           1,201,770
        Deferred revenue ..................................    1,000,000             --             (652,930)            347,070
                                                             -----------       -----------       -----------        ------------
             Net cash used in operating activities ........   (5,436,092)       (4,999,233)       (5,724,541)        (26,518,997)
                                                             -----------       -----------       -----------        ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  (Purchases of) proceeds from marketable securities, net .    1,795,575        (8,443,001)        3,119,187          (5,998,578)
  Purchases of equipment ..................................     (356,710)         (332,427)         (749,214)         (2,921,957)
  Licensed technology costs ...............................      (32,500)            --                --               (615,989)
  Patent application costs ................................      (53,746)          (41,714)          (23,168)           (358,972)
  Organization costs ......................................         --               --                --                (63,530)
                                                             -----------       -----------       -----------        ------------
             Net cash (used in) provided by investing
               activities .................................    1,352,619        (8,817,142)        2,346,805          (9,959,026)
                                                             -----------       -----------       -----------        ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from issuance of preferred and
    common stock ..........................................    7,440,186        18,473,922        10,792,981          52,342,664
  Deferred offering costs .................................       55,000             --                --                  --
  Advances from stockholder ...............................        --                --                --              1,200,000
  Repayments of capital lease obligations .................      (87,034)         (103,447)          (29,024)           (370,295)
  Borrowings under notes payable ..........................        --                --                --              1,179,135
  Repayments of notes payable .............................     (273,528)         (322,333)         (320,772)         (1,049,135)
  Security deposits and other assets ......................      219,039           180,238           185,850             (81,728)
  Repurchase of common stock ..............................        --                --                --                   (102)
                                                             -----------       -----------       -----------        ------------
             Net cash provided by financing activities ....    7,353,663        18,228,380        10,629,035          53,220,539
                                                             -----------       -----------       -----------        ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS .................    3,270,190         4,412,005         7,251,299          16,742,516

CASH AND CASH EQUIVALENTS, beginning of period ............    1,809,022         5,079,212         9,491,217               --
                                                             -----------       -----------       -----------        ------------
CASH AND CASH EQUIVALENTS, end of period ..................  $ 5,079,212       $ 9,491,217       $16,742,516        $ 16,742,516
                                                             ===========       ===========       ===========        ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for income taxes ..............................  $     6,554       $     --          $     --           $     30,684
                                                             ===========       ===========       ===========        ============
  Cash paid for interest expense ..........................  $   176,716       $   108,593       $    47,328        $    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
     (inflammation and 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
     third parties (see Note 10), non-human organ ("xenograft" organs) products
     designed for transplantation into humans without clinical rejection and
     immunoprotected retroviral vectors and producer cells for gene therapy.

     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 $31.8
     million through July 31, 1997. The Company has made no product sales to
     date and has recognized cumulative revenue from research grants and funding
     of $6.6 million through July 31, 1997. 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. During 1997, the
     Company completed an offering of 1,450,000 shares of common stock resulting
     in net proceeds of approximately $10.4 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 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 $22.7
     million as of July 31, 1997 will be sufficient to fund operations of the
     Company through at least calendar 1998.


                                      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 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, 1997, the Company's
     marketable securities had a maximum maturity of approximately one year.

     The following is a summary of marketable securities at July 31, 1996 and
     1997:


<TABLE>
<CAPTION>

                                                            Unrealized
                                             Amortized         Gains           Fair
                                               Cost          (Losses)          Value
                                             ----------     -----------     ----------
      <S>                                    <C>              <C>           <C>   
      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
                                             ==========       ========      ==========

      U.S. government obligations ........   $  498,216         $3,034      $  501,250
      Municipal obligations ..............    4,000,535          4,145       4,004,680
      Corporate bonds ....................    1,500,038            412       1,500,450
                                             ----------       --------      ----------
           Total marketable
             securities at
             July 31, 1997 ...............   $5,998,789       $  7,591      $6,006,380
                                             ==========       ========      ==========

</TABLE>


                                      F-8


<PAGE>

     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.

     Long-lived assets --

     In March 1995, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 121, "Accounting for the Impairment of
     Long-Lived Assets and Long-Lived Assets to be Disposed of" (SFAS 121). SFAS
     121 requires a company to review long-lived assets for impairment whenever
     events or changes in circumstances indicate that the carrying amount of an
     asset may not be recoverable. The adoption of this standard did not have a
     material impact on the Company's results of operations or financial
     position.

     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, 1996 and 1997 amounted to $285,624 and $373,623, 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,
     1996 and 1997 amounted to $141,801 and $190,282, respectively.

     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.

                                      F-9


<PAGE>

     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.

     New accounting pronouncements --

     In March 1997, the Financial Accounting Standards Board issued SFAS No.
     128, "Earnings Per Share", which establishes new standards for computing
     and presenting earnings per share. SFAS 128 is effective for financial
     statements issued for periods ending after December 31, 1997 and earlier
     adoption is not permitted. The Company believes that the impact of adoption
     of this statement will not have a material effect on net loss per share as
     reported in the accompanying financial statements.

     In July 1997, the Financial Accounting Standards Board issued SFAS No. 130
     "Reporting Comprehensive Income", which establishes standards for reporting
     and display of comprehensive income and its components in a full set of
     general purpose financial statements. The objective of the statement is to
     report a measure of all changes in equity of an enterprise that result from
     transactions and other economic events of the period other than
     transactions with owners ("comprehensive income"). SFAS No. 130 is
     effective for financial statements issued for fiscal years beginning after
     December 15, 1997 with earlier application permitted. The Company believes
     that the impact of adoption of this statement will not have a significant
     effect on the Company's financial position and 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
     including those 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, 1994 to April
     30, 1996 using the treasury stock method.

                                      F-10


<PAGE>

3.   Equipment:

     A summary of equipment as of July 31, 1996 and 1997 is as follows:

                                                         July 31,
                                                --------------------------
                                                   1996            1997
                                                   ----            ----
      Laboratory equipment .................... $2,038,304      $2,645,553
      Office equipment ........................    112,351         230,432
      Furniture ...............................     22,088          45,971
      Equipment under capital leases ..........    378,064         378,064
                                                ----------      ----------
                                                 2,550,807       3,300,020

      Less -- Accumulated depreciation
        and amortization ......................  1,958,536       2,513,525
                                                ----------      ----------
                                                $  592,271      $  786,495
                                                ==========      ==========


4.   Security Deposits and Other Assets:

     A summary of security deposits and other assets as of July 31, 1996 and
     1997, is as follows:

                                                         July 31,
                                                --------------------------
                                                   1996            1997
                                                   ----            ----
      Amounts held in deposit as
        collateral for notes payable
        (see Note 7) ..........................   $183,444         $  -
      Other ...................................     84,134          81,728
                                                  --------         -------
                                                  $267,578         $81,728
                                                  ========         =======


5.   Accrued Expenses:

     A summary of accrued expenses as of July 31, 1996 and 1997, is as follows:

                                                         July 31,
                                                --------------------------
                                                   1996           1997
                                                   ----           ----
      Research and development ................  $ 86,369      $  590,000
      Payroll and employee benefits ...........    23,000         354,395
      Professional fees .......................   225,990         185,281
      Other ...................................    65,218          72,094
                                                 --------      ----------
                                                 $400,577      $1,201,770
                                                 ========      ==========


                                      F-11


<PAGE>

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, 1997. Upon certain
     conditions, the amounts held as security deposits can be reduced and the
     funds released to the Company. After completion of the Company's IPO in
     1996 and the Company's common stock offering in 1997, all the security
     deposits relating to the lease financing arrangement 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.

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 1998, at interest
     rates ranging from approximately 10%-12% per annum.

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 provide 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.


                                      F-12



<PAGE>

     Research & development agreements generally provide 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, 1997, for each of the next five years are as follows:

                    Year                                      Research &
                   Ending                License             Development
                  July 31,             Agreements             Agreements
                  --------             ----------            -----------
                    1998                 $32,000               $109,811
                    1999                  27,000                 50,000
                    2000                  22,000                 50,000
                    2001                  22,000                 50,000
                    2002                  22,000                 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.

10.  Contract Research Revenues:

     Contract research revenues recorded by the Company during the three years
     ended July 31, 1997 consisted of research and development support under
     collaborations with third parties and various government grants from the
     National Institute of Health and the Department of Commerce.

     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 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). For the years ended July 31, 1996 and 1997, the
     Company recognized $2.0 and $1.8 million, respectively of revenue related
     to this agreement. As of July 31, 1997, the Company had received all of the
     preclinical funding available under this agreement. Additionally, during
     fiscal 1996 the third party purchased an additional $1.8 million of common
     stock offered in the Company's IPO.


                                      F-13


<PAGE>

     In December 1996, the Company entered into a license and collaborative
     research agreement with a third party relating to the Company's gene
     transfer technology. Under the agreement, the third party has been granted
     a worldwide exclusive license to use the Company's technology in its gene
     therapy products. The third party agreed to pay the Company an initial
     payment of $850,000 (consisting of a non-refundable license fee of $750,000
     and a one-time research support payment of $100,000) and to fund a minimum
     of $400,000 per year for two years for research and development support by
     the Company. The third party will also make payments to the Company upon
     achievement of certain product development milestones for gene therapy
     products utilizing the Company's technology and pay royalties on net sales,
     if any. For the year ended July 31, 1997, the Company recognized $1,083,330
     of revenue related to this agreement.

11.  Commitments:

     The Company has entered into three-year and five-year employment agreements
     with its executives. These agreements provide that these individuals will
     receive aggregate annual base salaries of approximately $916,000 as of July
     31, 1997. These individuals may also receive discretionary bonus awards, as
     determined by the Board of Directors.

     As of July 31, 1997, 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, 1997, under these
     leases and other noncancellable operating leases (primarily for equipment)
     are approximately $308,000 and $37,000 for the years ended July 31, 1998
     and 1999, respectively.

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-14



<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, make certain milestone payments, and 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.

     Fiscal 1997 Common Stock Offering --

     In July, 1997, the Company completed a private placement offering for
     1,450,000 shares of common stock, resulting in net proceeds of
     approximately $10.4 million.

     Rights to Purchase Preferred Stock --

     In February 1997, the Board of Directors of the Company declared a dividend
     of one preferred stock purchase right for each outstanding share of common
     stock. Under certain conditions, each right may be exercised to purchase
     one one-hundredth of a share of a new series of preferred stock at an
     exercise price of $75, subject to adjustment. The rights may be exercised
     only after a public announcement that a party acquired 20% or more of the
     Company's common stock or after commencement or public announcement to make
     a tender offer for 20% or more of the Company's common stock. The rights,
     which do not have voting rights, expire on March 6, 2002, and may be
     redeemed by the Company at a price of $.01 per right at any time prior to
     their expiration or the acquisition of 20% or more of the Company's stock.
     The preferred stock purchasable upon exercise of the rights will have a
     minimum preferential dividend of $10 per year, but will be entitled to
     receive, in the aggregate, a


                                      F-15


<PAGE>

     dividend of 100 times the dividend declared on a share of common stock. In
     the event of a liquidation, the holders of the shares of preferred stock
     will be entitled to receive a minimum liquidation payment of $100 per
     share, but will be entitled to receive a aggregate liquidation payment
     equal to 100 times the payment to be made per share of common stock.

     In the event that the Company is acquired in a merger, other business
     combination transaction, or 50% or more of its assets, cashflow, or earning
     power are sold, proper provision shall be made so that each holder of a
     right shall have the right to receive, upon exercise thereof at the then
     current exercise price, that number of shares of common stock of the
     surviving company which at the time of such transaction would have a market
     value of two times the exercise price of the right.

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. In September 1996, the Plans were
     amended by shareholders' majority consent to increase the number of shares
     covered by the Plans to 1,800,000. 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.

     In October 1995, the Financial Accounting Standards Board issued SFAS No.
     123, Accounting for Stock-Based Compensation (SFAS 123). SFAS 123 requires
     the measurement of the fair value of stock options or warrants to be
     included in the statement of income or disclosed in the notes to financial
     statements. The Company has determined that it will continue to account for
     stock-based compensation for employees under Accounting Principles Board
     Opinion No. 25 and elect the disclosure-only alternative under SFAS 123.
     The Company has computed the pro forma discloses required under SFAS 123
     for options granted in fiscal 1996 and 1997 using the Black-Scholes option
     pricing model prescribed by SFAS 123. The weighted average assumptions used
     are as follows:

                                                   1996                1997
                                                   ----                ----
           Risk free interest rate ............    6.25%               6.25%
           Expected dividend yield ............       0%                  0%
           Expected lives .....................  5 years             5 years
           Expected volatility ................      53%                 53%

                                      F-16


<PAGE>

     Had compensation cost for the Company's stock option plans been determined
     based on the fair value at the grant dates of awards under these plans
     consistent with the method of SFAS 123, the Company's net loss and pro
     forma net loss per common share would have been increased to the pro forma
     amounts indicated below:

                                                  1996                  1997
                                                  ----                  ----
     Net loss:
       As reported ........................   $(5,434,516)          $(7,251,570)
       Pro forma ..........................    (5,540,770)           (7,815,053)
     Pro forma net loss per common share:     
         As reported ......................          (.95)                 (.97)
         Pro forma ........................          (.96)                (1.05)
                                           
     Because SFAS 123 method of accounting has not been applied to options
     granted prior to August 1, 1995, the result pro forma compensation cost may
     not be representative of that to be expected in future years.

     A summary of the status of the Company's stock options plan at July 31,
     1995, 1996 and 1997 and changes during the years then ended is presented in
     the table and narrative below:


<TABLE>
<CAPTION>

                                                     1995                     1996                   1997         
                                              ---------------------   ---------------------  --------------------
                                                           Weighted               Weighted              Weighted
                                                            Average                Average               Average
                                                           Exercise               Exercise              Exercise
                                                Options      Price    Options       Price    Options      Price
                                              ----------  ---------   -------     ---------  -------    ---------
      <S>                                     <C>          <C>        <C>          <C>        <C>          <C>
                                              
      Outstanding at August 1 ............     448,669     $7.85        842,324    $3.45      1,207,334    $ 5.46
      Granted/reissued ...................     671,284     $2.38        405,800    $9.62        337,250    $10.37
      Exercised ..........................      (1,500)    $7.50        (13,442)   $5.23        (34,937)   $ 2.38
      Cancelled ..........................    (276,129)    $7.96        (27,348)   $5.46        (25,363)   $ 6.19
                                              --------                ---------               ---------
      Outstanding at July 31 .............     842,324     $3.45      1,207,334    $5.46      1,484,284    $ 6.63
                                              ========                =========               =========
      Options exercisable at                                                       
        July 31 ..........................     203,652     $5.99        363,492    $4.43        574,690    $ 4.98
      Weighted-average fair                                                        
        value of options                                                           
        granted during the                                                         
        year .............................                                         $5.38                   $ 5.40
                                                                   
 
</TABLE>


     During 1996, options to purchase 388,300 shares of common stock were
     granted at an exercise price equal to the fair value of the stock at the
     date of grant. The weighted average exercise price of these options was
     $9.94 per share. The weighted average fair value of these options at the
     date of grant was $5.27 per option. In addition, options to purchase 17,500
     shares of common stock were granted at an exercise price of $2.50 per share
     which was less than the fair value of the stock at the date of grant. The
     weighted average fair value of these options at the date of grant was $7.73
     per option.

                                      F-17



<PAGE>

     The following table presents weighted average price and life information
     about significant option groups outstanding at July 31, 1997.


<TABLE>
<CAPTION>

                                              Weighted
                                               Average     Weighted                Weighted
                                              Remaining    Average                 Average
         Range of                Number       Contractual  Exercise      Number    Exercise
      Exercise prices          Outstanding    Life (Yrs)    Price     Exercisable   Price
      ---------------          -----------    ----------   --------   -----------  --------
      <S>                       <C>              <C>       <C>         <C>          <C>

      Less than $2.51 ........   624,484         7.4       $ 2.38      331,438      $ 2.38
      $2.51 - $8.24 ..........   150,000         4.9       $ 7.57      148,500      $ 7.57
      $8.25 - $12.125 ........   709,800         9.2       $10.18       94,752      $10.00
                               ---------                               -------     
                               1,484,284         8.0       $ 6.63      574,690      $ 4.98
                               =========                               =======     
                                                                                
</TABLE>
                                       

     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 to employees 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.

     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.
     During fiscal 1997, warrants to purchase 38,166 shares of common stock were
     exercised with an aggregate purchase price of $286,246.

     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 was assigned to the warrants in the accompanying
     balance sheets.

                                      F-18


<PAGE>

     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 1997. 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 and $31,000 for the years ended July
     31, 1996 and 1997, respectively.

15.  Federal Income Taxes:

     At July 31, 1997, the Company has available for tax reporting purposes, net
     operating loss carryforwards of approximately $13,400,000 which expire
     commencing in fiscal 2008. The Company also has research and development
     credit carryovers of approximately $1,100,000 which expire commencing in
     fiscal 2008. The Tax Reform Act of 1986 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 significantly limit the Company's use of its
     existing net operating loss and tax credit carryforwards.

     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, 1997 are as follows:

      Deferred tax assets:
        Net operating loss carryforwards ....................  $ 13,400,000
        Tax credit carryforwards ............................     1,100,000
        Other ...............................................       370,000
                                                               ------------
      Total deferred tax assets .............................    14,870,000
      Valuation allowance for deferred tax assets ...........   (14,870,000)
                                                               ------------
      Net deferred tax assets ...............................  $      --
                                                               ============

     The Company has not yet achieved profitable operations. Accordingly,
     management believes the tax benefits as of July 31, 1997 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-19



<PAGE>

16.  Subsequent Events:

     In September 1997, the Company sold 400,000 shares of convertible preferred
     stock to an investor for gross proceeds of $10 million. This stock is
     convertible automatically in six months, or at the election of the holder
     at any time after the date of issuance, into 935,782 shares of common
     stock. The investor is entitled to a dividend of $2.25 per share of
     convertible preferred stock if this stock is held for six months. The
     dividend, if paid, is payable in cash or the Company's common stock at the
     discretion of the Company. The Company has an option to redeem the
     convertible preferred stock under certain conditions, as defined. Should
     the Company elect to exercise this option, the Company is required to fund
     such redemption and related dividends in cash.

     In September 1997, the Company modified its July 1995 research and
     development agreement with a third party (See Note 10). As part of the
     modification, the third party made an additional $6.5 million payment to
     the Company for equity, exclusive licensing rights and certain xenograft
     manufacturing assets. Under the modified agreement, the additional $6.5
     million payment consisted of: (i) a $3 million equity investment in the
     Company through the purchase of 166,945 shares of the Company's common
     stock and (ii) a $3.5 million payment to acquire exclusive licensing rights
     and certain xenograft manufacturing assets. Further, as part of the
     modified agreement, the third party and the Company agreed that the
     preclinical milestone payments in the original agreement are considered to
     have been satisfied.


                                      F-20

<PAGE>



 
                                EXHIBIT INDEX


Exhibit No.
- -----------

    10.2     Employment Agreement, dated October 22, 1997, between the Company
             and David W. Keiser.

    10.3     Employment Agreement, dated October 22, 1997, between the Company
             and Dr. Stephen P. Squinto.

    10.4     Employment Agreement, dated October 22, 1997, between the Company
             and Dr. Louis A. Matis.

    10.41    Form Stock Purchase Agreement dated June 1997.

    10.42    Stock Purchase Agreement dated September 9, 1997 by and between
             the Company and B B Biotech.

    23.1     Consent of Arthur Andersen LLP.

    27       Financial Data Schedule.

    99       Important Factors Regarding Forward-Looking Statements.









                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the "Agreement") dated as of October 22, 1997,
by and between Alexion Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and David Keiser (the "Executive").


                               W I T N E S S E T H


     WHEREAS, the Company wishes to employ Executive in an executive capacity
and Executive is desirous of being so employed;

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

     1. Employment, Duties and Acceptance.

     (a) The Company hereby employs the Executive for the Term (as hereinafter
defined), to render full-time services to the Company as Executive
Vice-President and Chief Operating Officer ("COO"), and to perform such duties
commensurate with such office as he shall reasonably be directed by the Board of
Directors (the "Board") of the Company to perform, which duties shall be
consistent with the provisions of the By-laws in effect on the date hereof that
relate to the duties of the COO and Executive Vice President. The Executive will
report directly to the President.

     (b) The Executive hereby accepts such employment and agrees to render the
services described above.

     2. Term of Employment.

     The term of the Executive's
 employment under this Agreement (the "Term")
commenced as of July 17, 1997 (the "Effective Date") and shall end on the third
anniversary thereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement. This Agreement shall not be renewed unless otherwise mutually agreed
by the parties.

     3. Compensation.

     (a) As full compensation for all services to be rendered pursuant to this
Agreement, the Company agrees to pay the Executive, during the Term, an annual
base salary of $178,000 for the first year of the Term and for each subsequent
year of the Term an amount to be determined by the Company, payable in such
installments as is the policy of the Company with respect to executive employees
of the Company (the "Salary").

     (b) Executive may receive bonuses on such dates, in such amounts and on
such other terms as may be determined by the Board of Directors in 


                                        1




<PAGE>


its sole discretion. In the sole discretion of the Board of Directors, such
bonuses, if any, may be paid in the form of grants of stock of the Company or
non-qualified stock options, each granted pursuant to plans adopted by the
Company and approved by the Company's Board of Directors.

     (c) The Company shall pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by him during the Term in the performance of
his services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as it reasonably may require.

     (d) The Executive shall be eligible under any incentive plan, stock option
plan, stock award plan, bonus, participation or extra compensation plan,
relocation plan, pension, group insurance or other so-called "fringe" benefits
which the Company generally provides for its executives.

     4. Other Benefits.

     In addition to all other benefits contained herein, the Executive shall be
entitled to:

          (1) Payment of health, disability, and life insurance at regular
     rates; and

          (2) Vacation time of four weeks per year taken, subject to fulfillment
     of his duties hereunder, in accordance with the vacation policy of the
     Company during the Term.

     5. Confidentiality.

     The Executive agrees that the "Proprietary Information and Inventions
Agreement" annexed hereto as Exhibit A and made a part hereof shall be deemed to
be a part of this Employment Agreement.

     6. Non-Competition.

     (a) During the Term the Executive shall not (1) provide any services,
directly or indirectly, to any other business or commercial entity or (2)
participate in the formation of any business or commercial entity. For a period
of one year following the date of termination, if terminated by the Company for
Cause or by the Executive for any reason other than as provided in Section 8
hereof, the Executive shall not (1) provide any services, directly or
indirectly, to any other business or commercial entity engaged in the Company's
Field of Interest or (2) participate in the formation of any business or
commercial entity engaged in the Company's Field of Interest; provided, however,
that nothing contained in this Section 6 shall be deemed to prohibit the
Executive from acquiring, solely as an investment, shares of capital stock (or
other interests) of any corporation (or other entity) not exceeding 2% of such
corporation's (or other entity's) then outstanding shares of capital stock. The
"Company's Field of Interest" means the primary business of the Company as


                                        2




<PAGE>


determined from time to time by the Board of Directors. This Section 6 shall be
subject to written waivers that may be obtained by the Executive from the
Company.

     (b) If the Executive commits a breach, or threatens to commit a breach, of
any of the provisions of this Section 6 or Exhibit A, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company.

     (c) If any of the covenants contained in Section 5, 6 or 10, or any part
thereof, is hereafter construed to be invalid or unenforceable, the same shall
not affect the remainder of the covenant or covenants, which shall be given full
effect without regard to the invalid portions.

     (d) If any of the covenants contained in Section 5, 6 or 10, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or area of such
provision and, in its reduced form, such provision shall then be enforceable.

     (e) The parties hereto intend to and hereby confer jurisdiction to enforce
the covenants contained in Sections 5, 6 and 10 upon the courts of any state
within the geographical scope of such covenants. In the event that the courts of
any one or more of such states shall hold any such covenant wholly unenforceable
by reasons of the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect the
Company's right to the relief provided above in the courts of any other states
within the geographical scope of such other covenants, as to breaches of such
covenants in such other respective jurisdictions, the above covenants as they
relate to each state being, for this purpose, severable into diverse and
independent covenants.

     7. Termination by the Company.

     (a) The Company may terminate this Agreement without Cause or if any one or
more of the following shall occur:

          (1) The Executive shall die during the Term; provided, however, that
     the Executive's legal representatives shall be entitled to receive his
     Salary through the last day of the month in which his death occurs.

          (2) The Executive shall become physically or mentally disabled so that
     he is unable substantially to perform his services hereunder for (a) a
     period of 120 consecutive days, or (b) for shorter periods aggregating 180
     days during any twelve-month period. Notwithstanding such disability the
     Company shall continue to pay the Executive his Salary through the date of
     such termination.

          (3) The Executive acts, or fails to act, in a manner that provides
     Cause for termination. For purposes of this Agreement, the term "Cause"


                                        3




<PAGE>


     means (a) the Executive's indictment for, or conviction of, any crime or
     serious offense involving money or other property which constitutes a
     felony in the jurisdiction involved, (b) the Executive's wilful and
     continual neglect or failure to discharge his duties, responsibilities, and
     obligations as Executive Vice President and COO of the Company after notice
     and a reasonable opportunity to cure, (c) the Executive's wilful misconduct
     or wilful breach of his fiduciary duties to the Company in connection with
     the performance of his duties, (d) the Executive's violation of any of the
     non-competition provisions of Section 6 hereof or the Executive's breach of
     any confidentiality provisions contained in Exhibit A hereto or (e) any act
     of fraud or embezzlement by the Executive involving the Company or any of
     its Affiliates.

     (b) All determinations of Cause or termination pursuant this Section 7
shall be determined by the Board (excluding the Executive if he is at such time
a member of the Board).

     8. Termination by the Executive.

     The Executive may terminate this Agreement on written notice to the Company
in the event of a material breach of the terms of this Agreement by the Company
and such breach continues uncured for 30 days after notice of such breach is
first given; provided, however, it shall constitute the termination of this
Agreement if such breach is for the payment of money and continues uncured for
ten days after notice of such breach is given.

     9. Severance.

     If, within the Term of this Agreement, the Company terminates this
Agreement for any reason other than Cause, death, or disability, or if the
Executive terminates this Agreement pursuant to Section 8, then: (1) the Company
shall pay the Executive a lump sum cash payment (the "Severance Payment") equal
to the greater of (x) the annual salary for the remainder of the then current
year of employment and (y) six months salary at the annual rate for the then
current year of employment; and (2) for options granted to the Executive prior
to the date of termination, the Company shall accelerate the vesting schedule
for such options such that the number of such options vested on the day of
termination shall be equal to the number of such options vested if the Executive
were to have been continuously employed by the Company until the date twelve
months after the date of termination. After termination of employment for any
reason other than death of the Executive, the Company shall continue to provide
all benefits subject to COBRA at its expense for the maximum required COBRA
period.

     10. Indemnification.

     The Company shall indemnify the Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company. The Company shall provide, at
its expense, Directors and Officers insurance for the Employee in amounts


                                       4




<PAGE>


reasonably satisfactory to the Executive to the extent available at reasonable
rates, which determination shall be made by the Board.

     11. Arbitration.

     Any controversy or claim arising out of or relating to this Agreement or
the breach thereof shall be settled by arbitration in the City of New York, in
accordance with the rules then existing of the American Arbitration Association
(three arbitrators), and judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The parties shall be free to pursue any
remedy before the arbitration tribunal that they shall be otherwise permitted to
pursue in a court of competent jurisdiction. The award of the arbitrators shall
be final and binding. During the pendency of any arbitration or any dispute not
yet submitted to arbitration, the Company shall not be entitled to any offset
against payments, stock awards or other benefits due to the Executive under this
Agreement or otherwise.

     12. Notices.

     All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):


                                       5




<PAGE>


           If to the Company:

           Alexion Pharmaceuticals, Inc.
           25 Science Park
           New Haven, Connecticut 06510

           Telephone: 203-776-1790
           Fax:       203-776-2089


           If to the Executive:

           David Keiser
           37 Georgetown Circle
           Madison, CT 06443

           Telephone: 203-421-5691

     13. General.

     (a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Connecticut applicable to agreements
made and to be performed entirely in Connecticut.

     (b) This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made by
either party that is not embodied in this Agreement, and neither party shall be
bound by or liable for any alleged representation, promise or inducement not so
set forth.

     (c) This Agreement may be amended, modified, superseded, canceled, renewed
or extended, and the terms or covenants hereof may be waived, only by a written
instrument executed by the parties hereto, or in the case of a waiver, by the
party waiving compliance. The failure of a party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by a party of the breach of any term
or covenant contained in this Agreement, whether by conduct or otherwise, or any
one or more or continuing waivers of any such breach, shall constitute a waiver
of the breach of any other term or covenant contained in this Agreement.


                                       6




<PAGE>


     (d) This Agreement shall be binding upon the legal representatives, heirs,
distributees, successors and assigns of the parties hereto.

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


ALEXION PHARMACEUTICALS, INC.


By /s/ LEONARD BELL
   ---------------------------------
   Leonard Bell


   /s/ DAVID KEISER
   -----------------------------
   David Keiser


                                       7




<PAGE>


                                    EXHIBIT A


                          ALEXION PHARMACEUTICALS, INC.

               PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT


     I recognize that ALEXION Pharmaceuticals, Inc., a Delaware corporation (the
"Company", which term includes any subsidiaries thereof), is engaged in multiple
aspects of pharmaceutical development and biotechnology.

     I understand that:

     A. As part of my employment by the Company I am expected to make new
contributions of value of the Company.

     B. My employment creates a relationship of confidence and trust between me
and the Company with respect to any information:

          (1) Applicable to the business of the Company and made known to me by
     the Company or learned by me during the period of my employment; or

          (2) Applicable to the business of any client, customer or strategic
     partner of the Company, which may be made known to me by the Company or by
     any client, customer or strategic partner of the Company, or learned by me
     during the period of my employment.

     C. The Company possesses and will continue to possess information that has
been created, discovered or developed, or has otherwise become known to the
Company (including without limitation information created, discovered, developed
or made known by or to me during the period of my employment by the Company),
and/or in which property or other rights have been assigned or otherwise
conveyed to the Company, which information has commercial value in the business
in which the Company is engaged and none of which is in the public domain except
through the breach by me or anyone else of a confidentiality duty. All of the
aforementioned information is hereinafter called "Proprietary Information." By
way of illustration, but not limitation, Proprietary Information includes
"Developments (as herein defined), data and know-how, techniques, marketing
plans and opportunities, cost and pricing data, strategies, forecasts and
customer lists. By way of illustration, but not limitation, "Developments"
includes developments, improvements, discoveries, trade secrets, technologies,
processes, research, methods, procedures, designs, models, testing systems,
research, assays, compounds, molecules, organisms, gene sequences, cell lines,
complement inhibitors and other re-agents (including the composition thereof),
uses of any of the foregoing, computer software and programs (including source
code and related documentation), test and/or experimental data and results,
specifications, laboratory notebooks, drawings and technical information and
materials.


                                       8




<PAGE>


     D. As used herein, the period of my employment includes any time in which I
may be retained by the Company as a consultant.

     In consideration of my employment or continued employment, as the case may
be, and the compensation received by me from the Company from time to time, I
hereby agree as follows:

          1. Prior to entering the employ of the Company, I have terminated
     employment with one or more prior employers. I agree to indemnify and hold
     harmless the Company, its directors, officers and employees against any
     liabilities and expenses including reasonable attorneys' fees and amounts
     paid in settlement, incurred by any of them in connection with any claim by
     any of my prior employers that the termination of my employment with such
     employer, my employment by the Company, or use of any skills and knowledge
     by the Company is a violation of contract or law.

          2. All Proprietary Information shall be the sole property of the
     Company and its assigns, and the Company and its assigns shall be the sole
     owner of all patents, copyrights, trade secrets and trademarks and other
     rights in connection therewith. I hereby assign to the Company any and all
     rights I may have or acquire in all Proprietary Information. At all times,
     both during my employment by the Company and after its termination, I will
     keep in confidence and trust all Proprietary Information, and I will not
     use or disclose any Proprietary Information without the written consent of
     the Company, except as may be necessary in the ordinary course of
     performing my duties as an employee of the Company.

          3. During the period of my employment by the Company I will not,
     without the Company's express written consent, engage in any employment or
     activity in any competitive business, other than for the Company.

          4. I will promptly disclose to the Company, or any persons designated
     by it, all Developments, improvements, processes, techniques, know-how,
     data and Developments made or conceived or reduced to practice or learned
     by me, either alone or jointly with others, during the period of my
     employment by the Company which are related to or useful in the business of
     the Company, or result from use of premises owned, leased or contracted for
     by the Company (all said Developments, improvements, processes, techniques,
     know-how, data and documentation, shall be collectively hereinafter called
     "Know-how").

          5. I agree that all Know-how shall be the sole property of the Company
     and its assigns, and the Company and its assigns shall be the sole owner of
     all patents, copyrights, trademarks and other rights in connection
     therewith. I hereby assign to the Company any rights I may have or acquire
     in all Know-how.

          I understand that this paragraph 5 does not apply to Know-how for
     which no equipment, supplies, facility or trade secret information of the
     Company was used and which was developed entirely on my own time, and (a)
     which does not relate (1) to the business of the Company or (2) to the
     Company's actual or demonstrably 


                                       9




<PAGE>


     anticipated research or development, or (b) which does not result from any
     work performed by me for the Company. I agree to execute any documents
     requested by the Company to effectuate the intent of this paragraph.

          6. The Company shall have the right (but shall not be obligated) to
     use, assert and/or apply for patent, copyright, trademark and other
     statutory or common law protection for any or all Know-how in any and all
     countries. I agree to assist the Company in every reasonable way without
     additional compensation (but at the Company's expense), to apply for,
     prosecute and obtain, and from time to time enforce, defend and protect,
     any and all patent, copyright, trademark and other statutory or common law
     protection for any of the Know-how in any and all countries. I shall,
     whether during or following my employment by the Company, at the Company's
     request and expense, but without additional compensation to me, execute any
     and all assignments, transfers, applications and other papers covering any
     Know-how which may be considered necessary or helpful by the Company in
     furtherance of the foregoing and/or to accomplish the assignment, transfer
     and/or license of any Know-how to persons designated by the Company.

          7. In the event of the termination of my employment by me or by the
     Company for any reason, I will deliver to the Company all documents,
     materials, compounds, samples, plasmids, proteins, probes and data of any
     nature pertaining to my work with the Company and I will not take with me
     any documents or data of any description or any reproduction of any
     description containing or pertaining to any Proprietary Information, and
     Know-how.

          8. I represent that to the best of my knowledge my performance of all
     the terms of this Agreement and as an employee of the Company does not and
     will not breach any agreement to keep in confidence proprietary information
     acquired by me in confidence or in trust prior to my employment by the
     Company. I have not entered into, and I agree I will not enter into, any
     agreement either written or oral in conflict herewith.

          9. I understand as part of the consideration for the offer of
     employment extended to me by the Company and of my employment or continued
     employment by the Company, that I have not brought and will not bring with
     me to the Company or use in the performance of my responsibilities at the
     Company any materials or documents of a former employer which are not
     generally available to the public, unless I have obtained written
     authorization from the former employer for their possession and use.

          Accordingly, this is to advise the Company that the only materials or
     documents of a former employer which are not generally available to the
     public that I have brought or will bring to the Company or have used or
     will use in my employment are identified on Schedule A attached hereto,
     and, as to each such item, I represent that I have obtained prior to the
     effective date of my employment with the Company written authorization for
     their possession and use in my employment with the Company.


                                       10




<PAGE>


          I also understand that, in my employment with the Company, I am not to
     breach any obligation of confidentiality that I have to former employers,
     and I agree that I shall fulfill all such obligations during my employment
     with the Company.

          10. In the event that any provision herein would be held to be
     invalid, prohibited or unenforceable in any jurisdiction for any reason
     (including, but not limited to, any provision which may be held
     unenforceable because of the scope, duration or area of its applicability),
     unless narrowed by construction, this Agreement shall, as to such
     jurisdiction, be construed as if such invalid, prohibited or unenforceable
     provision had been more narrowly drawn so as not to be invalid, prohibited
     or unenforceable (and the court making any such determination as to any
     provision shall have the power to modify such scope, duration or area or
     all of them, and such provision shall then be applicable in such modified
     form in such jurisdiction only). If, notwithstanding the foregoing, any
     provision herein would be held to be invalid, prohibited or unenforceable
     in any jurisdiction for any reason, such provision, as to such
     jurisdiction, shall be ineffective to the extent of such invalidity,
     prohibition or unenforceability, without invalidating the remaining
     provisions of this Agreement or affecting the validity or enforceability of
     such provision in any other jurisdiction.

          11. By reason of the fact that irreparable harm would be sustained by
     the Company in the event that there is a breach by me of any of the terms,
     covenants and agreements set forth herein, in addition to any other rights
     that the Company may otherwise have, the Company shall be entitled to apply
     to any court of competent jurisdiction and obtain specific performance
     and/or injunctive relief against me, without making a showing that monetary
     damages would be inadequate and without the requirement of posting any bond
     or other security whatsoever, in order to enforce or prevent any breach or
     threatened breach of any of the terms, covenants and agreements set forth
     herein, and I will not object thereto.

          12. This Agreement shall be binding upon me, my heirs, executors,
     assigns and administrators and shall inure to the benefit of the Company,
     its successors and assigns.

     This Agreement shall be governed in all respects by the laws of the State
of Delaware, applicable to agreements made and to be performed solely therein.


                                          By: /s/ 
                                              ----------------------------------
                                              

Dated: Oct. 22, 1997



ACCEPTED AND AGREED TO:
ALEXION PHARMACEUTICALS, INC.


By: /s/
    -------------------------------
    
    Title: President/CEO


                                       11





                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the "Agreement") dated as of October 22, 1997,
by and between Alexion Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and Stephen Squinto (the "Executive").


                               W I T N E S S E T H


     WHEREAS, the Company and Executive are parties to that certain Employment
Agreement dated as of March 23, 1992 (the "Old Employment Agreement");

     WHEREAS, the Old Employment Agreement expires on March 23, 1997 and the
Company and Executive desire to enter into a new Employment Agreement;

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

     1. Employment, Duties and Acceptance.

     (a) The Company hereby employs the Executive for the Term (as hereinafter
defined), to render full-time services to the Company as Vice President of
Research, Molecular Sciences, and to perform such duties commensurate with such
office as he shall reasonably be directed by the Board of Directors (the
"Board") of the Company to perform, which duties shall be consistent with the
provisions of the By-laws in effect on the date hereof that relate to the duties
of the Vice President of Research, Molecular Sciences.

     (b) The Executive hereby accepts
 such employment and agrees to render the
services described above.

     2. Term of Employment.

     The term of the Executive's employment under this Agreement (the "Term")
commenced as of March 23, 1997 (the "Effective Date") and shall end on the fifth
anniversary thereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement. This Agreement shall not be renewed unless otherwise mutually agreed
by the parties.

     3. Compensation.

     (a) As full compensation for all services to be rendered pursuant to this
Agreement, the Company agrees to pay the Executive, during the Term, an annual
base salary of not less than $158,000 for the first year of the Term and for
each subsequent year of the Term as determined by the Company, payable in such
installments as is the policy of the Company with respect to executive employees
of the Company (the "Salary").


                                       1




<PAGE>


     (b) Executive may receive bonuses on such dates, in such amounts and on
such other terms as may be determined by the Board of Directors in its sole
discretion. In the sole discretion of the Board of Directors, such bonuses, if
any, may be paid in the form of grants of stock of the Company or non-qualified
or qualified stock options, each granted pursuant to plans adopted by the
Company and approved by the Company's Board of Directors.

     (c) The Company shall pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by him during the Term in the performance of
his services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as it reasonably may require.

     (d) The Executive shall be eligible under any incentive plan, stock option
plan, stock award plan, bonus, participation or extra compensation plan,
relocation plan, pension, group insurance or other so-called "fringe" benefits
which the Company generally provides for its executives.

     4. Other Benefits.

     In addition to all other benefits contained herein, the Executive shall be
entitled to:

          (1) Payment of health, disability, and life insurance at regular
     rates; and

          (2) Vacation time of four weeks per year taken, subject to fulfillment
     of his duties hereunder, in accordance with the vacation policy of the
     Company during the Term.

     5. Confidentiality.

     The Executive agrees that the "Proprietary Information and Inventions
Agreement" annexed hereto as Exhibit A and made a part hereof shall be deemed to
be a part of this Employment Agreement.

     6. Non-Competition.

     (a) During the Term the Executive shall not (1) provide any services,
directly or indirectly, to any other business or commercial entity or (2)
participate in the formation of any business or commercial entity. For a period
of one year following the date of termination, if terminated by the Company for
Cause or by the Executive for any reason other than as provided in Section 8
hereof, the Executive shall not (1) provide any services, directly or
indirectly, to any other business or commercial entity engaged in the Company's
Field of Interest or (2) participate in the formation of any business or
commercial entity engaged in the Company's Field of Interest; provided, however,
that nothing contained in this Section 6 shall be deemed to prohibit the
Executive from acquiring, solely as an investment, shares of capital 


                                       2




<PAGE>


stock (or other interests) of any corporation (or other entity) not exceeding 2%
of such corporation's (or other entity's) then outstanding shares of capital
stock. The "Company's Field of Interest" means the primary business of the
Company as described in the Company's 1992 Private Placement Memorandum, or
subsequent disclosures, and as determined from time to time by the Board of
Directors. This Section 6 shall be subject to written waivers that may be
obtained by the Executive from the Company.

     (b) If the Executive commits a breach, or threatens to commit a breach, of
any of the provisions of this Section 6 or Exhibit A, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company.

     (c) If any of the covenants contained in Section 5, 6 or 10, or any part
thereof, is hereafter construed to be invalid or unenforceable, the same shall
not affect the remainder of the covenant or covenants, which shall be given full
effect without regard to the invalid portions.

     (d) If any of the covenants contained in Section 5, 6 or 10, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or area of such
provision and, in its reduced form, such provision shall then be enforceable.

     (e) The parties hereto intend to and hereby confer jurisdiction to enforce
the covenants contained in Sections 5, 6 and 10 upon the courts of any state
within the geographical scope of such covenants. In the event that the courts of
any one or more of such states shall hold any such covenant wholly unenforceable
by reasons of the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect the
Company's right to the relief provided above in the courts of any other states
within the geographical scope of such other covenants, as to breaches of such
covenants in such other respective jurisdictions, the above covenants as they
relate to each state being, for this purpose, severable into diverse and
independent covenants.

     7. Termination by the Company.

     (a) The Company may terminate this Agreement for any reason, with or
without Cause, including, without limitation, if any one or more of the
following shall occur:

          (1) The Executive shall die during the Term; provided, however, that
     the Executive's legal representatives shall be entitled to receive his
     Salary through the last day of the month in which his death occurs.

          (2) The Executive shall become physically or mentally disabled so that
     he is unable substantially to perform his services hereunder for (a) a


                                       3




<PAGE>


     period of 120 consecutive days, or (b) for shorter periods aggregating 180
     days during any twelve-month period. Notwithstanding such disability the
     Company shall continue to pay the Executive his Salary through the date of
     such termination.

          (3) The Executive acts, or fails to act, in a manner that provides
     Cause for termination. For purposes of this Agreement, the term "Cause"
     means (a) the Executive's indictment for, or conviction of, any crime or
     serious offense involving money or other property which constitutes a
     felony in the jurisdiction involved, (b) the Executive's wilful and
     continual neglect or failure to discharge his duties, responsibilities, and
     obligations as Director of Molecular Development of the Company after
     notice and a reasonable opportunity to cure, (c) the Executive's wilful
     misconduct or wilful breach of his fiduciary duties to the Company in
     connection with the performance of his duties, (d) the Executive's
     violation of any of the non-competition provisions of Section 6 hereof or
     the Executive's breach of any confidentiality provisions contained in
     Exhibit A hereto or (e) any act of fraud or embezzlement by the Executive
     involving the Company or any of its Affiliates.

     (b) All determinations of Cause or termination pursuant this Section 7
shall be determined by the Board (excluding the Executive if he is at such time
a member of the Board).

     8. Termination by the Executive.

     The Executive may terminate this Agreement on written notice to the Company
in the event of a material breach of the terms of this Agreement by the Company
and such breach continues uncured for 30 days after notice of such breach is
first given; provided, however, it shall constitute the termination of this
Agreement if such breach is for the payment of money and continues uncured for
ten days after notice of such breach is given.

     9. Severance.

     If, within the Term of this Agreement, the Company terminates this
Agreement for any reason other than Cause, death, or disability, or if the
Executive terminates this Agreement pursuant to Section 8, then: (1) the Company
shall pay the Executive a lump sum cash payment (the "Severance Payment") equal
to the greater of (x) the annual salary for the remainder of the then current
year of employment and (y) six months salary at the annual rate for the then
current year of employment; and (2) for options granted to the Executive prior
to the date of termination, the Company shall accelerate the vesting schedule
for such options such that the number of such options vested on the day of
termination shall be equal to the number of such options vested if the Executive
were to have been continuously employed by the Company until the date twelve
months after the date of termination. After termination of employment for any
reason other than death of the Executive, the Company shall continue to provide
all benefits subject to COBRA at its expense for the maximum required COBRA
period.


                                       4




<PAGE>


     10. Indemnification.

     The Company shall indemnify the Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company.

     11. Arbitration.

     Any controversy or claim arising out of or relating to this Agreement or
the breach thereof shall be settled by arbitration in the City of New York, in
accordance with the rules then existing of the American Arbitration Association
(three arbitrators), and judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The parties shall be free to pursue any
remedy before the arbitration tribunal that they shall be otherwise permitted to
pursue in a court of competent jurisdiction. The award of the arbitrators shall
be final and binding. During the pendency of any arbitration or any dispute not
yet submitted to arbitration, the Company shall not be entitled to any offset
against payments, stock awards or other benefits due to the Executive under this
Agreement or otherwise.

     12. Notices.

     All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):


                                       5




<PAGE>


           If to the Company:

           Alexion Pharmaceuticals, Inc.
           25 Science Park
           New Haven, Connecticut 06510

           Telephone: 203-776-1790
           Fax: 203-776-2089


           If to the Executive:

           Stephen Squinto, Ph.D.
           16 Coachman's Lane
           Bethany, CT 06525

           Telephone: 203-393-1823
           Fax: 203-393-2172

     13. General.

     (a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Connecticut applicable to agreements
made and to be performed entirely in Connecticut.

     (b) This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made by
either party that is not embodied in this Agreement, and neither party shall be
bound by or liable for any alleged representation, promise or inducement not so
set forth.

     (c) This Agreement may be amended, modified, superseded, canceled, renewed
or extended, and the terms or covenants hereof may be waived, only by a written
instrument executed by the parties hereto, or in the case of a waiver, by the
party waiving compliance. The failure of a party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by a party of the breach of any term
or covenant contained in this Agreement, whether by conduct or otherwise, or any
one or more or continuing waivers of any such breach, shall constitute a waiver
of the breach of any other term or covenant contained in this Agreement.


                                       6




<PAGE>


     (d) This Agreement shall be binding upon the legal representatives, heirs,
distributees, successors and assigns of the parties hereto.

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


ALEXION PHARMACEUTICALS, INC.


By /s/ LEONARD BELL
   ---------------------------------
   Leonard Bell


   /s/ STEPHEN SQUINTO
   ---------------------------------
   Stephen Squinto


                                       7




<PAGE>


                                    EXHIBIT A


                          ALEXION PHARMACEUTICALS, INC.

                PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT


     I recognize that Alexion Pharmaceuticals, Inc., a Delaware corporation (the
"Company", which term includes any subsidiaries thereof), is engaged in multiple
aspects of pharmaceutical development and biotechnology.

     I understand that:

     A. As part of my employment by the Company I am expected to make new
contributions of value of the Company.

     B. My employment creates a relationship of confidence and trust between me
and the Company with respect to any information:

          (1) Applicable to the business of the Company and made known to me by
     the Company or learned by me during the period of my employment; or

          (2) Applicable to the business of any client, customer or strategic
     partner of the Company, which may be made known to me by the Company or by
     any client, customer or strategic partner of the Company, or learned by me
     during the period of my employment.

     C. The Company possesses and will continue to possess information that has
been created, discovered or developed, or has otherwise become known to the
Company (including without limitation information created, discovered, developed
or made known by or to me during the period of my employment by the Company),
and/or in which property or other rights have been assigned or otherwise
conveyed to the Company, which information has commercial value in the business
in which the Company is engaged and none of which is in the public domain except
through the breach by me or anyone else of a confidentiality duty. All of the
aforementioned information is hereinafter called "Proprietary Information." By
way of illustration, but not limitation, Proprietary Information includes
"Developments (as herein defined), data and know-how, techniques, marketing
plans and opportunities, cost and pricing data, strategies, forecasts and
customer lists. By way of illustration, but not limitation, "Developments"
includes developments, improvements, discoveries, trade secrets, technologies,
processes, research, methods, procedures, designs, models, testing systems,
research, assays, compounds, molecules, organisms, gene sequences, cell lines,
complement inhibitors and other re-agents (including the composition thereof),
uses of any of the foregoing, computer software and programs (including source
code and related documentation), test and/or experimental data and results,
specifications, laboratory notebooks, drawings and technical information and
materials.


                                       8




<PAGE>


     D. As used herein, the period of my employment includes any time in which I
may be retained by the Company as a consultant.

     In consideration of my employment or continued employment, as the case may
be, and the compensation received by me from the Company from time to time, I
hereby agree as follows:

          1. Prior to entering the employ of the Company, I have terminated
     employment with one or more prior employers. I agree to indemnify and hold
     harmless the Company, its directors, officers and employees against any
     liabilities and expenses including reasonable attorneys' fees and amounts
     paid in settlement, incurred by any of them in connection with any claim by
     any of my prior employers that the termination of my employment with such
     employer, my employment by the Company, or use of any skills and knowledge
     by the Company is a violation of contract or law.

          2. All Proprietary Information shall be the sole property of the
     Company and its assigns, and the Company and its assigns shall be the sole
     owner of all patents, copyrights, trade secrets and trademarks and other
     rights in connection therewith. I hereby assign to the Company any and all
     rights I may have or acquire in all Proprietary Information. At all times,
     both during my employment by the Company and after its termination, I will
     keep in confidence and trust all Proprietary Information, and I will not
     use or disclose any Proprietary Information without the written consent of
     the Company, except as may be necessary in the ordinary course of
     performing my duties as an employee of the Company.

          3. During the period of my employment by the Company I will not,
     without the Company's express written consent, engage in any employment or
     activity in any competitive business, other than for the Company.

          4. I will promptly disclose to the Company, or any persons designated
     by it, all Developments, improvements, processes, techniques, know-how,
     data and Developments made or conceived or reduced to practice or learned
     by me, either alone or jointly with others, during the period of my
     employment by the Company which are related to or useful in the business of
     the Company, or result from use of premises owned, leased or contracted for
     by the Company (all said Developments, improvements, processes, techniques,
     know-how, data and documentation, shall be collectively hereinafter called
     "Know-how").

          5. I agree that all Know-how shall be the sole property of the Company
     and its assigns, and the Company and its assigns shall be the sole owner of
     all patents, copyrights, trademarks and other rights in connection
     therewith. I hereby assign to the Company any rights I may have or acquire
     in all Know-how.

          I understand that this paragraph 5 does not apply to Know-how for
     which no equipment, supplies, facility or trade secret information of the
     Company was used and which was developed entirely on my own time, and (a)
     which does not relate (1) to the business of the Company or (2) to the
     Company's actual or demonstrably 


                                       9




<PAGE>


     anticipated research or development, or (b) which does not result from any
     work performed by me for the Company. I agree to execute any documents
     requested by the Company to effectuate the intent of this paragraph.

          6. The Company shall have the right (but shall not be obligated) to
     use, assert and/or apply for patent, copyright, trademark and other
     statutory or common law protection for any or all Know-how in any and all
     countries. I agree to assist the Company in every reasonable way without
     additional compensation (but at the Company's expense), to apply for,
     prosecute and obtain, and from time to time enforce, defend and protect,
     any and all patent, copyright, trademark and other statutory or common law
     protection for any of the Know-how in any and all countries. I shall,
     whether during or following my employment by the Company, at the Company's
     request and expense, but without additional compensation to me, execute any
     and all assignments, transfers, applications and other papers covering any
     Know-how which may be considered necessary or helpful by the Company in
     furtherance of the foregoing and/or to accomplish the assignment, transfer
     and/or license of any Know-how to persons designated by the Company.

          7. In the event of the termination of my employment by me or by the
     Company for any reason, I will deliver to the Company all documents,
     materials, compounds, samples, plasmids, proteins, probes and data of any
     nature pertaining to my work with the Company and I will not take with me
     any documents or data of any description or any reproduction of any
     description containing or pertaining to any Proprietary Information, and
     Know-how.

          8. I represent that to the best of my knowledge my performance of all
     the terms of this Agreement and as an employee of the Company does not and
     will not breach any agreement to keep in confidence proprietary information
     acquired by me in confidence or in trust prior to my employment by the
     Company. I have not entered into, and I agree I will not enter into, any
     agreement either written or oral in conflict herewith.

          9. I understand as part of the consideration for the offer of
     employment extended to me by the Company and of my employment or continued
     employment by the Company, that I have not brought and will not bring with
     me to the Company or use in the performance of my responsibilities at the
     Company any materials or documents of a former employer which are not
     generally available to the public, unless I have obtained written
     authorization from the former employer for their possession and use.

          Accordingly, this is to advise the Company that the only materials or
     documents of a former employer which are not generally available to the
     public that I have brought or will bring to the Company or have used or
     will use in my employment are identified on Schedule A attached hereto,
     and, as to each such item, I represent that I have obtained prior to the
     effective date of my employment with the Company written authorization for
     their possession and use in my employment with the Company.


                                       10




<PAGE>


          I also understand that, in my employment with the Company, I am not to
     breach any obligation of confidentiality that I have to former employers,
     and I agree that I shall fulfill all such obligations during my employment
     with the Company.

          10. In the event that any provision herein would be held to be
     invalid, prohibited or unenforceable in any jurisdiction for any reason
     (including, but not limited to, any provision which may be held
     unenforceable because of the scope, duration or area of its applicability),
     unless narrowed by construction, this Agreement shall, as to such
     jurisdiction, be construed as if such invalid, prohibited or unenforceable
     provision had been more narrowly drawn so as not to be invalid, prohibited
     or unenforceable (and the court making any such determination as to any
     provision shall have the power to modify such scope, duration or area or
     all of them, and such provision shall then be applicable in such modified
     form in such jurisdiction only). If, notwithstanding the foregoing, any
     provision herein would be held to be invalid, prohibited or unenforceable
     in any jurisdiction for any reason, such provision, as to such
     jurisdiction, shall be ineffective to the extent of such invalidity,
     prohibition or unenforceability, without invalidating the remaining
     provisions of this Agreement or affecting the validity or enforceability of
     such provision in any other jurisdiction.

          11. By reason of the fact that irreparable harm would be sustained by
     the Company in the event that there is a breach by me of any of the terms,
     covenants and agreements set forth herein, in addition to any other rights
     that the Company may otherwise have, the Company shall be entitled to apply
     to any court of competent jurisdiction and obtain specific performance
     and/or injunctive relief against me, without making a showing that monetary
     damages would be inadequate and without the requirement of posting any bond
     or other security whatsoever, in order to enforce or prevent any breach or
     threatened breach of any of the terms, covenants and agreements set forth
     herein, and I will not object thereto.

          12. This Agreement shall be binding upon me, my heirs, executors,
     assigns and administrators and shall inure to the benefit of the Company,
     its successors and assigns.

     This Agreement shall be governed in all respects by the laws of the State
of Delaware, applicable to agreements made and to be performed solely therein.



                                          By: /s/ 
                                              ----------------------------------
                                              

Dated: 10/2397



ACCEPTED AND AGREED TO:
ALEXION PHARMACEUTICALS, INC.


By: /s/ LEONARD BELL
    -------------------------------
    Leonard Bell
    Title: President/CEO


                                       11





                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the "Agreement") dated as of October 22, 1997,
by and between ALEXION Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and Louis A. Matis (the "Executive").


                               W I T N E S S E T H


     WHEREAS, the Company wishes to employ Executive in an executive capacity
and Executive is desirous of being so employed;

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

     1. Employment, Duties and Acceptance.

     (a) The Company hereby employs the Executive for the Term (as hereinafter
defined), to render full-time services to the Company as Vice President of
Research, Immunobiology, and to perform such duties commensurate with such
office as he shall reasonably be directed by the Board of Directors (the
"Board") of the Company to perform, which duties shall be consistent with the
provisions of the By-laws in effect on the date hereof that relate to the duties
of the Vice President of Research, Immunobiology.

     (b) The Executive hereby accepts such employment and agrees to render the
services described above.

     2. Term of Employment.

     The term of the Executive's employment under this Agreement (the "Term")
commences
 as of August 1, 1997 (the "Effective Date") and shall end on the fifth
anniversary thereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement. This Agreement shall not be renewed unless otherwise mutually agreed
by the parties.

     3. Compensation.

     (a) As full compensation for all services to be rendered pursuant to this
Agreement, the Company agrees to pay the Executive, during the Term, an annual
base salary of not less than $158,000 for the first year of the Term and for
each subsequent year of the Term an amount to be determined by the Company,
payable in such installments as is the policy of the Company with respect to
executive employees of the Company (the "Salary").

     (b) Executive may receive bonuses on such dates, in such amounts and on
such other terms as may be determined by the Board of Directors in 


                                       1




<PAGE>


its sole discretion. In the sole discretion of the Board of Directors, such
bonuses, if any, may be paid in the form of grants of stock of the Company or
non-qualified stock options, each granted pursuant to plans adopted by the
Company and approved by the Company's Board of Directors.

     (c) The Company shall pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by him during the Term in the performance of
his services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as it reasonably may require.

     (d) The Executive shall be eligible under any incentive plan, stock option
plan, stock award plan, bonus, participation or extra compensation plan,
relocation plan, pension, group insurance or other so-called "fringe" benefits
which the Company generally provides for its executives.

     4. Other Benefits.

     In addition to all other benefits contained herein, the Executive shall be
entitled to:

          (1) Payment of health, disability, and life insurance at regular rates
     as described in Schedule A as of the date of this agreement; and

          (2) Vacation time of four weeks per year taken, subject to fulfillment
     of his duties hereunder, in accordance with the vacation policy of the
     Company during the Term.

     5. Confidentiality.

     The Executive agrees that the "Proprietary Information and Inventions
Agreement" annexed hereto as Exhibit A and made a part hereof shall be deemed to
be a part of this Employment Agreement.

     6. Non-Competition.

     (a) During the Term the Executive shall not (1) provide any services,
directly or indirectly, to any other business or commercial entity or (2)
participate in the formation of any business or commercial entity, provided that
the Executive shall not be prohibited from part-time teaching at any educational
institution to the extent that such teaching does not interfere with Executive's
duties, responsibilities, and obligations to the Company. For a period of one
year following the date of termination, if terminated by the Company for Cause
or by the Executive for any reason other than as provided in Section 8 hereof,
the Executive shall not (1) provide any services, directly or indirectly, to any
other business or commercial entity engaged in the Company's Field of Interest
or (2) participate in the formation of any business or commercial entity engaged
in the Company's Field of Interest; provided, however, that nothing contained in
this Section 6 shall be deemed to prohibit the Executive from acquiring, solely
as an investment, shares of capital stock (or other 


                                       2

<PAGE>


interests) of any corporation (or other entity) not exceeding 2% of such
corporation's (or other entity's) then outstanding shares of capital stock. The
"Company's Field of Interest" means the primary business of the Company as
determined from time to time by the Board of Directors. This Section 6 shall be
subject to written waivers that may be obtained by the Executive from the
Company.

     (b) If the Executive commits a breach, or threatens to commit a breach, of
any of the provisions of this Section 6 or Exhibit A, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company.

     (c) If any of the covenants contained in Section 5, 6 or 10, or any part
thereof, is hereafter construed to be invalid or unenforceable, the same shall
not affect the remainder of the covenant or covenants, which shall be given full
effect without regard to the invalid portions.

     (d) If any of the covenants contained in Section 5, 6 or 10, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or area of such
provision and, in its reduced form, such provision shall then be enforceable.

     (e) The parties hereto intend to and hereby confer jurisdiction to enforce
the covenants contained in Sections 5, 6 and 10 upon the courts of any state
within the geographical scope of such covenants. In the event that the courts of
any one or more of such states shall hold any such covenant wholly unenforceable
by reasons of the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect the
Company's right to the relief provided above in the courts of any other states
within the geographical scope of such other covenants, as to breaches of such
covenants in such other respective jurisdictions, the above covenants as they
relate to each state being, for this purpose, severable into diverse and
independent covenants.

     7. Termination by the Company.

     (a) The Company may terminate this Agreement for any reason, with or
without Cause, including, without limitation, if any one or more of the
following shall occur:

          (1) The Executive shall die during the Term; provided, however, that
     the Executive's legal representatives shall be entitled to receive his
     Salary through the last day of the month in which his death occurs.

          (2) The Executive shall become physically or mentally disabled so that
     he is unable substantially to perform his services hereunder for (a) a
     period of 120 consecutive days, or (b) for shorter periods aggregating 180
     days during 


                                       3




<PAGE>


     any twelve-month period. Notwithstanding such disability the Company shall
     continue to pay the Executive his Salary through the date of such
     termination.

          (3) The Executive acts, or fails to act, in a manner that provides
     Cause for termination. For purposes of this Agreement, the term "Cause"
     means (a) the Executive's indictment for, or conviction of, any crime or
     serious offense involving money or other property which constitutes a
     felony in the jurisdiction involved, (b) the Executive's wilful and
     continual neglect or failure to discharge his duties, responsibilities, and
     obligations as Director of Immunobiology of the Company after notice and a
     reasonable opportunity to cure, (c) the Executive's wilful misconduct or
     wilful breach of his fiduciary duties to the Company in connection with the
     performance of his duties, (d) the Executive's violation of any of the
     non-competition provisions of Section 6 hereof or the Executive's breach of
     any confidentiality provisions contained in Exhibit A hereto or (e) any act
     of fraud or embezzlement by the Executive involving the Company or any of
     its Affiliates.

     (b) All determinations of Cause or termination pursuant this Section 7
shall be determined by the Board (excluding the Executive if he is at such time
a member of the Board).

     8. Termination by the Executive.

     The Executive may terminate this Agreement on written notice to the Company
in the event of a material breach of the terms of this Agreement by the Company
and such breach continues uncured for 30 days after notice of such breach is
first given; provided, however, it shall constitute the termination of this
Agreement if such breach is for the payment of money and continues uncured for
ten days after notice of such termination is given.

     9. Severance.

     If, within the Term of this Agreement, the Company terminates this
Agreement for any reason other than Cause, death, or disability, or if the
Executive terminates this Agreement pursuant to Section 8, then: (1) the Company
shall pay the Executive a lump sum cash payment (the "Severance Payment") equal
to the greater of (x) the annual salary for the remainder of the then current
year of employment and (y) six months salary at the annual rate for the then
current year of employment; and (2) for options granted to the Executive prior
to the date of termination, the Company shall accelerate the vesting schedule
for such options such that the number of such options vested on the day of
termination shall be equal to the number of such options vested if the Executive
were to have been continuously employed by the Company until the date twelve
months after the date of termination. After termination of employment for any
reason other than death of the Executive, the Company shall continue to provide
all benefits subject to COBRA at its expense for the maximum required COBRA
period.


                                       4




<PAGE>


     10. Indemnification.

     The Company shall indemnify the Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company.

     11. Arbitration.

     Any controversy or claim arising out of or relating to this Agreement or
the breach thereof shall be settled by arbitration in the City of New York, in
accordance with the rules then existing of the American Arbitration Association
(three arbitrators), and judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The parties shall be free to pursue any
remedy before the arbitration tribunal that they shall be otherwise permitted to
pursue in a court of competent jurisdiction. The award of the arbitrators shall
be final and binding. During the pendency of any arbitration or any dispute not
yet submitted to arbitration, the Company shall not be entitled to any offset
against payments, stock awards or other benefits due to the Executive under this
Agreement or otherwise.

     12. Notices.

     All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):

           If to the Company:

           Alexion Pharmaceuticals, Inc.
           25 Science Park, Suite 360
           New Haven, Connecticut 06510

           Telephone: (203) 776-1790
           Fax:       (203) 776-2089


           If to the Executive:

           Louis A. Matis, M.D.
           775 Flintlock Road
           Southport, CT 06490

           Telephone: (203) 255-9906


                                       5




<PAGE>


     13. General.

     (a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Connecticut applicable to agreements
made and to be performed entirely in Connecticut.

     (b) This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made by
either party that is not embodied in this Agreement, and neither party shall be
bound by or liable for any alleged representation, promise or inducement not so
set forth.

     (c) This Agreement may be amended, modified, superseded, canceled, renewed
or extended, and the terms or covenants hereof may be waived, only by a written
instrument executed by the parties hereto, or in the case of a waiver, by the
party waiving compliance. The failure of a party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by a party of the breach of any term
or covenant contained in this Agreement, whether by conduct or otherwise, or any
one or more or continuing waivers of any such breach, shall constitute a waiver
of the breach of any other term or covenant contained in this Agreement.

     (d) This Agreement shall be binding upon the legal representatives, heirs,
distributees, successors and assigns of the parties hereto.

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


                                          ALEXION PHARMACEUTICALS, INC.


                                          By: /s/  LEONARD BELL
                                              ----------------------------------
                                              Leonard Bell


                                              /s/ LOUIS A. MATIS
                                              ----------------------------------
                                              Louis A. Matis


                                       6




<PAGE>





                                    EXHIBIT A


                          ALEXION PHARMACEUTICALS, INC.

               PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT


     I recognize that Alexion Pharmaceuticals, Inc., a Delaware corporation (the
"Company", which term includes any subsidiaries thereof), is engaged in multiple
aspects of pharmaceutical development and biotechnology.

     I understand that:

     A. As part of my employment by the Company I am expected to make new
contributions of value of the Company.

     B. My employment creates a relationship of confidence and trust between me
and the Company with respect to any information:

          (1) Applicable to the business of the Company and made known to me by
     the Company or learned by me during the period of my employment; or

          (2) Applicable to the business of any client, customer or strategic
     partner of the Company, which may be made known to me by the Company or by
     any client, customer or strategic partner of the Company, or learned by me
     during the period of my employment.

     C. The Company possesses and will continue to possess information that has
been created, discovered or developed, or has otherwise become known to the
Company (including without limitation information created, discovered, developed
or made known by or to me during the period of my employment by the Company),
and/or in which property or other rights have been assigned or otherwise
conveyed to the Company, which information has commercial value in the business
in which the Company is engaged and none of which is in the public domain except
through the breach by me or anyone else of a confidentiality duty. All of the
aforementioned information is hereinafter called "Proprietary Information." By
way of illustration, but not limitation, Proprietary Information includes
"Developments (as herein defined), data and know-how, techniques, marketing
plans and opportunities, cost and pricing data, strategies, forecasts and
customer lists. By way of illustration, but not limitation, "Developments"
includes developments, improvements, discoveries, trade secrets, technologies,
processes, research, methods, procedures, designs, models, testing systems,
research, assays, compounds, molecules, organisms, gene sequences, cell lines,
complement inhibitors and other re-agents (including the composition thereof),
uses of any of the foregoing, computer software and programs (including source
code and related documentation), test and/or experimental data and results,
specifications, laboratory notebooks, drawings and technical information and
materials.


                                       7




<PAGE>


     D. As used herein, the period of my employment includes any time in which I
may be retained by the Company as a consultant.

     In consideration of my employment or continued employment, as the case may
be, and the compensation received by me from the Company from time to time, I
hereby agree as follows:

          1. Prior to entering the employ of the Company, I have terminated
     employment with one or more prior employers. I represent and warrant that I
     have full right, power and authority to execute the terms of this
     Agreement; this Agreement has been duly executed by Executive and such
     execution and the performance of this Agreement by Executive does not
     result in any conflict, breach or violation of or default under any other
     agreement or any judgment, order or decree to which I am a party or by
     which I am bound. I acknowledge and agree that any material breach of the
     representations set forth in this paragraph will constiute Cause under
     Section 7(a)(3) of the accompanying Employment Agreement.

          2. All Proprietary Information shall be the sole property of the
     Company and its assigns, and the Company and its assigns shall be the sole
     owner of all patents, copyrights, trade secrets and trademarks and other
     rights in connection therewith. I hereby assign to the Company any and all
     rights I may have or acquire in all Proprietary Information. At all times,
     both during my employment by the Company and after its termination, I will
     keep in confidence and trust all Proprietary Information, and I will not
     use or disclose any Proprietary Information without the written consent of
     the Company, except as may be necessary in the ordinary course of
     performing my duties as an employee of the Company.

          3. During the period of my employment by the Company I will not,
     without the Company's express written consent, engage in any employment or
     activity in any competitive business, other than for the Company.

          4. I will promptly disclose to the Company, or any persons designated
     by it, all Developments, improvements, processes, techniques, know-how,
     data and Developments made or conceived or reduced to practice or learned
     by me, either alone or jointly with others, during the period of my
     employment by the Company which are related to or useful in the business of
     the Company, or result from use of premises owned, leased or contracted for
     by the Company (all said Developments, improvements, processes, techniques,
     know-how, data and documentation, shall be collectively hereinafter called
     "Know-how").

          5. I agree that all Know-how shall be the sole property of the Company
     and its assigns, and the Company and its assigns shall be the sole owner of
     all patents, copyrights, trademarks and other rights in connection
     therewith. I hereby assign to the Company any rights I may have or acquire
     in all Know-how.

          I understand that this paragraph 5 does not apply to Know-how for
     which no equipment, supplies, facility or trade secret information of the
     Company was used and which was developed entirely on my own time, and (a)
     which does not relate (1) to 


                                       8




<PAGE>


     the business of the Company or (2) to the Company's actual or demonstrably
     anticipated research or development, or (b) which does not result from any
     work performed by me for the Company. I agree to execute any documents
     requested by the Company to effectuate the intent of this paragraph.

          6. The Company shall have the right (but shall not be obligated) to
     use, assert and/or apply for patent, copyright, trademark and other
     statutory or common law protection for any or all Know-how in any and all
     countries. I agree to assist the Company in every reasonable way without
     additional compensation (but at the Company's expense), to apply for,
     prosecute and obtain, and from time to time enforce, defend and protect,
     any and all patent, copyright, trademark and other statutory or common law
     protection for any of the Know-how in any and all countries. I shall,
     whether during or following my employment by the Company, at the Company's
     request and expense, but without additional compensation to me, execute any
     and all assignments, transfers, applications and other papers covering any
     Know-how which may be considered necessary or helpful by the Company in
     furtherance of the foregoing and/or to accomplish the assignment, transfer
     and/or license of any Know-how to persons designated by the Company.

          7. In the event of the termination of my employment by me or by the
     Company for any reason, I will deliver to the Company all documents,
     materials, compounds, samples, plasmids, proteins, probes and data of any
     nature pertaining to my work with the Company and I will not take with me
     any documents or data of any description or any reproduction of any
     description containing or pertaining to any Proprietary Information, and
     Know-how.

          8. I represent that to my actual knowledge my performance of all the
     terms of this Agreement and as an employee of the Company does not and will
     not breach any agreement to keep in confidence proprietary information
     acquired by me in confidence or in trust prior to my employment by the
     Company.

          9. I understand as part of the consideration for the offer of
     employment extended to me by the Company and of my employment or continued
     employment by the Company, that, to my actual knowledge, I have not brought
     and will not bring with me to the Company or use in the performance of my
     responsibilities at the Company any materials or documents of a former
     employer which are not generally available to the public, unless I have
     obtained written authorization from the former employer for their
     possession and use.

          Accordingly, this is to advise the Company that, to my actual
     knowledge, the only materials or documents of a former employer which are
     not generally available to the public that I have brought or will bring to
     the Company or have used or will use in my employment are identified on
     Schedule A attached hereto, and, as to each such item, I represent that I
     have obtained prior to the effective date of my employment with the Company
     written authorization for their possession and use in my employment with
     the Company.


                                       9




<PAGE>


          I also understand that, in my employment with the Company, I am not to
     breach any obligation of confidentiality that I have to former employers,
     and I agree that I shall fulfill all such obligations during my employment
     with the Company.

          10. In the event that any provision herein would be held to be
     invalid, prohibited or unenforceable in any jurisdiction for any reason
     (including, but not limited to, any provision which may be held
     unenforceable because of the scope, duration or area of its applicability),
     unless narrowed by construction, this Agreement shall, as to such
     jurisdiction, be construed as if such invalid, prohibited or unenforceable
     provision had been more narrowly drawn so as not to be invalid, prohibited
     or unenforceable (and the court making any such determination as to any
     provision shall have the power to modify such scope, duration or area or
     all of them, and such provision shall then be applicable in such modified
     form in such jurisdiction only). If, notwithstanding the foregoing, any
     provision herein would be held to be invalid, prohibited or unenforceable
     in any jurisdiction for any reason, such provision, as to such
     jurisdiction, shall be ineffective to the extent of such invalidity,
     prohibition or unenforceability, without invalidating the remaining
     provisions of this Agreement or affecting the validity or enforceability of
     such provision in any other jurisdiction.

          11. By reason of the fact that irreparable harm would be sustained by
     the Company in the event that there is a breach by me of any of the terms,
     covenants and agreements set forth herein, in addition to any other rights
     that the Company may otherwise have, the Company shall be entitled to apply
     to any court of competent jurisdiction and obtain specific performance
     and/or injunctive relief against me, without making a showing that monetary
     damages would be inadequate and without the requirement of posting any bond
     or other security whatsoever, in order to enforce or prevent any breach or
     threatened breach of any of the terms, covenants and agreements set forth
     herein, and I will not object thereto.

          12. This Agreement shall be binding upon me, my heirs, executors,
     assigns and administrators and shall inure to the benefit of the Company,
     its successors and assigns.

     This Agreement shall be governed in all respects by the laws of the State
of Delaware, applicable to agreements made and to be performed solely therein.


                                          By: /s/ LOUIS A. MATIS
                                              ----------------------------------
                                              Louis A. Matis, M.D.
Dated: 10/23/97 



ACCEPTED AND AGREED TO:
ALEXION PHARMACEUTICALS, INC.


By: /s/ LEONARD BELL
    -------------------------------
    Leonard Bell
    Title: President/CEO


                                       10





                            STOCK PURCHASE AGREEMENT


Alexion Pharmaceuticals, Inc.
25 Science Park
New Haven, CT 06511


Ladies & Gentlemen:

     The undersigned, _________________________ (the "Investor"), hereby
confirms its agreement with you as follows:

     1. This Stock Purchase Agreement (the "Agreement") is made as of June 12,
1997 between Alexion Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and the Investor.

     2. The Company has authorized the sale and issuance of up to 1,450,000
shares of Common Stock of the Company (the "Stock"), subject to adjustment by
the Company's Board of Directors.

     3. The Company and the Investor agree that the Investor will purchase and
the Company will sell, for a purchase price of $7.75 per share, or an aggregate
purchase price of $ __________, _______ shares pursuant to the Terms and
Conditions for Purchase of Shares attached hereto as Annex I and incorporated
herein by reference as if fully set forth herein. Unless otherwise requested by
the Investor, certificates representing the shares purchased by the Investor
will be registered in the Investor's name and address as set forth below.

     4. The Investor represents that, except as set forth below, (a) it has had
no position, office or other material relationship within the past three years
with the Company or its affiliates,
 (b) neither it, nor any group of which it is
a member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any NASD member. Exceptions:

________________________________________________________________________________

________________________________________________________________________________
               (If no exceptions, write "none." If left blank,
                    response will be deemed to be "none.")




<PAGE>


     Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the spow for that purpose.


                                       INVESTOR
                                       
                                       _________________________________________

                                       Name:____________________________________

                                       By:______________________________________

                                       Title:___________________________________

                                       Address:_________________________________

                                       _________________________________________

                                       Tax ID No.:______________________________

                                       Contact name:____________________________

                                       Telephone:_______________________________

                                       Name in which shares should be 
                                       registered
                                       (if different):__________________________


AGREED AND ACCEPTED:


__________________________________
ALEXION PHARMACEUTICALS, INC.


__________________________________
By:    Leonard Bell, M.D.
Title: President and Chief 
       Executive Officer


                                      -2-




<PAGE>


                                     ANNEX I

                 TERMS AND CONDITIONS FOR PURCHASE OF SHARES

     1. Authorization and Sale of the Shares. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of up to
1,450,000 shares of the Common Stock, $.0001 par value (the "Stock"), of the
Company. The Company reserves the right to increase or decrease this number.

     2. Agreement to Sell and Purchase the Stock. At the Closing (as defined in
Section 3), the Company will sell to the Investor, and the Investor will
purchase from the Company, upon the terms and conditions hereinafter set forth,
the number of shares of Stock set forth on the signature page hereto at the
purchase price set forth on such signature page.

     The Company proposes to enter into this same form of purchase agreement
with certain other investors (the "Other Investors") and expects to complete
sales of the Stock to them. The Investor and the Other Investors are hereinafter
sometimes collectively referred to as the "Investors," and this Agreement and
the agreements executed by the Other Investors are hereinafter sometimes
collectively referred to as the "Agreements." The term "Placement Agent" shall
mean Robertson Stephens & Company LLC.

     3. Delivery of the Stock at Closing. The completion of the purchase and
sale of the Stock (the "Closing") shall occur at a place and time (the "Closing
Date") specified by the Company and the Placement Agent, not later than 90 days
after the date the Registration Statement (as hereinafter defined) is filed, and
of which tl be notified in advance by the Placement Agent. At the Closing, the
Company shall deliver to the Investor one or more stock certificates
representing the number of shares of Stock set forth on the signature page
hereto, each such certificate to be registered in the name of the Investor or,
if so indicated on the signature page hereto, in the name of a nominee
designated by the Investor.

     The Company's obligation to close the transaction shall be subject to the
following conditions, any one or more of which may be waived by the Company: (a)
receipt by the Company of a certified or official bank check or wire transfer of
funds in the full amount of the purchase price for the Stock being purchased
hereunder; (b) completion of the purchases and sales under the Agreements with
Other Investors; and (c) the accuracy of the representations and warranties made
by the Investors and the fulfillment of those undertakings of the Investors to
be fulfilled prior to the Closing.

     The Investor's obligation to close the transaction shall be subject to the
following conditions, any one or more of which may be waived by the Investor:
(a) Investors shall have executed Agreements for the purchase of at least
500,000 shares of Stock; (b) the Company shall have filed a registration
statement within five (5) business days of the date on which all of the
Agreements are executed (the "Pricing Date"), the Company shall have received an
indication from the Securities and Exchange Commission ("SEC") that the SEC has
no further comments, and the Company shall have submitted an 




<PAGE>


acceleration request providing for the Registration Statement to be declared
effective at a time immediately following the Closing and on or prior to the
90th day after the date of its filing; and (c) receipt by the Placement Agent of
legal opinions from the Company's counsel and patent counsel and of a comfort
letter from the Company's Independent Auditors. The Investor's obligations
hereunder are expressly not conditioned on the purchase by any or all of the
Other Investors of the Stock that they have agreed to purchase from the Company.
The Company may sign Stock Purchase Agreements with respect to sales of stock to
Other Investors on dates subsequent to the Pricing Date, provided that all such
Agreements shall have been executed on or prior to the date on which the
Registration Statement is filed with the SEC.

     4. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Purchaser as follows:

     4.1. Organization. Each of the Company and its Subsidiaries (as defined in
Rule 405 under the Securities Act of 1933, as amended (the "Securities Act")),
if any, is duly organized and validly existing in good standing under the laws
of the jurisdiction of its organization. Each of the Company and its
Subsidiaries has full power and authority to own, operate and occupy its
properties an business as presently conducted and as described in the private
placement memorandum, dated May 16, 1997 distributed in connection with the sale
of the Stock (including the documents incorporated by reference therein, the
"Placement Memorandum") and is registered or qualified to do business and in
good standing in each jurisdiction in which it owns or leases property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the business, financial condition, properties or
operations of the Company and its Subsidiaries, taken as a whole.

     4.2. Due Authorization. The Company has all requisite power and authority
to execute, deliver and perform its obligations under the Agreements, and the
Agreements have been duly authorized and validly executed and delivered by the
Company and constitute legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, except as rights
to indemnity and contribution may be limited by state or federal securities laws
or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

     4.3. Non-Contravention. The execution and delivery of the Agreements, the
issuance and sale of the Stock to be sold by the Company thereunder, the
fulfillment of the terms of the Agreements and the consummation of the
transactions contemplated thereby will not conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, any
material agreement or instrument to which the Company or any Subsidiary is a
party or by which it is bound or the charter, by-laws or other organizational
documents of the Company or any Subsidiary nor result in the 


                                      -2-




<PAGE>


creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or any Subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them is bound or to which any of the
property or assets of the Company or any Subsidiary is subject, nor conflict
with, or result in a violation of, any law, administrative regulation, ordinance
or order of any court or governmental agency, arbitration panel or authority
applicable to the Company or any Subsidiary. No consent, approval, authorization
or other order of, or registration, qualification or filing with, any regulatory
body, administrative agency, or other governmental body in the United States is
required for the valid issuance and sale of the Stock to be sold pursuant to the
Agreements, other than such as have been or will be made or obtained.

     4.4. Capitalization. The capitalization of the Company as of May 16, 1997
is as set forth in the Placement Memorandum. The Company has not issued any
capital stock since that date other than as contemplated by the Placement
Memorandum. The Stock to be sold pursuant to the Agreements have been duly
authorized, and when issued and paid for in accordance with the terms of the
Agreements will be validly issued, fully paid and nonassessnding shares of
capital stock of the Company have been duly and validly issued and are fully
paid and nonassessable. Except as set forth in or contemplated by the Placement
Memorandum, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity interest
in the Company or any Subsidiary, or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any capital
stock of the Company or any Subsidiary, any such convertible or exchangeable
securities or any such rights, warrants or options. The Company owns the entire
equity interest in each of its Subsidiaries, other than as contemplated by the
Placement Memorandum.

     4.5. Legal Proceedings. There is no material legal or governmental
proceeding pending or, to the knowledge of the Company, threatened or
contemplated to which the Company or any Subsidiary is or may be a party or of
which the business or property of the Company or any Subsidiary is or may be
subject that is not disclosed in the Placement Memorandum.

     4.6. No Violations. Neither the Company nor any Subsidiary is in violation
of its charter, bylaws, or other organizational document, in violation of any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or any
Subsidiary, which violation, individually or in the aggregate, would have a
material adverse effect on the business or financial condition of the Company
and its Subsidiaries, taken as a whole, or is in default in any material respect
in the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or 


                                      -3-




<PAGE>


instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound or by which the properties of the Company or
any Subsidiary are bound or affected, and there exists no condition which, with
the passage of time or otherwise, would constitute a material default under any
such document or instrument or result in the imposition of any material penalty
or the acceleration of any material indebtedness.

     4.7. Governmental Permits, Etc. Each of the Company and its Subsidiaries
has all necessary franchises, licenses, certificates and other authorizations
from any foreign, federal, state or local government or governmental agency,
department, or body that are currently necessary for the operation of the
business of the Company and its Subsidiaries as currently conducted and as
described in the Placement Memorandum, the absence of which would have a
material adverse effect on the Company and its Subsidiaries taken as a whole.

     4.8. Intellectual Property. Each of the Company and its Subsidiaries owns
or possesses sufficient rights to use all material patents, patent rights,
trademarks, copyrights, licenses, inventions, trade secrets and know-how
described or referred to in the Placement Memorandum as owned or used by it or
that are necessary for the conduct of its business as now conducted and as
proposed to be conducted as now conducted or (to the Company's knowledge based
on the current stage of development of the Company's products and, subject to
the matters discussed under "Risk Factors" in the Placement Memorandum) as
proposed to be conducted as described in the Placement Memorandum; except as
described in the Placement Memorandum, neither the Company nor any of its
Subsidiaries has received any notice of, or has any knowledge of, any
infringement of or conflict with as others with respect to any patent, patent
right, trademark, copyright, invention, trade secret or know-how that,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its Subsidiaries considered as one enterprise.

     4.9. Financial Statements. The financial statements of the Company and the
related notes contained in the Placement Memorandum present fairly the financial
position of the Company as of the dates indicated, and the results of its
operations and cash flows for the periods therein specified. Such financial
statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified, except as disclosed in the Placement
Memorandum. The other financial information contained in the Placement
Memorandum has been prepared on a basis consistent with the financial statements
of the Company.

     4.10. No Material Adverse Change. Subsequent to the respective dates as of
which information is given in the Placement Memorandum, and except as
contemplated in the Placement Memorandum, the Company and its Subsidiaries taken
as a whole have not incurred any material liabilities or obligations, direct or
contingent, other than in the ordinary course of business, and there has not
been any material adverse change 


                                      -4-




<PAGE>


in their consolidated condition (in each case, financial or other), results of
operations, business, prospects, key personnel or capitalization.

     4.11. Placement Memorandum. The information contained in the Placement
Memorandum does not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.

     4.12. Additional Information. The Company has filed in a timely manner all
documents that the Company was required to file under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") during the 12 months preceding the
date of this Agreement. The following documents complied in all material
respects with the SEC's requirements as of their respective filing dates, and
the information contained therein as of the date thereof did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading:

     (a)  The Company's Annual Report on Form 10-K for the year ended July 31,
          1996;

     (b)  The Company's Quarterly Report on Form 10-Q for the quarter ended
          January 31, 1997;

     (c)  The Company's proxy statement in connection with its Annual Meeting of
          Stockholders on December 13, 1996;

     (d)  The Company's Current Report on Form 8-K dated February 14, 1997;

     (e)  The Company's prospectus dated April 7, 1997 from its resale
          Registration Statement on Form S-1; and

     (f)  all other documents, if any, filed by the Company with the Securities
          and Exchange Commission (the "Commission") since April 7, 1997
          pursuant to the reporting requirements of the Exchange Act.

     4.13. Listing. The Company shall comply with all requirements of the
National Association of Securities Dealers, Inc. with respect to the issuance of
the Stock and the listing thereof on the Nasdaq National Market.

     4.14. Lock-up Agreements. Lock-up Agreements with the Placement Agent have
been executed by eay's Officers and Directors agreeing that such individual will
not sell, offer, contract to sell, pledge, grant any option to purchase or
otherwise dispose of any shares of the Company's Common Stock prior to the 90th
day after the Registration Statement is declared effective.


                                      -5-




<PAGE>


     5. Representations, Warranties and Covenants of the Investor.

     (a) The Investor represents and warrants to, and covenants with, the
Company that: (i) the Investor is an "accredited investor" as defined in
Regulation D under the Securities Act of 1933, as amended (the "Securities Act")
and the Investor is also knowledgeable, sophisticated and experienced in making,
and is qualified to make decisions with respect to investments in shares
presenting an investment decision like that involved in the purchase of the
Stock, including investments in securities issued by the Company and investments
in comparable companies, and has requested, received, reviewed and considered
all information it deemed relevant in making an informed decision to purchase
the Stock; (ii) the Investor is acquiring the number of shares of Stock set
forth on the signature page hereto in the ordinary course of its business and
for its own account for investment only and with no present intention of
distributing any of such shares of Stock or any arrangement or understanding
with any other persons regarding the distribution of such shares of Stock; (iii)
the Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the shares of Stock except in compliance
with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder; (iv) the Investor has answered all
questions on the signature page hereto for use in preparation for the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company immediately of any change in any of such
information until such time as the Investor has sold all of its shares of Stock
or until the Company is no longer required to keep the Registration Statement
effective; and (vi) the Investor has, in connection with its decision to
purchase the number of shares of Stock set forth on the signature page hereto,
relied only upon the representations and warranties of the Company contained
herein.

     (b) The Investor acknowledges, represents and agrees that no action has
been or will be taken in any jurisdiction outside the Untied States by the
Company or the Placement Agent that wofering of the shares of Stock, or
possession or distribution of offering materials in connection with the issue of
the shares of Stock, in any jurisdiction outside the United States where action
for that purpose is required. Each Investor outside the United States will
comply with all applicable laws and regulations in each foreign jurisdiction in
which it purchases, offers, sells or delivers shares of Stock or has in its
possession or distributes any offering material, in all cases at its own
expense. The Placement Agent is not authorized to make any representation or use
any information in connection with the issue, placement, purchase and sale of
the shares of Stock other than as contained in the Placement Memorandum.

     (c) The Investor hereby covenants with the Company not to make any sale of
the shares of Stock without complying with the provisions of this agreement,
including Section 7.2 hereof, and without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied. The Investor
acknowledges that there may occasionally be times when the Company, based on the
advice of its counsel, determines that it must suspend the use of the prospectus
forming a part of the 


                                      -6-




<PAGE>


Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the Commission
or until the Company has amended or supplemented such prospectus.

     (d) The Investor further represents and warrants to, and covenants with,
the Company that (i) the Investor has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and (ii) upon the execution and delivery of
this Agreement, this Agreement shall constitute a valid and binding obligation
of the Investor enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Investors herein may be legally unenforceable.

     (e) Investor will not, prior to the effectiveness of the Registration
Statement, sell, offer to sell, solicit offers to buy, dispose of, loan, pledge
or grant any right with respect to (collectively, a "Disposition"), the Common
Stock of the Company, nor will Investor engage in any hedging or other
transaction which is designed to or could reasonably be expected to lead to or
result in a Disposition of Common Stock of the Company by the Investor or any
other person or entity. Such prohibited hedging or other transactions would
include without limitation effecting any short sale or having in effect any
short position (whether or not such sale or position is against the box and
regardless of when such position was entered into) or any purchase, sale or
grant of any right (including without limitation any put or call option) with
respect to the Common stock of the Company or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the Common stock of the Company.

      (f) The Investor understands that nothing in the Placement Memorandum,
this Agreement or any other materials presented to the Investor in connection
with the purchase and sale of the Stock constitutes legal, tax or investment
advice. The Investor has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection of
Stock.

     6. Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement or by the Placement Agent,
all covenants, agreements, representations and warranties made by the Company
and the Investor herein shall survive the execution of this Agreement, the
delivery to the Investor of the shares of Stock being purchased and the payment
therefor.


                                      -7-




<PAGE>


     7. Registration of the Stock; Compliance with the Securities Act.

     7.1. Registration Procedures and Expenses. The Company shall:

     (a) use its best efforts, subject to receipt of necessary information from
Investors, to prepare and file with the Commission, within five (5) business
days of the Pricing Date, a Registration Statement on Form S-3 (the
"Registration Statement") to enable the sale of the Stock by the Investor from
time to time through the automated quotation system of the Nasdaq National
Market or in privately-negotiated transactions;

     (b) use its best efforts, subject to receipt of necessary information from
the Investor, to cause the Registration Statement to become effective within 90
days after the Registration Statement is filed by the Company;

     (c) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep the Registration Statement effective for a period not
exceeding, with respect to each Investor's shares purchased hereunder, the
earlier of (i) the second anniversary of the Closing Date, (ii) such time after
the first anniversary of the Closing Date when such Investor's shares of Stock
purchased hereunder and then owned by such Investor represent no more than one
percent of the Company's outstanding Common Stock, or (iii) such time as all
shares purchased by such Investor in this offering have been sold pursuant to a
registration statement.

     (d) furnish to the Investor with respect to the Stock registered under the
Registration Statement (and to each underwriter, if any, of such Stock) such
number of copies of prospectuses and preliminary prospectuses in conformity with
the requirements of the Securities Act and such other documents as the Investor
may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Stock by the Investor, provided, however, that
the obligation of the Company to deliver copies of prospectuses or preliminary
prospectuses to the Investor shall be subject to the receipt by the Company of
reasonable assurances from the Investor that the Investor will comply with the
applicable provisions of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with any use of such prospectuses or
preliminary prospectuses;

     (e) file documents required of the Company for normal blue sky clearance in
states specified in writing by the Investor, provided, however, that the Company
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so consented;
and

     (f) bear all expenses in connection with the procedures in paragraph (a)
through (e) of this Section 7.1 and the registration of the Stock pursuant ton
Statement, other than fees and expenses, if any, of counsel or other advisers to
the Investor or Other Investors.


                                      -8-




<PAGE>


     The Company understands that the Investor disclaims being an underwriter,
but the Investor being deemed an underwriter shall not relieve the Company of
any obligations it has hereunder.

     7.2. Transfer of Stock After Registration.

     (a) The Investor agrees that it will not effect any disposition of the
Stock or its right to purchase the Stock that would constitute a sale within the
meaning of the Securities Act except as contemplated in the Registration
Statement referred to in Section 7.1 and described below, and that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding the Investor or its Plan of Distribution.

     (b) The Investor agrees that to sell shares pursuant to the Registration
Statement, the Investor will:

          (i) The Investor must notify the Company three (3) business days prior
     to sale through the Company's counsel, Fulbright & Jaworski L.L.P., at the
     address provided in Section 9(b) hereto, of its intent to sell, so as to
     confirm that no event has occurred or is expected to occur which would make
     the Registration Statement false or misleading, and to ensure that the
     Registration Statement in its possession is current and has not been
     suspended. The Company may refuse to permit the Investor to resell pursuant
     to the Registration Statement, provided that it must notify the Investor in
     writing within three (3) business days that such as sale would violate
     federal securities laws unless the Registration Statement is updated. In
     such an event, the Company shall use its best efforts to amend the
     Registration Statement if necessary and take all other actions necessary to
     allow such sale under the federal securities laws within 10 business days
     of Investor's initial notification, and shall notify the Investor promptly
     after it has determined that such sale has become permissible under the
     federal securities laws. Notwithstanding the foregoing, within any twelve
     (12) month period the Company shall not, except upon advice of counsel as
     to the necessity pursuant to federal securities laws exercise its right to
     refuse to permit resale of any shares of Stock pursuant to the Registration
     Statement (i) more than three (3) times or (ii) for an aggregate period in
     excess of forty-five (45) days. Each Investor hereby covenants and agrees
     that it will not sell any shares of Stock pursuant to the Registration
     Statement during the periods the Registration Statement is withdrawn as set
     forth in this Section.

          (ii) If the Company or its counsel does not, within such three
     business days, notify the Investor that it is exercising its right to delay
     such sale, the investor may proceed with such sale provided that it
     arranges for delivery of a current prospectus to the transferee. Upon
     receipt of a request therefor, the Company has agreed to provide an
     adequate number of current prospectuses to each investor and to supply
     copies to any other parties requiring such prospectuses.

          (iii) The Investor must also deliver to the Company's counsel a Notice
     of Sale substantially in the form attached hereto as Exhibit A, so that the
     shares may be properly transferred.


                                      -9-




<PAGE>


     7.3. Indemnification. For the purpose 7.3:

          (i) the term "Selling Stockholder" shall include the Investor and any
     affiliate of such Investor;

          (ii) the term "Registration Statement" shall include any final
     prospectus, exhibit, supplement or amendment included in or relating to the
     Registration Statement referred to in Section 7.1;

          (iii) the term "untrue statement" shall include any untrue statement
     or alleged untrue statement, or any omission or alleged omission to state
     in the Registration Statement a material fact required to be stated therein
     or necessary to make the statements therein, in the light of the
     circumstances under which they were made, not misleading.

     (a) The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities to which
such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement of a material fact contained in the Registration Statement on the
effective date thereof, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement and the Company will
reimburse such Selling Stockholder for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim, or preparing to defend any such action, proceeding
or claim, provided, however, that the Company shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises out of, or
is based upon, an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use in
preparation of the Registration Statement, or the failure of such Selling
Stockholder to comply with the covenants and agreements contained in Sections
5(c) or 7.2 hereof respecting sale of the Stock or any statement or omission in
any Prospectus that is corrected in any subsequent Prospectus that was delivered
to the Investor prior to the pertinent sale or sales by the Investor.

     (b) The Investor agrees to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Section 5(c) or 7.2 hereof
respecting sale of the Stock, or any untrue statement of a material fact
contained in the Registration Statement on the effective date thereof if such
untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor specifically for use in
preparation 


                                      -10-

<PAGE>


of the Registration Statement, and the Investor will reimburse the Company (or
such officer, director or controlling person), as the case may be, for any legal
or other nably incurred in investigating, defending or preparing to defend any
such action, proceeding or claim.

     (c) Promptly after receipt by any indemnified person of a notice of a claim
or the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 7.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall be entitled to participate therein, and, to the extent
it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying
person to such indemnified person of its election to assume the defense thereof,
such indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof, provided, however, that if there exists or shall exist
a conflict of interest that would make it inappropriate, in the opinion of
counsel to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel for all indemnified parties.

     (d) If the indemnification provided for in this Section 7.3 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Investors on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company on the one hand or a Investor on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Investors agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Investors were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. 


                                      -11-




<PAGE>


Notwithstanding the provisions of this subsection (d), no Investor shall be
required to contribute any amount in excess of the amount by which the net
amount received by the Investor from the sale of the Stock to which such loss
the amount of any damages which such Investor has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Investors obligations in this subsection to contribute are several in proportion
to their sales of shares of Stock to which such loss relates and not joint.

     7.4. Termination of Conditions and Obligations. The conditions precedent
imposed by Section 5 or this Section 7 upon the transferability of the Stock
shall cease and terminate as to any particular number of the shares of Stock
when such Stock shall have been effectively registered under the Securities Act
and sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Stock or at
such time as an opinion of counsel satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act.

     7.5. Information Available. So long as the Registration Statement is
effective covering the resale of Stock owned by the Investor, the Company will
furnish to the Investor:

     (a) as soon as practicable after available one copy of (i) its Annual
Report to Stockholders (which Annual Report shall contain financial statements
audited in accordance with generally accepted accounting principles by a
national firm of certified public accountants), (ii) if not included in
substance in the Annual Report to Stockholders, its Annual Report on Form 10-K,
(iii) if not included in substance in its Quarterly Reports to Stockholders, its
Quarterly Reports on Form 10-Q, and (iv) a full copy of the particular
Registration Statement covering the Stock (the foregoing, in each case,
excluding exhibits);

     (b) upon the reasonable request of the Investor, all exhibits excluded by
the parenthetical to subparagraph (a)(iv) of this Section 7.6 and all other
information that is made available to stockholders; and

     (c) upon the reasonable request of the Investor, an adequate number of
copies of the prospectuses to supply to any other party requiring such
prospectuses; and the Company, upon the reasonable request of the Investor, will
meet with the Investor or a representative thereof at the Company's headquarters
to discuss all information relevant for disclosure in the Registration Statement
covering the Stock and will otherwise cooperate with any Investor conducting an
investigation for the purpose of reducing or eliminating such Investor's
exposure to liability under the Securities Act, including the reasonable
production of information at the Company's headquarters; provided, that, the
Company shall not be required to disclose any confidential information to or
meet at its headquarters with any Investor until and unless the 


                                      -12-



<PAGE>


Investor shall have entered into a confidentiality agreement in the form and
substance reasonably satisfactory to the Company with the Company with respect
thereto.

     8. Placement Agent's Fee. The Investor acknowledges that the Company
intends to pay to the Placement Agent a fee in respect of the sale of the Stock
to the Investor.

     9. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, or nationally recognized overnight express courier, postage
prepaid, and shall be deemed given when so mailed and shall be delivered as
addressed as follows:

     (a)  if to the Company, to:

          Alexion Pharmaceuticals, Inc.
          25 Science Park, Suite 360
          New Haven,11
          Attn: David W. Keiser or Barry Luke
          Phone: 203-776-1790
          Telecopy: 203-776-2089

     (b)  with a copy mailed to:

          Fulbright & Jaworski L.L.P.
          666 Fifth Avenue
          New York, NY  10103
          Attn: Lawrence Spector or Merrill M. Kraines
          Phone: 212-318-3000
          Telecopy: 212-752-5958

     (c)  if to the Investor, at its address on the signature page hereto, or at
          such other address or addresses as may have been furnished to the
          Company in writing.

     10. Changes. This Agreement may not be modified or amended except pursuant
to an instrument in writing signed by the Company and the Investor.

     11. Headings. The headings of the various section of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.

     12. Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.


                                      -13-




<PAGE>


     13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and the federal law of the
United States of America.

     14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.


                                      -14-




<PAGE>


                                    EXHIBIT A


                                                  Date:____________________


Lawrence Spector, Esq. or Merrill Kraines, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth avenue
New York, NY 10103

Re:  Alexion Pharmaceuticals, Inc.

                    INVESTOR'S CERTIFICATE OF SUBSEQUENT SALE

     The undersigned, an officer of, or other person duly authorized by
[official name of shareholder] _________________________ ("Shareholder") hereby
certifies that Shareholder has sold [number] ____________ shares of Alexion
Pharmaceuticals, Inc. Common Stock on [date] ____________ in accordance with
registration statement number [fill in number or otherwise identify registration
statement] __________________ and the requirements of delivering a current
prospectus has been connection with such sale.

Print or Type:

            Name of Purchaser
               (Individual or Institution):_____________________________________

            Name of Individual representing 
               Purchaser (if an Institution):___________________________________

            Title of Individual representing 
               Purchaser (if an Institution):___________________________________

Signature by:

            Individual Purchaser or
               Individual representing Purchaser:_______________________________


                                      -15-





                 SERIES B PREFERRED STOCK PURCHASE AGREEMENT


Alexion Pharmaceuticals, Inc.
25 Science Park
New Haven, CT 06511


Ladies & Gentlemen:

     The undersigned, Biotech Target S.A. (the "Investor"), hereby confirms its
agreement with you as follows:

     1. This Series B Preferred Stock Purchase Agreement (the "Agreement") is
made as of September 4, 1997 between Alexion Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and the Investor.

     2. The Company has authorized the sale and issuance of up to 400,000 shares
of Series B Convertible Preferred Stock, par value $.0001 per share (the "Series
B Preferred Stock").

     3. The Company and the Investor agree that the Investor will purchase and
the Company will sell, for a purchase price of $25.00 per share of Series B
Preferred Stock, or an aggregate purchase price of $10,000,000.00, the Series B
Preferred Stock, and upon such purchase and sale, the Company will issue the
Series B Preferred Stock, pursuant to the Terms and Conditions for Purchase of
Series B Preferred Stock attached hereto as Annex I and incorporated herein by
reference as if fully set forth herein (any reference to the "Agreement" in
Annex I shall mean this signature page and Annex I hereto, collectively). Unless
otherwise requested by the
 Investor, certificates representing the Series B
Preferred Stock will be registered in the Investor's name and address as set
forth below.

     4. The Investor represents that, except as set forth below, (a) it has had
no position, office or other material relationship within the past three years
with the Company or its affiliates, (b) neither it, nor any group of which it is
a member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any NASD member. Exceptions:

________________________________________________________________________________

________________________________________________________________________________
               (If no exceptions, write "none." If left blank,
                    response will be deemed to be "none.")



<PAGE>


     Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space below for that purpose.


                                       INVESTOR
                                       
                                       _________________________________________

                                       Name:____________________________________

                                       By:______________________________________

                                       Title:___________________________________

                                       Address:_________________________________

                                       _________________________________________

                                       Tax ID No.:______________________________

                                       Contact name:____________________________

                                       Telephone:

                                       Name in which the Series B Preferred
                                       Stock should be registered
                                       (if different):__________________________


AGREED AND ACCEPTED:


__________________________________
ALEXION PHARMACEUTICALS, INC.


__________________________________
By:    Leonard Bell, M.D.
Title: President and Chief 
       Executive Officer


                                      -2-




<PAGE>


                                     ANNEX I

          TERMS AND CONDITIONS FOR PURCHASE OF SERIES B PREFERRED STOCK

     1. Authorization and Sale of the Series B Preferred Stock. Subject to the
terms and conditions of this Agreement, the Company has authorized the sale of
up to 400,000 shares of its Series B Preferred Stock, $.0001 par value (the
"Series B Preferred Stock"), having the designations, powers, preferences and
rights described in the Certificate of the Designations, Powers, Preferences and
Rights of the Series B Preferred Stock (the "Certificate of Designations")
attached hereto as Exhibit A. The shares of Series B Preferred Stock, shares of
Common Stock, $.0001 par value (the "Common Stock") issuable upon the conversion
of the Series B Preferred Stock (the "Conversion Shares") and the Common Stock
issuable as a dividend upon the Series B Preferred Stock, if any, (the "Dividend
Shares") are sometimes collectively referred to herein as the "Securities."

     2. Agreement to Sell and Purchase the Series B Preferred Stock. At the
Closing (as defined in Section 3), the Company will sell to the Investor, and
the Investor will purchase from the Company, upon the terms and conditions
hereinafter set forth, 400,000 shares of Series B Preferred Stock at the
purchase price set forth on the signature page hereto.

     3. Delivery of the Series B Preferred Stock at Closing. The completion of
the purchase and sale of the Series B Preferred Stock (the "Closing") shall
occur on September 5, 1997 (the "Closing Date"). At the Closing, the Company
shall deliver to the Investor one or more stock certificates representing the
shares of Series B Preferred Stock to be purchased by the Investor hereunder,
each such certificate to be registered in the name of the Investor or, if so
indicated on the signature page hereto, in the name of a nominee designated by
the Investor.

     The Company's obligation to close the transaction shall be subject to the
following conditions, any one or more of which may be waived by the Company: (a)
receipt by the Company of a certified or official bank check or wire transfer of
funds in the full amount of the purchase price for the shares of Series B
Preferred Stock being purchased hereunder; and (b) the accuracy of the
representations and warranties made by the Investor and the fulfillment of those
undertakings of the Investor to be fulfilled prior to the Closing.

     The Investor's obligation to close the transaction shall be subject to: (a)
the receipt of the shares of Series B Preferred Stock; and (b) the accuracy of
the representations and warranties made by the Company and the fulfillment of
those undertakings of the Company to be fulfilled prior to the Closing.

     4. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Investor as follows:




<PAGE>


     4.1. Organization. The Company is duly organized and validly existing in
good standing under the laws of the State of Delaware. The Company has full
power and authority to own, operate and occupy its properties and conduct its
business as presently conducted and as described in its Annual Report on Form
10-K for the year ended July 31, 1996 (the "10-K") and the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended October 31, 1996, the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1997, as
amended by Form 10-Q/A, filed March 17, 1997, and Form 10-Q/A2, filed June 19,
1997, the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1997, the Company's Current Report on Form 8-K, dated February 28,
1997, the Company's Current Report on Form 8-K, dated June 17, 1997, the
Company's Current Report on Form 8-K dated July 9, 1997 and Registration
Statement on Form 8-A dated February 21, 1997, the foregoing filings constitute
all documents filed by the Company since the date of the 10-K with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (all such documents are hereinafter referred to as the "1934
Act Filings"), and is registered or qualified to do business and in good
standing in each jurisdiction in which it owns or leases property or transacts
business and where the failure to be so qualified would have a material adverse
effect upon the business, financial condition, properties or operations of the
Company. The Company has no subsidiaries.

     4.2. Due Authorization. The Company has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement, and this
Agreement has been duly authorized and validly executed and delivered by the
Company and constitutes the legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution may be limited by state or federal securities laws
or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

     4.3. Non-Contravention. The execution and delivery of the Agreement, the
issuance and sale of the shares of Series B Preferred Stock to be sold by the
Company hereunder, the fulfillment of the terms of the Agreement and the terms
of the Certificate of Designations the shares of Series B Preferred Stock and
the consummation of the transactions contemplated hereby and thereby will not
conflict with or constitute a violation of, or default (with the passage of time
or otherwise) under, any material agreement or instrument to which the Company
is a party or by which it is bound or the charter, by-laws or other
organizational documents of the Company nor result in the creation or imposition
of any lien, encumbrance, claim, security interest or restriction whatsoever
upon any of the material properties or assets of the Company or an acceleration
of indebtedness pursuant to any obligation, agreement or condition contained in
any material bond, debenture, note or any other evidence of indebtedness or any
material indenture, mortgage, deed of trust or any other agreement or instrument
to which the Company is a party or by which it is bound 


                                      -2-




<PAGE>


or to which any of the property or assets of the Company is subject, nor
conflict with, or result in a violation of, any law, administrative regulation,
ordinance, order, judgment or decree of any court or governmental agency,
arbitration panel or authority applicable to the Company. No consent, approval,
authorization or other order of, or registration, qualification or filing with,
any regulatory body, administrative agency, or other governmental body in the
United States is required for the valid issuance and sale of the Securities,
other than such as have been made or obtained before the date of this Agreement
and which, in the case of the Conversion Shares and the Dividend Shares, are not
required to be made until after the issuance of such shares, and other than a
Form D which will be filed under the Securities Act of 1933, as amended, after
the Closing Date, and other than Nasdaq listing which has been applied for and
will be obtained.

     4.4. Capitalization. The capitalization of the Company as of July 31, 1996
is as set forth in the 10-K. The Company has not issued any capital stock since
that date other than as contemplated by or described in the 1934 Act Filings,
including the issuance in June 1997 of 1,450,000 shares of Common Stock in a
private placement transaction. At September 4, 1997 the Company had outstanding
8,865,468 shares of Common Stock, holds in treasury 11,875 shares of Common
Stock and has outstanding options and warrants to purchase 1,471,484 and 926,669
shares of Common Stock, respectively. The shares of Series B Preferred Stock to
be sold pursuant to the Agreement have been, subject to the filing of the
Certificate of Designations with the Secretary of State of Delaware, duly
authorized, and upon Closing, will be validly issued, fully paid and
nonassessable. The Conversion Shares and, upon resolution by the Board of
Directors of the Company to pay the dividend on the shares of Series B Preferred
Stock in the form of Common Stock, the Dividend Shares, if any, issuable in
accordance with the Series B Preferred Stock have been, or will be, as the case
may be, duly authorized, and when issued in accordance with the terms of the
Series B Preferred Stock, will be validly issued, fully paid and nonassessable.
All outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable. Except as set forth above
there are no outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in the
Company, or any contract, commitment, agreement, understanding or arrangement of
any kind relating to the issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or options,
except for the rights granted to the holders of Common Stock pursuant to the
Rights Agreement, dated February 14, 1997, by and between the Company and
Continental Stock Transfer & Trust Company.

     4.5. Legal Proceedings. There is no material legal or governmental
proceeding pending or, to the knowledge of the Company, threatened or
contemplated to which the Company is or may be a party or of which the business
or property of the Company is or may be subject that is not disclosed in the
1934 Act Filings, and to the Company's knowledge no basis exists for any (i)
legal proceeding by or against the Company or (ii) governmental proceeding or
investigation of the Company.


                                      -3-




<PAGE>


     4.6. No Violations. The Company is not in violation of its charter, bylaws,
or other organizational document, in violation of any law, administrative
regulation, ordinance, order, judgment or decree of any court or governmental
agency, arbitration panel or authority applicable to the Company, except for any
violations which, individually or in the aggregate, would have a material
adverse effect on the business or financial condition of the Company. The
Company is not in default in any material respect in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness in any indenture, mortgage, deed of trust or any
other agreement or instrument to which the Company is a party or by which the
Company is bound or by which the properties of the Company are bound or
affected, and there exists no condition which, with the passage of time or
otherwise, would constitute a material default under any such document or
instrument or result in the imposition of any material penalty or the
acceleration of any material indebtedness.

     4.7. Governmental Permits, Etc. The Company has all necessary franchises,
licenses, permits, certificates and other authorizations from any foreign,
federal, state or local government or governmental agency, department, or body
that are currently necessary for the operation of the business of the Company as
currently conducted and as described in the 1934 Act Filings, the absence of
which would have a material adverse effect on the Company.

     4.8. Intellectual Property. Except as described in the 1934 Act Filings,
the Company owns or possesses sufficient rights to use all material patents,
patent rights, trademarks, copyrights, licenses, inventions, trade secrets and
know-how described or referred to in the 1934 Act Filings as owned or used by it
or that are necessary for the conduct of its business as now conducted or as
described in the 1934 Act Filings. Except as described in the 1934 Act Filings,
the Company has not received any notice of, and has no knowledge of or reason to
believe that, any infringement of or conflict with any right of others with
respect to any patent, patent right, trademark, copyright, invention, trade
secret or know-how that, individually or in the aggregate would have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company. Except as described in 1934 Act
Filings, the Company has not entered into or become party to any development,
work for hire, license or other agreement pursuant to which they have secured
the right or obligation to use, or granted others the right or obligation to
use, any trademarks, servicemarks, trade names, copyrights, patents or any other
intellectual property right. All proprietary technical information developed by
or belonging to the Company which has not been patented has been kept
confidential.

     4.9. Financial Statements. The financial statements of the Company and the
related notes contained in the 1934 Act Filings present fairly, subject to
customary year end adjustments in the case of the quarterly statements, the
financial position of the Company as of the dates indicated, and the results of
its operations and cash flows for the periods therein specified and the assets
and liabilities of the Company have not changed significantly since the date of
the most recent 1934 Act Filing except for changes in the ordinary course of
business or resulting from the Company's private 


                                      -4-




<PAGE>


placement of Common Stock during June 1997. Such financial statements (including
the related notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
therein specified, except as disclosed in the 1934 Act Filings. The other
financial information contained in the 1934 Act Filings has been prepared on a
basis consistent with the financial statements of the Company.

     4.10. No Material Adverse Change. Subsequent to the respective dates as of
which information is given in the 1934 Act Filings, and except as contemplated
or described in the 1934 Act Filings, the Company has not incurred any material
liabilities or obligations, direct or contingent, other than in the ordinary
course of business, and there has not been any material adverse change in its
condition (financial or other), results of operations, business, prospects, key
personnel or capitalization.

     4.11. Additional Information. The Company has filed in a timely manner all
documents that the Company was required to file under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") since the Company's initial public
offering. The 1934 Act Filings complied in all material respects with the SEC's
requirements as of their respective filing dates, and the information contained
therein as of the respective dates thereof did not contain any untrue statement
of material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.

     4.12. Listing. The Company shall comply with all requirements of the
National Association of Securities Dealers, Inc. with respect to the issuance of
the Securities and the listing of the Conversion Shares and Dividend Shares, if
any, on the Nasdaq National Market.

     4.13. Maintenance of Capital Surplus. The Company shall maintain sufficient
capital surplus (as such term is described in Section 154 of the Delaware
General Corporation Law) in order to satisfy its dividend obligations with
respect to the Series B Preferred Stock in accordance with Section 170 of the
Delaware General Corporation Law. In addition, the Corporation will take
whatever actions are necessary in order to satisfy its obligation to pay the
dividends referenced in the Certificate of Designations.

     4.14. Operation of the Business. Except as described in the 1934 Act
Filings, the Company owns and retains all such assets, tangible or intangible,
contractual, license and leasehold rights necessary for it (i) to operate its
business as described in the 1934 Act Filings, and (ii) to utilize the assets
and contractual, license and leasehold rights in the same manner as they were
utilized at the Closing Date, except where the failure to own, retain or utilize
such assets or rights will not have a material adverse effect upon the business
or financial condition of the Company.

     4.15. Environmental Matters. The Company is in compliance in all respects
with all applicable local, state and federal safety and environmental laws,
rules, orders and regulations ("Environmental Laws") under the jurisdiction of
the USDA, BATF, USNRC and CTDEP and any other federal or state agency with
applicable programs 


                                      -5-




<PAGE>


relating to biosafety, chemical hygiene, radiation safety, blood borne
pathogens, hazard communication, hazardous waste management and chemical,
medical and radiation waste disposal, except where the failure to comply with
the Environmental Laws will not have a material adverse effect upon the business
or financial condition of the Company.

     4.16. Reliance. The Company acknowledges that the Investor has reviewed and
relied upon the 1934 Act Filings in making its decision to purchase the shares
of Series B Preferred Stock.

     5. Representations, Warranties and Covenants of the Investor.

     (a) The Investor represents and warrants to, and covenants with, the
Company that: (i) the Investor is an "accredited investor" as defined in
Regulation D under the Securities Act of 1933, as amended (the "Securities Act")
and the Investor is also knowledgeable, sophisticated and experienced in making,
and is qualified to make decisions with respect to investments in securities
presenting an investment decision like that involved in the purchase of the
Securities, including investments in securities issued by the Company and
investments in comparable companies, and has requested, received, reviewed and
considered all information it deemed relevant in making an informed decision to
purchase the Securities; (ii) the Investor is acquiring the shares of Series B
Preferred Stock set forth on the signature page hereto in the ordinary course of
its business and for its own account for investment only and with no present
intention of distributing any of the Securities or any arrangement or
understanding with any other persons regarding the distribution of such
Securities; (iii) the Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Securities except in
compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder; (iv) the Investor has
answered all questions on the signature page hereto for use in preparation for
the Registration Statement (referred to below) and the answers thereto are true
and correct to the best of the Investors knowledge as of the Closing Date; and
(v) the Investor will notify the Company immediately of any change in any of
such information until such time as the Investor has sold all of its Securities
or until the Company is no longer required to keep the Registration Statement
effective.

     (b) The Investor acknowledges that no action has been or will be taken in
any jurisdiction outside the United States by the Company that would permit an
offering of the Securities, or possession or distribution of offering materials
in connection with the issue of the Securities, in any jurisdiction outside the
United States where action for that purpose is required. The Investor will
comply with all applicable laws and regulations in each foreign jurisdiction in
which it purchases, offers, sells or delivers Securities or has in its
possession or distributes any offering material, in all cases at its own
expense.

     (c) The Investor hereby covenants with the Company not to make any sale of
the Securities without complying with the provisions of this Agreement,
including 


                                      -6-




<PAGE>


Section 7.2 hereof, and without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied. The Investor acknowledges
that there may occasionally be times when the Company, based on the reasonable
advice of its counsel, determines that it must suspend the use of the prospectus
forming a part of the Registration Statement until such time as an amendment to
the Registration Statement has been filed by the Company and declared effective
by the SEC or until the Company has amended or supplemented such prospectus.

     (d) The Investor further represents and warrants to the Company that (i)
the Investor has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement, and (ii) upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding obligation of the Investor
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.

     (e) The Investor will not (unless pursuant to an applicable exemption under
the Securities Act) sell, offer to sell, solicit offers to buy, dispose of,
loan, pledge or grant any right with respect to the shares of Series B Preferred
Stock and, will not, prior to the effectiveness of the Registration Statement,
sell, offer to sell, solicit offers to buy, dispose of, loan, pledge or grant
any right with respect to (collectively, a "Disposition"), the Conversion Shares
or the Dividend Shares, if any, nor will the Investor engage in any hedging or
other transaction which is designed to or could reasonably be expected to lead
to or result in a Disposition of Common Stock of the Company by the Investor or
any other person or entity. Such prohibited hedging or other transactions would
include without limitation effecting any short sale or having in effect any
short position (whether or not such sale or position is against the box and
regardless of when such position was entered into) or any purchase, sale or
grant of any right (including without limitation any put or call option) with
respect to the Common stock of the Company or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the Common Stock of the Company,
but such security shall not include the capital stock or debt of the Investor,
its parent companies or their respective subsidiaries.

     (f) The Investor understands that nothing in this Agreement or any other
materials presented to the Investor in connection with the purchase and sale of
the Securities constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection of Securities.

     6. Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement, all covenants,


                                      -7-




<PAGE>


agreements, representations and warranties made by the Company and the Investor
herein shall survive the execution of this Agreement, the delivery to the
Investor of the shares of Series B Preferred Stock being purchased and the
payment therefor, including, without limitation, those contained in Section 7.3
hereof.

     7. Registration of the Conversion Shares and the Dividend Shares;
Compliance with the Securities Act.

     7.1. Registration Procedures and Expenses. The Company shall:

     (a) subject to receipt of necessary information from the Investor to
prepare and file with the Commission, within seventy-five (75) days of the
Closing Date, a Registration Statement on Form S-3 (the "Registration
Statement") to enable the sale of the Conversion Shares and the Dividend Shares,
if any, by the Investor from time to time through the automated quotation system
of the Nasdaq National Market or in privately-negotiated transactions;

     (b) use its best efforts, subject to receipt of necessary information from
the Investor, to cause the Registration Statement to become effective within 90
days after the Registration Statement is filed by the Company;

      (c) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep the Registration Statement effective until the earlier
of (i) the second anniversary of the Closing Date or (ii) such time as all
Conversion Shares and Dividend Shares have been sold pursuant to a registration
statement.

     (d) furnish to the Investor with respect to the Conversion Shares and
Dividend Shares registered under the Registration Statement (and to each
underwriter, if any, of such shares of Common Stock) such number of copies of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Investor may reasonably
request, in order to facilitate the sale or other disposition of all or any of
the Conversion Shares and Dividend Shares by the Investor, provided, however,
that the obligation of the Company to deliver copies of prospectuses or
preliminary prospectuses to the Investor shall be subject to the receipt by the
Company of reasonable assurances from the Investor that the Investor will comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such prospectuses or preliminary prospectuses;

     (e) file documents required of the Company for blue sky clearance in states
specified in writing by the Investor; provided, however, that the Company shall
not be required to qualify to do business or consent to service of process in
any jurisdiction in which it is not now so qualified or has not so consented;
and

     (f) bear all expenses in connection with the procedures in paragraph (a)
through (e) of this Section 7.1 and the registration of the Conversion Shares
and


                                      -8-




<PAGE>


Dividend Shares pursuant to the Registration Statement, other than fees and
expenses, if any, of counsel or other advisers to the Investor.

     The Company understands that the Investor disclaims being an underwriter,
but the Investor being deemed an underwriter shall not relieve the Company of
any obligations it has hereunder.

     7.2. Transfer of Conversion Shares and Dividend Shares After Registration.

     (a) The Investor agrees that it will not effect any disposition of the
Conversion Shares or the Dividend Shares that would constitute a sale within the
meaning of the Securities Act except as contemplated in the Registration
Statement referred to in Section 7.1 or Section 5(e) and described below, and
that it will promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Investor or in the "Plan of
Distribution" section of the Registration Statement.

     (b) The Investor agrees that to sell the Conversion Shares or Dividend
Shares pursuant to the Registration Statement or pursuant to an applicable
exemption under the Securities Act:

          (i) The Investor must notify the Company three (3) business days prior
     to sale through the Company's counsel, Fulbright & Jaworski L.L.P., at the
     address provided in Section 10(b) hereto, of its intent to sell, so as to
     confirm that no event has occurred or is expected to occur which would make
     the Registration Statement false or misleading, and to ensure that the
     Registration Statement in its possession is current and has not been
     suspended. The Company may refuse to permit the Investor to resell pursuant
     to the Registration Statement, provided that it must notify the Investor
     within three (3) business days that such a sale would violate federal
     securities laws unless the Registration Statement is updated. In such an
     event, the Company shall use its best efforts to amend the Registration
     Statement if necessary and take all other actions necessary to allow such
     sale under the federal securities laws within 10 business days of
     Investor's initial notification, and shall notify the Investor promptly
     after it has determined that such sale has become permissible under the
     federal securities laws. Notwithstanding the foregoing, within any twelve
     (12) month period the Company shall not, except upon advice of counsel as
     to the necessity pursuant to federal securities laws, exercise its right to
     refuse to permit resale of any Conversion Shares or Dividend Shares
     pursuant to the Registration Statement (i) more than three (3) times or
     (ii) for an aggregate period in excess of forty-five (45) days. The
     Investor hereby covenants and agrees that it will not sell any Conversion
     Shares or Dividend Shares pursuant to the Registration Statement during the
     periods the Registration Statement is withdrawn as set forth in this
     Section.

          (ii) If the Company or its counsel does not, within such three
     business days, notify the Investor that it is exercising its right to delay
     such sale, the Investor may proceed with such sale provided that it
     arranges for delivery of a current prospectus to the transferee.


                                      -9-




<PAGE>


          (iii) The Investor must also deliver to the Company's counsel a Notice
     of Sale substantially in the form attached hereto as Exhibit B, so that the
     Conversion Shares and Dividend Shares may be properly transferred.

     7.3. Indemnification. For the purpose 7.3:

          (i) the term "Selling Stockholder" shall include the Investor and any
     affiliate of such Investor;

          (ii) the term "Registration Statement" shall include any final
     prospectus, exhibit, supplement or amendment included in or relating to the
     Registration Statement referred to in Section 7.1;

          (iii) the term "untrue statement" shall include any untrue statement
     or alleged untrue statement, or any omission or alleged omission to state
     in the Registration Statement a material fact required to be stated therein
     or necessary to make the statements therein, in the light of the
     circumstances under which they were made, not misleading.

     (a) The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities to which
such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such Losses (as used herein the term "Losses" means any
and all claims, demands, costs, losses, damages and liabilities, net of
insurance proceeds, and includes reasonable attorney's fees and costs incurred
in the investigation and defense of a claim, demand, cost, loss or liability),
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon a breach by the Company of its representations,
warranties, covenants or obligations in this Agreement or any untrue statement
of a material fact contained in the Registration Statement on the effective date
thereof, or arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement and the Company will reimburse such
Selling Stockholder for any reasonable legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim, or preparing to defend any such action, proceeding or
claim, provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement made in such Registration Statement in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Selling Stockholder specifically for use in preparation of the
Registration Statement or the failure of such Selling Stockholder to comply with
the covenants and agreements contained in Sections 5(c) or 7.2 hereof respecting
sale of the Stock or any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Investor within
a reasonable time prior to the pertinent sale or sales by the Selling
Stockholder to inform the buyer of such change.

     (b) Each Selling Stockholder agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within the meaning of


                                      -10-




<PAGE>


Section 15 of the Securities Act, each officer of the Company who signs the
Registration Statement and each director of the Company) from and against any
Losses, claims, damages or liabilities to which the Company (or any such
officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such Losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure to comply with the covenants and agreements contained in
Section 5(c) or 7.2 hereof respecting sale of the Conversion Shares or Dividend
Shares, or any untrue statement of a material fact contained in the Registration
Statement on the effective date thereof if such untrue statement was made in
reliance upon and in conformity with written information furnished by or on
behalf of the Selling Stockholder specifically for use in preparation of the
Registration Statement, and the Selling Stockholder will reimburse the Company
(or such officer, director or controlling person), as the case may be, for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that (i) the obligations of the Selling Stockholder hereunder shall be limited
to an amount equal to the aggregate public offering price of the registered
stock of such Selling Stockholder sold as contemplated herein, unless such
liability arises out of or is based upon willful misconduct by the Selling
Stockholder and (ii) the indemnity for untrue statements or omissions described
above, and the reimbursement obligation relating thereto, shall not apply if the
Selling Stockholder provides the Company with additional written information a
reasonable time prior to the effectiveness of the Registration Statement as is
required to make the previously supplied written information true and complete,
together with a description in reasonable detail of the information previously
supplied which was untrue or complete.

     (c) Promptly after receipt by any indemnified person of a notice of a claim
or the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 7.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall be entitled to participate therein, and, to the extent
it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying
person to such indemnified person of its election to assume the defense thereof,
such indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof, provided, however, that if there exists or shall exist
a conflict of interest that would make it inappropriate, in the opinion of
counsel to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel for all indemnified parties.

     (d) If the indemnification provided for in this Section 7.3 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in 


                                      -11-

<PAGE>


respect of any losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as result of
such losses, claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and the Investor on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Investor on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Investor
agree that it would not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), the Investor
shall not be required to contribute any amount in excess of the amount by which
the net amount received by the Investor from the sale of the Stock to which such
loss the amount of any damages which the Investor has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

     7.4. Termination of Conditions and Obligations. The conditions precedent
imposed by Section 5 or this Section 7 upon the transferability of the
Conversion Shares and Dividend Shares shall cease and terminate as to any
particular number of the shares of Common Stock when such shares of Common Stock
shall have been effectively registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition set
forth in the Registration Statement covering such Conversion Shares and Dividend
Shares or at such time as an opinion of counsel reasonably satisfactory to the
Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act at such time for such sale
or at such time for all future sales at the Investor's option.

     7.5. Information Available. So long as the Registration Statement is
effective covering the resale of Conversion Shares and Dividend Shares owned by
the Investor, the Company will furnish to the Investor:

     (a) as soon as practicable after available one copy of (i) its Annual
Report to Stockholders (which Annual Report shall contain financial statements
audited in 


                                      -12-




<PAGE>


accordance with generally accepted accounting principles by a national firm of
certified public accountants), (ii) if not included in substance in the Annual
Report to Stockholders, its Annual Report on Form 10-K, (iii) if not included in
substance in its Quarterly Reports to Stockholders, its Quarterly Reports on
Form 10-Q, and (iv) a full copy of the particular Registration Statement
covering the Conversion Shares and Dividend Shares (the foregoing, in each case,
excluding exhibits);

     (b) upon the reasonable request of the Investor, all exhibits excluded by
the parenthetical to subparagraph (a)(iv) of this Section 7.5 and all other
information that is made available to stockholders; and

     (c) upon the reasonable request of the Investor, an adequate number of
copies of the prospectuses to supply to any other party requiring such
prospectuses; and the Company, upon the reasonable request of the Investor, will
meet with the Investor or a representative thereof at the Company's headquarters
to discuss all information relevant for disclosure in the Registration Statement
covering the Conversion Shares and Dividend Shares and will otherwise cooperate
with any Investor conducting an investigation for the purpose of reducing or
eliminating such Investor's exposure to liability under the Securities Act,
including the reasonable production of information at the Company's
headquarters; provided, that, the Company shall not be required to disclose any
confidential information to or meet at its headquarters with any Investor until
and unless the Investor shall have entered into a confidentiality agreement in
the form and substance reasonably satisfactory to the Company with the Company
with respect thereto.

     8. Right of First Refusal. The Company hereby grants to the Investor the
right of first refusal to purchase a pro rata portion of Common Stock, preferred
stock, debt or notes convertible into Common Stock, or notes sold together with
warrants to purchase Common Stock (collectively, "New Securities"), which the
Company may, from time to time, propose to sell and issue in private placements
for cash. This right of first refusal shall be subject to the following
provisions:

     (a) The right of first refusal granted herein shall not apply to New
Securities, (A) issued upon the exercise of the Company's outstanding options or
warrants, (B) issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets or other
reorganization, (C) issued by the Company in connection with the acquisition of
any patent or other rights to technology, including licenses, (D) issued to
employees, consultants, officers or directors of the Company pursuant to any
stock option plan or stock purchase or stock bonus arrangement approved by the
Board of Directors of the Company, (E) issued in connection with a corporate
collaboration, joint venture, partnership, or marketing, manufacturing, research
or other similar arrangement, or (F) issued pursuant to a public offering by the
Company.

     (b) In the event the Company proposes to undertake an issuance of New
Securities in a private placement, it shall give each Investor written notice of
its intention describing the price and other material terms at which the Company
proposes 


                                      -13-




<PAGE>


to issue the same. Each Investor shall have three (3) days from the date of
receipt of any such notice to agree to purchase its pro rata portion of such
securities for the price specified in the notice by giving written notice to the
Company and stating therein the quantity of securities to be purchased. Any
Investor exercising its right of first refusal hereunder shall, unless the
Company otherwise consents, be required to purchase its entire pro rata portion
if any securities are to be purchased.

     (c) In the event, and to the extent, that the Investors fail to exercise
the right of first refusal within said three (3) day period, the Company shall
have ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of securities covered thereby shall be closed, if at all, within
ninety (90) days from the date of said agreement) to sell the securities
respecting which the right of first refusal was not exercised, at a price and
upon material terms no more favorable to the purchasers thereof than specified
in the Company's notice. In the event the Company has not sold within said
ninety (90) day period or entered into an agreement to sell the securities
within said ninety (90) day period (or sold and issued securities in accordance
with the foregoing within ninety (90) days from the date of said agreement), the
Company shall not thereafter issue or sell any New Securities in a private
placement for cash without first offering such securities to the Investors in
the manner provided above.

     (d) For purposes of this Agreement, an Investor's "pro rata" portion shall
be the ratio of (A) the number of shares of Series B Preferred Stock held by
such Investor to (B) the total number of shares of Series B Preferred Stock then
outstanding.

     (e) The rights to purchase securities of the Company pursuant to this
Agreement may not be assigned by the Investors and shall terminate upon the
conversion of the Series B Preferred Stock into Common Stock.

     9. Fee. The Investor acknowledges that the Company intends to pay to the a
placement agent a fee in respect of the sale of the Securities to the Investor.

     10. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, or nationally recognized overnight express courier, postage
prepaid, and shall be deemed given when so mailed and shall be delivered as
addressed as follows:

     (a)  if to the Company, to:

            Alexion Pharmaceuticals, Inc.
            25 Science Park, Suite 360
            New Haven, Connecticut
            Attn: David W. Keiser or Barry Luke
            Phone:   203-776-1790
            Telecopy: 203-776-2089


                                      -14-




<PAGE>


     (b)  with a copy mailed to:

          Fulbright & Jaworski L.L.P.
          666 Fifth Avenue
          New York, NY  10103
          Attn: Lawrence A. Spector or Merrill M. Kraines
          Phone: 212-318-3000
          Telecopy: 212-752-5958

     (c)  if to the Investor, at its address on the signature page hereto, or at
          such other address or addresses as may have been furnished to the
          Company in writing.

     (d)  with a copy mailed to:

          Baker & McKenzie
          815 Connecticut Avenue, N.W.
          Washington, D.C.  20006
          Attn:  Daniel Goelzer, Esq.
          Phone:  (202) 452-7000
          Facsimile:  (202) 452-7074

     11. Changes. This Agreement may not be modified or amended except pursuant
to an instrument in writing signed by the Company and the Investor.

     12. Headings. The headings of the various section of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.

     13. Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

     14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and the federal law of the
United States of America.

     15. Choice of Forum; Venue; Service of Process. Any claim, suit, action, or
proceeding among any or all of the parties hereto relating to this Agreement, to
any document, instrument, or agreement delivered pursuant hereto, referred to
herein, or contemplated hereby, or in any other manner arising out of or
relating to the transactions contemplated by or referenced in this Agreement,
shall be commenced and maintained exclusively in the United States District
Court for the District of Delaware, or, if such Court lacks jurisdiction over
the subject matter, in a state court of competent subject-matter jurisdiction
sitting in the State of Delaware. The parties hereby submit themselves
unconditionally and irrevocably to the personal jurisdiction of such courts. The
parties further agree that venue shall be exclusively in Delaware. The parties
irrevocably waive any objection to such personal jurisdiction or venue
including, 


                                      -15-




<PAGE>


Delaware but not limited to, the objection that any suit, action, or proceeding
brought in the State of Delaware has been brought in an inconvenient forum. The
parties irrevocably agree that process issuing from such courts may be served on
them, either personally or by certified mail, return receipt requested, at the
addresses given Section 10 hereof; and further irrevocably waive any objection
to service of process made in such manner and at such addresses, including
without limitation any objection that service in such manner and at such
addresses is not authorized by the local or procedural laws of the State of
Delaware.

      16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.


                                      -16-




<PAGE>


                                    EXHIBIT A


                                                  Date:___________________


Lawrence Spector, Esq. or Merrill Kraines, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth avenue
New York, NY 10103

Re: Alexion Pharmaceuticals, Inc.

                    INVESTOR'S CERTIFICATE OF SUBSEQUENT SALE

     The undersigned, an officer of, or other person duly authorized by
[official name of shareholder] _________________________ ("Shareholder") hereby
certifies that Shareholder has sold [number] _____________ shares of Alexion
Pharmaceuticals, Inc. Common Stock on [date] _____________ in accordance with
registration statement number [fill in number or otherwise identify registration
statement]__________________ and the requirements of delivering a current
prospectus has been complied with in connection with such sale.

Print or Type:

            Name of Purchaser
               (Individual or Institution):_____________________________________

            Name of Individual representing 
               Purchaser (if an Institution):___________________________________

            Title of Individual representing 
               Purchaser (if an Institution):___________________________________

Signature by:

            Individual Purchaser or
               Individual representing Purchaser:_______________________________


                                      -1-






                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


     As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously filed
Registration Statements File numbers 333-19905, 333-24863, and 333-29617.


                                                 ARTHUR ANDERSEN LLP


Hartford, Connecticut
August 29, 1997 (except with
  respect to the matters
  discussed in Note 16 of the
  Company's July 31, 1997
  financial statements, as to
  which the date is
  September 30, 1997)








                                                                      EXHIBIT 99

                          ALEXION PHARMACEUTICALS, INC.

        IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

     IN ADDITION TO OTHER INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K AND IN
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, THE FOLLOWING RISK FACTORS
SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS
BECAUSE SUCH FACTORS CURRENTLY HAVE A SIGNIFICANT IMPACT OR MAY A SIGNIFICANT
IMPACT IN THE COMPANY'S BUSINESS, OPERATING RESULTS OR FINANCIAL CONDITION. THIS
FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE PURSUANT TO
THE PROVISIONS OF THE PRIVATE SECURITIIES LITIGATION REFORM ACT OF 1995. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF THE RISK-FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS
FORM.

     Operating Losses; Uncertainty of Future Profitability. Alexion has
generated no revenues from product sales and is dependent upon its research and
development contracts, including the agreements with US Surgical and
GTI/Novartis, external financing, other research and development contracts and
research and development grants to the extent that they can be obtained and
interest income to pursue
 its intended business activities. The Company has
incurred losses since inception and has cumulative net losses of approximately
$31.8 million through July 31, 1997. Losses have resulted principally from costs
incurred in research activities aimed at identifying and developing the
Company's product candidates and from general and administrative costs. The
Company expects to incur substantial additional operating losses over the next
several years and expects losses to increase as the Company's research and
development efforts expand and clinical trials continue and potentially expand.
The Company's ability to achieve profitability is dependent on its ability to
obtain patent protection and regulatory approval for its products, to obtain
licenses from third parties to use technology which it may need, to enter into
agreements for product development and commercialization with corporate partners
and to develop the capacity to manufacture and sell products. There can be no
assurance that the Company will successfully develop, commercialize, manufacture
or market any of its potential products, obtain required regulatory approvals,
patents or third party licenses to technology or ever achieve profitability.

     Early Stage of Product Development; Risks of Clinical Trials. The Company's
research and development programs are at an early stage. There can be no
assurance that the Company's drug discovery efforts will result in the
development of commercially successful therapeutic drugs. Potential products
which have been identified will require significant additional development,
preclinical and clinical testing, regulatory approval, and additional investment
prior to their commercialization, which may never be achieved. Potential
products may be found to be ineffective or cause harmful side effects or
unexpected results during preclinical testing or clinical trials, fail


                                     1 of 9

<PAGE>


to receive necessary regulatory approvals, be difficult to manufacture on a
large scale, fail to achieve market acceptance, be uneconomical or be precluded
from commercialization by proprietary rights of third parties. The results from
preclinical studies and early clinical trials may not be predictive of results
that will be obtained in large-scale clinical trials and do not necessarily
predict or prove safety or efficacy in humans.

     In addition, the Company has recently commenced clinical trials of one of
its product candidates. There can be no assurance that clinical trials of the
Company's product candidates will demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals or will result in marketable products.
Clinical trials are often conducted with patients that are critically ill.
During the course of treatment, these patients can die or suffer other adverse
medical effects for reasons that may not be related to the pharmaceutical agent
being tested but which can nevertheless affect clinical trial results. A number
of companies in the pharmaceutical industry have suffered significant setbacks
in advanced clinical trials, even after promising results in earlier trials. Any
such setback could have a material adverse effect on the Company's business,
financial condition and results of operations. The completion of clinical trials
of the Company's product candidates may be delayed by many factors and there can
be no assurance that delays or terminations will not occur. One such factor is
the rate of enrollment of patients, which generally varies throughout the course
of a clinical trial and which depends on the size of the patient population, the
number of clinical trial sites, the proximity of patients to clinical trial
sites, the eligibility criteria for the trial and the existence of competing
clinical trials. The Company cannot control the rate at which patients present
themselves for enrollment, and there can be no assurance that the rate of
patient enrollment will be consistent with the Company's expectations or be
sufficient to enable clinical trials of the Company's product candidates to be
completed in a timely manner. Further, there can be no assurance that clinical
trial materials will be produced in a timely manner, if at all.

     Need for Additional Funds. The Company will require substantial additional
funds for its research and product development programs, for operating expenses,
for pursuing regulatory approval and for developing required production, sales
and marketing capabilities. With the exception of the Company's agreements with
US Surgical and GTI/Novartis and certain research grants, the Company does not
have any commitments or arrangements to obtain any such funds and there can be
no assurance that funds for these purposes, whether through additional sales of
securities or collaborative or other arrangements with corporate partners or
from other sources, will be available to the Company when needed or on terms
favorable to the Company. 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 would have a material adverse effect on the Company. The Company
believes that its existing available resources, together with anticipated future
funding from US Surgical and GTI/Novartis and certain research grants, and
interest income should be sufficient to fund its operating expenses and capital
requirements as currently planned for at least 18 months through April 1999.
However, the Company's cash requirements may vary materially from those now
planned because of results of research and development, results of product
testing, relationships with strategic partners, changes in the focus and
direction of the Company's research and development programs, competitive and
technological factors, developments in the regulatory process and other factors,
none of which can be predicted.

                                     2 of 9

<PAGE>

     Rapid Technological Change. The Company is engaged in pharmaceutical fields
characterized by extensive research efforts, rapidly evolving technology and
intense competition from numerous organizations, including pharmaceutical
companies, biotechnology firms, academic institutions and others. New
developments are expected to continue at a rapid pace in both industry and
academia. There can be no assurance that research and discoveries by others will
not render any of the Company's programs or potential products obsolete or
uneconomical. In order to compete successfully, the Company will need to
complete development of and obtain regulatory approval of products that keep
pace with technological developments on a timely basis. Any failure by the
Company to anticipate or respond adequately to technological developments will
have a material adverse effect on the Company's business, financial condition
and results of operations.

     Patent, License and Proprietary Rights Uncertainties. 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 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 one company regarding the existence of a patent
which the owners claim may be relevant to the development and commercialization
of certain of the Company's proposed UniGraft organ transplantation products.
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. To the
extent it becomes necessary, there can be 

                                     3 of 9

<PAGE>

no assurance that the Company will be able to obtain a license 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 patent, or could find that the development, manufacture or sale of
products requiring such a license 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.

     No Assurance of FDA Approval; Government Regulation. The preclinical and
clinical testing, manufacturing, and marketing of the Company's products are
subject to extensive regulation by numerous government authorities in the United
States and other countries, including, but not limited to, the FDA. Among other
requirements, FDA approval of the Company's products, including a review of the
manufacturing processes and facilities used to produce such products, will be
required before such products may be marketed in the United States. Similarly,
marketing approval by a foreign governmental authority is typically required
before such products may be marketed in a particular foreign country. In order
to obtain FDA approval of a product, the Company must, among other things,
demonstrate to the satisfaction of the FDA that the product is safe and
effective for its intended uses and that the Company is capable of manufacturing
the product with procedures that conform to the FDA's then current good
manufacturing practice ("cGMP") regulations, which must be followed at all
times. The process of seeking FDA approvals can be costly, time consuming, and
subject to unanticipated and significant delays. There can be no assurance that
such approvals will be granted to the Company on a timely basis, or at all. Any
delay in obtaining or any failure to obtain such approvals would adversely
affect the Company's ability to introduce and market products and to generate
product revenue.

      The Company's research and development processes involve the controlled
use of hazardous materials. The Company is subject to federal, state and local
laws and regulations governing the use, manufacture, storage, handling and
disposing of such materials and certain waste products. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company. There can be no
assurance that the Company will not be required to incur significant costs to
comply with the environmental laws and regulations in the future, or that the
business, financial condition and results of operations of the Company will not
be materially adversely affected by current or future environmental laws or
regulations.

                                     4 of 9

<PAGE>

      Substantial Competition. The pharmaceutical and biotechnology industries
are characterized by 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.

      In particular, T-Cell Sciences, Inc. 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. In addition, each of Bayer A.G. ("Bayer"), Immunex
Corporation, Pharmacia & Upjohn and Rhone-Poulenc Rorer, Inc. sells a product
which is used to reduce surgical bleeding during CPB. 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 Novartis, Inc., in collaboration with Biotransplant
Inc., have publicly announced intentions to commercially develop xenograft
organs and the Company is aware that Diacrin Inc. and Genzyme Tissue Repair,
Inc. are also working in this field. These companies may succeed in developing
products that are more effective or less costly than any that may be developed
by Alexion and may also prove to be more successful than Alexion in production
and marketing. Competition may increase further as a result of potential
advances in the commercial applicability of biotechnology and greater
availability of capital for investment in these fields.

      Dependence on Qualified Personnel. The Company is highly dependent upon
the efforts of its senior management and scientific personnel including its
consultants, generally, and Dr. Leonard Bell, its President and Chief Executive
Officer, in particular. The Company and Dr. Bell are parties to an employment
agreement which expires on April 1, 2000. The loss of the services of one or
more of these individuals could have a material adverse effect on the Company's
ability to achieve its development objectives on a timely basis or at all. The
Company has a $2,000,000 key man life insurance policy on the life of Dr. Bell
of which the Company is the beneficiary. Because of the specialized scientific
nature of its business, Alexion is also highly dependent upon its ability to
continue to attract and retain qualified scientific and technical personnel.
There is intense competition for qualified personnel in the areas of the
Company's activities, and there can be no assurance that Alexion will be able to
continue to attract and retain the qualified personnel necessary for the
development of its business. Loss of the services of, or failure to recruit, key
scientific and technical personnel would be significantly detrimental to the
Company's product development programs.


                                     5 of 9

<PAGE>


     All members of the Company's Board of Scientific Advisors and the Company's
other scientific consultants are employed on a full-time basis by academic or
research institutions. Accordingly, such advisors and consultants will be able
to devote only a small portion of their time to the Company. In addition, in
certain circumstances, inventions or processes discovered by them may not become
the property of the Company but may be the property of their full-time employers
or of other companies and institutions for which they now consult. There can be
no assurance that the interests and motivations of the Company's collaborators
are or will remain consistent with those of the Company. Furthermore, there can
be no assurance that the Company will be able to successfully negotiate license
rights to the results of collaborations or that such licenses will be on
commercially reasonable terms.

     Dependence on Outside Parties and Collaborators. The Company's strategy for
the research, development, manufacture and commercialization of certain of its
products contemplates that it will enter into various arrangements with
corporate partners, licensors, licensees, outside researchers, consultants and
others and, therefore, the success of the Company is, and will be, dependent in
part upon the efforts of outside parties. There can be no assurance that the
Company will be able to negotiate acceptable collaborative arrangements to
develop or commercialize its products, that arrangements or other collaborations
entered into, if any, will be successful, or that current or potential
collaborators will not pursue treatments for other diseases or seek alternative
means of developing treatments for the diseases targeted by programs with the
Company.

     The Company has entered into research and development agreements with US
Surgical and GTI/Novartis to commercialize potential products to be developed in
the UniGraft program and for gene therapy. The amount and timing of resources
which US Surgical, GTI/Novartis or any other potential parties to collaboration
arrangements devote to these activities may not be within the control of the
Company. There can be no assurance that outside parties and collaborators will
perform their obligations as expected or that any revenue will be derived from
outside arrangements. The Joint Development Agreement with US Surgical 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. If
any of the Company's collaborators breaches or terminates its agreement with the
Company or otherwise fails to conduct its collaborative activities in a timely
manner, the development or commercialization of the product candidate or the
research program which is the subject of the agreement may be delayed and the
Company may be required to undertake unforeseen additional responsibilities or
to devote additional resources to development or commercialization or terminate
the development or commercialization. This could have a material adverse effect
on the Company's prospects, financial condition, intellectual property position
and results of operations.

     Limited Manufacturing, Marketing, Sales, Clinical Testing and Regulatory
Compliance Capability. The Company has not invested in the development of
commercial manufacturing, marketing, distribution or sales capabilities.
Moreover, the Company 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



                                     6 of 9

<PAGE>

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 in a timely manner, or at
all.

     Uncertainty of Availability of Health Care Reimbursement. The Company's
ability to commercialize its products successfully may depend in part on the
extent to which reimbursement for the cost of such products and related
treatments will be available from government health administration authorities,
private health insurers and other organizations. Third-party payors are
attempting to control costs by limiting coverage of products and treatments and
the level of reimbursement for medical products and services. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and if the Company succeeds in bringing one or more products to
market, there can be no assurance that these products will be considered
cost-effective, that reimbursement will be available, or, if available, that the
payor's reimbursement policies will not materially adversely affect the
Company's ability to sell its products on a profitable basis.

     Product Liability; Potential Liability for Human Clinical Trials. The
Company's business exposes it to potential product liability risks which are
inherent in the testing, manufacturing, marketing and sale of human therapeutic
products and there can be no assurance that the Company will be able to avoid
significant product liability exposure. With respect to the Company's UniGraft
program, little is known about the potential long-term health risks of
transplanting non-human tissue into humans. In addition to product liability
risks associated with sales of products, the Company may be liable to the claims
of individuals who participate in human clinical trials of its products. While
the Company has obtained, and will seek, waivers of liability from all persons
who participated or may in the future participate in human clinical trials
conducted by or on behalf of the Company, there can be no assurance that waivers
will be effective to protect the Company from liability or the costs of product
liability litigation. The Company currently has product liability insurance to
cover certain liabilities relating to the conduct of human clinical trials.
However, there can be no assurance that it will be able to maintain such
insurance on acceptable terms or that the insurance will provide adequate
protection against potential liabilities. An inability to maintain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or limit the commercialization
of products developed by the Company. Furthermore, a product liability related
claim or recall could have a material adverse effect on the business, financial
condition and results of operations of the Company.

     Volatility of Share Price. The market prices for securities of
biopharmaceutical companies have been volatile. Factors such as announcements of
technological innovations or new commercial products by the Company or its
competitors, government regulation, patent or proprietary rights developments,
public concern as to the safety or other implications of biopharmaceutical
products, results of preclinical or clinical trials, positive or negative
developments related to the Company's collaborators and market conditions in
general may have a significant impact on the market price of the Company's
Common Stock.

                                     7 of 9

<PAGE>

     Dilutive Effect of Stock Issuances, Grants, Options and Warrants. As of
July 31, 1997, Alexion has granted options to purchase an aggregate of
approximately 1,484,284 shares of the Company's Common Stock under certain stock
option plans. Warrants to purchase an aggregate of approximately 926,669 shares
of the Company's Common Stock, are also outstanding under previous financing
arrangements and other transactions. Many of these options and warrants have
exercise prices below the current market price of the Company's Common Stock. In
addition, the Company may issue additional stock, warrants and/or options to
raise capital in the future. The Company regularly examines opportunities to
expand its technology base through means such as licenses, joint ventures and
acquisition of assets or ongoing businesses and may issue securities in
connection with such transactions. The Company may also issue additional
securities in connection with its stock option plans. During the terms of such
options and warrants, the holders thereof are given the opportunity to profit
from a rise in the market price of the Company's Common Stock. The exercise of
such options and warrants may have an adverse effect on the market value of the
Company's Common Stock. The existence of such options and warrants may adversely
affect the terms on which the Company can obtain additional equity financing. To
the extent the exercise prices of such options and warrants are less than the
net tangible book value of the Company's Common Stock at the time such options
and warrants are exercised, the Company's stockholders will experience an
immediate dilution in the net tangible book value of their investment.

     Possible Adverse Impact on Holders of Common Stock; Anti-takeover
Provisions; Rights Plan. The Board of Directors may issue one or more series of
Preferred Stock, without any action on the part of the stockholders of the
Company, the terms of which may adversely affect the rights of holders of Common
Stock. Issuance of Preferred Stock, which may be accomplished through a public
offering or a private placement, may dilute the voting power of holders of
Common Stock (such as by issuing Preferred Stock with super voting rights) and
may render more difficult the removal of current management, even if such
removal may be in the stockholders' best interests. Further, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the stockholders. On February 14, 1997, the Board of Directors of
Alexion declared a dividend distribution of one preferred stock purchase right
(a "Right") for each outstanding share of Common Stock of the Company. The
Rights are not exercisable until the date of the earlier to occur of (i) ten
business days following the time of a public announcement or notice to the
Company that a person or group of affiliated or associated persons has acquired
beneficial ownership of 20% or more of the outstanding shares of Common Stock of
the Company (such 20% beneficial owner, an "Acquiring Person"), or (ii) ten
business days, or such later date as may be determined by the Board of Directors
of the Company, after the date of the commencement or announcement by a person
of an intention to make a tender offer or exchange offer for an amount of Common
Stock which, together with the shares of such stock already owned by such
person, constitutes 20% or more of the outstanding shares of such Common Stock.
The Rights and the Rights Agreement, as well as certain provisions of Delaware
law are designed to prevent any unsolicited acquisitions of the Company's Common
Stock. These provisions and any issuance of Preferred Stock could prevent the
holders of Common Stock from realizing a premium on their shares.

     Ownership by Management and Principal Stockholders. On October 1, 1997,
directors and officers of the Company and certain principal stockholders and
their


                                     8 of 9

<PAGE>


affiliates beneficially owned (as defined by the Securities and Exchange
Commission (the "SEC")) in the aggregate 2,095,934 shares of Common Stock,
representing 21.8% of the outstanding shares of Common Stock. Accordingly, they
have the ability to influence significantly the affairs of the Company and
matters requiring a stockholder vote, including the election of the Company's
directors, the amendment of the Company's charter documents, the merger or
dissolution of the Company and the sale of all or substantially all of the
Company's assets. The voting power of these holders may also discourage or
prevent any proposed takeover of the Company pursuant to a tender offer.


                                     9 of 9




<TABLE> <S> <C>

<ARTICLE>                  5
<LEGEND>
     THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET, THE STATEMENT OF OPERATIONS, AND THE STATEMENT OF CASH FLOWS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<MULTIPLIER>                    1,000
<PERIOD-START>                                AUG-01-1996
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                             JUL-31-1997
<PERIOD-END>                                  JUL-31-1997
<CASH>                                             16,743
<SECURITIES>                                        6,006
<RECEIVABLES>                                           0
<ALLOWANCES>                                            0
<INVENTORY>                                             0
<CURRENT-ASSETS>                                   22,981
<PP&E>                                              3,300
<DEPRECIATION>                                     (2,514)
<TOTAL-ASSETS>                                     24,261
<CURRENT-LIABILITIES>                               2,414
<BONDS>                                                 0
<PREFERRED-MANDATORY>                                   0
<PREFERRED>                                             0
<COMMON>                                                1
<OTHER-SE>                                         21,846
<TOTAL-LIABILITY-AND-EQUITY>                       24,261
<SALES>                                                 0
<TOTAL-REVENUES>                                    3,811
<CGS>                                                   0
<TOTAL-COSTS>                                      11,906
<OTHER-EXPENSES>                                        0
<LOSS-PROVISION>                                        0
<INTEREST-EXPENSE>                                    844
<INCOME-PRETAX>                                    (7,252)
<INCOME-TAX>                                            0
<INCOME-CONTINUING>                                (7,252)
<DISCONTINUED>                                          0
<EXTRAORDINARY>                                         0
<CHANGES>                                               0
<NET-INCOME>                                       (7,252)
<EPS-PRIMARY>                                       (0.97)
<EPS-DILUTED>                                       (0.97)
        
 

</TABLE>