PMC SUPPLY AGREEMENT


          This Agreement (the  "Agreement") is entered into as of August 1, 1998
by Connaught  Laboratories  Limited,  a company  incorporated  under the laws of
Ontario,  Canada,  with its principal place of business in North York,  Ontario,
Canada ("CLL" and, together with its Affiliates, "PMC"), and Aphton Corporation,
a Delaware  corporation,  with its principal executive office in Miami, Florida,
USA ("Aphton").


                              W I T N E S S E T H :


          WHEREAS,  Aphton owns or controls certain patents, patent applications
and  proprietary   information   relating  to  its  therapeutic  cancer  vaccine
("Gastrimmune(TM)")  and Aphton have entered into a  Co-Promotion  Agreement and
License dated as of February 14, 1997 (the "Marketing License"), which provides,
among other things,  that PMC will have certain  rights to  co-promote,  market,
distribute and sell Gastrimmune(TM) in Europe and North America;

          WHEREAS, PMC manufactures diphtheria toxoid and tetanus toxoid;

          WHEREAS,  Section 3.1(c) of the Marketing License provides that Aphton
and PMC will enter  into a supply  agreement  to  provide  for a supply of PMC's
diphtheria  toxoid and/or its tetanus toxoid to Aphton for inclusion in products
(including but not limited to Gastrimmune(TM)) developed by Aphton.


          NOW, THEREFORE, the parties hereto agree as follows:

          1. DEFINITIONS

          Unless otherwise  defined in this Agreement,  capitalized  terms shall
have the meaning set forth in the Marketing License.

          1.01 "Affiliate" shall mean, with respect to any Person, (i) any other
Person of which the securities or other ownership  interests  representing fifty
percent  (50%)  or more of the  equity  or  fifty  percent  (50%) or more of the
ordinary voting power or fifty percent (50%) or more of the general  partnership
interests are, at the time such  determination is being made, owned,  Controlled
or held, directly or indirectly, by such Person, or (ii) any other Person which,
at the time such  determination is being made, is Controlling,  Controlled by or
under common  Control with,  such Person.  As used herein,  the term  "Control,"
whether  used  as a  noun  or  verb,  refers  to  the  possession,  directly  or
indirectly, of the power to direct, or cause the direction of, the management or
policies of a Person,  whether  through the ownership of voting  securities,  by
contract or otherwise.

          1.02 "Aphton Supply  Agreement" shall mean the Aphton Supply Agreement
of even date herewith between Aphton and PMC.




<PAGE>


          1.03 "Bulk  Material"  shall mean DT and/or IT, as the case may be, in
each case as set forth in the Specifications.

          1.04  "Causative  Agent"  shall  mean any  virus,  bacterium,  fungus,
parasitic agent or microorganism which is directly or indirectly responsible for
causing the applicable disease.

          1.05  "Covered  Products"  shall  mean,  collectively,   the  Existing
Products,  the PMC Option  Products  and the  Declined  Products,  and  "Covered
Product" shall mean any of them. In addition,  the term "Covered  Product" shall
include  products in the research and  development  phase (whether such research
and  development  is being  performed  by  Aphton  itself,  or by a Third  Party
pursuant to a contract  research or development  arrangement in which such Third
Party  obtains no  contractual  rights to any product  which  results  from such
research or development work) which have not yet been offered to PMC pursuant to
Section 2.03 hereof.

          1.06  "Declined  Product"  shall  mean a product  developed  by Aphton
(either alone or in collaboration with a third party) to which, after compliance
by Aphton with Section 2.03 hereof, PMC does not obtain rights.

          1.07 "DT" shall mean PMC's diphtheria toxoid.

          1.08 "DT/TT-Based Product" shall have the meaning set forth in Section
2.03.

          1.09 "Existing Products" shall mean,  collectively,  anti-gonadatropin
releasing   hormone  products,   anti-gastrin   products,   and   anti-chorionic
gonadatropin products.

          1.10 "IND" means an Investigational New Drug application.

          1.11  "Index"  shall  mean  the  Industrial   Product  Price  Index  -
Pharmaceutical and Medicine Industry, Index No. D694150,  produced by Statistics
Canada, or any successor index.

          1.12 "Legal Requirements" shall mean all laws,  statutes,  ordinances,
codes, rules, regulations,  published standards,  permits,  judgments,  decrees,
writs,  injunctions,  rulings,  orders  and  other  requirements  of all  Public
Authorities.

          1.13  "Person"  shall  mean any  natural  person,  corporation,  firm,
business trust, joint venture, association,  organization,  company, partnership
or  other  business  entity,  or any  government,  or any  agency  or  political
subdivision thereof.

          1.14   "Phase   I"   shall   mean  a   clinical   trial   in  which  a
biopharmaceutical  product is  administered  to a limited  number of subjects to
test the product's safety.

          1.15   "Phase   II"   shall   mean  a   clinical   trial  in  which  a
biopharmaceutical  product is  administered  to a limited  number of subjects to
determine dose ranges and efficicacy.

          1.16   "Phase   III"  shall   mean  a   clinical   trial  in  which  a
biopharmaceutical  product is  administered  to a large  number of  subjects  to
determine safety and efficacy.


                                      -2-

<PAGE>


          1.17 "PMC Option  Product"  shall mean a product to which PMC acquires
rights in accordance with the procedure set forth in Section 2.03 hereof.

          1.18  "Public  Authority"  shall  mean  any  supranational,  national,
regional,  state or local government,  court,  governmental  agency,  authority,
board, bureau, instrumentality or regulatory body.

          1.19  "Specifications"  shall  mean  the  specifications  for the Bulk
Material  attached  hereto as  Exhibit  A, as  amended  from time to time by the
parties.

          1.20 "Third  Party" shall mean any Person which is not an Affiliate of
any party hereto.

          1.21 "TT" shall mean PMC's tetanus toxoid.

          2. SUPPLY OF BULK MATERIAL

          2.01  Subject to Section 2.02 hereof,  PMC agrees to  manufacture  (or
have  manufactured) and supply,  and Aphton agrees to purchase,  such amounts of
Bulk Material for use in Covered  Products as Aphton may from time to time order
in  accordance  with  the  terms  of this  Agreement;  provided  that  under  no
circumstances  shall Aphton (i) use (or permit to be used) any Bulk  Material in
any product for sale  anywhere in the world  unless such  product is approved by
the U.S. F.D.A.  Center for Biological  Evaluation and Response  (CBER),  or any
successor agency or department,  for  investigational  use or sale in the United
States  (or by a similar  regulatory  agency in the  European  Union,  Canada or
Japan), (ii) sell, supply, transfer or otherwise provide to any Third Person any
DT or TT  supplied to Aphton  hereunder  unless such DI or TT is to be used in a
research and development  program relating to a Covered  Product,  (iii) use (or
permit to be used) any Bulk  Material in any vaccine or other  product  which is
not a Covered  Product,  or (iv) use (or permit to be used) any Bulk Material in
any vaccine  against any  infectious  disease  Causative  Agents (other than any
vaccines  against   infectious  disease  Causative  Agents  which  are  Existing
Products).

          2.02 In the event that the  available  quantities of Bulk Material are
limited due to an Event of Force Majeure (as defined in Section  12.08  hereof),
PMC shall notify Aphton of such shortage as soon as possible and shall  allocate
to Aphton a pro rata share of the amount of Bulk Material  available to PMC from
PMC's DT and/or TT  manufacturing  facility,  or  facilities,  as applicable (or
contract manufacturer or manufacturers, as applicable), based upon the number of
grams of Bulk Material reflected in the applicable Forecast in comparison to the
total number of grams of Bulk Material  reflected in the approved  annual budget
of PMC,  subject to  verification  by Aphton in  accordance  with  Section  4.02
hereof.

          2.03  In the  event  that  Aphton  develops  (either  alone,  with  an
Affiliate or with a Third  Party) any new products  (other than any new products
which are vaccines against  infectious  disease  Causative Agents, in connection
with which Aphton may not under any  circumstances use any DT or TT, pursuant to
Section 2.01  hereof) in  connection  with which Aphton  desires to use any Bulk
Material in the manufacture of the final, licensed product (each, a "DT/TT-Based
Product"),  then promptly following the date on which Aphton decides to use Bulk
Material with such new product  (which shall be no earlier than the filing of an
IND in respect of such  DT/TT-Based  Product and no later than  commencement  of


                                      -3-

<PAGE>


preparation of clinical lots of such DT/TT-Based  Product for Phase III clinical
trials),  Aphton shall offer such product to PMC (the  "Offer").  Aphton  shall,
concurrently  with the Offer, (i) make available to PMC all data and information
relating to such  DT/TT-Based  Product which exists as of the date of the Offer,
and (ii) provide a written  representation  to PMC that all Phase I and Phase II
testing has been  completed  and that all data  resulting  therefrom in Aphton's
possession or of which Aphton is aware has been made available to PMC. PMC shall
have three (3) months  from the date such  product is offered by Aphton (and all
such information is received by PMC) to determine  whether it wishes to commence
negotiations  with respect to obtaining rights to such DT/TT-Based  Product.  If
PMC wishes to commence such negotiations, PMC and Aphton negotiate in good faith
and  exclusively  for a period of sixty (60) days the terms under which PMC will
obtain such rights. In the event that, at the end of such sixty (60) day period,
PMC and  Aphton  are  unable  in good  faith to  agree on fair and  commercially
reasonable  terms under which PMC will obtain  rights to develop  and/or  market
such product,  Aphton shall be free to use Bulk Material  supplied  hereunder in
connection with such  DT/TT-Based  Product (and such  DT/TT-Based  Product shall
constitute  a Declined  Product for the purposes of this  Agreement);  provided,
that  Aphton  shall not be  permitted  to grant to any Third Party any rights to
develop and/or market such DT/TT-Based Product on terms which are less favorable
to Aphton  than  PMC's  final  offer made in  connection  with the Offer and the
subsequent  negotiations.  If at any time Aphton  wishes to grant  rights to any
Third Party to develop and/or market such DT/TT-Based Product on terms which are
less  favorable to Aphton than those offered by PMC,  Aphton shall first confirm
if PMC's  final offer is still  open.  In  connection  therewith,  Aphton  shall
provide to PMC all  clinical  data which has been  generated  in respect of such
DT/TT-Based  Product and which has not  previously  been made  available  to PMC
(along with a written representation from Aphton that all such clinical data has
been provided to PMC). PMC shall  thereafter have thirty (30) days to confirm or
withdraw its final offer. If PMC confirms its final offer,  Aphton and PMC shall
promptly  execute and  deliver  appropriate  binding  written  agreements  which
reflect such offer.  If PMC withdraws  its final offer,  Aphton shall be free to
enter into an agreement with such Third Party on such less favorable  terms.  If
PMC and Aphton enter into an agreement under which PMC obtains rights to develop
and/or market such  DT/TT-Based  Product,  such product  shall  constitute a PMC
Option Product for the purposes of this  Agreement.  In order to ensure that PMC
can exercise the rights provided for hereunder,  Aphton agrees not to enter into
any agreements or understandings,  whether oral or written,  pursuant to which a
Third Party will acquire rights to market any DT/TT-Based Product,  either alone
or through an arrangement in which Aphton participates, which would preclude PMC
from  obtaining  exclusive  marketing  rights to such  DT/TT-Based  Product upon
acceptance of an Offer.

          3. FORECASTS AND ORDERS FOR BULK MATERIAL

          3.01 PMC will supply, and Aphton will purchase from PMC, quantities of
Bulk Material  determined in accordance  with the  procedures  set forth in this
Article 3.

          3.02 At the  reasonable  request  of Aphton  from  time to time  until
December  31,  1998,  PMC will  supply,  and  Aphton  will  purchase  from  PMC,
reasonable  quantities  of Bulk  Material  in  accordance  with  the  terms  and
conditions of this Agreement.


                                      -4-

<PAGE>


          3.03 Beginning on September 30, 1998 (for the period beginning January
1, 1999) and every three months  thereafter for so long as this Agreement  shall
remain in effect, Aphton shall provide PMC with a rolling nine-month forecast of
its  requirements  for Bulk Material  (each, a "Forecast"),  which Forecast must
specify (i) the number of grams of DT and/or TT, as applicable,  (ii) the amount
of such Bulk  Material  which shall  constitute  Art. 6 DT/TT (as defined in the
Marketing  License)  and  (iii)  if  any  quantities  are  specified,  at  least
[Redacted]* grams of Bulk Material must be specified.  The quantities  specified
in each Forecast (i) in respect of the first three month period covered thereby,
shall  constitute  an  irrevocable,  firm  order  (a  "Firm  Order")  as to  the
quantities  of Bulk  Material,  the delivery  dates and the  delivery  locations
specified  therein,  (ii) in respect of the second  three month  period  covered
thereby,  shall  constitute a Firm Order as to the  quantities  of Bulk Material
specified therein,  and (iii) in respect of the third three month period covered
thereby, shall constitute a non-binding estimate;  provided that such quantities
do not exceed  [Redacted]*  grams per annum in the  aggregate.  No quantities in
excess of [Redacted]*  grams per annum in the aggregate  will  constitute a Firm
Order if PMC has notified  Aphton (within ninety (90) days of the receipt of the
applicable  forecast) that the annual DT and/or TT  manufacturing  capacity,  as
applicable,  of its (or its contract  manufacturer's)  manufacturing facility or
facilities,  as  applicable,  would be  exceeded by such  quantities.  If PMC so
notifies Aphton, the parties will negotiate in good faith the possible expansion
of the  manufacturing  capacity and the costs  thereof.  A Firm Order may not be
canceled and,  following  performance by PMC of its  obligations  hereunder with
respect to such order, Aphton shall be obligated to pay the price for said order
as provided in Sections  4.01 and 4.02  hereof.  PMC shall be deemed to have met
its  obligations  hereunder in the event that the actual grams of Bulk  Material
delivered  in  accordance  with  Section  5.01  hereof  are  equal  to at  least
[Redacted]*% of the quantities specified in the Firm Order. Aphton agrees to pay
for the grams actually received, but only to the extent that such amounts do not
exceed   [Redacted]*%   of  the   quantities   specified   in  the  Firm  Order.
Notwithstanding  the foregoing,  in the event that market conditions  require an
increase or decrease in the  quantities of Bulk  Material  specified in any Firm
Order, the parties will negotiate in good faith alternative arrangements to meet
the business objectives of the parties.

          4. PRICE AND PAYMENT

          4.01 The price for Bulk Material  shall equal:  (a) in the case of DT,
US$[Redacted]*   per  gram   (Index-adjusted)   and  (b)  in  the  case  of  TT,
US$[Redacted]* per gram (Index-adjusted); provided that Article 6 DT/TT shall be
supplied to Aphton at no cost. The parties hereby amend the reference in Section
6.1(b) of the Marketing License to a price of  "US$[Redacted]*  per gram" for DT
to read "US$[Redacted]* per gram" to accord with this Section 4.01.

          4.02 During the term of this  Agreement  and for a period of three (3)
years thereafter,  upon reasonable  request and notice of Aphton,  PMC shall, at
the sole expense of Aphton, permit a reputable independent public accountant not
providing  significant services to either Aphton, PMC or any of their respective
Affiliates,  to have access during  ordinary  business hours to PMC's  financial
records  necessary  to  determine  the  correctness  of the  amount  of any Bulk
Material allocated to Aphton pursuant to Section 2.02. Such accountant shall not
disclose any  information  other than a statement  concerning the correctness of
such amount.  Such  examination may occur in any year in which there is a supply
shortfall.  The right to request a  determination  under this  Section 4.02 with
respect to any year shall terminate two (2) years after the end of such year. In
addition,  in the event that either party hereto  believes  that cost factors or
market conditions adversely affect to a significant degree the cost structure of


------------------------
*    The redacted  portions of this  document  have been  omitted  pursuant to a
     request for  confidential  treatment and such  redacted  portions have been
     filed separately with the Securities and Exchange Commission.

                                      -5-

<PAGE>


the transactions contemplated by this Agreement, the parties agree to discuss in
good faith  appropriate  adjustments to the price of Bulk Material  hereunder to
respond to such cost factors or market conditions.

          4.03 Bulk Material (other than Art. 6 DT/TT) supplied  hereunder shall
be invoiced  when  delivered to Aphton in accordance  with Section 5.01.  Aphton
shall pay to PMC the price of each shipment of Bulk Material  (other than Art. 6
DT/TT)  delivered  to Aphton as  provided  in Section  5.01  within  thirty (30)
business  days after the invoice  date with  respect to such  delivery.  Payment
shall be remitted in immediately available funds in United States dollars.

          5. DELIVERY AND RISK OF LOSS

          5.01 PMC shall deliver or arrange for the delivery of Bulk Material to
Aphton, DDP at a point or points of destination selected by Aphton.

          5.02 Title to Bulk Material sold  hereunder  shall pass to Aphton upon
delivery to Aphton in  accordance  with  Section  5.01,  whereupon  Aphton shall
assume all risk of loss or damage.

          6. WARRANTY

          6.01 EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 6.01,  PMC MAKES NO
WARRANTIES  OF ANY KIND,  EXPRESS OR  IMPLIED,  WRITTEN OR ORAL,  INCLUDING  ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR  PURPOSE.  PMC
warrants that Bulk Material, when delivered to Aphton in accordance with Section
5.01 hereof shall meet the Specifications.  Copies of the relevant establishment
and  product  licenses  (with all  confidential,  proprietary  material  deleted
therefrom) shall be provided to Aphton upon its request.

          6.02 If Aphton claims that the Bulk Material in any given shipment did
not at the time of delivery to Aphton in  accordance  with Section 5.01 meet the
Specifications,  PMC shall  conduct an assay of its  retained  samples from such
shipment. If Aphton's claim is correct, PMC, at its option, shall either replace
such  shipment or reimburse  or give credit for such payment to Aphton,  in each
case together with any out-of-pocket expenses incurred by Aphton.

          6.03  PMC  shall  retain  batch  data  records  and  quality   control
certificates  for each batch of Bulk Material of which any portion is shipped to
Aphton and, if requested by Aphton,  will  provide such  information  to Aphton.
Such records shall be retained for the period  required by any applicable  Legal
Requirements.

          7.  GMP  COMPLIANCE:  INSPECTION  OF  FACILITIES;  ADVERSE  EXPERIENCE
REPORTING; RECORDS

          7.01 The  parties  undertake  to comply  with all  regulations  of any
Public Authority having jurisdiction over the manufacturing,  storage,  handling
or sale of the Bulk  Material in effect  related to  obtaining  and  maintaining
legal approval for the marketing and sale of the Bulk Material.


                                      -6-

<PAGE>


          7.02 Upon reasonable request by either party (the "Inspecting Party"),
the other  party  (the  "Other  Party")  shall  permit  (or  cause its  contract
manufacturer to permit) duly authorized  employees of the Inspecting  Party and,
with the consent of the Other  Party (not to be  unreasonably  withheld),  other
representatives  of the Inspecting  Party,  to inspect the Other Party's (or its
contract  manufacturer's)  facilities,  procedures  and  capabilities  to insure
continued  compliance  with this  Agreement and applicable  Legal  Requirements,
provided  that the Other  Party  may,  in its sole  discretion,  refuse to grant
access to any areas of its  facilities or  manufacturing  records if such access
could  jeopardize the  confidentiality  of any of the Other Party's  proprietary
technology.

          7.03 During the term of this  Agreement,  each party shall  notify the
other  immediately  of any  information  (howsoever  obtained and from  whatever
source) concerning any unexpected side effect,  injury,  toxicity or sensitivity
reaction, or any unexpected incidence, and the severity thereof, associated with
the clinical uses,  studies,  investigations,  testing and marketing of the Bulk
Material.  For purposes of this Section 7.03,  "unexpected" shall mean (x) for a
non-marketed  product, an experience that is not identified in nature,  severity
or frequency in the current  clinical  investigator's  confidential  information
brochure,  and (y) for a marketed product,  an experience which is not listed in
the  current  labeling  for such  product,  and  includes  an event  that may be
symptomatically  and  pathophysiologically  related  to an event  listed  in the
labeling  but differs from the event  because of increased  frequency or greater
severity or specificity.  Each party shall further notify the other  immediately
of any  information  received  regarding any threatened or pending action by any
Public  Authority  which may affect the safety and  efficacy  claims of the Bulk
Material.  Upon receipt of any such information,  the parties shall consult with
each other in an effort to arrive at a mutually acceptable  procedure for taking
appropriate action;  provided,  however,  that nothing contained herein shall be
construed as  restricting  either  party's right to make a timely report of such
matter  to any  Public  Authority  or take  other  action  that it  deems  to be
appropriate or required by applicable law or regulation.

          7.04 If reasonably requested by Aphton, all technical records relating
to the  manufacturing,  supply or provision of Bulk  Material by or on behalf of
PMC shall be retained  for a period of at least  eleven (11) years from the date
of delivery of Bulk Material.

          7.05 PMC agrees to provide such  reasonable  assistance  and access to
regulatory  filings  on its DT or TT as may be  reasonably  necessary  to permit
Aphton to obtain  regulatory  approval in any  Regulatory  Jurisdiction  for any
Aphton product which  incorporates Bulk Material as a component,  subject to the
limitations set forth in Section 2.01 hereof.

          8. SUPERIORITY

          8.01 No  provision  on the  Aphton  purchase  order  form or on  PMC's
general conditions of sale which may purport to impose different conditions upon
Aphton or PMC shall modify the terms of this Agreement.

          9. INDEMNIFICATION

          9.01 PMC hereby agrees to indemnify,  defend and hold harmless Aphton,
its Affiliates,  officers, directors,  employees and agents from and against any
liabilities,  claims,  damages,  costs, expense (including reasonable attorneys'


                                      -7-

<PAGE>

fees),  judgments  (collectively,  "Damages")  arising  out  of,  based  upon or
resulting from (i) the  manufacturing of the Bulk Material,  (ii) the failure of
any Bulk Material to meet the Specifications therefor at the time of delivery to
Aphton in accordance with Section 5.01 hereof, or (iii) the breach by PMC of any
of its  obligations  or  warranties  hereunder,  except to the  extent  any such
Damages  arise out of, are based upon or result from the  negligence  or willful
misconduct  of  Aphton  or a  breach  by  Aphton  of any of its  obligations  or
warranties hereunder or under the Aphton Supply Agreement.

          9.02 Aphton hereby agrees to indemnify,  defend and hold harmless PMC,
its Affiliates,  officers, directors,  employees and agents from and against any
Damages  arising out of,  based upon or  resulting  from (i) the  negligence  or
willful  misconduct of Aphton or a breach by Aphton of any of its obligations or
warranties hereunder or under the Aphton Supply Agreement,  (ii) the possession,
processing,  shipment,  storage  or  disposal  of  any  Bulk  Material  supplied
hereunder,  or (iii)  the  possession,  manufacture,  sale,  use,  distribution,
processing,  shipment,  storage or disposal of any product by Aphton, whether or
not any Bulk Material is incorporated  therein.  Notwithstanding  the foregoing,
the  indemnities  set forth in Article 11 of the Marketing  License shall govern
the parties'  respective  indemnification  obligations in respect of the Product
(as defined therein). Aphton agrees to obtain and to maintain product liability,
clinical trial liability and environmental  liability  insurance (with PMC named
as an additional insured),  with an insurer rated "A" or better by A.M. Best, in
the amount  agreed upon by the Steering  Committee  pursuant to Article 11(c) of
the Marketing License.  Such insurance may not be cancelled or terminated except
upon  thirty (30) days'  prior  written  notice to PMC.  Such  insurance,  as it
applies  to all  Aphton  products  other  than the  Product  (as  defined in the
Marketing  License),  shall be obtained and maintained at Aphton's sole cost and
expense.  From  time  to  time,  at  the  request  of  PMC,  Aphton  will  cause
certificates of such insurance to be supplied to PMC evidencing  compliance with
the obligations set forth herein.  PMC shall not assert against Aphton,  and PMC
hereby waives,  any and all claims  against  Aphton for Damages  imposed upon or
incurred by PMC arising out of, based upon or resulting  from any claim  covered
by such insurance, to the extent of such coverage and to the extent Aphton shall
have  acknowledged  in writing its  obligation to indemnify PMC pursuant to this
Section 9.02 in respect of such claim.

          9.03 (a) Any party entitled to  indemnification  under Section 9.01 or
Section  9.02  (an   "Indemnified   Party")  shall  promptly  notify  the  party
potentially responsible for such indemnification (the "Indemnifying Party") upon
becoming  aware of any  claim or  claims  asserted  or  threatened  against  the
Indemnified Party which could give rise to a right of indemnification under this
Agreement,  provided,  however,  that the failure to give such notice  shall not
relieve the Indemnifying Party of its indemnity  obligation  hereunder except to
the extent that such failure substantially prejudices its rights hereunder.

          (b) The Indemnifying Party shall have the right to defend, at its sole
cost and expense, such claim by all appropriate  proceedings,  which proceedings
shall be prosecuted  diligently by the Indemnifying  Party to a final conclusion
or settled at the discretion of the Indemnifying Party, provided,  however, that
the  Indemnifying  Party may not enter into any compromise or settlement  unless
(i)  the  Indemnified  Party  consents  thereto,  which  consent  shall  not  be
unreasonably  withheld,  and (ii) such  compromise or settlement  includes as an
unconditional  term  thereof,  the giving by each  claimant or  plaintiff to the
Indemnified Party of a release from all liability in respect of such claim.


                                      -8-

<PAGE>


          (c) The Indemnified  Party may  participate  in, but not control,  any
defense or settlement of any claim controlled by the Indemnifying Party pursuant
to this Section  9.03 and shall bear its own costs and expenses  with respect to
such participation,  provided,  however,  that the Indemnifying Party shall bear
such  costs and  expenses  if  counsel  for the  Indemnifying  Party  shall have
reasonably  determined  that such  counsel may not properly  represent  both the
Indemnifying Party and the Indemnified Party.

          (d) If the  Indemnifying  Party fails to notify the Indemnified  Party
within twenty (20) days after  receipt of notice of a claim in  accordance  with
Section 9.03(a) that it elects to defend the Indemnified  Party pursuant to this
Section  9.03,  or if the  Indemnifying  Party elects to defend the  Indemnified
Party but fails to prosecute or settle the claim  diligently and promptly,  then
the  Indemnified  Party  shall  have the right to  defend,  at the sole cost and
expense of the  Indemnifying  Party,  the claim by all appropriate  proceedings,
which proceedings shall be promptly and vigorously prosecuted by the Indemnified
Party to a final  conclusion  or settled,  provided,  however,  that in no event
shall the Indemnifying  Party be required to indemnify the Indemnified Party for
any amount paid or payable by the  Indemnified  Party in the  settlement  of any
such claim  agreed to without the consent of the  Indemnifying  Party (not to be
unreasonably withheld).

          10. TERM AND TERMINATION

          10.01 This Agreement shall take effect as of the date hereof and shall
continue in effect unless terminated by a party in accordance with Section 10.02
hereof.

          10.02 This  Agreement  may be  terminated  by either  party if (i) the
other party fails to observe,  perform or otherwise breaches any of its material
covenants agreements or obligations under this Agreement in any material respect
and (ii) such failure continues for a period of sixty (60) days after receipt by
the other  party of notice  thereof  from the  electing  party  specifying  such
failure.  Following such period, the electing party has ninety (90) days to give
notice to the other party of its election to terminate this Agreement.

          10.03 Upon any termination of this Agreement, each party shall have no
further liability or obligation to the other,  except to pay any amount accruing
to the other party under the provisions of this Agreement while it was in effect
and damages for any breach.

          10.04 In addition,  anything  herein to the contrary  notwithstanding,
the following  provisions of this  Agreement  shall survive  termination of this
Agreement for the longest period  permitted by applicable law and/or required by
this Agreement with respect to all Bulk Material delivered prior to termination:
Sections 4.02, 7.02, 7.04, 10.03,  10.04, 12.01, 12.02 and 12.08 and Articles 6,
9 and 11.

          11. CONFIDENTIALITY

          11.01  Except as  expressly  set forth in this  Article 11, each party
shall,  and shall cause its  Affiliates and its and their  officers,  directors,
employees, agents and subcontractors (collectively,  "Representatives") to, keep
confidential any and all technical, commercial, scientific and other proprietary
data,  processes,  documents  or other  information  (whether in oral or written
form) or physical object (including, without limitation,  intellectual property,
marketing  data,  agreements  between  any  party  and a  third  party,  license


                                      -9-

<PAGE>

applications, and business plans and projections of any party) acquired from the
other  party,  its  Affiliates  or any of their  respective  Representatives  in
respect of the transactions contemplated by this Agreement and which relates (in
the case of a  party)  to the  other  party  or any of its  Affiliates  or their
respective businesses or products ("Confidential  Information"),  and each party
shall not  disclose  directly  or  indirectly,  and shall  cause its  respective
Affiliates  and  Representatives  not to disclose  directly or  indirectly,  any
Confidential  Information  to anyone  outside such Person,  such  Affiliates and
their respective  Representatives,  except that the foregoing  restriction shall
not apply to any  information  disclosed  hereunder  to any party if such Person
(the "Receiving Person") can demonstrate that such Confidential Information:

          (a) is or hereafter becomes generally available to the trade or public
     other than by reason of any breach hereof;

          (b) was already known to the Receiving  Person,  or such  Affiliate or
     Representative as shown by written records;

          (c)  is  disclosed  to the  Receiving  Person  or  such  Affiliate  or
     Representative  by a third  party  who  has  the  right  to  disclose  such
     information;

          (d) is developed by or on behalf of the Receiving Person or any of its
     Affiliates  independently,  without  reliance on  Confidential  Information
     received hereunder; or

          (e) based on such  Person's  good  faith  judgment  with the advice of
     counsel,   is  otherwise  required  to  be  disclosed  in  compliance  with
     applicable  Legal  Requirements by a Public  Authority and such information
     shall  remain  Confidential  Information  for  all  other  purposes  unless
     subparagraphs (a) through (d) above otherwise apply.

          11.02 Each party agrees that it shall not (and shall not permit any of
its Affiliates to) at any time use any  Confidential  Information in the conduct
of its  businesses  without the prior  written  consent of the other party.  The
obligations  set forth in this  Article 11 shall  extend to copies,  if any,  of
Confidential Information made by any of the Persons referred to in Section 11.01
and to documents  prepared by such Persons which embody or contain  Confidential
Information.

          11.03 Each party  shall deal with  Confidential  Information  so as to
protect it from  disclosure  with a degree of care not less than that used by it
in dealing with its own information  intended to remain  exclusively  within its
knowledge and shall take reasonable  steps to minimize the risk of disclosure of
Confidential Information.

          11.04 The  obligations  set forth in this Article 11 shall survive the
expiration,  termination or assignment of this Agreement for a period of fifteen
(15) years thereafter.

          11.05 Within thirty (30) days after the termination of this Agreement,
the Receiving  Person shall (and shall cause its Affiliates and  Representatives
to), at the option of the Disclosing Person,  return to the Disclosing Person or
destroy  all  Confidential  Information  in its or their  possession;  provided,
however,  that the Receiving  Person may, upon notice to the Disclosing  Person,


                                      -10-

<PAGE>

retain in its legal files or in the office of outside  legal counsel one copy of
any  document  solely  for use in any  pending  legal  proceeding  to which such
document relates.

          12. MISCELLANEOUS PROVISIONS

          12.01 Any notices to be given  hereunder shall be in writing and shall
be delivered by one of the  following  means:  personal  delivery,  certified or
registered airmail, facsimile with confirmed receipt or confirmed delivery by an
overnight commercial courier service:

          (a) if to Aphton, to:

              Aphton Corporation
              80 SW 8th St.
              Miami, Florida  33130
              USA
              Attention:   Chairman, President and Chief Executive Officer
              Telephone:   (305) 374-7338
              Facsimile:   (305) 374-7615

              with a copy to:

              Dimitrios T. Drivas, Esq.
              White & Case
              1155 Avenue of the Americas
              New York, New York  10036-2787
              USA
              Telephone:   (212) 819-8286
              Facsimile:   (212) 354-8113

          (b) if to PMC, to:

              Connaught Laboratories Limited
              1755 Steeles Avenue West
              North York, Ontario M2R 3T4
              Canada
              Attention:   Vice President and General Counsel
              Telephone:   (416) 667-2615
              Facsimile:   (416) 667-2860

              with copies to:

              Pasteur Merieux Serums & Vaccins S.A.
              58, avenue Leclerc - B.P. 7046
              69348 Lyon Cedex 07
              France
              Attention:   Senior Vice President, Secretary and General Counsel
              Telephone:   (33)(4) 72.73.77.84
              Facsimile:   (33)(4) 72.73.70.61


                                      -11-

<PAGE>


              L. Kevin O'Mara, Jr., Esq.
              Akin, Gump, Strauss, Hauer & Feld LLP
              590 Madison Avenue
              New York, New York  10022
              Telephone:   (212) 872-1021
              Facsimile:   (212) 872-1002

          12.02 This Agreement shall be governed by, and construed in accordance
with, the internal laws of New York, without regard to principles of conflict of
laws (other than Section 5-1401 of the General Obligations Law).

          12.03  This  Agreement  shall be binding  upon and shall  inure to the
benefit of the parties and their  respective  successors and permitted  assigns.
Notwithstanding the foregoing,  neither party shall have the right to assign its
rights or  obligations  hereunder  (whether by  operation  of law or  otherwise)
without the prior written consent of the other party.

          12.04 The parties shall  execute and deliver such other  documents and
take such other action as may be reasonably necessary to implement and carry out
the intent of this Agreement.

          12.05 If any  provision  of this  Agreement is  ultimately  held to be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the  remaining  provisions  hereof  shall not in any way be affected or impaired
thereby,  unless  the  absence  of  the  invalidated  provision  materially  and
adversely  affects the substantive  rights of the parties hereto.  To the extent
permitted by applicable law, each party hereby waives any provision of law which
renders any provision  hereof invalid,  illegal or unenforceable in any respect.
In the event that any provision  hereof shall be held to be invalid,  illegal or
unenforceable and the absence of such provision materially and adversely affects
the substantive  rights of the parties  hereunder,  the parties hereto shall use
their best efforts to replace the invalidated  provision with a legal, valid and
enforceable  provision which,  insofar as practicable,  implements the intent of
the invalidated provision.

          12.06 Except as  otherwise  provided  herein,  no term or condition of
this  Agreement  may be  waived  or  qualified  at any time  except by a written
instrument  executed by both parties hereto.  No waiver of any provision of this
Agreement  shall  constitute  a waiver of any other  provision,  nor shall  such
waiver  preclude  subsequent  reliance on such  provision.  Except as  otherwise
expressly  provided  herein,  no  omission,  delay or failure on the part of any
party in exercising any right or remedy,  and no partial exercise thereof,  will
constitute a waiver of any right remedy or preclude its further  exercise or the
exercise of any other right or remedy.

          12.07 Each of the parties shall pay their respective legal, accounting
and other professional  advisory fees, costs and expenses incurred in connection
with  the  execution  and  delivery  of this  Agreement  and all  documents  and
instruments executed pursuant to this Agreement and any other costs and expenses
incurred.

          12.08 No party  shall be liable to the other,  or be in default  under
the  terms  of this  Agreement,  for its  failure  to  fulfill  its  obligations
hereunder  to the extent such failure  arises for any reason  beyond its control
including,  without limitation,  strikes, lockouts, labor disputes, acts of God,


                                      -12-

<PAGE>


acts of nature, acts of governments or their agencies, fire, flood, storm, power
shortages or power failure, war, sabotage, inability to obtain sufficient labor,
raw materials,  fuel or utilities,  or inability to obtain transportation (each,
an "Event of Force Majeure"),  provided that the party relying on the provisions
of this Section 12.08 shall  forthwith give to the other notice of its inability
to observe or perform the provisions of this Agreement and the reasons therefor,
and provided  further that the  suspension  of the  obligations  of the party so
affected  will  continue  only  for so long  as  such  Event  of  Force  Majeure
continues.

          12.09 This Agreement contains the entire  understanding of the parties
with regard to the subject  matter of this  Agreement and  supersedes  all prior
agreements and  understandings of the parties with respect to the subject matter
hereof.  This Agreement may not be supplemented or amended,  except by a writing
signed by both parties.

          12.10 This  Agreement  may be executed in any number of  counterparts,
each of which when delivered  shall be deemed to be an original and all of which
together shall constitute one and the, same document.

          12.11 The parties  acknowledge  that it is in their mutual interest to
ensure that the transactions  contemplated  hereunder are structured in the most
tax-efficient manner. In the event that a party believes that these transactions
can be  restructured in order to achieve a more efficient tax outcome for one or
both  parties,   the  parties   agree  to  work   together  to  implement   such
restructuring,  provided  that such new  structure  respects the economic  terms
(disregarding tax effects) of the relationship.


                                      -13-

<PAGE>




          IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be
executed  as  of  the  date  hereof  by  their  duly   authorized   officers  or
representatives.


                                       CONNAUGHT LABORATORIES LIMITED


                                       By       /s/ J. Mark Lievonen
                                         ---------------------------------------
                                         Name:   J. Mark Lievonen
                                         Title:  Senior Vice President,
                                                  and General Manager,
                                                  Oncology Business Unit


                                       By       /s/ Dr. Raafat E. F. Fahim
                                         ---------------------------------------
                                         Name:   Dr. Raafat E. F. Fahim
                                         Title:  Vice President, Industrial
                                                  Operations


                                       APHTON CORPORATION


                                       By       /s/ Philip Gevas
                                         ---------------------------------------
                                         Name:   Philip Gevas
                                         Title:  Chairman, President & CEO


                                      -14-