Exhibit 10.13

                            ASSET PURCHASE AGREEMENT


       THIS ASSET  PURCHASE  AGREEMENT  is entered into as of February 23, 2004,
between: Houston Pharmaceuticals,  Inc., a Texas corporation (the "SELLER"), and
Callisto Pharmaceuticals, Inc., a Delaware corporation (the "PURCHASER").

                                    RECITALS

       WHEREAS,  the Seller owns and wishes to sell and  transfer the 784 Patent
Rights  (as  defined in  Exhibit A hereto  and  subject to certain  pre-existing
rights) to the Purchaser,  and the Purchaser wishes to purchase and acquire such
patent rights; and

       WHEREAS, as part of the transactions  contemplated by this Agreement, the
Purchaser  and the Seller will enter into the  Sublicense  Agreement (as defined
below),  whereby the Seller  will grant the  Purchaser  a  world-wide  exclusive
license  (subject to certain  pre-existing  rights) to the 412 Patent Rights (as
defined in  Exhibit A hereto  and,  together  with the 784  Patent  Rights,  the
"PATENT  RIGHTS"),  on the terms and subject to the  conditions set forth in the
Sublicense Agreement.

       NOW,  THEREFORE,  in  consideration of the  representations,  warranties,
agreements  and  conditions  set  forth in this  Agreement  and  other  good and
valuable  consideration,  the sufficiency of which is hereby  acknowledged,  the
parties agree as follows:

                                    AGREEMENT

       The parties to this  Agreement,  intending to be legally bound,  agree as
follows:

1.     SALE OF PATENT RIGHTS; GRANT OF LICENSE; RELATED TRANSACTIONS.

       1.1    SALE OF PATENT RIGHTS.  The Seller shall sell,  assign,  transfer,
convey and deliver to the Purchaser, at the Closing (as defined below), good and
valid title to the 784 Patent Rights (as defined in EXHIBIT A hereto),  free and
clear of any  encumbrances,  except  Permitted  Encumbrances,  on the  terms and
subject to the conditions set forth in this Agreement.  "PERMITTED ENCUMBRANCES"
shall mean those rights  retained by the University of Texas System  pursuant to
that certain Release of Invention, executed by the University of Texas System in
favor  of  Waldemar  Priebe,  Marta  Krawczyk,  Piotr  Skibicki,  Izabela  Fokt,
Krzysztof Dziewiszek, Grzegorz Grynkiewicz, and Roman Perez-Soler on January 31,
2000 (the  "RELEASE").  Under the terms of the Release,  the University of Texas
System and its components hold a royalty-free,  non-exclusive license to use the
784 Patent Rights in educational, research and patient-care activities.

       1.2    GRANT OF  LICENSE.  Subject  to the terms and  conditions  of this
Agreement, at the Closing, the Seller shall grant to the Purchaser an exclusive,
world-wide  license to the 412 Patent  Rights,  on the terms and  subject to the
conditions  set  forth in the  Sublicense  Agreement,  in the form of  EXHIBIT B
hereto (the "SUBLICENSE AGREEMENT").

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       1.3    CONSIDERATION.

              (a)    At the Closing, the Purchaser shall issue to the Seller:

                     (i)    25,000 shares of common stock of the Purchaser  (the
       "CLOSING SHARES"); and

                     (ii)   options to purchase an aggregate of 1,170,000 shares
       of  common  stock of the  Purchaser  at an  exercise  price  equal to the
       closing  price of the  Purchaser's  common stock on the date  hereof,  as
       quoted on the Over the  Counter  Bulletin  Board  ("OTCBB"),  which  such
       options  shall  vest as set  forth  in  EXHIBIT  C hereto  (the  "CLOSING
       OPTION").

              (b)    In  addition  to the  consideration  payable  to the Seller
pursuant to Section 1.3(a),  the Purchaser agrees to pay to the Seller a royalty
equal to two percent (2%) of Net Sales of Products. Royalties under this Section
1.3(b) shall be paid annually  during the period of time commencing on the first
commercial  sale of a Product  and  ending  upon the  expiration  of the last to
expire of the 784 Patent Rights.

                     (i)    "NET SALES" shall mean the gross amounts received by
       the Purchaser or its  affiliates or licensees for the sale of Products to
       third parties,  less the following:  (a) discounts actually granted,  (b)
       credits,  rebates or  allowances  actually  granted upon claims,  damaged
       goods, rejections or returns of Products, including recalls, (c) freight,
       postage,  shipping and  insurance  charges  actually  allowed or paid for
       delivery of  Products,  to the extent  billed,  and (d) taxes,  duties or
       other governmental  charges (other than income taxes) levied on, absorbed
       or otherwise imposed on sales of Products.

                     (ii)   "PRODUCT"   shall   mean  any   product   developed,
       manufactured  or sold by the  Purchaser or its  affiliates  or licensees,
       which,  when made, used or sold would, but for the sale of the 784 Patent
       Rights  to the  Purchaser  pursuant  to  this  Agreement,  constitute  an
       infringement  of a valid,  enforceable and unexpired claim within the 784
       Patent Rights.

              (c)    In  addition  to the  consideration  payable  to the Seller
       pursuant to Sections  1.3(a) and 1.3(b),  in the event that the Purchaser
       achieves any of the milestones listed on Exhibit C hereto after such time
       as the Closing  Option has become fully  vested,  then the  Purchaser and
       Seller  shall  mutually  determine  an  additional  number of  options to
       purchase  shares of the common stock of the Purchaser to be issued by the
       Purchaser  to the Seller;  PROVIDED,  that such number  shall not be less
       than the  number  of  options  that  would  have  vested  as a result  of
       achievement   of  such   milestone  had  the  Closing   Option  not  been
       fully-vested  at the time such  milestone  was achieved  (the  "MILESTONE
       OPTIONS" and, together with the Closing Option, the "OPTIONS"). Any stock
       options  issued to the Seller  pursuant to this  Section  1.3(c) shall be
       fully-vested  and  shall be  issued  at an  exercise  price  equal to the
       closing price of the  Purchaser's  common stock on the date of grant,  as
       quoted on the OTCBB.

       1.4    SALES TAXES. The Purchaser shall bear and pay, and shall reimburse
the Seller for, any sales taxes, use taxes, transfer taxes, documentary charges,
recording fees or similar taxes,

                                       2.
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charges,  fees or  expenses  that may  become  payable  in  connection  with the
transfer of the 784 Patent Rights to the Purchaser or in connection  with any of
the other transactions contemplated by this Agreement.

       1.5    CLOSING.

              (a)    The  closing  of the sale of the 784  Patent  Rights to the
Purchaser  (the  "CLOSING")  shall take place at the offices of Paul,  Hastings,
Janofsky  & Walker  LLP in San  Diego,  California,  at 10:00  a.m.  on the date
hereof. For purposes of this Agreement, "CLOSING DATE" shall mean the date as of
which the Closing actually takes place.

              (b)    At the Closing:

                     (i)    the  Seller   shall   execute  and  deliver  to  the
       Purchaser  a  bill  of  sale,  assigning,  conveying,   transferring  and
       delivering to the Purchaser good and valid title to the 784 Patent Rights
       free and clear of any encumbrances, except Permitted Encumbrances;

                     (ii)   the   Purchaser   shall  deliver  to  the  Seller  a
       certificate  representing  25,000 shares of common stock of the Purchaser
       and an  option  to  purchase  1,170,000  shares  of  common  stock of the
       Purchaser, as contemplated by Section 1.3(a);

                     (iii)  the Purchaser  shall pay to the Seller  $100,000 for
       the reimbursement of fully-burdened  costs and expenses incurred prior to
       the Closing Date by the Seller in  connection  with the  Seller's  patent
       rights, including, without limitation,  fully-burdened costs and expenses
       associated with acquiring and maintaining such patent rights;

                     (iv)   the  Purchaser  shall pay to the Seller up to $3,500
       for the  reimbursement of legal fees and expenses  incurred by the Seller
       in connection with the Transaction  Agreements and the Transactions (each
       as defined below); and

                     (v)    the  Seller  and the  Purchaser  shall  execute  and
       deliver the Sublicense Agreement.

2.     REPRESENTATIONS AND WARRANTIES OF THE SELLER.

              The  Seller  represents  and  warrants  as of  the  date  of  this
Agreement that each of the following  representations and warranties is true and
correct:

       2.1    DUE  ORGANIZATION.  The Seller is a  corporation  duly  organized,
validly existing and in good standing under the laws of the State of Texas.

       2.2    AUTHORITY;  BINDING  NATURE  OF  AGREEMENT.  The  Seller  has  the
corporate power and authority to enter into and to perform its obligations under
this  Agreement  and  the  Sublicense  Agreement  (together,   the  "TRANSACTION
AGREEMENTS");  and the execution,  delivery and performance by the Seller of the
Transaction  Agreements has been duly authorized by all

                                       3.
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necessary  action  on  the  part  of  the  Seller.  The  Transaction  Agreements
constitute the valid and binding obligations of the Seller,  enforceable against
the Seller in accordance with their terms, subject to any applicable bankruptcy,
insolvency,  reorganization,  moratorium or similar laws now or  hereinafter  in
effect  relating to  creditors'  rights  generally or to general  principles  of
equity.

       2.3    NON-CONTRAVENTION.  The execution, delivery and performance of the
Transaction  Agreements by the Seller, and the consummation by the Seller of the
transactions contemplated by the Transaction Agreements (the "TRANSACTIONS"), do
not and will not (a) contravene or conflict with the organizational documents of
the Seller,  (b) to the knowledge of the Seller,  contravene or conflict with or
constitute  a  material  violation  of any  provision  of any  applicable  legal
requirement  binding upon or  applicable  to the Seller,  or (c)  contravene  or
constitute a default under any material  contract of the Seller,  in the case of
each of (a), (b) and (c), except as would not have a material  adverse effect on
the Seller.

       2.4    PATENT RIGHTS.

              (a)    The Seller exclusively owns all right,  title, and interest
to and in the 784  Patent  Rights,  free and clear of any  encumbrances,  except
Permitted Encumbrances. Without limiting the generality of the foregoing:

                     (i)    All documents and  instruments  necessary to perfect
       the  rights of the  Seller in the 784  Patent  Rights  have been  validly
       executed,  delivered,  and filed in a timely manner with the  appropriate
       governmental body.

                     (ii)   Each person who is or was  involved in the  creation
       or development  of the 784 Patent Rights has signed a valid,  enforceable
       agreement containing an assignment of intellectual property rights to the
       Seller. No current or former stockholder,  officer, director, or employee
       of  the  Seller  has  any  claim,   right   (whether  or  not   currently
       exercisable), or interest to or in the 784 Patent Rights.

                     (iii)  The Seller has not assigned or otherwise transferred
       ownership of, or agreed to assign or otherwise transfer ownership of, the
       784  Patent  Rights to any other  person or  licensed  to any  person any
       rights with respect to the 784 Patent Rights.

              (b)    The  784  Patent   Rights  are   valid,   subsisting,   and
enforceable. Without limiting the generality of the foregoing:

                     (i)    Any U.S.  patent  application  within the 784 Patent
       Rights was filed within one year of the first printed publication, public
       use or offer for sale of the invention described in such patent.

                     (ii)   No interference, opposition, reissue, reexamination,
       or other  proceeding  of any  nature  is or has been  pending  or, to the
       knowledge of the Seller,  threatened,  in which the scope,  validity,  or
       enforceability of the 784 Patent Rights is being contested or challenged.

                                       4.
<PAGE>


       2.5    PROCEEDINGS;  ORDERS.  There  is no  pending  proceeding,  and  to
Seller's  knowledge,  no person has threatened to commence any  proceeding  that
challenges, or that may have the effect of preventing,  delaying, making illegal
or otherwise  interfering  with, any of the  Transactions.  There is no order to
which the 784 Patent Rights is subject.

       2.6    LIMITED  WARRANTY.  Except as otherwise  provided herein,  the 784
Patent  Rights  are sold "AS IS" and  without  WARRANTY  OF  MERCHANTABILITY  or
WARRANTY OF FITNESS FOR A PARTICULAR  PURPOSE or any other warranty,  express or
implied.  The Seller makes no representation or warranty that the use of the 784
Patent Rights will not infringe any other patent or other proprietary rights.

       2.7    INVESTMENT REPRESENTATIONS.

              (a)    THE SELLER BEARS  ECONOMIC  RISK.  The Seller must bear the
economic risk of this investment  indefinitely  unless the Closing Shares or the
shares of  Purchaser  common  stock  issued  upon  exercise  of the  Options are
registered  pursuant to the Securities Act of 1933, as amended (the  "SECURITIES
ACT"),  or  an  exemption  from  registration  is  available.  The  Seller  also
understands  that there is no assurance  that any  exemption  from  registration
under the  Securities  Act will be available and that,  even if available,  such
exemption  may not allow the Seller to transfer all or any portion of the shares
of the common stock of the  Purchaser  to be received by the Seller  pursuant to
this  Agreement  under the  circumstances,  in the  amounts  or at the times the
Seller might propose.

              (b)    ACQUISITION  FOR OWN ACCOUNT.  The Seller is acquiring  the
common  stock of the  Purchaser  to be received  by the Seller  pursuant to this
Agreement for its own account for  investment  only, and not with a view towards
distribution.

              (c)    THE SELLER CAN PROTECT ITS INTEREST.  The Seller represents
that by reason of its, or of its management's, business or financial experience,
the Seller has the capacity to protect its own interests in connection  with the
transactions contemplated by this Agreement.  Further, the Seller is aware of no
publication  of  any   advertisement   in  connection   with  the   transactions
contemplated by this Agreement.

              (d)    COMPANY  INFORMATION.  The Seller has had an opportunity to
discuss  the  Purchaser's  business,   management  and  financial  affairs  with
directors,  officers and management of the Purchaser and has had the opportunity
to review the Purchaser's operations and facilities. The Seller has also had the
opportunity  to ask questions of and receive  answers from the Purchaser and its
management regarding the terms and conditions of this investment.

              (e)    TRANSFER   RESTRICTIONS.   The  Seller  will  not  sell  or
otherwise  transfer the Closing  Shares,  the Options or any shares of Purchaser
common stock received upon exercise of the Options  without  registration  under
the Securities Act or unless an exemption from registration is available.

              (f)    RULE 144.  The  Seller  acknowledges  and  agrees  that the
common  stock of the  Purchaser  to be received  by the Seller  pursuant to this
Agreement must be held indefinitely  unless it is subsequently  registered under
the  Securities  Act or an exemption from such

                                       5.
<PAGE>


registration  is available.  The Seller is aware that the Closing Shares and any
shares of  Purchaser  common  stock  issued to the Seller  upon  exercise of the
Options  are  "restricted  securities,"  as such  term is  defined  in Rule  144
promulgated under the Securities Act. The Seller has been advised or is aware of
the  provisions of Rule 144  promulgated  under the  Securities Act as in effect
from time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain  conditions,  including,  among
other things:  the availability of certain current public  information about the
Purchaser, the resale occurring following the required holding period under Rule
144 and the  number of shares  being  sold  during  any  three-month  period not
exceeding specified limitations.

              (g)    NO  REPRESENTATIONS  OR WARRANTIES.  No  representations or
warranties  have  been  made to the  Seller  by the  Purchaser  or any  officer,
director,  employee,  agent, affiliate or subsidiary of the Purchaser other than
those  contained  herein,  and  in  accepting  shares  of  common  stock  of the
Purchaser,  the Seller is not  relying on any  representations  other than those
contained herein.

              (h)    RESIDENCE. The office of the Seller in which its investment
decision  was made is located at the  address of the Seller set forth in Section
6.3.

              (i)    LEGEND.  The Seller  understands and acknowledges  that any
shares of common stock of the Purchaser to be received by the Seller pursuant to
this Agreement shall bear a legend  substantially  as follows until such time as
(a) such securities  shall have been registered under the Securities Act, or (b)
in the opinion of counsel for the Purchaser such  securities may be sold without
registration under the Securities Act as well as any applicable state securities
laws:

                     "THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAW AND MAY NOT
BE PLEDGED,  HYPOTHECATED,  SOLD OR TRANSFERRED  UNLESS REGISTERED AND QUALIFIED
UNDER THE SECURITIES ACT AND, IF APPLICABLE,  STATE  SECURITIES  LAWS, OR IN THE
OPINION OF COUNSEL REASONABLY  SATISFACTORY TO THE COMPANY SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED."

                     The Purchaser shall reimburse the Seller for the reasonable
legal costs incurred by the Seller in obtaining an opinion of counsel reasonably
satisfactory  to the Purchaser in connection  with the sale by the Seller of the
Closing  Shares and any shares of Purchaser  common stock received by the Seller
upon exercise of the Options.

3.     REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

       The  Purchaser  represents  and  warrants,  to and for the benefit of the
Seller that each of the  following  representations  and  warranties is true and
correct:

       3.1    DUE  ORGANIZATION;  ETC.  The  Purchaser  is  a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware. The Purchaser is qualified,  authorized,  registered or licensed to do
business  as a  foreign  corporation  in any  jurisdiction  where  its  business
requires such qualification; PROVIDED, HOWEVER, that the

                                       6.
<PAGE>


Purchaser's  Application for Authority in New York is pending clearance from the
New York Department of Taxation and Finance.

       3.2    AUTHORITY;  BINDING  NATURE OF  AGREEMENTS.  The Purchaser has the
corporate  power and authority to enter into and perform its  obligations  under
each of the Transaction Agreements,  including, without limitation, the issuance
and delivery of the Closing  Shares and the Options and the  reservation  of the
shares of common stock of the  Purchaser  issuable upon exercise of the Options,
and the execution and delivery by the  Purchaser of each  Transaction  Agreement
has been duly  authorized by all  necessary  action on the part of the Purchaser
and its board of directors.  Each Transaction  Agreement  constitutes the legal,
valid  and  binding  obligation  of the  Purchaser,  enforceable  against  it in
accordance  with its terms,  subject to any applicable  bankruptcy,  insolvency,
reorganization, moratorium or similar laws now or hereinafter in effect relating
to creditors' rights generally or to general principles of equity.

       3.3    PURCHASER  COMMON  STOCK.  The  Closing  Shares  and  the  Closing
Options,  and the shares of common stock of the Purchaser issuable upon exercise
of the  Closing  Options  after the  Closing  Date,  have been duly and  validly
reserved for  issuance.  When issued in compliance  with the  provisions of this
Agreement, the Closing Shares and the Options, and the shares of common stock of
the Purchaser issuable upon exercise of the Options after the Closing Date, will
be,  when so  issued,  (i)  duly  authorized,  validly  issued,  fully  paid and
nonassessable,  (ii) free of any liens or encumbrances, (iii) free of preemptive
rights  created by statute,  the  Purchaser's  certificate of  incorporation  or
bylaws  or any  agreement  to which  the  Purchaser  is a party or by which  the
Purchaser is bound,  and (iv) issued in compliance  with all applicable  federal
and state securities laws.

       3.4    NON-CONTRAVENTION.  The execution, delivery and performance of the
Transaction Agreements by the Purchaser and the consummation of the Transactions
do not and  will  not  (a)  contravene  or  conflict  with  the  certificate  of
incorporation or bylaws of the Purchaser, (b) to the knowledge of the Purchaser,
contravene or conflict with or constitute a material  violation of any provision
of any applicable legal requirement binding upon or applicable to the Purchaser,
or (c)  contravene or  constitute a default  under any material  contract of the
Purchaser,  in the case of each of (a), (b) and (c),  except as would not have a
material adverse effect on the Purchaser.

       3.5    PROCEEDINGS; ORDERS. There is no pending proceeding, and no person
has threatened to commence any  proceeding:  (i) that could result in a material
adverse  effect to the  Purchaser  (whether or not the  Purchaser  is named as a
party  thereto);  or (ii)  that  challenges,  or that  may have  the  effect  of
preventing,  delaying,  making illegal or otherwise interfering with, any of the
Transactions. No event has occurred, and no claim, dispute or other condition or
circumstance  exists, that could directly or indirectly give rise to or serve as
a basis for the commencement of any such proceeding.  There is no proposed order
that,  if issued or otherwise  put into  effect,  (i) could result in a material
adverse  effect to the  Purchaser,  or (ii) may have the  effect of  preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.

                                       7.
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       3.6    SEC  DOCUMENTS  AND OTHER  REPORTS.  The  Purchaser  has filed all
required  documents with the Securities  and Exchange  Commission  ("SEC") since
January 1, 2003 (the "PURCHASER SEC DOCUMENTS"). As of the respective dates such
documents  were filed with the SEC (or,  if  amended or  superceded  by a filing
prior  to the date of this  Agreement,  then on the  date of such  filing),  the
Purchaser SEC Documents  complied in all material respects with the requirements
of the Securities  Act or the  Securities  Exchange Act of 1934, as amended (the
"EXCHANGE  ACT"),  as the case may be,  and, at the  respective  times they were
filed  (or if  amended  or  superceded  by a  filing  prior  to the date of this
Agreement, then on the date of such filing), none of the Purchaser SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the  circumstances  under which they were made, not misleading.  The
consolidated financial statements  (including,  in each case, any notes thereto)
of Purchaser included in the Purchaser SEC Documents,  with the exception of the
audited financial  statements of Callisto Research Labs, LLC (formerly  Callisto
Pharmaceuticals,  Inc.) for the years ended December 31, 2001 and 2002, included
in the  Current  Report on Form 8-K,  filed by the  Purchaser  on May 15,  2003,
complied  as to  form  in  all  material  respects  with  applicable  accounting
requirements  and the published  rules and  regulations  of the SEC with respect
thereto,   were  prepared  in  accordance  with  generally  accepted  accounting
principles  ("GAAP")  (except,  in the  case  of the  unaudited  statements,  as
permitted  by Form 10-Q of the SEC)  applied on a  consistent  basis  during the
periods  involved  (except as may be indicated  therein or in the notes thereto)
and  fairly  presented  in all  material  respects  the  consolidated  financial
position of Purchaser and its  consolidated  subsidiaries  as at the  respective
dates  thereof  and the  consolidated  results  of their  operations  and  their
consolidated  cash flows for the  periods  then ended  (subject,  in the case of
unaudited  statements,  to normal  year-end audit  adjustments  and to any other
adjustments  described therein which will not, individually or in the aggregate,
be material in amount). Except as disclosed in the Purchaser SEC Documents or as
required by GAAP,  Purchaser has not, since  September 30, 2003, made any change
in the accounting  practices or policies applied in the preparation of financial
statements.

4.     OTHER AGREEMENTS.

       4.1    DEVELOPMENT  AND  COMMERCIALIZATION  EFFORTS.  From and  after the
Closing Date, the Purchaser  shall use its  commercially  reasonable  efforts to
develop and  commercialize  at least one drug  candidate  resulting from the 784
Patent Rights that meets the Purchaser's criteria for clinical  development.  In
the event the Board of Directors of the Purchaser shall determine to abandon its
development and commercialization efforts with respect to the 784 Patent Rights,
the Board of  Directors  of the  Purchaser  shall  notify  the Seller in writing
within 10 days of the Board's determination (the "NOTICE"), and the Seller shall
have the right, in its sole discretion, to repurchase the 784 Patent Rights from
the Purchaser at a price to be mutually  agreed to by the parties in good faith;
PROVIDED, that such price shall not exceed the fair market value of that portion
of the  consideration  received by the Seller for such patent rights pursuant to
this Agreement plus the aggregate  amount spent by the Purchaser to maintain the
784 Patent  Rights from the  Closing  Date.  In order to  exercise  its right to
repurchase  the 784 Patent Rights  pursuant to this Section 4.1, the Seller must
notify the  Purchaser,  in writing,  of its intent to repurchase  within 30 days
after receipt of the Notice by the Seller. Any sale or license of the 784

                                       8.
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Patent  Rights  by the  Purchaser  shall  not  trigger  the  Seller's  right  to
repurchase the 784 Patent Rights pursuant to this Section 4.1.

       4.2    OWNERSHIP  OF  DEVELOPMENTS.  The  Purchaser  shall own the entire
right  and  title  in  all  inventions,   discoveries,   improvements  or  other
technology,  whether or not patentable,  and any patent  applications or patents
based  thereon,  made or  conceived  during  and as a  result  of the  research,
development  and  commercialization  of  the  Patent  Rights  by  the  Purchaser
(collectively,  the  "DEVELOPMENTS").  In addition,  the Seller  agrees that the
Purchaser will own all quantitative and qualitative information and test results
or reports arising from the research,  development, and commercialization of the
Patent  Rights.  In the event that the Seller  exercises its right to repurchase
the 784 Patent Rights  pursuant to Section 4.1 above,  the  Purchaser  agrees to
grant the Seller, on commercially  reasonable terms, a non-exclusive  license to
use any of the  Developments  that, in the reasonable  discretion of the Seller,
are  necessary  to enable  the  Seller to  develop  and  commercialize  any drug
candidates resulting from the 784 Patent Rights.

5.     INDEMNIFICATION, ETC.

       5.1    SURVIVAL OF SELLER REPRESENTATIONS.  Except as otherwise set forth
in this Section 5.1, (a) the  representations  and  warranties of the Seller set
forth in Section 2 (except that representation  that is specifically  referenced
in subsection  (b) below) shall expire at 11:59 p.m.  (PST) on the  twelve-month
anniversary  of the Closing Date, and (b) the  representation  of the Seller set
forth in Section  2.4(a)(iii)  shall  expire on the 10 year  anniversary  of the
Closing Date.  Notwithstanding  anything to the contrary  contained herein, if a
claim notice relating to any  representation or warranty set forth in any of the
provisions  of  Section 2 is given to the  Seller on or prior to the  expiration
date for such representation or warranty, then,  notwithstanding anything to the
contrary  contained in this Section 5.1, such  representation  or warranty shall
not so expire,  but rather shall remain in full force and effect until such time
as any breach of such  representation  or  warranty  has been fully and  finally
resolved,  either by means of a written settlement  agreement executed on behalf
of the Seller and the Purchaser or by means of a final,  non-appealable judgment
issued by a court of competent jurisdiction.

       5.2    INDEMNIFICATION BY THE SELLER.

              (a)    From and after the  Closing  Date,  the  Seller  shall hold
harmless and indemnify the Purchaser from and against,  and shall compensate and
reimburse the Purchaser for, any damages, costs or expenses that are suffered or
incurred  by the  Purchaser  and that arise from or as a result of any breach of
any of the representations or warranties made by the Seller in Section 2 of this
Agreement.

              (b)    The   Seller   shall   not  be   required   to   make   any
indemnification  payment pursuant to Section 5.2(a) until such time as the total
amount of all damages,  costs or expenses that have been suffered or incurred by
the  Purchaser  exceeds  $2,500.  If the total  amount of such  damages  exceeds
$2,500,  the  Purchaser  shall  be  entitled  to  be  indemnified   against  and
compensated and reimbursed for the entire amount of such damages, and not merely
the portion of such damages exceeding $2,500.

                                       9.
<PAGE>


              (c)    Notwithstanding anything in this Agreement to the contrary,
Seller's  aggregate  liability  for any  indemnification  payments  pursuant  to
Section 5.2(a) will be limited to, and shall not exceed,  an amount equal to the
fair market value of the Closing Shares on the date hereof, based on the closing
price of the Purchaser's common stock on the date hereof, as quoted on the OTCBB
(the "SHARES CAP"). Prior to the date that any of the Closing Shares may be sold
by the Seller in open market transactions,  all claims for indemnification which
are finally determined shall be satisfied by the return to the Purchaser of that
number of Closing  Shares  having a value equal to the total  amount of any such
claim.  Notwithstanding  the above,  if the  Seller's  aggregate  liability  for
indemnification  pursuant to Section  5.2(a) exceeds the Shares Cap (such excess
shall be  referred  to  herein  as the  "EXCESS  AMOUNT"),  at such  time as the
Seller's  liability for the Excess Amount becomes final,  the Purchaser shall be
entitled to cancel a number of unvested  Closing  Options  equal in value to the
Excess Amount.  The number of unvested Closing Options to be cancelled  pursuant
to the preceding  sentence  shall be determined by dividing the Excess Amount by
the difference  between (i) the closing price of the Purchaser's common stock on
the date  that  the  indemnification  claim  becomes  final,  as  quoted  on the
principal stock exchange on which the Purchaser's  common stock is listed or, if
not  listed  on a  national  stock  exchange,  as  quoted  on the OTCBB or other
quotation system,  and (ii) the per share exercise price of the Closing Options.
In the event  that (i) the  Seller's  aggregate  liability  for  indemnification
payments  pursuant  to Section  5.2(a)  shall  exceed the Shares  Cap,  (ii) all
unvested  Closing  Options  shall have been  cancelled  pursuant to this Section
5.2(c),  and (iii)  the  Seller  shall  have  additional  unpaid  liability  for
indemnification  payments  pursuant to Section 5.2(a) solely  resulting from the
Seller's breach of its  representation  set forth in Section  2.4(a)(iii)  (such
unpaid  liability shall be referred to herein as the "ADDITIONAL  AMOUNT"),  the
Seller  shall be required  to pay the  Purchaser  a cash  payment  equal to such
Additional Amount; PROVIDED,  HOWEVER, that the Seller's aggregate liability for
the Additional Amount shall be limited to, and shall not exceed, $100,000.

6.     MISCELLANEOUS PROVISIONS.

       6.1    FURTHER  ASSURANCES.  Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other documents,
and shall take such other actions,  as such other party may  reasonably  request
(at or after the Closing) for the purpose of carrying out or  evidencing  any of
the Transactions.

       6.2    ATTORNEYS'  FEES.  If any legal  action or other legal  proceeding
relating  to  any of  the  Transaction  Agreements  or  the  enforcement  of any
provision of any of the Transaction Agreements is brought between the parties to
this  Agreement,  the prevailing  party shall be entitled to recover  reasonable
attorneys'  fees,  costs and  disbursements  (in addition to any other relief to
which the prevailing party may be entitled).

       6.3    NOTICES.  Any notice or other communication  required or permitted
to be delivered to any party under this Agreement  shall be in writing and shall
be deemed  properly  delivered,  given and received when  delivered (by hand, by
registered  mail, by courier or express delivery service or by facsimile) to the
address or facsimile  telephone  number set forth beneath the name of such party
below (or to such other  address  or  facsimile  telephone  number as such party
shall have specified in a written notice given to the other parties hereto):

                                      10.
<PAGE>


              IF TO THE SELLER:         Houston Pharmaceuticals, Inc.
                                        4239 Emory Avenue
                                        Houston, TX 77005

              WITH A COPY (WHICH COPY SHALL NOT CONSTITUTE NOTICE) TO:

                                        Paul, Hastings, Janofsky & Walker LLP
                                        3579 Valley Centre Drive
                                        San Diego, CA 92130
                                        Attn: Carl Sanchez, Esq.

              IF TO THE PURCHASER:      Callisto Pharmaceuticals, Inc.
                                        420 Lexington Avenue, Suite 2500
                                        New York, NY 10170
                                        Facsimile: 212-297-0020

              WITH A COPY (WHICH COPY SHALL NOT CONSTITUTE NOTICE) TO:

                                        Sills Cummis Epstein & Gross, P.C.
                                        One Riverfront Plaza
                                        Newark, NJ 07102
                                        Attn: Jeffrey J. Fessler, Esq.
                                        Facsimile: 973-643-6500

       6.4    TIME OF THE ESSENCE. Time is of the essence of this Agreement.

       6.5    HEADINGS.  The underlined headings contained in this Agreement are
for  convenience  of  reference  only,  shall not be deemed to be a part of this
Agreement and shall not be referred to in connection  with the  construction  or
interpretation of this Agreement.

       6.6    COUNTERPARTS.   This   Agreement   may  be   executed  in  several
counterparts,  each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.

       6.7    GOVERNING  LAW.  This  Agreement  shall be construed in accordance
with,  and governed in all  respects  by, the internal  laws of the State of New
York (without giving effect to principles of conflicts of laws).

       6.8    SUCCESSORS AND ASSIGNS; PARTIES IN INTEREST.

              (a)    This  Agreement  shall be binding upon:  the Seller and its
successors  and assigns  (if any);  and the  Purchaser  and its  successors  and
assigns (if any). This Agreement shall inure to the benefit of: the Seller;  the
Purchaser and the respective successors and assigns (if any) of the foregoing.

              (b)    Neither the  Purchaser nor the Seller shall be permitted to
assign any of its rights or delegate any of its obligations under this Agreement
without the prior written consent of

                                      11.
<PAGE>


the other party; PROVIDED,  HOWEVER, that the Purchaser shall not be required to
obtain the prior written consent of the Seller in connection with the delegation
of any of its  obligations  under this  Agreement in  connection  with a sale or
license of the 784 Patent  Rights so long as the  Purchaser  provides the Seller
with written notice of such delegation within fifteen days following the closing
of the transaction.

              (c)    None of the  provisions  of this  Agreement  is intended to
provide  any rights or  remedies  to any person  other than the  parties to this
Agreement and their respective successors and assigns (if any).

       6.9    REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties  hereto  shall be  cumulative  and not  alternative.  The parties
hereto agree that:  (a) in the event of any breach or  threatened  breach by any
party hereto of any obligation or other  provision set forth in this  Agreement,
the other party shall be entitled  (in  addition to any other remedy that may be
available to it) to (i) a decree or order of specific performance or mandamus to
enforce the observance and  performance of such  obligation or other  provision,
and (ii) an injunction  restraining  such breach or threatened  breach;  and (b)
such other party shall not be required to provide any bond or other  security in
connection  with any such decree,  order or injunction or in connection with any
related action or proceeding.

       6.10   WAIVER.

              (a)    No failure on the part of any person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
person in exercising any power, right, privilege or remedy under this Agreement,
shall  operate as a waiver of such power,  right,  privilege  or remedy;  and no
single or partial exercise of any such power,  right,  privilege or remedy shall
preclude any other or further  exercise  thereof or of any other  power,  right,
privilege or remedy.

              (b)    No person shall be deemed to have waived any claim  arising
out of this  Agreement,  or any power,  right,  privilege  or remedy  under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly  set forth in a written  instrument  duly  executed  and  delivered on
behalf of such person;  and any such waiver shall not be  applicable or have any
effect except in the specific instance in which it is given.

       6.11   AMENDMENTS.  This Agreement may not be amended,  modified, altered
or  supplemented  other than by means of a written  instrument duly executed and
delivered on behalf of the Purchaser and the Seller.

       6.12   SEVERABILITY.  In the event that any provision of this  Agreement,
or the application of any such provision to any person or set of  circumstances,
shall be  determined  to be  invalid,  unlawful,  void or  unenforceable  to any
extent,  the remainder of this Agreement,  and the application of such provision
to persons or circumstances  other than those as to which it is determined to be
invalid,  unlawful,  void or  unenforceable,  shall not be impaired or otherwise
affected and shall  continue to be valid and  enforceable  to the fullest extent
permitted by law.

                                      12.
<PAGE>


       6.13   ENTIRE AGREEMENT.  The Transaction Agreements set forth the entire
understanding  of  the  parties  relating  to the  subject  matter  thereof  and
supersede all prior  agreements and  understandings  among or between any of the
parties relating to the subject matter thereof.

                                      13.
<PAGE>


       The parties to this  Agreement  have caused this Agreement to be executed
and delivered as of the date set forth above.

                                        HOUSTON PHARMACEUTICALS, INC.
                                         a Texas corporation



                                        By: /s/ Teresa Priebe
                                            ------------------------------------
                                            Name:  Teresa Priebe
                                                   -----------------------------

                                            Title: President
                                                   -----------------------------


                                        CALLISTO PHARMACEUTICALS, INC.
                                         a Delaware corporation



                                        By: /s/ Gary S. Jacob
                                            ------------------------------------
                                            Name:  Gary S. Jacob
                                                   -----------------------------
                                            Title: Chief Executive Officer
                                                   -----------------------------

                                      14.
<PAGE>


                                    EXHIBIT A


       The "784 PATENT RIGHTS" shall mean (a) that certain United States Patent
number 6,355,784, issued on March 12, 2002, entitled "Methods and compositions
for the manufacture of halogenated anthracyclines with increased antitumor
activity, other anthracyclines, halogenated sugars, and glycosyl donors," (b)
any and all foreign (including International) patents and patent applications
that claim priority either directly or indirectly from US 6,355,784 or US
Provisional Patent Application 60/089,162, (c) any provisionals, substitutions,
divisionals, reissues, renewals, continuations, continuations-in-part,
substitute applications and inventors' certificates that claim priority either
directly or indirectly from US 6,355,784 or US Provisional Patent Application
60/089,162, and (d) any foreign or domestic patents issuing from any of the
foregoing patent applications.


       The "412 PATENT RIGHTS" shall mean (a) that certain United States Patent
number 5,874,412, issued on February 23, 1999, entitled "Bis-Anthracyclines with
high activity against doxorubicin resistant tumors," (b) any and all foreign
(including International) patents and patent applications that claim priority
either directly or indirectly from US 5,874,412 or US Provisional Patent
Application 60/013,869, (c) any provisionals, substitutions, divisionals,
reissues, renewals, continuations, continuations-in-part, substitute
applications and inventors' certificates that claim priority either directly or
indirectly from US 5,874,412 or US Provisional Patent Application 60/013,869,
and (d) any foreign or domestic patents issuing from any of the foregoing patent
applications.

<PAGE>


                                    EXHIBIT B

                              SUBLICENSE AGREEMENT

<PAGE>


                                    EXHIBIT C

                                  STOCK OPTIONS

The stock options to purchase  1,170,000 shares of common stock of the Purchaser
to be issued to the Seller pursuant to Section 1.3(a)(ii) of the Agreement shall
vest pursuant to the following schedule:

---------------------------------------  ---------------------------------------
Milestone                                Number of Options Vested
---------------------------------------  ---------------------------------------
Each new grant award associated with     10,000
a clinical  candidate covered by the
Patent Rights.
---------------------------------------  ---------------------------------------
Any and each new drug candidate          30,000
covered by the Patent Rights that
achieves success in cancer animal
model studies.
---------------------------------------  ---------------------------------------
Each successful IND filing of a          50,000
new drug candidate covered by the
Patent Rights.
---------------------------------------  ---------------------------------------
Upon the completion of each              100,000
successful Phase II trial for
a drug covered by the
Patent Rights.
---------------------------------------  ---------------------------------------
Each time NDA approval is obtained       200,000
from the FDA for a drug covered by
the Patent Rights.
---------------------------------------  ---------------------------------------