Exhibit 10.3

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.


                                ESCROW AGREEMENT


         THIS ESCROW AGREEMENT (the "Escrow Agreement") is made as of March 26,
1999 by and among NEOSE TECHNOLOGIES, INC., a Delaware corporation ("Neose"),
CYTEL CORPORATION, a Delaware corporation ("Cytel"), and CHASE MANHATTAN TRUST
COMPANY, NATIONAL ASSOCIATION (the "Escrow Agent").

                                   Background

         At the Closing today under the Asset Purchase Agreement dated as of the
date hereof (the "Asset Purchase Agreement"), Neose is purchasing the Purchased
Assets, including the Patents that are the subject of this Escrow Agreement.

         This Escrow Agreement is being entered into pursuant to the Asset
Purchase Agreement. Unless otherwise defined herein, terms are used herein as
defined in the Asset Purchase Agreement.

                                   Witnesseth

         NOW, THEREFORE, in consideration of the respective covenants contained
herein and in the Asset Purchase Agreement and intending to be legally bound,
the parties hereto agree as follows:

1.       Appointment and Acceptance of Escrow Agent.

         Neose and Cytel hereby appoint the Escrow Agent as their agent
hereunder to serve in accordance with the terms and conditions of this Escrow
Agreement. The Escrow Agent hereby accepts such appointment and agrees to act in
accordance with such terms and conditions.

2.       Escrow Funds.

         2.1 Simultaneously with the execution hereof, Neose shall deposit with
the Escrow Agent a portion of the Purchase Price in the amount of $1,500,000
(the "Escrow Funds"), the receipt of which is hereby acknowledged by the Escrow
Agent.

         2.2 The Escrow Funds shall be held and disbursed by the Escrow Agent as
hereinafter provided. The Escrow Funds shall not be subject to lien or
attachment by any creditor of any party hereto and shall be used solely for the
purpose set forth in this Escrow Agreement.


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<PAGE>

         2.3 The Escrow Funds shall be invested exclusively in (i) any money
market mutual fund that invests exclusively in obligations of the United States
Government, or any agencies or instrumentalities thereof or any combination of
the foregoing, (ii) short-term obligations issued by the United States Treasury,
and (iii) such other government securities as may be approved jointly in writing
from time to time by Neose and Cytel. Any interest income or other investment
proceeds earned on the Escrow Funds ("Investment Income") shall be distributed
as provided in Section 4.1 and/or Section 4.2.

3.       Required Actions for Certain Patent Matters.

         3.1 Cytel shall use commercially reasonable efforts to complete, by no
later than [*] (the "Completion Date"), the following actions set forth in
subsections 3.1.1, 3.1.2 and 3.1.3 hereof ("Required Actions") with respect to
certain Patents included in the Purchased Assets in accordance with the
applicable standard specified below (the "Applicable Standard"):

                  3.1.1 With respect to the Patents more specifically described
         in Section 3.1.1 of Exhibit A hereto [*], by the Completion Date Cytel
         shall provide documentation reasonably satisfactory to Neose that (a)
         [*] associated with [*] listed in the [*], and [*] associated with the
         [*] listed in the [*], respectively, all of each such [*], at no
         additional cost, obligation or burden to Neose, and (b) either [*] has
         been [*], at no additional cost, obligation or burden to Neose, or [*]
         have entered into an [*] in the [*], at no additional cost, obligation
         or burden to Neose.

                  3.1.2 With respect to the Patents more specifically described
         in Section 3.1.2 of Exhibit A hereto (the [*]), by the Completion Date
         Cytel shall provide documentation reasonably satisfactory to Neose that
         each [*] of the [*] by the [*] and each of [*], at no additional cost,
         obligation or burden to Neose, [*] of such [*], respectively, to the
         [*].



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* INDICATES PORTION OF THIS EXHIBIT THAT HAVE BEEN OMITTED. SUCH PORTIONS HAVE
BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.

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<PAGE>


                  3.1.3 With respect to [*], by the Completion Date Cytel shall
         provide documentation reasonably satisfactory to Neose that [*] have
         been [*] at no additional cost, obligation or burden to Neose, and in a
         manner that [*] and its [*], if any, [*] that were the [*] at no
         additional cost, obligation or burden to [*]. A grant by [*] to the
         other party to the [*] in connection with the [*] of a [*] from the [*]
         that were the [*] to be at [*].

         3.2 Upon receipt of documentation identified in writing as final
("final documentation") with respect to a Required Action under any subsection
of Section 3.1, Neose shall have 30 days to determine if such final
documentation satisfies the Applicable Standard with respect to any such
Required Action. If Neose does not provide a Dispute Notice (as defined in
Section 3.3) to Cytel within such 30-day period, the Required Action for which
Cytel submitted final documentation shall be deemed to have been completed. In
the case of Sections 3.1.1 and 3.1.2 above, Cytel may submit to Neose for its
review and approval in advance the proposed documentation to be submitted to the
applicable parties for signature in order to satisfy the Applicable Standard
with respect to the applicable Required Action. If Neose approves the form of
such proposed documentation prior to its execution, then Neose shall be deemed
to have determined that such documentation, when signed by the relevant parties
and submitted as final documentation by Cytel, satisfies the Applicable Standard
with respect to the applicable Required Action.

         3.3 If Neose determines that the final documentation provided by Cytel
with respect to a Required Action does not satisfy the relevant Applicable
Standard, Neose shall provide written notice to Cytel of such determination (the
"Dispute Notice") within 30 days after receipt of the documentation from Cytel.
Following receipt of the Dispute Notice, Cytel may take either of the following
actions:

                  3.3.1 provide written notice to Neose within 15 days after its
         receipt of the Dispute Notice that it does not intend to provide any
         further documentation with respect to such disputed Required Action and
         request in such notice that the parties promptly (and in any event
         within 10 days) submit the dispute to patent counsel at a law firm of
         national reputation mutually appointed by Neose and Cytel (which
         counsel and firm do not then represent and have not previously
         represented either Neose or Cytel or any of their Affiliates) (the "IP
         Firm") for a determination in accordance with Section 3.5 of whether
         the Applicable Standard has been satisfied with respect to the disputed
         Required Action; or

                  3.3.2 at any time on or prior to the Completion Date, provide
         further documentation to Neose to show compliance with the Applicable
         Standard with respect to such Required Action accompanied by written
         notice to Neose whether or not Cytel reserves the right to provide
         additional further documentation with respect to such Required Action
         on or prior to the Completion Date.

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* INDICATES PORTION OF THIS EXHIBIT THAT HAVE BEEN OMITTED. SUCH PORTIONS HAVE
BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.

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<PAGE>


         3.4 If, pursuant to Section 3.3.2, Cytel provides further documentation
to Neose with respect to a disputed Required Action, Neose shall have 15 days
after its receipt of the documentation to provide a Dispute Notice to Cytel. If
Neose does not provide a Dispute Notice to Cytel within such 15-day period, the
Required Action at issue shall be deemed to have been completed. If Neose
provides a Dispute Notice to Cytel within such 15-day period and Cytel's notice
to Neose pursuant to Section 3.3.2 did not reserve the right to provide
additional further documentation to Neose with respect to such Required Action,
the parties shall promptly (and in any event within 10 days) submit the dispute
to the IP Firm for a determination in accordance with Section 3.5 of whether the
Applicable Standard has been satisfied with respect to the disputed Required
Action.

         3.5 Within 30 days after a submission by Neose and Cytel for resolution
of a disputed Required Action, the IP Firm shall determine and report to the
parties whether Cytel has satisfied the Applicable Standard with respect to such
disputed Required Action, and such report shall be final, binding and conclusive
on the parties. Neose and Cytel shall each pay one-half of the fees and
disbursements of the IP Firm incurred in connection with resolving any such
dispute.

         3.6 Upon a final determination that Cytel has satisfied the Applicable
Standard with respect to a Required Action, either by (i) Neose failing to
provide a Dispute Notice to Cytel with respect to such Required Action by the
end of the 30-day period specified in Section 3.2, or (ii) Neose failing to
provide a Dispute Notice to Cytel with respect to such Required Action by the
end of the 15-day period specified in Section 3.4, or (iii) by the issuance by
the IP Firm of a report to Neose and Cytel that Cytel has satisfied the
Applicable Standard with respect to such Required Action, Neose and Cytel shall,
within five days of the event specified in clauses (i), (ii) or (iii) above,
issue a joint written statement to the Escrow Agent that such relevant Required
Action has been completed (each, a "Completion Statement"). The Completion
Statement shall clearly identify which Required Action has been completed by
reference to the relevant subsection number of Section 3.1.

4. Payment of Escrow Funds and Investment Income; Termination of Escrow.

         4.1 Upon its receipt of the first Completion Statement, if any, for a
Required Action under Section 3.1, the Escrow Agent shall promptly deliver to
Cytel from the Escrow Funds the

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<PAGE>


amount of [*], plus all Investment Income thereon, by cashier's check. Upon its
receipt of the second Completion Statement, if any, for a Required Action under
Section 3.1, the Escrow Agent shall promptly deliver to Cytel from the Escrow
Funds the amount of [*], plus all Investment Income thereon, by cashier's check.
Upon its receipt of the third and final Completion Statement, if any, for a
Required Action under Section 3.1, the Escrow Agent shall promptly deliver to
Cytel from the Escrow Funds [*], plus all Investment Income thereon, by
cashier's check.

         4.2 If Cytel shall have failed to complete all Required Actions under
Section 3.1 prior to the Completion Date, as evidenced by the Escrow Agent's
failure to receive a Completion Statement for each of the Required Actions under
Sections 3.1.1, 3.1.2 and 3.1.3 on or prior to [*], then promptly after such
date the Escrow Agent shall deliver to Neose by cashier's check all remaining
Escrow Funds, plus all Investment Income thereon, that have not been disbursed
by the Escrow Agent to Cytel pursuant to Section 4.1.

         4.3 Upon the delivery by the Escrow Agent of all Escrow Funds and
Investment Income pursuant to Section 4.1 and/or Section 4.2, this Escrow
Agreement shall terminate. All rights and obligations of the parties hereto
arising prior to the termination of this Escrow Agreement shall survive any such
termination.

5.       Expenses.

         All expenses and fees (including reasonable attorneys' fees) of the
Escrow Agent shall be paid in equal amounts by Neose and Cytel. The Escrow
Agent's fee schedule is attached hereto as Exhibit B and incorporated herein. To
the extent the Escrow Agent requires the advance payment of any expenses and
fees, Neose and Cytel each shall pay one-half of such expenses and fees
simultaneously with the execution hereof and the deposit of the Escrow Funds.
Neose and Cytel shall each bear their own expenses in connection with the
resolution of any Required Action or other dispute with respect to this Escrow
Agreement, except as otherwise expressly provided herein or in the Asset
Purchase Agreement.

6.       Notices.


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* INDICATES PORTION OF THIS EXHIBIT THAT HAVE BEEN OMITTED. SUCH PORTIONS HAVE
BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.

                                       5
<PAGE>


         All notices that are required or permitted hereunder shall be in
writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number (with
such receipt being confirmed by the sender) set forth below, unless such address
or fax number is changed by notice to the other parties hereto:

         6.1      If to Neose:

                           Neose Technologies, Inc.
                           102 Witmer Road
                           Horsham, PA 19044
                           FAX: (215) 441-5896
                           Attention: Chief Executive Officer

                           with a copy to:

                           Morgan, Lewis & Bockius LLP
                           1701 Market Street
                           Philadelphia, PA 19103
                           Fax: (215) 963-5299
                           Attention: David R. King, Esquire

         6.2      If to Cytel:

                           Cytel Corporation
                           9393 Towne Centre Drive
                           San Diego, CA 92121
                           Fax: (619) 552-3025
                           Attention: Chief Executive Officer

                           with a copy to:

                           Cooley Godward LLP
                           4365 Executive Drive, Suite 1100
                           San Diego, CA 92121-2128
                           Fax: (619) 453-3555
                           Attention: L. Kay Chandler, Esquire

         6.3      If to the Escrow Agent:




                                       6
<PAGE>

                           Chase Manhattan Trust Company, National Association
                           Corporate Trust Department
                           1600 Market Street
                           30th Floor
                           Philadelphia, Pennsylvania 19103
                           Attn.: Stuart P. Papavassiliou, Asst. Vice President
                           Fax: (215) 585-8872


7.       Liability of Escrow Agent.

         7.1 Neose and Cytel, jointly and severally, shall indemnify the Escrow
Agent and hold it harmless from and against any losses, liabilities, expenses
(including reasonable attorneys' fees and expenses), claims or damages arising
out of or in connection with the performance of its obligations in accordance
with the provisions of this Escrow Agreement, except for losses, liabilities,
expenses, claims or damages resulting from the gross negligence or willful
misconduct of the Escrow Agent. These indemnities shall survive the resignation
of the Escrow Agent and the termination of this Escrow Agreement.

         7.2 The Escrow Agent shall have no duties except those specifically set
forth in this Escrow Agreement and shall not be subject to, nor have any
liability or responsibility under, any other agreement or document the parties
hereto may be responsible for, even if same is referenced herein.

         7.3 The Escrow Agent shall be protected in acting upon written
instructions from Neose and Cytel if it, in good faith, believes such written
instructions to be genuine and what they purport to be.

         7.4 The Escrow Agent may confer with legal counsel, including its own
in-house counsel, in the event of any dispute or questions as to the
construction of any of the provisions hereof, or its duties hereunder, and it
shall incur no liability and be fully protected in acting in accordance with the
opinions of such counsel except to the extent of any willful misconduct or gross
negligence of the Escrow Agent.

         7.5 If a dispute arises between or among any of the parties to this
Escrow Agreement, the Escrow Agent shall be entitled, at its option, and upon
written notice to Neose and Cytel, to tender into the custody of any court of
competent jurisdiction in Delaware the Escrow Funds, any Investment Income and
all materials that the Escrow Agent may be holding under this Escrow Agreement
and to begin such legal proceedings as the Escrow Agent deems appropriate. After
taking such actions, the Escrow Agent shall then be discharged from any further
duties and liability under this Escrow Agreement except to the extent of any
prior willful misconduct or gross negligence of the Escrow Agent.


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<PAGE>


8.       Resignation and Removal of Escrow Agent.

         The Escrow Agent may resign at any time and for any reason upon notice
to Neose and Cytel given at least 30 days prior to the effective date of such
resignation. During such 30-day period, Neose and Cytel shall endeavor to agree
upon a successor Escrow Agent. If Neose and Cytel fail to agree on a successor
Escrow Agent within such 30-day period, the Escrow Agent shall deliver the
Escrow Funds, any Investment Income and all materials that it may then be
holding to a court in accordance with Section 7.5 above. If the Escrow Agent
becomes unable to fulfill its duties hereunder, or if for any reason, Neose and
Cytel desire to remove the Escrow Agent hereunder, Neose and Cytel may jointly
appoint a successor Escrow Agent for the purposes of this Escrow Agreement. Upon
the appointment of any successor Escrow Agent under this Escrow Agreement, the
successor Escrow Agent shall have all the rights, duties and powers that applied
to the original Escrow Agent hereunder. Upon any resignation or removal of the
Escrow Agent under this Section 8, all amounts paid or to be paid to the Escrow
Agent shall be prorated from the date of this Agreement through the effective
date of such resignation or removal.

9.       General.

         9.1 This Escrow Agreement shall be construed and enforced in accordance
with the laws of the State of Delaware without regard to its provisions
concerning conflict of laws.

         9.2 The parties hereto agree to execute and deliver any and all papers
and documents necessary to complete the actions contemplated hereby.

         9.3 This Escrow Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective legal representatives,
successors and permitted assigns of the parties hereto. Nothing in this Escrow
Agreement, express or implied, is intended to confer on any person other than
the parties hereto, or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Escrow
Agreement. Neither Neose nor Cytel shall assign or otherwise transfer this
Escrow Agreement or any right, benefit or obligation hereunder (whether by
operation of law or otherwise) to any other person without the prior written
consent of the other party; provided, however, that (i) Neose may (a) assign or
otherwise transfer any or all of its rights and interests hereunder to one or
more of its Affiliates, and (b) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases Neose
nonetheless shall remain responsible for the performance of all of its
obligations hereunder), and (ii) either party may assign or otherwise transfer
any or all of its rights and interests hereunder in connection with the sale of
all or substantially all of its assets or business, whether by way of merger,
sale of stock, sale of assets or other similar transaction (in any or all of
which cases such party nonetheless shall remain responsible for the performance
of all of its obligations hereunder).

                                       8
<PAGE>


         9.4 This Agreement may be amended, modified or supplemented only by a
written instrument duly executed by each of the parties hereto. This Agreement
(including the Exhibits hereto), together with the Asset Purchase Agreement,
sets forth the entire agreement and understanding of the parties hereto with
respect to the matters set forth herein and supersedes all prior agreements or
understandings, oral or written, between the parties regarding those matters.

         9.5 This Escrow Agreement may be executed in two or more counterparts,
each of which shall be binding as the date first written above, all of which
shall constitute one and the same instrument. Each such copy shall be deemed an
original, and it shall not be necessary in making proof of this Escrow Agreement
to produce or account for more than one such counterpart.

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

                                   NEOSE TECHNOLOGIES, INC.


                                   By: /s/ P. Sherrill Neff
                                       --------------------------------
                                       P. Sherrill Neff
                                       President and Chief Financial Officer


                                   CYTEL CORPORATION


                                   By: /s/ Virgil Thompson
                                       --------------------------------
                                       Virgil Thompson
                                       President and Chief Executive Officer


                                   CHASE MANHATTAN TRUST COMPANY,
                                   NATIONAL ASSOCIATION,
                                   as Escrow Agent


                                   By:  /s/ Stuart P. Papavassiliou
                                        ------------------------------  
                                        Stuart P. Papavassiliou
                                        Assistant Vice President

                                       9
<PAGE>

                                   EXHIBIT A


Section 3.1.1

[*], and all [*], of any of the foregoing, and any [*] from any of the
foregoing.


Section 3.1.2

[*], any related [*] and all [*], of any of the foregoing, and any [*] from any
of the foregoing.



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* INDICATES PORTIONS OF THIS EXHIBIT THAT HAVE BEEN OMITTED. SUCH PORTIONS HAVE
BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.