SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q
(Mark One)

/ X /        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

             For the quarterly period ended September 30, 1996.


                                       OR

/   /        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934
             For the transition period from                  to
                                            ----------------     --------------

                         Commission file number: 0-27718


                            NEOSE TECHNOLOGIES, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                     13-3549286
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

102 Witmer Road, Horsham, Pennsylvania                         19044
--------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code         (215) 441-5890
                                                   ----------------------------


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes    X    No
    ------     ---------


         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 8,204,116 shares of
common stock, $.01 par value, were outstanding as of October 31, 1996.


<PAGE>


                            NEOSE TECHNOLOGIES, INC.
                          (a development-stage company)

                                      INDEX
                                      -----
<TABLE>
<CAPTION>

                                                                                                    Page
                                                                                                    ----
<S>     <C>                                                                                        <C>
PART I.  FINANCIAL INFORMATION:

Item 1.  Financial Statements

         Balance Sheets (unaudited) at December 31, 1995 and September 30, 1996........................3

         Statements of Operations (unaudited) for the three and nine months ended
         September 30, 1995 and 1996, and from the period of inception through
         September 30, 1996 ...........................................................................4

         Statements of Cash Flows (unaudited) for the nine months ended
         September 30, 1995 and 1996, and from the period of inception through
         September 30, 1996............................................................................5

         Notes to Unaudited Financial Statements.......................................................7


Item 2.  Management's Discussion and Analysis of Financial Condition and
             Results of Operations.....................................................................8


PART II. OTHER INFORMATION:

Item 1.  Legal Proceedings............................................................................23

Item 2.  Changes in Securities........................................................................23

Item 3.  Defaults Upon Senior Securities..............................................................23

Item 4.  Submission of Matters to a Vote of Security Holders..........................................23

Item 5.  Other Information............................................................................23

Item 6.  Exhibits and Reports on Form 8-K.............................................................23


SIGNATURES............................................................................................24

</TABLE>

                                       2


<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements


                                                   NEOSE TECHNOLOGIES, INC.
                                                (a development-stage company)

                                                        BALANCE SHEETS
                                                         (unaudited)
<TABLE>
<CAPTION>


ASSETS                                                                        December 31, 1995        September 30, 1996
------                                                                        -----------------        ------------------
<S>                                                                            <C>                     <C> 
CURRENT ASSETS:

     Cash and cash equivalents.............................................    $      11,189,001        $    35,717,379

     Restricted funds......................................................              148,300                110,648

     Prepaid expenses and other............................................              118,680                252,878
                                                                               -----------------        ---------------

         Total current assets..............................................           11,455,981             36,080,905

PROPERTY AND EQUIPMENT, net................................................            2,685,613              2,935,777

DEFERRED FINANCING COSTS...................................................              409,003                  --

RESTRICTED FUNDS                                                                          73,066                  --

OTHER ASSETS...............................................................               15,049                 15,049
                                                                               -----------------         --------------

                                                                               $      14,638,712         $   39,031,731
                                                                               =================         ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt..........................................    $         764,552         $      753,901

Accounts payable...........................................................              301,023                311,102

Accrued compensation.......................................................              191,318                208,000

Other accrued expenses.....................................................              297,605                130,582

Deferred revenue...........................................................               41,667                354,167
                                                                               -----------------        ---------------

         Total current liabilities.........................................            1,596,165              1,757,752

OTHER LIABILITIES..........................................................               74,986                 79,359

LONG-TERM DEBT.............................................................            1,234,527                682,500

STOCKHOLDERS' EQUITY:

Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued..
                                                                                         --                        --

Convertible preferred stock................................................               57,802                   --

Common stock, $.01 par value; 30,000,000 shares authorized; 3,145,256 and
         8,203,616 shares issued and outstanding..........................                31,453                 82,036

Additional paid-in capital.................................................           31,385,927             60,704,631

Deferred compensation......................................................             (359,900)              (292,419)

Deficit accumulated during the development stage...........................          (19,382,248)           (23,982,128)
                                                                                ----------------         --------------

         Total stockholders' equity........................................     $     11,733,034         $   36,512,120
                                                                                ----------------         --------------

                                                                                $     14,638,712         $   39,031,731
                                                                                ================         ==============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       3

<PAGE>


                            NEOSE TECHNOLOGIES, INC.
                          (a development-stage company)

                            STATEMENTS OF OPERATIONS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                                                      
                                                                                                                        Period
                                                 Three Months Ended                   Nine Months Ended             from Inception
                                                    September 30,                       September 30,             (January 17, 1989)
                                        ----------------------------------    ---------------------------------    to September 30,
                                              1995              1996              1995             1996                   1996
                                        ---------------    ---------------    --------------     --------------     ---------------
<S>                                      <C>             <C>              <C>              <C>                <C>
REVENUES FROM
  COLLABORATIVE AGREEMENTS............  $       375,833    $       312,500     $     875,833     $    1,006,100          $4,852,463
                                        ---------------    ---------------     -------------     --------------     ---------------

OPERATING EXPENSES:

  Research and development............        1,214,504          1,510,191         3,425,864          4,899,734          21,376,290

  General and administrative..........          290,267            596,836         1,171,781          1,788,343           8,477,072
                                        ---------------    ---------------     -------------     --------------     ---------------

      Total operating expenses........        1,504,771          2,107,027         4,597,645          6,688,077          29,853,362
                                        ---------------    ---------------      ------------     --------------     ---------------

      Operating Loss..................       (1,128,938)        (1,794,527)       (3,721,812)        (5,681,977)        (25,000,899)
                                        ---------------   ----------------     -------------     --------------     ---------------


INTEREST INCOME.......................           76,098            483,262           198,910          1,278,245           2,094,230


INTEREST EXPENSE......................          (59,749)           (58,318)         (126,116)          (196,148)         (1,075,459)
                                        ----------------    ---------------    -------------       ------------     ---------------


NET LOSS..............................  $     (1,112,589)   $  (1,369,583)     $  (3,649,018)     $  (4,599,880)    $   (23,982,128)
                                        ================    =============      =============      =============     ===============


PRO FORMA NET LOSS PER
    SHARE.............................  $         (0.23)    $       (0.17)     $       (0.79)     $       (0.60)
                                        ===============     =============      =============      =============


WEIGHTED AVERAGE NUMBER OF
     SHARES OUTSTANDING...............       4,782,000          8,193,000          4,598,000          7,728,000
                                       ===============     ==============      =============      =============

</TABLE>



         The accompanying notes are an integral part of these statements


                                       4
<PAGE>


                            NEOSE TECHNOLOGIES, INC.
                          (a development-stage company)

                            STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        Nine Months                     
                                                                    Ended September 30,                Period from Inception
                                                            ----------------------------------          (January 17, 1989)
                                                                  1995              1996               to September 30, 1996
                                                            ----------------  -----------------      -------------------------
<S>                                                          <C>               <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Loss.............................................   $  (3,649,018)    $ (4,599,880)             $   (23,982,128)

     Adjustments to reconcile net loss to cash
         used in operating activities--
         Depreciation and amortization....................         278,244          416,986                    1,592,580   
         Common stock issued for consulting, licensing                                                        
           and other non-cash charges.....................           --              --                           25,762
         Compensation  expense exchanged for                                                                           
          common stock....................................           --              --                           12,107
         Amortization of deferred compensation............           --              67,481                       67,481
         Other, net.......................................           --              --                           (2,907)
         Changes in operating assets and liabilities-
           Restricted funds...............................         314,850          110,718                     (110,648)
           Prepaid expenses and other.....................         (65,459)        (134,198)                    (252,878)
           Other assets...................................         (11,649)          --                          (15,049)
           Accounts payable...............................         179,944           10,079                      311,102
           Accrued compensation...........................        (177,197)          16,682                      250,096
           Other accrued expenses.........................          (5,287)        (167,023)                     132,959
           Deferred revenue...............................         250,000          312,500                      354,167
           Other liabilities..............................          17,953            4,373                       79,359
                                                              ------------      -----------                -------------
           Net cash used in operating activities..........      (2,867,619)      (3,962,282)                 (21,537,997)
                                                              ------------      -----------                -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment..................        (613,072)        (667,150)                  (3,770,457)
     Purchase of short-term investments...................           --              --                       (3,177,000)
     Proceeds from sale of short-term investments.........           --              --                        3,177,000
     Proceeds from sale-leaseback of equipment............         829,589           --                        1,382,027
                                                              ------------      -----------                -------------
        Net cash provided by (used in) investing
        activities........................................         216,517         (667,150)                  (2,388,430)
                                                              ------------      -----------                -------------
</TABLE>


                                   (Continued)


                                       5
<PAGE>


                            NEOSE TECHNOLOGIES, INC.
                          (a development-stage company)

                            STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                   (continued)

<TABLE>
<CAPTION>
                                                             Nine Months Ended September 30,          Period from Inception
                                                             -------------------------------            (January 17, 1989) 
                                                                 1995               1996              to September  30, 1996
                                                             ------------       ------------        --------------------------
<S>                                                         <C>                <C>                  <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the issuance of notes....................  $     --          $        --                $   1,225,000
  Repayment of notes payable.............................        --                   --                     (565,250)
  Proceeds from issuance of short-term debt..............        --                   --                      290,000
  Repayment of short-term debt...........................        --                   --                     (290,000)
  Proceeds from issuance of long-term debt...............        --                   --                    1,110,869
  Repayment of long-term debt............................     (326,146)           (562,678)                (1,560,945)
  Proceeds from issuance of preferred stock, net.........    5,352,583                --                   29,497,297
  Proceeds from issuance of common stock, net............         --                59,830                    380,665
  Proceeds from initial public offering, net.............         --            29,536,164                 29,127,161
  Proceeds from exercise of warrants.....................       37,500                --                      333,920
  Proceeds from exercise of stock options................        5,728             142,494                    203,491
  Dividends paid.........................................      (18,000)            (18,000)                   (72,000)
  Issuance costs resulting from conversion of
     notes to common stock...............................         --                  --                      (36,402)
                                                           -----------       -------------              -------------
     Net cash provided by financing
     activities..........................................    5,051,665          29,157,810                 59,643,806
                                                           -----------       -------------              -------------
NET INCREASE IN CASH AND
  CASH EQUIVALENTS.......................................    2,400,563          24,528,378                 35,717,379
CASH AND CASH EQUIVALENTS,  BEGINNING
  OF PERIOD..............................................    5,362,830          11,189,001                      --
                                                           -----------       -------------              -------------
CASH AND CASH EQUIVALENTS, END
  OF PERIOD.............................................   $ 7,763,393       $  35,717,379              $  35,717,379
                                                           ===========       =============              =============
SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION:
  Cash paid for interest...............................    $   141,967       $     203,125              $     996,318
                                                           ===========       =============              =============
  Non-cash financing activities--
     Issuance of common stock for dividends............    $    18,000       $       --                 $      18,000
                                                           ===========       =============              =============
   
     Issuance of common stock to employees in lieu
       cash compensation...............................    $    44,473       $       --                 $      44,473
                                                           ===========       =============              =============

</TABLE>


         The accompanying notes are an integral part of these statements

                                       6
<PAGE>


                            NEOSE TECHNOLOGIES, INC.
                          (a development-stage company)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS


1.   Basis of Presentation

         The unaudited financial statements at September 30, 1996, for the three
and nine months ended September 30, 1995 and 1996, and for the period from
inception (January 17, 1989) to September 30, 1996, contained herein have been
prepared in accordance with generally accepted accounting principles for interim
financial information. They do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In management's opinion, the unaudited information includes all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations and cash flows for
the periods presented. The results of operations for the interim periods shown
in this report are not necessarily indicative of results expected for the full
year. The financial statements should be read in conjunction with the financial
statements and notes for the year ended December 31, 1995, included in Neose
Technologies, Inc. (the "Company") Registration Statement on Form S-1 and the
Company's 1995 Annual Report.

2.   Sale of Common Stock

         The Company's initial public offering of Common Stock (the "Offering")
closed on February 22, 1996. The company offered and sold 2,250,000 shares of
Common Stock at a public offering price of $12.50 per share. The net proceeds to
the Company from the Offering were approximately $25,204,000. Pursuant to the
underwriters' over-allotment option, an additional 337,500 shares of Common
Stock were offered and sold by the Company on March 4, 1996, resulting in
additional net proceeds to the Company of approximately $3,923,000.

3.   Net Loss Per Share

         For the three months ended September 30, 1995, and the nine months
ended September 30, 1995, and 1996, pro forma net loss per share was computed
using the weighted average number of common shares outstanding during the
period, and includes all Convertible Preferred Stock which converted into shares
of Common Stock immediately prior to the closing of the Offering as if they were
converted into Common Stock on their original dates of issuance. For the three
months ended September 30, 1996, net loss per share was computed using the
weighted average number of common shares outstanding during the period. Common
stock equivalents were excluded for all periods presented because they are
antidilutive.

                                       7
<PAGE>


PART I.       FINANCIAL INFORMATION

Item 2.

                            NEOSE TECHNOLOGIES, INC.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


         This Quarterly Report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below in "Certain Factors Affecting
Operations and Market Price of Securities."

         The Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three and nine months ended September 30, 1996,
and as of September 30, 1996, should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 1995, included in the Company's
Registration Statement on Form S-1 and the Company's 1995 Annual Report.

Overview

         Neose Technologies, Inc. commenced operations in 1990, and has devoted
substantially all of its resources to the development of its enzymatic
carbohydrate synthesis technology and to the discovery and development of
complex carbohydrates for a variety of applications, including nutritional
additives and pharmaceuticals. The Company does not anticipate receiving
revenues from product sales for at least the next several years. The Company
anticipates that its sources of revenue for the next several years will be
payments under its strategic alliance with Abbott Laboratories ("Abbott") and
other collaborative arrangements, license fees, payments from future strategic
alliances and collaborative arrangements, if any, and interest income. Payments
under strategic alliances and collaborative arrangements will be subject to
significant fluctuation in both timing and amount. Therefore, the Company's
results of operations for any period may not be comparable to the results of
operations for any other period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

         The Company has incurred operating losses since its inception and, as
of September 30, 1996, the Company had an accumulated deficit of approximately
$24 million. The Company anticipates incurring additional operating losses over
at least the next several years, and such losses are expected to increase as the
Company expands its research and development programs, including preclinical
studies and clinical trials for its pharmaceutical product candidates under
development, and as the Company expands its manufacturing capabilities.

                                       8

<PAGE>


Results of Operations

     Revenues

         Revenues from collaborative agreements for the three and nine months
ended September 30, 1996, were $312,500 and $1,006,100, respectively, compared
to $375,833 and $875,833, respectively, for the corresponding periods in 1995.
The decrease for the comparable three month period was due to non-recurring
revenues received during the 1995 period. The increase for the comparable nine
month period was primarily attributable to increased revenues from the Company's
collaborative research agreements with Abbott and Bracco Research USA Inc.

     Operating Expenses

         Research and development expenses for the three and nine months ended
September 30, 1996, were $1,510,191 and $4,899,734, respectively, compared to
$1,214,504 and $3,425,864, respectively, for the corresponding periods in 1995.
The increases were primarily attributable to the hiring of additional scientific
personnel, increased purchases of laboratory supplies and services, increased
clinical trial expenditures for NE-0080, and increased funding of external
research.

         General and administrative expenses for the three and nine months ended
September 30, 1996, were $596,836 and $1,788,343, respectively, compared to
$290,267 and $1,171,781, respectively, for the corresponding periods in 1995.
The increases were primarily attributable to increased patent and business
development expenses, and expenses associated with being a public company.

  Interest Income and Expense

         Interest income for the three and nine months ended September 30, 1996,
was $483,262 and $1,278,245, respectively, compared to $76,098 and $198,910,
respectively, for the corresponding periods in 1995. The increases were
primarily attributable to higher average cash balances resulting from the
closing of a private placement of equity securities in the third and fourth
quarters of 1995 and the consummation of the Company's initial public offering
during the three and nine months ended September 30, 1996, as compared to the
corresponding periods in 1995.

         Interest expense for the three and nine months ended September 30,
1996, was $58,318 and $196,148, respectively, compared to $59,749 and $126,116,
respectively, for the corresponding periods in 1995. The increases were due to
higher average loan balances during the three and nine months ended September
30, 1996, as compared to the corresponding periods in 1995.

                                       9
<PAGE>


  Net Loss

         The Company incurred net losses of $1,369,583 and $4,599,880, or $0.17
and $0.60 per share, for the three and nine months ended September 30, 1996,
respectively, compared to net losses of $1,112,589 and $3,649,018, or $0.23 and
$0.79 per share, for the three and nine months ended September 30, 1995,
respectively. The decreases in the net loss per share for the three and nine
months ended September 30, 1996 were primarily attributable to an increase in
the shares used in computing net loss per share subsequent to the issuance of
common stock in the Offering in February 1996 and the issuance from July through
December 1995 of Series F Preferred Stock which converted into common stock
immediately prior to the closing of the Company's Offering, which offsets the
increased actual losses for the respective periods.

Liquidity and Capital Resources

         The Company had $35,717,379 in cash and cash equivalents at September
30, 1996, compared to $11,189,001 at December 31, 1995. This increase is
primarily attributable to the receipt of net proceeds from the Offering in
February 1996.

         In February and March 1996, the Company sold 2,587,500 shares of common
stock to the public at a price per share of $12.50. The Company received
proceeds of approximately $29,127,000 after deducting underwriting commissions
and offering expenses.

         The Company and Abbott have entered into collaborative agreements to
develop breast milk oligosaccharides as additives to infant formula and other
nutritional products. Under this strategic alliance, the Company has received
approximately $4.7 million in contract payments, license fees, and milestone
payments. In addition, Abbott is obligated to make an additional payment of
$500,000 to Neose in January 1997, and $5.0 million within 60 days of the first
commercial sale, if any, of infant formula containing the Company's nutritional
additive. Abbott may (a) at any time prior to the first commercial sale, if any,
of infant formula containing the Company's nutritional additive, elect to make
its license agreement non-exclusive, in which event the license fees payable by
Abbott after commercialization would be reduced by 50% and Abbott's obligations
to make contract and milestone payments, including the January 1997 payment and
the $5.0 million milestone payment, would be terminated, or (b) elect to
terminate the license agreement and return the licensed technology to Neose upon
60 days' notice, in which event it would have no further funding obligation to
the Company, including no obligation to make the January 1997 payment and the
$5.0 million milestone payment.

         The Company expects to make additional capital expenditures in the
total amount of approximately $6.0 million, beginning in the fourth quarter of
1996, to expand GMP manufacturing capabilities for NE-0080, and to establish GMP
manufacturing capabilities for NE-1530 and NE-0501. In each case, the Company

                                       10

<PAGE>


believes that the planned GMP capacity will be adequate to complete clinical
trials for the respective compounds. The Company is exploring various
alternatives for the long-term financing of this planned expansion.

         The Company leases its facility. The Company's minimum lease obligation
for the year ended December 31, 1996 is approximately $310,000. In connection
with the planned expansion described above, the Company is exploring the
possible acquisition of its facility, or alternatively, the possible extension
of its current lease term.

         The Company has entered into a capital lease agreement with an
equipment finance company that provides for up to $1.5 million of financing, of
which approximately $1.4 million had been drawn on as of September 30, 1996.

         During the nine months ended September 30, 1996, the Company purchased
approximately $667,000 of capital equipment and leasehold improvements.

                  The Company also has obligations to certain of its employees
under employment agreements.

                  The Company has incurred negative cash flows from operations
since its inception and has expended, and expects to continue to expend in the
future, substantial funds to continue its research and development programs. The
Company expects that its existing capital resources will be adequate to fund its
capital requirements through 1998. No assurance can be given that there will be
no change that would consume available resources significantly before such time.
The Company's future capital requirements and the adequacy of available funds
will depend on many factors, including progress in its research and development
activities, including its pharmaceutical discovery and development programs, the
magnitude and scope of these activities, progress with preclinical studies and
clinical trials, the costs involved in preparing, filing, prosecuting,
maintaining, and enforcing patient claims and other intellectual property
rights, competing technological and market developments, changes in existing
collaborative research relationships and strategic alliances, the ability of the
Company to establish additional collaborative arrangements for product
development, and the cost of manufacturing scale-up and developing effective
marketing activities and arrangements. To the extent that funds generated from
the Company's operations, together with its existing capital resources, and the
interest earned thereon, are insufficient to meet current or planned operating
requirements, it is likely that the Company will seek to obtain additional funds
through equity or debt financings, collaborative or other arrangements with
corporate partners and others, and from other sources. The terms and prices of
any such financings may be significantly more favorable to investors than those
of the Common Stock sold previously, which could have the effect of diluting or
adversely affecting the holdings or the rights of existing stockholders of the
Company. The Company does not currently have any committed sources of additional

                                       11
<PAGE>


financing. No assurance can be given that additional financing will be available
when needed or on terms acceptable to the Company. If adequate additional funds
are not available, the Company may be required to delay, scale back, or
eliminate certain of its research and product development activities or certain
other aspects of its business or attempt to obtain funds through collaborative
arrangements that may require the Company to relinquish some or all of its
rights to certain of its intellectual property, product candidates, or products.
If adequate funds are not available, the Company's business, financial
condition, and results of operations will be materially and adversely affected.

Certain Factors Affecting Operations and Market Price of Securities

         The Company's future business, financial condition, and results of
operations, and the market price for its securities are dependent on the
Company's ability to successfully manage the following business considerations.
No assurance can be given that the Company will be able to manage such
considerations successfully. The failure to manage such considerations could
have a material adverse effect on the Company's business, financial conditions,
and results of operations, and on the market price of its securities.

     Early Stage of Development; Uncertainty of Product Development;
         Technological Uncertainty

         The Company was founded in 1989 and is at an early stage of
development. The Company has not yet completed the development of any of its
products and, accordingly, has not begun to market or generate revenues from the
commercialization of products. It will be a number of years, if ever, before the
Company will recognize significant revenues from product sales or royalties.
Substantially all of the Company's revenues received to date have resulted from
payments received under its strategic alliance with Abbott. The Company expects
that substantially all of its revenues for the foreseeable future will result
from payments under its strategic alliance with Abbott, license fees, payments
from future strategic alliances and collaborative arrangements, if any, and
interest income. There can be no assurance that the Company will receive royalty
revenues from Abbott or that the Company will be successful in entering into
other strategic alliances or collaborative arrangements that will result in
significant revenues. The Company's products under development will require
significant time-consuming and costly research, development, preclinical
studies, clinical testing, regulatory approval, and significant additional
investment prior to their commercialization, which may never occur. Moreover,
the development and commercialization of complex carbohydrates for
pharmaceutical applications have been pursued successfully by few companies.
There can be no assurance that the Company's research and development programs
will be successful, that its oligosaccharide products will exhibit the expected
biological activities in humans, that its nutritional additive will be
successfully commercialized, that its pharmaceutical products, if developed,
will prove to be safe and efficacious in clinical trials, that the Company or
its collaborators will obtain the necessary regulatory approvals for its
products, or that the Company or its collaborators will be successful in
obtaining market acceptance of any of its products. The Company or its
collaborators may encounter problems and delays relating to research and
development, regulatory approval, manufacturing, and marketing. The failure by
the Company to address such problems and delays successfully would have a
material adverse effect on the Company's business, financial condition, and
results of operations.

                                       12
<PAGE>


     Dependence on Abbott; Dependence on Other Collaborative Partners

         The Company's strategic alliance with Abbott provides, in part, for the
receipt by the Company of certain license fees, milestone payments, and, if
commercialization occurs, royalty payments. The Company has derived
substantially all of its revenues to date from its strategic alliance with
Abbott and anticipates that payments from Abbott will constitute all or a
substantial portion of its revenues for the next several years. Abbott has the
option at any time prior to the first commercial sale, if any, of infant formula
containing the Company's nutritional additive, to elect to make the underlying
license agreement non-exclusive, in which event the license fees payable to the
Company after commercialization would be reduced by 50% and Abbott's obligations
to make contract and milestone payments would be terminated. Abbott also has the
right to terminate the underlying license agreement upon 60 days' notice, in
which event it would have no further funding obligations to the Company. The
success of the strategic alliance will depend on Abbott's own competitive,
marketing and strategic considerations, including the relative advantages of
alternative products being developed or marketed by competitors. The amount and
timing of resources Abbott commits to these activities are entirely within the
control of Abbott. There can be no assurance that Abbott will pursue the
development and commercialization of this product or that Abbott will perform
its obligations as expected. No assurance can be given that the strategic
alliance will result in the successful commercialization of the Company's
nutritional additive or that any future milestone payments or fees will be
received by the Company. The suspension or termination of the Company's
strategic alliance with Abbott, the failure of the strategic alliance to be
successful, or the delay in the development or commercialization of the
nutritional additive by Abbott would have a material adverse effect on the
Company's business, financial condition, and results of operations.

         The Company's strategy for the development and commercialization of its
pharmaceutical product candidates involves entering into collaborative
agreements with pharmaceutical and other companies. The Company may in the
future grant to its collaborative partners rights to license and commercialize
any products developed under these collaborative agreements, and such rights
would limit the Company's flexibility in considering alternatives for the
commercialization of such products. Under such agreements, the Company may rely
on its collaborative partners to conduct research and development efforts and
clinical trials on, obtain regulatory approvals for, and manufacture, market,
and commercialize certain of the Company's products. The amount and timing of
resources devoted to these activities generally will be controlled by each such
individual partner. To date, the Company has only entered into a limited number
of these collaborative arrangements, and none with respect to pharmaceutical
product candidates. There can be no assurance that the Company will be
successful in establishing any additional collaborative arrangements, that
existing or future collaborative arrangements will be successful in
commercializing products, or that the Company will derive any revenues from such
arrangements. In addition, the Company's strategy involves entering into
multiple, concurrent strategic alliances to pursue pharmaceutical discovery in
different disease areas. There can be no assurance that the Company will be able
to manage simultaneous programs successfully. With respect to existing and

                                       13
<PAGE>


potential future strategic alliances and collaborative arrangements, the Company
will be dependent upon the expertise and dedication of sufficient resources by
these outside parties to develop, manufacture, or market products. Should a
strategic alliance or collaborative partner fail to develop or commercialize a
product to which it has rights, the Company's business, financial condition, and
results of operations could be materially and adversely affected.

     History of Operating Losses; Uncertainty of Future Profits

         The Company has incurred losses since its inception and, as of
September 30, 1996, had an accumulated deficit of approximately $24 million. The
Company anticipates incurring additional losses over at least the next several
years and such losses are expected to increase as the Company expands its
research and development activities. To achieve profitability, the Company,
alone or with others, must successfully commercialize its nutritional additive,
develop its pharmaceutical products, conduct preclinical studies and clinical
trials, obtain required regulatory approvals and successfully manufacture,
introduce, and market such products. In addition, to the extent the Company
relies upon others for research, development, and commercialization activities,
the Company's ability to achieve profitability will be dependent upon the
success of such outside parties. The time required to reach profitability is
highly uncertain, and there can be no assurance that the Company will be able to
achieve profitability on a sustained basis, if at all. See "Management's
Discussion and Analysis of Financial Condition and Result of
Operations -- Overview."

     Additional Financing Requirements; Access to Capital

         The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to continue its research and development programs. The Company
expects that its existing capital resources will be adequate to fund its capital
requirements through 1998. No assurance can be given that there will be no
change that would consume available resources significantly before such time.
The Company's future capital requirements and the adequacy of available funds
will depend on many factors, including progress in its research and development
activities, including its pharmaceutical discovery and development programs, the
magnitude and scope of these activities, progress with preclinical studies and
clinical trials, the costs involved in preparing, filing, prosecuting,
maintaining, and enforcing patent claims and other intellectual property rights,
competing technological and market developments, changes in existing
collaborative research relationships and strategic alliances, the ability of the
Company to establish additional collaborative arrangements for product
development, and the cost of manufacturing scale-up and developing effective
marketing activities and arrangements. To the extent that funds generated from
the Company's operations, together with its existing capital resources and the
net proceeds of this offering and the interest earned thereon, are insufficient
to meet current or planned operating requirements, it is likely that the Company

                                       14
<PAGE>


will seek to obtain additional funds through equity or debt financings,
collaborative or other arrangements with corporate partners and others, and from
other sources. The terms and prices of any such financings may be significantly
more favorable to investors than those of the Common Stock sold in the Company's
initial underwritten public offering which could have the effect of diluting or
adversely affecting the holdings or the rights of existing stockholders of the
Company. The Company does not currently have any committed sources of additional
financing. No assurance can be given that additional financing will be available
when needed or on terms acceptable to the Company. If adequate additional funds
are not available, the Company may be required to delay, scale back, or
eliminate certain of its research and product development activities or certain
other aspects of its business or attempt to obtain funds through collaborative
arrangements that may require the Company to relinquish some or all of its
rights to certain of its intellectual property, product candidates, or products.
If adequate funds are not available, the Company's business, financial
condition, and results of operations will be materially and adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

     Uncertainty Regarding Patents and Proprietary Rights

         The Company's success will depend in part on its ability to obtain
patent protection for its products, preserve its trade secrets, and operate
without infringing the proprietary rights of other parties. Because of the
substantial length of time and expense associated with bringing new products
through development to the marketplace, the pharmaceutical and biotechnology
industries place considerable importance on obtaining and maintaining patent and
trade secret protection for new technologies, products, and processes. The
Company has an exclusive license from the University of Pennsylvania ("Penn") to
two U.S. patents as well as certain related foreign patents and patent
applications, subject to Penn's reserved right of use, and right to permit use
by non-profit organizations, solely for educational and research purposes. Such
license terminates upon the expiration of the last to expire licensed patent in
each country. The licensor may, at its option, terminate the license upon 60
days' notice if the Company is not using its continuing best efforts to develop
or sell a product using the licensed technology.

         The Company also owns or licenses a number of U.S. patents, and the
Company and its licensors have filed a number of U.S. and foreign patent
applications. Legal standards relating to the scope of claims and the validity
of patents in the biotechnology field are uncertain and still evolving. There
can be no assurance that patent applications to which the Company holds rights
will result in the issuance of patents, that any patents issued or licensed to
the Company will not be challenged and held to be invalid, or that any such
patents will provide commercially significant protection to the Company's
technology, products, and processes. In addition, there can be no assurance that
others will not independently develop substantially equivalent proprietary
information not covered by patents to which the Company owns rights or obtain
access to the Company's know-how or that others will not be issued patents which
may prevent the sale of one or more of the Company's products, or require
licensing and the payment of significant fees or royalties by the Company to
third parties in order to enable the Company to conduct its business. Defense
and prosecution of patent claims can be expensive and time consuming, regardless
of whether the outcome is favorable to the Company, and can result in the

                                      15
<PAGE>


diversion of substantial financial, management, and other resources from the
Company's other activities. An adverse outcome could subject the Company to
significant liabilities to third parties, require the Company to obtain licenses
from third parties, or require the Company to cease any related research and
development activities or product sales. In addition, the laws of certain
countries may not protect the Company's intellectual property. No assurance can
be given that any licenses required under any such third-party patents or
proprietary rights would be made available on acceptable terms, if at all.

         The Company's success is also dependent upon the skills, knowledge, and
experience of its scientific and technical personnel. To help protect its
rights, the Company requires all employees, consultants, advisors, and
collaborators to enter into confidentiality agreements that prohibit the
disclosure of confidential information to anyone outside the Company, and
require disclosure and assignment to the Company of their ideas, developments,
discoveries, and inventions. There can be no assurance, however, that these
agreements will provide adequate protection for the Company's trade secrets,
know-how, or other proprietary information in the event of any unauthorized use
or disclosure.


     Substantial Competition; Risk of Technological Obsolescence

         The Company is engaged in highly competitive industries. The Company
competes with many public and private companies, including well-known
nutritional products manufacturers, pharmaceutical companies, chemical
companies, specialized biotechnology companies, and academic institutions. Many
of the Company's competitors have significantly greater financial, scientific,
and technical resources, and manufacturing and marketing capabilities than the
Company. In addition, many of the Company's competitors have significantly
greater experience conducting preclinical studies and clinical trials of new
pharmaceutical products, and in obtaining regulatory approvals for
pharmaceutical products. The Company is relying on Abbott to develop and
commercialize its nutritional additive. As a result, the success of the
Company's nutritional additive will depend, in significant part, on Abbott's
ability to compete in the highly competitive infant formula market. Abbott's
principal competitors in this market include Bristol-Myers Squibb Company,
American Home Products Corp., Nestle S.A., and Gerber Products Co. Competitors
of the Company and its collaborators may develop products that compete
successfully with the Company's products and may develop and commercialize such
products more rapidly than the Company and its collaborators. Competition may
increase further as a result of potential advances from the study of complex
carbohydrates and greater availability of capital for investment in this field.
There can be no assurance that the Company's competitors will not succeed in
developing technologies and products that are more effective than any being
developed by the Company, or that would render the Company's technology and
products obsolete or noncompetitive.

                                       16
<PAGE>

    Government Regulation; No Assurance of Product Approval

         The Company's product candidates are subject to stringent regulation by
a number of government authorities in the United States and other countries,
including the United States Food and Drug Administration ("FDA"). NE-1340, the
Company's infant formula ingredient, may be subject to FDA review as a food
additive. Substances that are generally recognized as safe ("GRAS") are excluded
from the definition of food additives. Information supporting the safety of a
food additive is submitted to the FDA in the form of a food additive petition.
The food additive petition process is generally expensive and lengthy,
frequently requiring several years after the petition is submitted to the FDA.
No assurance can be given that, if submitted, the FDA will accept the petition
or that, if accepted, such petition will not result in the establishment of
regulations which necessitate costly and time-consuming compliance procedures.
This process could be time-consuming and expensive and would have a material
adverse effect on the Company's business, financial condition, and results of
operations. The FDA has by regulation affirmed a number of substances as GRAS,
although it is not required that a substance be affirmed as GRAS by regulation
in order to be GRAS. A manufacturer may make an independent determination that
there is general recognition of safety of a substance by qualified experts when
used for a particular use. There can be no assurance that Abbott will make such
a determination or that the FDA will agree with such a determination, if Abbott
were to elect to make such a determination. Accordingly, there is a risk that
the FDA will disagree with the determination. In such a circumstance the
manufacturer must submit a GRAS affirmation petition for the FDA to review and
affirm GRAS status by regulation in order to market and sell the additive or
formula containing the additive. This process could be time-consuming and
expensive and would have a material adverse effect on the Company's business,
financial condition, and results of operations.

         Any infant formula containing the Company's nutritional additive will
be subject to the provisions of the United States Infant Formula Act, which
amended the Food, Drug and Cosmetic Act (the "FDC Act") and established detailed
requirements for infant formulas, including their manufacture, composition, and
labeling. Pursuant to the Company's agreement with Abbott, Abbott is responsible
for all regulatory activities relating to the infant formula additive. There can
be no assurance that Abbott will be able to satisfy all applicable regulatory
requirements. Abbott may also market infant formula containing the additive in
foreign countries. Infant formula regulatory requirements vary widely from
country to country, and may be more or less stringent than FDA requirements. The
time required to obtain clearances, if required, in foreign countries may be
longer or shorter than that required in the United States.

         Prior to marketing, any pharmaceutical product candidates developed by
the Company must undergo an extensive regulatory approval process required by
the FDA and by comparable agencies in other countries. This process, which
includes preclinical studies and clinical trials of each compound to establish
its safety and effectiveness and confirmation by the FDA that good laboratory,
clinical, and manufacturing practices were maintained during testing and
manufacturing, can take many years, requires the expenditure of substantial
resources, and gives larger companies with greater financial resources a
competitive advantage over the Company. Failure to comply with applicable

                                       17
<PAGE>


requirements can result in fines, recall, or seizure of products, total or
partial suspension of production, withdrawal of existing product approvals,
refusal to approve new drug applications, and criminal prosecution. To date, no
pharmaceutical product candidate being developed by the Company has been
submitted for approval or has been approved by the FDA or any other regulatory
authority for marketing, and there can be no assurance that any such product
will ever be approved for marketing, or that the Company will be able to obtain
the labeling claims desired for its products. The Company is and will continue
to be dependent upon the laboratories and medical institutions conducting its
preclinical studies and clinical trials to maintain both good laboratory and
good clinical practices and, except for the manufacture of small quantities of
its drug formulations, which the Company is currently undertaking, upon the
manufacturers of its compounds to maintain compliance with current Good
Manufacturing Practices ("GMP"). Data obtained from preclinical studies and
clinical trials are subject to varying interpretations that could delay, limit,
or prevent FDA regulatory approval. Delays or rejections may be encountered
based upon changes in FDA policy for drug approval during the period of
development and FDA regulatory review. Similar delays also may be encountered in
foreign countries. Any delay in obtaining, or failure to obtain, such approvals
would adversely affect the Company's ability to generate product revenues or
royalties. There can be no assurance that regulatory approval will be obtained
for any product developed by the Company. Moreover, even if approval is granted,
such approval may entail commercially unacceptable limitations on the labeling
claims for which a product may be marketed. Even if such regulatory approval is
obtained, a marketed drug or compound and its manufacturer are subject to
continual review and inspection, and later discovery of previously unknown
problems with the product or manufacturer may result in restrictions or
sanctions on such product or manufacturer, including withdrawal of the product
from the market, and other enforcement actions. Additional governmental
regulations may be promulgated that would delay regulatory approval of the
Company's potential products. The Company cannot predict the impact of adverse
governmental action that might arise from future legislative and administrative
action.

     No Commercial Manufacturing Capability or Experience

         To be successful, the Company's products must be manufactured in
commercial quantities under GMP prescribed by the FDA and at acceptable costs.
The Company has not yet manufactured any products in commercial quantities and
currently does not have the facilities to manufacture any products in commercial
quantities under GMP. Existing facilities of the Company are not adequate for
commercial scale manufacturing. Therefore, the Company will need to develop its
own GMP manufacturing facility and/or depend on its collaborators, licensees, or
contract manufacturers for the commercial manufacture of its products. In the
event the Company determines to establish a manufacturing facility, it will
require substantial additional funds, the hiring and retention of significant
additional personnel and compliance with extensive regulations applicable to
such a facility. The Company has no experience in such commercial manufacturing,
and there can be no assurance that the Company will be able to establish such a
facility successfully and, if established, that it will be able to manufacture
products in commercial quantities for sale at competitive prices. If the Company
determines to rely on collaborators, licensees, or contract manufacturers for
the commercial manufacture of its products, the Company will be dependent on

                                       18
<PAGE>


such corporate partners or other entities for, and will have only limited
control over, the commercial manufacturing of its products. There can be no
assurance that the Company will be able to enter into any such manufacturing
arrangements on acceptable terms, if at all. If the Company is not able to enter
into commercial manufacturing agreements, it could encounter delays in
introducing its products into certain markets, or find that the manufacture of
its products in these markets is adversely affected. There can be no assurance
that the parties to the Company's future commercial manufacturing agreements
will perform their obligations as expected, or that any revenue will be derived
from these commercial manufacturing agreements.

     Limited Clinical Trial Experience; No Marketing or Sales Capability
       or Experience

         Before obtaining required regulatory approvals for the commercial sale
of its pharmaceutical product candidates, the Company must demonstrate through
human clinical trials that such products are safe and efficacious for use. To
date, the Company has very limited experience in conducting clinical trials. The
Company will either need to rely on third parties to design and conduct any
required clinical trials or expend resources to hire additional personnel to
administer such clinical trials. There can be no assurance that the Company will
be able to find appropriate third parties to design and conduct clinical trials
or that it will have the resources to hire personnel to administer clinical
trials in-house.

         The Company has no experience in marketing, distributing, or selling
nutritional additives or pharmaceutical products, and will have to develop a
sales force and/or rely on its collaborators, licensees, or arrangements with
others to provide for the marketing, distribution, and sales of its products.
There can be no assurance that the Company will be able to establish marketing,
distribution, and sales capabilities or make arrangements with third parties to
perform such activities on acceptable terms, if at all.

     Risks Associated with the Infant Formula Industry

         To the extent NE-1340 is added to infant formula, the Company is
subject to the risks generally associated with the infant formula industry.
These risks include: (i) product tampering or production defects may occur
requiring a recall of infant formula containing NE-1340, or may reduce the
demand for such infant formula; (ii) an ingredient in such formula, including
NE-1340, may be banned or its use limited or declared unhealthful; and (iii)
sales of infant formula may decline or use of NE-1340 may be limited or
discontinued due to real or perceived health concerns, adverse publicity, or
other reasons beyond the control of the Company.

     Dependence on Key Personnel

         The Company is highly dependent upon the efforts of its senior
management and scientific team. The loss of the services of one or more members
of the senior management and scientific team could significantly impede the
achievement of the Company's business and product development objectives. Due to
the specialized scientific nature of the Company's business, the Company is also
highly dependent upon its ability to attract and retain qualified scientific,
technical, and key management personnel. The number of qualified scientific
personnel is limited, and there is intense competition for such persons and for

                                       19
<PAGE>


other qualified personnel in the areas of the Company's activities. There can be
no assurance that the Company will be able to continue to attract and retain the
qualified personnel necessary for the development of its existing business and
its expansion into areas and activities requiring additional expertise, such as
production and marketing. The Company may need to hire additional personnel or
outside consultants skilled in clinical testing and regulatory compliance as it
develops its products. There can be no assurance that the Company will be able
to hire or retain such personnel. The loss of, or failure to recruit scientific,
technical and managerial personnel could have a material adverse effect on the
Company. In addition, the Company relies on members of its Scientific Advisory
Board and consultants to assist the Company in formulating its research and
development strategy. All of the members of the Scientific Advisory Board and
all of the Company's consultants are employed by other employers, and each such
member or consultant may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to the Company.

     Third-Party Reimbursement; Uncertainty of Health Care Reform Measures

         Successful commercialization of any pharmaceutical products the Company
may develop will depend in part upon the availability of reimbursement or
funding from third-party health care payors such as government and private
insurance plans. Third-party payors are continuing their efforts to contain or
reduce the costs of health care through various means. For example, third-party
payors are increasingly challenging the prices charged for medical products and
services. In addition, significant uncertainty exists as to the reimbursement
status of newly approved pharmaceutical products. There can be no assurance that
third-party reimbursement or funding will be available or will permit price
levels sufficient to realize an appropriate return on the Company's investment
in its pharmaceutical product development. The U.S. Congress is considering a
number of legislative and regulatory reforms that may affect companies engaged
in the health care industry in the United States. Although the Company cannot
predict whether these proposals will be adopted or the effects such proposals
may have on its business, the existence and pendency of such proposals could
have a material adverse effect on the Company in general. In addition, the
Company's ability to commercialize potential pharmaceutical products may be
adversely affected to the extent that such proposals have a material adverse
effect on other companies that are prospective collaborators with respect to any
of the Company's pharmaceutical product candidates.

     Product Liability; Lack of Product Liability Insurance

         The Company's business may be adversely affected by potential product
liability risks which are inherent in the testing, manufacturing, and marketing
of the Company's products which it has developed or which it may develop. There
can be no assurance that product liability claims will not be asserted against
the Company, its collaborators, or licensees. In addition, the use of
pharmaceutical products developed by the Company through collaborative or
licensing arrangements in clinical trials and the subsequent sale of such

                                       20
<PAGE>


products is likely to cause the Company to bear all or a portion of those
potential product liability risks. The Company does not currently have product
liability insurance. There can be no assurance that it will be able to obtain or
maintain adequate product liability insurance on acceptable terms or that such
insurance will provide adequate coverage against potential liabilities.
Furthermore, there can be no assurance that any collaborators or licensees of
the Company will agree to indemnify the Company, be sufficiently insured, or
have a net worth sufficient to satisfy the product liability claims. As a
result, a product liability claim or recall could have a material adverse effect
on the Company's business, financial condition, and results of operations.

     Hazardous Materials; Compliance with Environmental Regulations

         The Company's research and development activities involve the
controlled use of hazardous materials, chemicals, and radioactive compounds. The
risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, the Company could be
held liable for any resulting damages, and any such liability could exceed the
resources of the Company which would have a material adverse effect on the
Company's business, financial condition, and results of operations. The Company
may incur substantial additional costs to comply with environmental regulations
if the Company develops pharmaceutical manufacturing capacity.

     Control by Existing Management and Stockholders

         The Company's directors, executive officers, and certain principal
stockholders affiliated with members of the Board of Directors and their
affiliates beneficially own approximately 14% of the Common Stock. Accordingly,
such stockholders, if acting together, may have the ability to exert significant
influence over the election of the Company's Board of Directors and other
matters submitted to the Company's stockholders for approval. The voting power
of these holders may discourage or prevent tender offers for the Common Stock
unless the terms are approved by such holders.

     Possible Volatility of Common Stock Price

         The market price of the Common Stock could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements by the Company, its collaborative partners or the Company's
present or potential competitors regarding technological innovations or new
commercial products or services, regulatory developments, including the results
of preclinical testing and clinical trials, arrangements with collaborative
partners, the achievement of or failure to achieve certain milestones,
developments or disputes concerning patent or proprietary rights, or public
concern regarding the safety or efficacy of the products to be developed by the
Company or its collaborators, and other events or factors. In addition, the
stock market has experienced extreme price and volume fluctuations. This
volatility has significantly affected the market prices of securities of many
biotechnology and pharmaceutical companies for reasons frequently unrelated to
or disproportionate to the performance of the specific companies. These broad
market fluctuations may adversely affect the market price of the Common Stock.

                                       21
<PAGE>


     Anti-Takeover Effect of Charter and By-Law Provisions and Delaware Law

         The Company's Second Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") authorizes the Board of Directors to issue,
without stockholder approval, 5,000,000 shares of Preferred Stock with voting,
conversion, and other rights and preferences that could materially and adversely
affect the voting power or other rights of the holders of Common Stock. The
issuance of Preferred Stock or of rights to purchase Preferred Stock could be
used to discourage an unsolicited acquisition proposal. The Company's By-Laws
contain procedural restrictions on director nominations by stockholders and the
submission of other proposals for consideration at stockholder meetings. The
possible issuance of Preferred Stock and the procedures required for director
nominations and stockholder proposals could discourage a proxy contest, make
more difficult the acquisition of a substantial block of the Common Stock, or
limit the price that investors might be willing to pay in the future for shares
of the Common Stock. In addition, certain provisions of Delaware law applicable
to the Company could also delay or make more difficult a merger, tender offer,
or proxy contest involving the Company.





                                       22
<PAGE>


PART  II.      OTHER INFORMATION

Item 1.  Legal Proceedings.  None


Item 2.  Changes in Securities.  None


Item 3.  Defaults Upon Senior Securities.  None


Item 4.  Submission of Matters to a Vote of Security Holders.  None


Item 5.  Other Information.  None


Item 6.  Exhibits and Reports on Form 8-K

         A.  Exhibits

             Exhibit 27 - Financial Data Schedules

         B.  Reports on Form 8-K   None


                                       23

<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                      NEOSE TECHNOLOGIES, INC.



Date:    November 13, 1996            By: /s/  P. Sherrill Neff
                                          ----------------------------------
                                          P. Sherrill Neff
                                          President and Chief Financial Officer