<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
            ---------------------------------------------------------

                                    FORM 10-K

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

For the fiscal year ended September 30, 1998       Commission File No. 1-4430
            --------------------------------------------------------

                           MAXIM PHARMACEUTICALS, INC.
             (Exact Name of Registrant as specified in its charter)

             Delaware                                       87-0279983
 (State or other jurisdiction of                         (I.R.S. Employer
  incorporation or organization)                      Identification Number)

                     8899 University Center Lane, Suite 400
                           San Diego, California 92122
                                 (619) 453-4040
                   (Address, including zip code, and telephone
             number, including area code, of Registrant's principal
                               executive offices)

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


Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
         Title of Each Class               Name of Each Exchange on Which Registered
         -------------------               -----------------------------------------
<S>                                        <C>
Common Stock, $.001 Par Value                      American Stock Exchange
Redeemable Common Stock Purchase Warrants          American Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:      None

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

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be  
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.  /X/

         The aggregate market value of the voting stock held by persons
considered by the registrant for this purpose to be nonaffiliates of the
registrant was approximately $152,451,889 on December 28, 1998, when the
closing price of such stock, as reported in the American Stock Exchange, was
$15.375.

         The number of shares outstanding of the registrant's Common Stock,
$.001 par value, as of December 28, 1998 was 9,915,570.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Certain portions of the Registrant's Annual Report to Stockholders for the
     fiscal year ended September 30, 1998, are incorporated into Part II hereof.
2.   Certain portions of the Registrant's Proxy Statement for its Annual Meeting
     of Stockholders to be held on February 19, 1999, which will be mailed on or
     about January 11, 1998, are incorporated into Part III hereof.
================================================================================

<PAGE>

         THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS REGARDING OUR 
BUSINESS AND PRODUCTS AND OUR PROJECTED PROSPECTS AND QUALITIES. SUCH 
FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS REGARDING THE RESULTS OF 
PRODUCT DEVELOPMENT EFFORTS AND CLINICAL TRIALS, AND THE SCOPE AND SUCCESS OF 
FUTURE OPERATIONS. SUCH STATEMENTS ARE ONLY PREDICTIONS AND ARE SUBJECT TO 
CERTAIN RISKS AND UNCERTAINTIES, PARTICULARLY THOSE INHERENT IN THE PROCESS 
OF DISCOVERING AND DEVELOPING DRUGS THAT CAN BE PROVEN TO BE SAFE AND 
EFFECTIVE FOR USE AS HUMAN THERAPEUTICS AND THE ENDEAVOR OF BUILDING A 
BUSINESS AROUND SUCH POTENTIAL PRODUCTS. ACTUAL RESULTS COULD DIFFER 
MATERIALLY FROM THOSE PROJECTED IN THIS FORM 10-K. FACTORS THAT COULD CAUSE 
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE 
DISCUSSED IN THIS FORM 10-K INCLUDING, WITHOUT LIMITATION, IN THE SECTION OF 
ITEM I ENTITLED "RISK FACTORS." AS A RESULT, YOU ARE CAUTIONED NOT TO PLACE 
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS.

                                     PART 1

ITEM 1.   BUSINESS

         Maxim Pharmaceuticals, Inc. is referred to throughout this report as 
"Maxim", the "Company", "we" or "us".

OVERVIEW

         Maxim is developing advanced drugs and vaccines for cancer and 
infectious diseases. Clinical trials of our lead drug MAXAMINE-TM- in the 
treatment of malignant melanoma and acute myelogenous leukemia have shown a 
more than doubling of survival and remission times while maintaining patient 
quality of life during treatment. Earlier-stage clinical studies have also 
suggested promise in renal cell carcinoma and hepatitis C. We are currently 
testing MAXAMINE in three Phase III cancer clinical trials in 12 countries 
around the world.

         MAXAMINE, an immuno-modulator, is designed to offer a safer 
treatment that extends life for seriously ill patients. MAXAMINE is used in 
biotherapy, a class of treatments that are intended to improve the ability of 
a patient's immune system to identify, disable and destroy malignant or 
infected cells. MAXAMINE THERAPY combines the administration of MAXAMINE, 
which PROTECTS critical immune cells, with the administration of 
biotherapeutic agents such as cytokines designed to STIMULATE these immune 
cells. Because MAXAMINE THERAPY is designed to capitalize upon and enhance a 
patient's own immune capabilities, we believe that it has the potential to be 
used in a wide range of cancers and diseases that can be recognized by the 
immune system.

         In addition to extending survival, maintaining the quality of a 
patient's life during treatment is an important objective of MAXAMINE 
THERAPY. MAXAMINE is designed to allow self-administration by patients in 
their own homes, and is believed to reduce toxic side effects of cytokines 
and other biological response modifiers.

         We are conducting three Phase III clinical trials of MAXAMINE 
THERAPY for the treatment of cancer. In June 1997 we commenced a 240-patient 
Phase III clinical trial of MAXAMINE THERAPY for advanced malignant melanoma 
in the United States. A separate international Phase III advanced malignant 
melanoma trial centered in Europe, Australia and Canada was initiated in 
November 1997. Lastly, we commenced a Phase III clinical trial for acute 
myelogenous leukemia ("AML") in the United States, Europe, Australia and 
Canada in February 1998. Each of these trials are designed to independently 
support application for approval to market MAXAMINE.

         In two completed Phase II clinical trials for the treatment of 
advanced malignant melanoma, MAXAMINE THERAPY substantially improved patient 
survival. Median survival time for patients treated with MAXAMINE THERAPY in 
the two studies exceeded 13 and 15 months, respectively, as compared with 
reported median survival times of approximately six to seven months for 
existing available treatments. In patients for which the melanoma had 
metastasized to the liver, MAXAMINE THERAPY improved median survival time to 
19 months compared to predicted survival times of approximately four months 
for these patients.

                                      1

<PAGE>         Our Phase II clinical trial for the treatment of AML 
demonstrated a substantial improvement of disease-free remission intervals. 
As of September 1998, after a median of 24 months of follow-up, 58% of 
patients treated with MAXAMINE THERAPY during their first complete remission 
("CR1") remained in leukemia-free remission. Less than 20-25% would be 
expected to remain in remission under current treatments. Furthermore, 65% of 
patients treated with MAXAMINE THERAPY without concurrent diseases or 
antecedent illnesses remained in leukemia-free remission. Patients who 
relapsed and achieved a second or greater remission ("CR2+") and were 
subsequently treated with MAXAMINE THERAPY had a median time in remission in 
excess of 21 months as compared with the historic reported median time in 
remission of approximately six months under the current standard of care.

         A Phase II clinical trial of MAXAMINE in the treatment of renal cell 
carcinoma was initiated in Europe in late 1998. We have also tested MAXAMINE 
in a Phase I trial in hepatitis C (HCV) patients. The study suggested that 
the combination of MAXAMINE with interferon-alpha (IFN-(alpha)) is safe in 
the treatment of HCV patients, and that MAXAMINE may enhance the efficacy of 
IFN-(alpha) in patients who were previously nonresponsive to IFN-(alpha) 
therapy. We currently plan to start a Phase II trial in hepatitis C in 1999.

         We are also developing MAXDERM-TM-, a MAXAMINE-related drug for 
dermatological and other topical applications. Potential uses for MAXDERM 
include the treatment of herpes labialis (cold sores), oral mucositis, canker 
sores, pressure sores, shingles and burns.

         Our third technology, MAXVAX-TM-, is currently in preclinical 
development and is designed to facilitate a new class of needle-free vaccines 
for major respiratory infections, sexually transmitted diseases, 
gastrointestinal tract diseases and other infectious diseases. Nearly 85 
percent of infectious diseases enter the body through the mucosal membranes 
lining the nose, mouth, eyes, ears, lungs, intestinal and urogenital tracts. 
We hope that mucosal vaccines, using the MAXVAX carrier, can provide immune 
protection at these mucosal surfaces.

MAXAMINE DRUG FOR CANCER AND INFECTIOUS DISEASES

         CANCER MARKET

         Cancer comprises a large and diverse group of diseases resulting 
from the uncontrolled proliferation of abnormal (malignant) cells. Most 
cancers will spread beyond their original sites and invade surrounding tissue 
and may also metastasize to more distant sites and ultimately cause death in 
the patient unless effectively treated. To be effective, cancer treatment 
must target not only the primary tumor site but also distant metastases. 
CANCER FACTS AND FIGURES, a report from the American Cancer Society, 
estimates that a total of approximately 1,230,000 new cases and approximately 
565,000 deaths will be reported for invasive cancers in the United States in 
1998. Predominant forms of cancer include leukemia and lymphoma, breast, 
lung, urinary, prostate, melanoma, ovarian, colon, rectal and brain cancers. 
The National Cancer Institute estimates that the direct medical cost of 
treating cancer in the United States is $35 billion per year. Information 
regarding certain cancer indications is summarized below.

  Estimated Incidence for Selected Cancers for 1998 for Initial Target Markets*

<TABLE>
<CAPTION>
                                                                         Annual
                                                               --------------------------
                                                               New Cases           Deaths
                                                               ---------           ------
<S>                                                            <C>              <C>
Malignant Melanoma........................................        83,000           15,000
Acute Myelogenous Leukemia................................        19,000           13,000
Renal Cell Carcinoma......................................        60,000           23,000
All Invasive Cancers......................................     2,460,000        1,130,000
</TABLE>

         *These estimates are based upon the American Cancer Society's 1998
FACTS AND FIGURES doubled to provide an estimate of incidence for the European
Union and Australia.

         Predominant methods of treating cancer generally include surgery, 
radiation therapy, chemotherapy and biotherapy. Although these techniques 
have achieved success for certain cancers, particularly when detected in the 

                                      2

<PAGE>

early stages, each has drawbacks which may significantly limit their success 
in treating certain types and stages of cancer. For example, cancer may recur 
even after repeated attempts at surgical removal of tumors or other 
treatment. Surgery may be successful in removing visible tumors but may leave 
smaller nests of cancer cells in the patient which continue to proliferate. 
Radiation or chemotherapy are relatively imprecise methods for the 
destruction of cancer cells (i.e., such therapies can kill both cancer cells 
and normal cells) and have toxic side effects which may themselves be lethal 
to the patient; these toxic side effects may also restrict the application of 
these treatment modes to less than optimal levels required to ensure 
eradication of the cancer.

         The high number of cancer-related deaths indicate the need for more 
efficacious therapies for many patients. In addition, we believe that new 
cancer therapies will increasingly be expected to maintain patients' quality 
of life during treatment.

HEPATITIS C MARKET

         The U.S. Centers for Disease Control and Prevention estimates that 
approximately four million Americans are infected with the hepatitis C virus 
("HCV"). The World Health Organization and other sources estimate that at 
least 60 million people are chronically infected worldwide. Approximately 85% 
of HCV patients develop long-term or chronic infection, possibly leading to 
serious liver diseases, cirrhosis (scarring of the liver), liver cancer and 
death. HCV is the leading cause of liver cancer and the primary reason for 
liver transplantation in many countries. The majority of patients do not 
effectively respond to existing therapies or to therapies known by us to be 
under development.

BIOTHERAPY FOR CANCER AND INFECTIOUS DISEASES

         In recent years, significant research has focused on attempts to 
capitalize upon and enhance the immune system's ability to combat cancer and 
infectious diseases, a treatment approach known as biotherapy. New cytokines, 
drugs, vaccines, chemotherapeutic agents and advanced radiation therapy 
technologies are continually being developed in attempts to protect and 
enhance the response of the immune system. Many of these technologies, 
however, have demonstrated significant limitations in their ability to treat 
cancer and certain infectious agents. These limitations may include marginal 
efficacy, severe adverse side effects and the development of multi-drug 
resistance.

         Since the early 1980's, much research in the biotherapy area has 
included the testing of cytokines, naturally occurring proteins, such as 
interleukin-2 (IL-2) and interferon-alpha (IFN-(alpha)) for the treatment of 
a number of cancers and infectious diseases including advanced malignant 
melanoma, renal cell carcinoma, hepatitis C and AML. Two kinds of immune 
cells, the natural killer-cells (NK cells) and T cells, possess an ability to 
kill and support the killing of cancer cells and virally infected cells. IL-2 
and IFN-alpha are potent stimulators of NK cells and T Cells, yet they are 
often rendered ineffective in the treatment of patients as the NK cells and T 
cells are suppressed by another component of the body's immune system. As a 
result, cytokines demonstrate a clinically significant tumor response in only 
a small portion of cancer patients and often produce severe adverse side 
effects. Moreover, even with recent advances in the use of IFN-(alpha) in 
combination with anti-viral drugs or in sustained release formulations, the 
majority of HCV patients do not effectively respond to existing therapy.

MAXAMINE TECHNOLOGY

         The method of action of MAXAMINE THERAPY is intended to improve the
immune system's ability to identify, disable and destroy malignant or infected
cells. MAXAMINE may be key to successful biotherapy, the use of the body's own
immune system to fight cancer and infectious diseases. MAXAMINE is based on a
naturally occurring molecule, and its usefulness in biotherapy was discovered by
Maxim's collaborative scientists at the University of Goteborg, Sweden.

         Two kinds of immune cells, NK Cells and cytotoxic T Cells, possess an
ability to kill and support the killing of cancer cells and virally infected
cells. Maxim's researchers have shown, however, that NK Cells and T Cells are
suppressed by phagocytes, another component of the body's immune system.
Phagocytes are a class of white blood cells found in abundant quantities at the
site of tumors and viral infections. The release of free 

                                      3

<PAGE>

radicals by phagocytes results in apoptosis (programmed cell death) of NK 
Cells and T Cells, thereby destroying their cytotoxic capability and 
rendering the immune response against the tumor or virally infected cell 
largely ineffective.

         MAXAMINE is designed to modulate the immune system to protect NK 
Cells and T Cells, making biotherapy more effective. When histamine, a 
natural molecule present in the body, or any other molecules in the class 
known as H2 receptor agonists, binds to the H2 receptor on the phagocytes, 
the production and release of free radicals is temporarily prevented. The 
prevention of the release of free radicals thereby allows immune-activating 
agents, such as IL-2 and IFN-(alpha), to more effectively activate NK Cells 
and T Cells to enhance their killing of tumor cells or virally infected cells.

         We have formulated MAXAMINE, an analogue of histamine, so that it 
may be delivered to patients through a subcutaneous injection. Among the body 
of proprietary protection surrounding our MAXAMINE technology are United 
States and international patents and patent applications covering not only 
MAXAMINE, or histamine, but the use of any as H2 receptor agonist in the 
treatment of cancer and infectious diseases, as well as patent applications 
covering their use in other medical applications. See "Patents, Licenses and 
Proprietary Rights."

         In summary, MAXAMINE THERAPY combines the administration of 
MAXAMINE, which protects critical immune cells, with the administration of 
biotherapeutic agents designed to stimulate these immune cells. The results 
of the series of clinical trials conducted to date highlight the potential of 
MAXAMINE to improve the efficacy of certain biotherapeutic agents. Because 
MAXAMINE has been shown to increase the effectiveness of cytokines, lower 
doses of cytokines such as IL-2 and IFN-(alpha) can potentially be used in 
MAXAMINE THERAPY without compromising therapeutic effectiveness, thereby 
reducing serious side effects associated with the cytokines. Among the 
potential benefits of MAXAMINE THERAPY is the utilization and enhancement of 
the body's immune capabilities, thereby making the treatment potentially 
applicable to a broad range of cancers and infectious diseases recognizable 
by the immune system.

POTENTIAL BENEFITS OF MAXAMINE

         We believe that MAXAMINE may be integral in the growing trend toward 
combination therapy for certain cancers and infectious diseases, and may 
offer a number of important clinical and commercial advantages relative to 
current therapies or approaches, including:

         -        EXTENDING LIFE. Phase II clinical trials and other data have
                  provided evidence of improved therapeutic efficacy (extended
                  survival and remission intervals) over approved therapies or
                  standards of care.

         -        MAINTAINING QUALITY OF LIFE. Phase II clinical trials and
                  other data have indicated that MAXAMINE THERAPY may reduce 
                  the toxic side effects of cytokines and other biological 
                  response modifiers, thereby allowing the maintenance of the 
                  patient's quality of life during this outpatient therapy.

         -        OUTPATIENT ADMINISTRATION. MAXAMINE can be self-administered
                  on an outpatient basis, subcutaneously, in contrast to the
                  in-hospital administration required for many other
                  therapies.

         -        COST EFFECTIVE. Lower doses of IL-2 or IFN-(alpha) are
                  possible for many patients, potentially reducing the cost per
                  treatment cycle below existing treatment regimens. In
                  addition, the delivery of MAXAMINE THERAPY on an outpatient
                  basis may eliminate the costs associated with in-hospital
                  patient care. These factors, combined with the potential
                  improvements in efficacy, contribute favorably to the
                  assessment of benefit versus cost for this therapy.

MAXAMINE CLINICAL TRIAL STATUS

         Building upon the body of human data generated from a series of Phase
II clinical trials, we have initiated a clinical development program
encompassing three concurrent Phase III clinical trials of MAXAMINE THERAPY for

                                      4

<PAGE>

the treatment of cancer based in 12 countries. Each of these trials is 
designed to independently support regulatory submissions for approval to 
market MAXAMINE. Our Phase III trials target advanced malignant melanoma and 
AML, but we believe that these are only the first potential uses for the 
drug. A Phase II trial is underway in renal cell carcinoma, and earlier-stage 
trials have been conducted in hepatitis C and multiple myeloma.

         The table summarizes our current and completed clinical trial 
activities for each disease we currently target or plan to target. We cannot 
predict when clinical studies for any of the indications set forth below will 
be completed or whether the results of such studies will support the filing 
of New Drug Applications or the equivalent. In addition, we can give no 
assurance as to when we will be able to commence planned clinical studies.

                     MAXAMINE THERAPY Clinical Trial Status

<TABLE>
<CAPTION>
         Indication                      Phase            Status                  Location
         ----------                      -----            ------                  --------
<S>                                 <C>                   <C>                <C>
Advanced Malignant Melanoma         Phase III trial       Ongoing            United States
Advanced Malignant Melanoma         Phase III trial       Ongoing            Five countries  (Europe,
                                                                             Australia and Canada)
Acute Myelogenous Leukemia          Phase III trial       Ongoing            12 countries  (United States,
                                                                             Europe, Australia
                                                                             Canada and Israel)
Renal Cell Carcinoma                Phase II trial        Ongoing            Sweden, Denmark and
                                                                             United Kingdom
Multiple Myeloma                    Phase I trial         Completed          Sweden
Hepatitis C                         Phase I trial         Completed          Sweden
Hepatitis C                         Phase II trial        Planned for 1999   To be determined
Prostate Adenocarcinoma             Preclinical research  Completed          Sweden
</TABLE>

         ADVANCED MALIGNANT MELANOMA

         Malignant melanoma is the most serious form of skin cancer. Our 
initial Phase II clinical trial was conducted in Sweden at the Sahlgrenska 
University Hospital in Goteborg. In that study, fifteen patients with 
advanced metastatic malignant melanoma were treated with a high-dose regimen 
of IL-2 together with daily injections of IFN-(alpha) in five-day cycles. 
Eight of the patients were also given MAXAMINE THERAPY, which consisted of 
MAXAMINE injections twice daily in combination with treatment with IL-2 and 
IFN-(alpha).

         The results of the initial Phase II clinical trial indicated that
MAXAMINE may be given as an effective adjuvant to IL-2/IFN-(alpha) therapy. In
the seven patients who did not receive MAXAMINE THERAPY, one partial response
(defined as a 50% reduction of the total tumor burden) was observed in a patient
with skin and lymph node melanoma. In the eight patients treated with MAXAMINE
THERAPY, four partial and two mixed responses were observed. Notably, two of the
MAXAMINE THERAPY patients had complete resolution of their extensive liver
metastases. Sites of response in the MAXAMINE THERAPY patients also included
skin, lymph nodes, skeleton, spleen and muscle. In patients receiving MAXAMINE
THERAPY, there was a statistically significant improvement in overall survival
(p < 0.03). The MAXAMINE THERAPY patients had a mean survival of 13.3 months,
double the mean 6.8 month survival in the control group. One patient remained
completely free of detectable disease more than four years after the
commencement of treatment with MAXAMINE THERAPY.

         A second advanced malignant melanoma study was undertaken at the 
Sahlgrenska University Hospital in Sweden to determine if MAXAMINE THERAPY 
utilizing a lower-dose regimen of the same cytokines (IL-2 and IFN-(alpha)) 
in combination with the same doses of MAXAMINE would retain the efficacy seen 
in the first study, while reducing the side effects of the cytokine portion 
of the treatment. In addition to survival, a goal for MAXAMINE THERAPY is to 
lower the toxicity of biotherapy and better maintain the patients' quality of 
life. Lowering the doses of the cytokines reduces many of the side effects of 
these drugs, thereby facilitating tolerance of the therapy and even allowing 
self-administration of the drugs at home. The median survival time of 
patients with advanced (stage IV) malignant melanoma using conventional 
treatments is historically reported to be six to seven months. In this 
second, 

                                      5

<PAGE>

low-dose malignant melanoma study, 11 patients had a median survival time of 
15 months, more than double the rate generally reported for the normal course 
of the disease and exceeding the favorable results from the high-dose study 
described above. In this second malignant melanoma clinical trial, MAXAMINE 
THERAPY was well-tolerated and most patients were able to treat themselves at 
home.

         In the first two trials the median survival time exceeded 13 and 14 
months, respectively, compared to reported medians of six to seven months for 
conventional treatments. In addition, of the seven patients having liver 
metastases, treatment with MAXAMINE THERAPY was shown to significantly 
improve survival outcome (median of 19 months survival as a group) compared 
to the predicted four months survival time for these patients.

         In July 1997, we commenced a multi-center Phase III clinical trial 
of MAXAMINE THERAPY in the United States for the treatment of advanced 
malignant melanoma. In this clinical trial, advanced malignant melanoma 
patients are being treated with a combination of MAXAMINE and IL-2, while 
patients in the control group are being treated with IL-2 alone. The primary 
endpoint of the study is overall patient survival, and the secondary 
endpoints include time to progression, tumor response rate, duration of 
response and quality of life. The minimum enrollment objective for the study 
was 240 patients. More than 50 clinical sites in the United States are 
participating in the study, and we have exceeded the original enrollment goal 
for the study. We plan to terminate enrollment in the first half of 1999 
after enrolling approximately 300 patients.

         We commenced a second international Phase III trial of MAXAMINE 
THERAPY for the treatment of advanced malignant melanoma in November 1997 
based in five countries, including clinical sites in Europe, Australia and 
Canada. Patients in the MAXAMINE THERAPY arm will receive a co-administration 
of MAXAMINE plus low-dose IL-2 and IFN-(alpha), while patients in the control 
arm will receive dacarbazine (DTIC), the most commonly used chemotherapeutic 
agent for the treatment of advanced malignant melanoma. DTIC has a reported 
survival benefit of six to seven months in advanced malignant melanoma 
patients. The international study will be designed to encompass approximately 
240 patients.

         Our two Phase III malignant melanoma trials are designed to 
complement each other by addressing separate clinical and marketing issues. 
The United States trial is designed to demonstrate that treatment with a 
combination of MAXAMINE and IL-2 is better at extending patient survival than 
the administration of IL-2 alone. The international trial is designed to 
demonstrate that MAXAMINE THERAPY is better at extending patient survival 
than dacarbazine (DTIC), a standard treatment throughout the world for 
advanced malignant melanoma. A secondary endpoint of both trials is to 
evaluate patient quality of life while on MAXAMINE THERAPY.

         ACUTE MYELOGENOUS LEUKEMIA ("AML")

         Acute Myelogenous Leukemia is the most common form of acute leukemia 
in adults, and prospects for long-term survival are poor for the majority of 
patients. Once diagnosed with AML, patients are typically treated with 
chemotherapy, and the majority achieve complete remission ("CR"). 
Unfortunately 75-80% of patients who achieve their first CR ("CR1") will 
relapse, and the median time in remission before relapse is only 12 months 
with current treatments. Relapsed patients are typically treated again with 
chemotherapy, and many of these patients die during chemotherapy. Among those 
relapsed patients who do survive treatment and achieve a second complete 
remission ("CR2"), these subsequent remissions normally have a shorter 
duration than the prior CR (a median of only six months in the case of CR2 
patients).

         We conducted a Phase II study in Sweden in which 39 AML patients in 
remission were treated with MAXAMINE THERAPY. The objective of MAXAMINE 
THERAPY is to treat AML patients in remission with the combination of 
Maxamine and low doses of IL-2 to prevent relapse and prolong leukemia-free 
survival while maintaining a good quality of life for the patients during 
treatment.

         In the Phase II study, patients treated in their first remission 
with MAXAMINE THERAPY experienced a substantial increase in leukemia-free 
survival, highlighted by the following updated clinical results as of 
September 1, 1998 after a median 24 months of follow-up:

                                      6

<PAGE>

       -      58% (15 of 26) of all CR1 patients treated with MAXAMINE remained
              in leukemia-free remission. A prior study of AML patients
              suggested that only 20-25% of patients would be expected to be
              alive after two years.

       -      65% (13 of 20) of AML patients without concurrent diseases or
              antecedent illnesses treated with MAXAMINE remained in 
              leukemia-free remission.

       -      After a median of 24 months of follow up, the median time to
              relapse had not been reached in this study as more than 50% of the
              MAXAMINE-treated CR1 patients remained leukemia-free. By contrast,
              under the normal course for AML, the median time to relapse would
              be expected to be reached after only 12 months.

         These results were achieved despite the fact that the patients 
treated with MAXAMINE were a relatively older group of patients and more than 
half (15 of 26) of the patients were categorized as high risk for relapse.

         Patients treated in their second or subsequent remission ("CR2+") 
historically have a poor prognosis, with about 5% achieving long-term 
survival. The 13 CR2+ patients treated with MAXAMINE THERAPY in the Phase II 
study experienced a substantial increase in remission duration, and the 
median time to relapse for the CR2+ patients was 21 months, more than three 
times the six-month historic median. Remission inversion (prolonging the 
duration of CR2+ to that equal to or exceeding the patient's prior remission 
duration) was achieved in 8 of 11 (73%) patients treated with MAXAMINE 
THERAPY as compared with approximately 10% to 20% under the current standard 
of care.

         In February 1998, we commenced a Phase III AML clinical trial based 
in 12 countries, including clinical sites in the United States, Europe, 
Australia, Canada and Israel. The trial is designed as a remission therapy to 
demonstrate that MAXAMINE THERAPY can prolong leukemia-free remission time 
and prevent relapse in AML patients compared to the current standard of care, 
which is no therapy during remission. In the study, patients in CR2+ will be 
evaluated for up to 18 months, while patients in CR1 will be evaluated up to 
24 months. The trial is designed to include up to 400 patients.

         RENAL CELL CARCINOMA

         Advanced renal cell carcinoma (RCC), cancer of the kidneys, is 
resistant to radiation therapy and chemotherapy and patients have a poor 
prognosis for survival. A pilot study of six RCC patients was conducted at 
the Sahlgrenska Hospital in Gothenburg to evaluate the safety and feasibility 
of MAXAMINE THERAPY in this patient group. In the small study, three patients 
were treated with MAXAMINE and cytokines (IFN-(alpha) and IL-2) and achieved a 
mean survival of 29 months, while another three patients were treated with 
the cytokines alone and achieved a mean survival of four months.

         In late 1998 we initiated a Phase II clinical trial of MAXAMINE 
THERAPY in the treatment of patients with RCC. The trial is designed to 
evaluate MAXAMINE THERAPY, consisting in this trial of the combination of 
MAXAMINE, a natural cytokine Interferon Alfanative(R) and IL-2, in the 
treatment of late-stage RCC patients. Under the trial design, approximately 
40 patients are expected to be enrolled and treated for a period of up to 
nine months.

         HEPATITIS C (HCV)

         Hepatitis C ("HCV"), a viral infection that is estimated to afflict 
4 million people in the United States and at least 60 million people 
worldwide, is a leading cause of liver cirrhosis and liver cancer and the 
primary reason for liver transplantation. IFN-(alpha) is the primary 
treatment for HCV, but even with recent advances in the use of IFN-(alpha) in 
combination with anti-viral drugs or in sustained release formulations, the 
majority of patients do not effectively respond to therapy.

         In 1998 we reported results from a Phase I feasibility study in HCV
patients using MAXAMINE THERAPY. The study indicated that the combination of
MAXAMINE with IFN-(alpha) is safe in the treatment of HCV patients, and 

                                      7

<PAGE>

that MAXAMINE may enhance the efficacy of IFN-(alpha) in patients who were 
previously nonresponsive to IFN-(alpha) therapy. In the study, 10 patients 
who were characterized as nonresponders to previous IFN-(alpha) treatment 
were put back on treatment with the same dose of IFN-(alpha) plus MAXAMINE. 
Eight of the 10 patients had a decrease in ALT levels, an enzyme used to 
assess liver function, and two patients achieved a complete normalization of 
ALT. Patients treated with MAXAMINE plus IFN-(alpha) also demonstrated 
statistically significant decreases of viral load and AST. Based in part on 
these results and other support for the potential benefit of MAXAMINE in HCV, 
our goal is to commence a Phase II trial in Hepatitis C in 1999.

MAXDERM DERMATOLOGICAL AND TOPICAL THERAPY

         MAXDERM was developed to allow for topical delivery of the active 
ingredient in MAXAMINE. The noval technology underlying MAXDERM is designed 
to modulate the patient's immune system and inflammatory response to treat 
certain dermatological conditions and other topical applications. MAXDERM 
encompasses certain acquired and internally developed technologies that 
include three patents and a number of patent applications covering certain 
material compositions and uses. A total of more than 75 patients have been 
treated in randomized, double-blinded, placebo controlled pilot studies of 
MAXDERM.

         Potential uses of MaxDerm include the treatment of herpes labialis 
(cold sores), oral mucositis, canker sores, pressure sores, shingles and 
burns. We plan to further define our clinical development program for MAXDERM 
based on evaluation of the data from the completed preliminary studies as 
well as the results of market evaluations.

         MAXDERM represents an early stage development program. As with any 
such program, substantial additional development will be necessary in order 
for us or our partners to develop products based on the technology, and there 
can be no assurance that our development efforts will lead to development of 
products that are shown to be safe and effective in clinical trials and that 
are commercially viable.

MAXVAX MUCOSAL VACCINE CARRIER/ADJUVANT PLATFORM

         OVERVIEW OF VACCINE MARKET AND INFECTIOUS DISEASES

         There remains today a broad range of infectious diseases for which 
no therapies currently exist. One of the most promising areas in the fight 
against such diseases is the development of vaccines. Recent trends in the 
delivery of health care in the United States, including an increased emphasis 
on preventive health care, have contributed to significant growth of interest 
in disease prevention and development of the vaccine market. Immunization has 
long been recognized as an effective means to decrease health care costs 
through disease prevention, and is one of the key areas given priority 
attention by the United States Department of Health and Human Services and 
the World Health Organization in their respective public health service 
publications. It is estimated that by 1999, the world market for human 
vaccine products will total $5.3 billion.

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<PAGE>

         MUCOSAL MEMBRANES - A FIRST-LINE DEFENSE

         The mucosal membranes that line the nasal compartment and sinuses, 
eyes, ears, oral cavity, respiratory tract, gastrointestinal tract and 
urogenital tract represent the body's first line defense against infections 
and are the sites where most infectious agents enter the body. Examples of 
infectious pathogens which enter the body through the mucosal membranes are: 
chlamydia, herpes simplex viruses and HIV, which cause sexually transmitted 
diseases; respiratory syncytial virus ("RSV"), pneumococcus and 
streptococcus, which cause respiratory diseases; and HELICOBACTER PYLORI 
(ulcers) and rotavirus (diarrhea), which cause gastrointestinal diseases. 
There has been a long-standing interest in developing mucosal vaccines 
against these and other important infections.

         MAXVAX SYSTEM--MUCOSAL VACCINE CARRIER/ADJUVANT PLATFORM

         MAXVAX is a mucosal vaccine carrier/adjuvant platform based on the 
cholera toxin B subunit ("CTB"). CTB has already been administered to 
hundreds of thousands of patients worldwide and is a major component of an 
existing oral cholera vaccine and traveler's diarrhea vaccine. Most current 
vaccines have been designed to provide systemic immunity administered through 
injection. They treat or prevent infection only after the infecting organism 
has entered the blood stream or deep tissues of the body. The mechanisms 
which induce mucosal immunity appear to be distinct from those that protect 
systemically. We believe that the MAXVAX approach to therapeutic and 
protective vaccines has the potential to elicit both mucosal and systemic 
immunity by delivering antigens directly to the mucosal system. By combining 
our proprietary recombinant form of CTB ("rCTB") with vaccine antigens and/or 
genes, we believe that we may be able to develop effective, new needle-free 
mucosal-based vaccines.

         POTENTIAL BENEFITS OF MUCOSAL IMMUNIZATION USING MAXVAX

         The MAXVAX approach to therapeutic and protective vaccines has been 
shown to elicit both mucosal and systemic immunity and is based upon 
"non-injectable" administration. We believe that there are numerous important 
potential clinical and commercial advantages to mucosal immunization compared 
with traditional injected vaccine products, including:

         -        GREATER CLINICAL EFFICACY. The body's largest defense system
                  against disease is the mucosal immune system where most
                  infectious agents enter the body. We believe that our mucosal
                  vaccine platform may likely result in mucosal and systemic
                  immune stimulation and could more effectively prevent or treat
                  most infectious diseases, as compared to traditional injected
                  vaccines.

         -        HIGHER LEVEL OF SAFETY. CTB-based vaccines have been
                  administered to hundreds of thousands of patients worldwide in
                  clinical trials for cholera and traveler's diarrhea. CTB is
                  widely thought to be a safe and effective mucosal vaccine
                  carrier.

         -        LOWER COST OF ADMINISTRATION. The administration of potential
                  MAXVAX vaccines by oral, nasal and topical applications
                  involving direct contact with mucosal surfaces may not require
                  patients to go to clinics or require trained personnel,
                  thereby effectively lowering the cost of administration. The
                  vaccines may be prescribed by a doctor and dispensed by a
                  pharmacy, thus simplifying delivery and eliminating the
                  multiple office visits required for injection delivery of most
                  contemporary vaccines.

         -        IMPROVED VACCINE UTILIZATION. We believe that the relative
                  ease of administration and the concept of "prescription"
                  vaccines may improve vaccine utilization over traditionally
                  administered vaccines. Further, we believe that this novel
                  mucosal vaccine concept may allow development of protective
                  and therapeutic approaches to diseases where previous vaccines
                  and therapeutics have failed.

         The MAXVAX technology is currently in preclinical development. Two
studies published in INFECTION AND IMMUNITY in 1998 highlighted the potential of
MAXVAX. The first was a human vaccination study that 

                                       9

<PAGE>

demonstrated mucosal antibody responses in female volunteers after nasal and 
oral application of rCTB, the technology underlying MAXVAX. The results were 
important as they confirmed in humans the results of earlier animal studies 
in which rCTB has been shown to stimulate strong mucosal immune responses. 
The results also support the potential effectiveness of oral and nasal 
administration, the two most attractive routes for the delivery of mucosal 
vaccines. Also published was a preclinical study that demonstrated the 
induction of specific mucosal immunity within the female reproductive tract. 
The study's vaccination regimen was a prototype for mucosal vaccination 
against human sexually transmitted diseases.

         Prototype MAXVAX-based vaccines are currently being prepared and 
tested in our laboratories. Our objective is to align ourselves with 
corporate collaborators possessing antigens for specific diseases that can be 
coupled to the MAXVAX carrier, and to develop vaccine candidates in 
collaboration with these partners.

         The MAXVAX technology represents an early stage discovery and 
development program. As with any such program, substantial additional 
research and development will be necessary in order for us or our partners to 
develop products based on the technology, and there can be no assurance that 
our research and development efforts will lead to development of products 
that are shown to be safe and effective in clinical trials and that are 
commercially viable.

PRODUCT DEVELOPMENT AND COLLABORATIVE RELATIONSHIPS

         We conduct our research and other product development efforts 
through a combination of internal research personnel and collaborative 
programs. For MAXAMINE, we rely upon our clinical management personnel in 
extensive collaboration with universities and other clinical research sites, 
contract research organizations and similar service providers and persons. We 
expect to rely upon a similar combination of internal personnel and 
collaborators as we expand the clinical and other development of MAXDERM. 
Current research and development efforts related to MAXVAX are primarily 
conducted in our internal laboratories, although we expect to rely heavily on 
pharmaceutical company collaborative relationships to advance the clinical 
development of the technology.

         We have relied upon licensing and other transactions to gain access 
to certain of our proprietary technologies. Conduct of our current and 
planned clinical trials of MAXAMINE THERAPY rely heavily upon contractual 
relationships with universities and other clinical trial sites, contract 
research organizations, home nursing organizations, and regulatory and other 
consultants. Our strategy for development, commercialization and marketing of 
each of our product candidates will involve, where appropriate, the 
establishment of marketing and other collaborative relationships with 
pharmaceutical industry partners.

         During 1998 we entered into clinical collaborations with Chiron 
Corporation, Amgen Inc. and BioNative AB. Each of these companies possess 
cytokines that have the potential to benefit from use in combination with 
MAXAMINE, and under each of these agreements we receive economic and other 
support for important clinical trials without giving up any marketing or 
other future rights to MAXAMINE. For example, Chiron is providing the IL-2 
requirements and other assistance related to our Phase III AML clinical 
trial. These collaborations highlight our belief that MAXAMINE, a combination 
therapy, is complementary rather than competitive with many existing and 
future drugs, and may be the key to the successful use of many biotherapeutic 
agents.

         We expect to pursue additional collaborations to further the 
expanded use and development of MAXAMINE. We will also seek other 
collaborative relationships, particularly for the further development of 
MAXVAX and in other situations where we believe that the clinical testing, 
marketing, manufacturing and other resources of pharmaceutical or other 
collaborators will enable us to more effectively develop particular products 
or access geographic markets.

MARKETING AND SALES

         We expect that our strategy for the potential global market launch 
of MAXAMINE will be based on a combination of direct marketing by Maxim in 
the United States, and the establishment of marketing alliances with 
pharmaceuticals companies for international markets.

                                      10

<PAGE>

         We are currently undertaking efforts to prepare to market MAXAMINE 
directly in the United States. Our objective is to retain the full revenue 
stream from the potential sale of MAXAMINE in this key market, and we have 
built a core marketing group with experience in planning and managing 
successful United States launches of pharmaceutical products. As we move 
closer to the potential market launch of MAXAMINE, we have and will continue 
to undertake certain activities required to prepare for launch including 
market evaluations, reimbursement analysis, and building awareness of the 
drug among leading clinicians. The treatment of cancer is a highly 
specialized activity in which the approximately 3,500 practicing oncologists 
in the United States tend to be concentrated in approximately 1,500 major 
medical centers. Marketing MAXAMINE directly in the United States will 
require us to build a marketing infrastructure, including the recruitment and 
hiring of sales representatives. Our plan is to defer the build up of this 
infrastructure until obtaining some assurance (after a review of Phase III 
clinical data and initiation of the regulatory approval process) of the 
likelihood and timing of any potential approval to market MAXAMINE in the 
United States.

         In international markets we are in the process of recruiting, 
evaluating and selecting pharmaceutical companies to serve as marketing 
collaborators for major geographic regions, including Europe and the Pacific 
Rim. We are currently in discussions with potential collaborative marketing 
partners, although there can be no assurance that any such relationships can 
be consummated, or that any such relationships will be consummated under 
terms favorable to us.

         Due to the nature of the vaccine markets, we intend to establish 
agreements with pharmaceutical companies with large distribution systems for 
MAXVAX and do not expect to establish a direct sales capability in the 
vaccine area. Our marketing strategy for MAXDERM will be developed over time 
based upon, among other factors, the specific indications targeted for 
therapy.

MANUFACTURING

         We do not intend to acquire or establish our own dedicated 
manufacturing facilities for MAXAMINE in the foreseeable future. There are a 
number of facilities with FDA Good Manufacturing Practice ("GMP") approval 
available for contract manufacturing, and we have contracted with established 
pharmaceutical manufacturers for the production of MAXAMINE. These 
manufacturers are supplying the MAXAMINE requirements under GMP for our 
current clinical trial activities, and have demonstrated the capability to 
supply commercial quantities of the product for the potential market launch. 
The CTB protein portion of MAXVAX is currently being produced by SBL Vaccin 
AB, Stockholm, Sweden, under GMP through a system suitable for 
large-scale industrial production.

         We believe that, in the event of the termination of an agreement 
with any single supplier or manufacturer, we would likely be able to enter 
into agreements with other suppliers or manufacturers on similar terms. 
However, there can be no assurance that there will be manufacturing capacity 
available to us within the timelines and at quantities required. We expect, 
however, to establish relationships with additional manufacturers during 1999 
to provide alternate sources of supply for MAXAMINE.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

         We hold five issued or allowed patents and have eleven patent 
applications pending in the United States. In addition, we hold license 
rights to six issued patents and three patent applications pending in the 
United States. Corresponding patent applications have been filed, and in a 
number of instances patents have been issued, in major international markets. 
Our policy is to file, where possible, patent applications to protect 
technologies, inventions and improvements that are important to the 
development of our business. We have devoted substantial attention and 
resources to our patent and license portfolio in an attempt to develop the 
strongest positions available. Maintaining patents and licenses and 
conducting an assertive patent prosecution strategy is a priority for us.

         KEY GRANTED PATENTS AND PENDING APPLICATIONS

                                      11

<PAGE>

         We hold a patent relating to the combination of IL-2 and H2 receptor 
agonists ("H2RA's") that was issued by the U.S. Patent and Trademark Office 
in September 1994 and has additionally been granted in Europe, Australia and 
Japan. We also hold a U.S. patent issued in March 1998 relating to the 
combination of IFN-(alpha) and H2RA's, and a corresponding patent has also 
issued in Australia. We also hold seven other patent applications in the 
United States relating to other cytokines, biotherapies, mechanisms, rates 
and routes of administration, and other proprietary claims that have also 
been filed internationally.

         We also hold a worldwide, exclusive license to Professional 
Pharmaceuticals, Inc.'s (PPI) three U.S. patents for material compositions 
and other rights underlying the MAXDERM technology. We also hold a U.S. 
patent application related to the MAXDERM technology. Corresponding patents 
for each of the above have also been filed internationally.

         In the MAXVAX area, we hold a worldwide exclusive license to the 
U.S. and international patents of Vitec AB ("Vitec") and SBL Vaccin AB 
("SBL") for recombinantly producing CTB for use in infectious diseases other 
than cholera, bacterial related diarrheas and HIV (We hold non-exclusive 
rights to this patent with regard to HIV). We also hold exclusive license 
rights to related patent applications as well as a patent application with 
respect to certain therapeutic and anti-inflammatory properties of CTB.

         We have also filed three of our own U.S. and international patent 
applications related to MAXVAX, covering the use of CTB to make vaccines 
against chlamydia and other sexually transmitted diseases, the use of CTB and 
other proteins in gene delivery of DNA or RNA, and methods for developing 
CTB-based vaccines.

         MAXAMINE TECHNOLOGY RIGHTS

         In 1993 we entered into a technology transfer agreement under which 
we purchased the core intellectual property and patent rights related to our 
MAXAMINE technology. The technology transfer agreement requires that we pay 
certain royalty obligations to the two inventors of the technology, although, 
as part of a subsequent agreement with us, one of the inventors waived his 
royalty rights. We have also filed a number of additional patent applications 
and received additional patents encompassing the MAXAMINE technology as 
described above.

         MAXDERM TECHNOLOGY RIGHTS

         In 1998 we entered into a license agreement with PPI for an 
exclusive, worldwide license to technology related to material compositions 
and other patent rights underlying the MAXDERM technology. The license 
agreement requires that we pay certain royalty obligations to PPI. We have 
also filed an additional patent application related to the MAXDERM technology.

                                      12

<PAGE>

         MAXVAX LICENSES AND TECHNOLOGY RIGHTS

         In 1993 we entered into an option and license agreement with Vitec 
and SBL, under which we exercised an option for an exclusive, worldwide 
license to technology related to CTB for use in a chlamydia vaccine. Under 
the agreement, we are required to use our best efforts to engage SBL to 
manufacture any products which result from the application of the licensed 
technology. We also have to make royalty payments on the net sales of 
products using the licensed technology and to make additional license and 
milestone payments to Vitec upon the execution of any sub-licenses. Under the 
agreement, any party may terminate the license agreement, with respect to the 
rights and duties of that party, as a result of a material breach of the 
agreement by another party.

         In 1994 we entered into a second license agreement with Vitec and 
SBL for an exclusive, worldwide license to technology rights related to CTB 
for all infectious diseases except chlamydia (which is governed by the 
agreement discussed above), HIV (which is governed by a separate 
non-exclusive sub-license agreement held by us), cholera and 
bacterial-related diarrheas. Under the agreement, we have agreed to use our 
best efforts to engage SBL to manufacture any products which result from the 
application of licensed technology, and both Vitec and Maxim shall receive a 
percentage of any profits that SBL derives from manufacturing such products. 
The licensors may terminate the agreement upon a material breach of the 
agreement by us.

         In January 1998 we filed arbitration in Sweden relating to the 
licensors' performance under the above agreements. The arbitration alleges 
certain causes of action against the licensors (among other things, 
misstatements regarding the scope of Maxim's licensed rights) and seeks 
compensatory and punitive damages and declaratory relief. The arbitration 
also seeks specific performance of the licensors' obligations under the 
agreements (including full disclosure of relevant manufacturing information). 
We cannot determine what impact, if any, an unfavorable resolution of the 
existing concerns would have on the commercial value of the MAXVAX technology.

         We also hold other licenses relating to CTB, including a 
non-exclusive sub-license to CTB for the prevention and treatment of HIV 
infection, and an exclusive, worldwide license to patent applications and 
related technology rights with respect to certain therapeutic and 
anti-inflammatory properties of CTB.

GOVERNMENT REGULATION

         Regulation by governmental authorities in the United States and 
other countries is a significant factor in the development, manufacture and 
marketing of our proposed products and in our ongoing research and product 
development activities. The nature and extent to which such regulation 
applies to Maxim will vary depending on the nature of any products which may 
be developed by us. We anticipate that many if not all of our products will 
require regulatory approval by governmental agencies prior to 
commercialization. In particular, human therapeutic and vaccine products are 
subject to rigorous preclinical and clinical testing and other approval 
procedures of the U.S. Food and Drug Administration ("FDA") and similar 
regulatory authorities in European and other countries. Various governmental 
statutes and regulations also govern or influence testing, manufacturing, 
safety, labeling, storage and record-keeping related to such products and 
their marketing. The process of obtaining these approvals and the subsequent 
compliance with appropriate statutes and regulations require the expenditure 
of substantial time and money. Any failure by us or our collaborators to 
obtain, or any delay in obtaining, regulatory approval could adversely affect 
the marketing of any products developed by us, and prevent us from generating 
product revenues and obtaining adequate cash to continue present and planned 
operations.

         FDA APPROVAL PROCESS

         Prior to commencement of clinical studies involving humans, 
preclinical testing of new pharmaceutical products is generally conducted on 
animals in the laboratory to evaluate the potential efficacy and the safety 
of the product. The results of these studies are submitted to the FDA as a 
part of an Investigational New Drug ("IND") application, which must become 
effective before clinical testing in humans can begin. Typically, human 
clinical evaluation involves a time consuming and costly three-phase process. 
In Phase I, clinical trials are conducted with a small number of people to 
assess safety and to evaluate the pattern of drug distribution and metabolism 
within the 

                                      13

<PAGE>

body. In Phase II, clinical trials are conducted with groups of patients 
afflicted with a specific disease in order to determine preliminary efficacy, 
optimal dosages and expanded evidence of safety. In Phase III, large-scale, 
multi-center, comparative trials are conducted with patients afflicted with a 
target disease in order to provide enough data to demonstrate the efficacy 
and safety required by the FDA. The FDA closely monitors the progress of each 
of the three phases of clinical testing and may, at its discretion, 
re-evaluate, alter, suspend or terminate the testing based upon the data 
which have been accumulated to that point and its assessment of the 
risk/benefit ratio to the patient.

         The results of the preclinical and clinical testing on a 
non-biologic drug and certain diagnostic drugs are submitted to the FDA in 
the form of a New Drug Application ("NDA") for approval prior to commencement 
of commercial sales. In the case of vaccines, the results of clinical trials 
are submitted as a Product License Application ("PLA"). In responding to an 
NDA or PLA, the FDA may grant marketing approval, request additional 
information or deny the application if the FDA determines that the 
application does not satisfy its regulatory approval criteria. There can be 
no assurance that approvals will be granted on a timely basis, if at all, for 
any of our products. Similar procedures are in place in countries outside the 
United States.

         The Advisory Committee of Immunization Practices ("ACIP") of the 
Centers for Disease Control and Prevention ("CDCP") has a role in influencing 
the markets for most, if not all, of the vaccine products we intend to make. 
The ACIP meets quarterly to review developing data on licensed vaccines, and 
those approaching license, as well as epidemiologic data on the need for 
these products. The recommendations of the ACIP on the appropriate use of 
vaccines and related products are published in the MORBIDITY AND MORTALITY 
WEEKLY REPORT and reprinted in several journals. The CDCP develops 
epidemiological data in support of the need for new vaccines and monitors 
vaccine usage and changes in disease incidence. In addition, CDCP staff 
frequently act as key advisors to the FDA in their review process.

         EUROPEAN AND OTHER REGULATORY APPROVAL

         Whether or not FDA approval has been obtained, approval of a product 
by comparable regulatory authorities in Europe and other countries will 
likely be necessary prior to commencement of marketing the product in such 
countries. The regulatory authorities in each country may impose their own 
requirements and may refuse to grant, or may require additional data before 
granting, an approval even though the relevant product has been approved by 
the FDA or another authority. As with the FDA, the European Union ("EU") 
countries and other developed countries have very high standards of technical 
appraisal and, consequently, in most cases a lengthy approval process for 
pharmaceutical products. The process for gaining such approval in particular 
countries varies, but generally follows a similar sequence to that described 
for FDA approval. In Europe, the European Committee for Proprietary Medicinal 
Products provides a mechanism for EU-member states to exchange information on 
all aspects of product licensing. The EU has established a European agency 
for the evaluation of medical products, with both a centralized community 
procedure and a decentralized procedure, the latter being based on the 
principle of licensing within one member country followed by mutual 
recognition by the other member countries.

         OTHER REGULATIONS

         We are also subject to various U.S. federal, state, local and 
international laws, regulations and recommendations relating to safe working 
conditions, laboratory manufacturing practices and the use and disposal of 
hazardous or potentially hazardous substances, including radioactive 
compounds and infectious disease agents, used in connection with our research 
work. The extent of government regulation which might result from future 
legislation or administrative action cannot be predicted accurately.

                                      14

<PAGE>

THIRD-PARTY REIMBURSEMENT

         The business and financial condition of pharmaceutical and 
biotechnology companies will continue to be affected by the efforts of 
government and third-party payors to contain or reduce the cost of health 
care through various means. For example, in certain international markets, 
pricing negotiations are often required in each country of the European 
Community, even if approval to market the drug under the European Medical 
Evaluation Authority's centralized procedure is obtained. In the U.S. there 
have been, and we expect that there will continue to be, a number of federal 
and state proposals to implement similar government control. In addition, an 
increasing emphasis on managed care in the U.S. has and will continue to 
increase the pressure on pharmaceutical pricing. While we cannot predict 
whether any such legislative or regulatory proposals will be adopted or the 
effect such proposals or managed care efforts may have on our business, the 
announcement of such proposals or efforts could have a material adverse 
effect on our ability to raise capital, and the adoption of such proposals or 
efforts could have a material adverse effect on the our business, financial 
condition and results of operations. Further, to the extent that such 
proposals or efforts have a material adverse effect on other pharmaceutical 
companies that are prospective corporate partners for us, our ability to 
establish corporate collaborations may be adversely affected. In addition, in 
both the U.S. and elsewhere, sales of prescription pharmaceuticals are 
dependent in part on the availability of reimbursement to the consumer from 
third-party payors, such as government and private insurance plans that 
mandate predetermined discounts from list prices. Third-party payors are 
increasingly challenging the prices charged for medical products and 
services. If we succeed in bringing one or more products to the market, there 
can be no assurance that these products will be considered cost effective and 
that reimbursement to the consumer will be available or will be sufficient to 
allow us to sell our products on a competitive basis.

COMPETITION

         Competition in the discovery and development of methods for treating 
or preventing cancer and infectious disease is intense. Numerous 
pharmaceutical, biotechnology and medical companies and academic and research 
institutions in the United States and elsewhere are engaged in the discovery, 
development, marketing and sale of products for the treatment of cancer and 
infectious disease. These include surgical approaches, new pharmaceutical 
products and new biologically derived products. We expect to encounter 
significant competition for the principal pharmaceutical products we plan to 
develop. Companies that complete clinical trials, obtain regulatory approvals 
and commence commercial sales of their products before us may achieve a 
significant competitive advantage. A number of pharmaceutical companies are 
developing new products for the treatment of the same diseases being targeted 
by us, particularly hepatitis C. In some instances, our competitors already 
have products in late-stage clinical trials. In addition, certain 
pharmaceutical companies are currently marketing drugs for the treatment of 
the same diseases being targeted by us, and may also be developing new drugs 
to address these disorders.

         In the area of biotherapy, the impact of competition for MAXAMINE 
may be reduced by the fact that the drug may be complementary to many other
biotherapeutic agents. MAXAMINE THERAPY combines the administration of 
MAXAMINE with the administration of biotherapeutic agents. Accordingly, 
MAXAMINE and these biotherapeutic agents may not be competitive but may play 
complementary and synergistic roles in enhancing the immune system. For this 
reason, we believe that continuing advancements in the overall field of 
biotherapy may create new opportunities for MAXAMINE.

         Many of our competitors have substantially greater financial, 
clinical testing, regulatory compliance, manufacturing, marketing, human and 
other resources. Additional mergers and acquisitions in the pharmaceutical 
industry may result in even more resources being concentrated with our 
competitors. We believe that our competitive success will be based on our 
ability to create and maintain scientifically advanced technology, develop 
proprietary products, attract and retain scientific personnel, obtain patent 
or other protection for our products, obtain required regulatory approvals, 
obtain orphan drug status for certain products and manufacture and 
successfully market our products either independently or through outside 
parties.

EMPLOYEES AND CONSULTANTS

                                      15

<PAGE>

         As of December 28, 1998, the Company had 53 employees, all but two 
of whom were based at its two facilities in San Diego, California. The 
Company believes its relationships with its employees are satisfactory. Other 
experienced professionals and personnel are expected to be hired to join our 
company in 1999 to, among other things, address the requirements of the 
expansion of clinical trials of MAXAMINE and other commercialization efforts.

         In addition to our employees, we have engaged a number of 
experienced consultants in North America, Europe and Australia with 
pharmaceutical and business backgrounds to assist in its product development 
efforts. We plan to leverage our key personnel by making extensive use of 
contract laboratories, development consultants, and collaborations with 
pharmaceutical companies to expand our preclinical and clinical trials.

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<PAGE>

RISK FACTORS

         In evaluating Maxim and its business, you should carefully consider the
following risk factors in addition to the other information contained herein.

         DEVELOPMENT-STAGE COMPANY; HISTORY OF OPERATING LOSSES; UNCERTAINTY 
OF FUTURE PROFITABILITY. Maxim, as a development-stage enterprise, has 
experienced net losses every year since its inception and, as of September 
30, 1998, had a deficit accumulated during the development stage of 
approximately $42.7 million. We have not commercially introduced any product 
and each of our product candidates are in varying stages of development and 
testing. We anticipate incurring substantial additional losses over at least 
the next several years due to the need to expend substantial amounts on 
clinical trials, other anticipated research and development activities, 
preparation for the potential market launch of MAXAMINE, and the general and 
administrative expenses associated with these activities. Attaining 
profitability will depend upon our ability to develop products that are 
effective and commercially viable, to obtain regulatory approval for the 
manufacture and sale of our products and to market our products successfully. 
We cannot guarantee that we will ever achieve profitability or that 
profitability, if achieved, can be sustained on an ongoing basis. See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations."

         NEED FOR ADDITIONAL FUNDS; UNCERTAINTY OF ADDITIONAL FUNDING. Our 
operations to date have consumed substantial amounts of cash. Negative cash 
flow from our operations is expected to continue and to accelerate over at 
least the next several years. Our capital requirements will depend on 
numerous factors, including:
       -    the results of our clinical trials;
       -    the timing and scope of any additional clinical trials undertaken;
       -    the scope and results of our research and development programs; 
       -    the time required to obtain regulatory approvals; 
       -    our ability to establish marketing alliances and collaborative 
            agreements; 
       -    the cost of our internal marketing activities; and 
       -    the cost of filing, prosecuting and, if necessary, enforcing patent 
            claims.

         We will likely have to raise substantial additional funds to 
complete development of our products and to bring these products to market. 
Issuance of additional equity securities by us, for these or other purposes, 
could result in dilution to then existing stockholders. Additional financing 
may not be available on acceptable terms, if at all. If adequate funds are 
not available on acceptable terms, we may be required to delay, scale back or 
eliminate one or more of our product development programs or obtain funds 
through arrangements with collaborative partners or others that may require 
us to relinquish rights to certain of our technologies or products that we 
would not otherwise relinquish, which may have a detrimental effect on our 
business, financial condition and results of operations. See "Management's 
Discussion and Analysis of Financial Condition and Results of Operations."

         NO ASSURANCE OF SUCCESSFUL CLINICAL TRIALS AND PRODUCT DEVELOPMENT. 
Potential products based on our MAXAMINE, MAXDERM and MAXVAX technologies 
will require extensive clinical testing, regulatory approval and substantial 
additional investment prior to commercialization. There can be no assurance 
that any such products will be successfully developed, prove to be safe and 
effective in clinical trials, meet applicable regulatory standards, be 
capable of being produced in commercial quantities at acceptable costs, be 
eligible for third party reimbursement from governmental or private insurers, 
be successfully marketed or achieve market acceptance. Additional research 
and development and preclinical work will be required before clinical trials 
can be initiated with the MAXVAX technology, and may be required before 
clinical trials of the MAXAMINE and MAXDERM technologies can be expanded.

         We have not completed testing for efficacy or safety in humans on 
any of our products. We may find, at any stage of the clinical testing 
process, that products that appeared promising in preclinical studies or 
Phase I and Phase II clinical trials do not demonstrate efficacy in 
larger-scale, Phase III clinical trials and do not receive regulatory 
approvals. Further, our products may prove to have undesirable or unintended 
side effects that may prevent or limit their commercial use. Accordingly, any 
product development program undertaken by us may be curtailed, redirected or 
eliminated at any time. There may be delays in our expected testing and 
development 

                                      17

<PAGE>

schedules, and any such delays could have a material adverse effect on our 
business, financial condition and results of operations.

         NO ASSURANCE OF REGULATORY APPROVAL; GOVERNMENT REGULATION. The U.S. 
Food and Drug Administration (the "FDA") and comparable agencies in countries 
outside the United States impose substantial requirements on the introduction 
of therapeutic pharmaceutical products and vaccines through lengthy and 
detailed laboratory and clinical testing procedures and other costly and time 
consuming procedures. Satisfaction of these requirements typically takes a 
number of years and varies substantially based upon the type, complexity and 
novelty of the pharmaceutical agent. In general, the FDA approval process for 
pharmaceuticals involves the submission of an Investigational New Drug 
("IND") application following preclinical studies, clinical trials in humans 
to demonstrate the safety and efficacy of the product under the protocols set 
forth in the IND and submission of preclinical and clinical data as well as 
other information to the FDA in a New Drug Application ("NDA") or Product 
License Application ("PLA"). We are expending substantial time and financial 
resources to conduct clinical trials, but there can be no assurance that the 
results of such trials will support the submission of an NDA or PLA, or that 
any such applications will be approved by the FDA or any comparable agencies 
on a timely basis, or at all.

         We cannot assure that we will have sufficient resources to complete 
the required regulatory review process, or that we could overcome the 
inability to obtain, or delays in obtaining, such approvals. The failure to 
receive FDA approval for our products under development would preclude us 
from marketing and selling our products in the United States. Therefore, 
failure to receive such FDA approval would prevent us from generating product 
revenues and would be extremely detrimental to our business, financial 
condition and results of operations. European and other international 
regulatory approvals are subject to the same risks and uncertainties as FDA 
and other regulatory approvals in the United States.

         The production and marketing of our proposed products, as well as 
our ongoing research and development activities, are also subject to 
regulation by governmental agencies of the United States and other countries. 
The effect of government regulation may be to delay marketing of our products 
for a considerable period of time, to impose costly procedures upon our 
activities and to furnish a competitive advantage to larger companies that 
compete with us. In addition, the marketing and manufacturing of 
pharmaceuticals are subject to continuing FDA (or comparable international 
agency) review and surveillance and failure to comply with regulations or 
discovery of previously unknown problems can result in FDA (or comparable 
international agency) action against the product or the manufacturer, 
including fines, recalls, product seizures and suspension or withdrawal of 
previously granted regulatory approvals. Furthermore, government regulation 
may increase at any time, creating additional costs and delays for us. The 
extent of potential adverse government regulation which might arise from 
future legislation or administrative action cannot be predicted. See 
"Business--Government Regulation."

         UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. Our success 
depends in large part on our ability to obtain, maintain and protect patents, 
protect trade secrets and operate without infringing upon the proprietary 
rights of others. The patent positions of biotechnology and pharmaceutical 
companies are highly uncertain and involve complex legal and factual 
questions, and the breadth of claims allowed in biotechnology and 
pharmaceutical patents cannot be predicted. Patents may not issue from any of 
our patent applications. Patent applications in the United States are 
maintained in secrecy until a patent issues, and we cannot be certain that 
others have not filed patent applications for technology covered by our 
pending applications or that we were the first to file patent applications 
for such technology. Competitors may have filed applications for, or may have 
received patents and may obtain additional patents and proprietary rights 
relating to, compounds or processes that block or compete without infringing 
on those held by Maxim. In addition, patents currently held by us or issued 
to us in the future, or to licensors from whom we have licensed technology 
rights, may be challenged, invalidated or circumvented and the rights granted 
thereunder may not protect our technologies or provide commercial advantage 
to us.

         Other public and private concerns, including universities, may have
filed applications for or have been issued patents with respect to technology
potentially useful or necessary to us. The scope and validity of such 

                                      18

<PAGE>

patents, the extent to which we may wish or need to acquire licenses under 
such patents, and the cost or availability of such licenses, are currently 
unknown.

         In addition to patents and proprietary rights, we rely on unpatented 
trade secrets and proprietary know-how, and there can be no assurance that 
others will not obtain access to or independently develop such trade secrets 
and know-how. Although potential corporate partners and our research partners 
and consultants are not given access to trade secrets and proprietary 
know-how of ours until they have executed confidentiality agreements, these 
agreements may be breached by the other party or may otherwise be of limited 
effectiveness or enforceability.

         The pharmaceutical industry has experienced extensive litigation 
regarding patent and other intellectual property rights. Accordingly, we 
could incur substantial costs in defending ourselves in suits that may be 
brought against us claiming infringement of the patent rights of others or in 
asserting our patent rights in a suit against another party. We may also be 
required to participate in interference proceedings declared by the United 
States Patent and Trademark Office for the purpose of determining the 
priority of inventions in connection with our patent applications or other 
parties' patent applications. Adverse determinations in litigation or 
interference proceedings could require us to seek licenses that may not be 
available on commercially reasonable terms or subject us to significant 
liabilities to third parties, and could therefore have a material adverse 
effect on us. See "Business--Patents, Licenses and Proprietary Rights."

         DEPENDENCE ON QUALIFIED PERSONNEL. Our future performance depends in 
part upon the continued contributions of our senior management team and on 
our ability to attract and retain qualified management and scientific 
personnel. Competition for such personnel is intense, and there can be no 
assurance that we will be able to continue to attract, assimilate or retain 
highly qualified technical and management personnel. The loss of key 
personnel or the failure to recruit additional personnel or to develop needed 
expertise could have a material adverse effect on our business, financial 
condition and results of operations. See "Business--Employees and 
Consultants."

         DEPENDENCE ON COLLABORATIVE PARTNERS. Our strategy for the clinical 
testing, manufacturing, international marketing and certain research and 
development activities related to our products requires arrangements with 
numerous collaborators. These collaborators include universities, hospitals 
and other clinical trial sites, clinical contract research organizations, 
contract manufacturers, other corporate and university collaborators, 
licensors, marketing partners, licensees, consultants and others. Our success 
is dependent upon the success of these outside parties in performing their 
responsibilities. Although we believe that these parties will have an 
economic motivation to perform their contractual responsibilities, the amount 
and timing of resources and skill applied to these activities by our 
collaborators may not be within our control. In addition, some collaborators 
may pursue alternative technologies as a means for developing treatments for 
the diseases targeted by these collaborative programs. Furthermore, we may 
not be able to negotiate acceptable collaborative arrangements required in 
the future to implement our strategies, and such collaborative arrangements 
may not be successful. See "Business--Product Development and Collaborative 
Relationships."

         NO MARKETING AND SALES CAPABILITIES; ANTICIPATED DEPENDENCE UPON 
MARKETING COLLABORATIONS. Our current strategy is to market MAXAMINE directly 
in the United States, but we currently do not possess pharmaceutical 
marketing or sales capabilities. In order to market and sell MAXAMINE or 
other products, we will need to develop a sales force and a marketing group 
with relevant pharmaceutical experience, or make appropriate arrangements 
with strategic partners. We cannot guarantee that we will be able to attract, 
assimilate or retain highly qualified marketing and sales personnel, or 
successfully employ them to commercialize MAXAMINE. The inability to develop 
the required marketing and sales expertise could have a material adverse 
effect on our business, financial condition and results of operations.

         Our strategy for the commercialization and marketing of MAXAMINE in
international markets, and for MaxVax in all markets, is expected to rely upon
the establishment of marketing and other collaborative relationships with
pharmaceutical industry partners. We cannot guarantee that any such
relationships can be consummated on terms favorable to us, that such marketing
collaborators will apply adequate resources and skills 

                                      19

<PAGE>

to their responsibilities, or that marketing efforts undertaken by such 
partners will be successful. See "Business--Marketing and Sales."

         NO ASSURANCE OF MARKET ACCEPTANCE. MAXAMINE, and any of our other 
products in development, may not achieve market acceptance even if approved 
by the FDA and other regulatory agencies. The degree of market acceptance of 
our products will depend upon a number of factors, including the scope of 
regulatory approvals, the establishment and demonstration in the medical 
community of the clinical efficacy and safety of our products and their 
potential advantages over existing treatment methods, and reimbursement 
policies of government and other third-party payors. We cannot guarantee that 
physicians, patients, payors or the medical community in general will accept 
and utilize any products that may be developed by us. See 
"Business--Competition" and --Third-Party Reimbursement."

         NO MANUFACTURING CAPABILITIES. We do not intend to acquire or 
establish our own dedicated manufacturing facilities for MAXAMINE in the 
foreseeable future, and have and expect to continue to contract with 
established pharmaceutical manufacturers for the production of the product. 
If we are unable to continue to contract for manufacturing capabilities on 
acceptable terms, our ability to conduct clinical testing and to produce 
commercial quantities of MAXAMINE and other products will be adversely 
affected. Such manufacturing deficiencies could result in delays in 
submissions for regulatory approval and in commercial product launches, which 
in turn could materially impair our competitive position and the possibility 
of achieving profitability. We cannot guarangee that we will be able to 
maintain our existing contract manufacturing relationships, or acquire or 
establish new, satisfactory third-party relationships to provide adequate 
manufacturing capabilities. See "Business--Manufacturing."

         COMPETITION. There are many companies, both publicly and privately 
held, including well-known pharmaceutical companies, and academic and other 
research institutions, engaged in developing pharmaceutical and 
biologically-derived products for the treatment of cancer and vaccines and 
therapeutics for the prevention or the treatment of infectious diseases. Many 
of our competitors and potential competitors have substantially greater 
capital, research and development capabilities and human resources than us 
and represent significant competition. Many of these competitors also have 
significantly greater experience than us in undertaking preclinical testing 
and clinical trials of new pharmaceutical products and obtaining FDA and 
other regulatory approvals. Additional mergers and acquisitions in the 
pharmaceutical industry may result in even more resources being concentrated 
with our competitors. If any of our products are approved for commercial 
sale, we will also be competing with companies that have greater resources 
and experience in the manufacturing, marketing and sales of pharmaceutical 
products. Our competitors may succeed in developing products that are more 
effective, less costly, or have better side effect profiles than any that may 
be developed by us, and such competitors may also prove to be more successful 
than us in manufacturing, marketing and sales. See "Business--Competition."

         TECHNOLOGICAL CHANGES AND UNCERTAINTY. We are engaged in the 
pharmaceutical field, which is characterized by extensive research efforts 
and rapid technological progress. New developments in oncology, cancer 
therapy, medicinal pharmacology, biochemistry and other fields are expected 
to continue at a rapid pace in both industry and academia. Research and 
discoveries by others may render some or all of our proposed programs or 
products noncompetitive or obsolete. Our business strategy is subject to the 
risks inherent in the development of new products using new technologies and 
approaches. Unforeseen problems may develop with these technologies or 
applications, and we may not be able to successfully address technological 
challenges we encounter in our research and development programs to the 
extent required to develop commercially feasible products. See 
"Business--Competition."

         PRODUCT LIABILITY EXPOSURE AND INSURANCE. Our business exposes us to 
potential product liability risks which are inherent in the clinical testing, 
manufacturing and marketing of human therapeutic products. We currently 
maintain product liability insurance coverage for our clinical trials, and 
intend to expand our insurance coverage to include the sales of commercial 
products if marketing approval is obtained for MAXAMINE or other products 
under development. Such coverage may not be adequate now or in the future, 
and adequate insurance may not be available in the future at an acceptable 
cost, if at all. A product liability claim, even if we have insurance 
coverage, could materially adversely affect our business or financial 
condition.

                                      20

<PAGE>

         POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE; PRICE 
VOLATILITY OF THE COMMON STOCK. Our common stock currently trades on the 
American Stock Exchange and on the Stockholm Stock Exchange. Historically, 
our common stock has generally experienced relatively low daily trading 
volumes in relation to the aggregate number of shares outstanding. Sales of 
substantial amounts of our common stock in the public market could adversely 
affect the prevailing market prices for our common stock and our ability to 
raise equity capital in the future.

         Factors that may have a significant impact on the market price or 
the liquidity of the common stock also include:
       -     Actual or potential  clinical  trial results  relating to products
             under  development  by us or our competitors;
       -     Delays in our testing and development schedules,;
       -     Events or announcements relating to our collaborative relationships
             with others; 
       -     Announcements of technological innovations or new products by us or
             our competitors; 
       -     Developments or disputes concerning patents or proprietary rights; 
       -     Regulatory developments in both the United States and countries 
             outside of the United States;
       -     Economic and other external factors, as well as period-to-period
             fluctuations in our financial results.

         External factors may also adversely affect the market prices for our 
common stock. The price and liquidity of our common stock may be 
significantly affected by the overall trading activity and market factors on 
the AMEX and SSE, and these factors may differ between the two markets. In 
addition, the securities markets have from time to time experienced 
significant price and volume fluctuations that may be unrelated to the 
operating performance of particular companies. The market prices of the 
common stock of many publicly traded pharmaceutical or biotechnology 
companies have in the past been, and can in the future be expected to be, 
especially volatile.

                                      21

<PAGE>

ITEM 2.  PROPERTIES

         We currently lease approximately 35,000 square feet of laboratory 
and office space in two facilities in San Diego, California. Approximately 
5,000 square feet of laboratory space is subleased to a third party. We 
believe that our existing facilities will be adequate to accommodate the 
implementation of our current business strategies.

ITEM 3.  LEGAL PROCEEDINGS

         None


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
quarter ended September 30, 1998.

                                      22

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS

         (a) The information required by this Item 5(a) is incorporated herein
by reference to the information set forth on page 34 of our Annual Report to
Stockholders for the fiscal year ended September 30, 1998, filed as Exhibit 13.1
hereto.

In addition, in August and September 1998, the Company issued 10,769 and 16,666
shares of Common Stock, respectively, upon exercise of warrants at a price per
share of $3.00. The Company issued such shares in reliance upon the exemption
provided by Section 4(2) of the Securities Act of 1933.

         (b) During the fiscal year ended September 30, 1998, 392,000 of the
2,875,000 Redeemable Warrants issued in the Company's initial public offering
were exercised for 392,000 shares of Common Stock at an exercise price of $10.50
per share, for aggregate proceeds to the Company of $4,116,000.

Of the net offering proceeds to the Company of $22,336,000, including
$18,220,000 received at the time of the initial public offering and $4,116,000
received upon subsequent exercises of the Redeemable Warrants, through September
30, 1998, the following payments have been made:

<TABLE>
<CAPTION>
                                                  (A)                (B)
<S>                                           <C>             <C>
Purchase and installation of
machinery and equipment                                        1,101,000

Repayment of indebtedness                     289,000            795,000

Interest earning bonds and securities                          1,017,000

R&D expenses                                                  14,983,000

Business development expenses                                    977,000

G&A expenses                                                   2,637,000

Intellectual property                                            537,000
</TABLE>

(A) Direct or indirect payments to directors, officers, general partners of the
    issuer or their associates; to persons owning ten percent or more of any
    class of equity securities of the issuer; and to affiliates of the issuer.
(B) Direct or indirect payments to others.


ITEM 6.  SELECTED FINANCIAL DATA

         The information required by this Item 6 is incorporated herein by 
reference to the information set forth on page 35 of our Annual Report to 
Stockholders for the fiscal year ended September 30, 1998, filed as Exhibit 
13.1 hereto.

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

         The information required by this Item 7 is incorporated herein by
reference to the information contained under the caption "Management's
Discussion and Analysis" on pages 17-20 of our Annual Report to Stockholders for
the fiscal year ended, September 30, 1998, filed as Exhibit 13.1 hereto.

ITEM 7A   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      We invest our excess cash in interest-bearing investment-grade 
securities that we hold for the duration of the term of the respective 
instrument. We do not utilize derivative financial instruments, derivative 
commodity instruments or other market risk sensitive instruments, positions 
or transactions in any material fashion. Accordingly, we believe that, while 
the investment-grade securities we hold are subject to changes in the 
financial standing of the issuer of such securities, we are not subject to 
any material risks arising from changes in interest rates, foreign currency 
exchange rates, commodity prices, equity prices or other market changes that 
affect market risk sensitive instruments.

                                      23

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this Item 8 is incorporated herein by 
reference to the information set forth on pages 21-36 of our Annual Report to 
Stockholders for the fiscal year ended September 30, 1998, filed as Exhibit 
13.1 hereto.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURES

         None.

                                      24

<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information concerning directors and executive officers is 
incorporated herein by reference to the information under the captions 
"Election of Directors" and "Other Information - Executive Officers" set 
forth in our definitive Proxy Statement to be filed with the Securities and 
Exchange Commission within 120 days after September 30, 1998, for our Annual 
Meeting of Stockholders to be held on February 19, 1999. 

         Information concerning compliance with Section 16(a) of the Exchange 
Act is incorporated herein by reference to the information included under the 
caption "Section 16(a) Beneficial Ownership Reporting Compliance" set forth 
in our definitive Proxy Statement to be filed with the Securities and 
Exchange Commission within 120 days after September 30, 1998, for our Annual 
Meeting of Stockholders to be held on February 19, 1999.

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this Item 11 is incorporated herein by 
reference to the information under the caption "Executive Compensation" set 
forth in our definitive Proxy Statement to be filed with the Securities and 
Exchange Commission within 120 days after September 30, 1998, for our Annual 
Meeting of Stockholders to be held on February 19, 1999.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item 12 is incorporated herein by 
reference to the information under the caption "Security Ownership of Certain 
Beneficial Owners and Management" in our definitive Proxy Statement to be 
filed with the Securities and Exchange Commission within 120 days after 
September 30, 1998, for our Annual Meeting of Stockholders to be held on 
February 19, 1999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item 13 is incorporated herein by
reference to the information under the caption "Certain Transactions" in our
definitive Proxy Statement to be filed with the Securities and Exchange
Commission within 120 days after September 30, 1998, for our Annual Meeting of
Stockholders to be held on February 19, 1999.

                                      25

<PAGE>

                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

         (a)      The following documents are filed as part of this Annual 
                  Report:

                  1.      Financial Statements

                  The following financial statements, including the Notes
                  thereto, are incorporated herein by reference from pages 21-36
                  of our Annual Report to Stockholders for the fiscal year ended
                  September 30, 1998 filed as Exhibit 13.1 hereto:

                  Balance Sheets as of September 30, 1998 and 1997

                  Statements of Operations for the years ended September 30,
                  1998, 1997, and 1996, and from October 23, 1989 (date of
                  inception) to September 30, 1998

                  Statements of Stockholders' Equity from October 23, 1989 (date
                  of inception) through September 30, 1998

                  Statements of Cash Flows for the years ended September 30,
                  1998, 1997, and 1996, and from October 23, 1989 (date of
                  inception) to September 30, 1998


                  2.      Financial Statement Schedules

                  All schedules have been omitted since the required information
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or notes thereto.

                  3.      Exhibits

                  See list of Exhibits set forth in paragraph (c) below.

                  The following management contracts or compensatory plans and
                  arrangements are required to be filed as exhibits to this
                  Annual Report pursuant to Item 14(c).

                  10.15   Employment Agreement dated October 1, 1998 between the
                          Registrant and Kurt R. Gehlsen.
                  10.16   Employment Agreement dated October 1, 1998 between the
                          Registrant and Dale A. Sander.
                  10.17   Employment Agreement dated November 9, 1998 between 
                          the Registrant and Larry G. Stambaugh.
                  10.23   Employment  Agreement  dated  October 1, 1998  between
                          the Registrant and Geoffrey B. Altman.

         (b)      The Company filed no reports on Form 8-K during the fourth 
quarter of the fiscal year ended September 30, 1998.

                                      26

<PAGE>

         (c)       Exhibits
<TABLE>
<CAPTION>
Exhibit No.                Description
-----------                -----------
<S>      <C>
3.1      Amended and Restated Certificate of Incorporation of Registrant. (1)

3.2      Bylaws of Registrant. (1)

4.1      Reference is made to Exhibits 3.1 and 3.2.

4.2      Form of Common Stock Certificate. (1)

10.1     Form of Indemnification Agreement for directors and officers of the 
         Registrant. (1)

10.2     Form of Representative's Warrant Agreement between the Company and
         National Securities Corporation, as representative of the several
         Underwriters (the "Representative"), including form of Representative's
         Warrant Certificate. (1)

10.3     Form of Warrant Agreement between the Company, the Representative and
         American Stock Transfer & Trust Company, including form of Warrant
         Certificate. (1)

10.4     Option to Buy Technology and Rights Agreement, dated March 30, 1993,
         between the Registrant and Estero Anstalt. (1)(2)

10.5     Security Agreement, dated July 27, 1993, between the Registrant and
         Estero Anstalt. (1)(2)

10.6     Exclusive License Agreement, dated June 14, 1995, among the
         Registrant, Jan Holmgren, M.D., Ph.D., Cecil Czerkinsky, Duotol AB and
         Triotol Ltd. (1)(2)

10.7     Option and License Agreement, dated May 19, 1993, among the
         Registrant, Vitec AB and SBL Vaccin AB, as amended. (1)(2)

10.8     License Agreement dated January 14, 1994, among the Registrant, Vitec
         AB and SBL Vaccin, AB, as amended. (1)(2)

10.9     Agreement, dated December 2, 1995, among the Registrant, Syntello
         Vaccine Development AB and Estero Anstalt. (1)(2)

10.10    Agreement, dated April 23, 1996, among the Registrant, Anders Vahlne,
         M.D., Ph.D. and Syntello Vaccine Development AB. (1)(2)

10.11    Letter Agreement, dated February 15, 1996, between the Registrant and
         Burrill & Craves, Inc.(1)

10.12    Lease dated November 1, 1996 between DM Spectrum LLC, a California
         limited liability company, as Landlord and the Registrant for 3099
         Science Park Road, Suite 150, San Diego, California 92121. (3)

10.13    Stock Purchase Agreement, dated as of July 5, 1996, by and between 
         Dr. Anders Vahlne and the Registrant. (1)

10.14    Amended and Restated 1993 Long-Term Incentive Plan and forms of stock 
         option agreements. (4)

10.15    Employment Agreement dated October 1, 1998 between the Registrant and 
         Kurt R. Gehlsen.

10.16    Employment Agreement dated October 1, 1998 between the Registrant and 
         Dale A. Sander.
</TABLE>


                                      27

<PAGE>

<TABLE>

<S>      <C>
10.17    Employment Agreement dated November 9, 1998 between the Registrant and 
         Larry G. Stambaugh.

10.18    Loan and Security Agreement between the Registrant and Silicon Valley 
         Bank. (5)

10.19    Financial Advisory Services Agreement between the Registrant and Rodman
         & Renshaw, Inc. dated September 17, 1997. (6)

10.20    Lease dated January 13, 1998 between British Pacific Properties 
         Corporation, a California Corporation, as Landlord, and the Registrant.
         (7)

10.21    Amendment to Loan and Security Agreement dated March 6, 1998 between 
         the Registrant and Silicon Valley Bank. (8)

10.22    Lease dated July 2, 1998 between British Pacific Properties Corporation, 
         a California Corporation, as Landlord, and the Registrant. (9)

10.23    Employment Agreement dated October 1, 1998 between the Registrant and Geoffrey B. Altman.

10.24    Amendment to Loan and Security Agreement dated September 1, 1998 
         between the Registrant and Silicon Valley Bank

11.1     Statement re: computation of pro forma loss per share.

13.1     Registrant's Annual Report to Stockholders for the fiscal year ended
         September 30, 1998.

23.1     Consent of KPMG Peat Marwick LLP, Independent Auditors.

24.1     Power of Attorney. Reference is made to page 30.

27       Financial Data Schedule.

99       Independent Auditors' Report.
</TABLE>
-------

(1)  Previously filed together with the Registrant's Registration Statement on
     Form SB-2 (File No. 333-4854-LA) or amendments thereto and incorporated
     herein by reference.

(2)  Certain confidential portions deleted pursuant to Order Granting
     Application Under the Securities Act of 1933 and Rule 406 thereunder
     respecting confidential treatment.

(3)  Previously filed together with the Registrant's Annual Report on Form 10-K
     (File No. 1-4430) dated September 30, 1996 and incorporated herein by
     reference.

(4)  Previously filed together with the Registrant's Quarterly Report on Form
     10-Q (File No. 1-4430) dated December 31, 1996 and incorporated herein by
     reference.

(5)  Previously filed together with the Registrant's Quarterly Report on Form
     10-Q (File No. 1-4430) dated March 31, 1997 and incorporated herein by
     reference.

(6)  Previously filed together with the Registrant's Registration Statement on
     Form S-1 (File No. 333-35895) dated September 18, 1997 and incorporated
     herein by reference.

                                      28

<PAGE>

(7)  Previously filed together with the Registrant's Quarterly Report on Form
     10-Q (File No. 1-4430) dated December 31, 1997 and incorporated herein by
     reference.

(8)  Previously filed together with the Registrant's Quarterly Report on Form
     10-Q (File No. 1-4430) dated March 31, 1998 and incorporated herein by
     reference.

(9)  Previously filed together with the Registrant's Quarterly Report on Form
     10-Q (File No. 1-4430) dated June 30, 1998 and incorporated herein by
     reference.

                                      29

<PAGE>

                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) 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.
                                              MAXIM PHARMACEUTICALS, INC.

                                              By:  /s/ DALE A. SANDER
                                                  --------------------
                                              Dale A. Sander,
                                              Vice President, Finance
                                              and Chief Financial Officer

                                              Date:  December 29, 1998

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature 
appears below constitutes and appoints Larry G. Stambaugh and Dale A. Sander, 
and each of them, as his true and lawful attorneys-in-fact and agents, with 
full power of substitution and resubstitution, for him and in his name, place 
and stead, in any and all capacities, to sign any and all amendments to this 
Report, and to file the same, with all exhibits thereto, and other documents 
in connection therewith, with the Securities and Exchange Commission, 
granting unto said attorneys-in-fact and agents, and each of them, full power 
and authority to do and perform each and every act and thing requisite and 
necessary to be done in connection therewith, as fully to all intents and 
purposes as he might or could do in person, hereby ratifying and confirming 
that all said attorneys-in-fact and agents, or any of them or their or his 
substitute or substituted, may lawfully do or cause to be done by virtue 
hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below, by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

Signature                                            Title                                   Date
---------                                            -----                                   ----
<S>                                         <C>                                       <C>
/S/ LARRY G. STAMBAUGH                      Chairman of the Board                     December 29, 1998
----------------------                      Director, President and      
Larry G. Stambaugh                          Chief Executive Officer      
                                            (Principal Executive Officer)
                                            

/S/ DALE A. SANDER                          Vice President, Finance, and              December 29, 1998
-----------------------------------         Chief Financial Officer           
Dale A. Sander                              (Principal Accounting Officer and 
                                            Principal Financial Officer)      

/S/ COLIN B. BIER                           Director                                  December 29, 1998
-----------------------------------
Colin B. Bier, Ph.D.

/S/ PER-OLOF MARTENSSON                     Director                                  December 29, 1998
-----------------------------------
Per-Olof Martensson

/S/ F. DUWAINE TOWNSEN                      Director                                  December 29, 1998
-----------------------------------
F. Duwaine Townsen
</TABLE>

                                      30