<PAGE>
 
                                                            Exhibit 10.38
                                                            -------------


                           EMPLOYEE LEASING AGREEMENT

          THIS EMPLOYEE LEASING AGREEMENT is made as of the 26th day of
September, 1996, by and between Somerset Central Corporation, a New Jersey
corporation, P.O. Box 157, Skillman, New Jersey 08558 ("SCC"), and CYTOGEN
CORPORATION, a Delaware corporation, 600 College Road East, Princeton, NJ 08540
("CYTOGEN").

                                   BACKGROUND
                                   ----------

          1.   SCC is, among other things, an employee leasing company engaged
in the business of providing personnel to provide services to its customers.

          2.   CYTOGEN is a biopharmaceutical company engaged in the marketing
and development of products for the delivery of diagnostic and therapeutic
substances directly to the sites of disease.

          3.   CYTOGEN desires to retain SCC, and SCC desires to be retained by
CYTOGEN, for the purposes of providing services to CYTOGEN and to CYTOGEN'S
wholly-owned subsidiary, AxCell Biosciences Corporation.

          4.   SCC has personnel who have expertise in the areas of service
required by CYTOGEN and SCC is willing to provide such services.


          NOW THEREFORE, intending to be legally bound, and in consideration of
the mutual promises set forth herein, CYTOGEN and SCC hereby agree as follows:


                                  1.  SERVICES
                                      --------

          SCC will lease its employee identified in Exhibit A annexed hereto to
perform services for CYTOGEN in the positions described in Exhibit A.  The
positions, duties and responsibilities described in Exhibit A may not be changed
or altered in any material respect without the written agreement of SCC and
CYTOGEN.  CYTOGEN shall have the ability to appoint an SCC employee whose
services are made available under this Agreement as an officer of CYTOGEN.
<PAGE>
 
                             2.  TERM OF AGREEMENT
                                 -----------------

          This Agreement shall become effective on the day and year first above
written and shall continue indefinitely unless sooner terminated under Paragraph
3 of this Agreement.

                          3.  TERMINATION & AMENDMENT
                              -----------------------

          SCC may, for any reason, terminate this Agreement upon 30 days'
written notice.  CYTOGEN may, for any reason, terminate this Agreement upon one
year's written notice.  In the event that (i) the employee of SCC whose services
have been provided to CYTOGEN pursuant to this Agreement, (a) refuses or fails
to perform and discharge his duties and responsibilities to CYTOGEN in
accordance with the terms of this Agreement, (b) is convicted of a felony, or
(c) is convicted of any other crime involving the personal dishonesty or moral
turpitude, or (ii) SCC breaches a material provision of this Agreement, CYTOGEN
may terminate the Agreement immediately and without any notice period.

                           4.  PAYMENT FOR SERVICES
                               --------------------

          CYTOGEN hereby agrees to pay the compensation listed in Exhibit B
annexed hereto for the services of the employees that SCC provides to CYTOGEN.
CYTOGEN shall have the exclusive ability to adjust annually the amounts payable
to SCC based upon the prior year's performance of the employees that SCC has
provided to CYTOGEN, provided, however, that the compensation may not be reduced
without the written consent of SCC.  In addition, CYTOGEN shall have the
exclusive ability to make bonus payments to SCC based upon the prior year's
performance of the SCC employees providing services to CYTOGEN in a manner
similar to the bonus payments that CYTOGEN makes to its employees.  No SCC
employee shall participate in any employee benefit plan that CYTOGEN maintains
for its employees.  CYTOGEN shall promptly reimburse SCC for costs and expenses
incurred by its employees on behalf of CYTOGEN in a manner consistent with the
reimbursement policies and procedures in effect for CYTOGEN employees.

                         5.  SCC'S SERVICE OBLIGATIONS
                             -------------------------

          SCC's service obligation hereunder is to provide employees who will
perform the services associated with the position described in Exhibit A annexed
hereto in a timely and effective manner and in accordance with CYTOGEN's written
policies and procedures.

                                      -2-
<PAGE>
 
          SCC shall assign to CYTOGEN the exclusive ability to designate the
general manner in which SCC's employees shall provide the work or services to
CYTOGEN under this Agreement, and CYTOGEN will control and direct the details,
manner or means by which SCC's employees conduct any work or services provided
hereunder.

                       6.  RESPONSIBILITY FOR PERSONNEL
                           ----------------------------

          All personnel used by SCC will be employees of SCC and will not be
considered employees or subcontractors of CYTOGEN for any purpose.  SCC assumes
full responsibility for the actions of all such personnel while performing
services under this Agreement and for the payment of their compensation,
including, withholding of income taxes, and the payment and withholding of
social security and other payroll taxes, worker's compensation, disability
benefits and the like, to the extent applicable to the personnel involved.

          Both SCC and CYTOGEN agree to comply with all applicable labor and
employment laws, including, without limitation, all federal, state and local
laws and regulations relating to equal employment opportunities.  Neither SCC
nor CYTOGEN shall discriminate on the basis of race, color, national origin,
religion, age, sex, disability or any other classification protected by
applicable law.

          Work and services by employees provided by SCC hereunder shall be
performed at the premises of CYTOGEN.  Such premises shall be maintained at the
sole cost and expense of CYTOGEN.  CYTOGEN agrees to comply with all applicable
federal, state and local laws and regulations regarding proper use, health,
safety, and accessibility of such premises, including, without limitation, the
Occupational Health and Safety Act, as amended, and the Americans With
Disabilities Act, all successor statutes thereto and all regulations promulgated
thereunder.

          CYTOGEN is solely responsible for maintaining a safe work place and
for complying with all laws governing its premises and activities carried out on
such premises.

                   7.  RIGHT TO PERFORM SERVICES FOR OTHERS
                       ------------------------------------

          SCC retains the right to contract to perform services (not involving
use of CYTOGEN's processes) for others, including competitors of CYTOGEN.
During the term of this Agreement, SCC shall give CYTOGEN prior written notice
of any services that SCC desires to perform for others to ensure that there will
not be any conflicts of interest inherent in performing services for others.

                                      -3-
<PAGE>
 
                         8.  CONFIDENTIAL INFORMATION
                             ------------------------

          8.1  Definition.  As used in this Agreement, the term "confidential 
               ----------                             
information" shall mean

               (i)    information relating to the products, product development
                      activities, research, technical and/or scientific know-
                      how, plans, projects, processes or manner of operations;

               (ii)   methods of selling, pricing and business operations in
                      general as well as specific;

               (iii)  the identity of customers, and any information in any form
                      relating to such customers and their relationships or
                      dealings with the Company or any subsidiary or affiliate
                      thereof; and

               (iv)   any trade secret or confidential information of or
                      concerning any customers, affiliates or business
                      relations.

          8.2  Non-Disclosure.  Except as otherwise provided herein, SCC shall
               --------------                                                 
keep confidential information confidential, shall exercise reasonable
precautions to protect and preserve the confidentiality of such information
disclosed by CYTOGEN with no less care than SCC treats its own confidential
information, shall not disclose or otherwise make available confidential
information or any part thereof to any person, firm, corporation or other
entity, and shall not use confidential information for any purpose not directly
related to performance of services under this Agreement.

          8.3  Exceptions.  The confidentiality obligations of this Agreement
               ----------                                                    
shall not apply to information including, without limitation, information which
SCC shall be able to demonstrate (i) was in the public domain at the time of
receipt from CYTOGEN, (ii) was in SCC's possession prior to receipt from
CYTOGEN, (iii) shall have become part of the public domain through no fault of
SCC, (iv) was lawfully received by SCC from a third party not prohibited from
disclosing it to SCC, (v) shall be required to be disclosed in a judicial or
administrative proceeding after legal remedies for maintaining confidential
information in confidence shall have been exhausted; notice of any such
proceeding to be given to CYTOGEN promptly by SCC.

          8.4  Survival.  The confidentiality obligations of this Agreement
               --------                                                    
shall expire three years after the date of receipt of confidential information
by SCC from CYTOGEN.

                                      -4-
<PAGE>
 
          8.5  Remedies for Breach.  SCC and CYTOGEN agree that the remedies at
               -------------------                                             
law for breach of the foregoing covenants may be inadequate and that CYTOGEN may
be entitled to injunctive or to such other equitable relief as a court may deem
appropriate for any breach of such covenants.  If such covenants are at any time
adjudged invalid to any extent by any court of competent jurisdiction, such
covenants shall be deemed modified to the extent necessary to render all or any
of them enforceable.

                            9.  PROPERTY OWNERSHIP
                                ------------------

          All materials and documents of every kind and description supplied to
CYTOGEN by SCC or prepared or developed by SCC pursuant to this Agreement shall
be the sole and exclusive property of CYTOGEN, and CYTOGEN shall have the right
to make whatever use it deems desirable of any such materials and documents.

                            10. SCC'S RISK OF LOSS
                                ------------------
                                        
          Nothing in this Agreement shall be construed as guaranteeing to SCC
any net profit from the conduct of SCC's business.  SCC alone shall bear the
risk of any loss incurred in the conduct of SCC's business.

                  11.  NO ASSIGNMENT OR TRANSFER OF AGREEMENT
                       --------------------------------------

          SCC may not assign or transfer this Agreement.

                      12.  INDEMNIFICATION AND REMEDIES
                           ---------------------------- 

          12.1  Taxes.  SCC shall be responsible for all employment matters
                -----                                                      
relating to payment of federal and state employment taxes.  SCC shall provide to
CYTOGEN a letter from SCC's tax preparer regarding the status of taxes due and
payable by SCC under federal and state tax laws as of the date of this Agreement
and as of the dates of the subsequent anniversary dates of this Agreement.  If a
final determination is made that results in CYTOGEN paying taxes, interest or
penalties arising from any payments or benefits provided to SCC under this
Agreement, SCC shall indemnify CYTOGEN for any such taxes, interest and
penalties.

          12.2  Limitation on Liability.  CYTOGEN expressly acknowledges and
                -----------------------                                     
agrees that SCC shall not be liable to CYTOGEN for any losses, liabilities,
damages, injuries, claims, demands, costs and expenses (including without
limitation, attorneys' fees and disbursements) of whatever nature, directly or
indirectly resulting from or relating to any act, error or omission of any
employee leased to CYTOGEN under this Agreement,

                                      -5-
<PAGE>
 
including without limitation, any loss of CYTOGEN'S business goodwill, profits
or any other consequential, special  or incidental damages, and CYTOGEN agrees
not to assert any claims against SCC for any such matters with respect to any
employee leased hereunder.

                                13.  INSURANCE
                                     ---------

          While this Agreement is in effect, SCC will maintain adequate and
appropriate insurance for its personnel and as may otherwise be prescribed by
the law of the state in which the work is performed.  CYTOGEN will maintain at
all times the following policies of insurance:  general liability, including,
but not limited to personal injury, premises, operations and contractual
liability; officers and directors liability coverage; automobile liability, to
the extent any SCC employee leased hereunder shall operate a vehicle in
connection with any services to be rendered to CYTOGEN; and product liability
insurance.

                      14.  INDEPENDENT CONTRACTOR STATUS
                           -----------------------------

          SCC's relationship with CYTOGEN under this Agreement shall be that of
an independent contractor, and nothing in this Agreement or the arrangements for
which it is made shall constitute SCC or anyone furnished or used by SCC in the
performance of the services contemplated by this Agreement as an employee, joint
venturer, partner, or servant of CYTOGEN.

                      15.  WARRANTIES AND REPRESENTATIONS
                           ------------------------------

          SCC warrants and represents to CYTOGEN that SCC's personnel has the
capability to fulfill in an expert, professional manner the services which will
be performed under this Agreement.

                                 16.  NOTICES
                                      -------

          Any notices which either party may be required or shall desire to give
hereunder shall be deemed to be duly given when delivered personally or mailed
by certified or registered mail, postage prepaid, to the party to whom notice is
to be given at the address first given above or such other address or addresses
of which such party shall have given written notice.

                                      -6-
<PAGE>
 
                               17.  SEVERABILITY
                                    ------------

          If any provision hereof shall be determined to be invalid or
unenforceable, the validity and effect of the other provisions of this Agreement
shall not be affected thereby.

                     18.  ENTIRE AGREEMENT; MODIFICATIONS
                          -------------------------------

          This Agreement encompasses the entire agreement of the parties and
there are no other agreements or understandings, either written or oral.  This
Agreement may not be modified or amended except in writing, and then, only by
the mutual agreement of CYTOGEN and SCC.

                                      -7-
<PAGE>
 
          IN WITNESS WHEREOF, the parties hereto have caused this Employee
Leasing Agreement to be executed and their seals hereunto affixed and attested
as of the date first written above.


                                    SOMERSET CENTRAL CORPORATION



                                    By:  /s/ T.J. Madison
                                         ------------------------------------



                                    CYTOGEN CORPORATION



                                    By:  /s/ Thomas J. McKearn
                                         ------------------------------------

                                      -8-
<PAGE>
 
                                   Exhibit A

                                JOB DESCRIPTION

IDENTIFIED EMPLOYEE OF SCC:  T. Jerome Madison
--------------------------                    

TITLE:         Vice President, Finance & Administration/CFO

DIVISION:      Administration/Corporate

REPORTS TO:    Chairman, President & CEO

JOB SUMMARY:
----------- 

Under the direction and supervision of the CEO, directs all Finance, Insurance,
Human Resources and MIS activities.  Raises working and growth capital.  Manages
use of capital.  Responsible for developing strategic alliances and creating an
optimal business structure, including spin outs, joint ventures and other forms
of business organizations for achieving the Company's overall strategic goals.

ESSENTIAL FUNCTIONS:
------------------- 

1.   At the direction and supervision of the CEO, participates in deciding
     company strategy and direction.

2.   Directs the Department of the Corporate Controller in providing and
     directing procedures and systems necessary to assure the integrity and
     completeness of all business transactions, including issuance of periodic
     financial statements and operating recommendations.

3.   Directs Human Resources in the planning, development, implementation and
     administration of all human resources programs and policies which are
     consistent with the corporate strategic plan.

4.   Appraises the corporation's financial position, and raises capital as
     necessary and appropriate.

5.   Directs the development of corporate budgets including budget revision
     procedures.

6.   Directs and analyzes studies of general economic, business and financial
     conditions and their impact on the corporation's policies and operations.

                                      -9-
<PAGE>
 
7.   Evaluates the financial viability of all alliances and business ventures.

8.   Directs merger, acquisition, joint venture and similar activities.

9.   Serves as CEO of AxCell Biosciences Corporation and may be elected Chairman
     of the Board of AxCell and an officer of CYTOGEN Corporation.

ALLOCATION OF TIME:  60% of time devoted to items 1 - 8; 40% of time devoted to
------------------                                                             
item 9.

                                      -10-
<PAGE>
 
                                  Exhibit B  
 
<TABLE>
 
================================================================================
 <S>                         <C> 
 Basic Services              $193,250 per annum ($16,014 per month)
--------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------
 Bonus payments              Performance payments to be made at discretion of
                             the Board of Directors of Cytogen
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 Stock Grants                10,000 shares of CYTOGEN common stock shall be
                             issued and sold to SCC, or, at the written
                             direction of SCC, to its employee who provides
                             services hereunder or such employee's pension or
                             benefit fund (i) upon execution of the Agreement
                             and (ii) upon each of the next two anniversary
                             dates of the Agreement at a purchase price of $.01
                             per share or $100.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 Stock Options               Discretionary grants of non-qualified options for
                             CYTOGEN common stock as may be approved by
                             CYTOGEN's Board of Directors from time to time.
                             Subject to the approval of the Board of Directors
                             of AxCell Biosciences Corporation, an initial grant
                             of 40,000 non-qualified options for AxCell
                             Biosciences Corporation common stock; additional
                             discretionary grants of non-qualified options for
                             AxCell common stock as may be approved by AxCell's
                             Board of Directors from time to time. Option shall
                             be granted to SCC or, at its written direction, to
                             its employee who provides services hereunder, or
                             such employee's pension or benefit fund.
================================================================================
</TABLE>

                                      -11-