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                                                                   EXHIBIT 10.53

                             TREGA BIOSCIENCES, INC.

                        EXEMPT EMPLOYEE LETTER AGREEMENT

Lawrence D. Muschek, PhD
Muthesiusweg 47
D-30559 Hannover
GERMANY


Dear Larry:

         This letter sets forth the basic terms and conditions of your
employment with Trega Biosciences, Inc. ("Trega") effective October 6, 1997
("Effective Date"). By signing this letter, you will be agreeing to these terms.
It is important that you understand clearly both what your benefits are and what
is expected of you by Trega.


         1. Salary. You will be paid an annual base salary of $250,000 ("Base
Salary"), less regular payroll deductions, (payable as $10,416.67 semi-monthly),
which compensates you for all hours worked. Generally, your salary will be
reviewed annually but Trega reserves the right to change your compensation from
time to time on reasonable notice.

         2. Term of Employment. Trega agrees to employ you for a period of two
(2) years (the "Term of Employment") commencing on the effective date of this
agreement unless terminated sooner as provided in paragraph 14 below.

         3. Eligibility for Bonus. You will be eligible for a bonus compensation
award of up to sixty percent (60%) of your annual Base Salary contingent upon
the Board of Directors' assessment of your annual performance, achievement of
business development objectives, achievement of pre-agreed targets in stock
price performance and other factors that are jointly determined. These bonus
criteria are set forth in greater detail in Attachment A. To be eligible for a
bonus you must perform at a level acceptable to the Board of Directors and be on
the Trega payroll when the bonus is paid. No pro-rata payment will be made if
you are not employed by Trega when the bonus is paid.

         4. Incentive Stock Options. You will be eligible to receive 86,486
Incentive Stock Options. The options will be issued pursuant and subject to the
Trega 1996 Stock Incentive Plan ("Plan") a copy of which is attached here to as
Attachment B. The above-referenced shares shall vest according to the Plan, and
shall become fully vested in the event of a "Change in Control" as defined in
the Plan. You will also be eligible to receive 113,514 shares nonqualifying
stock options. You may be eligible for additional stock option grants at the
discretion of the Board of Directors and its Compensation Committee.

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         5. Duties. Your job title will be President of Research and
Development. Your duties generally will include responsibility for all
activities relating to combinatorial chemistry, combinatorial biology,
biological screening and pre-clinical and clinical development. You will work
closely with the Board of Directors, the management team and the Scientific
Advisory Board in the development and implementation of the strategic and
technical planning necessary to enhance the company's valuation and global
recognition. You will also play a major role in all corporate collaborations,
negotiations and future financings. You may be assigned other duties as needed
and your duties may change from time to time on reasonable notice, based on the
needs of Trega and your skills, as determined by Trega.

         As an exempt employee, you are required to exercise your specialized
expertise, independent judgment and discretion to provide high-quality services.
You are required to follow office policies and procedures adopted from time to
time by Trega and to take such general direction as you may be given from time
to time by your superiors. Trega reserves the right to change these policies and
procedures at any time. (Also see Adjustments and Changes in Employment Status).
You are required to devote your full energies, efforts and abilities to your
employment, unless Trega expressly agrees otherwise.

         6. Competitive Activity. You shall not during the Term of Employment
period directly or indirectly own, manage, operate, control or participate in
the ownership, management, operation or control of, or be connected as an
officer, employee, partner, director, or otherwise with, or have any financial
interest in or aid or assist anyone else in the conduct of a "Competitive
Operation" which is in competition with any aspect of the business conducted by
Trega (or any of the Company's affiliates) at any time during the two (2) year
period immediately preceding the date on which you propose to own, participate
in, or be connected with, or have any financial interest in or aid or assist
anyone else in the conduct of, such Competitive Operation in any area in which
such business is or was then being conducted by Trega (or any of the Trega's
affiliates); provided, however, that ownership of not more than one percent (1%)
of the equity securities of any publicly held Competitive Operation shall not
constitute a violation hereof.

         7. Adjustments and Changes in Employment Status. You understand that
the Company reserves the right to make personnel decisions regarding your
employment, including but not limited to decisions regarding any promotion,
salary adjustment, transfer or disciplinary action, up to and including
termination (in accordance with paragraph 14 below), consistent with the needs
of the business.

         8. Hours of Work. As an exempt employee, you are expected to work the
number of hours required to get the job done. However, you are generally
expected to be present during normal working hours of Trega. Normal working
hours will be established by Trega and may be changed as needed to meet the
needs of the business.

         9. Proprietary Information Agreement. You will be required to sign and
abide by the terms of the enclosed proprietary information agreement, which is
incorporated into this agreement by reference as Attachment C.

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         10. Immigration Documentation. Please be advised that your employment
is contingent on your ability to prove your identity and authorization to work
in the U.S. for Trega. You must comply with the Immigration and Naturalization
Service's employment verification requirements.

         11. Representation and Warranty of Employee. You represent and warrant
to Trega that the performance of your duties will not violate any agreements
with or trade secrets of any other person or entity.

         12. Employee Benefits. You will be eligible for three weeks paid
vacation each calendar year. Vacation will accrue on a pro-rata basis
semi-monthly. You will receive an additional vacation day for each year of
service subject to Trega's vacation policy. You will also be paid for sick leave
and holidays also subject to Trega's policies. You will be provided with health
insurance benefits and dental insurance benefits, as provided in our benefit
plans. You will be eligible to participate in Trega's 401(k) retirement savings
plan and Trega's flexible spending account. These benefits may change from time
to time. You will be covered by workers' compensation insurance and State
Disability Insurance, as required by state law.

         13. Additional Benefits. You will be provided with the following
additional benefits: You will be reimbursed for reasonable relocation expenses
for (i) the move of your household goods from Atlanta, Georgia and Fort Walton
Beach, Florida to San Diego; (ii) a pre-move house hunting trip; (iii) temporary
living quarters and temporary transportation for up to thirty (30) days; and
(iv) specific costs relating to the sale and purchase of your primary residence
as pre-approved by Trega. Any payments made to you or third parties on your
behalf for relocation, other than the moving of household goods and travel, is
required to be included in your gross earnings for the year. Trega agrees to pay
you a cash bonus "grossed up" to compensate you for the taxes you will be
required to pay on this additional income. Trega will also reimburse you for
accounting fees for expatriot status for two years. Trega will further reimburse
you for a lease payoff for your residence in Germany if it is not re-leased
after reasonable efforts.

         14. Termination and Severance Benefits. Trega and you each retain the
right to terminate this Agreement, with or without cause, upon thirty (30) days
prior written notice to the other. In the event of termination without "cause"
(as hereinafter defined), you shall be entitled to the balance of your salary
during the period from the date of termination through the end of the Term of
Employment (the "Severance Pay"). The Severance Pay will be paid in equal
semi-monthly installments. In the event of termination of this Agreement for
"cause," you shall not be entitled to Severance Pay or any other benefits.
"Cause," for purposes of this agreement shall mean (i) conviction of a criminal
offense; (ii) failure to substantially perform duties hereunder other than
because of physical or mental illness resulting in disability; or (iii) acts of
moral turpitude or other conduct which is injurious to the reputation of Trega
or you.

         15. Dispute Resolution Procedure. The parties agree that any dispute
arising out of or related to the employment relationship between them, including
the termination of that relationship and any allegations of unfair or
discriminatory treatment arising under state or federal law or otherwise, shall
be resolved by final and binding arbitration, except where the law

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specifically forbids the use of arbitration as a final and binding remedy.

         (a) The party claiming to be aggrieved shall furnish to the other party
a written statement of the grievance identifying any witnesses or documents that
support the grievance and the relief requested or proposed.

         (b) If the other party does not agree to furnish the relief requested
or proposed, or otherwise does not satisfy the demand of the party claiming to
be aggrieved, the parties shall submit the dispute to nonbinding mediation
before a mediator to be jointly selected by the parties. Trega will pay the cost
of the mediation.

         (c) If the mediation does not produce a resolution of the dispute, the
parties agree that the dispute shall be resolved by final and binding
arbitration. The parties shall attempt to agree to the identity of an
arbitrator, and, if they are unable to do so, they will obtain a list of
arbitrators from the Federal Mediation and Conciliation Service and select an
arbitrator by striking names from that list.

         The arbitrator shall have the authority to determine whether the
conduct complained of in paragraph (a) of this section violates the rights of
the complaining party and, if so, to grant any relief authorized by law;
provided, however, the parties agree, that for violations of the employee's
trade secret obligations, Trega retains the right to seek preliminary injunctive
relief in court in order to preserve the status quo or prevent irreparable
injury before the matter can be heard in arbitration. The arbitrator shall not
have the authority to modify, change or refuse to enforce the terms of any
employment agreement between the parties. In addition, the arbitrator shall not
have the authority to require Trega to change any lawful policy or benefit plan.

         The hearing shall be transcribed. Trega shall bear the costs of the
arbitration if the employee prevails. If Trega prevails, the employee will pay
half the cost of the arbitration or $500, whichever is less. Each party shall
be responsible for paying its own attorneys fees.

         (d) Arbitration shall be the exclusive final remedy for any dispute
between the parties, and the parties agree that no dispute shall be submitted to
arbitration where the party claiming to be aggrieved has not complied with the
preliminary steps provided for in paragraphs (a) and (b) above.

         (e) Trega reserves the right to modify, change or cancel this provision
upon 30 days written notice. However, such cancellation shall not affect matters
which have already been submitted to arbitration.

         16. Integrated Agreement. Please note that this Agreement supersedes
any prior agreements, representations or promises of any kind, whether written,
oral, express or implied between the parties hereto with respect to the subject
matters herein. It constitutes the full, complete and exclusive agreement
between you and Trega with respect to the subject matters herein. This agreement
cannot be changed unless in writing, signed by you and Robert S. Whitehead or
the then current Chief Executive Officer.

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         17. Severability. If any term of this Agreement is held to be invalid,
void or unenforceable, the remainder of this Agreement shall remain in full
force and effect and shall in no way be affected; and, the parties shall use
their best efforts to find an alternative way to achieve the same result.

         We look forward to your joining our organization. In order to confirm
your agreement with and acceptance of these terms, please sign one copy of this
letter and return it to me. The other copy is for your records. If there is any
matter in this letter which you wish to discuss further, please do not hesitate
to speak to me.

                        Very truly yours,

                        Trega Biosciences, Inc.



                        By: /s/ Robert S. Whitehead
                                  -----------------------------

                        Title: President and Chief Executive Officer


 ................................................................................


         I agree to the terms of employment set forth in this Agreement.


         /s/ Lawrence D. Muschek                        11/26/97
         -----------------------------                  -----------------------
         Employee                                       Date


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