EXHIBIT 10.92
EXECUTION COPY
--------------


Portions  of  this  Exhibit  have  been  omitted   pursuant  to  a  request  for
confidential treatment. The omitted portions,  marked by an * and [ ], have been
separately filed with the Commission.







                  RESEARCH COLLABORATION AND LICENSE AGREEMENT
                                  by and among
                               MERCK & CO., INC.,
                          TRANSCELL TECHNOLOGIES, INC.
                                       and
                        INTERNEURON PHARMACEUTICALS, INC.










The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.





                                TABLE OF CONTENTS
                                -----------------

                                                                          Page
                                                                          ----

ARTICLE I  DEFINITIONS.......................................................1

ARTICLE II  RESEARCH PROGRAM AND  DRUG DEVELOPMENT PROGRAM...................7
         2.1 General.........................................................7
         2.2 Conduct of Research.............................................7
         2.3 Additional FTE's................................................7
         2.4 [*] Research Program............................................7
         2.5 [*] Research Program............................................7
         2.6 Joint Research Committee........................................7
         2.7 Exchange of Information.........................................9
         2.8 Records and Reports.............................................9
         2.9 Research Information and Inventions.............................9
         2.10 Research Program Term.........................................10
         2.11 Research Program Materials....................................11
         2.12 Drug Development Program......................................11

ARTICLE III  LICENSE; DEVELOPMENT AND COMMERCIALIZATION.....................12
         3.1 License Grant..................................................12
         3.2 Retained Rights................................................12
         3.3 Exclusivity in Expanded Field..................................12
         3.4 Princeton Agreements...........................................13
         3.5 Development and Commercialization..............................13

ARTICLE IV  CONFIDENTIALITY AND PUBLICATION.................................14
         4.1 Non-disclosure and Non-Use Obligations.........................14
         4.2 Permitted Disclosure of Proprietary Information................14
         4.3 Publication and Public Disclosures.............................15

ARTICLE V  PAYMENTS; ROYALTIES AND REPORTS..................................16
         5.1 Commitment Fee and Option Payment..............................16
         5.2 Research Program Funding.......................................16
         5.3 Milestone Payments.............................................16
         5.4 Royalties......................................................17
         5.5 Reports; Payment of Royalty....................................19
         5.6 Audits.........................................................19
         5.7 Payment Exchange Rate..........................................20
         5.8 Income Tax Withholding.........................................20


                                        i




The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



ARTICLE VI  REPRESENTATIONS AND WARRANTIES..................................21
         6.1 Transcell Representations and Warranties.......................21
         6.2 Interneuron Representations and Warranties.....................22
         6.3 General Disclaimer.............................................22
         6.4 Merck Representations and Warranties...........................23

ARTICLE VII  PATENT MATTERS.................................................23
         7.1 Filing, Prosecution and Maintenance of Patents.................23
         7.2 Right of Other Parties to Prosecute and Maintain Patents.......23
         7.3 Interference, Opposition, Reexamination and Reissue............24
         7.4 Enforcement and Defense........................................24
         7.5 Patent Term Restoration........................................25

ARTICLE VIII  TERM AND TERMINATION..........................................26
         8.1 Term and Expiration............................................26
         8.2 Termination by Notice..........................................26
         8.3 Termination....................................................26
         8.4 Effect of Expiration or Termination............................28

ARTICLE IX  MISCELLANEOUS...................................................28
         9.1 Force Majeure..................................................28
         9.2 Assignment.....................................................29
         9.3 Severability...................................................29
         9.4 Notices........................................................29
         9.5 Applicable Law.................................................30
         9.6 Dispute Resolution.............................................30
         9.7 Entire Agreement...............................................31
         9.8 Headings.......................................................31
         9.9 Independent Contractors........................................31
         9.10 Waiver........................................................31
         9.11 Counterparts..................................................31


Schedule 1.19           --     Interneuron Patent Assets
Schedule 1.25           --     List of Major Market Countries
Attachment 1.39         --     1993 Princeton License Agreement
Attachment 1.40         --     1997 Princeton Research Agreement
Attachment 1.46         --     Side Agreement
Schedule 1.52           --     Transcell Patent Assets
Attachment 2.1.A        --     [*] Research Program
Attachment 2.1.B        --     [*] Research Program


                                       ii







The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



Attachment 4.3          --     Form of Press Release
Schedule 7.1            --     Countries Where Interneuron and Transcell will 
                               File, Prosecute and  Maintain Patents






                                       iii








                  RESEARCH COLLABORATION AND LICENSE AGREEMENT

         THIS AGREEMENT  effective as of June 30, 1997, (the  "Effective  Date")
between Merck & Co.,  Inc., a corporation  organized and existing under the laws
of New Jersey ("Merck"),  Transcell  Technologies Inc., a corporation  organized
and  existing  under  the  laws  of  Delaware   ("Transcell")   and  Interneuron
Pharmaceuticals,  Inc., a corporation  organized and existing  under the laws of
Delaware ("Interneuron").

                                   WITNESSETH:

         WHEREAS,  Transcell  and/or  Interneuron have developed or will develop
certain  Transcell  Know-How  and  Interneuron  Know-How and have or will obtain
rights to certain Patent Assets (as hereinafter defined);

         WHEREAS,   Merck  and  Transcell   desire  to  enter  into  a  research
collaboration  to discover and develop  Compounds (as hereinafter  defined) upon
the terms and conditions set forth herein;

         WHEREAS,  Merck  desires  to  obtain  a  license  under  Transcell  and
Interneuron  Intellectual  Property,  upon the  terms and  conditions  set forth
herein;

         NOW,  THEREFORE,  in  consideration  of the foregoing  premises and the
mutual covenants herein contained, the parties hereby agree as follows:



                                    ARTICLE I

                                   DEFINITIONS
                                   -----------

         Unless  specifically  set forth to the contrary  herein,  the following
terms,  whether  used in the  singular  or  plural,  shall  have the  respective
meanings set forth below:

1.1      "Affiliate"  shall mean (i) any corporation or business entity of which
         fifty  percent  (50%)  or more of the  securities  or  other  ownership
         interests   representing  the  equity,  the  voting  stock  or  general
         partnership  interest  are  owned,  controlled  or  held,  directly  or
         indirectly,  by a Party;  or (ii) any  corporation  or business  entity
         which,  directly or indirectly,  owns,  controls or holds fifty percent
         (50%) (or the maximum ownership  interest  permitted by law) or more of
         the securities or other ownership  interests  representing  the equity,
         the voting stock or, if applicable,  the general partnership  interest,
         of a Party.

1.2      "Calendar  Quarter"  shall  mean the  respective  periods  of three (3)
         consecutive  calendar months ending on March 31, June 30,  September 30
         and December 31.






The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



1.3      "Calendar Year" shall mean each successive period of twelve (12) months
         commencing on January 1 and ending on December 31.

1.4      "Combination  Product" shall mean a Licensed Product which includes one
         or more active  ingredients  other than  Compound in  combination  with
         Compound.

1.5      "Compound"  shall mean any chemical  entity that is synthesized  in, or
         discovered  in  or  during,  the  Research  Program,  or a  derivative,
         homolog,  or  analogue  of such a  chemical  entity  or a salt or ester
         thereof.

1.6      "Drug Development  Program" shall mean the drug development  program to
         be carried out by Merck in accordance with Section 2.12.

1.7      "Effective Date" shall mean June 30, 1997.

1.8      "Expanded  Field"  shall  mean all  antibacterial  agents  for human or
         animal use.

1.9      "Extended  Research  Program  Term" shall have the meaning set forth in
         Section 2.10.

1.10     "FDA" shall mean the United States Food and Drug Administration and any
         successor agency having substantially the same functions.

1.11     "Field"  shall mean all [*] and [*] analogues  which are  antibacterial
         agents for human or animal use.

1.12     "First  Commercial  Sale"  shall  mean,  with  respect to any  Licensed
         Product,  the first sale for end use or  consumption  of such  Licensed
         Product in a country after all required approvals,  including marketing
         and  pricing  approvals,  have been  granted  by the  governing  health
         authority of such country.

1.13     "Full  Time  Equivalent"  or  "FTE"  shall  mean  the  equivalent  of a
         full-time  scientist's work time over a twelve-month  period (including
         normal vacations,  sick days and holidays).  The portion of an FTE year
         devoted by a scientist to the Research  Program  shall be determined by
         dividing the number of days during any  twelve-month  period devoted by
         such  employee to the  Research  Program by the total number of working
         days during such twelve-month period.

1.14     "Improvement"   shall  mean  any   enhancement   in  the   manufacture,
         formulation, ingredients, preparation, presentation, means of delivery,
         dosage or packaging of Compound or Licensed Product.

                                        2





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.

1.15     "Interneuron  Information and Inventions" shall have the meaning as set
         forth in Section 2.9.

1.16     "Interneuron   Intellectual   Property"   shall  mean  (i)  Interneuron
         Know-How, (ii) Interneuron Patent Assets, (iii) Interneuron Information
         and Inventions,  (iv) Interneuron's  interest in  Interneuron/Transcell
         Joint  Information  and  Inventions and (v)  Interneuron's  interest in
         Interneuron/Merck Joint Information and Inventions.

1.17     "Interneuron  Know-How"  shall  mean all  Interneuron  Information  and
         Inventions,  and  all  information  and  materials,  including  but not
         limited  to,  discoveries,  Improvements,  processes,  formulas,  data,
         inventions,  know-how and trade secrets, patentable or otherwise, which
         during the term of this Agreement (i) are in  Interneuron's  possession
         or control or in which Interneuron has sub-licensable rights, including
         its rights under the 1997 Princeton  Research  Agreement,  (ii) are not
         generally  known  and  (iii)  are  necessary  or  useful  to  Merck  in
         connection with rights granted and activities  contemplated  under this
         Agreement.

1.18     "Interneuron/Merck  Joint  Information and  Inventions"  shall have the
         meaning as set forth in Section 2.9.

1.19     "Interneuron  Patent  Assets"  shall  mean  issued  patents  and patent
         applications  (which  shall  be  deemed  to  include   certificates  of
         invention and  applications  for  certificates of invention)  presently
         existing  or which  during  the  term of this  Agreement  are  owned by
         Interneuron or which Interneuron  through license or otherwise acquires
         rights,  including,  but not limited to, those listed on Schedule 1.19,
         which: (i) relate to a Compound and/or Licensed Product,  their uses in
         the Field or Expanded Field or a method of their  manufacture;  or (ii)
         relate to Research Information and Inventions; including all divisions,
         continuations,  continuations-in-part,  reissues, renewals, extensions,
         supplementary  protection  certificates or the like of any such patents
         and patent applications and foreign equivalents thereof.

1.20     "Interneuron/Transcell Joint Information and Inventions" shall have the
         meaning as set forth in Section 2.9.

1.21     "Joint  Research  Committee"  shall  mean the  committee  described  in
         Section 2.6.

1.22     "Lead  Candidate"  means a  Compound  that  is  selected  by the  Joint
         Research  Committee as a lead compound for medicinal  chemistry studies
         in  accordance  with  the [*]  Research  Program  or the  [*]  Research
         Program.



                                        3





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



1.23     "Licensed Product" shall mean any preparation in final form for sale by
         prescription,  over-the-counter  or by any other  method,  for human or
         animal use, which contains a Compound,  including,  without limitation,
         any Combination Product.

1.24     "Licensor(s)"  shall mean Interneuron and/or Transcell,  as the context
         indicates.

1.25     "Major  Market  Country"  shall mean a country  listed on Schedule 1.25
         hereto.

1.26     "Merck  Information and Inventions" shall have the meaning as set forth
         in Section 2.9.

1.27     "Merck  Know-How"  shall  mean any  Merck  information  and  materials,
         including  but not limited to,  discoveries,  Improvements,  processes,
         formulas, data, inventions,  know-how and trade secrets,  patentable or
         otherwise,  which during the term of this  Agreement  are not generally
         known and which arise out of the Research  Program or are  necessary or
         useful to Transcell in the  performance  of its  obligations  under the
         Research Program.

1.28     "Merck Patent Assets" shall mean issued patents and patent applications
         (which  shall be  deemed  to  include  certificates  of  invention  and
         applications  for  certificates of invention)  which during the term of
         this  Agreement  are owned by Merck or which Merck  through  license or
         otherwise  acquires  rights,  which:  (i) relate to a  Compound  and/or
         Licensed  Product or their uses in the Field or Expanded Field; or (ii)
         relate to Research Information and Inventions; including all divisions,
         continuations,  continuations-in-part,  reissues, renewals, extensions,
         supplementary  protection  certificates or the like of any such patents
         and patent applications and foreign equivalents thereof.

1.29     "Milestone"  shall have the meanings as described in  Attachment  2.1.A
         and Attachment 2.1.B hereto.

1.30     "[*]  Research  Program"  shall  mean  the  research  program  for  the
         synthesis and biological evaluation of [*] analogues and development of
         Licensed Products as described in Attachment 2.1.B hereto.

1.31     "NDA"  shall  mean a new  drug  application  filed  with  the  FDA  for
         marketing authorization of a Licensed Product.

1.32     "Net Sales" shall mean the gross invoice price of Licensed Product sold
         by Merck,  its Affiliates or sublicensees  (which term does not include
         distributors) to the first independent third party after deducting,  if
         not previously deducted, from the amount invoiced:

         (a)      trade, cash and quantity discounts;

                                        4





         (b)      credits  and  allowances  on account of  returned  or rejected
                  products;

         (c)      rebates,  chargebacks  and  other  amounts  paid  on  sale  or
                  dispensing of Licensed Product;

         (d)      retroactive price reductions;

         (e)      with  regard to sales in the  United  States,  a fixed  amount
                  equal to five percent (5%) of the amount invoiced to cover bad
                  debt,  sales or excise  taxes,  transportation  and  insurance
                  charges; and with regard to sales outside the United States, a
                  fixed amount equal to ten percent (10%) of the amount invoiced
                  to cover  the  above and  additional  special  transportation,
                  custom duties, and other governmental charges; and

         (f)      the  inventory  cost of devices or delivery  systems  used for
                  dispensing  or   administering   Licensed   Product,   special
                  packaging   of  Licensed   Product  and  diluents  or  similar
                  exogenous  materials which accompany Licensed Product as it is
                  sold.

         With  respect  to sales of  Combination  Products,  Net Sales  shall be
         calculated  on the basis of the invoice  price of  Licensed  Product(s)
         containing  the same weight of a Compound  sold  without  other  active
         ingredients.  If such Licensed Product is not sold without other active
         ingredients,  Net Sales shall be calculated on the basis of the invoice
         price  of  the  Combination  Product  multiplied  by  a  fraction,  the
         numerator  of which  shall be the  inventory  cost of  Compound  in the
         Licensed  Product and the  denominator  of which shall be the inventory
         cost  of all of the  active  ingredients  in the  Combination  Product.
         Inventory cost shall be determined in accordance  with Merck's  regular
         accounting methods.

1.33     "Option  Payment"  shall mean the payment  described  in Section 5.1 in
         consideration for the rights granted in Section 3.3.

1.34     "Option Period" shall mean the option period described in Section 3.3.

1.35     "Party" shall mean Merck, Transcell or Interneuron.

1.36     "Patent  Assets"  shall  mean the  Interneuron  Patent  Assets  and the
         Transcell Patent Assets.

1.37     "Princeton" shall mean Princeton University, Princeton, New Jersey.

1.38     "Princeton  Agreements" shall mean the 1993 Princeton License Agreement
         and the 1997 Princeton Research  Agreement,  as the same may be amended
         from time to time.



                                        5





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



1.39     "1993 Princeton License  Agreement" shall mean the License Agreement by
         and between the Trustees of  Princeton  and  Transcell  effective as of
         October 14, 1993, as amended  February 21, 1997 and as further  amended
         from time to time,  a copy of which is  attached  hereto as  Attachment
         1.39.

1.40     "1997 Princeton  Research  Agreement" shall mean the Research Agreement
         by and between the Trustees of Princeton and  Interneuron  effective as
         of April 29,  1997,  as amended  from time to time,  a copy of which is
         attached hereto as Attachment 1.40.

1.41     "Proprietary Information" shall mean any and all scientific,  clinical,
         regulatory,  marketing,  financial and commercial  information or data,
         whether communicated in writing, orally or by any other means, which is
         provided  by one  Party to the  other  Party in  connection  with  this
         Agreement.  Proprietary Information shall include,  without limitation,
         Merck Know-How and Transcell Know-How.

1.42     "Research  Information  and  Inventions"  shall mean the entire  right,
         title  and  interest  in  all  discoveries,   Improvements,  processes,
         formulas, data, inventions,  know-how and trade secrets,  patentable or
         otherwise, arising from the Research Program.

1.43     "Research Program" shall mean the collaborative research effort between
         the  parties  as  described  in  Attachments  2.1.A  and  2.1.B  hereto
         consisting of the [*] Research Program and the [*] Research Program, as
         may be amended or revised  pursuant to the provisions of Section 2.6.3.
         References   to  the   Research   Program   shall  refer  only  to  the
         collaborative  phase of the research  effort and shall not refer to the
         selection  of a  Safety  Assessment  Candidate  by Merck or to the Drug
         Development Program.

1.44     "Research  Program  Term"  shall have the  meaning set forth in Section
         2.10.

1.45     "Safety  Assessment  Candidate" shall mean a Compound with a scientific
         data  package  that is  evaluated  and  approved by the Merck  Research
         Management Committee for initiation of formal toxicology studies.

1.46     "Side Agreement" shall mean the agreement  entered into not later than,
         and effective as of, the Effective Date by and among Merck,  Transcell,
         Interneuron  and the  Trustees  of  Princeton  and  attached  hereto as
         Attachment 1.46.

1.47     "Territory" shall mean all of the countries in the world.



                                        6





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



1.48     "Transcell  Intellectual  Property" shall mean (i) Transcell  Know-How,
         (ii)  Transcell   Patent  Assets,   (iii)  Transcell   Information  and
         Inventions,   (iv)  Transcell's   interest  in  Transcell/Merck   Joint
         Information   and   Inventions   and  (v)   Transcell's   interest   in
         Interneuron/Transcell Joint Information and Inventions.

1.49     "Transcell  Information and  Inventions"  shall have the meaning as set
         forth in Section 2.9.

1.50     "Transcell   Know-How"   shall  mean  all  Transcell   Information  and
         Inventions,  and  all  information  and  materials,  including  but not
         limited  to,  discoveries,  Improvements,  processes,  formulas,  data,
         inventions,  know-how and trade secrets, patentable or otherwise, which
         during the term of this Agreement (i) are in Transcell's  possession or
         control or in which Transcell has sub-licensable  rights,  (ii) are not
         generally  known  and  (iii)  are  necessary  or  useful  to  Merck  in
         connection with rights granted and activities  contemplated  under this
         Agreement.

1.51     "Transcell/Merck  Joint  Information  and  Inventions"  shall  have the
         meaning as set forth in Section 2.9.

1.52     "Transcell   Patent  Assets"  shall  mean  issued  patents  and  patent
         applications  (which  shall  be  deemed  to  include   certificates  of
         invention and  applications  for  certificates of invention)  presently
         existing  or which  during  the  term of this  Agreement  are  owned by
         Transcell or which  Transcell  through  license or  otherwise  acquires
         rights,  including,  but not limited to, those listed on Schedule 1.52,
         which: (i) relate to a Compound and/or Licensed Product,  their uses in
         the Field or Expanded Field, or a method of their manufacture;  or (ii)
         relate to Research Information and Inventions; including all divisions,
         continuations,  continuations-in-part,  reissues, renewals, extensions,
         supplementary  protection  certificates or the like of any such patents
         and patent applications and foreign equivalents thereof.

1.53     "Valid Patent  Claim" means a claim of an issued and  unexpired  patent
         included within the Patent Assets or the Merck Patent Assets, which has
         not been  revoked or held  unenforceable  or invalid by a decision of a
         court  or  other   governmental   agency  of  competent   jurisdiction,
         unappealable  or  unappealed  within the time  allowed for appeal,  and
         which has not been  disclaimed,  denied or  admitted  to be  invalid or
         unenforceable through reissue or disclaimer or otherwise.

1.54     "[*]  Research  Program"  shall  mean  the  research  program  for  the
         synthesis   and   biological   evaluation  of  [*]  analogues  and  the
         development  of Licensed  Products as  described  in  Attachment  2.1.A
         hereto.

                                        7





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



                                   ARTICLE II

                              RESEARCH PROGRAM AND
                            DRUG DEVELOPMENT PROGRAM
                            ------------------------

2.1      General.  Transcell and Merck shall engage in the Research Program upon
         the terms and conditions set forth in this Agreement. The activities to
         be undertaken  in the course of Research  Program are set forth in this
         Article II and in Attachment  2.1.A and  Attachment  2.1.B hereto which
         may be  amended  from time to time  upon the  mutual  agreement  of the
         parties.

2.2      Conduct  of  Research.  Transcell  and Merck  each  shall  conduct  the
         Research Program in a good scientific  manner, and in compliance in all
         material  respects with all  requirements of applicable laws, rules and
         regulations and all applicable standard laboratory practices to attempt
         to achieve their objectives  efficiently and  expeditiously.  Transcell
         and Merck each shall  proceed  diligently  with the work set out in the
         Research Program by using their respective good faith efforts.

2.3      Additional FTE's. In the event that the initial stage of either the [*]
         Research  Program or the [*] Research  Program  yields a Compound  that
         satisfies the criteria set forth in the relevant  Research  Program for
         Milestone I, Merck,  in  consultation  with  Transcell,  will determine
         whether an increased number of chemistry FTE's may be required at Merck
         or Transcell  for carrying out the  subsequent  stages of such Research
         Program. In the event that Merck determines that an increased number of
         FTE's are  required  at  Transcell  and/or  Princeton,  Merck  shall be
         responsible  for the costs of such FTE's at the same rate  provided for
         in Section 5.2(b) of this Agreement.

2.4      [*]  Research  Program.  The [*]  Research  Program  shall  proceed  as
         described in Attachment 2.1.A.

2.5      [*]  Research  Program.  The [*]  Research  Program  shall  proceed  as
         described in Attachment 2.1.B.

2.6      Joint Research Committee. The parties hereby establish a joint research
         committee to direct and monitor the Research Program as follows:

         2.6.1    Composition  of the Committee.  The Research  Program shall be
                  conducted   under  the  direction  of  a  joint  research  and
                  development   committee  (the  "Joint   Research   Committee")
                  comprised  of three named  representatives  of Merck and three
                  named   representatives  of  Transcell.   Each  of  Merck  and
                  Transcell shall appoint its

                                        8





                  respective  representatives  to the Joint Research  Committee,
                  and  from  time  to  time  may  substitute  one or more of its
                  representatives, in its sole discretion, effective upon notice
                  to the other  Party of such  change.  It is  anticipated  that
                  these   representatives   shall  have  appropriate   technical
                  credentials and knowledge,  and ongoing  familiarity  with the
                  Research Program. The Merck representatives initially shall be
                  John  Kozarich,  James Heck and a third  representative  to be
                  appointed and the Transcell representatives initially shall be
                  Daniel Kahne,  Michael Sofia and a third  representative to be
                  appointed.  Additional representatives or consultants may from
                  time to time, by mutual consent of the parties,  be invited to
                  attend  Joint   Research   Committee   meetings,   subject  to
                  compliance with Section 4.1.

         2.6.2    Chairman and Vice Chairmen. The Chairman of the Joint Research
                  Committee  shall be John Kozarich and the Vice Chairmen  shall
                  be Daniel Kahne and Michael  Sofia.  The Chairman and the Vice
                  Chairmen  shall be the  primary  contacts  between the parties
                  with respect to the Research Program.  Each Party shall notify
                  the  other  as  soon  as   practicable   upon   changing  this
                  appointment.

         2.6.3    Meetings and  Decisions.  The Joint Research  Committee  shall
                  meet at least once each Calendar  Quarter at such locations as
                  shall be  determined  by the Joint  Research  Committee.  Each
                  Party shall bear its owns  expenses  related to  attendance of
                  such  meetings  by  its  representatives.  At the  first  such
                  meeting,  which  shall  take  place  within 30 days  after the
                  Effective Date, the Joint Research Committee shall discuss any
                  necessary or recommended changes in the Research Program.  The
                  Joint Research  Committee may meet by means of  teleconference
                  or video conference or other similar communications equipment.
                  The Joint Research  Committee  shall confer and make decisions
                  regarding the status and direction of the Research Program and
                  the other matters  specified in the Research Program and shall
                  also  consider,   advise  and  make  decisions  regarding  any
                  technical,  budgetary  or  economic  matters  relating  to the
                  Research  Program.  Decisions of the Joint Research  Committee
                  shall be made by a majority of the members.  In the event that
                  the Joint  Research  Committee  cannot or does not, after good
                  faith  efforts,  achieve a  majority  on an  issue,  the Chief
                  Executive Officer of Transcell, or his designee, acting as the
                  duly authorized representative of Transcell, and the Executive
                  Vice President of Merck Research  Laboratories,  acting as the
                  duly  authorized  representative  of Merck,  shall discuss the
                  matter and attempt,  in good faith,  to reach  agreement  with
                  respect  to  such  decision.  In  the  event  that  the  Chief
                  Executive  Officer  of  Transcell,  or his  designee,  and the
                  Executive Vice President of Merck Research  Laboratories shall
                  be  unable  to  reach  agreement,  Merck  shall,  in its  sole
                  discretion,  make the final decision;  provided, however, that
                  (i) in the event Merck  determines that in increased number of
                  FTE's  are  required  to  carry  out a stage  of the  Research
                  Program,  Merck  shall be  responsible  for the  costs of such
                  FTE's at the same rate provided for in Section  5.2(b) of this
                  Agreement and (ii) any changes to the Research Program

                                        9





                  which could affect the  provisions of Article V hereof require
                  the written approval of both Parties.

         2.6.4    Records.  The Joint Research Committee shall maintain accurate
                  records to document  the  discussions  and  decisions  at each
                  meeting.  Meeting  minutes or  summaries  shall be prepared in
                  accordance with  procedures  established by the Joint Research
                  Committee at its first meeting and shall be distributed to all
                  members of the Joint  Research  Committee  after  approval  of
                  drafts by the Chairman and Vice Chairmen.

2.7      Exchange of Information.  Upon execution of this  Agreement,  Transcell
         shall  disclose  to  Merck  in  writing  all  Transcell   Know-How  not
         previously disclosed.  During the Research Program Term or any Extended
         Research  Program Term,  Transcell and Interneuron  shall also promptly
         disclose to Merck in writing on an ongoing basis all Transcell Know-How
         and Interneuron  Know-How.  Merck shall promptly  disclose to Transcell
         during the Research Program Term all Merck Know-How.

2.8      Records and Reports.

         2.8.1    Records. Transcell shall maintain records in sufficient detail
                  and in good  scientific  manner  appropriate  for  patent  and
                  regulatory purposes,  which shall be complete and accurate and
                  shall  fully and  properly  reflect  all work done and results
                  achieved in the performance of the Research Program.

         2.8.2    Copies and Inspection of Records.  Merck shall have the right,
                  during normal  business hours and upon reasonable  notice,  to
                  inspect and copy all such records of Transcell  referred to in
                  Section  2.8.1.  Merck  shall  maintain  such  records and the
                  information disclosed therein in confidence in accordance with
                  Section  4.1.  Merck  shall have the right to arrange  for its
                  employees,  agents and outside  consultants to visit Transcell
                  at its offices and  laboratories,  and to visit the laboratory
                  of  Daniel  Kahne,  during  normal  business  hours  and  upon
                  reasonable notice, and to discuss the Research Program and its
                  results in detail with the technical personnel and consultants
                  of Transcell.

         2.8.3    Quarterly  Reports.  Within thirty (30) days following the end
                  of each  Calendar  Quarter  during the Research  Program Term,
                  Transcell  shall  provide to the Joint  Research  Committee  a
                  written   progress   report  which  shall  describe  the  work
                  performed to date on the Research  Program,  evaluate the work
                  performed in relation to the goals of the Research Program and
                  provide  such  other  information  required  by  the  Research
                  Program or reasonably requested by Merck or the Joint Research
                  Committee relating to the progress of the goals or performance
                  of the Research Program. Upon request, Transcell shall provide
                  copies of the records described in Section 2.8.1. above.

                                       10





2.9      Research   Information   and  Inventions.   Research   Information  and
         Inventions developed or invented:

         (a)      (i) solely by employees,  agents or  consultants  of Transcell
                  (other than  Daniel  Kahne or Suzanne  Walker-Kahne)  shall be
                  owned by  Transcell;  (ii)  solely  by  employees,  agents  or
                  consultants  of  Princeton  and subject to the 1993  Princeton
                  License  Agreement  shall be owned by  Princeton,  subject  to
                  Transcell's rights under the 1993 Princeton License Agreement;
                  and (iii)  jointly  by  employees,  agents or  consultants  of
                  Transcell  (other than Daniel Kahne or Suzanne  Walker- Kahne)
                  and  Princeton  and  subject  to the  1993  Princeton  License
                  Agreement  shall be owned  jointly by Transcell  and Princeton
                  ((i),  (ii)  and/or  (iii)   individually   or   collectively,
                  "Transcell Information and Inventions");

         (b)      solely by employees,  agents or  consultants  of Princeton and
                  subject  to the 1997  Princeton  Research  Agreement  shall be
                  owned by Princeton,  subject to Interneuron's rights under the
                  1997 Princeton  Research Agreement  ("Interneuron  Information
                  and Inventions"),;

         (c)      solely by employees,  agents or  consultants of Merck shall be
                  owned solely by Merck ("Merck Information and Inventions");

         (d)      (i) jointly by employees,  agents or  consultants of Transcell
                  (other than Daniel  Kahne or Suzanne  Walker-Kahne)  and Merck
                  shall  be owned  jointly  by  Transcell  and  Merck;  and (ii)
                  jointly by employees,  agents or  consultants of Princeton and
                  Merck and  subject  to the 1993  Princeton  License  Agreement
                  shall be owned jointly by Princeton and Merck with Princeton's
                  interest in such Research  Information and Inventions  subject
                  to  Transcell's   rights  under  the  1993  Princeton  License
                  Agreement   ((i)  and/or  (ii)   individually   or   together,
                  "Transcell/Merck Joint Information and Inventions");

         (e)      jointly by employees,  agents or  consultants of Princeton and
                  Merck and  subject to the 1997  Princeton  Research  Agreement
                  shall be owned jointly by Princeton and Merck with Princeton's
                  interest in such Research  Information and Inventions  subject
                  to  Interneuron's  rights  under the 1997  Princeton  Research
                  Agreement    ("Interneuron/Merck    Joint    Information   and
                  Inventions"); and

         (f)      jointly by employees,  agents or  consultants of Princeton and
                  Transcell  (other than Daniel  Kahne or Suzanne  Walker-Kahne)
                  and subject to the 1997 Princeton  Research Agreement shall be
                  owned  jointly by Princeton  and  Transcell  with  Princeton's
                  interest in such Research  Information and Inventions  subject
                  to  Interneuron's  rights  under the 1997  Princeton  Research
                  Agreement   ("Interneuron/Transcell   Joint   Information  and
                  Inventions").

         Each  Party  shall   promptly   disclose  to  the  other   Parties  the
         development,  making,  conception  or reduction to practice of Research
         Information and Inventions.

                                       11





2.10     Research  Program Term. The term of the Research Program shall commence
         on the  Effective  Date and  continue  for a period of two  years  (the
         "Research Program Term"),  unless (a) Merck elects in writing to extend
         the Research  Program Term for one or more  additional  one-year  terms
         (each, an "Extended Research Program Term") or (b) the Research Program
         is  terminated  prior  to the  end  of the  Research  Program  Term  in
         accordance with this Agreement.  If Merck elects to extend the Research
         Program,  Merck shall notify  Transcell in writing of such  election at
         least 90 days before the end of the current  Research  Program  Term or
         Extended  Research  Program Term and, if Transcell agrees to extend the
         Research Program, the parties shall negotiate in good faith to complete
         a mutually  acceptable  written agreement at least 45 days prior to the
         expiration of the current  Research  Program Term or Extended  Research
         Program  Term,  which  agreement  will  describe the  Research  Program
         activities  to be  carried  out by  Merck  and  Transcell  during  such
         Extended Research Program Term and the funding arrangements  applicable
         to such Extended Research Program Term.

2.11     Research Program Materials.  The parties  contemplate that each of them
         will make compounds and/or biological  materials available for purposes
         of the Research  Program and that additional  compounds may be invented
         and/or synthesized in the course of the Research Program. In respect of
         such  compounds  and/or  biological  materials,  the  parties  agree as
         follows:

         2.11.1   Compounds or biological materials  transmitted by one Party to
                  another  pursuant to this  Agreement (i) shall be  distributed
                  only to the employees of the  receiving  Party who have a need
                  to receive them to carry out the terms of this Agreement, (ii)
                  shall be used solely for the purposes  expressly  set forth in
                  this  Agreement  (iii)  subject to 2.11.2,  shall be  returned
                  promptly to the  transmitting  Party upon such Party's request
                  and (iv) shall not be  disclosed or  distributed  to any third
                  party  without  the  prior   written   consent  of  the  Party
                  transmitting such compounds or biological material.

         2.11.2   Compounds  that  are  used  in the  Research  Program  and are
                  determined not to be Lead Candidates  shall be returned to the
                  Party  which  made  such  compound  available.   Ownership  of
                  Compounds  shall be determined in accordance with the terms of
                  this Agreement, and all such Compounds that are determined not
                  to be Lead  Candidates  shall  revert to the Party or  Parties
                  that  own(s)  such  Compounds.  Any  such  Compound  which  is
                  returned to a Party pursuant to this Section 2.11.2 may not be
                  developed, made, used or sold by such Party, its Affiliates or
                  licensees in the Expanded Field prior to the First  Commercial
                  Sale in a Major Market Country of a Licensed Product developed
                  pursuant to this  Agreement.  Compounds that are determined to
                  be Lead Candidates  shall remain  available to the Parties for
                  the purposes of the  Research  Program and shall be subject to
                  the terms of this Agreement.

2.12     Drug Development  Program.  A Compound which is identified by the Joint
         Research  Committee as meeting the criteria in  Attachment  2.1 set for
         Milestone II will be reviewed

                                       12





         by Merck's  internal system for acceptance of such Compound as a Safety
         Assessment Candidate.  After identification of such a Safety Assessment
         Candidate,  Merck  will be  responsible  for  and  will  undertake  all
         preclinical development, toxicology and clinical development, including
         regulatory  filings,  which are  required  for  commercialization.  The
         progress and results of Merck's Drug  Development  Program,  as well as
         such other information  reasonably  requested by Transcell  relating to
         the progress,  goals or  performance of the Drug  Development  Program,
         will be reported to  Transcell  through  semi-annual  summary  reports.
         Merck  shall also notify  Transcell  upon (i) the filing of an IND with
         the FDA (ii) the  filing of an NDA with the FDA and (iii) the  approval
         of an NDA by the FDA.

                                   ARTICLE III

                   LICENSE; DEVELOPMENT AND COMMERCIALIZATION
                   ------------------------------------------

3.1      License Grant.

         3.1.1  Subject  to  Sections  3.2  and  3.3 and  the  other  terms  and
         conditions  set  forth  herein,  Transcell  hereby  grants  to Merck an
         exclusive   license  in  the  Field,   including  the  right  to  grant
         sublicenses to Merck  Affiliates and to third parties,  under Transcell
         Intellectual Property solely to make, have made, use, develop,  import,
         offer  for  sale  and  sell  Compounds  and  Licensed  Products  in the
         Territory.  The foregoing license includes an exclusive  sub-license in
         the  Field of  Transcell's  rights  under  the 1993  Princeton  License
         Agreement solely to make, have made, use,  develop,  import,  offer for
         sale and sell Compounds and Licensed Products in the Territory.

         3.1.2 Subject to Section 3.2 and 3.3 and the other terms and conditions
         set forth  herein,  Interneuron  hereby  grants  to Merck an  exclusive
         license in the Field, including the right to grant sublicenses to Merck
         Affiliates  and  to  third  parties,  under  Interneuron   Intellectual
         Property  solely to make, have made, use,  develop,  import,  offer for
         sale and sell  Compounds and Licensed  Products in the  Territory.  The
         foregoing  license  includes an exclusive  sub-license  in the Field to
         Interneuron's  rights pursuant to the 1997 Princeton Research Agreement
         including any license  agreement  entered into between  Interneuron and
         Princeton pursuant to the 1997 Princeton Research Agreement,  solely to
         make,  have  made,  use,  develop,  import,  offer  for  sale  and sell
         Compounds and Licensed Products in the Territory.

3.2      Retained Rights.  Except as specifically set forth herein, Merck is not
         granted  any other  license by  implication  or  otherwise.  During the
         Research Program Term and any Extended Research Program Term, Transcell
         shall  retain  the right to use  Transcell  Intellectual  Property  and
         Interneuron  shall  retain  the right to use  Interneuron  Intellectual
         Property (i) in the Field,  solely for the purposes of performing their
         obligations  under the  Research  Program and (ii) outside of the Field
         for any  purpose,  subject to Section 3.3 below.  After  expiration  or
         termination of the Research Program Term, Transcell and

                                       13





         Interneuron  shall  retain  the  right  to use  Transcell  Intellectual
         Property and Interneuron Intellectual Property outside of the Field for
         any purpose, subject to Section 3.3 below.

3.3      Exclusivity in Expanded Field. In  consideration of the Option Payment,
         Transcell and Interneuron agree that, for a period of one year from and
         after the Effective Date (the "Option  Period"),  neither Transcell nor
         Interneuron  will collaborate with a third party in the Expanded Field,
         or grant or engage in  negotiations  to grant a license in the Expanded
         Field  to  any  third  party  under  the  Transcell   and   Interneuron
         Intellectual   Property;   provided,   however,   that   Transcell  and
         Interneuron  may hold  introductory  meetings of a general  nature with
         third parties during such period. During the Option Period, Merck shall
         have  an  exclusive  option  to  request  an  exclusive  license  under
         Transcell  Intellectual Property and Interneuron  Intellectual Property
         in the Expanded  Field upon terms to be mutually  agreed.  In the event
         that  Merck  elects to  exercise  such  option,  Merck  shall so notify
         Transcell  in writing  prior to the end of the Option  Period,  and the
         parties shall negotiate in good faith to complete a mutually acceptable
         written license agreement not later than ninety (90) days after the end
         of the Option Period. Such agreement will describe the activities to be
         carried out by the Parties, the funding arrangements and any additional
         terms as agreed by the Parties.  Neither Transcell nor Interneuron will
         collaborate  with a third  party  in the  Expanded  Field,  or grant or
         engage in  negotiations to grant a license in the Expanded Field to any
         third party under the Transcell and Interneuron  Intellectual  Property
         during the period of such negotiations with Merck;  provided,  however,
         that  Transcell and  Interneuron  may hold  introductory  meetings of a
         general nature with third parties during such period.

3.4      Princeton  Agreements.  (a) With respect to the 1993 Princeton  License
         Agreement,  Merck  acknowledges that it is a sublicensee of Transcell's
         rights  under such  Agreement  to the extent  provided  in Section  3.1
         hereof, and Merck agrees to be bound by the terms thereof to the extent
         set forth in the Side  Agreement.  Except to the extent provided for in
         the Side Agreement,  Merck shall have no responsibility for payments to
         Princeton under the 1993 Princeton License Agreement.

         (b) With respect to the 1997 Princeton Research Agreement,  Interneuron
         agrees  to  exercise  its  right  under  such  Agreement  to  obtain an
         exclusive license to Princeton's  interest in Research  Information and
         Inventions  in a timely  manner  in  accordance  with the terms of such
         agreement  and to use  commercially  reasonable  efforts to negotiate a
         license which is consistent  with the terms of this Agreement and which
         will provide the broadest possible rights to such Research  Information
         and Inventions. Interneuron shall promptly provide Merck with a copy of
         any such license upon execution thereof,  and Merck shall automatically
         be deemed a  sublicensee  of  Interneuron's  rights  thereunder  to the
         extent  provided in Section 3.1 hereof.  Except to the extent  provided
         for in the Side  Agreement,  Merck  shall  have no  responsibility  for
         payments to Princeton under the 1997 Princeton  Research  Agreement and
         under any  license  agreement  entered  into  between  Interneuron  and
         Princeton pursuant thereto.

                                       14





3.5      Development and Commercialization.  Merck shall use reasonable efforts,
         consistent  with the usual  practice  followed by Merck in pursuing the
         commercialization  and marketing of pharmaceutical  products of similar
         market  potential,  at its own expense,  to develop and commercialize a
         Licensed  Product on a commercially  reasonable basis in such countries
         in the Territory where in Merck's opinion it is commercially  viable to
         do so;  provided,  that such countries  shall include the United States
         and at least one other Major Market Country.



                                   ARTICLE IV

                         CONFIDENTIALITY AND PUBLICATION
                         -------------------------------

4.1      Non-disclosure  and Non-Use  Obligations.  All Proprietary  Information
         disclosed by one Party to any other Party hereunder shall be maintained
         in  confidence  and shall not be disclosed to any non-party or used for
         any purpose  except as  expressly  permitted  herein  without the prior
         written consent of the disclosing  Party. The foregoing  non-disclosure
         and  non-use  obligations  shall  not  apply to the  extent  that  such
         Proprietary Information:

         (a)      is known by the  receiving  Party at the time of its  receipt,
                  and not through a prior disclosure by the disclosing Party, as
                  documented by business records;

         (b)      is properly in the public domain;

         (c)      is  subsequently  disclosed  to a  receiving  Party by a third
                  party who may lawfully do so and is not under an obligation of
                  confidentiality to the disclosing Party; or

         (d)      is  developed  by  the  receiving   Party   independently   of
                  Proprietary  Information  received  from the other  Party,  as
                  documented by research and development records.

4.2      Permitted  Disclosure  of  Proprietary   Information.   Notwithstanding
         Section 4.1, a Party receiving Proprietary Information of another Party
         may disclose such Proprietary Information:

         (a)      to  governmental  or  other  regulatory  agencies  in order to
                  obtain patents subject to this Agreement,  or to gain approval
                  to conduct clinical trials or to market Licensed Product,  but
                  such disclosure may be only to the extent reasonably necessary
                  to obtain such patents or authorizations;

         (b)      by Merck to its permitted sublicensees,  agents,  consultants,
                  Affiliates  and/or  other third  parties for the  research and
                  development,  manufacturing  and/or  marketing of the Licensed
                  Product (or for such  parties to determine  their  interest in
                  performing such  activities) in accordance with this Agreement
                  on the condition  that such third parties agree to be bound by
                  the confidentiality obligations contained this

                                       15





                  Agreement,  provided that the term of confidentiality for such
                  third parties shall be no less than seven (7) years; or

         (c)      if required to be disclosed  by law or court  order,  provided
                  that notice is promptly delivered to the non-disclosing  Party
                  in order to provide an  opportunity  to challenge or limit the
                  disclosure obligations;  provided,  however,  without limiting
                  any of the  foregoing,  it is  understood  that (i) any  Party
                  hereto,   including  any   Affiliate,   may  make   reasonable
                  disclosure  of this  Agreement,  and the  terms  hereof in any
                  filings required by the United States  Securities and Exchange
                  Commission,  subject  to review by the other  Parties  of such
                  proposed  disclosure and requests for  confidential  treatment
                  for certain  provisions  of this  Agreement,  as agreed by the
                  Parties.

4.3      Publication  and  Public  Disclosures.  (a)  Merck and  Transcell  each
         acknowledge  the other Party's  interest in  publishing  its results to
         obtain recognition  within the scientific  community and to advance the
         state of scientific  knowledge.  Each Party also  recognizes the mutual
         interest  in  obtaining  valid  patent  protection  and  in  protecting
         business interests and trade secret information.  Consequently,  either
         Party, its employees or consultants wishing to make a publication or to
         make an oral disclosure  shall deliver to the other Party a copy of the
         proposed  written  publication  or an outline of an oral  disclosure at
         least  forty-five  (45) days prior to  submission  for  publication  or
         presentation.  The reviewing  Party shall have the right (a) to propose
         modifications to the publication or oral disclosure for patent reasons,
         trade secret reasons or business reasons or (b) to request a reasonable
         delay in publication or oral disclosure in order to protect  patentable
         information. If the reviewing Party requests a delay, the publishing or
         disclosing Party shall delay submission or presentation for a period of
         sixty (60) days to enable patent  applications  protecting each Party's
         rights in such  information  to be filed in accordance  with Article VI
         below.  Upon  expiration of such sixty (60) days, the publishing  Party
         shall be free to proceed with the  publication or oral  disclosure.  If
         the reviewing Party requests  modifications  to the publication or oral
         disclosure, the publishing Party shall edit such publication to prevent
         disclosure of trade secret or proprietary business information prior to
         submission of the publication or prior to oral  disclosure,  subject to
         the  terms  of  the  Princeton   Agreements  and  the  Side  Agreement.
         Interneuron agrees promptly to forward to Merck for review any proposed
         publication  or other  disclosure by Princeton  (including  any student
         thesis or dissertation)  received by Interneuron  pursuant to Section 8
         of the 1997  Princeton  Research  Agreement  and  which is  subject  to
         Merck's  rights  hereunder and, upon Merck's  request,  to request that
         Princeton delay such  publication or  presentation  for a maximum of 60
         days to protect the patentability of any inventions  described therein,
         subject to the  provisions  of the Side  Agreement.  In addition,  upon
         Merck's request,  Interneuron  shall request that such a publication or
         presentation  be  altered,  or  not  made,  in  order  to  protect  the
         patentability  of  any  inventions   described   therein,   subject  to
         Princeton's  rights under the 1997 Princeton Research Agreement and the
         Side Agreement.

                                       16





         (b) Any Party  hereto,  including  any  Affiliate of a Party,  may make
         disclosure of the  existence of this  Agreement and the terms hereof in
         any  filings  required by the United  States  Securities  and  Exchange
         Commission,  provided  that  any  such  proposed  disclosure  shall  be
         submitted  to the other  Parties for prior  review  within a reasonable
         time in  advance of the filing of such  proposed  disclosure,  and such
         other  Parties may request  reasonable  modifications  to such proposed
         disclosure  for  patent  reasons,  trade  secret  reasons  or  business
         reasons.  The  Parties  shall use good  faith  efforts  (i) to  provide
         reasonable  time for prior review of proposed  disclosures  and (ii) to
         respond to requests for review of  disclosures  in a timely  manner.  A
         Party which has  complied  with this  Section  shall not be required to
         delay a  disclosure  if such  delay  would  cause a  violation  of law,
         regulation  or court  order.  Upon  execution  of this  Agreement,  the
         Parties may issue a press  release in the form  attached as  Attachment
         4.3. Any additional press releases or public announcements with respect
         to this  Agreement  or the  transactions  and  activities  contemplated
         herein  shall be at such time and in such manner as the  Parties  shall
         agree. Any information which has been previously  disclosed pursuant to
         the terms of this Section  4.3(b) shall be subject to expedited  review
         by  the  other  Party  prior  to  the  subsequent  disclosure  of  such
         information.  A  request  for  expedited  review  shall  (i)  state the
         proposed use of the information;  (ii) include a copy of the previously
         approved  disclosure of the  information;  and (iii) state the deadline
         for response.



                                    ARTICLE V

                         PAYMENTS; ROYALTIES AND REPORTS
                         -------------------------------

5.1      Commitment Fee and Option  Payment.  In  consideration  for Transcell's
         commitment to perform its  obligations  under the Research  Program and
         for  access  to  the  Transcell  Know-How  and  Patent  Assets  granted
         hereunder,  Merck shall pay to Transcell a non-  refundable  commitment
         fee of $1,500,000  within thirty (30) days after the Effective Date. In
         consideration for the option granted in Section 3.3 hereof, Merck shall
         pay to Transcell a non-refundable  Option Payment of $1,000,000  within
         thirty (30) days after the Effective Date.

5.2      Research Program Funding. In consideration for Transcell's  performance
         of its obligations  under the Research Program and subject to the terms
         and conditions contained herein, Merck shall pay Transcell:

         (a) During the First and Second Years of the Research  Program Term: an
         amount  equal  to  $750,000   per  year  payable  in  equal   quarterly
         installments  of  $187,500,  for 6 FTE's:  3 FTE's at  Transcell  and 3
         FTE's,  including time spent by Daniel Kahne,  at Princeton.  The first
         such  quarterly  installment  shall be due  within  30 days  after  the
         Effective  Date.  The  remaining  quarterly  installments  shall be due
         within  fifteen  (15)  days  after  the end of each  Calendar  Quarter,
         beginning October 15, 1997.

                                       17





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



         (b) For any  Additional  Year(s) of the Research  Program  Term: If the
         Research  Program  Term is extended for a third or  subsequent  year in
         accordance  with Section 2.10 above,  payments for such additional year
         or years shall be negotiated  annually,  based upon [______] per FTE at
         Transcell and [_______] per FTE at Princeton.

5.3      Milestone  Payments.  Subject to the terms and conditions  contained in
         this   Agreement,   Merck  shall  pay  to   Transcell   the   following
         non-refundable milestone payments, each milestone payment is to be made
         no more than once with  respect to the [*]  Research  Program  and once
         with respect to the [*] Research Program:

         (a)      $1,500,000 upon [*];

         (b)      $3,000,000 upon [*];

         (c)      $4,000,000 upon [*];

         (d)      $6,000,000 upon [*]; and

         (e)      $8,000,000 upon [*].

         5.3.1    Merck shall  notify  Transcell in writing  within  thirty (30)
                  days after the achievement of each milestone,  and such notice
                  shall be accompanied by payment of the  appropriate  milestone
                  payment.  The  milestone  payments  described  above  shall be
                  payable only upon the initial  achievement  of such  milestone
                  for  each of the [*]  Research  Program  and the [*]  Research
                  Program and no amounts shall be due  hereunder for  subsequent
                  or repeated  achievement of such milestones  within a Research
                  Program.

         5.3.2    Fifty  percent  (50%) of each  milestone  payment made for the
                  achievement of a milestone described in (c), (d) and (e) above
                  shall be credited against the royalties payable by Merck under
                  Section  5.4 for the  Compound  for which such  milestone  was
                  paid.

5.4      Royalties.

         5.4.1    Royalties   Payable  By  Merck.   Subject  to  the  terms  and
                  conditions of this Agreement,  for each Licensed Product Merck
                  shall  pay  to  Transcell  royalties  on a  country-by-country
                  basis:



                                       18





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.



                  (a) if Merck's  activities with respect to a Licensed  Product
                  or Compound would,  but for this  Agreement,  infringe or fall
                  within  the scope of a Valid  Patent  Claim or a  supplemental
                  protection certificate in the country of sale, then:

                           (i) for  annual  Net Sales of  Licensed  Products  by
                  Merck,  its Affiliates or  sublicensees  less than or equal to
                  [*],  an amount  equal to [*] percent [*] of such Net Sales in
                  such countries;

                           (ii) for that  amount of annual Net Sales of Licensed
                  Products by Merck, its Affiliates or sublicensees greater than
                  [*] and  less  than or equal to [*],  an  amount  equal to [*]
                  percent [*] of such Net Sales in such countries; and

                           (iii) for that amount of annual Net Sales of Licensed
                  Products by Merck, its Affiliates or sublicensees greater than
                  [*],  an amount  equal to [*] percent [*] of such Net Sales in
                  such countries; or

                  (b)      for sales other than those covered in Subsection 
                  5.4.1(a) above:

                           (i) for  annual  Net Sales of  Licensed  Products  by
                  Merck,  its Affiliates or  sublicensees  less than or equal to
                  [*],  an amount  equal to [*] percent [*] of such Net Sales in
                  such countries;

                           (ii) for that  amount of annual Net Sales of Licensed
                  Products by Merck, its Affiliates or sublicensees greater than
                  [*] and  less  than or equal to [*],  an  amount  equal to [*]
                  percent [*] of such Net Sales in such countries; and

                           (iii) for that amount of annual Net Sales of Licensed
                  Product by Merck, its Affiliates or sublicensees  greater than
                  [*],  an amount  equal to [*] percent [*] of such Net Sales in
                  such countries

         Royalties on each Licensed Product at the rate set forth above shall be
         effective as of the date of First  Commercial Sale of Licensed  Product
         in a country and shall  continue until either (i) the expiration of the
         last  applicable  patent on such  Licensed  Product or Compound in such
         country in the case of sales under  Subsection  5.4.1(a)  above or (ii)
         until the tenth (10th) anniversary of the First Commercial Sale in such
         country  in the case of  sales of  Licensed  Product  under  Subsection
         5.4.1(b) above, subject to the following conditions:

                  (x)     that only one royalty shall be due with respect to the
                  same unit of Licensed Product;

                                       19





                  (y)  that no  royalties  shall  be due  upon the sale or other
                  transfer among Merck, its Affiliates or  sublicensees,  but in
                  such  cases  the  royalty  shall  be due and  calculated  upon
                  Merck's or its Affiliate's or its  sublicensee's  Net Sales to
                  the first independent third party; and

                  (z) no royalties  shall accrue on the  disposition of Licensed
                  Product in reasonable  quantities by Merck,  Affiliates or its
                  sublicenses   as  samples   (promotion  or  otherwise)  or  as
                  donations  (for  example,   to  non-profit   institutions   or
                  government agencies for a non-commercial purpose).

         5.4.2    Managed  Pharmaceutical  Contract.  Merck  may  sell  Licensed
                  Products to an independent  third party (such as a retailer or
                  wholesaler) and may subsequently  perform services relating to
                  Licensed   Products  and  other   products   under  a  managed
                  pharmaceutical benefits contract or other similar contract. In
                  such cases,  it is agreed by the parties  that Net Sales shall
                  be based on the invoice  price to an  independent  retailer or
                  wholesaler,  as set  forth in the  definition  of Net Sales in
                  Article  I hereof,  notwithstanding  that  Merck  may  receive
                  compensation arising from the performance of such services.

         5.4.3    Change in Sales Practices. The parties acknowledge that during
                  the term of this  Agreement,  Merck's sales  practices for the
                  marketing and distribution of Licensed  Products may change to
                  the  extent  to  which  the  calculation  of the  payment  for
                  royalties  on  Net  Sales  may  become   impractical  or  even
                  impossible.  In such  event  the  parties  agree  to meet  and
                  discuss in good faith new ways of  compensating  Transcell  to
                  the extent currently contemplated under Section 5.4.1.

         5.4.4    Royalties for Bulk Compound.  In those cases where Merck sells
                  bulk Compound rather than a Licensed  Product in packaged form
                  to an independent  third party, and is unable to determine Net
                  Sales,  the  royalty  obligations  of this  Article V shall be
                  applicable to the bulk Compound sold.

         5.4.5    Compulsory  Licenses.  If a compulsory license is granted to a
                  Third Party with respect to Licensed Product in any country in
                  the Territory  with a royalty rate lower than the royalty rate
                  provided by Section  5.4.1.,  then the royalty rate to be paid
                  by Merck on Net  Sales in that  country  under  Section  5.4.1
                  shall be  reduced  to the rate  paid by the  compulsory  Third
                  Party licensee.

         5.4.6    Third Party  Licenses.  If one or more patent  licenses from a
                  third party or parties are required by Merck,  its  Affiliates
                  and  sublicensees  in order to develop,  make, have made, use,
                  sell or import  Compound or Licensed  Product in a  particular
                  country,  50% of any royalties  actually paid under such third
                  party  patent  licenses by Merck for sale of such  Compound or
                  Licensed  Product in a country for such Calendar Quarter shall
                  be  creditable  against  the  royalty  payments  to be paid to
                  Transcell by Merck with  respect to the sale of such  Licensed
                  Products in such country.

                                       20





5.5      Reports;  Payment of Royalty.  Following the First Commercial Sale of a
         Licensed  Product  and during the term of the  Agreement,  Merck  shall
         furnish to  Transcell  a  quarterly  written  report  for the  Calendar
         Quarter showing the sales of all Licensed  Products  subject to royalty
         payments sold by Merck,  its  Affiliates  and its  sublicensees  in the
         Territory  during the  reporting  period (and a  reconciliation  to Net
         Sales) and the royalties payable under this Agreement. Reports shall be
         due on the  thirtieth  (30th) day  following the close of each Calendar
         Quarter.  Royalties  shown to have accrued by each royalty report shall
         be due and payable on the date such royalty  report is due. Merck shall
         keep complete and accurate  records in sufficient  detail to enable the
         royalties payable hereunder to be determined.

5.6      Audits.

         (a)      Upon the written  request of Transcell  and not more than once
                  in each  Calendar  Year,  Merck  shall  permit an  independent
                  certified  public  accounting  firm of  nationally  recognized
                  standing  selected by Transcell and  reasonably  acceptable to
                  Merck,  to have access during normal business hours to such of
                  the records of Merck as may be reasonably  necessary to verify
                  the  accuracy of the royalty  reports  hereunder  for any year
                  ending not more than twenty-four (24) months prior to the date
                  of  such  request.  The  accounting  firm  shall  disclose  to
                  Transcell  only  whether  the  royalty  reports are correct or
                  incorrect   and   the   specific   details    concerning   any
                  discrepancies.

         (b)      If such  accounting  firm correctly  concludes that additional
                  royalties  were owed during such  period,  Merck shall pay the
                  additional  royalties  within  thirty  (30)  days of the  date
                  Transcell  delivers to Merck such  accounting  firm's  written
                  report  so  correctly  concluding.  The fees  charged  by such
                  accounting firm shall be paid by Transcell; provided, however,
                  that if an error in favor of Transcell in the -------- -------
                  payment of  royalties  of more than five  percent  (5%) of the
                  royalties  due  hereunder  for the period  being  reviewed  is
                  discovered,  then the fees and expenses of the accounting firm
                  shall be borne by Merck.

         (c)      Merck shall include in each sublicense  granted by it pursuant
                  to this  Agreement a provision  requiring the  sublicensee  to
                  make reports to Merck,  to keep and maintain  records of sales
                  made pursuant to such  sublicense  and to grant access to such
                  records  by  Transcell's  independent  accountant  to the same
                  extent  required  of  Merck  under  this  Agreement.  Upon the
                  expiration of twenty-four (24) months following the end of any
                  year,  the  calculation  of royalties  payable with respect to
                  such year shall be binding and conclusive upon Transcell,  and
                  Merck  and  its  sublicensees   shall  be  released  from  any
                  liability or accountability with respect to royalties for such
                  year.

         (d)      Transcell  shall treat all  financial  information  subject to
                  review  under  this  Section  5.6  or  under  any   sublicense
                  agreement in accordance with the confidentiality provisions of
                  this  Agreement,  and shall cause its accounting firm to enter
                  into an

                                       21





                  acceptable  confidentiality agreement with Merck obligating it
                  to  retain  all  such  financial   information  in  confidence
                  pursuant to such confidentiality agreement.

5.7      Payment  Exchange Rate. All payments to Transcell  under this Agreement
         shall  be made in  United  States  dollars  by bank  wire  transfer  in
         immediately  available  funds to such bank account in the United States
         designated  in writing by Transcell  from time to time.  In the case of
         sales  outside  the United  States,  the rate of exchange to be used in
         computing the amount of currency  equivalent  in United States  dollars
         due Transcell  shall be made at the rate of exchange  utilized by Merck
         in its  worldwide  accounting  system,  prevailing on the fourth to the
         last  business  day of the  Calendar  Quarter  to which  such  payments
         relate.  Such rate of exchange is that rate quoted by Reuters  Ltd. for
         the spot purchase of U.S. dollars at 7:15 a.m. Eastern Standard Time on
         such day.

5.8      Income  Tax  Withholding.   If  laws,  rules  or  regulations   require
         withholding  of income taxes or other taxes  imposed upon  payments set
         forth in this Article V, Merck shall make such withholding  payments as
         required and subtract such  withholding  payments from the payments set
         forth in this  Article  V.  Merck  shall  submit  appropriate  proof of
         payment  of the  withholding  taxes to  Transcell  within a  reasonable
         period  of time.  Merck  will use  efforts  consistent  with its  usual
         business  practices to ensure that any  withholding  taxes  imposed are
         reduced as far as possible  under the  provisions of the current or any
         future  double   taxation   treaties  or  agreements   between  foreign
         countries, and the Parties shall cooperate with each other with respect
         thereto,  with the appropriate  Party under the circumstance  providing
         the  documentation  required  under such treaty or  agreement  to claim
         benefits thereunder.



                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

6.1      Transcell  Representations  and  Warranties.  Transcell  represents and
         warrants to Merck that as of the date of this Agreement:

         (a)      to the best of Transcell's knowledge, without having conducted
                  an  investigation,  the Transcell  Patent Assets and Transcell
                  Know-How  are not  invalid  or  unenforceable,  in whole or in
                  part;

         (b)      it has the full right,  power and authority to enter into this
                  Agreement,  to perform the  Research  Program and to grant the
                  licenses granted under Article III hereof;

         (c)      it has  not  previously  assigned,  transferred,  conveyed  or
                  otherwise  encumbered  its right,  title and  interest  in the
                  Transcell Patent Assets or Transcell Know-How;

                                       22





         (d)      to the best of Transcell's knowledge, without having conducted
                  an  investigation,  it is the sole and  exclusive  owner of or
                  licensee  under the  Transcell  Patent  Assets  and  Transcell
                  Know-How,  all of  which  are free  and  clear  of any  liens,
                  charges and encumbrances, subject to the Princeton Agreements,
                  and,  other than the rights of Princeton and the United States
                  pursuant  to  the  Princeton  Agreements,   no  other  person,
                  corporate or other private entity,  or governmental  entity or
                  subdivision  thereof,  has any valid claim of  ownership  with
                  respect to the Transcell Patent Assets and Transcell Know-How,
                  whatsoever;

         (e)      to the best of Transcell's knowledge, without having conducted
                  an  investigation,  the licensed  Transcell  Patent Assets and
                  Transcell  Know-How  practiced as contemplated  herein and the
                  development,   manufacture,  use  and  sale  of  Compound  and
                  Licensed  Products do not infringe any patent  rights owned or
                  possessed by any third party;

         (f)      there are no claims,  judgments or settlements against or owed
                  by  Transcell  or  pending  or,  to the  best  of  Transcell's
                  knowledge,  threatened  claims or  litigation  relating to the
                  Transcell Patent Assets and Transcell Know-How;

         (g)      it has disclosed to Merck all relevant information known by it
                  regarding the Transcell  Patent Assets and Transcell  Know-How
                  reasonably  related to the activities  contemplated under this
                  Agreement; and

         (h)      the  copy of the  1993  Princeton  License  Agreement  and the
                  amendment  thereto  attached  hereto  is  true,  complete  and
                  correct  and there  have been no  further  amendments  to such
                  agreement,  and, to its  knowledge,  such agreement is in full
                  force and effect as of the date hereof.

6.2      Interneuron Representations and Warranties.  Interneuron represents and
         warrants to Merck that as of the date of this Agreement:

         (a)      it has the full right,  power and authority to enter into this
                  Agreement   and  subject  to  the  1997   Princeton   Research
                  Agreement,  to grant the licenses  granted  under  Article III
                  hereof;

         (b)      it has  not  previously  assigned,  transferred,  conveyed  or
                  otherwise  encumbered  its right,  title and  interest  in the
                  Interneuron Patent Assets or Interneuron Know- How;

         (c)      to  the  best  of  Interneuron's  knowledge,   without  having
                  conducted  an  investigation,  it has the sole  and  exclusive
                  right under the 1997 Research Agreement to obtain an exclusive
                  license under the  Interneuron  Patent Assets and  Interneuron
                  Know-How,  all of  which  are free  and  clear  of any  liens,
                  charges and encumbrances, subject to the Princeton Agreements,
                  and,  other than the rights of Princeton and the United States
                  pursuant to the Princeton Agreements, no other

                                       23





                  person,  corporate or other private  entity,  or  governmental
                  entity  or  subdivision   thereof,  has  any  valid  claim  of
                  ownership  with respect to the  Interneuron  Patent Assets and
                  Interneuron Know-How, whatsoever;

         (d)      to  the  best  of  Interneuron's  knowledge,   without  having
                  conducted an investigation,  the licensed  Interneuron  Patent
                  Assets and  Interneuron  Know-How  practiced  as  contemplated
                  herein  and the  development,  manufacture,  use  and  sale of
                  Compound  and  Licensed  Products do not  infringe  any patent
                  rights owned or possessed by any third party;

         (e)      there are no claims,  judgments or settlements against or owed
                  by  Interneuron  or pending  or, to the best of  Interneuron's
                  knowledge,  threatened  claims or  litigation  relating to the
                  Interneuron Patent Assets and Interneuron Know-How;

         (f)      it has disclosed to Merck all relevant information known by it
                  regarding  the  Interneuron   Patent  Assets  and  Interneuron
                  Know-How  reasonably  related to the  activities  contemplated
                  under this Agreement; and

         (g)      the copy of the 1997  Princeton  Research  Agreement  attached
                  hereto is true,  complete  and  correct and there have been no
                  amendments  to such  agreement,  and, to its  knowledge,  such
                  agreement is in full force and effect as of the date hereof.

6.3      General   Disclaimer.   THE  PATENT  ASSETS,   TRANSCELL  KNOW-HOW  AND
         INTERNEURON  KNOW-HOW  PROVIDED BY  LICENSORS TO MERCK ARE PROVIDED "AS
         IS" AND  LICENSORS  MAKE NO  REPRESENTATION  OR  WARRANTY  OF ANY KIND,
         EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING, WITHOUT LIMITATION, ANY
         REPRESENTATION OR WARRANTY WITH RESPECT TO THE VALUE, ADEQUACY, FREEDOM
         FROM FAULT, OR THE QUALITY, EFFICIENCY,  SUITABILITY,  CHARACTERISTICS,
         USEFULNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF, THE
         PATENT ASSETS,  TRANSCELL KNOW-HOW OR INTERNEURON KNOW-HOW, OR ANY DATA
         CONTAINED THEREIN.

6.4      Merck Representations and Warranties.  Merck represents and warrants to
         Transcell and Interneuron  that as of the date of this Agreement it has
         the full right, power and authority to enter into this Agreement and to
         perform the Research Program.



                                   ARTICLE VII

                                 PATENT MATTERS
                                 --------------

7.1      Filing,  Prosecution and Maintenance of Patents.  Each of Transcell and
         Interneuron agrees to file,  prosecute and maintain in the countries in
         the Territory listed on Schedule

                                       24





         7.1 hereto,  or such other  countries  as the  Parties may agree,  upon
         appropriate  consultation  with Merck,  the Transcell Patent Assets and
         the Interneuron  Patent Assets,  respectively,  licensed to Merck under
         this Agreement;  provided, however, (i) with respect to Transcell/Merck
         Joint Information and Inventions or Interneuron/Merck Joint Information
         and Inventions, Merck shall have the first right to file, prosecute and
         maintain the patent  applications  and (ii) if Transcell or Interneuron
         elects not to file a patent  application on Transcell  Information  and
         Inventions or Interneuron Information and Inventions,  Merck shall have
         the right to file, prosecute and maintain such patent application,  and
         Transcell or Interneuron,  as the case may be, shall cooperate fully in
         the filing and  prosecution  of such patents.  In each case, the filing
         Party shall give the  non-filing  Parties an  opportunity to review the
         text  of  the  application  before  filing,   shall  consult  with  the
         non-filing   Parties  with  respect  thereto,   and  shall  supply  the
         non-filing  Parties with a copy of the  application as filed,  together
         with notice of its filing date and serial number. Each Party shall keep
         the other Parties  advised of the status of the actual and  prospective
         patent filings and upon the request of another Party,  provide  advance
         copies of any papers related to the filing, prosecution and maintenance
         of such patent  filings.  Each Licensor  shall  promptly give notice to
         Merck of the  grant,  lapse,  revocation,  surrender,  invalidation  or
         abandonment  of any Patent  licensed or  sub-licensed  to Merck by such
         Licensor.  The Party that is the filing Party under this Section  shall
         be  responsible  for the payment of all costs and  expenses  related to
         such filing.

7.2      Right of Other  Parties to Prosecute  and Maintain  Patents.  Any Party
         having  the first  right to file,  prosecute  and  maintain  the patent
         applications  and patents  referred to in Section 7.1 shall give notice
         to the  other  Parties  of  any  desire  to  cease  prosecution  and/or
         maintenance of a patent constituting part of Patent Assets and, in such
         case,  shall  permit  the other  Parties,  at the other  Parties'  sole
         discretion,  to continue prosecution or maintenance at its own expense,
         subject to the Princeton Agreements and the Side Agreement.

7.3      Interference, Opposition, Reexamination and Reissue.

         (a)      A Licensor, within ten (10) days of learning of such an event,
                  shall   inform   Merck  of  any  request  for,  or  filing  or
                  declaration of, any interference,  opposition or reexamination
                  relating to Patent Assets.  Merck and such Licensor thereafter
                  shall  consult and  cooperate  fully to  determine a course of
                  action  with  respect to any such  proceeding  and shall agree
                  upon the Parties' rights of review and approval of submissions
                  relating to such proceeding  based upon the Parties'  relative
                  interests in the relevant portion of Patent Assets.

         (b)      A Licensor shall not institute any opposition,  reexamination,
                  or reissue  proceeding  relating to Patent Assets  without the
                  prior  written  consent  of  Merck,  which  consent  shall not
                  unreasonably be withheld or delayed.

         (c)      In connection with any interference,  opposition,  reissue, or
                  reexamination  proceeding relating to Patent Assets, Merck and
                  Licensors will cooperate fully

                                       25





                  and will provide each other with any information or assistance
                  that either reasonably may request. Licensors shall keep Merck
                  informed of  developments  in any such  action or  proceeding,
                  including,  to  the  extent  permissible,  the  status  of any
                  settlement  negotiations  and the terms of any  offer  related
                  thereto.

         (d)      Licensors   shall  bear  the  expense  of  any   interference,
                  opposition,  reexamination,  or reissue proceeding relating to
                  Patent Assets.

7.4      Enforcement and Defense.

         (a)      Each Party shall  promptly  give the other  Parties  notice of
                  either   any   infringement   of   Patent   Assets,   or   any
                  misappropriation   or  misuse   of   Transcell   Know-How   or
                  Interneuron  Know-How,  that comes to such Party's  attention.
                  The Parties shall  thereafter  consult and cooperate  fully to
                  determine a course of action,  including,  without limitation,
                  the commencement of legal action by any or all of the Parties.
                  However, Licensors, upon notice to Merck, shall have the first
                  right to initiate and prosecute such legal action at their own
                  expense and in the name of Transcell  and/or  Interneuron,  as
                  applicable,  and  Merck,  or to  control  the  defense  of any
                  declaratory   judgment   action   relating  to  Transcell  and
                  Interneuron  Intellectual  Property.  Licensors shall promptly
                  inform  Merck if both  Licensors  elect not to  exercise  such
                  first right,  and Merck thereafter shall have the right either
                  to  initiate  and  prosecute  such  action or to  control  the
                  defense  of such  declaratory  judgment  action in the name of
                  Merck and, if necessary, Transcell or Interneuron.

         (b)      If  Licensors   elect  not  to  initiate   and   prosecute  an
                  infringement  action as provided  in  Subsection  7.4(a),  and
                  Merck elects to do so, the cost of any  agreed-upon  course of
                  action,  including the costs of any legal action  commenced or
                  the defense of any declaratory judgment, shall be borne solely
                  by Merck.

         (c)      For any such  legal  action,  in the  event  that any Party is
                  unable to initiate or prosecute  such action solely in its own
                  name, the other Parties will join such action  voluntarily and
                  will  execute  and cause its  Affiliates  under its control to
                  execute all documents necessary for the Party to prosecute and
                  maintain such action. In connection with any such action,  the
                  Parties will cooperate  fully and will provide each other with
                  any  information  or  assistance  that either  reasonably  may
                  request.   Each  Party  shall  keep  the  other   informed  of
                  developments in any such action or proceeding,  including,  to
                  the extent  permissible  by law, the status of any  settlement
                  negotiations and the terms of any offer related thereto.

         (d)      Any  recovery  obtained by Merck or either  Licensor  shall be
                  shared as follows:

                  (i)      the Party that  initiated and  prosecuted  the action
                           shall recoup all of its costs and  expenses  incurred
                           in connection with the action,  whether by settlement
                           or otherwise;

                                       26





                  (ii)     the  other  Party then shall, to the extent possible,
                           recover its costs and expenses incurred in connection
                           with the action;

                  (iii)    if Licensors initiated and prosecuted the action, the
                           amount  of  any  recovery  remaining  then  shall  be
                           retained by Licensors; and

                  (iv)     if Merck  initiated and  prosecuted  the action,  the
                           amount of any recovery remaining shall be retained by
                           Merck except that  Licensors  shall receive a portion
                           equivalent to the royalties  they would have received
                           on such amount.

         (e)      Each  Licensor   shall  inform  Merck  of  any   certification
                  regarding any Patent Assets it has received pursuant to either
                  21 U.S.C.ss.ss.355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or under
                  Canada's Patented Medicines (Notice of Compliance) Regulations
                  Article  5 and  shall  provide  Merck  with  a  copy  of  such
                  certification within five (5) days of receipt.  Licensors' and
                  Merck's rights with respect to the initiation and  prosecution
                  of any legal action as a result of such  certification  or any
                  recovery  obtained as a result of such legal  action  shall be
                  allocated  as  defined  in  Subsections  7.4(a)  through  (d);
                  provided,  however,  that  Licensors  shall exercise the first
                  right to initiate  and  prosecute  any action and shall inform
                  Merck of such decision  within  fifteen days of receipt of the
                  certification, after which time, if Licensors have not advised
                  Merck  of their  intention  to  initiate  and  prosecute  such
                  action,  Merck shall have the right to initiate and  prosecute
                  such action.

7.5      Patent Term  Restoration.  The Parties  shall  cooperate  in  obtaining
         patent term  restoration or  supplemental  protection  certificates  or
         their equivalents in any country in the Territory where applicable.  If
         elections with respect to obtaining such patent term restoration are to
         be made,  Merck shall have the right to make the election and Licensors
         shall abide by such election.



                                  ARTICLE VIII

                              TERM AND TERMINATION

8.1      Term  and  Expiration.  This  Agreement  shall be  effective  as of the
         Effective Date and unless  terminated  earlier pursuant to Sections 8.2
         or 8.3 below, the term of this Agreement shall continue in effect until
         expiration of all royalty  obligations  hereunder.  Upon  expiration of
         this Agreement due to expiration of all royalty obligations  hereunder,
         Merck's  licenses  pursuant to Section 3.1 shall become fully  paid-up,
         perpetual licenses.

8.2      Termination by Notice. Notwithstanding anything contained herein to the
         contrary, Merck shall have the right to terminate this Agreement at any
         time by giving ninety (90)


                                       27





         days advance written notice to Transcell and Interneuron.  In the event
         of  such  termination,   (i)  the  rights  and  obligations  hereunder,
         including  any  payment  obligations  not  due  and  owing  as  of  the
         termination  date shall  terminate and (ii) Merck shall have no further
         rights with respect to Transcell  Intellectual Property and Interneuron
         Intellectual Property.

8.3      Termination.

         8.3.1    Termination for Cause.  Any Party may terminate this Agreement
                  by notice to the other  Parties at any time during the term of
                  this Agreement:

                  (a)      if  another  Party  is  in  breach  of  its  material
                           obligations  hereunder  by causes and reasons  within
                           its  control  and has not cured  such  breach  within
                           ninety (90) days after notice  requesting cure of the
                           breach; or

                  (b)      upon  the  filing  or   institution   of  bankruptcy,
                           reorganization,     liquidation    or    receivership
                           proceedings,  or upon an  assignment of a substantial
                           portion of the assets for the benefit of creditors by
                           another Party; provided,  however, in the case of any
                           involuntary   bankruptcy  proceeding  such  right  to
                           terminate  shall only become  effective  if the Party
                           consents  to  the  involuntary   bankruptcy  or  such
                           proceeding is not  dismissed  within ninety (90) days
                           after the filing thereof.

         8.3.2    Effect of Termination for Cause on License.

                  (a)      In the event that  either  Transcell  or  Interneuron
                           breaches its material obligations hereunder and Merck
                           notifies Transcell and Interneuron of the termination
                           of this Agreement under Section 8.3.1(a) or initiates
                           arbitration  against  Transcell  or  Interneuron  for
                           breach of this Agreement  pursuant to Section 9.6, or
                           both,  any  milestone or royalty  payments that Merck
                           may be required to pay pursuant to this Agreement and
                           that are not  subject to Section 8.4 shall be paid by
                           Merck  instead  into an escrow  account  pending  the
                           resolution of the  arbitration or other  agreement of
                           the Parties. If the arbitrators  determine that Merck
                           had the  right  to  terminate  this  Agreement  under
                           Section   8.3.1(a)   due  to  a  breach  of  material
                           obligations by Transcell or Interneuron which was not
                           cured as set forth therein, Merck's licenses pursuant
                           to this Agreement  shall become  perpetual  licenses,
                           and the royalty to be paid by Merck, if any, shall be
                           determined by the arbitrators. In addition, Licensors
                           shall,  within  one month  from  such  determination,
                           return or cause to be returned to Merck all  Licensed
                           Products,  Compounds, Know-How or other substances or
                           composition,  delivered or provided by Merck, as well
                           as any other materials and/or  documents  provided by
                           Merck in any medium.


                                       28





                  (b)      In  the  event  that  Merck   breaches  its  material
                           obligations  hereunder and Licensors  notify Merck of
                           the  termination  of  this  Agreement  under  Section
                           8.3.1(a) or initiate  arbitration  against  Merck for
                           breach of this Agreement  pursuant to Section 9.6, or
                           both,  Merck shall  continue to pay to Transcell  any
                           milestone  or  royalty  payments  that  Merck  may be
                           required to pay  pursuant to this  Agreement  pending
                           the resolution of the  arbitration or other agreement
                           of the Parties.  If the  arbitrators  determine  that
                           Licensors had the right to terminate  this  Agreement
                           under  Section  8.3.1(a)  due to a breach of material
                           obligations by Merck which was not cured as set forth
                           therein,  Licensors shall be entitled to any payments
                           then due or owing  under  this  Agreement  and  Merck
                           shall  have  no  further   rights  with   respect  to
                           Transcell   Intellectual   Property  or   Interneuron
                           Intellectual Property.  Merck shall, within one month
                           from  such  determination,  return  or  cause  to  be
                           returned  to   Licensors   all   Licensed   Products,
                           Compounds,    Know-How   or   other   substances   or
                           composition,  delivered or provided by Licensors,  as
                           well as any other materials and/or documents provided
                           by Licensors in any medium.

                  (c)      In the event Merck  terminates  this Agreement  under
                           Section  8.3.1(b)  or  this  Agreement  is  otherwise
                           terminated  under  8.3.1(b),  all rights and licenses
                           granted  pursuant to this  Agreement  are,  and shall
                           otherwise  be deemed to be, for  purposes  of Section
                           365(n) of the Bankruptcy Code,  licenses of rights to
                           "intellectual  property"  as  defined  under  Section
                           101(35A) of the  Bankruptcy  Code.  The Parties agree
                           that Merck,  as a licensee of such rights  under this
                           Agreement, shall retain and may fully exercise all of
                           its rights and elections  under the Bankruptcy  Code.
                           The Parties  further  agree that, in the event of the
                           commencement of a bankruptcy proceeding by or against
                           Transcell or Interneuron  under the Bankruptcy  Code,
                           Merck shall be entitled  to a complete  duplicate  of
                           (or  complete  access  to, as  appropriate)  any such
                           intellectual  property  and all  embodiments  of such
                           intellectual  property upon written request therefore
                           by  Merck.   Such   intellectual   property  and  all
                           embodiments  thereof  shall be promptly  delivered to
                           Merck (i) upon any such  commencement of a bankruptcy
                           proceeding upon written  request  therefore by Merck,
                           unless Transcell and Interneuron elect to continue to
                           perform  all of their  respective  obligations  under
                           this  Agreement  or (ii) if not  delivered  under (i)
                           above,  upon the rejection of this Agreement by or on
                           behalf of Transcell or  Interneuron,  as the case may
                           be, upon written request therefor by Merck.

8.4      Effect of Expiration or Termination.  Expiration or termination of this
         Agreement  shall not  relieve the  parties of any  obligation  accruing
         prior to such expiration or  termination,  and Merck shall be obligated
         to pay and shall pay to Transcell,  within thirty (30) calendar days of
         such  expiration  or  termination,  all payments and  royalties  due or
         accrued

                                       29





         pursuant to the terms of Article V herein. The provisions of Article IV
         shall survive the expiration or termination of this Agreement and shall
         continue in effect for seven (7) years from the date of  expiration  or
         termination.  Any  expiration or early  termination  of this  Agreement
         shall be  without  prejudice  to the  rights of any Party  against  the
         others accrued or accruing under this Agreement  prior to  termination,
         including the  obligation  to pay royalties for Licensed  Product(s) or
         Compound  sold  prior  to such  termination.  Upon  the  expiration  or
         termination of this Agreement other than pursuant to Section 8.3, Merck
         shall,  within one month from the date of termination,  return or cause
         to be returned to Licensors all Licensed Products,  Compounds, Know-How
         or other substances or composition, delivered or provided by Licensors,
         as well as any other materials and/or  documents  provided by Licensors
         in any medium and  Licensors  shall,  within one month from the date of
         termination,  return  or cause to be  returned  to Merck  all  Licensed
         Products,  Compounds,  Know-How  or other  substances  or  composition,
         delivered or provided by Merck, as well as any other  materials  and/or
         documents  provided  by  Merck in any  medium..  In  addition,  if this
         Agreement is  terminated  by Merck  pursuant to Section 8.2 for reasons
         other  then  concerns  regarding  the  safety  of a  Safety  Assessment
         Candidate,  Merck may, in its sole  discretion,  offer to Licensors the
         right to acquire the  information  and data  developed by Merck for the
         IND or NDA  with  respect  to such  Safety  Assessment  Candidate  upon
         mutually  agreeable  terms  and  for  reasonable   compensation  to  be
         negotiated in good faith.



                                   ARTICLE IX

                                  MISCELLANEOUS

9.1      Force  Majeure.  No Party  shall be held liable or  responsible  to the
         other  Parties nor be deemed to have  defaulted  under or breached  the
         Agreement for failure or delay in fulfilling or performing  any term of
         the  Agreement  when such failure or delay is caused by or results from
         causes beyond the reasonable  control of the affected Party  including,
         but not limited to, fire, flood, embargo, war, acts of war (whether war
         be declared  or not),  insurrection,  riot,  civil  commotion,  strike,
         lockout or other  labor  disturbance,  act of God or act,  omission  or
         delay in  acting  by any  governmental  authority  or one of the  other
         Parties.  The  affected  Party shall  notify the other  Parties of such
         force majeure circumstances as soon as reasonably practical.

9.2      Assignment. The Agreement may not be assigned or otherwise transferred,
         nor,  except  as  expressly  provided  hereunder,   may  any  right  or
         obligations  hereunder be assigned or  transferred,  by a Party without
         the consent of the other  Parties;  provided,  however,  that any Party
         may,  without such  consent,  assign the  Agreement  and its rights and
         obligations  hereunder  to an  Affiliate  or  in  connection  with  the
         transfer or sale of all or substantially all of its assets related to a
         Licensed  Product  or its  business,  or in the event of its  merger or
         consolidation  or  change  in  control  or  similar  transaction.   Any
         permitted  assignee shall assume all  obligations of its assignor under
         this Agreement.

                                       30





9.3      Severability. In the event that any of the provisions contained in this
         Agreement are held invalid,  illegal or  unenforceable  in any respect,
         the validity,  legality and enforceability of the remaining  provisions
         contained herein shall not in any way be affected or impaired  thereby,
         unless the absence of the invalidated provision(s) adversely affect the
         substantive  rights of the  parties.  The  Parties  shall  replace  the
         invalid,  illegal or unenforceable  provision(s) with valid,  legal and
         enforceable  provision(s)  which,  insofar as practical,  implement the
         purposes of this Agreement.

9.4      Notices.  All  notices or other  communications  which are  required or
         permitted  hereunder  shall be in writing and  sufficient  if delivered
         personally,  sent by  telecopier  (and  promptly  confirmed by personal
         delivery,  registered or certified mail or overnight courier),  sent by
         nationally-recognized  overnight  courier  or  sent  by  registered  or
         certified mail, postage prepaid, return receipt requested, addressed as
         follows:

                  if to Transcell, to:      Transcell Technologies Inc.
                                            8 Cedarbrook Drive
                                            Cranbury Junction, NJ  08512
                                            Attention: Chief Operating Officer
                                            Telecopier No.: 609-655-6930

         if to Interneuron to:              Interneuron Pharmaceuticals, Inc.
                                            One Ledgemont Center
                                            99 Hayden Avenue, Suite 340
                                            Lexington, MA  02173
                                            Attention:  President
                                            Telecopier No.:  617-674-2448

                  in either case
                  with copies to:           Bachner, Tally, Polevoy & Misher LLP
                                            380 Madison Avenue
                                            18th Floor
                                            New York, NY  10017
                                            Attention:  Jill M. Cohen
                                            Telecopier No.: 212-682-5729

                                            Lowe Price LeBlanc & Becker
                                            99 Canal Center Plaza
                                            Suite 300
                                            Alexandria, VA  22314
                                            Attention:  Gilberto M. Villacorta
                                            Telecopier No.:  703-684-1124

                  if to Merck, to:          Merck & Co., Inc.
                                            One Merck Drive

                                       31





                                            P.O. Box 100
                                            Whitehouse Station, NJ 08889-0100
                                            Attention:  Office of Secretary
                                            Telecopier No.: 908-735-1246
                  with a copy to:           Attention: Office of Assistant
                                                          General Counsel
                                            Telecopier No.: 908-735-1226

         or to such other address as the Party to whom notice is to be given may
         have furnished to the other Parties in writing in accordance  herewith.
         Any  such  communication  shall  be  deemed  to have  been  given  when
         delivered if  personally  delivered or sent by telecopier on a business
         day,   on   the    business    day   after    dispatch   if   sent   by
         nationally-recognized  overnight  courier and on the third business day
         following the date of mailing if sent by mail.

9.5      Applicable  Law. The  Agreement  shall be governed by and  construed in
         accordance  with the laws of the  State of New  Jersey  and the  United
         States without reference to any rules of conflict of laws or renvoi.

9.6      Dispute Resolution. The Parties agree to attempt initially to solve all
         claims,  disputes,  or  controversies  arising  under,  out  of,  or in
         connection with this Agreement by conducting  good faith  negotiations.
         If the Parties are unable to settle the matter between themselves,  the
         matter shall thereafter be resolved by alternative  dispute resolution,
         starting  with  mediation  and  including,  if  necessary,  a final and
         binding  arbitration.  Whenever  a  Party  shall  decide  to  institute
         arbitration proceedings, it shall give written notice to that effect to
         the other  Party.  The Party  giving such  notice  shall  refrain  from
         instituting the arbitration proceedings for a period of sixty (60) days
         following such notice.  During such period, the Parties shall make good
         faith efforts to amicably resolve the dispute without arbitration.  Any
         arbitration  hereunder  shall  be  conducted  under  the  rules  of the
         American  Arbitration  Association.  Each  such  arbitration  shall  be
         conducted  by a panel of three  arbitrators:  one  arbitrator  shall be
         appointed  by each of  Merck  and  Transcell  and the  third  shall  be
         appointed by the American Arbitration Association. Any such arbitration
         shall be held in New York,  New York.  The  arbitrators  shall have the
         authority to grant  specific  performance.  Judgment  upon the award so
         rendered may be entered in any court having jurisdiction or application
         may be made to such court for judicial  acceptance  of any award and an
         order of  enforcement,  as the case may be. In no event  shall a demand
         for  arbitration be made after the date when  institution of a legal or
         equitable  proceeding  based on such claim,  dispute or other matter in
         question would be barred by the applicable statute of limitations.

9.7      Entire  Agreement.  This Agreement and the Side  Agreement  contain the
         entire  understanding of the Parties with respect to the subject matter
         hereof.  All express or implied agreements and  understandings,  either
         oral or written,  heretofore  made are  expressly  merged in and made a
         part of this  Agreement.  This  Agreement  may be amended,  or any term
         hereof  modified,  only by a written  instrument  duly  executed by all
         Parties hereto.

                                       32





9.8      Headings.  The captions to the several Articles and Sections hereof are
         not a part of the Agreement,  but are merely guides or labels to assist
         in locating and reading the several Articles and Sections hereof.

9.9      Independent Contractors.  It is expressly agreed that the Parties shall
         be  independent  contractors  and that  the  relationship  between  the
         Parties shall not constitute a partnership, joint venture or agency. No
         Party shall have the authority to make any statements,  representations
         or  commitments  of any kind,  or to take any  action,  which  shall be
         binding on the other  Parties,  without the prior consent of such other
         Parties.

9.10     Waiver.  The  waiver by a Party  hereto of any right  hereunder  or the
         failure to perform or of a breach by another  Party shall not be deemed
         a waiver of any other right hereunder or of any other breach or failure
         by said other Party whether of a similar nature or otherwise.

9.11     Counterparts.   The   Agreement   may  be   executed  in  two  or  more
         counterparts,  each of which  shall be deemed an  original,  but all of
         which together shall constitute one and the same instrument.


                                       33





         IN WITNESS WHEREOF,  the Parties have executed this Agreement as of the
date first set forth above.



MERCK & CO., INC.                            TRANSCELL TECHNOLOGIES, INC.


BY:    /s/ Edward M. Scolnick                BY:    /s/ Vincent L. Fabiano
   ------------------------------------          -------------------------------
     Name:  Edward M. Scolnick               Name:   Vincent L. Fabiano
     Title: President,                       Title:  Executive Vice President
            Merck Research Laboratories              and Chief Operating Officer


                                             INTERNEURON PHARMACEUTICALS, INC.


                                             BY:    /s/ Glenn L. Cooper
                                                 -------------------------------
                                             Name:   Glenn L. Cooper, M.D.
                                             Title:  President and CEO


                                       34





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.


                                  Schedule 1.19
                            Interneuron Patent Assets

<TABLE>
<CAPTION>
=============================================================================================================
TITLE OF APPLICATION           DOCKET NO.      SERIAL NO.     FILING DATE          STATUS         PATENT NO.
=============================================================================================================
<S>                           <C>             <C>            <C>               <C>                  <C>  

New Application Regarding
    [*] Libraries             Unassigned      Unassigned     Not Yet Filed     In Preparation        N/A
-------------------------------------------------------------------------------------------------------------
</TABLE>







                                  SCHEDULE 1.25

                         LIST OF MAJOR MARKET COUNTRIES


                                  United States
                                 United Kingdom
                                     Germany
                                     France
                                      Italy
                                      Spain
                                      Japan






                                 ATTACHMENT 1.39

                                LICENSE AGREEMENT


         This  License  Agreement  (hereinafter  referred  to  as  the  "License
Agreement"), effective as of October 14, 1993, is by and between The Trustees of
PRINCETON UNIVERSITY,  a nonprofit,  private educational institution existing in
the State of New Jersey (hereinafter referred to as "PRINCETON"),  and TRANSCELL
TECHNOLOGIES,  INC., a corporation duly organized and existing under the laws of
the State of Delaware and having a principal  place of business at 2000 Cornwall
Road,  Monmouth  Junction,  New Jersey  08852  (hereinafter  referred  to as the
"LICENSEE").

         WHEREAS,    PRINCETON    and    INTERNEURON    PHARMACEUTICALS,    INC.
("INTERNEURON")  entered  into a  Research  Agreement  effective  July  1,  1991
(hereafter referred to as the "Research  Agreement" and attached,  hereto, along
with any addenda, as Appendix I), granting INTERNEURON a first option to acquire
a worldwide  license,  with the right to  sublicense,  under any  inventions and
confidential  information,  including  any patent  rights  which may be obtained
thereon, arising out of a Research Program supervised by Daniel Kahne, Ph.D., as
a Principal Investigator in the Department of Chemistry at PRINCETON.

         WHEREAS,  INTERNEURON,  on March  22,  1993,  exercised  the  option to
license the Kahne patent  application filed February 23, 1993, which is based on
inventions and confidential information arising out of the Research Program;

         WHEREAS,  said  Research  Agreement  and  all  the  rights  thereunder,
including the option to license the Kahne patent  application,  were assigned by
INTERNEURON  to LICENSEE on April 22, 1993 and  LICENSEE now desires to obtain a
license,  under the patent rights, upon the terms and conditions hereinafter set
forth; and

         WHEREAS,  LICENSEE has represented to PRINCETON, to induce PRINCETON to
enter into this License  Agreement,  that it shall commit  itself to a thorough,
vigorous and diligent  program of exploiting  said  inventions and  confidential
information,  including any patent rights which may be obtained thereon, so that
public utilization shall result therefrom.

         NOW, THEREFORE, it is agreed as follows:


                                        1





                                    ARTICLE 1

                                   DEFINITIONS

         For the purposes of this License  Agreement,  the  following  words and
phrases shall have the following meanings:

         1.1 "LICENSEE" shall mean TRANSCELL TECHNOLOGIES, INC., and any related
company or subsidiary  of LICENSEE,  the voting stock of which is at least fifty
percent (50%), directly or indirectly, owned or controlled by LICENSEE.

         1.2      "Patent Rights" shall mean:

                  1.2.1  United   States   Patent   Application   Serial  Number
08/021,391,  as set forth in Appendix II (hereinafter referred to as the "Patent
Rights Patent Application");

                  1.2.2  Any  other  United   States   and/or   foreign   patent
applications and/or patents, arising out of the Research Program as set forth in
the Research Agreement,  which may, by subsequent agreement between the parties,
be added to  Appendix  II  (hereinafter  referred  to as "Patent  Rights  Patent
Applications");

                  1.2.3 Any  later-filed  United  States and/or  foreign  patent
applications based on the patent  applications and/or patents listed in Appendix
II (including patent applications on any compounds or products made by using the
process  set  forth  in the  patent  application  listed  in  Appendix  II),  or
corresponding  thereto,  including  any  continuations,   continuations-in-part,
divisionals, reissues, reexaminations, or extensions thereof, arising out of the
Research Program as set forth in the Research Agreement (hereinafter referred to
as the "Patent Rights Patent Application"); and

                  1.2.4 Any United States and/or  foreign  patents  issuing from
any of the foregoing (hereinafter referred to as the "Patent Rights Patents").

         1.3      "Licensed Product(s)" shall mean any product which:

                  (a) is  covered  in  whole or in part by (i) a  pending  claim
contained  in a Patent  Rights  Patent  Application  in the country in which the
Licensed  Product(s) is made,  used or sold, or (ii) a valid and unexpired claim
contained  in a Patent  Rights  Patent  in the  country  in which  the  Licensed
Product(s) is made, used or sold;

                  (b) is  manufactured  by using a process  which is  covered in
whole or in part by (i) a pending  claim  contained  in a Patent  Rights  Patent
Application in the country in which the

                                        2





Licensed  Process(es) is used or (ii) a valid and unexpired claim contained in a
Patent Rights Patent in the country in which the Licensed Process(es) is used;

                  (c) is used according to a method which is covered in whole or
in part by (i) a pending claim  contained in a Patent Rights Patent  Application
in the  country in which the  Licensed  Process(es)  is used or (ii) a valid and
unexpired  claim contained in a Patent Rights Patent in the country in which the
Licensed Process(es) is used.

         1.4 "Licensed  Process(es)" shall mean any process which is covered, in
whole or in part,  by (i) a pending  claim  contained in a Patent  Rights Patent
Application  or (ii) a valid and  unexpired  claim  contained in a Patent Rights
Patent.

         1.5      "Net Revenues" shall mean the sum of (a) and (b) below:

                  (a) All  amounts  actually  received by LICENSEE on account of
billings by LICENSEE for Licensed  Product(s) sold by LICENSEE,  less the sum of
the following:

                           (i)       Discounts and free goods allowed in amounts
customary in the trade;

                           (ii)       Sales,  tariff  duties  and/or  use  taxes
directly imposed and with reference to particular sales;

                           (iii)     Outbound transportation prepaid or allowed;

                           (iv)      Amounts allowed or credited on returns;

                           (v)       Actual losses incurred due to changes in
foreign currency exchange rates.

         No deductions shall be made for commissions paid to individuals whether
they be with independent sales agencies or regularly employed by LICENSEE and on
its payroll, or for cost of collections.

                  (b)   Royalties   actually   received  by  LICENSEE  from  its
sublicensees  on account of their sales of Licensed  Products which, at the time
the  sublicense  was entered into,  had either (i) been developed by LICENSEE to
the stage where they were  substantially  ready for sale and  marketing  or (ii)
were  pharmaceutical  products  which had entered  Phase II clinical  testing or
(iii) were products on which LICENSEE had expended  $1,000,000 or more in direct
development costs.


                                        3





         Net Revenues shall not include amounts  received by LICENSEE as payment
for product development services or other services rendered by LICENSEE.

         1.6 "Net Ancillary  Product  Royalties"  shall mean royalties  actually
received by LICENSEE from its sublicensees on account of their sales of Licensed
Products other than the Licensed Products referred to in Paragraph 1.5.


                                    ARTICLE 2

                                      GRANT

         2.1  PRINCETON  hereby  grants to  LICENSEE  an  exclusive  (even as to
PRINCETON)  worldwide  license under the Patent  Rights and to make,  have made,
use,  lease,  and/or sell any  Licensed  Products  and to practice  the Licensed
Processes,  to the full end of the term for which the Patent Rights are granted,
unless sooner  terminated as hereinafter  provided,  said license to include the
right to sublicense.

         2.2 LICENSEE  agrees that any  sublicenses  granted by it shall provide
for  privity  of  contract  between  PRINCETON  and  sublicensee  such  that the
obligations of this License  Agreement  shall be binding upon the sublicensee as
if it were in the place of LICENSEE,  except that each sublicensee shall pay its
royalties  to  LICENSEE.  LICENSEE  further  agrees that a copy of this  License
Agreement  shall be attached to, and made a part of, any  sublicense  agreement,
which shall be forwarded to PRINCETON upon execution.

         2.3  LICENSEE  agrees to forward to  PRINCETON  annually a copy of such
reports  received from any  sublicensee  as may be pertinent to an accounting of
royalties.

         2.4 LICENSEE agrees that Licensed Products leased or sold in the United
States shall be manufactured substantially in the United States.


                                    ARTICLE 3

                                  DUE DILIGENCE

         3.1 LICENSEE shall use its best efforts to  commercialize  the Licensed
Products and/or  Licensed  Processes  through a thorough,  vigorous and diligent
program for exploitation of the Patent Rights.


                                        4





         3.2   In  addition  to the obligations of Paragraph 3.1, LICENSEE shall
adhere to the following milestones:

                  3.2.1 Within six (6) months from  demonstrating the utility of
the technology  described in the Patent Rights by successfully  synthesizing two
complicated  oligosaccharides on the solid phase such as a derivative of the GMI
ganglioside and one other biologically important oligosaccharide, LICENSEE shall
develop and submit to  PRINCETON  a business  plan  setting  forth the amount of
money,  number and kind of  personnel,  and time,  budgeted and planned for each
phase of the development of Licensed Products and/or Licensed Processes.

                  3.2.2  Within  three  (3)  months  of  the  submission  of the
business plan, LICENSEE shall meet with PRINCETON to discuss further milestones,
and  LICENSEE  shall  establish  further   reasonable   milestones  as  soon  as
practicable thereafter.

                  3.2.3   Commencing   by  January  31   following   the  second
anniversary of the Effective Date of this License Agreement and by January 31 of
each  succeeding  year  during  which  this  License   agreement  has  not  been
terminated,  LICENSEE shall provide to PRINCETON a written report  outlining the
development  plan for the  technology for the following year and a brief written
summary of the  developmental  activities of the previous year.  Such report and
summary  shall  include  a review  of the  milestones  established  pursuant  to
Paragraph  3.2.2  and  may  include   proposed  changes  thereto  based  on  the
development activities and other relevant information.  LICENSEE shall meet with
PRINCETON  to discuss the report and  summary,  and  LICENSEE  shall  revise the
milestones,  or  establish  new  ones,  as may  be  appropriate  following  such
discussions.

         3.3  LICENSEE's  failure to perform in  accordance  with  Paragraph 3.1
shall  constitute a material  breach or default for purposes of the  termination
provisions of Paragraph 7.3.

         3.4 If  LICENSEE  fails to meet the  milestone  set forth in  Paragraph
3.2.1 or any  milestones  established  pursuant  to  Paragraph  3.2.2 or  3.2.3,
PRINCETON  and  LICENSEE  shall  engage in god faith  negotiations  to establish
substitute  milestones,  on the  basis  of the  development  work  that has been
completed  to date,  the  prospectus  and  expected  time  and cost for  further
development,  marketing  potential for resulting  products,  and other  relevant
factors.  Any material  failure by LICENSEE to meet  milestones  to which it has
agreed,  except where such failure was not within LICENSEE's reasonable control,
and any  failure by LICENSEE  to engage in good faith  negotiations  relating to
milestones,  as provided  herein,  shall constitute a material breach or default
for purposes of the termination provisions of Paragraph 7.3.


                                        5






                                    ARTICLE 4

                                    ROYALTIES

         4.1 For the rights, privileges and license granted hereunder,  LICENSEE
shall pay to PRINCETON, as set forth below, to the end of the term of the Patent
Rights or until  this  License  Agreement  shall be  terminated  as  hereinafter
provided:

                  4.1.1  A  license  issue  fee  of  fifteen   thousand  dollars
($15,000),  which license  issue fee shall be deemed earned and due  immediately
upon the execution of this License Agreement.

                  4.1.2 A royalty in an amount equal to (a) four percent  (4.0%)
of Net Revenues up to Five Million  Dollars  ($5,000,000)  in any calendar year;
and (b) a royalty in an amount  equal to three  percent  (3.0%) of Net  Revenues
over Five Million Dollars, but less than Ten Million Dollars  ($10,000,000),  in
any calendar year; and (c) a royalty in an amount equal to two percent (2.0%) of
Net Revenues over Ten Million Dollars ($10,000,00) in any calendar year;

                  4.1.3 A royalty in an amount equal to (a) fifty  percent (50%)
of Net  Ancillary  Product  Royalties  where the royalty rate to LICENSEE is ten
percent (10%) or more of the sublicensees'  sales or revenues;  (b) a royalty in
an amount equal to forty percent (40%) of Net Ancillary  Product Royalties where
the  royalty  rate to LICENSEE  is five  percent  (5%) or more but less than ten
percent (10%) of the  sublicensees'  sales or revenues;  and (c) a royalty in an
amount equal to thirty percent (30%) of Net Ancillary  Product  royalties  where
the royalty rate to LICENSEE is less than five percent (5%) of the sublicensees'
sales or revenues.

                  4.1.4  Up to fifty  percent  (50%)  of any  royalties  paid by
LICENSEE to a third party, in any calendar year, as a condition of utilizing the
Licensed Patents or the Licensed Processes, may be deducted from the amounts due
under Paragraphs 4.1.2 and 4.1.3.

                  4.1.5  In  the  event  that  LICENSEE's   royalty  payment  to
PRINCETON  hereunder for licensed  operation  during the calendar year 1999, and
each year thereafter in which this License  Agreement is in effect and there are
any Licensed  Products or Licensed  Processes,  falls below One Hundred Thousand
Dollars  ($100,000),  LICENSEE shall, with it last report for said years, pay to
PRINCETON,  in  addition  to the  royalty  payments  provided  in the  foregoing
paragraphs, an amount sufficient to attain such annual $100,000 amount.


                                        6





         4.2 In  addition  to the  foregoing  royalties,  LICENSEE  shall pay to
PRINCETON License Maintenance Fees of Twenty-Five Thousand Dollars ($25,000) for
each of 1995 and 1996 and Fifty Thousand Dollars  ($50,000) for each of 1997 and
1998.  Such  payments will be made with the first  quarterly  report for each of
such years pursuant to Paragraph 5.2.

         4.3 No multiple  royalties  shall be payable  because the use, lease or
sale of any of the Licensed  Products or the practice of the Licensed  Processes
is, or shall be, covered by more than one claim  contained in the Patent Rights.
No royalties  shall be payable under this License  Agreement with respect to any
Net  Revenues or Net  Ancillary  Product  Royalties if a royalty is also payable
thereon  to  PRINCETON  under  the  License   Agreement  between  PRINCETON  and
INTERNEURON effective as of January 1, 1992.

         4.4  Royalty  payments  shall  be  paid in  United  States  dollars  at
Princeton,  New  Jersey  or at such  other  place as  PRINCETON  may  reasonably
designate  consistent with the laws and  regulations  controlling in any foreign
country.  Any  withholding  taxes  which  LICENSEE  shall be  required by law to
withhold on remittance of the royalty  payments shall be deducted from royalties
paid to  PRINCETON.  LICENSEE  shall furnish  PRINCETON  with copies of official
receipts  for such  taxes.  If any  currency  conversion  shall be  required  in
connection with the payment of royalties  hereunder,  such  conversion  shall be
made by using the  exchange  rate at the date of  remittance  of said payment to
LICENSEE.


                                    ARTICLE 5

                               REPORTS AND RECORDS


         5.1  LICENSEE  shall  keep  full,  true and  accurate  books of account
containing all particulars  that may be necessary for the purpose of showing the
amount  payable  to  PRINCETON  by way of royalty  as  aforesaid.  Said books of
account  shall be kept at  LICENSEE's  principal  place of business and shall be
maintained in accordance with generally accepted  accounting  principles (GAAP).
Said books and the  supporting  data shall be open,  upon  reasonable  notice to
LICENSEE and no more than twice per calendar year, for five (5) years  following
the end of the  calendar  year to which  they  pertain,  for  inspection  by the
PRINCETON  Internal Audit Division  and/or by an  independent  certified  public
accountant employed by PRINCETON, to which LICENSEE has no reasonable objection,
for the purpose of verifying LICENSEE's royalty statement or compliance in other
respects with this License Agreement.


                                        7





         5.2  LICENSEE,  within sixty (60) days after the end of each quarter of
each calendar year, shall deliver to PRINCETON true and accurate reports, giving
such  particulars  of the business  conducted by LICENSEE  during the  preceding
quarter  under  this  License  Agreement  as shall  be  pertinent  to a  royalty
accounting hereunder. These shall include at least the following:

                  (a)      All Licensed Products leased or sold, by or for
LICENSEE or its sublicensees;

                  (b)      Total amounts  received for Licensed  Products leased
or sold by LICENSEE;

                  (c)      Deductions  applicable as provided in the  definition
of Net Revenues;

                  (d)      Total   royalties  due  to  PRINCETON  based  on  Net
Revenues of LICENSEE;

                  (e)      Names and  addresses  of all  sublicensees  of Patent
Rights of LICENSEE, and the applicable royalty rates for each sublicense;

                  (f)      Net Ancillary Product Royalties  received by LICENSEE
from sublicensees where the royalty rate to LICENSEE is (i) 10% or more; (ii) 5%
or more but less than 10%;  (ii) 5% or more but less  than 10%;  and (iii)  less
than 5%;

                  (g)      Total   royalties  due  to  PRINCETON  based  on  Net
Ancillary Product Royalties of LICENSEE;

                  (h)      On an annual basis, LICENSEE's annual report.

         5.3 With each such report  submitted,  LICENSEE  shall pay to PRINCETON
the  royalties  due and payable  under this License  Agreement  provided that no
payment  to  PRINCETON  shall be payable  in the event  that the  remittance  of
royalties  from  foreign  countries  to the  accounts  of LICENSEE in the United
States  shall be blocked  by  exchange  controls  in  foreign  countries,  which
exchange  controls are beyond the control of LICENSEE.  If no royalties shall be
due, LICENSEE shall so report.


                                    ARTICLE 6

                               PATENT PROSECUTION

         In  accordance  with  Paragraph  11.4 of the  Research  Agreement,  the
LICENSEE,  at its own expense and utilizing the Patent  Attorneys of its choice,
shall have the sole right and  responsibility for the filing,  prosecution,  and
maintenance of

                                        8





any patent  applications and patents  contained in the Patent Rights;  provided,
however,  that PRINCETON  shall have the right to approve  LICENSEE's  choice of
Patent Attorneys,  said approval not to be unreasonably  withheld.  LICENSEE, or
its patent counsel,  shall provide  PRINCETON with copies of all  correspondence
and  documents  filed  with,  or received  from,  the United  States  Patent and
Trademark  Office or any foreign  patent  office or patent  agent.  In addition,
LICENSEE  agrees that any and all official or "ribbon"  copies of issued patents
shall be forwarded to, and retained by, PRINCETON.


                                    ARTICLE 7

                                   TERMINATION

         7.1 If LICENSEE  shall  become  bankrupt  or insolvent, or shall file a
petition in  bankruptcy,  or if the business of LICENSEE  shall be placed in the
hands of a receiver,  assignee or trustee for the benefit of creditors,  whether
by the  voluntary  act of LICENSEE or otherwise,  this License  Agreement  shall
automatically terminate.

         7.2 Should  LICENSEE  fail in its payment to PRINCETON of royalties due
in accordance with the terms of this License Agreement, PRINCETON shall have the
right to serve notice upon LICENSEE, by certified mail to the address designated
in Article 14 hereof,  of its  intention  to terminate  this  License  Agreement
within  thirty  (30) days after  receipt of said  notice of  termination  unless
LICENSEE  shall pay to  PRINCETON,  within the thirty (30) day period,  all such
royalties due and payable. Upon the expiration of the thirty (30) day period, if
LICENSEE  shall not have paid all such  royalties  due and  payable,  the right,
privileges and license granted hereunder shall thereupon immediately terminate.

         7.3 Upon any material  breach or default of this  License  Agreement by
LICENSEE,  other  than  those  occurrences  set  out in  Paragraphs  7.1 and 7.2
hereinabove,  which shall always take precedence in that order over any material
breach or default  referred to in this Paragraph 7.3,  PRINCETON  shall have the
right to terminate this License Agreement and the rights, privileges and license
granted  hereunder by ninety (90) days' notice to LICENSEE by certified  mail to
the address  designated  in Article 14 hereof.  Such  termination  shall  become
effective  unless  LICENSEE shall have cured any such breach or default prior to
the  expiration  of the  ninety  (90) day period  from  receipt of the notice of
termination.

         7.4 LICENSEE shall have the right to terminate  this License  Agreement
at any time on six (6) months' notice by certified mail


                                        9





to  PRINCETON,  in whole or with respect to  designated  countries or designated
Patent Rights, Licensed Products or Licensed Processes.

         7.5 Upon termination of this License Agreement for any reason,  nothing
herein  shall be  construed to release  either  party from any  obligation  that
matured prior to the effective  date of such  termination.  LICENSEE  and/or any
sublicensee thereof may, however,  after the effective date of such termination,
sell all Licensed  Products,  and complete  Licensed  Products in the process of
manufacture at the time of such  termination,  and sell the same,  provided that
LICENSEE  shall pay to PRINCETON the royalties  thereon as required by Article 4
of this License  Agreement  and shall  submit the reports  required by Article 5
hereof on the sales of Licensed Products.


                                    ARTICLE 8

                                   ARBITRATION

         8.1 Except as to issues  relating to the validity,  enforceability,  or
infringement of any patent  contained in the Patent Rights  licensed  hereunder,
any and all  claims,  disputes or  controversies  arising  under,  out of, or in
connection  with this License  Agreement,  which have not been  resolved by good
faith negotiations  between the parties,  shall be resolved by final and binding
arbitration in Princeton, New Jersey under the rules of the American Arbitration
Association  then in  effect.  The  arbitrators  shall  have no power to add to,
subtract  from,  or  modify  any of the  terms  or  conditions  of this  License
Agreement.  Any award  rendered  in such  arbitration  may be enforced by either
party in either the state or federal courts of New Jersey, to whose jurisdiction
for such purposes,  PRINCETON and LICENSEE each hereby irrevocably  consents and
submits.

         8.2  Any  claim,  dispute,  or  controversy  concerning  the  validity,
enforceability,  or  infringement  of any patent  contained in the Patent Rights
licensed hereunder shall be resolved in any court having jurisdiction thereof.

         8.3 In the event that, in any arbitration  proceeding,  any issue shall
arise  concerning the validity,  enforceability,  or  infringement of any patent
contained in the Patent Rights licensed hereunder, the arbitrators shall, to the
extent  possible,  resolve all issues other than validity,  enforceability,  and
infringement;  in any event,  the  arbitrators  shall not delay the  arbitration
proceeding  for the purpose of  obtaining or  permitting  either party to obtain
judicial  resolution  of such issues,  unless an order  staying the  arbitration
proceeding shall be entered by a court of competent jurisdiction. Neither party


                                       10





shall raise any issue concerning the validity,  enforceability,  or infringement
of any  patent  contained  in  the  Patent  Rights  licensed  hereunder,  in any
proceeding to enforce any  arbitration  award  hereunder,  or in any  proceeding
otherwise arising out of any such arbitration award.


                                    ARTICLE 9

                         INFRINGEMENT AND OTHER ACTIONS

         9.1 LICENSEE and PRINCETON shall promptly  provide  written notice,  to
the other  party,  of any  alleged  infringement  by a third party of the Patent
Rights  and  provide  such  other  party  with any  available  evidence  of such
infringement.

         9.2 During the term of this  Agreement,  LICENSEE shall have the right,
but not the  obligation,  to  prosecute  and/or  defend,  at its own expense and
utilizing  counsel of its choice,  any infringement of, and/or challenge to, the
Patent  Rights.  In  furtherance  of such right,  PRINCETON  hereby  agrees that
LICENSEE  may join  PRINCETON  as a party in any such suit,  without  expense to
PRINCETON. No settlement,  consent judgment or other voluntary final disposition
of any such suit may be entered  into  without the consent of  PRINCETON,  which
consent shall not unreasonably be withheld.  LICENSEE shall indemnify  PRINCETON
against any order for costs that may be made against PRINCETON in any such suit.

         9.3 In the event that LICENSEE shall undertake the  enforcement  and/or
defense of the Patent  Rights,  as  provided  in  Paragraph  9.2,  LICENSEE  may
withhold up to fifty  percent (50%) of the royalties  otherwise  thereafter  due
PRINCETON and apply the same toward  reimbursement  of its  expenses,  including
attorneys' fees, in connection  therewith.  Any recovery of damages by LICENSEE,
in any such suit,  shall be applied first in  satisfaction  of any  unreimbursed
expenses  and legal  fees of  LICENSEE  relating  to the suit,  and next  toward
reimbursement  of PRINCETON for any  royalties  past due or withheld and applied
pursuant to this paragraph.  The balance  remaining from any such recovery shall
be divided equally between LICENSEE and PRINCETON.

         9.4 If within  six (6) months  after  receiving  notice of any  alleged
infringement,  LICENSEE shall have been  unsuccessful  in persuading the alleged
infringer  to  desist,  or shall not have  brought  and shall not be  diligently
prosecuting an infringement  action, or if LICENSEE shall notify  PRINCETON,  at
any time prior  thereto,  of its intention not to bring suit against the alleged
infringer,  then, and in those events only,  PRINCETON shall have the right, but
not the obligation,  to prosecute,  at its own expense and utilizing  counsel of
its choice,  any infringement of the Patent Rights,  and PRINCETON may, for such
purposes, join the

                                       11





LICENSEE as a party plaintiff.  The total cost of any such  infringement  action
commenced  solely by PRINCETON  shall be borne by PRINCETON and PRINCETON  shall
keep any recovery or damages for past infringement derived therefrom.

         9.5 In any suit to enforce and/or defend the Patent Rights  pursuant to
this  License  Agreement,  the party not in control of such suit  shall,  at the
request and expense of the controlling party,  cooperate in all respects and, to
the  extent  possible,  have  its  employees  testify  when  requested  and make
available  relevant records,  papers,  information,  samples,  specimens and the
like.


                                   ARTICLE 10

                                PRODUCT LIABILITY

         10.1 PRINCETON,  by this License Agreement,  makes no representation as
to the  patentability  and/or breadth of the inventions  contained in the Patent
Rights.  PRINCETON  by this  License  Agreement  makes no  representation  as to
patents  now held or which  will be held by others in the field of the  Licensed
Products or Licensed Process for a particular purpose.

         10.2 LICENSEE agrees to defend,  indemnify, and hold PRINCETON harmless
from and against all liability,  demands,  damages, expense or losses for death,
personal  injury,  illness or property damage arising (a) out of use by LICENSEE
or its  transferees of inventions  licensed or information  furnished under this
License Agreement,  or (b) out of any use, sale or other disposition by LICENSEE
or its transferees of products made by use of such inventions or information. As
used in this  clause,  "PRINCETON"  includes  its  Trustees,  Officers,  Agents,
Employees and Students and "LICENSEE"  includes its Affiliates,  Contractors and
Sub-Contractors.

         10.3  In  discharge  of  the  above,  LICENSEE  will  maintain  general
liability  insurance in the amount of at least One Million Dollars  ($1,000,000)
per  occurrence,  with an appropriate  deductible,  if possible of not more than
$10,000  per  occurrence,  with such  insurers  and on such  terms as  PRINCETON
approves in writing,  against damage to, or destruction of, property, and injury
to, or death of,  individuals,  and against  such other risks as  PRINCETON  may
reasonably  request  arising out of, or in connection  with, any of the Licensed
Products  or  Licensed  Process.  PRINCETON,  and its  officers,  trustees,  and
employees will be named insureds under all such  insurance.  Such insurance will
also provide that PRINCETON will be given notice of any modification thereof and
at least ten (10) days prior written notice of  cancellation  or termination and
the reason therefor.

                                       12





LICENSEE will furnish PRINCETON,  upon request,  written  confirmation issued by
the insurer or an  independent  insurance  agent  confirming  that  insurance is
maintained in accordance with the above requirements.


                                   ARTICLE 11

                                   ASSIGNMENT

         11.1 LICENSEE may assign or otherwise  transfer this License  Agreement
and the license  granted  hereunder  and the rights  acquired by it hereunder so
long as such  assignment  or  transfer  shall  be to a  subsidiary  or  shall be
accompanied  by a sale or other transfer of LICENSEE's  entire  business or that
part of LICENSEE's business to which the license granted hereunder relates.

         11.2  LICENSEE  shall give  PRINCETON  thirty  (30) days prior  written
notice  within which to approve,  or  reasonably  object to, such  assignment or
transfer. If within thirty (30) days after the giving of such notice, no written
objection is received by LICENSEE,  PRINCETON  shall be deemed to have  approved
such assignment or transfer; provided, however, PRINCETON shall not be deemed to
have  approved such  assignment  or transfer  unless such assignee or transferee
shall have  agreed in writing  to be bound by the terms and  conditions  of this
License  Agreement.  Upon such  assignment  or transfer  and  agreement  by such
assignee or  transferee,  the term  LICENSEE,  as used  herein,  shall mean such
assignee or transferee.  If LICENSEE shall sell or otherwise transfer its entire
business  or that part of its  business  to which  the  license  granted  hereby
relates and the  transferee  shall not have agreed in writing to be bound by the
terms and  conditions  of this License  Agreement,  or new terms and  conditions
shall not have agreed in writing to be bound by the terms and conditions of this
License  Agreement,  or new terms and conditions  shall not have been reasonably
agreed upon within  sixty (60) days of such sale or  transfer,  PRINCETON  shall
have the right to terminate this License Agreement.


                                   ARTICLE 12

                                NON-USE OF NAMES

         LICENSEE shall not use the name of PRINCETON or any adaptation  thereof
or of any faculty member,  employee or student, in any advertising,  promotional
or sales literature  without prior written consent  obtained from PRINCETON,  in
each case,  except that  LICENSEE  may state that it is  licensed by  PRINCETON,
under

                                       13





one or more of the patents and/or applications comprising the Patent Rights.


                                   ARTICLE 13

                                 EXPORT CONTROLS

         It is  understood  that  PRINCETON is subject to United States laws and
regulations  controlling  the  export  of  technical  data,  computer  software,
laboratory  prototypes and other commodities  (including the Arms Export Control
Act,  as  amended,  and the  Export  Administration  Act of 1979),  and that its
obligations hereunder are contingent on compliance with applicable United States
export  laws  and  regulations.  The  transfer  of  certain  technical  data and
commodities may require a license from the cognizant agency of the United States
Government and/or written  assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign  countries without prior approval of such
agency.  Princeton  neither  represents that a license shall not be required nor
that, if required, it shall be issued.


                                   ARTICLE 14

                                PAYMENTS, NOTICES
                            AND OTHER COMMUNICATIONS

         Any  payment,  notice or other  communication  pursuant to this License
Agreement shall be sufficiently  made or given on the date of mailing if sent to
such party by certified first class mail,  postage  prepaid,  addressed to it at
its address below or as it shall  designate by written notice given to the other
party:

         In the case of PRINCETON UNIVERSITY:

                  Jean A. Mahoney, Director
                  Office of Technology and Trademark Licensing
                  PRINCETON UNIVERSITY
                  5 New South Building, P.O. Box 36
                  Princeton, New Jersey 08544

         In the case of LICENSEE:

                  Elizabeth Tallett - President
                  TRANSCELL TECHNOLOGIES, INC.
                  2000 Cornwall Road
                  Monmouth Junction, NJ 08852



                                       14





                                   ARTICLE 15

                            MISCELLANEOUS PROVISIONS


         15.1 This License Agreement shall be construed,  governed,  interpreted
and applied in accordance with the laws of the State of New Jersey,  except that
questions affecting the validity,  enforceability, or infringement of any patent
contained in the Patent  Rights shall be determined by the law of the country in
which the patent was granted.

         15.2 The parties hereto  acknowledge  that this License  Agreement sets
forth the entire  agreement and  understanding  of the parties  hereto as to the
subject  matter hereof,  and shall not be subject to any change or  modification
except by the  execution of a written  instrument  subscribed  to by the parties
hereto.

         15.3 The provisions of this License Agreement are severable, and in the
event that any  provision of this License  Agreement  shall be  determined to be
invalid or  unenforceable  under any controlling body of law, such invalidity or
unenforceability  shall not in any way affect the validity or  enforceability of
the remaining provisions hereof.

         15.4 LICENSEE  agrees to mark the Licensed  Products sold in the United
States with all applicable  United States patent numbers.  All Licensed Products
shipped to, or sold in, other  countries  shall be marked in such a manner as to
conform with the patent laws and practice of the country of manufacture or sale.

         15.5 The  failure  of either  party to assert a right  hereunder  or to
insist upon  compliance  with any term or condition  of this  License  Agreement
shall  not  constitute  a waiver of that  right or  excuse a similar  subsequent
failure to perform any such term or condition by the other party.



                                       15





         IN WITNESS  WHEREOF,  the parties  hereto have  executed  this  License
Agreement, in duplicate, by proper persons thereunto duly authorized.

TRUSTEES OF PRINCETON UNIVERSITY


By:  /s/ Allen J. Sinisgalli
   ----------------------------------
Name: Allen J. Sinisgalli
Title: Associate Provost for Research
           and Project Administration

Date: _______________________________



TRANSCELL TECHNOLOGIES, INC.

By:  /s/ Elizabeth E. Tallett
    ---------------------------------
Name: Elizabeth E. Tallett
Title: President
Date: 15th October 1993


                                       16





                                   APPENDIX I

                               RESEARCH AGREEMENT



                                       17





                                   APPENDIX II

1.       United States Patent Application Serial Number 08-021,391
         filed February 23, 1993, in the name of Daniel E. Kahne,
         entitled SINGLE-STEP FORMATION OF MULTIPLE GLYCOSIDIC
         LINKAGES.


                                       18





                  [LETTERHEAD OF TRANSCELL TECHNOLOGIES, INC.]



                                                  August 2, 1993



Ms. Jo Anne McLusky, Associate Director
Office of Research & Project Administration
Fifth Floor, New South Building
P.O. Box 36
Princeton, NJ  08544-0036

Dear Ms. McLusky:

On July 25, 1993 Dr. Daniel Kahne  submitted to Transcell  Technologies,  Inc. a
Research Proposal entitled "Rapid Synthesis of GM1 Derivatives," Proposal number
130-M173, seeking $195,154 for the period July 1, 1993 to December 31, 1993. The
proposed  Sponsored  Research is an extension of the Research  Agreement between
the University and Transcell dated July 1, 1991.

Pursuant to the Research  Agreement,  Transcell is providing this written notice
of its decision to provide the requested funding. Although the Research Proposal
did not include a payment  schedule,  we propose to adapt the schedule set forth
in Paragraph  6.1,  with the first  payment of $78,062 (40% of the total project
amount)  payable  within 30 days of acceptance of the Research  Proposal and the
balance of $117,092 due on October 30, 1993.

Thank you for your assistance in this matter.


                                           Sincerely,


                                           /s/ Elizabeth E. Tallett
                                           -------------------------------------

                                           Elizabeth E. Tallett
                                           President and Chief Executive Officer

                                       19







         Amendment No. 1 (the "Amendment") to License Agreement, effective as of
February 21, 1997,  is by and between The  Trustees of PRINCETON  UNIVERSITY,  a
nonprofit,  private educational  institution existing in the State of New Jersey
(hereinafter referred to as "PRINCETON"),  and TRANSCELL  TECHNOLOGIES,  INC., a
corporation  duly organized and existing under the laws of the State of Delaware
and  having a  principal  place of  business  at 2000  Cornwall  Road,  Monmouth
Junction, New Jersey 08852 (hereinafter referred to as the "LICENSEE").

         WHEREAS,  PRINCETON  and  LICENSEE  entered  into a  License  Agreement
effective as of October 14, 1993 (the "License Agreement"),  granting LICENSEE a
worldwide  license,  with the right to sublicense,  under certain inventions and
confidential  information,  including  any patent  rights  which may be obtained
thereon, on the terms and conditions set forth therein; and

         WHEREAS,  PRINCETON and LICENSEE desire to amend certain  provisions of
the License Agreement, on the terms and conditions set forth herein.

         NOW, THEREFORE, it is agreed as follows:

         1.       Section  1.5(b) of the License  Agreement is hereby amended to
                  add the following new subsection (iv) to the end thereof:

                  "(iv) been developed using technology covered under the Patent
                  Rights, on which technology  LICENSEE had expended  $1,000,000
                  or more in development costs"

         2.       Article 2 of the License  Agreement  is hereby  amended to add
                  the following new Section 2.5 to the end thereof:

                  "2.5 Notwithstanding the provisions set forth in the preceding
                  sections of this  Article 2,  PRINCETON  reserves the right to
                  use the invention,  PRINCETON'S  Patent  Rights,  the Licensed
                  Products, the Licensed Processes,  the technology,  associated
                  information   and  know-how  for   PRINCETON'S   own  internal
                  educational,  research and other non-commercial purposes only,
                  and to publish  the  results  thereof in  accordance  with the
                  terms of Section 13 of the Research Agreement."

         3.       Section 4.1 of the License  Agreement is hereby amended to add
                  the following new Section 4.1.6 to the end thereof:

                  "4.1.6   Notwithstanding  the  provisions  set  forth  in  the
                  preceding  sections  of this  Section  4.1,  in the event of a
                  sublicense  of Patent  Rights,  the  maximum  royalty  payable
                  hereunder  shall be 25% of the royalties  received by LICENSEE
                  from  sublicensees  as a  result  of  sublicensees'  sales  of
                  Licensed Products and Licensed Processes;  provided,  however,
                  that  in the  event  such  limitation  would  cause  royalties
                  payable  hereunder  to be less than 1.5% of the  sublicensees'
                  net sales, then the royalty payable hereunder shall be 1.5% of
                  the sublicensees' net sales. For example, in the event

                                        1





                  the royalty  payable from a  sublicensee  to LICENSEE is 5% of
                  the  sublicensee's net sales of Licensed Products and Licensed
                  Processes,  the royalties payable to PRINCETON hereunder shall
                  be 1.5% (since 25% of 5% is less than 1.5%).  For  purposes of
                  this  section,  references to  sublicensees'  net sales assume
                  that such net sales are  calculated  in the same manner as Net
                  Sales in this Agreement."

         4.       Section 4.2 is hereby  amended and restated in its entirety to
                  read as follows:

                  "4.2 In addition to the foregoing  royalties,  LICENSEE  shall
                  pay to Princeton  License  Maintenance Fees of (i) two hundred
                  thousand  dollars  ($200,000),  payable upon execution of this
                  Amendment and (ii) one hundred thousand dollars ($100,000) for
                  each year commencing  October 14, 1997, through the earlier of
                  (i)  termination of the License  Agreement or (ii) the date of
                  first commercial sale of a Licensed Product."

         5.       Appendix II to the  License  Agreement  is hereby  updated and
                  restated as of the date of this Amendment in the form attached
                  hereto.

         6.       This Amendment may be executed in counterparts,  each of which
                  counterparts,  when so executed and delivered, shall be deemed
                  an original  and all of which  counterparts,  taken  together,
                  shall   constitute  one  and  the  same   instrument.   Unless
                  separately  defined,  all defined  terms herein shall have the
                  meaning set forth in the License Agreement.

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Amendment, in duplicate, by proper persons thereunto duly authorized.

TRUSTEES OF PRINCETON UNIVERSITY
By:     /s/ Allen J. Sinisgalli
----------------------------------------
Name:    Allen J. Sinisgalli
Title:   Associate Provost for
         Research & Project Admin.
Date:    2/17/97


TRANSCELL TECHNOLOGIES, INC.
By:       /s/ Glenn L. Cooper
----------------------------------------
Name:    Glenn L. Cooper, M.D.
Title:   Acting President
Date:    2/21/97

                                        2





                                   Appendix II

1.       Lowe Price LeBlanc & Becker Docket No. 2645-002
                  United States  Patent  Application  Serial  Number  08/021,391
                  filed  February  23,  1993,  in the name of Daniel  E.  Kahne,
                  entitled   SINGLE-STEP   FORMATION   OF  MULTIPLE   GLYCOSIDIC
                  LINKAGES.

2.       Lowe Price LeBlanc & Becker Docket No. 2645-002A
                  United States  Patent  Application  Serial  Number  08/198,271
                  filed  February  18,  1994,  in the name of Daniel  E.  Kahne,
                  entitled  SOLUTION  AND SOLID PHASE  FORMATION  OF  GLYCOSIDIC
                  LINKAGES.

3.       Lowe Price LeBlanc & Becker Docket No. 2645-002B
                  United States  Patent  Application  Serial  Number  08/281,167
                  filed  July 24,  1994,  in the name of Daniel E. Kahne et al.,
                  entitled SOLUTION AND SOLID-PHASE GLYCOSIDIC LINKAGES.

4.       Lowe Price LeBlanc & Becker Docket No. 2645-002C
                  United  States  Patent   Application   Serial  Number  (to  be
                  assigned)  filed  January  9,  1997,  in the name of Daniel E.
                  Kahne,   entitled   SOLUTION  AND  SOLID-PHASE   FORMATION  OF
                  GLYCOSIDIC LINKAGES.

5.       Lowe Price LeBlanc & Becker Docket No. 2645-002D
                  United  States  Patent   Application   Serial  Number  (to  be
                  assigned)  filed  January 10,  1997,  in the name of Daniel E.
                  Kahne,   entitled   SOLUTION  AND  SOLID  PHASE  FORMATION  OF
                  GLYCOSIDIC LINKAGES.


                                        3











                                 ATTACHMENT 1.40

                        1997 PRINCETON RESEARCH AGREEMENT










The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.


                              PRINCETON UNIVERSITY
                               RESEARCH AGREEMENT


This  Research  Agreement is entered into on April 29, 1997 between the Trustees
of Princeton  University,  a  not-for-profit,  private  educational  institution
existing in the State of New Jersey,  hereinafter referred to as "Princeton" and
Interneuron  Pharmaceuticals  Inc., a corporation existing under the laws of the
State of Delaware, hereinafter referred to as "Sponsor."

1.   Statement of Work

     Princeton,  through the Department of Chemistry,  has valuable  experience,
     skill and ability in the construction of a [*] library.  Sponsor desires to
     have  Princeton  undertake a research  project in the  above-named  area in
     accordance  with  the  scope  of work  described  in  Exhibit  A,  Research
     Proposal. Princeton agrees to use reasonable effort to perform the research
     project  described  therein and  hereafter  referred to as the  "Research."
     Sponsor   acknowledges   that  Princeton  makes  no  expressed  or  implied
     warranties for the research.

2.   Principal Investigator

     The research  will be  supervised  by Professor  Daniel  Kahne.  If for any
     reason he is unable to continue to serve as  Principal  Investigator  and a
     successor  acceptable to both Princeton and Sponsor is not available,  this
     Agreement shall be terminated as provided in Article 6.

3.   Period of Performance

     This research will be conducted during the period July 1, 1996 through June
     30, 1998, but may be extended under the same terms and conditions by mutual
     written  agreement  of the  Parties.  A third year of  optional  funding is
     listed in the  budget and shall be  exercised  by mutual  agreement  of the
     parties.

4.   Reimbursement of Costs

     Princeton  shall  be  reimbursed  by  Sponsor  for all  costs  incurred  in
     connection  with the  research  up to the amount of  $441,246.  While it is
     estimated that this amount is sufficient to conduct the research, Princeton
     and  Sponsor  may  mutually  agree to fund the third year of  research,  as
     listed in the  budget.  Sponsor is not liable for any cost in excess of the
     amount  specified  herein  unless this  Agreement is modified in writing by
     both parties.









5.   Payment Schedule

     (a) Payments  shall be made to Princeton by Sponsor with the first  payment
         of  $110,000  due  within  thirty  (30) days from the  signing  of this
         Agreement.  The  balance  is  due  in  accordance  with  the  following
         schedule:

         March 31, 1997          $55,000          December 31, 1997    $55,000
         June 30, 1997           $55,000          March 31, 1998       $55,000
         September 30, 1997      $55,000          June 30, 1998        $56,246

     (b) Checks payable to Princeton University shall reference 130-4297, and be
         sent to:

         Raymond J. Clark, Treasurer
         P.O. Box 35
         Princeton University
         Princeton, New Jersey  08544

6.   Termination

     Performance  under this  Agreement  may be terminated by Sponsor upon sixty
     (60) days' written  notice;  performance  may be terminated by Princeton if
     circumstances  beyond its control  preclude  continuation  of the research.
     Upon   termination,   Princeton  will  be  reimbursed  for  all  costs  and
     non-cancelable  commitments incurred in the performance of the research and
     not yet paid for, such  reimbursement  together with other  payments not to
     exceed  the total  estimated  project  costs  specified  in  Article 4. The
     provision  of  Article  7 hereof  shall  survive  any  termination  of this
     Agreement.

7.   Intellectual Property

     (a) Ownership of Inventions

         (1)  The  term   "Invention"   means  any   patentable  or  potentially
              patentable  subject  matter or  discovery  conceived or reduced to
              practice  in  carrying  out  of  the  Research  pursuant  to  this
              Agreement.

         (2)  Any  Invention  developed,  as part of this  Research,  solely  by
              Sponsor personnel will be the exclusive  property of Sponsor which
              may, to the extent  permitted  by law,  hold all right,  title and
              interest in such Invention. Such Inventions,  including the right,
              title  and   interest   therein,   are   referred   to  herein  as
              "Sponsor-owned".

         (3)  Any  Invention  developed,  as part  of the  Research,  solely  by
              Princeton  personnel,  including faculty,  students and employees,
              will be the  exclusive  property of  Princeton,  which may, to the
              extent  permitted by law, hold all right,  title,  and interest in
              such Invention.  Such Inventions,  including the right,  title and
              interest therein, are referred to herein as "Princeton-owned".

                                       2




         (4)  Any  Invention  developed,  as part of this  Research,  jointly by
              Sponsor and Princeton personnel,  including faculty,  students and
              employees, will be the mutual property of both parties, which may,
              to the extent permitted by law, jointly hold all right,  title and
              interest in such Invention. Such Inventions,  including the right,
              title  and   interest   therein,   are   referred   to  herein  as
              "Jointly-owned".

     (b) Patents

         The parties agree that it is desirable to file patent  applications  on
         discoveries  and  Inventions  conceived  or first  reduced to  practice
         during the term of this Agreement.  Sponsor acknowledges that Princeton
         has an obligation to protect and transfer its technology for the public
         benefit and the  parties  agree to  cooperate  to effect that end in an
         expedient manner equitable to both parties.

     (c) Patent Applications

         (1)  Princeton  and Sponsor  agree to cooperate  fully in applying for,
              obtaining, prosecuting and maintaining patents.

         (2)  Princeton  shall  promptly  disclose to Sponsor,  in writing,  any
              Princeton-owned   or   Jointly-owned   Inventions   disclosed   to
              Princeton.  Princeton  shall file and  prosecute  U.S. and foreign
              patent  applications in its name at Sponsor's request and expense,
              using mutually agreed upon patent counsel, on such Princeton-owned
              or Jointly-owned Inventions as may, in Sponsor's judgment,  become
              appropriate  during  the term of this  Agreement  and up to twelve
              (12)  months  after  its  termination.  All  information  given to
              Sponsor by Princeton in accordance with this section shall be held
              in  confidence  by  Sponsor  so long as such  information  remains
              unpublished or undisclosed by Princeton.  Such patent applications
              and any patents resulting  therefrom shall be subject to the terms
              of this Agreement.

         (3)  Princeton shall have the  opportunity to file patent  applications
              in its  name at its  own  expense  for  those  Princeton-owned  or
              Jointly-owned  Inventions  made by its  personnel  and  for  which
              Sponsor does not agree, within thirty (30) days after notification
              by  Princeton of its intent to file a patent  application,  to pay
              for  Princeton  to  file  said  patent  application;  such  patent
              applications  and any  patents  resulting  therefrom  shall not be
              subject to the terms of this Agreement.

         (4)  Sponsor  patent  counsel may prepare,  file and prosecute all U.S.
              applications for any Jointly-owned  Inventions,  at Sponsor's sole
              cost and expense, provided, however, that Princeton shall have the
              right to review and approve the  application,  and be consulted on
              all prosecution actions, and foreign filing decisions. Princeton's
              right,   title  and  interest  in  the  Jointly-owned   Inventions
              disclosed  or claimed in such patent  applications  or in any such
              patents shall be subject to the terms of this Agreement.


                                       3



     (d) Grant of Patent Rights

         (1)  In  consideration  for its  sponsorship  of the research  program,
              Sponsor  shall  retain an  irrevocable,  royalty-free,  worldwide,
              nonexclusive  license,  without  the  right  to  sublicense,   for
              Sponsor's  own internal  research use,  under any  Princeton-owned
              Inventions, under any patents or patent applications.

         (2)  Princeton,  to  the  extent  it is  permitted  to  do  so  by  its
              agreements  with other  government  sponsors of research,  and the
              provisions of Public Laws 96-517 and 98-620,  grants to Sponsor an
              exclusive Option to obtain an exclusive  worldwide  license to any
              Princeton-owned   Inventions  and  Princeton's  right,  title  and
              interest  under any  Jointly-owned  Inventions,  patents or patent
              applications,   with  a  right  to  sublicense  upon   Princeton's
              approval,  which shall not be unreasonably  withheld, on the terms
              and  conditions  set forth in the  resulting  license  agreements.
              Sponsor  agrees not to sublicense or assign any such  intellectual
              property  to  Transcell  Technologies  Inc.,  without  Princeton's
              written consent.

         (3)  Such  Option with  respect to each  Invention  shall  extend for a
              period  commencing  on the  date the  Invention  is  disclosed  to
              Sponsor  through ninety (90) days from the filing date of a patent
              application disclosing and claiming same. Sponsor may exercise its
              Option on Princeton-owned and jointly-owned patent applications or
              patents  by  providing  a written  statement  to  Princeton.  Upon
              exercise of each such  Option,  Sponsor and  Princeton  shall have
              twelve (12) months to  negotiate  in good faith a  royalty-bearing
              worldwide exclusive license under reasonable royalty terms. During
              the Option and subsequent negotiation periods, Princeton shall not
              offer commercial  license rights to any third party. At the end of
              twelve (12) months from the date Sponsor  exercises  its Option if
              no license  agreement has been signed,  Princeton shall be free to
              negotiate  licenses with other parties,  and Sponsor shall have no
              further rights to such Inventions except for those provided for in
              7.d.1 herein, and those it retains to any jointly owned Inventions
              by virtue of its ownership thereof.

     (e) Unpatented Technology

         It is recognized that some technology created in the performance of the
         Research and uses  thereof may not be protected by patent  applications
         or patents.  Accordingly,  Princeton,  to the extent  permitted  by its
         obligations to other government sponsors,  hereby grants to Sponsor the
         exclusive  Option to negotiate an exclusive  royalty-bearing  worldwide
         license to use any such  technology  for  commercial  purposes,  to the
         extent said  technology or the use thereof  contemplated  by Sponsor is
         not covered by a patent application or patent assigned to or controlled
         by  Princeton.  Sponsor may exercise this Option in the same manner as,
         and subject to the limitations of, its Options under Inventions, patent
         application  or  patents  with the  Option  period  beginning  upon the
         provision  of a written  description  or samples of the  technology  to
         Sponsor. Princeton hereby grants to Sponsor a worldwide,  royalty-free,
         nonexclusive license,  without the right to sublicense,  to utilize all
         such technology for its own internal research purposes only.

                                       4




     (f) Computer Software

         Copyrights and all other rights in any computer software created in the
         course of the Research shall be owned by Princeton.  Sponsor shall have
         nonexclusive  royalty-free  license for internal use, without the right
         to sublicense.  Princeton  hereby grants Sponsor an exclusive Option to
         negotiate an exclusive  royalty-bearing  license, such Option to extend
         for sixty (60) days from the date  Sponsor is  provided  with a copy of
         said software.  Sponsor may exercise this Option in the same manner as,
         and subject to the limitations of, its Option under patent applications
         or patents.

8.   Publication

     (a) Subject  to the terms of this  paragraph  8,  Princeton  shall have the
         right,  at its  discretion,  to release  information  or to publish any
         material resulting from the Research. Sponsor and Princeton acknowledge
         that patent  rights may be  jeopardized  by public  disclosure  of such
         Research  results  prior  to  the  filing  of  a  patent   application.
         Accordingly,  Princeton  shall  forward  copies  of  presentations  and
         publications  (including  poster  sessions)  to Sponsor  for review and
         comment  30 days  prior to  submission  for  publication.  Sponsor  may
         request  Princeton to delay  publication an additional  sixty days (60)
         days in order to protect the potential  patentability  of any Invention
         described  therein.  Such delay shall not,  however,  be imposed on the
         filing of any student thesis or dissertation.

     (b) The parties will  cooperate  to minimize  delay of  manuscripts.  In no
         event will a submission  for  publication  or  presentation  under this
         Agreement  be delayed  longer  than  three (3)  months  from the date a
         manuscript is submitted to Sponsor for review.

     (c) Princeton shall give Sponsor the option of receiving an  acknowledgment
         in  any  publication  for  its  sponsorship  of the  Research.  Sponsor
         understands  that  the  basic  objective  of  research   activities  at
         Princeton  is the  generation  of new  knowledge  and  its  expeditious
         dissemination.  Therefore, in review of any publication,  Sponsor shall
         provide all reasonable cooperation in meeting this objective.

9.   Consultation

     Selected  personnel of Sponsor,  designated by Sponsor to Princeton,  shall
     have the right to confer  with the  Principal  Investigator  and his or her
     associates  for such  reasonable  periods and at such times as are mutually
     agreeable.

10.  Publicity and Use of Names

     Neither  Sponsor nor Princeton will use the name of the other in connection
     with any product,  promotional literature,  or advertising material without
     the prior  written  permission  of the other party.  This shall not include
     internal  documents  available to the public that identify the existence of
     the  Agreement;  and shall not  preclude the Sponsor  from  disclosing  any
     information to the SEC or other governmental regulatory agency, if required

                                       5




11.      Reports

     Princeton  shall furnish  Sponsor  annual letter reports during the term of
     this Agreement  summarizing the research conducted.  A final report setting
     forth  the  accomplishments  and  significant  research  findings  shall be
     prepared by Princeton and  submitted to Sponsor  within ninety (90) days of
     the expiration of the Agreement.  A final summary report shall be submitted
     to Sponsor if the Research is extended for an  additional  year,  under the
     terms of Article 3.

12.      Proprietary Data

     Princeton's  acceptance  and  use  of any  proprietary  data  which  may be
     supplied by Sponsor in the course of the  Research  shall be subject to the
     following:

     (a) The  data  must  be  marked  or designated in writing as proprietary to
         Sponsor.

     (b  Princeton  retains the right to refuse to accept any such data which it
         does not consider to be essential to the completion of the Research.

     (c) When  Princeton  does  accept  such data as  proprietary,  it agrees to
         exercise all reasonable  efforts not to publish or otherwise reveal the
         data to  others  outside  the  University  without  the  permission  of
         Sponsor,  unless  the data has  already  been  published  or  disclosed
         publicly by third  parties or is required to be disclosed by order of a
         court of law.

     (d) Princeton  understands  and agrees that the  disclosure of  proprietary
         data or confidential information to the University by the Sponsor shall
         not be construed as granting  Princeton any ownership rights in, or to,
         the  disclosed  data or  information,  or any right to use such data or
         information,  except  in the  manner  agreed  upon by the  Sponsor  and
         Princeton prior to disclosure of the  proprietary  data or confidential
         information.

     (e) The obligations under this provision shall survive and continue for one
         year  after  termination  of this  Research  Agreement,  at which  time
         Princeton  shall return any and all  proprietary  data or  confidential
         information to the Sponsor; provided,  however, that Princeton may keep
         one  copy  of  any  form  of  such  proprietary  data  or  confidential
         information for archival purposes.

13.      Indemnification

     Sponsor  agrees to indemnify  and hold  Princeton  harmless  from any loss,
     claim,  damage,  or liability of any kind  involving an employee of Sponsor
     arising out of or in connection with this  Agreement,  except to the extent
     that such loss, claim, damage, or liability arises in whole or in part from
     the gross negligence or willful misconduct of Princeton.

14.      Warranties

     Princeton  makes  no  warranties,  express  or  implied,  as to any  matter
     whatsoever, including, without limitation, the condition of the research or
     any inventions(s) or product(s), whether


                                       6



     tangible or  intangible,  conceived,  discovered,  or developed  under this
     Agreement; or the ownership,  merchantability,  or fitness for a particular
     purpose of the research or any such invention or product.  Princeton  shall
     not be liable for any direct,  consequential,  or other damages suffered by
     any  licensee or any others  resulting  from the use of the research or any
     such  invention or product,  except to the extent such damages  result from
     the sole negligence of Princeton.

15.      Equipment

     Title to any equipment  purchased or manufactured in the performance of the
     work funded under the Agreement shall vest in Princeton.

16.      Assignment

     Neither  party shall  assign this  Agreement  to another  without the prior
     written  consent  of the  other  party,  which  will  not  be  unreasonably
     withheld;  provided,  however,  that Sponsor may assign this Agreement to a
     successor  in ownership of all or  substantially  all its business  assets.
     Sponsor  agrees,  however,  that  this  agreement  may not be  assigned  to
     Transcell  Technologies  Inc.  without the  express  written  agreement  of
     Princeton.  Such successor shall expressly assume in writing the obligation
     to perform in accordance  with the terms and conditions of this  Agreement.
     Any other purported assignment shall be void.

17.      Independent Inquiry

     Nothing  in this  Agreement  shall be  construed  to limit the  freedom  of
     researchers  who are not  participants  in this  Agreement from engaging in
     similar research inquiries made independently under other grants, contracts
     or agreements with parties other than Sponsor.

18.      Governing Law

     This Agreement shall be governed by the laws of the State of New Jersey.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
by proper persons thereunto duly authorized.

Interneuron Pharmaceuticals, Inc.           The Trustees of Princeton University


By:        /s/ Glenn L. Cooper              By:        /s/ Allen J. Sinisgalli
-----------------------------------         -----------------------------------
Name:   Glenn L. Cooper, M.D.               Name:   Allen J. Sinisgalli
Title:     President and CEO                Title:   Associate Provost of
                                                     Research and Project Admin.
Date:      May 1, 1997                      Date:    5/6/97


Principal Investigator           /s/ Daniel Kahne
                         ---------------------------------------------------
                           Professor Daniel Kahne               Date


                                       7



The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.


                               Research Proposal - EXHIBIT A



TITLE:                         Construction of a [*] Library

INSTITUTION:                   Princeton University
                               Department of Chemistry
                               Princeton, New Jersey  08544

PRINCIPAL INVESTIGATOR:


                               /s/ Daniel Kahne                 Oct. 31, 1996
                               -----------------------------------------------
                               Daniel Kahne                             Date
                               Department of Chemistry
                               Princeton, New Jersey  08544
                               Phone:  609-258-6368
                               Fax:     609-258-2617

INSTITUTIONAL ENDORSEMENTS:


                                /s/ George McLendon                 Nov. 1996
                               -----------------------------------------------
                               George McLendon, Chair                   Date
                               Department of Chemistry
                               Princeton, New Jersey 08544
                               Phone:  609-258-3916
                               Fax:      609-258-6746



                               -----------------------------------------------
                               Allen J. Sinisgalli, Associate Provost   Date
                               Office of Research and Project Administration
                               5 New South Building
                               Princeton, New Jersey  08544
                               Phone:  609-258-3090
                               Fax:     609-258-1159

TOTAL COST:                    $441,246

DURATION:                      July 1, 1996 to June 30, 1998










The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.

                                                                         -------
                                                                                








                                                                             [*]










                                                                         -------





References


1.        a) Cohen,  M.L.  Science 1992,  257, 1050; b) Neu, H.C.  Science 1992,
          257, 1064.

2.        Walsh, C.T. Science 1993, 261, 308.

3.        Nagarajan,  R.; Schabel, A.A.;  Occolowitz,  J.L.; Counter, F.T.; Ott,
          J.L.; Felty- Duckworth, A.M.J. Antibiotics 1989, 41, 63.

4.        Yan, L.; Taylor,  C.M.; Goodnow,  Jr., R.; Kahne, D. J. Am. Chem. Soc.
          1994, 116, 6953.

5.        Doyle,  R.J.  and Ofek,  I. (Eds.)  Adhesion of  Microbial  Pathogens,
          Methods in Enzymology, Vol 253, Academic Press; San Diego, 1995.








The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.


                                 ATTACHMENT 1.46

                                 SIDE AGREEMENT

         REFERENCE  IS MADE  to (i)  the  License  Agreement  between  Transcell
Technologies,  Inc.  ("Transcell")  and the  Trustees  of  Princeton  University
("Princeton")  effective  as of October 14,  1993,  as amended  (the  "Princeton
License   Agreement"),   (ii)  the  Research  Agreement  between  Princeton  and
Interneuron  Pharmaceuticals,  Inc.  ("Interneuron")  dated as of April 29, 1997
(the "Princeton Research Agreement") and (iii) the draft Research  Collaboration
and  License  Agreement  among  Merck  &  Co.,  Inc.  ("Merck"),  Transcell  and
Interneuron (the "Merck/Transcell Collaboration Agreement").

         WHEREAS,   a  portion  of  the   collaboration   contemplated   by  the
Merck/Transcell  Collaboration Agreement includes the construction by Dr. Daniel
Kahne of a [*] library in order to identify new antibacterial  agents based upon
[*]; and

         WHEREAS,  pursuant  to  the  Merck/Transcell  Collaboration  Agreement,
Transcell  and  Interneuron  are  granting  to  Merck  exclusive   licenses  and
sub-licenses limited to the field of certain antibacterial agents with an option
to obtain exclusive  licenses and sub-licenses  limited to a specified  expanded
field of  antibacterial  agents,  such  sub-licenses  (the "Merck Rights") being
granted to Merck under Transcell's and  Interneuron's  exclusive rights pursuant
to the Princeton License Agreement and the Princeton  Research Agreement and any
subsequent  license  agreement  entered into between  Princeton and Transcell or
between Princeton and Interneuron related to such agreements; and

         WHEREAS,  Merck,  Transcell,  Interneuron and Princeton (the "Parties")
desire to set forth  the  relative  rights of the  Parties  related  to  certain
matters under the Princeton License Agreement,  the Princeton Research Agreement
and the Merck/Transcell  Collaboration  Agreement. In view of the foregoing, the
Parties agree as follows:

1.        Merck agrees that the following  provisions  of the Princeton  License
          Agreement shall apply to Merck as if it were the Licensee  thereunder,
          to the extent, and only to that extent, that such provisions relate to
          the  Merck  Rights  and to the  activities  of Merck  pursuant  to the
          Merck/Transcell  Collaboration Agreement:  Section 2.4 (manufacture in
          the U.S.),  Section  10.2  (indemnification),  Article 12  (non-use of
          names)  and  Article  13  (export  controls).  All  other  rights  and
          obligations  of the Licensee  under the  Princeton  License  Agreement
          shall be rights and obligations of Transcell only, except as otherwise
          provided in this Side Agreement.  The obligations of Interneuron under
          the  Princeton  Research  Agreement  and under any  license  agreement
          entered into by Princeton  and  Interneuron  pursuant to the Princeton
          Research  Agreement shall be the  obligations of Interneuron  only and
          shall not be binding upon Merck,  except as otherwise provided in this
          Side Letter or agreed to in writing by Merck.








2.        In connection with the research project  contemplated by the Princeton
          Research   Agreement,   Princeton  agrees  that  all  publications  or
          presentations  (including any student thesis or dissertation)  subject
          to Section 8 of the  Princeton  Research  Agreement and subject to the
          Merck  Rights  shall,  after   Interneuron's   receipt  of  same  from
          Princeton,  be submitted by  Interneuron  to Merck for review prior to
          submission to the publisher or prior to  presentation.  In addition to
          any rights of Interneuron under the Princeton Research Agreement, upon
          Merck's  request,  Interneuron  may then request that Princeton  delay
          publication or presentation  for a maximum of an additional 60 days to
          protect the patentability of any inventions  described  therein.  Such
          delay  shall not be  imposed on the  filing of any  student  thesis or
          dissertation for the purposes of fulfilling academic requirements.

3.        Notwithstanding  the provisions of Article 6 of the Princeton  License
          Agreement and of Section 7(c) of the Princeton Research Agreement, the
          Parties  agree that Merck shall have the right to file,  prosecute and
          maintain  patent   applications   and  patents  relating  to  research
          information and inventions  owned jointly by Merck and Princeton which
          are  subject  to the  Merck  Rights.  In  addition,  if  Transcell  or
          Interneuron,  as the case may be,  elects  not to file,  prosecute  or
          maintain  patent  applications  and patents  covering  Princeton-owned
          inventions subject to the Princeton License Agreement or the Princeton
          Research  Agreement and subject to the Merck Rights,  Merck shall have
          the right to  prosecute  and  maintain  such patent  applications  and
          patents,  if rights  thereunder  are  sublicensed  to Merck  under the
          Merck/Transcell  Collaboration  Agreement.  The rights  granted by and
          exercised  under this paragraph  shall have no effect on the rights of
          ownership of any patent rights or  inventions  which shall be governed
          by applicable  patent laws and applicable  provisions of the Princeton
          License   Agreement,   the  Princeton   Research   Agreement  and  the
          Merck/Transcell Collaboration Agreement.

4.        Notwithstanding  the provisions of Article 9 of the Princeton  License
          Agreement, the Parties agree that, if Transcell or Interneuron, as the
          case  may  be,   elects  not  to  initiate  and   prosecute  a  patent
          infringement action or to defend against a declaratory judgment action
          relating to patents arising out of the Princeton  License Agreement or
          the  Princeton  Research  Agreement  which  are  subject  to the Merck
          Rights,  Merck shall have the right either to initiate  and  prosecute
          such  patent  enforcement  action or to  control  the  defense of such
          declaratory  judgment  action under the terms and conditions set forth
          in the Merck/Transcell  Collaboration  Agreement,  if rights under the
          relevant  patent are  sublicensed  to Merck under the  Merck/Transcell
          Collaboration  Agreement.  The rights  granted by and exercised  under
          this paragraph  shall have no effect on the rights of ownership of any
          patent  rights or  inventions  which shall be  governed by  applicable
          patent  laws  and  applicable  provisions  of  the  Princeton  License
          Agreement,  the Princeton Research  Agreement and the  Merck/Transcell
          Collaboration Agreement.

5.        Notwithstanding  Section 7.1 of the Princeton License  Agreement,  the
          Parties agree that in the event that Transcell  becomes  bankrupt,  or
          shall file a petition in  bankruptcy,  or if the business of Transcell
          shall be placed in the hands of a  receiver,  assignee  or trustee for
          the benefit of creditors, whether by the voluntary act of Transcell or
          otherwise,  (i) the Princeton  License  Agreement  shall not terminate
          with respect to the rights granted to Merck under the  Merck/Transcell
          Collaboration Agreement, (ii) Merck

                                       2






         shall  retain and may fully  exercise  all of its rights and  elections
         under the Bankruptcy Code as sub-licensee of such rights and (iii) upon
         Merck's  request,  Merck and Princeton shall negotiate in good faith an
         agreement  providing for the assumption by Merck of Transcell's  rights
         and obligations  under the Princeton  License Agreement with respect to
         the rights  granted to Merck  under the  Merck/Transcell  Collaboration
         Agreement.

6.        The Parties agree that a copy of any notice of Transcell's  failure to
          pay or any  other  material  breach  or  default  by  Transcell  under
          Sections 7.2 or 7.3 of the Princeton  License  Agreement shall be sent
          to Merck as follows: Merck & Co., Inc., One Merck Drive, P.O. Box 100,
          Whitehouse  Station,  NJ  08889-0100,  Attention  Office of Secretary,
          Telecopier  No.: (908) 735-1246,  with a copy to Attention:  Office of
          Assistant  General  Counsel,   Telecopier  No.:  (908)  735-1226.   If
          Transcell fails to cure such breach within the specified period, Merck
          shall  have the  right,  but not the  obligation,  to cure  such  non-
          payment or other breach on Transcell's behalf within 30 days of notice
          to Merck of such failure to cure. In such event,  Princeton  shall not
          have the right to terminate the Princeton License  Agreement  pursuant
          to Sections 7.2 or 7.3 of the  Princeton  License  Agreement and Merck
          may  credit  any  amount  so  paid  to  Princeton  or the  direct  and
          reasonable  costs of effecting  such other cure on behalf of Transcell
          against the amounts then due and owing from Merck to Transcell.

7.        Princeton and  Transcell  agree that they will not amend the Princeton
          License  Agreement  so as to make  such  agreement  inconsistent  with
          Merck's  rights under,  or in violation of, this Side Agreement or the
          Merck/Transcell   Collaboration   Agreement  without  Merck's  written
          consent.

8.        Princeton and Interneuron agree that they will not amend the Princeton
          Research Agreement so as to make such agreement  inconsistent with, or
          in  violation  of,  Merck's  rights  under this Side  Agreement or the
          Merck/Transcell   Collaboration   Agreement  without  Merck's  written
          consent.  Princeton and Interneuron  further agree they will not enter
          into  any  license  agreement   pursuant  to  the  Princeton  Research
          Agreement upon terms which are inconsistent  with, or in violation of,
          Merck's  rights  under  this  Side  Agreement  or the  Merck/Transcell
          Collaboration Agreement without Merck's written consent.

9.        Princeton  hereby consents to (i) the sublicense by Transcell to Merck
          pursuant to the Merck/Transcell  Collaboration Agreement of certain of
          Transcell's  rights under the Princeton License Agreement and (ii) the
          sublicense by  Interneuron  to Merck  pursuant to the  Merck/Transcell
          Collaboration  Agreement of certain of Interneuron's  rights under the
          Princeton  Research  Agreement and any license  agreement entered into
          pursuant to the Princeton Research Agreement.

10.       This  Agreement  shall be  effective  as of June 30, 1997 and shall be
          governed by the laws of the State of New Jersey  without  reference to
          any rules of conflict of laws. This



                                       3








 Agreement may be executed in two or more  counterparts,  each of which shall be
deemed an original,  but all of which together shall constitute one and the same
instrument.

MERCK & CO., INC.                         TRANSCELL TECHNOLOGIES, INC.

BY:    /s/ Edward M. Scolnick             BY:      /s/ Vincent L. Fabiano
   --------------------------------          --------------------------------- 
NAME:  Edward M. Scolnick                   NAME:  Vincent L. Fabiano
TITLE:   President,                         TITLE: Executive Vice President
           Merck Research                          and Chief Operating Officer
           Laboratories

TRUSTEES OF                                INTERNEURON
PRINCETON UNIVERSITY                       PHARMACEUTICALS, INC.

BY:     /s/ Allen J. Sinisgalli            BY:      /s/ Glenn L. Cooper
   --------------------------------          --------------------------------- 
NAME:  Allen J. Sinisgalli                 NAME:  Glenn L. Cooper
TITLE:  Associate Provost for              TITLE:   President and CEO
        Research & Project Admin.


                                       4





The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.

<TABLE>
<CAPTION>
                                                   Schedule 1.52
                                              Transcell Patent Assets

------------------------------------------------------------------------------------------------------------------------------------
Title of Application                                Docket No.       Serial No.      Filing Date       Status            Patent No.
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>            <C>               <C>               <C>
New Application Regarding [*] Library               2644-007                         Not Yet Filed     In Preparation
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002         08/021,391      2/23/93           Issued 6/18/97    5,639,866
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AAR      327,496         2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AAU      61382/94        2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002ACA      2156717         2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AEPC     94908048.5      2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AIL      108,748         2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AIN      119/MAS/94      2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AJP      519067/94       2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AKE      94/00128        2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AMX      94-1390         2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002APCT     94/01604        2/23/94           National Phase
Linkages                                                                                               Completed
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002APH      47814           2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002APK      0077/94         2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002ARU      95122803        2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002ASD      94/150069       2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002ASK      703535/95       2/23/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002ATW      83102930        4/02/94           Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AVE      0295-94         3/4/94            Pending
------------------------------------------------------------------------------------------------------------------------------------
Solution and Solid Phase Formation of Glycosidic    2645-002AZA      94/1229         2/23/94           Issued 11/30/94   9401229
------------------------------------------------------------------------------------------------------------------------------------
Libraries Prepared by the Solid Phase Formation     2645-002C        08/780,914      1/9/97            Pending
of Glycosidic Linkages
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>







The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.


                                ATTACHMENT 2.1.A


                                                                       ---------













                                                                             [*]














                                                                       ---------






                                       7







The information below marked by * and [ ] has been omitted pursuant to a request
for confidential  treatment.  The omitted portion has been separately filed with
the Commission.


                                ATTACHMENT 2.1.B




                                                                       ---------

















                                                                             [*]





















                                                                       ---------









                                 ATTACHMENT 4.3

                              FORM OF PRESS RELEASE


                              FOR IMMEDIATE RELEASE

                     Contact at Interneuron, (617) 402-3410:
                                 William B. Boni
                            VP, Corp. Communications

                      Contact at Transcell, (609) 655-6900
                               Vincent L. Fabiano
                              Executive VP and COO


                         TRANSCELL AND MERCK ENTER INTO

                      ANTI-BACTERIAL RESEARCH COLLABORATION


LEXINGTON, MA and PRINCETON,  NJ, July , 1997 - Transcell Technologies,  Inc., a
majority-owned  subsidiary of Interneuron  Pharmaceuticals,  Inc. (NASDAQ: IPIC)
and  Interneuron  today  announced  that they have entered into a  collaborative
research and licensing  agreement with Merck & Co., Inc. (NYSE: MRK) to discover
and commercialize novel antibacterial agents.

The initial focus of this  collaboration  will be the  discovery and  biological
evaluation of analogues of anti-bacterial  compounds  selected from two distinct
structural  classes and the license to Merck of any products  arising out of the
two research programs.  Transcell will utilize its combinatorial technologies to
prepare libraries of carbohydrate derivative compounds for biological evaluation
and further development.  Additionally,  Merck has an option to extend the field
of the  collaboration  and license to include all  antibacterial  pharmaceutical
products.

Under this agreement, Transcell receives from Merck an initial licensing payment
and  research  support  over two years.  In  addition,  Transcell  will  receive
additional  payments based upon the  achievement of defined  milestones for each
program.  While there is no assurance these  milestones  will be reached,  these
additional  payments,  combined with the initial  licensing payment and research
support,  could total  approximately  $48,000,000 if products from both programs
were approved by the FDA. In addition,  Transcell would receive royalty payments
on sales of any products that may be developed based on the research programs.

                                    - MORE -
Page 1 of 2








Certain of the  rights  licensed  to Merck are based on  exclusive  licenses  or
rights held by Transcell and Interneuron from Princeton  University,  which will
be entitled to varying  percentages of certain  payments and royalties  received
from Merck. Transcell's combinatorial  carbohydrate technology is based upon the
research of its scientific  founders,  .Dr. Daniel Kahne and .Dr. Suzanne Walker
of Princeton University.

"Merck's  recognition  that  Transcell's  platform of synthetic  chemistries and
combinatorial  technologies can add significant value to its antibacterial  drug
discovery programs is a very important step in our development of the technology
for drug  discovery in several  therapeutic  areas,"  said  Vincent L.  Fabiano,
executive  vice  president and chief  operating  officer of  Transcell.  "We are
pleased to have  Merck as our first drug  discovery  partner.  Our  partnership,
which  initially  will provide Merck access to libraries of new analogues of two
antibiotics,   has  the  potential  for  expansion   into  the  broad  field  of
antibacterial drug discovery."

Transcell   Technologies,    a   majority-owned    subsidiary   of   Interneuron
Pharmaceuticals,  is exploiting  the  molecular  diversity of  carbohydrates  to
discover novel small molecule pharmaceutical products.

Interneuron  Pharmaceuticals is a diversified  biopharmaceutical company engaged
in the development and  commercialization of a portfolio of products and product
candidates primarily for neurological and behavioral  disorders.  Interneuron is
also developing products and technologies, generally outside the central nervous
system field,  through three other  subsidiaries:  Intercardia,  Inc. focused on
cardiovascular disease,  Progenitor, Inc. focused on developmental genomics, and
InterNutria, Inc. focused on dietary supplement products.

Except for the descriptions of historical facts contained  herein,  this release
contains  forward-looking  statements  that involve risks and  uncertainties  as
detailed from time to time in Interneuron's SEC filings under the Securities Act
of 1933 and the Securities  Exchange Act of 1934 under "Risk Factors" that could
cause Interneuron's  actual results to differ significantly from those discussed
in the forward-looking  statements,  including the early stage of development of
Transcell's  technology,   uncertainties  related  to  preclinical  development,
corporate collaborations,  clinical trials, patent risks, government regulation,
and dependence on third parties for manufacturing and marketing.

                                       ###




Page 2 of 2






                                  SCHEDULE 7.1

                    COUNTRIES WHERE INTERNEURON AND TRANSCELL

                    WILL FILE, PROSECUTE AND MAINTAIN PATENTS

                                    Argentina
                                    Australia
                                     Canada
                                     Austria
                                     Belgium
                            Switzerland/Liechtenstein
                                     Germany
                                     Denmark
                                      Spain
                                     Finland
                                     France
                                 United Kingdom
                                      Italy
                                   Netherlands
                                     Sweden
                                     Israel
                                      India
                                      Japan
                                      Kenya
                                     Mexico
                                   Philippines
                                    Pakistan
                               Russian Federation
                                   South Korea
                                     Taiwan
                                  United States
                                    Venezuela
                                  South Africa

            Which List of Countries Can Be Amended From Time to Time
                   By Mutual Written Agreement of the Parties