<PAGE>
 
                   [Letterhead Magainin Pharmaceuticals Inc.]

November 25, 1996                                            Confidential
                                                             Via Federal Express

                                    Amended

Kenneth Holroyd, M.D.
1213 Runnymede Lane
Bel Air, MD 21014

Dear Ken:

I am pleased to offer you the position of Vice President, Magainin
Pharmaceuticals Inc., reporting to Dr. Roy Levitt, Executive Vice President,
Magainin Pharmaceuticals Inc. and President, Magainin Institute of Molecular
Medicine, subject to the terms and conditions of this letter. The base salary
for this position will be $12,500 per month ($150,000/year). It is expected that
the Compensation Committee of the Board of Directors will grant to you at its
next meeting options to purchase 50,000 shares of Magainin Common Stock,
exercisable at the fair market value of the underlying Common Stock on the date
you commence employment with the Company. These options will have a term of 10
years and vest at the rate of 25% per year beginning on the first anniversary of
the date of your commencement of employment. As with all Magainin options, the
grant will be subject to execution of a stock option agreement in the form
specified by the Compensation Committee. A copy of our Stock Option Plan is
attached hereto.

If your employment is terminated without cause, as defined in the Stock Option
Plan, you will receive your monthly base salary for six (6) months following the
date of termination, or for such shorter period until you have secured full-time
employment elsewhere.

The following additional provisions will apply to your employment:

      (i)   You will be eligible for merit increases, cash bonuses, and such
            further stock option grants as may be awarded at the annual
            discretion of the Company's Board of Directors.

      (ii)  You will be eligible to participate in Magainin's Employee Benefit
            Plans, including health, life, disability, tuition reimbursement and
            401k. You will be entitled to four (4) weeks vacation. A summary of
            these benefits is available for your review.

Furthermore, we will reimburse you for relocation expenses as provided for in
Attachment A. We request that you manage the relocation process in the most cost
effective manner possible.

Upon the commencement of your employment with the Company, you will execute the
Company's Drug Free Workplace Policy, Proprietary Information Agreement, Policy
Statement on Securities Trading by
<PAGE>
 
Kenneth Holroyd, M.D.
November 25, 1996
Page 2


Magainin Personnel and Corporate Governance - Conflict of Interest Policy, each
in the form previously provided to you. Magainin may have already provided you
with certain of its confidential business or scientific information which it
expects you to keep confidential and to use only to further Magainin's
legitimate business interests. Just as Magainin expects you to keep confidential
its business or scientific information, Magainin also expects you to honor your
obligations to your former employers with respect to maintaining the
confidentiality of their business or scientific information.

All of the terms and provisions of this Agreement shall be binding upon and
inure to the benefit and be enforceable by the respective heirs,
representatives, successors (including any successor as a result of a merger or
similar reorganization) and assigns of the parties hereto, except that your
duties and responsibilities hereunder are of a personal nature and shall not be
assignable in whole or in part by you.

We look forward to your joining us at Magainin Pharmaceuticals Inc. Please
indicate acceptance of this offer, which is for at will employment, by your
signature below. We have agreed that your starting date for employment with
Magainin will be on a date between January 1, 1997 and March 1, 1997.

If you have any questions, please do not hesitate to call me or Dr. Levitt.

Sincerely yours,

/s/ Michael R. Dougherty

Michael R. Dougherty
Executive Vice President and
Chief Financial Officer

MRD/bl

cc: Jay Moorin

Accepted: /s/ Kenneth Holroyd                         Date: 12/5/96
          -----------------------------------------         ----------------
          KENNETH HOLROYD
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                                  Attachment A

Moving Cost Reimbursement

Magainin Pharmaceuticals Inc. (MPI) will pay your expenses of moving, that is,
the reasonable, direct, out of pocket costs of transporting yourself, your
family and your household items from your current residence to your new
residence located near MPI. To obtain reimbursement, you must submit for
approval, a detailed estimate of such expenses prior to their incurrence.

House Hunting Trips

MPI will reimburse you for the reasonable expenses of a single two-day
(two-night) visit for you to find suitable housing in the local area. Reasonable
expenses will include the cost of transportation from your current residence,
and the cost of lodging, meals and economy car rental during your stay. MPI has
arrangements with a local hotel for guests, and we will be happy to make these
arrangements for you. At your request, our Human Resources department can
arrange for you to meet a relocation specialist to assist you during your house
hunting trip, including providing you with information prior to your visit and
giving you a tour of the local area.

Closing Costs

MPI will pay the reasonable closing costs of (i) the sale of your current home
and (ii) the purchase of a home in the local area within nine (9) months of your
date of employment.

The following closing (settlement) costs will not be paid by MPI:

      .     any real estate or other taxes (transfer taxes will be paid)

      .     any insurance premiums (title insurance will be paid)

      .     any broker fees or commissions

      .     any "points" paid

Please submit a detailed estimate of your closing costs to the Human Resources
department for approval prior to your closing date. After closing, please submit
a copy of your settlement sheet to the Human Resources department in order to
obtain reimbursement.

Temporary Living Expense

We have agreed that you may forgo temporary living expenses in return for a
payment of $1,500 per month, for a period of nine (9) months.

Loss on Current Residence

To the extent that the sale price for your current residence is less than your
purchase price, MPI will reimburse you for such loss, up to a maximum of
$15,000.

Out-of-Pocket Costs

To offset certain out-of-pocket relocation costs, you will receive a payment of
$7,500.