MATRIX PHARMACEUTICAL, INC.
                               34700 Campus Drive
                           Fremont, California 94555



                                August 25, 1997




Michael D. Casey
51 Butternut Lane
Basking Ridge NJ 07920

PERSONAL AND CONFIDENTIAL


        RE:     Terms of Employment


Dear Michael:

        In accordance with our ongoing discussions,  the following are the terms
and conditions that we propose for your  employment with Matrix  Pharmaceutical,
Inc. (the  "Company"). If, after reviewing these terms and conditions,  you feel
that they are acceptable to you,  please so indicate by executing a copy of this
letter and returning same to us.


        Specifically,  the various  terms and  conditions  on which I believe we
have reached agreement are as follows:

      Base  Salary: $400,000  per annum. This base  salary  will be  subject  to
                    review  twelve months from now and annually  thereafter  and
                    shall be subject to adjustment at the sole discretion of the
                    Board of Directors.

     Target Bonus:  You shall be eligible to receive a performance  based bonus,
                    targeted  at  35%  of  your  base  salary.  The  performance
                    objectives  shall  be  mutually  acceptable  to you  and the
                    Conpensation  Committee of the Board of Directors  and shall
                    initially  cover  the  objectives  to be  accomplished  over
                    fiscal year 1998 (beginning January 1, 1998). You shall also
                    be eligible  for a bonus of up to $50,OO0 at 6 months  after
                    your  start date based  upon  certain  mutually-agreed  upon
                    milestones.

   Sign-on Bonus:   $150,000 to replace bonus  compensation lost at Schein to be
                    paid on your first day of employment with Matrix.


   Stock Options:   You shall be granted  options to acquire  550,000  shares of
                    Matrix Common Stock.  These options will be priced as of the
                    date on which  you first  begin  rendering  services  to the
                    Company (which can be structured to be based upon an initial
                    brief part-time

<PAGE>

                    employment period,  i.e. thirty days, during which you would
                    begin a  transition  process  but would not be  expected  to
                    spend any significant time on Company matters).  The options
                    will be priced to equal the closing  price of the  Company's
                    stock on the start date of your part time employment,  would
                    be  non-qualified  options for tax  purposes and would begin
                    their  vesting   effective   your  first  day  of  full-time
                    employment.  If you desire to have a portion of the options,
                    e.g.  up to  $100,000  in value  structured  as ISOs,  those
                    options  would have to be priced at the closing price on the
                    day you began full-time employment. All options will vest as
                    follows:  110,000 on the first day of full-time  employment,
                    110,000 to "cliff"  vest one year later,  remainder  to vest
                    ratably over 3 years on a monthly  basis from cliff  vesting
                    date. No additional vesting during severance period.

   Second Option:   Immediately  following the Annual Meeting of Stockholders in
                    May  1998,  you  will  receive  a  further  option  grant to
                    purchase an  additional  50,000  share of Common Stock which
                    option shall be  exercisable  at the closing  stock price on
                    that date and shall vest ratably over a four year period.

      Relocation:   Relocation  package to cover all reasonable costs associated
                    with the sale of your house in Basking  Ridge,  New  Jersey,
                    and your subsequent  purchase of a primary  residence in the
                    Bay Area. These costs would include,  but not be limited to,
                    the  transaction  costs  associated  with  the  sale of your
                    present home (not  including  capital  gains,  if any),  the
                    physical  move of your  personal  items,  transaction  costs
                    associated with the purchase of a new residence,  reasonable
                    costs  for  house-hunting  trips,  the  costs  of  temporary
                    housing in the Bay Area  pending a purchase  of a house here
                    and any other ancillary  items that are customarily  paid by
                    the new employer. If needed to speed your transition process
                    to  full  time   employment   with  Matrix,   a  third-party
                    relocation  service  will  be  employed  by  Matrix  on your
                    behalf.  In the event that your acquire a house here (rather
                    than renting  temporary  housing as covered  above) prior to
                    completing  the sale of your New Jersey  residence,  we will
                    cover  the  lower  of  the  two   houses'   mortgage   costs
                    (principal,  interest  and taxes) for a period not to exceed
                    six months from the date of your employment. We will further
                    take such  actions as are  necessary  to make you whole with
                    respect to any ordinary  income tax effects of the foregoing
                    items.

  Residence Loan:   We will  provide  you a residence  loan  (secured by the new
                    property) in an amount of $500,000 (to help cover the spread
                    between  the cost of the house  sold in New  Jersey  and the
                    house purchased here in  California).  This loan will have a
                    seven year term, be interest free (to the extent  secured as
                    stated   above  to   comply   with  IRS   requirements   for
                    interest-free  loans),  and shall be  forgiven at the end of
                    years  3  through  7  of  your   employment   (in   $100,000
                    increments). If you are  terminated  for "Cause" (as defined
                    below) at any time the loan would  immediately  come due. If
                    terminated  Without  Cause  the loan  would  come due on the
                    earlier of a sale of the house or three years after the date
                    of such termination.  Notwithstanding the foregoing,  if the
                    Company is acquired in a "Meaningful Acquisition" as defined
                    below,  then the  outstanding  balance  of the loan shall be
                    forgiven on the closing of such  transaction.  A "Meaningful
                    Acquisition"  shall mean any transaction in which there is a
                    "Change in Control"  (as  defined  below) of the Company and
                    (a) at least one of the following is true: (i) the price per
                    share of the consideration  received by Matrix  stockholders
                    is at least  equal to twice  the  average  trading  price of
                    Matrix's  Common  Stock  during  the  month  of  March  1998
                    (weighted for daily  volume);  (ii) the  transaction  is the
                    result of an unsolicited
<PAGE>
                    tender offer  regardless of price;  or (iii) the transaction
                    occurs more than  twenty four months  after the date of your
                    employment  by Matrix;  but (b) neither of the  following is
                    true:  (i) in the case of any merger between the Company and
                    another  entity;  you are  offered  the  position  of  Chief
                    Executive  Officer  (in  title  and  role) of the  successor
                    entity (with  commensurate  compensation and duties to those
                    set forth  herein) and this  residence  loan is assumed;  or
                    (ii) in the case of any  control-share  transaction in which
                    less than  eighty  percent  (80%) of the Company is acquired
                    with the acquiror having a contingent  option to acquire the
                    remainder  of  the  Company  later;   you  are  offered  the
                    opportunity to remain the Chief Executive  Officer (in title
                    and role) of the Company (with commensurate compensation and
                    duties to those set forth herein) and this residence loan is
                    assumed (provided,  however, that any subsequent acquisition
                    of the remainder of the Company shall itself be treated as a
                    new  Meaningful  Acquisition).  In  addition,  to  assist in
                    reducing your mortgage costs we will provide  coverage of up
                    to  $25,000  to "buy  down"  the  interest  rate on your new
                    mortgage  (this sum is  intended  to cover the  buy-down  to
                    approximately 6.75% on a five year fixed, therafter variable
                    mortgage).

   Termnination
      w/o Cause:    The Company  shall have the right to terminate you from time
                    to time and at any time with or  Without  Cause.  If you are
                    terminated  without  Cause,  the Company will  continue your
                    compensation  (including  health and medical benefits) for a
                    period of 12 months from the date of termination.  Your then
                    current  base  salary will be  received  without  consulting
                    duties.  An amount  equal to the prior  year's  actual bonus
                    will be paid  in  exchange  for  reasonable  but  meaningful
                    consulting  assistance,  if  requested  by the  Company.  In
                    addition,  if  there  is a  termination  Without  Cause as a
                    result of a Meaningful  Acquisition  (as defined above) then
                    the foregoing amounts shall be doubled to 24 months.

   Automobile
    Allowance:      You will  receive an  automobile  allowance  that covers the
                    cost of usage, gasoline, taxes, insurance and maintenance on
                    an automobile having an approximate retail purchase value of
                    $50,000.

Life Insurance:     We will  provide  you with term a life  insurance  policy of
                    $1,000,000.

        In addition, you will be appointed President and Chief Executive Officer
of the Company as of your date of full time employment and will be asked to join
the Board of Directors of the Company.  Your duties shall include overseeing all
corporate  functions and directing the  organization to ensure the attainment of
the goals and objectives set forth from time to time by the Board of Directors.

        Your  employment  shall  be  conditioned  upon  your  acceptance  of the
following:

        (1) That you agree to abide by the terms and conditions of the Company's
standard  Proprietary  Information and Inventions  Agreement between you and the
Company.  You would further agree that at all times both during your  employment
by the  Company  and after your  termination,  you will keep in  confidence  and
trust,  and will not use or  disclose,  except as directed by the  Company,  any
confidential or proprietary information of the Company.

        (2) That you shall indemnify and hold the Company  harmless  against any
liability,  damage,  claims,  or suits and related  costs and expenses  that may
arise directly or indirectly out of your

<PAGE>


termination of any prior  employment  relationship  or agreement.  Further,  you
represent  that you have not entered  into,  and agrees not to enter  into,  any
agreement in conflict with the terms of this Agreement or your  employment  with
the Company.

        (3) You shall devote substantially all of your business time, attention,
knowledge,  skills and  interests to the business of the Company and the Company
shall be entitled to all of the benefits and profits  rising from or incident to
such work, services and advice.

        (4) During the term of this Agreement,  you shall not,  whether directly
or indirectly, render any services of a commercial or professional nature to any
other person or organization,  whether for compensation or otherwise without the
prior consent of the Board of Directors.

        (5)  During  the term of this  Agreement  you  shall  not,  directly  or
indirectly,  engage or participate  in any business that is in competition  with
the business of the Company.

        For  purposes  of this  letter,  certain  defined  terms  shall have the
meanings set forth below:

        "Without  Cause" shall mean that Matrix has without  "Cause," as defined
below, and without your written  consent:  (i) terminated your services with the
Company;   (ii)  materially  reduced  your  job  title,   duties,  and  material
responsibilities  with Matrix;  (iii) reduced your base salary by more than five
percent;  or (iv)  required  that you be based at a location  more than 40 miles
from the Company's present location.

        "Cause"  shall  mean  misconduct,  including  but  not  limited  to  the
following:  (i) embezzlement,  theft, misuse of confidential  information or any
other  illegal  or  improper  act by  you  against  Matrix;  (ii)  conduct  that
constitutes a material  breach of Matrix policy,  after thirty (30) days' notice
and  failure  to  cure;  (iii)  unauthorized   conduct  that  causes,  or  could
potentially cause, harm to the health or safety of other Employees;  and/or (iv)
any other unauthorized conduct that causes, or could potentially cause, material
harm to the business or reputation of Matrix, after thirty (30) days' notice and
failure to cure.

        "Change of Control" solely for purposes of this Agreement shall mean any
transaction or series of related  transactions in which (i) substantially all of
the  assets of the  Company  are sold;  or (ii) any  merger,  reorganization  or
acquisition in which the stockholders of the Company  immediately  prior to such
transaction or series of related  transactions  hold less than 51% of the equity
securities of the surviving  entity (or any parent  thereof)  immediately  after
such transaction.

        We hope that these terms and  conditions  are acceptable to you. If they
we, please so indicate by executing a copy of this letter and returning  same to
me via facsimile at my office (415)  496-2736.  We eagerly await your acceptance
and your ability to begin full-time  employment with Matrix as soon as possible.
We  understand  and  acknowledge  that you will need some time to  initiate  the
transition  process,  but would like to include you in meetings of the Executive
Committee  of the  Board  as soon as  possible  and  would  expect  you to begin
full-time  employment sometime in September.  Please feel free to contact either
Ed Luck or myself with any questions.


                                           Sincerely,



                                           /s/  J. Stephan Dolezalek
AGREED AND ACCEPTED:                            -----------------------
                                                J. Stephan Dolezalek
/s/  Michael D. Casey
     ------------------
     Michael D. Casey