EXHIBIT 99.1
            CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" 
            PROVISIONS OF THE PRIVATE SECURITIES REFORM ACT OF 1995


         Martek Biosciences  Corporation  ("Martek" or the "Company") desires to
take  advantage of the new "safe harbor"  provisions  of the Private  Securities
Litigation  Reform Act of 1995 (the  "Act"). Many  of  the  following  important
factors  discussed  below have been discussed in Martek's prior SEC filings.

         Martek wishes to caution readers that the following  important factors,
among  others,  in some cases have  affected,  and in the future  could  affect,
Martek's  actual  results,  and could  cause  Martek's  actual  results  for the
financial  periods ending after the date hereof to differ  materially from those
expressed in any forward-looking  statements made by or on behalf of Martek. The
filing of this list should not be construed as  constituting  all factors  which
investors  should  consider  prior to making an investment  decision in Martek's
securities, nor should investors assume that the information contained herein is
complete or accurate in all respects after the date of this filing.  The Company
disclaims any duty to update the statements contained herein.

         History of Operating Losses;  Uncertainty of Future Financial  Results.
The Company has  experienced  net  operating  losses  since its  inception.  The
Company  expects  such  losses  to  continue  until  significant  sales  of  its
nutritional oils occur and/or until  significant  royalties from sales of infant
formula  products  containing  the Company's  oils are  recognized.  The Company
expects to have  quarter-to-quarter  and year-to-year  fluctuations in revenues,
expenses  and  losses,  some of which  could be  significant.  Future  financial
results will be affected by, among other  things,  the  following  factors:  the
Company's  ability  to  complete  successfully  the  commercialization  and cost
optimization  of its products;  the  willingness  and ability of infant  formula
licensees to  incorporate  the product into their infant formula  products;  the
willingness of potential  strategic  partners to market the Company's  products;
growth in revenues from the Company's  nutritional oils; growth in revenues from
sales of products for use in molecular  structure  research and  structure-based
drug design; the progress of the Company's research and development programs and
its preclinical and clinical  product  studies;  the time and costs of obtaining
regulatory approvals for those products subject to such approval;  the Company's
ability to protect its proprietary rights; the costs of protecting the Company's
patent claims;  competing  technological and market developments;  manufacturing
costs associated with its various products and potential products; and the costs
of commercializing and marketing the Company's products.

         Early Stage of the Company and its Products. The Company was founded in
1985.  Although the Company  expects to receive most of its future revenues from
direct sales of products,  royalty  income and licensing  fees, a portion of its
revenues to date has come from  research and  development  contracts  (primarily
from the federal  government) and federal  government  grants. The Company first
realized revenues from its products for use in molecular  structure research and
structure-based  drug design in 1989 and from  license  fees and sales of sample
quantities  of certain  of its  nutritional  and  diagnostic  products  in 1992.
Certain of the Company's products will require  substantial  additional research
and  development.   Some  will  require  laboratory  and  clinical  testing  and
regulatory  approval.  There  can be no  assurance  that the  Company's  product
development  efforts will be successfully  completed,  that required  regulatory
approvals  will be  obtained  on a timely  basis or at all,  that the  Company's
products  will be capable of being  manufactured  in  commercial  quantities  at
reasonable  cost or that any new products,  if  introduced,  will achieve market
acceptance.  In addition,  although the Company  anticipates the introduction of
new  products  over the next  several  years,  some of the  Company's  potential
products, especially in the area of pharmaceuticals,  are not expected to become
commercially available for many years, if at all.

         Need for Additional Capital.  Substantial expenditures will be required
to enable the Company to continue its research and  development  activities,  to
conduct  preclinical  and  clinical  studies and to  manufacture  and market its
products. The level of expenditures required for these activities will depend in
part on the extent to which the Company  develops,  manufactures and markets its
products   independently   or  with  other   companies   through   collaborative
arrangements.  The Company's future capital requirements will also depend, among
other things, on one or more of the following  factors:  the extent and progress
of its research  and  development  programs;  the  progress of  preclinical  and
clinical  studies;  the time and costs of obtaining  regulatory  clearances  for
those  products  subject  to such  clearances;  the costs  involved  in  filing,
protecting  and enforcing  patent  claims;  competing  technological  and market
developments;  the cost of capital  expenditures at the Company's  manufacturing
facilities;   the  cost  of  acquiring   additional  and/or  operating  existing
manufacturing  facilities  for  its  various  products  and  potential  products
(depending on which products the Company decides to manufacture and continues to
manufacture  itself);  and  the  costs  of  marketing  and  commercializing  the
Company's  products.  There can be no  assurance  that funding to carry on these
activities will be available at all or on favorable  terms to permit  successful
commercialization  of the Company's  products.  The Company has only established
limited debt financing  arrangements,  which require the Company to meet certain
financial  covenants  related to its  outstanding  term  loans.  There can be no
assurance  that it will be able to continue  such  arrangements,  to continue to
comply  with  bank   covenants  or  to  establish   additional   debt  financing
arrangements  on  satisfactory  terms,  if at all.  If  adequate  funds  are not
available,  the Company  may be required to curtail one or more of its  research
and development,  manufacturing and  commercialization  programs or obtain funds
through arrangements with collaborative  partners or others that may require the
Company to relinquish  certain technology or product rights including patent and
other intellectual property rights.

         Dependence  on Third  Parties;  Reliance on Future  Collaborations.  To
date,  a portion of the  Company's  revenues  has  consisted of license fees and
anniversary  payments  received  from infant  formula  manufacturers  which have
licensed the Company's nutritional oils. Under these agreements,  the Company is
entitled to receive royalty  payments based on the licensees'  sales of products
including the Company's nutritional oils. Such licensees will be responsible for
performing  all clinical  testing on,  obtaining  regulatory  approvals  for and
marketing  products  containing the Company's  nutritional oils. These licensees
are not required to use the Company's  nutritional oils in any of their products
and  are  not  restricted   under  the  licensing   agreements   from  obtaining
docosahexaenoic  acid ("DHA") or arachidonic acid ("ARA") from other sources for
use in their  infant  formula  products.  Although  some of the  licensees  have
introduced  infant formula  products  containing the Company's  nutritional oils
overseas,  the Company cannot predict  whether any licensee will broaden its use
of the Company's oils or whether they will be used by any of the Company's other
licensees in their infant formula  products.  Accordingly,  future revenues from
the Company's  nutritional oils are largely  dependent on factors over which the
Company will have no control.

         The  Company's   strategy  for  the  development,   clinical   testing,
manufacturing and commercialization of certain of its products includes entering
into various  collaborations with corporate partners,  licensors,  licensees and
others.  In 1997, the Company entered into a supply agreement with a third party
manufacturer for its ARA-containing oil. Although the Company is able to produce
its ARA oil in its Kentucky manufacturing plant, a halt in supply from its third
party ARA oil manufacturer  could adversely impact the Company's ability to meet
product demand in the short-run and, in the long-run,  if this source of ARA oil
could not be replaced.  There can be no assurance  that the Company will be able
to negotiate other collaborative arrangements in the future on acceptable terms,
if at all, or that such  collaborative  arrangements  will be  beneficial to the
Company.  To  the  extent  that  the  Company  is not  able  to  establish  such
arrangements,  it would face increased  capital  requirements  to undertake such
activities  at its  own  expense  and  might  encounter  significant  delays  in
introducing  its  products  into certain  markets or find that the  development,
manufacture,  marketing  and sale of its  products in such  markets is adversely
affected.  In  particular,  the  continuing  ability of the  Company to generate
nutritional  oil-related revenues is dependent on the Company's ability to enter
into agreements with additional licensees.  Certain of the Company's nutritional
oil licensing  agreements  contain  provisions  which  restrict the Company from
entering into agreements  with future  licenses for infant formula  applications
containing payment terms more favorable, or with lower royalty rates, than those
granted to current licensees. Such provisions may restrict the Company's ability
to negotiate with potential infant formula licensees.

         Dependence  on Major  Customers.  The  Company's  dependence on sizable
product orders from its infant formula  licensees and other  marketing  partners
will  make the  relationship  with each  customer  critically  important  to the
Company's  business.  While each customer  relationship is typically  structured
around a detailed, heavily negotiated contract, as the relationship evolves over
time,  adjustments to such items as product pricing,  royalty rates and delivery
timetables  may be required in  response to customer  demands and  expectations.
There can be no assurance  that the Company will be able to manage its licensees
and  other  customer  relationships  successfully.  Additionally,  the  size and
complexity of the  Company's  licensees and other  marketing  partners,  and the
typically  long and  unpredictable  product launch cycles require the Company to
make  considerable  early  investments  in account  management and other efforts
without the  assurance of future  revenues.  There can be no assurance  that the
Company  will be able to convert  these  investments  into  significant  revenue
generating relationships.

         Technological  Change and Competition.  The Company operates in rapidly
evolving  fields.   Competition   from  larger,   more  experienced  and  better
capitalized companies has been and will continue to be intense.  There can be no
assurance that developments by others will not render the Company's  products or
technologies obsolete or noncompetitive or that the Company will be able to keep
pace with any new technological  developments.  Currently,  DHA-containing  fish
oils  provide  alternative  sources of DHA,  and the Company is aware of another
company which produces DHA from fungal  sources.  In addition,  DHA and ARA have
been derived from egg yolk lipids, and the Company is currently aware of several
European infant formula  manufacturers that are adding DHA derived from egg yolk
lipids to their infant formula. Further, although the Company has obtained seven
U.S.  patents and a number of patents outside the U.S.  covering certain aspects
of its nutritional oils to date, and has additional patent applications  pending
covering certain aspects of these DHA- and ARA-containing  oils, the Company has
not been  awarded  any  European  patents  relating to its  ARA-containing  oil.
Accordingly,  competitors  may be able to  produce,  sell and use ARA in  Europe
during the period when  patents  have not been  issued or have been  invalidated
using similar or identical processes to those used by the Company, although they
generally are  prohibited  from  manufacturing,  using or selling such materials
where patents have been issued.  Competitors  may also be able to produce,  sell
and use DHA-and/or  ARA-containing  oils in countries  where the Company has not
applied for patent protection. In addition, competitors may produce certain DHA-
and  ARA-containing  oils that are not  covered by the  Company's  patents.  The
Company is aware of several other  companies  offering  ARA-containing  oils for
sale. In addition,  there can be no assurance that other sources of DHA and ARA,
the two primary  components  of the Company's  nutritional  oil, will not become
commercially viable.

         Uncertainty Regarding Patents and Proprietary Technology. The Company's
success is dependent in part on its ability to obtain patent  protection for its
products,  maintain trade secret  protection and operate without  infringing the
proprietary  rights of others.  The Company's policy is to protect  aggressively
its proprietary technology through patents, where appropriate, and through trade
secrets in other cases.  Additionally,  the Company, in certain cases, relies on
the  licenses  of patents  and  technology  of third  parties.  The  Company has
obtained over 18 U.S. patents, covering various aspects of its technology, which
will expire on various dates between 2007 and 2015.  The Company has filed,  and
intends to file,  applications for additional patents covering both products and
processes as appropriate. There can be no assurance that any patent applications
filed by,  assigned to, or licensed  to, the Company  will be granted,  that the
Company will develop additional products that are patentable or that any patents
issued  to or  licensed  by the  Company  will  provide  the  Company  with  any
competitive  advantages or adequate  protection  for  inventions.  Moreover,  no
assurance  can be given that any  patents  issued to or  licensed by the Company
will not be challenged, invalidated or circumvented by others.

         There can be no  assurance  that issued  patents,  or patents  that may
issue,  will provide  protection  against  competitive  products or otherwise be
commercially valuable.  Furthermore,  patent law relating to the scope of claims
in the  fields  of  health  care  and  biosciences  is still  evolving,  and the
Company's  patent rights are subject to this  uncertainty.  The Company's patent
rights on its  products  therefore  might  conflict  with the  patent  rights of
others,  whether existing now or in the future.  Alternatively,  the products of
others  could  infringe  the  patent  rights of the  Company.  The  defense  and
prosecution  of patent  claims is both  costly and time  consuming,  even if the
outcome were  favorable to the Company.  An adverse  outcome  could  subject the
Company to significant liabilities to third parties,  require disputed rights to
be  licensed  from third  parties or require  the  Company to cease  selling its
products.

         The Company has been issued seven U.S. patents covering certain aspects
of its DHA and/or ARA oils.  the Company  has  applied for other  patents in the
United States  covering  certain other aspects of its  nutritional  oils and has
also filed  patent  applications  on a selective  basis in other  industrialized
countries,  some of which are pending and some of which have been  granted.  The
Company is unable to predict, however, whether these patents will be challenged,
invalidated or circumvented by others. Failure by the Company to obtain adequate
patent  protection for its nutritional oils would have a material adverse effect
on the  Company's  results  of  operations,  particularly  future  sales  of its
nutritional oils,  future royalties on sales of infant formula  containing these
oils or license fees related thereto. In particular,  failure to maintain patent
protection  would permit  competitors  of the company to produce  products which
would be  directly  competitive  with its  nutritional  oils  using  similar  or
identical  processes,  and it is possible that the infant formula  manufacturers
currently  under  license by the  Company  or which may be under  license in the
future may choose formula  ingredients from these  competitors if they choose to
include the ingredients in their formulas at all.

         The  Company's  other  patents  cover its  photobioreactor  system  for
culturing microalgae and certain aspects of Martek's breath test technology; its
Celtone and Celtone M technology; and its combinatorial library technology.

         The Company  also relies on trade  secrets  and  proprietary  know-how,
which  it  seeks  to  protect  in part by  confidentiality  agreements  with its
collaborators,  employees and consultants.  There can be no assurance that these
agreements  will not be breached,  that the Company will have adequate  remedies
for any such  breach or that the  Company's  trade  secrets  will not  otherwise
become known or be independently developed by competitors.

         Risks   Associated  with  Infant  Formula  and   Nutritional   Products
Industries.  To the extent the Company's nutritional oils are included in infant
formula,  and/or the  Company's  oils are included in  nutritional  products for
consumer  use,  the Company is subject to the risks  generally  associated  with
these industries.  These risks include, among others, that (i) product tampering
or  production  defects  may occur  which may require a recall or may reduce the
demand for such products;  (ii) an ingredient  used in such products,  including
the  Company's  nutritional  oils,  may be banned or its use limited or declared
unhealthful;  and  (iii)  sales of  infant  formula  may  decline  or use of the
Company's  nutritional  oils may be limited  or  discontinued  due to  perceived
health  concerns,  adverse  publicity or other reasons beyond the control of the
Company.

         Potential  Difficulty in Obtaining FDA and other Government  Approvals.
The Company's products and its manufacturing and research activities are subject
to varying  degrees of regulation by a number of government  authorities  in the
United  States and other  countries,  including  the FDA pursuant to the Federal
Food,  Drug and  Cosmetic  Act (the "FDC Act").  The FDA  regulates,  to varying
degrees  and  sometimes  in  very  different  ways,  infant  formulas,   dietary
supplements,  medical  foods,  enteral and parenteral  nutritional  products and
diagnostic  and  pharmaceutical   products,   including  their  manufacture  and
labeling.   Generally,   prescription   pharmaceuticals  and  certain  types  of
diagnostic  products are regulated more rigorously  than foods,  such as dietary
supplements.  Infant  formulas are special types of food that are regulated more
rigorously than most other types of foods.  Federal and state laws,  regulations
and policies are always subject to change and depend  heavily on  administrative
policies and  interpretations.  There can be no assurance  that any changes with
respect to federal and state laws, regulations and policies,  and, particularly,
with  respect  to  the  FDA or  other  such  regulatory  bodies,  with  possible
retroactive effect, will not have a material adverse effect on the Company.

         Martek's  infant formula  licensees are  responsible  for obtaining the
requisite  regulatory  clearances to market their products  containing  Martek's
oils. To date, none of the company's infant formula  licensees have obtained the
requisite  marketing  clearances for any of the Company's  products that require
such clearances in the United States.  Sales of the Company's  products  outside
the United States are subject to foreign  regulatory  requirements that may vary
widely from country to country.  Term infant  formula  products  containing  the
Company's  nutritional  oils are currently  being  marketed  outside the U.S. in
three countries,  and pre-term infant formula products  containing the Company's
oils are  currently  being  marketed  outside the U.S. in 30  countries.  Martek
understands that its licensees have received appropriate  regulatory  clearances
to the extent they are required to market such products in those countries.

         The  time  required  to  obtain  clearances  from  additional   foreign
countries  and for term  infant  formulas  containing  Martek's  oils in foreign
countries  may be longer or shorter than that  required by the FDA or other such
agencies,  and clearance or other product  requirements may differ. There can be
no assurance that such foreign  clearances or other requirements can be obtained
or met on a timely basis, if at all.

         There  can be no  assurance  that  DHA and ARA used in  medical  foods,
infant  formulas  or enteral  nutritional  products  will not be subject to food
additive  regulation  under the FDC Act.  Additional  data also may be needed to
support the use of DHA and ARA in medical foods.

         The process of  obtaining  FDA  clearances  can be  time-consuming  and
expensive,  and there is no assurance  that such  clearances  will be granted or
that the FDA  review  process  will  not  involve  delays  that  materially  and
adversely  affect the testing,  marketing  and sale of the  Company's  products.
Moreover, regulatory clearances for products such as medical devices, new drugs,
or new food additives,  even if granted, may include significant  limitations on
the  uses  for  which  such  products  may be  marketed.  Additionally,  product
clearances  could be withdrawn for failure to comply with regulatory  standards.
There can be no assurance that any clearances that are required,  once obtained,
will not be withdrawn or that compliance with other regulatory  requirements can
be maintained.

         Many of the Company's products are in research and development  phases.
The Company cannot predict all regulatory  requirements or issues that may apply
to or arise in connection with the Company's products. Changes in existing laws,
regulations  or policies and the adoption of new laws,  regulations  or policies
could  prevent the Company or its  licensees  or  collaborators  from,  or could
affect  the  timing  of,  achieving  compliance  with  regulatory  requirements,
including obtaining current and future regulatory clearances, where necessary.

         Due to the cost and time commitment  associated with the FDA regulatory
process, as well as the Company's lack of experience in obtaining FDA regulatory
clearances,  the Company will decide on a  product-by-product  basis  whether to
handle relevant clearance and other requirements independently or to assign such
responsibilities to its licensees or future collaborative partners. There can be
no assurance that the Company,  its licensees or  collaborators  will be able to
obtain such  regulatory  clearances,  if required,  on a timely basis or at all.
Delays in receipt  of, or  failure  to  receive,  such  clearances,  the loss of
previously received approvals or clearances,  or failure to comply with existing
or future  regulatory  requirements  would have a material adverse effect on the
Company's business, financial condition and results of operations.

         In connection with the Company's decision to manufacture certain of its
products which it markets  directly,  or licenses to or collaborates with others
to  market,   it  will  be  required  to  adhere  to  applicable   current  Good
Manufacturing  Practices ("GMP") as required by the FDA. GMP regulations specify
component and product testing standards, control quality assurance requirements,
and records and other documentation  controls. In general, drug GMP requirements
are more  stringent  than food GMP  requirements  although  significant  quality
control  procedures  exist for infant  formulas.  Depending upon the type of FDA
application that is submitted,  compliance with relevant GMP requirements can be
onerous and time  consuming,  and there can be no assurance that the Company can
meet  relevant  FDA  manufacturing   requirements,   particularly  for  scale-up
operations  involving  product  marketing  applications.  Because the Company is
manufacturing  its DHA and ARA oils,  it is  subject  to GMP and  various  other
requirements  applicable to infant  formulas and dietary  supplements as well as
periodic  inspections  by the FDA.  Further,  the Company  has had only  limited
experience  in the area of regulatory  compliance  with respect to its products.
There  can be no  assurance  that  the  company  will  be able  to  continue  to
manufacture its nutritional  oils in accordance with relevant infant formula and
dietary supplement  requirements for commercial use. Ongoing compliance with GMP
and other  applicable  regulatory  requirements  are monitored  through periodic
inspections  by state and federal  agencies,  including  the FDA and  comparable
agencies in other countries. A determination that the Company is in violation of
such GMP and other  regulations could lead to the imposition of civil penalties,
including fines, product recalls or product seizures, and, in the most egregious
cases, criminal sanctions.

         Each line of products  that is or may be marketed by the Company or its
licensees or  collaborators  can present unique  regulatory  problems and risks,
depending on the product type, uses and method of manufacture.

         The  Federal  Dietary  Supplement  Health  and  Education  Act of  1994
("DSHEA") regulates the use and marketing of dietary supplements. The DSHEA sets
forth standards for adulteration of dietary supplements or ingredients  thereof,
prescribes   detailed   requirements  for  labeling   dietary   supplements  and
establishes  GMP  requirements  for  dietary  supplements.  Martek is  currently
marketing a line of DHA dietary supplements,  Neuromins(TM) and Neuromins(TM)PL.
In addition,  it is researching and developing new  applications for its DHA and
ARA oils. There can be no assurance that the Company will be able to comply with
the  requirements  of the DSHEA or any  regulations  that the FDA may promulgate
thereunder with regards to ARA as a dietary  supplement or that the Company will
be able to  continue to meet such  requirements  with regard to DHA as a dietary
supplement.

         The  Company's  fluorescent  pigments and other  products  derived from
microalgae  are subject to  potential  regulation  by the FDA as either  medical
devices or as a combination  medical device/drug product to the extent that they
are  used  in the  diagnosis,  mitigation,  treatment,  cure  or  prevention  of
diseases. Such classification would subject the products to premarket clearances
and/or regulatory approvals.  There can be no assurances that the Company or its
licensees or  collaborators  would be able to develop the  extensive  safety and
efficacy data needed to support such FDA premarket  clearances and/or regulatory
approvals  or that the FDA  ultimately  would  authorize  the  marketing of such
products on a timely basis, if at all.

         For pharmaceutical uses of products derived from microalgae,  there can
be no assurance that required  clinical  testing will be completed  successfully
within any  specified  time period,  if at all,  with  respect to the  Company's
products.  Additionally, there is no assurance that the Company or its licensees
or collaborators  will be able to develop the extensive data needed to establish
the safety and efficacy of these  products  for approval for drug uses,  or that
such drug products  will not be subject to regulation as biological  products or
as controlled substances, which would affect marketing and other requirements.

         Limited   Manufacturing   and  Sales  and  Marketing   Experience   and
Capabilities.  In 1995, the Company acquired a fermentation plant in Winchester,
Kentucky for the manufacture of its nutritional  oils.  During 1996, the Company
completed the  construction  of an oil extraction  and refining  facility at its
Winchester plant. The Company has limited experience operating its manufacturing
facility. There can be no assurance that the Company will be able to scale-up or
successfully   optimize   production  of  its  nutritional  oils  or  its  other
nutritional,  diagnostic or  pharmaceutical  products or comply with  applicable
regulatory, including GMP, requirements or that these production facilities will
be sufficient to meet future demand for the Company's  products.  If the Company
is not  able to  develop  adequate  manufacturing  capability  or  contract  for
manufacturing on acceptable  terms, the Company may not be able to commercialize
certain of its  current or planned  products  or such  commercialization  may be
significantly  delayed.  In addition,  the Company has only  limited  experience
managing  operations  at  a  remote  geographic  location.   Managing  a  remote
manufacturing  plant may place a substantial strain on the managerial  resources
of the Company.

         The Company  believes that its Winchester,  Kentucky plant will be able
to  produce  the  Company's  nutritional  oils in  sufficient  quantity  to meet
near-term  demand.  Nevertheless,  because demand for the Company's  nutritional
oils under the Company's infant formula licensing agreements and other marketing
relationships is based on factors beyond the Company's  control,  the Company is
unable to predict whether it has sufficient  manufacturing  capacity to meet any
such future  demand.  During 1997, the Company  entered into a supply  agreement
with one of the world's  largest  fermentation  companies to provide ARA oil. In
addition,  the company has  conducted  DHA  production  trials with  third-party
manufacturers  to prepare  for future DHA oil demand in excess of the  Company's
current plant  capacity.  Although the Company  believes that it will be able to
use third party  manufacturing  for its DHA oil if demand requires,  there is no
assurance  that the Company will be able to do so  successfully.  The failure to
meet demand for the  Company's  nutritional  oils could  encourage the Company's
infant formula  licensees and other  nutritional  product  customers to look for
alternative manufacturing sources.

         The  Company  currently  does not have the  capability  to  manufacture
therapeutic and diagnostic products in accordance with GMP requirements.  Should
the  Company  decide  to  manufacture  and  scale-up  the  production  of future
diagnostic and pharmaceutical  products,  substantial start-up expenses would be
incurred,  expansion of facilities  would be required and  additional  personnel
would have to be hired.

         The Company currently markets its nutritional supplements,  formula and
nutritional products for use in molecular structure research and structure-based
drug  design and  fluorescent  pigments  both  directly to end users and through
distributors.  The Company  markets its infant formula oils and its  nutritional
supplements primarily through distributors,  and to a lesser extent, directly to
consumers.  Other nutritional  products and products the Company develops in the
diagnostic and  pharmaceutical  areas will require the Company to form corporate
alliances with companies  capable of marketing such products  and/or develop its
own sales and marketing  force.  There can be no assurance that the Company will
be able to maintain  existing or establish an effective sales or marketing force
at an acceptable cost, or at all, or to establish  additional  third-party sales
and marketing arrangements.

         No Clinical and Limited Regulatory Compliance Capabilities. The Company
has limited  experience and  capabilities  in the area of product testing and no
experience and limited  capabilities  in the area of regulatory  compliance with
respect to its  products  and will have to expend  significant  sums of money to
acquire and expand such  capabilities,  reach  collaborative  arrangements  with
third  parties to provide these  capabilities  or contract with third parties to
provide these capabilities.  These capabilities will be important to the Company
for the successful  commercialization of its existing and potential nutritional,
human diagnostic and pharmaceutical products.

         The Company  intends to depend on its current  licensees  to obtain any
required  regulatory  clearances  for  its  nutritional  oils to be used by such
licensees as infant formula  ingredients.  See  "--Dependence  on Third Parties;
Reliance  on Future  Collaborations."  Although  the Company  believes  that its
infant formula  licensees will perform  required testing and obtain any required
regulatory  clearances,  the Company  cannot control the timing or the resources
such licensees will devote to these activities.  The Company may, in the future,
decide  to seek  FDA  clearances  itself  for  its  nutritional  oils  or  other
nutritional  products,  if such  clearances  are required.  In the area of human
diagnostics,  the  Company  has not yet  decided  whether  to  develop  in-house
capability,  contract with third parties,  seek collaborative  arrangements with
partners or use a combination  of the three to test its product  candidates  and
obtain any required  regulatory  clearances.  If the Company were to manufacture
these  diagnostic  products for certain  uses, it would be subject to applicable
regulatory requirements.  For its potential pharmaceutical products, the Company
will likely contract with third parties and seek collaborative  arrangements for
these  activities.  In any case,  these  activities  may require the devotion of
substantial  resources by the Company and a significant  portion of management's
time. There can be no assurance that the Company can effectively test and obtain
regulatory  clearances  for its products and delays in testing or obtaining such
regulatory  clearances may result in delay in or the inability to  commercialize
the affected product.

         Product  Liability.  The  Company  faces an inherent  business  risk of
exposure to product  liability claims alleging that the use of its technology or
products  resulted  in  adverse  effects.  Such risk  exists in the  conduct  of
clinical  studies and even with respect to those products,  if any, that receive
regulatory  clearances for commercial  sale.  There can be no assurance that the
Company's  current  level of product  and  clinical  study  liability  insurance
together with indemnification rights under its infant formula license agreements
and other collaborative arrangements will be adequate to protect the Company. It
is  uncertain  whether the Company  will be able to obtain  increased  levels of
insurance  as  the  Company  grows,   that  any  level  of  insurance  would  be
economically  practical  or that it would be able to renew its current or future
policies.  A product  liability  claim or recall in excess of insured amounts or
amounts  recoverable under applicable  contractual  arrangements could adversely
affect the business, financial condition or future prospects of the Company.

         Dependence Upon Key Personnel.  The Company is highly  dependent on the
principal  members  of its  management,  production,  sales  and  marketing  and
scientific  staff.  The loss of certain key management and scientific  employees
could have a material  adverse effect on the Company.  In addition,  the Company
believes  that its future  success will depend in large part upon its ability to
attract  and  retain  highly  skilled   scientific,   managerial  and  marketing
personnel.   The  Company  faces  competition  for  such  personnel  from  other
companies,  research and academic  institutions,  government  entities and other
organizations.  There can be no assurance that the Company will be successful in
hiring or retaining the personnel it requires for continued growth.

         Limited Availability of Certain Supplies. The availability of carbon-13
and nitrogen-15 is critical for production of the Company's  products for use in
drug design.  Although the current  supplies of these items are adequate for the
Company's  near-term  needs,  they may not be  adequate  if the  demand  for the
Company's  products for use in drug design and/or breath test  diagnosis were to
sustain significant growth.

         Possible  Volatility  of Stock  Price;  Limited  Liquidity;  Absence of
Dividends.  The market price of the Common Stock may  experience a high level of
volatility,  as frequently occurs with publicly traded emerging growth companies
and biosciences  companies.  Announcements of  technological  innovations or new
commercial products by the Company or its competitors,  developments or disputes
concerning patent or proprietary rights, publicity regarding actual or potential
medical  results  relating to products  under  development by the Company or its
competitors, general regulatory developments affecting the Company's products in
both the United States and foreign  countries,  market  conditions  for emerging
growth  companies and biosciences  companies and economic and other internal and
external factors, as well as period-to-period fluctuations in financial results,
may have a  significant  impact on the  Company's  business or the future market
price of the Common Stock. Since the Company's initial public offering of Common
Stock on November 23, 1993, the average daily trading volume in the Common Stock
as reported on the Nasdaq  National Market has been relatively low. There can be
no assurance that a more active  trading market will develop in the future.  The
Company has never  declared or paid any cash  dividends  on its Common Stock and
does not intend to do so for the foreseeable future.

         Anti-Takeover  Provisions;  Preferred  Stock.  The  Company's  Board of
Directors  is divided  into three  classes  with each class of  directors  being
elected to three-year  terms on a rotating basis. As such, only one-third of the
members of the Board of Directors stand for election every year. The Company has
adopted a stockholder rights plan which may have the effect of deterring hostile
or coercive  attempts to acquire the Company through the  distribution of rights
to stockholders  enabling those  stockholders to acquire shares of the Company's
Common Stock,  or that of an acquiror,  at a substantial  discount to the public
market  price  should  any person or group  acquire  more than 20% of the Common
Stock without  approval of the Board of Directors  under certain  circumstances.
The  Company  has  reserved  300,000  shares  of  Series A Junior  Participating
Preferred Stock for issuance in connection with the Stockholder Rights Plan. The
Company is authorized to issue an additional 4,700,000 shares of Preferred Stock
in one or more series,  having  terms fixed by the Board of Directors  without a
stockholder  vote.  While the Board of Directors  has no current  intentions  or
plans to issue any Preferred Stock,  issuance of these shares could also be used
as an anti-takeover device.

         Shares  Eligible for Future Sale;  Registration  Rights.  As of May 26,
1998, the Company had outstanding  shares of Common Stock,  substantially all of
which are available for sale in the public marketplace.  As of May 26,1998 there
were also outstanding stock options to purchase an aggregate of 1,881,505 shares
of Common  Stock at various  exercise  prices  ranging  from $2.00 to $32.88 per
share and  warrants  issued in  connection  with the Common  Stock  Warrant  and
Purchase  Agreement dated April 27, 1998 (the "Purchase  Agreement") to purchase
196,669 shares of Common Stock at an exercise price of $18.76 per share.  If the
Company  elects to sell all the shares of Common Stock and  Warrants  which have
not  been  sold  pursuant  to the  Purchase  Agreement  but  which  the  Selling
Stockholders  are  irrevocably  obligated to  purchase,  there would be up to an
additional outstanding 819,454 shares of Common Stock and 245,836 warrants, with
exercise prices ranging from $15.01 to $18.76 per share.  Shares of Common Stock
which may be issued under outstanding options and warrants will be available for
sale in the public markets.  To the extent that these  outstanding stock options
and warrants are exercised, the percentage ownership of certain of the Company's
stockholders will be diluted.  In addition,  certain holders of the Common Stock
have certain demand and piggyback registration rights pursuant to a Registration
Rights  Agreement  between the Company and these  holders.  No prediction can be
made as to the  effect,  if any,  that  sales of shares  of Common  Stock or the
availability  of such  shares  for sale  will have on the  market  prices of the
Common Stock  prevailing  from time to time. The  possibility  that  substantial
amounts of Common Stock may be sold in the public  market may  adversely  affect
prevailing  market  prices for the Common Stock and could  impair the  Company's
ability to raise capital through the sale of its equity securities.  Further, if
the Company were required to include shares, through exercise of the outstanding
piggyback registration rights, in a Company-initiated  registration, the sale of
such shares could have a material  adverse  effect on the  Company's  ability to
raise additional capital.

         Year 2000  Compliance.  The Company uses a number of computer  software
programs  and   operating   systems  in  its  internal   operations,   including
applications  used in  financial  business  systems and  various  administrative
functions.  Management  is in  the  process  of  evaluating  the  business  risk
associated with the Company's  information  systems.  Based upon the information
known at this time about the  Company's  current  systems,  management  does not
anticipate  that the "Year  2000"  issue will have a  significant  impact on its
information systems.  However, there can be no assurance that "Year 2000" issues
will not require a  significant  commitment  of resources  to resolve  potential
problems.