Document:

<PAGE>   1

                                                                    EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is made as of May 17,
2001, by and among Montrose Investments Ltd., a Cayman Islands corporation,
Strong River Investments, Inc., a Cayman Islands corporation (each such investor
individually, a "Purchaser," and collectively, the "Purchasers"), and
NeoTherapeutics, Inc., a Delaware corporation (the "Company"), whereby the
parties agree as follows:

     The Purchaser shall buy from the Company and the Company agrees to sell to
the Purchasers: (i) 1,400,000 shares (the "Shares") of the Company's common
stock, par value $.001 per share (the "Common Stock") at a price per share of
$4.25, and (ii) five-year warrants to purchase up to 280,000 shares of Common
Stock at a purchase price per share of $6.00, as follows:

<TABLE>
<CAPTION>
                                Shares     Warrant Shares   Purchase Price
<S>                             <C>        <C>              <C>

Montrose Investments Ltd.       900,000        180,000        $3,825,000
Strong River Investments, Inc.  500,000        100,000        $2,125,000
</TABLE>

     The Company is a corporation duly incorporated and validly existing under
the laws of the State of Delaware. The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
to issue and sell the Shares in accordance with the terms of this Agreement, and
the issuance of the Shares shall not contravene any agreement to which the
Company is a party. The Shares have been duly authorized by all necessary
corporate action, and, when paid for and issued in accordance with the terms of
this Agreement, the Shares will be validly issued, fully paid and nonassessable.
The Shares have been listed on the Nasdaq National Market.

     The Shares are being issued and sold pursuant to a registration statement
on Form S-3, File No. 333-53108, which registration statement has been declared
effective and continues to be effective and not subject to any stop order by the
Securities and Exchange Commission. The Company has delivered to each Purchaser
and each Purchaser has reviewed a copy of the prospectus included in such
registration statement and a prospectus supplement regarding the issuance and
sale of the Shares, a copy of which is attached hereto as Exhibit A.

     Prior to the close of business on May 18, 2001:

     1.   Each Purchaser shall wire their respective purchase price set forth
          above to the Company to the account set forth below:

          Chase Manhattan Bank, N.Y.C.
          4 New York Plaza, 15th Floor
          New York, NY  10004

          ABA Routing No:  021 000 021
          FBO: Salomon Smith Barney, Inc.
               Account No.  066-198038
          For further credit to:  NeoTherapeutics, Inc.
               Account No. 561-04051-19-103

<PAGE>   2

     2.   The Company shall cause its transfer agent to transmit the Shares
          electronically to each Purchaser's account with the DTC set forth
          below:

          DTC No. 0050                 DTC No. 352
          Account No. 038-07785        Account No. 102-07978, Attn: Perry Teagle
          Montrose Investments Ltd.    Strong River Investments, Inc.

     Notices to the Company shall be delivered to:

     NeoTherapeutics, Inc.
     Attention: Samuel Gulko, Senior Vice President, Finance
     157 Technology Drive,
     Irvine, California  92618
     Facsimile:  (949) 788-6706

     Notices to the Purchasers shall be delivered to:

     For Montrose Investments Ltd.:

     Montrose Investments Ltd.
     c/o  John Mosle and Kim Rozman
     300 Crescent Court, Suite 700
     Dallas, TX 75201
     Facsimile:  (214) 758-1221

     For Strong River Investments, Inc.:

     Strong River Investments, Inc.
     c/o Cavallo Capital Corp.
     660 Madison Avenue, 18th Floor
     New York, New York 10021
     Facsimile:  (212) 651-9010

     Delivery of an executed copy of a signature page to this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
copy of this Agreement and shall be effective and enforceable as the original.
This Agreement shall be governed and construed in accordance with the internal
laws of the State of New York without giving effect to the conflicts of law
principles thereunder.

                           [SIGNATURE PAGE TO FOLLOW]

                                       2
<PAGE>   3

AGREED AND ACCEPTED, as of the date indicated above:

NeoTherapeutics, Inc.

By: /s/ Samuel Gulko
    ---------------------------------
Name:  Samuel Gulko
Title: Senior Vice President, Finance

Strong River Investments, Inc.

By: /s/ Kenneth L. Hendersen
    ---------------------------------
Name:  Kenneth L. Hendersen
Title: Attorney-in-Fact

Montrose Investments Ltd.

By: /s/ David C. Haley
    ---------------------------------
Name:  David C. Haley
Title: Authorized Signatory

                [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

                                        3<PAGE>   1

                                                                    EXHIBIT 10.2

                          [NEOTHERAPEUTICS LETTERHEAD]

                                  May 17, 2001

Montrose Investments Ltd.
300 Crescent Court
Suite 700
Dallas, TX 75201

Strong River Investments, Inc.
Wickhams Cay I, Vanterpool Plaza
P.O. Box 873
Road Town, Tortola. BVI

     Re:  Amendment to April 17, 2001 Letter Agreement

Dear Sirs/Ladies:

     Reference is made to that certain Letter Agreement dated April 17, 2001, by
and among Strong River Investments, Inc. ("Strong River"), Montrose Investments
Ltd. ("Montrose"), HBK Master Fund, L.P. ("Master Fund") and NeoTherapeutics,
Inc. (the "Company") (the "Letter Agreement"). The parties to the Letter
Agreement hereby agree to this amendment to the Letter Agreement as follows:

     1.   Montrose and Strong River (the "Purchasers") hereby agree to reduce
the amount of the first tranche cancellation fee due to them under Section 1(c)
of the Letter Agreement ("Cancellation Fee") from $500,000 each to $202,500 each
in consideration of the signing of the Securities Purchase Agreement dated May
17, 2001, by and among the Company and the Purchasers. The Cancellation Fee, as
reduced hereby, shall be due and payable to the Purchasers on June 18, 2001.

     2.   The Purchasers hereby agree that, notwithstanding the decision of the
Company not to complete the closing of the sale of the first tranche of
convertible debentures and fixed-price warrants as described in Section 1(b) and
Exhibit A of the Letter Agreement, the Purchasers remain obligated under the
Letter Agreement to purchase convertible debentures and fixed-price warrants
from the Company with an aggregate purchase price of $8 million, under the
second tranche on or before November 17, 2001, as described in Section 1(b) and
Exhibit A of the Letter Agreement, should the Company exercise its option to
issue and sell such convertible debentures and fixed-price warrants.

          Except as set forth in this letter, the Letter Agreement shall remain
in full force and effect in accordance with its respective terms.

<PAGE>   2

          Please indicate your agreement with the foregoing by signing where
indicated below and returning a signed copy to us, upon which this letter will
become a binding agreement between us.

                                                Very truly yours,

                                                NEOTHERAPEUTICS, INC.

                                                By: /s/ Samuel Gulko
                                                    ----------------------------
                                                Name:  Samuel Gulko
                                                Title: Senior Vice President,
                                                       Finance, Chief Financial
                                                       Officer, Secretary and
                                                       Treasurer

Agreed and Accepted
as of May 17, 2001

Montrose Investments Ltd.

By: /s/ David C. Haley
    ---------------------------
Name:  David C. Haley
Title: Authorized Signatory

Strong River Investments, Inc.

By: /s/ Kenneth L. Hendersen
    ---------------------------
Name:  Kenneth L. Hendersen
Title: Attorney-in-FactExhibit 10.1
                                  ------------

                               ADVISORY AGREEMENT

Phage  Therapeutics  International  Inc., and its wholly owned  subsidiary Phage
Therapeutics,  Inc.,  ("PhageTx" or the "Company") desire to engage the advisory
services  ("Service") of Seymour Froman, PhD, as an advisory  ("Advisor") in the
general  fields  of  microbiology,   mycobacteriology,   bacteriophage  biology,
mycobacteriophage,  and bacteriophage  therapeutics.  Advisor desires to provide
such  Service  to  PhageTx.   By  execution  of  this  Advisory  Agreement  (the
"Agreement"),  Advisor  agrees to provide  such Service in  accordance  with the
following terms and conditions:

1. Service - At time mutually agreeable to Advisor and PhageTx, and as requested
by PhageTx,  Advisor will  undertake  the  designated  Service for one (1) year,
commencing on the effective date of this Agreement (See Section 4 below).  It is
expected that Advisor will provide at least  seventy-two (72) days of cumulative
Service during the one (1) year period of this Agreement, consisting of periodic
teleconferences,  electronic mail, written communications,  direct meetings, and
the like, upon the prior agreement of Advisor and PhageTx.

2.  Compensation  - As  compensation  for  Advisor's  Service,  PhageTx will pay
Advisor  three  thousand  dollars  ($3,000)  per month for each month of Service
provided  during the one (1) year period of this  Agreement  as an advisory  fee
("Fee").  In addition,  should Advisor incur other expenses,  such as for office
supplies,  clerical work, shipping,  materials or project-related travel, and in
the event such expenses are previously determined to be agreeable to Advisor and
acceptable  to  PhageTx,  Advisor  shall be  reimbursed  for all such  expenses.
PhageTx shall make payment to Advisor in accordance  with this paragraph  within
thirty (30) days of recepts of an invoice with  attached  receipts  from Advisor
itemizing such  expenses.  Invoices  should be directed to: Phage  Therapeutics,
Inc., 19017 - 120th Avenue NE, Suite 102, Bothell,  WA. 98011.  Attn: Kenneth E.
Lehman, Controller.

In recognition and  consideration  of Advisor's  potential  contributions to the
Company's technology and product development efforts,  PhageTx wishes Advisor to
participate in the Company's  future success by granting to Advisor an option to
purchase  shares  of stock in the  Company  in accord  with the legal  terms and
conditions of the PhagTx Stock Option Plan.  The actual grant of options will be
determined  by  the  PhageTx  Board  of  Direcotrs,   which   functions  as  the
Administrator of the Stock Option Plan.

3. Independent Contractor - It is agreed that Advisor will have complete freedom
of action as to the details,  methods, and means of performing th Service. It is
further  understood  that Advisor is retained by and has contracted with PhageTx
only for the  purposes and to the extent set forth in this  Agreement,  and that
Advisor's  relation to PhageTx during the period of this Agreement shall be that
of  an  independent  contractor.  Advisor  shall  not  e  considered  under  the
provisions of this Agreement or otherwise as having the status of an employee of
PhageTx.

4. Effective  Date,  Term,  Termination  and Extension - This Agreement  becomes
effective on January 1, 2001,  and will  continue in effect  until  December 31,
2001 (the first  twelve-month-period).  It is  provided,  however,  that  either
Advisor or Phage Tx may terminate  this Agreement at any time during its term by
giving at least one (1) month written notice to the other. At the sole option of
PhageTx,  this Agreement may be extended for one (1) or more consecutive  twelve
period(s),  under similar terms as are provided  herein,  except that certain of
the terms may be modified  by mutual  agreement  of the  parties,  by  PhageTx's
providing to Advisor  written notice of its desire to continue the Agreement for
an  additional  term by at least two (2)  months  prior to the end of the twelve
(12)-month period in question.

5.  Inventions  - During  Advisor's  Service to PhageTx,  PhageTx  may  disclose
certain  confidential  information to Advisor and may ask Advisor to participate
in activities that may result in inventions  related to PhageTx's  technology or
business.  To the  extent  that  Advisor  is not  precluded  from  doing so by a
pre-existing employment contract or another agreement, where, as a direct result
of such  Services to  PhageTx,  Advisor  receives or is made aware of  technical
information by a PhageTx employee, consultant, advisor or contractor that causes
Advisor to  conceive,  make or develop  any  inventions  relating  to  PhageTx's
bacteriophage  technology or products,  Advisor's  signature hereon notices that
Advisor agrees to: a) give notice of any such invention to PhageTx; b) assign to
PhagTx  all of  Advisor's  rights  therein,  in-so-far  as those  rights are not
subject to conditions of Advisor's current employment or another agreement; and,
c) execute any  documents  and otherwise  reasonably  cooperate  with PhageTx in
securing patents on such inventions.

6. Security - Advisor  shall,  during and  subsequent  to providing  Services to
PhageTx,  keep confidential and shall not use any technical or other proprietary
information  provided  by  PhageTx,  including  knowledge  of PhageTx  projects,
general  activities and proprietary  information not publicly disclosed relating
to PhageTx's technology, products and business which Advisor

<PAGE>

may acquire as a result of the  Services or  otherwise.  Advisor  shall hold all
such  information  in  strict  confidence  and shall  not use or  disclose  such
information in any manner, or cause same to be published without PhageTx's prior
written  consent.  This  obligation  of  confidence  has been  agreed  to and is
provided for between Advisor and PhageTx in a separate  Confidential  Disclosure
Agreement executed by both parties on November 25, 1998.

Title to all property  involved  shall remain  exclusively  with  PhageTx.  Upon
termination  of the  Service  or this  Agreement,  or upon  request at any time,
Advisor  shall  account  for and  return to PhageTx  all  papers  and  materials
containing any such confidential information.

PhageTx  shall be free to utilize the results of the  Services  described  under
this Agreement without any further payment or obligation to Advisor. Thus, it is
also  essential  that  Advisor  shall  undertake  not to disclose to PhageTx any
information  which is secret or  confidential  or  belonging  to Advisor or to a
third party,  or with respect to which Advisor is under an obligation to a third
party to maintain  confidentiality.  Similarly, if during this Agreement Advisor
discloses any  inventions to PhageTx which were  conceived  prior to the term or
are outside the scope of the Services under this  Agreement,  PhageTx shall have
no liability to Advisor because of its use of such ideas, except that this shall
not be  construed as a license  under any valid  patent now or hereafter  issued
thereon.

7.  Publicity - Advisor shall not originate any  publicity,  news  releases,  or
other  public  announcement,  written or oral,  whether  to the public  press or
otherwise,   relating  to  this  Agreement,  to  any  amendment  hereto,  or  to
performance hereunder without PhageTx's prior written consent.

8.  Conflict  of Interest - Advisor  represents  that he is  presently  under no
obligation  to  any  third  party   (including  a  prior  employer,   government
organization,  and others  with whom he may now  consult  or may have  consulted
previously)  which would  prevent his  carrying  out his duties and  obligations
under this  Agreement or which is  inconsistent  with the  provisions  contained
herein. To avoid any potential  conflict of interest,  Advisor agrees to provide
written notice to PhageTx  within one (1) week of entering into any  consulting,
advisory or  research  agreement  with a  corporate  third party in the field of
bacteriophage  technology  or products  during the period  Advisor is  providing
Services to PhageTx.  The term  "Corporate" is intended to mean any organization
operating  in the  United  States of  America  or in a foreign  country  with an
expressed  intent  to make  profits  and  includes  organizations  like  limited
partnerships, joint ventures, corporations, and the like.

9. Freedom of Action - It is agreed that  Advisor's  rendering of services under
this  Agreement  shall  in no  way  conflict  or  interfere  with  his  existing
professional responsibilities. In that Advisor is an independent contractor, and
not an employee of PhageTx,  PhageTx shall not be responsible for Advisor's acts
while  Advisor is  performing  the  Services  hereunder,  whether  on  PhageTx's
premises  or  elsewhere,  and  Advisor  shall not have  authority  to speak for,
represent,  or obligate  PhageTx in any way without the explicit  prior  written
authority from PhageTx.

If any part of this Agreement shall be held as  unenforceable,  the remainder of
the  Agreement  shall  nevertheless  remain  in full  force and  effect  and the
unenforceable  provision  shall be construed by the court in such a manner as to
be held enforceable while giving maximum effect to the intended meaning.

Please  indicate  Advisor's  acceptance  of the  foregoing  by returning a fully
executed copy of this Agreement to PhageTx.

Phage Therapeutics, Inc.:                 Advisor:
19017 - 120th Avenue Ne, Suite 102             Seymour Froman, PhD
Bothell, WA 98011                              20415 Wintergreen Drive
                                               Sun City West, AZ 85375

By: /s/ Richard C. Honour /s/                  By: /s/ Seymour Froman PhD /s/
    -------------------------                      --------------------------
Richard C. Honour, PhD                         Seymour Froman, PhD
President & CEO                                Advisor

Date: 01.05.01                                 Date:  2/04/01
      --------                                      ---------

<PAGE>

                               ADVISORY AGREEMENT

Phage  Therapeutics  International  Inc., and its wholly owned  subsidiary Phage
Therapeutics,  Inc.,  ("PhageTx" or the "Company") desire to engage the advisory
services  ("Service")  of Luiz E.  Bermudez,  MD, having  offices and laboratory
operations  located at Kuzell  Institute for Arthritis and Infectious  Diseases,
California Pacific Medical Center Research Institute, 2200 Webster Street, Suite
305, San Francisco,  CA 94115-1821  ("Kuzell") as an advisor  ("Advisor") in the
general  fields of  bacterial  infectious  diseases,  bacteriophage  biology and
bacteriophage therapeutics.  Advisor desires to provide such Service to PhageTx.
By execution of this Advisory  Agreement  (the  "Agreement"),  Advisor agrees to
provide such Service in accordance with the following terms and conditions:

1. Service - At time mutually agreeable to Advisor and PhageTx, and as requested
by PhageTx,  Advisor will  undertake  the  designated  Service for one (1) year,
commencing on the effective date of this Agreement (See Section 4 below).  It is
expected that Advisor will provide at least  seventy-two (72) days of cumulative
Service during the one (1) year period of this Agreement, consisting of periodic
teleconferences,  electronic mail, written communications,  direct meetings, and
the like, upon the prior agreement of Advisor and PhageTx.

2.  Compensation  - As  compensation  for  Advisor's  Service,  PhageTx will pay
Advisor a minimum of one thousand  dollars ($1,000) per day for each full day of
Service provided during the one (1) year period of this Agreement as an advisory
fee ("Fee").  As compensation  for any Service rendered in excess of twenty four
(24) days per year, PhageTX shall also pay Advisor one thousand dollars ($1,000)
per day for each full day of work. Partial days of work on which Advisor renders
Service  shall be  compensated  by PhageTx on a fractional  basis  determined by
dividing  the actual  number of hours worked by either (8) and  multiplying  the
fractional  result  obtained by the  applicable  per day rate.  In addition,  at
certain times PhageTx may request that Advisor travel away from his home, and in
the event that this is agreeable to Advisor, Advisor shall be reimbursed for air
travel (economy class),  as well as all reasonable  living expenses,  including,
but not limited to, car rental,  meals,  and  lodging.  For both the Fee and the
reimbursement  of  expenses,  PhageTx  shall  make all  payments  to  Advisor in
accordance with this paragraph  within thirty (30) days of recepts of an invoice
with attached receipts from Advisor itemizing such expenses.  Invoices should be
directed  to:  Phage  Therapeutics,  Inc.,  19017 - 120th  Avenue NE, Suite 102,
Bothell, WA. 98011. Attn: Kenneth E. Lehman, Controller.

In recognition and  consideration  of Advisor's  potential  contributions to the
Company's technology and product development efforts,  PhageTx wishes Advisor to
participate in the Company's  future success by granting to Advisor an option to
purchase  shares  of stock in the  Company  in accord  with the legal  terms and
conditions of the PhagTx Stock Option Plan.  The actual grant of options will be
determined  by  the  PhageTx  Board  of  Direcotrs,   which   functions  as  the
Administrator  of the Stock Option Plan,  and will be provided  under a separate
Stock Option Agreement.

3. Independent Contractor - It is agreed that Advisor will have complete freedom
of action as to the details, methods, and means of performing the Service. It is
further  understood  that Advisor is retained by and has contracted with PhageTx
only for the  purposes and to the extent set forth in this  Agreement,  and that
Advisor's  relation to PhageTx during the period of this Agreement shall be that
of an independent contractor,  and that Advisor shall be free to dispose of such
portion of his entire time, energy and skill as he is not obligated to devote to
PhageTx in such manner as he sees fit to such persons, firms, or corporations as
he deems  necessary,  so long as same does not  create a  conflict  of  interest
between PhageTx and such other persons, firms or corporations.

Advisor  shall not be  considered  under the  provisions  of this  Agreement  or
otherwise as having the status of an employee of PhageTx,  nor shall  Advisor be
entitled hereafter to participate in any plans, arrangements or distributions by
PhageTx  relating to any pension,  deferred  compensation,  bonus,  stock bonus,
hospitalization,  insurance or other benefits  extended to its employees,  since
Advisor is performing the Service as and independent contractor.

4. Effective  Date,  Term,  Termination  and Extension - This Agreement  becomes
effective on January 1, 2001,  and will  continue in effect  until  December 31,
2001 (the first  twelve-month-period).  It is  provided,  however,  that  either
Advisor or Phage Tx may terminate  this Agreement at any time during its term by
giving at least one (1) month written notice to the other. At the sole option of
PhageTx,  this Agreement may be extended for one (1) or more consecutive  twelve
period(s),  under similar terms as are provided  herein,  except that certain of
the terms may be modified  by mutual  agreement  of the  parties,  by  PhageTx's
providing to Advisor  written notice of its desire to continue the Agreement for
an  additional  term by at least two (2)  months  prior to the end of the twelve
(12)-month period in question.

5.  Inventions  - During  Advisor's  Service to PhageTx,  PhageTx  may  disclose
certain confidential information to Advisor and

<PAGE>

may ask  Advisor to  participate  in  activities  that may result in  inventions
related to PhageTx's  technology or business.  To the extent that Advisor is not
precluded  from  doing  so by a  pre-existing  employment  contract  or  another
agreement,  where,  as a direct  result of such  Services  to  PhageTx,  Advisor
receives  or is made  aware of  technical  information  by a  PhageTx  employee,
consultant,  advisor or  contractor  that causes  Advisor to  conceive,  make or
develop  any  inventions  relating  to  PhageTx's  bacteriophage  technology  or
products,  Advisor's  signature  hereon  notices that Advisor agrees to: a) give
notice of any such  invention  to PhageTx;  b) assign to PhagTx all of Advisor's
rights  therein,  in-so-far  as those  rights are not subject to  conditions  of
Advisor's current employment or another agreement; and, c) execute any documents
and  otherwise  reasonably  cooperate  with PhageTx in securing  patents on such
inventions.

6. Security - Advisor  shall,  during and  subsequent  to providing  Services to
PhageTx,  keep confidential and shall not use any technical or other proprietary
information  provided  by  PhageTx,  including  knowledge  of PhageTx  projects,
general  activities and proprietary  information not publicly disclosed relating
to PhageTx's  technology,  products and business  which Advisor may acquire as a
result of the Services or otherwise.  Advisor shall hold all such information in
strict  confidence and shall not use or disclose such information in any manner,
or cause same to be published  without  PhageTx's  prior written  consent.  This
obligation of confidence has been agreed to and is provided for between  Advisor
and PhageTx in a separate  Confidential  Disclosure  Agreement  executed by both
parties on 01-01-2001

Title to all property  involved  shall remain  exclusively  with  PhageTx.  Upon
termination  of the  Service  or this  Agreement,  or upon  request at any time,
Advisor  shall  account  for and  return to PhageTx  all  papers  and  materials
containing any such confidential information.

PhageTx  shall be free to utilize the results of the  Services  described  under
this Agreement without any further payment or obligation to Advisor. Thus, it is
also  essential  that  Advisor  shall  undertake  not to disclose to PhageTx any
information  which is secret or  confidential  or  belonging  to Advisor or to a
third party,  or with respect to which Advisor is under an obligation to a third
party to maintain  confidentiality.  Similarly, if during this Agreement Advisor
discloses any  inventions to PhageTx which were  conceived  prior to the term or
are outside the scope of the Services under this  Agreement,  PhageTx shall have
no liability to Advisor because of its use of such ideas, except that this shall
not be  construed as a license  under any valid  patent now or hereafter  issued
thereon.

7.  Publicity - Advisor shall not originate any  publicity,  news  releases,  or
other  public  announcement,  written or oral,  whether  to the public  press or
otherwise,   relating  to  this  Agreement,  to  any  amendment  hereto,  or  to
performance hereunder without PhageTx's prior written consent.

8.  Conflict  of Interest - Advisor  represents  that he is  presently  under no
obligation  to  any  third  party   (including  a  prior  employer,   government
organization,  and others  with whom he may now  consult  or may have  consulted
previously)  which would  prevent his  carrying  out his duties and  obligations
under this  Agreement or which is  inconsistent  with the  provisions  contained
herein. To avoid any potential  conflict of interest,  Advisor agrees to provide
written notice to PhageTx  within one (1) week of entering into any  consulting,
advisory or  research  agreement  with a  corporate  third party in the field of
bacteriophage  technology  or products  during the period  Advisor is  providing
Services to PhageTx.  The term  "Corporate" is intended to mean any organization
operating  in the  United  States of  America  or in a foreign  country  with an
expressed  intent  to make  profits  and  includes  organizations  like  limited
partnerships, joint ventures, corporations, and the like.

9. Freedom of Action - It is agreed that  Advisor's  rendering of services under
this  Agreement  shall  in no  way  conflict  or  interfere  with  his  existing
professional responsibilities. In that Advisor is an independent contractor, and
not an employee of PhageTx,  PhageTx shall not be responsible for Advisor's acts
while  Advisor is  performing  the  Services  hereunder,  whether  on  PhageTx's
premises  or  elsewhere,  and  Advisor  shall not have  authority  to speak for,
represent,  or obligate  PhageTx in any way without the explicit  prior  written
authority from PhageTx.

If any part of this Agreement shall be held as  unenforceable,  the remainder of
the  Agreement  shall  nevertheless  remain  in full  force and  effect  and the
unenforceable  provision  shall be construed by the court in such a manner as to
be held enforceable while giving maximum effect to the intended meaning.

Please  indicate  Advisor's  acceptance  of the  foregoing  by returning a fully
executed copy of this Agreement to PhageTx.

Phage Therapeutics, Inc.:               Advisor:
19017 - 120th Avenue Ne, Suite 102          Luiz E. Bermudez, MD
Bothell, WA 98011                           Kuzell Institute for Arthiritis and
                                               Infectious Diseases
                                            California Pacific Medical Center
                                               Research Institute
                                            2200 Webster Street, Suite 305
                                            San Francisco, CA 94115-1821
By: /s/ Richard C. Honour /s/               By: /s/ Luiz Bermudez /s/
    -------------------------                   ---------------------
Richard C. Honour, PhD                      Luiz E. Bermudez, MD
President & CEO                             Advisor
Date: 01.02.01                              Date: 12/22/00
      --------                                   ---------

<PAGE>

                               ADVISORY AGREEMENT

Phage  Therapeutics  International  Inc., and its wholly owned  subsidiary Phage
Therapeutics,  Inc.,  ("PhageTx" or the "Company") desire to engage the advisory
services ("Service") of Tyler A. Kokjohn,  PhD, as an advisor ("Advisor") in the
general  fields  of  microbiology,   bacteriophage   biology  and  bacteriophage
therapeutics.  Advisor desires to provide such Service to PhageTx.  By execution
of this Advisory  Agreement  (the  "Agreement"),  Advisor agrees to provide such
Service in accordance with the following terms and conditions:

1. Service - At time mutually agreeable to Advisor and PhageTx, and as requested
by PhageTx,  Advisor will  undertake  the  designated  Service for one (1) year,
commencing on the effective date of this Agreement (See Section 4 below).  It is
expected  that  Advisor  will  provide at least  twelve (12) days of  cumulative
Service during the one (1) year period of this Agreement, consisting of periodic
teleconferences,  electronic mail, written communications,  direct meetings, and
the like, upon the prior agreement of Advisor and PhageTx.

2.  Compensation  - As  compensation  for  Advisor's  Service,  PhageTx will pay
Advisor a minimum of one thousand  dollars ($1,000) per day for each full day of
Service provided during the one (1) year period of this Agreement as an advisory
fee ("Fee").  As compensation  for any Service rendered in excess of twelve (12)
days per year,  PhageTX shall also pay Advisor one thousand dollars ($1,000) per
day for each full day of work.  Partial  days of work on which  Advisor  renders
Service  shall be  compensated  by PhageTx on a fractional  basis  determined by
dividing  the actual  number of hours worked by either (8) and  multiplying  the
fractional  result  obtained by the  applicable  per day rate.  In addition,  at
certain times PhageTx may request that Advisor travel away from his home, and in
the event that this is agreeable to Advisor, Advisor shall be reimbursed for air
travel (economy class),  as well as all reasonable  living expenses,  including,
but not limited to, car rental,  meals,  and  lodging.  For both the Fee and the
reimbursement  of  expenses,  PhageTx  shall  make all  payments  to  Advisor in
accordance with this paragraph  within thirty (30) days of recepts of an invoice
with attached receipts from Advisor itemizing such expenses.  Invoices should be
directed  to:  Phage  Therapeutics,  Inc.,  19017 - 120th  Avenue NE, Suite 102,
Bothell, WA. 98011. Attn: Kenneth E. Lehman, Controller.

In recognition and  consideration  of Advisor's  potential  contributions to the
Company's technology and product development efforts,  PhageTx wishes Advisor to
participate in the Company's  future success by granting to Advisor an option to
purchase  shares  of stock in the  Company  in accord  with the legal  terms and
conditions of the PhagTx Stock Option Plan.  The actual grant of options will be
determined  by  the  PhageTx  Board  of  Direcotrs,   which   functions  as  the
Administrator  of the Stock Option Plan,  and will be provided  under a separate
Stock Option Agreement.

3. Independent Contractor - It is agreed that Advisor will have complete freedom
of action as to the details, methods, and means of performing the Service. It is
further  understood  that Advisor is retained by and has contracted with PhageTx
only for the  purposes and to the extent set forth in this  Agreement,  and that
Advisor's  relation to PhageTx during the period of this Agreement shall be that
of an independent contractor,  and that Advisor shall be free to dispose of such
portion of his entire time, energy and skill as he is not obligated to devote to
PhageTx in such manner as he sees fit to such persons, firms, or corporations as
he deems  necessary,  so long as same does not  create a  conflict  of  interest
between PhageTx and such other persons, firms or corporations.

Advisor  shall not be  considered  under the  provisions  of this  Agreement  or
otherwise as having the status of an employee of PhageTx,  nor shall  Advisor be
entitled hereafter to participate in any plans, arrangements or distributions by
PhageTx  relating to any pension,  deferred  compensation,  bonus,  stock bonus,
hospitalization,  insurance or other benefits  extended to its employees,  since
Advisor is performing the Service as and independent contractor.

4. Effective  Date,  Term,  Termination  and Extension - This Agreement  becomes
effective on December 1, 2001,  and will  continue in effect until  November 30,
2001 (the first  twelve-month-period).  It is  provided,  however,  that  either
Advisor or Phage Tx may terminate  this Agreement at any time during its term by
giving at least one (1) month written notice to the other. At the sole option of
PhageTx,  this Agreement may be extended for one (1) or more consecutive  twelve
period(s),  under similar terms as are provided  herein,  except that certain of
the terms may be modified  by mutual  agreement  of the  parties,  by  PhageTx's
providing to Advisor  written notice of its desire to continue the Agreement for
an  additional  term by at least two (2)  months  prior to the end of the twelve
(12)-month period in question.

5.  Inventions  - During  Advisor's  Service to PhageTx,  PhageTx  may  disclose
certain  confidential  information to Advisor and may ask Advisor to participate
in activities that may result in inventions  related to PhageTx's  technology or
business.  To the  extent  that  Advisor  is not  precluded  from  doing so by a
pre-existing employment contract or another agreement, where, as a

<PAGE>

direct result of such Services to PhageTx,  Advisor receives or is made aware of
technical information by a PhageTx employee,  consultant,  advisor or contractor
that causes  Advisor to  conceive,  make or develop any  inventions  relating to
PhageTx's  bacteriophage  technology  or products,  Advisor's  signature  hereon
notices that Advisor agrees to: a) give notice of any such invention to PhageTx;
b) assign to PhagTx all of Advisor's  rights therein,  in-so-far as those rights
are not  subject  to  conditions  of  Advisor's  current  employment  or another
agreement; and, c) execute any documents and otherwise reasonably cooperate with
PhageTx in securing patents on such inventions.

6. Security - Advisor  shall,  during and  subsequent  to providing  Services to
PhageTx,  keep confidential and shall not use any technical or other proprietary
information  provided  by  PhageTx,  including  knowledge  of PhageTx  projects,
general  activities and proprietary  information not publicly disclosed relating
to PhageTx's  technology,  products and business  which Advisor may acquire as a
result of the Services or otherwise.  Advisor shall hold all such information in
strict  confidence and shall not use or disclose such information in any manner,
or cause same to be published  without  PhageTx's  prior written  consent.  This
obligation of confidence has been agreed to and is provided for between  Advisor
and PhageTx in a separate  Confidential  Disclosure  Agreement  executed by both
parties on December 3, 2000.

Title to all property  involved  shall remain  exclusively  with  PhageTx.  Upon
termination  of the  Service  or this  Agreement,  or upon  request at any time,
Advisor  shall  account  for and  return to PhageTx  all  papers  and  materials
containing any such confidential information.

PhageTx  shall be free to utilize the results of the  Services  described  under
this Agreement without any further payment or obligation to Advisor. Thus, it is
also  essential  that  Advisor  shall  undertake  not to disclose to PhageTx any
information  which is secret or  confidential  or  belonging  to Advisor or to a
third party,  or with respect to which Advisor is under an obligation to a third
party to maintain  confidentiality.  Similarly, if during this Agreement Advisor
discloses any  inventions to PhageTx which were  conceived  prior to the term or
are outside the scope of the Services under this  Agreement,  PhageTx shall have
no liability to Advisor because of its use of such ideas, except that this shall
not be  construed as a license  under any valid  patent now or hereafter  issued
thereon.

7.  Publicity - Advisor shall not originate any  publicity,  news  releases,  or
other  public  announcement,  written or oral,  whether  to the public  press or
otherwise,   relating  to  this  Agreement,  to  any  amendment  hereto,  or  to
performance hereunder without PhageTx's prior written consent.

8.  Conflict  of Interest - Advisor  represents  that he is  presently  under no
obligation  to  any  third  party   (including  a  prior  employer,   government
organization,  and others  with whom he may now  consult  or may have  consulted
previously)  which would  prevent his  carrying  out his duties and  obligations
under this  Agreement or which is  inconsistent  with the  provisions  contained
herein. To avoid any potential  conflict of interest,  Advisor agrees to provide
written notice to PhageTx  within one (1) week of entering into any  consulting,
advisory or  research  agreement  with a  corporate  third party in the field of
bacteriophage  technology  or products  during the period  Advisor is  providing
Services to PhageTx.  The term  "Corporate" is intended to mean any organization
operating  in the  United  States of  America  or in a foreign  country  with an
expressed  intent  to make  profits  and  includes  organizations  like  limited
partnerships, joint ventures, corporations, and the like.

9. Freedom of Action - It is agreed that  Advisor's  rendering of services under
this  Agreement  shall  in no  way  conflict  or  interfere  with  his  existing
professional responsibilities. In that Advisor is an independent contractor, and
not an employee of PhageTx,  PhageTx shall not be responsible for Advisor's acts
while  Advisor is  performing  the  Services  hereunder,  whether  on  PhageTx's
premises  or  elsewhere,  and  Advisor  shall not have  authority  to speak for,
represent,  or obligate  PhageTx in any way without the explicit  prior  written
authority from PhageTx.

If any part of this Agreement shall be held as  unenforceable,  the remainder of
the  Agreement  shall  nevertheless  remain  in full  force and  effect  and the
unenforceable  provision  shall be construed by the court in such a manner as to
be held enforceable while giving maximum effect to the intended meaning.

Please  indicate  Advisor's  acceptance  of the  foregoing  by returning a fully
executed copy of this Agreement to PhageTx.

Phage Therapeutics, Inc.:            Consultant:
19017 - 120th Avenue Ne, Suite 102       Tyler A. Kokjohn, PhD
Bothell, WA 98011                        Midwestern University
                                         Arizona College of Osteopathic Medicine
                                         19555 North 59th Avenue
                                         Glendale, AZ 85308

By: /s/ Richard C. Honour /s/          By: /s/ Tyler A. Kokjohn /s/
    -------------------------              ------------------------
Richard C. Honour, PhD                     Tyler A. Kokjohn, PhD
President & CEO                            Advisor

Date: 12.26.00                         Date: 12/20/00
      --------                              ---------

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