8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): June 30, 2005

NOVAVAX, INC.

(Exact Name of Registrant as Specified in Charter)

DELAWARE	0-26770
(State or Other Jurisdiction	(Commission File Number)
of Incorporation)

508 Lapp Road, Malvern, Pennsylvania
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: 484-913-1200

N/A

     (Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events
Novavax, Inc. announced today that it has priced and closed a registered direct offering for the sale of 4,000,000 shares of its common stock at a price of $1.00 per share. Lane Capital Markets, LLC acted as the placement agent for the offering. The transaction closed on Friday, July 1, 2005. The offered shares are registered pursuant to Novavax’s $50.0 million shelf registration statement (File No. 333-108006) that was originally filed with the Securities and Exchange Commission on August 15, 2003.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

99.1	Placement Agent Agreement, dated June 30, 2005.
99.2	Press Release, dated July 5, 2005.
99.3	Risk Factors.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NOVAVAX, INC.

/s/ Dennis Genge                                           
Dennis Genge
Vice President and Chief Financial Officer

July 5, 2005

EXHIBIT INDEX

The following exhibits are filed herewith:

Exhibit Description

99.1	Placement Agent Agreement, dated June 30, 2005.
99.2	Press Release, dated July 5, 2005.
99.3	Risk Factors.

EX-99.1

Exhibit 99.1

NOVAVAX, INC.

4,000,000 Shares of Common Stock

($0.01 Par Value Per Share)

PLACEMENT AGENT AGREEMENT

Lane Capital Markets, LLC	June 30, 2005
200 West 57th Street, Suite 203
New York, NY 10019

Dear Sirs:

     Novavax, Inc., a Delaware corporation (the “Company”), confirms its agreement with Lane Capital Markets, LLC (the “Placement Agent”), that the Placement Agent shall act as the Company’s exclusive placement agent on a “best efforts” basis, in connection with the takedown by the Company of $4,000,000 worth of shares of common stock of the Company (“Common Stock”) $0.01 par value per share (the “Shares”) from the registration statement on Form S-3 declared effective August 15, 2003, and otherwise in accordance with the engagement letter (the “Engagement Letter”) between the Company and the Placement Agent dated as of May 25, 2005 (the “Distribution”).

     The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (file no. 333-108006), including a prospectus, relating to the Shares. The registration statement at the time it became effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the “Securities Act”) and all documents incorporated or deemed to be incorporated by reference therein, is hereinafter referred to as the “Registration Statement”; the prospectus in the form first used to confirm sales of Shares is hereinafter referred to as the “Prospectus”. Any reference herein to the term “Registration Statement” shall, for all periods subsequent to the date on which the post-effective amendment (“Post-Effective Amendment”) is declared effective, be deemed to include the Post-Effective Amendment. All references in this Agreement to the Registration Statement, the Post-Effective Amendment, a Preliminary Prospectus (as defined herein), the Prospectus or any amendments or supplements to any of the foregoing, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

     All references in this Placement Agent Agreement (this “Agreement”) to financial statements and schedules and other information which is “contained,” “included” or “stated” in the Registration Statement, a Preliminary Prospectus or the Prospectus (and all other references

Lane Capital Markets, LLC
June 30, 2005
Page 2

of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in the Registration Statement, a Preliminary Prospectus or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, a Preliminary Prospectus or the Prospectus shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is or is deemed to be incorporated by reference in the Registration Statement, a Preliminary Prospectus or the Prospectus, as the case may be.

          1. Definitions. The following terms, when used in this Agreement, shall have the meanings indicated:

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

“Commission” shall mean the Securities and Exchange Commission.

“Effective Date” shall mean each date and time that the Registration Statement and any post-effective amendment or amendments thereto became or become effective.

“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto.

“Person” shall mean an individual, corporation, trust, partnership, limited liability company, joint venture, unincorporated organization, government body or any agency or political subdivision thereof, or any other entity.

“Preliminary Prospectus” shall mean any preliminary prospectus included in the Registration Statement at the Effective Date that omits Rule 430A Information.

“Rule 424(b)” and “Rule 430A” refer to such rules under the Act.

“Rule 430A Information” means information with respect to the Shares and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A.

          2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with the Placement Agent that:

               (a) The Company meets the requirements for the use of Form S-3 under the Securities Act. The Registration Statement has become effective under the Securities Act; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the Company’s knowledge, threatened by

Lane Capital Markets, LLC
June 30, 2005
Page 3

the Commission. Any required filing of the Prospectus and any supplement thereto pursuant to Rule 424 (b) of the Securities Act has been and will be made in the manner and within the time period required by such Rule 424(b).

               (b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and (iii) the Prospectus and any Preliminary Prospectus do not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty as to the information contained in or omitted from the Registration Statement, any Preliminary Prospectus or the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with information furnished in writing to the Company by the Placement Agent specifically for inclusion therein. The Chief Executive Officer and the Chief Financial Officer of the Company have signed, and the Company has furnished to the Commission, all certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither the Company nor any of its officers has received notice from any governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications.

               (c) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Securities Act and the Exchange Act and, when read together with the other information in the Prospectus, at the time the Registration Statement and any amendments thereto become effective and at the Closing Date will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

               (d) The Company has no direct or indirect subsidiaries other than Fielding Pharmaceutical Company, and that subsidiary is a dormant “shell” corporation with substantially no business other than business related to the winding up of its affairs. The Company has no exposure to liabilities in connection with the winding up of the affairs of its dormant subsidiary and the Company is not liable for any tax or other obligations of its dormant subsidiary under the laws of the jurisdiction where the dormant subsidiary was incorporated or otherwise, except where such liabilities would not have a Material Adverse Effect.

Lane Capital Markets, LLC
June 30, 2005
Page 4

               (e) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is organized with full corporate power and authority to own its properties and conduct its business as described in the Prospectus. The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification, except where the failure to be so qualified or in good standing could, either individually or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company, taken as a whole (a “Material Adverse Effect”), whether or not arising from transactions in the ordinary course of business.

               (f) The Company’s authorized equity capitalization is as set forth in the Prospectus; the capital stock of the Company conforms to the description thereof contained in the Prospectus; the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable; the Shares being sold hereunder have been duly and validly authorized; the Shares, on the Closing Date, will have been approved for quotation on the Nasdaq National Market (“Nasdaq”); the form of the certificates for the Shares complies with applicable law. No holder of the Shares will be subject to personal liability by reason of being such a holder. Neither the Commission nor, to the best of the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of any Prospectus or has instituted or, to the best of the Company’s knowledge, threatened to institute any proceedings with respect to such an order.

               (g) The Common Stock (including the Shares) is registered pursuant to Section 12(g) of the Exchange Act and is approved for quotation on Nasdaq, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or revoking the inclusion of the Common Stock for quotation on Nasdaq, nor has the Company received any notification that the Commission or the National Association of Securities Dealers, Inc. (the “NASD”) is contemplating terminating such registration or inclusion for quotation. The Company makes no representation or warranty that it will continue to meet all of the requirements for listing of the Common Stock on Nasdaq.

               (h) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (ii) the effect of rules of law governing the availability of equitable remedies.

               (i) Except as disclosed in the Registration Statement or the Prospectus, there are no outstanding (i) securities or obligations of the Company convertible into or exchangeable for any capital stock of the Company; (ii) warrants, rights or options to subscribe for or purchase from the Company any such capital stock or any such convertible or

Lane Capital Markets, LLC
June 30, 2005
Page 5

exchangeable securities or obligations; (iii) obligations of the Company to issue any shares of capital stock, any such convertible or exchangeable securities or obligation, or any such warrants, rights or options; or (iv) contractual obligation of the Company to repurchase, redeem or otherwise acquire any shares of Common Stock or to provide funds to make any investment in any other Person, other than those which have been previously disclosed to the Placement Agent.

               (j) In connection with the offering of the Shares, the Company has not offered and will not offer shares of its Common Stock or any other securities convertible into or exchangeable or exercisable for shares of Common Stock in a manner in violation of the Securities Act; the Company has not distributed and will not distribute any offering material in connection with the offer and sale of the Shares, other than any Preliminary Prospectus, the Prospectus, the Registration Statement and other materials permitted by the Securities Act. There is no franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required.

               (k) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus will not be, an “investment company” or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended.

               (l) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, except such as have been obtained under the Securities Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Shares by the Placement Agent in the manner contemplated herein and in the Prospectus.

               (m) Neither the issue and sale of the Shares nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach or default under (with or without the giving of notice, the lapse of time or both), or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, (i) the charter or by-laws of the Company or (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company is a party or bound or to which the property of the Company is subject, except for any conflict, breach or default or any lien, charge or encumbrance which could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of the properties of the Company.

Lane Capital Markets, LLC
June 30, 2005
Page 6

               (n) There are no contracts, agreements or understandings between the Company and any Person granting such Person the right, contractual or otherwise, to require the Company to include any securities of the Company with the Shares registered pursuant to the Registration Statement, other than those which have been expressly waived in writing. In addition, no Person has preemptive rights, co-sale rights, rights of first refusal or other rights to purchase any of the Shares.

               (o) The consolidated financial statements of the Company included in the Prospectus and the Registration Statement, together with the related schedules and notes, present fairly in all material respects the financial condition, results of operations, stockholders’ equity and cash flows of the Company as of the dates and for the periods indicated; such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States and on a consistent basis during the periods involved and in accordance with Regulation S-X promulgated by the Commission, subject in the case of the unaudited financial statements, to normal year-end adjustments; and all requirements of Form S-3 and the Securities Act and the applicable rules and regulations of the Commission thereunder with respect to financial statements and schedules to be included in the Registration Statement and the Prospectus have been satisfied in all material respects.

               (p) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company’s board of directors (the “Board”) maintains an audit committee that meets the listing standards imposed by Nasdaq for companies whose stock is approved for quotation in that market and the members of which are independent of the Company as required by such listing standards. The audit committee meets regularly and has reviewed all financial statements filed with the Commission.

               (q) No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the Company’s performance of this Agreement, or the consummation of any of the transactions contemplated hereby, or thereby (ii) could reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus. The Company is not subject to any judgment, order or decree that restricts its business practices or its ability to acquire any property or conduct its business as described in the Prospectus, except for any such judgment, order and/or decree which

Lane Capital Markets, LLC
June 30, 2005
Page 7

could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business.

               (r) The Company owns or leases all such properties as are necessary to the conduct of its operations as presently conducted; the Company is not in violation of any law, rule or regulation of any Federal, state or local governmental or regulatory authority applicable to it, except for any violation which could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus.

               (s) The Company is not in violation or breach of or in default under (nor has any event occurred which with or without the giving of notice, the lapse of time or both, would result in a breach of, or constitute a default under) (i) any provision of its charter or bylaws, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject, except for any such violation, breach or default which could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its properties, as applicable, except for any such violation, breach or default which could, either individually or in the aggregate, not reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business.

               (t) The Company is conducting its business as described in the Prospectus in compliance with the Fair Labor Standards Act, the rules and regulations of the United States Food and Drug Administration (“FDA”), and all applicable federal, state and local laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal laws and regulations governing health, sanitation, safety, zoning and land use, except where the failure to so comply could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business. There are no rulemaking or similar proceedings before the FDA or comparable federal, state, local or foreign governmental bodies that involve or, to the Company’s knowledge, affect the Company that could, if the outcome of such proceedings was unfavorable to the Company, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business.

               (u) The Company has not received any notices or correspondence from the FDA or any federal, state, local or foreign regulatory body that regulates the types of

Lane Capital Markets, LLC
June 30, 2005
Page 8

matters subject to the jurisdiction of the FDA (collectively, “Health Authorities”) which have not been resolved requiring or threatening the termination, suspension or modification of any animal studies, preclinical tests, clinical trials or manufacturing activities conducted by or on behalf of the Company or in which the Company has participated that are described in the Registration Statement, the Prospectus or any Preliminary Prospectus, or the results of which are referred to in the Registration Statement, the Prospectus or any Preliminary Prospectus. To the Company’s knowledge, the currently pending clinical trials, studies and other preclinical tests conducted by or on behalf of the Company and that are described in the Registration Statement, the Prospectus or any Preliminary Prospectus or the results of which are referred to in the Registration Statement, the Prospectus or any Preliminary Prospectus, are being conducted in accordance with experimental protocols, procedures and controls generally used by qualified experts in the preclinical or clinical study of new drugs. The Company has no knowledge of any adverse event that has resulted from any of such studies, tests or trials that was required to be disclosed that was not disclosed as required to any Health Authority.

               (v) Ernst & Young LLP, who have certified certain financial statements of the Company and delivered their report with respect to the audited consolidated financial statements and schedules included in the Prospectus, are independent public accountants with respect to the Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder.

               (w) There are no transfer taxes or other similar fees or charges under Federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Shares.

               (x) The Company has filed on a timely basis all material federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and has paid all taxes shown as due thereon; no tax deficiency has been asserted against the Company; the Company does not know of any tax deficiency which is likely to be asserted against it which could, if adversely determined, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; there are no tax audits or investigations pending or, to the Company’s knowledge, threatened that could, if adversely determined, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; nor, to the Company’s knowledge, are there any proposed additional tax assessments against the Company which could, if adversely determined, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; all tax liabilities are adequately provided for on the books of the Company.

               (y) No material labor dispute with the employees of the Company exists, or, to the Company’s knowledge, is imminent; and the Company does not have knowledge of any existing, threatened or imminent labor disturbance by the employees of any of

Lane Capital Markets, LLC
June 30, 2005
Page 9

its principal suppliers, manufacturers or contractors that could reasonably be expected to have a Material Adverse Effect.

               (z) The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which it is engaged; and the Company does not have any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from insurers of recognized financial responsibility as may be necessary to continue its business at a cost that would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business.

               (aa) [reserved]

               (bb) The Company possesses all licenses, certificates, permits and other authorizations issued by the appropriate federal, state, local or foreign regulatory authorities (“Governmental Permits”) necessary to conduct its business, including the ownership, operation or leasing of property, and the Company is not in violation of or in default under, or has received any notice of proceedings relating to the possible revocation or modification of, any such Governmental Permit, except where the failure to obtain any such Governmental Permit or such violation, default or proceedings could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business. All of the Governmental Permits are valid and in full force and effect.

               (cc) The Company and each of its officers, directors and controlling persons has not taken, and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or which is otherwise proscribed by Regulation M promulgated by the Commission.

               (dd) The Company (i) is not required to register as a “broker” or “dealer” in accordance with the provisions of the Exchange Act or the regulations promulgated thereunder and (ii) does not, either directly or indirectly through one or more intermediaries, control any member firm of the NASD.

               (ee) The Company is (i) in compliance with any and all applicable foreign, federal, state and local laws, orders, rules, regulations, directives, decrees and judgments relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), except where noncompliance with such Environmental Laws could not reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, (ii) have received and are in compliance with all permits, licenses or other approvals

Lane Capital Markets, LLC
June 30, 2005
Page 10

required of them under applicable Environmental Laws to conduct their respective businesses, except where the failure to obtain such permits, licenses and/or other approvals and/or such noncompliance could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business and (iii) have not received notice of any actual or potential liability under any environmental law. There are no costs or liabilities to which the Company is currently subject which are associated with any Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up and any potential liabilities to third parties) which could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business. To the Company’s knowledge, there are no pending or threatened, administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any applicable law, including any Environmental Law against the Company. To the Company’s knowledge, there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of their respective predecessors in interest relating to hazardous materials or any Environmental Laws, except for any such events or circumstances which could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business. No property that is or has been owned, leased or occupied by the Company has been designated as a Superfund Site pursuant to the Comprehensive Environmental Response, Compensation of Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq. “CERCLA”) or otherwise designated as a contaminated site under applicable state or local law and the Company has not been named as a “potentially responsible party” under CERCLA.

               (ff) All agreements between the Company and third parties filed as exhibits to the Registration Statement or referenced in the Prospectus are legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (ii) the effect of rules of law governing the availability of equitable remedies.

               (gg) No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, which is required by the Securities Act to be described in the Registration Statement or the Prospectus that is not so described.

               (hh) The books of account, minute books, stock record books and other records of the Company are complete and correct in all material respects and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Exchange Act, including an adequate system of internal controls. The minute books of the Company contain accurate and complete records of all meetings of, and corporate action taken

Lane Capital Markets, LLC
June 30, 2005
Page 11

by, the stockholders, the boards of directors and committees of the boards of directors of the Company, and no such meeting has been held for which minutes have not been prepared and are not contained in such minute books.

               (ii) All of the information provided by the Company to the Placement Agent or to counsel for the Placement Agent in connection with letters, filings or other supplemental information provided to NASD Regulation Inc. pursuant to NASD Conduct Rule 2710 or 2720 is true, complete and correct in all material respects, and there is a “bona fide independent market”, as defined in Section 2720(a)(3) of the NASD Conduct Rules, for the Shares.

               (jj) The Fielding Pharmaceutical Company is the only subsidiary of the Company.

               (kk) The Company owns, possesses, licenses or has the right to use on commercially reasonable terms, the Intellectual Property (as defined below) necessary for the conduct of the Company’s business as now conducted. The Company owns, possesses, licenses or has the right to use (or believe are readily available to it) on commercially reasonable terms, the Intellectual Property necessary for the conduct of the Company’s business as proposed in the Prospectus to be conducted. Except as set forth in the Prospectus, (i) there are no rights of third parties to any Company Intellectual Property (as defined below) owned by the Company, other than licenses granted by the Company with respect to such owned Company Intellectual Property (ii) to the Company’s knowledge, there is no infringement by third parties of any Company Intellectual Property, except for any such infringement which could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (iii) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by any Person challenging the Company’s rights in or to the Company Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim, (iv) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of the Company Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim, (v) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes or otherwise violates any Intellectual Property of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim, (vi) to the Company’s knowledge, there is no U.S. patent or published U.S. patent application which contains claims that dominate or may dominate any Company Intellectual Property described in the Prospectus or that interferes with the issued claims of any such Company Intellectual Property, (vii) no issued patent or patent application within the Company Intellectual Property is involved in or, to the Company’s knowledge, is threatened to be involved in, any interference, reissue, re-examination or opposition, (viii) the Company has adopted and enforces invention assignment, non-disclosure and confidentiality policies and its employees, consultants and others with access to the Company Intellectual Property are bound by such policies, (ix) the

Lane Capital Markets, LLC
June 30, 2005
Page 12

Company has invention assignment and/or licensing agreements with its employees, consultants and others who develop or create Intellectual Property for or on behalf of the Company except where the failure to obtain such agreements could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (x) there is no prior art of which the Company is aware that may render any U.S. patent held by the Company invalid other than such prior art which has been (or will be prior to the issuance of such U.S. patent) disclosed to the U.S. Patent and Trademark Office and to the Company’s knowledge, the issued patents and trademarks within the Company Intellectual Property are subsisting and enforceable. “Intellectual Property” means any and all patents, patent applications, and patent disclosures, together with all reissuances, continuations continuation in part, provisionals, divisions, revisions, extensions and re-examinations thereof; trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, ideas, inventions, improvements, discoveries, developments, designs, trade secrets, technology, know-how, processes, procedures, techniques, formulas, specifications, computer programs, drawings and other proprietary rights. “Company Intellectual Property” means any and all Intellectual Property owned by or exclusively licensed to (including an exclusive license for a particular territory) the Company that is necessary for the conduct of the Company’s business as now conducted or as proposed in the Prospectus to be conducted.

               (ll) The minimum funding standard under Section 302 of the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (“ERISA”), has been satisfied by each “pension plan” (as defined in Section 3(2) of ERISA) which has been established or maintained by the Company, and the trust forming part of each such plan which is intended to be qualified under Section 401 of the Code is so qualified; the Company has fulfilled its obligations, if any, under Section 515 of ERISA; the Company does not maintain or is required to contribute to a “welfare plan” (as defined in Section 3(1) of ERISA) which provides retiree or other post-employment welfare benefits or insurance coverage (other than “continuation coverage” (as defined in Section 602 of ERISA) and other than with respect to severance agreements with current and former executive officers of the Company); each pension plan and welfare plan established or maintained by the Company is in compliance in all material respects with the currently applicable provisions of ERISA; and the Company has not incurred or could reasonably be expected to incur any withdrawal liability under Section 4201 of ERISA, any liability under Section 4062, 4063, or 4064 of ERISA or any other liability under Title IV of ERISA.

               (mm) Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company is aware of or has taken any action, directly or indirectly, that would result in a violation by such Persons of the Foreign Corrupt Practice Act of 1977, as amended and the rules and regulations thereunder (“FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of

Lane Capital Markets, LLC
June 30, 2005
Page 13

anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith, except where the failure to institute and maintain such policies could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

               (nn) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) the Company has not incurred any liability or obligation which is material to the Company taken as a whole, direct or contingent, nor entered into any material transaction not in the ordinary course of business, (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock; (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company, except in each case as described in the Prospectus, (iv) there has not been any development, whether or not arising in the ordinary course of business, that would reasonably be expected to result in a Material Adverse Effect and (v) there has not been any loss or interference with the business of the Company from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, the effect of which could reasonably be expected to have a Material Adverse Effect. The Company has does not have any material contingent obligation which is not disclosed in the Registration Statement.

          3. Sale of the Shares. On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, the Company agrees to issue and sell $4,000,000 worth of Shares. All Shares to be offered and sold shall be issued and sold through the Placement Agent, as agent for the Company, to the public and the Placement Agent agrees to use its best efforts to sell the Shares as agent for the Company, at $1.00 per share (the “Public Offering Price”). The Company agrees to pay the Placement Agent a commission (“Selling Commission”) equal to five percent (5%) of the Public Offering Price of all Shares sold in the distribution. The Placement Agent is not purchasing or selling any Shares, nor are they required to arrange for the purchase or sale of any specific number or dollar amount of the Shares, but have agreed to use best efforts to arrange for the sale of all $4,000,000 worth of Shares.

It shall be the Placement Agent’s responsibility to compensate any selected dealers out of the commissions that it receives from the Company. The Placement Agent may reject any offer to purchase the Shares made through the Placement Agent or a selected dealer in whole or in part, and any such rejection shall not be deemed a breach of the Placement Agent’s agreement contained herein.

          4. Sales by the Placement Agent. It is understood that, after the

Lane Capital Markets, LLC
June 30, 2005
Page 14

Prospectus becomes effective, the Placement Agent proposes to sell the Shares to the public as agent for the Company upon the terms and conditions set forth in the Prospectus. The escrow procedures established by the Placement Agent shall comply with Commission Rule 15c2-4 promulgated under the Exchange Act. All purchasers to whom the Placement Agent directly sells Shares shall be instructed to make their check for payment of the Shares payable to Continental Stock Transfer & Trust Company or to wire transfer funds in accordance with the specific instructions provided in connection with the establishment of the escrow. In addition, the Placement Agent shall comply with Rule 15c2-4. The Placement Agent shall transmit all funds that it receives from purchasers to Continental Stock Transfer & Trust Company, the escrow agent (the “Escrow Agent”) by noon of the next business day following receipt thereof. Only broker/dealers who are either (i) members in good standing of the NASD that are registered with the NASD and maintain net capital pursuant to Rule 15c3-1 promulgated under the Exchange Act of not less than $25,000 or (ii) dealers with their principal places of business located outside the United States, its territories and its possessions and not registered as brokers or dealers under the Exchange Act, who have agreed not to make any sales within the United States, its territories or its possessions or to persons who are nationals thereof or residents therein shall be designated selected dealers by the Placement Agent. The Placement Agent shall require all selected dealers to comply with Rule 15c2-4.

          5. Payment and Delivery. The Placement Agent shall direct the Escrow Agent to make payment for the Shares sold hereunder by wire transfer. Such payment is to be made at the offices of Continental Stock Transfer & Trust Company, 17 Battery Place, 8^th Floor, New York, NY 10004, at 4:00pm local time, on or about July 1, 2005, or at such other time, date and place as you and the Company shall agree upon, such time and date being herein referred to as the “Closing Date.” Unless the transaction is closed book-entry through The Depository Trust Company and no certificates are requested, in which case the procedures applicable thereto shall be complied with, the certificates for the Shares will be delivered in such denominations and in such registrations as the Placement Agent requests in writing not later than the day following the Closing Date. The Company shall direct the Escrow Agent to deliver payment of the portion of the Selling Commission due to the Placement Agent by wire transfer or certified or bank cashier’s check drawn to the order of the Placement Agent in next day funds, to the Placement Agent on the Closing Date.

          6. Covenants of the Company. In further consideration of the agreements of the Placement Agent contained herein, the Company covenants with the Placement Agent, as of the date hereof, that:

               (a) The Company will file the Prospectus with the Commission within the time period specified by Rule 424(b) and will file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; and the Company will use its best efforts to furnish copies of the

Lane Capital Markets, LLC
June 30, 2005
Page 15

Prospectus to the Placement Agent in such quantities as the Placement Agent may reasonably request.

(b) [reserved]

(c) Prior to the termination of the offering of the Shares, the Company will not file any amendment to the Registration Statement or supplement to the Prospectus unless the Company has furnished the Placement Agent with a copy of any such amendment or supplement for the Placement Agent’s review prior to filing and will not file any such amendment or supplement to which the Placement Agent reasonably objects. The Company will promptly advise the Placement Agent (i) when the Prospectus, and any supplement thereto, shall have been filed with the Commission pursuant to Rule 424(b), (ii) when, prior to termination of the offering of the Shares, any amendment to the Registration Statement shall have been filed or becomes effective, (iii) of any request by the Commission or its staff for any amendment of the Registration Statement, or for any supplement to the Prospectus or the receipt of comments from the Commission relating to the Registration Statement or any other request by the Commission for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus or the Prospectus or the initiation or threatening of any proceeding for such purpose and (v) of the Company’s receipt of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the institution or threat of institution of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or suspension and, if issued, to obtain as promptly as possible the withdrawal thereof.

(d) The Company will comply with the Securities Act and the Exchange Act so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and in the Prospectus. If, at any time when a prospectus relating to the Shares is required to be delivered under the Securities Act, any event occurs as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Prospectus in order to comply with the Securities Act or the rules thereunder, the Company will promptly (i) notify the Placement Agent of any such event, (ii) prepare and file with the Commission, subject to paragraph (a) of this Section 6, an amendment or supplement which will correct such statement or omission or effect such compliance and (iii) supply to the Placement Agent any such amendment or supplement in such quantities as the Placement Agent may reasonably request. Notwithstanding the foregoing, in the event that such amendment or supplement is required because of a change of information relating to the Placement Agent or the plan of distribution described in the Prospectus, the Placement Agent will promptly notify the Company of such event in order to permit the Company to prepare and file such amendment or supplement as set forth above.

Lane Capital Markets, LLC
June 30, 2005
Page 16

               (e) As soon as practicable, the Company will make generally available to its security holders and to the Placement Agent an earnings statement or statements of the Company which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder.

               (f) The Company will use its best efforts to maintain the quotation of the Shares on Nasdaq and will file with Nasdaq all documents and notices required by Nasdaq of companies that have securities that are traded in the over-the-counter market and quotations for which are reported by Nasdaq.

               (g) The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Stock.

               (h) The Company will arrange, if necessary, for the qualification of the Shares for sale under the laws of such jurisdictions as the Placement Agent may reasonably request and will maintain such qualifications in effect so long as required for the distribution of the Shares; provided, however, that in no event shall the Company be obligated to (i) qualify to do business in any jurisdiction where it is not now so qualified or (ii) take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Shares, in any jurisdiction where it is not now so subject.

               (i) [reserved]

               (j) The Company will comply with all (i) securities and other applicable Federal laws, rules and regulations, including, without limitation, the Sarbanes-Oxley Act, and will use its best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes-Oxley Act and (ii) securities and other applicable state, local and foreign laws, rules and regulations, except where the failure to comply with such securities and other applicable state, local or foreign laws, rules and/or regulations could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business.

               (k) The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of the Shares.

               (l) The Company will apply the net proceeds from the sale of the Shares as described in the Prospectus under the heading “Use of Proceeds”.

               (m) [reserved]

Lane Capital Markets, LLC
June 30, 2005
Page 17

               (n) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), each Preliminary Prospectus, the Prospectus, and each amendment or supplement to any of them, (ii) the printing (or reproduction) and delivery to the Placement Agent or to a distribution center designated by the Placement Agent (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Preliminary Prospectus, the Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested by the Placement Agent for use in connection with the offering and sale of the Shares, (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp or transfer taxes in connection with the original issuance and sale of the Shares, (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Shares, (v) the registration of the Shares under the Exchange Act and the listing of the Shares on Nasdaq, (vi) any registration or qualification of the Shares for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of one counsel for the Placement Agent relating to such registration and qualification), (vii) any filings required to be made with the National Association of Securities Dealers, Inc. (including filing fees and the reasonable fees and expenses of one counsel for the Placement Agent relating to such filings); (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Shares, (ix) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company, (x) all out-of-pocket expenses of the Placement Agent (including reasonable fees and disbursements of one counsel) which in the aggregate shall not exceed $20,000, whether or not such purchase and sale is completed and (xi) all other costs and expenses incident to the Company’s performance of its obligations hereunder.

Lane Capital Markets, LLC
June 30, 2005
Page 18

          7. Conditions to the Obligations of the Placement Agent.

               (a) No order suspending the effectiveness of the Registration Statement shall be in effect, and, to the knowledge of the Company, no proceeding for such purpose shall be pending before or threatened by the Commission; the Prospectus shall have been filed with the Commission in the manner and within the time period required by Rule 424(b); and all requests by the Commission for additional information shall have been complied with to the reasonable satisfaction of the Placement Agent.

               (b) The representations and warranties of the Company contained herein shall be true and correct in all material respects on the date hereof and on and as of the Closing Date (provided, however, that such qualification shall only apply to representations or warranties not otherwise qualified by materiality); and the statements of the Company and its officers made in any certificates delivered pursuant to this Agreement shall be true and correct on and as of the Closing Date.

               (c) Subsequent to the execution and delivery of this Agreement, no event or condition of a type described in Section 2(pp) hereof shall have occurred or shall exist, which event or condition is not described in the Prospectus (excluding any amendment or supplement thereto) and the effect of which in the Placement Agent’s judgment makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Shares on the Closing Date, on the terms and in the manner contemplated by this Agreement and the Prospectus.

               (d) The Placement Agent shall have received on and as of the Closing Date a certificate of the Company’s chief financial officer or chief accounting officer and one additional senior executive officer of the Company who is reasonably satisfactory to the Placement Agent (i) confirming that such officers have carefully reviewed the Registration Statement and the Prospectus and, to the best knowledge of such officers, the representation of the Company set forth in Section 2(b) hereof is true and correct, (ii) confirming that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date and (iii) confirming the matters set forth in paragraphs (a), (b) and (c) above.

               (e) None of the events or conditions set forth in Section 7(a) through 7(f) hereof shall have occurred or shall exist.

               (f) The Company shall have requested and caused counsel for the Company to have furnished to Placement Agent their opinion, dated the Closing Date and addressed to the Placement Agent, in form and substance reasonably acceptable to the Placement Agent.

Lane Capital Markets, LLC
June 30, 2005
Page 19

               (g) On the date of this Agreement and on the Closing Date, Ernst & Young LLP shall have furnished to the Placement Agent, at the Company’s request, letters, dated the respective dates of delivery thereof and addressed to the Placement Agent, in form and substance satisfactory to the Placement Agent, of the type described in American Institute of Certified Public Accountants Statement on Auditing Standards No. 72, with respect to the financial statements and certain financial information contained or incorporated by reference in the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date, shall use a “cut-off” date no more than three business days prior to the Closing Date.

               (h) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date, prevent the issuance or sale of the Shares; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the issuance or sale of the Shares.

               (i) The Placement Agent shall have received on and as of the Closing Date, satisfactory evidence of the good standing of the Company in the State of Delaware and its good standing as a foreign entity in Maryland and Pennsylvania, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions.

               (j) The Shares shall have been approved for quotation on Nasdaq, and satisfactory evidence of such action shall have been provided to the Placement Agent.

               (k) On or prior to the Closing Date, the Company shall have furnished to the Placement Agent such further information, certificates and documents as the Placement Agent may reasonably request.

               (l) If any of the conditions specified in this Section 7 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Placement Agent and counsel for the Placement Agent, this Agreement and all of the Placement Agent’s obligations hereunder may be cancelled by the Placement Agent at or prior to the Closing Date. Notice of such cancellation shall be given to the Company in the manner prescribed by Section 11 hereof.

               (m) The documents required to be delivered by this Section 5 shall be delivered at the office of McCarter & English LLP, counsel for the Placement Agent, on the Closing Date.

          8. Indemnification and Contribution.

               (a) The Company agrees to indemnify and hold harmless the Placement Agent, the directors, officers, employees and agents of the Placement Agent and each

Lane Capital Markets, LLC
June 30, 2005
Page 20

Person who controls the Placement Agent within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities (including, without limitation, any legal or other expenses, as incurred, reasonably incurred in connection with defending or investigating any suit or action in respect thereof and any legal or other expenses incurred in enforcing the provisions of this Section 6) to which it or any of them may become subject under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or suits or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability (A) arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Placement Agent specifically for inclusion therein (it being understood and agreed that the only such information furnished by the Placement Agent consists of the information described in subsection (b) below) or (B) has resulted from the willful misconduct, gross negligence or unlawful act by the Placement Agent or such the party claiming indemnification hereunder. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

               (b) The Placement Agent agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each Person who controls the Company within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Placement Agent, but only with reference to information relating to the Placement Agent furnished in writing by the Placement Agent to the Company specifically for inclusion in the Registration Statement, any Preliminary Prospectus or the Prospectus.

               (c) In case any suit, action, claim, demand or proceeding (including any governmental or regulatory investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section 6, such Person (the “Indemnified Party”) shall promptly notify the Person against whom such indemnity may be sought (the “Indemnifying Party”) in writing (the “Indemnification Notice”); provided, however, that the failure so to notify the indemnifying party will not (i) relieve it from liability under paragraph (a) or (b), as the case may be, above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the Indemnifying Party of substantial rights and defenses and (ii) in any event, relieve the Indemnifying Party from any obligations to any Indemnified Party other than the indemnification obligation provided in paragraph (a) or (b) above. Promptly upon receipt of the Indemnification Notice, the Indemnifying Party shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others entitled to indemnification pursuant to this Section 6 and shall pay the fees and

Lane Capital Markets, LLC
June 30, 2005
Page 21

disbursements of such counsel related to the suit, action, claim, demand or proceeding for which indemnification is sought hereunder. In any such suit, action, claim, demand or proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be borne by the Indemnified Party unless (i) the use of counsel chosen by the Indemnifying Party to represent the Indemnified Party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party has reasonably concluded that there may be legal defenses available to it and/or other Indemnified Parties which are different from or in addition to those available to the Indemnifying Party, (iii) the Indemnifying Party has not employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after receipt of the Indemnification Notice or (iv) the Indemnifying Party authorizes the Indemnified Party in writing to employ separate counsel at the expense of the Indemnifying Party. An Indemnifying Party will not, without the prior written consent of each Indemnified Party, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened suit, action, claim, demand or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any such Indemnified Party is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such suit, action, claim, demand or proceeding.

               (d) To the extent the indemnification provided for in this Section 6 is unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party or parties, on the one hand, and the Indemnified Party or parties, on the other hand, from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party or parties, on the one hand, and of the Indemnified Party or parties, on the other hand, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Placement Agent, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Placement Agent, in each case as set forth in the Prospectus. The relative fault of the Company, on the one hand, and the Placement Agent, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Placement Agent and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Placement Agent agree that it would not be just and equitable if contribution were determined by pro rata

Lane Capital Markets, LLC
June 30, 2005
Page 22

allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6, each Person who controls an Placement Agent within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee and agent of an Placement Agent shall have the same rights to contribution as such Placement Agent, and each Person who controls the Company within the meaning of either the Securities Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).

          9. Termination. This Agreement shall be subject to termination in Placement Agent’s absolute discretion, by notice given to the Company, if after the execution and delivery of this Agreement and prior to the Closing Date, (a) (i) trading generally is suspended or materially limited (A) on any of the New York Stock Exchange, the American Stock Exchange or Nasdaq or (B) by the Commission, the NASD or any other governmental authority or (ii) limited or minimum prices shall have been established on the New York Stock Exchange, the American Stock Exchange or Nasdaq or by order of the Commission, the NASD or any other governmental authority; (b) trading of any securities of the Company is suspended by the Commission or on any exchange or market, (c) there is a material disruption in securities settlement, payment or clearance services in the United States, (d) a general moratorium on commercial banking activities is declared by either federal or New York state authorities, (e) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States, or there shall have been a declaration of a national emergency or war by the United States or (f) there shall have occurred a material adverse change in general domestic or international economic, political or financial conditions, including, without limitation, as a result of terrorist activities, or the effect of international conditions on the financial markets in the United States shall be such as to make it, in the reasonable judgment of the Placement Agent, impracticable or inadvisable to proceed with the public offering or delivery of the Shares being delivered on the Closing Date on the terms and in the manner contemplated in the Prospectus. Upon any termination hereunder, the Company shall immediately reimburse the Placement Agent pursuant to Section 6(n).

          10. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Placement Agent set forth in or made pursuant to this Agreement will survive delivery of and payment for the Shares and shall remain in full force and effect, regardless of any termination of this Agreement or any investigation made by or on behalf of the Company or the Placement Agent or any of the officers, directors or controlling Persons referred to in Section 4 hereof.

Lane Capital Markets, LLC
June 30, 2005
Page 23

          11. Notices. All communications hereunder shall be in writing, shall be effective only upon receipt and shall be mailed, hand delivered or telecopied to the parties hereto, or sent by reliable overnight delivery service, as follows:

If to the Placement Agent:

Lane Capital Markets, LLC
Attention: Ryan M. Lane — Partner
200 West 5^th Street
Suite 203
New York, New York 10019
Tel: (212) 399-3982
Fax: (212) 399-3986

with a copy to (which copy shall not constitute notice):

McCarter & English, LLP
Attention: Jeffrey A. Baumel, Esq.
100 Mulberry Street
Gateway Center Four
Newark, New Jersey 07101
Tel: (973) 622-4444
Fax: (973) 624-7070

If to the Company:

Novavax, Inc.
Attention: Nelson Sims — President and Chief Executive Officer
508 Lapp Road
Malvern, Pennsylvania 19335
Tel: (484) 913-1200
Fax: (484) 913-0152

with a copy to:

Ropes & Gray LLP
Attention: Sanford Kaynor, Esq.
45 Rockefeller Plaza
New York, NY 10111
(212) 841-5764 (direct)
(212) 841-5725 (fax)

          12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors and controlling Persons referred to in Section 4 hereof, and no other Person will have any right or obligation

Lane Capital Markets, LLC
June 30, 2005
Page 24

hereunder. The term “successors” shall not include any purchaser of the Shares from the Placement Agent merely by reason of such purchase.

          13. Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to the conflicts of laws principles thereof.

          14. Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is judicially determined not to be enforceable in accordance with its terms, the parties agree that the court judicially making such determination may modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its modified form, such provision will then be enforceable and will be enforced.

          15. Consent to Jurisdiction. Any action, suit or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought only in any federal court located in the Southern District of New York or in any New York State court located in New York County, and each party consents to the exclusive jurisdiction and venue of such courts (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such, action, suit or proceeding in any such court or that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such action, suit or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, service of process on such party as provided in Section 9 shall be deemed effective service of process on such party.

          16. Entire Agreement. This Agreement, together with the Engagement of Intent and any certificates, documents, instruments and writings that are delivered pursuant hereto, constitutes the entire agreement and understanding of the parties hereto in respect of the matter hereof and supersedes all prior understandings, agreements or representations by or among the parties, written or oral, to the extent they relate in any way to the subject matter hereof. Amendments. This Agreement may not be amended or modified, and the provisions hereof may not be waived, without the written consent of the Company and the Placement Agent.

          17. Counterparts; Effectiveness. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. This Agreement will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. For

Lane Capital Markets, LLC
June 30, 2005
Page 25

purposes of determining whether a party has signed this Agreement or any document contemplated hereby or any amendment or waiver hereof, only a handwritten original signature on a paper document or a facsimile copy of such a handwritten original signature shall constitute a signature, notwithstanding any law relating to or enabling the creation, execution or delivery of any contract or signature by electronic means.

          18. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof.

          19. Sophisticated Parties. Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the provisions of Section 4 hereof, and is fully informed regarding such provisions. Each of the parties hereto further acknowledges that the provisions of Section 4 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Registration Statement, any Preliminary Prospectus and the Prospectus (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act.

Lane Capital Markets, LLC
June 30, 2005
Page 26

     If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement between the Company and the Placement Agents in accordance with its terms.

Very truly yours,

NOVAVAX, INC.

By: /s/ Nelson Sims
      Name: Nelson Sims
      Title: Chief Executive Officer & President

Confirmed and accepted in
New York, N.Y., as of the
date first above written:

LANE CAPITAL MARKETS, LLC

By: /s/Ryan M. Lane
           Ryan M. Lane
           Managing Director

EX-99.2

Exhibit 99.2

FOR IMMEDIATE RELEASE NASDAQ symbol: NVAX

NOVAVAX RAISES $4,000,000 IN EQUITY OFFERING
- - PARTNERING FOR ESTRASORB CONTINUES TO PROGRESS -

Malvern, PA, July 5, 2005 - Novavax, Inc. (Nasdaq: NVAX), a specialty biopharmaceutical company, today announced that it has completed a financing resulting in gross proceeds of $4,000,000. Novavax issued 4,000,000 shares of its common stock at a price of $1.00 per share, under the agent-led offering. The shares were issued under a shelf registration statement previously filed with and declared effective by the U.S. Securities and Exchange Commission. The net proceeds of the transaction will be used for product development and working capital purposes.

“We believe this financing, together with a customary upfront payment from a possible ESTRASORB^® partnership agreement, will assist Novavax in advancing the development of our drug delivery and biological technology pipelines,” said Nelson M. Sims, President and CEO of Novavax. “We are encouraged that the development of our pipeline remains ahead of schedule, as evidenced by the recent positive preclinical results for both hormone and non-hormone compounds. This financing, with participation from sophisticated life-science investors that represent new shareholders, will allow us to strengthen our cash position and accelerate our research programs.”

Novavax has successfully applied its micellar nanoparticle (MNP) technology to commercialize ESTRASORB and complete Phase I trials for Androsorb ^TM . On May 24 and June 8, 2005, Novavax announced that it had completed preclinical testing on seven new product candidates using its proprietary MNP technology. The Company expects to file Investigational New Drug Applications for two of these drug candidates before the end of 2005.

About Micellar Nanoparticle (MNP) Technology
Micellar nanoparticles are oil and water nanoemulsions that allow systemic drug delivery through topical application. MNP technology is the basis for ESTRASORB, marketed as a topical emulsion that delivers estrogen in a lotion-like formulation for the management of moderate to severe vasomotor symptoms in postmenopausal women. MNP technology has also been successfully applied in the development of Androsorb, which has completed Phase I trials as a topical testosterone replacement therapy.

About Novavax, Inc.
Novavax, Inc. is a specialty biopharmaceutical company focused on the research, development and commercialization of products utilizing its proprietary drug delivery and biological technologies for large and growing markets. Novavax currently markets and distributes a line of prescription pharmaceutical products and prenatal vitamins.

Statements made in this press release that state Novavax’s or management’s intentions, hopes, beliefs, expectations, or predictions of the future are forward-looking statements. Forward-looking statements include but are not limited to statements regarding usage of cash, product sales, future product development and related clinical trials and future research and development, including FDA approval. Novavax’s actual results could differ materially from those expressed in such forward-looking statements. Such forward-looking statements involve known and unknown risks,

uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from those expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions; ability to enter into future collaborations with industry partners, including an ESTRASORB ^® licensing agreement; competition; unexpected changes in technologies and technological advances; ability to obtain rights to technology; ability to obtain and enforce patents; ability to commercialize and manufacture products; ability to establish and maintain commercial-scale manufacturing capabilities; results of clinical studies; progress of research and development activities; business abilities and judgment of personnel; availability of qualified personnel; changes in, or failure to comply with, governmental regulations; the ability to obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity financing or otherwise; and other factors referenced herein. Additional information is contained in Novavax’s annual report on Form 10K for the year ended December 31, 2004 and quarterly report on Form 10Q for the quarter ended March 31, 2005, incorporated herein by reference. Statements made herein should be read in conjunction with Novavax’s annual and quarterly reports filed with the SEC. Copies of these filings may be obtained by contacting Novavax at 508 Lapp Road, Malvern, PA 19355 Tel 484-913-1200 or the SEC at www.sec.gov.

-###-

For further information:
INVESTOR RELATIONS
Nelson M. Sims, President and CEO
Rita Freedman, Manager Investor Relations
Novavax Inc.
Tel: (484) 913-1200
Email: rfreedman@novavax.com

EX-99.3

                                                                    Exhibit 99.3

                                  RISK FACTORS

    Investing in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and all other information
contained in this prospectus supplement and the accompanying prospectus and
incorporated by reference into the accompanying prospectus before purchasing our
common stock. The risks and uncertainties described below are not the only ones
facing us. Additional risks and uncertainties that we are unaware of, or that we
currently deem immaterial, also may become important factors that affect us. If
any of the following risks occur, our business, financial condition or results
of operations could be materially and adversely affected. In that case, the
trading price of our common stock could decline, and you may lose some or all of
your investment.

RISKS RELATED TO OUR BUSINESS

    THE PRESCRIPTION TRENDS FOR ESTRASORB HAVE NOT MET OUR EXPECTATIONS AND WE
MAY FACE ADDITIONAL RISKS AS WE EXPAND OUR RESEARCH AND DEVELOPMENT
CAPABILITIES.

    ESTRASORB was approved for commercial sale by the FDA in October 2003 and
commercially launched in June 2004. To date, the prescription trends for
ESTRASORB have not met our expectations. Many factors have affected and could
continue to affect our ability to successfully commercialize ESTRASORB,
including:

    o   our inability to timely and effectively promote and sell ESTRASORB so
        that ESTRASORB gains a meaningful share of the estrogen therapy market,
        which currently is dominated by Premarin(R), an oral estrogen tablet
        sold by Wyeth; estrogen patches sold by several companies including
        Novartis Pharma AG and Berlex Laboratories, Inc.; and gels currently
        sold by Solvay Pharmaceuticals, Inc;.

    o   our inability to manufacture ESTRASORB at acceptable gross margins;

    o   the inability to obtain coverage and favorable reimbursement rates for
        ESTRASORB from insurers and other third-party payors; and

    o   the market acceptance of physicians and patients of this new technology.

      In addition to the marketing risks of ESTRASORB, we are in the process of
expanding our research and development capabilities in an effort to build upon
the strength of our proprietary topical micellar nanoparticle drug (MNP)
delivery platform. We cannot predict whether we will encounter problems with the
implementation of our modified business strategy, including the delay or
suspension of clinical trials or delay the analysis of data derived from them. A
number of events could delay our development efforts and negatively impact our
ability to obtain regulatory approval for, and to market and sell, a particular
drug candidate.


     AFTER THE CONSUMMATION OF THIS OFFERING, WITHOUT THE INFUSION OF
ADDITIONAL CAPITAL, WE WILL ONLY HAVE SUFFICIENT FUNDS TO CONTINUE OPERATIONS
TO THE END OF 2005 AND WILL NOT HAVE SUFFICIENT LIQUIDITY TO AVOID A "GOING
CONCERN" QUALIFICATION FROM OUR AUDITORS FOR FISCAL YEAR 2006.

     Our auditors issued a "going concern" opinion for our financial statements
for the year ended December 31, 2004. Even after the consummation of this
offering we will only have sufficient funds to continue operations to the end
of 2005, and we will not have sufficient liquidity to avoid a "going concern"
qualification from our auditors for the fiscal year 2006, unless we are able to
enter into subsequent strategic alliances with third parties which result in
the infusion of capital, or raise additional capital through public or private
equity, this year.


     WE HAVE LIMITED FINANCIAL RESOURCES AND WE ARE NOT CERTAIN THAT WE WILL BE
ABLE TO OBTAIN FINANCING TO MAINTAIN OUR OPERATIONS OR TO FUND THE DEVELOPMENT
OF FUTURE PRODUCTS.

    In the near term we will not generate revenues from product sales in an
amount sufficient to fund our operations, and we will require additional funds
to maintain our operations, continue our research and development programs,
commence future preclinical and clinical trials, seek regulatory approvals,
establish commercial-scale manufacturing capabilities, and market our products.
We will seek such additional funds through public or private equity or debt
financings, collaborative arrangements and other sources. We cannot be certain
that adequate additional funding will be available to us on acceptable terms, if
at all. If we cannot raise the additional funds required for our anticipated
operations, we may be required to delay significantly, reduce the scope of or
eliminate one or more of our research or development programs, downsize our
selling, marketing, general and administrative infrastructure or programs, or
seek alternative measures to avoid insolvency, including arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our technologies, product candidates or products. If we raise
additional funds through future offerings of shares of our common stock or other
securities, such offerings would cause dilution of existing stockholders'
percentage ownership in the Company. These future offerings also could have a
material and adverse effect on the price of our common stock.


                                       1

    WE FACE SUBSTANTIAL COMPETITION IN CONNECTION WITH THE SALE OF ESTRASORB,
OUR OTHER PRODUCTS AND OUR PRODUCT CANDIDATES.

    We compete with numerous other companies worldwide that have developed or
are developing products that compete or may compete with ESTRASORB, our other
currently marketed products and our product candidates. These competitors
include both large and small pharmaceutical companies, biotechnology firms,
universities and other research institutions. We may not succeed in developing
technologies and products that are more effective than those being developed by
our competitors.

    Many large companies currently produce and sell estrogen products for
clinical indications identical to those for ESTRASORB. Currently, the oral and
patch product segments account for approximately 75% and 15% of the market,
respectively, according to 2004 Verispan data. Wyeth commits significant
resources to the sale and marketing of its product, Premarin(R), in order to
maintain its market leadership position. Several other companies compete in the
estrogen category including Berlex, Novartis and Solvay. Recently, Solvay
introduced an ethanol-based gel product, Estrogel, that is directly competitive
with ESTRASORB.

    These and other products sold by our competitors have all achieved a
degree of market penetration superior to ESTRASORB. ESTRASORB competes in the
United States for market share with these products and we cannot guarantee that
we will be able to effectively promote ESTRASORB against these competitive
products. In order to effectively compete, we have and may continue to make
substantial investments in sales and marketing and may have to partner with one
or more established companies that have greater financial resources and
marketing expertise. Many of these products are sold by companies with greater
resources and experience and there is no assurance that we will be successful in
gaining significant market share for ESTRASORB or in earning a return on our
investment in ESTRASORB or our product candidates, if approved.

    Our technologies and products may be rendered obsolete or noncompetitive as
a result of products introduced by our competitors. Our vitamin products have
faced sustained and increasing generic competition which recently has resulted
in declining sales volumes and a high volume of returns for this product line.
Most of our competitors have substantially greater financial and technical
resources, production and marketing capabilities, and related experience which
may enable them to develop, manufacture and market their products more
successfully and at a lower cost. In addition, many of our competitors have
significantly greater experience in conducting preclinical testing and clinical
trials of human pharmaceuticals and obtaining regulatory approvals to market
such products. Accordingly, our competitors may succeed in obtaining FDA
approval for products more rapidly than we will, which may give them an
advantage in achieving market acceptance of their products.

    WE HAVE A HISTORY OF LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN.

    Our expenses have exceeded our revenues since our formation in 1987, and our
accumulated deficit at December 31, 2004 was $130.7 million. Our net revenues
for the last three years were $8.3 million in 2004, $11.8 million in 2003 and
$15.0 million in 2002. For the three months ended March 31, 2005 and 2004, our
revenues were $719,000 and $2.2 million, respectively. We cannot be certain when
or if we will generate substantial revenues from the sale of ESTRASORB. We have
received a limited amount of product-related revenue from research contracts,
licenses and agreements to provide vaccine products, services and adjuvant
technologies. We cannot be certain that we will be successful in entering into
strategic alliances or collaborative arrangements with other companies that will
result in other significant revenues to offset our expenses. Our net losses for
the last three years were $25.9 million in 2004, $17.3 million in 2003 and $22.7
million in 2002, while they were $8.9 million and $5.3 million for the three
months ended March 31, 2005 and 2004, respectively.

    Our losses have resulted from research and development expenses, sales and
marketing expenses for ESTRASORB, protection of our intellectual property and
other general operating expenses. Our losses increased due to the launch of
ESTRASORB as we expanded our manufacturing capacity and sales and marketing
capabilities, and may increase as and when we conduct additional and larger
clinical trials for our product candidates. Therefore, we expect our cumulative
operating loss to increase until such time, if ever, product sales, licensing
fees and royalty payments generate sufficient revenue to fund our continuing
operations. We cannot

                                       2

predict when, if ever, we might achieve profitability and cannot be certain that
we will be able to sustain profitability, if achieved.

    Over the past year we have allocated a significant portion of our sales
force's time to the sales and marketing of ESTRASORB and, consequently, the
sales of our other women's health products has been adversely affected. The
costs of maintaining our own sales force to market our current products
including ESTRASORB currently exceed product revenues. If we continue to market
ESTRASORB or any of our current or future products directly, significant
additional expenditures and management resources will be required to sustain the
size of our internal sales force.

    WE MAY NEED ADDITIONAL MANUFACTURING CAPABILITY TO COMMERCIALIZE OUR
PRODUCTS.

    We currently manufacture ESTRASORB within a facility of Cardinal Health in
Philadelphia, Pennsylvania. Cardinal Health provides packaging services for
ESTRASORB that we manufacture in their facility. In early 2004, we completed the
build-out of the facility to meet FDA requirements and installed manufacturing
equipment for commercial production. We have been successful in manufacturing
for our current commercial requirements; however, we have limited experience
with the large capacity manufacturing which may be required for the commercial
sale of ESTRASORB or future products. Although we have had the ability to
produce the limited quantities of products needed to support our current
research and development programs and clinical trials (including utilizing
contract manufacturing organizations), we may need more production capacity for
larger, later-stage clinical studies and commercial sales. Our potential
products may be too difficult or costly to manufacture on a large scale, to
develop into commercially viable products, or to market.

    In the near term, we intend to continue manufacturing ESTRASORB only in the
Philadelphia facility. We may determine to qualify an additional site or sites
for the manufacture of ESTRASORB if our production requirements increase or we
have opportunities to improve our cost of sales. If we are unable to utilize the
Philadelphia facility to manufacture ESTRASORB prior to our qualification of a
second site, however, we would not have immediate access to ESTRASORB and would
be required to reestablish our validation process at a different facility, which
could cause us to lose sales of ESTRASORB and would adversely affect our
business.

    We currently utilize third-party contract manufacturers to manufacture our
other products. Any contract manufacturer's facility that we may use, including
the Cardinal Health facility, must adhere to the FDA's regulations on current
good manufacturing practices, which are enforced by the FDA through its
facilities inspection program. These facilities are subject to periodic
inspection by the FDA. The manufacture of products at these facilities will be
subject to strict quality control testing and record-keeping requirements. If
compliance issues exist at these facilities, thereby interfering with the
manufacture of our products, we would be required to seek alternative
manufacturing arrangements. There can be no assurance that we would be able to
enter into alternative manufacturing arrangements at commercially acceptable
rates, if at all. Moreover, the manufacturers we use may not provide sufficient
quantities of product to meet our specifications or our delivery, cost and other
requirements.

    If we decide to manufacture our own products, we will need to acquire
additional manufacturing facilities and improve our manufacturing technology.
Establishing additional manufacturing facilities will require us to spend
substantial funds, hire and retain a significant number of additional personnel
and comply with extensive regulations applicable to such facilities in the
United States and abroad, including the current good laboratory practices and
good manufacturing practices required by the FDA. If we elect or are required to
manufacture our own products, we risk the possibility that we may not be able to
do so in a timely fashion at acceptable quality and prices or in compliance with
good laboratory practices and good manufacturing practices.

    WE HAVE NOT COMPLETED THE DEVELOPMENT OF OTHER PRODUCTS AND WE MAY NOT
SUCCEED IN OBTAINING THE FDA APPROVAL NECESSARY TO SELL ANY ADDITIONAL PRODUCTS.

    The development, manufacture and marketing of our pharmaceutical products
are subject to government regulation in the United States and other countries.
In the United States and most foreign countries, we must complete rigorous
preclinical testing and extensive human clinical trials that demonstrate the
safety and efficacy

                                       3

of a product in order to apply for regulatory approval to market the product.
ESTRASORB is our only product to have been approved for sale in the United
States. Approval outside the U.S. may take longer or may require additional
clinical trials. Our product candidate ANDROSORB has completed two Phase I human
clinical studies. Additional product candidates are in preclinical laboratory or
animal studies. Before applying for FDA approval to market any additional
product candidates, we must conduct larger-scale Phase II and III human clinical
trials that demonstrate the safety and efficacy of our products to the
satisfaction of the FDA and other regulatory authorities. These processes are
expensive and can take many years to complete, and we may not be able to
demonstrate the safety and efficacy of our products to the satisfaction of such
regulatory authorities. We may also be required to demonstrate that our proposed
products represent an improved form of treatment over existing therapies and we
may be unable to do so without conducting further clinical studies.

    We may fail to obtain regulatory approval for our products on a timely
basis. Delays in obtaining regulatory approval can be extremely costly in terms
of lost sales opportunities and increased clinical trial costs. The speed with
which we complete our clinical trials and our applications for marketing
approval will depend on several factors, including the following:

    o   the rate of patient enrollment, which is a function of many factors,
        including the size of the patient population, the proximity of patients
        to clinical sites, the eligibility criteria for the study and the nature
        of the protocol;

    o   institutional review board approval of the protocol and the informed
        consent form;

    o   prior regulatory agency review and approval;

    o   analysis of data obtained from preclinical and clinical activities,
        which are susceptible to varying interpretations and which
        interpretations could delay, limit or prevent regulatory approval;

    o   changes in the policies of regulatory authorities for drug approval
        during the period of product development; and

    o   the availability of skilled and experienced staff to conduct and monitor
        clinical studies and to prepare the appropriate regulatory applications.

    We have limited experience in conducting and managing the preclinical and
clinical trials necessary to obtain regulatory marketing approvals. We may not
be able to obtain the approvals necessary to conduct clinical studies. We also
face the risk that the results of our clinical trials may be inconsistent with
the results obtained in preclinical studies or that the results obtained in
later phases of clinical trials may be inconsistent with those obtained in
earlier phases. A number of companies in the specialty biopharmaceutical
industry have suffered significant setbacks in advanced clinical trials, even
after experiencing promising results in early animal and human testing. If
regulatory approval of a drug is granted, such approval is likely to limit the
indicated uses for which it may be marketed. Furthermore, even if a product
gains regulatory approval, the product and the manufacturer of the product will
be subject to continuing regulatory review. We may be restricted or prohibited
from marketing or manufacturing a product, even after obtaining product
approval, if previously unknown problems with the product or its manufacture are
subsequently discovered.

    OUR SUCCESS DEPENDS ON OUR ABILITY TO MAINTAIN THE PROPRIETARY NATURE OF OUR
TECHNOLOGY.

    Our success in large part depends on our ability to maintain the proprietary
nature of our technology and other trade secrets, including our proprietary drug
delivery and vaccine technologies. To do so, we must prosecute and maintain
existing patents, obtain new patents and pursue trade secret and other
intellectual property protection. We also must operate without infringing the
proprietary rights of third parties or letting third parties infringe our
rights. We currently have 51 U.S. patents and corresponding foreign patents and
patent applications covering our technologies. However, patent issues relating
to pharmaceuticals involve complex legal, scientific and factual questions. To
date, no consistent policy has emerged regarding the breadth of biotechnology
patent claims that are granted by the U.S. Patent and Trademark Office or
enforced by the federal courts. Therefore, we do not know

                                       4

whether our patent applications will result in the issuance of patents, or that
any patents issued to us will provide us with any competitive advantage. We also
cannot be sure that we will develop additional proprietary products that are
patentable. Furthermore, there is a risk that others will independently develop
or duplicate similar technology or products or circumvent the patents issued to
us.

    There is a risk that third parties may challenge our existing patents or
claim that we are infringing their patents or proprietary rights. We could incur
substantial costs in defending patent infringement suits or in filing suits
against others to have their patents declared invalid or claim infringement. It
is also possible that we may be required to obtain licenses from third parties
to avoid infringing third-party patents or other proprietary rights. We cannot
be sure that such third-party licenses would be available to us on acceptable
terms, if at all. If we are unable to obtain required third-party licenses, we
may be delayed in or prohibited from developing, manufacturing or selling
products requiring such licenses.

    Although our patents include claims covering various features of our
products and product candidates, including composition, methods of manufacture
and use, our patents do not provide us with complete protection against the
development of competing products. For example, our patents do not prohibit
third parties from developing and selling products for estrogen therapy that
deliver estrogen through a topical emulsion, ointment or similar medium.

    Some of our know-how and technology is not patentable. To protect our
proprietary rights in unpatentable intellectual property and trade secrets, we
require employees, consultants, advisors and collaborators to enter into
confidentiality agreements. These agreements may not provide meaningful
protection for our trade secrets, know-how or other proprietary information in
the event of any unauthorized use or disclosure.

    HEALTH CARE INSURERS AND OTHER PAYORS MAY NOT PAY FOR OUR PRODUCTS OR MAY
IMPOSE LIMITS ON REIMBURSEMENT.

    Our ability to successfully commercialize ESTRASORB and future products will
depend, in part, on the extent to which reimbursement for such products will be
available from third-party payors such as Medicare, Medicaid, health maintenance
organizations, health insurers and other public and private payors. If we
succeed in bringing future products to the market in addition to ESTRASORB, we
cannot be assured that third-party payors will pay for ESTRASORB or such future
products or establish and maintain price levels sufficient for realization of an
appropriate return on our investment in product development. For example,
ESTRASORB currently is being sold as an outpatient prescription drug. Medicare
does not cover the costs of most outpatient prescription drugs. We expect that
over time ESTRASORB will be treated the same as other estrogen therapy products
with respect to government and third-party payor reimbursement, however,
additional time is required to increase the number of payors who currently
accept our product for reimbursement. There can be no assurance that ESTRASORB
will receive similar reimbursement treatment.

    Many health maintenance organizations and other third-party payors use
formularies, or lists of drugs for which coverage is provided under a health
care benefit plan, to control the costs of prescription drugs. Each payor that
maintains a drug formulary makes its own determination as to whether a new drug
will be added to the formulary and whether particular drugs in a therapeutic
class will have preferred status over other drugs in the same class. This
determination often involves an assessment of the clinical appropriateness of
the drug and, in some cases, the cost of the drug in comparison to alternative
products. There can be no assurance that ESTRASORB or any of our future products
will be added to payors' formularies, that our products will have preferred
status to alternative therapies, or that the formulary decisions will be
conducted in a timely manner. We may also decide to enter into discount or
formulary fee arrangements with payors, which could result in us receiving lower
or discounted prices for ESTRASORB or future products.

    WE MAY HAVE PRODUCT LIABILITY EXPOSURE.

    The administration of drugs to humans, whether in clinical trials or after
marketing clearances are obtained, can result in product liability claims. We
maintain product liability insurance coverage in the total amount of $10.0
million for claims arising from the use of our currently marketed products and
products in clinical trials

                                       5



prior to FDA approval. Coverage is becoming increasingly expensive, however, and
we may not be able to maintain insurance at a reasonable cost. There can be no
assurance that we will be able to maintain our existing insurance coverage or
obtain coverage for the use of our other products in the future. This insurance
coverage and our resources may not be sufficient to satisfy liabilities
resulting from product liability claims. A successful claim may prevent us from
obtaining adequate product liability insurance in the future on commercially
desirable terms, if at all. Even if a claim is not successful, defending such a
claim would be time-consuming and expensive, may damage our reputation in the
marketplace, and would likely divert management's attention.

    WE HAVE MADE LOANS TO CERTAIN OF OUR DIRECTORS, AND HAVE GUARANTEED A
BROKERAGE MARGIN LOAN FOR ONE OF THESE DIRECTORS, WHICH COULD HAVE A NEGATIVE
IMPACT ON OUR STOCK PRICE.

    In 2002, pursuant to our 1995 Stock Option Plan, we approved the payment of
the exercise price of options by two of our directors through the delivery of
full-recourse, interest-bearing promissory notes, in the aggregate principal
amount of approximately $1.5 million, secured by a pledge of the underlying
shares. As of December 31, 2004, accrued interest receivable related to the
borrowing was $209,000. In addition, in 2002 we executed a conditional guaranty
of a brokerage margin account for a director in the amount of $500,000. Due to
heightened sensitivity in the current environment surrounding related-party
transactions, these transactions could be viewed negatively in the market and
our stock price could be negatively affected. Our corporate governance policies
have been revised and our 2005 stock incentive plan prohibits any additional
loans or guarantees to directors.

     THE PRICE OF OUR COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE VOLATILE; AND
IF WE ARE UNABLE TO MAINTAIN COMPLIANCE WITH NASDAQ LISTING REQUIREMENTS, OUR
STOCK COULD BE DELISTED.

    Historically, the market price of our common stock has fluctuated over a
wide range. In fiscal year 2004, our common stock traded in a range from a low
of $2.88 to a high of $6.99. Between January 1, 2005 and June 29, 2005, our
common stock traded in a range from a low of $1.13 to a high of $3.35. It is
likely that the price of our common stock will fluctuate in the future. The
market prices of securities of small-capitalization, specialty biopharmaceutical
companies, including ours, from time to time experience significant price and
volume fluctuations unrelated to the operating performance of these companies.
In particular, the market price of our common stock may fluctuate significantly
due to a variety of factors, including:

    o   governmental agency actions including the FDA's determination with
        respect to new drug applications for new products;

    o   our ability to obtain financing;

    o   our ability to develop additional products; and

    o   sales of our products, particularly ESTRASORB.

    In addition, the occurrence of any of the risks described in this "Risk and
Factors" section could have a material and adverse impact on the market price of
our common stock.

     On June 30, 2005 the closing price of our common stock as reported on the
Nasdaq National Market was $1.32 per share. Companies listed on NASDAQ are,
among other requirements, required to maintain a minimum closing bid price of
$1.00 per share. Failure to maintain compliance with NASDAQ listing requirements
could result in the delisting of our shares from trading on the NASDAQ system,
which could have a material adverse effect on the trading price, volume and
marketability of our common stock.

    OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR CASH FLOW AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS.

    As of March 31, 2005 we had $36.8 million of outstanding indebtedness. Our
substantial amount of outstanding indebtedness could have significant
consequences. For example, it:

    o   could increase our vulnerability to general adverse economic and
        industry conditions;

    o   requires us to dedicate a substantial portion of our cash flow from
        operations to service payments on our indebtedness, reducing the
        availability of our cash flow to fund future capital expenditures,
        working capital, execution of our growth strategy, research and
        development costs and other general corporate requirements;

    o   could limit our flexibility in planning for, or reacting to, changes in
        our business and the pharmaceutical industry, which may place us at a
        competitive disadvantage compared with competitors that have less
        indebtedness; and

                                       6

    o   could limit our ability to obtain additional funds, even when necessary
        to maintain adequate liquidity.

    We may incur additional indebtedness for various reasons, which would
increase the risks associated with our substantial leverage.

RISKS RELATED TO THIS OFFERING

    MANAGEMENT WILL HAVE BROAD DISCRETION AS TO THE USE OF THE PROCEEDS FROM
THIS OFFERING, AND WE MAY NOT USE THE PROCEEDS EFFECTIVELY.

    We have not designated the amount of net proceeds we will use for any
particular purpose. Accordingly, our management will have broad discretion as to
the application of the net proceeds and could use them for purposes other than
those contemplated at the time of this offering. Our stockholders may not agree
with the manner in which our management chooses to allocate and spend the net
proceeds. Moreover, our management may use the net proceeds for corporate
purposes that may not increase our market value or make us profitable.

    BECAUSE THE TOTAL PRICE YOU WILL PAY FOR YOUR SHARES IN THE OFFERING WILL BE
MUCH GREATER THAN THE VALUE OF OUR ASSETS AFTER SUBTRACTING OUR LIABILITIES, THE
VALUE OF YOUR INVESTMENT IN OUR COMMON STOCK WILL BE DILUTED.

    If you purchase our common stock in this offering, the price you will pay
for our common stock will be much greater than the book value per share of our
outstanding common stock after the offering. In addition, the total amount of
our capital will be less than it would have been had you and all of the existing
stockholders, optionees, and warrant holders paid the same amount per share for
our common stock. Accordingly, you will suffer immediate and substantial
dilution of your investment. In the past, we have issued options and warrants to
buy our common stock at prices below the offering price. You will experience
further dilution to the extent that additional shares of our common stock are
issued upon the exercise of outstanding stock options and warrants. See
"Dilution" for a detailed calculation of the dilution that will result from this
offering.

    THE ISSUANCE OF SHARES OF OUR COMMON STOCK IN CONNECTION WITH THIS OFFERING
WILL CAUSE ADDITIONAL SHARES OF COMMON STOCK TO BE ISSUABLE UPON THE CONVERSION
OF CERTAIN OUTSTANDING CONVERTIBLE NOTES OF THE COMPANY.

     Assuming that we issue an aggregate of 4,000,000 shares, of our common
stock at a public offering price of $1.00 per share, an additional 474,147
shares of common stock will be issuable upon the conversion of $35.0 million
aggregate principal amount of 4.75% convertible notes that are due July 15,
2009. Accordingly, you will suffer additional dilution of your investment. See
"Dilution" for a detailed calculation of the dilution that will result from this
offering.


                                       7