10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


[X]   ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                      For the year ended December 31, 1998

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE  ACT OF 1934

                For the transition period from _______ to _______

                         Commission File Number 0-19041


                       AMERICAN BIOGENETIC SCIENCES, INC.
- - --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)
  
            DELAWARE                                         11-2655906
- - ---------------------------------           ---- -------------------------------
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
  incorporation or organization)

1375 Akron Street, Copiague New York                                      11726
- - -------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

                                  516-789-2600
      --------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:

                              Class A Common Stock
- - --------------------------------------------------------------------------------
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No_____

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]

         As of the close of business on March 19, 1999,  there were  outstanding
36,018,841 shares of the registrant's  Class A Common Stock and 3,000,000 shares
of its Class B Common Stock. The approximate  aggregate market value (based upon
the closing price on The Nasdaq Stock Market's  National  Market) of shares held
by non-affiliates of the registrant as of March 19, 1999 was $43,583,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions  of the  registrant's  Proxy  Statement  relating  to its 1999
Annual Meeting of  Stockholders  are  incorporated by reference into Part III of
this report.


                                     PART I

Item 1.           Business
- - ------            --------

General

         American Biogenetic Sciences,  Inc. ("ABS" or the "Company") is engaged
in  researching,   developing  and  marketing  cardiovascular  and  neurobiology
products for commercial development.  The Company commenced selling its products
during the last quarter of 1997.

         Certain ABS products are designed to be used for in vivo,  while others
are designed for in vitro, diagnostic procedures.  In vivo diagnostic procedures
are those in which proteins or compounds are injected  directly into the body or
bloodstream  to  assess  abnormal  reactions  or  conditions.  During  in  vitro
procedures,  blood,  urine or other bodily fluid or tissue is extracted from the
body and the diagnostic  tests are performed in a test tube or other  laboratory
equipment.

         ABS' main products are:

         o        Functional Intact Fibrinogen  diagnostic test,  referred to as
                  the FiF(TM) test.  This is an in vitro  diagnostic  test which
                  measures the levels of  fibrinogen  in blood.  Fibrinogen is a
                  protein used in the blood-clotting process.

         o        Thrombus Precursor Protein diagnostic test, referred to as the
                  TpP(TM)  test.  This is an in vitro  diagnostic  test  used to
                  assess the risk of blood clots in the veins or arteries.  This
                  test is also used to monitor the performance of  anti-clotting
                  therapy or drugs used in the prevention of blood clots.

         o        In vitro  diagnostics  products  that focus on the  infectious
                  diseases and  auto-immune  disease  markets to  determine  the
                  status of such diseases as human herpes and lupus

         o         Mouse serum used in diagnostic tests of other manufacturers.

         The latter two products are  manufactured by Stellar Bio Systems,  Inc.
("Stellar"),  all of the  issued  and  outstanding  capital  stock of which  was
acquired  by the  Company  on April 23,  1998.  Stellar  is a  manufacturer  and
distributor of in vitro diagnostic products and research reagents.  Reagents are
individual  components of diagnostic products,  such as antibodies,  calibrators
and serum used in the biotechnology industry. The purchase price was $120,000 in
cash and $700,000 in Class A Common Stock  (398,406  shares were  issued),  plus
future  contingent  payments of $650,000 in Class A Common Stock to be paid over
three years based upon future sales  levels of Stellar,  with the Class A Common
Stock to be valued at its market value on the acquisition  agreement anniversary
dates.  Stellar's in vitro diagnostic  products focus on the infectious  disease
and auto-immune disease markets.  Stellar markets a complete line of products to
determine  the immune  status of numerous  human  herpes  viruses.  In addition,
auto-immune  diseases,  such as lupus,  are detected using  Stellar's  products.
Stellar is also the largest domestic  provider of mouse serum, a blood component
that lacks blood cells and which is used in  diagnostic  tests by major in vitro
diagnostic product manufacturers for a variety of purposes.

                                        2





         ABS was  incorporated  in Delaware in  September  1983.  The  Company's
principal executive offices are located at 1375 Akron Street, Copiague, New York
11726 and its telephone number is 516-789-2600.

Forward Looking Statements

         In  order  to  keep  investors   informed  of  ABS'  future  plans  and
objectives,  this Report (and other reports and statements issued by the Company
and its officers from time to time) contains certain  statements  concerning the
Company's future results, future performance,  intentions, objectives, plans and
expectations that are or may be deemed to be "forward-looking  statements".  The
Company's  ability  to do this  has  been  fostered  by the  Private  Securities
Litigation  Reform  Act of 1995  which  provides a "safe  harbor"  for  forward-
looking statements to encourage companies to provide prospective  information so
long as those  statements are  accompanied by meaningful  cautionary  statements
identifying  important  factors  that  could  cause  actual  results  to  differ
materially from those discussed in the statement.  The Company believes it is in
the  best  interests  of  investors  to  take  advantage  of the  "safe  harbor"
provisions of that Act. Such forward-looking  statements are subject to a number
of known and  unknown  risks and  uncertainties  that,  in  addition  to general
economic and business  conditions (both in the United States and in the overseas
markets  where  ABS also  intends  to  distribute  products),  could  cause  the
Company's anticipated results, performance and achievements to differ materially
from those described or implied in the forward-looking statements.  Factors that
could cause or contribute to such differences  include,  but are not limited to,
ABS' ability to complete  products under  development  and to maintain  superior
technological   capability,   foresee   changes   and   identify,   develop  and
commercialize innovative and competitive products (see "Products in Development"
below),  obtain widespread  acceptance of its products by the medical community,
including  the  reliability,  safety and  effectiveness  of such  products  (see
"Marketing and Sales" below), meet competition (see "Competition" below), comply
with various  governmental  regulations  related to the  Company's  products and
obtain government clearance to market its products (see "Government  Regulation"
below),  successfully expand its manufacturing  capability (see  "Manufacturing"
below), attract and retain technologically  qualified personnel (see "Personnel"
below),  and generate cash flows and obtain  collaborative or other arrangements
with  pharmaceutical  companies or obtain other financing to support its product
development  testing and  marketing  operations  and growth  (see  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
Item 7 of this Report).

Global Scientific Network(R)

         ABS' operations are comprised of a portfolio of  interrelated  programs
and projects. In order to promote and facilitate  collaborative research leading
to product development, the Company has formed the Global Scientific Network.

         This  network  brings   together  teams  of  scientists   from  various
disciplines  in a  joint  effort  to  expedite  the  research,  development  and
commercialization  of ABS's diagnostic and therapeutic  products.  This resource
offers the  Company's  management  an  opportunity  to review and  evaluate  new
technologies  available in addition to a network of certain  scientific  leaders
who offer advice and direction.  To facilitate the  identification and screening
of new technologies,  the Company has scientific coordinators in St. Petersburg,
Russia; and Beijing,  China. These activities are coordinated from the Company's
office in Dublin, Ireland.


                                        3




         The  Company  is  currently  collaborating  with  leading  medical  and
scientific  institutions worldwide including University College Dublin, Ireland;
University of Hanover,  Germany;  William  Harvey  Research  Institute,  London,
England.

         Through its Global  Scientific  Network,  ABS has entered  into various
agreements which generally grant the Company an exclusive license to the results
of the research.  Pursuant to these  agreements,  the Company is paying  certain
research expenses and the costs of filing and processing patent  applications in
the  United  States  and other  countries,  and is to pay the  inventors  or the
university a royalty,  which is typically 5% of net product  sales.  The term of
each  agreement,  generally,  is the duration of any patents that may be granted
with a minimum term of 10 years. See "-- Agreements for Neuroscience Programs."

The Antigen-Free Mouse Colony -- Monoclonal Antibodies

         ABS' enabling  technology is a patented  antigen-free (AF) mouse colony
which allows the generation of highly  specific  monoclonal  antibodies that are
difficult  to obtain  from  conventional  systems.  The  Company  utilizes  this
technology  to  supply  antibodies  for  its in  vitro  and in  vivo  diagnostic
products.  The  proprietary  AF  mouse  colony  is  maintained  in  a  germ-free
environment  and fed a  chemically  defined  and  ultrafiltered  diet.  When the
antigen-free mice are challenged with a foreign entity,  there is a large immune
response  that  eventually  results in the  proliferation  of a large  number of
specific  monoclonal  antibody  secreting  cells. The AF mouse colony is covered
under ABS' United States Patent No.  5,223,410,  entitled "Method for Production
of Antibodies  Utilizing an Antigen-Free  Animal",  and United States Patent No.
5,721,122,  entitled "Method Comprising  Immunization of Antigen-Free  Mice." In
addition,  United States  Patent No.  5,837,540,  entitled  "Method of Producing
Fibrin-Specific  Antibodies  Using Soluble Fibrin  Polymers as an Immunogen" has
been  issued  and  extends  the  method of  producing  antibodies  to  include a
hybridoma cell line. This gives the Company greater flexibility in producing its
TpP-related antibodies.

Stellar

         Stellar  manufactures  in vitro  immunodiagnostic  assays  utilizing an
immunofluorescent  antibody assay format for infectious  diseases and autoimmune
conditions.  These assays  determine the presence of: human herpes simplex virus
1, human herpes simplex virus 2, Epstein-Barr virus, cytomegalovirus,  varicella
zoster virus,  respiratory  syncytial virus,  human herpes virus 6, human herpes
virus 7, human parvovirus B-19, measles virus, rubella virus, adenovirus,  mumps
virus,  antinuclear bodies Hep-2,  anti-nuclear  bodies KB, anti-  mitochondrial
bodies, and anti-native DNA bodies.  Stellar is also a supplier of high quality,
domestic mouse serum.  Stellar's mouse serum is used as an assay component by in
vitro diagnostic assay  manufacturers.  Stellar also provides  contract services
for  the  development,   process  scale  up,  manufacture  and  purification  of
monoclonal and polyclonal antibodies.

Medical Background For Cardiovascular Products

         Two of ABS' main  products,  its FiF and TpP tests,  assist  doctors in
diagnosing and treating  blood clots lodged in the legs and the lungs,  known as
thrombosis,  a condition which can be fatal.  Thrombosis is also associated with
other medical conditions,  like heart attacks,  strokes and complications during
pregnancies.  ABS is pursuing the  application  of its tests in these areas with
additional clinical testing. The Company has also developed patented antibodies,
45J and MH1, which are used in its TpP(TM) and FiF(TM) tests.

                                        4





         Several  epidemiological  studies have  revealed a  significant  causal
relationship  between high fibrinogen  levels and coronary artery disease (CAD).
It is  widely  accepted  that  events  leading  to CAD  are  caused  as  much by
biochemical  processes  in the  coagulation  (blood-clotting)  system  as by the
metabolism of  cholesterol.  The most important  landmark trial to show a causal
relationship  between high  fibrinogen  and CAD is the  Framingham  epidemiology
study (1985) conducted at the Institute for Prevention of Cardiovascular Disease
at the Deaconess  Hospital,  Harvard Medical  School.  That study concluded that
elevated levels of fibrinogen "exceeded that of all risk factors except elevated
systolic blood pressure".

         Other  studies  indicate  that  individuals  with  elevated  levels  of
fibrinogen are predisposed to thrombosis.  On the other hand,  diminished levels
may result in hemorrhage.  Thus, reagents that can be used to measure fibrinogen
can play a vital  role in  determining  the  appropriate  level of  thrombolytic
therapy, as well as determine an individual's risk of CAD.

         ABS has developed,  through its AF mouse colony,  monoclonal antibodies
that react specifically with both fibrinogen and fibrin.

         Some of the most hazardous sites for inappropriate blood clot formation
include  the  coronary  arteries  where  a blood  clot  can  lead to  myocardial
infarction (heart attack); the arteries leading to the brain, where a blood clot
can  cause  stroke;  and the  veins of the legs  which  can lead to a  pulmonary
embolism.

         Thrombi (blood clots) that form in the bloodstream consist of two major
parts:  a cellular  component  made up of  platelets,  and a meshwork  of fibrin
fibers  that  cements  the  platelets  into  an  insoluble  mass  which  has the
mechanical  strength to withstand the pressure of blood in the circulation.  The
fibrin  component is insoluble and is derived from a blood protein,  fibrinogen,
that is manufactured in the liver. When thrombin, an enzyme produced in response
to injury of a blood vessel, is present in blood, it converts soluble fibrinogen
to fibrin at the site of vascular injury.

         Just as the  generation  of  thrombin  is the  seminal  event in fibrin
formation,  the generation of plasmin plays the major role in  fragmentation  of
the fibrin  meshwork,  a process known as fibrinolysis.  Like thrombin,  plasmin
does not  ordinarily  circulate  in plasma but is derived  from the  circulating
protein plasminogen when the fibrinolytic system is activated.

         In addition to causing  fragmentation  of fibrin,  plasmin also attacks
fibrinogen   and   institutes   changes  in  its  structure   that  prevent  its
polymerization to fibrin. In extreme cases  fibrinogenolysis,  e.g., dissolution
of fibrinogen, can lead to bleeding caused by lack of clottable fibrinogen.

         Fragmentation  of fibrin  leads to the  production  of  soluble  fibrin
degradation  products  that  circulate in plasma and are  generally  elevated in
patients following a thrombotic event. Since all these products are proteins, it
is possible to produce  antibodies that can react  specifically  with individual
fibrin degradation products.

                                        5





Products Developed and Under Development

         In Vitro Diagnostic Tests Based on Monoclonal Antibody 45J

         In February 1992, ABS obtained United States Patent No. 5,091,512 for a
monoclonal antibody,  designated 45J, that recognizes fibrinogen.  This antibody
is intended to be used as an in vitro  diagnostic tool for measuring  fibrinogen
in blood.

         In January 1992, the Company  entered into an agreement with Yamanouchi
Pharmaceutical  Co.,  Ltd.  ("Yamanouchi")  of  Japan  granting  Yamanouchi  the
exclusive right to manufacture, use and sell in Japan and Taiwan diagnostic test
kits which utilize 45J. The Company received an initial payment of $900,000 (net
of Japanese taxes).  The license agreement  requires  Yamanouchi to purchase its
45J  requirements  from ABS.  The  agreement  is for a period of fifteen  years,
provided that if any of the Company's patent rights for 45J have not yet expired
at the end of that period,  the agreement will continue  until such  expiration.
The Company has filed a patent  application  in Japan  relating to 45J. To date,
Yamanouchi  has not  made any  sales of the  diagnostic  tests  covered  by this
agreement. The Company does not have any further obligations and could terminate
the agreement.

         Functional  Intact  Fibrinogen  Assay  (FiF(TM)):  This test,  known as
Functional  Intact  Fibrinogen  (FiF(TM)),  has been cleared by the Federal Drug
Administration  (the  "FDA"),  and is intended to provide a direct and  accurate
quantitative  measurement of the amount of fibrinogen  present in plasma. In May
1996, a research group of the  Framingham  Heart Study reported that the FiF(TM)
test is an accurate  method of  detecting  elevated  fibrinogen  levels,  a risk
factor for cardiovascular disease.  Furthermore,  the findings demonstrated that
the  fibrinogen  levels  measured by the FiF(TM) test were  correlated  with the
prevalence of  cardiovascular  disease both by itself and when adjusted for age,
weight,  smoking and diabetes.  The Company has been marketing the FiF test in a
manual  format kit since late 1997 and continues to seek  corporate  partners to
include the FiF test on automated  equipment.  Traditional clotting tests are an
indirect  measure of  fibrinogen,  estimated  by the amount of time that  passes
before a clot is formed,  which can be influenced by the presence of degradation
products  of  fibrin/fibrinogen.  FiF on the other  hand is a direct  measure of
fibrinogen that is not adversely influenced by these products.

         Diagnostic and Therapeutic Products Based on Monoclonal Antibody MH1

         In  1992,  ABS  obtained  United  States  Patent  No.  5,120,834  for a
monoclonal  antibody  (designated MH1) that  specifically  identifies fibrin and
does not react to fibrinogen  or fibrin  degradation  products.  Since levels of
fibrin degradation products become extremely elevated during clot development as
well as thrombolytic (clot dissolving) therapy. This property sets it apart from
all other fibrin specific antibodies known to the Company.  The Company is using
MH1 for its TpP assay and is seeking to use MH1 in three potential products.

         Thrombus  Precursor  Protein  (TpP(TM)):  The TpP(TM) is an enzyme test
which uses ABS' monoclonal  antibodies MH1 and 45J. TpP measures  soluble fibrin
polymers  in blood to  indicate  active  blood clot  formation  (thrombosis)  in
individuals  with  possible  myocardial  infarction  (MI) heart attack and other
clinical conditions  precipitated by clot formation such as deep vein thrombosis
(DVT)  blood  clots in the leg.  Approximately  10 million  people in the United
States present with chest pain each year at emergency rooms. However, as much as
80% of these  individuals  do not have a heart attack and may be suffering  from
some

                                        6




less serious  conditions.  An early warning test that establishes those patients
that  are  not  having  a  heart  attack  will  eliminate  expensive  diagnostic
procedures  and  unnecessary   hospital  admissions.   Furthermore,   the  early
identification of those patients who are forming life threatening blood clots or
suffering from a heart attack would permit earlier use of clot dissolving  drugs
or anticoagulants.

         Current biochemical tests for acute myocardial infarction (AMI) measure
cardiac  muscle  proteins  which  leak out as a result  of dying  heart  muscle.
Examples of muscle cell  proteins  used to confirm MI include,  creatine  kinase
(CK),  creatine kinase MB isoform (CKMB),  lactate  dehydrogenase (LD), troponin
and myoglobin.  This release of cardiac specific  proteins only occurs 4-6 hours
after the onset of clinical symptoms; therefore, there is a clinical need for an
earlier  warning  of MI. The  detection  of blood  clot  formation  early in the
clinical  event should  facilitate  proper  identification  and  treatment of MI
patients with life saving,  clot dissolving drugs. TpP relies on the measurement
of soluble fibrin  polymers which are produced and circulate  freely when a clot
starts to form, even before the onset of clinical symptoms, and is elevated when
the patient first begins to experience chest pain.

         There are 12 million  surgical  procedures  performed  each year in the
United  States  alone which put  patients  at risk of forming a blood clot.  TpP
provides a means to measure  intravascular  coagulation  (fibrin  formation)  in
post-operative  patients to determine the risk of deep vein  thrombosis  and its
clinical  sequelae,  pulmonary  embolism.  Soluble  fibrin  polymers  have  been
identified  by  electrophoretic  techniques  in  the  plasma  of  patients  with
different  clinical  conditions  including MI and DVT.  Elevated  soluble fibrin
levels, as determined by ELISA (Enzyme Linked ImmunoSorbent Assay), a laboratory
format of an immuno-  diagnostic test, have also been reported in other clinical
conditions where  intravascular  fibrin formation has been indicated,  including
disseminated  intravascular  coagulation (DIC) and patients  undergoing surgical
procedures  who are  experiencing  thrombotic  complications.  It has also  been
demonstrated  that  TpP  levels  are  significantly  lower in  patients  who are
undergoing  invasive  surgical  procedures  (e.g. PTCA) and have been adequately
anticoagulated.  The Company's  TpP test is also expected to offer  physicians a
screening tool to monitor patients post-operatively for blood clot formation and
to effect  therapeutic  intervention  if required and monitor their  response to
anticoagulant  therapy. A study using the Company's TpP test to monitor patients
post-operatively  was conducted at Johns  Hopkins  School of Medicine and at the
University of Perugia, Italy in 1997. These studies showed that TpP was elevated
post operatively.

         In September 1995, ABS obtained United States Patent No.  5,453,359 for
the use of this  test to  measure  intravascular  fibrin  polymer  formation  in
patients with symptoms  indicating a blood clotting event. In December 1998, ABS
obtained a United  States  patent  which  applies to the TpP test kit itself and
extends the  Company's  claims  regarding the  antibodies  used to recognize the
presence of TpP in blood.  The new patent  claims the use of any  antibody  that
recognizes or binds to the epitope, an antibody binding site on the TpP protein,
that is recognized by MH-1 or 45J.

         In October 1995, ABS entered into a license and collaboration agreement
with F. Hoffmann-La Roche, Ltd.  ("Hoffman-La Roche") for the co-development and
marketing  of the  Company's  TpP test for the  detection  of active  thrombosis
(blood clot  formation).  The  agreement  grants  Hoffmann-La  Roche a worldwide
license to market the TpP test in a latex based particle  agglutination  format.
Under the agreement,  the Company received a $60,000 non-refundable  development
payment to adapt the TpP test in the latex based particle  agglutination  format
to Hoffmann-La  Roche's  automated  diagnostic  systems.  The Company is also to
receive milestone payments upon achievement of certain  commercialization goals.
The TpP test is to be manufactured by the Company for use on Hoffmann-La Roche's
instruments. ABS is to receive a

                                        7





percentage  of   Hoffmann-La   Roche's  net  selling  price  for  the  Company's
manufacturing of the TpP test plus a 5% royalty on net sales made by Hoffmann-La
Roche.  Under  the  agreement,  the  TpP  test  is  also  to be  sold by ABS and
Hoffmann-La   Roche  to  other  diagnostic   companies  using  similar  particle
agglutination  technology.  On these sales, gross profit is to be shared equally
between the Company and  Hoffmann-La  Roche.  To date,  ABS has not received any
milestone or royalty payments.

         In December  1995,  ABS entered  into a license  agreement  with Abbott
Laboratories  ("Abbott")  for the  marketing  of the  Company's  TpP assay.  The
license  agreement grants Abbott a worldwide  license to market the TpP test for
Abbott's  immunoassay  formats.  The Company received a $100,000  non-refundable
up-front  payment  and is to receive  milestone  payments  upon  achievement  of
certain development and commercialization  goals. The Company is to receive a 5%
royalty on net sales made by Abbott.  In addition,  the reagent for the TpP test
is to be  manufactured  by the Company for use by Abbott.  To date,  ABS has not
received any milestone or royalty payments.

         In October 1996, ABS received  510(k)  clearance from the FDA to market
the TpP test to aid in the risk assessment of thrombosis  (blood clot formation)
and the monitoring of anticoagulant  therapy. The Company began to market TpP in
late 1997 through independent distributors.

         In 1998, ABS put additional effort into clinical evaluation of TpP with
the goal to characterize  the most promising  applications,  and demonstrate the
advantages of TpP over competitor products.  Dr. Yale Arkel was appointed as the
Company's  Coordinator of Clinical  Development for TpP. Dr. Arkel,  director of
the Blood Disorder Center for Hemostasis and Thrombosis at Overlook  Hospital in
Summit, New Jersey,  maintains his current clinical and research duties and acts
as an outside consultant to the Company.

         In addition, ABS is developing a hand-held,  disposable,  point-of-care
device  which  will  measure  TpP levels in plasma.  An initial  prototype  of a
portable, hand-held device for obtaining semi-quantitative test results has been
produced  and the  Company  plans to  submit a 510(k)  to the FDA for  marketing
approval of the  point-of-care  TpP test in 1999. The Company  believes that the
more  user-friendly  and rapid  point-of-  care format will greatly  enhance the
market opportunity for the TpP test. The Company intends to seek outside sources
for the manufacture of its point-of-care device and corporate partners to market
this product.

         MH1 as an Imaging  Agent:  ABS has labeled an antibody  fragment of its
MH1 antibody that contains the binding site for fibrin with a  radioisotope  for
use as an in vivo imaging  agent to show the size and location of blood clots in
pre-clinical  animal studies and clinical human studies which generates an image
with the  resolution  required  for  commercial  use. The product is intended to
permit the rapid  imaging  of blood  clots in the lungs,  a  condition  known as
pulmonary  embolism  (PE);  and the  detection  of  blood  clots  in the legs (a
clinical  condition  known as deep vein thrombosis  (DVT)).  The primary protein
component of a thrombus is fibrin, and an antibody that can differentiate fibrin
from its plasma precursor,  fibrinogen,  can be used when appropriately  labeled
with a  radioisotope,  to image the site and extent of an occlusion and to carry
thrombolytic reagents to the site.

         Traditional  methods for detecting a thrombus in the circulatory system
have consisted of angiography,  venography,  duplex doppler and monitoring radio
labeled  blood clot  components,  derived from a human donor,  injected into the
circulatory  system and then absorbed by the clot.  These procedures are costly,
often may lack sensitivity and some can pose potential risks to the patient. The
large  quantity of dye required in  angiography  and venography may cause kidney
problems and may irritate the walls of blood vessels. Also,

                                        8





in  angiography  a catheter is used for  delivery  of the dye into the  arterial
system  which  adds  further to the risk of the  patient.  In  contrast,  only a
minimum  quantity of ABS' radio labeled MH1 need be used, and since the antibody
is not derived from man, there is no risk of human blood-borne disease. However,
whenever a foreign  substance is  introduced  into the human body,  there is the
risk of an immune reaction and cases of reactions to mouse-derived antibody have
been reported.

         In March 1993, ABS was cleared by the FDA, under an Investigational New
Drug  (IND)  application,  to begin  Phase I human  clinical  testing  of MH1 in
imaging blood clots for PE and DVT, thus becoming the Company's first product to
be evaluated in humans.  In January 1995,  ABS completed  Phase I testing for PE
and DVT. The final Phase I report was submitted to the FDA in October 1995.  The
Company has compiled all necessary information regarding the Phase I/II clinical
trials for MH1 imaging that were  subsequently  conducted  and submitted a final
report  to  the  FDA in  1998.  ABS  is  seeking  corporate  partners  to  fund,
collaborate,  license  and to  conduct  full  Phase II and Phase III  trials and
market the product.

         MH1 as a Delivery  Vehicle  for  Thrombolytic  Therapy:  The Company is
seeking  to  develop  a  product  using  MH1  as a  delivery-vehicle  for  known
thrombolytics  (drugs that  dissolve  blood  clots).  Tests by the Company  have
demonstrated  the  ability to link MH1 to a known  thrombolytic  agent to form a
potent,  fibrin specific,  therapeutic agent which, in animals, has demonstrated
superior clot dissolving  properties.  In March 1998, ABS obtained United States
Patent No. 5,723,126 for this clinical application.

         MH1 as an Antithrombotic: The Company is also investigating the utility
of MH1 as an antithrombotic  agent (potential product to prevent clot formation)
for the interference  and/or  inhibition of excess fibrin deposition in surgical
procedures  such as  angioplasty.  In January 1996,  ABS obtained  United States
Patent No. 5,487,892 for this clinical application.

         There can be no assurance  that the Company's  products in  development
will prove to be  commercially  viable,  that any of the  products  will receive
regulatory clearance or clearance for particular  indications,  or that ABS will
successfully market any products or achieve  significant  revenues or profitable
operations.  The  Company is seeking  to enter  into  additional  collaborative,
licensing,  distribution, and/or co-marketing arrangements with third parties to
expedite  the  commercialization  of  its  products.  However,  there  can be no
assurance that ABS will be able to enter into any such  additional  arrangements
or,  if it does,  that  any such  arrangements  will be on  terms  that  will be
favorable to ABS.

         Neurobiology Program

          The goal of this  longer  term  program  is to develop  fine  chemical
compounds  for the  treatment of  epilepsy,  migraine and mania and to treat and
halt  the  progression  of  neurodegenerative   diseases  such  as  Alzheimer's,
Parkinson's,  neuropathy,  trauma and stroke. Most of the applications developed
to date,  have been  developed in conjunction  with  scientists in the Company's
Global Scientific Network.

         Therapeutics

         The Company,  in collaboration with the National University of Ireland,
Dublin, University of Hanover, Germany,  University of Notre Dame, United States
and fellow  researchers  within the Company's  Global  Scientific  Network,  has
identified chemical compounds for the potential  treatment of  neurodegenerative
diseases.

                                        9





         The Company has filed two United States provisional patent applications
relating to small molecules  which may be useful for enhancing  memory - ABS 300
series. This technology has resulted from the collaboration of scientists at the
National University of Ireland, Dublin and the University of Notre Dame.

         The ABS 200 series of compounds are putative  neuroprotectants designed
to treat and halt the progression of neurodegenerative  diseases.  The compounds
have been  evaluated in cells where they exhibit nerve growth factor  (NGF)-like
activity. The ABS 200 series of compounds can penetrate the blood-brain barrier,
unlike NGF, which requires  specific  development of a delivery  system.  A lead
compound,  ABS 205, has been  identified  which can induce the  expression  of a
protein known as neural cell adhesion molecule (NCAM) in vitro. NCAM is involved
in memory,  neurodevelopment  and other  neuroplastic  events.  ABS 205 can also
enhance  NCAM  function in the rat  hippocampus  and  cortex,  areas known to be
involved  in memory  formation.  Moreover,  ABS 205  protects  against  chemical
induced amnesia (memory loss) in animals. The Company has received United States
Patent No.  5,672,746  relating to this  technology.  ABS has  recently  filed a
reissue application for this patent. An interference in the United States Patent
and Trademark Office was declared  regarding this  technology.  See "Proprietary
Technology, Patents and Trade Secrets".

         Epilepsy

         ABS is developing a series of  anticonvulsant  compounds that relate to
valproate,  which is currently used for the treatment of epilepsy,  migraine and
mania. In pre-clinical trials in Germany, the Company's lead compound,  ABS-103,
has been shown to potently  control seizure  activity without sedative action or
birth defects commonly  associated with other  anticonvulsants.  The Company has
isolated the R-isomer (R-103) ABS-103. Isomers can be described as mirror images
of the same  compound.  R-103 is an  enantiomer,  which  is a  specific  type of
isomer.  ABS  scientists  were able to isolate  the R (right)  isomer from the S
(left) to produce  R-103.  The value of  isolating  R-103  lies in its  superior
safety and efficacy profile.  Scientists have recently  discovered that for many
drugs one of the isomers is responsible for the therapeutic effects and that the
other  isomer  may be  inactive  or cause  unwanted  side  effect.  R-103 is the
preferred  chemical entity for commercial  development.  ABS has received United
States   Patent  No.   5,786,380   relating  to  the  use  of  ABS-  103  as  an
anticonvulsant. Patents have been obtained in Europe and additional applications
relating to this technology are pending.

         Agreements for Neuroscience Programs

         ABS has entered  into  various  agreements,  with  universities  and/or
individual  scientists  under the Company's  Global  Scientific  Network,  which
generally grant the Company an exclusive  license to the results of the research
for use in various  neuroscience  applications,  which may include compounds and
antibodies.  In general,  the agreements are for a term equal to the duration of
any patents that may be granted with a minimum term of 10 years. In exchange for
a license,  ABS is to pay certain research  expenses and the costs of filing and
processing patent applications in the United States and any other countries that
ABS may select.  Pursuant to these agreements,  ABS is also to pay the inventors
or the university a royalty,  typically 5% of net product sales.  The Company is
seeking to  commercialize  the  products  under  development  by  entering  into
collaborative   arrangements,   licensing  agreements  and/or  through  research
development partners.

         ABS has also  entered  into  development  agreements  with the National
Institutes of Health (NIH) for some of its neurobiology  products,  including an
agreement with the NIH (epilepsy  branch) in 1998 to evaluate ABS-103 and R-103.
Results of these evaluations are expected to be available in mid 1999. In

                                       10




addition,  ABS received Phase I Small Business  Innovation Research (SBIR) grant
funding  from the NIH to further  evaluate the effect of ABS-205 on learning and
memory.

         There can be no assurance that the Company's neurobiology products will
prove  to be  commercially  viable,  or that ABS will  successfully  market  the
products or achieve significant revenues or profitable  operations or enter into
any  arrangements  with  third  parties  for  development  of  the  neurobiology
products,  or if it does, that any such  arrangements will be on terms that will
be favorable to ABS.

Various Other Agreements

         As part of its  development  stage  activities,  ABS,  in the  ordinary
course  of  business,  enters  into  various  agreements  that  provide  for the
expenditure  by the Company of funds for  research and  development  activities.
These agreements typically provide for the payment of royalties (typically 2% to
8% of net sales) by ABS if any products are successfully  developed and marketed
as a result of the work being performed  under the agreement.  Reference is made
to Note 10 of the Notes to Consolidated Financial Statements for a discussion of
various  arrangements  which the  Company  has  entered  into for  collaborative
research and development  projects (including  arrangements for the use of space
and  services) and  technology  license  arrangements  for the  development  and
prospective manufacturing and sale of products being developed.

Marketing and Sales

         During fiscal year 1998,  the Company had one customer  account for 34%
of the Company's  revenue,  another  customer  accounted for 17%,  while a third
customer  accounted  for 10% of the  Company's  revenues.  The Company  does not
believe that the loss of any of these  customers  would have a material  adverse
effect on the Company.

         The Company anticipates that commercial sales of its in vitro test kits
will  be  directed  to  hospitals,   laboratories,   clinical  laboratories  and
physicians in large group medical practices.  The Company believes that sales to
hospitals and clinical  laboratories will be dependent on general  acceptance by
physicians  using direct  fibrinogen  level  measurement  as part of routine and
special blood analyses.

         Because ABS lacks the necessary financial resources, it intends to rely
on collaborative  arrangements with pharmaceutical firms to conduct and fund the
major  portion  of the  human  clinical  trials  that are  necessary  to  obtain
regulatory  approval for any in vivo  products it may develop.  The Company also
intends  to rely on these  firms to market  and sell the  products  exclusively,
especially  during  the  first  few  years  of  the  collaboration.  While  each
arrangement may vary, the Company intends to require payments of a royalty based
on sales of the product, with an amount to be paid "up front" upon entering into
the  arrangement.   The  Company  continues  to  seek  arrangements  with  large
pharmaceutical  companies to market its products.  In the event ABS is unable to
enter into other  arrangements or, if the arrangements which it has entered into
or may enter into in the future are not successful, the Company will likely seek
to market  such  products,  through  distributors,  which  would  require ABS to
develop a marketing  program to support sales.  The Company has begun  marketing
through distributors its TpP diagnostic kit which requires,  among other things,
the Company to pay the expenses of developing  promotional literature and aides,
hiring sales support personnel and completing studies to support clinical use of
the product which will aid  distributors  in selling  ABS's in vitro  diagnostic
tests. Independent distributors that ABS uses also market similar products.


                                       11





         There  can be no  assurance  that any  marketing  arrangements  will be
entered into or, that if entered  into,  they will be on terms  similar to those
discussed  above  or on terms  that  will be  favorable  to the  Company.  If no
arrangements  are  entered  into,  ABS  will  require  substantial   alternative
financing in order to market its  products.  There can be no assurance  that any
such  financing  arrangements  will be available to the Company or, if available
to, it will be available on terms acceptable or favorable to the Company.

         Sales  of  ABS'  proposed  products  on  a  commercial  basis  will  be
substantially  dependent on widespread acceptance by the medical community.  The
use of any products  that the Company may develop for diagnosis and therapy will
require  educating  the medical  community as to their  reliability,  safety and
effectiveness.  The Company,  and any  pharmaceutical  company with which it may
collaborate,  may use several approaches to obtain the general acceptance in the
medical  community  of  the  Company's  proposed   products.   Such  promotional
approaches may include:  publicizing existing studies;  offering the products to
current  practitioners and researchers who are leaders in their fields for their
use and  publication  of their  findings;  conducting  comparative  studies with
competitive  products  and  methodologies  and  publishing  the  results  of the
studies; and sponsoring professional symposia and seminars.

         The personnel and financial resources of the Company are not sufficient
to permit the Company to alone gain the acceptance of the medical  community for
ABS'  proposed in vivo  pharmaceutical  products or vaccines.  Accordingly,  the
Company  may  be  required  to  collaborate  with  one  or  more  pharmaceutical
companies,  which will provide the  necessary  financing and expertise to obtain
the acceptance of the medical community of ABS' proposed in vivo products.  Such
arrangements are likely to entail, among other things, the sharing of revenue or
profits with such companies.

         There can be no assurance  that any of the  Company's  products will be
accepted in the medical community, and ABS is unable to estimate whether it will
be able to, and if so the length of time it would take to, gain such acceptance.

Competition

         The  biotechnology  industry is  characterized  by rapid  technological
advances, evolving industry standards and technological obsolescence.

         ABS has numerous competitors,  none of whom is believed to be dominant,
and it is likely  that  others  may enter the  field.  Competitors  may  develop
products which may render ABS' products  obsolete or which have  advantages ABS'
products,  such as greater  accuracy and precision or greater  acceptance by the
medical  community.   ABS'  inability  to  meet  and  surpass  its  competitors'
technological  advances,  could have a material  adverse effect on the Company's
business, financial condition and results of operations.  Competing products may
also get through the  regulatory  approval  process  sooner than ABS'  products,
enabling  those  competitors  to market  their  products  earlier  than ABS can.
Usually,  the first  person to market a product  has a  significant  marketplace
advantage.  In addition,  other  products now in use,  presently  undergoing the
regulatory approval process, or under development by others, may perform similar
functions as our existing products or those under development.


                                       12





Proprietary Technology, Patents and Trade Secrets

         ABS' policy is to seek patent  protection  for its  proposed  products,
whether  resulting  from its own  research  and  development  activities  or any
development  and licensing  arrangements  that the Company  enters into. ABS has
been issued United States  Patents,  Nos.  4,870,023 and  5,041,379,  which will
expire 2006 and 2008,  respectively;  one United States Patent,  No.  5,294,548,
relating to the Hepatitis A vaccine,  filed jointly with the University of Iowa,
which will expire 2011. In addition,  ABS has been issued United States  Patent,
Nos.  5,091,512  and  5,120,834,  each of which  will  expire in 2009,  covering
monoclonal antibodies specific for fibrinogen and monoclonal antibodies specific
for fibrin  respectively.  ABS has also been issued a United  States  Patent No.
5,223,410, which will expire in 2010, covering the use of its AF mouse colony to
generate  monoclonal  antibodies.  ABS has also been issued United States Patent
No.  5,721,122  which  expires in 2015,  covering a method of  obtaining  primed
lymphocytes  collected  from immunized  antigen-free  mice. ABS has further been
issued United States Patent No. 5,453,359,  which will expire in 2012,  covering
an   immunoassay   for   soluble   fibrin   using  The   Company's   proprietary
fibrin-specific monoclonal antibody as a method of detecting a thrombotic event,
such as myocardial infarction. ABS has also been issued United States Patent No.
5,487,892,  which will expire in 2014, covering use of the Company's proprietary
fibrin-specific  monoclonal antibody as an antithrombotic agent. ABS has further
been  issued  United  States  Patent No.  5,723,126,  which will expire in 2015,
covering the use of the Company's propriety fibrin-specific  monoclonal antibody
in conjunction with a thrombolytic reagent for the treatment of thrombosis.  ABS
has been issued United States Patent No.  5,837,540,  which will expire in 2016,
covering  a method  of  producing  fibrin-specific  antibody.  ABS has also been
issued United States Patent No. 5,843,690, which will expire in 2015, covering a
method and an assay kit for the in vitro  detection of the presence or amount of
soluble  fibrin  polymers in a sample  from a subject.  ABS has also been issued
United  States  Patent  No.  5,871,737,  which will  expire in 2008,  covering a
fibrin-specific monoclonal antibody.  Additional patent applications are pending
covering alternative  embodiments of the Company's  proprietary  fibrin-specific
monoclonal  antibody,  as well as  improved  methods of raising  fibrin-specific
monoclonal  antibodies  and of using the  soluble  fibrin  immunoassay.  ABS has
twenty-two counterpart applications (including designated countries under patent
treaties) covering  monoclonal  antibodies  specific for fibrinogen,  monoclonal
antibodies  specific for fibrin,  methods for use of the  Company's  proprietary
fibrin-specific  monoclonal  antibody  in a  soluble  fibrin  assay,  and  as an
antithrombotic  agent, and the use of the AF mouse colony to generate monoclonal
antibodies.  ABS  presently  has  issued  three  patents in  Australia  covering
monoclonal  antibodies specific for fibrinogen,  monoclonal  antibodies specific
for fibrin, methods for localizing a blood clot in a patient, an immunoassay for
determining  fibrin levels in a patient's  blood, and use of the AM mouse colony
to generate monoclonal antibodies. The Company has exclusive worldwide rights in
technology  relating to certain methods and compositions for treating  epilepsy.
ABS has the exclusive license for United States Patent No. 5,786,380, which will
expire in 2015,  covering a method of reducing seizure activity in an individual
by administering an anti-epileptic compound that contains  2-n-propyl-4-hexynoic
acid.  Patents  protect this  technology  on behalf of the Company in the United
States and the European Patent Office. The European Patent has been activated in
16 European  countries.  ABS has filed  additional  patent  applications  in the
United  States  and  other  foreign   jurisdictions   to  further  protect  this
technology.  The  Company  also has  exclusive  worldwide  rights in  technology
related to certain novel  neurotrophic  methods and compositions.  United States
Patent No. 5,672,746 issued September 30, 1997. Foreign  applications to protect
this technology  worldwide are pending.  ABS is the worldwide exclusive licensee
of United  States  Patent  No.  5,492,812,  issued to Trinity  College  (Dublin,
Ireland),   which  will  expire  in  2013,  covering  a  method  for  diagnosing
Alzheimer's disease, and a corresponding pending European patent application.

                                       13





         Ono Pharmaceutical,  Ltd., ("Ono"),  has filed third party observations
in ABS' patent applications relating to its neurotrophic compounds in the Japan,
and  Australian  patent offices as well as the European  Patent Office.  ABS has
filed a reissue application of its United States Patent No. 5,672,746 to provide
the United  States Patent and Trademark  Office an  opportunity  to examine this
patent in light of the issues  raised by Ono. On November 30,  1998,  the United
States Patent and Trademark  declared an interference  between an application of
Ono and one of the Company's  applications  related to its  5,672,746  patent to
determine the priority of invention of commonly  claimed  subject  matter.  As a
result of the  interference,  a determination  will be made as to whether ABS or
Ono was the first to invent the invention  within the scope of the  interference
and therefore entitled to a patent, based on information not presently available
to ABS. Because  interferences are interparty  disputes,  the cost of conducting
the interference may be substantial, whether or not the Company prevails.

         There can be no  assurance  that any of the claims in pending or future
applications  will issue as patents,  that any issued  patents  will provide ABS
with  significant  competitive  advantages,  or  that  challenges  will  not  be
instituted  against the validity or  enforceability  of any patent issued to ABS
or, if instituted,  that such  challenges  will not be  successful.  The cost of
litigation to uphold the validity and prevent  infringement  can be substantial.
Furthermore,  there  can be no  assurance  that  others  have not  independently
developed  or  will  not  develop  similar  technologies  or  will  not  develop
distinctively patentable technology duplicating the Company's technology or that
they will not design around the patentable aspects of the Company's  technology.
While obtaining  patents is deemed  important by ABS, patents are not considered
essential to the success of its business.  However, if patents do not issue from
present  or  future  patent   applications,   ABS  may  be  subject  to  greater
competition. Moreover, unpatented technology could be independently developed by
others  who  would  then  be  free to use the  technology  in  competition  with
unpatented technology of ABS.

         With respect to certain aspects of its technology, ABS currently relies
upon,  and  intends  to  continue  to  rely  upon,  trade  secrets,   unpatented
proprietary  know-how and  continuing  technological  innovation  to protect its
potential  commercial  position.  Relationships  between ABS and its  scientific
consultants  and  collaborators  may provide  access to the Company's  know-how,
although,  in general, ABS has entered into confidentiality  agreements with the
parties  involved.  Similarly,  ABS' employees and consultants have entered into
agreements  with the Company which  require that they  forebear from  disclosing
confidential  information  of ABS and to assign to the Company all rights in any
inventions  made  while  in ABS'  engagement  relating  to  Company  activities.
However,  all  members of the  Company'  Scientific  Advisory  Committee  may be
employed by or have consulting  agreements  with third parties,  the business of
which may conflict or compete with ABS, and any  inventions  discovered  by such
individuals as part of their  agreement with third parties,  will not become the
property of ABS.  There can be no assurance that trade secrets will be developed
and maintained, or that secrecy obligations will be honored, or that others will
not  independently  develop similar or superior  technology.  To the extent that
consultants, employees, collaborators or other third parties apply technological
information  independently  developed by them or by others to Company  projects,
disputes  may arise as to the  ownership  of such  information  which may not be
resolved in favor of ABS. See "Scientific Advisory Committee."

                                       14





Trademarks

         ABS owns  trademarks  registered  with the  United  States  Patent  and
Trademark  Office for the names  Global  Scientific  Network(R)  and  Cadkit(R).
Federally  registered  trademarks  have a  perpetual  life,  as long as they are
renewed  on a timely  basis,  subject  to the  rights of third  parties  to seek
cancellation of the marks. ABS has filed other trademark applications, including
for  TpP(TM)  and  FiF(TM),  may claim  common law trade name rights as to other
potential products,  and anticipates filing additional trademark applications in
the future.  ABS does not  believe  that any of its  trademarks  (or applied for
trademarks) is material to its business.

Government Regulation

         ABS'  present  and  proposed   activities  are  subject  to  government
regulation in the United States and any other countries in which the Company may
choose to market its proposed products or conduct product development,  research
or manufacturing.  ABS has not determined those countries, other than the United
States, where it will seek regulatory approvals to market its proposed products.
The following is a discussion  of the processes  required in order to obtain FDA
approval for  marketing a product,  which are  different  for the three types of
products  being  developed  by ABS:  monoclonal  antibodies  for in  vitro  use,
monoclonal antibodies for in vivo use and drugs to test neurological diseases.

         In Vitro Diagnostic Products

         For some in vitro  diagnostic  products,  a process  known as a "510(k)
review" is available to enable the manufacturer to demonstrate that the proposed
product is "substantially  equivalent" to another product that was in commercial
distribution  in the United States  before May 28, 1976 or is lawfully  marketed
under a 510(k) (a "predicate  device").  When a 510(k) review is used, a sponsor
is required to submit a pre-market  notification  to the FDA. ABS cannot proceed
with  commercial  sales of such products for diagnostic use in the United States
until it  receives  510(k)  clearance  from the FDA.  In the event  that the FDA
requests  additional  information  for the pre-market  notification,  this could
result in multiple cycles of submissions,  each potentially involving additional
review  periods  until 510(k)  clearance is granted or FDA  determines  that the
device is not substantially equivalent.

         In  cases  where  ABS'  product  is  determined  by the  FDA  not to be
"substantially  equivalent"  to the  predicate  device,  an approved  pre-market
approval  application  ("PMA"),  which involves a lengthier and more  burdensome
process, will be required before commercial distribution is permitted. There can
be no assurance  that any present or future in vitro test ABS  develops  will be
determined to be substantially  equivalent by the FDA or receive PMA approval by
the FDA in a timely  manner or at all. A PMA may be required for some or all the
Company's future proposed in vitro products.

         The FDA invariably  requires  clinical data for a PMA and, although the
FDA may grant 510(k) clearance without  supporting  clinical data, such data may
be required  by the FDA.  ABS expects  that it will submit  clinical  data in at
least some of its anticipated 510(k) notices. The Clinical data must be gathered
in accordance with FDA's regulations.

         Medical devices may be exported before  receiving  510(k)  clearance or
PMA approval under certain conditions.  Once cleared for marketing in the United
States, a diagnostic  device must comply with certain  regulatory  requirements,
such as good manufacturing practices (also known as the Quality System

                                       15





Regulation),  medical device  reporting,  and  restrictions  on advertising  and
promotion. The failure to comply can lead to FDA enforcement actions.

         The European  Union has developed a structure for the  regulation of in
vitro  diagnostic  devices.  ABS believes that there are no material  regulatory
impediments  to the  sale  of its in  vitro  diagnostic  tests  presently  under
development in North Africa and the Middle East.

         Monoclonal Antibodies for In Vivo Use and Vaccines

         Any products  intended  for in vivo use,  including  vaccines,  will be
subject to  regulation  by the FDA.  The products  produced,  depending on their
characteristics,  may be classified as "biologics" or Products  regulated  under
the Public Health  Service Act (the "PHS" Act) and the Federal Food,  Drug,  and
Cosmetic Act (the "FDCA") or may be classified as  non-biologic  drugs regulated
only under the FDCA.  Development of a pharmaceutical  product for use in humans
under either statute is a multistep  process.  First,  laboratory animal testing
establishes  probable safety and parameters of use of the  experimental  product
for testing in humans and suggests  potential  efficacy  with respect to a given
disease.  Once the general  investigative  plan and protocols for specific human
studies are  developed,  an  investigational  new drug  ("IND")  application  is
submitted to the FDA. FDA clearance of the IND is required  before the study can
begin.

         In general the initial phase of clinical testing (Phase I) is conducted
to evaluate the  pharmacological  actions and side  effects of the  experimental
product  in  humans  and,   possibly,   to  gain  early   evidence  of  possible
effectiveness.  Phase I studies evaluate the safety of the drug. A demonstration
of  therapeutic  benefit  is not  required  in order  to  complete  such  trials
successfully. If acceptable product safety is demonstrated, then Phase II trials
may be initiated.  Phase II trials are designed to evaluate the effectiveness of
the product in the treatment of a given disease and, often are  well-controlled,
closely  monitored  studies in a relatively  small  number of patients.  Routes,
dosages and schedules of administration may also be studied.  If Phase II trials
are successfully completed,  Phase III trials may be commenced. Phase III trials
are  expanded,  controlled  trials  which  are  intended  to  gather  additional
information  about  safety and  effectiveness  in order to evaluate  the overall
risk/benefit  relationship of the product and provide the evidence of safety and
effectiveness necessary for product approval. Although this is the standard drug
testing pattern, different approaches are often used, such as combining Phases I
and II.

         It is not  possible to  estimate  the time in which Phase I, II and III
studies will be completed  with  respect to a given  product,  although the time
period to  complete  all the  testing  can  exceed  five  years.  Following  the
successful  completion of clinical trials,  the clinical  evidence that has been
accumulated is submitted to the FDA as part of a marketing application.

         ABS completed its agreement  with Verax  Corporation  ("Verax"),  which
manufactured  the MH1 monoclonal  antibody for the Phase I human trials.  ABS is
party to an agreement with Creative BioMolecules Inc. ("Creative"), a bioprocess
technology  company which succeeded Verax, to manufacture a sufficient  quantity
of the  Company's in vivo  monoclonal  antibody to enable the Company to conduct
human trials for Phase II, at a total cost of approximately $250,000.

         Approval of the  application  is necessary  before a company may market
the product. The approval process can be very lengthy and depends upon the FDA's
review of the application and the time required to provide  satisfactory answers
or additional clinical data when requested. With any given product, there is no

                                       16





assurance  that an application  will be approved in a timely manner,  or at all.
Failure to obtain such  approvals  would  prevent ABS from  commercializing  its
products and would have a material adverse effect on the Company's business.

         The FDA also has extensive  regulations  concerning good  manufacturing
practices.  ABS' compliance with good manufacturing practice, and its ability to
assure the potency,  purity and quality of the drugs and biologics manufactured,
must  be  documented  in  the  applications  submitted  for  the  products,  and
manufacturing  facilities will be subject to pre-approval and other  inspections
by the FDA and other government agencies.

         Continued  compliance  with  current  good  manufacturing  practices is
required to market both  biologic and  non-biologic  drug products once they are
approved. Failure to comply with the good manufacturing practice regulations, or
to comply  with  other  applicable  legal  requirements,  can lead to seizure of
violative products, injunctive actions, other enforcement actions, and potential
criminal  and civil  liability  on the part of a Company and of the officers and
employees of a Company.

         Furthermore,  the process of seeking and  obtaining  FDA approval for a
new product generally  requires  substantial  funding.  ABS anticipates that, in
most instances where it develops a product,  the Company will seek to enter into
a  joint  venture  or  similar  arrangement  with  an  established  chemical  or
pharmaceutical  company that will help conduct the required  preclinical studies
and clinical  trials and bear a substantial  portion of the expense of obtaining
FDA approval.

         In addition to complying with FDA  regulations,  ABS and the facilities
used by it are also  required  to comply with  federal and state  environmental,
occupational  health and other  applicable  regulations.  ABS believes  that its
facilities comply with such regulations.

Manufacturing

         While ABS has produced a limited quantity of monoclonal  antibodies for
testing and evaluation of its in vitro products, there can be no assurances that
ABS  will  be  able  to  either  finance  or  meet  FDA   regulations  for  good
manufacturing  practices  required in order to convert and operate such facility
for commercial production of such products. ABS does not intend to establish its
own  manufacturing  operations for its in vivo products unless and until, in the
opinion  of  management  of ABS,  the size and  scope  of its  business  and its
financial resources so warrant. It is the Company's intention to seek additional
third parties to  manufacture  its in vivo  monoclonal  antibody for  commercial
production or enter into a joint venture or license agreement with a partner who
will be  responsible  for future  manufacturing.  Each joint venture  partner or
contract  manufacturer   participating  in  the  manufacturing  process  of  the
Company's  monoclonal  antibody  must  comply with FDA  regulations  and provide
documentation to support that part of the  manufacturing  process in which it is
involved.  ABS has  contracted  with four  different GMP  manufacturers  for the
production of antibodies and the TpP(TM) and FiF(TM) kits.  With the acquisition
of Stellar and  management's  plan to consolidate  its facilities in Boston,  MA
into  Stellar's  facilities  in  Columbia,  MD,  the  Company  intends  that the
manufacture and assembly of TpP(TM) and FiF(TM) kits will be performed in house.
Stellar's facility meets GMP regulations.

         There is no assurance  that third parties in the future will be able to
manufacture  sufficient  quantities of the Company's in vivo monoclonal antibody
necessary to obtain full FDA clearance, that the FDA will

                                       17





accept the Company's manufacturing  arrangements,  or find the facilities in GMP
compliance, or that these commercial manufacturing  arrangements can be obtained
on acceptable terms.

Product Liability

         The testing, marketing, manufacture and sale of pharmaceutical products
entails a risk of product and other  liability  claims by consumers  and others.
Additionally,  ABS'  monoclonal  antibodies  are generated  from an antigen free
mouse colony and  instances of the human immune  system  negatively  reacting to
mouse derived antibodies have been reported.  Product and other liability claims
may be asserted by physicians,  laboratories, hospitals or patients relying upon
the results of ABS' diagnostic tests (MH1 imaging). Product liability claims may
be asserted by physicians,  laboratories, hospitals or patients relying upon the
results of the  Company's  diagnostic  tests (TpP,  FiF and  Stellar  products).
Claims may also be asserted against ABS by end users of the Company's  products,
including   persons  who  may  be  treated  with  any  in  vivo   diagnostic  or
therapeutics.

         Certain distributors of pharmaceutical products require minimum product
liability insurance coverage as a condition precedent to purchasing or accepting
products for distribution.  Failure to satisfy such insurance requirements could
impede  the  ability  of ABS  to  achieve  broad  distribution  of its  proposed
products,  which  would have a material  adverse  effect upon the  business  and
financial condition of ABS.

         ABS has obtained product liability  insurance  covering its TpP and FiF
products.  Although ABS will attempt to obtain product liability insurance prior
to the marketing of any of its other  proposed  products,  there is no assurance
that ABS will be able to obtain such insurance.  Also, there can be no assurance
that any insurance obtained  (including its existing policies) can be maintained
or that such  insurance can be acquired or  maintained  at a reasonable  cost or
will be  sufficient  to  cover  all  possible  liabilities.  In the  event  of a
successful suit against ABS, lack or insufficiency  of insurance  coverage could
have a material adverse effect on ABS.

Scientific Advisory Committee

         ABS has a Scientific Advisory Committee (the "Committee")  comprised of
scientists and physicians  active in the fields of microbiology,  immunology and
molecular  biology  and in  cardiovascular  disease,  hepatic  disease  and drug
development.  These scientists serve as advisors to the Company.  Members of the
Committee  generally  make  themselves   available  on  an  informal  basis  for
consultations  with ABS.  Members of the Committee are selected by the Company's
management.

         Members  of the  Committee  review  the  feasibility  of the  Company's
proposed research and development programs,  the progress of programs undertaken
and assist in establishing  both the scientific  goals of ABS and the priorities
of its product  development.  All members of the  Company'  Scientific  Advisory
Committee may be employed by or have  consulting  agreements with third parties,
the  business of which may  conflict  or compete  with ABS,  and any  inventions
discovered by such  individuals  as part of their  agreement with third parties,
will not become the  property  of ABS.  These  individuals  are not  required to
devote any, and expected to devote only a small  portion,  of their time to ABS,
and are not expected to actively participate in the development of the Company's
technology.  It is possible  regulations or policies now in effect or adopted in
the future might limit the ability of the scientific  advisors to continue their
relationship with ABS. Members of the Scientific Advisory Committee were used on
an informal basis for consultations in 1998.

                                       18





Payments to the members,  exclusive of expenses, is $1,000 per meeting attended.
Members of the Advisory Committee have been granted ten year options to purchase
from 5,000 to 15,000  shares of Common Stock from the  Company,  an aggregate of
203,000  shares held by members of the Committee (in addition to options held by
Dr. Born in his capacity as a non-employee director of the Company), at exercise
prices ranging from $1.94 per share to $7.75 per share, as of December 31, 1998.
The  1998  payments  to  for  the  advisors  for  informal  meetings  and  other
consultations  as a group was  approximately  $115,000.  Certain  members of the
Committee are associated with  institutions with which ABS has undertaken or may
in the future engage in collaborative  research efforts.  Arrangements with such
institutions  may  result  in one or more  members  of the  Committee  receiving
royalties  or other  compensation  from such  institution  or ABS if such member
works as a scientist in the collaborative effort.

         The members of the Committee have no general  fiduciary  duties to ABS,
have  entered  into  limited  confidentiality   agreements  and  may,  in  their
discretion,  engage in activities which are competitive with those engaged in by
the Company. The members of the Committee as of March 19, 1998 are:

         Giancarlo Agnelli, M.D., is Associate Professor of Internal Medicine at
the University of Perugia, Italy, where he received his medical education. Prior
to appointment to his present post he was a research  fellow and clinical fellow
in  the   Department  of  Pathology  and  Department  of  Medicine  at  McMaster
University,  Hamilton,  Ontario,  Canada. He continues as an associate member of
the  Hamilton  Civic  Hospital  Research  Center at McMaster  University.  He is
co-chairman  of  the  Sub-Committee  on  Control  of  Anti-  coagulation  of the
Scientific  and  Standardization  Committee  of  the  International  Society  on
Thrombosis  Research.  He has presented  lectures at more than 200 international
and national meetings and is the author or co-author of more than 200 scientific
articles.

         Denian Ba,  M.D.,  is  presently  Academician,  The Chinese  Academy of
Engineering; President of the Chinese Academy of Medical Sciences & Peking Union
Medical College; Chairman, Chinese Society of Immunology; Vice Chairman, Chinese
Medical  Association.  Dr. Ba was engaged in research  on Cancer  Immunology  as
Associate  Chief,  Chief,  Department  of  Immunology at the Institute of Cancer
Research in Harbin  Medical  University,  and Deputy  Director,  Director at the
Institute of Cancer Research in Harbin Medical  University.  Dr. Ba received his
M.D. from the Department of Medicine of Harbin Medical University,  received his
Master of Science of Biochemistry  from Beijing Medical  University and received
his Ph.D. from the School of Medicine of Hokkaido University, Japan.

         Konrad T.  Beyreuther,  Ph.D.,  is  presently  professor  of  Molecular
Biology and Head of  Laboratory  for Molecular  Neuropathology  at the Center of
Molecular Biology,  University of Heidelberg,  Federal Republic of Germany.  His
primary  research  deals with  genetics  and  molecular  biology of  Alzheimer's
disease and related dementia disorders. He earned his doctorate at the Max-Plank
Institute for Biochemistry Munich, University Munich, Germany.

         Gustav  Victor  Rudolf  Born,  M.D.,  D. Phil.,  F.R.S.,  is  presently
Research Director of The William Harvey Research Institute at St.  Bartholomew's
Hospital  Medical  College,   London,   England,   and  Emeritus   Professor  of
Pharmacology in the University of London.  Among Professor Born's  distinctions,
appointments  and  activities  are:  Fellowship  and  Royal  Medal of the  Royal
Society;  Foundation  President  of  the  British  Society  for  Thrombosis  and
Haemostasis;  Corresponding  Member of the Belgian  Royal  Academy of  Medicine;
Professor of the Foundation de France,  Paris; Robert Pfleger, Paul Morawitz and
Alexander-von-  Humbolst Prizes; Honorary Life Member of the New York Academy of
Sciences; Medical Advisor of the

                                       19





Heineman  Medical Research Center,  Charlotte,  North Carolina;  Co-Director for
Centre for Thrombosis Research,  Perugia,  Italy; Honorary Doctorates from eight
universities  including  Brown and  Loyola.  Dr.  Born is also a director of the
Company.

         Francis J.  Castellino,  Ph.D., is Dean of the College of Science,  and
Kleiderer-Pezold  Professor of  Biochemistry at the University of Notre Dame. He
earned  a  doctorate  in  biochemistry  at the  University  of  Iowa,  and was a
postdoctoral  fellow at Duke University  Medical Center. He maintains a research
program studying blood coagulation and fibrinolysis.

         Jeffrey  Ginsberg,  M.D., is a hematologist  with research  training in
clinical and laboratory  aspects of thrombosis.  His current research  interests
include the clinical development of novel  antithrombotic  agents, the diagnosis
and management of thrombosis during  pregnancy,  the prevention and treatment of
the post- phlebitic syndrome, the investigation of the clinical complications of
antiphospholipid   antibodies,  and  the  diagnosis  of  venous  thrombosis  and
pulmonary  embolism.  He is currently the principal  investigator of a number of
clinical   trials   relative  to   thrombosis.   He  is  the   Director  of  the
Thromboembolism Unit at Chedoke- McMaster Hospitals and a Career Investigator of
the Heart and Stroke Foundation of Ontario.

         Lawrence Grossman, Ph.D., is University Distinguished Service Professor
of  Biochemistry  at the Johns Hopkins  University  School of Hygiene and Public
Health,  Baltimore,  Maryland.  He is consultant to Applied DNA Systems, Inc. He
earned  a  Ph.D.  degree  from  the  University  of  Southern  California,   and
subsequently  trained and worked  thereafter  at Johns  Hopkins  University  and
Brandeis  University.  His  expertise  are in DNA  repair,  molecular  basis  of
mutagenesis and molecular biology in general.

         Thomas W. Meade,  CBE,  DM,  FRCP,  FRS, is  presently  Director of the
Medical Research Council  Epidemiology and Medical Care Unit,  Wolfson Institute
of Preventive  Medicine,  St. Bartholomew's and the Royal London Hospital School
of Medicine and Dentistry,  London,  England.  Additional  appointments include:
Professor of Epidemiology University of London, Hon. Consultant in Epidemiology,
Northwick Park and St. Mark's NHS Trust,  Hon.  Consultant in Epidemiology,  The
Royal  Hospitals  NHS  Trust.  He is:  Doctor of  Medicine,  Fellow of the Royal
College of Physicians and Fellow of the Royal Society.

         Daniel M.  Michaelson,  Ph.D., is presently  Professor of Neurobiology,
Department of  Neurobiochemistry,  Tel Aviv  University,  Tel Aviv,  Israel.  He
earned a Ph.D. in Biophysics from the University of California,  Berkeley. Among
Professor Michaelson's distinctions, appointments and activities are: Membership
of the  International  Society  of  Neurochemistry,  International  Society  for
Developmental Neuroscience,  International Brain Research Organization,  the New
York Academy of Sciences,  Israel Society of Neurosciences,  Israel  Biochemical
Society and the Israel Society for Pharmacology  and Physiology.  He is a member
of the Scientific Advisory Board of the Alzheimer Foundation, and a board member
of Ramot University  Authority for Applied  Research and Industrial  Development
Ltd.

         Peter Victorovich  Morozov,  M.D., Ph.D., is Professor of Psychiatry at
the Russian State Medical University,  Moscow. He has served as the Secretary of
the International  Section of the National  Scientific  Society of Psychiatrists
and is currently  secretary of the Russian Section of French-Russian  Society of
Psychiatrists.  Dr.  Morozov's  primary area of research is  psychopharmacology,
problems of classification and diagnosis,  post-traumatic stress disorders.  Dr.
Morozov graduated from Pirogov II Medical School and received his doctorate from
the Institute of Psychiatry AMS USSR.

                                       20





         Gerald P. Murphy,  M.D., before joining The Pacific Northwest  Research
Foundation  in 1993 was with the American  Cancer  Society as the Chief  Medical
Officer since 1988, served as the Associate Director and Director of the Roswell
Park Memorial  Institute,  Cancer Research and Treatment  Center,  Buffalo,  New
York,  from 1968 to 1985.  Dr.  Murphy was Professor of Urology and in charge of
the Urologic Cancer Research  Laboratory at the State  University of New York at
Buffalo from 1985 to June 1988. Dr. Murphy was National  American Cancer Society
President  for 1983 & 1984.  Dr.  Murphy  received his B.Sc.  degree  (Summa Cum
Laude)  from  Seattle  University  and a M.D.  degree  from  the  University  of
Washington.

         Alfred  Nisonoff,  Ph.D.,  is  Professor of Biology  (Emeritus)  at the
Rosenstiel Research Center,  Brandeis  University,  Waltham,  Massachusetts.  He
earned a  doctorate  in  chemistry  from Johns  Hopkins  University,  Baltimore,
Maryland and was a postdoctoral  fellow at the Johns Hopkins Medical School. Dr.
Nisonoff is on the  Scientific  Advisory  Committee  of the Roswell  Park Cancer
Institute,  Buffalo,  New York and was  employed  by ABS from  November  1996 to
November  1997 as Research and  Development  Executive.  His expertise is in the
field of immunology and idiotypic  antibodies.  He was also Executive  Secretary
for the Task Force on Immunology,  National  Institute of Allergy and Infectious
Diseases  (1998).  Member,  United States National  Academy of Sciences;  Former
President,  American Association of Immunologists;  Member,  American Academy of
Avis and Sciences; Foreign Correspondent; Belgian Academy of Medicine.

         Rem V. Petrov, M.D., is currently  Vice-President of Russian Academy of
Sciences, Moscow, Russia and chief of the Immunology Department of the Institute
of Bioorganic  Chemistry of the Academy.  His main  scientific  interests are in
fields of Immunogenetics (genetical control of Immune response,  interactions of
syngeneic and nonsyngeneic cells) and Immunobiotechnology (artificial immunogens
and    vaccines,     immunopharmacology-myelopeptides    and    other    natural
immunodulators).

         Craig M. Pratt, M.D., currently is a Professor of Medicine,  Section of
Cardiology,  Department  of  Internal  Medicine,  Baylor  College  of  Medicine,
Houston,  Texas.  Dr. Pratt is currently  Director of the Coronary Care Unit and
Non-invasive  Laboratories at The Methodist Hospital.  Nationally,  Dr. Pratt is
Chairman of the  Cardiovascular  and Renal Drugs  Advisory Board to the Food and
Drug Administration. Dr. Pratt also serves on the Program Planning Committee for
the Annual Meeting, American College of Cardiology.

         John H. Proctor,  Ph.D.,  Fellow and formerly  Secretary General of the
World  Academy of Art and Science from  1986-1997,  and Past  President and Life
Fellow  of the  Washington  Academy  of  Sciences  in  Washington,  D.C.,  and a
corresponding  member  of  the  Spanish  Royal  Academy  of  Sciences.   He  has
facilitated  national  and  international  technology  transfer,  organizational
development and  productivity  improvement  projects for over thirty years.  Dr.
Proctor  has written  three books and has  published  seventy-  three  technical
papers.

         Ciaran  M.  Regan,   Ph.D.,  D.Sc.  is  presently  Associate  Professor
Pharmacology  at University  College,  Dublin,  Ireland.  Dr. Regan received his
B.Sc. and Ph.D.,  from University  College,  Dublin.  He is a past  Postdoctoral
Fellow, Department of Biochemistry,  University of Nijmegen, The Netherlands and
past Scientific  Officer of Medical  Research  Council,  Institute of Neurology,
London. Dr. Regan has numerous publications.

                                       21





         Jacob  Szmuszkovicz,   Ph.D.,  is  a  Professor  of  Chemistry  at  the
University  of Notre  Dame,  Notre  Dame,  Indiana.  He  earned a  doctorate  in
Chemistry from the Hebrew University,  Jerusalem. He served as a Member of Staff
at the Weizmann  Institute  before  joining the Upjohn Company where he held the
position of a Distinguished  Scientist in the CNS (Central  Nervous System) Unit
from 1954 to 1985. Dr.  Szmuszkovicz is co-inventor on over 100 patents.  He has
served as a Member of the Executive Committee of the Organic Division of the ACS
(American Chemical Society).

Personnel

         As of March 12, 1999,  ABS had 34 full time  employees  and 9 part-time
employees. Of the full-time employees 16 are research and development personnel,
including  7  Ph.D.s,   and  the  remaining  are  executive  and  administrative
personnel.

         ABS' President and Chief  Executive  Officer,  Executive Vice President
and Senior  Vice  President  Business  Development  are  parties  to  employment
agreements  with the Company  ending  December 31, 1999,  September 30, 2001 and
November 30, 2001, respectively. They also are parties to agreements with ABS to
keep  corporate   information  with  regard  to  the  business  of  the  Company
confidential during and subsequent to their employment with ABS.

         None of ABS'  employees are  represented by a labor  organization.  ABS
believes its relationship  with its employees is  satisfactory.  The Company has
standardized  procedures for  recruiting,  interviewing  and reference  checking
prospective personnel.

Item 2.           Properties
- - ------            ----------

         ABS leases 7,700 square feet of space from Boston University in Boston,
Massachusetts which houses all of ABS's research and development  activities for
an annual base rent of $275,000 for a three year term ending  December 31, 1999,
of which a portion may be paid in shares of Class A Common  Stock and  warrants.
See Item 5 of this Report.  The Company is negotiating  an early  termination of
this lease and intends to consolidate its research and development activities at
Stellar's facility.

         ABS'  subsidiary,  Stellar has a lease  covering  16,000 square feet in
Columbia,  Maryland, with an annual base rent of $136,000 and terms ending March
31, 2001.

         ABS leases office space in Copiague, New York (6,000 square feet) under
a lease  expiring  July 1999  (with an annual  base rent of  $30,000),  which it
intends to renew, and in Dublin, Ireland under a short-term arrangement.

Item 3.           Legal Proceedings
- - ------            -----------------

         Not Applicable

Item 4.           Submission of Matters to a Vote of Security Holders
- - ------            ---------------------------------------------------

          At a Special  Meeting of  Stockholders of the Company held on November
11, 1998,  stockholders of ABS authorized an Amendment to the Company's Restated
Certificate of Incorporation in order to permit


                                       22





the  Company  to  effect,  at any time prior to June 30,  1999  without  further
stockholder  approval, a stock combination (reverse split) pursuant to which the
Company's  outstanding  shares of Class A Common  Stock and Class B Common Stock
would be  exchanged  for new  shares of Class A Common  Stock and Class B Common
Stock,  respectively,  in an  exchange  ratio  to be  approved  by the  Board of
Directors,  ranging from one newly issued share for each four outstanding shares
to one  newly  issued  share  for  each  eight  outstanding  shares  by  vote of
33,637,605  shares in favor and 3,096,323  shares  against,  with 139,256 shares
abstaining. As a result of the Company's repurchase of all remaining outstanding
5% Convertible  Debentures,  the second proposal  scheduled for consideration at
such stockholders meeting (to approve the issuance of more than 4,000,000 shares
of Class A Common Stock upon conversion of such debentures)  became moot and was
not considered by stockholders.

                                     PART II

Item 5.           Market for Registrant's Common Stock and Related Security 
- - ------            ---------------------------------------------------------
                  Holder Matters
                  --------------

         ABS'  Class A Common  Stock  ("Common  Stock")  is traded on the Nasdaq
National  Market tier of the Nasdaq Stock Market under the trading symbol MABXA.
The  following  table  sets  forth the high and low  closing  bid prices for the
Company's Common Stock for the periods indicated, as reported by Nasdaq, without
retail mark-ups, mark-downs or commissions.


Fiscal Years 
- - ------------  
                      High                  Low
1998                  ----                  ---
- - ----

First Quarter        $2  3/8             $ 1  17/32

Second Quarter        2                       31/32

Third Quarter         1  3/16                 13/32

Fourth Quarter        1 23/32                  5/32

1997
- - ----

First Quarter        $6                  $ 3    3/8

Second Quarter        3 15/16              2    1/8

Third Quarter         3 15/16              2  15/16

Fourth Quarter        3  3/4               1    1/2



                                       23





         There were  approximately  694 holders of record of Common  Stock as of
March 19, 1999 (exclusive of  stockholders  whose shares are held in street name
by brokers, depositories and other institutional firms).

         ABS has not paid any cash  dividends  on its  Common  Stock  since  its
inception and does not anticipate paying dividends for the foreseeable future.

         In connection with its Boston,  Massachusetts lease agreement, ABS may,
at its option,  pay a portion of the annual lease obligation with Class A Common
Stock (the "Issued Shares") plus a warrant (the "Warrant") to purchase shares of
Class A Common Stock (the  "Warrant  Shares").  The number of Issued  Shares are
computed  using the average market price of ABS' Class A Common Stock during the
ten days prior to issuance.  The Warrant Shares are to be exercisable at a price
equal to the closing  price of the  underlying  Class A Common Stock on the date
the Warrant is issued and for a period of four years from the date of  issuance.
Pursuant to the lease agreement,  on November 30, 1998, ABS issued 31,250 shares
of Class A Common  Stock  and a Warrant  to  purchase  31,250  shares of Class A
Common Stock at an exercise  price of $1.03 per share.  The purchaser  agreed to
acquire the Issued Shares, the Warrant and the Warrant Shares for investment and
not with a view to the distribution of such securities. In connection therewith,
ABS has granted the purchaser  certain  rights to cause the Warrant Shares to be
registered  under  the Act at the  Company's  expense.  ABS  believes  that  the
exemption from registration afforded by Section 4(2) of the Act is applicable to
the issuance of such securities.

                                       24





Item 6.           Selected Financial Data
- - ------            -----------------------

         The following  selected  financial data for the periods  indicated have
been derived from the consolidated  financial  statements of the Company audited
by Arthur Andersen LLP, independent public accountants.  This information should
be read in conjunction with the related  financial  statements and notes thereto
and management's  discussion and analysis of financial conditions and results of
operations included elsewhere in this report.



                                             For the Year Ended December 31,
                                -----------------------------------------------------------------------

                                 1998           1997           1996            1995                1994
                                 ----           ----           ----            ----                ----
                                                                                                
Operating Results
Revenues:
   Sales                      $1,197,000         $150,000          -             -                  -
   Royalties/License               -                 -             -          $100,000              -
   Collaborative Agreements        -               $9,000      $54,000         $27,000              -
                                                               
Net Loss                     ($7,548,000)     ($7,147,000) ($7,700,000)    ($5,607,000)       ($7,431,000)
Net Loss Per Share                                                                                          
   Basic and Diluted               ($.29)           ($.35)       ($.45)          ($.39)             ($.52)
Weighted Average Shares       25,740,000       20,223,000   17,209,000      14,455,000         14,399,000





                                       As of December 31,
- - -----------------------------------------------------------------------------------------

Balance Sheet           1998         1997          1996           1995            1994
- - -------------           ----         ----          ----           ----            ----
               
                                                                    
Working Capital       $2,947,000     $4,761,000   $13,697,000     $9,485,000     $7,055,000
Total Assets          $6,514,000     $9,388,000   $16,473,000    $12,521,000     $8,964,000
Long-Term Debt           $56,000         $8,000   $10,319,000     $7,865,000         -

Total Liabilities       $918,000     $2,705,000   $10,931,000     $8,376,000       $408,000
Accumulated Deficit ($56,963,000)  ($49,415,000) ($42,268,000)  ($34,568,000)  ($28,961,000)



ABS has not paid any cash dividends on its Common Stock since its inception.

                                       25





Item 7.           Management's Discussion and Analysis of Financial Condition 
- - ------            --------------------------------------------------------------
                  and Results of Operations
                  -------------------------

         The following  discussion and analysis provides  information which ABS'
management  believes is  relevant  to an  assessment  and  understanding  of the
Company's results of operations and financial condition.  This discussion should
be read in  conjunction  with the  consolidated  financial  statements and notes
appearing elsewhere herein.

Liquidity and Capital Resources

         ABS, a  development  stage  company  incorporated  in  September  1983,
launched two  commercial  products ( TpP(TM),  ABS' Thrombus  Precursor  Protein
diagnostic test, and FiF(TM), ABS' Functional Intact Fibrinogen diagnostic test)
in the fourth quarter of 1997.  Although to date has not derived any significant
revenues  from the sale of  these  products.  On April  23,  1998,  the  Company
acquired Stellar Bio Systems, Inc. ("Stellar") a manufacturer and distributor of
in vitro  diagnostic  products and research  reagents.  Reagents are  individual
components of diagnostic  products,  such as antibodies,  calibrators  and serum
used in the biotechnology  industry. The purchase price was $120,000 in cash and
$700,000  in Class A Common  Stock  (398,406  shares were  issued),  plus future
contingent  payments of  $650,000 in Class A Common  Stock to be paid over three
years based upon future sales  levels of Stellar,  with the Class A Common Stock
to be valued at its market value on the acquisition agreement anniversary dates.

         The Company has funded its research and development  activities to date
principally  from (i) the sale of  Common  Stock  issued  in an  initial  public
offering,  (ii) the exercise of the Class A and Class B Warrants  issued in ABS'
initial public offering,  (iii) private placements of Convertible Debentures and
Class  A  Common  Stock,  (iv)  the  exercise  of  stock  options,  (v)  capital
contributions  to ABS by it's  Chairman of the Board,  (vi) initial  license fee
payments and, (vii) the income on funds invested in bank deposits, United States
Treasury bills and notes and other high grade liquid investments.

         ABS expects to continue to incur  substantial  expenditures in research
and product  development in the neurobiology  program and in the development and
commercialization  of a point of care format for TpP(TM),  as well as in the FDA
approval process relating to additional  510(k) filings for TpP(TM),  FiF(TM)and
Stellar's products.

         As of December 31,1998, ABS had working capital of $2,947,000, compared
to $4,761,000 at December 31,1997. ABS' management believes that current working
capital along with the projected  receipt of licensing fees and/or  financing or
other  contingency  plans,  will be  sufficient  to fund its planned  activities
through the first quarter of 2000.  Currently,  product development plans of ABS
include  licensing  TpP(TM)  and the  neurobiology  compound  ABS 103,  to large
pharmaceutical  companies to provide additional funding and clinical  expertise,
to perform  additional  testing  necessary to obtain  regulatory  approvals,  to
provide  manufacturing  expertise  and to market  ABS'  products.  Without  such
licensing or co-marketing  arrangements,  additional  sources of funding will be
required to finance ABS.

         The  Company's  cash and cash  equivalents  decreased by  $4,074,000 to
$3,047,000  during fiscal year 1998,  primarily  because cash used in operations
($5,181,000)  and  investing  activities  ($389,000)  exceeded net proceeds from
financing activities ($1,496,000). Net cash of $5,181,000 was used in operations
to fund the

                                       26





Company's cash loss from  operations of $5,288,000  (net of non cash expenses of
$497,000 for depreciation and amortization, $306,000 incurred in connection with
the issuance of stock and warrants,  $317,000 for debt discount amortization and
a $1,140,000  loss related to the  repurchase  of the  Company's 5%  Convertible
Debentures).  Cash of  $107,000  was  provided  by changes in  operating  assets
primarily  as a result of an increase in accounts  payable and accrued  expenses
($265,000),  partially  offset  by  higher  accounts  receivable  ($69,000)  and
inventory  ($91,000)  due the  increased  operations.  Cash  used  in  investing
activities was for purchase of equipment  ($41,000),  the acquisition of Stellar
Bio Systems  ($119,000)  and  capitalized  patent  costs  ($229,000).  Financing
activities  provided  $1,496,000.  In May 1998,  the Company raised $3.7 million
(net of issuance  costs) from the  issuance of 5%  Convertible  Debentures.  The
debentures  were  convertible  into Class A Common  Stock at a  discount  to the
market  price.  The  Company's  stock price  subsequently  decreased  to $.16 on
October  23,  1998,  when the Company  raised an  additional  $2.7  million in a
private  placement of Class A Common Stock at $.25 per share (a premium over the
market).  The  proceeds  of this  private  placement,  plus an  additional  $1.1
million,  was used to repurchase the  outstanding  debentures in order to reduce
the level of potential dilution of the Common Stock.

         At December 31,  1998,  ABS had net  operating  loss  carryforwards  of
approximately  $55,045,000  for  income tax  purposes.  The net  operating  loss
carryforwards will expire in varying amounts through 2013. In addition,  ABS has
approximately  $1,150,000 of available  research and  development tax credits to
offset  future  taxes.  These credits  expire  through 2012. In accordance  with
Statement of  Financial  Accounting  Standards  No. 109  "Accounting  for Income
Taxes," ABS has recorded a valuation  allowance of  $56,195,000 to fully reserve
for the  deferred tax benefit  attributable  to its net  operating  loss and tax
credit carryforwards due to the uncertainty as to their ultimate realizability.

         In accordance with certain  provisions of the Tax Reform Act of 1986, a
change in ownership of a corporation of greater than 50 percentage points within
a three-year period places an annual limitation on the corporation's  ability to
utilize its  existing  net  operating  loss  carryforwards,  investment  tax and
research and development credit  carryforwards  (collectively "tax attributes").
Such a change in ownership was deemed to have  occurred in connection  with ABS'
1990  initial  public  offering  at which time ABS' tax  attributes  amounted to
approximately $4.9 million. The annual limitation of the utilization of such tax
attributes is approximately $560,000. To the extent the annual limitation is not
utilized, it may be carried forward for utilization in future years. At December
31, 1998, ABS has approximately  $4,830,000 of the $4.9 million of net operating
losses that are no longer subject to this limitation.

Results of Operations

         ABS has not  generated  any  significant  revenues from the sale of any
products.  Revenues from inception  through  December 31, 1998 of $2,649,000 are
attributable to nonrefundable  initial license fees and  collaborative  research
agreements,  since the fourth  quarter of 1997,  sales of TpP and FiF and, since
April 1998, sales of Stellar products.  As a result of ABS' substantial start-up
expenses and minimal revenues,  ABS had an accumulated deficit of $56,963,000 as
of December 31, 1998. ABS' research and development  expenses are anticipated to
be substantial for the  foreseeable  future and ABS expects to continue to incur
significant operating losses.

         ABS initiated its marketing  efforts for TpP and FiF in the  microtiter
plate format,  in November  1997. ABS made initial sales of TpP kits in 1997 and
continued   sales  of  TpP  kits  to  European,   Japanese  and  United   States
distributors.  ABS' efforts in 1999 will be directed toward  increasing sales of
TpP and FiF in the EIA

                                       27





format by adding  distributors,  completing the development of the point of care
(POC) format of TpP,  entering into license  agreements  for the POC TpP and the
neuro compound,  ABS 103,  continuing  clinical  studies with TpP for additional
indications  and expanding  Stellar's  product base through FDA 510K filings and
product  acquisitions.  ABS has  licenses  for TpP with  Abbott and Roche in the
automated instrument format and a license for 45J with Yamanouchi.  ABS does not
have any performance obligations under these agreements.  In order to market the
product, the licensees will be required to file for the appropriate governmental
clearances.  ABS has a sufficient  quantity of  antibodies  to initially  supply
these  licensees.  Management  believes  that the POC format will  increase  the
commercial potential of the TpP test and encourage the licensees to complete the
commercialization process under these agreements.

Comparison of Years Ended December 31, 1998 and 1997

         ABS' net loss was  $7,548,000  for the year  ended  December  31,  1998
compared to $7,147,000  for the year ended  December 31, 1997.  The increase was
primarily  the result of an  extraordinary  charge for the early  retirement  of
debentures  of $1,140,000  discussed  above.  The loss before the  extraordinary
charge  decreased  by  $739,000.  This  decrease  is due to  Stellar  operations
(included  from  April 23,  1998),  continued  sales of TpP and FiF and  reduced
research and development  costs offset, in part, by increased  selling,  general
and administrative and the facility consolidation costs.

         Sales during 1998 of $1,197,000 include sales of Stellar products since
the date of  acquisition  in late April 1998 and sales of TpP and FiF. TpP sales
were  comparable to the 1997 sales of $150,000.  Stellar product sales increased
over 1997 (prior to its acquisition and  accordingly,  prior to the inclusion of
it's results in the Company's consolidated results of operations).

         Cost of sales  increased  by $433,000  during the twelve  months  ended
December  31, 1998  compared to the twelve  months  ended  December 31, 1997 due
primarily to increased  sales.  Cost of sales as a percentage of sales was 38.8%
in 1998 and 21.3% in 1997. The percentage  increase was due to Stellar  products
having a higher cost, plus an increase in the cost of TpP and FiF kits.

         Research and development costs decreased  $1,081,000 from $3,242,000 to
$2,161,000 in the 1998 period.  The decrease was primarily due to the absence of
costs incurred during the first six months of 1997 relating to the relocation of
ABS' research  laboratories from South Bend,  Indiana to Boston,  Massachusetts.
The cost of relocation included  severance,  relocation and moving costs as well
as duplicate  facility costs. The decrease was also  attributable to a reduction
in personnel  (FDA filing  related) and  consulting  costs  offset,  in part, by
increases  in the  cost  of TpP  clinical  studies  and the  TpP  point  of care
development costs.

         Selling, general and administrative expenses increased by $765,000 from
$3,667,000 in the 1997 period to  $4,432,000 in the 1998 period,  primarily as a
result of the inclusion of Stellar,  selling expenses  relating to the marketing
and promotion of TpP and increased  personnel  cost relating to marketing of TpP
and business development.

         Facility consolidation cost of $252,000 includes severance costs, lease
termination  expenses  and a write-down of leasehold  improvements.  In order to
conserve   resources  and  operate  more  efficiently  with  less   duplication,
management decided to close the Boston facility and consolidate the research and
development and antigen free mouse colony at the Stellar facilities in Columbia,
Maryland. The process of closing the Boston facility is expected to be completed
in the first half of 1999.

                                       28





         Interest expense was $301,000 lower in 1998 than in 1997 due to a lower
average amount of debentures being outstanding during the year, with those being
outstanding bearing a lower average interest rate.

         Interest  income,  net, was $230,000  lower in 1998 than in 1997 due to
lower average cash balances.

Comparison of Years Ended December 31, 1997 and 1996

         ABS' net loss was  $7,147,000  for the year  ended  December  31,  1997
compared to  $7,700,000  for the year ended  December 31, 1996.  The decrease of
$553,000 was primarily due to a decrease in interest  expense of $1,035,000  and
increase  in cost and  expenses of $598,000  and  product  revenue of  $150,000.
Revenue in fiscal year 1997 was  primarily  from the sale of TpP(TM)  diagnostic
kits.

         Research and development expenses increased $539,000 from $2,703,000 in
the 1996  fiscal  year to  $3,242,000  in the 1997  fiscal  year as a result  of
relocating  ABS'  research  laboratories  from  South  Bend,  Indiana  to Boston
Massachusetts  ( including  severance,  relocation and moving costs),  increased
rent  costs   offset  in  part  by  a  reduction  in  payments  for  research  /
collaborative projects.

         General and  administrative  expenses increased $27,000 from $3,640,000
in the 1996 period to  $3,667,000  in the 1997  period as a result of  increased
personnel as to investor  relations and travel and meeting costs relating to the
launch of the TpP, offset by a reduction in consulting costs, primarily relating
to investor and public relations.

         Interest  expenses  decreased by $1,035,000 from $1,950,000 in the 1996
period to $915,000 in the 1997 period, as a result of $1,351,000 amortization of
debt discount and $431,000 of debt issuance costs included in the 1996 period as
compared to $492,000  amortization of debt discount included in the 1997 period.
During fiscal year 1997,  $8,600,000 of Convertible  Debentures plus $161,000 of
accrual interest were converted into 2,995,006 shares of Class A Common Stock.

Year 2000

         State of  Readiness:  The  Year  2000  problem  is the  result  of some
computer  programs being written using two-digits rather than four to define the
applicable   year.   Therefore,   it  is  possible   that   programs  that  have
time-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000,  which could result in a system  failure or  miscalculation.
ABS has been  assessing  the  impact of the Year 2000  issue on its  information
systems.  ABS uses software developed and supported by third parties for various
applications,  including financial reporting,  sales,  purchasing and inventory,
which will require upgrade.

         In  addition,  ABS may face some risk to the extent that  suppliers  of
products and others with whom ABS has a material business  relationship will not
be Year 2000 compliant.  Accordingly,  ABS has initiated  formal  communications
with significant suppliers and third parties in order to determine the extent to
which ABS may be vulnerable to the failure of these  suppliers and third parties
to  remediate  their own Year 2000  issues.  ABS will  review and  evaluate  the
responses it receives and  periodically  monitor the progress of these suppliers
and third parties in addressing their own Year 2000 issues.  However, ABS is not
dependent  upon any one  supplier  and believes  that it could  readily  replace
non-compliant suppliers, should that become necessary.

                                       29






         ABS has reviewed its  non-information  technology  systems to determine
the extent of any changes  that may be necessary  and  currently  believes  that
minimal changes are necessary for Year 2000 compliance.

         Costs:  The  estimated  cost of the Year 2000 project is  approximately
$50,000.  This  cost  estimate  may  change as ABS  progresses  in its Year 2000
project, obtains additional information and conducts further testing.

         Risks: ABS is not aware, at this time, of any Year 2000  non-compliance
that  will not be cured by the Year 2000 and that will  materially  affect  ABS.
However some risks that ABS faces include:  the failure of internal  information
systems,  a slow down in  receipt  of  manufactured  product  and in  customers'
ability to make payments.

         Contingency Plans: As an additional  precaution,  ABS is in the process
of developing  contingency plans to mitigate the possible disruption in business
operations that could result.  These plans, which are dependent in large part on
the  responses  ABS  receives  from third  parties  with whom ABS has a business
relationship,  are expected to be completed  during the first half of 1999. Once
developed,  contingency  plans and related cost  estimates  will be  continually
refined as additional information becomes available.


Item 7 a.     Quantitative and Qualitative Disclosures about Market Risk
- - --------      ----------------------------------------------------------    

         The Company's  available cash is invested in highly liquid  investments
(primarily  United States Treasury Bills) which have a maturity,  at the time of
purchase,  of less than three months.  ABS does not have  operations  subject to
risks of foreign  currency  fluctuations,  nor does it use derivative  financial
instruments  in its  operations.  ABS does not have  exposure  to  market  risks
associated  with changes in interest  rates as it has no variable  interest rate
debt  outstanding.  ABS does not believe it has any other  material  exposure to
market risks associated with interest rates.

Item 8.   Financial Statements and Supplementary Data
- - ------    --------------------------------------------

         The response to this item is  submitted  in a separate  section of this
report, starting on page F-1.


                                       30





Item 9.   Disagreements on Accounting and Financial Disclosure
- - ------    ----------------------------------------------------

         Not applicable.
                                    PART III
                                    --------

         The information called for by Part III (Items 10, 11, 12 and 13 of Form
10-K) is  incorporated  herein by  reference to such  information  which will be
contained in ABS' Proxy  Statement to be filed pursuant to Regulation 14A of the
Securities  Exchange  Act of 1934 with  respect to ABS' 1999  Annual  Meeting of
Stockholders.

                                     PART IV
                                     -------


Item 14.  Exhibits, Financial Statements and Reports on Form 8-K
- - -------   ------------------------------------------------------

         (a)  1. and 2.  Financial Statements and Financial Statement Schedules

         The  following  consolidated  financial  statements  of ABS are annexed
hereto immediately following the signature page of this Report.

                                                                Page
                                                                ----

         Index to Consolidated Financial Statements              F -1

         Report of Independent Public Accountants                F-2

         Consolidated Balance Sheets                             F-3

         Consolidated Statements of Operations                   F-4

         Consolidated Statements of Cash Flows                   F-5

         Consolidated Statements of Stockholders' Equity         F-6  -  F-8

         Notes to Consolidated Financial Statements              F-9  -  F-26

         Information  required by schedules  called for under  Regulation S-X is
either not  applicable or the  information  required  therein is included in the
consolidated financial statements or notes thereto.


                                       31





                                    Exhibits
Exhibit No.        Description
- - ----------         -----------

3.1               Restated  Certificate of  Incorporation  of ABS, as filed with
                  the   Secretary  of  State  of  Delaware  on  July  30,  1996.
                  Incorporated  herein  by  reference  to  Exhibit  4.01 to ABS'
                  Registration Statement on Form S-8, File No. 333-09473.

3.2               Amended and Restated  By-Laws of ABS.  Incorporated  herein by
                  reference  to Exhibit 4.02 to ABS'  Registration  Statement on
                  Form S-8, File No. 333-09473.

4.1(a)            Form of ABS' 8%  Convertible  Debentures due October 13, 1998.
                  Incorporated  herein  by  reference  to  Exhibit  4.1 to  ABS'
                  Current  Report on Form 8-K dated  October  12,  1995 (date of
                  earliest event reported), File No. 0-19041.

4.1(b)            Form of the Company's 7% Convertible  Debentures due September
                  30, 1998.  Incorporated herein by reference to Exhibit 4.01 to
                  the Company's  Current Report on Form 8-K dated  September 30,
                  1996 (date of earliest event reported), File No. 0-19041.

4.1(c)(1)         Form of ABS' 5%  Convertible  Debentures due May 20, 2001 (the
                  "5% Debentures").  Incorporated herein by reference to Exhibit
                  4.1 to ABS'  Current  Report on Form 8-K  dated  May 20,  1998
                  (date of earliest event reported), File No. 0-19041.

4.1(c)(2)        Form of Securities Subscription Agreement between ABS and each
                  of the purchasers of the 5% Debentures. Incorporated herein by
                  reference to Exhibit  99.1 to ABS' Current  Report on Form 8-K
                  dated May 20, 1998 (date of earliest event reported), File No.
                  0-19041.

4.1(c)(3)         Registration  Rights  Agreement  between  ABS and  each of the
                  purchasers  of  the  5%  Debentures.  Incorporated  herein  by
                  reference to Exhibit  99.2 to ABS' Current  Report on Form 8-K
                  dated May 20, 1998 (date of earliest event reported), File No.
                  0-19041.

4.1(c)(4)         Form  of  ABS'  Series  WA  Warrant  issued  to  each  of  the
                  purchasers  of  the  5%  Debentures.  Incorporated  herein  by
                  reference to Exhibit  99.3(a) to ABS'  Current  Report on Form
                  8-K dated May 20, 1998 (date of earliest event reported), File
                  No. 0-19041.

4.1(c)(5)         Form  of  ABS'  Series  WB  Warrant  issued  to  each  of  the
                  purchasers  of  the  5%  Debentures.  Incorporated  herein  by
                  reference to Exhibit  99.3(b) to ABS'  Current  Report on Form
                  8-K dated May 20, 1998 (date of earliest event reported), File
                  No. 0-19041.

4.1(c)(6)         Form  of  ABS'  Series  WC  Warrant  issued  to  each  of  the
                  purchasers  of  the  5%  Debentures.  Incorporated  herein  by
                  reference  to Exhibit 4.1 to ABS'  Current  Report on Form 8-K
                  dated May 20, 1998 (date of earliest event reported), File No.
                  0-19041.

4.1(d)            Form of  Purchase  and  Investment  Agreement  executed by the
                  Company  and   several   investors   on  October   27,   1998.
                  Incorporated  by  reference  to  Exhibit  99 to the  Company's
                  Registration  Statement  on Form S-3,  file number  333-69735,
                  filed with the Commission on December 24, 1998.

                                       32



4.1(e)*           Form of  Warrant  issued  to  several  individuals  under  the
                  Company's  Financial  Advisory  Agreement with M.H. Meyerson &
                  Co., Inc., dated as of August 13, 1998 and schedule of holders
                  thereof.

10.1(a) +         Employment  Agreement  dated  October 1, 1996  between ABS and
                  Ellena M. Byrne.  Incorporated  herein by reference to Exhibit
                  10.1(b) to ABS's Form 10-K/A  dated April 30,  1997,  File No.
                  0-19041.

10.1(b)+*         Employment  Agreement  dated  November 3, 1998 between ABS and
                  Mr. John S. North.

10.1(c)+          Employment  Agreement  dated November 12, 1997 between ABS and
                  Dr. Emer Leahy.  Incorporated  by reference to Exhibit 10.1(c)
                  to ABS'  Annual  Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (File No. 0-19041).

10.2(a)+          ABS' Stock Option  Plan,  as amended.  Incorporated  herein by
                  reference  to Exhibit 28.1 to ABS'  Registration  Statement on
                  Form S-8, File No. 33-51240.

10.2(b)+          ABS'   1993   Non-Employee   Director   Stock   Option   Plan.
                  Incorporated  herein by  reference  to  Exhibit  99.01 to ABS'
                  Registration Statement on Form S-8, File No. 33-65416.

10.2(c)+          The Company's 1996  Stock Option  Plan. Incorporated herein by
                  reference to Exhibit A to the Company's  Proxy Statement dated
                  April 29,  1996 used in  connection  with the  Company's  1996
                  Annual Meeting of Stockholders, File No. 0-19041.

10.3              Exclusive License Agreement dated January 24, 1992 between ABS
                  and Yamanouchi Pharmaceutical Co., Ltd. Incorporated herein by
                  reference to Exhibit 10.29 to ABS' Current  Report on Form 8-K
                  dated January 24, 1992 (date of earliest event reported), File
                  No. 0- 19041.

10.4              Warrant dated  October 25, 1995 issued to Swartz  Investments,
                  Inc. Incorporated herein by reference to Exhibit 10.13 to ABS'
                  Current  Report on Form 8-K dated  October  12,  1995 (date of
                  earliest event reported), File No. 0-19041.

21*               List of Subsidiaries.

24*               Consent of Independent Public Accountants.

27*               Financial Data Schedule.
- - --------------------------------------------------------------------------------

 *                Filed  herewith.   All  other  exhibits  are  incorporated  by
                  reference to the document following the description thereof.

 +                Management contract or compensatory plan.

 (b)              Reports on Form 8-K
                  None

                                       33





                                   Signatures
                                   ----------

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                              AMERICAN BIOGENETIC SCIENCES, INC.
                                                            (Registrant)

         March 25, 1999 
- - -------------------------------
          (Date)                              By /s/ Josef C. Schoell   
                                              ----------------------------------
                                              Josef C. Schoell
                                              Vice President, Finance
                                             (Principal Financial and
                                              Accounting Officer)

              Pursuant to the  requirements  of the  Securities  Exchange Act of
1934,  this report has been signed below by the  following  persons on behalf of
the Registrant and in the capacities and on the dates indicated.



       March 23, 1999                 /s/ Alfred J. Roach    
       --------------                 ---------------------------------------   
              (Date)                  Alfred J. Roach, Chairman of the
                                      Board of Directors


       March 25, 1999                 /s/ Josef C. Schoell   
        --------------                 ---------------------------------------  
              (Date)                  Josef C. Schoell
                                      Vice President, Finance



       March 25, 1999                 /s/ John S. North  
        --------------                 ---------------------------------------  
              (Date)                  John S. North
                                      President and Chief Executive Officer


                                       34





                                   Signatures
                                   ----------



       March 25, 1999                  /s/ Timothy J. Roach    
       --------------                 --------------------------------------- 
              (Date)                   Timothy J. Roach, Secretary,
                                       Treasurer, and Director



       March 25, 1999                  /s/ Ellena M. Byrne    
       --------------                 --------------------------------------- 
              (Date)                   Ellena M. Byrne, Executive
                                       Vice President and Director



       March 25, 1999                  /s/ Joseph C. Hogan 
       --------------                 --------------------------------------- 
          (Date)                       Joseph C. Hogan, Director




       March 25, 1999                   /s/ William G. Sharwell
       --------------                 --------------------------------------- 
              (Date)                   William G. Sharwell, Director



       March 25, 1999                  /s/ Gustav Victor Rudolf Born          
       --------------                 ---------------------------------------
              (Date)                   Gustav Victor Rudolf Born, Director



       March 25, 1999                  /s/ Glenna M. Crooks 
       --------------                 ---------------------------------------
              (Date)                   Glenna M. Crooks, Director


                                       35



                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY

                          (a development stage company)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                      Page
                                                                      ----

Report of Independent Public Accountants                              F-2

Consolidated Balance Sheets                                           F-3

Consolidated Statements of Operations                                 F-4

Consolidated Statements of Cash Flows                                 F-5

Consolidated Statements of Stockholders' Equity                       F-6 - F-8

Notes to Consolidated Financial Statements                            F-9 - F-26



         Information  required by schedules  called for under  Regulation S-X is
either not  applicable or the  information  required  therein is included in the
consolidated financial statements or notes thereto.

                                      F - 1





                    Report of Independent Public Accountants


To American Biogenetic Sciences, Inc.:

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
American Biogenetic  Sciences,  Inc. (a Delaware  corporation in the development
stage) and  subsidiaries  as of  December  31,  1998 and 1997,  and the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1998 and for the period
from  inception  (September  1, 1983) to  December  31,  1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the financial position of American Biogenetic
Sciences,  Inc.  and  subsidiaries  as of December  31,  1998 and 1997,  and the
results of their  operations and their cash flows for each of the three years in
the period ended December 31, 1998 and for the period from inception to December
31, 1998 in conformity with generally accepted accounting principles.


                                                      Arthur Andersen LLP


Melville, New York
March 22, 1999


                                      F - 2




                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
                          (a development stage company)

                           CONSOLIDATED BALANCE SHEETS                                  December 31,
                                                                          ----------------------------------------
                                  Assets                                        1998                     1997
                                                                          ----------------          --------------

Current Assets:
                                                                                                    
  Cash and cash equivalents                                                     $3,047,000              $7,121,000
  Accounts receivable                                                              177,000                       -
  Inventory                                                                        545,000                 296,000
  Other current assets                                                              40,000                  41,000
                                                                           ---------------------------------------
    Total current assets                                                         3,809,000               7,458,000
                                                                           ---------------------------------------

Fixed assets, net                                                                  631,000                 511,000

Patent costs, net of accumulated amortization
  of $390,000 and $292,000, respectively                                         1,468,000               1,337,000

Debt issuance costs, net of accumulated amortization
  of $0 and $520,000, respectively                                                       -                  59,000

Intangible assets, net                                                             580,000                       -

Other assets                                                                        26,000                  23,000
                                                                           ---------------------------------------
                                                                                $6,514,000              $9,388,000
                                                                           ---------------------------------------

                   Liabilities and Stockholders' Equity

Current Liabilities:
  Accounts payable and accrued expenses                                           $797,000                $494,000
  Current portion of capital lease obligation                                        8,000                   3,000
  Current portion of notes payable                                                  57,000                       -
  7% convertible debentures                                                              -               1,350,000
  8% convertible debentures                                                              -                 850,000
                                                                           ---------------------------------------
    Total current liabilities                                                      862,000               2,697,000
                                                                           ---------------------------------------

Long Term Liabilities:
  Notes Payable, less current portion                                               56,000                       -

  Long-term portion of capital lease obligation                                          -                   8,000
                                                                           ---------------------------------------
    Total liabilities                                                              918,000               2,705,000
                                                                           ---------------------------------------

Commitments (Notes 1, 5, 8 and 10)

Stockholders' Equity:
  Class A common stock, par value $.001 per share; 
    50,000,000 shares authorized; 35,559,556 and 19,341,617
    shares issued and outstanding, respectively                                     36,000                  19,000

  Class B common stock, par value $.001 per share; 
    3,000,000 shares authorized; 3,000,000 and 1,725,500
    shares issued and outstanding, respectively                                      3,000                   2,000

  Additional paid-in capital                                                    62,520,000              56,077,000
  Deficit accumulated during the development stage                             (56,963,000)            (49,415,000)
                                                                           ---------------------------------------
    Total stockholders' equity                                                   5,596,000               6,683,000
                                                                           ---------------------------------------
                                                                                $6,514,000              $9,388,000
                                                                           ---------------------------------------


                   The accompanying notes are an integral part
                      of these consolidated balance sheets.
                                      F-3



                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS                                                  For the Period
                                                                                                             From Inception
                                                                                                             (September 1,
                                                        Year Ended December 31,                              1983) Through
                                      -------------------------------------------------------------           December 31,
                                        1998                    1997                    1996                     1998
                                      ----------------     ---------------    ---------------------   ------------------
                                                                                                    
Revenues:
  Sales                                     $1,197,000            $150,000                 $      -           $1,347,000
  Royalties / license fees                           -                   -                        -            1,000,000
  Collaborative agreements                           -               9,000                   54,000              302,000
                                      ----------------------------------------------------------------------------------
                                             1,197,000             159,000                   54,000            2,649,000
Costs and expenses:
  Cost of sales                                465,000              32,000                        -              497,000
  Research and development                   2,161,000           3,242,000                2,703,000           28,806,000
  Selling, general and administrative        4,432,000           3,667,000                3,640,000           29,093,000
  Facility consolidation cost                  252,000                   -                        -              252,000
                                      ----------------------------------------------------------------------------------
Loss from operations                       (6,113,000)         (6,782,000)              (6,289,000)         (55,999,000)
                                      ----------------------------------------------------------------------------------
Other Income (Expense):
  Interest expense                           (614,000)           (915,000)              (1,950,000)          (4,356,000)
  Net gain on sale of fixed assets                   -               1,000                        -                7,000
  Investment income, net                       319,000             549,000                  539,000            4,525,000
                                      ----------------------------------------------------------------------------------
Loss before extraordinary charge           (6,408,000)         (7,147,000)              (7,700,000)         (55,823,000)

Extraordinary charge for early
  retirement of debentures, net            (1,140,000)                   -                        -          (1,140,000)
                                      ----------------------------------------------------------------------------------
Net loss                                  ($7,548,000)        ($7,147,000)             ($7,700,000)        ($56,963,000)
                                      ----------------------------------------------------------------------------------
Per Share Information (Note 2):
Basic and Diluted loss per share

  Loss before extraordinary charge             ($0.25)             ($0.35)                  ($0.45)
                                      -------------------------------------------------------------
  Extraordinary charge for early
    retirement of debentures, net              ($0.04)                   -                        -
                                      -------------------------------------------------------------
  Net loss                                     ($0.29)             ($0.35)                  ($0.45)
                                      -------------------------------------------------------------
Common shares used in computing
  per share amounts:
       Basic and Diluted                    25,740,000          20,223,000               17,209,000
                                      -------------------------------------------------------------

                  The accompanying notes are an integral part
                       of these consolidated statements.
                                      F - 4



                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                           For the Period
                                                                                                                      From Inception
                                                                                                                      (September 1,
                                                                                                                         1983)
                                                                                 Year Ended December 31,                Through
                                                                       ------------------------------------------      December 31,
                                                                           1998          1997            1996              1998
                                                                        -----------   ------------     -----------      ------------
                                                                                                                 
Cash Flows From Operating Activities:
Net income (loss)                                                        ($7,548,000)  ($7,147,000)     ($7,700,000)  ($56,963,000)
Adjustments to reconcile net (loss) to net cash
 used in operating activities:
   Depreciation and amortization                                             497,000        531,000         541,000       2,722,000
   Net (gain) loss on sale of fixed assets                                         -        (1,000)               -         (7,000)
   Net (gain) loss on sale of marketable securities                                -              -               -       (217,000)
   Other non-cash expenses accrued primarily for stocks and warrants         306,000        299,000         285,000       2,042,000
   Amortization of debt discount included in interest expense                317,000        492,000       1,351,000       2,160,000
   Extraordinary loss on repurchase of debt                                1,140,000              -               -       1,140,000
   Write-off of patent costs                                                       -              -               -          93,000
 Changes in operating assets and liabilities:
   (Increase) decrease in accounts receivable                               (69,000)              -               -        (69,000)
   (Increase) decrease in inventory                                         (91,000)      (296,000)               -       (387,000)
   (Increase) decrease in other current assets                                 1,000        487,000       (365,000)        (40,000)
   (Increase) decrease in other assets                                         1,000        (2,000)           2,000          73,000

   Increase (decrease) in accounts payable and accrued expenses              265,000         46,000         267,000         976,000
   Increase in interest payable to stockholder                                     -              -               -         112,000
                                                                         ----------------------------------------------------------

          Net cash used in operating activities                          (5,181,000)    (5,591,000)     (5,619,000)    (48,365,000)
                                                                         ----------------------------------------------------------
Cash Flows From Investing Activities:
  Capital expenditures                                                      (41,000)      (222,000)       (158,000)     (2,043,000)
  Proceeds from sale of fixed assets                                               -          2,000               -          18,000
  Payments for patent costs and other assets                               (229,000)      (434,000)       (275,000)     (1,928,000)
  Business acquisition, net of stock issued and cash acquired              (119,000)              -               -       (119,000)
  Proceeds from maturity and sale of marketable securities                         -      5,817,000      11,098,000      67,549,000
  Purchases of marketable securities                                               -    (2,796,000)     (9,722,000)    (67,332,000)
                                                                         ----------------------------------------------------------

          Net cash provided by (used in) investing activities              (389,000)      2,367,000         943,000     (3,855,000)
                                                                         ----------------------------------------------------------
Cash Flows From Financing Activities:
  Payments to debentureholders                                           (1,000,000)    (1,246,000)               -     (2,246,000)
  Proceeds from issuance of common stock, net                              3,182,000        834,000       1,439,000      39,484,000
  Proceeds from issuance of 5% convertible debentures, net                 3,727,000              -               -       3,727,000
  Proceeds from issuance of 7% convertible debentures, net                         -              -       8,565,000       8,565,000
  Proceeds from issuance of 8% convertible debentures, net                         -              -               -       7,790,000
  Principal payments under capital lease obligation and notes payable       (61,000)        (3,000)         (4,000)        (70,000)
  Redemption of 8% convertible debentures                                  (500,000)              -               -       (500,000)
  Repurchase of 5% convertible debentures                                (3,852,000)              -               -     (3,852,000)
  Capital contributions from chairman                                              -              -               -       1,000,000
  Increase in loans payable to stockholder / affiliates                            -              -               -       2,669,000
  Repayment of loans payable to stockholder / affiliates
   (remainder contributed to capital by the stockholder)                           -              -               -     (1,300,000)
                                                                         -----------------------------------------------------------
          Net cash provided by (used in) financing activities              1,496,000      (415,000)      10,000,000      55,267,000
                                                                         ----------------------------------------------------------

Net Increase (Decrease) in Cash and Cash Equivalents                     (4,074,000)    (3,639,000)       5,324,000       3,047,000

Cash and Cash Equivalents at Beginning of Period                           7,121,000     10,760,000       5,436,000               -
                                                                         -----------------------------------------------------------
Cash and Cash Equivalents at End of Period                                $3,047,000     $7,121,000     $10,760,000      $3,047,000
                                                                         ----------------------------------------------------------
Supplemental Disclosure of Non-cash Activities:
  Capital expenditure made under capital lease obligation                          -              -               -         $20,000
                                                                         ----------------------------------------------------------
  Convertible debentures converted into 4,851,618,  2,995,006,
   2,269,755 and 10,470,853 shares of Common Stock, respectively          $1,447,000     $7,155,000      $5,485,000     $14,658,000
                                                                         ----------------------------------------------------------
  Warrants issued to debentureholders and placement agents                   $63,000              -         $45,000        $588,000
                                                                         ----------------------------------------------------------
  Conversion of stockholder loan to paid-in capital                                -              -               -      $1,481,000
                                                                         ----------------------------------------------------------

 The accompanying notes are an integral part of these consolidated statements.
                                      F - 5




                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
                          (a development stage company)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                                                                               Deficit        
                                                       Class A             Class B                            Accumulated
                                            Per        Common Stock        Common Stock           Additional  During the
                                            Share                                                  Paid-in    Development  
                                           Amount      Shares    Dollars   Shares      Dollars  Capital       Stage         Total
                                            -------------------  --------- ---------- --------- ----------- -------------   -------

                                                                                                
BALANCE, AT INCEPTION,  (SEPTEMBER 1,        $         -               $ -          -     $ -        $ -        $    -       $ -
1983)

  Sale of common stock to chairman for cash  .33        78,000           -          -       -     26,000             -       26,000 
  Net (loss) for the period                                  -           -          -       -          -      (25,000)     (25,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1983                              78,000           -          -       -     26,000      (25,000)        1,000
                                                   --------------------------------------------------------------------------------

  Sale of common stock to chairman for cash  .33       193,500           -          -       -     65,000             -       65,000 
  Net (loss) for the period                                  -           -          -       -          -     (242,000)    (242,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1984                             271,500           -          -       -     91,000     (267,000)    (176,000)
                                                   ---------------------------------------------------------------------------------

  Sale of common stock to chairman for cash  .33       276,700           -          -       -     92,000             -       92,000
  Net (loss) for the period                                  -           -          -       -          -     (305,000)    (305,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1985                             548,200       1,000          -       -    183,000     (572,000)    (388,000)
                                                   --------------------------------------------------------------------------------

  Sale of common stock to chairman for cash  .33       404,820           -          -       -    134,000             -      134,000
  Net (loss) for the period                                  -           -          -       -          -     (433,000)    (433,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1986                             953,020       1,000          -       -    317,000   (1,005,000)    (687,000)
                                                   ---------------------------------------------------------------------------------

  Sale of common stock to chairman for cash  .33        48,048          -           -       -     16,000             -       16,000
  Net (loss) for the period                                  -          -           -       -          -     (730,000)    (730,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1987                           1,001,068       1,000          -       -    333,000   (1,735,000)  (1,401,000)
                                                   ---------------------------------------------------------------------------------

  Exchange of common stock for Class B stock       (1,001,068)     (1,000)  1,001,068   1,000          -             -            -
  Sale of Class B stock to chairman for cash .33             -           -  1,998,932   2,000    664,000             -      666,000
  Net (loss) for the period                                  -           -          -       -          -   (1,031,000)  (1,031,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1988                                   -           -  3,000,000   3,000    997,000   (2,766,000)  (1,766,000)
                                                   ---------------------------------------------------------------------------------

  Net (loss) for the period                                  -           -          -       -          -   (1,522,000)  (1,522,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1989                                   -           -  3,000,000   3,000    997,000   (4,288,000)  (3,288,000)
                                                   ---------------------------------------------------------------------------------

  Conversion of loans payable to stockholder into
    additional paid-in capital                               -           -          -       -  1,481,000             -    1,481,000
  Sale of 1,150,000 Units to public consisting of
    3,450,000 shares of Class A common stock and
    warrants (net of $1,198,000 underwrit    2.00    3,450,000       3,000          -       -  5,699,000             -    5,702,000
expenses)
  Conversion of Class B stock into
    Class A stock                                      668,500       1,000  (668,500) (1,000)          -             -            -
  Net (loss) for the period                                  -           -          -       -          -   (2,100,000)   (2,100,000)
                                                   ---------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1990                           4,118,500      $4,000  2,331,500  $2,000 $8,177,000  ($6,388,000)   $1,795,000
                                                   ---------------------------------------------------------------------------------



                                    CONTINUED

                                      F - 6





                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
                          (a development stage company)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                                                                          Deficit
                                                     Class A              Class B                         Accumulated
                                         Per      Common Stock            Common Stock      Additional    During the
                                        Share                                               Paid-in       Development   
                                        Amount     Shares        Dollars   Shares  Dollars  Capital       Stage              Total
                                       --------  --------------  -------  -------- -------  ---------    -----------       ---------

                                                                                                    
BALANCE, DECEMBER 31, 1990                        4,118,500    $4,000   2,331,500 $2,000   $8,177,000 ($6,388,000)     $1,795,000

  Exercise of Class A Warrants (net of
$203,000
    in underwriting expenses) for cash     3.00   3,449,955     3,000           -      -   10,143,000            -     10,146,000
  Exercise of Class B Warrants for cash    4.50      79,071         -           -      -      356,000            -        356,000
  Conversion of Class B stock
    into Class A stock                              850,000     1,000   (850,000)(1,000)            -            -              -
  Exercise of stock options                2.00     417,750     1,000           -      -      835,000            -        836,000
  Expense for warrants issued                             -         -           -      -      900,000            -        900,000
  Net (loss) for the period                               -         -           -      -            -  (4,605,000)    (4,605,000)
                                                 --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1991                        8,915,276     9,000   1,481,500  1,000   20,411,000 (10,993,000)      9,428,000
                                                 --------------------------------------------------------------------------------

  Exercise of Class B Warrants (net of
$701,000
    in underwriting expenses) for cash     4.50   3,370,884     3,000           -      -   14,465,000            -     14,468,000
  Conversion of Class B stock
    into Class A stock                              106,000         -   (106,000)      -            -            -              -
  Exercise of stock options                2.49     348,300     1,000           -      -      865,000            -        866,000
  Net (loss) for the period                               -         -           -      -            -  (4,016,000)    (4,016,000)
                                                 --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1992                       12,740,460    13,000   1,375,500  1,000   35,741,000 (15,009,000)     20,746,000
                                                 --------------------------------------------------------------------------------

  Sale of common stock to Medeva PLC.      7.50     200,000         -           -      -    1,500,000            -      1,500,000
  Exercise of stock options                2.00      32,700         -           -      -       65,000            -         65,000
  Net (loss) for the period                               -         -           -      -            -  (6,521,000)    (6,521,000)
                                                 --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993                       12,973,160    13,000   1,375,500  1,000   37,306,000 (21,530,000)     15,790,000
                                                 --------------------------------------------------------------------------------

  Exercise of stock options                2.16      91,250         -           -      -      197,000            -        197,000
  Net (loss) for the period                               -         -           -      -            -  (7,431,000)    (7,431,000)
                                                 --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994                       13,064,410    13,000   1,375,500  1,000   37,503,000 (28,961,000)      8,556,000
                                                 --------------------------------------------------------------------------------

  Conversion of 8% convertible debentures
into
    Class A Common Stock                   1.85     354,204         -           -      -      571,000            -        571,000
  Exercise of stock options                1.82      12,750         -           -      -       23,000            -         23,000
  Expense for warrants/options issued                     -         -           -      -      602,000            -        602,000
  Net (loss) for the period                               -         -           -      -            -   (5,607,000)   (5,607,000)
                                                 --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995                       13,431,364   $13,000   1,375,500 $1,000  $38,699,000 ($34,568,000)    $4,145,000
                                                 --------------------------------------------------------------------------------


                                    CONTINUED

                              F - 7




                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
                          (a development stage company)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                                          Deficit
                                                Class A                Class B                           Accumulated
                                         Per    Common Stock           Common Stock        Additional    During the
                                        Share                                              Paid-in       Development
                                        Amount  Shares       Dollars   Shares     Dollars  Capital       Stage            Total
                                       -------- ------------ --------  ---------  -------  ------------  --------------  --------

                                                                                                    
BALANCE, DECEMBER 31, 1995                        13,431,364  $13,000  1,375,500   $1,000  $38,699,000   ($34,568,000)   $4,145,000

  Conversion of 8% convertible debentures
into
    Class A Common Stock                   2.74    2,269,755    2,000          -        -    5,483,000               -    5,485,000
  Exercise of stock options                2.53      569,875    1,000          -        -    1,438,000               -    1,439,000
  Expense for warrants/options issued                      -        -          -        -      330,000               -      330,000
  Discount on 7% convertible debentures                    -        -          -        -    1,843,000               -    1,843,000
  Net (loss) for the period                                -        -          -        -            -     (7,700,000)  (7,700,000)
                                                  ----------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996                        16,270,994   16,000  1,375,500    1,000   47,793,000    (42,268,000)    5,542,000
                                                  ----------------------------------------------------------------------------------

  Conversion of 7% and 8% convertible
debentures into
    Class A Common Stock                   2.93    2,995,006    3,000          -        -    7,152,000               -    7,155,000
  Sale of Class B Common Stock to          2.23            -        -    350,000    1,000      778,000               -      779,000
Chairman for cash
  Exercise of stock options                2.00       27,500        -          -        -       55,000               -       55,000
  Expense for warrants issued                              -        -          -        -      149,000               -      149,000
  Class A Common Stock issued              3.12       48,117        -          -        -      150,000               -      150,000
  Net (loss) for the period                                -        -          -        -            -     (7,147,000)  (7,147,000)
                                                -----------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997                        19,341,617   19,000  1,725,500    2,000   56,077,000    (49,415,000)    6,683,000
                                                -----------------------------------------------------------------------------------

  Conversion of 5%, 7% and 8% convertible
debentures
    into Class A Common Stock              0.32    4,851,618    5,000          -        -    1,442,000               -    1,447,000
  Sale of Class B Common Stock to          0.37            -        -  1,274,500    1,000      465,000               -      466,000
Chairman for cash
  Exercise of stock options                1.75        4,000        -          -        -        7,000               -        7,000
  Expense for warrants issued                              -        -          -        -      205,000               -      205,000
  Class A Common Stock issued              1.06      163,915        -          -        -      174,000               -      174,000
  Class A Common Stock issued for Stellar  1.76      398,406    1,000                          699,000               -      700,000
  Class A Common Stock issued for Private  0.25   10,800,000   11,000          -        -    2,689,000               -    2,700,000
Placement
  Discount on 5% convertible debentures                    -        -          -        -      762,000               -      762,000
  Net (loss) for the period                                -        -          -        -            -     (7,548,000)  (7,548,000)
                                                -----------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998                        35,559,556  $36,000  3,000,000   $3,000  $62,520,000   ($56,963,000)   $5,596,000
                                                -----------------------------------------------------------------------------------


The accompanying notes are an integral part of these consolidated statements.

                                      F-8



                AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY

                          (a development stage company)

                   Notes to Consolidated Financial Statements


1.        Business and Development Stage Risks:

         American  Biogenetic  Sciences,  Inc.  (together with its  subsidiaries
(Note 2), the "Company" or "ABS") was  incorporated  in Delaware on September 1,
1983.  The  Company  was  formed  to  engage in the  research,  development  and
production of  bio-pharmaceutical  products. As a development stage company, the
Company has not  materially  commenced  its  principal  operations.  Most of its
efforts  have been  devoted to research and  development,  acquiring  equipment,
recruiting  and  training  personnel,  and  financial  planning.  The  Company's
research  efforts have been focused on the  development of products to diagnose,
prevent and treat diseases in humans.

         The Company has had limited  product  sales to date and has had limited
revenues  from  collaborative  and  licensing  agreements  (Note 10).  Since its
inception, the Company has been dependent upon the receipt of capital investment
or  other  financing  to fund  its  continuing  research  and  commercialization
activities.  The Company expects to incur  substantial  expenditures in research
and product  development and the Food and Drug  Administration  approval process
relating  to  510(k)  applications  for  its  TpP and  other  diagnostic  tests.
Currently  product  development  plans  of the  Company  include  entering  into
collaborative,   licensing   and   co-   marketing   arrangements   with   large
pharmaceutical companies to provide additional funding and clinical expertise to
perform tests necessary to obtain regulatory  approvals,  provide  manufacturing
expertise  and  market  the  Company's  products.  Without  such  collaborative,
licensing or co-marketing  arrangements,  additional  sources of funding will be
required to finance the Company. In addition to the normal risks associated with
a business engaged in research and development of new products,  there can be no
assurance  that the  Company's  research and  development  will be  successfully
completed, that any products developed will obtain the necessary U.S. regulatory
approvals  (principally  from the  FDA),  that any  approved  product  will be a
commercial success, that adequate product liability insurance can be obtained or
that sufficient capital will be available when required to permit the Company to
realize its plans. In addition,  the Company operates in an environment of rapid
changes in technology and in an industry which has many competitors who have far
more resources available to them than does the Company.  Further, the Company is
dependent upon the services of several employees and advisors.

         While losses from development stage activities are expected to continue
in 1999,  management  believes  that its  liquidity  and  capital  resources  at
December  31, 1998 along with the  projected  receipt of  licensing  fees and/or
additional  financing or other  contingency plans will be sufficient to fund its
planned activities through the first quarter of 2000.

                                      F -9



2.        Summary of Significant Accounting Policies:

Principles of Consolidation

          During 1989,  the Company  formed a  subsidiary,  American  Biogenetic
Sciences  (Ireland),  Ltd.,  which is 99% owned by the  Company  and, to fulfill
legal requirements, 1% owned by an officer of the Company. On April 23, 1998 the
Company  acquired  all of  the  capital  stock  of  Stellar  Bio  Systems,  Inc.
("Stellar")  (Note 5). The  financial  statements  reflect  the  accounts of the
Company and these subsidiaries.  All significant  intercompany  transactions and
balances have been eliminated in consolidation.

Cash Equivalents

          Cash  equivalents  include  highly  liquid  investments  which have an
original maturity of less than three months from date of purchase.

Marketable Securities

         The Company follows the provisions of Statement of Financial Accounting
Standards  ("SFAS") No. 115,  "Accounting  for Certain  Investments  in Debt and
Equity  Securities".  This  Statement  requires the  classification  of debt and
equity securities based on whether the securities will be held to maturity,  are
considered trading securities or are available for sale.  Classification  within
these  categories may require the securities to be reported at their fair market
value with unrealized  gains and losses  included either in current  earnings or
reported as a separate  component  of  stockholders'  equity,  depending  on the
ultimate classification.

Concentration of Credit Risk

         As of December 31, 1998, the Company had four customers  whose balances
exceeded 10% of the accounts receivable  balance.  These customers accounted for
22%, 21%, 18% and 11% of the accounts receivable balance.

         During  fiscal  year  1998,  one  customer  accounted  for  34%  of the
Company's  revenues,  another customer  accounted for 17% while a third customer
accounted for 10% of the Company's  revenues.  There were no customers in fiscal
years 1997 and 1996 that exceeded 10% of revenues.

Inventory

         Inventory  is  valued  at the lower of cost  (first-in,  first-out)  or
market.

                                     F - 10


Long-Lived Assets

         In  accordance  with SFAS No. 121,  "Accounting  for the  Impairment of
Long-Lived  Assets and Long- Lived Assets to Be Disposed  Of," ABS  periodically
reviews  long-lived assets and certain  identifiable  intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the fair value of
the assets  measured  by the future  net cash flows (on an  undiscounted  basis)
expected  to be  generated  by the asset.  If such assets are  considered  to be
impaired,  the  impairment to be  recognized  would be measured by the amount by
which the carrying amount of the assets exceeds the underlying fair value of the
assets.  ABS has performed a review of its long-lived  assets and has determined
that no impairment of the respective carrying values has occurred as of December
31, 1998.

Depreciation and Amortization

         Depreciation  and  amortization  is  generally   provided  for  by  the
straight-line method over the estimated useful lives of the assets.

Patent Costs

         Costs of certain patent applications are capitalized.  Upon issuance of
a patent,  such costs are charged to  operations  over the  estimated  period of
benefit or 17 years, whichever is shorter, on the straight-line method. Costs of
unsuccessful  patent  applications  or  discontinued  projects  are  charged  to
expense.

Deferred Financing Costs

         Deferred  financing cost incurred by the Company in connection with the
issuance of  convertible  debentures  (Note 7) were  capitalized  and charged to
operations  as  additional  interest  expense over the life of the related debt.
Upon conversion of the underlying debt, any unamortized deferred financing costs
are charged to paid-in capital.

Intangible Assets

         Intangible  assets include goodwill and intellectual  know how relating
to the  acquisition  of Stellar.  Intangible  assets are being  amortized over a
10-year period.

Fair Value of Financial Instruments

         The Company accounts for the fair value of its financial instruments in
accordance  with  SFAS No.  107,  "Disclosures  about  Fair  Value of  Financial
Instruments." The carrying value of all financial  instruments  reflected in the
accompanying  balance  sheets  approximated  fair value at December 31, 1998 and
December 31, 1997, respectively.


                                      F - 11



Revenue Recognition

         Revenue on product  sales is  recognized  at the time the  products are
shipped to customers.  Revenue from  royalties  and license fees are  recognized
when earned, provided that no significant performance obligations remain.



Research and Development Income and Expenses

         Revenues from  collaborative  agreements  are recognized as the Company
performs research  activities under the terms of each agreement provided that no
further  performance  obligations  remain.  Research and  development  costs are
charged to expense in the year incurred.

Stock-Based Compensation

         Effective   January  1,  1995,  the  Company   adopted  SFAS  No.  123,
"Accounting for Stock-Based  Compensation." This statement establishes financial
accounting and reporting standards for stock-based employee  compensation plans.
SFAS  No.  123  encourages  entities  to  adopt a fair  value  based  method  of
accounting for stock compensation plans.  However, SFAS No. 123 also permits the
Company to continue to measure compensation costs under pre-existing  accounting
pronouncements.  If the fair value based  method of  accounting  is not adopted,
SFAS No. 123  requires  pro forma  disclosures  of net (loss) and net (loss) per
common share in the notes to consolidated financial statements.  The Company has
elected to provide the necessary pro forma disclosures (Note 8).

Net Loss Per Common Share

         Effective  December  31,  1997,  the  Company  adopted  SFAS  No.  128,
"Earnings  Per Share." Basic net loss per common share ("Basic EPS") is computed
by  dividing  net  loss  by  the  weighted   average  number  of  common  shares
outstanding.  Diluted net loss per common share  ("Diluted  EPS") is computed by
dividing net loss by the weighted  average  number of common shares and dilutive
potential common shares then outstanding. SFAS No. 128 requires the presentation
of both Basic EPS and Diluted EPS on the face of the consolidated  statements of
operations. The impact of the adoption of this statement was not material to all
previously reported EPS amounts. Diluted EPS for 1998, 1997 and 1996 is the same
as Basic EPS because the inclusion of stock options and  convertible  debentures
outstanding would be anti-dilutive.  For the purposes of the calculation of both
basic and diluted EPS, Class A and Class B Common Stock have been treated as one


                                     F - 12


class.  The following  equity  instruments  were not included in the diluted net
loss per share calculation as their effect would be antidilutive:

                                                    December 31,             

                                           1998            1997        1996
                                           ----            ----        ----

Stock Options - Exercisable              3,279,334       3,018,543   2,546,750
Conversion of Convertible Debentures             -       1,160,000   1,249,000
Exercise of Warrants                       709,445         445,216     397,099
                                    --------------  -------------- -----------
Total Shares                             3,988,779       4,623,759   4,192,849
                                    ==============  ============== ===========

Reclassifications

         Certain  reclassifications  of prior period  balances have been made to
conform with the current year presentation.



Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

3.       Inventory

         Inventory consists of the following:


                                                      December 31,
                                              ---------------------------

                                                   1998            1997
                                                   -----          -----

Raw Materials                                    $339,000       $236,000
Work in Progress                                   91,000             --
Finished Goods                                    115,000         60,000 
                                               ----------      ---------
                                                 $545,000       $296,000
                                               ==========      =========

4.       Fixed Assets

         Fixed assets consists of the following:

                                                        December 31,
                                              -------------------------------

                                                1998               1997
                                                ----               ----

Laboratory equipment                             $1,261,000      $1,241,000
Office equipment, furniture and vehicles            554,000         521,000
Leasehold improvements                              534,000         230,000
                                              -------------    ------------
                                                  2,349,000       1,992,000
Accumulated depreciation and amortization        (1,718,000)     (1,481,000)
                                              -------------    ------------
                                                $   631,000     $   511,000
                                              =============    ============

                                     F - 13



5.       Acquisition

         On April 23, 1998,  the Company  acquired  all of the capital  stock of
Stellar,  a manufacturer  of  immunodiagnostic  kits and reagents.  The purchase
price was $120,000 in cash and $700,000 in Class A Common Stock (398,406  shares
were issued) plus future contingent payments of $650,000 in Class A Common Stock
to be paid over three years based upon future  sales  levels of Stellar with the
Class A Common stock to be valued at its market value on the anniversary  dates.
The Acquisition was accounted for by the purchase method.  Results of operations
have been included in the Company's  consolidated financial statements since the
date of  acquisition.  The excess of the aggregate  purchase price over the fair
value of net assets acquired of $621,000 has been allocated to intangible assets
(intellectual  know-how  of $100,000  and  goodwill  of  $521,000)  and is being
amortized over a 10-year period.  Any additional  future payments required under
the contingent  earnout  provisions of the purchase  agreement will be accounted
for as additional  goodwill and will be amortized over the remaining life of the
goodwill.  Accumulated  amortization  of  intangible  assets  was  $41,000 as of
December 31, 1998.

6.       Accounts Payable and Accrued Expenses

         Accounts payable and accrued liabilities consist of the following:

                                            December 31,              

                                       1998             1997
                                       ----             ----

Accounts Payable                       $355,000        $216,000
Accrued Interest                              -         149,000
Professional Fees                      110,0000          70,000
Payroll and Related Expenses             85,000          59,000
Facility Consolidation Reserve          247,000              --                 
                                   ------------    ------------
                                       $797,000        $494,000
                                   ============    ============

7.       Long Term Debt:

         On October  26,  1995,  the Company  completed  an  $8,500,000  private
placement of 8%  Convertible  Debentures  due on October 13, 1998 which  accrued
interest,  payable  at  maturity,  at a rate of 8% per  annum.  Each  holder  of
Debentures  was entitled to convert the aggregate  principal  amount and accrued
interest of the Debentures  through  October 13, 1998 at an exercise price equal
to the lesser of the closing bid price of the Company's  Common Stock on October
13,  1995  ($3.375) or 85% of the  average  closing  bid price of the  Company's
Common Stock for the five trading days prior to the conversion date. The Company
had the right to demand conversion of the Debentures and any accrued interest on
or after April 13,  1997.  The Company  also had the right to redeem  Debentures
submitted for conversion for an amount determined under a formula related to the


                                  F - 14


market price of the shares which would otherwise be issued upon  conversion.  In
conjunction  with this  offering,  the  Company  incurred  both cash and noncash
issuance costs totaling $1,190,000.  These issuance costs have been amortized on
a straight  line basis as a component  of interest  expense over the term of the
Debentures  which  approximated  the effective  interest  rate method.  Upon the
conversion of the Debentures,  the related unamortized  deferred financing costs
were charged to paid-in  capital.  As compensation to the placement agent of the
Debentures,  the Company paid the placement  agent an 8%  commission  and issued
warrants  entitling the  placement  agent to purchase  201,481  shares of Common
Stock at an  exercise  price of $4.05 per share at any time  until  October  23,
2000. The fair value of the warrants as determined using an option-pricing model
of $480,000  was recorded as  additional  paid-in  capital,  and included in the
$1,190,000  total issuance costs described above. As of December 31, 1998, these
debentures have been fully converted or redeemed.

         On September  30,  1996,  the Company  completed a  $9,000,000  private
placement of 7% Convertible  Debentures due September 30, 1998.  Interest on the
Debentures  was payable  quarterly at the rate of 7% per annum.  The  Debentures
(together with any accrued  interest)  were  convertible to the extent of 25% of
the principal amount thereof commencing on December 23, 1996, with an additional
25% of the principal  amount of the Debentures  becoming  convertible on each of
the 30th, 60th and 90th days  thereafter,  at a conversion price equal to 83% of
the average of the closing prices of the Company's  Class A Common Stock for the
five  consecutive  trading days ending on the trading day immediately  preceding
the conversion date of the Debentures  (the "Current  Market Price");  provided,
however,  that in no event  could the  conversion  price be less than  $3.00 per
share (the  "Minimum  Conversion  Price") nor greater  than $8.00 per share (the
"Maximum  Conversion  Price"). In the event that, but for the Minimum Conversion
Price,  the number of shares that would have been  issued was  greater  than the
number of shares actually issued,  the holder converting such Debenture was also
entitled to receive cash in an amount equal to such difference multiplied by the
Current  Market Price.  In the event any Debenture  remained  outstanding at its
maturity  date, the Company had the option to either convert such Debenture into
shares of Class A Common Stock on the same basis as the  Debenture  holder could
have converted such Debenture or pay the outstanding  principal  amount thereof,
plus any accrued interest  thereon,  in cash. In conjunction with this offering,
the Company  incurred both cash and noncash  issuance costs  totaling  $480,000.
These issuance costs were amortized on a  straight-line  basis as a component of
interest  expense  over  the  term  of the  Debentures  which  approximated  the
effective  interest  rate method.  Upon the  conversion of the  Debentures,  the
related unamortized deferred financing costs were charged to paid-in-capital. As
compensation to the placement  agent,  the Company paid the placement agent a 4%
commission and issued to brokers  affiliated  with the placement  agent warrants
entitling  them to purchase an aggregate of 15,618  shares of Common Stock at an
exercise price of $5.76 per share at any time until September 30, 1998. The fair
value of the warrants as determined  using an  option-pricing  model of $45,000,
was  recorded as  additional  paid-in  capital,  and included in the $480,000 of
total  issuance  costs  related to these  Debentures.  In addition,  the Company
recorded  additional  paid-in capital and debt discount of $1,843,000 to reflect
the intrinsic  value of the market price  conversion  discount  (17%) related to
these Debentures. The debt discount was amortized on a straight-line basis which
approximated the effective interest


                                     F - 15



method,  and charged to interest  expense from October 1, 1996 through March 23,
1997, the period during which the Debentures became 100%  convertible.  In 1996,
$1,351,000 of this debt  discount was amortized and charged to interest  expense
and the balance of $492,000 was amortized in 1997. As of December 31, 1998 these
debentures have been fully converted.

         On May 20,  1998,  the Company  completed a private  placement to three
accredited investors of an aggregate of $4,000,000 of 5% Convertible  Debentures
due May 20, 2001, and three series of Warrants to purchase up to an aggregate of
261,288  shares of the Company's  Class A Common Stock.  The  Debentures  became
convertible to the extent of 25% of the principal  amount thereof  commencing on
September  17,  1998,  with an  additional  25% of the  principal  amount of the
Debentures  becoming first convertible on each of October 17, 1998, November 16,
1998 and  December  16,  1998  (subject  to  potential  acceleration  in certain
instances) at a conversion  price equal to 87% (if converted before November 17,
1998),  86% (if converted  between November 17, 1998 and February 14, 1999), 85%
(if converted  between  February 15, 1999 and May 20, 1999) or 84% (if converted
after May 20, 1999),  respectively,  of the average of the closing bid prices of
the  Company's  Class A Common  Stock  for the  five  consecutive  trading  days
immediately  preceding  the  date of  conversion  of the  Debentures;  provided,
however,  that in no event may the conversion  price be greater than $1.9375 per
share,  which was 125% of such average price over the five  consecutive  trading
days prior to the  consummation of the  transaction.  Interest on the Debentures
was payable only on maturity,  conversion,  redemption or when other payment was
made on the Debentures in cash or, if registered for resale under the Securities
Act of 1933, as amended,  in shares of the Company's Class A Common Stock valued
at the applicable  Debenture conversion price. In the event the Company would be
required to issue more than  4,000,000  shares of its Class A Common  Stock upon
conversion of all of the Debentures,  the Company had the option of: (i) issuing
additional  shares of Common Stock if stockholder  approval had been obtained or
if  stockholder  approval  was not  required in order to comply with  applicable
rules of the market upon which its Class A Common Stock is traded or (ii) paying
cash to the  holder in an amount  equal to the  principal  amount of  Debentures
being  converted  plus an amount equal to the number of shares of Class A Common
Stock  that  would be  otherwise  issuable  upon  conversion  of the  Debentures
multiplied  by the  difference  between the highest sales price of the Company's
Common Stock on the date of conversion and the applicable  Debenture  conversion
price. These debentures were repurchased on November 11, 1998 (see below).

         The Company also issued to the investors  warrants in series  entitling
the  investors  to  purchase,  at an  exercise  price of $1.9141  per share,  an
aggregate of 261,228 shares of the Company's Class A Common Stock at any time to
and  including May 19, 2002.  These  warrants were canceled on November 11, 1998
(see below).

         In conjunction  with this offering,  the Company incurred both cash and
noncash issuance costs totaling $525,000. These issuance costs were amortized on
a straight-line  basis as a component of interest  expense through  November 11,
1998.  Upon  conversion  of the  Debentures,  the related  unamortized  deferred
financing costs were charged to paid-in capital.  The fair value of the warrants


                                     F - 16



as  determined  using an  option-pricing  model of  $252,000,  was  recorded  as
additional  paid-in  capital and included in the $525,000  total  issuance costs
related to these  Debentures.  In  addition,  the  Company  recorded  additional
paid-in  capital and debt discount of $762,000 to reflect the intrinsic value of
the maximum market price conversion  discount (16%) related to these Debentures.
The debt  discount was  amortized  and charged to interest  expense from May 20,
1998 through November 11, 1998. The unamortized issuance costs and debt discount
were included in the  extraordinary  charge for early  extinguishment  discussed
below.

         On November  11, 1998,  the Company  repurchased  the then  outstanding
principal amount of the debentures,  of $3,248,000 plus accrued interest thereon
of $79,000 and a $525,000 premium for a total of $3,852,000.  As a result of the
repurchase the Company has recorded a one-time  extraordinary charge to earnings
of $1,140,000 which represents the loss on early extinguishment.

         For each of the  aforementioned  debt instruments and warrants the fair
value of each was estimated on the date of the agreement using an option-pricing
model with the following assumptions:  dividend yield of 0%; expected volatility
of 135% in 1998 and 84% in 1995 and 1996;  risk-free interest rate of range 5.7%
to  6.5%  and  expected  lives  of 2 to 5  years  dependent  on the  life of the
instrument.

8.        Stockholders' Equity:

Description of Class A and Class B Common Stock

         Holders  of Class A Common  Stock and Class B Common  Stock  have equal
rights to receive dividends, equal rights upon liquidation, vote as one class on
all matters requiring stockholder  approval,  have no preemptive rights, are not
redeemable and do not have cumulative voting rights; however, holders of Class A
Common  Stock have one vote for each  share  held  while  holders of the Class B
Common Stock have ten votes for each share held on all matters to be voted on by
the stockholders. All Class B Common Stock is owned by the Chairman of the Board
and may be converted into Class A Common Stock on a share-for-share basis at the
option of the holder and generally are  automatically  converted in the event of
sale or, with certain exceptions, transfer.


Initial Public Offering

          In May and June 1990, the Company completed an initial public offering
of 1,150,000 units of its equity securities. Each unit consisted of three shares
of Class A Common Stock and three  redeemable  Class A Warrants.  As a result of
this offering, the Company received approximately $5,702,000 of proceeds, net of
underwriting  and other expenses.  Each holder of a Class A Warrant was entitled
to  purchase  one share of Class A Common  Stock  and one Class B Warrant  at an
exercise price of $3.00 at any time until five years from the date of the public
offering. Each holder of a Class B Warrant was entitled to purchase one share of


                                     F - 17



Class A Common Stock at an exercise price of $4.50 at any time after exercise of
the Class A Warrants and until May 1995. During 1991, 3,449,955 Class A Warrants
and 79,071 Class B Warrants were exercised  yielding net proceeds to the Company
of approximately $10,502,000 (after expenses of approximately $203,000).  During
1992,  3,370,884  Class  B  Warrants  were  exercised  for  $14,468,000  (net of
approximately $701,000 of expenses). At December 31, 1998 and December 31, 1997,
there were no outstanding Class A and Class B Warrants.

Private Placement

         On October 27, 1998, the Company  entered into an agreement to issue an
aggregate  of  10,800,000  shares  of its  Class A  Common  Stock  to a group of
accredited  investors  at a price of $.25 per  share,  a price  above the market
price  of the  Company's  Class A  Common  Stock at the  time.  Of such  shares,
4,000,000  shares were purchased by Alfred J. Roach,  the Company's  Chairman of
the Board of Directors and Chief  Executive  Officer,  for an aggregate price of
$1,000,000.  The Company has agreed to register the shares issued in the private
placement under the Securities Act of 1933, as amended,  within six months after
the issuance of the shares.  The proceeds from this private  placement were used
to repurchase the 5% Convertible Debentures (see Note 7).

Stock Option Plans

         The Company's 1986 Stock Option Plan (the "1986 Plan") provided for the
grant of incentive stock options and/or non-qualified options until July 1997 of
up to an  aggregate of  4,450,000  shares of Class A Common Stock to  employees,
officers and consultants of the Company. Options were granted at exercise prices
not less than the fair  market  value at the date of grant and for a term not to
exceed ten years from the date of grant;  except that an incentive  stock option
granted  under  the  1986  Plan to a  stockholder  owning  more  than 10% of the
outstanding  Common  Stock of the Company  could not have a term which  exceeded
five years nor have an exercise price of less than 110% of the fair market value
of the Class A Common Stock on the date of the grant.  The  outstanding  options
have a vesting  period  ranging two years to four years ratably from the date of
grant.


                                      F-18




         Changes in  outstanding  options and options  available for grant under
the 1986 Plan, expressed in number of shares, are as follows:

                                              For the Years Ended
                                December 31, 1998         December 31, 1997
                             ---------------------------------------------------
                            Shares     Weighted Avg.    Shares     Weighted Avg.
                             Under        Option         Under        Option
                            Option         Price        Option         Price

Options outstanding,
 beginning of year          2,873,625        $4.10      2,979,500        $4.07

Granted                          --           --               --         --

Exercised                      (4,000)       $1.75        (27,500)       $2.01

Canceled                      (79,125)       $3.74        (78,375)       $3.86

Options outstanding,
end of year                 2,790,500        $4.11      2,873,625        $4.10

Options exercisable,
end of year                 2,730,750        $4.13      2,737,125        $4.13

Options available
for grant, end
of year                            --                          --


         The Company's 1993  Non-Employee  Director Stock Option Plan (the "1993
Plan")  provides for the issuance of stock  options for up to 500,000  shares of
Class A Common Stock to outside  directors  of the Company.  Options to purchase
10,000  shares of Class A Common  Stock are  automatically  granted  immediately
following each Annual Meeting of the Company to each outside director elected at
the Annual  Meeting.  The option exercise price is 100% of the fair market value
of the Class A Common Stock on the date of grant and the option may be exercised
during a  period  of five  years  from the date of grant at the rate of 25% each
year on a cumulative basis, commencing one year from the date of grant.


                                     F - 19



         Changes in  outstanding  options and options  available for grant under
the 1993 Plan, expressed in number of shares, are as follows:

                                          For the Years Ended
                             December 31, 1998        December 31, 1997
                           -----------------------------------------------------
                           Shares    Weighted Avg.   Shares       Weighted Avg.
                            Under       Option        Under        Option
                           Option        Price       Option         Price

Options outstanding,
 beginning of year         110,000       $4.05        80,000        $4.25


Granted                     30,000       $1.00        30,000        $3.50

Exercised                  --              --         --             --

Canceled/Expired           (20,000)      $4.13        --             --

Options outstanding,
 end of year               120,000       $3.27       110,000        $4.05


Options exercisable,
end of year                 52,500       $3.86        50,000        $3.89


Options available
for grant, end
of year                    367,500                   377,500


         The  Company's  1996 Stock Option Plan,  as amended (the "1996  Plan"),
which  replaced the 1986 plan,  provides  for the  issuance of  incentive  stock
options and/or non-qualified options to purchase up to an aggregate of 2,000,000
shares of Class A Common Stock to  employees,  officers and  consultants  of the
Company. Options may be granted at exercise prices not less than the fair market
value at the date of grant and may be exercisable for a period not to exceed ten
years from the date of grant;  except that the term of an incentive stock option
granted  under  the  1996  plan to a  stockholder  owning  more  than 10% of the
outstanding  Common  Stock of the Company must not exceed five years nor have an
exercise  price of less than 110% of the fair market value of the Class A Common
Stock  on the  date of the  grant.  The  majority  of  options  outstanding  are
exercisable  25% each year on a cumulative  basis,  commencing one year from the
date of grant.


                                     F - 20



         Changes in  outstanding  options and options  available for grant under
the 1996 Plan, expressed in number of shares, are as follows:

                                             For the Years Ended

                              December 31, 1998                December 31, 1997
                              --------------------------------------------------

                              Shares    Weighted Avg.    Shares    Weighted Avg.
                               Under      Option         Under       Option
                              Option       Price        Option        Price

Options outstanding,
 beginning of year            821,000      $3.35           80,000        $4.94

Granted                       741,500       $.58          917,000        $3.34

Exercised                     --            --             -               -

Canceled                      (74,750)     $2.95         (176,000)       $4.02

Options outstanding,
end of year                 1,487,750      $1.99          821,000        $3.35


Options exercisable,
end of year                   496,084      $3.41          231,418        $3.46

Options available
for grant, end                512,250                     179,000


         The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock- Based  Compensation."  Accordingly,  no compensation cost
has been recognized for the stock option plans.
 Had  compensation  cost for the  Company's  stock option plans been  determined
based on the fair value at the grant date for options granted in 1998, 1997, and
1996 with the  provisions  of SFAS No. 123, the  Company's net loss and loss per
share would have been increased to the pro forma amounts indicated below:


                                        1998            1997          1996
- - --------------------------------------------------------------------------------

Net loss - as reported              ($7,548,000)    ($7,147,000)  ($7,700,000)

Net loss - pro forma                ($8,243,000)    ($7,522,000)  ($8,075,000)

Basic and diluted loss per share -                                            
as reported                            ($.29)          ($.35)        ($.45)

Basic and diluted loss per share -     ($.32)          ($.37)        ($.47)
pro forma

- - --------------------------------------------------------------------------------

         The fair value of each option  grant is  estimated on the date of grant
using   the   Black-Scholes   option-   pricing   model   with   the   following
weighted-average assumptions used for grants in 1998, 1997 and 1996:

                                     F - 21





dividend  yield of 0%;  expected  volatility of 135% in 1998 and 84% in 1997 and
1996;  risk-free interest rate of range 4.4% to 7.0% and expected lives of seven
years.

         The  weighted  average fair value of all three option plans for options
granted were $.50,  $2.10 and $3.77 in 1998,  1997 and 1996,  respectively.  The
following table sets forth additional SFAS No. 123 disclosure  information as to
options outstanding for all three plans at December 31, 1998:


  Shares     Exercisable    Exercise      Weighted Average    Weighed Average
Outstanding   Shares       Price Range     Exercise Price        Remaining
                                                              Contractual Life
    425,000          --   $ .25 -  $  .28        $  --              8.7
    162,500          --   $ .53 -  $  .66        $  --              9.8
     90,000       7,500     $1.00 - $1.50      $  1.50              7.5
    901,250     733,000     $1.52-  $2.25      $  1.89              5.5
    504,000     372,250     $2.38 - $3.50      $  3.34              7.1
  1,852,250   1,726,834     $3.63 - $5.38      $  4.66              4.1
    462,250     438,750     $5.50 - $7.75      $  5.61              3.3
      1,000       1,000            $10.00       $10.00              3.2
- - -----------  ----------
  4,398,250   3,279,334


Other Options Granted

         The Company  entered into a consulting  agreement with an  unaffiliated
third  party to assist  in the  strategic  planning  and  implementation  of the
Company's  licensing,   collaborative  and  co-marketing  plans,  which  expired
February 29, 1996.  Pursuant to the agreement,  the Company granted an option to
purchase 50,000 shares of Class A Common Stock on or before February 28, 2000 at
$2.25 per share. The Company also granted performance options to purchase 50,000
shares of Class A Common Stock at $2.25 for licensing or collaborative agreement
entered into which met certain criteria.  These options are exercisable for five
years from the date of grant.

         The Company has granted an investor  relations  consultant a warrant to
purchase 50,000 shares of Class A Common Stock on or before November 14, 2000 at
$3.50 per share pursuant to an agreement dated November 27, 1995.

         The Company entered into an agreement with an unaffiliated  third party
dated October 6, 1995 to assist with the marketing of the Company's products and
intellectual property, which agreement has expired.  Pursuant to this agreement,
the Company  granted  performance  options to purchase  25,000 shares of Class A
Common Stock and issued 5,000 shares for services  rendered under the agreement.
Options were granted for 12,500  shares at $3.00 per share and 12,500  shares at
$5.50. These options are exercisable for five years from the date of grant.

         The Company entered into an agreement with an unaffiliated  third party
to render  financial  consulting  advice,  dated  August 13, 1998 and amended on
October 1, 1998.  Pursuant to this agreement,  the Company  granted  performance
options to purchase up to 400,000 shares of Class A Common Stock. Options were

                                     F - 22




granted for 150,000 shares at $.75 per share,  150,000 shares at $1.00 per share
and 100,000  shares at $1.50 per share.  The options  are  exercisable  for four
years from the  agreement  date.  The fair value of these  options as determined
using an option-pricing  model was $124,000 which is being recorded as a noncash
charge over the vesting/service period of the options. The following assumptions
were used for this fair value  computation:  dividend yield of 0%, volatility of
135%,  risk-free  interest rate of 4.26% and expected lives of 4 years. The 1998
charge was $43,000.

         The Company  performed a valuation  of the  aforementioned  options and
warrants  using an  option-  pricing  model at the date of grant and  recorded a
charge to operations over the related service period.

9.       Federal Income Taxes:

         At December 31, 1998, the Company had net operating loss carry forwards
of  approximately  $55,045,000  for income tax purposes.  The net operating loss
carry  forwards will expire in varying  amounts  through 2013. In addition,  the
Company has approximately  $1,150,000 of available  research and development tax
credits to offset future taxes. These credits expire through 2012. In accordance
with Statement of Financial  Accounting Standards No. 109 "Accounting for Income
Taxes," the Company has recorded a valuation  allowance of  $56,195,000 to fully
reserve for the deferred tax benefit  attributable to its net operating loss and
tax  credit   carryforwards   due  to  the  uncertainty  as  to  their  ultimate
realizability.

         In accordance with certain  provisions of the Tax Reform Act of 1986, a
change in ownership of a corporation of greater than 50 percentage points within
a three-year period places an annual limitation on the corporation's  ability to
utilize its existing  net  operating  loss carry  forwards,  investment  tax and
research and development credit carry forwards  (collectively "tax attributes").
Such a change in ownership was deemed to have  occurred in  connection  with the
Company's  1990  initial  public  offering  at  which  time  the  Company's  tax
attributes amounted to approximately $4.9 million.  The annual limitation of the
utilization of such tax attributes is approximately  $560,000. To the extent the
annual limitation is not utilized,  it may be carried forward for utilization in
future years. At December 31, 1998, the Company has approximately  $4,830,000 of
the $4.9  million of net  operating  losses  that are no longer  subject to this
limitation.

10.      Various Agreements

Agreements with Boston University

         On December 1, 1996, the Company entered into a Sublease Agreement and,
effective  January 1, 1997, an Agreement  for Services  with Boston  University.
These two agreements provide for the Company's use of approximately 7,700 square
feet of space for laboratories  and for its  antigen-free  technology at a total
annual payment of $275,000.  The agreements have an initial term of three years.
In connection with this lease agreement,  the Company may, at its option,  pay a
portion of the annual lease  obligation with Class A Common Stock plus a warrant
to purchase  shares of Class A Common  Stock.  The number of shares are computed
using the average market price of the Company's  Class A Common Stock during the
ten days prior to issuance.  The warrant shares are to be exercisable at a price
equal to the closing  price of the  underlying  Class A Common Stock on the date
the warrant is issued and for a period of four years from the date of  issuance.
During  1997,  the  Company  issued  48,117  shares of Class A Common  Stock and
warrants to purchase  48,117  shares of Class A Common  Stock with the  exercise
price  ranging from $2.13 to $4.75.  During  1998,  the Company  issued  129,847
shares of Class A Common Stock and warrants to purchase

                                     F - 23





129,847 shares of Class A Common Stock with the exercise price ranging from $.63
to $2.19. The fair value of the warrants were calculated using an option-pricing
model at the date of issue and  recorded  a charge to  operations  of $99,000 in
1998 and $93,000 in 1997. In the fourth quarter of 1998, the Company implemented
a  consolidation  of  its  research  and  development  facilities.   The  Boston
facilities  will be  closed in the first  half of 1999 and  consolidated  at the
Stellar facilities in Baltimore,  Maryland.  In 1998, the Company has recorded a
reserve  for  consolidating   facilities  of  $252,000.  This  reserve  includes
severance   costs,   lease   termination,   and  the   write-down  of  leasehold
improvements.

University of Notre Dame Agreement

         On December 1, 1983,  the Company  entered into a lease  agreement with
the  University  of Notre Dame  ("Notre Dame  Agreement")  which was amended and
extended until November 30, 1993, at which time it was  terminated.  On December
1, 1993,  the Company  entered into a lease with Notre Dame ("Notre Dame Lease")
for substantially the same premises occupied by the Company under the Notre Dame
Agreement for a term ending August 31, 1995. Notre Dame extended the rental of a
portion of the space  through  August 31, 1996.  In February  1996,  the Company
entered into a lease in South Bend, Indiana for approximately  5,200 square feet
with an annual base rent of $52,200.  This lease  commenced on April 1, 1996 and
was a five-year  lease with three  one-year  renewal  options  after the initial
five-year  period. In September 1996, the Company entered into a second lease in
South Bend, Indiana for approximately 3,000 square feet with an annual base rent
of $30,400.  This lease is a three year lease.  In 1997,  the Company  moved its
research  and  development  activities  from  South  Bend,  Indiana  to  Boston,
Massachusetts.  The  Company  closed both  facilities  and has  terminated  both
leases.

         Under the Notre Dame  Agreement,  the Company was required to pay Notre
Dame for the  direct  and  indirect  payroll  cost of  substantially  all of the
Company's research and development personnel,  purchases of laboratory supplies,
items of equipment or other costs associated with the research projects.

         Notre Dame has granted the  Company all rights,  title and  interest in
and to any inventions,  patents and patent  applications  for research  projects
funded by the Company.  Inventors of any processes or  technology  which receive
Company  support have  assigned  his or her  interest in the product,  patent or
patent  applications to the Company.  The Company incurred costs under the Notre
Dame  Agreement  of  approximately  $0, $0 and  $14,000  during the years  ended
December 31, 1998, 1997, and 1996,  respectively,  and $6,150,000 for the period
from inception (September 1, 1983) through December 31, 1998.

         The  Company  has  agreed to pay Notre  Dame a royalty of 5% of the net
income  the   Company   achieves   from  sales  of   products   resulting   from
Company-sponsored  research  activities at Notre Dame.  Royalty  payments  shall
continue for a ten-year  period from the date of the first  commercial sale of a
product, regardless of the continuation of the Notre Dame Agreement.

Employment Agreements

         The President and Chief Executive Officer, Executive Vice-President and
Senior Vice President Business Development are parties to employment  agreements
with the Company ending  November 15, 2001,  September 30, 2001 and November 30,
2001,  respectively.  The  aggregate  annual  minimum  compensation  under these
agreements  as of December 31, 1998 was  approximately  $500,000.  They also are
parties to

                                     F - 24





confidentiality  agreements  with the  Company  during and  subsequent  to their
employment with the Company.

Scientific Advisory Committee Agreements

         The Company has entered into  advisory  board  agreements  with certain
research  scientists with respect to specific  projects in which the Company has
an interest.  The 1998  payment to the advisors for informal  meetings and other
consultations as a group was approximately $115,000.  Generally,  members of the
Company's  Scientific  Advisory  Committee  are  employed by or have  consulting
agreements  with third parties,  the businesses of which may conflict or compete
with the Company and any  inventions  discovered  by such  individuals  will not
become the property of the Company.

         As part of its development  stage  activities,  the Company enters into
various  agreements  that provide for the  expenditure of funds for research and
development  activities  and  typically  provide  for the  payment of  royalties
(between 2% to 8% of net sales) by the Company if any products are  successfully
developed  and  marketed  as a result  of the work  being  performed  under  the
agreement.  The following is a summary of significant agreements the Company has
entered into:

License Agreements

         On January 24, 1992,  the Company  entered into an  exclusive,  15 year
license agreement with Yamanouchi  Pharmaceutical  Co., Ltd.  ("Yamanouchi"),  a
Japanese   pharmaceutical   company.   Under  this  agreement,   Yamanouchi  may
manufacture,  use  or  market  diagnostic  assays  that  contain  the  Company's
monoclonal   antibody,   45-J,   in  Japan  and   Taiwan.   Yamanouchi   paid  a
non-refundable,  initial  sign-up  payment to the  Company of  $900,000  (net of
Japanese taxes).  The agreement provides that Yamanouchi is to pay the Company a
fixed  percentage  over the Company's  manufacturing  costs of the 45-J antibody
supplied to Yamanouchi.  On an ongoing  basis,  Yamanouchi is to pay the Company
royalties  at the rate of 10% of all net  sales  of  diagnostic  assays  sold by
Yamanouchi or its  affiliates  during each calendar year of the agreement  term.
Additionally,  Yamanouchi  is to  pay  the  Company  50% of  any  initial  fees,
royalties or other consideration received with respect to any sublicense granted
by Yamanouchi. To date, Yamanouchi has not made any sales.

         On  December  10,  1992,  the Company  entered  into an  agreement  (as
amended)  with  University  College  Dublin,  Ireland  granting  the  Company an
exclusive license for  drugs/compounds  to halt the onset and/or  progression of
neurodegenerative  diseases, in general, and Alzheimer's Disease, in particular.
The  agreement's  term is the duration of any patents that may be granted to the
university with a minimum of 10 years. Pursuant to the agreement, the Company is
to pay the  university a royalty of 5% of net income  relating to product sales.
The  Company  expensed  $5,000 in 1998,  $12,000 in 1997 and $62,000 in 1996 for
certain research expenses, supplies and equipment under this agreement.

         On August 10, 1993, the Company entered into a five-year  collaboration
agreement with the Free University of Berlin to develop  therapeutic  compounds.
The Company also acquired a series of anticonvulsant compounds.  Pursuant to the
agreement,  the Company is to pay a royalty of 5% of the net product sales.  The
agreement  lasts the life of the  patent or a minimum of 10 years.  The  Company
expensed  $103,000 in 1998,  $116,000 in 1997 and  $117,000 in 1996 for research
expenses and supplies under this agreement.


                                     F - 25




         In October 1995, ABS entered into a license and collaboration agreement
with F. Hoffmann-La Roche, Ltd.  ("Hoffman-La Roche") for the co-development and
marketing  of the  Company's  TpP test for the  detection  of active  thrombosis
(blood clot  formation).  The  agreement  grants  Hoffmann-La  Roche a worldwide
license to market the TpP test in a latex based particle  agglutination  format.
Under the agreement,  the Company received a $60,000 non-refundable  development
payment, to adapt the TpP test in the latex based particle  agglutination format
to Hoffmann-La  Roche's  automated  diagnostic  systems.  The Company is also to
receive milestone payments upon achievement of certain  commercialization goals.
The TpP test is to be manufactured by the Company for use on Hoffmann-La Roche's
instruments.  ABS is to receive a percentage of Hoffmann-La  Roche's net selling
price for the Company's  manufacturing  of the TpP test plus a 5% royalty on net
sales made by Hoffmann-La Roche. Under the agreement, the TpP test is also to be
sold by ABS and Hoffmann-La  Roche to other  diagnostic  companies using similar
particle agglutination  technology. On these sales, gross profit is to be shared
equally between the Company and Hoffmann-La Roche. To date, ABS has not received
any milestone or royalty payments.

         In December  1995,  ABS entered  into a license  agreement  with Abbott
Laboratories  ("Abbott")  for the  marketing  of the  Company's  TpP assay.  The
license  agreement grants Abbott a worldwide  license to market the TpP test for
Abbott's  immunoassay  formats.  The Company received a $100,000  non-refundable
up-front  payment  and is to receive  milestone  payments  upon  achievement  of
certain development and commercialization  goals. The Company is to receive a 5%
royalty on net sales made by Abbott.  In addition,  the reagent for the TpP test
is to be  manufactured  by the Company for use by Abbott.  To date,  ABS has not
received any milestone or royalty payments.

                                     F - 26





                                                     Commission File No. 0-19041




                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    EXHIBITS

                                       to

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
                       FISCAL YEAR ENDED DECEMBER 31, 1998


                       AMERICAN BIOGENETIC SCIENCES, INC.





Exhibit                                                           
Number                  Document
- - -------                 --------  

3.1                    Restated  Certificate of  Incorporation  of ABS, as filed
                       with the Secretary of State of Delaware on July 30, 1996.
                       Incorporated  herein by reference to Exhibit 4.01 to ABS'
                       Registration Statement on Form S-8, File No. 333-09473.

3.2                    Amended and Restated By-Laws of ABS.  Incorporated herein
                       by  reference  to  Exhibit  4.02  to  ABS'   Registration
                       Statement on Form S-8, File No. 333-09473.

4.1(a)                 Form of ABS' 8%  Convertible  Debentures  due October 13,
                       1998.  Incorporated herein by reference to Exhibit 4.1 to
                       ABS'  Current  Report on Form 8-K dated  October 12, 1995
                       (date of earliest event reported), File No. 0-19041.

4.1(b)                 Form  of the  Company's  7%  Convertible  Debentures  due
                       September 30, 1998.  Incorporated  herein by reference to
                       Exhibit 4.01 to the Company's  Current Report on Form 8-K
                       dated   September  30,  1996  (date  of  earliest   event
                       reported), File No. 0-19041.

4.1(c)(1)              Form of ABS' 5%  Convertible  Debentures due May 20, 2001
                       (the "5% Debentures").  Incorporated  herein by reference
                       to Exhibit 4.1 to ABS'  Current  Report on Form 8-K dated
                       May 20, 1998 (date of earliest event reported),  File No.
                       0-19041.

4.1(c)(2)              Form of Securities Subscription Agreement between ABS and
                       each of the purchasers of the 5% Debentures. Incorporated
                       herein  by  reference  to  Exhibit  99.1 to ABS'  Current
                       Report on Form 8-K dated May 20,  1998 (date of  earliest
                       event reported), File No. 0-19041.

4.1(c)(3)              Registration Rights Agreement between ABS and each of the
                       purchasers of the 5% Debentures.  Incorporated  herein by
                       reference to Exhibit 99.2 to ABS' Current  Report on Form
                       8-K dated May 20, 1998 (date of earliest event reported),
                       File No. 0-19041.

4.1(c)(4)              Form of ABS'  Series  WA  Warrant  issued  to each of the
                       purchasers of the 5% Debentures.  Incorporated  herein by
                       reference to Exhibit  99.3(a) to ABS'  Current  Report on
                       Form 8-K  dated  May 20,  1998  (date of  earliest  event
                       reported), File No. 0-19041.






4.1(c)(5)              Form of ABS'  Series  WB  Warrant  issued  to each of the
                       purchasers of the 5% Debentures.  Incorporated  herein by
                       reference to Exhibit  99.3(b) to ABS'  Current  Report on
                       Form.

4.1(c)(6)              Form of ABS'  Series  WC  Warrant  issued  to each of the
                       purchasers of the 5% Debentures.  Incorporated  herein by
                       reference to Exhibit 4.1 to ABS'  Current  Report on Form
                       8-K dated May 20, 1998 (date of earliest event reported),
                       File No. 0-19041.

4.1(d)                 Form of Purchase and Investment Agreement executed by the
                       Company  and  several  investors  on  October  27,  1998.
                       Incorporated  by reference to Exhibit 99 to the Company's
                       Registration   Statement   on  Form  S-3,   file   number
                       333-69735,  filed with the  Commission  on  December  24,
                       1998.

4.1(e)*                Form of Warrant issued to several  individuals  under the
                       Company's Financial Advisory Agreement with M.H. Meyerson
                       & Co., Inc.,  dated as of August 13, 1998 and schedule of
                       holders thereof.

10.1(a) +              Employment  Agreement  dated  October 1, 1996 between ABS
                       and Ellena M. Byrne.  Incorporated herein by reference to
                       Exhibit  10.1(b) to ABS's  Form  10-K/A  dated  April 30,
                       1997, File No. 0-19041.

10.1(b)+               Employment  Agreement dated November 12, 1997 between ABS
                       and Dr. Emer Leahy.  Incorporated by reference to Exhibit
                       10.1(c) to ABS' Annual Report on Form 10-K for the fiscal
                       year ended December 31, 1997 (File No. 0-19041).

10.1(c) +*             Employment  Agreement  dated November 3, 1998 between ABS
                       and Mr. John S. North.

10.2(a) +              ABS' Stock Option Plan, as amended.  Incorporated  herein
                       by  reference  to  Exhibit  28.1  to  ABS'   Registration
                       Statement on Form S-8, File No. 33-51240.

10.2(b) +              ABS'  1993  Non-Employee   Director  Stock  Option  Plan.
                       Incorporated herein by reference to Exhibit 99.01 to ABS'
                       Registration Statement on Form S-8, File No. 33-65416.





10.2(c) +              The Company's 1996 Stock Option Plan. Incorporated herein
                       by  reference  to  Exhibit  A  to  the  Company's   Proxy
                       Statement  dated April 29, 1996 used in  connection  with
                       the Company's 1996 Annual Meeting of  Stockholders,  File
                       No. 0-19041.

10.3                   Exclusive   License  Agreement  dated  January  24,  1992
                       between  ABS  and  Yamanouchi  Pharmaceutical  Co.,  Ltd.
                       Incorporated herein by reference to Exhibit 10.29 to ABS'
                       Current  Report on Form 8-K dated  January 24, 1992 (date
                       of earliest event reported), File No. 0-19041.

10.4                   Warrant   dated   October   25,  1995  issued  to  Swartz
                       Investments,  Inc.  Incorporated  herein by  reference to
                       Exhibit  10.13 to ABS'  Current  Report on Form 8-K dated
                       October 12, 1995 (date of earliest event reported),  File
                       No. 0-19041.

21*                    List of Subsidiaries.

24*                    Consent of Independent Public Accountants.

27*                    Financial Data Schedule.

- - --------------------------------------------------------------------------------


 *                     Filed  herewith.  All other exhibits are  incorporated by
                       reference  to  the  document  following  the  description
                       thereof.

 +                     Management contract or compensatory plan.

EX-4.1(E)

            THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE
            HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN
                     THIS WARRANT EXCEPT AS HEREIN PROVIDED.

               VOID AFTER 5:00 P.M. EASTERN TIME, __________  , 2002

                                 FORM OF WARRANT

                               For the Purchase of

                        __________ Shares of Common Stock

                                       of

                       AMERICAN BIOGENETIC SCIENCES, INC.


1.       Warrant.

         THIS  CERTIFIES  THAT, in  consideration  of _______ and other good and
valuable consideration,  duly paid by or on behalf of __________ ("Holder"),  as
registered  owner  of  this  Warrant,  to  American  Biogenetic  Sciences,  Inc.
("Company"),  Holder is  entitled,  at any time or from time to time at or after
the  dates  set  forth  in  the  vesting   schedule  set  forth  below  (each  a
"Commencement Date"), and at or before 5:00 p.m., Eastern Time __________,  2002
("Expiration Date"), but not thereafter, to subscribe for, purchase and receive,
in whole or in part, up to _____________________________________________________
shares  of  Class  A  Common  Stock  of the  Company  ("Common  Stock").  If the
Expiration Date is a day on which banking  institutions are authorized by law to
close,  then this Warrant may be exercised on the next  succeeding  day which is
not such a day in accordance with the terms herein.  During the period ending on
the  Expiration  Date,  the  Company  agrees not to take any  action  that would
terminate  the Warrant.  This Warrant is  initially  exercisable  at a price per
share of Common Stock as follows:  _______  with  respect to ________  shares of
Common Stock,  _______ with respect to _______  shares of Common  Stock,  and of
______ with respect to ______ shares of Common Stock;  provided,  however,  that
upon the  occurrence  of any of the events  specified  in Section 6 hereof,  the
rights granted by this Warrant,  including the applicable exercise price and the
number of shares of Common  Stock to be received  upon such  exercise,  shall be
adjusted as therein specified.  The term "Exercise Price" shall mean the initial
applicable exercise price or the adjusted  applicable exercise price,  depending
on the context, of a share of Common Stock. The term "Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant.

         This Warrant shall be exercisable in three installments as follows: (i)
this Warrant  insofar as it represents  the right to purchase  _______ shares at
____ per share shall be  exercisable  as of the date  hereof;  (ii) this Warrant
insofar as it  represents  the right to  purchase  _______  shares at ______ per
share  shall  become  exercisable,  subject to the  further  provisions  of this
paragraph,  on the seventh month anniversary of the date hereof;  and (iii) this
Warrant insofar as it represents the right to purchase _______ shares at _______
per share shall become  exercisable,  subject to the further  provisions of this
paragraph,  on the  thirteenth  month  anniversary  of the date hereof.  Once an
installment shall become exercisable, it shall be deemed vested and fully earned
and may not




be terminated  prior to the Expiration  Date. This Warrant is one of a series of
similar  Warrants  representing  the right to purchase in the aggregate ________
shares  of Common  Stock and has been  issued  in  connection  with a  Financial
Advisory  Agreement,  dated as of August 13, 1998,  between the Company and M.H.
Meyerson & Co., Inc. ("MHM"). That agreement provides that either the Company or
MHM may terminate the engagement by the Company of MHM thereunder  upon 30 days'
prior written  notice.  If that  agreement is terminated by either party,  then,
effective upon such termination,  all installments  under this Warrant that have
not yet become  exercisable as of the effective date of such termination,  shall
expire and shall become null and void. Such termination,  however, shall have no
effect on that  portion of the Warrant  that has become  exercisable  and vested
prior to the termination of such agreement.

2.       Exercise.

         2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached  hereto  must be duly  executed  and  completed  and  delivered  to the
Company,  together  with this Warrant and payment of the Exercise  Price for the
Securities being purchased.  If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m.,  Eastern time, on the Expiration  Date,
this Warrant shall become and be void without  further force or effect,  and all
rights represented hereby shall cease and expire.

         2.2  Legend.  Each  certificate  for  Securities  purchased  under this
Warrant  shall  bear a legend  as  follows,  unless  such  Securities  have been
registered under the Securities Act of 1933, as amended ("Act"):

         "The  securities   represented  by  this   certificate  have  not  been
         registered  under the  Securities  Act of 1933,  as amended  ("Act") or
         applicable  state law. The securities may not be offered for sale, sold
         or otherwise  transferred except pursuant to an effective  registration
         statement under the Act, or pursuant to an exemption from  registration
         under the Act and applicable state law."

         2.3      Conversion Right.

                  2.3.1  Determination of Amount.  In lieu of the payment of the
Exercise Price in cash, the Holder shall have the right (but not the obligation)
to convert any portion of this Warrant that has become exercisable,  in whole or
in part, into Common Stock ("Conversion  Right"),  as follows:  upon exercise of
the Conversion  Right,  the Company shall deliver to the Holder (without payment
by the  Holder of any of the  Exercise  Price)  that  number of shares of Common
Stock equal to the  quotient  obtained  by dividing  (x) the "Value" (as defined
below) of the portion of the Warrant being  converted at the time the Conversion
Right is  exercised by (y) the Market  Price.  The "Value" of the portion of the
Warrant being converted shall equal the remainder  derived from  subtracting (a)
the Exercise Price multiplied by the number of shares of Common Stock underlying
the  portion of the Warrant  being  converted  from (b) the Market  Price of the
Common Stock  multiplied by the number of shares of Common Stock  underlying the
portion of the Warrant being converted.  As used herein, the term "Market Price"
at any date  shall be deemed to be the last  reported  sale  price of the Common
Stock on such date,  or, in case no such  reported sale takes place on such day,
the average of the last reported sale prices for the immediately preceding three
trading days, in either case as officially reported by the principal  securities
exchange on which the Common Stock is listed or admitted to trading,  or, if the
Common  Stock is not listed or  admitted to trading on any  national  securities
exchange or if any such  exchange on which the Common Stock is listed is not its
principal trading market, the






last reported sale price as furnished by the National  Association of Securities
Dealers,  Inc.  ("NASD")  through the Nasdaq National Market or SmallCap Market,
or, if applicable,  the OTC Bulletin Board, or if the Common Stock is not listed
or admitted to trading on any of the foregoing markets, or similar organization,
as  determined  in good faith by  resolution  of the Board of  Directors  of the
Company, based on the best information available to it.

                  2.3.2 Exercise of Conversion  Right.  The Conversion Right may
be exercised by the Holder on any business day on or after the Commencement Date
with respect to that  portion of the Warrant to be converted  and not later than
the Expiration Date by delivering the Warrant with a duly executed exercise form
attached hereto with the conversion section completed to the Company, exercising
the  Conversion  Right and specifying the total number of shares of Common Stock
the Holder will purchase pursuant to such conversion.

3.       Transfer.

         3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance  hereof,  agrees  that  it will  not  sell,  transfer  or  assign  or
hypothecate  this Warrant to anyone except upon compliance  with, or pursuant to
exemptions  from,  applicable  securities  laws.  In order to make any permitted
assignment,  the Holder must deliver to the Company the assignment form attached
hereto duly  executed and  completed,  together with this Warrant and payment of
all transfer taxes, if any, payable in connection  therewith.  The Company shall
immediately  transfer this Warrant on the books of the Company and shall execute
and  deliver  a new  Warrant  or  Warrants  of  like  tenor  to the  appropriate
assignee(s)  expressly  evidencing the right to purchase the aggregate number of
shares of Common Stock  purchasable  hereunder or such portion of such number as
shall be contemplated by any such assignment.

         3.2  Restrictions  Imposed by the Securities  Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the  Company  has  received  the  opinion  of counsel  for the Holder  that such
securities may be sold pursuant to an exemption from registration under the Act,
and  applicable  state law,  the  availability  of which is  established  to the
reasonable  satisfaction  of  the  Company,  or  (ii) a  registration  statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange  Commission and compliance with applicable  state
law.

4.       New Warrants to be Issued.

         4.1  Partial  Exercise  or  Transfer.  Subject to the  restrictions  in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment  hereof in part only,  upon surrender
of this Warrant for  cancellation,  together with the duly executed  exercise or
assignment  form and  funds (or  conversion  equivalent)  sufficient  to pay any
Exercise  Price and/or  transfer tax, the Company shall cause to be delivered to
the Holder  without  charge a new  Warrant of like tenor to this  Warrant in the
name of the Holder  evidencing the right of the Holder to purchase the aggregate
number of shares of Common Stock and Warrants purchasable  hereunder as to which
this Warrant has not been exercised or assigned.

         4.2  Lost  Certificate.   Upon  receipt  by  the  Company  of  evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of reasonably  satisfactory  indemnification,  the Company shall execute and
deliver a new Warrant of like tenor and date. Any such new Warrant  executed and
delivered  as a result of such loss,  theft,  mutilation  or  destruction  shall
constitute a substitute contractual obligation on the part of the Company.

                                        3





5.       Registration Rights.

         5.1      Demand Registration.

                  5.1.1  Grant  of  Right.  The  Company,  upon  written  demand
("Initial  Demand  Notice")  of the  Holder(s)  of at least 51% of the  Warrants
comprising this series of similar warrants and/or the 400,000  underlying shares
of Common Stock ("Majority Holders"), agrees to register on one occasion, all or
any portion of the Warrants  requested  by the  Majority  Holders in the Initial
Demand Notice and all of the Common Stock underlying the Warrants  (collectively
the  "Registrable  Securities").  On such  occasion,  the  Company  will  file a
Registration  Statement  covering the Registrable  Securities within thirty days
after receipt of the Initial Demand Notice and use its best efforts to have such
registration  statement declared effective promptly  thereafter.  If the Company
fails to comply with the provisions of this Section 5.1.1, the Company shall, in
addition to any other equitable or other relief  available to the Holder(s),  be
liable for any and all incidental,  special and consequential  damages sustained
by the Holder(s).  The demand for  registration may be made at any time during a
period of six years  commencing  on the date hereof.  The Company  covenants and
agrees to give written notice of its receipt of any Initial Demand Notice by any
Holder(s) to all other registered Holders of the Warrants and/or the Registrable
Securities  within  ten days from the date of the  receipt  of any such  Initial
Demand Notice.

                  5.1.2  Terms.  The  Company  shall bear all fees and  expenses
attendant to registering the Registrable  Securities,  including all filing fees
payable to the National Association of Securities Dealers,  Inc. but the Holders
shall pay any and all  underwriting  commissions  and the  expenses of any legal
counsel selected by the Holders to represent them in connection with the sale of
the Registrable Securities.  The Company agrees to use its best efforts to cause
the  filing  required  herein to become  effective  promptly  and to  qualify or
register the Registrable  Securities in such states as are reasonably  requested
by the  Holder(s);  provided,  however,  that in no event  shall the  Company be
required  to  register  the  Registrable  Securities  in a state in  which  such
registration  would cause (i) the Company to be obligated to register or license
to do business in such state, or (ii) the principal  stockholders of the Company
to be  obligated to escrow  their  shares of capital  stock of the Company.  The
Company  shall cause any  registration  statement  filed  pursuant to the demand
rights  granted  under  Section  5.1.1  to  remain  effective  until  all of the
Registrable  Securities covered by such registration statement have been sold or
are eligible for resale without restriction pursuant to Rule 144(k).


         5.2      "Piggy-Back" Registration.

                  5.2.1 Grant of Right.  The Holder of this  Warrant  shall have
the right for a period of six years commencing on January 1, 1999 to include the
Registrable  Securities as part of any  registration of securities  filed by the
Company (other than in connection with a transaction contemplated by Rule 145(a)
promulgated  under  the Act or  pursuant  to Form S-8 or any  equivalent  form);
provided,  however,  that if, in the written  opinion of the Company's  managing
underwriter or underwriters, if any, for such offering (the "Underwriter"),  the
inclusion of the  Registrable  Securities,  when added to the  securities  being
registered by the Company or the selling stockholder(s), will exceed the maximum
amount  of the  Company's  securities  which  can  be  marketed  (i) at a  price
reasonably  related  to  their  then  current  market  value,  or  (ii)  without
materially  and  adversely  affecting  the entire  offering,  the Company  shall
nevertheless register all or any portion of the Registrable  Securities required
to be so registered but such Registrable

                                        4





Securities shall not be sold by the Holders until 90 days after the registration
statement for such offering has become effective;  and provided further that, if
any securities are registered for sale on behalf of other  stockholders  in such
offering  and such  stockholders  have not  agreed to defer  such sale until the
expiration  of such 90 day period,  the number of  securities  to be sold by all
stockholders  in such  public  offering  during  such  90 day  period  shall  be
apportioned pro rata among all such selling stockholders,  including all holders
of the  Registrable  Securities,  according to the total amount of securities of
the Company  proposed to be sold by said  selling  stockholders,  including  all
holders of the Registrable Securities.

                  5.2.2  Terms.  The  Company  shall bear all fees and  expenses
attendant to registering the Registrable  Securities,  including any filing fees
payable to the National Association of Securities Dealers, Inc., but the Holders
shall pay any and all  underwriting  commissions  and the  expenses of any legal
counsel selected by the Holders to represent them in connection with the sale of
the Registrable  Securities.  In the event of such a proposed regis tration, the
Company shall  furnish the then Holders of  outstanding  Registrable  Securities
with not less than thirty days  written  notice  prior to the  proposed  date of
filing of such registration statement. Such notice to the Holders shall continue
to be given for each registration statement filed by the Company until such time
as all of the Registrable  Securities have been sold by the Holder.  The holders
of the Registrable  Securities shall exercise the  "piggy-back"  rights provided
for herein by giving  written  notice,  within twenty days of the receipt of the
Company's notice of its intention to file a registration statement.  The Company
shall cause any registration  statement filed pursuant to the above  "piggyback"
rights to remain effective until all Registrable Securities thereunder have been
sold, or are freely saleable,  without restriction,  under an exemption from the
registration requirements.  Nothing contained in this Warrant shall be construed
as requiring  any Holder to exercise  this Warrant or any part thereof  prior to
the initial filing of any registration statement or the effectiveness thereof.

         5.3      General Terms

                  5.3.1    Indemnification.

                           (a) The Company shall  indemnify the Holder(s) of the
Registrable  Securities  to be  sold  pursuant  to  any  registration  statement
hereunder and any  underwriter or person deemed to be an  underwriter  under the
Act and each  person,  if any,  who controls  such  Holders or  underwriters  or
persons deemed to be underwriters within the meaning of Section 15 of the Act or
Section  20(a) of the  Securities  Exchange Act of 1934,  as amended  ("Exchange
Act"),  against all loss,  claim,  damage,  expense or liability  (including all
reasonable   attorneys'   fees  and  other  expenses   reasonably   incurred  in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such registration statement. The Holder(s) of the Registrable Securities to
be sold  pursuant  to such  registration  statement,  and their  successors  and
assigns, shall severally,  and not jointly,  indemnify the Company,  against all
loss, claim, damage,  expense or liability (including all reasonable  attorneys'
fees and other  expenses  reasonably  incurred in  investigating,  preparing  or
defending  against any claim  whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from information furnished by or
on  behalf  of  such  Holders,  in  writing,  for  specific  inclusion  in  such
registration statement.

                           (b) If any action is brought  against a party hereto,
("Indemnified  Party") in respect of which  indemnity may be sought  against the
other party ("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such

                                        5





action and Indemnifying Party shall assume the defense of such action, including
the employment and fees of counsel  reasonably  satisfactory  to the Indemnified
Party.  Such  Indemnified  Party shall have the right to employ its or their own
counsel in any such case,  but the fees and expenses of such counsel shall be at
the expense of such Indemnified  Party unless (i) the employment of such counsel
shall have been authorized in writing by  Indemnifying  Party in connection with
the defense of such action, or (ii)  Indemnifying  Party shall not have employed
counsel to defend such action,  or (iii) such Indemnified  Party shall have been
advised by counsel that there may be one or more legal defenses  available to it
which may result in a conflict  between the Indemnified  Party and  Indemnifying
Party (in which case  Indemnifying  Party shall not have the right to direct the
defense  of such  action on behalf of the  Indemnified  Party),  in any of which
events, the reasonable fees and expenses of not more than one additional firm of
attorneys  designated  in writing  by the  Indemnified  Party  shall be borne by
Indemnifying Party.  Notwithstanding  anything to the contrary contained herein,
if Indemnified  Party shall assume the defense of such action as provided above,
Indemnifying  Party  shall not be liable for any  settlement  of any such action
effected without its written consent.

                           (c) If the indemnification or reimbursement  provided
for  hereunder  is  finally  judicially  determined  by  a  court  of  competent
jurisdiction  to be  unavailable  to  an  Indemnified  Party  (other  than  as a
consequence of a final judicial  determination of willful misconduct,  bad faith
or gross negligence of such Indemnified  Party), then Indemnifying Party agrees,
in lieu of indemnifying such Indemnified Party, to contribute to the amount paid
or payable by such Indemnified Party (i) in such proportion as is appropriate to
reflect  the  relative  benefits  received,   or  sought  to  be  received,   by
Indemnifying Party on the one hand and by such Indemnified Party on the other or
(ii) if (but only if) the allocation  provided in clause (i) of this sentence is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the  relative  benefits  referred  to in such  clause  (i) but also the
relative fault of Indemnifying  Party and of such Indemnified  Party;  provided,
however,  that in no event shall the aggregate  amount  contributed  by a Holder
exceed the profit,  if any, earned by such Holder as a result of the exercise by
him of the  Warrants  and the sale by him of the  underlying  shares  of  Common
Stock.

                           (d)  The  rights  accorded  to  Indemnified   Parties
hereunder shall be in addition to any rights that any Indemnified Party may have
at common law, by separate agreement or otherwise.

                  5.3.2 Exercise of Warrants.  Nothing contained in this Warrant
shall be construed as requiring the Holder(s) to exercise  their  Warrants prior
to  or  after  the  initial  filing  of  any   registration   statement  or  the
effectiveness thereof.

                  5.3.3  Documents  Delivered  to  Holders.  The  Company  shall
furnish to each Holder  participating  in any of the foregoing  offerings and to
each Underwriter of any such offering,  if any, a signed counterpart,  addressed
to such  Holder or  Underwriter,  of (i) an opinion  of counsel to the  Company,
dated  the  effective  date  of  such  registration   statement  (and,  if  such
registration includes an underwritten public offering, an opinion dated the date
of the closing under any underwriting  agreement  related  thereto),  and (ii) a
"cold comfort"  letter dated the effective date of such  registration  statement
(and, if such registration  includes an underwritten  public offering,  a letter
dated the date of the closing under the  underwriting  agreement)  signed by the
independent  public  accountants  who  have  issued a  report  on the  Company's
financial  statements  included  in such  registration  statement,  in each case
covering  substantially  the same  matters  with  respect  to such  registration
statement (and the prospectus included therein) and,

                                        6





in the case of such  accountants'  letter,  with respect to events subsequent to
the date of such financial statements, as are customarily covered in opinions of
issuer's  counsel and in  accountants'  letters  delivered  to  underwriters  in
underwritten  public  offerings of  securities.  The Company  shall also deliver
promptly  to  each  Holder   participating   in  the  offering   requesting  the
correspondence  and memoranda  described  below and to the managing  underwriter
copies of all correspondence between the Commission and the Company, its counsel
or auditors and all memoranda relating to discussions with the Commission or its
staff with  respect to the  registration  statement  and permit  each Holder and
underwriter to do such  investigation,  upon  reasonable  advance  notice,  with
respect to information  contained in or omitted from the registration  statement
as it deems  reasonably  necessary to comply with applicable  securities laws or
rules of the NASD. Such investigation shall include access to books, records and
properties  and  opportunities  to discuss the  business of the Company with its
officers and inde pendent  auditors,  all to such reasonable  extent and at such
reasonable times and as often as any such Holder shall reasonably request.


                  5.3.4 Underwriting Agreement.  The Company shall enter into an
underwriting agreement with the managing  underwriter(s) selected by any Holders
whose Registrable  Securities are being registered pursuant to Section 5.1. Such
agreement shall be reasonably satisfactory in form and substance to the Company,
each  Holder  and  such   managing   underwriters,   and  shall   contain   such
representations, warranties and covenants by the Company and such other terms as
are  customarily  contained  in  agreements  of that type  used by the  managing
underwriter. The Holders shall be parties to any underwriting agreement relating
to an underwritten  sale of their  Securities and may, at their option,  require
that any or all the representations,  warranties and covenants of the Company to
or for  the  benefit  of  such  underwriters  shall  also be made to and for the
benefit  of such  Holders.  Such  Holders  shall  not be  required  to make  any
representations  or  warranties  to  or  agreements  with  the  Company  or  the
underwriters  except as they may relate to such Holders,  their shares and their
intended methods of distribution.

                  5.3.5  Documents to be Delivered  by  Holder(s);  Cooperation.
Each of the  Holder(s)  participating  in any of the foregoing  offerings  shall
furnish to the Company a completed  and executed  questionnaire  provided by the
Company requesting information customarily sought of selling securityholders and
shall otherwise cooperate with the Company's reasonable requests.

6.       Adjustments.

         6.1  Adjustments  to  Exercise  Price  and  Number of  Securities.  The
Exercise  Price and the number of shares of Common Stock  issuable upon exercise
of the Warrant shall be subject to adjustment  from time to time as  hereinafter
set forth:

                  6.1.1 Stock  Dividends,  Split-Ups.  If after the date hereof,
and subject to the  provisions of Section 7.2 below,  the number of  outstanding
shares of Common  Stock is increased  by a stock  dividend  payable in shares of
Common Stock or by a split-up of shares of Common Stock or other similar  event,
then, on the effective  date of such stock  dividend or split-up,  the number of
shares of Common Stock  issuable on exercise of this Warrant  shall be increased
in proportion to such increase in outstanding shares.

                  6.1.2  Aggregation  of Shares.  If after the date hereof,  and
subject to the  provisions of Section 7.2, the number of  outstanding  shares of
Common Stock is decreased by

                                        7





a consolidation,  combination or  reclassification  of shares of Common Stock or
other  similar  event,  then,  upon the  effective  date of such  consolidation,
combination or  reclassification,  the number of shares of Common Stock issuable
on exercise of this Warrant shall be decreased in proportion to such decrease in
outstanding shares.


7.       Adjustments

         7.1  Adjustments  to  Exercise  Price  and  Number of  Securities.  The
Exercise Price and the number of shares of Common Stock  underlying this Warrant
shall be subject to adjustment from time to time as hereinafter set forth:

         7.1.1 Stock  Dividends -  Split-Ups.  If,  after the date  hereof,  and
subject to the provisions of Section 7.2 below, the number of outstanding shares
of Common Stock is increased by a stock  dividend on the Common Stock payable in
shares  of Common  Stock or by a  split-up  of  shares of Common  Stock or other
similar  event,  then,  on the effective  date thereof,  the number of shares of
Common  Stock  issuable  on  exercise  of this  Warrant  shall be  increased  in
proportion to such increase in outstanding shares.

         7.1.2 Aggregation of Shares.  If after the date hereof,  and subject to
the provisions of Section 6.3, the number of outstanding  shares of Common Stock
is decreased by a consolidation,  combination or  reclassification  of shares of
Common Stock or other similar event, then, upon the effective date thereof,  the
number of shares of Common Stock  issuable on exercise of this Warrant  shall be
decreased in proportion to such decrease in outstanding shares.

         7.1.3  Adjustments in Exercise Price.  Whenever the number of shares of
Common Stock  purchasable  upon the  exercise of this  Warrant is  adjusted,  as
provided in this  Section  7.1,  the  Exercise  Price shall be adjusted  (to the
nearest cent) by  multiplying  such  Exercise  Price  immediately  prior to such
adjustment  by a  fraction  (x) the  numerator  of which  shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such  adjustment,  and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.

         7.1.4  Replacement of Securities upon  Reorganization,  etc. In case of
any reclassification or reorganization of the outstanding shares of Common Stock
other than a change  covered by Section  7.1.1 or Section  7.1.2 hereof or which
solely  affects the par value of such shares of Common Stock,  or in the case of
any merger or  consolidation  of the Company  with or into  another  corporation
(other than a  consolidation  or merger in which the  Company is the  continuing
corporation and which does not result in any  reclassification or reorganization
of the  outstanding  shares  of  Common  Stock),  or in the  case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expiration  of the  right of  exercise  of this  Warrant)  to  receive  upon the
exercise  hereof,  for the  same  aggregate  Exercise  Price  payable  hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property  (including cash) receivable upon such  reclassification,
reorganization,  merger or  consolidation,  or upon a dissolution  following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company  obtainable  upon exercise of this Warrant  immediately  prior to
such event;  and if any  reclassification  also results in a change in shares of
Common Stock covered by Sections 7.1.1 or 7.1.2,  then such adjustment  shall be
made pursuant to Sections


                                        8





7.1.1, 7.1.2, 7.1.3 and this Section 7.1.4. The provisions of this Section 7.1.4
shall similarly apply to successive reclassifications,  reorganizations, mergers
or consolidations, sales or other transfers.

         7.1.5  Changes in Form of  Warrant.  This form of  Warrant  need not be
changed  because of any change  pursuant to this  Section,  and Warrants  issued
after  such  change  may state the same  Exercise  Price and the same  number of
shares of Common  Stock and  Warrants  as are stated in the  Warrants  initially
issued pursuant to this Agreement.  The acceptance by any Holder of the issuance
of new Warrants  reflecting a required or permissive  change shall not be deemed
to waive any rights to a prior adjustment or the computation thereof.

         7.2  Elimination  of  Fractional  Interests.  The Company  shall not be
required to issue certificates  representing fractions of shares of Common Stock
upon the  exercise of this  Warrant,  nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the  nearest  whole  number  of  shares  of  Common  Stock or other  securities,
properties or rights.

8.  Reservation  and Listing.  The Company  shall at all times  reserve and keep
available out of its authorized  shares of Common Stock,  solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
thereof.  The Company  covenants and agrees that,  upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock and other
securities  issuable upon such exercise shall be duly and validly issued,  fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants  shall be  outstanding,  the Company  shall use its best
efforts  to cause all  shares of Common  Stock  issuable  upon  exercise  of the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges (or, if applicable on Nasdaq) on which the Common Stock is then listed
and/or quoted.

9.       Certain Notice Requirements.

         9.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company.  If, however, at any time
prior to the  expiration of the Warrants and their  exercise,  any of the events
described in Section 9.2 shall occur,  then, in one or more of said events,  the
Company  shall give written  notice of such event at least fifteen days prior to
the date fixed as a record  date or the date of closing the  transfer  books for
the determination of the stockholders  entitled to such dividend,  distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify  such record date or the date of the closing of the transfer  books,  as
the case may be.

         9.2 Events Requiring Notice.  The Company shall be required to give the
notice described in this Section 9 upon one or more of the following events: (i)
if the Company  shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution, or (ii)
the Company  shall offer to all the holders of its Common  Stock any  additional
shares  of  capital  stock of the  Company  or  securities  convertible  into or
exchangeable for shares of capital stock of the Company, or any option, right or
warrant to subscribe therefor,  or (iii) a merger or reorganization in which the
Company is not the surviving


                                        9





party,  or (iv) a  dissolution,  liquidation or winding up of the Company (other
than  in  connection  with  a  consolidation  or  merger)  or a  sale  of all or
substantially all of its property, assets and business shall be proposed.

         9.3 Notice of Change in Exercise  Price.  The Company  shall,  promptly
after an event  requiring a change in the Exercise  Price  pursuant to Section 6
hereof,  send notice to the Holders of such event and change  ("Price  Notice").
The Price Notice shall  describe the event  causing the change and the method of
calculating  same and  shall be  certified  as being  true and  accurate  by the
Company's President and Chief Financial Officer.

         9.4 Transmittal of Notices. All notices,  requests,  consents and other
communications  under this  Warrant  shall be in writing  and shall be deemed to
have been duly made on the date of delivery if delivered  personally  or sent by
overnight courier,  with  acknowledgment of receipt by the party to which notice
is  given,  or on the fifth  day  after  mailing  if mailed to the party to whom
notice  is  to be  given,  by  registered  or  certified  mail,  return  receipt
requested,  postage  prepaid and properly  addressed  as follows:  (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company,  or (ii) if to the  Company,  to its  principal  executive
office.

10.      Miscellaneous.

         10.1 Headings.  The headings  contained herein are for the sole purpose
of  convenience  of  reference,  and shall  not in any way  limit or affect  the
meaning or interpretation of any of the terms or provisions of this Warrant.

         10.2 Entire Agreement. This Warrant (together with the other agreements
and documents  being  delivered  pursuant to or in connection with this Warrant)
constitutes  the entire  agreement  of the parties  hereto  with  respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.

         10.3 Binding Effect.  This Warrant shall inure solely to the benefit of
and shall be  binding  upon,  the Holder and the  Company  and their  respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable  right,  remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.

         10.4 Governing Law;  Submission to Jurisdiction.  This Warrant shall be
governed by and construed  and enforced in accordance  with the law of the State
of New York,  without  giving  effect to  conflict of laws.  The Company  hereby
agrees  that any  action,  proceeding  or claim  against it  arising  out of, or
relating in any way to this Warrant  shall be brought and enforced in the courts
of the State of New York or of the  United  States of America  for the  Southern
District  of New York,  and  irrevocably  submits  to such  jurisdiction,  which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested,  postage
prepaid,  addressed  to it at the  address  set forth in Section 8 hereof.  Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company  in any  action,  proceeding  or  claim.  The  Company  agrees  that the
prevailing  party(ies)  in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees

                                       10





and expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.

         10.5  Waiver,  Etc.  The failure of the Company or the Holder to at any
time  enforce  any of the  provisions  of this  Warrant  shall  not be deemed or
construed  to be a waiver of any such  provision,  nor to in any way  affect the
validity of this Warrant or any provision  hereof or the right of the Company or
any Holder to thereafter  enforce each and every  provision of this Warrant.  No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this  Warrant  shall be  effective  unless set forth in a written  instrument
executed  by the party or  parties  against  whom or which  enforcement  of such
waiver  is  sought;  and  no  waiver  of  any  such  breach,  non-compliance  or
non-fulfillment  shall be  construed  or  deemed  to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 13th day of August, 1998.

                                     AMERICAN BIOGENETIC, SCIENCES, INC.



                                     By:                                        
                                          Print Name:
                                          Print Title:


                                       11





Form to be used to exercise Warrant:

American Biogenetic Sciences, Inc.
1275 Akron Street
Copaigue, New York  11726

Date:  _____________________, 19___

                  The  undersigned  hereby  elects  irrevocably  to exercise the
within   Warrant  and  to   purchase   ________   shares  of  Common   Stock  of
_________________________ and hereby makes payment of $____________ (at the rate
of  $_________  per share of Common  Stock) in  payment  of the  Exercise  Price
pursuant  thereto.  Please  issue the Common  Stock as to which this  Warrant is
exercised in accordance with the instructions given below.


                                       --------------------------------------
                                       Signature


- - ---------------------------
Signature Guaranteed

                  NOTICE:  The signature to this form must  correspond  with the
name as written upon the face of the within Warrant in every particular  without
alteration or enlargement or any change whatsoever,  and must be guaranteed by a
bank,  other than a savings  bank,  or by a trust  company  or by a firm  having
membership on a registered national securities exchange.

                   INSTRUCTIONS FOR REGISTRATION OF SECURITIES


Name              ________________________________________________________
                                            (Print in Block Letters)


Address           ________________________________________________________
Form to be used to assign Warrant:




                                       12




                                   ASSIGNMENT


                  (To be executed by the registered  Holder to effect a transfer
of the within Warrant):

                  FOR  VALUE  RECEIVED,   ________________________________  does
hereby sell,  assign and  transfer  unto  _________________________________  the
right   to   purchase   _____________________   shares   of   Common   Stock  of
_________________________________  ("Company")  evidenced by the within  Warrant
and does hereby authorize the Company to transfer such right on the books of the
Company.


Dated:____________________, 19___



                                     --------------------------------------
                                     Signature






                  NOTICE:  The signature to this form must  correspond  with the
name as written upon the face of the within Warrant in every particular  without
alteration or enlargement or any change whatsoever.


                                       13


                                   Schedule 1


                                           Number of
Name                                        Warrants
- - ----                                        --------
Jeffrey Berg                                   2,000
Ronald I. Heller                             112,200
Martan & Co.                                 149,600
David Nagelberg                              112,200
Michael Silvestri                             20,000
Eugene Whitehouse                              4,000
                                  TOTAL      400,000




             

EX-10.1(C)

                                                                 Exhibit 10.1(c)
                              EMPLOYMENT AGREEMENT

              JOHN S. NORTH AND AMERICAN BIOGENETIC SCIENCES, INC.

         AGREEMENT,  dated as of the 2nd day of November,  1998,  by and between
AMERICAN BIOGENETIC SCIENCES,  INC., a Delaware  corporation,  having a place of
business at 1375 Akron Street,  Copiague, New York 11726 (hereinafter designated
and referred to as "Company"),  and John S. North,  residing at 7812  Chesapeake
Dr. East, Indianapolis, Indiana 46236 (hereinafter designated and referred to as
"Employee").

         WHEREAS,  the Company desires to employ the Employee in the capacity of
President and Chief Executive Officer of the Company; and

         WHEREAS,  Employee is willing to accept such employment by the Company,
all in accordance with provisions hereinafter set forth.

         NOW THEREFORE,  in  consideration  of the promises and mutual covenants
herein contained, the parties hereto agree as follows:

         1. Term: The term of this Agreement  shall be for a period of three (3)
years commencing November 16, 1998 and automatically terminating on November 15,
2001,  subject to earlier  termination as provided  herein or unless extended by
mutual  consent of both  parties in writing  four (4) months prior to the end of
the term of this  Agreement or any extension  thereof,  but nothing herein shall
require  the  Company  to  agree to any  specific  term or  condition  or to any
continuation of Employee's employment beyond November 15, 2001.

         2.  Employment:  Subject  to the  terms  and  conditions  and  for  the
compensation  hereinafter  set forth,  the Company  employs the Employee for and
during the term of this Agreement. Employee is hereby employed by the Company as
its President and Chief Executive Officer, his powers and duties of an executive
nature which are appropriate  for a President and Chief Executive  Officer shall
be  determined  only by the  Chairman of the Board or the Board of  Directors or
their duly authorized designee,  from time to time; and the Employee does hereby
accept such  employment and agrees to use his best efforts and to devote all his
normal business time,  during the term of this Agreement,  to the performance of
his duties  faithfully,  diligently  and to the best of his  abilities  upon the
conditions  hereinafter set forth.  Employee shall report to the Chairman of the
Board  and  Board of  Directors  (collectively  hereinafter  referred  to as the
"Board") of the Company.

         3. Compensation:  During the term of this Agreement, the Company agrees
to pay Employee,  and Employee agrees to accept, an annual salary of Two Hundred
and Sixty Thousand  Dollars  ($260,000.00)  per year less all applicable  taxes,
payable  every two  weeks,  for all  services  rendered  by  Employee  hereunder
including  being a Director of the Company if elected to the Board of Directors.
In  addition,  the Employee  shall  receive a one time sign on payment of Twenty
Five Thousand  Dollars  ($25,000)  payable on January 15, 1999,  and an interest
free loan of One Hundred Thousand Dollars  ($100,000) which shall be forgiven as
to  twenty-five  (25%)  every  six (6)  months  provided  Employee  is  still an
Employee.

         4. Expenses:  The Company shall reimburse Employee, not less often than
monthly,  for all reasonable  and actual  business  expenses  incurred by him in
connection  with  his  service  to  the  Company,  upon  submission  by  him  of
appropriate vouchers and expense account reports. The Employee shall have use of
a Company American Express Card for Company business purposes.

         5.  Benefits:  In  addition  to  the  salary  to be  paid  to  Employee
hereunder,  the Company shall provide medical and dental insurance and allow the
Employee to participate in any disability, pension,





retirement or other  qualified  plans adopted for the benefit of its  employees,
and in accordance with the Company's Plan(s).  The Employee shall be entitled to
a four (4) weeks annual vacation.

         6. Extent of Service:  The Employee  during the term of this  Agreement
shall devote his full normal business time,  attention and energy and render his
best efforts and skill to the business of the Company.

         7.  Restrictive  Covenant:  (A)  Employee  acknowledges  that  (i)  the
business in which the Company is engaged is intensely  competitive  and that his
employment  by the Company will require that he have access to and  knowledge of
confidential information of the Company,  including, but not limited to, certain
of the Company's confidential plans for the creation, acquisition or disposition
of products,  expansion plans, product development plans,  financial status, and
plans and personnel information and trade secrets, which are of vital importance
to the success of the Company's business; (ii) the direct or indirect disclosure
of any such confidential information to existing or potential competitors of the
Company  would place the Company at a competitive  disadvantage  and would cause
damage,  financial and otherwise,  to the Company's  business;  and (iii) by his
training,  experience and expertise, some of his services to the Company will be
special and unique.  (B) Employee agrees that, during the term of this Agreement
and for a period of one (1) year after the  termination  of this  Agreement,  he
will not  directly or  indirectly  become  affiliated  as an officer,  director,
employee  or  consultant  or as a  substantial  security  holder  with any other
company or entity in a business which is directly  competitive with any business
then being conducted by the Company or its  subsidiaries  within the Continental
United  States or in countries  abroad  participating  in the  Company's  Global
Network.  For the  purpose  hereof,  "substantial  security  holder"  shall mean
ownership, directly or indirectly, of more than 5% of any class of securities of
a company or partnership interest in any partnership.

         8. Discoveries, etc.:

         [A] The Company shall be the owner,  without further  compensation,  of
all  rights  of  every  kind in and  with  respect  to any  reports,  materials,
inventions, processes,  discoveries,  improvements,  modifications,  know-how or
trade  secrets  hereafter  made,  prepared,  invented,   discovered,   acquired,
suggested  or reduced to practice  (hereinafter  designated  and  referred to as
"Property Rights") by Employee in connection with Employee's  performance of his
duties pursuant to this Agreement,  and the Company shall be entitled to utilize
and dispose of such in such manner as it may determine.

         [B] The Employee agrees to and shall promptly disclose to the Board all
Property Rights (whether or not patentable) made,  discovered or conceived of by
him, alone or with others,  at any time during his employment  with the Company.
Any such Property Rights will be the sole and exclusive property of the Company,
and Employee will execute any assignments requested by the Company of his right,
title or interest in any such Property  Rights.  In addition,  the Employee will
also provide the Company with any other  instruments  or documents  requested by
the  Company,  at the  Company's  expense,  as may be  necessary or desirable in
applying for and obtaining patents with respect thereto in the United States and
all foreign countries. The Employee also agrees to cooperate with the Company in
the  prosecution  or defense of any patent claims or  litigation or  proceedings
involving  inventions,  trade  secrets,   trademarks,   services  marks,  secret
processes,  discoveries  or  improvements,  whether or not he is employed by the
Company at the time.

         9. Confidential Information:  Employee recognizes and acknowledges that
the  Company,  through the  expenditure  of  considerable  time and money,  will
acquire, has developed and will continue to develop in the future,  information,
skills, confidential information,  know-how,  formulae,  technical expertise and
methods  relating to or forming part of the Company's  services and products and
conduct of its business, and that the same are confidential and proprietary, and
are "trade  secrets" of the Company.  Employee  understands and agrees that such
trade secrets give or may give the Company a significant  competitive advantage.
Employee  further  recognizes that the success of the Company depends on keeping
confidential  both the trade secrets already developed or to be acquired and any
future developments of trade secrets.  Employee understands that in his capacity
with the Company he will be entrusted  with knowledge of such trade secrets and,
in recognition of the importance  thereof and in consideration of his employment
by the Company  hereunder,  agrees that he will not,  without the consent of the
Board, make any disclosure of trade secrets now or hereafter possessed





by the Company to any person,  partnership,  corporation or entity either during
or after the term  hereunder,  except to such  employees  of the  Company or its
subsidiaries or affiliates, if any, as may be necessary in the regular course of
business and except as may be required pursuant to any court order,  judgment or
decision  from any  court of  competent  jurisdiction.  The  provisions  of this
Section shall continue in full force and effect  notwithstanding any termination
of this Agreement.

         10.  Irreparable  Harm:  Employee  agrees that any breach or threatened
breach by Employee of provisions  set forth in Sections seven (7), eight (8) and
nine (9) of this  Agreement,  would cause the Company  irreparable  harm and the
Company may obtain injunctive  relief against such actual or threatened  conduct
and without the necessity of a bond.

         11.  Return of Company  Property:  Employee  agrees that  following the
termination of his  employment  for any reason,  he shall return all property of
the Company which is then in or thereafter comes into his possession, including,
but not limited to, documents, contracts, agreements, plans, photographs, books,
notes, electronically stored data and all copies of the foregoing as well as any
other materials or equipment supplied by the Company to the Employee.

         12.      Termination:

         [A] Death: In the event of the Employee's  death during the term of his
employment,  this Agreement shall automatically  terminate on the date of death,
and  Employee's  estate shall be entitled to payment of Employee's  salary until
date of death.

         [B]  Disability:  In the event the  Employee,  by reason of physical or
mental  incapacity,  shall  be  disabled  for a  period  of  at  least  two  (2)
consecutive  months  in any of the  years  of this  Agreement  or any  extension
hereof,  the Company shall have the option at any time thereafter,  to terminate
Employee's  employment and to terminate this Agreement;  such  termination to be
effective  ten  (10)  days  after  the  Company  gives  written  notice  of such
termination to the Employee,  and all obligations of the Company hereunder shall
cease upon the date of such termination.  "Incapacity" as used herein shall mean
the  inability  of the Employee to perform his normal  duties as  President  and
Chief Executive Officer.


         [C]      Company's Rights To Terminate This Agreement:

                  [a] The Company shall have the right, before the expiration of
the  term of this  Agreement,  to  terminate  this  Agreement  and to  discharge
Employee for cause (hereinafter "Cause"), and all compensation to Employee shall
cease to accrue upon  discharge of the  Employee for Cause.  For the purposes of
this Agreement,  the term "Cause" shall mean the Employee's (i) violation of the
Company's  written  policy or  directions  of the  Board  which  directions  are
consistent  with  normally  acceptable  business  practices  or the  failure  to
observe,  or the  failure or refusal to perform any  obligations  required to be
performed in accordance with this  Agreement.  (ii) admission or conviction of a
serious crime involving  moral  turpitude or (iii) if the Board  determines that
employee has committed a demonstrable act (or omission) of malfeasance seriously
detrimental to this Company.

                  [b] If the Company,  elects to terminate Employee's employment
for Cause,  under  Section 12 [C] [a](i),  the Company shall first give Employee
written  notice  and a period of ten (10) days to cure such  Cause,  and if such
Cause is not cured in said ten (10) days,  such  termination  shall be effective
five (5) days after the Company gives written notice of such  termination to the
Employee.  In the event of a termination of the Employee's  employment for Cause
in  accordance  with the  provisions  of  Section 12 [C][a]  (ii) or (iii),  the
Company shall have no further obligation to the Employee, except for the payment
of salary through the date of such termination from employment.

         [D]      Termination Without Cause by the Company:
                                                                         



                  [a]  The  Company  shall  have  the  right  to  terminate  the
Agreement without cause on thirty (30) days' written notice to the Employee.

                  [b] In the event  the  Agreement  is  terminated  pursuant  to
subsection  12 [D][a],  the Company  shall pay the  Employee  his then  existing
compensation  for twelve (12) months  payable  monthly  commencing  with the day
following the day the notice  becomes  effective and Employee shall be available
for on call  consulting  services  during such one year period at no  additional
compensation.  If during such one year period Employee enters into an employment
relationship or provides consultation  services,  with a third party then (i) no
further  compensation shall be due to Employee hereunder and (ii) Employee shall
no longer be required to provide on call consulting services.

         13. Travel:  Employee  agrees to work out of the offices of the Company
in  Copiague,  New York,  and spend so much of his normal  business  time at the
other facilities of the Company,  as is necessary to properly fulfill his duties
as its President and Chief  Executive  Officer.  Employee  agrees to relocate to
Long  Island,  New York and maintain an  apartment  or home.  In  addition,  the
Employee  agrees that to the extent  required he shall travel both  domestically
and internationally for the Company.

         14. Waiver:  Any waiver by either party of a breach of any provision of
this  Agreement  shall not operate as or be  construed  as a waiver of any other
breach or default hereof.

         15.  Governing  Law:  The  validity of this  Agreement or of any of the
provisions  hereof shall be  determined  under and  according to the laws of the
State of New York,  and this  Agreement  and its  provisions  shall be construed
according to the laws of the State of New York  without  reference to its choice
of law rules.

         16. Notice:  Any notice required to be given pursuant to the provisions
of this  Agreement  shall be in writing and by registered or certified  mail and
mailed to the following addresses:

                           Company:         American Biogenetic Sciences, Inc.
                                            1375 Akron Street
                                            Copiague, New York 11726
                                            Attention: Alfred J. Roach
                                            Chairman

                           Employee:        John S. North
                                            7812 Chesapeake Dr. East
                                            Indianapolis, Indiana 46236

         17.  Assignment:  The  Employee's  assignment of this  Agreement or any
interest  herein,  or any  monies  due or to  become  due by reason of the terms
hereof,  without the prior written  consent of the Company  shall be void.  This
Agreement  shall be binding  upon the Company,  its  successors  (including  any
transferee of the good will of the Company) or assigns.

         18.  Miscellaneous:  This Agreement  contains the entire  understanding
between the parties hereto and supersedes all other oral and written  agreements
or understandings  between them. No modification or addition hereto or waiver or
cancellation  of any provision  shall be valid except in writing  signed by both
parties.

         19. Obligations of a Continuing Nature: It is expressly  understood and
agreed that the covenants,  agreements and restrictions undertaken by or imposed
on Employee  hereunder,  which are stated to exist or continue after termination
of Employee's employment with the Company, shall exist and continue.

         20.  Severability:  Employee  agrees  that  if any  of  the  covenants,
agreements or restrictions on the part of Employee are held to be invalid by any
court of competent  jurisdiction,  such holding will not  invalidate  any of the
other  covenants,  agreements  and/or  restrictions  herein  contained  and such
invalid provisions shall






be severable so that the invalidity of any such  provision  shall not invalidate
any others.  Moreover,  if any one or more of the  provisions  contained in this
Agreement  shall be held to be  excessively  broad as to  duration,  activity or
subject,  such provisions shall be construed by limiting and reducing them so as
to be enforceable to the maximum extent allowed by applicable law.

         21.  Representation:  Employee  represents and warrants that he has the
legal right to enter into this  Agreement and to perform all of the  obligations
on his part to be performed  hereunder in accordance  with its terms and that he
is not a party  to any  agreement  or  understanding,  written  or  oral,  which
prevents  him  from  entering  into  this  Agreement  or  performing  all of his
obligations  hereunder.  In the  event of a  breach  of such  representation  or
warranty on his part or if there is any other legal  impediment  which  prevents
him from  entering  into this  Agreement or  performing  all of his  obligations
hereunder,  the Company  shall have the right to  terminate  this  Agreement  in
accordance with Section 12[C][a]; in which event the "Cause" shall not be deemed
curable under Section  12[C][b],  and Employee will save harmless the Company in
the event of legal action by former employers for injunction relief or damages.


         22. Stock  Option:  Employee  and the Company  agree to execute a stock
option  agreement  that Employee  shall have a right to purchase an aggregate of
300,000  shares of Class A Common  Stock of the Company in  accordance  with the
Company's  Stock Option Plan ("Plan"),  exercisable at the rate of 25% per year.
The options will be exercisable at the price of $.25 per share. The options will
be subject to all of the terms and  conditions  of the Plan and Employee  hereby
agrees to all such terms and conditions.  The Company will have an annual review
for the issuance of additional  Stock  Options to the  Employee.  If the Company
terminates  the  Agreement  prior to the term hereof  without  Cause per Section
12[C], the Employee shall retain all of the above Stock Options granted.

         23.  Descriptive  Headings:  The  headings  contained  herein  are  for
reference  purposes  only  and  shall  not in any  way  affect  the  meaning  or
interpretation of this Agreement.





                   IN WITNESS  WHEREOF,  the  parties  have duly  executed  this
Agreement as of the day and year first above written.

                                       AMERICAN BIOGENETIC SCIENCES, INC.

                                       By:  /s/ Alfred J. Roach
                                           -------------------------------------
                                                Alfred J. Roach
                                                Chairman and CEO

                                       By: /s/  John S. North
                                           -------------------------------------
                                                John S. North
                                                Employee

EX-21

                                                                      Exhibit 21

                              LIST OF SUBSIDIARIES




                                   Jurisdiction of      Name(s) under which
Subsidiary                         Incorporation        Subsidiary does business

American Biogenetic 
   Sciences (Ireland) Ltd.         Ireland                   *

Stellar Bio Systems, Inc.          Maryland                  *


- - --------------------------------


*  Not applicable

EX-24

                                                                      Exhibit 24

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS




As independent public accountants, we hereby consent to the incorporation of our
report  dated  February  18,  1998  included  in this Form 10-K,  into  American
Biogenetic Sciences, Inc.'s previously filed Registration Statements on Form S-8
(File Nos. 33-35992, 33-39683,  33-51240,  33-65416,  333-09473, and 333-59351),
and previously filed Registration  Statements on Form S-3 (File Nos.  333-13615,
333-13619, 333-13623, 333- 14447, 333-59345 and 333-60117 ).




                                                      /s/ Arthur Andersen LLP


Melville, New York
March 29, 1999

EX-27

 

<ARTICLE>                     5
<LEGEND>
THIS SCHEDULE CONTAINS TWELVE MONTHS YEAR-TO-DATE SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM AMERICAN BIOGENETIC SCIENCES, INC. 1998 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998.

<CIK>                         0000856984
<NAME>                        AMERICAN BIOGENETIC SCIENCES, INC.
       
                             
<PERIOD-TYPE>                              12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                       3,047,000
<SECURITIES>                                         0
<RECEIVABLES>                                  177,000
<ALLOWANCES>                                         0
<INVENTORY>                                    545,000
<CURRENT-ASSETS>                                40,000
<PP&E>                                       2,349,000
<DEPRECIATION>                               1,718,000
<TOTAL-ASSETS>                               6,514,000
<CURRENT-LIABILITIES>                          862,000
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        39,000
<OTHER-SE>                                   5,557,000
<TOTAL-LIABILITY-AND-EQUITY>                 6,514,000
<SALES>                                      1,197,000
<TOTAL-REVENUES>                             1,197,000
<CGS>                                          465,000
<TOTAL-COSTS>                                  465,000
<OTHER-EXPENSES>                             2,161,000
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             614,000
<INCOME-PRETAX>                            (6,408,000)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                        (6,408,000)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                            (1,140,000)
<CHANGES>                                            0
<NET-INCOME>                               (7,548,000)
<EPS-PRIMARY>                                    (.29)
<EPS-DILUTED>                                    (.29)