UNITED STATES OF AMERICA
                            Before the
                SECURITIES AND EXCHANGE COMMISSION



SECURITIES ACT of 1933
Release No.  7358 / October 17, 1996

SECURITIES EXCHANGE ACT of 1934
Release No. 37833 / October 17, 1996

ACCOUNTING AND AUDITING ENFORCEMENT
Release No.  843 / October 17, 1996

ADMINISTRATIVE PROCEEDING
File No. 3-9169

-------------------------------                               
                               :
                               :        ORDER INSTITUTING 
In the Matter of:              :        PROCEEDINGS PURSUANT TO
                               :        SECTION 8A OF THE         
                               :        SECURITIES ACT OF 1933
     CAMBRIDGE BIOTECH         :        AND SECTION 21C OF THE
       CORPORATION,            :        SECURITIES EXCHANGE ACT
                               :        OF 1934, MAKING FINDINGS
Respondent.                    :        AND IMPOSING A CEASE-AND-
                               :        DESIST ORDER
                               :          
                               :
--------------------------------

                               I. 
 
     The Securities and Exchange Commission ("Commission") deems
it appropriate that public administrative proceedings be
instituted pursuant to Section 8A of the Securities Act of 1933
("Securities Act") and Section 21C of the Securities Exchange Act
of 1934 ("Exchange Act") against Cambridge Biotech Corporation
("CBC").
 
                               II. 
 
     In anticipation of the institution of these proceedings, CBC
submitted an Offer of Settlement ("Offer"), which the Commission
has determined to accept.  Solely for the purpose of these
proceedings and any other proceedings brought by or on behalf of
the Commission or in which the Commission is a party, and without
admitting or denying the Commission's findings contained herein,
but admitting the jurisdiction of the Commission over CBC and the
subject matter of this proceeding, CBC consents to the issuance
of this Order Instituting Proceedings, Making Findings and
Imposing a Cease-and-Desist Order (the "Order"). 
==========================================START OF PAGE 2======

                              III. 

                             FINDINGS
 
     On the basis of this Order and the Offer, the Commission
makes the following findings: -[1]-
 
A.   FACTS

     1.   Respondent
 
     CBC is a Delaware corporation headquartered in Worcester,
Massachusetts.  CBC reports its financial results on a fiscal
year ending December 31.  CBC made its initial public offering of
common stock in March 1983, and secondary public offerings in
April 1986, June 1988, October 1991 and December 1993.  CBC's
shares are registered with the Commission pursuant to Section
12(g) of the Exchange Act and, at times relevant hereto, were
traded through the National Association of Securities Dealers
Automated Quotation System. -[2]-

     2.   Summary 
 
     Between June 1991 and December 1992, CBC recognized revenue
from a series of nine sales and license transactions even though
they failed to meet the revenue recognition requirements of
Generally Accepted Accounting Principles ("GAAP"). -[3]- 
These transactions were structured by the former Chief Executive
Officer (the "CEO") and the former Chief Financial Officer (the




---------FOOTNOTES----------
     -[1]-     The findings are not binding on anyone other than
               the respondent.

     -[2]-     CBC filed for bankruptcy on July 7, 1994, and its
               plan of reorganization was confirmed by order of
               the Bankruptcy Court on July 18, 1996.  Pursuant
               to the plan of reorganization, a newly-formed
               holding company, Aquila Pharmaceuticals, Inc.,
               will be the successor to CBC for Exchange Act
               reporting purposes, and CBC is anticipated to
               cease to be a reporting company.

     -[3]-     GAAP with regard to revenue recognition is set
               forth in Financial Accounting Standards Board
               ("FASB") Statement of Financial Accounting
               Concepts No. 5 ("CON 5"), entitled Recognition and
               Measurement in Financial Statements of Business
               Enterprises.
==========================================START OF PAGE 3======

"CFO") of CBC. -[4]-  Recognition of the revenue falsified
CBC's sales records and caused it to report materially inflated
revenues and earnings.  The transactions included shipments of
product with no expectation of payment, premature recognition of
license fee revenues, and use of corporate funds to resolve
outstanding receivables by creating the false appearance that CBC
had purchased unrelated goods and services, when in fact CBC had
simply "bought" its own product back.

     During the audit of CBC's 1991 and 1992 financial
statements, the CEO and the CFO attempted to deceive CBC's
independent auditors by directing the completion of the circular
transactions, by obtaining false audit confirmations, and by
obtaining false documentation of agreements having been reached
in earlier periods.

     CBC thereby overstated revenue by $2.652 million (10.1%) and
reported a net income before taxes of $497,851, instead of a net
loss before taxes of $1.836 million for the year ended December
31, 1991, and overstated revenue by $3.571 million (10.3%) and
reported a net loss before taxes of $11.404 million instead of a
net loss before taxes of $14.765 million for the year ended
December 31, 1992.  The fraudulent operating results were
included in CBC's annual reports on Form 10-K ("Form 10-K") filed
with the Commission for its fiscal years ended December 31, 1991
and December 31, 1992, in CBC's Form S-3 Registration Statement
("Form S-3") for its public offering in October 1991 (the "public
offering"), in CBC's Form S-3 for its shelf registration in
December 1993 (the "shelf registration"), and in most of CBC's
quarterly reports on Form 10-Q ("Form 10-Q") filed with the
Commission during the period.

     3.   Fraudulent Transactions in 1991

          a.   Q2 - The English Distributor - $975,000

     During June 1991, at the CEO's direction, CBC's English
distributor agreed to place an order for $975,000 worth of
product with no obligation to pay.  In the fall of 1991, the CFO
devised a scheme to retrieve the product and simultaneously make
it appear that the $975,000 price was paid by the English
distributor to CBC.  In December 1991, at the CFO's direction,
CBC's Irish subsidiary, Cambridge Biotech Limited ("CBL"),
-[5]- ordered $1.097 million worth of a different product
from a third company.  The product that CBL purchased, however,
was actually the same product that had been shipped to the

---------FOOTNOTES----------
     -[4]-     CBC terminated the CEO on May 9, 1994, and the CFO
               had previously resigned from CBC on June 30, 1993.

     -[5]-     CBC sold CBL in 1995.
==========================================START OF PAGE 4======

English distributor.  That product had been intentionally
mislabelled as the different product to avoid detection of the
scheme.  The funds from this "purchase" were used to pay the
English distributor's "debt" to CBC in full.
 
          b.   Q3 - The Swiss Distributor - $817,000

     During the summer of 1991, CBC began discussing with its
Swiss distributor the possibility that CBC would acquire the
Swiss distributor.  In the fall of 1991, at the CFO's direction,
the Swiss distributor agreed to take delivery of product with no
obligation to pay for it.  In November 1991 (after the revenue
from this transaction had been included in CBC's reported results
for the third quarter of 1991), CBC agreed to acquire certain of
the Swiss distributor's assets for a purchase price that netted
out the $817,000 receivable.

          c.   Q4 - Two fraudulent transactions totalling
               $860,500                                  

               i.   The English Trading Company - $600,000

     During December 1991, at the CFO's direction, an English
trading company agreed to order $600,000 of product for the
manufacture of tests for the presence of the HIV virus, for
ultimate delivery to CBL, and with no obligation to pay.  The
transaction arose in part because of a concern that U.S. Food and
Drug Administration ("FDA") regulations did not permit CBC to
supply certain raw materials for CBL's manufacture of HIV tests
to be sold into third world countries.  In December 1991, the CFO
and the CEO had agreed to find a way around these regulations.  

     In April 1992, the CFO and CEO devised a scheme to make it
appear that the English trading company had paid for its $600,000
order.  At the CFO's and CEO's direction, CBL bought raw material
from a company related to the English trading company, paying
$737,349, when the true vale of the material was $48,640.  The
sequence was: 1) CBL paid the related company $737,349 under
cover of a purchase order for the raw material, 2) the related
company bought the raw material, which was shipped to CBL, 3) the
related company provided $600,000 to the English trading company,
4) the English trading company paid the $600,000 back to CBL. 
The English trading company and the related company retained the
$88,709 difference as a 5% "commission" on the transaction, and
for shipping costs, duties and taxes.

               ii.  Q4 - The Irish Company - $260,500

     During December 1991, at the CFO's direction, an Irish
company that had previously supplied laboratory materials to CBL
agreed to order $260,500 of product for the manufacture of tests
for the presence of the HIV virus, for ultimate delivery to CBL,
==========================================START OF PAGE 5======

and with no obligation to pay.  This transaction also was partly
structured to evade the FDA regulations.  The product was not
properly refrigerated for shipment, however, and it spoiled. 
Nevertheless, at the CFO's direction, the sale was not reversed
until the second and third quarters of 1992.

     4.   Fraudulent Transactions in 1992

          a.   Q2 - The Irish Company - $204,000

     In June 1992, at the CEO's and the CFO's direction, the
Irish company agreed to order $204,000 of product for the
manufacture of tests for the presence of the HIV virus, for
ultimate delivery to CBL, and with no obligation to pay.  In
October 1992, the CFO devised a scheme to make it appear that the
Irish company had paid for its $204,000 order.  At the CFO's
direction, a CBL officer paid the Irish company $214,000 for
consulting work that the CFO claimed that he had agreed to have
the Irish company perform.  The Irish company simultaneously used
these funds to pay its $204,000 "debt."  No such consulting work
was ever performed or agreed to.

          b.   Q3 - Three fraudulent transactions totalling
               $4.726 million                              

               i.   The U.S. Company - $726,000

     During the summer and fall of 1992, CBC and a U.S. company
had attempted to negotiate an agreement for the joint development
of a combination test for the presence of two infectious
diseases.  As proposed by CBC, the project included a requirement
that the U.S. company purchase $726,000 of raw materials from
CBC.  By September 30, 1992, the U.S. company had not committed
to fund the project.  Despite this, in November 1992, the CFO
instructed that the $726,000 purchase of raw materials be
recorded as revenue for the third quarter of 1992.  In December
1992, the U.S. company's president wrote to CBC that funding
could not be committed to until at least 1993.  Both the CEO and
the CFO received copies of the letter.  Despite this, the sale
was not reversed.

     During early 1993, the U.S. company's president told the CEO
that the U.S. company did not want to pursue the project. 
Despite this, in the fall of 1993, the CEO devised a scheme to
make it appear that the U.S. company had paid its "debt."  At the
CEO's suggestion, the U.S. company and its joint venture partner
agreed to pay the amount of the outstanding receivable to
purchase from CBC certain "clones" for the production of
antigens.  In November 1993, the U.S. company and its joint
venture partner each paid one-half of the amount of the
outstanding receivable for the purchase of three clones each. 
Despite the substitution of these transactions for the original
==========================================START OF PAGE 6======

transaction, CBC did not restate its results for the third
quarter of 1992 to reflect that the original revenue was
improperly recognized.

               ii.  Q3 - The European Company - $2 million 

     In September 1992, CBC and a European company entered into
an agreement that granted the European company a license to
commercialize a CBC product in certain vaccines, and required CBC
to supply raw material.  The agreement stated that the license
fees for 1992 and 1993 were to be paid as follows: $2 million by
September 30, 1992, and $3 million on January 15, 1993.  In
October 1992, the CFO suggested to the CEO that, to improve the
appearance of CBC's third quarter results, the European company
"could have" agreed in September to have the 1992 license fee be
$4 million (instead of $2 million), and to have the 1993 license
fee be $1 million (instead of $3 million), which would have
allowed CBC to recognize an additional $2 million for the third
quarter of 1992.

     At the CEO's request, and using language provided by the
CEO, the European company provided a letter that falsely
suggested that the companies had agreed in September 1992 that
the 1992 license fee would be $4 million, $2 million of which
would be payable on January 15, 1993, along with the $1 million
license fee for 1993.  This agreement had not in fact occurred. 
Despite this, in November 1992, at the CFO's direction, the
additional $2 million from the European company was recorded as
revenue for the third quarter of 1992.

               iii. Q3 - The Second European
                    Company - $2 million    

     During 1992, CBC attempted to reach an agreement with a
second European company for it to pay CBC $2 million for rights
to a vaccine technology.  No agreement was reached by September
30, 1992, however.  Despite this, in November 1992, at the CFO's
direction, CBC booked $2 million in license fee revenue from the
second European company.  In February 1993, CBC and the second
European company entered an agreement that granted the second
European company rights to the vaccine technology and to another
vaccine, for a payment of $3 million, the first $1 million of
which was paid in April 1993.

     During the 1992 audit, the CEO misrepresented to CBC's
auditors that he had reached an oral agreement with the second
European company in September 1992 concerning the $2 million for
the original vaccine technology, but that the execution of the
agreement had been delayed until February 1993 as the companies
attempted to expand the scope of the joint venture to include,
among other things, the other vaccine.  CBC's auditors insisted
that the second European company confirm these facts. 
==========================================START OF PAGE 7======

Accordingly, at the CEO's request, the second European company's
general counsel countersigned a letter on CBC letterhead signed
by the CEO.  The letter falsely stated that the second European
company made a commitment by September 30, 1992 to pay CBC $2
million for rights to the vaccine technology.

          c.   Q4 - The Irish Company - $612,000

     In December 1992, the CEO and the CFO agreed that CBC should
effect another sale to the Irish company.  At the CFO's request,
the Irish company agreed to order $612,000 of product with no
obligation to pay.  In January 1993, CBC's auditors sought to
confirm this sale with the Irish company.  The CFO agreed to pay
the Irish company's principal $42,000 to falsely confirm the
transaction.  At the CFO's direction, $42,000 of CBC funds was
transferred to the Irish company's principal's personal bank
account, and the Irish company's principal then confirmed the
transaction with CBC's auditors.

     In May 1993, the CFO devised a scheme to make it appear that
the Irish company had provided services in exchange for its debt.

At the CFO's direction, CBC began writing down the receivable
from the Irish company at the rate of $75,000 per month by
charging an expense account for consulting services purportedly
provided by the Irish company to CBL, which in fact were never
agreed to or provided.

     5.   False Filings

     In its Form 10-Q for the second quarter of 1991, CBC
reported revenues of $7.072 million, and a net loss before taxes
of $420,000.  Without the fraudulent $975,000 product sale to the
English distributor in June 1991, however, the revenues would
have been $6.097 million, and the net loss before taxes would
have been $1.13 million.  Recording this sale overstated second
quarter 1991 revenues by 16%, and understated the net loss before
taxes by $710,000.

     On August 23, 1991, CBC filed the Form S-3 for the public
offering.  The public offering of 3.8 million shares at $7.75 per
share, or approximately $27 million, was declared effective on
October 16, 1991.  The Form S-3 included the results reported on
Form 10-Q for the second quarter of 1991.

     In its Form 10-Q for the third quarter of 1991, CBC reported
revenues of $7.363 million for the quarter, and a net loss before
taxes of $229,005.  Without the fraudulent $817,000 product sale
to the Swiss distributor in September 1991, however, third
quarter revenues would have been $6.546 million, and the net loss
before taxes would have been $775,415.  Recording this sale
overstated third quarter 1991 revenues by approximately 12.5%,
and understated the net loss before taxes by $546,410.
==========================================START OF PAGE 8======

     In its Form 10-K for 1991, CBC reported revenue of $28.981
million for the year, and net income before taxes of $497,851. 
Of total revenues, however, $2.652 million was improperly
recognized for the June 1991 sale to the English distributor, the
September 1991 sale to the Swiss distributor, and the December
1991 sales of $600,000 to the English trading company and
$260,500 to the Irish company.  These transactions overstated
revenues by 10.1%.  Net income before taxes was overstated by
$2.334 million.

     In its Form 10-Q for the second quarter of 1992, CBC
reported revenues of approximately $10.936 million for the
quarter, and net income before taxes of $899,000.  Without the
fraudulent $204,000 sale to the Irish company in June 1992,
however, net income before taxes would have been $706,000. 
Accordingly, second quarter revenues were overstated by 1.9%, and
net income before taxes was overstated by 27%.

     In its Form 10-Q for the third quarter of 1992, CBC reported
revenues of approximately $12 million for the quarter, and a net
loss before taxes of $5.691 million.  Of total revenues, however,
$4.726 million was improperly recognized for the three
transactions that, in November 1992, the CFO had directed be
recorded as revenue as of September 30, 1992:  the $726,000
product sale to the U.S company in connection with the joint
development project, the $2 million license fees to be paid by
the European company, and the $2 million license fees to be paid
by the second European company.  These transactions overstated
revenue by approximately $4.726 million, and the net loss before
taxes should have been reported as $10.362 million.  Thus,
revenues for the third quarter of 1992 were overstated by
approximately 64%, and the net loss before taxes was understated
by $4.671 million.

     In its report on Form 10-K for 1992, CBC reported revenue of
approximately $38.138 million for the year, and a net loss before
taxes of $11.404 million.  Of total revenues, however,
approximately $3.571 million was improperly recognized for the
June 1992 sale to the Irish company, the $612,000 sale to the
Irish company in December 1992, the product sale to the U.S
company in connection with the joint development project
(including an additional $29,425 booked in December 1992 when the
lots that had been isolated from stock were priced), and the
license fees to be paid by the European company.  These
transactions overstated revenues by 10.3%.  The net loss before
taxes was understated by $3.361 million.

     On May 21, 1993, CBC filed the Form S-3 for the shelf
registration.  On October 29, 1993, during review of the filing
by the Commission staff, CBC restated its third quarter 1992
results, and its 1992 results, reversing the $2 million in
revenue from the second European company and stating that it
==========================================START OF PAGE 9======

would be recognized over successive periods.  The restatement and
the Form S-3, however, did not disclose that 1) there were no
facts supporting recognition of the revenue from the second
European company as of September 30, 1992, 2) third quarter 1992
results had been overstated by an additional $2.726 million, 3)
1992 results had been overstated by an additional $1.571 million
or that 4) 1991 results had been overstated by $2.652 million. 
The offering went effective on December 23, 1993, and CBC sold a
total of $6.6 million worth of common stock during January and
February 1994.

B.   LEGAL ANALYSIS

     1.   The Antifraud Provisions

     Section 10(b) of the Exchange Act and Rule 10b-5 thereunder
proscribe the making of materially false and misleading
statements "in connection with the purchase or sale of any
security."  Section 17(a) of the Securities Act prohibits the
making of such statements in connection with the "offer or sale"
of securities.  Violations of Section 10(b) and Rule 10b-5 occur
when an issuer makes material misstatements in registration
statements, prospectuses or periodic reports filed with the
Commission and trading thereafter occurs in the issuer's
securities.  SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir.
1968), cert. denied, 394 U.S. 976 (1969).

     The filing of false and misleading periodic reports also is
a violation of Section 10(b) of the Exchange Act and Rule 10b-5
thereunder, because reports of publicly traded companies affect
the markets for the offer, sale and purchase of their 
securities.  SEC v. World-Wide Coin Investment, Ltd., 657 F.
Supp. 724, 746 n.35 (N.D. Ga. 1983); SEC v. Benson, 657 F. Supp.
1122, 1131 (S.D.N.Y. 1987).  The misstatements and omissions in
the filings must be material.  Id.  Further, to hold an issuer
liable under Section 10(b) of the Exchange Act and Section
17(a)(1) of the Securities Act, a showing of scienter is
necessary.  Aaron v. SEC, 446 U.S. 680, 697 (1980). -[6]-    
 

     The misrepresentations and omissions in CBC's Form S-3, Form
10-Q and Form 10-K filings were material.  Figures relating to
revenue, sales and net income are critical in determining an
issuer's financial condition.  It is well settled that
"information concerning the financial condition of a company is
presumptively material."  SEC v. Blavin, 557 F. Supp. 1304, 1313
(E.D. Mich. 1983), aff'd, 760 F.2d 706 (6th Cir. 1985); SEC v.

---------FOOTNOTES----------
     -[6]-     Scienter does not have to be shown for violations
               of Sections 17(a)(2) or 17(a)(3) of the Securities
               Act.  Aaron v. SEC, 446 U.S. at 697 (1980).
==========================================START OF PAGE 10======

Murphy, 626 F.2d 633, 653 (9th Cir. 1980); SEC v. Shapiro, 494
F.2d 1301, 1307 (2d Cir. 1974); Burlington Industries v. Edelman,
666 F. Supp. 799, 815 (M.D.N.C. 1987).  A reasonable investor
would have viewed the differences between the real and reported
figures as significantly altering the total mix of information
made available.
 
     CBC acted with the requisite scienter.  CBC committed the
fraudulent acts through the acts of the CEO and the CFO.  The
scienter of the CEO and the CFO is imputed to CBC.  See, SEC v.
First Securities Co. of Chicago, 463 F.2d 981, 985-88 (7th Cir.),
cert. denied, 409 U.S. 880 (1972).  The CEO and the CFO knew or
were reckless in not knowing that the misrepresentations and
omissions would cause the filings to be materially misstated.

     2.   Reporting and Recordkeeping Provisions

     Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13
thereunder require issuers of registered securities to file with
the Commission annual and quarterly reports, respectively. 
Courts have uniformly held that it is implicit in this
requirement that the information provided be accurate.  See,
e.g., SEC v. Savoy Industries, Inc., 587 F.2d 1149, 1165 (D.C.
Cir. 1978), cert. denied, 440 U.S. 913 (1979).  Regulation S-X,
17 C.F.R.  210.4, provides in part, that, unless the Commission
has provided otherwise, financial statements not prepared in
conformity with generally accepted accounting principles ("GAAP")
are presumed to be misleading.  Section 13(a) also requires that
issuers comply with the disclosure requirements of Regulation S-
K, 17 C.F.R.  229.10 et seq.  In addition, Exchange Act Rule
12b-20 requires that these periodic reports contain all
information necessary to ensure that statements made in them are
not materially misleading.  No showing of scienter is necessary
to establish a violation of Section 13(a) or the rules
thereunder.  Id. at 1167.

     Section 13(b)(2)(A) of the Exchange Act requires issuers to
make and keep books, records, and accounts which accurately and
fairly reflect the transactions and dispositions of their assets.

No showing of scienter is necessary to establish a violation of
Section 13(b)(2)(A) or the rules thereunder.  SEC v. World-Wide
Coin Investments, Ltd., 567 F. Supp. 724, 749 (N.D. Ga. 1983).

      CBC, during 1991, 1992 and 1993, violated Section 13(a) of
the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder by
filing annual and quarterly reports that contained false and
misleading financial statements.  CBC also violated Section
13(b)(2)(A) of the Exchange Act by maintaining false and
misleading books, records and accounts which improperly reflected
sales from transactions that did not qualify as revenue under
GAAP.
 
==========================================START OF PAGE 11======
==========================================START OF PAGE 12======

Based on the foregoing, the Commission concludes that:

     CBC violated Section 17(a) of the Securities Act and
Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and
Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.
 
                               IV. 
 
                              ORDER

     Accordingly, IT IS HEREBY ORDERED, pursuant to Section 8A of
the Securities Act and Section 21C of the Exchange Act, that
Cambridge Biotech Corporation cease and desist from committing or
causing any violation and any future violation of Section 17(a)
of the Securities Act and Sections 10(b), 13(a) and 13(b)(2)(A)
of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13
thereunder.

 
     By the Commission.


                                   Jonathan G. Katz
                                   Secretary