As filed with the Securities and Exchange Commission on November 14, 1997
 
                                                 Registration No. 333-__________

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                            REGISTRATION STATEMENT ON
                                    FORM S-8
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                   ----------

                        INTERNEURON PHARMACEUTICALS, INC.
             (Exact name of registrant as specified in its charter)

                                   ----------

            
           Delaware                                     04-3047911
           --------                                     ----------
(State or other jurisdiction                       (I.R.S. Employer I.D.
     of Incorporation)                                    number)

                                   ----------
 
                       INTERNEURON PHARMACEUTICALS, INC.
                                99 Hayden Avenue
                               Lexington, MA 02173
                                 (781) 861-8444
   (Address and telephone number of Registrant's principal executive offices)

                                   ----------
 
                          1997 EQUITY INCENTIVE PLAN
                              (Full Title of Plan)
 
                                   ----------

          Glenn L. Cooper, M.D., President and Chief Executive Officer
                        INTERNEURON PHARMACEUTICALS, INC.
                                99 Hayden Avenue
                               Lexington, MA 02173
                                 (781) 861-8444
               (Address and telephone number of agent for service)

                                   ----------
                                    Copy to:
                               Jill M. Cohen, Esq.
                      Bachner, Tally, Polevoy & Misher LLP
                               380 Madison Avenue
                            New York, New York 10017
                                 (212) 687-7000


<TABLE>
<CAPTION>


                                           CALCULATION OF REGISTRATION FEE
===========================================================================================================================
          Title of                  Amount            Proposed Maximum        Proposed Maximum            Amount of
Securities to be Registered    to be Registered        Offering Price     Aggregate Offering Price     Registration Fee
                                                       Per Share (2)                (1)
---------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                    <C>                     <C>                       <C>
Common Stock, $.001 par
value                           1,750,000 (1)             $11.125               $19,468,750               $5,899.62
---------------------------------------------------------------------------------------------------------------------------

</TABLE>


(1)  Pursuant to Rule 416  promulgated  under the  Securities  Act an additional
     undeterminable  number of shares of  Common  Stock is being  registered  to
     cover any  adjustment  in the number of shares of Common Stock  pursuant to
     the  anti-dilution  provisions of the 1997 Equity Incentive Plan.  Includes
     675,000  shares  which  are  also   registered  for  sale  by  the  Selling
     Stockholders.

(2)  Based on the average of the high and low sales price of the Common Stock as
     of November 12, 1997 and estimated  solely for purposes of calculating  the
     registration fee pursuant to Rule 457(a) under the Securities Act.

In addition, pursuant to Rule 416(c) under the Securities Act, this Registration
Statement also covers an indeterminate amount of interests to be offered or sold
pursuant to the employee benefit plan described herein.


================================================================================






                                EXPLANATORY NOTE

     The  first  part  of this  Registration  Statement  has  been  prepared  in
accordance  with  the  requirements  of Form S-8 and is  intended  to be used to
register shares to be issue and sold pursuant to the Interneuron Pharmaceuticals
Inc. 1997 Equity  Incentive Plan (the "Plan").  The Reoffer  Prospectus filed as
part of this  Registration  Statement has been  prepared in accordance  with the
requirements  of Form S-3 and may be used for  reofferings  or resales of common
stock to be  acquired  by the  participants  in the Plan who are deemed  control
persons of the Company.

                               PART I OF FORM S-8

     The documents  containing the  information  specified in Part I of Form S-8
will be sent or given to employees as specified by Rule 428(b)(1). In accordance
with the  instructions  to Part I of Form S-8, such  documents will not be filed
with  the  Commission  either  as  part  of this  registration  statement  or as
prospectuses or prospectus supplements pursuant to Rule 424.

                               REOFFER PROSPECTUS

                        INTERNEURON PHARMACEUTICALS, INC.
                         675,000 shares of Common Stock

     This  Prospectus  relates to the resale of 675,000 shares (the "Shares") of
Common  Stock,  par value $.001 per share (the  "Common  Stock") of  Interneuron
Pharmaceuticals,  Inc.  ("Interneuron"  and the "Company"),  which are issuable,
subject to vesting and certain other  conditions,  pursuant to restricted  stock
awards  ("Restricted Stock Awards") granted to executive officers of the Company
(the "Selling Stockholders") under the Company's 1997 Equity Incentive Plan (the
"Plan").  The  Reoffer  Prospectus  is  being  filed  as part of a  Registration
Statement  on Form S-8 to enable  the  Selling  Stockholders  to sell the Shares
issuable  to them in the public  market  from time to time.  The Shares  vest in
installments  aggregating  225,000  per year in each of January  1998,  1999 and
2000.

     The Plan covers an aggregate of 1,750,000  shares of Common Stock which may
be issued  pursuant to Restricted  Stock Awards,  subject to vesting and certain
other conditions. The Plan was authorized for adoption by the Board of Directors
in  October  1997  and,  pursuant  to  Board  authorization,   approved  by  the
Compensation  Committee of the Board in November 1997, as an integral  component
of a  management  and  employee  incentive  and  retention  program.  The  Board
determined  that such program,  including the Plan, was in the best interests of
the Company in order to retain,  motivate and provide incentive to the Company's
management and other  employees,  particularly in response to the perceived risk
of attrition of key personnel and employee  morale  issues  resulting  after the
withdrawal of Redux and related  negative media coverage and legal  proceedings.
See "Risk Factors".

     Restricted  Stock Awards to acquire an  aggregate of 1,328,704  Shares have
been  granted to all  current  employees  of  Interneuron  in  consideration  of
services rendered to the Company by such employees. Of these Shares, 675,000 are
subject to awards granted to executive  officers,  653,704 are subject to awards
granted to other  employees  of the Company and 421,296 are  reserved for future
grants of Restricted Stock Awards to individuals who are not currently executive
officers of the Company. The number of Shares subject to Restricted Stock Awards
granted to each individual was based primarily on the employee's compensation.

     The Selling  Stockholders may sell all or a portion of the Shares from time
to time in  transactions  on the Nasdaq  National  Market or other  exchanges or
markets on which the Shares may be traded,  in the  over-the-counter  market, in
negotiated  transactions,  through  the  writing  of  options on the Shares or a
combination  of such  methods  of sale or  through  other  means.  Sales  may be
effected at fixed prices that may be changed, at market prices prevailing at the
time  of  sale,  at  prices  related  to such  prevailing  market  prices  or at
negotiated prices.

     The Selling Stockholders may effect such transactions by selling the Shares
to or through broker-dealers  (including  broker-dealers which may be affiliated
with  any  such  Selling   Stockholder)  and  such  broker-dealers  may  receive
compensation  in the form of  discounts,  concessions  or  commissions  from the
Selling   Stockholders   or  the   purchasers   of  the  Shares  for  whom  such
broker-dealers may act as agent or to whom they sell as principal or both (which
compensation  to a  particular  broker-dealer  might be in excess  of  customary
commissions). See "Selling Stockholders" and "Plan of Distribution."

     None  of  the  proceeds  from  the  sale  of  the  Shares  by  the  Selling
Stockholders  will be  received by the  Company.  The Company has agreed to bear
expenses  in  connection  with the  registration  and sale of the  Shares  being
offered by the Selling  Stockholders.  The Company has agreed to  indemnify  the
Selling Stockholders against certain liabilities,  including certain liabilities
under the Securities Act of 1933, as amended (the "Act").

     The Common  Stock  trades on the Nasdaq  National  Market  under the symbol
IPIC. On November 12, 1997, the last sale price of the Shares was $11.

                                   ----------

          THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
           SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.

                                   ----------

THESE   SECURITIES   HAVE   NOT  BEEN APPROVED OR  DISAPPROVED BY THE SECURITIES
AND  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
SECURITIES AND EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION  PASSED
UPON THE  ACCURACY OR ADEQUACY OF THIS  PROSPECTUS.  ANY  REPRESENTATION  TO THE
CONTRARY IS A CRIMINAL OFFENSE.


                                   ----------

                The date of this Prospectus is November 14, 1997


                                      -2-








                              AVAILABLE INFORMATION

     The Company has filed with the  Securities  and  Exchange  Commission  (the
"Commission"),  Washington,  D.C. a Registration Statement on Form S-8 under the
Act covering the securities offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the  Registration  Statement and the
exhibits thereto.  Statements contained in this Prospectus as to the contents of
any contract or other document  referred to are not necessarily  complete and in
each instance such  statement is qualified by reference to each such contract or
document.  The  Company  is  subject to the  informational  requirements  of the
Securities  Exchange  Act of 1934,  as  amended  (the  "Exchange  Act"),  and in
accordance  therewith files reports and other  information  with the Commission.
Reports and other  information  filed by the Company with the  Commission can be
inspected  and  copies at the  public  reference  facilities  maintained  by the
Commission at the following  addresses:  New York Regional  Office,  Seven World
Trade Center,  New York, New York 10048; and Chicago  Regional Office,  500 West
Madison Street,  Chicago,  Illinois  60661-2511.  Copies of such material can be
obtained  from the  Public  Reference  Section  of the  Commission  at 450 Fifth
Street,  N.W.,  Washington,  D.C.  20549 at  prescribed  rates.  The  Commission
maintains  a  Web  site  at  http://www.sec.gov  that  contains  reports,  proxy
statements and other information regarding issuers that file electronically with
the Commission.

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

     Redux(TM)  is a  trademark  of Les  Laboratoires  Servier,  licensed to the
Company and American Home Products Corp. CerAxon(TM), Bextra(TM), LidodexNS(TM),
Melzone(TM)  and PMS  Escape(TM)  are  trademarks  owned by or  licensed  to the
Company or its subsidiaries.  All other trademarks or tradenames  referred to in
this Prospectus are the property of their respective owners.




                                      -3-








                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The following  documents filed with the Securities and Exchange  Commission
(File No.  0-18728)  pursuant to the  Exchange  Act are  incorporated  herein by
reference:

     1. The  Company's  Annual  Report on Form 10-K for the  fiscal  year  ended
September 30, 1996,  including any documents or portions thereof incorporated by
reference therein and all amendments thereto;

     2. The Company's  definitive proxy statement dated January 28, 1997, except
the Compensation  Committee Report on executive compensation and the performance
graph  included  in the proxy  statement,  filed  pursuant  to Section 14 of the
Exchange Act;

     3. The Company's  Reports on Form 10-Q for the quarters  ended December 31,
1996, March 31, 1997 and June 30, 1997.

     4. The  Company's  Reports on Form 8-K dated  February 18, 1997,  March 14,
1997, May 5, 1997,  June 19, 1997,  July 3, 1997,  July 18, 1997, July 25, 1997,
August 29, 1997, September 15, 1997, September 18, 1997 and October 15, 1997.

     5. The Company's  Registration  Statement on Form 8-A declared effective on
March 8, 1990, as amended,  registering the Common Stock under the Exchange Act;
and

     6. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering, except the Compensation Committee Report on
Executive Compensation and the performance graph included in the Proxy Statement
filed pursuant to Section 14 of the Exchange Act. Any statement contained in any
document  incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or  superseded  for  purposes  of this  Prospectus  to the
extent that a statement  contained herein or in any subsequently  filed document
which also is or is deemed to be  incorporated  by reference  herein modifies or
supersedes  such statement.  Any such statement so modified or superseded  shall
not be deemed,  except as modified or  superseded,  to constitute a part of this
Prospectus.  The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the  documents  incorporated  herein by  reference  (other than
exhibits to such documents which are not specifically  incorporated by reference
into such  documents).  Requests  for such  documents  should be directed to the
Company, 99 Hayden Avenue,  Lexington,  Massachusetts  02173,  Attention:  Chief
Financial Officer, telephone (781) 402-3404.


                           FORWARD LOOKING STATEMENTS

     From time to time,  information  provided by the Company or statements made
by  its  directors,  officers  or  employees  may  constitute  "forward-looking"
statements under the Private  Securities  Litigation  Reform Act of 1995 and are
subject  to  numerous  risks  and  uncertainties.  Any  statements  made in this
Registration   Statement,   including  any  statements  incorporated  herein  by
reference (see "Incorporation of Certain Documents by Reference"),  that are not
statements   of   historical   fact   are   forward-looking   statements.   Such
forward-looking  statements and other forward-  looking  statements  made by the
Company or its  representatives are based on a number of assumptions and involve
a number of risks and  uncertainties,  and,  accordingly,  actual  results could
differ materially.  Factors that may cause such differences include, but are not
limited to those set forth under the heading "Risk Factors."


                                      -4-




                                   THE COMPANY

     Interneuron  Pharmaceuticals,  Inc.  ("Interneuron"  or the "Company") is a
diversified   biopharmaceutical   company   engaged  in  the   development   and
commercialization  of a portfolio of products and product  candidates  primarily
for  neurological  and  behavioral  diseases and  disorders,  including  stroke,
anxiety and  migraine  headache.  The Company is also  developing  products  and
technologies,  generally outside the central nervous system field,  through four
subsidiaries:  Intercardia, Inc. ("Intercardia"), a public company which focuses
on cardiovascular disease;  Progenitor,  Inc.  ("Progenitor"),  a public company
which focuses on functional  genomics  using  developmental  biology;  Transcell
Technologies,  Inc.  ("Transcell"),  which  focuses on  carbohydrate-based  drug
discovery;  and  InterNutria,  Inc.  ("InterNutria"),  which  focuses on dietary
supplement products.

Redux for Obesity

     The  Company's  first  pharmaceutical   product,   Redux   (dexfenfluramine
hydrochloride)   capsules  C-IV,   received  clearance  by  the  Food  and  Drug
Administration  ("FDA") in April 1996 and was commercially launched in June 1996
as a prescription drug for the treatment of obesity. Until September 1997, Redux
was  marketed by the  Wyeth-Ayerst  ("Wyeth-Ayerst")  division of American  Home
Products Corp. ("AHP"), which obtained from the Company exclusive U.S. marketing
rights,  in exchange for royalties and milestone  payments.  The Company,  which
retained co-promotion and certain manufacturing rights,  obtained U.S. rights to
Redux to treat abnormal  carbohydrate  craving and obesity from Les Laboratoires
Servier ("Servier") in exchange for royalties on net sales.

     On September 15, 1997, the Company and  Wyeth-Ayerst  announced a voluntary
withdrawal  of Redux and  Wyeth-Ayerst  announced a  simultaneous  withdrawal of
Pondimin (fenfluramine  hydrochloride) tablets C-IV. This action was taken based
on new, preliminary  information regarding possible heart valve abnormalities in
patients using these  medications,  most often in combination with  phentermine,
another  medication  used for weight loss. The Company has been named,  together
with AHP and other  pharmaceutical  companies,  as a defendant in numerous legal
actions involving the use of Redux and other weight loss drugs. Several clinical
studies have been initiated by Wyeth-Ayerst and the Company  generally  designed
to  compare  echocardiograms  of  patients  who had  taken  either  Redux or the
combination of  fenfluramine  and phentermine  ("fen-phen")  with those of obese
patients  who did not  receive  these  medications.  Results of certain of these
studies are currently  expected  during the first half of 1998.  In addition,  a
number of similar  studies have been and may be  conducted by others.  See "Risk
Factors."

CerAxon for Ischemic Stroke

     The Company is  preparing,  and intends to submit to the FDA during 1997, a
New Drug Application ("NDA") for the use of CerAxon (cytidyl diphosphocholine or
citicoline)  to treat 

                                      -5-






ischemic  stroke.  Based on the  clinical  data to date,  the  Company  believes
citicoline may be a promising acute ischemic therapy,  particularly  forpatients
with  moderate  to  severe  stroke.  The  Company  is  also  conducting  several
additional Phase 3 clinical trials, which will not be completed prior to the NDA
submission,  to  study  CerAxon's  effect  on  reduction  in  infarct  size  and
functional  improvement  in ischemic  stroke  patients.  Under an agreement (the
"Ferrer Agreement") with Ferrer  Internacional,  SA ("Ferrer"),  the Company has
U.S. and Canadian marketing rights to certain uses of citicoline, which has been
approved for marketing in over 20 countries.

Bextra for Congestive Heart Failure

     Through  Intercardia  and CPEC,  Inc.,  the  Company is  developing  Bextra
(bucindolol),  which is currently  undergoing a Phase 3 clinical  trial known as
the Beta-blocker Evaluation of Survival Trial (the "BEST Study"). The BEST Study
is being  conducted  by a division  of the  National  Institutes  of Health (the
"NIH") and the Department of Veterans  Affairs (the "VA"),  for the treatment of
congestive heart failure.  Intercardia  obtained  worldwide rights to bucindolol
and, in December 1995,  entered into an agreement with Astra Merck, Inc. ("Astra
Merck") for the development and  commercialization in the U.S. of bucindolol for
the treatment of congestive heart failure.  CPEC is owned  approximately  80% by
Intercardia  and  approximately  20% by  Interneuron.  Intercardia  also  has an
agreement  with  BASF   Pharma/Knoll   AG  relating  to  the   development   and
commercialization  of bucindolol  in all  countries  outside the U.S. and Japan.
Interneuron owns  approximately 61% of Intercardia's  outstanding  Common Stock.
See "Recent Developments".

Other Products

     Other product  candidates in the Company's  pipeline include  pagoclone,  a
drug under  development to treat  anxiety/panic  disorders which is undergoing a
Phase 2/3 clinical trial in patients with panic disorders aimed at a longer-term
safety and efficacy evaluation,  and LidodexNS for acute migraine headache which
is under pre-clinical  investigation and for which an  Investigational  New Drug
Application  ("IND") is expected to be filed in early 1998.  The Company is also
engaged  in  discussions  relating  to the  acquisition  of  other  products  or
companies having rights to other therapeutic  products under development,  which
may  include  the  issuance  of  Company  securities  and/or  cash  payments  or
commitments.

     The Company is also developing additional products and technologies through
its  subsidiaries.  Progenitor,  which  completed its initial public offering in
August 1997,  is engaged in the  discovery and  functional  characterization  of
genes to identify  targets for the  development  of new  pharmaceuticals,  using
developmental  biology and genomic  technologies.  Through  its  acquisition  of
Mercator Genetics,  Inc. ("Mercator")  simultaneously with the completion of the
initial public offering,  Progenitor obtained complementary technologies in gene
discovery. Interneuron owns approximately 37% of Progenitor's outstanding Common
Stock.  Transcell's  leading  technologies  include  combinatorial  carbohydrate
chemistry  methods for the synthesis and  development  of  oligosaccharides  and
glycoconjugates libraries.

     InterNutria's  leading  products are PMS Escape,  a dietary  supplement for
women during the pre-menstrual  period, which is currently undergoing a national
launch, and three sports supplement  products which are being test marketed.  In
addition,  Interneuron  intends to license to  InterNutria  Melzone,  a low-dose
dietary  supplement  form of melatonin,  a naturally  occurring  hormone that is
believed to regulate the body's circadian (sleep) rhythm, which may be useful to
induce restful sleep.

                                      -6-







     The Company was originally  incorporated in New York in October 1988 and in
March 1990 was reincorporated in Delaware.  The Company's  executive offices are
located at One Ledgemont  Center,  99 Hayden  Avenue,  Lexington,  Massachusetts
02173, and its telephone number is (781) 861-8444.  Unless the context indicates
otherwise,   all  references  to  the  Company   include   Interneuron  and  its
subsidiaries,   Intercardia,   Progenitor,   Transcell,   and  InterNutria  (the
"Subsidiaries").

Recent Developments

     On November 5, 1997, Intercardia,  Interneuron and Transcell entered into a
letter  of  intent  relating  to the  proposed  acquisition  by  Intercardia  of
Transcell and related technology rights (the "Proposed  Transcell  Transaction")
in  exchange  for  Intercardia  Common  Stock  with a  current  market  value of
approximately  $15 million  and the  issuance of  Intercardia  stock  options to
Transcell   employees  and  consultants   with  an  aggregate  market  value  of
approximately   $3-4  million.   The  purchase  price  will  be  paid  in  three
installments,  at closing  and on the 15th and 21st month  anniversaries  of the
closing,  and  includes  $3  million to be issued to  Interneuron  at closing in
connection  with the transfer by Interneuron  to Intercardia of certain  license
and technology rights and Interneuron's  continued guaranty of Transcell's lease
obligations.  Interneuron will retain a majority  interest in Intercardia  after
the Proposed Transcell Transaction.  Completion of the transaction is subject to
certain conditions including execution of definitive agreements, approval by the
stockholders of Intercardia, and completion of due diligence. In connection with
the Proposed  Transcell  Transaction,  Intercardia  and  Interneuron  will incur
charges to operations  during the period in which the closing  occurs  currently
estimated to range from approximately $6 to $8 million and will incur additional
future  charges  relating to certain  stock  options to be issued  pursuant  the
Proposed Transcell Transaction.

     In October  1997 the Board of  Directors  authorized  the Plan for adoption
and, pursuant to Board authorization,  the Plan was approved by the Compensation
Committee in November 1997 as part of an integral  component of a management and
employee incentive and retention program,  which also includes additional option
grants to all employees,  designed to motivate,  retain and provide incentive to
the Company's  management and other  employees,  particularly in response to the
perceived  risk  of  attrition  of key  personnel  and  employee  morale  issues
resulting after the withdrawal of Redux and related  negative media coverage and
legal  proceedings.  The Plan provides for the grant of Restricted  Stock Awards
which entitle the plan  participants to receive Shares upon the  satisfaction of
specified  vesting  periods,  in  consideration  of  services  rendered  to  the
Corporation  or such  other  consideration  as the  Board or the  Committee  may
determine.

     An aggregate of 1,328,704  Restricted Stock Awards have been granted to all
employees of the Company, of which 675,000 awards were granted to four executive
officers of the Company, and 653,704 awards were granted to other employees, all
in consideration of services rendered by the employee to the Company. The Shares
are eligible for resale  immediately upon vesting.  The number of Shares subject
to  each   employee's   award  were  based  primarily  on  the  employee's  base
compensation. The Shares subject to the awards granted to the executive officers
vest in installments  aggregating  225,000 Shares per year in January 1998, 1999
and 2000 and have been registered for resale herein. See "Selling Stockholders."
The Company  will incur  compensation  expense  over the  vesting  period of the
1,328,704 Shares subject to outstanding  Restricted Stock Awards.  These charges
are expected to aggregate  approximately  $15.5 million,  of which approximately
$11 million is expected to be incurred in the fiscal year ending  September  30,
1998 and the remainder through the quarter ending June 30, 2000.

                                      -7-




                                  RISK FACTORS

     An investment in the securities offered hereby is speculative in nature and
involves a high  degree of risk.  Each  prospective  investor  should  carefully
consider the following risk factors,  as well as others  described  elsewhere or
incorporated  by  reference in this  Prospectus,  before  making an  investment.
Prospective  investors are cautioned that the statements in this Prospectus that
are not descriptions of historical facts may be forward looking  statements that
are subject to risks and  uncertainties.  Actual results could differ materially
from those  currently  anticipated  due to a number of factors,  including those
identified  under "Risk  Factors" and elsewhere in this  Prospectus or documents
incorporated by reference herein.

     Withdrawal of Redux; Safety Issues Relating to Redux;  Litigation Risks. On
Monday,  September 15, 1997, the Company and Wyeth-Ayerst  announced a voluntary
withdrawal  of Redux and  Wyeth-Ayerst  announced a  simultaneous  withdrawal of
Pondimin.  On Friday,  September  12,  1997,  the FDA  provided  the Company and
Wyeth-Ayerst  with new preliminary  information  concerning  potential  abnormal
echocardiogram  findings in patients using these drugs.  These patients had been
treated  with  fenfluramine  or  Redux  for  up  to 24  months,  most  often  in
combination with phentermine.  Potential abnormal  echocardiogram  findings were
reported to the FDA in 92 of 291 subjects evaluated. Two hundred and seventy-one
of the 291 patients had taken fenfluramine in combination with phentermine,  and
20  of  the  291  patients  had  taken  Redux  or a  combination  of  Redux  and
phentermine.  It was  reprinted  that of these 20, 11 had taken  Redux alone and
nine had taken Redux in  combination  with  phentermine,  and of the 11, two had
potential abnormal  echocardiogram  findings and of the nine, four had potential
abnormal echocardiogram findings.

     These  observations  reflect a preliminary  analysis of pooled  information
rather than results of a formal  clinical  investigation,  and are  difficult to
evaluate because of the absence of matched  controls and  pretreatment  baseline
data for these patients.  Nevertheless,  the Company believes it was prudent, in
light of this information,  to have withdrawn Redux from the market. At the time
of and in connection with the withdrawal of Redux, the Company announced that it
anticipated  incurring  charges to operations  in its fourth  quarter and fiscal
year ended September 30, 1997 for expenses  relating to the  discontinuation  of
the operations  related to Redux.  Based on preliminary  estimates,  the Company
announced  that these charges were  anticipated  to range from $8 million to $12
million,  excluding  the  costs of  echocardiogram  studies  and any  subsequent
charges which may result from legal actions relating to Redux.

     In  July  1997  the  Mayo  Clinic  reported  observations  of  heart  valve
abnormalities in 24 patients taking the combination of Pondimin and phentermine.
The Mayo Clinic cases were subsequently  reported in an article appearing in the
August 28, 1997 issue of The New England  Journal of Medicine.  This article was
accompanied by a letter to the editor from the FDA reporting additional cases of
heart valve disease in 28 patients  taking the  combination of  phentermine  and
fenfluramine, two patients taking fenfluramine alone, four patients taking Redux
alone and two patients taking Redux and  phentermine.  Additional  adverse event
reports of abnormal heart valve findings in patients using Redux or fenfluramine
alone or in combination with other weight loss agents continue to be received by
the Company and Wyeth-Ayerst  and the FDA. These reports have included  symptoms
such as shortness of breath, chest pain,  fainting,  swelling of the ankles or a
new heart murmur.

     Wyeth-Ayerst  has stated that it is  supporting  or  conducting  studies to
compare echocardiograms of patients who had taken either Redux or the "fen/phen"

                                      -8-












(fenfluramine/phentermine)  combination  with a matched group of obese  patients
who did not receive these medications,  including a study of approximately 1,100
patients who were  originally in a clinical study comparing Redux to an extended
release  formulation  of Redux  which had been  under  development  prior to the
withdrawal of Redux.  The studies are being  conducted and will be analyzed by a
blinded panel of cardiologists to determine the association, if any, between the
administration  of these drugs and cardiac valve findings and obtain  additional
information relating to the clinical significance of these findings. The Company
also  intends  to  conduct  an  approximately   1,000  patient  study  comparing
echocardiograms  of patients who took only Redux to a control  group who did not
take  either  Redux,  Pondimin,  phentermine  or  "fen-phen."  The costs of this
Company-supported study are currently estimated at up to $5 million. A number of
similar clinical  studies have been and may be conducted by others.  The results
of these studies and the impact of such results on the Company cannot  currently
be predicted.

     On November  13, 1997,  the U.S.  Department  of Health and Human  Services
("HHS") issued preliminary  recommendations for the medical management of people
who took Pondimin or Redux. HHS recommended,  until more complete information is
available,  that  patients  who took either drug should see their  physician  to
determine  whether  there are signs or symptoms of heart or lung  disease and if
such person has signs or symptoms of heart or lung disease,  such as a new heart
murmur  or  shortness  of  breath,  have an  echocardiogram  performed  and that
physicians  strongly  consider  performing an  echocardiogram  for such patients
before the patient has any invasive procedure for which antibiotic  prophylactic
treatment is recommended to prevent the development of bacterial endocarditis.

     Included in the FDA-approved  labeling for Redux were references to certain
other  risks  that  may  be  associated  with  dexfenfluramine  and  which  were
highlighted  during the FDA's review of the drug.  One issue  relates to whether
there   is   an   association   between   appetite    suppressants,    including
dexfenfluramine,  and the development of primary pulmonary hypertension ("PPH"),
a rare  but  serious  lung  disorder.  In the  general  population,  the  yearly
occurrence  of PPH is  estimated  to be about one to two cases per  million.  An
epidemiologic  study  conducted in Europe  examining risk factors for PPH showed
that among other factors,  weight  reduction  drugs  including  dexfenfluramine,
systemic hypertension,  and obesity itself were associated with a higher risk of
PPH. Results of the final study,  including a reclassification  and inclusion of
certain  previously  excluded  cases by the authors of the study,  estimated the
yearly  occurrence to be between 23 and 46 cases per million for patients taking
appetite suppressants for greater than three months duration.

     A second issue discussed in the FDA-approved labeling for Redux was whether
dexfenfluramine is associated with certain  neurochemical  changes in the brain.
Certain  studies related to this issue,  conducted by third parties,  purport to
show that very high doses of dexfenfluramine cause prolonged serotonin depletion
in  certain  animals,  which  some  researchers  believe  is  an  indication  of
neurotoxicity. The Company presented data relating to the lack of neurocognitive
effects in patients  taking Redux and believes  that, as  demonstrated  in human
trials,  these animal  studies are  clinically  irrelevant to humans  because of
pharmacokinetic differences between animals and humans (resulting in much higher
brain  concentrations  of  dexfenfluramine  and its active metabolite in certain
animals than in humans) and because of the high dosages used in animal  studies.
The  Company  had agreed  with the FDA to conduct a Phase 4, or  post-marketing,
study of  Redux,  to  further  evaluate  long-term  neurocognitive  function  in
patients  taking  Redux.  However,  as a result  of the  withdrawal  of Redux in
September 1997, such study was discontinued.

     The Company has been named,  together with other pharmaceutical  companies,
as a  defendant  in over 100 legal  actions,  many of which  purport to be class
actions,  in federal and state  courts  relating  to the use of Redux.  Based on
media reports and other sources, the Company anticipates that it will be named a
defendent  in  additional  Redux-related  lawsuits  in the  future.  The actions
generally  have been brought by or on behalf of putative  classes of persons who
claim to have  suffered  injury or who claim that they may suffer  injury in the
future  due to  use  of  one  or  more  weight  loss  drugs  including  Pondimin
(fenfluramine),  phentermine and Redux. Plaintiff's allegations of liability are
based on various  theories of recovery,  including,  but not limited to, product
liability,   strict  liability,   negligence,   various  breaches  of  warranty,
conspiracy,  fraud misrepresentation and deceit. These lawsuits typically allege
that the short or long-term use of PONDOMIN  and/or REDUX,  independently  or in
combination  (including the  combination of PONDOMIN and  phentermine  popularly
known  as   "fen/phen"),   causes,   among  other  things,   primary   pulmonary
hypertension,   valvular  heart  disease  and/or  neurological  dysfunction.  In
addition, some lawsuits allege severe emotional distress caused by the purported
increased risk of injury in the future.  Plaintiffs typically seek relief in the
form of monetary damages (including general damages, medical care and monitoring
expenses,  loss of earnings  and  earnings  capacity,  compensatory  damages and
punitive damages), generally in unspecified amounts, on behalf of the individual
or the class.  In addition,  some actions  seeking class  certification  ask for
certain types of  purportedly  equitable  relief,  including but not limited to,
declaratory   judgements  and  the   establishment  of  a  research  or  medical
surveillance  program.  The Company and certain directors and/or officers of the
Company have also been named as defendants in several  lawsuits filed by alleged
purchasers  of the  Company's  Common  Stock,  purporting  to be class  actions,
claiming among other things that the Company  publicly  disseminated  materially
false and  misleading  statements  concerning the prospects and safety of Redux,
resulting in the artificial inflation of the


                                      -9-








Company's  Common Stock price during various  periods,  the earliest  commencing
March 1, 1997 through September 17, 1997, in violation of the federal securities
laws.  Although the Company maintains certain product liability and director and
officer  liability  insurance  and intends to defend  these and similar  actions
vigorously,  the Company may be required to devote  significant  management time
and  resources  to these  actions and, in the event of  successful  uninsured or
insufficiently  insured  claims,  or in the event a  successful  indemnification
claim was made against the Company, the Company's business,  financial condition
and results of operations could be materially adversely affected.  Under certain
circumstances,   the  Company  is  required  to  indemnify  Servier,  Boehringer
Ingelheim Pharmaceuticals Inc. (the contract manufacturer of Redux capsules) and
AHP,  and the Company is entitled to  indemnification  by AHP,  against  certain
claims,  damages or  liabilities  incurred in connection  with Redux.  The cross
indemnification  between the Company and AHP generally relates to the activities
and responsibilities of each company.

     UNCERTAINTIES RELATING TO CERAXON.

     The  Company  intends  to submit to the FDA prior to the end of 1997 an NDA
for the use of CerAxon to treat ischemic  stroke.  The FDA has 60 days after NDA
submission  to accept or reject the NDA for filing and there can be no assurance
the FDA will accept the NDA for filing.  The Company  believes the two completed
Phase 3  clinical  studies,  as well as  supportive  data,  show the  safety and
beneficial  treatment  effect of  CerAxon  in  patients  with  ischemic  stroke,
particularly  those with moderate to severe  strokes.  The Company is conducting
additional  Phase 3 clinical  studies to study CerAxon's  effect on reduction in
infarct size and  functional  improvement  in ischemic  stroke  patients.  These
studies will not be completed prior to submission of, and are not believed to be
required for  acceptance  for filing of, the NDA.  There can be no assurance the
FDA will grant  authorization  to  commercialize  CerAxon  based on the  studies
submitted with the NDA.  Ferrer may terminate the Ferrer  Agreement in the event
FDA approval of citicoline is not obtained by January 1999,  which date shall be
extended if the Company provides  information to Ferrer which tends to establish
that the Company has carried out the steps for  obtaining  such  approval and if
such approval has not been obtained for reasons beyond the Company's control.

     The manufacturing  facilities of Ferrer used to produce  citicoline as well
as the contract  manufacturer of finished  product,  are required to comply with
all FDA  requirements,  including  current good  manufacturing  practice ("GMP")
regulations,  and are  subject  to FDA  inspection,  both  before  and after NDA
approval,  to determine compliance with those requirements.  The GMP regulations
are complex and failure to be in compliance  could lead to  non-approval  of the
NDA or, if such approval is obtained,  the need for remedial  action,  penalties
and delays in  production  of material  acceptable  to the FDA.  There can be no
assurance the  manufacturing  facilities  for  citicoline  have complied or will
continue  to comply  with  applicable  requirements.  In  addition,  the Company
intends to market CerAxon  directly and will be required to establish,  maintain
and manage sufficient sales and marketing capabilities. Although the Company has
a small  sales  force  which had been  engaged in  co-promotion  of Redux and is
promoting  PMS Escape for  InterNutria,  it has no  experience  in marketing any
pharmaceutical  products  directly  and there can be no  assurance  that it will
successfully market CerAxon.  Further,  the Company may require additional funds
for the  manufacturing  and  marketing  of  CerAxon  and,  if such funds are not
available,  may be  required  to  delay  or  reduce  such  efforts,  as  well as
activities relating to the development of other products.

     HISTORY OF LOSSES; ACCUMULATED DEFICIT AND POTENTIAL FUTURE LOSSES; CHARGES
TO  OPERATIONS;  POTENTIAL  FLUCTUATIONS  IN  REVENUES.

     Through  June 30,  1997,  the  Company  had  accumulated  net losses  since
inception of  approximately  $125  million.  Substantially  all of the Company's
revenues from operations were derived from Redux, which was withdrawn


                                      -10-









from the market in September  1997.  Losses are continuing and cash continues to
be used by  operating  activities.  The  Company  will be  required  to  conduct
significant development and clinical testing activities and establish marketing,
sales,  regulatory  and  administrative  capabilities  for many of its  proposed
products,  including  products under development or which may be acquired in the
future,  which are  expected  to result in  continued  operating  losses for the
foreseeable  future.  The extent of future  losses and time  required to achieve
profitability are highly uncertain.  The Company will incur significant  charges
to operations in the fiscal  quarter and year ended  September 30, 1997 relating
to  the  acquisition  of  Mercator  by  Progenitor,  currently  estimated  to be
approximately  $8 million,  and relating to the  withdrawal of Redux,  currently
estimated to range from approximately $8 to $12 million,  excluding the costs of
echocardiogram  studies and any  subsequent  charges which may result from legal
returns  relating  to Redux.  In  addition,  the Company  will incur  charges to
operations  in  connection  with the  proposed  acquisition  by  Intercardia  of
Transcell,  as disclosed  under "Recent  Developments,"  currently  estimated to
range  from  approximately  $6 to $8  million,  during  the  period in which the
closing  occurs  and  future  charges  relating  to  certain  option  grants  in
connection  with  the   acquisition.   In  addition,   the  Company  will  incur
compensation  expense over the vesting period of the 1,328,704 Shares subject to
outstanding  Restricted  Stock  Awards.  These charges are expected to aggregate
approximately  $15.5 million,  of which approximately $11 million is expected to
be  incurred  in the fiscal year  ending  September  30, 1998 and the  remainder
through the quarter  ending June 30, 2000.  There can be no  assurance  that the
Company will be able to achieve  profitability  on a sustained basis, if at all.
The Company has  experienced,  and may continue to experience,  fluctuations  in
revenues  as a  result  of  the  timing  of  license  fees,  royalties,  product
shipments, regulatory approvals, product launches and milestone payments.

     UNCERTAINTIES  GENERALLY  RELATED  TO  CLINICAL  TRIALS.  

     Before obtaining  regulatory approval for the commercial sale of any of its
pharmaceutical products under development, the Company must demonstrate that the
product is safe and efficacious for use in each target  indication.  The results
of  preclinical  studies  and early  clinical  trials may not be  predictive  of
results that will be obtained in large-scale  testing or use, and there canbe no
assurance that clinical trials of the products under  development by the Company
will demonstrate the safety and efficacy of such products or that, regardless of
clinical trial results,  FDA approval will be obtained. A number of companies in
the  pharmaceutical  industry  have  suffered  significant  setbacks in advanced
clinical trials or have not received FDA approval,  even after promising results
in earlier trials. If clinical trials do not demonstrate the safety and efficacy
of certain products under  development,  the Company may be adversely  affected.
Citicoline and bucindolol are currently in Phase 3 clinical trials and pagoclone
is undergoing a Phase 2/3 clinical  trial.  There can be no assurance that these
trials will confirm or  demonstrate  the safety and  efficacy of the  respective
drug. The Company also expects to conduct clinical evaluation on certain dietary
supplement  products  under  development  to  substantiate  the claims  that are
expected  to be made for the  products.  There can be no  assurance  that  these
clinical evaluations will be successful.

     RISK OF PRODUCT  LIABILITY.  

     In  addition  to the claims and risks  summarized  under  "--Withdrawal  of
Redux;  Safety  Issues  Relating  to Redux;  Litigation  Risks",  the use of the
Company's  other  products in clinical  trials and the marketing of any products
may expose the Company to substantial  product liability claims.  Certain of the
Company's agreements require the Company to obtain specified levels of insurance
coverage,  naming the other party thereto as an additional insured. There can be
no  assurance  that the Company  will  continue to be able to maintain or obtain
such  insurance  coverage,  that such  insurance  can be acquired in  sufficient
amounts to protect the Company or other named parties against such liability, at
a  reasonable  cost,  or at all or that any  insurance  obtained  will cover any
particular  liability  claim.  The Company  may also be  required  to  indemnify
licensors or licensees  against product  liability  claims incurred by them as a
result  of  products  developed  or  marketed  by the  Company.  In the event of
uninsured or insufficiently



                                      -11-






insured product liability  claims, or in the event a successful  indemnification
claim was made  against  the  Company,  the  Company's  business  and  financial
condition could be materially adversely affected. There can be no assurance that
the Company will continue to be able to obtain adequate insurance in the future,
at an acceptable cost or at all.

     FUNDING REQUIREMENTS.  

     The Company has expended and will continue to expend  substantial  funds to
conduct research and development activities and preclinical and clinical testing
on products under  development,  including products which may be acquired in the
future. In addition,  the Company intends to market directly and is establishing
sales and marketing  capabilities  for CerAxon,  is marketing PMS Escape through
InterNutria  and intends to market  directly  or  co-promote  sports  supplement
products and Melzone,  assuming applicable regulatory approvals are obtained and
test  launches  are  successful.  The  Company  will  therefore  be  required to
establish and maintain  appropriate internal sales forces and functions and will
require  additional funds for manufacturing and marketing  activities.  Although
the Company is devoting  significant  funding to the  national  marketing of PMS
Escape,  it cannot yet predict  whether such product will  generate  substantial
revenues or be profitable to the Company.  The Company may seek additional funds
through corporate  collaborations or future equity or debt financings to provide
funding for new business opportunities and future growth.

     Interneuron intends to fund $2 million of a $10 million payment intended to
be made by CPEC and/or Intercardia to Astra-Merek in December 1997 (representing
Interneuron's  percentage  ownership  in CPEC).  Interneuron  is also  currently
funding the activities of Transcell and InterNutria, each of which is seeking to
enter into  collaborations,  business  combinations  or private or public equity
financings to pursue development and  commercialization of their technologies or
products.  Although  Interneuron may acquire  additional  equity in a subsidiary
through  participation in any such financing or conversion of intercompany debt,
equity  financings by a subsidiary will likely reduce  Interneuron's  percentage
ownership of that subsidiary and funds raised by the Subsidiaries will generally
not be  available  to  Interneuron.  Although  certain of the  Subsidiaries  are
engaged in discussions relating to potential business combinations or private or
public  equity  financings,  except as set forth or  incorporated  by  reference
herein,  none of the Subsidiaries  has any commitments for additional  financing
and there can be no  assurance  that any such  financing  will be  available  on
acceptable  terms,  if at all.  If  adequate  funds are not  available  to these
subsidiaries on acceptable  terms,  such  subsidiaries may be required to delay,
scale back or  eliminate  some or all of their  respective  research and product
development programs or product launches. Intercardia, Interneuron and Transcell
have entered into a letter of intent relating to the potential sale of Transcell
to  Intercardia,  although  there  is no  assurance  this  acquisition  will  be
completed. See "Recent Developments."

     RISKS RELATING TO MANAGING  GROWTH.

     Assuming   additional   proposed   product   launches  occur,  the  Company
anticipates  experiencing  a period  of rapid  growth,  which is likely to place
significant  demands on the  Company's  management,  operational,  financial and
accounting  resources.  The  Company's  intention  to  market  certain  products
directly,   particularly  CerAxon,  will  further  strain  these  resources.  In
particular,  the Company will be required to establish  and maintain a marketing
organization,  including  a sales  force and  related  management  systems.  The
Company's  future  success  will  depend in part on  whether  it can  expand its
operational,  financial and accounting systems and expand,  train and manage its
employee base. The Company's inability to manage growth effectively could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

     RISKS RELATING TO CONTRACTUAL  ARRANGEMENTS. 

     The Company's agreements with licensors and licensees generally provide the
other party with rights to terminate the agreement,  in whole or in part,  under
certain circumstances. For example, Ferrer has the right to terminate the


                                      -12-






Ferrer  Agreement  in the event FDA  approval of  citicoline  is not obtained by
January 1999, which date shall be extended if the Company  provides  information
to Ferrer  which tends to  establish  that the Company has carried out the steps
for  obtaining  such  approval and if such  approval  has not been  obtained for
reasons  beyond the Company's  control,  or in the event an  unaffiliated  party
acquires 50% of Interneuron's  Common Stock.  Servier has the right to terminate
the  agreements  relating to the licensing of Redux to the Company under certain
conditions including an acquisition by a new party of a 20% beneficial ownership
interest in the Company without Servier's consent or certain Company  activities
relating to the marketing of certain competitive products,  subject to specified
terms  and  conditions.   Termination  of  certain  of  these  agreements  could
substantially  reduce  the  likelihood  of  successful  commercialization  of  a
particular  product  which,  depending upon the importance to the Company of the
product  that is  subject to any such  agreement,  could  materially  adversely
affect the Company's business.

     UNCERTAINTY OF GOVERNMENT REGULATION.

     The Company's  research,  development and  pre-clinical and clinical trials
and the  manufacturing  and  marketing of most of its products are subject to an
extensive  regulatory  approval process by the FDA and other regulatory agencies
in the U.S. and other countries. The process of obtaining FDA and other required
regulatory  approvals  for  drug  and  biologic  products,   including  required
preclinical and clinical testing, is lengthy, expensive and uncertain. There can
be no assurance that, even after such time and expenditures, the Company will be
able to obtain  necessary  regulatory  approvals for clinical testing or for the
manufacturing  or marketing of any  products.  Even if  regulatory  clearance is
obtained,  post-market evaluation of the products, if required,  could result in
restrictions  on a product's  marketing  or  withdrawal  of the product from the
market as well as possible civil or criminal sanctions. In addition, the Company
will be dependent upon the manufacturers of its products to maintain  compliance
with GMP and on laboratories  and medical  institutions  conducting  preclinical
studies and clinical  trials to maintain both good  laboratory and good clinical
practices. There can be no assurance that GMP manufacturers capable of producing
product according to forecasts can be obtained on a timely basis, or at all, for
products  under  development,  including  CerAxon  and  pagoclone,  which  would
materially  adversely  affect  the  Company's  ability  to  commercialize  these
products.  Certain products are or are proposed to be marketed by the Company as
dietary  supplements,  such as PMS Escape,  the sports  supplement  products and
Melzone. There can be no assurance that the FDA will not attempt to regulate the
products  as drugs,  which  would  require  the  filing of NDAs and  review  and
approval by the FDA prior to marketing,  or otherwise  restrict the marketing of
these  products.  In  addition,  classification  of these  products  as  dietary
supplements  limits  the  types of  claims  that can be made in  marketing.  The
Federal Trade Commission has overlapping  jurisdiction  with the FDA to regulate
the  promotion  and  advertising  of  dietary   supplements  and  other  special
nutritional products, including those of InterNutria.

     In addition to the regulatory framework for product approvals,  the Company
and its  collaborative  partners  may be subject to  regulation  under state and
federal laws, including requirements  regarding occupational safety,  laboratory
practices,  environmental protection and hazardous substance control, and may be
subject to other present and possible future local,  state,  federal and foreign
regulation.  The impact of such  regulation upon the Company cannot be predicted
and could be material and adverse.

     UNCERTAINTY  OF PATENT  POSITION  AND  PROPRIETARY  RIGHTS. 

     The Company's success will depend to a significant extent on its ability to
obtain and enforce  patent  protection  on its  products  and  technologies,  to
maintain  trade secrets and to operate  without  infringing  on the  proprietary
rights of others. There can be no assurance that any Company patents will afford
any competitive



                                      -13-







advantages or will not be challenged  or  circumvented  by third parties or that
any pending patent applications will result in patents being issued.  Certain of
the Company's patents and patent applications include  biotechnology claims, the
patentability  of which generally is highly uncertain and involves complex legal
and factual  questions.  Because of the extensive time required for development,
testing and regulatory review of a potential product, it is possible that before
a potential  product can be  commercialized,  any related patent may expire,  or
remain in existence for only a short period  following  commercialization,  thus
reducing any advantage of the patent.

     The U.S.  composition  of matter patent on  bucindolol  expires in November
1997. As a result, assuming FDA approval can be obtained, competitors, including
generic drug manufacturers,  may market bucindolol,  subject to potential market
exclusivity  under the  Waxman-Hatch  Act. The Company's  licensed  U.S.  patent
covering the  administration  of citicoline  to treat  patients  afflicted  with
conditions associated with the inadequate release of brain acetylcholine expires
in 2003, subject to potential extension under the Waxman-Hatch Act. As described
in  the  licensed  patent,  the  inadequate  release  of  acetylcholine  may  be
associated  with several  disorders,  including the behavioral and  neurological
syndromes  seen after brain  traumas and  peripheral  neuro-muscular  disorders,
brain  ischemia  and  post-stroke  rehabilitation.  Although  the  claim  of the
licensed  patent is broadly  directed to the treatment of inadequate  release of
brain  acetylcholine,  there  can  be  no  assurance  this  patent  will  afford
protection against  competitors of CerAxon to treat ischemic stroke. The Company
has also filed a patent application  relating to the use of citicoline to reduce
the size of the area damaged by the stroke, or infarct size,  although there can
be no assurance this patent will issue.

     The Company may conduct research on pharmaceutical or chemical compounds or
technologies, the patents or other rights to which may be held by third parties.
Others  have  filed and in the  future  may file  patent  applications  covering
certain  products or technologies  that are similar to those of the Company.  If
products based on such technologies are commercialized by the Company,  they may
infringe such patents or other rights, licenses to which may not be available to
the  Company.  Failure  to  obtain  needed  patents,   licenses  or  proprietary
information  held by others may have a material  adverse effect on the Company's
business.  There can be no assurance that others will not independently  develop
similar technologies or duplicate any technology developed by the Company or, if
patents are  issued,  successfully  design  around the  patented  aspects of any
technology developed by the Company. Furthermore, litigation may be necessary to
enforce any patents  issued to the Company,  to determine the scope and validity
of the  patent  rights of others or in  response  to legal  action  against  the
Company claiming damages for infringement of patent rights or other  proprietary
rights or seeking  to enjoin  commercial  activities  relating  to the  affected
product  or  process.  Not only is the  outcome  of any such  litigation  highly
uncertain,  but such litigation may also result in significant use of management
and financial resources.

     To the extent that consultants,  key employees or other third parties apply
technological  information  independently  developed by them or by others to the
Company's proposed products,  disputes may arise as to the proprietary rights to
such information which may not be resolved in favor of the Company.  Most of the
Company's  consultants are employed by or have consulting  agreements with third
parties and any  inventions  discovered by such  individuals  generally will not
become  property  of  the  Company.  There  can  be no  assurance  that  Company
confidentiality  agreements  will not be  breached or that the  Company's  trade
secrets  will not  otherwise  become  known or be  independently  discovered  by
competitors.

                                      -14-





     COMPETITION.

     Competition from other pharmaceutical  companies,  biotechnology companies,
dietary supplement  companies and research and academic  institutions is intense
and  expected to  increase.  The Company is aware of products  and  technologies
under development by its competitors that address diseases being targeted by the
Company and  competitors  have  developed  or are in the  process of  developing
products  or  technologies  that are,  or in the  future  may be,  the basis for
competitive products.  Activase, a thrombolytic agent, is marketed by Genentech,
Inc.  as  a  treatment  for  stroke.   To  the  Company's   knowledge,   Janssen
Pharmaceutical  NV has  filed an NDA for a stroke  treatment  known as  Prosynap
(lubeluzole)  and a number of products are in clinical  development  pursuing an
indication  for stroke which could also compete with  CerAxon.  In addition,  if
regulatory  approval is obtained,  Bextra will compete with Coreg  (carvedilol),
which has been  approved and is marketed in the U.S. by  SmithKline  Beecham for
the treatment of congestive  heart  failure.  In addition,  Melzone will compete
with a substantial number of available melatonin dietary supplement products and
PMS  Escape  competes  with a number of  products  for use by women  during  the
pre-menstrual period.

     UNCERTAINTY  REGARDING  WAXMAN-HATCH ACT.

     Certain  provisions of the Waxman- Hatch Act grant market  exclusivity  for
certain new drugs and dosage forms.  The Waxman-Hatch Act provides that a patent
which claims a product,  use or method of manufacture covering certain drugs and
certain other  products may be extended for up to five years to  compensate  the
patent  holder for a portion of the time required for research and FDA review of
the product.  The  Waxman-Hatch  Act also  establishes a period of time from the
date of FDA approval of certain new drug  applications  during which the FDA may
not accept or approve  short-form  applications for generic versions of the drug
from other sponsors,  although it may accept or approve  long-form  applications
(that is, other  complete  NDAs) for such drug.  There can be no  assurance  the
Company will receive marketing  exclusivity for any product.  The composition of
matter patent for bucindolol expires in November 1997. There can be no assurance
that any of the benefits of the Waxman-Hatch Act or similar foreign laws will be
available to the Company or that such laws will not be amended or repealed.

     EARLY STAGE OF PRODUCTS UNDER  DEVELOPMENT  BY THE COMPANY. 

     The  Company  is  investigating  for  therapeutic  potential  a variety  of
pharmaceutical  compounds,  technologies and other products at various stages of
development.  In particular,  Progenitor and Transcell each are conducting  very
early stage  research and all of their  proposed  products  require  significant
further research and development,  as well as testing and regulatory clearances,
and are subject to the risks of failure  inherent in the development of products
or therapeutic procedures based on innovative  technologies.  The products under
development  by the  Company  are  subject  to the risk that any or all of these
proposed  products are found to be ineffective  or unsafe,  or otherwise fail to
receive  necessary  regulatory  clearances.  The  Company  is unable to  predict
whether any of its  products  will be  successfully  manufactured  or  marketed.
Further,  due to the extended  testing and regulatory  review  process  required
before   marketing   clearance   can  be   obtained,   the   time   frames   for
commercialization of any products or procedures are long and uncertain.

     DEPENDENCE  ON  OTHERS  FOR  CLINICAL  DEVELOPMENT,  REGULATORY  APPROVALS,
     MANUFACTURING  AND  MARKETING.  

     The  Company   expects  to  rely  upon   collaborative   partners  for  the
development,  manufacturing and marketing of certain of its products,  including
products which may be acquired in the future. The Company is therefore dependent
on the efforts of these collaborative  partners and the Company may have limited
control  over  the  manufacture  and  commercialization  of such  products.  For
example,  with respect to Bextra,  neither the Company nor Intercardia  controls
the BEST Study,  which is being conducted by the NIH and the VA, and the Company
will be


                                      -15-









substantially  dependent  upon  Astra  Merck for the  commercial  success of the
twice-daily  formulation  of  bucindolol  in the U.S.,  assuming FDA approval is
obtained. In the event certain of the Company's collaborative partners terminate
the related  agreements or fail to manufacture or  commercialize  products,  the
Company  would be  materially  adversely  affected.  Because  the  Company  will
generally  retain a royalty  interest  in sales of  products  licensed  to third
parties, its revenues may be less than if it retained  commercialization  rights
and  marketed  products  directly.   Although  the  Company  believes  that  its
collaborative  partners will have an economic  motivation to  commercialize  the
products  that they may license,  the amount and timing of resources  devoted to
these activities  generally will be controlled by each partner.  There can be no
assurance  that the Company will be successful in  establishing  any  additional
collaborative  arrangements,  or that any such  collaborative  partners  will be
successful  in  commercializing  products or not terminate  their  collaborative
agreements with the Company.

     Many companies in the pharmaceutical and dietary supplement industries have
substantially greater financial resources and development  capabilities than the
Company and have substantially greater experience in undertaking preclinical and
clinical testing of products,  obtaining  regulatory approvals and manufacturing
and marketing  products.  In addition to competing with  universities  and other
research   institutions  in  the  development  of  products,   technologies  and
processes,  the Company may compete with other companies in acquiring  rights to
products  or  technologies.  There can be no  assurance  that the  Company  will
develop  products that are more effective or achieve  greater market  acceptance
than competitive products, or that the Company's competitors will not succeed in
developing  products and  technologies  that are safer or more effective or less
expensive  than those being  developed  by the Company or that would  render the
Company's products and technologies less competitive or obsolete.

     DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS. 

     The Company is  dependent  on certain  executive  officers  and  scientific
personnel and the Company's  business would be adversely affected by the loss of
certain of these individuals. The Company has key person life insurance policies
on the lives of Glenn L.  Cooper,  M.D.,  Richard  Wurtman,  M.D. and Lindsay A.
Rosenwald,  M.D. Drs.  Wurtman and Rosenwald devote only a portion of their time
to the Company's  business.  In addition,  the Company is dependent upon certain
executive  officers of the subsidiaries,  each of which has separate  management
who are responsible,  to a large extent,  for the day-to-day  operations and the
strategic  direction of the  respective  subsidiary.  In  addition,  the Company
relies on independent  consultants to design and supervise  clinical  trials and
assist in preparation of FDA submissions.

     Competition for qualified employees among  pharmaceutical and biotechnology
companies is intense,  and the loss of any of such  persons,  or an inability to
attract,  retain and motivate highly skilled  employees,  could adversely affect
the Company's business and prospects. There can be no assurance that the Company
will be able to retain its existing personnel or to attract additional qualified
employees.

     UNCERTAINTY  REGARDING   PHARMACEUTICAL  PRICING  AND  REIMBURSEMENT.

     The Company's  business will be affected by the efforts of governmental and
third-party  payors to  contain or reduce  the cost of health  care.  There have
been,  and the Company  anticipates  that there will continue to be, a number of
proposals to implement  government  control over the pricing or profitability of
prescription pharmaceuticals,  as is currently the case in many foreign markets.
The  announcement  or adoption of such proposals could have an adverse effect on
the Company.  Furthermore,  the Company's  ability to commercialize its products
may be adversely affected to the extent that such



                                      -16-









proposals have a material  adverse effect on the business,  financial  condition
and  profitability of companies that are prospective  collaborative  partners of
the Company. Successful  commercialization of many of the Company's products may
depend on the  availability of  reimbursement  for the cost of such products and
related treatment from third-party  health care payors,  such as the government,
private  insurance  plans  and  managed  care  organizations.  There  can  be no
assurance that such reimbursement will be available. Such third-party payors are
increasingly challenging the price of medical products and services.

     CONTROL BY PRESENT STOCKHOLDERS;  ANTI-TAKEOVER  PROVISIONS.  

     The executive officers, directors and principal stockholders of the Company
(including  individuals or entities related to such  stockholders)  beneficially
own  approximately  47%  of  the  Company's  Common  Stock.  Accordingly,  these
officers,  directors and stockholders may have the ability to exert  significant
influence over the election of the Company's Board of Directors and to determine
corporate actions requiring stockholder approval.

     The Board of Directors has the authority,  without further  approval of the
Company's stockholders, to fix the rights and preferences of and to issue shares
of preferred  stock. In addition,  Ferrer may terminate the Ferrer  Agreement in
the event an  unaffiliated  third party  acquires  50% of  Interneuron's  Common
Stock.  The preferred  stock held by AHP provides that AHP's consent is required
prior  to the  merger  of the  Company,  the  sale of  substantially  all of the
Company's assets or certain other transactions.  In addition,  vesting of shares
of Common Stock  subject to Restricted  Stock Awards under the Plan  accelerates
and  outstanding  options under the Plans become  immediately  exercisable  upon
certain changes in control of the Company,  except under certain conditions.  In
addition,  Delaware  corporate  law  imposes  limitations  on  certain  business
combinations.  These provisions  could,  under certain  circumstances,  have the
effect of  delaying  or  preventing  a change in  control  of the  Company  and,
accordingly, could adversely affect the price of the Company's Common Stock.

     No  Dividends.  The Company has not paid any cash  dividends  on its Common
Stock since  inception and does not expect to do so in the  foreseeable  future.
Any dividends will be subject to the preferential cumulative dividend of $0.1253
per share and $1.00 per share  payable  on the  outstanding  Series B  Preferred
Stock and Series C  Preferred  Stock,  respectively,  held by AHP and  dividends
payable on any other preferred stock issued by the Company.

     POSSIBLE  VOLATILITY OF STOCK PRICE.

     The  market  prices  for  securities  of  emerging  growth  companies  have
historically been highly volatile.  Future announcements  concerning the Company
or its subsidiaries,  including  Intercardia and Progenitor,  which are publicly
traded,  or the Company's  competitors,  including the initiation and results of
litigation,  clinical studies, regulatory filings,  technological innovations or
competitive   products,    developments   concerning   government   regulations,
proprietary  rights, the Company's results of operations or public concern as to
the safety or commercial value of the Company's products, may have a significant
impact on the market price of the Company's Common Stock.

     SHARES  ELIGIBLE FOR FUTURE SALE;  REGISTRATION  RIGHTS.

     As of October 31, 1997, 41,165,810 shares of Common Stock were outstanding,
excluding  treasury shares.  Substantially  all of these shares are eligible for
sale  without  restriction  or under  Rule 144.  In  general,  under Rule 144 as
currently  in  effect,  a person  (or  persons  whose  shares  are  aggregated),
including  persons who may be deemed to be  "affiliates"  of the Company as that
term is defined under the Act, is entitled to sell within any three-month period
a number of restricted shares beneficially owned for at least one year that does
not

                                      -17-









exceed the greater of (i) one percent of the then  outstanding  shares of Common
Stock,  or (ii) the average weekly trading volume in the Common Stock during the
four calendar weeks  preceding such sale.  Sales under Rule 144 are also subject
to certain requirements as to the manner of sale, notice and the availability of
current public  information about the Company.  However,  a person who is not an
affiliate  and has  beneficially  owned  such  shares  for at least two years is
entitled to sell such shares without regard to the volume or other requirements.

     AHP has demand  and  piggy-back  registration  rights  relating  to 622,222
shares of Common Stock  issuable  upon  conversion of preferred  stock.  Certain
stockholders  entitled to receive  additional shares of Common Stock in December
1997 with a market value of $1,200,000 at the time of issuance have registration
rights in January 1998 relating to the resale of those  shares.  In the event up
to a maximum of approximately  232,000 shares of Common Stock are issued in June
1998 pursuant to certain put protection rights, holders of such shares will have
registration rights at that time.

In addition to the registration  statement  covering  1,750,000 shares of Common
Stock  issuable  under the Plan,  of which  this  Prospectus  forms a part,  the
Company has  outstanding  registration  statements  on Form S-3  relating to the
resale  of shares of Common  Stock and on Form S-8  relating  to its 1989  Stock
Option Plan, 1994 Long-Term Incentive Plan and its 1995 Stock Purchase Plan (the
"Plans").

     All of the shares of Common Stock  issuable  under the Plan,  including the
675,000 Shares offered hereby, can be sold by the recipient thereof  immediately
upon vesting of the Shares.  Of the  1,328,704  shares of Common Stock  issuable
under the Plan pursuant to outstanding  Restricted Stock Awards, 112,334 vest in
December  1997,  265,567 vest in January 1998  (including  225,000 of the Shares
offered hereby),  112,334 vest in May 1998, 76,834 vest in December 1998 and the
remainder  vest in the same amounts and during the same months from January 1998
through May 2000,  subject to extension of each vesting date if it occurs during
a "Black  Out  Period,"  generally  meaning  a period  in  which  the  recipient
(including any Selling  Stockholder) is unable to sell the Shares subject to the
award at the applicable  vesting date due to legal or contractual  restrictions.
The vesting dates are also subject to acceleration under certain  circumstances,
including  certain  changes in  control of the  Company,  except  under  certain
conditions.  Sales of the shares of Common  Stock  subject to  Restricted  Stock
Awards, including the Shares offered hereby, or the possibility of sales of such
shares may adversely affect the market price of the Company's Common Stock.

     Outstanding  Options and  Warrants.  As of October 31, 1997,  approximately
7,884,000  shares of Common Stock were  issuable  upon  exercise of  outstanding
options and warrants,  subject to anti-dilution  provisions. As a result of such
provisions, issuance of Shares pursuant to Restricted Stock Awards may result in
additional  shares of Common  Stock  being  issuable  upon  exercise  of certain
warrants.  In addition,  the Company is required to issue  additional  shares of
Common Stock in connection with technology acquisitions and may issue additional
shares if certain put protection rights are exercised. To the extent such shares
are issued, the interest of holders of Common Stock will be diluted.


                                 USE OF PROCEEDS

     To the extent any Shares are sold each Selling Stockholder will receive all
the net proceeds from the sale of his  representative  Shares;  the Company will
not  receive  any of such net  proceeds.  See  "Plan of  Distribution." 

                                       18











                               SELLING STOCKHOLDERS

     The following  table sets forth the names of each Selling  Stockholder  and
for each, the number of Shares  beneficially  owned at the  commencement  of the
offering,  and the  number of Shares  offered  for  sale,  based on  information
provided  to the  Company  by such  Selling  Stockholders.  The Shares are being
registered to permit  public  secondary  trading of the Shares,  and the Selling
Stockholders  may offer all or any portion of the Shares for resale from time to
time.

     The Shares are issuable to the Selling Stockholders, subject to the vesting
as  described in Note (2) below,  pursuant to  Restricted  Stock Awards  granted
under the Plan in  consideration  of services  rendered  (and payment of the par
value of the Shares) to the Company by the Selling Stockholders, each of whom is
an executive officer of the Company.

     The Plan covers an aggregate of 1,750,000  shares of Common Stock which may
be issued  pursuant to Restricted  Stock Awards,  subject to vesting and certain
other conditions. The Plan was authorized for adoption by the Board of Directors
in  October  1997  and,  pursuant  to  Board  authorization,   approved  by  the
Compensation  Committee of the Board in November 1997, as an integral  component
of a  management  and  employee  incentive  and  retention  program.  The  Board
determined  that such program,  including the Plan, was in the best interests of
the Company in order to retain,  motivate and provide incentive to the Company's
management and other  employees,  particularly in response to the perceived risk
of attrition of key personnel and employee  morale  issues  resulting  after the
withdrawal of Redux and related  negative media coverage and legal  proceedings.
See "Risk Factors".

     Restricted  Stock Awards to acquire an  aggregate of 1,328,704  Shares have
been  granted to all  current  employees  of  Interneuron  in  consideration  of
services rendered to the Company by such employees. Of these Shares, 675,000 are
subject to awards granted to executive  officers,  653,704 are subject to awards
granted to other  employees  of the Company and 421,296 are  reserved for future
grants of Restricted Stock Awards to individuals who are not currently executive
officers of the Company. The number of Shares subject to Restricted Stock Awards
granted to each individual was based primarily on the employee's compensation.

     The Company has agreed,  among other  things,  to bear certain  expenses in
connection  with the  registration  and sale of the Shares being  offered by the
Selling Stockholders. See "Plan of Distribution."

<TABLE>
<CAPTION>

                                      Number of Shares    Percent of Outstanding   
                                     Beneficially Owned     Shares Beneficially   Number of Shares  
Selling Stockholders               Prior to Offering(1)           Owned            Being Offered(2)    
--------------------               --------------------           -----            ----------------    
<S>                   <C>                 <C>                      <C>                     <C>    
Glenn L. Cooper, M.D. (3)                 942,206                  2.2%                    225,000
Mark S. Butler (4)                        520,500                  1.2%                    150,000
Thomas F. Farb (5)                        307,822                    *                     150,000
Bobby W. Sandage, Jr., Ph.D. (6)          437,228                   1%                     150,000

</TABLE>

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

*     Less than 1%

(1)   Unless otherwise indicated, each stockholder listed has sole power to vote
      and direct disposition of the shares of Common Stock shown as beneficially
      owned by such stockholder.  Includes (i) Shares which have Initial Vesting
      Dates  pursuant to the Plan within 60 days of the date of this  Prospectus
      and (ii) shares of Common Stock issuable upon exercise of


                                      -19-










      options  which  are  exercisable  within  60  days  of the  date  of  this
      Prospectus. Excludes (i) Shares which have Initial Vesting Dates which are
      not within 60 days (although such Shares are being  registered for resale)
      and (ii) shares of Common Stock  issuable  upon  exercise of options which
      are not exercisable within 60 days.

(2)   The  Shares  are  being   registered   for  the  account  of  the  Selling
      Stockholders,  each of whom are entitled to receive Shares in satisfaction
      of  Restricted  Stock  Awards  granted  pursuant  to the Plan,  subject to
      vesting and to the Company's  right to repurchase the Shares under certain
      conditions.  Of the Shares,  one-third of the Shares being Offered vest on
      staggered  dates in each of January 1998,  January 1999,  and January 2000
      (the "Initial Vesting Dates"),  provided that each Initial Vesting Date is
      subject to extension to a later vesting date under certain  circumstances.
      See "Description of Securities - Shares Eligible for Future Sale".

(3)   Dr. Cooper is President and the Chief Executive  Officer and a director of
      the Company. Excludes 34,200 Shares subject to Restricted Stock Awards and
      shares of Common  Stock  issuable  upon  exercise  of options  held by Dr.
      Cooper's  spouse,  an  employee  of  the  Company.  Dr.  Cooper  disclaims
      beneficial ownership of such shares.

(4)   Includes 3,000 shares of Common Stock owned by Mr. Butler's children.  Mr.
      Butler is  Executive  Vice  President,  Chief  Administrative  Officer and
      General Counsel of the Company.

(5)   Mr.  Farb is  Executive  Vice  President,  Treasurer  and Chief  Financial
      Officer of the Company.

(6)   Dr. Sandage is Executive Vice President - Research and Development,  Chief
      Scientific Officer of the Company.



                                      -20-






                              PLAN OF DISTRIBUTION

     The Company has been advised that the Selling  Stockholders may sell Shares
from time to time in  transactions  on the  Nasdaq  National  Market or on other
exchanges on which the Shares may be traded, in the over-the-counter  market, in
negotiated  transactions,  through  the  writing  of  options on the Shares or a
combination  of such  methods of sale,  or  through  other  means.  Sales may be
effected at fixed prices which may be changed,  at market  prices  prevailing at
the time of sale,  at prices  related  to such  prevailing  market  prices or at
negotiated prices.

     The Selling Stockholders may effect such transactions by selling the Shares
to  or  through  underwriters,   broker-dealers,   or  agents  who  may  receive
compensation  in the form of  discounts,  concessions  or  commissions  from the
Selling   Stockholders   or  the   purchasers   of  the  Shares  for  whom  such
broker-dealers  may act as  agent or to whom  they  sell as  principal,  or both
(which  compensation  to a  particular  broker-dealer  might  be  in  excess  of
customary  commissions).  The Selling  Stockholders  and any  broker-dealers  or
agents who participate in the  distribution of Shares hereunder may be deemed to
be  "underwriters"  as that  term is  defined  in the Act,  and any  commissions
received  by them and profit on any resale of the Shares as  principal  might be
deemed to be underwriting discounts and commissions under the Act.

     The Company has agreed to pay the expenses of  registration  in  connection
with this Offering and to indemnify  the Selling  Stockholders  against  certain
liabilities, including certain liabilities under the Act.

     At the time a particular offer of Shares is made, to the extent required, a
supplement to this Prospectus will be prepared which will identify and set forth
the aggregate amount of Shares being offered and the terms of the offering.

     The Selling  Stockholders  are not  restricted as to the price or prices at
which they may sell their Shares. Sales of Shares or the possibility of sales of
Shares may depress the market price of the Company's  Common Stock.  The Selling
Stockholders  are subject to  applicable  provisions of the Exchange Act and the
rules and regulations  thereunder,  including without  limitation  Regulation M,
which  provisions  may limit the timing of purchases  and sales of the Shares by
the Selling Stockholders.


                                      -21-




                            DESCRIPTION OF SECURITIES

Common Stock

     The Company is authorized to issue up to 80,000,000 shares of Common Stock,
$.001 par value.  At October 31, 1997,  there were  41,165,810  shares of Common
Stock  outstanding,  excluding  treasury  shares.  Holders  of Common  Stock are
entitled  to one vote at all  meetings  of  stockholders  for each share held by
them. Holders of Common Stock have no preemptive rights and have no other rights
to  subscribe  for  additional  shares  or any  conversion  right  or  right  of
redemption.  Holders of Common Stock are  entitled to receive such  dividends as
may be  declared  by the  Board  of  Directors  out of funds  legally  available
therefor.  Subject to the rights of holders of  Preferred  Stock,  if any,  upon
liquidation, all such holders are entitled to participate pro rata in the assets
of the Company  available for  distribution.  All of the  outstanding  shares of
Common Stock are, and the shares to be issued hereby will be, when issued, fully
paid and nonassessable.

Preferred Stock

     The Certificate of Incorporation of the Company  authorizes the issuance of
5,000,000  shares  of  Preferred  Stock.  The  Board of  Directors,  within  the
limitations and restrictions  contained in the Certificate of Incorporation  and
without further action by the Company's stockholders, has the authority to issue
Preferred Stock from time to time in one or more series and to fix the number of
shares and the relative rights,  conversion  rights,  voting rights,  rights and
terms of redemption,  liquidation preferences and any other preferences, special
rights and  qualifications of any such series. To the extent shares of Preferred
Stock with voting rights are issued,  such issuance affects the voting rights of
the  holders  of  the  Company's  Common  Stock  by  increasing  the  number  of
outstanding shares entitled to vote and, if applicable, by the creation of class
or series voting rights. In addition,  while the issuance of Preferred Stock can
provide   flexibility  in  connection  with  acquisitions  and  other  corporate
purposes,  any issuance of Preferred Stock could,  under certain  circumstances,
have the effect of delaying or preventing a change in control of the Company and
may adversely  affect the rights of holders of Common Stock.  The Company has no
agreements or arrangements to issue any additional  shares of Preferred Stock or
to establish or designate any series of Preferred Stock.

     In November  1992 and June 1993,  the  Company  sold shares of Series B and
Series C Preferred  Stock to AHP pursuant to the AHP Agreements for an aggregate
purchase  price of  $3,500,000.  Holders of the Series B and Series C  Preferred
Stock are entitled to vote on all matters  submitted  to a vote of  stockholders
generally,  other than the  election of  directors,  holding the number of votes
equal to the number of shares of Common Stock into which the Preferred  Stock is
then  convertible.  The  shares of  Series B  Preferred  Stock and the  Series C
Preferred  Stock are  convertible  into an aggregate of 622,222 shares of Common
Stock,  subject to  adjustment.  Holders of the Series B and Series C  Preferred
Stock are entitled to receive out of funds legally available therefor, mandatory
dividends of $0.1253 and $1.00 per share, respectively,  payable at the election
of the Company in cash or Common Stock.  Such dividends are payable  annually on
April 1 of each year,  accrue on a daily basis and are cumulative.  In the event
of any  liquidation,  distribution  or sale of all or  substantially  all of the
assets,  dissolution  or winding up of the Company,  the holders of Series B and
Series C Preferred Stock shall be entitled to receive a preference of $12.53 and
$100 per share,  respectively,  plus  cumulated and unpaid  dividends,  over the
holders of Common Stock and any other shares.
                      

                                      -22-

 




     Until  the  date  AHP  ceases  to be the  registered  holder  of all of the
outstanding  Preferred  Stock of at least  one  series,  the  Company  will not,
without the approval of the majority of the outstanding  shares of all series of
Preferred Stock issued to AHP, (i) issue shares of stock having a preference or,
except shares  issued to AHP,  ranking pari passu with the  outstanding  series;
(ii)  reclassify any shares of stock to shares having a preference over any such
series;  (iii) make any amendment to its Certificate of Incorporation or by-laws
adversely  affecting  the  rights  of  holders  of such  series;  (iv)  merge or
consolidate with any entity or sell or otherwise dispose of all or substantially
all of its  assets or  liquidate,  dissolve,  recapitalize  or  reorganize;  (v)
repurchase or redeem any shares of its Common Stock;  (vi) pay dividends or make
any other  distribution  on any  Common  Stock,  except a  distribution  payable
entirely  in Common  Stock,  unless at the same  time,  a payment is made to the
holder of such series equal to the amount the holder would have been entitled to
had such holder  converted its Series B and Series C Preferred Stock into Common
Stock;  or  (vii)  guarantee  any  indebtedness  of any  third  party,  except a
subsidiary.

Subsidiary Financing Warrants and Put Protection Rights

     In  connection  with  certain  private   placements  by  the  Subsidiaries,
Interneuron  issued to the  investors  (i)  three-year  warrants  to purchase an
aggregate  of 218,125  shares of Common  Stock and (ii)  rights to sell  varying
amounts  of  investors'  convertible  preferred  stock  in the  Subsidiaries  to
Interneuron (the "Put Protection  Rights") in exchange for shares of Interneuron
Common Stock in the event certain conditions (including a public offering by the
applicable  subsidiary)  are not met by June 30,  1998.  The  shares  underlying
certain of these  warrants  were  registered  for  resale in March 1996 and,  at
October 31, 1997 40,000 of such warrants  remained  outstanding.  At October 31,
1997, a maximum of  approximately  232,000 shares may be issued upon exercise of
the Put Protection Rights (if Interneuron's Common Stock is $2.00 or less at the
time of exercise).

Other Options and Warrants

     At October 31, 1997,  approximately  7,884,000  shares of Common Stock were
issuable  upon  exercise  of  outstanding  options  and  warrants,   subject  to
anti-dilution  provisions.  As a result of such  provisions,  issuance of Shares
pursuant to Restricted  Stock Awards may result in  additional  shares of Common
Stock being issuable upon exercise of certain warrants.

Business Combination Provisions

     The Business  Combination  provision contained in Section 203 of Delaware's
General Corporation Law ("Section 203") defines an interested shareholder as any
person that (i) owns,  directly or  indirectly,  15% or more of the  outstanding
voting  stock of the  corporation  or (ii) is an  affiliate  or associate of the
corporation and was the owner of 15% or more of the outstanding  voting stock at
any time within the three-year period  immediately prior to the date on which it
is sought to be determined whether such person is an interested shareholder; and
the affiliates and the associates of such person.  Under Section 203, a resident
domestic  corporation  may not  engage  in any  business  combination  with  any
interested  shareholder  for a period  of three  years  following  the date such
shareholder became an interested shareholder,  unless (i) prior to such date the
board of directors of the corporation  approved either the business  combination
or the  transaction  which  resulted in the  shareholder  becoming an interested
shareholder or (ii) upon  consummation of the transaction  which resulted in the
shareholder becoming an interested shareholder, the interested shareholder owned
at least 85% of the voting stock of the corporation  outstanding at the time the
transaction   commenced   


                                      -23-






(excluding for determining the number of shares  outstanding (a) shares owned by
persons who are directors and officers and (b) employee stock plans,  in certain
instances) or (iii) on or subsequent  to such date the business  combination  is
approved  by the board of  directors  and  authorized  at an  annual or  special
meeting of shareholders by at least 66% of the affirmative voting stock which is
not owned by the interested shareholder.  The Company did not "elect-out" of the
statute and,  therefore,  the  restrictions  imposed by Section 203 apply to the
Company.

Transfer Agent and Registrar

     American  Stock Transfer & Trust  Company,  New York,  New York,  serves as
transfer agent and registrar for the Company's Common Stock.

Shares Eligible for Future Sale

     At October 31,  1997,  the Company had  41,165,810  shares of Common  Stock
outstanding,  excluding  treasury shares.  Substantially all of these shares are
eligible for sale without restriction or under Rule 144. In general,  under Rule
144 as currently in effect,  a person (or persons whose shares are  aggregated),
including  persons who may be deemed to be  "affiliates"  of the Company as that
term is defined under the Act, is entitled to sell within any three-month period
a number of restricted shares beneficially owned for at least one year that does
not exceed  the  greater of (i) one  percent of the then  outstanding  shares of
Common  Stock,  or (ii) the average  weekly  trading  volume in the Common Stock
during the four calendar  weeks  preceding  such sale.  Sales under Rule 144 are
also subject to certain  requirements  as to the manner of sale,  notice and the
availability of current public information about the Company.  However, a person
who is not an affiliate and has beneficially  owned such shares for at least two
years is  entitled  to sell such  shares  without  regard to the volume or other
requirements.

     A stockholder of the Company has demand and piggy-back  registration rights
relating to 622,222 shares of Common Stock issuable upon conversion of preferred
stock.  Certain  stockholders  entitled to receive  additional  shares of Common
Stock to be issued in December  1997 with a market  value of  $1,200,000  at the
time of issuance have registration rights in January 1998 relating to the resale
of those shares. In the event up to a maximum of approximately 232,000 shares of
Common Stock are issued in June 1998 pursuant to Put Protection Rights,  holders
of such shares will have registration rights at that time.

     All of the shares of Common Stock  issuable  under the Plan,  including the
675,000 Shares offered hereby, can be sold by the recipient thereof  immediately
upon vesting of the Shares.  Of the  1,328,704  shares of Common Stock  issuable
under the Plan pursuant to outstanding  Restricted Stock Awards, 112,334 vest in
December  1997,  265,567 vest in January 1998  (including  225,000 of the Shares
offered hereby),  112,334 vest in May 1998, 76,834 vest in December 1998 and the
remainder  vest in the same amounts and during the same months from January 1998
through May 2000,  subject to extension of each vesting date if it occurs during
a "Black  Out  Period,"  generally  meaning  a period  in  which  the  recipient
(including any Selling  Stockholder) is unable to sell the Shares subject to the
award at the applicable  vesting date due to legal or contractual  restrictions.
The vesting dates are also subject to acceleration under certain  circumstances,
including  certain  changes in  control of the  Company,  except  under  certain
conditions.  Sales of the shares of Common  Stock  subject to  Restricted  Stock
Awards, including the Shares

                                      -24-







offered hereby,  or the possibility of sales of such shares may adversely affect
the market price of the Company's Common Stock.

     In addition to the registration  statement of which this Prospectus forms a
part, the Company has outstanding  registration  statements on Form S-3 relating
to the resale by other stockholders of the Company of shares of Common Stock and
on Form S-8  relating  to its Plans in order to permit  holders of  options  and
shares issued pursuant to the Plans,  other than  affiliates of the Company,  to
sell, without restriction, shares of Common Stock issued pursuant to the Plans.

                                  LEGAL MATTERS

     The validity of the securities offered hereby have been passed upon for the
Company by Bachner, Tally, Polevoy & Misher LLP, New York, New York. A member of
Bachner,  Tally, Polevoy & Misher LLP, who is the secretary of the Company, owns
approximately 17,000 shares of Common Stock.

                                     EXPERTS

     The  consolidated  balance sheets as of September 30, 1996 and 1995 and the
consolidated  statements of operations,  cash flows and stockholders' equity for
each of the three years in the period ended September 30, 1996,  incorporated by
reference  in this  registration  statement,  have been  incorporated  herein in
reliance  on the report of Coopers & Lybrand  L.L.P.,  independent  accountants,
given on the authority of that firm as experts in accounting and auditing.


                                      -25-











     No dealer,  salesman or any other  person has been  authorized  to give any
information or to make any  representation  not contained in this  Prospectus in
connection  with the  Offering  herein  contained,  and, if given or made,  such
information or representation  must not be relied upon as having been authorized
by the Company or any underwriter.  This Prospectus does not constitute an offer
to sell or a  solicitation  of any  offer to buy any of the  securities  offered
hereby in any  jurisdiction to any person to whom it is unlawful to make such an
offer  or  solicitation  in such  jurisdiction.  Neither  the  delivery  of this
Prospectus  nor any sale  hereunder  shall  under any  circumstances  create any
implication  that there has been no change in the affairs of the  Company  since
any of the dates as of which  information is furnished  herein or since the date
hereof.



                                TABLE OF CONTENTS

                                                                         Page

Available Information ..................................................  3
Incorporation of Certain Documents by Reference ........................  4
The Company.............................................................  5
Risk Factors ...........................................................  8
Use of Proceeds ........................................................  18
Selling Stockholders ...................................................  19
Plan of Distribution ...................................................  21
Description of Securities ..............................................  22
Legal Matters ..........................................................  25
Experts ................................................................  25




                                      -26-





                                     PART II

                     Information Not Required in Prospectus


Item 3. Incorporation of Documents by Reference

     The  following  documents  filed  with the  Commission  (File No.  0-18728)
pursuant to the Exchange Act are incorporated herein by reference:

     1. The  Company's  Annual  Report on Form 10-K for the  fiscal  year  ended
September 30, 1996,  including any documents or portions thereof incorporated by
reference therein and all amendments thereto;

     2. The Company's  definitive proxy statement dated January 28, 1997, except
the Compensation  Committee Report on executive compensation and the performance
graph  included  in the proxy  statement,  filed  pursuant  to Section 14 of the
Exchange Act;

     3. The Company's  Reports on Form 10-Q for the quarters  ended December 31,
1996, March 31, 1997 and June 30, 1997.

     4. The Company's Reports on Form 8-K dated December 19, 1996,  February 18,
1997,  March 14, 1997, May 5, 1997,  June 19, 1997, July 3, 1997, July 18, 1997,
July 25, 1997,  August 29, 1997,  September  15,  1997,  September  18, 1997 and
October 15, 1997.

     5.The Company's  Registration  Statement on Form 8-A declared  effective on
March 8, 1990, as amended,  registering the Common Stock under the Exchange Act;
and

     6. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering, except the Compensation Committee Report on
Executive Compensation and the performance graph included in the Proxy Statement
filed pursuant to Section 14 of the Exchange Act. Any statement contained in any
document  incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or  superseded  for  purposes  of this  Prospectus  to the
extent that a statement  contained herein or in any subsequently  filed document
which also is or is deemed to be  incorporated  by reference  herein modifies or
supersedes  such statement.  Any such statement so modified or superseded  shall
not be deemed,  except as modified or  superseded,  to constitute a part of this
Prospectus.  The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the  documents  incorporated  herein by  reference  (other than
exhibits to such documents which are not specifically  incorporated by reference
into such  documents).  Requests  for such  documents  should be directed to the
Company, 99 Hayden Avenue,  Lexington,  Massachusetts  02173,  Attention:  Chief
Financial Officer, telephone (781) 402-3404.




                                      II-1








Item 6. Indemnification of Directors and Officers.

     The  Certificate of  Incorporation  and By-Laws of the Company provide that
the  Company  shall  indemnify  any person to the full extent  permitted  by the
Delaware General Corporation Law.

     Reference is hereby made to Section 145 of the Delaware General Corporation
Law relating to the  indemnification  of officers and directors which Section is
hereby incorporated herein by reference.

     The Registrant  also has  Indemnification  Agreements with its officers and
directors and has director and officer liability insurance.

Item 8. Exhibits.

  Exhibits
  --------

  4.8    - 1997  Equity  Incentive  Plan  and  form of  Restricted  Stock  Award
           Agreement thereunder

  5.1    - Opinion of Bachner, Tally, Polevoy & Misher LLP as to legality
                                         

  23.1   - Consent of Coopers & Lybrand L.L.P. - Included on II - 7

  23.2   - Consent of Bachner, Tally, Polevoy & Misher LLP - Included in Exhibit
           5.1
                                                    

  24.1   - Power of Attorney - Included on II-4




Item 9. Undertakings

     (a) The undersigned registrant hereby undertakes:

         (1)    To file,  during any  period in which  offers or sales are being
                made, a post-effective  amendment to this registration statement
                to include any material  information with respect to the plan of
                distribution  not  previously   disclosed  in  the  registration
                statement  or any  material  change to such  information  in the
                registration statement;

         (2)    That,  for the purpose of  determining  any liability  under the
                Securities  Act of 1933,  as  amended  (the  "Act"),  each  such
                post-effective   amendment   shall  be   deemed   to  be  a  new
                registration   statement relating  to  the  securities   offered
                therein,  and the  offering  therein,  and the  offering of such
                securities  at that time shall be deemed to be the initial  bona
                fide offering thereof.

         (3)    To  remove  from  registration  by  means  of  a  post-effective
                amendment any of the securities  being  registered  which remain
                unsold at the termination of the offering.

     (b) The  undersigned  registrant  hereby  undertakes  that, for purposes of
         determining   any   liability   under  the  Act,  each  filing  of  the
         registrant's  annual  report  pursuant to Section 13(a) or 15(d) of the
         Securities  Exchange Act of 1934 that is  incorporated  by reference in
         the  registration  statement  shall be deemed to be a new  registration
         statement relating to the securities offered therein,  and the offering
         of such securities at that time shall be deemed to be initial bona fide
         offering thereof.


                                      II-2






     (c) Insofar as indemnification for liabilities arising under the Act may be
         permitted to directors, officers or controlling persons pursuant to the
         foregoing  provisions,  or otherwise,  the  registrant has been advised
         that in the opinion of the  Securities  and  Exchange  Commission  such
         indemnification  is against  public  policy as expressed in the Act and
         is,   therefore,   unenforceable.   In  the  event  that  a  claim  for
         indemnification against such liabilities (other than the payment by the
         registrant  of  expenses  incurred  or paid by a  director,  officer or
         controlling  person of the registrant in the successful  defense of any
         action,  suit or proceeding)  is asserted by such director,  officer or
         controlling  person in connection with the securities being registered,
         the  registrant  will,  unless in the opinion of its counsel the matter
         has  been  settled  by  controlling  precedent,  submit  to a court  of
         appropriate  jurisdiction the question whether such  indemnification by
         it is  against  public  policy  as  expressed  in the Act  and  will be
         governed by the final adjudication of such issue.



                                      II-3






                                   SIGNATURES

     Pursuant to the  requirements of the Securities Act of 1933, the registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements for filing Form S-8 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Lexington, County of Middlesex on the 14th day of November, 1997.

                                     INTERNEURON PHARMACEUTICALS, INC.

                                       By: /s/ Glenn L. Cooper, M.D.
                                          ----------------------------------
                                          Glenn L. Cooper, M.D.
                                          President and Chief Executive Officer

     KNOW ALL  PERSONS  BY THESE  PRESENTS,  that each  person  whose  signature
appears  below  constitutes  and appoints,  severally and not jointly,  Glenn L.
Cooper, M.D. and Lindsay Rosenwald, M.D., with full power to act alone, his true
and lawful attorneys-in-fact, with the power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including  post-effective  amendments) to this Registration  Statement,  and to
file the same,  with all exhibits  thereto,  and other  documents in  connection
therewith,  with the  Securities  and Exchange  Commission,  granting  unto said
attorneys-in-fact  full power and authority to do and perform each and every act
and  thing  requisite  and  necessary  to be done as  fully to all  intents  and
purposes as he might or could do in person,  hereby ratifying and confirming all
that  said  attorneys-in-fact  may  lawfully  do or cause  to be done by  virtue
hereof.

     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated:

<TABLE>
<CAPTION>

       Signature                            Title                     Date
       ---------                            -----                     ----

<S>                           <C>                                <C>   
/s/ Glenn L. Cooper, M.D.       President, Chief Executive        November 14,1997
--------------------------      Officer and Director
Glenn L. Cooper, M.D.          (Principal Executive Officer)

/s/ Lindsay Rosenwald, M.D.
--------------------------
Lindsay Rosenwald, M.D.         Chairman of the Board of          November 14,1997
                                Directors

/s/ Harry J. Gray
--------------------------                                        November 14,1997
Harry J. Gray                   Director


/s/ Alexander M. Haig, Jr.
--------------------------                                        November 14,1997
Alexander M. Haig, Jr.          Director



--------------------------                                        November 14,1997 
Peter Barton Hutt               Director



                                      II-4




/s/ Malcolm Morville, Ph.D.
--------------------------                                       November 14, 1997
Malcolm Morville, Ph.D.         Director


/s/ Robert K. Mueller 
--------------------------                                       November 13, 1997
Robert K. Mueller               Director


/s/ Lee J. Schroeder
--------------------------                                       November 14, 1997
Lee J. Schroeder                Director



/s/ David Sharrock
--------------------------                                       November 14, 1997
David Sharrock                  Director


/s/ Richard Wurtman, M.D.
--------------------------                                       November 14, 1997
Richard Wurtman, M.D.           Director


/s/ Thomas F. Farb 
---------------------------                                      November 14, 1997
Thomas F. Farb                  Executive Vice President,
                                Treasurer and Chief
                                Financial Officer (Principal
                                Financial Officer)
/s/ Dale Ritter 
---------------------------                                      November 14, 1997
Dale Ritter                     Vice President, Corporate
                                Controller (Principal Accounting
                                Officer)


</TABLE>

                                      II-5





                                  Exhibit Index
                                  -------------


4.8            - 1997 Equity  Incentive Plan and form of Restricted  Stock Award
                 Agreement thereunder

5.1            - Opinion of Bachner, Tally, Polevoy & Misher LLP as to legality
                                           

23.1           - Consent of Coopers & Lybrand L.L.P. - Included on II-7

23.2           - Consent of Bachner,  Tally,  Polevoy & Misher LLP - Included in
                 Exhibit 5.1
                                                   

24.1           - Power of Attorney - Included on II-4


                                      II-6



                                                                    EXHIBIT 23.1



                       CONSENT OF INDEPENDENT ACCOUNTANTS

     We consent to the incorporation by reference in this Registration Statement
of Interneuron Pharmaceuticals, Inc. on Form S-8 of our report dated November 8,
1996 on our  audits of the  consolidated  financial  statements  of  Interneuron
Pharmaceuticals,  Inc.  as of  September  30,  1996 and 1995 and for each of the
three  years in the period  ended  September  30, 1996  appearing  in the Annual
Report on Form 10-K for the fiscal year ended  September  30, 1996 (SEC File No.
0-18728) of  Interneuron  Pharmaceuticals,  Inc.  filed with the  Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     We also consent to the reference to our firm in the Registration  Statement
under the caption "Experts".


                                                        Coopers & Lybrand L.L.P.


Boston, Massachusetts
November 13, 1997


                                      II-7
[{"type": "S-8", "sequence": "1", "description": "FORM S-8", "secsgml_size_bytes": 115701}]
{"company-data": {"conformed-name": "INTERNEURON PHARMACEUTICALS INC", "cik": "0000854222", "assigned-sic": "2834", "irs-number": "043047911", "state-of-incorporation": "DE", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-40315", "film-number": "97722171"}, "business-address": {"street1": "ONE LEDGEMONT CENTER", "street2": "99 HAYDEN AVE", "city": "LEXINGTON", "state": "MA", "zip": "02173", "phone": "6178618444"}, "mail-address": {"street1": "ONE LEDGEMONT CENTER", "street2": "99 HAYDEN AVE", "city": "LEXINGTON", "state": "MA", "zip": "02173"}}
As filed with the Securities and Exchange Commission on November 14, 1997
 
                                                 Registration No. 333-__________

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                            REGISTRATION STATEMENT ON
                                    FORM S-8
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                   ----------

                        INTERNEURON PHARMACEUTICALS, INC.
             (Exact name of registrant as specified in its charter)

                                   ----------

            
           Delaware                                     04-3047911
           --------                                     ----------
(State or other jurisdiction                       (I.R.S. Employer I.D.
     of Incorporation)                                    number)

                                   ----------
 
                       INTERNEURON PHARMACEUTICALS, INC.
                                99 Hayden Avenue
                               Lexington, MA 02173
                                 (781) 861-8444
   (Address and telephone number of Registrant's principal executive offices)

                                   ----------
 
                          1997 EQUITY INCENTIVE PLAN
                              (Full Title of Plan)
 
                                   ----------

          Glenn L. Cooper, M.D., President and Chief Executive Officer
                        INTERNEURON PHARMACEUTICALS, INC.
                                99 Hayden Avenue
                               Lexington, MA 02173
                                 (781) 861-8444
               (Address and telephone number of agent for service)

                                   ----------
                                    Copy to:
                               Jill M. Cohen, Esq.
                      Bachner, Tally, Polevoy & Misher LLP
                               380 Madison Avenue
                            New York, New York 10017
                                 (212) 687-7000
CALCULATION OF REGISTRATION FEE
===========================================================================================================================
          Title of                  Amount            Proposed Maximum        Proposed Maximum            Amount of
Securities to be Registered    to be Registered        Offering Price     Aggregate Offering Price     Registration Fee
                                                       Per Share (2)                (1)
---------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value                           1,750,000 (1)             $11.125               $19,468,750               $5,899.62
---------------------------------------------------------------------------------------------------------------------------
(1)  Pursuant to Rule 416  promulgated  under the  Securities  Act an additional
     undeterminable  number of shares of  Common  Stock is being  registered  to
     cover any  adjustment  in the number of shares of Common Stock  pursuant to
     the  anti-dilution  provisions of the 1997 Equity Incentive Plan.  Includes
     675,000  shares  which  are  also   registered  for  sale  by  the  Selling
     Stockholders.

(2)  Based on the average of the high and low sales price of the Common Stock as
     of November 12, 1997 and estimated  solely for purposes of calculating  the
     registration fee pursuant to Rule 457(a) under the Securities Act.

In addition, pursuant to Rule 416(c) under the Securities Act, this Registration
Statement also covers an indeterminate amount of interests to be offered or sold
pursuant to the employee benefit plan described herein.

================================================================================

                                EXPLANATORY NOTE

     The  first  part  of this  Registration  Statement  has  been  prepared  in
accordance  with  the  requirements  of Form S-8 and is  intended  to be used to
register shares to be issue and sold pursuant to the Interneuron Pharmaceuticals
Inc. 1997 Equity  Incentive Plan (the "Plan").  The Reoffer  Prospectus filed as
part of this  Registration  Statement has been  prepared in accordance  with the
requirements  of Form S-3 and may be used for  reofferings  or resales of common
stock to be  acquired  by the  participants  in the Plan who are deemed  control
persons of the Company.

                               PART I OF FORM S-8

     The documents  containing the  information  specified in Part I of Form S-8
will be sent or given to employees as specified by Rule 428(b)(1). In accordance
with the  instructions  to Part I of Form S-8, such  documents will not be filed
with  the  Commission  either  as  part  of this  registration  statement  or as
prospectuses or prospectus supplements pursuant to Rule 424.

                               REOFFER PROSPECTUS

                        INTERNEURON PHARMACEUTICALS, INC.
                         675,000 shares of Common Stock

     This  Prospectus  relates to the resale of 675,000 shares (the "Shares") of
Common  Stock,  par value $.001 per share (the  "Common  Stock") of  Interneuron
Pharmaceuticals,  Inc.  ("Interneuron"  and the "Company"),  which are issuable,
subject to vesting and certain other  conditions,  pursuant to restricted  stock
awards  ("Restricted Stock Awards") granted to executive officers of the Company
(the "Selling Stockholders") under the Company's 1997 Equity Incentive Plan (the
"Plan").  The  Reoffer  Prospectus  is  being  filed  as part of a  Registration
Statement  on Form S-8 to enable  the  Selling  Stockholders  to sell the Shares
issuable  to them in the public  market  from time to time.  The Shares  vest in
installments  aggregating  225,000  per year in each of January  1998,  1999 and
2000.

     The Plan covers an aggregate of 1,750,000  shares of Common Stock which may
be issued  pursuant to Restricted  Stock Awards,  subject to vesting and certain
other conditions. The Plan was authorized for adoption by the Board of Directors
in  October  1997  and,  pursuant  to  Board  authorization,   approved  by  the
Compensation  Committee of the Board in November 1997, as an integral  component
of a  management  and  employee  incentive  and  retention  program.  The  Board
determined  that such program,  including the Plan, was in the best interests of
the Company in order to retain,  motivate and provide incentive to the Company's
management and other  employees,  particularly in response to the perceived risk
of attrition of key personnel and employee  morale  issues  resulting  after the
withdrawal of Redux and related  negative media coverage and legal  proceedings.
See "Risk Factors".

     Restricted  Stock Awards to acquire an  aggregate of 1,328,704  Shares have
been  granted to all  current  employees  of  Interneuron  in  consideration  of
services rendered to the Company by such employees. Of these Shares, 675,000 are
subject to awards granted to executive  officers,  653,704 are subject to awards
granted to other  employees  of the Company and 421,296 are  reserved for future
grants of Restricted Stock Awards to individuals who are not currently executive
officers of the Company. The number of Shares subject to Restricted Stock Awards
granted to each individual was based primarily on the employee's compensation.

     The Selling  Stockholders may sell all or a portion of the Shares from time
to time in  transactions  on the Nasdaq  National  Market or other  exchanges or
markets on which the Shares may be traded,  in the  over-the-counter  market, in
negotiated  transactions,  through  the  writing  of  options on the Shares or a
combination  of such  methods  of sale or  through  other  means.  Sales  may be
effected at fixed prices that may be changed, at market prices prevailing at the
time  of  sale,  at  prices  related  to such  prevailing  market  prices  or at
negotiated prices.

     The Selling Stockholders may effect such transactions by selling the Shares
to or through broker-dealers  (including  broker-dealers which may be affiliated
with  any  such  Selling   Stockholder)  and  such  broker-dealers  may  receive
compensation  in the form of  discounts,  concessions  or  commissions  from the
Selling   Stockholders   or  the   purchasers   of  the  Shares  for  whom  such
broker-dealers may act as agent or to whom they sell as principal or both (which
compensation  to a  particular  broker-dealer  might be in excess  of  customary
commissions). See "Selling Stockholders" and "Plan of Distribution."

     None  of  the  proceeds  from  the  sale  of  the  Shares  by  the  Selling
Stockholders  will be  received by the  Company.  The Company has agreed to bear
expenses  in  connection  with the  registration  and sale of the  Shares  being
offered by the Selling  Stockholders.  The Company has agreed to  indemnify  the
Selling Stockholders against certain liabilities,  including certain liabilities
under the Securities Act of 1933, as amended (the "Act").

     The Common  Stock  trades on the Nasdaq  National  Market  under the symbol
IPIC. On November 12, 1997, the last sale price of the Shares was $11.

                                   ----------

          THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
           SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.

                                   ----------

THESE   SECURITIES   HAVE   NOT  BEEN APPROVED OR  DISAPPROVED BY THE SECURITIES
AND  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
SECURITIES AND EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION  PASSED
UPON THE  ACCURACY OR ADEQUACY OF THIS  PROSPECTUS.  ANY  REPRESENTATION  TO THE
CONTRARY IS A CRIMINAL OFFENSE.

                                   ----------

                The date of this Prospectus is November 14, 1997

                                      -2-

                              AVAILABLE INFORMATION

     The Company has filed with the  Securities  and  Exchange  Commission  (the
"Commission"),  Washington,  D.C. a Registration Statement on Form S-8 under the
Act covering the securities offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the  Registration  Statement and the
exhibits thereto.  Statements contained in this Prospectus as to the contents of
any contract or other document  referred to are not necessarily  complete and in
each instance such  statement is qualified by reference to each such contract or
document.  The  Company  is  subject to the  informational  requirements  of the
Securities  Exchange  Act of 1934,  as  amended  (the  "Exchange  Act"),  and in
accordance  therewith files reports and other  information  with the Commission.
Reports and other  information  filed by the Company with the  Commission can be
inspected  and  copies at the  public  reference  facilities  maintained  by the
Commission at the following  addresses:  New York Regional  Office,  Seven World
Trade Center,  New York, New York 10048; and Chicago  Regional Office,  500 West
Madison Street,  Chicago,  Illinois  60661-2511.  Copies of such material can be
obtained  from the  Public  Reference  Section  of the  Commission  at 450 Fifth
Street,  N.W.,  Washington,  D.C.  20549 at  prescribed  rates.  The  Commission
maintains  a  Web  site  at  http://www.sec.gov  that  contains  reports,  proxy
statements and other information regarding issuers that file electronically with
the Commission.

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

     Redux(TM)  is a  trademark  of Les  Laboratoires  Servier,  licensed to the
Company and American Home Products Corp. CerAxon(TM), Bextra(TM), LidodexNS(TM),
Melzone(TM)  and PMS  Escape(TM)  are  trademarks  owned by or  licensed  to the
Company or its subsidiaries.  All other trademarks or tradenames  referred to in
this Prospectus are the property of their respective owners.

                                      -3-

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The following  documents filed with the Securities and Exchange  Commission
(File No.  0-18728)  pursuant to the  Exchange  Act are  incorporated  herein by
reference:

     1. The  Company's  Annual  Report on Form 10-K for the  fiscal  year  ended
September 30, 1996,  including any documents or portions thereof incorporated by
reference therein and all amendments thereto;

     2. The Company's  definitive proxy statement dated January 28, 1997, except
the Compensation  Committee Report on executive compensation and the performance
graph  included  in the proxy  statement,  filed  pursuant  to Section 14 of the
Exchange Act;

     3. The Company's  Reports on Form 10-Q for the quarters  ended December 31,
1996, March 31, 1997 and June 30, 1997.

     4. The  Company's  Reports on Form 8-K dated  February 18, 1997,  March 14,
1997, May 5, 1997,  June 19, 1997,  July 3, 1997,  July 18, 1997, July 25, 1997,
August 29, 1997, September 15, 1997, September 18, 1997 and October 15, 1997.

     5. The Company's  Registration  Statement on Form 8-A declared effective on
March 8, 1990, as amended,  registering the Common Stock under the Exchange Act;
and

     6. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering, except the Compensation Committee Report on
Executive Compensation and the performance graph included in the Proxy Statement
filed pursuant to Section 14 of the Exchange Act. Any statement contained in any
document  incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or  superseded  for  purposes  of this  Prospectus  to the
extent that a statement  contained herein or in any subsequently  filed document
which also is or is deemed to be  incorporated  by reference  herein modifies or
supersedes  such statement.  Any such statement so modified or superseded  shall
not be deemed,  except as modified or  superseded,  to constitute a part of this
Prospectus.  The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the  documents  incorporated  herein by  reference  (other than
exhibits to such documents which are not specifically  incorporated by reference
into such  documents).  Requests  for such  documents  should be directed to the
Company, 99 Hayden Avenue,  Lexington,  Massachusetts  02173,  Attention:  Chief
Financial Officer, telephone (781) 402-3404.

                           FORWARD LOOKING STATEMENTS

     From time to time,  information  provided by the Company or statements made
by  its  directors,  officers  or  employees  may  constitute  "forward-looking"
statements under the Private  Securities  Litigation  Reform Act of 1995 and are
subject  to  numerous  risks  and  uncertainties.  Any  statements  made in this
Registration   Statement,   including  any  statements  incorporated  herein  by
reference (see "Incorporation of Certain Documents by Reference"),  that are not
statements   of   historical   fact   are   forward-looking   statements.   Such
forward-looking  statements and other forward-  looking  statements  made by the
Company or its  representatives are based on a number of assumptions and involve
a number of risks and  uncertainties,  and,  accordingly,  actual  results could
differ materially.  Factors that may cause such differences include, but are not
limited to those set forth under the heading "Risk Factors."

                                      -4-

                                   THE COMPANY

     Interneuron  Pharmaceuticals,  Inc.  ("Interneuron"  or the "Company") is a
diversified   biopharmaceutical   company   engaged  in  the   development   and
commercialization  of a portfolio of products and product  candidates  primarily
for  neurological  and  behavioral  diseases and  disorders,  including  stroke,
anxiety and  migraine  headache.  The Company is also  developing  products  and
technologies,  generally outside the central nervous system field,  through four
subsidiaries:  Intercardia, Inc. ("Intercardia"), a public company which focuses
on cardiovascular disease;  Progenitor,  Inc.  ("Progenitor"),  a public company
which focuses on functional  genomics  using  developmental  biology;  Transcell
Technologies,  Inc.  ("Transcell"),  which  focuses on  carbohydrate-based  drug
discovery;  and  InterNutria,  Inc.  ("InterNutria"),  which  focuses on dietary
supplement products.

Redux for Obesity

     The  Company's  first  pharmaceutical   product,   Redux   (dexfenfluramine
hydrochloride)   capsules  C-IV,   received  clearance  by  the  Food  and  Drug
Administration  ("FDA") in April 1996 and was commercially launched in June 1996
as a prescription drug for the treatment of obesity. Until September 1997, Redux
was  marketed by the  Wyeth-Ayerst  ("Wyeth-Ayerst")  division of American  Home
Products Corp. ("AHP"), which obtained from the Company exclusive U.S. marketing
rights,  in exchange for royalties and milestone  payments.  The Company,  which
retained co-promotion and certain manufacturing rights,  obtained U.S. rights to
Redux to treat abnormal  carbohydrate  craving and obesity from Les Laboratoires
Servier ("Servier") in exchange for royalties on net sales.

     On September 15, 1997, the Company and  Wyeth-Ayerst  announced a voluntary
withdrawal  of Redux and  Wyeth-Ayerst  announced a  simultaneous  withdrawal of
Pondimin (fenfluramine  hydrochloride) tablets C-IV. This action was taken based
on new, preliminary  information regarding possible heart valve abnormalities in
patients using these  medications,  most often in combination with  phentermine,
another  medication  used for weight loss. The Company has been named,  together
with AHP and other  pharmaceutical  companies,  as a defendant in numerous legal
actions involving the use of Redux and other weight loss drugs. Several clinical
studies have been initiated by Wyeth-Ayerst and the Company  generally  designed
to  compare  echocardiograms  of  patients  who had  taken  either  Redux or the
combination of  fenfluramine  and phentermine  ("fen-phen")  with those of obese
patients  who did not  receive  these  medications.  Results of certain of these
studies are currently  expected  during the first half of 1998.  In addition,  a
number of similar  studies have been and may be  conducted by others.  See "Risk
Factors."

CerAxon for Ischemic Stroke

     The Company is  preparing,  and intends to submit to the FDA during 1997, a
New Drug Application ("NDA") for the use of CerAxon (cytidyl diphosphocholine or
citicoline)  to treat 

                                      -5-

ischemic  stroke.  Based on the  clinical  data to date,  the  Company  believes
citicoline may be a promising acute ischemic therapy,  particularly  forpatients
with  moderate  to  severe  stroke.  The  Company  is  also  conducting  several
additional Phase 3 clinical trials, which will not be completed prior to the NDA
submission,  to  study  CerAxon's  effect  on  reduction  in  infarct  size  and
functional  improvement  in ischemic  stroke  patients.  Under an agreement (the
"Ferrer Agreement") with Ferrer  Internacional,  SA ("Ferrer"),  the Company has
U.S. and Canadian marketing rights to certain uses of citicoline, which has been
approved for marketing in over 20 countries.

Bextra for Congestive Heart Failure

     Through  Intercardia  and CPEC,  Inc.,  the  Company is  developing  Bextra
(bucindolol),  which is currently  undergoing a Phase 3 clinical  trial known as
the Beta-blocker Evaluation of Survival Trial (the "BEST Study"). The BEST Study
is being  conducted  by a division  of the  National  Institutes  of Health (the
"NIH") and the Department of Veterans  Affairs (the "VA"),  for the treatment of
congestive heart failure.  Intercardia  obtained  worldwide rights to bucindolol
and, in December 1995,  entered into an agreement with Astra Merck, Inc. ("Astra
Merck") for the development and  commercialization in the U.S. of bucindolol for
the treatment of congestive heart failure.  CPEC is owned  approximately  80% by
Intercardia  and  approximately  20% by  Interneuron.  Intercardia  also  has an
agreement  with  BASF   Pharma/Knoll   AG  relating  to  the   development   and
commercialization  of bucindolol  in all  countries  outside the U.S. and Japan.
Interneuron owns  approximately 61% of Intercardia's  outstanding  Common Stock.
See "Recent Developments".

Other Products

     Other product  candidates in the Company's  pipeline include  pagoclone,  a
drug under  development to treat  anxiety/panic  disorders which is undergoing a
Phase 2/3 clinical trial in patients with panic disorders aimed at a longer-term
safety and efficacy evaluation,  and LidodexNS for acute migraine headache which
is under pre-clinical  investigation and for which an  Investigational  New Drug
Application  ("IND") is expected to be filed in early 1998.  The Company is also
engaged  in  discussions  relating  to the  acquisition  of  other  products  or
companies having rights to other therapeutic  products under development,  which
may  include  the  issuance  of  Company  securities  and/or  cash  payments  or
commitments.

     The Company is also developing additional products and technologies through
its  subsidiaries.  Progenitor,  which  completed its initial public offering in
August 1997,  is engaged in the  discovery and  functional  characterization  of
genes to identify  targets for the  development  of new  pharmaceuticals,  using
developmental  biology and genomic  technologies.  Through  its  acquisition  of
Mercator Genetics,  Inc. ("Mercator")  simultaneously with the completion of the
initial public offering,  Progenitor obtained complementary technologies in gene
discovery. Interneuron owns approximately 37% of Progenitor's outstanding Common
Stock.  Transcell's  leading  technologies  include  combinatorial  carbohydrate
chemistry  methods for the synthesis and  development  of  oligosaccharides  and
glycoconjugates libraries.

     InterNutria's  leading  products are PMS Escape,  a dietary  supplement for
women during the pre-menstrual  period, which is currently undergoing a national
launch, and three sports supplement  products which are being test marketed.  In
addition,  Interneuron  intends to license to  InterNutria  Melzone,  a low-dose
dietary  supplement  form of melatonin,  a naturally  occurring  hormone that is
believed to regulate the body's circadian (sleep) rhythm, which may be useful to
induce restful sleep.

                                      -6-

     The Company was originally  incorporated in New York in October 1988 and in
March 1990 was reincorporated in Delaware.  The Company's  executive offices are
located at One Ledgemont  Center,  99 Hayden  Avenue,  Lexington,  Massachusetts
02173, and its telephone number is (781) 861-8444.  Unless the context indicates
otherwise,   all  references  to  the  Company   include   Interneuron  and  its
subsidiaries,   Intercardia,   Progenitor,   Transcell,   and  InterNutria  (the
"Subsidiaries").

Recent Developments

     On November 5, 1997, Intercardia,  Interneuron and Transcell entered into a
letter  of  intent  relating  to the  proposed  acquisition  by  Intercardia  of
Transcell and related technology rights (the "Proposed  Transcell  Transaction")
in  exchange  for  Intercardia  Common  Stock  with a  current  market  value of
approximately  $15 million  and the  issuance of  Intercardia  stock  options to
Transcell   employees  and  consultants   with  an  aggregate  market  value  of
approximately   $3-4  million.   The  purchase  price  will  be  paid  in  three
installments,  at closing  and on the 15th and 21st month  anniversaries  of the
closing,  and  includes  $3  million to be issued to  Interneuron  at closing in
connection  with the transfer by Interneuron  to Intercardia of certain  license
and technology rights and Interneuron's  continued guaranty of Transcell's lease
obligations.  Interneuron will retain a majority  interest in Intercardia  after
the Proposed Transcell Transaction.  Completion of the transaction is subject to
certain conditions including execution of definitive agreements, approval by the
stockholders of Intercardia, and completion of due diligence. In connection with
the Proposed  Transcell  Transaction,  Intercardia  and  Interneuron  will incur
charges to operations  during the period in which the closing  occurs  currently
estimated to range from approximately $6 to $8 million and will incur additional
future  charges  relating to certain  stock  options to be issued  pursuant  the
Proposed Transcell Transaction.

     In October  1997 the Board of  Directors  authorized  the Plan for adoption
and, pursuant to Board authorization,  the Plan was approved by the Compensation
Committee in November 1997 as part of an integral  component of a management and
employee incentive and retention program,  which also includes additional option
grants to all employees,  designed to motivate,  retain and provide incentive to
the Company's  management and other  employees,  particularly in response to the
perceived  risk  of  attrition  of key  personnel  and  employee  morale  issues
resulting after the withdrawal of Redux and related  negative media coverage and
legal  proceedings.  The Plan provides for the grant of Restricted  Stock Awards
which entitle the plan  participants to receive Shares upon the  satisfaction of
specified  vesting  periods,  in  consideration  of  services  rendered  to  the
Corporation  or such  other  consideration  as the  Board or the  Committee  may
determine.

     An aggregate of 1,328,704  Restricted Stock Awards have been granted to all
employees of the Company, of which 675,000 awards were granted to four executive
officers of the Company, and 653,704 awards were granted to other employees, all
in consideration of services rendered by the employee to the Company. The Shares
are eligible for resale  immediately upon vesting.  The number of Shares subject
to  each   employee's   award  were  based  primarily  on  the  employee's  base
compensation. The Shares subject to the awards granted to the executive officers
vest in installments  aggregating  225,000 Shares per year in January 1998, 1999
and 2000 and have been registered for resale herein. See "Selling Stockholders."
The Company  will incur  compensation  expense  over the  vesting  period of the
1,328,704 Shares subject to outstanding  Restricted Stock Awards.  These charges
are expected to aggregate  approximately  $15.5 million,  of which approximately
$11 million is expected to be incurred in the fiscal year ending  September  30,
1998 and the remainder through the quarter ending June 30, 2000.

                                      -7-

                                  RISK FACTORS

     An investment in the securities offered hereby is speculative in nature and
involves a high  degree of risk.  Each  prospective  investor  should  carefully
consider the following risk factors,  as well as others  described  elsewhere or
incorporated  by  reference in this  Prospectus,  before  making an  investment.
Prospective  investors are cautioned that the statements in this Prospectus that
are not descriptions of historical facts may be forward looking  statements that
are subject to risks and  uncertainties.  Actual results could differ materially
from those  currently  anticipated  due to a number of factors,  including those
identified  under "Risk  Factors" and elsewhere in this  Prospectus or documents
incorporated by reference herein.

     Withdrawal of Redux; Safety Issues Relating to Redux;  Litigation Risks. On
Monday,  September 15, 1997, the Company and Wyeth-Ayerst  announced a voluntary
withdrawal  of Redux and  Wyeth-Ayerst  announced a  simultaneous  withdrawal of
Pondimin.  On Friday,  September  12,  1997,  the FDA  provided  the Company and
Wyeth-Ayerst  with new preliminary  information  concerning  potential  abnormal
echocardiogram  findings in patients using these drugs.  These patients had been
treated  with  fenfluramine  or  Redux  for  up  to 24  months,  most  often  in
combination with phentermine.  Potential abnormal  echocardiogram  findings were
reported to the FDA in 92 of 291 subjects evaluated. Two hundred and seventy-one
of the 291 patients had taken fenfluramine in combination with phentermine,  and
20  of  the  291  patients  had  taken  Redux  or a  combination  of  Redux  and
phentermine.  It was  reprinted  that of these 20, 11 had taken  Redux alone and
nine had taken Redux in  combination  with  phentermine,  and of the 11, two had
potential abnormal  echocardiogram  findings and of the nine, four had potential
abnormal echocardiogram findings.

     These  observations  reflect a preliminary  analysis of pooled  information
rather than results of a formal  clinical  investigation,  and are  difficult to
evaluate because of the absence of matched  controls and  pretreatment  baseline
data for these patients.  Nevertheless,  the Company believes it was prudent, in
light of this information,  to have withdrawn Redux from the market. At the time
of and in connection with the withdrawal of Redux, the Company announced that it
anticipated  incurring  charges to operations  in its fourth  quarter and fiscal
year ended September 30, 1997 for expenses  relating to the  discontinuation  of
the operations  related to Redux.  Based on preliminary  estimates,  the Company
announced  that these charges were  anticipated  to range from $8 million to $12
million,  excluding  the  costs of  echocardiogram  studies  and any  subsequent
charges which may result from legal actions relating to Redux.

     In  July  1997  the  Mayo  Clinic  reported  observations  of  heart  valve
abnormalities in 24 patients taking the combination of Pondimin and phentermine.
The Mayo Clinic cases were subsequently  reported in an article appearing in the
August 28, 1997 issue of The New England  Journal of Medicine.  This article was
accompanied by a letter to the editor from the FDA reporting additional cases of
heart valve disease in 28 patients  taking the  combination of  phentermine  and
fenfluramine, two patients taking fenfluramine alone, four patients taking Redux
alone and two patients taking Redux and  phentermine.  Additional  adverse event
reports of abnormal heart valve findings in patients using Redux or fenfluramine
alone or in combination with other weight loss agents continue to be received by
the Company and Wyeth-Ayerst  and the FDA. These reports have included  symptoms
such as shortness of breath, chest pain,  fainting,  swelling of the ankles or a
new heart murmur.

     Wyeth-Ayerst  has stated that it is  supporting  or  conducting  studies to
compare echocardiograms of patients who had taken either Redux or the "fen/phen"

                                      -8-

(fenfluramine/phentermine)  combination  with a matched group of obese  patients
who did not receive these medications,  including a study of approximately 1,100
patients who were  originally in a clinical study comparing Redux to an extended
release  formulation  of Redux  which had been  under  development  prior to the
withdrawal of Redux.  The studies are being  conducted and will be analyzed by a
blinded panel of cardiologists to determine the association, if any, between the
administration  of these drugs and cardiac valve findings and obtain  additional
information relating to the clinical significance of these findings. The Company
also  intends  to  conduct  an  approximately   1,000  patient  study  comparing
echocardiograms  of patients who took only Redux to a control  group who did not
take  either  Redux,  Pondimin,  phentermine  or  "fen-phen."  The costs of this
Company-supported study are currently estimated at up to $5 million. A number of
similar clinical  studies have been and may be conducted by others.  The results
of these studies and the impact of such results on the Company cannot  currently
be predicted.

     On November  13, 1997,  the U.S.  Department  of Health and Human  Services
("HHS") issued preliminary  recommendations for the medical management of people
who took Pondimin or Redux. HHS recommended,  until more complete information is
available,  that  patients  who took either drug should see their  physician  to
determine  whether  there are signs or symptoms of heart or lung  disease and if
such person has signs or symptoms of heart or lung disease,  such as a new heart
murmur  or  shortness  of  breath,  have an  echocardiogram  performed  and that
physicians  strongly  consider  performing an  echocardiogram  for such patients
before the patient has any invasive procedure for which antibiotic  prophylactic
treatment is recommended to prevent the development of bacterial endocarditis.

     Included in the FDA-approved  labeling for Redux were references to certain
other  risks  that  may  be  associated  with  dexfenfluramine  and  which  were
highlighted  during the FDA's review of the drug.  One issue  relates to whether
there   is   an   association   between   appetite    suppressants,    including
dexfenfluramine,  and the development of primary pulmonary hypertension ("PPH"),
a rare  but  serious  lung  disorder.  In the  general  population,  the  yearly
occurrence  of PPH is  estimated  to be about one to two cases per  million.  An
epidemiologic  study  conducted in Europe  examining risk factors for PPH showed
that among other factors,  weight  reduction  drugs  including  dexfenfluramine,
systemic hypertension,  and obesity itself were associated with a higher risk of
PPH. Results of the final study,  including a reclassification  and inclusion of
certain  previously  excluded  cases by the authors of the study,  estimated the
yearly  occurrence to be between 23 and 46 cases per million for patients taking
appetite suppressants for greater than three months duration.

     A second issue discussed in the FDA-approved labeling for Redux was whether
dexfenfluramine is associated with certain  neurochemical  changes in the brain.
Certain  studies related to this issue,  conducted by third parties,  purport to
show that very high doses of dexfenfluramine cause prolonged serotonin depletion
in  certain  animals,  which  some  researchers  believe  is  an  indication  of
neurotoxicity. The Company presented data relating to the lack of neurocognitive
effects in patients  taking Redux and believes  that, as  demonstrated  in human
trials,  these animal  studies are  clinically  irrelevant to humans  because of
pharmacokinetic differences between animals and humans (resulting in much higher
brain  concentrations  of  dexfenfluramine  and its active metabolite in certain
animals than in humans) and because of the high dosages used in animal  studies.
The  Company  had agreed  with the FDA to conduct a Phase 4, or  post-marketing,
study of  Redux,  to  further  evaluate  long-term  neurocognitive  function  in
patients  taking  Redux.  However,  as a result  of the  withdrawal  of Redux in
September 1997, such study was discontinued.

     The Company has been named,  together with other pharmaceutical  companies,
as a  defendant  in over 100 legal  actions,  many of which  purport to be class
actions,  in federal and state  courts  relating  to the use of Redux.  Based on
media reports and other sources, the Company anticipates that it will be named a
defendent  in  additional  Redux-related  lawsuits  in the  future.  The actions
generally  have been brought by or on behalf of putative  classes of persons who
claim to have  suffered  injury or who claim that they may suffer  injury in the
future  due to  use  of  one  or  more  weight  loss  drugs  including  Pondimin
(fenfluramine),  phentermine and Redux. Plaintiff's allegations of liability are
based on various  theories of recovery,  including,  but not limited to, product
liability,   strict  liability,   negligence,   various  breaches  of  warranty,
conspiracy,  fraud misrepresentation and deceit. These lawsuits typically allege
that the short or long-term use of PONDOMIN  and/or REDUX,  independently  or in
combination  (including the  combination of PONDOMIN and  phentermine  popularly
known  as   "fen/phen"),   causes,   among  other  things,   primary   pulmonary
hypertension,   valvular  heart  disease  and/or  neurological  dysfunction.  In
addition, some lawsuits allege severe emotional distress caused by the purported
increased risk of injury in the future.  Plaintiffs typically seek relief in the
form of monetary damages (including general damages, medical care and monitoring
expenses,  loss of earnings  and  earnings  capacity,  compensatory  damages and
punitive damages), generally in unspecified amounts, on behalf of the individual
or the class.  In addition,  some actions  seeking class  certification  ask for
certain types of  purportedly  equitable  relief,  including but not limited to,
declaratory   judgements  and  the   establishment  of  a  research  or  medical
surveillance  program.  The Company and certain directors and/or officers of the
Company have also been named as defendants in several  lawsuits filed by alleged
purchasers  of the  Company's  Common  Stock,  purporting  to be class  actions,
claiming among other things that the Company  publicly  disseminated  materially
false and  misleading  statements  concerning the prospects and safety of Redux,
resulting in the artificial inflation of the

                                      -9-

Company's  Common Stock price during various  periods,  the earliest  commencing
March 1, 1997 through September 17, 1997, in violation of the federal securities
laws.  Although the Company maintains certain product liability and director and
officer  liability  insurance  and intends to defend  these and similar  actions
vigorously,  the Company may be required to devote  significant  management time
and  resources  to these  actions and, in the event of  successful  uninsured or
insufficiently  insured  claims,  or in the event a  successful  indemnification
claim was made against the Company, the Company's business,  financial condition
and results of operations could be materially adversely affected.  Under certain
circumstances,   the  Company  is  required  to  indemnify  Servier,  Boehringer
Ingelheim Pharmaceuticals Inc. (the contract manufacturer of Redux capsules) and
AHP,  and the Company is entitled to  indemnification  by AHP,  against  certain
claims,  damages or  liabilities  incurred in connection  with Redux.  The cross
indemnification  between the Company and AHP generally relates to the activities
and responsibilities of each company.

     UNCERTAINTIES RELATING TO CERAXON.

     The  Company  intends  to submit to the FDA prior to the end of 1997 an NDA
for the use of CerAxon to treat ischemic  stroke.  The FDA has 60 days after NDA
submission  to accept or reject the NDA for filing and there can be no assurance
the FDA will accept the NDA for filing.  The Company  believes the two completed
Phase 3  clinical  studies,  as well as  supportive  data,  show the  safety and
beneficial  treatment  effect of  CerAxon  in  patients  with  ischemic  stroke,
particularly  those with moderate to severe  strokes.  The Company is conducting
additional  Phase 3 clinical  studies to study CerAxon's  effect on reduction in
infarct size and  functional  improvement  in ischemic  stroke  patients.  These
studies will not be completed prior to submission of, and are not believed to be
required for  acceptance  for filing of, the NDA.  There can be no assurance the
FDA will grant  authorization  to  commercialize  CerAxon  based on the  studies
submitted with the NDA.  Ferrer may terminate the Ferrer  Agreement in the event
FDA approval of citicoline is not obtained by January 1999,  which date shall be
extended if the Company provides  information to Ferrer which tends to establish
that the Company has carried out the steps for  obtaining  such  approval and if
such approval has not been obtained for reasons beyond the Company's control.

     The manufacturing  facilities of Ferrer used to produce  citicoline as well
as the contract  manufacturer of finished  product,  are required to comply with
all FDA  requirements,  including  current good  manufacturing  practice ("GMP")
regulations,  and are  subject  to FDA  inspection,  both  before  and after NDA
approval,  to determine compliance with those requirements.  The GMP regulations
are complex and failure to be in compliance  could lead to  non-approval  of the
NDA or, if such approval is obtained,  the need for remedial  action,  penalties
and delays in  production  of material  acceptable  to the FDA.  There can be no
assurance the  manufacturing  facilities  for  citicoline  have complied or will
continue  to comply  with  applicable  requirements.  In  addition,  the Company
intends to market CerAxon  directly and will be required to establish,  maintain
and manage sufficient sales and marketing capabilities. Although the Company has
a small  sales  force  which had been  engaged in  co-promotion  of Redux and is
promoting  PMS Escape for  InterNutria,  it has no  experience  in marketing any
pharmaceutical  products  directly  and there can be no  assurance  that it will
successfully market CerAxon.  Further,  the Company may require additional funds
for the  manufacturing  and  marketing  of  CerAxon  and,  if such funds are not
available,  may be  required  to  delay  or  reduce  such  efforts,  as  well as
activities relating to the development of other products.

     HISTORY OF LOSSES; ACCUMULATED DEFICIT AND POTENTIAL FUTURE LOSSES; CHARGES
TO  OPERATIONS;  POTENTIAL  FLUCTUATIONS  IN  REVENUES.

     Through  June 30,  1997,  the  Company  had  accumulated  net losses  since
inception of  approximately  $125  million.  Substantially  all of the Company's
revenues from operations were derived from Redux, which was withdrawn

                                      -10-

from the market in September  1997.  Losses are continuing and cash continues to
be used by  operating  activities.  The  Company  will be  required  to  conduct
significant development and clinical testing activities and establish marketing,
sales,  regulatory  and  administrative  capabilities  for many of its  proposed
products,  including  products under development or which may be acquired in the
future,  which are  expected  to result in  continued  operating  losses for the
foreseeable  future.  The extent of future  losses and time  required to achieve
profitability are highly uncertain.  The Company will incur significant  charges
to operations in the fiscal  quarter and year ended  September 30, 1997 relating
to  the  acquisition  of  Mercator  by  Progenitor,  currently  estimated  to be
approximately  $8 million,  and relating to the  withdrawal of Redux,  currently
estimated to range from approximately $8 to $12 million,  excluding the costs of
echocardiogram  studies and any  subsequent  charges which may result from legal
returns  relating  to Redux.  In  addition,  the Company  will incur  charges to
operations  in  connection  with the  proposed  acquisition  by  Intercardia  of
Transcell,  as disclosed  under "Recent  Developments,"  currently  estimated to
range  from  approximately  $6 to $8  million,  during  the  period in which the
closing  occurs  and  future  charges  relating  to  certain  option  grants  in
connection  with  the   acquisition.   In  addition,   the  Company  will  incur
compensation  expense over the vesting period of the 1,328,704 Shares subject to
outstanding  Restricted  Stock  Awards.  These charges are expected to aggregate
approximately  $15.5 million,  of which approximately $11 million is expected to
be  incurred  in the fiscal year  ending  September  30, 1998 and the  remainder
through the quarter  ending June 30, 2000.  There can be no  assurance  that the
Company will be able to achieve  profitability  on a sustained basis, if at all.
The Company has  experienced,  and may continue to experience,  fluctuations  in
revenues  as a  result  of  the  timing  of  license  fees,  royalties,  product
shipments, regulatory approvals, product launches and milestone payments.

     UNCERTAINTIES  GENERALLY  RELATED  TO  CLINICAL  TRIALS.  

     Before obtaining  regulatory approval for the commercial sale of any of its
pharmaceutical products under development, the Company must demonstrate that the
product is safe and efficacious for use in each target  indication.  The results
of  preclinical  studies  and early  clinical  trials may not be  predictive  of
results that will be obtained in large-scale  testing or use, and there canbe no
assurance that clinical trials of the products under  development by the Company
will demonstrate the safety and efficacy of such products or that, regardless of
clinical trial results,  FDA approval will be obtained. A number of companies in
the  pharmaceutical  industry  have  suffered  significant  setbacks in advanced
clinical trials or have not received FDA approval,  even after promising results
in earlier trials. If clinical trials do not demonstrate the safety and efficacy
of certain products under  development,  the Company may be adversely  affected.
Citicoline and bucindolol are currently in Phase 3 clinical trials and pagoclone
is undergoing a Phase 2/3 clinical  trial.  There can be no assurance that these
trials will confirm or  demonstrate  the safety and  efficacy of the  respective
drug. The Company also expects to conduct clinical evaluation on certain dietary
supplement  products  under  development  to  substantiate  the claims  that are
expected  to be made for the  products.  There can be no  assurance  that  these
clinical evaluations will be successful.

     RISK OF PRODUCT  LIABILITY.  

     In  addition  to the claims and risks  summarized  under  "--Withdrawal  of
Redux;  Safety  Issues  Relating  to Redux;  Litigation  Risks",  the use of the
Company's  other  products in clinical  trials and the marketing of any products
may expose the Company to substantial  product liability claims.  Certain of the
Company's agreements require the Company to obtain specified levels of insurance
coverage,  naming the other party thereto as an additional insured. There can be
no  assurance  that the Company  will  continue to be able to maintain or obtain
such  insurance  coverage,  that such  insurance  can be acquired in  sufficient
amounts to protect the Company or other named parties against such liability, at
a  reasonable  cost,  or at all or that any  insurance  obtained  will cover any
particular  liability  claim.  The Company  may also be  required  to  indemnify
licensors or licensees  against product  liability  claims incurred by them as a
result  of  products  developed  or  marketed  by the  Company.  In the event of
uninsured or insufficiently

                                      -11-

insured product liability  claims, or in the event a successful  indemnification
claim was made  against  the  Company,  the  Company's  business  and  financial
condition could be materially adversely affected. There can be no assurance that
the Company will continue to be able to obtain adequate insurance in the future,
at an acceptable cost or at all.

     FUNDING REQUIREMENTS.  

     The Company has expended and will continue to expend  substantial  funds to
conduct research and development activities and preclinical and clinical testing
on products under  development,  including products which may be acquired in the
future. In addition,  the Company intends to market directly and is establishing
sales and marketing  capabilities  for CerAxon,  is marketing PMS Escape through
InterNutria  and intends to market  directly  or  co-promote  sports  supplement
products and Melzone,  assuming applicable regulatory approvals are obtained and
test  launches  are  successful.  The  Company  will  therefore  be  required to
establish and maintain  appropriate internal sales forces and functions and will
require  additional funds for manufacturing and marketing  activities.  Although
the Company is devoting  significant  funding to the  national  marketing of PMS
Escape,  it cannot yet predict  whether such product will  generate  substantial
revenues or be profitable to the Company.  The Company may seek additional funds
through corporate  collaborations or future equity or debt financings to provide
funding for new business opportunities and future growth.

     Interneuron intends to fund $2 million of a $10 million payment intended to
be made by CPEC and/or Intercardia to Astra-Merek in December 1997 (representing
Interneuron's  percentage  ownership  in CPEC).  Interneuron  is also  currently
funding the activities of Transcell and InterNutria, each of which is seeking to
enter into  collaborations,  business  combinations  or private or public equity
financings to pursue development and  commercialization of their technologies or
products.  Although  Interneuron may acquire  additional  equity in a subsidiary
through  participation in any such financing or conversion of intercompany debt,
equity  financings by a subsidiary will likely reduce  Interneuron's  percentage
ownership of that subsidiary and funds raised by the Subsidiaries will generally
not be  available  to  Interneuron.  Although  certain of the  Subsidiaries  are
engaged in discussions relating to potential business combinations or private or
public  equity  financings,  except as set forth or  incorporated  by  reference
herein,  none of the Subsidiaries  has any commitments for additional  financing
and there can be no  assurance  that any such  financing  will be  available  on
acceptable  terms,  if at all.  If  adequate  funds are not  available  to these
subsidiaries on acceptable  terms,  such  subsidiaries may be required to delay,
scale back or  eliminate  some or all of their  respective  research and product
development programs or product launches. Intercardia, Interneuron and Transcell
have entered into a letter of intent relating to the potential sale of Transcell
to  Intercardia,  although  there  is no  assurance  this  acquisition  will  be
completed. See "Recent Developments."

     RISKS RELATING TO MANAGING  GROWTH.

     Assuming   additional   proposed   product   launches  occur,  the  Company
anticipates  experiencing  a period  of rapid  growth,  which is likely to place
significant  demands on the  Company's  management,  operational,  financial and
accounting  resources.  The  Company's  intention  to  market  certain  products
directly,   particularly  CerAxon,  will  further  strain  these  resources.  In
particular,  the Company will be required to establish  and maintain a marketing
organization,  including  a sales  force and  related  management  systems.  The
Company's  future  success  will  depend in part on  whether  it can  expand its
operational,  financial and accounting systems and expand,  train and manage its
employee base. The Company's inability to manage growth effectively could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

     RISKS RELATING TO CONTRACTUAL  ARRANGEMENTS. 

     The Company's agreements with licensors and licensees generally provide the
other party with rights to terminate the agreement,  in whole or in part,  under
certain circumstances. For example, Ferrer has the right to terminate the

                                      -12-

Ferrer  Agreement  in the event FDA  approval of  citicoline  is not obtained by
January 1999, which date shall be extended if the Company  provides  information
to Ferrer  which tends to  establish  that the Company has carried out the steps
for  obtaining  such  approval and if such  approval  has not been  obtained for
reasons  beyond the Company's  control,  or in the event an  unaffiliated  party
acquires 50% of Interneuron's  Common Stock.  Servier has the right to terminate
the  agreements  relating to the licensing of Redux to the Company under certain
conditions including an acquisition by a new party of a 20% beneficial ownership
interest in the Company without Servier's consent or certain Company  activities
relating to the marketing of certain competitive products,  subject to specified
terms  and  conditions.   Termination  of  certain  of  these  agreements  could
substantially  reduce  the  likelihood  of  successful  commercialization  of  a
particular  product  which,  depending upon the importance to the Company of the
product  that is  subject to any such  agreement,  could  materially  adversely
affect the Company's business.

     UNCERTAINTY OF GOVERNMENT REGULATION.

     The Company's  research,  development and  pre-clinical and clinical trials
and the  manufacturing  and  marketing of most of its products are subject to an
extensive  regulatory  approval process by the FDA and other regulatory agencies
in the U.S. and other countries. The process of obtaining FDA and other required
regulatory  approvals  for  drug  and  biologic  products,   including  required
preclinical and clinical testing, is lengthy, expensive and uncertain. There can
be no assurance that, even after such time and expenditures, the Company will be
able to obtain  necessary  regulatory  approvals for clinical testing or for the
manufacturing  or marketing of any  products.  Even if  regulatory  clearance is
obtained,  post-market evaluation of the products, if required,  could result in
restrictions  on a product's  marketing  or  withdrawal  of the product from the
market as well as possible civil or criminal sanctions. In addition, the Company
will be dependent upon the manufacturers of its products to maintain  compliance
with GMP and on laboratories  and medical  institutions  conducting  preclinical
studies and clinical  trials to maintain both good  laboratory and good clinical
practices. There can be no assurance that GMP manufacturers capable of producing
product according to forecasts can be obtained on a timely basis, or at all, for
products  under  development,  including  CerAxon  and  pagoclone,  which  would
materially  adversely  affect  the  Company's  ability  to  commercialize  these
products.  Certain products are or are proposed to be marketed by the Company as
dietary  supplements,  such as PMS Escape,  the sports  supplement  products and
Melzone. There can be no assurance that the FDA will not attempt to regulate the
products  as drugs,  which  would  require  the  filing of NDAs and  review  and
approval by the FDA prior to marketing,  or otherwise  restrict the marketing of
these  products.  In  addition,  classification  of these  products  as  dietary
supplements  limits  the  types of  claims  that can be made in  marketing.  The
Federal Trade Commission has overlapping  jurisdiction  with the FDA to regulate
the  promotion  and  advertising  of  dietary   supplements  and  other  special
nutritional products, including those of InterNutria.

     In addition to the regulatory framework for product approvals,  the Company
and its  collaborative  partners  may be subject to  regulation  under state and
federal laws, including requirements  regarding occupational safety,  laboratory
practices,  environmental protection and hazardous substance control, and may be
subject to other present and possible future local,  state,  federal and foreign
regulation.  The impact of such  regulation upon the Company cannot be predicted
and could be material and adverse.

     UNCERTAINTY  OF PATENT  POSITION  AND  PROPRIETARY  RIGHTS. 

     The Company's success will depend to a significant extent on its ability to
obtain and enforce  patent  protection  on its  products  and  technologies,  to
maintain  trade secrets and to operate  without  infringing  on the  proprietary
rights of others. There can be no assurance that any Company patents will afford
any competitive

                                      -13-

advantages or will not be challenged  or  circumvented  by third parties or that
any pending patent applications will result in patents being issued.  Certain of
the Company's patents and patent applications include  biotechnology claims, the
patentability  of which generally is highly uncertain and involves complex legal
and factual  questions.  Because of the extensive time required for development,
testing and regulatory review of a potential product, it is possible that before
a potential  product can be  commercialized,  any related patent may expire,  or
remain in existence for only a short period  following  commercialization,  thus
reducing any advantage of the patent.

     The U.S.  composition  of matter patent on  bucindolol  expires in November
1997. As a result, assuming FDA approval can be obtained, competitors, including
generic drug manufacturers,  may market bucindolol,  subject to potential market
exclusivity  under the  Waxman-Hatch  Act. The Company's  licensed  U.S.  patent
covering the  administration  of citicoline  to treat  patients  afflicted  with
conditions associated with the inadequate release of brain acetylcholine expires
in 2003, subject to potential extension under the Waxman-Hatch Act. As described
in  the  licensed  patent,  the  inadequate  release  of  acetylcholine  may  be
associated  with several  disorders,  including the behavioral and  neurological
syndromes  seen after brain  traumas and  peripheral  neuro-muscular  disorders,
brain  ischemia  and  post-stroke  rehabilitation.  Although  the  claim  of the
licensed  patent is broadly  directed to the treatment of inadequate  release of
brain  acetylcholine,  there  can  be  no  assurance  this  patent  will  afford
protection against  competitors of CerAxon to treat ischemic stroke. The Company
has also filed a patent application  relating to the use of citicoline to reduce
the size of the area damaged by the stroke, or infarct size,  although there can
be no assurance this patent will issue.

     The Company may conduct research on pharmaceutical or chemical compounds or
technologies, the patents or other rights to which may be held by third parties.
Others  have  filed and in the  future  may file  patent  applications  covering
certain  products or technologies  that are similar to those of the Company.  If
products based on such technologies are commercialized by the Company,  they may
infringe such patents or other rights, licenses to which may not be available to
the  Company.  Failure  to  obtain  needed  patents,   licenses  or  proprietary
information  held by others may have a material  adverse effect on the Company's
business.  There can be no assurance that others will not independently  develop
similar technologies or duplicate any technology developed by the Company or, if
patents are  issued,  successfully  design  around the  patented  aspects of any
technology developed by the Company. Furthermore, litigation may be necessary to
enforce any patents  issued to the Company,  to determine the scope and validity
of the  patent  rights of others or in  response  to legal  action  against  the
Company claiming damages for infringement of patent rights or other  proprietary
rights or seeking  to enjoin  commercial  activities  relating  to the  affected
product  or  process.  Not only is the  outcome  of any such  litigation  highly
uncertain,  but such litigation may also result in significant use of management
and financial resources.

     To the extent that consultants,  key employees or other third parties apply
technological  information  independently  developed by them or by others to the
Company's proposed products,  disputes may arise as to the proprietary rights to
such information which may not be resolved in favor of the Company.  Most of the
Company's  consultants are employed by or have consulting  agreements with third
parties and any  inventions  discovered by such  individuals  generally will not
become  property  of  the  Company.  There  can  be no  assurance  that  Company
confidentiality  agreements  will not be  breached or that the  Company's  trade
secrets  will not  otherwise  become  known or be  independently  discovered  by
competitors.

                                      -14-

     COMPETITION.

     Competition from other pharmaceutical  companies,  biotechnology companies,
dietary supplement  companies and research and academic  institutions is intense
and  expected to  increase.  The Company is aware of products  and  technologies
under development by its competitors that address diseases being targeted by the
Company and  competitors  have  developed  or are in the  process of  developing
products  or  technologies  that are,  or in the  future  may be,  the basis for
competitive products.  Activase, a thrombolytic agent, is marketed by Genentech,
Inc.  as  a  treatment  for  stroke.   To  the  Company's   knowledge,   Janssen
Pharmaceutical  NV has  filed an NDA for a stroke  treatment  known as  Prosynap
(lubeluzole)  and a number of products are in clinical  development  pursuing an
indication  for stroke which could also compete with  CerAxon.  In addition,  if
regulatory  approval is obtained,  Bextra will compete with Coreg  (carvedilol),
which has been  approved and is marketed in the U.S. by  SmithKline  Beecham for
the treatment of congestive  heart  failure.  In addition,  Melzone will compete
with a substantial number of available melatonin dietary supplement products and
PMS  Escape  competes  with a number of  products  for use by women  during  the
pre-menstrual period.

     UNCERTAINTY  REGARDING  WAXMAN-HATCH ACT.

     Certain  provisions of the Waxman- Hatch Act grant market  exclusivity  for
certain new drugs and dosage forms.  The Waxman-Hatch Act provides that a patent
which claims a product,  use or method of manufacture covering certain drugs and
certain other  products may be extended for up to five years to  compensate  the
patent  holder for a portion of the time required for research and FDA review of
the product.  The  Waxman-Hatch  Act also  establishes a period of time from the
date of FDA approval of certain new drug  applications  during which the FDA may
not accept or approve  short-form  applications for generic versions of the drug
from other sponsors,  although it may accept or approve  long-form  applications
(that is, other  complete  NDAs) for such drug.  There can be no  assurance  the
Company will receive marketing  exclusivity for any product.  The composition of
matter patent for bucindolol expires in November 1997. There can be no assurance
that any of the benefits of the Waxman-Hatch Act or similar foreign laws will be
available to the Company or that such laws will not be amended or repealed.

     EARLY STAGE OF PRODUCTS UNDER  DEVELOPMENT  BY THE COMPANY. 

     The  Company  is  investigating  for  therapeutic  potential  a variety  of
pharmaceutical  compounds,  technologies and other products at various stages of
development.  In particular,  Progenitor and Transcell each are conducting  very
early stage  research and all of their  proposed  products  require  significant
further research and development,  as well as testing and regulatory clearances,
and are subject to the risks of failure  inherent in the development of products
or therapeutic procedures based on innovative  technologies.  The products under
development  by the  Company  are  subject  to the risk that any or all of these
proposed  products are found to be ineffective  or unsafe,  or otherwise fail to
receive  necessary  regulatory  clearances.  The  Company  is unable to  predict
whether any of its  products  will be  successfully  manufactured  or  marketed.
Further,  due to the extended  testing and regulatory  review  process  required
before   marketing   clearance   can  be   obtained,   the   time   frames   for
commercialization of any products or procedures are long and uncertain.

     DEPENDENCE  ON  OTHERS  FOR  CLINICAL  DEVELOPMENT,  REGULATORY  APPROVALS,
     MANUFACTURING  AND  MARKETING.  

     The  Company   expects  to  rely  upon   collaborative   partners  for  the
development,  manufacturing and marketing of certain of its products,  including
products which may be acquired in the future. The Company is therefore dependent
on the efforts of these collaborative  partners and the Company may have limited
control  over  the  manufacture  and  commercialization  of such  products.  For
example,  with respect to Bextra,  neither the Company nor Intercardia  controls
the BEST Study,  which is being conducted by the NIH and the VA, and the Company
will be

                                      -15-

substantially  dependent  upon  Astra  Merck for the  commercial  success of the
twice-daily  formulation  of  bucindolol  in the U.S.,  assuming FDA approval is
obtained. In the event certain of the Company's collaborative partners terminate
the related  agreements or fail to manufacture or  commercialize  products,  the
Company  would be  materially  adversely  affected.  Because  the  Company  will
generally  retain a royalty  interest  in sales of  products  licensed  to third
parties, its revenues may be less than if it retained  commercialization  rights
and  marketed  products  directly.   Although  the  Company  believes  that  its
collaborative  partners will have an economic  motivation to  commercialize  the
products  that they may license,  the amount and timing of resources  devoted to
these activities  generally will be controlled by each partner.  There can be no
assurance  that the Company will be successful in  establishing  any  additional
collaborative  arrangements,  or that any such  collaborative  partners  will be
successful  in  commercializing  products or not terminate  their  collaborative
agreements with the Company.

     Many companies in the pharmaceutical and dietary supplement industries have
substantially greater financial resources and development  capabilities than the
Company and have substantially greater experience in undertaking preclinical and
clinical testing of products,  obtaining  regulatory approvals and manufacturing
and marketing  products.  In addition to competing with  universities  and other
research   institutions  in  the  development  of  products,   technologies  and
processes,  the Company may compete with other companies in acquiring  rights to
products  or  technologies.  There can be no  assurance  that the  Company  will
develop  products that are more effective or achieve  greater market  acceptance
than competitive products, or that the Company's competitors will not succeed in
developing  products and  technologies  that are safer or more effective or less
expensive  than those being  developed  by the Company or that would  render the
Company's products and technologies less competitive or obsolete.

     DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS. 

     The Company is  dependent  on certain  executive  officers  and  scientific
personnel and the Company's  business would be adversely affected by the loss of
certain of these individuals. The Company has key person life insurance policies
on the lives of Glenn L.  Cooper,  M.D.,  Richard  Wurtman,  M.D. and Lindsay A.
Rosenwald,  M.D. Drs.  Wurtman and Rosenwald devote only a portion of their time
to the Company's  business.  In addition,  the Company is dependent upon certain
executive  officers of the subsidiaries,  each of which has separate  management
who are responsible,  to a large extent,  for the day-to-day  operations and the
strategic  direction of the  respective  subsidiary.  In  addition,  the Company
relies on independent  consultants to design and supervise  clinical  trials and
assist in preparation of FDA submissions.

     Competition for qualified employees among  pharmaceutical and biotechnology
companies is intense,  and the loss of any of such  persons,  or an inability to
attract,  retain and motivate highly skilled  employees,  could adversely affect
the Company's business and prospects. There can be no assurance that the Company
will be able to retain its existing personnel or to attract additional qualified
employees.

     UNCERTAINTY  REGARDING   PHARMACEUTICAL  PRICING  AND  REIMBURSEMENT.

     The Company's  business will be affected by the efforts of governmental and
third-party  payors to  contain or reduce  the cost of health  care.  There have
been,  and the Company  anticipates  that there will continue to be, a number of
proposals to implement  government  control over the pricing or profitability of
prescription pharmaceuticals,  as is currently the case in many foreign markets.
The  announcement  or adoption of such proposals could have an adverse effect on
the Company.  Furthermore,  the Company's  ability to commercialize its products
may be adversely affected to the extent that such

                                      -16-

proposals have a material  adverse effect on the business,  financial  condition
and  profitability of companies that are prospective  collaborative  partners of
the Company. Successful  commercialization of many of the Company's products may
depend on the  availability of  reimbursement  for the cost of such products and
related treatment from third-party  health care payors,  such as the government,
private  insurance  plans  and  managed  care  organizations.  There  can  be no
assurance that such reimbursement will be available. Such third-party payors are
increasingly challenging the price of medical products and services.

     CONTROL BY PRESENT STOCKHOLDERS;  ANTI-TAKEOVER  PROVISIONS.  

     The executive officers, directors and principal stockholders of the Company
(including  individuals or entities related to such  stockholders)  beneficially
own  approximately  47%  of  the  Company's  Common  Stock.  Accordingly,  these
officers,  directors and stockholders may have the ability to exert  significant
influence over the election of the Company's Board of Directors and to determine
corporate actions requiring stockholder approval.

     The Board of Directors has the authority,  without further  approval of the
Company's stockholders, to fix the rights and preferences of and to issue shares
of preferred  stock. In addition,  Ferrer may terminate the Ferrer  Agreement in
the event an  unaffiliated  third party  acquires  50% of  Interneuron's  Common
Stock.  The preferred  stock held by AHP provides that AHP's consent is required
prior  to the  merger  of the  Company,  the  sale of  substantially  all of the
Company's assets or certain other transactions.  In addition,  vesting of shares
of Common Stock  subject to Restricted  Stock Awards under the Plan  accelerates
and  outstanding  options under the Plans become  immediately  exercisable  upon
certain changes in control of the Company,  except under certain conditions.  In
addition,  Delaware  corporate  law  imposes  limitations  on  certain  business
combinations.  These provisions  could,  under certain  circumstances,  have the
effect of  delaying  or  preventing  a change in  control  of the  Company  and,
accordingly, could adversely affect the price of the Company's Common Stock.

     No  Dividends.  The Company has not paid any cash  dividends  on its Common
Stock since  inception and does not expect to do so in the  foreseeable  future.
Any dividends will be subject to the preferential cumulative dividend of $0.1253
per share and $1.00 per share  payable  on the  outstanding  Series B  Preferred
Stock and Series C  Preferred  Stock,  respectively,  held by AHP and  dividends
payable on any other preferred stock issued by the Company.

     POSSIBLE  VOLATILITY OF STOCK PRICE.

     The  market  prices  for  securities  of  emerging  growth  companies  have
historically been highly volatile.  Future announcements  concerning the Company
or its subsidiaries,  including  Intercardia and Progenitor,  which are publicly
traded,  or the Company's  competitors,  including the initiation and results of
litigation,  clinical studies, regulatory filings,  technological innovations or
competitive   products,    developments   concerning   government   regulations,
proprietary  rights, the Company's results of operations or public concern as to
the safety or commercial value of the Company's products, may have a significant
impact on the market price of the Company's Common Stock.

     SHARES  ELIGIBLE FOR FUTURE SALE;  REGISTRATION  RIGHTS.

     As of October 31, 1997, 41,165,810 shares of Common Stock were outstanding,
excluding  treasury shares.  Substantially  all of these shares are eligible for
sale  without  restriction  or under  Rule 144.  In  general,  under Rule 144 as
currently  in  effect,  a person  (or  persons  whose  shares  are  aggregated),
including  persons who may be deemed to be  "affiliates"  of the Company as that
term is defined under the Act, is entitled to sell within any three-month period
a number of restricted shares beneficially owned for at least one year that does
not

                                      -17-

exceed the greater of (i) one percent of the then  outstanding  shares of Common
Stock,  or (ii) the average weekly trading volume in the Common Stock during the
four calendar weeks  preceding such sale.  Sales under Rule 144 are also subject
to certain requirements as to the manner of sale, notice and the availability of
current public  information about the Company.  However,  a person who is not an
affiliate  and has  beneficially  owned  such  shares  for at least two years is
entitled to sell such shares without regard to the volume or other requirements.

     AHP has demand  and  piggy-back  registration  rights  relating  to 622,222
shares of Common Stock  issuable  upon  conversion of preferred  stock.  Certain
stockholders  entitled to receive  additional shares of Common Stock in December
1997 with a market value of $1,200,000 at the time of issuance have registration
rights in January 1998 relating to the resale of those  shares.  In the event up
to a maximum of approximately  232,000 shares of Common Stock are issued in June
1998 pursuant to certain put protection rights, holders of such shares will have
registration rights at that time.

In addition to the registration  statement  covering  1,750,000 shares of Common
Stock  issuable  under the Plan,  of which  this  Prospectus  forms a part,  the
Company has  outstanding  registration  statements  on Form S-3  relating to the
resale  of shares of Common  Stock and on Form S-8  relating  to its 1989  Stock
Option Plan, 1994 Long-Term Incentive Plan and its 1995 Stock Purchase Plan (the
"Plans").

     All of the shares of Common Stock  issuable  under the Plan,  including the
675,000 Shares offered hereby, can be sold by the recipient thereof  immediately
upon vesting of the Shares.  Of the  1,328,704  shares of Common Stock  issuable
under the Plan pursuant to outstanding  Restricted Stock Awards, 112,334 vest in
December  1997,  265,567 vest in January 1998  (including  225,000 of the Shares
offered hereby),  112,334 vest in May 1998, 76,834 vest in December 1998 and the
remainder  vest in the same amounts and during the same months from January 1998
through May 2000,  subject to extension of each vesting date if it occurs during
a "Black  Out  Period,"  generally  meaning  a period  in  which  the  recipient
(including any Selling  Stockholder) is unable to sell the Shares subject to the
award at the applicable  vesting date due to legal or contractual  restrictions.
The vesting dates are also subject to acceleration under certain  circumstances,
including  certain  changes in  control of the  Company,  except  under  certain
conditions.  Sales of the shares of Common  Stock  subject to  Restricted  Stock
Awards, including the Shares offered hereby, or the possibility of sales of such
shares may adversely affect the market price of the Company's Common Stock.

     Outstanding  Options and  Warrants.  As of October 31, 1997,  approximately
7,884,000  shares of Common Stock were  issuable  upon  exercise of  outstanding
options and warrants,  subject to anti-dilution  provisions. As a result of such
provisions, issuance of Shares pursuant to Restricted Stock Awards may result in
additional  shares of Common  Stock  being  issuable  upon  exercise  of certain
warrants.  In addition,  the Company is required to issue  additional  shares of
Common Stock in connection with technology acquisitions and may issue additional
shares if certain put protection rights are exercised. To the extent such shares
are issued, the interest of holders of Common Stock will be diluted.

                                 USE OF PROCEEDS

     To the extent any Shares are sold each Selling Stockholder will receive all
the net proceeds from the sale of his  representative  Shares;  the Company will
not  receive  any of such net  proceeds.  See  "Plan of  Distribution." 

                                       18

                               SELLING STOCKHOLDERS

     The following  table sets forth the names of each Selling  Stockholder  and
for each, the number of Shares  beneficially  owned at the  commencement  of the
offering,  and the  number of Shares  offered  for  sale,  based on  information
provided  to the  Company  by such  Selling  Stockholders.  The Shares are being
registered to permit  public  secondary  trading of the Shares,  and the Selling
Stockholders  may offer all or any portion of the Shares for resale from time to
time.

     The Shares are issuable to the Selling Stockholders, subject to the vesting
as  described in Note (2) below,  pursuant to  Restricted  Stock Awards  granted
under the Plan in  consideration  of services  rendered  (and payment of the par
value of the Shares) to the Company by the Selling Stockholders, each of whom is
an executive officer of the Company.

     The Plan covers an aggregate of 1,750,000  shares of Common Stock which may
be issued  pursuant to Restricted  Stock Awards,  subject to vesting and certain
other conditions. The Plan was authorized for adoption by the Board of Directors
in  October  1997  and,  pursuant  to  Board  authorization,   approved  by  the
Compensation  Committee of the Board in November 1997, as an integral  component
of a  management  and  employee  incentive  and  retention  program.  The  Board
determined  that such program,  including the Plan, was in the best interests of
the Company in order to retain,  motivate and provide incentive to the Company's
management and other  employees,  particularly in response to the perceived risk
of attrition of key personnel and employee  morale  issues  resulting  after the
withdrawal of Redux and related  negative media coverage and legal  proceedings.
See "Risk Factors".

     Restricted  Stock Awards to acquire an  aggregate of 1,328,704  Shares have
been  granted to all  current  employees  of  Interneuron  in  consideration  of
services rendered to the Company by such employees. Of these Shares, 675,000 are
subject to awards granted to executive  officers,  653,704 are subject to awards
granted to other  employees  of the Company and 421,296 are  reserved for future
grants of Restricted Stock Awards to individuals who are not currently executive
officers of the Company. The number of Shares subject to Restricted Stock Awards
granted to each individual was based primarily on the employee's compensation.

     The Company has agreed,  among other  things,  to bear certain  expenses in
connection  with the  registration  and sale of the Shares being  offered by the
Selling Stockholders. See "Plan of Distribution."
Number of Shares    Percent of Outstanding   
                                     Beneficially Owned     Shares Beneficially   Number of Shares  
Selling Stockholders               Prior to Offering(1)           Owned            Being Offered(2)    
--------------------               --------------------           -----            ----------------
Glenn L. Cooper, M.D. (3)                 942,206                  2.2%                    225,000
Mark S. Butler (4)                        520,500                  1.2%                    150,000
Thomas F. Farb (5)                        307,822                    *                     150,000
Bobby W. Sandage, Jr., Ph.D. (6)          437,228                   1%                     150,000
------------------------- 

*     Less than 1%

(1)   Unless otherwise indicated, each stockholder listed has sole power to vote
      and direct disposition of the shares of Common Stock shown as beneficially
      owned by such stockholder.  Includes (i) Shares which have Initial Vesting
      Dates  pursuant to the Plan within 60 days of the date of this  Prospectus
      and (ii) shares of Common Stock issuable upon exercise of

                                      -19-

      options  which  are  exercisable  within  60  days  of the  date  of  this
      Prospectus. Excludes (i) Shares which have Initial Vesting Dates which are
      not within 60 days (although such Shares are being  registered for resale)
      and (ii) shares of Common Stock  issuable  upon  exercise of options which
      are not exercisable within 60 days.

(2)   The  Shares  are  being   registered   for  the  account  of  the  Selling
      Stockholders,  each of whom are entitled to receive Shares in satisfaction
      of  Restricted  Stock  Awards  granted  pursuant  to the Plan,  subject to
      vesting and to the Company's  right to repurchase the Shares under certain
      conditions.  Of the Shares,  one-third of the Shares being Offered vest on
      staggered  dates in each of January 1998,  January 1999,  and January 2000
      (the "Initial Vesting Dates"),  provided that each Initial Vesting Date is
      subject to extension to a later vesting date under certain  circumstances.
      See "Description of Securities - Shares Eligible for Future Sale".

(3)   Dr. Cooper is President and the Chief Executive  Officer and a director of
      the Company. Excludes 34,200 Shares subject to Restricted Stock Awards and
      shares of Common  Stock  issuable  upon  exercise  of options  held by Dr.
      Cooper's  spouse,  an  employee  of  the  Company.  Dr.  Cooper  disclaims
      beneficial ownership of such shares.

(4)   Includes 3,000 shares of Common Stock owned by Mr. Butler's children.  Mr.
      Butler is  Executive  Vice  President,  Chief  Administrative  Officer and
      General Counsel of the Company.

(5)   Mr.  Farb is  Executive  Vice  President,  Treasurer  and Chief  Financial
      Officer of the Company.

(6)   Dr. Sandage is Executive Vice President - Research and Development,  Chief
      Scientific Officer of the Company.

                                      -20-

                              PLAN OF DISTRIBUTION

     The Company has been advised that the Selling  Stockholders may sell Shares
from time to time in  transactions  on the  Nasdaq  National  Market or on other
exchanges on which the Shares may be traded, in the over-the-counter  market, in
negotiated  transactions,  through  the  writing  of  options on the Shares or a
combination  of such  methods of sale,  or  through  other  means.  Sales may be
effected at fixed prices which may be changed,  at market  prices  prevailing at
the time of sale,  at prices  related  to such  prevailing  market  prices or at
negotiated prices.

     The Selling Stockholders may effect such transactions by selling the Shares
to  or  through  underwriters,   broker-dealers,   or  agents  who  may  receive
compensation  in the form of  discounts,  concessions  or  commissions  from the
Selling   Stockholders   or  the   purchasers   of  the  Shares  for  whom  such
broker-dealers  may act as  agent or to whom  they  sell as  principal,  or both
(which  compensation  to a  particular  broker-dealer  might  be  in  excess  of
customary  commissions).  The Selling  Stockholders  and any  broker-dealers  or
agents who participate in the  distribution of Shares hereunder may be deemed to
be  "underwriters"  as that  term is  defined  in the Act,  and any  commissions
received  by them and profit on any resale of the Shares as  principal  might be
deemed to be underwriting discounts and commissions under the Act.

     The Company has agreed to pay the expenses of  registration  in  connection
with this Offering and to indemnify  the Selling  Stockholders  against  certain
liabilities, including certain liabilities under the Act.

     At the time a particular offer of Shares is made, to the extent required, a
supplement to this Prospectus will be prepared which will identify and set forth
the aggregate amount of Shares being offered and the terms of the offering.

     The Selling  Stockholders  are not  restricted as to the price or prices at
which they may sell their Shares. Sales of Shares or the possibility of sales of
Shares may depress the market price of the Company's  Common Stock.  The Selling
Stockholders  are subject to  applicable  provisions of the Exchange Act and the
rules and regulations  thereunder,  including without  limitation  Regulation M,
which  provisions  may limit the timing of purchases  and sales of the Shares by
the Selling Stockholders.

                                      -21-

                            DESCRIPTION OF SECURITIES

Common Stock

     The Company is authorized to issue up to 80,000,000 shares of Common Stock,
$.001 par value.  At October 31, 1997,  there were  41,165,810  shares of Common
Stock  outstanding,  excluding  treasury  shares.  Holders  of Common  Stock are
entitled  to one vote at all  meetings  of  stockholders  for each share held by
them. Holders of Common Stock have no preemptive rights and have no other rights
to  subscribe  for  additional  shares  or any  conversion  right  or  right  of
redemption.  Holders of Common Stock are  entitled to receive such  dividends as
may be  declared  by the  Board  of  Directors  out of funds  legally  available
therefor.  Subject to the rights of holders of  Preferred  Stock,  if any,  upon
liquidation, all such holders are entitled to participate pro rata in the assets
of the Company  available for  distribution.  All of the  outstanding  shares of
Common Stock are, and the shares to be issued hereby will be, when issued, fully
paid and nonassessable.

Preferred Stock

     The Certificate of Incorporation of the Company  authorizes the issuance of
5,000,000  shares  of  Preferred  Stock.  The  Board of  Directors,  within  the
limitations and restrictions  contained in the Certificate of Incorporation  and
without further action by the Company's stockholders, has the authority to issue
Preferred Stock from time to time in one or more series and to fix the number of
shares and the relative rights,  conversion  rights,  voting rights,  rights and
terms of redemption,  liquidation preferences and any other preferences, special
rights and  qualifications of any such series. To the extent shares of Preferred
Stock with voting rights are issued,  such issuance affects the voting rights of
the  holders  of  the  Company's  Common  Stock  by  increasing  the  number  of
outstanding shares entitled to vote and, if applicable, by the creation of class
or series voting rights. In addition,  while the issuance of Preferred Stock can
provide   flexibility  in  connection  with  acquisitions  and  other  corporate
purposes,  any issuance of Preferred Stock could,  under certain  circumstances,
have the effect of delaying or preventing a change in control of the Company and
may adversely  affect the rights of holders of Common Stock.  The Company has no
agreements or arrangements to issue any additional  shares of Preferred Stock or
to establish or designate any series of Preferred Stock.

     In November  1992 and June 1993,  the  Company  sold shares of Series B and
Series C Preferred  Stock to AHP pursuant to the AHP Agreements for an aggregate
purchase  price of  $3,500,000.  Holders of the Series B and Series C  Preferred
Stock are entitled to vote on all matters  submitted  to a vote of  stockholders
generally,  other than the  election of  directors,  holding the number of votes
equal to the number of shares of Common Stock into which the Preferred  Stock is
then  convertible.  The  shares of  Series B  Preferred  Stock and the  Series C
Preferred  Stock are  convertible  into an aggregate of 622,222 shares of Common
Stock,  subject to  adjustment.  Holders of the Series B and Series C  Preferred
Stock are entitled to receive out of funds legally available therefor, mandatory
dividends of $0.1253 and $1.00 per share, respectively,  payable at the election
of the Company in cash or Common Stock.  Such dividends are payable  annually on
April 1 of each year,  accrue on a daily basis and are cumulative.  In the event
of any  liquidation,  distribution  or sale of all or  substantially  all of the
assets,  dissolution  or winding up of the Company,  the holders of Series B and
Series C Preferred Stock shall be entitled to receive a preference of $12.53 and
$100 per share,  respectively,  plus  cumulated and unpaid  dividends,  over the
holders of Common Stock and any other shares.
                      

                                      -22-

 

     Until  the  date  AHP  ceases  to be the  registered  holder  of all of the
outstanding  Preferred  Stock of at least  one  series,  the  Company  will not,
without the approval of the majority of the outstanding  shares of all series of
Preferred Stock issued to AHP, (i) issue shares of stock having a preference or,
except shares  issued to AHP,  ranking pari passu with the  outstanding  series;
(ii)  reclassify any shares of stock to shares having a preference over any such
series;  (iii) make any amendment to its Certificate of Incorporation or by-laws
adversely  affecting  the  rights  of  holders  of such  series;  (iv)  merge or
consolidate with any entity or sell or otherwise dispose of all or substantially
all of its  assets or  liquidate,  dissolve,  recapitalize  or  reorganize;  (v)
repurchase or redeem any shares of its Common Stock;  (vi) pay dividends or make
any other  distribution  on any  Common  Stock,  except a  distribution  payable
entirely  in Common  Stock,  unless at the same  time,  a payment is made to the
holder of such series equal to the amount the holder would have been entitled to
had such holder  converted its Series B and Series C Preferred Stock into Common
Stock;  or  (vii)  guarantee  any  indebtedness  of any  third  party,  except a
subsidiary.

Subsidiary Financing Warrants and Put Protection Rights

     In  connection  with  certain  private   placements  by  the  Subsidiaries,
Interneuron  issued to the  investors  (i)  three-year  warrants  to purchase an
aggregate  of 218,125  shares of Common  Stock and (ii)  rights to sell  varying
amounts  of  investors'  convertible  preferred  stock  in the  Subsidiaries  to
Interneuron (the "Put Protection  Rights") in exchange for shares of Interneuron
Common Stock in the event certain conditions (including a public offering by the
applicable  subsidiary)  are not met by June 30,  1998.  The  shares  underlying
certain of these  warrants  were  registered  for  resale in March 1996 and,  at
October 31, 1997 40,000 of such warrants  remained  outstanding.  At October 31,
1997, a maximum of  approximately  232,000 shares may be issued upon exercise of
the Put Protection Rights (if Interneuron's Common Stock is $2.00 or less at the
time of exercise).

Other Options and Warrants

     At October 31, 1997,  approximately  7,884,000  shares of Common Stock were
issuable  upon  exercise  of  outstanding  options  and  warrants,   subject  to
anti-dilution  provisions.  As a result of such  provisions,  issuance of Shares
pursuant to Restricted  Stock Awards may result in  additional  shares of Common
Stock being issuable upon exercise of certain warrants.

Business Combination Provisions

     The Business  Combination  provision contained in Section 203 of Delaware's
General Corporation Law ("Section 203") defines an interested shareholder as any
person that (i) owns,  directly or  indirectly,  15% or more of the  outstanding
voting  stock of the  corporation  or (ii) is an  affiliate  or associate of the
corporation and was the owner of 15% or more of the outstanding  voting stock at
any time within the three-year period  immediately prior to the date on which it
is sought to be determined whether such person is an interested shareholder; and
the affiliates and the associates of such person.  Under Section 203, a resident
domestic  corporation  may not  engage  in any  business  combination  with  any
interested  shareholder  for a period  of three  years  following  the date such
shareholder became an interested shareholder,  unless (i) prior to such date the
board of directors of the corporation  approved either the business  combination
or the  transaction  which  resulted in the  shareholder  becoming an interested
shareholder or (ii) upon  consummation of the transaction  which resulted in the
shareholder becoming an interested shareholder, the interested shareholder owned
at least 85% of the voting stock of the corporation  outstanding at the time the
transaction   commenced   

                                      -23-

(excluding for determining the number of shares  outstanding (a) shares owned by
persons who are directors and officers and (b) employee stock plans,  in certain
instances) or (iii) on or subsequent  to such date the business  combination  is
approved  by the board of  directors  and  authorized  at an  annual or  special
meeting of shareholders by at least 66% of the affirmative voting stock which is
not owned by the interested shareholder.  The Company did not "elect-out" of the
statute and,  therefore,  the  restrictions  imposed by Section 203 apply to the
Company.

Transfer Agent and Registrar

     American  Stock Transfer & Trust  Company,  New York,  New York,  serves as
transfer agent and registrar for the Company's Common Stock.

Shares Eligible for Future Sale

     At October 31,  1997,  the Company had  41,165,810  shares of Common  Stock
outstanding,  excluding  treasury shares.  Substantially all of these shares are
eligible for sale without restriction or under Rule 144. In general,  under Rule
144 as currently in effect,  a person (or persons whose shares are  aggregated),
including  persons who may be deemed to be  "affiliates"  of the Company as that
term is defined under the Act, is entitled to sell within any three-month period
a number of restricted shares beneficially owned for at least one year that does
not exceed  the  greater of (i) one  percent of the then  outstanding  shares of
Common  Stock,  or (ii) the average  weekly  trading  volume in the Common Stock
during the four calendar  weeks  preceding  such sale.  Sales under Rule 144 are
also subject to certain  requirements  as to the manner of sale,  notice and the
availability of current public information about the Company.  However, a person
who is not an affiliate and has beneficially  owned such shares for at least two
years is  entitled  to sell such  shares  without  regard to the volume or other
requirements.

     A stockholder of the Company has demand and piggy-back  registration rights
relating to 622,222 shares of Common Stock issuable upon conversion of preferred
stock.  Certain  stockholders  entitled to receive  additional  shares of Common
Stock to be issued in December  1997 with a market  value of  $1,200,000  at the
time of issuance have registration rights in January 1998 relating to the resale
of those shares. In the event up to a maximum of approximately 232,000 shares of
Common Stock are issued in June 1998 pursuant to Put Protection Rights,  holders
of such shares will have registration rights at that time.

     All of the shares of Common Stock  issuable  under the Plan,  including the
675,000 Shares offered hereby, can be sold by the recipient thereof  immediately
upon vesting of the Shares.  Of the  1,328,704  shares of Common Stock  issuable
under the Plan pursuant to outstanding  Restricted Stock Awards, 112,334 vest in
December  1997,  265,567 vest in January 1998  (including  225,000 of the Shares
offered hereby),  112,334 vest in May 1998, 76,834 vest in December 1998 and the
remainder  vest in the same amounts and during the same months from January 1998
through May 2000,  subject to extension of each vesting date if it occurs during
a "Black  Out  Period,"  generally  meaning  a period  in  which  the  recipient
(including any Selling  Stockholder) is unable to sell the Shares subject to the
award at the applicable  vesting date due to legal or contractual  restrictions.
The vesting dates are also subject to acceleration under certain  circumstances,
including  certain  changes in  control of the  Company,  except  under  certain
conditions.  Sales of the shares of Common  Stock  subject to  Restricted  Stock
Awards, including the Shares

                                      -24-

offered hereby,  or the possibility of sales of such shares may adversely affect
the market price of the Company's Common Stock.

     In addition to the registration  statement of which this Prospectus forms a
part, the Company has outstanding  registration  statements on Form S-3 relating
to the resale by other stockholders of the Company of shares of Common Stock and
on Form S-8  relating  to its Plans in order to permit  holders of  options  and
shares issued pursuant to the Plans,  other than  affiliates of the Company,  to
sell, without restriction, shares of Common Stock issued pursuant to the Plans.

                                  LEGAL MATTERS

     The validity of the securities offered hereby have been passed upon for the
Company by Bachner, Tally, Polevoy & Misher LLP, New York, New York. A member of
Bachner,  Tally, Polevoy & Misher LLP, who is the secretary of the Company, owns
approximately 17,000 shares of Common Stock.

                                     EXPERTS

     The  consolidated  balance sheets as of September 30, 1996 and 1995 and the
consolidated  statements of operations,  cash flows and stockholders' equity for
each of the three years in the period ended September 30, 1996,  incorporated by
reference  in this  registration  statement,  have been  incorporated  herein in
reliance  on the report of Coopers & Lybrand  L.L.P.,  independent  accountants,
given on the authority of that firm as experts in accounting and auditing.

                                      -25-

     No dealer,  salesman or any other  person has been  authorized  to give any
information or to make any  representation  not contained in this  Prospectus in
connection  with the  Offering  herein  contained,  and, if given or made,  such
information or representation  must not be relied upon as having been authorized
by the Company or any underwriter.  This Prospectus does not constitute an offer
to sell or a  solicitation  of any  offer to buy any of the  securities  offered
hereby in any  jurisdiction to any person to whom it is unlawful to make such an
offer  or  solicitation  in such  jurisdiction.  Neither  the  delivery  of this
Prospectus  nor any sale  hereunder  shall  under any  circumstances  create any
implication  that there has been no change in the affairs of the  Company  since
any of the dates as of which  information is furnished  herein or since the date
hereof.

                                TABLE OF CONTENTS

                                                                         Page

Available Information ..................................................  3
Incorporation of Certain Documents by Reference ........................  4
The Company.............................................................  5
Risk Factors ...........................................................  8
Use of Proceeds ........................................................  18
Selling Stockholders ...................................................  19
Plan of Distribution ...................................................  21
Description of Securities ..............................................  22
Legal Matters ..........................................................  25
Experts ................................................................  25

                                      -26-

                                     PART II

                     Information Not Required in Prospectus

Item 3. Incorporation of Documents by Reference

     The  following  documents  filed  with the  Commission  (File No.  0-18728)
pursuant to the Exchange Act are incorporated herein by reference:

     1. The  Company's  Annual  Report on Form 10-K for the  fiscal  year  ended
September 30, 1996,  including any documents or portions thereof incorporated by
reference therein and all amendments thereto;

     2. The Company's  definitive proxy statement dated January 28, 1997, except
the Compensation  Committee Report on executive compensation and the performance
graph  included  in the proxy  statement,  filed  pursuant  to Section 14 of the
Exchange Act;

     3. The Company's  Reports on Form 10-Q for the quarters  ended December 31,
1996, March 31, 1997 and June 30, 1997.

     4. The Company's Reports on Form 8-K dated December 19, 1996,  February 18,
1997,  March 14, 1997, May 5, 1997,  June 19, 1997, July 3, 1997, July 18, 1997,
July 25, 1997,  August 29, 1997,  September  15,  1997,  September  18, 1997 and
October 15, 1997.

     5.The Company's  Registration  Statement on Form 8-A declared  effective on
March 8, 1990, as amended,  registering the Common Stock under the Exchange Act;
and

     6. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering, except the Compensation Committee Report on
Executive Compensation and the performance graph included in the Proxy Statement
filed pursuant to Section 14 of the Exchange Act. Any statement contained in any
document  incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or  superseded  for  purposes  of this  Prospectus  to the
extent that a statement  contained herein or in any subsequently  filed document
which also is or is deemed to be  incorporated  by reference  herein modifies or
supersedes  such statement.  Any such statement so modified or superseded  shall
not be deemed,  except as modified or  superseded,  to constitute a part of this
Prospectus.  The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the  documents  incorporated  herein by  reference  (other than
exhibits to such documents which are not specifically  incorporated by reference
into such  documents).  Requests  for such  documents  should be directed to the
Company, 99 Hayden Avenue,  Lexington,  Massachusetts  02173,  Attention:  Chief
Financial Officer, telephone (781) 402-3404.

                                      II-1

Item 6. Indemnification of Directors and Officers.

     The  Certificate of  Incorporation  and By-Laws of the Company provide that
the  Company  shall  indemnify  any person to the full extent  permitted  by the
Delaware General Corporation Law.

     Reference is hereby made to Section 145 of the Delaware General Corporation
Law relating to the  indemnification  of officers and directors which Section is
hereby incorporated herein by reference.

     The Registrant  also has  Indemnification  Agreements with its officers and
directors and has director and officer liability insurance.

Item 8. Exhibits.

  Exhibits
  --------

  4.8    - 1997  Equity  Incentive  Plan  and  form of  Restricted  Stock  Award
           Agreement thereunder

  5.1    - Opinion of Bachner, Tally, Polevoy & Misher LLP as to legality
                                         

  23.1   - Consent of Coopers & Lybrand L.L.P. - Included on II - 7

  23.2   - Consent of Bachner, Tally, Polevoy & Misher LLP - Included in Exhibit
           5.1
                                                    

  24.1   - Power of Attorney - Included on II-4

Item 9. Undertakings

     (a) The undersigned registrant hereby undertakes:

         (1)    To file,  during any  period in which  offers or sales are being
                made, a post-effective  amendment to this registration statement
                to include any material  information with respect to the plan of
                distribution  not  previously   disclosed  in  the  registration
                statement  or any  material  change to such  information  in the
                registration statement;

         (2)    That,  for the purpose of  determining  any liability  under the
                Securities  Act of 1933,  as  amended  (the  "Act"),  each  such
                post-effective   amendment   shall  be   deemed   to  be  a  new
                registration   statement relating  to  the  securities   offered
                therein,  and the  offering  therein,  and the  offering of such
                securities  at that time shall be deemed to be the initial  bona
                fide offering thereof.

         (3)    To  remove  from  registration  by  means  of  a  post-effective
                amendment any of the securities  being  registered  which remain
                unsold at the termination of the offering.

     (b) The  undersigned  registrant  hereby  undertakes  that, for purposes of
         determining   any   liability   under  the  Act,  each  filing  of  the
         registrant's  annual  report  pursuant to Section 13(a) or 15(d) of the
         Securities  Exchange Act of 1934 that is  incorporated  by reference in
         the  registration  statement  shall be deemed to be a new  registration
         statement relating to the securities offered therein,  and the offering
         of such securities at that time shall be deemed to be initial bona fide
         offering thereof.

                                      II-2

     (c) Insofar as indemnification for liabilities arising under the Act may be
         permitted to directors, officers or controlling persons pursuant to the
         foregoing  provisions,  or otherwise,  the  registrant has been advised
         that in the opinion of the  Securities  and  Exchange  Commission  such
         indemnification  is against  public  policy as expressed in the Act and
         is,   therefore,   unenforceable.   In  the  event  that  a  claim  for
         indemnification against such liabilities (other than the payment by the
         registrant  of  expenses  incurred  or paid by a  director,  officer or
         controlling  person of the registrant in the successful  defense of any
         action,  suit or proceeding)  is asserted by such director,  officer or
         controlling  person in connection with the securities being registered,
         the  registrant  will,  unless in the opinion of its counsel the matter
         has  been  settled  by  controlling  precedent,  submit  to a court  of
         appropriate  jurisdiction the question whether such  indemnification by
         it is  against  public  policy  as  expressed  in the Act  and  will be
         governed by the final adjudication of such issue.

                                      II-3

                                   SIGNATURES

     Pursuant to the  requirements of the Securities Act of 1933, the registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements for filing Form S-8 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Lexington, County of Middlesex on the 14th day of November, 1997.

                                     INTERNEURON PHARMACEUTICALS, INC.

                                       By: /s/ Glenn L. Cooper, M.D.
                                          ----------------------------------
                                          Glenn L. Cooper, M.D.
                                          President and Chief Executive Officer

     KNOW ALL  PERSONS  BY THESE  PRESENTS,  that each  person  whose  signature
appears  below  constitutes  and appoints,  severally and not jointly,  Glenn L.
Cooper, M.D. and Lindsay Rosenwald, M.D., with full power to act alone, his true
and lawful attorneys-in-fact, with the power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including  post-effective  amendments) to this Registration  Statement,  and to
file the same,  with all exhibits  thereto,  and other  documents in  connection
therewith,  with the  Securities  and Exchange  Commission,  granting  unto said
attorneys-in-fact  full power and authority to do and perform each and every act
and  thing  requisite  and  necessary  to be done as  fully to all  intents  and
purposes as he might or could do in person,  hereby ratifying and confirming all
that  said  attorneys-in-fact  may  lawfully  do or cause  to be done by  virtue
hereof.

     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated:
Signature                            Title                     Date
       ---------                            -----                     ----
/s/ Glenn L. Cooper, M.D.       President, Chief Executive        November 14,1997
--------------------------      Officer and Director
Glenn L. Cooper, M.D.          (Principal Executive Officer)

/s/ Lindsay Rosenwald, M.D.
--------------------------
Lindsay Rosenwald, M.D.         Chairman of the Board of          November 14,1997
                                Directors

/s/ Harry J. Gray
--------------------------                                        November 14,1997
Harry J. Gray                   Director

/s/ Alexander M. Haig, Jr.
--------------------------                                        November 14,1997
Alexander M. Haig, Jr.          Director

--------------------------                                        November 14,1997 
Peter Barton Hutt               Director

                                      II-4

/s/ Malcolm Morville, Ph.D.
--------------------------                                       November 14, 1997
Malcolm Morville, Ph.D.         Director

/s/ Robert K. Mueller 
--------------------------                                       November 13, 1997
Robert K. Mueller               Director

/s/ Lee J. Schroeder
--------------------------                                       November 14, 1997
Lee J. Schroeder                Director

/s/ David Sharrock
--------------------------                                       November 14, 1997
David Sharrock                  Director

/s/ Richard Wurtman, M.D.
--------------------------                                       November 14, 1997
Richard Wurtman, M.D.           Director

/s/ Thomas F. Farb 
---------------------------                                      November 14, 1997
Thomas F. Farb                  Executive Vice President,
                                Treasurer and Chief
                                Financial Officer (Principal
                                Financial Officer)
/s/ Dale Ritter 
---------------------------                                      November 14, 1997
Dale Ritter                     Vice President, Corporate
                                Controller (Principal Accounting
                                Officer)
II-5

                                  Exhibit Index
                                  -------------

4.8            - 1997 Equity  Incentive Plan and form of Restricted  Stock Award
                 Agreement thereunder

5.1            - Opinion of Bachner, Tally, Polevoy & Misher LLP as to legality
                                           

23.1           - Consent of Coopers & Lybrand L.L.P. - Included on II-7

23.2           - Consent of Bachner,  Tally,  Polevoy & Misher LLP - Included in
                 Exhibit 5.1
                                                   

24.1           - Power of Attorney - Included on II-4

                                      II-6

                                                                    EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS

     We consent to the incorporation by reference in this Registration Statement
of Interneuron Pharmaceuticals, Inc. on Form S-8 of our report dated November 8,
1996 on our  audits of the  consolidated  financial  statements  of  Interneuron
Pharmaceuticals,  Inc.  as of  September  30,  1996 and 1995 and for each of the
three  years in the period  ended  September  30, 1996  appearing  in the Annual
Report on Form 10-K for the fiscal year ended  September  30, 1996 (SEC File No.
0-18728) of  Interneuron  Pharmaceuticals,  Inc.  filed with the  Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     We also consent to the reference to our firm in the Registration  Statement
under the caption "Experts".

                                                        Coopers & Lybrand L.L.P.

Boston, Massachusetts
November 13, 1997

                                      II-7