<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 8-K

                            CURRENT REPORT PURSUANT
                         TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


        Date of Report (Date of earliest event reported):  May 21, 1996


                        IDEC PHARMACEUTICALS CORPORATION
             (Exact name of registrant as specified in its charter)


                                   CALIFORNIA
                 (State or other jurisdiction of incorporation)


                 0-19311                            33-0112644 
         (Commission File Number)        (IRS Employer Identification No.)


               11011 Torreyana Road, San Diego, California 92121
             (Address of principal executive offices)   (Zip Code)


                                 (619) 550-8500
              (Registrant's telephone number, including area code)

<PAGE>   2

Item 5.  Other Events.

         On May 21, 1996, IDEC Pharmaceuticals Corporation (the "Company")
entered into a letter agreement with Genentech, Inc., a copy of which is
attached hereto as Exhibit 10.1.

         On May 22, 1996, the Company's shareholders approved the amendment of
the Company's Articles of Incorporation to increase the authorized number of
shares to 50,000,000.  A copy of the Company's Second Amended and Restated
Articles of Incorporation, filed with the Secretary of State of the State of
California, is attached hereto as Exhibit 3.1.


Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

         (c)     Exhibits.

                 Exhibit 3.1      Second Amended and Restated Articles of
                                  Incorporation
                 Exhibit 10.1     Letter Agreement between the Company and
                                  Genentech, Inc., dated May 21, 1996.



                                   SIGNATURES


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

                                 IDEC PHARMACEUTICALS CORPORATION



                                 By:  /s/  PHILLIP M. SCHNEIDER
                                    ------------------------------------
                                    Phillip M. Schneider, Vice President
                                      and Chief Financial Officer

Date: June 6, 1996




                                      -1-

<PAGE>   3

                                 EXHIBIT INDEX



<TABLE>
<CAPTION>
                                                                                          Sequentially
   Exhibit                                                                                  Numbered
   Number                                     Document                                       Page     
   ------                                     --------                                   -------------
 <S>          <C>                                                                              <C>
  3.1         Second Amended and Restated Articles of Incorporation . . . . . . . .            __

 10.1         Letter Agreement between the Company and Genentech, Inc., dated May
              21, 1996  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            __
</TABLE>






                                      -2-





<PAGE>   1
                                                                     EXHIBIT 3.1

             SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
                                       OF
                        IDEC PHARMACEUTICALS CORPORATION
                            a California Corporation



                 The undersigned, Kenneth J. Woolcott, hereby certifies that:

1.       He is the duly elected and acting Vice President and Secretary of IDEC
         Pharmaceuticals Corporation, a California corporation (the
         "Corporation").

2.       The Restated Articles of Incorporation of this Corporation shall be
         amended and restated in full to read as follows:


                                   ARTICLE I

                 The name of this Corporation is IDEC Pharmaceuticals 
Corporation.


                                   ARTICLE II

                 The purpose of this Corporation is to engage in any lawful act
or activity for which a Corporation may be organized under the General
Corporation Law of the State of California other than the banking business, the
trust company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.


                                  ARTICLE III

                 A.       Classes of Stock.  This corporation is authorized to
issue two classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the corporation is
authorized to issue is Fifty-Eight Million (58,000,000) shares.  Fifty Million
(50,000,000) shares shall be Common Stock
 and Eight Million (8,000,000) shares
shall be Preferred Stock.

                 B.       Rights, Preferences and Restrictions of Preferred
Stock.  The Preferred Stock authorized by these Second Amended and Restated
Articles of Incorporation (the "Restated Articles") may be issued from time to
time in one or more series.  The rights, preferences, privileges, and
restrictions granted to and imposed on the Preferred Stock are as set forth
below in this Article III(B).  The Board of Directors is hereby authorized to
fix or alter the rights, preferences, privileges and restrictions granted to or
imposed upon additional series of Preferred Stock, and the number of shares
constituting any such series

<PAGE>   2
and the designation thereof, or of any of them.  Subject to compliance with
applicable protective voting rights which have been or may be granted to the
Preferred Stock or series thereof in Certificates of Determination or the
Corporation's Restated Articles, as amended from time to time ("Protective
Provisions"), but notwithstanding any other rights of the Preferred Stock or
any series thereof, the rights, privileges, preferences and restrictions of any
such additional series may be subordinated to, pari passu with (including,
without limitation, inclusion in provisions with respect to liquidation and
acquisition preferences, redemption and/or approval of matters by vote or
written consent), or senior to any of those of any present or future class or
series of Preferred or Common Stock.  Subject to compliance with applicable
Protective Provisions, the Board of Directors is also authorized to increase or
decrease the number of shares of any series, prior or subsequent to the issue
of that series, but not below the number of shares of such series then
outstanding.  In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.

                 C.       Series A and Series B Preferred Stock.  Of its
authorized Preferred Stock, the Corporation is authorized to issue (1) One
Million Seven Hundred Fifty Thousand (1,750,000) shares collectively designated
as "Series A Preferred Stock" which may be issued in seven subseries consisting
of designated as (i) "Series A-1 Preferred Stock," consisting of 100,000
authorized shares; (ii) "Series A-2 Preferred Stock," consisting of 150,000
authorized shares; (iii) "Series A-3 Preferred Stock," consisting of 700,000
authorized shares; (iv) "Series A-4 Preferred Stock," consisting of 250,000
authorized shares; (v) "Series A-5 Preferred Stock," consisting of 350,000
authorized shares; (vi) "Series A-6 Preferred Stock," consisting of 100,000
authorized shares; and (vii) "Series A-7 Preferred Stock," consisting of
100,000 authorized shares; and (2) 69,375 shares designated as "Series B
Preferred Stock."  The Series A Preferred Stock and the subseries thereof shall
have the relative rights, preferences and restrictions set forth in Annex A
hereto, which is incorporated by reference herein and made a part hereof.  The
Series B Preferred Stock shall have the relative rights, preferences and
restrictions set forth in Annex B hereto, which is hereby incorporated by
reference herein and made a part hereof.

                 D.       Common Stock.

                          (1)     Dividend Rights.  Subject to the prior rights
of holders of all classes of stock at the time outstanding having prior rights
as to dividends, the holders of the Common Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of any assets of the
Corporation legally available therefor, such dividends as may be declared from
time to time by the Board of Directors.

                          (2)     Liquidation Rights.  Upon the liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
shall be distributed as provided in this Article III or Annex A and Annex B
hereto.





                                       2.

<PAGE>   3

                          (3)     Redemption.  The Common Stock is not
redeemable.

                          (4)     Voting Rights.  The holder of each share of
Common Stock shall have the right to one vote, and shall be entitled to notice
of any shareholders' meeting in accordance with the bylaws of this Corporation,
and shall be entitled to vote upon such matters and in such manner as may be
provided by law.


                                   ARTICLE IV

                 A.       The liability of the directors of this Corporation
for monetary damages shall be eliminated to the fullest extent permissible
under California law.

                 B.       This Corporation is authorized to provide
indemnification of agents (as defined in Section 317 of the Corporations Code)
for breach of duty to the Corporation and its shareholders or otherwise,
through bylaw provisions or through agreements with the agents, or both, in
excess of the indemnification otherwise permitted by Section 317 of the
Corporations Code, subject to the limits on such excess indemnification set
forth in Section 204 of the Corporations Code."


3.       The foregoing amendment has been approved by the Board of Directors of
         the Corporation.

4.       These Restated Articles were approved by the holders of the requisite
         number of shares of the Corporation entitled to vote thereon in
         accordance with Sections 902 and 903 of the California General
         Corporation Law; the total number of outstanding shares of capital
         stock entitled to vote was 15,227,257 shares of Common Stock and
         13,667,610 shares were voted in favor.  The number of shares voting in
         favor of the foregoing amendment and restatement of the Articles of
         Incorporation equaled or exceeded the vote required, such required
         vote being a majority of the outstanding shares.  One Hundred Thousand
         (100,000) shares of non-voting Series A-1 Preferred Stock,
         Thirty-Seven Thousand Five Hundred Twenty-One (37,521) shares of
         non-voting Series A-2 Preferred Stock, Twenty-Two Thousand Nine
         Hundred Ninety-Three (22,993) shares of non-voting Series A-3
         Preferred Stock and Sixty-Nine Thousand Three Hundred Seventy-Five
         (69,375) shares of non-voting Series B Preferred Stock were
         outstanding and no shares of voting Preferred Stock were outstanding.





                                       3.

<PAGE>   4
                 The undersigned declares under penalty of perjury under the
laws of the State of California that the matters set forth herein are true and
correct of our respective knowledge.

DATED:  May 31, 1996.




              /s/ Kenneth J. Woolcott
              ----------------------------
                              Kenneth J. Woolcott, Vice President and Secretary




                                       4.

<PAGE>   5
                                                                         ANNEX A

                  RIGHTS, PREFERENCES AND RESTRICTIONS OF THE
          SERIES A-1, A-2, A-3, A-4, A-5, A-6 AND A-7 PREFERRED STOCK



                 The rights, preferences, restrictions and other matters
relating to the Series A Preferred Stock are as follows:

                 "Affiliate" means an entity that, directly or indirectly,
through one or more intermediaries, is controlled by IDEC or Genentech. As used
herein, the term "control" will mean the direct or indirect ownership of fifty
percent (50%) or more of the stock having the right to vote for directors
thereof or the ability to otherwise control the management of the corporation
or other business entity.

                 "Approval Process Event" means a determination by the Joint
Development Committee that the formulation of C2B8 and the process for C2B8
recovery are commercially viable as more fully described in Appendix I to the
Development Plan.

                 "C2B8" means that certain monoclonal antibody to B cells more
particularly described on Exhibit B to the Collaboration Agreement.

                 "Collaboration Agreement" shall mean the Collaboration
Agreement dated the Effective Date between the Corporation and Genentech.

                 "Controlled," unless specified otherwise herein, means
possession of the ability to grant a license or sublicense as provided for
herein without violating the terms of any agreement or other arrangement with
any entity other than the Corporation or Genentech.

                 "Effective Date" means March 16, 1995.

                 "First Anniversary Date" means the date which is twelve (12)
calendar months following March 16, 1995.

                 "FDA Approval Date" means the date on which the United States
Food and Drug Administration grants Regulatory Approval of C2B8 for manufacture
and sale in the United States.

                 "FDA Approval Event" means the FDA Approval Date occurs on or
before the Fifty-Four Month Anniversary Date.

                 "Fifty-Four Month Anniversary Date" means that date which is
fifty-four (54) calendar months following March 16, 1995.

                 "Genentech" means Genentech, Inc., a Delaware corporation, and
its Affiliates.

                 "IDEC" means IDEC Pharmaceuticals Corporation, a California
corporation, and its Affiliates.

                 "Licensed Product(s)" means any compound or composition of
matter whose mechanism of action is initiated by interaction with the CD20 or
CD19 B-cell determinant (including C2B8, but excluding Y2B8 (as defined in
Section 2.2. of the Collaboration Agreement) and In2B8 (as defined in Section
2.2. of the Collaboration Agreement) unless the option set forth in Section 2.3
of the Collaboration Agreement is exercised) (a) developed by IDEC or (b) the
intellectual property rights to which are owned or Controlled,





                                      A-1.

<PAGE>   6
in whole or in part, by IDEC, in either (a) or (b) as of the Effective Date or
during the term of the Collaboration Agreement.

                 "Major European Country" means the United Kingdom, Italy,
Germany, France or Spain.

                 "ML/MS Agreement" means the Preferred and Common Stock
Purchase Agreement dated March 16, 1995 by and between ML/MS Associates, L.P.
and IDEC, whereby IDEC reacquired the rights to certain technologies for the
treatment of B-cell lymphomas funded and developed by ML/MS Partners pursuant
to a Development Agreement and related agreements, dated as of February 17,
1988 and October 27, 1988.

                 "ML/MS Partners" shall mean ML Technology Ventures, L.P. and
Morgan Stanley Ventures, L.P., and any assignee or successor to ML/MS Partners.

                 "National Exchange" shall mean the Nasdaq National Market or
any other national exchange on which the Common Stock of the Corporation is
listed.

                 "Option Agreement" means the Option Agreement to be dated as
of the Effective Date between Genentech and the Corporation.

                 "Patent Milestone Event" means the notice of grant in the
European Patent Office or issuance in a Major European Country of the first
valid and enforceable letters patent covering C2B8.

                 "Preferred Stock Purchase Agreement" means the Preferred Stock
Purchase Agreement dated the Effective Date between the Corporation and
Genentech.

                 "Regulatory Approval" means any approvals (including pricing
and reimbursement approvals), licenses, registrations or authorizations of any
federal, state or local regulatory agency, department, bureau or other
governmental entity, necessary for the manufacture and sale of a Licensed
Product in a regulatory jurisdiction.

                 "Registration Rights Agreement" means the 1995 Registration
Rights Agreement dated as of the Effective Date between Genentech, ML/MS
Associates, L.P. and the Corporation.

                 "Third Anniversary Date" means that date which is thirty-six
months following March 16, 1995.

                 2.       Dividend Provisions.

                          a.      Series A-1, A-2, A-3, A-4, A-5 and A-6
Preferred Stock Dividend Provisions.  No dividend or other distribution shall
be paid, or declared and set apart for payment (other than dividends of Common
Stock on the Common Stock of the Corporation, dividends payable on the Series B
Preferred Stock and dividends payable on the Series A-7 Preferred Stock
pursuant to Section 2(b) below), on the shares of any class or series of
capital stock of the Corporation unless and until a dividend of equal or
greater amount (calculated as if the shares of Series A-1, A-2, A-3, A-4, A-5
and A-6 Preferred Stock had been converted Common Stock on the date the
dividend is declared) is first declared and paid with respect to any series of
Series A Preferred Stock.





                                      A-2.

<PAGE>   7
                          b.      Series A-7 Preferred Stock Dividend
Provisions.  Cumulative dividends shall accrue from the date of issuance of the
Series A-7 Preferred Stock at a fluctuating rate per annum equal to the sum of
two percent (2%) plus the "Prime Rate" as announced by the Bank of America, San
Francisco Branch, from time to time.  Accrued dividends shall be payable
quarterly in arrears on the first day of each quarter, commencing with the
first day of the first quarter following the earlier of the FDA Approval Date
or the Fifty-Four Month Anniversary Date.  On the earlier of the FDA Approval
Date or the Fifty-Four Month Anniversary Date, all dividends accrued through
such date shall be paid.  Any accumulation of dividends on the Series A-7
Preferred Stock shall not bear interest.  No dividend or other distribution
shall be paid, or declared and set apart for payment (other than dividends of
Common Stock on the Common Stock of the Corporation), on the shares of any
class or series of capital stock of the Corporation unless and until such
dividends have been paid.  The Corporation shall take any and all corporate
action necessary to declare and pay such dividends described in this Section
2(b).

                 3.       Liquidation Preference.  The holders of Series A
Preferred Stock share a liquidation preference as follows:

                          a.      Series A-1, A-2, A-3, A-4, A-5, A-6 and A-7
Preferred Stock Liquidation Preference.  In the event of any liquidation,
dissolution or winding up of this Corporation, either voluntary or involuntary,
subject to the rights of series of Series A Preferred Stock that may from time
to time come into existence, the holders of Series A-1, Series A-2, Series A-3,
Series A-4, Series A-5, Series A-6 and Series A-7 Preferred Stock and Series B
Preferred Stock, shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Corporation to the holders of Common
Stock and any other series of Series A Preferred Stock by reason of their
ownership thereof, an amount per share equal to the Original Issue Price
(defined below) for such subseries plus an amount equal to (i) the declared but
unpaid dividends and distributions on such share in the case of the Series A-1,
Series A-2, Series A-3, Series A-4, Series A-5 and Series A-6 Preferred Stock
and (ii) the accrued but unpaid dividends and distributions on such share in
the case of the Series A-7 Preferred Stock and Series B Preferred Stock.  If
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series A-1, Series A-2, Series A-3, Series A-4, Series A-5,
Series A-6 and Series A-7 Preferred Stock and Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Series A
Preferred Stock that may from time to time come into existence, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A-1, Series A-2, Series
A-3, Series A-4, Series A-5, Series A-6 and Series A-7 Preferred Stock and
Series B Preferred Stock on an as-converted to Common Stock basis in proportion
to the amount of such stock owned by each such holder.  The "Original Issue
Price" for each subseries shall mean the price at which the initial share of
such subseries is issued.





                                      A-3.

<PAGE>   8

                          b.      Upon the completion of the distribution
required by subparagraph (a) of this Section 3 and any other distribution that
may be required with respect to series of Series A Preferred Stock that may
from time to time come into existence, if assets remain in this Corporation,
the holders of the Common Stock of this Corporation, shall receive all of the
remaining assets of this Corporation.

                          c.      If (i) a single shareholder or group of
affiliated shareholders, other than a holder of the Series A Preferred Stock,
or a Controlled Affiliate thereof, who would be required to file a Schedule 13D
under the Securities Exchange Act of 1934, as amended, acquires or obtains the
right to acquire voting stock of the Corporation so that its total holdings of
such stock equal or exceed fifty percent (50%) of the then outstanding voting
stock of the Corporation, or (ii) any third party (i.e., a party other than a
holder or a Controlled Affiliate) acquires or obtains the right to acquire all
or substantially all of the assets of the Corporation, then such event shall be
considered a liquidation under this Section 3.  For purposes hereunder,
"Controlled Affiliate" shall mean a party that, directly or indirectly, through
one or more intermediaries, is controlled by such holder.

                 4.       Series A Preferred Stock Conversion.  The holders of
the Series A-1, Series A-2, Series A-3, Series A-4, Series A-5, Series A-6 and
Series A-7 Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):

                          a.      Series A-1, Series A-2, Series A-3, Series
A-4 and Series A-5, Preferred Stock Conversion.  Each share of Series A-1,
Series A-2, Series A-3, Series A-4 and Series A-5 Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of this Corporation or any transfer agent
for such stock, into ten (10) fully paid and nonassessable shares of Common
Stock (the "Conversion Rate" for the Series A-1 Preferred Stock, Series A-2
Preferred Stock, Series A-3 Preferred Stock, Series A-4 Preferred Stock and the
Series A-5 Preferred Stock).

                          b.      [Intentionally omitted.]

                          c.      Series A-6 Preferred Stock Conversion.

                                  (1)      "Series A-6 Conversion Number" means
the number calculated according to the following formulas: (i) If the FDA
Approval Date occurs prior to the Fifty-Four Month Anniversary Date, then the
Series A-6 Conversion Number shall equal the average closing price for the
Common Stock during the period beginning on the FDA Approval Date and ending on
the date which is twenty (20) trading days following the FDA Approval Date, as
reported on the National Exchange; or (ii) if the Fifty-Four Month Anniversary
Date occurs prior to the FDA Approval Date, then the Series A-6 Conversion
Number shall equal the average closing price for the Common Stock during the
period beginning on the date which is twenty (20) trading days prior to the
Fifty-Four Month Anniversary Date and ending on the Fifty-Four Month
Anniversary Date, as reported on the National Exchange.





                                      A-4.

<PAGE>   9

                                  (2)      The Series A-6 Preferred Stock shall
not be convertible until the earlier of (i) twenty (20) trading days following
the FDA Approval Date or (ii) the Fifty-Four Month Anniversary Date.
Thereafter, each share of Series A-6 Preferred Stock shall be convertible, at
the option of the holder thereof, into the number of shares of fully paid and
nonassessable shares of Common Stock as equals seventy-five (75) divided by the
Series A-6 Conversion Number (the "Conversion Rate" for the Series A-6
Preferred Stock).

                          d.      Series A-7 Preferred Stock Conversion.

                                  (1)      "Series A-7 Conversion Number" means
the average closing price for the Common Stock during the period beginning on
the twentieth (20th) trading day preceding the date on which the holder gives
notice of such holder's intention to convert (the "Notice Date") and ending on
the Notice Date, as reported on the National Exchange.

                                  (2)      Each share of Series A-7 Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the Fifty-Four Month Anniversary Date at the office of this Corporation
or any transfer agent for such stock, into such number of shares of fully paid
and nonassessable shares of Common Stock as equals (A) one hundred (100)
divided by (B) the Series A-7 Conversion Number (the "Conversion Rate" for the
Series A-7 Preferred Stock).

                          e.      Automatic Conversion.  (i) Each share of
Series A-1, Series A-2, Series A-3, Series A-4 and Series A-5 Preferred Stock;
(ii) each share of Series A-6 Preferred Stock that has become convertible at
the option of the holder pursuant to Section 4(c); and (iii) each share of
Series A-7 Preferred Stock that has become convertible at the option of the
holder pursuant to Section 4(d), shall, in each case, automatically be
converted into shares of Common Stock at its then effective Conversion Rate
immediately upon the transfer of ownership by the initial holder to a third
party which is not an Affiliate of such holder.  For purposes hereunder,
"Affiliate" shall mean a party that, directly or indirectly, through one or
more intermediaries, controls or is controlled by such holder.

                          f.      Mechanics of Conversion of Series A Preferred
Stock.  Before any holder of Series A Preferred Stock shall be entitled to
convert the same into shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of this
Corporation or of any transfer agent for the Series A Preferred Stock, and
shall give written notice to this Corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are
to be issued; provided, however, that in the event of an automatic conversion
pursuant to Section 4(e), the outstanding shares of Series A Preferred Stock
shall be converted automatically without any further action by the holder of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent, and provided further that
the Corporation shall not be obligated to issue certificates evidencing the
shares of





                                      A-5.

<PAGE>   10
Common Stock issuable upon such automatic conversion unless the certificates
evidencing such shares of Series A Preferred Stock are delivered to the
Corporation or its transfer agent as provided herein.  This Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid and shall promptly pay in cash or,
to the extent sufficient funds are not then legally available therefor, in
Common Stock (at the Common Stock's fair market value determined by the Board
of Directors as of the date of such conversion), any declared and unpaid
dividends on the shares of Series A-1, Series A-2, Series A-3, Series A-4,
Series A-5 and Series A-6 Preferred Stock being converted and any accrued but
unpaid dividends on the shares of Series A-7 Preferred Stock being converted.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of Series A
Preferred Stock to be converted, or in the case of automatic conversion
pursuant to Section 4(e), on the date of transfer to the new non-Affiliate
holder; and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date.

                          g.      Conversion Rate Adjustments of Series A
Preferred Stock for Splits and Combinations.  The Conversion Rate of the Series
A-1, Series A-2, Series A-3, Series A-4, Series A-5, Series A-6 and Series A-7
Preferred Stock shall be subject to adjustment from time to time as follows:

                                  (1)      In the event the Corporation should
at any time or from time to time after the date upon which any shares of Series
A Preferred Stock were first issued (the "Purchase Date"), fix a record date
for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Rate of the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be increased in proportion to
such increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.

                                  (2)      If the number of shares of Common
Stock outstanding at any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Rate for the applicable series
of Series A Preferred Stock shall be appropriately decreased so that





                                      A-6.

<PAGE>   11
the number of shares of Common Stock issuable on conversion of each share of
such series shall be decreased in proportion to such decrease in outstanding
shares.  Any adjustment under Section 4(g)(1) or (2) shall become effective at
the close of business on the date the split, subdivision, stock dividend, other
distribution or combination becomes effective.

                          h.      Distributions.  In the event this Corporation
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by this Corporation or other persons, assets (excluding
cash dividends), then, in each such case for the purpose of this subsection
4(h), the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Series A Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.

                          i.      Recapitalizations.  If at any time or from
time to time there shall be a recapitalization of the Common Stock (other than
a subdivision or combination provided for elsewhere in this Section 4 or a
change in control provided for in Section 3(c)) provision shall be made so that
the holders of the Series A-1, Series A-2, Series A-3, Series A-4, Series A-5,
Series A-6 and Series A-7 Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock the number of shares of
stock or other securities or property of the Corporation or otherwise, to which
a holder of Common Stock deliverable upon conversion would have been entitled
on such recapitalization, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.  In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the applicable Conversion
Rate then in effect and the number of shares purchasable upon conversion of the
Series A Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.

                          j.      No Impairment.  This Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this Corporation, but will at all times in good faith assist in
the carrying out of all the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.

                          k.      No Fractional Shares and Certificate as to
Adjustments.

                                  (1)      No fractional shares shall be issued
upon the conversion of any share or shares of the Series A Preferred Stock, and
the number of shares of Series A Preferred Stock or Common Stock to be issued
shall be rounded to the nearest whole





                                      A-7.

<PAGE>   12
share.  Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Series A
Preferred Stock the holder is at the time converting into Series A Preferred
Stock or Common Stock and the number of shares of Series A Preferred Stock or
Common Stock issuable upon such aggregate conversion.

                                  (2)      Upon the occurrence of each
adjustment or readjustment of the Conversion Rate of Series A Preferred Stock
pursuant to this Section 4, this Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based.  This Corporation shall,
upon the written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (a) such adjustment and readjustment, (b) the Conversion Rate for such
Series A Preferred Stock at the time in effect, and (c) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of a share of Series A Preferred Stock.

                          l.      Notices of Record Date.  In the event of any
taking by this Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
this Corporation shall mail to each holder of Series A Preferred Stock, at
least 20 days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.

                          m.      Reservation of Stock Issuable Upon
Conversion.  This Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the shares of the Series A-1, Series A-2, Series
A-3, Series A-4, Series A-5, Series A-6 and Series A-7 Preferred Stock,
respectively, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Series A-1, Series A-2, Series A-3, Series A-4, Series A-5, Series A-6 and
Series A-7 Preferred Stock, respectively, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series A-1, Series
A-2, Series A-3, Series A-4, Series A-5, Series A-6 and Series A-7 Preferred
Stock, respectively, in addition to such other remedies as shall be available
to the holder of such Preferred Stock, this Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including,





                                      A-8.

<PAGE>   13
without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to its Articles.

                          n.      Notices.  Any notice required to be given to
the holders of shares of Series A Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this Corporation.

                 5.       Voting Rights.  The holders of shares of Series A
Preferred Stock shall not have any voting rights, except as required under the
General Corporation Law of California.

                 6.       Status of Unissued, Converted or Redeemed Stock.  In
the event any shares shall be converted pursuant to Section 4 hereof, the
shares so converted shall be cancelled and shall not be issuable by the
Corporation.  The Articles of this Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.  In the event the Corporation issues less than the number of authorized
shares of any subseries of Series A Preferred Stock, the Articles of this
Corporation shall be appropriately amended to effect a corresponding reduction
in such subseries of Preferred Stock.

                 7.       Cancellation of Series A-3 Preferred Stock.  If the
Approval Process Event has not occurred on or before the First Anniversary Date
and if the Patent Milestone Event occurs prior to the Third Anniversary Date,
then this Corporation may, at its option, cancel that number of shares of
Series A-3 Preferred Stock (or if an insufficient number of shares of Series
A-3 Preferred Stock are outstanding, then an equivalent number of outstanding
shares of other subseries of Series A Preferred Stock or Common Stock) equal to
$2,500,000 divided by the Series A-3 Cancellation Price, where the "Series A-3
Cancellation Price" equals the higher of the (i) price paid per share for the
Series A-3 Preferred Stock on the date of issuance, or (ii) fair market value
of the Series A-3 Preferred Stock calculated as (A) the average closing price
for the Corporation's Common Stock during the period beginning twenty-three
(23) trading days prior to the date of cancellation and ending three (3)
trading days prior to the date of cancellation, as reported on the National
Exchange, multiplied by (B) the Conversion Rate for the Series A-3 Preferred
Stock.

                 8.       Cancellation of Series A-7 Preferred Stock.  If the
FDA Approval Date occurs on or before the Fifty-Four Month Anniversary Date,
the Corporation shall cancel all of the then outstanding shares of Series A-7
Preferred Stock by crediting therefor an amount equal to the liquidation
preference of such shares (including accrued but unpaid dividends) against the
milestone payments due the Corporation pursuant to the Collaboration Agreement,
such amount to be credited first to the milestone payment payable upon
Regulatory Approval in the United States (as described in Section 7.4 of the
Collaboration Agreement) and second, to the extent the aforesaid liquidation
preference





                                      A-9.

<PAGE>   14
remains unpaid, to the milestone payment then payable on the date of regulatory
approval in the first Major European Country (as described in Section 7.4 of
the Collaboration Agreement) (collectively, the "Milestone Payments").  If at
any time there is a Default Event (defined below), the Corporation shall
immediately cancel all of the outstanding shares of Series A-7 Preferred Stock
by paying the holders in cash an amount equal to the liquidation preference of
such shares (including accrued but unpaid dividends) (an "Acceleration Event").
If the Corporation is unable to cancel such shares of Series A-7 Preferred
Stock within seven (7) calendar days from the occurrence of the Default Event,
then notwithstanding any provision herein to the contrary, the holder of such
shares may, at its sole election, convert such shares into shares of Common
Stock of the Corporation equal to the liquidation preference of such shares
(including accrued but unpaid dividends) divided by the Original Issue Price
for such subseries multiplied by the Conversion Rate for the Series A-7
Preferred Stock.  If there is an Acceleration Event and the holder receives
cash or converts to Common Stock in exchange for cancellation of the
outstanding shares of Series A-7 Preferred Stock as described in the preceding
sentence, the holder shall be obligated to pay, in cash, to the Corporation,
any and all Milestone Payments as such payments become due under the
Collaboration Agreement.

         A "Default Event" shall mean the occurrence of any of the following
events:

                      (i)         Distributions.  Failure to make a required
payment or distribution hereunder;

                      (ii)        Material Adverse Event.  At the end of any
fiscal quarter, the total cash, cash equivalents and marketable debt
investments of the Corporation shall be valued at less than the sum of the
principal of and unpaid accrued interest on (i) all indebtedness of the
Corporation to banks, insurance companies or financial institutions regularly
engaged in the business of lending money, which is for money borrowed by the
Corporation; (ii) all purchase money security interests in an amount not to
exceed $5,000,000 (as defined in the California Uniform Commercial Code); and
(iii) the liquidation preference of the outstanding Series A-7 Preferred Stock.
In such event, the Corporation shall provide holder with written notice thereof
within twenty-four (24) hours of determining that such event has occurred.

                    (iii)         Bankruptcy Commenced by the Corporation.  If
the Corporation:

                                  (a)      shall commence any proceeding in
bankruptcy or seek reorganization, arrangement, readjustment of its debts,
dissolution, liquidation, winding-up, composition or any other relief under the
United States Bankruptcy Act, as amended, or under any other insolvency,
liquidation, dissolution, arrangement, composition, readjustment of debt or any
other similar act or law, of any jurisdiction, domestic or foreign, now or
hereafter existing;





                                     A-10.

<PAGE>   15
                                  (b)      shall admit is inability to pay its
debts as they mature in any petition or pleading in connection with any such
proceeding;

                                  (c)      shall apply for, or, in writing,
consent to or acquiesce in, an appointment of a receiver, conservator, trustee
or similar officer for it or for all or substantially all of its assets;

                                  (d)      shall make a general assignment for
the benefit of creditors; or

                                  (e)      shall admit in writing its inability
to pay its debts as they mature;

                      (iv)        Bankruptcy Commenced Against the Corporation.
If any proceedings are commenced or any other action is taken against the
Corporation in bankruptcy or seeking reorganization, arrangement, readjustment
of its debts, dissolution, liquidation, winding-up, composition or any other
relief under the United States Bankruptcy Act, as amended, or under any other
insolvency, reorganization, liquidation, dissolution, arrangement, composition,
readjustment of debt or any other similar act or law, of any jurisdiction,
domestic or foreign, now or hereafter existing; or a receiver, conservator,
trustee or similar officer for the Corporation or for all or substantially all
of its assets is appointed; and in each such case, such event continues for
ninety (90) days undismissed, unbounded and undischarged; and

                      (v)         Material Breach.  (A) Any breach of any
material representation, warranty, covenant or obligation of the Corporation
under (i) the Collaboration Agreement, which breach is not cured within sixty
(60) days of written notice thereof from Genentech (or if such breach is not
susceptible of cure within such period, the Corporation is not making diligent
good faith efforts to cure such breach); (ii) the Preferred Stock Purchase
Agreement, the Option Agreement or the Registration Rights Agreement, which
breach is not cured within thirty (30) days after receipt of written notice of
such breach from Genentech to the Corporation; or (iii) the ML/MS Agreement, to
the extent such breach materially adversely affects the Corporation's ability
to perform its obligations under the Collaboration Agreement; or (B) if, at any
time, any of the Collaboration Agreement, the Series A Preferred Stock
Agreement, the Option Agreement or the Registration Rights Agreement ceases to
be in full force and effect.

                      *                *                *





                                     A-11.

<PAGE>   16
                                                                         ANNEX B

                  RIGHTS, PREFERENCES AND RESTRICTIONS OF THE
                            SERIES B PREFERRED STOCK



                 The rights, preferences, restrictions and other matters
relating to the Series B Preferred Stock are as follows:

                 1.       Dividend Provisions.

                          a.      Series B Preferred Stock Dividend Provisions.
Subject to the rights of the Series A-7 Preferred Stock and future series of
Preferred Stock, the corporation shall pay a cumulative dividend at a rate of
Ten Dollars ($10.00) per annum on each share of Series B Preferred Stock.
Dividends shall accrue until March 15, 1997, thereafter, accrued dividends
shall be payable quarterly in arrears on the first day of each quarter,
commencing on March 15, 1997.  Any accumulation of dividends on the Series B
Preferred Stock shall not bear interest.  No dividend or other distribution
shall be paid, or declared and set apart for payment (other than dividends of
Common Stock on the Common Stock of the Corporation), on the shares of any
class or series of capital stock of the Corporation, other than the Series A-7
Preferred Stock, unless and until such dividends have been paid.

                 2.       Liquidation Preference.  The holders of Series B
Preferred Stock shall share a liquidation preference as follows:

                          a.      Series B Preferred Stock Liquidation
Preference.  In the event of any liquidation, dissolution or winding up of this
corporation, either voluntary or involuntary, subject to the rights of the
Series A Preferred Stock and any other series of Preferred Stock that may from
time to time come into existence, the holders of Series B Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets of this corporation to the holders of Common Stock and any other
series of Preferred Stock by reason of their ownership thereof, and pari-passu
with the holders of the Series A Preferred Stock, an amount per share equal to
one hundred dollars ($100.00) per share plus an amount equal to the accrued but
unpaid dividends and distributions on such share.  If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A and Series B Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the entire assets and funds of the corporation legally
available for distribution shall be distributed ratably among the holders of
the Series A and Series B Preferred Stock on an as-converted to Common Stock
basis in proportion to the amount of such stock owned by each such holder.





                                      B-1.

<PAGE>   17
                          b.      Upon the completion of the distribution
required by subparagraph (a) of this Section 2 and any other distribution that
may be required with respect to series of Preferred Stock that may from time to
time come into existence, if assets remain in this corporation, the holders of
the Common Stock of this corporation, shall receive all of the remaining assets
of this corporation.

                          c.      A consolidation or merger of the Corporation
with or into any other corporation or corporations, or a sale, conveyance or
dispositions of all or substantially all of the assets of the Corporation or
the effectuation by the Corporation of a transaction or series or related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, shall be treated as a liquidation pursuant to this Section 2.

                 3.       Conversion.  The holders of the Series B Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):

                                  (1)      Definitions.

                                        (A)     "Series B Conversion Number"
means the higher of (a) $3.75 or (b) (1) the average closing price for the
Common Stock during the period beginning on February 1, 1997 and ending March
1, 1997, as reported on the Nasdaq National Market or any other securities
exchange on which the price of Common Stock of the Corporation is then quoted
or (2) the price paid in any Merger Liquidation per share of Common Stock
(assuming the conversion of all preferred stock).

                                        (B)     "Conversion Rate" means (a) one
hundred (100) plus the amount of accrued but unpaid dividends on each share
divided by (b) the Series B Conversion Number.

                                  (2)      Elective Conversion.  In the event
of a liquidation as described in Section 2(c) above (a "Merger Liquidation"),
each holder of Series B Preferred Stock shall have the right to convert each
share of Series B Preferred Stock, and all accrued dividends thereon, into that
number of fully paid and nonassessable shares of Common Stock as equals the
Conversion Rate.

                                  (3)      Automatic Conversion.  The Series B
Preferred Stock shall not be convertible until March 15, 1997 except in the
event of a Merger Liquidation.  On March 15, 1997, each share of Series B
Preferred Stock and all accrued dividends thereon shall automatically be
converted, without any further action on the part of the holder thereof, into
the number of shares of fully paid and nonassessable shares of Common Stock as
equals the Conversion Rate.

                          a.      Mechanics of Conversion of Series B Preferred
Stock.  Before any holder of Series B Preferred Stock shall be entitled to
convert the same into shares of Common Stock pursuant to Section 3(2), such
holder shall surrender the certificate or





                                      B-2.

<PAGE>   18
certificates therefor, duly endorsed, at the office of this Corporation or of
any transfer agent for the Series B Preferred Stock, and shall give written
notice to this Corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued;
provided, however, that in the event of an automatic conversion pursuant to
Section 3(3), the outstanding shares of Series B Preferred Stock shall be
converted automatically without any further action by the holder of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent, and provided further that the
Corporation shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon such automatic conversion unless the certificates
evidencing such shares of Series B Preferred Stock are delivered to the
Corporation or its transfer agent as provided herein.  This Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid.  Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series B Preferred Stock to be converted, or in the
case of automatic conversion pursuant to Section 3(3), on March 15, 1997; and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.

                          b.      Conversion Rate Adjustments of Series B
Preferred Stock for Splits and Combinations.  The Conversion Rate of the Series
B Preferred Stock shall be subject to adjustment from time to time as follows:

                                  (1)      In the event the corporation should
at any time or from time to time after the date upon which any shares of
Preferred Stock were first issued (the "Purchase Date"), fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Rate of the Preferred Stock shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase of the
aggregate of shares of Common Stock outstanding and those issuable with respect
to such Common Stock Equivalents.





                                      B-3.

<PAGE>   19
                                  (2)      If the number of shares of Common
Stock outstanding at any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Rate for the applicable series
of Preferred Stock shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of such series
shall be decreased in proportion to such decrease in outstanding shares.  Any
adjustment under Section 3(b)(1) or (2) shall become effective at the close of
business on the date the split, subdivision, stock dividend, other distribution
or combination becomes effective.

                          c.      Distributions.  In the event this corporation
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by this corporation or other persons, assets (excluding
cash dividends), then, in each such case for the purpose of this subsection
3(c), the holders of the Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the number of
shares of Common Stock of the corporation into which their shares of Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of the corporation entitled to receive such
distribution.

                          d.      Recapitalizations.  If at any time or from
time to time there shall be a recapitalization of the Common Stock provision
shall be made so that the holders of the Series B Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series B Preferred
Stock the number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization, all subject to
further adjustment as provided herein or with respect to such other securities
or property by the terms thereof.  In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 3 with
respect to the rights of the holders of the Series B Preferred Stock after the
recapitalization to the end that the provisions of this Section 3 (including
adjustment of the Conversion Rate then in effect and the number of shares
purchasable upon conversion of the Series B Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.

                          e.      No Impairment.  This corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in
the carrying out of all the provisions of this Section 3 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series B Preferred Stock against
impairment.





                                      B-4.

<PAGE>   20
                          f.      No Fractional Shares and Certificate as to
Adjustments.

                                  (1)      No fractional shares shall be issued
upon the conversion of any share or shares of the Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share.  Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.

                                  (2)      Upon the occurrence of each
adjustment or readjustment of the Conversion Rate of Series B Preferred Stock
pursuant to this Section 3, this corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series B Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based.  This corporation shall,
upon the written request at any time of any holder of Series B Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (a) such adjustment and readjustment, (b) the Conversion Rate for such
Series B Preferred Stock at the time in effect, and (c) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of a share of Series B Preferred Stock.

                          g.      Notices of Record Date.  In the event of any
taking by this corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
this corporation shall mail to each holder of Series B Preferred Stock, at
least 20 days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.

                          h.      Reservation of Stock Issuable Upon
Conversion.  This corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the shares of the Series B Preferred Stock,
respectively, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Series B Preferred Stock, respectively, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series B Preferred
Stock, respectively, in addition to such other remedies as shall be available
to the holder of such Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be





                                      B-5.

<PAGE>   21
sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary amendment
to these articles.

                          i.      Notices.  Any notice required by the
provisions of this Section 3 to be given to the holders of shares of Preferred
Stock shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of this corporation.

                 4.       Voting Rights.  The holders of shares of Series B
Preferred Stock shall not have any voting rights, except as required under the
General Corporation Law of California.

                 5.       Status of Converted Stock.  In the event any Series B
Preferred Stock shall be converted pursuant to Section 3 hereof, the shares so
converted shall be cancelled and shall not be issuable by the Corporation.  The
Articles of this Corporation shall be appropriately amended to effect the
corresponding reduction in the Corporation's authorized capital stock.

                      *                *                *





                                      B-6.



<PAGE>   1
                                                                    EXHIBIT 10.1
GENENTECH, INC.

LEGAL DEPARTMENT
460 Point San Bruno Boulevard
South San Francisco, CA 94080-4990
(415) 225-1000
Fax: (415) 952-9881 or (415) 952-9882



                                  May 21, 1996



Kenneth J. Woolcott, Esq.
Vice President, General Counsel
& Licensing Executive
IDEC Pharmaceuticals Corporation
11011 Torreyana Road
San Diego, CA  92121

Dear Ken:

                 As you know, Genentech, Inc. and XOMA Corporation executed
that certain License Agreement dated as of May 15, 1996 regarding, among other
things, U.S. Patent 5,500,362 entitled "Chimeric Antibody with Specificity to
Human B Cell Surface Antigen" (the "License Agreement").  For good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Genentech and IDEC make the agreements and acknowledgements described in this
letter.

                 Under the terms of the Collaboration Agreement dated as of
March 16, 1995 between Genentech and IDEC, as amended (the "Collaboration
Agreement"), Genentech confirms that, contingent upon fulfillment of the
obligations contained in the following paragraph, any Patents licensed to
Genentech under the License Agreement shall be considered Genentech Patents
which are sublicensed to IDEC pursuant to Section 9.2 of the Collaboration

Agreement and pursuant to Genentech's rights and obligations under the License
Agreement.  Capitalized terms used but not defined herein shall have the
meanings given to them in the Collaboration Agreement.

                 In connection with executing the License Agreement, Genentech
paid XOMA $3 million.  Notwithstanding any provision in the Collaboration
Agreement to the contrary, IDEC shall pay Genentech $350,000 on or prior to May
25, 1996 and Genentech shall receive a credit of $1 million of the amounts paid
by Genentech to XOMA to be set off against future royalties otherwise payable
by Genentech to IDEC under Section 7.7(a) of the Collaboration Agreement, as
reduced by Section 7.7(c) of the Collaboration Agreement.






<PAGE>   2
Kenneth J. Woolcott, Esq.
May 21, 1996
Page 2



                 IDEC and Genentech agree that any costs and expenses incurred
by Genentech under the License Agreement, including royalties but excluding the
$3 million described above, which are specifically attributable to the
Co-Promotion Territory shall be treated as expenses under Exhibit A to the
Collaboration Agreement for purposes of determining Operating Profit or Loss.
Notwithstanding the penultimate sentence of Section 9.2 of the Collaboration
Agreement, Genentech shall pay to XOMA all royalties attributable to the
Co-Promotion Territory and all payments so made shall be treated as expenses
under Exhibit A to the Collaboration Agreement for purposes of determining
Operating Profit or Loss.  IDEC and Genentech agree that any costs and expenses
incurred by Genentech under the License Agreement, other than the $3 million
described above and royalties attributable to Licensed Territory, which are
specifically attributable to the Licensed Territory shall be paid by Genentech.
Expenses incurred by Genentech under the License Agreement, other than the $3
million described above and royalties, which are not specifically attributable
to either the Co-Promotion Territory or the Licensed Territory shall be deemed
one-half attributable to the Co-Promotion Territory and one-half attributable
to the Licensed Territory and treated as described in the first two sentences
of this paragraph.  Royalties payable by Genentech under the License Agreement
which relate to the Licensed Territory shall be treated as Third Party
royalties as described in Section 7.7(c) of the Collaboration Agreement.

                 Genentech agrees that it will not sublicense, without IDEC's
prior written consent, any rights under the License Agreement to any third
party within the Field (as defined in the Collaboration Agreement) other than
IDEC (within the Co-Promotion Territory), Zenyaku Kogyo Co., Ltd. ("Zenyaku")
(within Japan), and F. Hoffmann La Roche or any of its affiliates ("Roche")
(within the Licensed Territory, other than Japan, and within Canada).

                 In any agreement that Genentech enters into with Roche whereby
Genentech sublicenses any of its rights under the terms of the Collaboration
Agreement to Roche, Genentech will provide in such agreement that any
sublicense from Genentech to Roche under the License Agreement within the Field
will terminate if Roche's sublicense from Genentech under the Collaboration
Agreement is terminated.  In addition, if the Collaboration Agreement is
terminated by Genentech pursuant to Section 15.4(a)(ii) or by IDEC pursuant to
Section 15.5 due to Genentech's material breach: (i) Genentech shall grant to
IDEC a sublicense under the License Agreement within the Field in all countries
in which Genentech has a license under the License Agreement solely for the
purpose of developing, manufacturing, having manufactured, using, selling,
offering for sale, and importing C2B8 and such additional Licensed Products as
the Parties mutually agree to develop in the Co-Promotion Territory, (ii) IDEC
will grant a sublicense under the






<PAGE>   3
Kenneth J. Woolcott, Esq.
May 21, 1996
Page 3



sublicense from clause (i) of this sentence within the Field to Roche within
the Licensed Territory and Zenyaku within Japan, so long as they are performing
their respective obligations regarding the development of C2B8, and (iii) IDEC
will reimburse Genentech for all royalties, costs and expenses Genentech incurs
under the License Agreement following the date of termination of the
Collaboration Agreement.

                 In addition to the foregoing and as required by the License
Agreement, IDEC agrees to satisfy the obligations of a sublicensee under the
terms of the License Agreement, including without limitation, Section 4.3.

                 Please acknowledge your agreement with the terms of this
Letter Agreement by signing below and returning the duplicate copy of this
Letter Agreement to me as soon as possible.

                                Very truly yours,


                                /s/ Stephen G. Juelsgaard

                                    Stephen G. Juelsgaard
                                    Vice President and General Counsel



IDEC Pharmaceuticals Corporation
Agreed:


/s/ Kenneth J. Woolcott           
- ---------------------------------
Kenneth J. Woolcott
Vice President, General Counsel
& Licensing Executive