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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q
(Mark One)

      |X|  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
           ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

      |_|  TRANSITION  REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM     TO

                        COMMISSION FILE NUMBER: 000-14879

                               Cytogen Corporation
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           Delaware                              22-2322400
           --------                              ----------
    (State of Incorporation)         (I.R.S. Employer Identification No.)


       650 College Road East, Suite 3100, Princeton, New Jersey 08540-5308
--------------------------------------------------------------------------------
               (Address of principal executive offices)(Zip Code)

                                 (609) 750-8200
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
        (Former name, former address and former fiscal year, if changed
                               since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such  reports),  and (2) has been subject to the
filing requirements for at least the past 90 days. Yes |X| No |_|

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer.

 Large Accelerated Filer |_|  Accelerated Filer |X|  Non- Accelerated Filer |_|

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be filed by  Sections  12, 13 or  15(d)of  the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.                              |_| Yes |_| No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Class: Common Stock, $.01 par value           Outstanding at November 6, 2006:
                                                                    22,502,407

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


<PAGE>


                               CYTOGEN CORPORATION
                          QUARTERLY REPORT ON FORM 10-Q
                               SEPTEMBER 30, 2006

                                TABLE OF CONTENTS
                                -----------------
                                                                            Page
                                                                            ----
PART I.   FINANCIAL INFORMATION...........................................    1
     Item 1.  Consolidated Financial Statements (unaudited)...............    1

              Consolidated Balance Sheets as of September 30, 2006 and
                 December 31, 2005........................................    2

              Consolidated Statements of Operations for the Three Months
                 and Nine Months Ended September 30, 2006 and 2005........    3

              Consolidated Statements of Cash Flows for the Nine Months
                 Ended September 30, 2006 and 2005 .......................    4

              Notes to Consolidated Financial Statements..................    5

     Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................    25

     Item 3.  Quantitative and Qualitative Disclosures About Market Risk..    46

     Item 4.  Controls and Procedures.....................................    46

PART II.  OTHER INFORMATION...............................................    47

     Item 1.  Legal Proceedings...........................................    47

     Item 1A. Risk Factors................................................    47

     Item 6.  Exhibits....................................................    55

SIGNATURES................................................................    57


     PROSTASCINT(R),  QUADRAMET(R),  ONCOSCINT(R) and CAPHOSOL(R) are registered
United  States  trademarks  of  Cytogen  Corporation.  All  other  trade  names,
trademarks or servicemarks  appearing in this Quarterly  Report on Form 10-Q are
the  property  of their  respective  owners,  and not the  property  of  Cytogen
Corporation or any of its subsidiaries.


<PAGE>
















                         PART I - FINANCIAL INFORMATION
                         ------------------------------
              ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)











                                      -1-
<PAGE>


                      CYTOGEN CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
           (All amounts in thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               SEPTEMBER 30,           DECEMBER 31,
                                                                                   2006                    2005
                                                                           --------------------     ------------------
<S>                                                                         <C>                      <C>
ASSETS:
Current assets:
     Cash and cash equivalents.......................................       $      26,972            $      30,337
     Accounts receivable, net........................................               1,802                    1,743
     Inventories.....................................................               1,774                    3,582
     Prepaid expenses................................................               1,562                      906
     Other current assets............................................                  66                      354
                                                                            -------------            -------------

       Total current assets..........................................              32,176                   36,922

Property and equipment, less accumulated depreciation and
     amortization of $1,290 and $981 at September 30, 2006
     and December 31, 2005, respectively.............................                 742                      886
QUADRAMET license fee, less accumulated amortization of
     $2,195 and $1,673 at September 30, 2006 and December
     31, 2005, respectively..........................................               5,805                    6,327
SOLTAMOX license fee, less accumulated amortization of $68
     at September 30, 2006...........................................               1,932                       --
Other assets.........................................................                 468                      655
                                                                            -------------            -------------

                                                                            $      41,123            $      44,790
                                                                            =============            =============

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
     Current portion of long-term liabilities........................                  62                       26
     Accounts payable and accrued liabilities........................               6,588                    5,271
                                                                            -------------            -------------

       Total current liabilities.....................................               6,650                    5,297

Warrant liability....................................................               1,565                    1,869
Other long-term liabilities..........................................                  76                       46
                                                                            -------------            -------------
       Total liabilities.............................................               8,291                    7,212
                                                                            -------------            -------------

Commitments and contingencies

Stockholders' equity:
     Preferred stock, $.01 par value, 5,400,000 shares
       authorized-Series C Junior Participating Preferred Stock,
       $.01 par value, 200,000 shares authorized, none issued
       and outstanding...............................................                  --                       --
     Common stock, $.01 par value, 50,000,000 shares
       authorized, 22,502,407 and 22,473,762 shares issued and
       outstanding at September 30, 2006 and December 31,
       2005, respectively............................................                 225                      225
     Additional paid-in capital......................................             451,303                  450,502
     Unearned compensation...........................................                  --                     (610)
     Accumulated other comprehensive income..........................                  69                       28
     Accumulated deficit.............................................            (418,765)                (412,567)
                                                                            -------------            -------------

       Total stockholders' equity....................................              32,832                   37,578
                                                                            -------------            -------------

                                                                            $      41,123            $      44,790
                                                                            =============            =============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                      -2-
<PAGE>


                      CYTOGEN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (All amounts in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          THREE MONTHS                         NINE MONTHS
                                                                       ENDED SEPTEMBER 30,                 ENDED SEPTEMBER 30,
                                                                ------------------------------      -------------------------------
                                                                     2006              2005              2006              2005
                                                                 -----------      -----------        -----------      ------------
<S>                                                              <C>              <C>                <C>              <C>
Revenues:
     Product revenue:

       QUADRAMET.............................................    $     1,998      $     1,991        $     6,242      $      6,198
       PROSTASCINT...........................................          2,171            1,525              6,535             5,348
                                                                 -----------      -----------        -----------      ------------
           Total product revenue.............................          4,169            3,516             12,777            11,546

     License and contract revenue............................              3               35                  9               155
                                                                 -----------      -----------        -----------      ------------

           Total revenues....................................          4,172            3,551             12,786            11,701
                                                                 -----------      -----------        -----------      ------------

Operating expenses:
     Cost of product revenue.................................          2,681            2,386              7,691             7,064
     Selling, general and administrative.....................          6,737            6,740             19,968            20,456
     Research and development................................            990            1,746              5,435             3,847
     Equity in loss of joint venture.........................             --              677                120             2,879
                                                                 -----------      -----------        -----------      ------------

           Total operating expenses..........................         10,408           11,549             33,214            34,246
                                                                 -----------      -----------        -----------      ------------

           Operating loss....................................         (6,236)          (7,998)           (20,428)          (22,545)

Interest income..............................................            384              195              1,073               492
Interest expense.............................................             (8)             (21)               (20)             (105)
Gain on sale of equity interest in joint venture.............             --               --             12,873                --
Decrease in value of warrant liability.......................            122              703                304               703
                                                                 -----------       ----------        -----------      ------------

Net loss.....................................................    $    (5,738)      $   (7,121)       $    (6,198)     $    (21,455)
                                                                 ===========       ==========        ===========      ============

Basic and diluted net loss per share.........................    $     (0.26)      $    (0.40)       $     (0.28)     $      (1.31)
                                                                 ===========       ==========        ===========      ============

Basic and diluted weighted average common shares outstanding.
                                                                      22,494           17,857             22,481            16,326
                                                                 ===========       ==========        ===========      ============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                      -3-
<PAGE>


                      CYTOGEN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (All amounts in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED SEPTEMBER 30,
                                                                       ----------------------------------------
                                                                              2006                  2005
                                                                       -----------------       --------------
<S>                                                                       <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................   $     (6,198)          $    (21,455)
Adjustments to reconcile net loss to net cash used
     in operating activities:
       Depreciation and amortization.................................            933                    753
       Decrease in value of warrant liability........................           (304)                  (703)
       Share-based compensation expense..............................          1,359                     78
       Share-based milestone obligation..............................             --                    500
       Decrease in provision for doubtful accounts...................             (4)                   (13)
       Amortization of premiums on investments.......................             --                     52
       Gain on sale of equity interest in joint venture..............        (12,873)                    --
       Deferred rent.................................................            (14)                    16
       Changes in assets and liabilities:
         Accounts receivable.........................................            (55)                  (187)
         Inventories.................................................          1,808                   (914)
         Other assets................................................           (399)                   (98)
         Liability related to joint venture..........................             --                   (396)
         Accounts payable and accrued liabilities....................          1,331                 (1,497)
                                                                        ------------           ------------

       Net cash used in operating activities.........................        (14,416)               (23,864)
                                                                        ------------           ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of SOLTAMOX license.........................................         (2,000)                    --
Purchases of property and equipment..................................           (103)                  (295)
Proceeds from sale of equity interest in joint venture...............         13,132                     --
Maturities of short-term investments.................................             --                 22,727
                                                                         -----------           ------------

       Net cash provided by investing activities.....................         11,029                 22,432
                                                                         -----------           ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock...............................             52                 10,610
Proceeds from issuance of warrants...................................             --                  3,535
Payment of long-term liabilities.....................................            (30)                (2,292)
                                                                         -----------           ------------

       Net cash provided by financing activities.....................             22                 11,853
                                                                         -----------           ------------

Net increase (decrease) in cash and cash equivalents.................         (3,365)                10,421

Cash and cash equivalents, beginning of period.......................         30,337                 13,046
                                                                         -----------           ------------

Cash and cash equivalents, end of period.............................     $   26,972           $     23,467
                                                                          ==========           ============

Supplemental disclosure of non-cash information:
Capital lease of equipment...........................................     $       96           $         --
                                                                          ==========           ============
Unrealized holding gain on marketable securities.....................     $       41           $         47
                                                                          ==========           ============

Supplemental disclosure of cash information:
Cash paid for interest...............................................     $       20           $        386
                                                                          ==========           ============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                      -4-
<PAGE>


                      CYTOGEN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1. THE COMPANY

BACKGROUND

     Founded in 1980,  Cytogen  Corporation  (the  "Company" or  "Cytogen") is a
biopharmaceutical  company dedicated to advancing the care of cancer patients by
building,   developing,   and   commercializing   a   portfolio   of   specialty
pharmaceutical products. The Company's specialized sales force currently markets
QUADRAMET(R)  (samarium Sm-153 lexidronam injection),  PROSTASCINT(R)  (capromab
pendetide) kit, and SOLTAMOX(TM)  (tamoxifen citrate, oral solution 10mg/5mL) to
the U.S.  oncology  market.  QUADRAMET is approved for the  treatment of pain in
patients whose cancer has spread to the bone,  PROSTASCINT  is a  PSMA-targeting
monoclonal  antibody-based  agent to image the  extent  and  spread of  prostate
cancer,  and SOLTAMOX is the first liquid hormonal  therapy approved in the U.S.
for the  treatment of breast  cancer in adjuvant and  metastatic  settings.  The
Company introduced SOLTAMOX to the U.S. oncology market in August 2006. In early
2007, Cytogen plans to introduce its fourth approved product to the U.S. market,
CAPHOSOL(R). Approved as a prescription medical device, CAPHOSOL(R) is a topical
oral ajent for the  treatment of oral  mucositis  and dry mouth.  The Company is
also  developing  CYT-500,  a  third-generation  radiolabeled  antibody to treat
prostate cancer. In addition,  the Company has exclusive United States marketing
rights to COMBIDEX(R)  (ferumoxtran-10) for all applications,  and the exclusive
right to  market  and sell  ferumoxytol  (previously  Code  7228)  for  oncology
applications in the United States.

     On  April  21,  2006,  the  Company  and  Savient   Pharmaceuticals,   Inc.
("Savient") entered into a distribution agreement granting the Company exclusive
marketing  rights for  SOLTAMOX in the United  States.  SOLTAMOX,  a  cytostatic
estrogen receptor antagonist, is indicated for the treatment of breast cancer in
adjuvant  and  metastatic  settings  and to reduce the risk of breast  cancer in
women with ductal  carcinoma in situ (DCIS) or with high risk of breast  cancer.
In  addition,  the  Company  entered  into  a  supply  agreement  with  Rosemont
Pharmaceuticals  Limited,   previously  a  wholly-owned  subsidiary  of  Savient
("Rosemont"), for the manufacture and supply of SOLTAMOX.

     On October 11, 2006, the Company and InPharma AS ("InPharma")  entered into
a license agreement  granting the Company exclusive rights for CAPHOSOL in North
America.  Approved as a prescription medical device,  CAPHOSOL is a topical oral
agent  indicated  in the United  States as an adjunct to  standard  oral care in
treating oral mucositis caused by radiation or high dose chemotherapy.  CAPHOSOL
is also  indicated for dryness of the mouth  (hyposalivation)  or dryness of the
throat  (xerostomia)  regardless  of the cause or  whether  the  conditions  are
temporary or permanent.

     Cytogen has a history of operating losses since its inception.  The Company
currently relies on two products,  PROSTASCINT and QUADRAMET,  for substantially
all of its revenues.  In addition,  the Company has, from time to time,  stopped
selling certain products,  such as NMP22 BLADDERCHEK,  BRACHYSEED and ONCOSCINT,
that the Company previously


                                      -5-
<PAGE>


believed would generate significant revenues. The Company's products are subject
to  significant  regulatory  review  by the  FDA and  other  federal  and  state
agencies,   which  requires   significant  time  and  expenditures  in  seeking,
maintaining and expanding product approvals.  In addition, the Company relies on
collaborative   partners  to  a  significant  degree,  among  other  things,  to
manufacture  its products,  to secure raw  materials,  and to provide  licensing
rights to their  proprietary  technologies for the Company to sell and market to
others. The Company is also subject to revenue and credit concentration risks as
a small number of its customers  account for a high percentage of total revenues
and corresponding receivables.  The loss of one of these customers or changes in
their buying patterns could result in reduced sales, thereby adversely affecting
the Company's operating results.

     The Company has  incurred  negative  cash flows from  operations  since its
inception,  and has  expended,  and expects to  continue to expend,  substantial
funds  to  implement  its  planned  product   development   efforts,   including
acquisition  of  products,  research  and  development,   clinical  studies  and
regulatory  activities,  and  to  further  the  Company's  marketing  and  sales
programs,  including  new product  launches.  The Company  expects its  existing
capital  resources at September  30, 2006,  along with  proceeds  expected to be
received  from the  November  2006 sale of equity,  should be  adequate  to fund
operations  and  commitments  at least into the second half of 2007. The Company
cannot  assure you that its business or  operations  will not change in a manner
that would  consume  available  resources  more  rapidly than  anticipated.  The
Company  expects that it will have  additional  requirements  for debt or equity
capital,  irrespectively  of whether  and when  profitability  is  reached,  for
further  product  development,  product and technology  acquisition  costs,  and
working capital.

BASIS OF CONSOLIDATION

     The consolidated  financial  statements include the financial statements of
Cytogen and its  subsidiaries.  All intercompany  balances and transactions have
been eliminated in consolidation.

BASIS OF PRESENTATION

     The  consolidated  financial  statements  and notes  thereto of Cytogen are
unaudited and include all adjustments  which, in the opinion of management,  are
necessary to present fairly the financial condition and results of operations as
of  and  for  the  periods  set  forth  in  the  Consolidated   Balance  Sheets,
Consolidated Statements of Operations and Consolidated Statements of Cash Flows.
All  such  accounting  adjustments  are  of  a  normal,  recurring  nature.  The
consolidated  financial  statements  do not include all of the  information  and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with U.S. generally accepted accounting principles and should be read
in  conjunction  with the  consolidated  financial  statements and notes thereto
included in the Company's  Annual Report on Form 10-K, filed with the Securities
and Exchange  Commission,  which includes financial statements as of and for the
year ended  December 31, 2005.  The results of the Company's  operations for any
interim  period are not  necessarily  indicative of the results of the Company's
operations for any other interim period or for a full year.


                                      -6-
<PAGE>


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

Cash and Cash Equivalents

     Cash and cash  equivalents  include  cash on  hand,  cash in banks  and all
highly-liquid investments with a maturity of three months or less at the time of
purchase.

Inventories

     The  Company's  inventories  include  PROSTASCINT  and  SOLTAMOX  with  the
majority of the inventories  related to  PROSTASCINT.  Inventories are stated at
the lower of cost or market using the first-in,  first-out  method and consisted
of the following (all amounts in thousands):

                                      SEPTEMBER 30, 2006      DECEMBER 31, 2005
                                     --------------------    -------------------
   Raw materials....................     $       287            $       291
   Work-in-process..................             469                  2,625
   Finished goods...................           1,018                    666
                                         -----------            -----------
                                         $     1,774            $     3,582
                                         ===========            ===========

Net Loss Per Share

     Basic net loss per common share is calculated by dividing the Company's net
loss by the  weighted-average  common  shares  outstanding  during each  period.
Diluted  net loss per  common  share is the same as basic net loss per share for
each of the three and nine  month  periods  ended  September  30,  2006 and 2005
because the  inclusion of common stock  equivalents,  which consist of nonvested
shares,  warrants and options to purchase shares of the Company's  common stock,
would be antidilutive due to the Company's losses.

OTHER COMPREHENSIVE INCOME OR LOSS

     Other  comprehensive  income  consisted of net  unrealized  holding gain on
marketable securities.  For the three months ended September 30, 2006, there was
no unrealized  holding gain or loss for these  securities and, as a result,  the
comprehensive loss for the three months ended September 30, 2006 was $5,738,000,
the  same as net  loss.  For the nine  months  ended  September  30,  2006,  the
unrealized  holding  gain of the  securities  was $41,000  and as a result,  the
comprehensive  loss for the nine months ended September 30, 2006 was $6,157,000.
For the three months ended  September 30, 2005, the  unrealized  holding loss of
those securities was $3,000,  and as a result,  the  comprehensive  loss for the
three months ended September 30, 2005 was


                                      -7-
<PAGE>


$7,124,000. For the nine months ended September 30, 2005, the unrealized holding
gain of the  securities was $47,000 and as a result the  comprehensive  loss for
the nine months ended September 30, 2005 was $21,408,000.

RECENT ACCOUNTING PRONOUNCEMENTS

Evaluation of Misstatements

     On  September  13,  2006,  the  staff of the SEC  issued  Staff  Accounting
Bulletin  No. 108,  "Considering  the Effects of Prior Year  Misstatements  when
Quantifying  Misstatements  in Current Year Financial  Statements"  ("SAB 108"),
which  provides   interpretive  guidance  on  how  the  effects  of  prior  year
misstatements  should be considered  in evaluating a current year  misstatement.
The cumulative  effect from the initial adoption of SAB 108 may be reported as a
cumulative  effect  adjustment to the  beginning of year retained  earnings with
disclosure of the nature and amount of each individual  error.  The Company will
begin  to  apply  the  provisions  of SAB 108 in the  fourth  quarter  of  2006.
Management is currently  evaluating the  requirements of SAB 108 and has not yet
determined the impact it will have on its consolidated financial statements.

Fair Value Measurements

     On  September  15,  2006,  the  FASB  issued  SFAS  No.  157,  "Fair  Value
Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework
for measuring fair value and expands  disclosures about fair value measurements.
SFAS 157 is  effective as of the  beginning  of the first fiscal year  beginning
after November 15, 2007. The Company will be required to adopt this statement in
the first quarter of 2008.  Management is currently  evaluating the requirements
of SFAS 157 and has not yet determined the impact this standard will have on its
consolidated financial statements.

Income Taxes

     In June 2006, the FASB issued FASB  Interpretation  No. 48, "Accounting for
Uncertainty  in Income Taxes" ("FIN 48").  FIN 48 is applicable for fiscal years
beginning after December 15, 2006. This Interpretation  clarifies the accounting
for  uncertainty  in  income  taxes  recognized  in  an  enterprise's  financial
statements in accordance  with FASB  Statement No. 109,  "Accounting  for Income
Taxes." This Interpretation  prescribes a recognition  threshold and measurement
attribute for the  financial  statement  recognition  and  measurement  of a tax
position taken or expected to be taken in a tax return. This Interpretation also
provides  guidance on  de-recognition,  classification,  interest and penalties,
accounting  in interim  periods,  disclosure,  and  transition.  The  Company is
currently  evaluating  the impact of the  adoption of FIN 48 upon its  financial
statements  and  related  disclosures.  The  Company  does not  expect  that the
adoption  will have a material  effect on its results of operations or financial
condition.

Sales Tax

     In March 2006, the FASB's  Emerging  Issues Task Force released Issue 06-3,
"How  Sales  Taxes   Collected  From  Customers  and  Remitted  to  Governmental
Authorities  Should Be  Presented  in the Income  Statement"  ("EITF  06-3").  A
consensus was reached that entities may adopt a policy of presenting sales taxes
in the income statement on either a gross or net basis. If


                                      -8-
<PAGE>


taxes are significant,  an entity should disclose its policy of presenting taxes
and the amount of taxes if reflected  on a gross basis in the income  statement.
The guidance is effective for periods  beginning  after  December 15, 2006.  The
Company  presents  sales net of sales taxes in its  consolidated  statements  of
operations and does not anticipate changing its policy as a result of EITF 06-3.

Share-Based Payment

     In December 2004, the FASB issued SFAS No. 123(R),  "Share-Based  Payment,"
which  revised SFAS No. 123 ("SFAS 123") and  superseded  Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees"  ("APB 25").
SFAS 123(R) requires that companies  recognize  compensation  expense associated
with share-based compensation arrangements, including employee stock options, in
the financial  statements  effective as of the first interim or annual reporting
period that begins after June 15, 2005.  SFAS 123(R)  eliminates  the  Company's
ability  to  account  for  such  transactions  using  the  intrinsic  method  of
accounting  under APB 25. SFAS 123(R) also  requires  that  companies  recognize
compensation  expense  associated  with  purchases  of shares of common stock by
employees at a discount to market value under employee stock purchase plans that
do not meet certain criteria.

     In April  2005,  the  Securities  and  Exchange  Commission  announced  the
adoption  of a new rule  allowing  companies  to  implement  SFAS  123(R) at the
beginning   of  their  next  fiscal  year  that  begins  after  June  15,  2005.
Accordingly,  the  Company  adopted  SFAS  123(R) in its fiscal  year  beginning
January 1, 2006 using the modified  prospective  transition  method.  Under this
method,  compensation expense is reflected in the financial statements beginning
January 1, 2006 with no restatement to the prior periods. As such,  compensation
expense,  which is  measured  based on the fair value of the  instrument  on the
grant date, is recognized for awards that are granted, modified,  repurchased or
cancelled  on or after  January  1,  2006 as well as for the  portion  of awards
previously  granted that have not vested as of January 1, 2006.  The Company has
implemented the straight-line expense attribution method for all options granted
after  January 1, 2006.  Prior to adopting  SFAS  123(R),  the Company  used the
accelerated  attribution  method in accordance with FASB  Interpretation No. 28,
"Accounting  for Stock  Appreciation  Rights and Other  Variable Stock Option or
Award  Plans" ("FIN 28").  The adoption of SFAS 123(R) had a material  impact on
the Company's results of operations (see Note 2).

Abnormal Inventory Costs

     In  November  2004,  the FASB issued SFAS No.  151,  "Inventory  Costs,  an
amendment of ARB No. 43,  Chapter 4" ("SFAS No. 151"),  to clarify that abnormal
amounts of idle facility expense,  freight,  handling costs, and wasted material
(spoilage)  should be  recognized  as  current  period  charges,  and that fixed
production  overheads  should be  allocated  to  inventory  based on the  normal
capacity of  production  facilities.  This  statement is effective for inventory
costs incurred during fiscal years  beginning after June 15, 2005.  Accordingly,
the Company  adopted SFAS No. 151 in its fiscal year beginning  January 1, 2006.
The adoption of this standard did not have any impact on the Company in the nine
months ended September 30, 2006.

2. SHARE-BASED COMPENSATION

     The Company has various share-based compensation plans that provide for the
issuance  of common  stock and  incentive  and  non-qualified  stock  options to
purchase the Company's


                                      -9-
<PAGE>


common stock to employees, non-employee directors and outside consultants. These
plans are administered by the  Compensation  Committee of the Board of Directors
(the  "Compensation  Committee").  The  Company  may issue new common  shares or
reacquire  them  on  the  open  market  to  satisfy  option  exercises  or  upon
satisfaction of service requirement for nonvested shares.

Cytogen Stock Options

     Currently,  the Company  has three  plans  which allow for the  issuance of
stock options and other  awards:  the 2006 Equity  Compensation  Plan (the "2006
Plan");  the  2004  Stock  Incentive  Plan  (the  "2004  Plan");  and  the  2004
Non-Employee  Director  Stock  Incentive  Plan (the "2004  Director  Plan").  An
aggregate of  1,500,000,  1,200,000 and 375,000  shares of Cytogen  common stock
have been reserved for issuance upon the exercise of options or stock awards (as
applicable) under the 2006 Plan, 2004 Plan and 2004 Director Plan, respectively.
The Company  also has certain  other option  plans,  for which there are options
outstanding but no new options can be granted under those plans.

     On June 13, 2006, the Company's  stockholders approved the 2006 Plan at the
2006 Annual  Meeting of  Stockholders.  The 2006 Plan  provides for the grant of
incentive stock options,  nonqualified stock options, stock units, stock awards,
stock  appreciation  rights  and  other  stock-based  awards  to  the  Company's
employees and non-employee directors.  Performance-based awards, which will vest
upon the achievement of objective  performance  goals, may also be granted under
the 2006 Plan.  Options shall become  exercisable in accordance  with such terms
and conditions as may be determined by the  Compensation  Committee.  As long as
Cytogen common stock is traded on the Nasdaq National Market, the exercise price
of Cytogen  stock options under the 2006 Plan will be equal to the last reported
sales  price for  Cytogen  common  stock on the date of  grant,  unless a higher
exercise price is specified by the  Compensation  Committee.  Except for certain
circumstances,  the options will generally  expire upon the earlier of ten years
after the date of grant or within a certain period of time after  termination of
services as determined by the Compensation  Committee. As of September 30, 2006,
no options or awards have been granted under the 2006 Plan.

     The  2004  Plan  provides  for  the  grant  of  incentive   stock  options,
non-qualified  stock  options or nonvested  shares (see below) to the  Company's
employees,  officers,  consultants and advisors.  Generally,  options granted to
employees  will vest 40%, 30% and 30% one year,  two years and three years after
the date of grant, respectively. Options granted to officers will generally vest
annually  one third each year over a  three-year  period from the date of grant.
Performance options, which will vest upon the achievement of certain milestones,
may also be granted  under the 2004 Plan.  The exercise  price of Cytogen  stock
options is equal to the  average  of high and low  trading  prices  for  Cytogen
common stock on the date of grant,  unless a higher  exercise price is specified
by the Compensation  Committee.  Except for certain  circumstances,  the options
will  generally  expire upon the earlier of ten years after the date of grant or
90 days after termination of employment.

     The 2004  Director  Plan  provides  for the  grant of  non-qualified  stock
options and shares of Cytogen common stock, in certain circumstances, to members
of the  Company's  Board of  Directors  who are not  employees  of the  Company.
According  to  the  2004  Director   Plan,   each   re-elected   Director  shall
automatically  receive options to purchase shares of Cytogen common stock on the
day following each Annual Meeting of Stockholders. Each new Director who is


                                      -10-
<PAGE>


appointed after the date of the most recent Annual Meeting of Stockholders  will
receive  a  certain  number  of  options,  pro-rated  for the  number  of months
remaining until the next Annual Meeting.  All options will become exercisable on
the first  anniversary  of the date of grant,  unless  options  are granted to a
Director who has served on the  Company's  Board of Directors for at least three
years and retires or resigns after  reaching 55 years of age. In such case,  the
options may be exercised in full  regardless of the time lapse since the date of
grant.  The exercise  price of Cytogen  stock options is equal to the average of
high and low  trading  prices  for  Cytogen  common  stock on the date of grant.
Except for certain  circumstances,  the options will  generally  expire upon the
earlier of ten years after the date of grant or 90 days after termination date.

     A summary of option activities  related to Cytogen stock options other than
performance options, for the nine months ended September 30, 2006 is as follows:

<TABLE>
<CAPTION>
                                                                        WEIGHTED-      WEIGHTED-
                                                       NUMBER OF         AVERAGE        AVERAGE
                                                        CYTOGEN         EXERCISE        REMAINING        AGGREGATE
CYTOGEN OPTIONS OTHER THAN                               STOCK          PRICE PER      CONTRACTUAL       INTRINSIC
PERFORMANCE OPTIONS                                     OPTIONS           SHARE           LIFE             VALUE
--------------------------------------------         ------------    ------------     ------------    -------------
<S>                                                   <C>             <C>    <C>         <C>            <C>
Balance at December 31, 2005................            980,796       $   10.04
   Granted..................................            585,350            3.36
   Exercised................................                 --              --
   Forfeited................................           (122,260)           5.06
   Expired..................................            (56,480)          14.59
                                                      ----------      ----------       ----------      -----------

Balance at September 30, 2006...............          1,387,406       $     7.47          8.23         $    4,000

Exercisable and expected to vest at
  September 30, 2006........................          1,257,947       $     7.78          8.20         $    3,000

Exercisable at September 30, 2006...........            622,149       $    11.25          7.02                 --
</TABLE>


     A summary of option activities related to performance  options for the nine
months ended September 30, 2006 is as follows:

<TABLE>
<CAPTION>
                                                     NUMBER         WEIGHTED-         WEIGHTED-
                                                       OF            AVERAGE           AVERAGE
                                                     CYTOGEN        EXERCISE           REMAINING       AGGREGATE
                                                      STOCK         PRICE PER         CONTRACTUAL      INTRINSIC
PERFORMANCE OPTIONS                                 OPTIONS          SHARE              LIFE             VALUE
-------------------------------------------      --------------   ------------    ------------------  -----------

<S>                                                 <C>           <C>                <C>               <C>
Balance at December 31, 2005...............         150,000       $      3.54
   Granted.................................              --                --
   Exercised...............................              --                --
   Forfeited and Expired...................              --                --
                                                  -----------     -------------    ------------       -----------

Balance at September 30, 2006..............         150,000       $      3.54           6.22              --

Exercisable and expected to vest at
 September 30, 2006........................          50,000       $      3.54           6.22              --

Exercisable at September 30, 2006..........          50,000       $      3.54           6.22              --
</TABLE>


                                      -11-
<PAGE>


     In 2002,  options to purchase  150,000  shares of Cytogen common stock were
granted to a key employee.  These options have three separate and equal tranches
for  which  vesting  are  based  upon  the  achievement  of  certain  milestones
established  by the  Company's  Board of Directors.  In June 2006,  the Board of
Directors determined that one of the performance milestones had been met, and as
a result,  approved the vesting of 50,000 performance options.  During the three
and nine months ended  September 30, 2006, the Company  recorded $0 and $152,000
in selling, general and administrative expenses,  respectively,  which represent
the grant  date fair  value of the  vested  options  based on the  Black-Scholes
option pricing model. The remaining 100,000  performance  options are not deemed
probable of becoming exercisable at September 30, 2006.

     At September 30, 2006, the weighted-average  exercise price of outstanding,
exercisable and expected to vest, and  exercisable  options each was higher than
the market price of the Company's  underlying common share, and as a result, the
aggregate intrinsic value was zero.

Nonvested Shares

     Under the 2004 Plan, the Company may issue  nonvested  shares to employees,
officers,  consultants and advisors. The maximum number of shares authorized for
grant under the 2004 Incentive Plan is 200,000.  Generally, the nonvested shares
will vest in installments  over three to six year periods.  The Company may also
issue stock awards to its employees and  non-employee  directors  under the 2006
Plan. As of September 30, 2006, no awards have been granted under this plan.

     A summary of the Cytogen's  nonvested share  activities for the nine months
ended September 30, 2006 is as follows:

<TABLE>
<CAPTION>
                                                                                 WEIGHTED-
                                                  NUMBER        WEIGHTED-         AVERAGE
                                                    OF           AVERAGE         REMAINING         AGGREGATE
                                                 NONVESTED     GRANT DATE         VESTING          INTRINSIC
NONVESTED SHARES                                  SHARES       FAIR VALUE          TERM             VALUE
-------------------------------------------     ----------    ------------     -------------    -------------

<S>                                               <C>          <C>                  <C>         <C>
Balance at December 31, 2005................      136,200      $     5.15
    Granted.................................       76,800            3.47
    Vested..................................           --              --
    Forfeited...............................      (34,300)           4.77
                                                 ---------     -----------      ------------    -------------

Balance at September 30, 2006...............      178,700      $     4.50           2.60        $  420,000

Vested and expected to vest at
    September 30, 2006......................      144,662      $     4.42           2.51        $  340,000

Vested at September 30, 2006................           --              --             --                --
</TABLE>

Employee Stock Purchase Plan

     In September  2005, the Board of Directors of the Company  adopted the 2005
Employee  Stock  Purchase  Plan (the  "2005  ESPP").  The 2005  ESPP,  which was
approved by the


                                      -12-
<PAGE>


Company's  stockholders  on June 13,  2006,  is effective  October 1, 2005,  and
replaces  the  Company's  existing  employee  stock  purchase  plan which had no
remaining shares available for future  issuance.  Under the 2005 ESPP,  eligible
employees  may elect to purchase  shares of Cytogen  common  stock at 85% of the
lower  of  fair  market  value  as of the  first  or  last  trading  day of each
participation  period. Under the 2005 ESPP, officers of the Company who purchase
shares may not transfer such shares for a period of 12 months after the purchase
date. The initial  offering period was a nine-month  period beginning on October
1,  2005 and  ending  on June 30,  2006.  Subsequent  purchase  periods  will be
three-month  periods  beginning on the first day in July,  October,  January and
April.  The  Company  has  reserved  500,000  shares of common  stock for future
issuance  under the 2005  ESPP.  The 2005 ESPP plan is  compensatory  under SFAS
123(R).  In the  three and nine  months  ended  September  30,  2006,  employees
purchased 8,314 and 28,645 shares of common stock for aggregate  proceeds to the
Company of $17,000 and $60,000,  respectively.  At September  30, 2006,  471,355
shares remain available for purchase under the 2005 ESPP.

Warrants and Options Issued to Non-Employees

     From time to time,  the Company may issue  warrants and options to purchase
Cytogen  common stock to  non-employees,  excluding  directors,  in exchange for
goods or  services.  Warrants are issued  outside of any  approved  compensation
plans.  Terms of warrants  and options  vary among  various  arrangements,  with
vesting  period  generally  up to one year and may  require  exercise if certain
conditions are met. Contractual term ranges up to ten years.

     A summary of the Cytogen warrants and options issued to  non-employees  for
the nine months ended September 30, 2006 is as follows:

<TABLE>
<CAPTION>
                                                      NUMBER
                                                        OF           WEIGHTED-          WEIGHTED-
                                                      CYTOGEN         AVERAGE            AVERAGE
                                                      WARRANTS        EXERCISE          REMAINING       AGGREGATE
WARRANTS AND OPTIONS TO                                 AND           PRICE PER         CONTRACTUAL     INTRINSIC
NON-EMPLOYEES                                         OPTIONS          SHARE              LIFE            VALUE
------------------------------------------------   -----------     -------------    --------------    ---------------
<S>                                                   <C>           <C>                   <C>               <C>
Balance at December 31, 2005................          359,978       $      6.96
   Granted..................................               --                --
   Exercised................................               --                --
   Forfeited................................               --                --
   Expired..................................          (70,000)      $      5.65
                                                   -----------      -----------     ---------------   ---------------

Balance at September 30, 2006...............          289,978       $       7.27          3.34              --

Exercisable and expected to vest at
   September 30, 2006.......................          289,978       $       7.27          3.34              --

Exercisable at September 30, 2006...........          289,978       $       7.27          3.34              --
</TABLE>

     At September 30, 2006, the weighted-average  exercise price of outstanding,
exercisable and expected to vest, and exercisable  warrants each was higher than
the market price of the Company's  underlying common share, and as a result, the
aggregate intrinsic value was zero.


                                      -13-
<PAGE>


AxCell BioSciences Stock Options

     AxCell   BioSciences,   a   non-publicly   traded   subsidiary  of  Cytogen
Corporation,  also has a stock  option plan that  provides  for the  issuance of
incentive  and  non-qualified  stock  options to purchase  AxCell  common  stock
("AxCell  Stock  Options") to employees,  for which  2,000,000  shares of AxCell
common stock have been reserved. AxCell Stock Options are granted with a term of
10 years and generally become  exercisable in installments over periods of up to
5 years.

     A summary of AxCell  stock  option  activities  for the nine  months  ended
September 30, 2006 is as follows:

<TABLE>
<CAPTION>
                                                                                                WEIGHTED-
                                                           NUMBER OF        WEIGHTED-           AVERAGE
                                                            AXCELL          AVERAGE            REMAINING
                                                            STOCK           EXERCISE          CONTRACTUAL
AXCELL STOCK OPTIONS                                       OPTIONS           PRICE                TERM
-----------------------------------------------         -------------    --------------     ----------------
<S>                                                         <C>            <C>                    <C>
Balance at December 31, 2005...................             69,405         $     4.34             6.10
   Granted.....................................                 --                 --
   Exercised...................................                 --                 --
   Forfeited...................................                 --                 --
   Expired.....................................            (19,405)              3.60
                                                        -------------      -----------      ----------------

Balance at September 30, 2006..................             50,000         $     4.63             5.58

Exercisable and expected to vest at
  September 30, 2006...........................             50,000         $     4.63             5.58

Exercisable at September 30, 2006..............             50,000         $     4.63             5.58
</TABLE>

     AxCell is not a publicly traded  subsidiary.  While there was not a readily
available  market price for AxCell's  underlying  common share at September  30,
2006,  the  Company  estimated  that its fair  value was less than the  exercise
price, and as a result, the aggregate intrinsic value was zero.

     Effective  January 1, 2006,  the  Company  adopted  SFAS No.  123(R)  which
requires  companies  to  measure  and  recognize  compensation  expense  for all
share-based  payments at fair value.  Prior to the adoption of SFAS 123(R),  the
Company accounted for its stock-based  employee  compensation  expense under the
recognition and measurement  principles of APB 25, and related  interpretations.
Under APB 25,  compensation costs related to stock options granted with exercise
prices equal to or greater than the fair value of the  underlying  shares at the
date of  grant  under  those  plans  were  not  recognized  in the  consolidated
statements of  operations.  Compensation  costs related to nonvested  shares and
stock options  granted with exercise  prices below fair value of the  underlying
shares at the date of grant were  recognized in the  consolidated  statements of
operations over the requisite  service period,  generally the vesting periods of
the awards. Compensation costs associated with those awards granted prior to the
adoption of SFAS 123(R) were recognized using the accelerated attribution method
in  accordance  with FIN 28 and  forfeitures  were  recorded  as  incurred.  The
following table  illustrates the effect on net loss and net


                                      -14-
<PAGE>

loss per share as if the fair value  method  under SFAS 123 had been applied for
the three and nine months ended  September  30, 2005 (all amounts in  thousands,
except per share data):

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED          NINE MONTHS
                                                                         ENDED                   ENDED
                                                                  SEPTEMBER 30, 2005      SEPTEMBER 30, 2005
                                                                  ------------------      ------------------
<S>                                                                  <C>                    <C>
  Net loss, as reported..................................            $    (7,121)           $     (21,455)

    Add: Stock-based employee compensation
       expense included in reported net loss.............                     65                       78
    Deduct: Total stock-based employee
       compensation expense determined under
       fair value-based method for all awards............                   (525)                  (1,653)
                                                                     ------------           --------------

  Pro forma net loss.....................................            $    (7,581)           $     (23,030)
                                                                     ============           ==============



  Basic and diluted net loss per share, as
    reported.............................................            $     (0.40)           $       (1.31)
                                                                     ============           ==============
  Pro forma basic and diluted net loss per
    share................................................            $     (0.42)           $       (1.41)
                                                                     ============           ==============
</TABLE>

     The  Company  adopted  SFAS  No.  123(R)  using  the  modified  prospective
transition method, which requires that share-based compensation cost be based on
the grant-date  fair value  estimated in accordance  with the provisions of SFAS
123(R) and is recognized for all awards  granted,  modified or settled after the
effective  date as well as awards  granted to employees  prior to the  effective
date that remain  unvested as of the effective  date. For the three months ended
September 30, 2006, the Company  recorded  $587,000 of share-based  compensation
expense,  of which $482,000 was included in selling,  general and administrative
expenses and $105,000 was recorded in research and development expenses. For the
nine months ended  September  30,  2006,  the Company  recorded  $1.4 million of
share-based compensation expense, of which $1.2 million was included in selling,
general and  administrative  expenses and  $157,000 in research and  development
expenses.  For the three and nine months ended  September 30, 2005,  the Company
recorded  charges  of  $65,000  and  $78,000,   respectively,   for  share-based
compensation.  During the three and nine months ended September 30, 2006,  there
were no  modification to the  share-based  awards and no  compensation  cost was
capitalized into assets.

     The  adoption of SFAS 123(R)  resulted in higher loss for the three  months
ended September 30, 2006 of $525,000,  or $0.02 per basic and diluted share, and
higher loss for the nine months ended  September  30, 2006 of $1.2  million,  or
$0.05 per basic and diluted share,  than if the Company had continued to account
for  the  share-based   compensation  under  APB  25.  At  September  30,  2006,
unrecognized  compensation  expense,  which  includes  the  impact of  estimated
forfeitures,  related to unvested awards granted under the Company's share-based
compensation  plans is  approximately  $1.9 million and remains to be recognized
over a weighted average period of 1.2 years. The Company recognizes  share-based
compensation  on a  straight-line  basis over the requisite  service  period for
grants  on  or  after  January  1,  2006,  however,  the  cumulative  amount  of
compensation expense recognized at any point in time for an award cannot be less
than the  portion  of the grant  date fair  value of the award that is vested at
that date.


                                      -15-
<PAGE>


Unrecognized  compensation  expense  related to grants made prior to adoption of
SFAS 123(R) are recognized  using the  accelerated  amortization  method.  Prior
periods were not restated to reflect the impact of adopting the new standard. No
cumulative  effect  adjustment was recorded for the accounting change related to
recording actual forfeitures as incurred under APB 25 to estimating  forfeitures
in accordance with SFAS 123(R) as the amount was de minimus.

     The Company's  share-based  compensation  costs are generally  based on the
fair value of the option awards calculated using a Black-Scholes  option pricing
model on the date of grant. The weighted-average grant date fair value per share
of the options granted under the Cytogen stock option plans during the three and
nine months ended  September 30, 2006 is estimated at $1.72 and $2.71 per share,
respectively,  as compared to $3.95 and $3.70, respectively, in the same periods
of 2005,  using  the  Black-Scholes  option  pricing  model  with the  following
weighted average assumptions:

                                            THREE MONTHS         NINE MONTHS
                                               ENDED                ENDED
                                         SEPTEMBER 30, 2006   SEPTEMBER 30, 2006
                                         ------------------   ------------------

   Expected life (years)..................      5.96                6.48
   Expected volatility....................       91%                 97%
   Dividend yield.........................        0%                  0%
   Risk-free interest rate................     4.92%               4.94%


                                             THREE MONTHS        NINE MONTHS
                                                ENDED               ENDED
                                         SEPTEMBER 30, 2005   SEPTEMBER 30, 2005
                                         ------------------   ------------------

   Expected life (years)..................      5.74                4.52
   Expected volatility....................      109%                 96%
   Dividend yield.........................        0%                  0%
   Risk-free interest rate................     4.18%               3.95%

     The  compensation  costs for  nonvested  share awards are based on the fair
value of Cytogen common stock on the date of grant. The  weighted-average  grant
date fair value per share of nonvested share awards granted during the three and
nine month periods ended  September 30, 2006 was $2.18 and $3.47,  respectively,
as compared to $5.15 during the nine months ended September 30, 2005. There were
no nonvested  share awards granted  during the three months ended  September 30,
2005.

     The weighted-average fair value per share of the shares purchased under the
employee  stock  purchase  plan during  each of the three and nine months  ended
September  30,  2006 was  $0.60  and  $0.56  per  share  on the  date of  grant,
respectively,  as  compared to $1.92 and $3.35 per share,  respectively,  in the
same  periods  in 2005 using the  Black-Scholes  option  pricing  model with the
following weighted-average assumptions:


                                      -16-
<PAGE>


                                             THREE MONTHS         NINE MONTHS
                                                ENDED                ENDED
                                         SEPTEMBER 30, 2006   SEPTEMBER 30, 2006
                                         ------------------   ------------------

   Expected life (months).................         3                   1
   Expected volatility....................       44%                 42%
   Dividend yield.........................        0%                  0%
   Risk-free interest rate................     4.99%               4.92%

                                             THREE MONTH          NINE MONTHS
                                                ENDED                ENDED
                                         SEPTEMBER 30, 2005   SEPTEMBER 30, 2005
                                         ------------------   ------------------

   Expected life (months).................         3                   3
   Expected volatility....................       66%                112%
   Dividend yield.........................        0%                  0%
   Risk-free interest rate................     3.17%               2.70%

     No warrants were granted to  non-employees  in exchange for services during
the three and nine months ended September 30, 2006 and 2005.

     The Company  calculates  the expected life using the  simplified  method as
described in the SEC's Staff Accounting  Bulletin No. 107 ("SAB 107") for "plain
vanilla" options meeting certain criteria. The simplified method is based on the
vesting period and the contractual  term for each grant or each  vesting-tranche
of awards with graded  vesting.  The mid-point  between the vesting date and the
expiration  date is used as the  expected  term under this  method.  The Company
calculates   expected   volatility  for  stock-based   awards  using  historical
volatility,  measured  over a period  equal to the  expected  term of the award,
which it believes is a  reasonable  estimate  of future  volatility.  As options
granted  to the Board of  Director  members do not meet the  criteria  of "plain
vanilla" options,  the Company determines the expected term for these options by
analyzing  the  historical  exercise  experience  and  post-vesting  termination
behaviors.  The  Company  believes  the result is a  reasonable  estimate of the
length of time that the options are expected to be outstanding.

     In  addition,  under SFAS  123(R),  the  Company is  required  to  estimate
expected  forfeitures  of options and stock  grants over the  requisite  service
period  and  adjust  shared-based  compensation  accordingly.  The  estimate  of
forfeitures  will be adjusted  over the requisite  service  period to the extent
that actual forfeitures  differ, or are expected to differ, from such estimates.
The cumulative effect of changes in estimated  forfeitures will be recognized in
the  period of change  and will also  impact  the  amount of stock  compensation
expense to be recognized in future periods. Under the provisions of SFAS 123(R),
the Company  will record  additional  expense if the actual  forfeiture  rate is
lower than what had been  estimated  and the  Company  will record a recovery of
prior  expense  if the  actual  forfeiture  rate is  higher  than  what had been
estimated.

     During the three and nine months ended September 30, 2006, total fair value
on the date of vesting of stock  options  that  became  vested was  $32,000  and
$857,000,  respectively, as compared to $86,000 and $1.1 million,  respectively,
for the same periods in 2005.  There was no


                                      -17-
<PAGE>


vesting of nonvested shares during the three and nine months ended September 30,
2006 and 2005.  There were no option  exercises during the three and nine months
ended  September  30, 2006 as compared  to total  intrinsic  value of $1,000 and
$2,000,  respectively,  for options  exercised  during the same periods in 2005.
Cash  received  from the option  exercises  for the three and nine month periods
ended September 30, 2005 was $5,000 and $7,000, respectively.

3. JOINT VENTURE - THE PSMA DEVELOPMENT COMPANY LLC

     In June 1999,  Cytogen  entered into a joint venture with Progenics to form
the PSMA  Development  Company LLC (the "Joint  Venture"),  a development  stage
enterprise.   The  Joint  Venture  was  developing  antibody-based  and  vaccine
immunotherapeutic  products utilizing Cytogen's proprietary PSMA technology. The
Joint Venture was owned  equally by Cytogen and  Progenics  until April 20, 2006
(see below).  Cytogen accounted for the Joint Venture using the equity method of
accounting.  Cytogen had recognized 50% of the Joint Venture's operating results
in its  consolidated  statements  of operations  until April 20, 2006,  when the
Company entered into a Membership  Interest Purchase Agreement with Progenics to
sell the Company's 50% ownership interest in the Joint Venture. In addition, the
Company entered into an Amended and Restated  PSMA/PSMP  License  Agreement with
Progenics and the Joint Venture pursuant to which the Company licensed the Joint
Venture certain rights in PSMA  technology.  Under the terms of such agreements,
the Company  sold its 50%  interest in the Joint  Venture for a cash  payment of
$13.2 million,  potential future milestone  payments  totaling up to $52 million
payable upon  regulatory  approval and  commercialization  of the Joint  Venture
products,  and royalties on future product sales of the Joint  Venture,  if any.
Cytogen has no continuing  involvement and no further obligations to provide any
products,  services, or financial support to the Joint Venture. This transaction
was a sale of an asset in which the  consideration  was fully  received  and for
which the earning process is complete.  As a result,  the Company recorded $12.9
million in gain on sale of equity  interest  in the Joint  Venture in the second
quarter of 2006, which represents the net proceeds after  transaction costs less
the carrying value of the Company's  investment in the Joint Venture at the time
of sale.

     For the three and nine months ended September 30, 2006, Cytogen recorded $0
and  $120,000,  respectively,  of the Joint  Venture's  net losses  compared  to
$677,000 and $2.9 million of the Joint  Venture's  losses in the same periods of
2005. At December 31, 2005,  the carrying  value of the Company's  investment in
the Joint Venture was $379,000,  which represented  Cytogen's  investment in the
Joint  Venture,  less its cumulative  share of losses,  which net investment was
recorded in other assets.  Selected financial statement information of the Joint
Venture is as follows (all amounts in thousands):

BALANCE SHEET DATA:

                                                                  December 31,
                                                                      2005
                                                                 ---------------

                                   ASSETS:
Cash............................................................  $       873
Prepaid expenses................................................            9
Accounts receivable from Progenics Pharmaceuticals,
   Inc., a related party........................................          194
                                                                  --------------
                                                                  $     1,076
                                                                  ==============


                                      -18-
<PAGE>


                      LIABILITIES AND MEMBERS' EQUITY:

Accounts payable to Cytogen Corporation,
  a related party.....................................     $         3
Accounts payable and accrued expenses.................             332
                                                           -----------
      Total liabilities...............................             335
                                                           -----------
Capital contributions.................................          31,198
Deficit accumulated during the development stage......         (30,457)
                                                           -----------
      Total members' equity...........................             741
                                                           -----------
      Total liabilities and members' equity...........     $     1,076
                                                           ===========

INCOME STATEMENT DATA:

<TABLE>
<CAPTION>
                                     THREE MONTHS       FROM            NINE        FOR THE PERIOD
                                        MONTHS        JANUARY 1,       MONTHS        FROM JUNE 15,
                                         ENDED         2006 TO         ENDED             1999
                                       SEPTEMBER       APRIL         SEPTEMBER      (INCEPTION) TO
                                       30, 2005       20, 2006        30,2005       APRIL 20, 2006

<S>                                 <C>            <C>             <C>              <C>
Interest income.................    $          3   $           6   $          6     $         256
Total operating (income)
    expenses....................           1,358             246          5,764            30,953
                                    -------------  -------------   ------------     -------------

Net income (loss)...............    $     (1,355)  $       (240)   $    (5,758)     $    (30,697)
                                    =============  =============   ============     =============
</TABLE>

     Prior to the sale of its interest in the Joint  Venture in April 2006,  the
Company provided limited research and development services to the Joint Venture.
During the three and nine months ended September 30, 2005, the Company  recorded
revenue related to the Joint Venture of $33,000 and $152,000,  respectively, and
incurred  costs of $25,000  and  $129,000,  respectively.  The  Company  did not
provide any research and development services to the Joint Venture in 2006.

4. BRISTOL-MYERS SQUIBB MEDICAL IMAGING, INC.

     Effective  January 1, 2004, the Company  entered into a  manufacturing  and
supply  agreement with  Bristol-Myers  Squibb Medical Imaging,  Inc.  ("BMSMI"),
whereby BMSMI will  manufacture,  distribute  and provide order  processing  and
customer  service for  Cytogen  relating  to  QUADRAMET.  Under the terms of the
agreement,  Cytogen is obligated to pay at least $4.7 million annually,  subject
to future annual price  adjustment,  through 2008, unless terminated by BMSMI or
Cytogen on two years prior written  notice.  This agreement  will  automatically
renew for five successive one-year periods unless terminated by BMSMI or Cytogen
on two  years  prior  written  notice.  During  each of the three  months  ended
September  30, 2006 and 2005,  Cytogen  incurred  $1.1 million of  manufacturing
costs for QUADRAMET.  During the nine month periods ended September 30, 2006 and
2005,  Cytogen  incurred  $3.4  million  and  $3.2  million,   respectively,  of
manufacturing  costs for QUADRAMET,  all of which is included in cost of product
revenue.  The  Company  also pays  BMSMI a  variable  amount  per month for each
QUADRAMET order placed to cover the costs of customer  service which is included
in selling, general and administrative expenses.


                                      -19-
<PAGE>


     The two primary  components of  QUADRAMET,  particularly  Samarium-153  and
EDTMP, are provided to BMSMI by outside  suppliers.  BMSMI obtains its supply of
Samarium-153  from a sole  supplier,  and  EDTMP  from  another  sole  supplier.
Alternative  sources for these components may not be readily available,  and any
alternate  suppliers  would have to be identified and qualified,  subject to all
applicable regulatory  guidelines.  If BMSMI cannot obtain sufficient quantities
of these components on commercially  reasonable terms, or in a timely manner, it
would be unable to manufacture QUADRAMET on a timely and cost-effective basis.

5. LAUREATE PHARMA, L.P.

     In September 2004, the Company  entered into a non-exclusive  manufacturing
agreement with Laureate  Pharma,  L.P.  pursuant to which Laureate  manufactured
PROSTASCINT  and its primary raw materials for Cytogen in Laureate's  Princeton,
New Jersey  facility.  Laureate is the sole  manufacturer of PROSTASCINT and its
antibodies.  The  agreement  terminated  in the  third  quarter  of  2006,  upon
Laureate's  completion of the specified  production campaign for PROSTASCINT and
shipment of the resulting products from Laureate's facility.  Under the terms of
the  agreement,  the Company  incurred  approximately  $4.2  million,  which was
recorded as inventory  when  purchased.  During the three and nine month periods
ended  September 30, 2006 and 2005,  the Company  incurred  $35,000 and $35,000,
respectively, compared to $12,000 and $1.8 million in the same periods of 2005.

     In September 2006, the Company  entered into a non-exclusive  manufacturing
agreement with Laureate pursuant to which Laureate shall manufacture PROSTASCINT
and its primary raw materials for Cytogen in  Laureate's  Princeton,  New Jersey
facility.  The agreement will terminate,  unless terminated  earlier pursuant to
its terms, upon Laureate's  completion of the specified  production campaign for
PROSTASCINT  and shipment of the resulting  products from  Laureate's  facility.
Under the terms of the agreement,  the Company  anticipates it will pay at least
an aggregate of $3.9 million  through the end of the term of contract,  of which
no amount was recorded during the three months ended September 30, 2006.

6. WARRANT LIABILITY

     In July and August 2005, the Company sold 3,104,380  shares of common stock
and 776,096  warrants to purchase  shares of its common stock having an exercise
price of $6.00 per share.  These warrants are  exercisable  beginning six months
and ending ten years after their issuance. The shares of common stock underlying
the warrants were  registered  under the Company's  existing shelf  registration
statement.  The  Company  is  required  to  maintain  the  effectiveness  of the
registration statement as long as any warrants are outstanding.

     Under EITF No.  00-19  "Accounting  for  Derivative  Financial  Instruments
Indexed to, and  Potentially  Settled in, a Company's Own Stock" ("EITF 00-19"),
to qualify as permanent equity,  the equity derivative must permit the issuer to
settle in unregistered  shares. The Company does not have that ability under the
securities  purchase  agreement for the warrants  issued in July and August 2005
and,  as EITF  00-19  considers  the  ability to keep a  registration  statement
effective as beyond the Company's control,  the warrants cannot be classified as
permanent  equity and are instead  classified as a liability in the accompanying
consolidated balance  sheets.  At September 30, 2006 and December 31, 2005,  the
Company  recorded  the warrant  liability  at its fair value of $1.6 million and
$1.9 million, respectively,  using a Black-Scholes option-pricing model with the
following assumptions:


                                      -20-
<PAGE>


                                                SEPTEMBER 30,       DECEMBER 31,
                                                    2006                2005
                                                -------------       ------------
     Dividend yield............................      0%                  0%
     Expected volatility.......................     108%                106%
     Expected life.............................   8.8 years           9.6 years
     Risk-free interest rate...................     4.69%              4.40%
     Cytogen common stock price................     $2.35              $2.74

     Equity  derivatives  not  qualifying  for permanent  equity  accounting are
recorded  at fair  value and are  remeasured  at each  reporting  date until the
warrants  are  exercised  or expire.  Changes in the fair  value of the warrants
will be reported in the  consolidated  statements of operations as non-operating
income or expense.  At September  30,  2006,  the fair value of the warrants was
$1.6  million,  resulting  in gains of $122,000  and $304,000  for the three and
nine months ended  September  30, 2006,  respectively,  compared to $703,000 and
$703,000 for the same periods in 2005.

7. SAVIENT PHARMACEUTICALS, INC.

     On April 21,  2006,  the Company and Savient  entered  into a  distribution
agreement  granting the Company  exclusive  marketing rights for SOLTAMOX in the
United States. SOLTAMOX, a cytostatic estrogen receptor antagonist, is the first
oral  liquid  hormonal  therapy  approved in the U.S.  It is  indicated  for the
treatment of breast cancer in adjuvant and metastatic settings and to reduce the
risk of breast cancer in women with ductal carcinoma in situ (DCIS) or with high
risk of breast  cancer.  The Company  introduced  SOLTAMOX to the U.S.  oncology
market in August 2006.

     In the case of new products  like  SOLTAMOX,  the Company has no historical
return  experience.  Since the Company cannot reliably estimate expected returns
of this new product,  it will defer  recognition  of revenue  until the right of
return no longer exists or until the Company has developed sufficient historical
experience  to estimate  sales  returns.  The Company  has  deferred  revenue of
$100,000 at September 30, 2006.

     In addition,  the Company entered into a supply agreement with Rosemont for
the  manufacture  and  supply  of  SOLTAMOX.   Under  the  terms  of  the  final
transaction,  the Company paid Savient an upfront  licensing fee of $2.0 million
and may pay additional contingent  sales-based payments of up to a total of $4.0
million to Savient and Rosemont. The Company is also required to pay Savient and
Rosemont  royalties  on net sales of  SOLTAMOX.  Beginning  in 2007,  Cytogen is
obligated to pay Savient and Rosemont  quarterly  minimum  royalties based on an
agreed upon  percentage of total tamoxifen  prescriptions  in the United States.
Unless  terminated  earlier,  the  distribution  agreement  with Savient and the
supply  agreement  with Rosemont will each  terminate upon the expiration of the
last to expire patent covering SOLTAMOX in the United States, which is currently
June 2018. In the event the tamoxifen prescriptions for an agreed upon period of
time are less than the pre-established  minimum, the agreement may be terminated
if the  parties  are  unable  to reach an  agreement  to amend  the terms of the
contract to account for such impact.


                                      -21-
<PAGE>


     The up-front  license  payment of $2.0 million was  capitalized as SOLTAMOX
license  fee  in the  accompanying  consolidated  balance  sheet  and  is  being
amortized on a straight-line basis over approximately  twelve years which is the
estimated  performance  period of the  agreement.  The  amortization  expense is
recorded as cost of product revenue.

8. BERLEX, INC.

     On May 8, 2006, the Company  entered into a royalty  buyout  agreement with
Berlex, Inc. for QUADRAMET which was to close within 90 days, subject to certain
closing  conditions.  Under the terms of the  agreement,  Cytogen  would have no
longer paid Berlex a royalty on QUADRAMET  sales in exchange for a one-time cash
payment and a certain number of shares of Cytogen  common stock.  The closing of
the transaction  did not occur and the parties are no longer  pursuing  entering
into a royalty buyout  agreement.  Cytogen will continue to pay Berlex royalties
on net sales of QUADRAMET.

9. ONCOLOGY THERAPEUTICS NETWORK, J.V.

     On June 20, 2006, the Company entered into a purchase and supply  agreement
with Oncology Therapeutics Network, J.V. ("OTN") appointing OTN as the exclusive
distributor of SOLTAMOX in the United States.  In August 2006, the agreement was
amended  to revise  certain  terms,  including  changing  the role of OTN to the
exclusive warehousing agent and non-exclusive distributor of SOLTAMOX. Under the
terms of the amended agreement,  OTN will purchase SOLTAMOX from the Company for
its own  wholesaler  channels and, along with third party  logistics  providers,
distribute SOLTAMOX to the Company's other customers through its warehousing and
distribution  facilities.  The Company was obligated to pay OTN a minimal set up
fee upon execution of the agreement  which was recorded as selling,  general and
administrative  expense in the second quarter of 2006. In addition,  the Company
will pay OTN  management  fees based upon a percentage of SOLTAMOX  sales.  This
agreement  has a three-year  term and will  automatically  renew for  successive
one-year periods unless terminated by OTN or Cytogen on a 90 days written notice
prior to the end of the  applicable  term.  Either party also may  terminate the
agreement, without cause, on 180 days written notice.

     During the three months ended  September  30, 2006,  OTN purchased and paid
for $100,000 of SOLTAMOX  product  which is recorded as deferred  revenue in the
accompanying  consolidated balance sheet at September 30, 2006. In the case of a
new product like SOLTAMOX,  which was introduced in August 2006, the Company has
no historical  return  experience.  Since the Company cannot  reliably  estimate
expected  returns of this new  product,  the Company will defer  recognition  of
revenue  until the right of return  no longer  exists or until the  Company  has
developed  sufficient  historical  experience  to estimate  sales  returns.  The
Company  may use  information  from  external  sources to  estimate  our returns
provision.

10. LITIGATION

     In December 2005, Trapeziod Healthcare Communications LLC filed a complaint
against the Company in the Superior  Court of New Jersey,  Law Division,  Mercer
County,  seeking  approximately  $426,000 in damages  arising from the Company's
alleged failure to pay Trapezoid for marketing  services  allegedly  provided to
the Company.  On May 22,  2006,  the Company  settled this matter for  $365,000,
without  any  admission  of fault  or  liability.  The  Company  had  previously
established a reserve for the full amount of this claim.


                                      -22-
<PAGE>


     In January 2006, the Company filed a complaint  against Advanced  Magnetics
in the  Massachusetts  Superior  Court for  breach of  contract,  fraud,  unjust
enrichment, and breach of the implied covenant of good faith and fair dealing in
connection with the parties' 2000 license agreement. The complaint seeks damages
along with a request for specific  performance  requiring  Advanced Magnetics to
take all reasonable  steps to secure FDA approval of COMBIDEX in compliance with
the terms of the licensing agreement. In February 2006, Advanced Magnetics filed
an  answer  to the  Company's  complaint  and  asserted  various  counterclaims,
including  tortuous  interference,  defamation,  consumer  fraud  and  abuse  of
process.  The Company  believes these  counterclaims  have no merit and plans to
conduct a vigorous defense of such counterclaims.  Legal proceedings are subject
to uncertainties,  and the outcomes are difficult to predict.  Consequently, the
Company is unable to estimate  the  ultimate  financial  impact,  if any, to its
results of operations and financial condition.

     In addition, the Company is, from time to time, subject to claims and suits
arising in the ordinary  course of business.  In the opinion of management,  the
ultimate resolution of any such current matters would not have a material effect
on the Company's financial condition, results of operations or liquidity.

11. SUBSEQUENT EVENTS

     On October  11,  2006,  the  Company and  InPharma  entered  into a license
agreement  granting the Company  exclusive  rights for CAPHOSOL in North America
and options to license  the  marketing  rights for  CAPHOSOL in Europe and Asia.
Approved as a  prescription  medical  device,  CAPHOSOL is a topical  oral agent
indicated in the United  States as an adjunct to standard  oral care in treating
oral mucositis caused by radiation or high dose  chemotherapy.  CAPHOSOL is also
indicated  for  dryness of the mouth  (hyposalivation)  or dryness of the throat
(xerostomia)  regardless of the cause or whether the conditions are temporary or
permanent.  Under the terms of the  Agreement,  the Company is  obligated to pay
Inpharma $5.0 million in up-front  fees, of which $4.6 million was paid upon the
execution  of the  agreement,  $400,000  will be paid into an escrow  account by
November 10, 2006 to be released over time provided there are no indemnification
claims by the Company,  and $1.0 million upon the six-month  anniversary  of the
execution  of the  agreement.  In  addition,  the  Company is  obligated  to pay
Inpharma  royalties based on a percentage of net sales and future payments of up
to an  aggregate  of  $49.0  million  based  upon  the  achievement  of  certain
sales-based  milestones  of which  payments  totaling $35 million are based upon
annual sales levels first reaching levels in excess of $30 million.

     In the event Cytogen  exercises the options to license marketing rights for
CAPHOSOL in Europe and Asia, the Company is obligated to pay Inpharma additional
fees and payments,  including  sales-based milestone payments for the respective
territories.

     The Company  shall pay  Inpharma a portion of any upfront  license fees and
milestone payments,  but not royalties,  received by Cytogen in consideration of
the grant by Cytogen to other parties of the right to market  CAPHOSOL in Europe
and Asia, to the extent such upfront license fees and milestone  payments are in
excess of the respective amounts paid by Cytogen to Inpharma for such rights.


                                      -23-
<PAGE>


     On November 7, 2006,  the Company  entered into  purchase  agreements  with
certain  institutional  investors for the sale of 7,092,203 shares of its common
stock and 3,546,108  warrants to purchase shares of its common stock,  through a
private  placement  offering.  The warrants will have an exercise price of $3.32
per share and will be  exercisable  beginning  six months and ending  five years
after their  issuance.  In exchange for $2.82,  the purchasers  will receive one
share of common  stock and warrants to purchase .5 shares of common  stock.  The
transaction  is expected to close on November 10, 2006. The offering is expected
to provide gross  proceeds of  approximately  $20 million to the Company  before
deducting  costs  associated  with the offering.  The  placement  agents in this
transaction  will receive  compensation  consisting of a cash fee equal to 7% of
the aggregate  gross  proceeds.  In connection  with this sale, the Company will
enter into a Registration  Rights  Agreement with the investors.  The Company is
evaluating  the  accounting  for this  transaction  under  EITF 00-19 and may be
required to classify the fair value of the warrants as a liability.







                                      -24-
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     This  Quarterly  Report on Form 10-Q  contains  forward-looking  statements
within the meaning of the Private  Securities  Litigation Reform Act of 1995 and
Section  21E  of  the  Securities  Exchange  Act  of  1934,  as  amended.  These
forward-looking  statements  regarding  future events and our future results are
based on current  expectations,  estimates,  forecasts,  and projections and the
beliefs and assumptions of our management  including,  without  limitation,  our
expectations   regarding   results   of   operations,   selling,   general   and
administrative  expenses,  research and development expenses and the sufficiency
of our cash for future operations.  Forward-looking statements may be identified
by the use of  forward-looking  terminology  such as  "may,"  "will,"  "expect,"
"estimate," "anticipate," "continue," or similar terms, variations of such terms
or the  negative  of  those  terms.  These  forward-looking  statements  include
statements  regarding the timing of the product launch for CAPHOSOL,  growth and
market penetration for QUADRAMET,  PROSTASCINT and SOLTAMOX,  increased expenses
resulting  from our sales force and  marketing  expansion,  including  sales and
marketing expenses for PROSTASCINT and QUADRAMET, the sufficiency of our capital
resources  and supply of products for sale,  the  continued  cooperation  of our
contractual  and  collaborative  partners,  our need for additional  capital and
other  statements  included in this  Quarterly  Report on Form 10-Q that are not
historical facts. Such forward-looking  statements involve a number of risks and
uncertainties  and investors are cautioned not to put any undue  reliance on any
forward-looking statement. We cannot guarantee that we will actually achieve the
plans,   intentions  or  expectations  disclosed  in  any  such  forward-looking
statements.  Factors  that could  cause  actual  results  to differ  materially,
include, our ability to launch a new product, market acceptance of our products,
the results of our clinical  trials,  our ability to hire and retain  employees,
economic and market conditions  generally,  our receipt of requisite  regulatory
approvals for our products and product candidates,  the continued cooperation of
our marketing and other  collaborative  and strategic  partners,  our ability to
protect our intellectual  property, and the other risks identified under Item 1A
"Risk Factors" in this Quarterly  Report on Form 10-Q and Item 1A "Risk Factors"
in our Annual  Report on Form 10-K for the year ended  December  31,  2005,  and
those  under the  caption  "Risk  Factors,"  as included in certain of our other
filings, from time to time, with the Securities and Exchange Commission.

     Any  forward-looking  statements  made by us do not reflect  the  potential
impact of any future  acquisitions,  mergers,  dispositions,  joint  ventures or
investments  we may make.  We do not  assume,  and  specifically  disclaim,  any
obligation  to update  any  forward-looking  statements,  and  these  statements
represent our current outlook only as of the date given.

     The following  discussion and analysis  should be read in conjunction  with
the  consolidated  financial  statements  and related  notes  thereto  contained
elsewhere  herein,  as well as in our  Annual  Report  on Form 10-K for the year
ended  December  31, 2005,  and from time to time in our other  filings with the
Securities and Exchange Commission.

OVERVIEW

     Founded  in  1980,  Cytogen  Corporation  is  a  biopharmaceutical  company
dedicated to advancing the care of cancer patients by building,  developing, and
commercializing a portfolio


                                      -25-
<PAGE>


of specialty  pharmaceutical  products.  Our  specialized  sales force currently
markets QUADRAMET (samarium Sm-153 lexidronam injection),  PROSTASCINT (capromab
pendetide) kit, and SOLTAMOX (tamoxifen citrate,  oral solution 10mg/5mL) to the
U.S.  oncology  market.  QUADRAMET  is  approved  for the  treatment  of pain in
patients whose cancer has spread to the bone,  PROSTASCINT  is a  PSMA-targeting
monoclonal  antibody-based  agent to image the  extent  and  spread of  prostate
cancer,  and SOLTAMOX is the first liquid hormonal  therapy approved in the U.S.
for the  treatment of breast  cancer in adjuvant  and  metastatic  settings.  We
introduced  SOLTAMOX to the U.S.  oncology market in August 2006. In early 2007,
we plan to introduce our fourth approved product to the U.S.  market,  CAPHOSOL.
Approved as a prescription medical device,  CAPHOSOL is a topical oral agent for
the treatment of oral mucositis and dry mouth. We are also developing CYT-500, a
third-generation radiolabeled antibody to treat prostate cancer. In addition, we
have exclusive United States  marketing  rights to COMBIDEX(R)  (ferumoxtran-10)
for all  applications,  and the exclusive  right to market and sell  ferumoxytol
(previously  Code 7228) for  oncology  applications  in the United  States.  Our
product-focused   strategy  focuses  on  attaining  sustainable  growth  through
clinical, commercial, and strategic initiatives.

SIGNIFICANT EVENTS IN 2006

Cytogen Announces that FDA Clears IND for CYT-500, a Monoclonal Antibody for the
Treatment of Metastatic Hormone-Refractory Prostate Cancer

     On May 8, 2006,  we announced  that the U.S.  Food and Drug  Administration
cleared  an  Investigational   New  Drug  application  for  CYT-500,   our  lead
therapeutic  candidate targeting PSMA. We expect to begin the first U.S. Phase I
clinical trial of CYT-500 in patients with hormone-  refractory prostate cancer,
subject to  Institutional  Review Board (IRB)  approval at the planned  clinical
site. CYT-500 uses the same monoclonal  antibody from our PROSTASCINT  molecular
imaging agent,  but is linked through a higher  affinity linker than is used for
PROSTASCINT to a therapeutic as opposed to an imaging  radionuclide.  This novel
product  candidate is designed to enable targeted  delivery of a cytotoxic agent
to  PSMA-expressing  cells. We retain full and exclusive  development  rights to
CYT-500.

Cytogen Sells Ownership in PSMA Development Joint Venture to Progenics

     On April 20, 2006, we entered into a Membership Interest Purchase Agreement
with Progenics  Pharmaceuticals,  Inc.  ("Progenics")  providing for the sale to
Progenics of our 50% ownership interest in PSMA Development Company LLC ("PDC"),
our  joint  venture  with  Progenics  for  the  development  of in  vivo  cancer
immunotherapies  based on PSMA.  In  addition,  we entered  into an Amended  and
Restated PSMA/PSMP License Agreement with Progenics and PDC pursuant to which we
licensed  PDC  certain  rights  in PSMA  technology.  Under  the  terms  of such
agreements, we sold our 50% interest in PDC for a cash payment of $13.2 million,
potential  future milestone  payments  totaling up to $52.0 million payable upon
regulatory  approval and  commercialization  of PDC  products,  and royalties on
future PDC product sales, if any. We are no longer responsible for funding PDC.


                                      -26-
<PAGE>


Cytogen and Savient Execute Marketing Agreement for SOLTAMOX

     On April 21, 2006,  we and Savient  entered into a  distribution  agreement
granting us exclusive  marketing rights for SOLTAMOX  (tamoxifen citrate) in the
United States. SOLTAMOX, a cytostatic estrogen receptor antagonist, is the first
oral  liquid  hormonal  therapy  approved in the U.S.  It is  indicated  for the
treatment of breast cancer in adjuvant and metastatic settings and to reduce the
risk of breast cancer in women with ductal carcinoma in situ (DCIS) or with high
risk of breast  cancer.  In addition,  we entered into a supply  agreement  with
Rosemont  Pharmaceuticals  Limited,  previously  a  wholly-owned  subsidiary  of
Savient  ("Rosemont"),  for the  manufacture  and supply of SOLTAMOX.  Under the
terms of the final transaction, we paid Savient an upfront licensing fee of $2.0
million and may pay additional contingent  sales-based payments of up to a total
of $4.0 million to Savient and Rosemont. We are also required to pay Savient and
Rosemont royalties on net sales of SOLTAMOX.  We introduced SOLTAMOX to the U.S.
oncology market in August 2006.

Cytogen  Enters into Purchase and Supply  Agreement  with Oncology  Therapeutics
Network

     On June 20,  2006,  we entered into a purchase  and supply  agreement  with
Oncology  Therapeutics  Network,  J.V.  ("OTN")  appointing OTN as the exclusive
distributor of SOLTAMOX in the United States.  In August 2006, the agreement was
amended  to revise  certain  terms,  including  changing  the role of OTN to the
exclusive warehousing agent and non-exclusive distributor of SOLTAMOX. Under the
terms of the amended  agreement,  OTN will purchase SOLTAMOX from us for its own
wholesaler channels and, along with third party logistics providers,  distribute
SOLTAMOX  to our  other  customers  through  its  warehousing  and  distribution
facilities.

Cytogen Introduces SOLTAMOX in the United States

     In August  2006,  the  Company  introduced SOLTAMOX, the first oral  liquid
hormonal  therapy  approved  in the  United  States.  It is  indicated  for  the
treatment of breast cancer in adjuvant and metastatic settings and to reduce the
risk of breast cancer in women with ductal carcinoma in situ (DCIS) or with high
risk of breast  cancer.  We are now preparing  for an upcoming  symposium at the
2006 San Antonio  Breast  Cancer  Conference  in  December.  This  meeting  will
represent an ideal forum for us to review various therapies, including SOLTAMOX,
with a focused audience of key thought leaders.

Cytogen and InPharma Execute License Agreement for CAPHOSOL

     On October 11, 2006,  we entered  into a license  agreement  with  InPharma
granting  us  exclusive  rights for  CAPHOSOL  in North  America.  Approved as a
prescription  medical device,  CAPHOSOL is a topical oral agent indicated in the
United  States as an adjunct to standard  oral care in treating  oral  mucositis
caused by radiation or high dose  chemotherapy.  CAPHOSOL is also  indicated for
dryness of the mouth  (hyposalivation)  or  dryness  of the throat  (xerostomia)
regardless  of the cause or whether the  conditions  are temporary or permanent.
Under the terms of the agreement,  we are obligated to pay Inpharma $5.0 million
in  up-front  fees,  of which $4.6  million was paid upon the  execution  of the
agreement,  $400,000  will be paid into an escrow  account by November 10, 2006,
and $1.0 million after six months. In addition, InPharma is


                                      -27-
<PAGE>


eligible  to  receive  royalties  and  sales-based   milestone   payments.   The
transaction  also provides us with options to acquire the rights to CAPHOSOL for
the European and Asian markets.

Appointment of New Chief Financial Officer

     On October 26, 2006, we announced the  appointment  of Kevin Bratton as our
new chief  financial  officer.  A finance  executive  with more than 35 years of
experience  in  healthcare,   biotechnology  and  technology,  Mr.  Bratton  was
previously  chief financial  officer at Metrologic  Instruments,  Inc.  (Nasdaq:
MTLG), a global technology company. During his tenure at Metrologic, Mr. Bratton
directed the company's finance  operations during a period of significant growth
in sales, net income, cash flow from operations, and working capital.

Sale of Common Stock and Warrants

     On November 7, 2006,  we entered  into  purchase  agreements  with  certain
institutional investors for the sale of 7,092,203 shares of our common stock and
3,546,108  warrants to purchase  shares of our common  stock,  through a private
placement offering.  The warrants will have an exercise price of $3.32 per share
and will be  exercisable  beginning six months and ending five years after their
issuance. In exchange for $2.82, the purchasers will receive one share of common
stock and warrants to purchase .5 shares of common  stock.  The  transaction  is
expected  to close on November  10,  2006.  The  offering is expected to provide
gross  proceeds  of  approximately  $20  million  to us before  deducting  costs
associated  with the offering.  The placement  agents in this  transaction  will
receive compensation consisting of a cash fee equal to 7% of the aggregate gross
proceeds. In connection with this sale, we will enter into a Registration Rights
Agreement with the investors.  We are evaluating the proper  accounting for this
transaction  and may be required to classify the fair value of the warrants as a
liability.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

REVENUES

                                                           INCREASE/(DECREASE)
                                                          ----------------------
                                  2006         2005          $             %
                                  ----         ----       -------      ---------
                              (ALL AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)
QUADRAMET..................... $  1,998     $  1,991      $    7        --%
PROSTASCINT...................    2,171        1,525         646        42%
License and Contract..........        3           35         (32)      (91)%
                               --------     --------      ------
                               $  4,172     $  3,551      $  621        17%
                               ========     ========      ======

     Total revenues were $4.2 million for the third quarter of 2006, compared to
$3.6 million in the third quarter of 2005.  Product revenues  accounted for 100%
and 99% of total revenues for the third quarters of 2006 and 2005, respectively.
License and contract revenues accounted for the remainder of revenues.

     QUADRAMET.  QUADRAMET sales for each of the third quarters of 2006 and 2005
were $2.0 million. QUADRAMET sales accounted for 48% and 57% of product revenues
for


                                      -28-
<PAGE>


the third quarters of 2006 and 2005, respectively.  QUADRAMET unit sales in 2006
were slightly lower than the prior year period,  and is partially  offset by the
effect of a 5% price increase  which we  implemented on September 1, 2006.  Such
price increase did not have a material effect on third quarter  revenues because
of notification  requirements to key customers.  In addition,  because QUADRAMET
has only a 72-hour  shelf  life,  stocking  by  customers  of  QUADRAMET  is not
possible.  Currently,  we market QUADRAMET only in the United States and have no
rights  to  market  QUADRAMET  in  Europe.  We  are  focusing  on  multiple  key
initiatives  to position  QUADRAMET  for future  growth and market  penetration,
including:   (i)  distinguishing  the  physical  properties  of  QUADRAMET  from
first-generation  agents within its class;  (ii) empowering and marketing to key
prescribing  audiences;  (iii)  broadening  palliative  use within  label beyond
prostate cancer to include breast,  lung and multiple  myeloma;  (iv) evaluating
the role of QUADRAMET in combination  with other commonly used oncology  agents;
and (v) expanding  clinical  development  to evaluate the potential  tumoricidal
versus palliative attributes of QUADRAMET.  We cannot assure you that we will be
able to  successfully  market  QUADRAMET or that QUADRAMET will achieve  greater
market penetration on a timely basis or result in significant revenues for us.

     PROSTASCINT.  PROSTASCINT  sales were $2.2 million for the third quarter of
2006,  compared to $1.5 million in the third quarter of 2005.  PROSTASCINT sales
accounted for 52% and 43% of product revenues for the third quarters of 2006 and
2005,  respectively.  The  increase  from the prior  year  period was due to the
implementation  of a 9% price increase for  PROSTASCINT on September 1, 2006 and
increased  demand  associated  with  our  focused  marketing  programs.  We have
implemented a price increase in the middle of the quarter to provide enough time
for the demand to be  normalized  within the quarter.  Our customers are careful
not to  maintain  inventory  in  excess  of the  customers'  ordinary  course of
business  inventory  levels because we do not accept returns on PROSTASCINT.  We
are focusing on multiple key areas to position PROSTASCINT for future growth and
market  penetration,  including:  (i)  improving  image quality  through  fusion
technology;   (ii)  validating  the  antigen   targeted  by  PROSTASCINT  as  an
independent  prognostic  factor;  (iii)  the  publication  and  presentation  of
outcomes  data;  (iv)   development  of  image-guided   applications   including
brachytherapy,  intensity modulated radiation therapy, surgery, and cryotherapy;
and (v) expanding clinical development to evaluate the potential for PROSTASCINT
to monitor  response to cytotoxic  therapies and image other cancers.  We cannot
assure  you that we will be able to  successfully  market  PROSTASCINT,  or that
PROSTASCINT will achieve greater market  penetration on a timely basis or result
in significant revenues for us.

     LICENSE AND CONTRACT  REVENUES.  License and contract  revenues were $3,000
and $35,000 for the third  quarters of 2006 and 2005,  respectively.  During the
third  quarter of 2005,  license  and  contract  revenues  reflected  $33,000 of
contract  revenues for limited research and development  services provided by us
to the PSMA  Development  Company LLC, our joint venture with Progenics.  We did
not provide any research services to the joint venture in 2006.


                                      -29-
<PAGE>


OPERATING EXPENSES
<TABLE>
<CAPTION>

                                                                                    INCREASE/(DECREASE)
                                                                                    -------------------
                                                       2006          2005               $           %
                                                       ----          ----           --------     ------
                                                      (ALL AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S>                                                 <C>            <C>              <C>            <C>
  Cost of product revenue.......................... $  2,681       $  2,386         $   295        12%
  Selling, general and administrative..............    6,737          6,740              (3)       --%
  Research and development.........................      990          1,746            (756)     (43)%
  Equity in loss of joint venture..................       --            677            (677)    (100)%
                                                    --------       --------         --------
                                                    $ 10,408       $ 11,549         $(1,141)     (10)%
                                                    ========       ========         ========
</TABLE>

     Total  operating  expenses for the third quarter of 2006 were $10.4 million
compared to $11.5 million in the same quarter of 2005.

     COST OF PRODUCT REVENUE.  Cost of product revenue for the third quarters of
2006 and 2005 were $2.7 million and $2.4  million,  respectively,  and primarily
reflect  manufacturing  costs for PROSTASCINT  and QUADRAMET,  royalties  on our
sales of  products  and  amortization  of the  up-front  payments to acquire the
marketing  rights to QUADRAMET in 2003 and SOLTAMOX in April 2006.  The increase
in cost of product revenue is primarily attributable to a higher product revenue
in 2006.

     SELLING,  GENERAL AND ADMINISTRATIVE.  Selling,  general and administrative
expenses for each of the third quarters of 2006 and 2005 were $6.7 million.  The
expenses in the 2006 period  include  $381,000 of launch costs  associated  with
SOLTAMOX,  which we introduced in the third quarter 2006, and the recognition of
$482,000 of share-based  compensation  in 2006 for options and nonvested  shares
granted to employees.  The 2005 expenses include the expanded investment for the
commercial  support of both QUADRAMET and PROSTASCINT and $50,000 of share-based
compensation  for nonvested  shares granted to employees.

     RESEARCH AND DEVELOPMENT.  Research and development  expenses for the third
quarter of 2006 were  $990,000  compared  to $1.7  million in the same period of
2005.  The decrease  from the prior year period is primarily  driven by costs of
clinical supplies incurred in 2005 associated with our radiolabeled  therapeutic
program to attach the therapeutic radionuclide  lutetium-177 as a payload to the
7E11  monoclonal  antibody  utilized  in  PROSTASCINT,  partially  offset by the
recognition  of $105,000  of  share-based  compensation  in 2006 for options and
nonvested shares granted to employees.

     EQUITY IN LOSS OF JOINT  VENTURE.  During the third quarter of 2006, we had
no expense with respect to the former joint venture with Progenics,  as compared
to an expense of $677,000 in the third quarter of 2005. Such amount  represented
50% of the joint  venture's net loss. We equally  shared  ownership and costs of
the joint  venture with  Progenics and accounted for the joint venture using the
equity method of  accounting  until April 20, 2006 when we sold to Progenics our
ownership  interest  in PDC.  Following  the sale of our  interest  in the joint
venture in April 2006, we have no further obligations to the joint venture.


                                      -30-
<PAGE>


     INTEREST INCOME/EXPENSE.  Interest income for the third quarter of 2006 was
$384,000  compared to $195,000 in the same period of 2005.  The increase in 2006
from the prior year period was due to a higher  average yield on higher  average
cash balances in 2006. Interest expense for the third quarter of 2006 was $8,000
compared  to  $21,000  in the same  period in 2005.  Interest  expense  includes
interest  on  outstanding  debt,  which was repaid in August  2005,  and finance
charges  related to various  equipment  leases that are accounted for as capital
leases.

     DECREASE IN WARRANT  LIABILITY.  In connection  with the sale of our common
stock and  warrants  in July and August  2005,  we  recorded  the  warrants as a
liability  at their fair value using a  Black-Scholes  option-pricing  model and
will  remeasure  them at each reporting date until they are exercised or expire.
Changes in the fair value of the  warrants  are  reported in the  statements  of
operations  as  non-operating  income or  expense.  For the three  months  ended
September  30, 2006,  we reported a gain of $122,000  related to the decrease in
fair value of these  warrants  since June 30, 2006  compared to a $703,000  gain
recorded  in the same  period of 2005  related to the  decrease in fair value of
these  warrants  since their  issuance dates in July and August 2005. The market
price  for  our  common  stock  has  been  and  may  continue  to  be  volatile.
Consequently,  future  fluctuations  in the price of our common  stock may cause
significant increases or decreases in the fair value of these warrants.

     NET LOSS. We had net loss of $5.7  million,  compared to a net loss of $7.1
million in the same  quarter of 2005.  The basic and  diluted net loss per share
for the third quarter of 2006 was $0.26 based on 22.5 million  weighted  average
common shares outstanding, compared to a basic and diluted net loss per share of
$0.40 based on 17.9 million weighted  average common shares  outstanding for the
same period in 2005.

NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

REVENUES
                                                           Increase/(Decrease)
                                                           -------------------
                                   2006       2005          $             %
                                   ----       ----       -------   ----------
                              (All amounts in thousands, except percentage data)

QUADRAMET...................... $  6,242   $  6,198      $    44          1%
PROSTASCINT....................    6,535      5,348        1,187         22%
License and Contract...........        9        155         (146)      (94)%
                                --------   --------      -------
                                $ 12,786   $ 11,701      $ 1,085          9%
                                ========   ========      =======


     Total  revenues for the nine months of 2006 were $12.8 million  compared to
$11.7 million for the same period in 2005.  Product revenues  accounted for 100%
and 99% of total  revenues  for the nine months of 2006 and 2005,  respectively.
License and contract revenues accounted for the remainder of revenues.

     QUADRAMET.  QUADRAMET  sales  for each of the nine  months of 2006 and 2005
were $6.2 million. QUADRAMET sales accounted for 49% and 54% of product revenues
for the nine months of 2006 and 2005, respectively.  The increase from the prior
year  period  was due to the  effect  of 5%  price  increases  in June  2005 and
September 2006, partially offset by lower


                                      -31-
<PAGE>


QUADRAMET  unit  sales  in  2006.  Such  price  increase  in 2006 did not have a
material effect on third quarter revenues  because of notification  requirements
to key customers. In addition,  because QUADRAMET has only a 72-hour shelf life,
stocking  by  customers  of QUADRAMET  was not  possible.  Currently,  we market
QUADRAMET  only in the United  States and have no rights to market  QUADRAMET in
Europe.  We are focusing on multiple key  initiatives to position  QUADRAMET for
future growth and market penetration, including: (i) distinguishing the physical
properties of QUADRAMET  from  first-generation  agents  within its class;  (ii)
empowering  and  marketing  to  key  prescribing  audiences;   (iii)  broadening
palliative use within label beyond prostate  cancer to include breast,  lung and
multiple  myeloma;  (iv)  evaluating the role of QUADRAMET in  combination  with
other commonly used oncology agents; and (v) expanding  clinical  development to
evaluate the potential tumoricidal versus palliative attributes of QUADRAMET. We
cannot assure you that we will be able to successfully  market QUADRAMET or that
QUADRAMET will achieve greater market penetration on a timely basis or result in
significant revenues for us.

     PROSTASCINT.  PROSTASCINT  sales were $6.5  million  for the nine months of
2006,  an increase of $1.2 million from $5.3 million in the nine months of 2005.
Sales of PROSTASCINT  accounted for 51% and 46% of product revenues for the nine
months of 2006 and 2005,  respectively.  The increase from the prior year period
was  due to  the  implementation  of a 9%  price  increase  for  PROSTASCINT  on
September 1, 2006 and increased  demand  associated  with our focused  marketing
programs.  We have  implemented a price increase in the middle of the quarter to
provide  enough time for the demand to be  normalized  within the  quarter.  Our
customers  are  careful not to maintain  inventory  in excess of the  customers'
ordinary course of business inventory levels because we do not accept returns on
PROSTASCINT.  We are focusing on multiple key areas to position  PROSTASCINT for
future growth and market  penetration,  including:  (i) improving  image quality
through fusion  technology;  (ii) validating the antigen targeted by PROSTASCINT
as an independent  prognostic factor;  (iii) the publication and presentation of
outcomes  data;  (iv)   development  of  image-guided   applications   including
brachytherapy,  intensity modulated radiation therapy, surgery, and cryotherapy;
and (v) expanding clinical development to evaluate the potential for PROSTASCINT
to monitor  response to cytotoxic  therapies and image other cancers.  We cannot
assure  you that we will be able to  successfully  market  PROSTASCINT,  or that
PROSTASCINT will achieve greater market  penetration on a timely basis or result
in significant revenues for us.

     LICENSE AND CONTRACT  REVENUES.  License and contract  revenues were $9,000
and $155,000 for the nine months of 2006 and 2005, respectively. During the nine
months of 2005, we recognized $152,000 of contract revenues for limited research
and development services provided by us to the PSMA Development Company LLC, our
joint venture with  Progenics.  We did not provide any research  services to the
joint venture in 2006.


                                      -32-
<PAGE>


OPERATING EXPENSES
<TABLE>
<CAPTION>
                                                                         INCREASE/(DECREASE)
                                                                        ---------------------
                                                  2006         2005         $           %
                                                  ----         ----     ---------   ---------
                                              (ALL AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

<S>                                           <C>          <C>          <C>             <C>
  Cost of product revenues..................  $   7,691    $   7,064    $    627         9%
  Selling, general and administrative.......     19,968       20,456        (488)      (2)%
  Research and development..................      5,435        3,847       1,588        41%
  Equity in loss of joint venture...........        120        2,879      (2,759)     (96)%
                                              ---------    ---------    --------
                                              $  33,214    $  34,246    $ (1,032)      (3)%
                                              =========    =========    ========
</TABLE>

     Total  operating  expenses  for the nine months of 2006 were $33.2  million
compared to $34.2 million in the same period of 2005.

     COST OF PRODUCT  REVENUES.  Cost of product revenues for the nine months of
2006 were $7.7  million  compared to $7.1 million in the same period of 2005 and
primarily reflects manufacturing costs for PROSTASCINT and QUADRAMET,  royalties
on our sales of products and  amortization  of the up-front  payments to acquire
the  marketing  rights to  QUADRAMET  in 2003 and  SOLTAMOX in April  2006.  The
increase in cost of product  revenues  from the prior year  period is  primarily
attributable to the higher product revenues in 2006.

     SELLING,  GENERAL AND ADMINISTRATIVE.  Selling,  general and administrative
expenses  for the nine  months  of 2006 were  $20.0  million  compared  to $20.5
million in the same period of 2005.  The decrease  from the prior year period is
primarily  driven  by  $743,000  of  pre-launch  costs in 2005  associated  with
COMBIDEX,  which is currently  awaiting  approval from the FDA, and the expanded
investment for the commercial support of both QUADRAMET and PROSTASCINT in 2005,
partially offset by $833,000 of costs associated with the launch  activities for
SOLTAMOX  and by  share-based  compensation  expenses  related  to  options  and
nonvested  shares.  In 2006,  the Company  recorded $1.2 million of  share-based
compensation for options and nonvested  shares granted to employees  compared to
$58,000 of the share-based  compensation expenses related to nonvested shares in
2005.

     RESEARCH AND  DEVELOPMENT.  Research and development  expenses for the nine
months of 2006 were $5.4 million  compared to $3.8 million in the same period of
2005.  The  increase  from the  prior  year  period is  primarily  driven by new
clinical  development  initiatives  for both QUADRAMET and  PROSTASCINT  and the
preclinical  development  costs  associated  with our  radiolabeled  therapeutic
program to attach the therapeutic radionuclide  lutetium-177 as a payload to the
7E11 monoclonal antibody utilized in PROSTASCINT, partially offset by a $500,000
charge  in the  second  quarter  of 2005  for a  non-cash  milestone  obligation
incurred related to the progress of the PSMA development programs.

     EQUITY  IN LOSS  OF  JOINT  VENTURE.  Our  share  of the  loss of the  PSMA
Development  Company LLC, our former joint venture with Progenics,  was $120,000
during the nine months of 2006  compared  to $2.9  million in the same period of
2005. Such amounts represented 50% of


                                      -33-
<PAGE>


the joint  venture's net losses.  We equally  shared  ownership and costs of the
joint  venture with  Progenics  and  accounted  for the joint  venture using the
equity  method of  accounting  until April 20,  2006 when we sold our  ownership
interest in PDC to  Progenics.  Following  the sale of our interest in the joint
venture in April 2006, we have no further obligations to the joint venture.

     INTEREST  INCOME/EXPENSE.  Interest  income for the nine months of 2006 was
$1.1  million  compared to $492,000 in the same period of 2005.  The increase in
2006 from the prior  year  period  was due to a higher  average  yield on higher
average cash balances in 2006. Interest expense was $20,000 and $105,000 for the
nine months of 2006 and 2005,  respectively.  Interest expense includes interest
on  outstanding  debt,  which was repaid in August  2005,  and  finance  charges
related to various equipment leases that are accounted for as capital leases.

     GAIN ON SALE OF EQUITY  INTEREST IN JOINT  VENTURE.  On April 20, 2006,  we
entered into a Membership  Interest Purchase Agreement with Progenics  providing
for the sale to  Progenics  of our 50%  ownership  interest  in PDC,  our  joint
venture with  Progenics for the  development  of in vivo cancer  immunotherapies
based on PSMA.  In addition,  we entered into an Amended and Restated  PSMA/PSMP
License  Agreement  with  Progenics  and PDC  pursuant to which we licensed  PDC
certain rights in PSMA technology.  Under the terms of such agreements,  we sold
our 50% interest in PDC for a cash payment of $13.2  million,  potential  future
milestone payments totaling up to $52.0 million payable upon regulatory approval
and  commercialization  of PDC  products,  and  royalties  on future PDC product
sales,  if any.  As a  result  of the  transaction,  for the nine  months  ended
September 30, 2006, we recorded $12.9 million in gain on sale of equity interest
in the joint venture,  which represents the net proceeds after transaction costs
less the carrying  value of our  investment  in the joint venture at the time of
sale.

     DECREASE IN WARRANT  LIABILITY.  In connection  with the sale of our common
stock and  warrants  in July and August  2005,  we  recorded  the  warrants as a
liability  at their fair value using a  Black-Scholes  option-pricing  model and
will  remeasure  them at each reporting date until they are exercised or expire.
Changes in the fair value of the  warrants  are  reported in the  statements  of
operations  as  non-operating  income  or  expense.  For the nine  months  ended
September  30, 2006,  we reported a gain of $304,000  related to the decrease in
fair value of these warrants since December 31, 2005 compared to a $703,000 gain
recorded  in the same  period of 2005  related to the  decrease in fair value of
these  warrants  since their  issuance dates in July and August 2005. The market
price  for  our  common  stock  has  been  and  may  continue  to  be  volatile.
Consequently,  future  fluctuations  in the price of our common  stock may cause
significant increases or decreases in the fair value of these warrants.

     NET  LOSS.  We had net  loss of $6.2  million  in the nine  months  of 2006
compared to $21.5  million  reported  in the nine months of 2005.  The basic and
diluted  net loss per share for the nine  months of 2006 was $0.28 based on 22.5
million  weighted  average  common shares  outstanding,  compared to a basic and
diluted  net loss per  share of $1.31  based on 16.3  million  weighted  average
common  shares  outstanding  for  the  same  period  in  2005.  The  significant
fluctuation in results was due to the gain on the sale of our equity interest in
the joint venture.


                                      -34-
<PAGE>


COMMITMENTS

     We have entered into various  contractual and commercial  commitments.  The
following table summarizes our obligations with respect to theses commitments as
of September 30, 2006:

<TABLE>
<CAPTION>
                                                       LESS
                                                       THAN       1 TO 3        4 TO 5     MORE THAN
                                                      1 YEAR       YEARS         YEARS       5 YEARS      TOTAL
                                                     -------     --------      --------    ----------   -----------
                                                                      (ALL AMOUNTS IN THOUSANDS)
<S>                                                  <C>         <C>           <C>         <C>          <C>
Capital lease obligations  ........................  $   62      $    76       $     --    $      --    $       138
Facility leases....................................     338           28             --           --            366
Research and development and
   other obligations...............................     586          213            151          500          1,450
Manufacturing contracts(1).........................   5,189        4,689             --           --          9,878
Minimum royalty payments(2)........................   1,000        2,000          2,000        2,083          7,083
                                                     -------     --------      --------    ---------     ----------

      Total........................................ $ 7,175      $ 7,006       $  2,151     $  2,583      $  18,915
                                                    ========     ========      ========    =========     ==========
</TABLE>

(1)  Effective  January 1,  2004,  we entered  into a  manufacturing  and supply
     agreement   with  BMS-MI  for  QUADRAMET   whereby   BMS-MI   manufactures,
     distributes  and provides  order  processing  and customer  services for us
     relating to QUADRAMET.  Under the terms of our agreement,  we are obligated
     to pay at least  $4.7  million  annually,  subject to future  annual  price
     adjustment,  through 2008,  unless terminated by BMS-MI or us on a two year
     prior written  notice.  This  agreement will  automatically  renew for five
     successive one-year periods unless terminated by BMS-MI or us on a two-year
     prior written notice.  Accordingly, we have not included commitments beyond
     September 30, 2008.

     In September 2006, we entered into a non-exclusive  manufacturing agreement
     with Laureate pursuant to which Laureate shall manufacture  PROSTASCINT and
     its primary raw materials for Cytogen in Laureate's  Princeton,  New Jersey
     facility. The agreement will terminate,  unless terminated earlier pursuant
     to its  terms,  upon  Laureate's  completion  of the  specified  production
     campaign  for  PROSTASCINT  and  shipment of the  resulting  products  from
     Laureate's facility. Under the terms of the agreement, we anticipate paying
     at least an aggregate  of $3.9  million  through the end of the term of the
     contract.  We are  obligated  to pay $500,000 in  liquidated  damages if we
     cancel  orders  placed after  November  2006 for certain  production  runs.
     Accordingly, we have included $500,000 in the commitment table.

(2)  We  acquired  an  exclusive  license  from  The Dow  Chemical  Company  for
     QUADRAMET  for the  treatment of  osteoblastic  bone  metastases in certain
     territories.  The  agreement  requires us to pay Dow  royalties  based on a
     percentage of net sales of QUADRAMET,  or a guaranteed  contractual minimum
     payment,  whichever is greater,  and future  payments upon  achievement  of
     certain  milestones.  Future annual  minimum  royalties due to Dow are $1.0
     million per year in 2006 through 2012 and $833,000 in 2013.

     In addition to the above, we are obligated to make certain royalty payments
based on sales of the  related  product and  certain  milestone  payments if our
collaborative partners achieve


                                      -35-
<PAGE>


specific development milestones or commercial milestones.  We did not include in
the table above any payments that do not represent fixed or minimum payments but
are instead payable only upon the achievement of a milestone, if the achievement
of that milestone is uncertain or the obligation amount is not determinable.  We
also did not  include  in the table  above the  amounts  required  to be paid to
Inpharma since this transaction was not consummated until October 2006 (see Note
1 to the Consolidated Financial Statements).

LIQUIDITY AND CAPITAL RESOURCES

CONDENSED STATEMENT OF CASH FLOWS:
                                                           NINE MONTHS ENDED
                                                           SEPTEMBER 30, 2006
                                                      --------------------------
                                                      (ALL AMOUNTS IN THOUSANDS)

    Net loss................................................  $    (6,198)
    Adjustments to reconcile net loss to net cash
      used in operating activities..........................       (8,218)
                                                              ------------
    Net cash used in operating activities...................      (14,416)
    Net cash provided by investing activities...............       11,029
    Net cash provided by financing activities...............           22
                                                              ------------
    Net decrease in cash and cash equivalents...............  $    (3,365)
                                                              ============

OVERVIEW

     Our cash and cash  equivalents were $27.0 million as of September 30, 2006,
compared to $30.3 million as of December 31, 2005.  During the nine months ended
September  30, 2006 and 2005,  net cash used in operating  activities  was $14.4
million and $23.9  million,  respectively.  The  decrease in cash usage from the
prior  year  period  was  primarily  due to the  prior  year's  build-up  of our
PROSTASCINT inventory, pre-launch costs associated with COMBIDEX in 2005 and the
termination  of funding  obligations  in 2006 related to the PDC joint  venture,
partially  offset by costs  associated  with launch  activities for SOLTAMOX and
increased  investment in clinical  programs.  On April 20, 2006, we sold our 50%
interest in PDC for a cash payment of $13.2  million.  Following the sale of our
interest in the joint venture in April 2006, we have no further  obligations  to
the joint venture. We expect our operating expenditures in the fourth quarter of
2006 to increase  compared to the nine months of 2006 as we market  SOLTAMOX and
prepare to launch Caphosol in early 2007.

     Historically,  our  primary  sources  of cash have been  proceeds  from the
issuance and sale of our stock through public offerings and private  placements,
product related revenues,  revenues from contract research  services,  fees paid
under license agreements and interest earned on cash and short-term investments.

     Our long-term  financial  objectives  are to meet our capital and operating
requirements through revenues from existing products and licensing arrangements.
To  achieve  these  objectives,  we may  enter  into  research  and  development
partnerships and acquire, in-license and develop other technologies, products or
services.  Certain of these strategies may require payments by us in either cash
or stock in addition to the costs associated with developing and


                                      -36-
<PAGE>


marketing a product or technology. However, we believe that, if successful, such
strategies may increase long-term revenues.  We cannot assure you of the success
of such  strategies  or that  resulting  funds will be  sufficient  to meet cash
requirements until product revenues are sufficient to cover operating  expenses,
if ever. To fund these strategic and operating  activities,  we may sell equity,
debt or other  securities  as  market  conditions  permit or enter  into  credit
facilities.

     We have incurred  negative cash flows from operations  since our inception,
and have expended,  and expect to continue to expend in the future,  substantial
funds  to  implement  our  planned  product   development   efforts,   including
acquisition   of  products   and   complementary   technologies,   research  and
development,  clinical  studies and  regulatory  activities,  and to further our
marketing and sales programs.  We expect that our existing capital  resources at
September  30, 2006,  along with the proceeds  expected to be received  from the
November  2006 sale of equity,  should be  adequate to fund our  operations  and
commitments at least into the second half of 2007. We cannot assure you that our
business or operations will not change in a manner that would consume  available
resources more rapidly than anticipated.  We expect that we will have additional
requirements  for debt or equity  capital,  irrespective  of whether and when we
reach  profitability,   for  further  product  development  costs,  product  and
technology acquisition costs, and working capital.

     Our future capital  requirements  and the adequacy of available  funds will
depend on numerous factors,  including: (i) the successful  commercialization of
our products;  (ii) the costs  associated with the acquisition of  complementary
products and technologies; (iii) progress in our product development efforts and
the magnitude and scope of such efforts; (iv) progress with clinical trials; (v)
progress  with  regulatory  affairs   activities;   (vi)  the  cost  of  filing,
prosecuting,  defending  and  enforcing  patent  claims  and other  intellectual
property rights;  (vii) competing  technological  and market  developments;  and
(viii)  the  expansion  of  strategic   alliances  for  the  sales,   marketing,
manufacturing and distribution of our products. To the extent that the currently
available  funds and  revenues  are  insufficient  to meet  current  or  planned
operating  requirements,  we will be required to obtain additional funds through
equity or debt  financing,  strategic  alliances  with  corporate  partners  and
others,  or through  other  sources.  We cannot  assure  you that the  financial
sources  described above will be available when needed or at terms  commercially
acceptable  to us. If adequate  funds are not  available,  we may be required to
delay,  further  scale back or eliminate  certain  aspects of our  operations or
attempt to obtain funds  through  arrangements  with  collaborative  partners or
others that may require us to relinquish  rights to certain of our technologies,
product  candidates,  products or potential  markets.  If adequate funds are not
available,  our business,  financial condition and results of operations will be
materially and adversely affected.

OTHER LIQUIDITY EVENTS

     On April 20, 2006, we entered into a Membership Interest Purchase Agreement
with Progenics providing for the sale to Progenics of our 50% ownership interest
in PDC. In addition,  we entered into an Amended and Restated  PSMA/PSMP License
Agreement  with  Progenics  and PDC  pursuant to which we  licensed  PDC certain
rights in PSMA technology.  Under the terms of such agreements,  we sold our 50%
interest in PDC for a cash payment of $13.2 million,  potential future milestone
payments  totaling up to $52.0  million  payable  upon  regulatory  approval and
commercialization of PDC products, and royalties on future PDC product sales, if
any.


                                      -37-
<PAGE>


Following  the sale of our interest in the joint  venture in April 2006, we have
no further obligations to the joint venture.

     On April 21, 2006,  we and Savient  entered into a  distribution  agreement
granting  us  exclusive  marketing  rights for  SOLTAMOX  in the United  States.
SOLTAMOX,  a cytostatic estrogen receptor  antagonist,  is the first oral liquid
hormonal  therapy  approved in the U.S. It is  indicated  for the  treatment  of
breast  cancer in adjuvant  and  metastatic  settings  and to reduce the risk of
breast cancer in women with ductal carcinoma in situ (DCIS) or with high risk of
breast cancer. In addition, we entered into a supply agreement with Rosemont for
the  manufacture  and  supply  of  SOLTAMOX.   Under  the  terms  of  the  final
transaction,  we paid Savient an upfront  licensing  fee of $2.0 million and may
pay additional contingent  sales-based payments of up to a total of $4.0 million
to Savient and Rosemont.  We introduced  SOLTAMOX to the U.S. oncology market in
August 2006. We are also  required to pay Savient and Rosemont  royalties on net
sales of SOLTAMOX.  Beginning  in 2007,  Cytogen is obligated to pay Savient and
Rosemont quarterly minimum royalties based on an agreed upon percentage of total
tamoxifen prescriptions in the United States. Unless terminated earlier, each of
the  distribution  agreement with Savient and the supply agreement with Rosemont
will  terminate  upon the  expiration  of the  last to  expire  patent  covering
SOLTAMOX in the United  States,  which is currently  June 2018. In the event the
tamoxifen  prescriptions  for an  agreed  upon  period of time are less than the
pre-established  minimum,  the  agreement  may be  terminated if the parties are
unable to reach an  agreement  to amend the terms of the contract to account for
such impact.

     On May 8, 2006,  we entered into a royalty  buyout  agreement  with Berlex,
Inc. for QUADRAMET which was to close within 90 days, subject to certain closing
conditions.  Under the terms of the agreement, Cytogen would have no longer paid
Berlex a royalty on QUADRAMET  sales in exchange for a one-time  cash payment of
$6.0  million and 623,441  shares of Cytogen  common  stock.  The closing of the
transaction did not occur and the parties are no longer pursuing entering into a
royalty buyout  agreement.  Cytogen will continue to pay Berlex royalties on net
sales of QUADRAMET.

     On October 11, 2006,  we entered  into a license  agreement  with  InPharma
granting  us  exclusive  rights for  CAPHOSOL  in North  America  and options to
license the  marketing  rights for  CAPHOSOL  in Europe and Asia.  Approved as a
prescription  medical device,  CAPHOSOL is a topical oral agent indicated in the
United  States as an adjunct to standard  oral care in treating  oral  mucositis
caused by radiation or high dose  chemotherapy.  CAPHOSOL is also  indicated for
dryness of the mouth  (hyposalivation)  or  dryness  of the throat  (xerostomia)
regardless  of the cause or whether the  conditions  are temporary or permanent.
Under the terms of the Agreement,  we are obligated to pay Inpharma $5.0 million
in  up-front  fees,  of which $4.6  million was paid upon the  execution  of the
agreement,  $400,000  will be paid into an escrow  account by November 10, 2006,
and $1.0 million after six months. In addition, we are obligated to pay Inpharma
royalties  based on a  percentage  of net sales and future  payments of up to an
aggregate of $49.0 million  based upon the  achievement  of certain  sales-based
milestones  of which  payments  totaling $35 million are based upon annual sales
levels first reaching levels in excess of $30 million.

     In the event we  exercise  the  options  to  license  marketing  rights for
CAPHOSOL in Europe and Asia,  we are obligated to pay Inpharma  additional  fees
and  payments,  including  sales-based  milestone  payments  for the  respective
territories.


                                      -38-
<PAGE>

     We also  shall pay  Inpharma  a portion  of any  upfront  license  fees and
milestone  payments,  but not royalties,  received by us in consideration of the
grant by us to other parties of the right to market CAPHOSOL in Europe and Asia,
to the extent such upfront license fees and milestone  payments are in excess of
the respective amounts paid by us to Inpharma for such rights.

     On November 7, 2006,  we entered  into  purchase  agreements  with  certain
institutional investors for the sale of 7,092,203 shares of our common stock and
3,546,108  warrants to purchase  shares of our common  stock,  through a private
placement offering.  The warrants will have an exercise price of $3.32 per share
and will be  exercisable  beginning six months and ending five years after their
issuance. In exchange for $2.82, the purchasers will receive one share of common
stock and warrants to purchase .5 shares of common  stock.  The  transaction  is
expected  to close on November  10,  2006.  The  offering is expected to provide
gross  proceeds  of  approximately  $20  million  to us before  deducting  costs
associated  with the offering.  The placement  agents in this  transaction  will
receive compensation consisting of a cash fee equal to 7% of the aggregate gross
proceeds.

     In September 2004, we entered into a non-exclusive  manufacturing agreement
with Laureate Pharma, L.P. pursuant to which Laureate  manufactured  PROSTASCINT
and its primary raw materials for us in its Princeton, New Jersey facility. This
agreement  terminated upon Laureate's  completion of the production campaign and
shipment of the resulting  products from  Laureate's  facility.  During the nine
months ended  September 30, 2006, we incurred  approximately  $35,000 under this
agreement. In October 2004, Laureate was acquired by Safeguard Scientifics, Inc.
Laureate  has  continued  to operate as a full  service  contract  manufacturing
organization   and  we  have  not   experienced  any  disruption  in  Laureate's
performance of its obligations to produce PROSTASCINT.

     In September 2006, we entered into a non-exclusive  manufacturing agreement
with Laureate pursuant to which Laureate shall  manufacture  PROSTASCINT and its
primary raw materials for Cytogen in Laureate's Princeton,  New Jersey facility.
The agreement will terminate,  unless terminated  earlier pursuant to its terms,
upon Laureate's  completion of the specified production campaign for PROSTASCINT
and shipment of the resulting products from Laureate's facility. Under the terms
of the  agreement,  we anticipate  paying at least  an aggregate of $3.9 million
through the end of the term of contract,  of which no amount was recorded during
the three months ended September 30, 2006.

     Effective  January 1,  2004,  we entered  into a  manufacturing  and supply
agreement with  Bristol-Myers  Squibb Medical Imaging,  Inc.  ("BMS-MI") whereby
BMS-MI  manufactures,  distributes  and provides  order  processing and customer
services for us relating to QUADRAMET.  Under the terms of the new agreement, we
are  obligated to pay at least $4.7 million  annually,  subject to future annual
price  adjustment,  through 2008, unless terminated by BMS-MI or us on two years
prior  written  notice.  During the nine months ended  September  30,  2006,  we
incurred $3.4 million of manufacturing costs for QUADRAMET.  This agreement will
automatically  renew for five successive  one-year periods unless  terminated by
BMS-MI or us on a two year prior written  notice.  We also pay BMS-MI a variable
amount per month for each QUADRAMET  order placed to cover the costs of customer
service.


                                      -39-
<PAGE>


     We  acquired  an  exclusive  license  from  The Dow  Chemical  Company  for
QUADRAMET  for  the  treatment  of  osteoblastic   bone  metastases  in  certain
territories.  The  agreement  requires  us  to  pay  Dow  royalties  based  on a
percentage  of net  sales of  QUADRAMET,  or a  guaranteed  contractual  minimum
payment,  whichever is greater,  and future payments upon achievement of certain
milestones. Future annual minimum royalties due to Dow are $1.0 million per year
in 2006 through 2012 and $833,000 in 2013.

     On May 6, 2005, we entered into a license  agreement  with The Dow Chemical
Company to create a targeted  oncology  product  designed to treat  prostate and
other cancers. The agreement applies proprietary  MeO-DOTA  bifunctional chelant
technology  from  Dow  to  radiolabel  our  PSMA  antibody  with  a  therapeutic
radionuclide.  Under the agreement,  proprietary  chelation technology and other
capabilities, provided through ChelaMedSM radiopharmaceutical services from Dow,
will be used to attach a  therapeutic  radioisotope  to the  7E11-C5  monoclonal
antibody utilized in our PROSTASCINT molecular imaging agent. As a result of the
agreement,  we are obligated to pay a minimal  license fee and aggregate  future
milestone payments of $1.9 million for each licensed product and royalties based
on sales  of  related  products,  if any.  Unless  terminated  earlier,  the Dow
agreement  terminates at the later of (a) the tenth  anniversary  of the date of
first  commercial  sale for each licensed  product or (b) the  expiration of the
last to expire  valid claim that would be  infringed by the sale of the licensed
product.  We may  terminate  the license  agreement  with Dow on 90 days written
notice.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Financial  Reporting  Release No. 60 requires  all  companies  to include a
discussion of critical accounting policies or methods used in the preparation of
financial  statements.  Note 1 to our Consolidated  Financial  Statements in our
Annual  Report on Form 10-K for the year ended  December 31,  2005,  as amended,
includes a summary of our  significant  accounting  policies and methods used in
the preparation of our  Consolidated  Financial  Statements.  The following is a
brief discussion of the more significant accounting policies and methods used by
us. The preparation of our Consolidated Financial Statements requires us to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  Our actual results could differ  materially  from
those estimates.

REVENUE RECOGNITION

     Product revenues include product sales by us to our customers. We recognize
revenues in accordance with SEC Staff  Accounting  Bulletin No. 104 ("SAB 104"),
"Revenue  Recognition." We recognize  product sales when  substantially  all the
risks and rewards of ownership have transferred to the customer, which generally
occurs on the date of shipment. Our revenue recognition policy has a substantial
impact on our  reported  results and relies on certain  estimates  that  require
subjective  judgments on the part of management.  We recognize product sales net
of  allowances  for  estimated  returns,  rebates  and  discounts.  We  estimate
allowances   based   primarily  on  our  past  experience  and  other  available
information pertinent to the use and marketing of the product.


                                      -40-
<PAGE>


     In the case of new products  like  SOLTAMOX,  which we introduced in August
2006, we have no historical return experience. Since we cannot reliably estimate
expected returns of this new product, we will defer recognition of revenue until
the  right of return no  longer  exists  or until we have  developed  sufficient
historical  experience to estimate sales returns.  We will recognize  revenue of
SOLTAMOX (net of provisions  for estimated  reductions to gross sales  discussed
below,  which may involve  significant  estimates  and  judgments)  when we have
sufficient  information  to  estimate  expected  product  returns.  We  may  use
information from external sources to project the prescription demand-based sales
and to estimate our gross to net sales adjustments.

Provisions for Estimated Reductions to Gross Sales
--------------------------------------------------

     At the time product sales are made, we reduce gross sales through  accruals
for  product  returns,  rebates  and  volume  discounts.  We  account  for these
reductions in accordance with Emerging Issues Task Force Issue No. 01-9,  ("EITF
01-9"),  Accounting for Consideration Given by a Vendor to a Customer (Including
a Reseller of the Vendor's  Products) ("EITF 01-9"),  and Statement of Financial
Accounting  Standard No. 48,  Revenue  Recognition  When Right of Return  Exists
("SFAS 48"), as applicable.

Returns
-------

     Quadramet is a radioactive product that is indicated for the relief of pain
due to metastatic bone disease arising from various types of cancer.  Due to its
rapid rate of  radioactive  decay,  QUADRAMET  has a shelf life of only about 72
hours.  For this  reason,  QUADRAMET  is  ordered  for a  specific  patient on a
pre-scheduled  visit,  and, as such,  our customers are unable to maintain stock
inventories  of this  product.  In addition,  because the product is ordered for
pre-scheduled  visits for specific  patients,  product returns are very low. Our
methodology  to estimate  sales returns is based on historical  experience  that
demonstrates  that the vast  majority of the returns  occur  within one month of
when  product was  shipped.  At the time of sale,  we estimate  the quantity and
value of QUADRAMET that may ultimately be returned.  We generally have the exact
number of returns  related to prior  month sales in the  current  month,  so the
provision  for returns is trued up to actual  quickly.

     We do not allow product returns for PROSTASCINT.

     Returns  from new product,  like  SOLTAMOX,  are more  difficult to assess.
Since we have no historical return experience with SOLTAMOX,  we cannot reliably
estimate  expected  returns  of this  new  product.  Therefore,  we  will  defer
recognition  of revenue  until the right of return no longer  exists or until we
have developed  sufficient  historical  experience to estimate sales returns. We
may use information from external sources to estimate our return provisions.

Volume Discounts
----------------

     We provide volume  discounts to certain  customers based on sales levels of
given products  during each calendar  month.  We recognize  revenue net of these
volume  discounts at the end of each month.  There are no volume discounts based
on cumulative sales over more than a one month period. Accordingly,  there is no
current need to estimate volume discounts.


                                      -41-
<PAGE>


Rebates
-------

     From time to time,  we may offer rebates to our  customers.  We establish a
rebate accrual based on the specific terms in each agreement, in an amount equal
to our reasonable  estimate of the expected  rebate claims  attributable  to the
sales in the current  period and adjust the  accrual  each  reporting  period to
reflect  the  actual  experience.  If the  amount  of future  rebates  cannot be
reasonably  estimated,  a liability will be recognized for the maximum potential
amount of the rebates.

     License and contract  revenues  include  milestone  payments and fees under
collaborative  agreements with third parties,  revenues from research  services,
and revenues from other miscellaneous sources. We defer non-refundable  up-front
license fees and  recognize  them over the estimated  performance  period of the
related agreement,  when we have continuing  involvement.  Since the term of the
performance periods is subject to management's estimates,  future revenues to be
recognized could be affected by changes in such estimates.

ACCOUNTS RECEIVABLE

     Our accounts  receivable  balances are net of an  estimated  allowance  for
uncollectible  accounts.  We continuously  monitor collections and payments from
our customers and maintain an allowance for  uncollectible  accounts  based upon
our historical  experience and any specific  customer  collection issues that we
have identified. While we believe our reserve estimate to be appropriate, we may
find it  necessary to adjust our  allowance  for  uncollectible  accounts if the
future  bad debt  expense  exceeds  our  estimated  reserve.  We are  subject to
concentration  risks as a limited number of our customers provide a high percent
of total revenues, and corresponding receivables.

INVENTORIES

     Inventories are stated at the lower of cost or market,  as determined using
the first-in, first-out method, which most closely reflects the physical flow of
our  inventories.  Our  products  and raw  materials  are subject to  expiration
dating.  We  regularly  review  quantities  on hand to  determine  the  need for
reserves for excess and obsolete  inventories  based  primarily on our estimated
forecast of product sales. Our estimate of future product demand may prove to be
inaccurate,  in which case we may have understated or overstated our reserve for
excess and obsolete inventories.


                                      -42-
<PAGE>


CARRYING VALUE OF FIXED AND INTANGIBLE ASSETS

     Our fixed assets and certain of our acquired  rights to market our products
have been recorded at cost and are being amortized on a straight-line basis over
the estimated useful life of those assets. If indicators of impairment exist, we
assess the  recoverability  of the  affected  long-lived  assets by  determining
whether the carrying value of such assets can be recovered through  undiscounted
future  operating cash flows. If impairment is indicated,  we measure the amount
of such  impairment by comparing the carrying value of the assets to the present
value of the expected  future cash flows  associated  with the use of the asset.
Adverse  changes  regarding  future  cash flows to be received  from  long-lived
assets could  indicate  that an impairment  exists,  and would require the write
down of the carrying value of the impaired asset at that time.

WARRANT LIABILITY

     We follow  Emerging  Issues Task Force (EITF) No.  00-19,  "Accounting  for
Derivative  Financial  Instruments  Indexed  to, and  Potentially  Settled in, a
Company's  Own  Stock"  which  provides  guidance  for  distinguishing   between
permanent equity, temporary equity and assets and liabilities. Under EITF 00-19,
to qualify as permanent  equity,  the equity derivative must permit us to settle
in  unregistered  shares.  We do not have  that  ability  under  the  securities
purchase  agreement for the warrants issued in July and August 2005 and, as EITF
00-19 considers the ability to keep a registration statement effective as beyond
our  control,  the warrants  cannot be  classified  as permanent  equity and are
instead  classified  as a liability  in the  accompanying  consolidated  balance
sheet.

     We record the warrant  liability  at its fair value  using a  Black-Scholes
option-pricing  model and remeasure it at each reporting date until the warrants
are exercised or expire. Changes  in the fair value of the warrants are reported
in the consolidated statements of operations as non-operating income or expense.
The fair value of the warrants is subject to  significant  fluctuation  based on
changes in our stock price,  expected  volatility,  expected life, the risk-free
interest rate and dividend yield. The market price for our common stock has been
and may continue to be volatile. Consequently,  future fluctuations in the price
of our common  stock may cause  significant  increases  or decreases in the fair
value of the warrants issued in July and August 2005.

     The warrants  expected to be issued in  connection  with the November  2006
equity transaction may be required to be recorded as a liability.

SHARE-BASED COMPENSATION

     We account for share-based compensation in accordance with SFAS No. 123(R),
"Share-Based  Payment."  Under  the fair  value  recognition  provision  of this
statement,  the share-based  compensation,  which is generally based on the fair
value of the awards calculated using the  Black-Scholes  option pricing model on
the date of grant,  is  recognized on a  straight-line  basis over the requisite
service period,  generally the vesting period, for grants on or after January 1,
2006. For nonvested shares, we use the fair value of the underlying common stock
on the date of grant.  Determining  the fair value of share-based  awards at the
grant date requires  judgment,  including  estimating  expected  dividend yield,
expected forfeiture rates, expected volatility, the


                                      -43-
<PAGE>


expected term and expected risk-free interest rates. If we were to use different
estimates or a different valuation model, our share-based  compensation  expense
and our results of operations could be materially impacted.

RECENT ACCOUNTING PRONOUNCEMENTS

Evaluation of Misstatements

     On  September  13,  2006,  the  staff of the SEC  issued  Staff  Accounting
Bulletin  No. 108,  "Considering  the Effects of Prior Year  Misstatements  when
Quantifying  Misstatements  in Current Year Financial  Statements"  ("SAB 108"),
which  provides   interpretive  guidance  on  how  the  effects  of  prior  year
misstatements  should be considered  in evaluating a current year  misstatement.
The cumulative  effect from the initial adoption of SAB 108 may be reported as a
cumulative  effect  adjustment to the  beginning of year retained  earnings with
disclosure of the nature and amount of each  individual  error. We will begin to
apply the  provisions  of SAB 108 in the fourth  quarter of 2006.  Management is
currently  evaluating the requirements of SAB 108 and has not yet determined the
impact it will have on our consolidated financial statements.

Fair Value Measurements

     On  September  15,  2006,  the  FASB  issued  SFAS  No.  157,  "Fair  Value
Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework
for measuring fair value and expands  disclosures about fair value measurements.
SFAS 157 is  effective as of the  beginning  of the first fiscal year  beginning
after  November  15,  2007.  We will be required to adopt this  statement in the
first quarter of 2008.  Management is currently  evaluating the  requirements of
SFAS 157 and has not yet  determined  the impact this  standard will have on our
consolidated financial statements.

Income Taxes

     In June 2006, the FASB issued FASB  Interpretation  No. 48, "Accounting for
Uncertainty  in Income Taxes" ("FIN 48").  FIN 48 is applicable for fiscal years
beginning after December 15, 2006. This Interpretation  clarifies the accounting
for  uncertainty  in  income  taxes  recognized  in  an  enterprise's  financial
statements in accordance  with FASB  Statement No. 109,  "Accounting  for Income
Taxes." This Interpretation  prescribes a recognition  threshold and measurement
attribute for the  financial  statement  recognition  and  measurement  of a tax
position taken or expected to be taken in a tax return. This Interpretation also
provides  guidance on  de-recognition,  classification,  interest and penalties,
accounting in interim  periods,  disclosure,  and  transition.  We are currently
evaluating  the impact of the adoption of FIN 48 upon our  financial  statements
and related disclosures. We do not expect that the adoption will have a material
effect on our results of operations or financial condition.

SALES TAX

     In March 2006, the FASB's  Emerging  Issues Task Force released Issue 06-3,
"How  Sales  Taxes   Collected  From  Customers  and  Remitted  to  Governmental
Authorities  Should Be Presented in the Income  Statement" or ("EITF  06-3").  A
consensus was reached that entities may adopt a policy of presenting sales taxes
in the income statement on either a gross or net


                                      -44-
<PAGE>


basis.  If taxes  are  significant,  an entity  should  disclose  its  policy of
presenting  taxes and the amount of taxes if  reflected  on a gross basis in the
income statement. The guidance is effective for periods beginning after December
15, 2006. We present sales net of sales taxes in our consolidated  statements of
operations and do not anticipate changing our policy as a result of EITF 06-3.

Share-Based Payment

     In December 2004, the FASB issued SFAS No. 123(R),  "Share-Based  Payment,"
which  revised SFAS No. 123 ("SFAS 123") and  superseded  Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees"  ("APB 25").
SFAS 123(R) requires that companies  recognize  compensation  expense associated
with share-based compensation arrangements, including employee stock options, in
the financial  statements  effective as of the first interim or annual reporting
period that begins after June 15, 2005.  SFAS 123(R)  eliminates  the  Company's
ability  to  account  for  such  transactions  using  the  intrinsic  method  of
accounting  under APB 25. SFAS 123(R) also  requires  that  companies  recognize
compensation  expense  associated  with  purchases  of shares of common stock by
employees at a discount to market value under employee stock purchase plans that
do not meet certain criteria.

     In April  2005,  the  Securities  and  Exchange  Commission  announced  the
adoption  of a new rule  allowing  companies  to  implement  SFAS  123(R) at the
beginning   of  their  next  fiscal  year  that  begins  after  June  15,  2005.
Accordingly, we adopted SFAS 123(R) in its fiscal year beginning January 1, 2006
using  the  modified   prospective   transition   method.   Under  this  method,
compensation  expense is reflected in the financial statements beginning January
1, 2006 with no restatement to the prior periods. As such, compensation expense,
which is measured  based on the fair value of the  instrument on the grant date,
is recognized for awards that are granted, modified, repurchased or cancelled on
or after January 1, 2006 as well as for the portion of awards previously granted
that  have  not  vested  as  of  January  1,  2006.  We  have   implemented  the
straight-line  expense  attribution method for all options granted after January
1, 2006.  Prior to adopting  SFAS 123(R),  we used the  accelerated  attribution
method in accordance  with FASB  Interpretation  No. 28,  "Accounting  for Stock
Appreciation  Rights and Other Variable Stock Option or Award Plans" ("FIN 28").
The adoption of SFAS 123(R) had a material impact on our results of operations.

Abnormal Inventory Costs

In November 2004, the FASB issued SFAS No. 151,  "Inventory  Costs, an amendment
of ARB No. 43, Chapter 4" ("SFAS No. 151"), to clarify that abnormal  amounts of
idle facility expense,  freight,  handling costs, and wasted material (spoilage)
should be  recognized  as current  period  charges,  and that  fixed  production
overheads  should be  allocated  to  inventory  based on the normal  capacity of
production facilities.  This statement is effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. Accordingly,  we adopted SFAS
No. 151 in its fiscal  year  beginning  January 1, 2006.  The  adoption  of this
standard  did not have any  impact  on the  Company  in the  nine  months  ended
September 30, 2006.


                                      -45-
<PAGE>


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We  do  not  have   operations   subject  to  risks  of  foreign   currency
fluctuations,  nor do we use derivative financial instruments in our operations.
Our  exposure  to  market  risk  is   principally   confined  to  interest  rate
sensitivity. Our cash equivalents and short-term investments are conservative in
nature, with a focus on preservation of capital. Due to the short-term nature of
our investments and our investment  policies and procedures,  we have determined
that the risks  associated  with  interest  rate  fluctuations  related to these
financial instruments are not material to our business.

     We are exposed to certain  risks  arising  from changes in the price of our
common stock,  primarily due to potential effect of changes in fair value of the
warrant  liability  related to the warrants  issued in July and August 2005. The
warrant liability is measured at fair value using a Black-Scholes option-pricing
model  at each  reporting  date  and is  subject  to  significant  increases  or
decreases  in  value  and a  corresponding  loss  or gain  in the  statement  of
operations  due to the effects of changes in the price of common stock at period
end and the related calculation of volatility.

ITEM 4.   CONTROLS AND PROCEDURES

(a)  Disclosure Controls and Procedures

     Our management,  with the  participation of our chief executive officer and
vice president,  finance, evaluated the effectiveness of our disclosure controls
and  procedures  as of September  30, 2006.  The term  "disclosure  controls and
procedures,"  as defined in Rules  13a-15(e) and 15d-15(e)  under the Securities
Exchange Act of 1934,  means controls and other procedures of a company that are
designed to ensure that  information  required to be disclosed by the Company in
the reports that it files or submits under the  Securities  Exchange Act of 1934
is  recorded,  processed,  summarized  and  reported,  within  the time  periods
specified  in the SEC's  rules and forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information  required to be  disclosed by a company in the reports that it files
or  submits  under  the  Securities  Exchange  Act of  1934 is  accumulated  and
communicated to the company's management,  including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding
required disclosure.  Management recognized that any controls and procedures, no
matter how well designed and operated,  can provide only reasonable assurance of
achieving their  objectives and management  necessarily  applied its judgment in
evaluating the  cost-benefit  relationship of possible  controls and procedures.
Based on this  evaluation,  our  chief  executive  officer  and vice  president,
finance  concluded  that, as of September 30, 2006, our disclosure  controls and
procedures were effective.

(2)  Changes in Internal Control Over Financial Reporting

     No change in our internal  control over financial  reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter  ended as of  September  30, 2006 that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.


                                      -46-
<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     In January 2006,  we filed a complaint  against  Advanced  Magnetics in the
Massachusetts  Superior Court for breach of contract,  fraud, unjust enrichment,
and breach of the implied  covenant of good faith and fair dealing in connection
with the parties' 2000 license agreement. The complaint seeks damages along with
a request for  specific  performance  requiring  Advanced  Magnetics to take all
reasonable steps to secure FDA approval of COMBIDEX in compliance with the terms
of the licensing agreement. In February 2006, Advanced Magnetics filed an answer
to  our  complaint  and  asserted  various  counterclaims,   including  tortuous
interference,  defamation, consumer fraud and abuse of process. We believe these
counterclaims  have no merit and we plan to conduct a  vigorous  defense of such
counterclaims.

ITEM 1A.  RISK FACTORS

     This section sets forth changes in the risks factors  previously  disclosed
in our Annual Report on Form 10-K due to our activities during the quarter ended
September 30, 2006.

     Investing  in our common stock  involves a high degree of risk.  You should
carefully consider the risks and uncertainties described below together with the
other  risks  described  in our Annual  Report on Form 10-K and the  information
included or incorporated by reference in this Quarterly  Report on Form 10-Q and
our Annual  Report on Form 10-K in your  decision as to whether or not to invest
in our common stock. If any of the risks or uncertainties  described below or in
our Annual Report on Form 10-K actually occur, our business, financial condition
or results of operations would likely suffer. In that case, the trading price of
our common stock could fall,  and you may lose all or part of the money you paid
to buy our common stock.

We have a history of operating  losses and an accumulated  deficit and expect to
incur losses in the future.

     Given the high level of  expenditures  associated with our business and our
inability to generate revenues  sufficient to cover such  expenditures,  we have
had a history of operating losses since our inception. We had a net loss of $5.7
million for the quarter  ended  September  30,  2006.  We had a net loss of $6.2
million for the nine months  ended  September  30, 2006.  We had an  accumulated
deficit of $419 million as of September 30, 2006.

     In order to develop and commercialize  our  technologies,  particularly our
prostate-specific  membrane  antigen  technology,  and  launch  and  expand  our
products, we expect to incur significant increases in our expenses over the next
several  years.  As a result,  we will need to generate  significant  additional
revenue to become profitable.

     To date, we have taken  affirmative steps to address our trend of operating
losses. Such steps include, among other things:

     o    undergoing   steps  to   realign   and   implement   our  focus  as  a
          product-driven biopharmaceutical company;


                                      -47-
<PAGE>


     o    establishing and maintaining our in-house specialty sales force;

     o    reacquiring  North  American and Latin  American  marketing  rights to
          QUADRAMET from Berlex Laboratories in August 2003; and

     o    enhancing our marketed product portfolio  through marketing  alliances
          and strategic arrangements.

     Although we have taken  these  affirmative  steps,  we may never be able to
successfully implement them, and our ability to generate and sustain significant
additional  revenues or achieve  profitability will depend upon the risk factors
discussed  elsewhere in this section  entitled,  "Risk Factors" or in our Annual
Report on Form 10-K for the year ended  December 31, 2005.  As a result,  we may
never be able to generate or sustain  significant  additional revenue or achieve
profitability.

We depend on sales of QUADRAMET and  PROSTASCINT  for  substantially  all of our
near-term revenues.

     We expect QUADRAMET and PROSTASCINT to account for substantially all of our
product  revenues in the near future.  For the quarter ended September 30, 2006,
revenues from QUADRAMET and PROSTASCINT accounted for approximately 48% and 52%,
respectively,  of our product revenues.  For the nine months ended September 30,
2006,  revenues from QUADRAMET and PROSTASCINT  accounted for  approximately 49%
and 51%, respectively, of our product revenues. If QUADRAMET or PROSTASCINT does
not achieve  broader  market  acceptance,  either because we fail to effectively
market such products or our competitors introduce competing products, we may not
be able to generate sufficient revenue to become profitable.

     On April 21, 2006,  we and Savient  entered into a  distribution  agreement
granting us exclusive  marketing  rights for SOLTAMOX in the United  States.  We
introduced  SOLTAMOX to the U.S.  oncology  market in August  2006.  We have not
recognized any sales of SOLTAMOX as of September 30, 2006.

     On October 11, 2006,  we entered  into a license  agreement  with  Inpharma
granting us exclusive  marketing rights for CAPHOSOL in North America. We expect
to launch CAPHOSOL during the first quarter of 2007.

A small number of customers  account for the majority of our sales, and the loss
of one of them, or changes in their purchasing patterns, could result in reduced
sales, thereby adversely affecting our operating results.

     We sell our products to a small number of  radiopharmacy  networks.  During
the nine months ended  September 30, 2006, we received 63% of our total revenues
from three  customers,  as follows:  41% from Cardinal Health  (formerly  Syncor
International  Corporation);   13%  from  Mallinckrodt  Inc.;  and  9%  from  GE
Healthcare (formerly Amersham Health).  During the year ended December 31, 2005,
we received 67% of our total revenues from three customers, as


                                      -48-
<PAGE>


follows: 47% from Cardinal Health (formerly Syncor  International  Corporation);
11%  from  Mallinckrodt  Inc.;  and 9% from  GE  Healthcare  (formerly  Amersham
Health).  During the year ended  December 31, 2004, we received 68% of our total
revenues from three  customers,  as follows:  46% from Cardinal Health (formerly
Syncor International  Corporation);  12% from Mallinckrodt Inc.; and 10% from GE
Healthcare (formerly Amersham Health).

     The small  number of  radiopharmacies,  consolidation  in this  industry or
financial  difficulties of these radiopharmacies could result in the combination
or elimination of customers for our products.  We anticipate that our results of
operations in any given period will  continue to depend to a significant  extent
upon  sales  to a small  number  of  customers.  As a  result  of this  customer
concentration,  our  revenues  from quarter to quarter and  business,  financial
condition   and   results  of   operations   may  be   subject  to   substantial
period-to-period  fluctuations.  In addition, our business,  financial condition
and results of operations could be materially  adversely affected by the failure
of customer orders to materialize as and when anticipated. None of our customers
have entered into an agreement  requiring on-going minimum purchases from us. We
cannot  assure  you that our  principal  customers  will  continue  to  purchase
products  from us at current  levels,  if at all.  The loss of one or more major
customers  could  have a  material  adverse  effect on our  business,  financial
condition and results of operations.

There are risks associated with the manufacture and supply of our products.

     If we are to be successful,  our products will have to be  manufactured  by
contract  manufacturers in compliance with regulatory  requirements and at costs
acceptable to us. If we are unable to  successfully  arrange for the manufacture
of our products and product candidates,  either because potential  manufacturers
are not cGMP compliant,  are not available or charge excessive amounts,  we will
not be  able to  successfully  commercialize  our  products  and  our  business,
financial  condition  and  results  of  operations  will  be  significantly  and
adversely affected.

     PROSTASCINT  is  currently  manufactured  at a current  Good  Manufacturing
Practices,  or cGMP,  compliant  manufacturing  facility  operated  by  Laureate
Pharma,  L.P.  Although  we entered  into  another  agreement  with  Laureate in
September 2006 which provides for Laureate's  manufacture of PROSTASCINT for us,
our failure to maintain a long term supply agreement on commercially  reasonable
terms will have a material adverse effect on our business,  financial  condition
and results of operations.  In October 2004,  Laureate was acquired by Safeguard
Scientifics,  Inc.  Laureate has continued to operate as a full service contract
manufacturing  organization  and we  have  not  experienced  any  disruption  in
Laureate's performance of its obligations to produce PROSTASCINT.

     We have an  agreement  with BMS-MI to  manufacture  QUADRAMET  for us. Both
primary  components  of  QUADRAMET,  particularly  Samarium-153  and EDTMP,  are
provided to BMS-MI by outside suppliers. Due to radioactive decay,  Samarium-153
must be  produced  on a  weekly  basis.  BMS-MI  obtains  its  requirements  for
Samarium-153  from a  sole  supplier  and  EDTMP  from  another  sole  supplier.
Alternative  sources for these components may not be readily available,  and any
alternative  supplier would have to be identified and qualified,  subject to all
applicable regulatory guidelines.  If BMS-MI cannot obtain sufficient quantities
of the components on commercially  reasonable  terms, or in a timely manner,  it
would be unable to


                                      -49-
<PAGE>


manufacture  QUADRAMET on a timely and cost-effective  basis, which would have a
material  adverse  effect on our  business,  financial  condition and results of
operations.

     We have a supply  agreement with Rosemont to  manufacture  SOLTAMOX for us.
The supply  agreement  with Rosemont will  terminate  upon the expiration of the
last to expire patent covering SOLTAMOX in the United States, which is currently
June 2018. Our failure to maintain a long term supply  agreement for SOLTAMOX on
commercially  reasonable  terms  will  have a  material  adverse  effect  on our
business, financial condition and results of operations.

     The  Company,  our  contract  manufacturers  and testing  laboratories  are
required to adhere to FDA regulations  setting forth  requirements for cGMP, and
similar regulations in other countries, which include extensive testing, control
and documentation requirements. Ongoing compliance with cGMP, labeling and other
applicable regulatory requirements is monitored through periodic inspections and
market  surveillance  by state and federal  agencies,  including the FDA, and by
comparable agencies in other countries. Failure of our contract vendors or us to
comply with  applicable  regulations  could result in sanctions being imposed on
us, including fines, injunctions,  civil penalties, failure of the government to
grant pre-market clearance or pre-market approval of drugs,  delays,  suspension
or  withdrawal  of  approvals,   seizures  or  recalls  of  products,  operating
restrictions  and criminal  prosecutions  any of which could  significantly  and
adversely affect our business, financial condition and results of operations.

We rely heavily on our collaborative partners.

     Our success depends largely upon the success and financial stability of our
collaborative  partners.  We have entered into the following  agreements for the
development,  sale,  marketing,  distribution  and  manufacture of our products,
product candidates and technologies:

     o    a license  agreement  with The Dow  Chemical  Company  relating to the
          QUADRAMET technology;

     o    a manufacturing  and supply agreement for the manufacture of QUADRAMET
          with Bristol-Myers Squibb Medical Imaging, Inc.;

     o    a  manufacturing  agreement for the  manufacture of  PROSTASCINT  with
          Laureate Pharma, L.P.;

     o    marketing, license and supply agreements with Advanced Magnetics, Inc.
          related to COMBIDEX and ferumoxytol (formerly Code 7228);

     o    a  distribution  services  agreement  with  Cardinal  Health 105, Inc.
          (formerly CORD Logistics, Inc.) for PROSTASCINT;


                                      -50-
<PAGE>


     o    a license  agreement with The Dow Chemical  Company  relating to Dow's
          proprietary MeO-DOTA  bifunctional chelant technology for use with our
          Therapeutic  7E11-C5 Monoclonal  Antibody program;

     o    a development and manufacturing  agreement with Laureate Pharma,  L.P.
          for the scale-up  for the cGMP  manufacturing  of a MeO-DOTA  chelator
          conjugate of the 7E11-C5 monoclonal antibody;

     o    a  distribution  agreement  with Savient  Pharmaceuticals,  Inc. and a
          manufacture   and  supply   agreement   with   Savient  and   Rosemont
          Pharmaceuticals  Limited  related  to  the  supply  and  marketing  of
          SOLTAMOX;

     o    a  purchase  and supply  agreement  with OTN for the  distribution  of
          SOLTAMOX; and

     o    a license agreement with Inpharma AS for the marketing of CAPHOSOL.

     Because   our   collaborative   partners   are   responsible   for  certain
manufacturing and distribution  activities,  among others,  these activities are
outside  our  direct  control  and we  rely on our  partners  to  perform  their
obligations.  In the event that our collaborative partners are entitled to enter
into third party  arrangements that may economically  disadvantage us, or do not
perform their obligations as expected under our agreements, our products may not
be  commercially  successful.  As a result,  any  success may be delayed and new
product  development  could be  inhibited  with the  result  that our  business,
financial  condition  and  results  of  operation  could  be  significantly  and
adversely affected.

     In January 2006,  we filed a complaint  against  Advanced  Magnetics in the
Massachusetts  Superior Court for breach of contract,  fraud, unjust enrichment,
and breach of the implied  covenant of good faith and fair dealing in connection
with the parties' 2000 license agreement. The complaint seeks damages along with
a request for  specific  performance  requiring  Advanced  Magnetics to take all
reasonable steps to secure FDA approval of COMBIDEX in compliance with the terms
of the licensing agreement. In February 2006, Advanced Magnetics filed an answer
to  our  complaint  and  asserted  various  counterclaims,   including  tortuous
interference,  defamation, consumer fraud and abuse of process. We believe these
counterclaims  have no merit and we plan to conduct a vigorous  defense of these
claims.

Certain  of  our  products  are  in  the  early   stages  of   development   and
commercialization  and we may never  achieve the revenue  goals set forth in our
business plan.

     We began  operations  in 1980 and have  since  been  engaged  primarily  in
research  directed toward the  development,  commercialization  and marketing of
products to improve the diagnosis  and treatment of cancer.  In October 1996, we
introduced for commercial use our  PROSTASCINT  imaging agent. In March 1997, we
introduced for commercial use our QUADRAMET  therapeutic  product. In June 2003,
we  reacquired  the  marketing  rights to QUADRAMET  in North  America and Latin
America.

     In April 2006, we executed a distribution  agreement with Savient  granting
us exclusive  marketing rights for SOLTAMOX in the United States.  SOLTAMOX,  an
oral liquid hormonal


                                      -51-
<PAGE>


therapy,  is approved for marketing in the United States. We introduced SOLTAMOX
to the U.S. oncology market in August 2006.

     On October 11, 2006,  we entered  into a license  agreement  with  Inpharma
granting us exclusive  marketing rights for CAPHOSOL in North America. We expect
to launch CAPHOSOL during the first quarter of 2007.

     In  May  2006,   the  U.S.   Food  and  Drug   Administration   cleared  an
Investigational New Drug application for CYT-500, our lead therapeutic candidate
targeting  PSMA.  We expect to begin the first U.S.  Phase I  clinical  trial of
CYT-500  in  patients  with  hormone-  refractory  prostate  cancer,  subject to
Institutional  Review Board (IRB) approval at the planned clinical site. CYT-500
uses the same monoclonal antibody from our PROSTASCINT  molecular imaging agent,
but is linked through a higher affinity linker than is used for PROSTASCINT to a
therapeutic as opposed to an imaging radionuclide. This PSMA technology is still
in the early stages of development.

     In August 2000,  we entered  into a license and  marketing  agreement  with
Advanced Magnetics for COMBIDEX, for all applications, and ferumoxytol (formerly
Code 7228) for oncology  applications  only.  We have  exclusive  United  States
marketing  rights to  COMBIDEX.  On March 3,  2005,  the FDA's  Oncologic  Drugs
Advisory  Committee  (ODAC)  voted  15 to 4 to  not  recommend  approval  of the
proposed broad  indication for COMBIDEX being sought by Advanced  Magnetics.  On
March 24, 2005,  Advanced  Magnetics,  Inc. informed us that Advanced  Magnetics
received  an  approvable  letter from the FDA for  COMBIDEX,  subject to certain
conditions.

     We cannot assure you, however, that Advanced Magnetics will obtain approval
from the FDA for COMBIDEX on a timely  basis,  if at all. If Advanced  Magnetics
does not secure  regulatory  approval for COMBIDEX,  we will not be permitted to
sell and market  COMBIDEX  as we have  anticipated  and we will not  realize any
return on the  significant  amount of time and  resources  we have  allocated to
COMBIDEX.  Ferumoxytol  is being  developed by Advanced  Magnetics for use as an
iron  replacement  therapeutic in chronic  kidney disease  patients and Advanced
Magnetics  has stated that no clinical  applications  are  currently  planned or
contemplated  for oncology  applications.  We cannot assure you that ferumoxytol
will be developed for oncology applications.

     In July 2004,  as part of our  continuing  efforts to reduce  non-strategic
expenses,  we  initiated  the closure of  facilities  at our AxCell  Biosciences
subsidiary.  Research  projects  through  academic,  governmental  and corporate
collaborators will continue to be supported and additional  applications for the
intellectual  property and  technology  at AxCell are being  pursued.  We may be
unable  to  further  develop  or   commercialize   any  of  these  products  and
technologies in the future.

     Our business is therefore  subject to the risks  inherent in an early-stage
biopharmaceutical business enterprise, such as the need:

     o    to obtain sufficient capital to support the expenses of developing our
          technology and commercializing our products;


                                      -52-
<PAGE>


     o    to ensure that our products are safe and effective;

     o    to obtain regulatory approval for the use and sale of our products;

     o    to  manufacture  our  products  in  sufficient  quantities  and  at  a
          reasonable cost;

     o    to develop a sufficient market for our products; and

     o    to attract  and retain  qualified  management,  sales,  technical  and
          scientific staff.

     The problems frequently encountered using new technologies and operating in
a competitive environment also may affect our business,  financial condition and
results of operations. If we fail to properly address these risks and attain our
business objectives, our business could be significantly and adversely affected.

We depend on attracting and retaining key personnel.

     We are highly  dependent on the  principal  members of our  management  and
scientific  staff.  The  loss of their  services  might  significantly  delay or
prevent the  achievement  of development  or strategic  objectives.  Our success
depends  on our  ability  to retain  key  employees  and to  attract  additional
qualified employees.  Competition for personnel is intense, and therefore we may
not be able to retain existing personnel or attract and retain additional highly
qualified employees in the future.

     On June 20, 2006,  Christopher  P.  Schnittker  resigned as our Senior Vice
President and Chief Financial Officer to pursue other career  opportunities.  On
October 26, 2006, we announced the appointment of Kevin Bratton as our new chief
financial  officer. A finance executive with more than 35 years of experience in
healthcare,  biotechnology  and  technology,  Mr. Bratton was  previously  chief
financial  officer at Metrologic  Instruments,  Inc.  (Nasdaq:  MTLG),  a global
technology  company.  During his tenure at Metrologic,  Mr. Bratton directed the
company's finance operations during a period of significant growth in sales, net
income, cash flow from operations, and working capital.

     We do not carry key person life insurance  policies and we do not typically
enter into long-term  arrangements  with our key personnel.  If we are unable to
hire and retain personnel in key positions,  our business,  financial  condition
and results of operations could be significantly  and adversely  affected unless
qualified replacements can be found.

We may need to raise additional capital, which may not be available.

     Our cash and cash  equivalents were $27.0 million at September 30, 2006. On
November 7, 2006, we entered into purchase agreements with certain institutional
investors  for the sale of 7,092,203  shares of our common  stock and  3,546,108
warrants to purchase  shares of our common  stock,  through a private  placement
offering.  The warrants will have an exercise  price of $3.32 per share and will
be exercisable  beginning six months and ending five years after their issuance.
In exchange for $2.82, the purchasers will receive one share of common stock and


                                      -53-
<PAGE>


warrants to purchase .5 shares of common stock.  The  transaction is expected to
close on November 10, 2006.  The offering is expected to provide gross  proceeds
of  approximately  $20 million to us before  deducting costs associated with the
offering.  We expect that our existing capital  resources at September 30, 2006,
along with the proceeds  expected to be received from this November 2006 sale of
equity,  should be  adequate to fund our  operations  and  commitments  into the
second half of 2007.

     We have incurred  negative cash flows from  operations  since our inception
and have expended,  and expect to continue to expend in the future,  substantial
funds based upon the:

     o    success of our product commercialization efforts;

     o    success of any  future  acquisitions  of  complementary  products  and
          technologies we may make;

     o    magnitude,  scope and results of our product  development and research
          and development efforts;

     o    progress of preclinical studies and clinical trials;

     o    progress toward regulatory approval for our products;

     o    costs of filing,  prosecuting,  defending and enforcing  patent claims
          and other intellectual property rights;

     o    competing technological and market developments; and

     o    expansion  of  strategic   alliances  for  the  sale,   marketing  and
          distribution of our products.

     Our  business  or  operations  may change in a manner  that  would  consume
available  resources more rapidly than anticipated.  We expect that we will have
additional requirements for debt or equity capital,  irrespective of whether and
when we reach profitability,  for further product development costs, product and
technology  acquisition  costs  and  working  capital.  To the  extent  that our
currently  available  funds and  revenues  are  insufficient  to meet current or
planned operating  requirements,  we will be required to obtain additional funds
through equity or debt financing,  strategic  alliances with corporate  partners
and  others,  or through  other  sources.  These  financial  sources  may not be
available when we need them or they may be available,  but on terms that are not
commercially  acceptable to us. If adequate funds are not  available,  we may be
required  to delay  further  scale  back or  eliminate  certain  aspects  of our
operations or attempt to obtain funds through  arrangements  with  collaborative
partners or others that may  require us to  relinquish  rights to certain of our
technologies,  product  candidates,  products or potential markets.  If adequate
funds are not  available,  our  business,  financial  condition  and  results of
operations will be materially and adversely affected.


                                      -54-
<PAGE>


ITEM 6.   EXHIBITS.

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

          10.1             Manufacturing  Agreement  dated September 29, 2006 by
                           and between the  Company  and Laureate  Pharma, Inc.*
                           Filed herewith.

          10.2             Product License and Assignment  Agreement dated as of
                           October 11, 2006 by and  among the Company,  InPharma
                           AS, and InPharma,  Inc.* Filed herewith.

          10.3             Securities Purchase Agreement dated as of November 1,
                           2006,  among  the  Company  and  certain  Purchasers.
                           Filed  as an exhibit to the Company's  Current Report
                           on Form 8-K, filed with the Commission on November 9,
                           2006,  and  incorporated herein by reference.

          10.4             Form of Common  Stock Purchase  Warrant issued by the
                           Company in favor of certain  Purchasers.  Filed as an
                           exhibit to the Company's Current Report on Form  8-K,
                           filed  with  the  Commission on November 9, 2006, and
                           incorporated  herein by reference.

          10.5             Form  of  Registration  Rights  Agreement  among  the
                           Company and certain  Purchasers.  Filed as an exhibit
                           to the  Company's Current  Report on Form 8-K,  filed
                           with   the   Commission  on   November 9, 2006,   and
                           incorporated herein by reference.

          31.1             Certification  of  President   and  Chief   Executive
                           Officer  pursuant to Rule 13a-14(a) or  15d-14(a)  of
                           the  Securities  Exchange  Act  of  1934,  as adopted
                           pursuant to Section 302 of the  Sarbanes-Oxley Act of
                           2002. Filed herewith.

          31.2             Certification of Vice President, Finance, pursuant to
                           Rule  13a-14(a)   or  15d-14(a)  of  the   Securities
                           Exchange Act of 1934, as adopted  pursuant to Section
                           302  of   the  Sarbanes-Oxley   Act  of   2002. Filed
                           herewith.

          32.1             Certification  of   President  and  Chief   Executive
                           Officer  pursuant  to  18 U.S.C.  Section  1350,   as
                           adopted  pursuant to Section  906  of  the  Sarbanes-
                           Oxley Act of 2002. Furnished  herewith.

          32.2             Certification of Vice President, Finance, pursuant to
                           18 U.S.C.  Section  1350,  as  adopted  pursuant   to
                           Section  906  of  the  Sarbanes-Oxley  Act  of  2002.
                           Furnished herewith.


                                      -55-
<PAGE>


*    The Company has submitted an application  for  confidential  treatment with
the  Securities  and  Exchange  Commission  with  respect to certain  provisions
contained in this exhibit.  The copy filed as an exhibit  omits the  information
subject to the confidentiality application.






                                      -56-
<PAGE>


                                   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 thereunto duly authorized.


                                 CYTOGEN CORPORATION





Date: November 9, 2006           By:/s/ Michael D. Becker
                                    --------------------------------------------
                                    Michael D. Becker
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)



Date: November 9, 2006           By:/s/ Thu A. Dang
                                    --------------------------------------------
                                    Thu A. Dang
                                    Vice President, Finance
                                    (Principal Financial and Accounting Officer)



                                      -57-