## UNITED STATES

## SECURITIES AND EXCHANGE COMMISSION

## WASHINGTON, D.C. 20549

## FORM 10Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THESECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
September 30, 2001

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THESECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM
_________ TO _________

COMMISSION FILE NO. 015443

# THERAGENICS CORPORATION

(Exact name of registrant as specified in its charter)

|Delaware                 | 581528626                             
|------------------------ | ---------------------------------------
|(State of incorporation) | (I.R.S. Employer Identification
Number)

| | 5203 Bristol Industrial Way              |                 
| | ---------------------------------------- | ----------------
|
| | Buford, Georgia                          | 30518           
| | (Address of principal executive offices) | (Zip
      Code)

Registrants telephone number, including area code:(770) 2710233

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

As of November 14, 2001 the number of shares of
$.01 par value common stock outstanding was 29,660,496.

---

### THERAGENICS CORPORATION

### TABLE OF CONTENTS

| | PART I. FINANCIAL INFORMATION:                                   |  |   
| | ---------------------------------------------------------------- |  | --
|
| | ITEM 1. FINANCIAL STATEMENTS
      (UNAUDITED)                   |  |   
|
| | Balance Sheets 
      December 31, 2000 and September 30, 2001  |  | 3 
|
| | Statements of Earnings
      for the three and nine months ended
| | September 30, 2000 and 2001                                      |  | 5 
|
| | Statements of Cash
      Flows for the nine months ended        
| | September 30, 2000 and
      2001                                |  | 6 
|
| | Statement of Changes
      in Shareholders Equity for the nine 
| | months ended September 30,
      2001                            |  | 7 
|
| | Notes to Financial
      Statements                              |  | 8 
|
| | ITEM 2. MANAGEMENTS DISCUSSION
      AND ANALYSIS OF FINANCIAL 
| | CONDITION
      AND RESULTS OF OPERATION                         |  | 10
|
| | ITEM 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT    
| | MARKET
      RISK                                                |  | 15
|
| | PART II. OTHER INFORMATION                                       | 
|
| | ITEM 1. LEGAL PROCEEDINGS                                        |  | 15
| | ITEM 6. EXHIBITS AND REPORTS ON
      FORM 8K                   |  | 15
|
| | SIGNATURES                                                       |  | 16

---

### THERAGENICS CORPORATIONBALANCE
SHEETS(UNAUDITED)(Amounts in thousands, except per share data)

|ASSETS                                        
|----------------------------------------------
|                                              
|                                              
|                                              
|                                              
|CURRENT ASSETS                                
|Cash and shortterm investments               
|Marketable securities                         
|Trade accounts receivable, net                
|Inventories                                   
|Deferred income tax asset                     
|Prepaid expenses and other current assets     
|TOTAL CURRENT ASSETS                          
|PROPERTY AND EQUIPMENT                        
|Buildings and improvements                    
|Machinery and equipment                       
|Office furniture and equipment                
|                                              
|Less accumulated depreciation and amortization
|                                              
|                                              
|Land and improvements                         
|Construction in progress                      
|TOTAL PROPERTY AND EQUIPMENT                  
|                                              
|OTHER ASSETS                                  
|TOTAL ASSETS                                  

---

### THERAGENICS CORPORATION BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except per share data)

|LIABILITIES & SHAREHOLDERSEQUITY        
|-----------------------------------------
|                                         
|                                         
|                                         
|                                         
|                                         
|CURRENT LIABILITIES                      
|Accounts payable                         
|Trade                                    
|Construction                             
|Accrued salaries, wages and payroll taxes
|Income taxes payable                     
|Other current liabilities                
|TOTAL CURRENT LIABILITIES                
|LONG TERM LIABILITIES                    
|Deferred income taxes                    
|Other                                    
|TOTAL LONGTERM LIABILITIES              
|SHAREHOLDERS EQUITY                     
|Common stock, $.01 par value, 100,000    
|shares authorized; 29,579 and 29,657     
|issued and outstanding                   
|Additional paidin capital               
|Retained earnings                        
|TOTAL SHAREHOLDERS EQUITY               
|TOTAL LIABILITIES AND                    
|SHAREHOLDERS EQUITY                     

The accompanying notes are an integral part of these statements.

---

### THERAGENICS CORPORATIONSTATEMENTS OF
EARNINGS(UNAUDITED)(Amounts in thousands, except per share data)

| |                                   |                    |               |                   |               |               | 
| | --------------------------------- | ------------------ | ------------- | ----------------- | ------------- | ------------- | 
| |                                   | Three Months Ended |               | Nine Months Ended |              
| |                                   | September 30,      |               | September 30,     |              
| |                                   | 2000               | 2001          |                   | 2000          | 2001          | 
| | REVENUE                          
| | Product sales                     | $    10,511        | $    11,858   |                   | $    33,264   | $    38,436   | 
| | Licensing Fees                    | 25                 | 34            |                   | 75            | 144           | 
| | Total Revenue                     | 10,536             | 11,892        |                   | 33,339        | 38,580        | 
|
| | COST OF SALES                     | 3,579              | 3,597         |                   | 10,356        | 11,231        | 
| |                                  
| | GROSS PROFIT                      | $      6,957       | $      8,295  |                   | $    22,983   | $    27,349   | 
| |                                  
| | OPERATING EXPENSES               
| | Selling, general & administrative | 1,678              | 2,678         |                   | 5,142         | 7,751         | 
| | Research & development            | 596                | 506           |                   | 1,515         | 2,051         | 
| |                                   | 2,274              | 3,184         |                   | 6,657         | 9,802         | 
| | EARNINGS FROM OPERATIONS          | 4,683              | 5,111         |                   | 16,326        | 17,547        | 
| |                                  
| | OTHER INCOME (EXPENSE)           
| | Minimum income                    | 5,444              |             |                   | 5,444         |             | 
| | Interest income                   | 505                | 369           |                   | 1,403         | 1,345         | 
| | Interest and financing costs      | (35)               | (36)          |                   | (109)         | (114)         | 
| | Other                             | (10)               | (3)           |                   |             | (38)          | 
| |                                   | 5,904              | 330           |                   | 6,738         | 1,193         | 
| |                                  
| | EARNINGS BEFORE INCOME TAXES      | 10,587             | 5,441         |                   | 23,064        | 18,740        | 
| | Income tax expense                | 3,777              | 2,009         |                   | 8,160         | 6,740         | 
| | NET EARNINGS                      | $      6,810       | $      3,432  |                   | $    14,904   | $    12,000   | 
| |                                  
| | NET EARNINGS PER COMMON SHARE    
| | Basic                             | $        0.23      | $        0.12 |                   | $        0.50 | $        0.41 | 
| | Diluted                           | $        0.23      | $        0.11 |                   | $        0.50 | $        0.40 | 
| |                                  
| | WEIGHTED AVERAGE SHARES          
| | Basic                             | 29,531             | 29,646        |                   | 29,527        | 29,614        | 
| | Diluted                           | 29,903             | 30,185        |                   | 30,064        | 29,999        | 

The accompanying notes are an integral part of these statements.

---

### THERAGENICS CORPORATIONSTATEMENTS OF CASH
FLOWS(UNAUDITED)(Amounts in thousands, except per share data)

| |                                                                       | Nine
      Months         |            
| | --------------------------------------------------------------------- | ------------------------- | -----------
| |                                                                       | Ended
      September 30, |            
| |                                                                       | 2000                      | 2001       
| | CASH FLOWS FROM OPERATING ACTIVITIES                                 
| | Net Earnings                                                          | $14,904                   | $12,000    
| | Adjustments to reconcile net
      earnings to                        |                           |            
| | net cash provided by operating
      activities                      
| | Deferred
      income taxes                                           | 1,116                     | 477        
| | Depreciation
      & amortization                                     | 3,891                     | 4,333      
| | Provision
      for allowances                                        | (114)                     | 270        
| | Stock
      based compensation                                        | 142                       | 92         
| | Income tax
      benefit from options                                 | 26                        | 160        
| | Loss on
      disposal of equipment                                   |                          | 52         
| | Deferred
      rent                                                   | (3)                       | (2)        
| |                                                                      
| | Changes in assets and
    liabilities:                               
| | Accounts
      Receivable                                             | 924                       | (244)      
| | Inventories                                                           | 18                        | (244)      
| | Prepaid
      expenses and other current assets                       | 59                        | (593)      
| | Other assets                                                          | (86)                      | (89)       
| | Trade accounts
    payable                                            | 128                       | (22)       
| | Accrued salaries,
      wages and payroll taxes                       | 461                       | 416        
| | Income taxes
payable                                                  | 1,050                     | (2,866)    
| | Other
      current liabilities                                       | 214                       | 322        
| | Net
      cash provided by operating activities                       | 22,730                    | 14,062     
| |                                                                      
| | CASH FLOWS FROM INVESTING ACTIVITIES                                 
| | Purchases and
      construction of property and equipment            | (13,409)                  | (5,678)    
| | Purchases and
      maturities of marketable securities               | (4,864)                   | 5,198      
| | Net
      cash used by investing activities                           | (18,263)                  | (480)      
| |                                                                      
| | CASH FLOWS FROM FINANCING ACTIVITIES                                 
| | Proceeds
      from exercise of stock options and stock purchase plan | 89                        | 244        
| | Net
      cash provided by financing activities                       | 89                        | 244        
| |                                                                      
| | NET INCREASE IN CASH AND                                             
| | SHORTTERM INVESTMENTS                                                | 4,556                     | 13,826     
| |                                                                      
| | CASH AND SHORTTERM INVESTMENTS AT                                   
| | BEGINNING OF PERIOD                                                   | 18,765                    | 29,722     
| |                                                                      
| | CASH AND SHORTTERM INVESTMENTS AT                                   
| | END OF PERIOD                                                         | $     23,321              | $    43,548

---

### THERAGENICS CORPORATIONSTATEMENT OF SHAREHOLDERS
EQUITYFOR THE THREE MONTHS ENDED SEPTEMBER 30,
2001(UNAUDITED)(Amounts in thousands, except per share data)

| |                              | Common Stock | Additional |         |          |         
| | ---------------------------- | ------------ | ---------- | ------- | -------- | --------
| |                              | Number of    | Par value  | paidin | Retained |         
| |                              | shares       | $0.01      | capital | earnings | Total   
| | BALANCE, December 31, 2000   | $29,579      | $296       | $60,005 | $59,862  | $120,163
| | Exercise of stock options    | 67           | 1          | 190     |         | 191     
| | Employee stock purchase plan | 11           |           | 53      |         | 53      
| | Stockbased compensation     |             |           | 92      |         | 92      
| | Tax effect from options      |             |           | 160     |         | 160     
| | Net earnings for the period  |             |           |        | 12,000   | 12,000  
| | BALANCE, September 30, 2001  | $29,657      | $297       | $60,500 | $71,862  | $132,659

The accompanying notes are an integral part of these statements.

---

## THERAGENICS
CORPORATION
 NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(Unaudited)

## NOTE A  BASIS
OF PRESENTATION

The interim financial
statements included herein have been prepared by the Company without audit.
These statements reflect all adjustments which are, in the opinion of
management, necessary to present fairly the financial position, results of
operations, cash flows and changes in shareholders equity for the periods
presented. All such adjustments are of a normal recurring nature. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes that the financial statements and
disclosures are adequate to make the information not misleading. It is suggested
that these financial statements and notes be read in conjunction with the
audited financial statements and notes for the year ended December 31, 2000,
included in the Form 10K filed by the Company.

## NOTE B 
DISTRIBUTION AGREEMENTS AND MAJOR CUSTOMERS

The Company sells its
TheraSeed® product directly to health care providers and to third party
distributors. Currently, the Company has nonexclusive distribution agreements
in place with four companies. Sales to three of the four nonexclusive
distributors represented approximately 65% and 57%of product revenue for the
quarter and nine months ended September 30,2001,respectively, with sales to each
of the three nonexclusive distributors exceeding 10% of total revenue for each
period. Accounts receivable from three of the four nonexclusive distributors
represented approximately 57% of accounts receivable at September 30, 2001, with
each nonexclusive distributor exceeding 10% of total accounts receivable.

## NOTE C 
CONSTRUCTION IN PROGRESS AND PURCHASE COMMITMENTS

The U.S. Department of
Energy (DOE) has granted Theragenics access to unique DOE technology for use in
production of isotopes, including Pd103. This technology venture represents
part of a DOE initiative to redirect Cold War assets to peacetime use and
cushion the economic impact of U.S. Defense Department cutbacks. The Company is
constructing a facility in Oak Ridge, Tennessee to house the equipment,
infrastructure and work force necessary to support the production of isotopes,
including Pd103, using this DOE technology. The Company expects to invest
approximately $25 million to $30 million through 2001 to build this
manufacturing and R&D facility. Construction costs of approximately $22.6
million have been incurred on this project as of September 30, 2001, and are
included in construction in progress.

## NOTE D 
MINIMUM INCOME

During the quarter ended
September 30, 2000, Theragenics recognized nonrecurring minimum income of $5.4
million, representing a payment received from Indigo Medical, Inc. (Indigo), the
Companys former marketing partner. The payment was made in connection with the
termination of an exclusive Sales and Marketing Agreement between the Company
and Indigo. The $5.4 million payment added approximately $3.5 million or $0.12
per diluted share to net earnings for the quarter and nine months ended
September 30,2000.

---

## THERAGENICS
CORPORATION NOTES TO FINANCIAL STATEMENTS  CONTINUEDSEPTEMBER 30,
2001(Unaudited)

## NOTE E 
LITIGATION

In January 1999, the
Company and certain of its officers and directors were named as defendants in
certain securities actions alleging violations of the federal securities laws,
including Sections 10(b), 20(a) and Rule 10b5 of the Securities and Exchange
Act of 1934, as amended. These actions have been consolidated into a single
action pending in the U.S. District Court for the Northern District of Georgia.
The complaint, as amended, purports to represent a class of investors who
purchased or sold securities during the time period from January 29, 1998 to
January 11, 1999. The amended complaint generally alleges that the defendants
made certain misrepresentations and omissions in connection with the performance
of the Company during the class period and seeks unspecified damages. On May 14,
1999 a stockholder of the Company filed a derivative complaint in the Delaware
Court of Chancery purportedly on behalf of the Company, alleging that certain
directors breached their fiduciary duties by engaging in the conduct that is
alleged in the consolidated federal class action complaint. The derivative
action has been stayed by the agreement of the parties. On July 19, 2000, the
Court granted the Companys motion to dismiss the consolidated federal class
action complaint for failure to state a claim against the Company, and granted
the plaintiffs leave to amend their complaint. On August 21, 2000, the
plaintiffs filed a second amended complaint and on March 30, 2001, the Court
denied the defendants motion to dismiss the plaintiffs second amended
complaint. The Court also denied the Companys motion for reconsideration, and
discovery is underway. Management believes these charges are without merit and
intends to vigorously oppose the litigation, however, given the nature and early
stage of the proceedings, the ultimate outcome of the litigation cannot be
determined at this time. Accordingly, no provision for any liability that might
result from this litigation has been made. The Company maintains insurance for
claims of this general nature.

---

## Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations

Results of Operations

Revenues for the third
quarter of 2001 were $11.9 million, compared to $10.5 million for the third
quarter of 2000, an increase of $1.4 million, or 13.3%. Revenues for the nine
months ended September 30, 2001 were $38.6 million, compared to $33.3 million
for the same period in 2000, an increase of $5.3 million, or 15.9%. During the
third quarter and nine months ended September 30, 2001, approximately 21% and
28% of unit sales, respectively, were sold by Theragenics directly to
customers, at higher prices than those sold to thirdparty distributors.
Theragenics had no appreciable quantity of directtocustomer sales in the same
periods in 2000. As a result, the average selling price of TheraSeed® increased,
accounting for the increases in revenue over the comparable periods of 2000.
Unit sales during the first quarter and first nine months of 2001 were largely
unchanged as compared to the same periods in 2000.

During the first half of
2000 the Company was a party to a Sales and Marketing Agreement with Indigo
Medical, Inc. (Indigo) that granted Indigo exclusive worldwide marketing rights
to TheraSeed® for the treatment of prostate cancer. This agreement was
terminated effective January 5, 2001. Currently, the Company has nonexclusive
distribution agreements with four companies for the distribution of TheraSeed®.
Several customers that had been purchasing from Indigo now purchase directly
from Theragenics, while many other former Indigo customers are purchasing
TheraSeed® from Theragenics nonexclusive distributors. Management expects
these nonexclusive distributors to continue to aggressively market to the
former Indigo customers, and expects the percentage of direct sales of
TheraSeed® units by the Company, and accordingly, its average revenue per
TheraSeed® unit, to decline. Direct sales to customers have continued to decline
throughout 2001, and the Company anticipates that direct sales to customers
could eventually decline to 10% to 15% of unit sales.

At any point in time,
management of Theragenics and/or its nonexclusive distributors may change
their respective pricing policies for TheraSeed® in order to take advantage of
market opportunities or respond to competitive situations. Responding to market
opportunities and competitive situations could have an adverse effect on the
prices of TheraSeed® and/or could have a favorable effect on market share and
volumes, while failure to do so could adversely affect market share and volumes
although per unit pricing could possibly be maintained.

Cost of sales was $3.6
million during the third quarter of 2001 and 2000, resulting in a gross profit
margin of 69.8% in 2001 and 66.0% in 2000. For the first nine months of 2001,
cost of sales was $11.2 million, resulting in a gross profit margin of 70.9%,
compared with cost of sales of $10.3 million and a gross profit margin of 68.9%
during the first nine months of 2000. In the 2001 periods, fourteen cyclotrons
were in operation. During 2000, all fourteen cyclotrons were not in operation
until the third quarter. The increase in cost of sales in the nine months ended
September 30, 2001 over the comparable 2000 period was due to the increase in
depreciation and operating costs related to the additional cyclotrons in
operation. Maintenance expenses also increased during the nine months ended
September 30, 2001 compared to the same period in 2000.

Selling, general and
administrative ("SG&A") expenses were $2.7 million, or 22.5% of revenue,
during the third quarter of 2001, compared to $1.7 million, or 15.9% of revenue,
during the third quarter of 2000, an increase of $1.0 million, or 58.9%. For the
first nine months of 2001 SG&A expenses were $7.8 million, or 20.1% of
revenue, compared to $5.1 million, or 15.4% of revenue, during the first nine
months of 2000, an increase of $2.7 million, or 52.9%. The increases in the 2001
periods were primarily due to an increase in advertising, marketing, customer
service and cancer information expenses. These expenses were borne by Indigo
under the terms of the Indigo Agreement during the 2000 periods. Additionally,
bad debt expense increased, as the Company increased its allowance for doubtful
accounts in recognition of both the move to direct sales and the lack of
collection experience with the new nonexclusive distributors. Finally,
compensation and benefits, and start up expenses associated with the Companys
PSP Project (see "Liquidity and Capital Resources" below), also increased during
the 2001 periods.

In the third quarter of
2001 the Company recruited a marketer with experience in health care and direct
to consumer marketing, and expects direct to consumer advertising activity to
increase significantly. The Company also expects to continue other activities in
an attempt to support its brand and increase demand for TheraSeed® implants,
including; advertising to physicians, clinical studies aimed at showing the
superiority of TheraSeed® implants in the treatment of prostate cancer,
technical field support to TheraSeed® customers and other customer service and
patient information activities. Accordingly, the Company expects that marketing
expenses will continue to increase.

Research and development
(R&D) expenses were $506,000, or 4.2% of revenue, in the third quarter of
2001, and $596,000, or 5.7% of revenue, in the third quarter of 2000. R&D
expenses during the first nine months of 2001 were $2.1 million, or 5.3 % of
revenue compared to $1.5 million, or 4.5% of revenue, during the 2000 period.
The increase in R&D expenses in the year to date period was a result of the
Companys R&D initiatives, including restenosis studies carried out by the
Atlanta Cardiovascular Research Institute (see below), and development efforts
to improve the Companys proprietary production processes. R&D expenses in
the third quarter of 2001 declined slightly from the 2000 period as phases of
certain activities associated with the work performed by the Atlanta
Cardiovascular Research Institute reached completion. The Companys research and
development initiatives are intended to expand the application of Pd103 to
other oncological and nononcological uses, and explore options for using the
Companys expertise and capabilities in other areas. Management plans to
continue to increase efforts in research and development as its initiatives to
diversify move forward and expects R&D expenditures to increase
proportionately. However, R&D spending is dependent on the complex
scheduling of research and development activities in progress as well as the
pursuit of other appropriate opportunities as they arise. Accordingly, R&D
expenses may fluctuate significantly from period to period.

As part of its R&D
initiatives, the Company has an agreement with the Atlanta Cardiovascular
Research Institute (ACRI) to conduct preclinical animal studies addressing the
use of Pd103 for the prevention of restenosis. Early phases of the studies have
indicated that the inhibitory effects of Pd103 are similar to that of other
emitters, both beta and gamma. The Company is continuing its preclinical animal
studies, and expects longerterm data to be available in early 2002. The Company
has met with representatives of the U.S. Food and Drug Administration (FDA) to
present the results of the preclinical animal studies, discuss further
preclinical studies planned, and discuss the requirements and timing on
proceeding with human clinical studies using TheraSource, the Companys
proprietary Pd103 source. The Company is planning to enter human trials for
restenosis in 2002, and is inclined toward pursuing human studies involving
peripheral vessels rather than coronary studies. However, the commencement and
completion of any human trials will be dependent upon receiving successful
results from the ongoing additional preclinical animal studies, the submission
and approval of an Investigational Device Exemption by the FDA, and evaluation
of potential competing forms of treatment.

The market for the
prevention of restenosis is characterized by rapid technological innovation,
significant research efforts and continual scientific discoveries. Many
innovative treatments for the prevention of restenosis are currently being
studied, all at different stages of development. Many companies are involved in
research in this area, some with significant resources available to them. Early
clinical results disclosed in the third quarter of 2001 for one such alternative
treatment, drugcoated stents, have been exceptional. Theragenics believes that
the treatment of restenosis will continue to evolve at a rapid pace, and the
Companys development efforts in this area will continue to be flexible.

Other R&D efforts are
also underway, including the use of Pd103 in treating the wet form of
agerelated macular degeneration. This disease is a degeneration of eyesight
that, in some cases, can lead to complete blindness. The Company has developed a
prototype device for macular degeneration animal studies and expects to begin
these studies during 2002.

Other income (exclusive of
minimum income), comprised of interest income and nonoperating expenses, was
$330,000 in the third quarter of 2001 compared to $460,000 during the third
quarter of 2000. For the first nine months of the year, other income was $1.2
million in 2001, compared to $1.3 million in 2000. The Companys investments
consist primarily of shortterm cash investments and highcredit quality
municipal obligations, in accordance with the Companys investment policies.
While additional funds were available for investment during the 2001 periods,
the interest rate environment during 2001 has reduced the effective returns on a
significant portion of the Companys investments. Funds available for investment
have and will continue to be utilized for the Companys current and future
expansion programs and research and development activities. As funds continue to
be used for these programs and activities, and as interest rates continue to
change, management expects other income to fluctuate accordingly.

The Company recognized $5.4
million of other income in the third quarter of 2000 related to purchase minimum
shortfalls under the Sales and Marketing Agreement with Indigo. This increased
net earnings during the third quarter and first nine months of 2000 by $3.5
million, or $.12 per diluted share.

The Companys effective
income tax rate was approximately 37% and 36% for the third quarter of 2001 and
2000, respectively, and 36% and 35% for the first nine months of 2001 and 2000,
respectively. This increase is a result of a reduction in tax credits generated
by the Companys investments in its expansion projects and research activities
during 2001. The Companys income tax rate in each period is lower than the
statutory rates primarily due to the recognition of tax credits generated by the
Companys investments in its expansion projects and research activities, and
taxexempt interest income.

Liquidity and Capital Resources

The Company had cash,
shortterm investments and marketable securities of $53.8 million at September
30, 2001, compared to $45.2 million at December 31, 2000. Marketable securities
consist primarily of shortterm cash investments and highcredit quality
municipal obligations, in accordance with the Companys investment policies. The
increase in cash, shortterm investments and marketable securities was a result
of cash generated by operations, partially offset by capital expenditures.
Working capital was $62.0 million at September 30, 2001, compared to $49.9
million at December 31, 2000. The Company also has an Unsecured Credit Agreement
with a financial institution that provides for maximum borrowings of $40.0
million under two lines of credit, and an additional uncommitted $10.0 million
line of credit. No borrowings were outstanding under the Unsecured Credit
Agreement as of September 30, 2001.

Cash generated by
operations was $14.0 million and $22.7 million during the first nine months of
2001 and 2000, respectively. Cash generated from operations consists of net
earnings plus noncash expenses such as depreciation, amortization and deferred
income tax expense and changes in balance sheet items such as accounts
receivables, inventories and payables. In addition to the cash generated from
net income for 2001 and 2000, noncash depreciation and amortization expenses
increased to $4.3 million in the first nine months of 2001 from $3.9 million in
the first nine months of 2000. The increase in depreciation and amortization was
primarily a result of the increase in the number of cyclotrons that were
operational during 2001. Further contributing to the change in cash, $244,000 in
cash was absorbed by an increase in accounts receivable during the first nine
months of 2001, as the Companys accounts receivable base changed as a result of
its direct to customer sales and nonexclusive distribution agreements. The
change in accounts receivable in the 2000 period generated $900,000 as Indigo
paid its 1999 yearend revenue sharing balance. Finally, another significant
change in cash occurred as $2.9 million was utilized to pay income taxes in the
first nine months of 2001, while a change in income taxes payable generated $1.0
million in cash during the 2000 period.

The Companys primary use
of cash in the first nine months of 2001 and 2000 related to capital spending to
increase manufacturing capacity. Capital expenditures totaled $5.7 million and
$13.4 million during the first nine months of 2001 and 2000, respectively.

The U.S. Department of
Energy (DOE) has granted Theragenics access to unique DOE technology, known as
the Plasma Separation Process (PSP), for use in production of isotopes,
including Pd103 (the "PSP Project"). This technology venture represents part of
a DOE initiative to redirect Cold War assets to peacetime use and cushion the
economic impact of U.S. Defense Department cutbacks. The Company expects that
the use of the PSP technology could significantly increase its Pd103 capacity
and allow for expanded use of Pd103 and TheraSeed® beyond treatment of prostate
cancer to new medical applications. The Company also believes that the PSP
Project may allow it to explore options for applying this technology to other
uses, including the production of isotopically engineered materials for use in
medical and nonmedical applications, though there are no assurances that this
will be achieved. The Company is constructing a facility in the Oak Ridge,
Tennessee area to house the equipment, infrastructure and work force necessary
to support the production of isotopes, including Pd103, using this DOE
technology. Construction costs of approximately $22.6 million have been incurred
on the PSP Project through September 30, 2001, and the Company expects to
additionally invest between $2.4 million and $7.4 million through 2001 to
complete this manufacturing and R&D facility. The PSP Project is expected to
become operational in early 2002, though no significant revenues are expected to
be generated from the PSP Project in 2002.

As part of the PSP Project,
the Company has leased land in the Oak Ridge, Tennessee area and equipment
previously used by the government to produce isotopes. As a result of the
sensitive nature of the equipment, the specialized technology involved and the
restrictions on access to unique DOEoperated facilities, the Company has
contracted with the DOEs primary contractor for the Oak Ridge government
installation to handle certain technical and operational services that are
critical to the project, including moving, reassembling and recommissioning
equipment currently in storage, designing and fabricating new parts and
modifications to the equipment and DOE facilities; and operating and providing
ongoing access to the DOE facilities. The success of the project is dependent on
the continued cooperation of the DOE and its primary contractor, which could be
adversely affected by future changes in governmental program priorities and
funding. If the equipment cannot be recommissioned successfully, if there are
problems with the operation or modification of the DOEoperated facilities, or
if unforeseen challenges arise, the project may not be successful or the costs
or timeliness associated with the project could exceed current estimates.
Additionally, as a result of the sensitive nature of the PSP equipment and the
specialized technology involved, the DOE can terminate the Companys access in
the event of national emergency or in the interest of national defense, or
require the Company to perform work involving programmatic use of the technology
for the DOE in connection with carrying out its governmental mission. The
Company would be entitled to compensation in the event of termination in
connection with national emergency or defense or for programmatic use of the
technology for the DOE.

In addition to using cash
to fund the PSP Project in 2001, the Company expects that R&D spending will
continue to increase. Preclinical animal studies addressing the use of Pd103
for the prevention of restenosis are underway, and the Company is working toward
beginning human clinical trials in 2002. Other R&D activities are also
occurring (see "Results of Operations", above). R&D has fluctuated and could
continue to do so depending on the scheduling and progress of R&D activities
as well as the pursuit of currently unforeseen opportunities.

Cash provided by financing
activities was $244,000 and $89,000 in the first nine months of 2001 and 2000,
respectively, consisting of cash proceeds from the exercise of stock options and
the Companys Employee Stock Purchase Plan.

The Company believes that
current cash and investment balances, cash from future operations and credit
facilities, will be sufficient to meet its currently anticipated working capital
and capital expenditure requirements. In the event additional financing becomes
necessary, management may choose to raise those funds through other means of
financing as appropriate.

Medicare Developments

Based on the importance of
thirdparty reimbursement to all providers of healthcare products and services,
Theragenics, like many others, closely monitors reimbursement of healthcare
costs. The U.S. Congress and the Centers for Medicare & Medicaid Services
(CMS), (formerly the Health Care Financing Administration, or HCFA) frequently
consider reforms that provide for reductions in Medicare spending and
prospective payment reform on healthcare purchasing levels and payment streams.
CMS is promulgating changes in the Medicare Part B payments that hospitals will
receive for providing brachytherapy in outpatient departments in calendar year
2002. Medicare currently pays for brachytherapy seeds and brachytherapy needles
under "passthrough" codes that are separate from the procedure codes that
comprise Medicares outpatient prospective payment system (OPPS). In a rule
published on November 2, 2001, CMS announced that "passthrough" payments for
medical devices under the OPPS would change, resulting in acrosstheboard
reductions in payments of approximately 15 to 20 percent. CMS has requested
legislation from Congress that would make these reductions in payments smaller.
In a written response dated November 2, 2001, to the Department of Health and
Human Services and CMS concerning the rule, Senate Finance Committee Chairman
Max Baucus, DMT, and ranking minority member Charles Grassley, RIA expressed
"deep concern" stating that CMS failed to "consult properly" with the Senate
Finance Committee on the matter and recommended delaying the rules
implementation. Baucus and Grassley also faulted CMS for not having sufficient
OPPS data, not fully understanding the rules impact on beneficiaries and
hospitals, and not ensuring proper and timely implementation of the policy. As
relates to the medical devices covered under the rule, there also remains a
possibility that CMS may treat brachytherapy seeds and needles separately from
other passthrough devices in 2002. CMS is expected to publish final
reimbursement rates and policies for calendar year 2002 in an upcoming notice
prior to January 1st. Unfavorable changes in reimbursement for the Companys
TheraSeed® implant could adversely affect prices of TheraSeed® and the Companys
revenue stream.

Forward Looking and Cautionary Statements

This document contains
certain forwardlooking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 including, without limitation, statements
regarding sales, marketing and distribution efforts, sales mix, effectiveness of
nonexclusive distribution agreements, pricing for TheraSeed®, future cost of
sales, R&D efforts and expenses, inventory investment, SG&A expenses,
other income, timing and ultimate outcome of the Companys activities in
restenosis, macular degeneration and other diversification efforts, potential
new products and opportunities, the PSP Project, and the sufficiency of the
Companys liquidity and capital resources. From time to time, the Company may
also make other forwardlooking statements relating to such matters as well as
anticipated financial performance, business prospects, technological
developments, research and development activities and similar matters. These
forwardlooking statements are subject to certain risks, uncertainties and other
factors which could cause actual results to differ materially from those
anticipated, including risks associated with research and development
activities, including animal studies and clinical trials related to new
products, risks associated with new product development cycles, effectiveness
and execution of marketing and sales programs of Theragenics and its
nonexclusive distributors, potential costs and delays in the startup of the
Oak Ridge facility, potential changes in product pricing and competitive
conditions, continued acceptance of TheraSeed® by the market, execution and
effectiveness of competitors, management of growth, acceptance and efficacy of
Pd103 for other applications, adverse changes in governmental program
priorities and budgetary funding by the relevant governmental authorities,
potential costs and delays in the startup and refinement of technology and
related equipment, potential equipment failure, government regulation of the
therapeutic radiological pharmaceutical and device business, and potential
changes in thirdparty reimbursement. All forward looking statements and
cautionary statements included in this document are made as of the date hereby
based on information available to the Company as of the date hereof, and the
Company assumes no obligation to update any forward looking statement or
cautionary statement.

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

The Companys market risk
exposure related to market risk sensitive financial instruments is not material.
As of September 30, 2001, there were no outstanding borrowings under the
Companys Unsecured Credit Agreement.

## PART II. OTHER
INFORMATION

## Item 1. Legal
Proceedings.

See Note E to the Companys
financial statements included in Item 1 of this report, which is incorporated by
reference hereby.

## Item 6.
Exhibits and Reports on Form 8K.

(a) No reports on Form 8K were filed
during the quarter ended September 30, 2001.

---

#### SIGNATURES

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

| | (Registrant)                               
| | -------------------------------------------
| | THERAGENICS CORPORATION                    
| |                                            
| | By:/s/ M. Christine Jacobs                 
| | M. Christine
  Jacobs                      
| | Chief Executive
    Officer                
| |                                            
| | By:/s/ Bruce W. Smith                      
| | Bruce W. Smith                             
| | Treasurer and Chief
      Financial Officer

Dated: November 14, 2001