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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-K



x ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the Fiscal Year Ended December 31, 2003



Commission File Number: 0-21990



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OXiGENE, INC.

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 13-3679168                       
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)



230 Third Avenue

Waltham, MA 02451

(Address of principal executive offices, including zip code)



(781) 547-5900

(Telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act: None



Securities registered pursuant to Section 12(g) of the
Act:



Common Stock, par value $.01 per share

Title of Class



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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 ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this
Form 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) Yes x No ̈



The aggregate market value of the registrants voting and non-voting common stock held by non-affiliates of the registrant (without admitting that
any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold, as of the last business day of the registrants most recently completed second fiscal
quarter was $124,167,354.



As of March 5, 2004, the aggregate
number of outstanding shares of Common Stock of the registrant was 16,849,502.



DOCUMENTS INCORPORATED BY REFERENCE



Certain portions of the registrants Proxy Statement for the Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12 and 13 of Part III of this Form 10-K.



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SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995



Except for historical information contained herein, this Annual Report on Form 10-K (Annual Report) contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that may cause the Companys actual results or outcomes to be materially different from those anticipated
and discussed herein. Important factors that the Company believes may cause such differences are discussed in the Risk Factors section of this Annual Report and in the cautionary statements accompanying the forward-looking statements in
this Annual Report. In assessing forward-looking statements contained herein, readers are urged to read carefully all Risk Factors and cautionary statements contained in this Annual Report. Further, the Company operates in an industry sector where
securities values may be volatile and may be influenced by regulatory and other factors beyond the Companys control.





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TABLE OF CONTENTS



|         |  |                                                                                                |  |     
|-------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                |  | Page
|PART I   |  | 1                                                                                             
|         |  |                                                                                               
|1.       |  | BUSINESS                                                                                       |  | 1   
|         |  | INTRODUCTION                                                                                   |  | 1   
|         |  | TECHNOLOGY OVERVIEW                                                                            |  | 3   
|         |  | CLINICAL TRIAL PROGRAM                                                                         |  | 5   
|         |  | GOVERNMENTAL REGULATION AND PRODUCT APPROVAL                                                   |  | 6   
|         |  | RESEARCH AND DEVELOPMENT AND COLLABORATIVE ARRANGEMENTS                                        |  | 8   
|         |  | PATENTS AND TRADE SECRETS                                                                      |  | 10  
|         |  | COMPETITION                                                                                    |  | 13  
|         |  | EMPLOYEES                                                                                      |  | 14  
|         |  | RISK FACTORS                                                                                   |  | 16  
|         |  | GLOSSARY OF SCIENTIFIC TERMS                                                                   |  | 20  
|2.       |  | PROPERTIES                                                                                     |  | 20  
|3.       |  | LEGAL PROCEEDINGS                                                                              |  | 20  
|4.       |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            |  | 20  
|         | 
|PART II  |  | 21                                                                                            
|         |  |                                                                                               
|5.       |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                          |  | 21  
|6.       |  | SELECTED FINANCIAL DATA                                                                        |  | 22  
|         |  | SUMMARY FINANCIAL INFORMATION                                                                  |  | 22  
|7.       |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |  | 23  
|         |  | OVERVIEW                                                                                       |  | 23  
|         |  | RESULTS OF OPERATIONS                                                                          |  | 23  
|         |  | LIQUIDITY AND CAPITAL RESOURCES                                                                |  | 26  
|         |  | CRITICAL ACCOUNTING POLICIES                                                                   |  | 29  
|         |  | R&D DISCLOSURE                                                                                 |  | 30  
|7A.      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     |  | 30  
|8.       |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    |  | 30  
|9.       |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           |  | 30  
|9A.      |  | CONTROLS AND PROCEDURES                                                                        |  | 31  
|         | 
|PART III |  | 31                                                                                            
|         |  |                                                                                               
|10.      |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             |  | 31  
|11.      |  | EXECUTIVE COMPENSATION                                                                         |  | 31  
|12.      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 31  
|13.      |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |  | 31  
|14.      |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                         |  | 31  
|         | 
|PART IV  |  | 32                                                                                            
|         |  |                                                                                               
|15.      |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                               |  | 32  



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PART I



|1. | BUSINESS
|-- | --------



INTRODUCTION



OXiGENE, Inc.
(OXiGENE or the Company), The Vascular Targeting Company, is a biopharmaceutical company engaged in research into and the development of products for use in the treatment of cancer and certain ocular diseases. The
Companys efforts in oncology are focused on developing products for application as direct cancer treatment agents, particularly vascular targeting agents, or VTAs. These agents attack a tumors network of existing and emerging blood
vessels, which are its main life support system. The Company is also investigating the use of certain products for other applications in the field of ophthalmology, in particular age-related macular degeneration and myopic macular degeneration.
Certain Company activities are conducted with third parties, either through licensing arrangements or collaborations. Currently, OXiGENE has, in various stages of clinical and pre-clinical development, multiple therapeutic product candidates that
were derived from its principal vascular targeting platform.



Combretastatin. The Companys primary technology is based on Combretastatin. Combretastatins are a family of proprietary small molecule anti-tumor VTAs that attack the existing blood vessels which have recently formed within,
and to some extent the blood vessels leading to, a tumor, thereby rapidly starving large regions of a tumor of the oxygen and nutrients required to survive and grow. Blood vessels in normal tissue that are mature are much more resistant to the
action of Combretastatin. OXiGENEs lead Combretastatin compound, CA4P, targets the inner areas of the tumor, which are believed to be resistant to conventional cancer therapies such as chemotherapy and radiation, as well as emerging antibody
and protein based therapeutics. The Company is actively developing its next-generation Combretastatin-based product, OXi4503, that not only targets the blood vessels at the central core of the tumor but also appears to affect the vessels and tumor
cells at the periphery. Currently, OXiGENE has, in various stages of pre-clinical and clinical development, other therapeutic product candidates.



VTAs, like Combretastatin, are distinguishable from anti-angiogenesis agents because VTAs directly target the blood vessels already formed in tumors.
Products that are developed as anti-angiogenesis agents attempt to prevent the formation of new tumor blood vessels as opposed to attacking existing blood vessels that are already present in a tumor. The Company believes that anti-angiogenesis
products, if successful, may prevent the continued growth of tumors, but may not directly result in the death of existing cancer cells. In contrast, Combretastatin-based CA4P rapidly shuts down blood flow to larger regions of the tumor, resulting in
extensive tumor cell death. Moreover, because it targets the regions of the tumor believed resistant to many other treatments, it has the potential to enhance the effectiveness of currently available cancer therapies.



Combretastatins are a family of naturally occurring, highly active
substances, of which OXiGENEs lead compound is CA4P. CA4P is an inactive synthetic derivative that becomes activated following entry into the blood stream, and then targets the tumors blood vessels. Studies directed at understanding how
Combretastatin works shows CA4P can have dramatic effects on the shape of newly formed endothelial cells, such as those formed in malignant tumors, but less effect on quiescent endothelial cells that are found in healthy, normal tissues. For
example, in vitro effects of CA4P on tubulin cytoskeleton and endothelial cell shape include rapid changes in endothelial cell shape that dramatically alter capillary blood flow and, as a result, cause an occlusion of blood vessels within tumors.
The eventual result is reduction of blood flow, which is critical to tumor maintenance and growth, and consequently, a cascade of tumor cell death by nutrient and oxygen deprivation. Certain Combretastatins were discovered by Dr. George R. Pettit,
Regents Professor of Chemistry at Arizona State University, or ASU. ASU has granted the Company an exclusive, world-wide, royalty-bearing license with respect to the commercial rights to particular Combretastatins. Specific Combretastatins have been
successfully tested in vitroand in vivo in laboratories in the United States and Europe.



CA4P



The Companys most promising Combretastatin product, CA4P, is currently being tested in five human clinical trials in oncology, and one human
clinical trial in ophthalmology, after having completed its initial three Phase I clinical trials in approximately 100 patients in the United States and the United Kingdom.



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In the field of oncology, CA4P has completed a Phase Ib combination trial with the widely used
chemotherapeutic drug Carboplatin at the University of Pennsylvania and has entered into a Phase I/II combination clinical trial with Carboplatin and Paclitaxel in advanced ovarian cancer at the Mount Vernon Hospital in London, United Kingdom. In
addition, a Phase II single agent trial in advanced and metastatic anaplastic thyroid cancer (ATC) and a Phase I/II combination trial in newly diagnosed ATC are both underway at the Ireland Cancer Center at University Hospitals of
Cleveland and the Josephine Ford Cancer Center in Detroit. A Phase I/II combination trial with radiotherapy in head & neck, lung and prostate cancers is being conducted at the Mount Vernon Hospital in London, United Kingdom, and a Phase Ib
combination trial with a monoclonal antibody in colorectal cancer is underway at the Mount Vernon and Royal Free Hospitals in the United Kingdom.



The Company has also broadened its research efforts into the field of ophthalmology whereby CA4P has been accepted by the Foundation for Fighting
Blindness (FFB), the premier eye charity in the United States, for the funding of a Phase I/II clinical trial in age-related macular degeneration (AMD) at the Wilmer Eye Institute of the Johns Hopkins School of Medicine. The Company also plans to
file a new investigational drug application (IND) with respect to CA4P for the treatment of myopic macular degeneration (MMD) in 2004.



Other VTA Compounds



The Company has an active discovery program for its next generation of VTA compounds. OXi4503, a compound from the Combretastatin family, has advanced
into animal toxicology testing and is targeted to enter into clinical trials in 2004. Early pre-clinical research with OXi4503 suggests that it not only shuts down blood flow to the central core of the tumor much like CA4P, but it is then
metabolized into a compound which selectively kills the remaining tumor cells at the periphery of the tumor. Another addition to the Companys pipeline of next generation VTAs is OXi6197, which was discovered by researchers at Baylor
University. As part of the collaboration with Baylor University, OXiGENE retains the exclusive rights to OXi6197, which has been accepted by the National Cancer Institute (NCI) for the funding of various in vitro and in vivo
experiments. Most recently, another compound discovered at Baylor University, OXi8007, has shown to exhibit vascular shutdown properties and has been positioned as a second-generation ophthalmology candidate.



The Companys strategy is to develop innovative therapeutics for
oncology and to leverage its technology in the field of ophthalmology. The principal focus of the Company, in the foreseeable future, is to complete the clinical development of its lead compound, CA4P, as well as to advance the pre-clinical
development of its next generation VTAs, OXi4503, OXi6197 and OXi8007. To advance its strategy, the Company has established relationships with universities, research organizations and other institutions in these fields. The Company intends to
broaden these relationships, as well as making selective additions in its in-house research, development and clinical staff. The Company plans to market its products, if and when approved, generally through strategic alliances and joint ventures
with unaffiliated pharmaceutical companies. See   Research and Development and Collaborative Arrangements.



The Benzamide Platform. The benzamide technology was originally developed by the Company around the inhibition of DNA repair processes. The third
generation benzamide is Declopramide (formerly OXi-104). The Company licensed to Active Biotech AB of Sweden its benzamide technology rights (other than Declopramide) in November 2001. In April 2002, OXiGENE and Active entered into an additional
licensing arrangement whereby Active acquired exclusive patent rights to certain anti-cancer and anti-inflammatory uses of Declopramide. The grant of this exclusive license was subject to fulfillment of certain research, clinical development and
marketing obligations by Active. In January 2004, Active formally notified OXiGENE that it had discontinued all research efforts and has terminated both license agreements. OXiGENE has concluded all research and clinical development of Declopramide.



General. The Company is a Delaware corporation that was
originally incorporated in the state of New York in 1988 and reincorporated in the state of Delaware in 1992. The Company has its corporate office in the United States at 230 Third Avenue, Waltham, Massachusetts 02451 (telephone: 781-547-5900; fax:
781-547-6800).



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In June 2001, the Company moved its corporate headquarters to Watertown, Massachusetts from Stockholm,
Sweden. In September 2003, the Company relocated its corporate headquarters from Watertown, Massachusetts to Waltham, Massachusetts. On December 31, 2001, the Company closed its Stockholm, Sweden office, and effective December 2003, completed the
liquidation of its wholly-owned subsidiary, OXiGENE Europe AB, in Sweden. The Company maintains a small employee and facilities base, with administrative and scientific functions, which include among other things, product development, regulatory
oversight and clinical testing, being managed from its Waltham, Massachusetts headquarters. Substantial scientific activities are conducted pursuant to collaborative arrangements with universities. Regulatory and clinical testing functions are
generally the subject of contracts with third party, specialty enterprises. References in this Annual Report to OXiGENE or the Company refer to OXiGENE, Inc. and, prior to its liquidation, the Companys wholly-owned
Swedish subsidiary OXiGENE Europe AB.



TECHNOLOGY OVERVIEW



OXiGENEs technology platform consists of a family of VTAs, currently being evaluated both in human clinical trials as well as pre-clinical animal experiments. Anti-tumor vascular targeting is a cancer therapy that departs
significantly from other current approaches to treating cancer. In contrast to traditional methods involving a direct attack on cancer cells, anti-tumor VTAs attack a tumors life support system, a network of existing and emerging blood
vessels. Based on pre-clinical studies, management believes that VTAs will be complementary to existing and emerging cancer treatments. The Company has also expanded its clinical research with respect to its lead VTA, CA4P, by advancing into
ophthalmic indications.



According to Cancer Research UK, a
cancer organization in the United Kingdom, nearly 90 percent of all cancers, more than 200 types, are solid tumors dependent on a developing vascular supply for their growth and survival and, therefore, are potential candidates for treatment with
VTAs. Despite advances in treatment with surgery, radiation and chemotherapy, serious problems with those conventional treatments persist. Many solid tumors remain incurable, especially when the tumor has metastasized or is a large mass at the time
of diagnosis. Surgery may not be capable of treating certain tumors because of their location, and chemotherapy and radiation may not be effective in attacking the tissue core of the tumor. Also, and importantly, chemotherapy and radiation
treatments damage healthy cells along with cancerous cells, resulting in serious side effects for patients and, in many instances, eventually inducing drug resistance in the tumor.



Combretastatin: An Anti-Tumor Vascular Targeting Agent. Combretastatin compounds are organic small molecules found
naturally in the bark of the African Bush Willow (Combretum caffrum). They were discovered and isolated over a decade ago by George R. Pettit, Ph.D. of Arizona State University. In May 1997, OXiGENE and ASU entered into an option agreement to
develop and test Combretastatin. The agreement granted OXiGENE an option to acquire an exclusive, world-wide, royalty-bearing license with respect to the family of Combretastatins commercial rights, which OXiGENE exercised and subsequently
signed a license agreement with respect to on August 2, 1999.



OXiGENEs lead Combretastatin family therapeutic candidate, CA4P, is a completely synthetic water-soluble derivative of Combretastatin A-4. It is the lead compound in a new class of drugs of anti-tumor VTAs that can induce extensive
cell death within solid tumors by selectively targeting and attacking existing tumor-specific blood vessels. The Companys most promising Combretastatin product, CA4P, has completed its initial three Phase I clinical trials in approximately 100
patients in the United States and the United Kingdom (UK) combined. In the field of oncology, CA4P has recently completed a Phase Ib combination trial with the widely used chemotherapeutic drug Carboplatin at the University of Pennsylvania and has
entered into a Phase I/II combination clinical trial with Carboplatin and Paclitaxel in advanced ovarian cancer at the Mount Vernon Hospital in London, UK. In addition, a Phase II single agent trial in regionally advanced and/or metastatic ATC and a
Phase I/II combination trial in newly diagnosed ATC are both under way at the Ireland Cancer Center at University Hospitals of Cleveland and the Josephine Ford Cancer Center in Detroit. A Phase I/II combination trial with radiotherapy in head &
neck, lung and prostate cancers is being conducted at the Mount Vernon Hospital in London, UK. Finally, a Phase Ib combination trial with the radiolabeled anti-CEA monoclonal antibody A5B7 in colorectal cancer is underway at the Mount Vernon and
Royal Free Hospitals in the UK.



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The Company has broadened its research efforts into the field of ophthalmology whereby CA4P has been
accepted by the Foundation Fighting Blindness, the premier eye charity in the United States, for the funding of a Phase I/II clinical trial in age-related macular degeneration (AMD) at the Wilmer Eye Institute of the Johns Hopkins School of
Medicine. The Company also plans to file an IND for the treatment of MMD in 2004.



In December 2001, the Company announced the selection of its next generation VTA, OXi4503. OXi4503 is a VTA with a profile of activity that appears distinct from CA4P in that it appears to be able to cause tumor
regressions in a number of experimental tumor systems when administered as a single agent. While CA4P has demonstrated the ability to block blood flow to most central parts of the tumor when it is used alone, regrowth can occur in many cases from a
narrow rim of tumor cells surviving at the periphery adjacent to normal tissue. Current research indicates that in addition to the effects on blood vessels penetrating the tumor, OXi4503 is metabolized to a compound, which appears to attack the
surviving tumor cells and blood vessels in the tumor periphery. A Phase I dose escalating clinical trial is expected to be initiated in 2004. The Company has executed agreements with Evotec OAI Ltd. for the production of OXi4503.



In March 2003, the Company was awarded a U.S. patent covering the method of
treating vascular proliferative diseases with drugs designed to seek out and destroy abnormal blood vessels. U.S. Patent No. 6,538,038, Compositions and Methods for Use in Vascular Targeting Destruction, covers the use of multiple
Vascular Targeting Agents (VTAs) to treat cancer, macular degeneration and other illnesses characterized by the formation of abnormal blood vessels.



In June 2003, the U.S. Food and Drug Administration (FDA) granted fast track designation to the Companys lead tumor-starving compound, CA4P, for the
treatment of regionally advanced and/or metastatic ATC. The FDAs fast track program is intended to facilitate the development and expedite the review of new drugs intended to treat life-threatening conditions for which there is no approved
therapy. The fast track designation applies to the combination of the drug candidate and a specific disease indication.



In July 2003, CA4P was awarded orphan drug status for the treatment of advanced ATC and for the treatment of medullary, Stage IV papillary and Stage IV
follicular thyroid cancers. Orphan drug designations are granted to provide economic incentives to stimulate the research, development and approval of promising products that treat rare diseases. The Orphan Drug Act guarantees seven years of market
exclusivity to the first sponsor that obtains market approval for an orphan drug-designated product. It also provides tax credits to defray the cost of research conducted to generate the data required for marketing approval, funding to support
clinical trials and assistance in designing research studies.



In July 2003, the results of independent animal studies demonstrating the potential role of the Companys lead compound, CA4P, in preventing and treating certain retinal degenerative diseases were published in the peer-reviewed journal
Investigative Ophthalmology and Visual Science. The studies showed that CA4P suppressed the development of subretinal neovascularization in rhodopsin/VEGF transgenic mice and suppressed the development of choroidal neovascularization at Bruchs
membrane rupture sites.



As part of the Companys ongoing
research program seeking new chemical entities with promising activity against solid tumors, the vascular targeting agent OXi6197 has recently been selected for continued pre-clinical development. This compound is currently in pre-clinical
evaluation with the National Cancer Institute. In addition, researchers at Baylor University continue to work on discovering additional compounds as part of the research collaboration with OXiGENE. One such compound is OXi8007, which has been shown
to exhibit vascular shutdown properties and is being developed as a second-generation ophthalmology candidate owing to its enhanced tolerability in animal models. These compounds are structurally distinct from the Combretastatin structures and have
provided activity in a number of experimental tumor systems.



While angiogenesis inhibitors (anti-angiogenesis agents) and anti-tumor VTAs, such as Combretastatin, both target a tumors blood vessels, they differ in their approach and in their end result. With anti-angiogenesis agents, the aim is
to prevent tumor growth by inhibiting the formation of new tumor-specific blood vessels that sprout and feed the tumor. These agents may have to be used chronically over months and years to prevent further growth of tumor mass. As the tumor is not
destroyed, it can form new feeder blood vessels after treatment has stopped. Anti-tumor VTAs, on the other hand, aim to attack tumors rapidly by selectively disrupting their existing



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blood vessel structure, particularly those within the tumor, creating a rapid and irreversible shutdown of these blood vessels.



The Company believes that shutting off a tumors blood supply is an
efficient therapeutic strategy and that there are many advantages to VTAs. First, many thousands of tumor cells depend on every blood vessel and thus damage to a relatively few number of endothelial cells, which line the blood vessels, could stop
flow and trigger a cascade of tumor cell death. Second, the endothelial cells that line the blood vessels and are the primary targets of VTAs, reside adjacent to the blood stream and thus delivery problems that are common with conventional
chemotherapy, may be overcome. Third, since endothelial cells are not transformed, treatment-resistant mutations are unlikely to emerge. Finally, recent advances in technologies which can accurately measure blood flow in a tumor allows the Company
to establish early on in the clinical trial process that VTAs have biological activity. The fact that Combretastatin does not target fundamental processes associated with cell growth may avoid the adverse side effect profiles associated with
currently available treatments.



Since other disease
pathologies are associated with the abnormal development of new vessels, VTAs may well have application outside of cancer therapy. Promising pre-clinical data with CA4P in animal models of ocular disorders associated with neovascularization have led
the Company in conjunction with the FFB to evaluate the effects of CA4P in wet AMD with investigators at the Wilmer Eye Institute of the Johns Hopkins School of Medicine and, in July 2003, the Company launched a Phase I/II clinical trial of CA4P in
wet AMD. The Company also has decided to apply for an IND with respect to CA4P for ophthalmic indications, and enter into one or more additional ocular clinical trials, in 2004.



CLINICAL TRIAL PROGRAM



Combretastatin A-4 Prodrug. The Company began testing CA4P in three Phase I/II dose escalation clinical trials during the fourth quarter of 1998 and the first quarter of 1999. Each of these clinical trials, which examined the safety,
pharmacokinetics and mode of action of CA4P using three different dose regimens in patients with advanced solid cancers, has been completed. The key findings of these clinical trials are summarized below:



| | (1) | CA4P was well tolerated and a consistent maximum tolerated dose was determined in each clinical trial.
| | --- | ------------------------------------------------------------------------------------------------------



| | (2) | Side effects were manageable and did not display the typical toxicities associated with chemotherapeutic agents.
| | --- | ----------------------------------------------------------------------------------------------------------------



| | (3) | It was determined that CA4P had a reasonable therapeutic index and blood flow reduction in tumors was observed below, up to, and beyond the maximum tolerated dose.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | There is data to support biological and vascular activity in humans.
| | --- | --------------------------------------------------------------------



| | (5) | Promising signs of clinical effects were observed with one complete response, one partial response, two cases of measurable tumor size reduction and three cases of long-term
stabilization of disease.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Following the
successful completion of these three Phase I trials, CA4P progressed to the next stage of clinical evaluation. In early 2002, CA4P entered into a Phase Ib combination trial with the widely used chemotherapeutic drug, Carboplatin, at the University
of Pennsylvania to treat various solid tumors. Pre-clinical data suggests that CA4P in combination with Carboplatin may demonstrate a high degree of synergistic effect on tumors. This dose escalation study evaluated the safety and compatibility of
these drugs as well as the potential for a synergistic effect against a variety of solid tumor types. The study was completed in 2003.



In 2002 and January 2003, OXiGENE announced the start of five new clinical trials aimed at the further clinical development of CA4P both as a single agent
and in combination with other cancer treatment modalities. In addition, a trial using CA4P in an ophthalmic indication was begun in 2003. This trial represents OXiGENEs expansion of CA4P into non-oncology indications.



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A Phase II single agent trial was initiated at the Ireland Cancer Center at University Hospitals of
Cleveland to treat a rare form of thyroid cancer, anaplastic thyroid carcinoma (ATC). A complete response in this tumor type was achieved in one of the Phase I studies. This trial is to evaluate the mean survival time of patients with regionally
advanced and/or metastatic ATC treated with CA4P in comparison to what has historically been a 4-6 month mean survival time with conventional therapy. The clinical trial centers have been expanded to include the Josephine Ford Cancer Center in
Detroit, and additional centers are being added.



Another Phase
II study for ATC was initiated at the Ireland Cancer Center at University Hospitals of Cleveland and the Josephine Ford Cancer Center. This trial is to evaluate the mean survival time of patients with newly diagnosed ATC undergoing treatment with
CA4P as part of a multimodality regimen, that is, in combination with the conventional chemotherapeutic agents doxorubicin and cisplatin as well as radiotherapy. Additional clinical centers are to be added to this trial. The Company monitors the
clinical trials being performed at the Ireland Cancer Center.



A Phase I/II combination trial with radiotherapy in head & neck, lung and prostate cancers at the Mount Vernon Hospital in London, UK received clearance from the UKs regulatory authority, the Medicines Control Agency. Pre-clinical
data suggests that CA4P in combination with radiotherapy may demonstrate a high degree of synergistic effect on tumors. The trial is an increase dosing regimen designed to evaluate the safety of the combination and to explore the potential effects
in a limited selection of tumor types that routinely employ radiotherapy as a treatment.



A Phase Ib/II combination trial with Carboplatin, Paclitaxel and CA4P in ovarian and all types of cancers at the Mount Vernon Hospital in London, UK also received clearance from the Medicines Control Agency. This
trial is to establish the optimal schedule, maximum tolerated dose and recommended Phase II dose for the combination of CA4P and Carboplatin, and the combination of CA4P and Paclitaxel, as well as the safety and tolerability of the
CA4P-Carboplatin-Paclitaxel combination. In addition, preliminary data on the anti-tumor efficacy of the CA4P-Carboplatin-Paclitaxel combination will be obtained. The Company relies on INC Research to monitor the clinical trials being performed at
Mount Vernon Hospital. The Company intends to initiate an advanced clinical trial in ovarian cancer combining CA4P with Carboplatin and Paclitaxel.



A Phase Ib study to evaluate the combination of CA4P with the radiolabeled anti-CEA monoclonal antibody A5B7 is now underway at the Mount Vernon and Royal
Free Hospitals in the UK under the auspices of the Cancer Research-UK. Studies with the combination of these agents in pre-clinical xenograft models demonstrated a high degree of synergy. Patients in this study will include only those with advanced
gastrointestinal carcinoma expressing the CEA antigen. The study will employ two dose levels of CA4P and three dose levels of the antibody. In addition to assessing the safety profile of the combination, the relationship between efficacy and tumor
blood flow reduction will also be determined.



In 2003, OXiGENE
announced the initiation of a Phase I/II clinical trial for the non-life threatening ocular disease, wet age-related macular degeneration (wet AMD). In this disease setting, the aim of treatment is not the death and eradication of tumor cells, but
the blood vessels themselves. The abnormally growing blood vessels can cause irreversible damage to patients vision and lead to blindness. This is a dose escalating study conducted at the Wilmer Eye Institute of the Johns Hopkins School of
Medicine (Baltimore, MD) to evaluate the safety of CA4P in patients with AMD. Patients safety and tolerability is evaluated by means of visual acuity, fluorescein angiography, and optical coherence tomography.



GOVERNMENTAL REGULATION AND PRODUCT APPROVAL



Research, the first step in biopharmaceutical product development, initially involves optimization of leading chemical structures into leading compounds. Once a compound has been identified, the pre-clinical phase
commences. In that phase, certain selected compounds are tested for therapeutic potential in a number of animal models and undergo laboratory testing, with the objective of characterizing the investigated compounds in relation to existing treatment
and obtaining a first indication of the compounds development potential. Successful pre-clinical work may lead to the filing of an Investigational New Drug application (IND), or a foreign equivalent, with the relevant regulatory
authorities. The grant of an IND provides permission to administer the compound to humans in clinical trials. Several years of research and testing generally are necessary before an IND may be



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obtained and clinical development may commence. There can be no certainty that submission of an IND will result in FDA authorization to commence clinical
trials or that authorization of a particular phase of a human clinical trial program will result in authorization of other phases or that the completion of any clinical trials will result in FDA approval.



The clinical development of new drugs is subject to approval by the health
authorities in individual countries, which have broad discretionary powers. For example, in the United States, the FDA reviews the results of all clinical studies and if it becomes aware of one or more significant safety issues, or convincing
evidence that the therapy is not effective for the chosen indication, it may discontinue a clinical trial. The requirements regarding the conduct and duration of a clinical phase vary considerably among countries.



For life threatening and severely debilitating conditions where products
provide meaningful therapeutic benefit over existing treatments or where no satisfactory treatment currently exists, however, there are several FDA programs offered that can aid in the clinical development of a compound.



The first of these is the Fast Track Approval program, whereby the regulatory
dossier for a specific drug and indication can receive priority review and potential approval to market in a shorter timeframe. It is not unusual for New Drug Application (NDA) filings to take 12 months or more for approval to market. However, under
the Fast Track Approval/Priority Review programs, approvals (or an FDA decision) may take as little as six months.



The second FDA program is called the Accelerated Drug Approval Program, in which drugs intended to treat life-threatening or severely debilitating
conditions can receive approval to market based on a surrogate endpoint. That is to say, the sponsor must show that the drug is safe for a specific indication and has a meaningful effect on a disease variable indicative of a beneficial outcome for
patients. For example, in the oncology setting, if a sponsor can show that a certain degree of tumor response is indicative of patient survival, an NDA filed under this program may be approved to market the drug based on tumor response data. The
sponsor would then be obligated to conduct additional clinical trials to indeed demonstrate and confirm the survival benefit.



Finally, for indications that are life threatening or severely debilitating and have relatively small numbers of people with the condition, sponsors may
apply for Orphan Drug Status. This designation provides an incentive to develop treatments for relatively rare conditions by giving the sponsor a seven-year marketing exclusivity upon marketing approval as well as a variety of tax benefits and
funding opportunities.



The time periods mentioned below are
indications only that may vary significantly and be materially longer. Upon successful completion of the development program, an NDA, or a foreign equivalent, may be submitted to the authorities, and, if approved, the product may then be marketed
upon the terms and conditions of such approval. Submission of an NDA does not assure that the FDA will approve a product for manufacturing and marketing. Clinical trials are typically conducted in three sequential phases, but the phases may overlap.



Phase I. The purpose of a Phase I trial is to evaluate
the toxicity of the tested compound and to establish how the tested compound is tolerated and decomposed in the human body. A Phase I clinical trial traditionally tests the compound for safety (adverse effects), dosage tolerance, metabolism,
distribution, excretion and pharmacodynamics in a small group of healthy individuals. In certain settings such as oncology, where the disease is life threatening, cancer patients may participate in Phase I trials. A Phase I trial may last up to one
year.



Phase Ib. In some therapeutic areas, drugs are
often combined in the hope that an enhanced effect can be realized that is greater than giving either of the drugs separately. When developing drugs in this setting, safety trials are performed utilizing the drug combination to evaluate their
compatibility. A panel of tests similar to those used in Phase I are used in these types of trials. A Phase Ib trial may last up to one year.



Phase II. A Phase II trial marks the beginning of clinical trials on a limited number of patients to (1) determine the efficacy of the compound for
specific indications, (2) determine dosage tolerance and optimal dosage and (3) identify possible adverse effects and safety risks. The trials also seek to establish the most effective route of administration. Trials are conducted on a larger, but
still limited number of carefully monitored patients. A Phase II trial may last up to two and one-half years.



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Phase III. If preliminary evidence suggesting effectiveness has been obtained during Phase II
trials and the compound is found to have an acceptable safety profile in Phase II trials, a Phase III trial may be undertaken. A Phase III trial is an extensive clinical trial in a large number of patients. The number of patients in a Phase III
trial depends to a great extent on the clinical indications that the drug addresses. Trials are often double-blinded and involve a detailed statistical evaluation of test results. The compound is tested against placebos and existing treatment, if
such treatment is available. The product is manufactured in commercial quantities (batch manufacturing) and tested for shelf life, or stability, and further evaluation of the clinical efficacy and safety of the compound takes place. A Phase III
trial may last several years and is the most time-consuming and expensive part of a clinical trial program. There can be no assurance that a Phase I, Phase II or Phase III trial will be completed successfully within any specified time period, if at
all, with respect to any of the Companys potential products.



OXiGENE, like other biopharmaceutical companies, will be subject to strict controls covering the manufacture, labeling, supply and marketing of any products it may develop and market. The most important regulation is the requirement to
obtain and maintain regulatory approval of a product from the relevant regulatory authority to enable that product to be marketed in a given country. Further, OXiGENE is subject to strict controls over how clinical trials of its potential
pharmaceutical products are conducted.



The regulatory
authorities in each country may impose their own requirements and may refuse to grant, or may require additional data before granting an approval even though the relevant product has been approved by another authority. The United States and European
Union countries have very high standards of technical appraisal and, consequently, in most cases a lengthy approval process for pharmaceutical products. The time required to obtain such approval in particular countries varies, but if obtained
generally takes from six months to several years, if approval is received at all, from the date of application, depending upon the degree of control exercised by the regulatory authority, the duration of its review procedures, and the nature of the
product. The trend in recent years has been towards stricter regulation and higher standards.



In the United States, the primary regulatory authority is the FDA. In addition to regulating clinical procedures and processes, the FDA investigates and approves market applications for new pharmaceutical products and
is responsible for regulating the labeling, marketing and monitoring of all pharmaceutical products, whether currently marketed or under investigation. Upon approval in the United States, a drug may be marketed only for the approved indications in
the approved dosage forms and dosages. In addition to obtaining FDA approval for each indication to be treated with each product, each domestic drug manufacturing firm must register with the FDA, list its drug products with the FDA, comply with
current Good Manufacturing Practice (cGMP) requirements and be subject to inspection by the FDA. Foreign manufacturing firms distributing drugs in the United States also must comply with cGMP requirements and list their products with the
FDA and are subject to periodic inspection by the FDA or by local authorities under agreement with the FDA.



In Europe, the European Committee for Proprietary Medicinal Products provides a mechanism for European Union-member states to exchange information on all
aspects of product licensing and assesses license applications submitted under two different procedures (the multistate and the high-tech concentration procedures). The European Union has established a European agency for the evaluation of medical
products, with both a centralized community procedure and a decentralized procedure, the latter being based on the principle of mutual recognition between the member states.



RESEARCH AND DEVELOPMENT AND COLLABORATIVE ARRANGEMENTS



The Companys strategy is to develop innovative therapeutics for oncology and to leverage its technology in the field of ophthalmology. The principal focus of the Company, in the foreseeable future, is to
complete the clinical development of its lead compound, CA4P, as well as to advance the pre-clinical development of its next generation VTAs, OXi4503, OXi6197 and OXi8007. To advance its strategy, the Company has established relationships with
universities, research organizations and other institutions in these fields. The Company intends to broaden these relationships, rather than expand its in-house research, development and clinical staff. In general, these programs are created,
developed and controlled by internal Company management. Currently, however, the Company has collaborative agreements and arrangements with a number of institutions in the United States and abroad, which it utilizes to perform the day-to-day
activities associated with drug development. These institutions consist of the following:



| |  | University of Lund in Lund, Sweden;
| | - | -----------------------------------



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| |  | Gray Cancer Institute in Middlesex, United Kingdom;
| | - | ---------------------------------------------------



| |  | Baylor University in Waco, Texas; and
| | - | -------------------------------------



| |  | Arizona State University in Tempe, Arizona.
| | - | -------------------------------------------



In October 2001, the Company announced that it had regained its rights to the Combretastatin anti-tumor compounds licensed to BMS upon the agreement of
the parties to conclude the Research Collaboration and License Agreement established in December 1999. The Company recognized approximately $6.9 million of deferred revenue as revenue in the fourth quarter of 2001 as a result of the agreement. In
addition, the Company recorded an accrued liability of approximately $0.5 million related to certain inventory and royalty payments negotiated with BMS. In February of 2002, the Company and BMS finalized their Termination Agreement.



In December 2001, the Company announced selection of its next generation VTA,
OXi4503. OXi4503 is a VTA with a profile of activity that appears distinct from CA4P in that it appears to be able to cause tumor regressions in experimental tumor systems with single agent activity. While CA4P has demonstrated the ability to block
blood flow to the tumor in all but the periphery of a tumor, OXi4503 appears to attack blood vessels in all regions of the tumor including the periphery.



In June 2002, the Company announced that it had reached agreement with the NCI for funding of pre-clinical studies of OXi6197, a VTA discovered through
its collaboration with Baylor University. The NCI has conducted in vitro anti-tumor activity and selectivity studies with various tumor types. Additionally, in vivo xenograft studies were performed to evaluate the biological activity
of the compound. When administered intravenously, OXi6197 is designed to reduce blood flow in newly formed tumor vasculature, triggering the death of downstream tumor cells. In January 2004, the NCI informed OXiGENE that it plans to perform
additional pre-clinical studies to determine the potential for moving OXi6197 into clinical studies.



In October 2002, the Company announced that it had reached an agreement with the FFB. The FFB is a nationwide charitable organization whose mission is to
discover the causes, treatments and cures for retinal degenerative diseases. Under the agreement, the FFB has agreed to fund a physician-sponsored Phase I/II human clinical trial. The study will evaluate the safety and effectiveness of CA4P as a
treatment for a retinal disease known as wet AMD. If the research funded by FFB results in approval by the FDA of a new drug application, the Company must pay FFB up to an aggregate amount of $250,000. The term of this agreement has been extended to
October 30, 2005. No payments have been made to FFB to date.



The Company has secured a technology license from Arizona State University (ASU). The ASU license is an exclusive, world-wide, royalty-bearing license with respect to the commercial rights to particular Combretastatins. Under
the ASU license, the Company has the right to grant sublicenses. ASU is entitled to royalty and milestone payments under the license agreement. The Company bears the costs of preparing, filing, prosecuting and maintaining all patent applications
under the ASU license. Under the license agreement, the Company has agreed to diligently proceed with the development, manufacture and sale of products using the licensed technology. ASU has the first responsibility of enforcing patents under the
license agreement. Either party may terminate the license agreement upon material default or bankruptcy by the other party. Payments made to ASU to date have amounted to $1,640,000. One remaining payment of $160,000 is to be made on June 1, 2004.
The agreement is to terminate on December 31, 2014 or within two months written notice of termination from the Company. The Company is in compliance with the license.



The Company also has a license with Baylor University. The Baylor license is an exclusive license to all novel compositions
developed for the treatment of vascular disorders, inflammation, parasitic diseases and infections, fungal diseases and infections and/or cancer. The Company has the right to grant sublicenses under the Baylor license. The agreement with Baylor
stipulates that royalties will be paid by the Company should sales be generated through use of Baylors compounds. The Company is not required to pay Baylor for use of Baylors compounds aside from this royalty mechanism. The Company shall
be entitled to file, prosecute and maintain patent applications on products for which the Company has a



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license. The Company had made a one-time payment of $50,000 for the licensing fee that was used as a credit against research expenses generated by Baylor.
The agreement will terminate on June 1, 2009 or within 90 days of written notice of material breach of the agreement by either party. The Company is in compliance with the Baylor license.



In May 2003, the Company announced the discovery of its new drug candidate, OXi8007. The molecular structure of OXi8007,
which was discovered through the collaboration with Baylor University, is distinct from the Companys Combretastatin family of tumor-starving compounds (CA4P and OXi4503) and from its OXi6197 anti-tumor agent.



In May 2003, Cancer Research UK agreed to complete pre-clinical studies on
OXi4503 and to then move the compound into Phase I human clinical trials. Cancer Research UK is Europes leading cancer charity, dedicated to curing, treating and preventing the disease through world-class research. The charity relies almost
entirely on voluntary donations from the public to fund the vital work of its 3,000 scientists, doctors and nurses.



The Company incurred approximately $6.1 million, approximately $5.1 million and approximately $3.9 million in research and development expenses in the
years ended December 31, 2001, 2002 and 2003, respectively. Most of these amounts represent external research and development expenditures.



Unless and until the Company enters into any new material collaborations, with respect to CA4P and/or the related Combretastatin family of compounds, the
Company intends to advance CA4P through the next stages of clinical trials and development independently.



PATENTS AND TRADE SECRETS



To
date, OXiGENEs principal products have been based on certain previously known compounds. The Company anticipates that any products it develops hereafter may include or be based on the same or other compounds owned or produced by unaffiliated
parties, as well as synthetic compounds it may discover. Although the Company expects to seek patent protection for any compounds it discovers, there is no assurance that any or all of them will be subject to effective patent protection. Further,
the development of regimens for the administration of pharmaceuticals, which generally involve specifications for the frequency, timing and amount of dosages, has been, and the Company believes, will continue to be, important to the Companys
efforts, although those processes, as such, may not be patentable.



Patent Protection. It is the Companys policy to seek patent protection in the United States and in foreign countries. Primarily because of different patent laws in various jurisdictions, the scope of, and hence the protection
afforded by, any patents OXiGENE may receive may vary even though they relate essentially to the same subject matter.



The patent position of firms in the Companys industry generally involves highly complex legal and other issues, resulting in both an apparent
inconsistency regarding the breadth of claims allowed in United States patents and general uncertainty as to their legal interpretation and enforceability. Accordingly, there can be no assurance that patent applications owned by the Company will
result in patents being issued or that, if issued, the patents will afford competitive protection.



Further, there can be no assurance that products or processes developed by the Company will not be covered by third party patents, in which case continued
development and marketing of those products or processes could require a license under such patents. There can be no assurance that if a legal action were to be brought against the Company on the basis of any third party patents, such action would
be resolved in the Companys favor. Such an unfavorable result against the Company could result in monetary damages and injunctive relief. Further, even a favorable result could cause expenditure of substantial monetary and other resources in
connection with the Companys defense against any such action.



Granted Patents and Pending Applications. The following is a brief description of the Companys current patent position, both in the United States and abroad. As United States patent applications are generally maintained in
secrecy by the United States Patent and Trademark Office for at least some time after filing and because



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publication of discoveries in the scientific or patent literature often lags behind actual discoveries, OXiGENE cannot be certain that it was the first
creator of inventions covered by its pending applications or that it was the first to file patent applications for those inventions.



The Company owns eight (8) granted United States patents, thirteen (13) pending United States patent applications, and granted patents and/or pending
applications in several other major markets, including the European Union, Canada and Japan. Of the pending United States patent applications, one was filed in 1997, three were filed in 2001, five were filed in 2002, and four were filed in 2003.



The following table summarizes the Companys United
States patent portfolio by the number of patents that have been granted or that are currently pending for each of its product lines:



OXiGENE United States Patent Portfolio



|                                          |  |                 |  |                
|----------------------------------------- |  | --------------- |  | ---------------
|Product Line                              |  | Patents Pending |  | Patents Granted
|Combretastatins:                          |  |                 |  |                
|Owned                                     |  | 9               |  | 1              
|Licensed                                  |  | 5               |  | 6              
|Baylor VTA Compounds:                     |  |                 |  |                
|Owned                                     |  | 3               |  | 0              
|Licensed                                  |  | 1               |  | 4              
|Benzamides, Nicotinamides, & Cordycepins: |  |                 |  |                
|Owned                                     |  | 1               |  | 6              
|Licensed                                  |  | 1               |  | 0              
|Diagnostic:                               |  |                 |  |                
|Owned                                     |  | 0               |  | 1              
|Licensed                                  |  |                |  |               
|Total:                                    |  | 20              |  | 18             



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The following table summarizes the United States patent number, applicable expiration date, holder of
patent and importance of the Companys material patents:



|                                                                                                                                                |  |                |  |                   |  |                            |  |                                                                                                                                                                                                                                                                                               
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | ----------------- |  | -------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Title of Patent                                                                                                                                 |  | U.S. PatentNo. |  | Date ofexpiration |  | Holder ofpatent            |  | Importance                                                                                                                                                                                                                                                                                    
|                                                                                                                                                |  |                |  |                  
|Combretastatin A-4                                                                                                                              |  | 4,996,237      |  | February26, 2008  |  | Arizona StateUniversity    |  | Provides composition-of-matter protection for the active, tubulin-binding parent compound of the prodrug CA4P, as well as protection for methods-of-use for treatment of cancer. CA4P is generated
in the body following administration of CA4P, which is the Companys most advanced product.
|                                                                                                                                                |  |                |  |                  
|Combretastatin A-4 Prodrug                                                                                                                      |  | 5,561,122      |  | December22, 2014  |  | Arizona StateUniversity    |  | Provides composition-of-matter protection for the Companys lead VTA compound, CA4P. Claims were also granted for methods of using CA4P for the treatment of cancer.                                                                                                                          
|                                                                                                                                                |  |                |  |                  
|Isolation, Structural Elucidation, and Synthesis of novel Antineoplastic Agents termed Combretastatins                                        |  | 5,569,786      |  | October29, 2013   |  | Arizona StateUniversity    |  | Provides composition-of-matter protection for several Combretastatins, including CA1, which is the active, tubulin-binding compound of OXi4503, the Companys most advanced second generation
compound.                                                                                       
|                                                                                                                                                |  |                |  |                  
|Isolation, Structural Elucidation, and Synthesis of novel Antineoplastic Agents termed Combretastatins                                         |  | 5,409,953      |  | April 25,2012     |  | Arizona StateUniversity    |  | Provides methods of using Combretastins, including CA1, for the treatment of cancerous cells. CA1 is the active, tubulin-binding parent compound of OXi4503, the Companys most advanced
second generation compound.                                                                          
|                                                                                                                                                |  |                |  |                  
|Compositions and Methods for Use in Targeting Vascular Destruction                                                                              |  | 6,538,038      |  | February16, 2020  |  | OXiGENE,Inc.               |  | Provides methods of using phosphate prodrugs of tubulin-binding compounds, including CA4P and OXi4503, to selectively target the proliferating vasculature of cancers, proliferative
retinopathies, and other diseases characterized by the presence of unwanted neovascularization.          
|                                                                                                                                                |  |                |  |                  
|Combretastatin A-4 Phosphate Prodrug Mono  and Di-Organic Amine Salts, Mono  and Di-Amino Acid Salts, and Mono  and D-Amino Acid Ester
Salts |  | 6,670,344      |  | Sept 11,2021      |  | Bristol-MyersSquibbCompany |  | Provides novel Tromethamine (TRIS) and Histidine salt forms of CA4P along with methods for their use and manufacture. The preferred TRIS salt composition provides enhanced
formulation properties over the Disodium salt of CA4P.                                                          



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Combretastatins. The Companys core Combretastatin technology platform is covered by a mix of
existing and pending patents. The Company is an exclusive licensee of six (6) United States patents, five (5) pending United States patent applications, and granted patents and/or pending applications in other countries corresponding to three of the
granted United States patents, all of which relate to Combretastatin compositions and/or methods of use in treating cancer or other angiogenic diseases. The owners of record of these licensed patents and applications are the Arizona Board of
Regents, a corporate body of the State of Arizona, acting for and on behalf of ASU, and Bristol Myers Squibb Co., with whom OXiGENE terminated its research and clinical development collaboration in February 2002.



In 2003, the Company continued to expand on the breadth and scope of its
licensed Combretastatin patent portfolio. On March 26, 2003, the Company announced the issuance of United States Patent No. 6,538,038, on which the Company is the sole assignee. On January 6, 2004, the issuance of United States Patent No. 6,670,344
on December 30, 2003 was announced (the CA4P Tris Salt Patent). The CA4P Tris Salt patent is exclusively licensed from Bristol Myers Squibb Company. In addition to continuing with the prosecution of the five applications that it filed in
2002, the Company filed three additional United States applications in 2003, all of which claim new methods of use for existing Combretastatin VTAs.



Baylor VTA Compounds. The Company has maintained exclusive patent rights to a number of tubulin-binding agents that have potential for future
development as VTAs. These compounds are functionally related but structurally distinct from Combretastatin, and are covered by four (4) issued United States patents and four (4) pending United States patent applications. Ownership of the licensed
patents and patent applications is assigned to Baylor University. OXiGENE is a co-assignee of two (2) pending patent applications in this area.



Benzamide & Other Compounds. The Company continues to retain ownership of patent rights to certain benzamide and nicotinamide compositions and
their use in a wide variety of indications. The Company is the assignee of six (6) United States patents, one (1) pending United States application, and granted patents and/or pending applications in foreign countries covering methods of use for
treating cancer and anti-inflammatory disorders. In April 2002, the Company out-licensed exclusive patent rights for the benzamide platform to Active and Active assumed further patent prosecution and maintenance responsibilities for the patent
portfolio. In mid-January 2004, Active formally notified OXiGENE that it had discontinued all research efforts and has terminated its license agreements. OXiGENE has concluded all research and clinical development of the benzamide and nicotinamide
technology. Finally, on December 3, 2003, the Company filed a patent application for certain Nucleoside Prodrugs related to Cordycepin which have potential for development as anti-cancer, anti-microbial, or anti-parasitic compounds. These compounds
were developed and exclusively licensed from Baylor University as part of the parties June 1, 1999 Research and License Agreement. This patent application has been exclusively sub-licensed to Aengus Pharmaceuticals LLC for clinical development.



COMPETITION



The industry in which
the Company is engaged is characterized by rapidly evolving technology and intense competition. The Companys competitors include, among others, major pharmaceutical, biopharmaceutical and biotechnology companies, many of which have financial,
technical and marketing resources significantly greater than those of the Company. In addition, many of the small companies that compete with the Company have also formed collaborative relationships with large, established companies to support
research, development, clinical trials and commercialization of products that may be competitive with those of the Company. Academic institutions, governmental agencies and other public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on their own or through joint ventures or other collaborations.



The Company is aware of a limited number of companies involved in the development of VTAs. Such companies include AstraZeneca, Aventis, and Antisoma, all
of which have VTAs that management believes are at an earlier stage of clinical development than the Companys lead compound, CA4P.



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The Company is aware of a number of companies engaged in the research, development and testing of new
cancer therapies or ways of increasing the effectiveness of existing therapies. Such companies include, among others, AstraZeneca, Aventis, Bayer, Bristol-Myers Squibb, Abbott Laboratories, Inc., Aeterna Laboratories Inc., Eli Lilly and Company,
EntreMed Inc., Genentech, GlaxoSmithKline, Johnson & Johnson, Millennium, NeoPharm, Inc., Novartis AG, Pharmacyclics, Inc., Pfizer Inc., and Pierre Fabre S.A., some of whose products have already received, or are in the process of receiving,
regulatory approval or are in later stages of clinical trials.



There can be no assurance that the Companys competitors will not succeed in developing technologies and products that are more effective, safer or more affordable than those being developed by the Company.



The Company expects that if any of its products gain regulatory approval for
sale they will compete primarily on the basis of product efficacy, safety, patient convenience, reliability, price and patent protection. The Companys competitive position also will depend on its ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products and implement joint ventures or other alliances with large pharmaceutical companies in order to jointly market and manufacture its products.



EMPLOYEES



The Company expects to
maintain a relatively small number of executives and other employees. OXiGENE relies as much as possible on consultants and independent contractors for its research, development, pre-clinical testing and clinical trials. As of March 5, 2004 the
Company had 11 full-time employees, of which seven were engaged in research and development and monitoring of clinical trials. Most of the Companys pre-clinical testing and clinical trials are subcontracted and performed at certain
universities in the United States and Europe with the assistance of contract research organizations.



SCIENTIFIC ADVISORY BOARD AND CLINICAL TRIAL ADVISORY BOARD



OXiGENEs Clinical Trial Advisory Board assesses and evaluates the Companys clinical trial program. The
Scientific Advisory Board discusses and evaluates the Companys research and development projects. Members of the Clinical Trial Advisory Board and the Scientific Advisory Board are independent and have no involvement with the Company other
than serving on such boards.



Some members of the Scientific
Advisory Board and the Clinical Trial Advisory Board receive cash compensation. Others have from time to time received, and are expected to continue to receive, options to purchase shares of Common Stock of the Company. All members are reimbursed
for reasonable out-of-pocket expenses incurred in connection with serving on such boards.



The members of the Scientific Advisory Board are:



HANS WIGZELL, M.D., Ph.D. is the President at the Karolinska Institute, Stockholm, Sweden, where he is also Professor of Immunology. Professor Wigzell is the chairman of OXiGENEs Scientific Advisory Board
and serves as an advisor to the Companys Board of Directors. He was, for many years, a member of the Nobel committee for the prize in medicine of which he also has served as chairman. Professor Wigzell is currently a member of the editorial
board of several international medical journals and has published more than 500 articles in the areas of tumor biology, immunology, cell biology and infectious diseases.



ROBERT S. KERBEL, Ph.D. is an internationally recognized tumor biologist known for his studies in cancer metastasis,
drug resistance and tumor angiogenesis. He is a Canada Research Chair in Molecular Medicine and a Professor in the Departments of Medical Biophysics, and Laboratory Medicine & Pathobiology in the University of Toronto. Dr. Kerbel is a Senior
Scientist in Molecular and Cell Biology Research, which he directed from 1991-2002, at the Sunnybrook and Womens College Health Sciences Centre in Toronto. He is the author of more than 250 scientific papers and the recipient of numerous
scientific awards. Dr. Kerbel serves on the editorial boards of seven scientific journals including: Cancer Research, Clinical Cancer Research, American Journal of Pathology, Cell Cycle, Molecular Cancer Research and Angiogenesis. He was
Editor-in-Chief of Cancer & Metastasis Reviews from 1991-2001.



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DIETMAR W. SIEMANN, Ph.D. is the John P. Cofrin Professor and Associate Chair for Research in
Radiation Oncology at the University of Florida College of Medicine in Gainesville. In addition, he is a professor in the schools Department of Pharmacology and Therapeutics. Dr. Siemann has authored more than 150 scientific papers and is the
recipient of numerous scientific awards, including the Research Award of the Radiation Research Society in Oak Brook, Illinois (1990). He is the former Chairman of the National Cancer Institutes Radiation Study Section (1996-1998).



MARVIN H. CARUTHERS, Ph.D. is Distinguished Professor of Chemistry
and Biochemistry at the University of Colorado, where he has taught for over thirty years. He has also served as Chairman of that department (1992-1995). He is a member of both the American Academy of Arts & Sciences and the National Academy of
Sciences, and has served on the National Academy of Sciences Board on Chemical Sciences and Technology. In 1999, Dr. Caruthers received the ABRF-Hewlett-Packard Award for Outstanding Board are:



HAKAN MELLSTEDT, M.D., Ph.D. is Professor of Oncologic Biotherapy at
the Karolinska Institute and Managing Director of Cancer Center Karolinska, Karolinska Institute, Stockholm, Sweden. He holds a position as Chief Physician at the Department of Oncology (Radiumhemmet), Karolinska Hospital, Stockholm, and has
specialist certificates in Oncology, Hematology and Internal Medicine. He is a Member of the Board of Directors of ESMO (European Society for Medical Oncology) and a Member of ESMOs Executive Committee. Professor Mellstedt is currently a
member of the Editorial Board of several international scientific journals and has published more than 450 articles in the areas of hematology, Contributions to Biomolecular Technologies.



The members of the Companys Clinical Trial Advisory medical oncology, tumor immunology and the development of
immunotherapeutics/biotherapeutics in hematological malignancies as well as in solid tumors. Professor Mellstedt is the Chairman of OXiGENEs Clinical Trial Advisory Board.



MARGARET A. TEMPERO, M.D. is Deputy Director of the University of California San Francisco Cancer Center and
Professor and Chief of Medical Oncology in the School of Medicine. She is President-Elect of the American Society of Clinical Oncology (ASCO) and in June of 2003 will become President. She also has served on the Board of ASCO and is on the Board of
Scientific Counselors, which is advisory to the intramural programs on the NCI. She holds or has held editorial positions on numerous prestigious journals such as Cancer Research, Journal of Clinical Oncology, Clinical Cancer Research and the
American Journal of Medicine. She is also credited with over 100 original articles and book chapters.



JAN B. VERMORKEN, M.D., Ph.D. is Professor of Oncology and head of the Department of Medical Oncology of the University Hospital of the University
of Antwerp, Belgium. Professor Vermorken has held numerous functions with the Dutch Cancer Society and the European Organization for Research on Treatment of Cancer (EORTC). He is a member of several EORTC study groups and presently is Secretary of
the EORTC Head and Neck Cancer Group. Professor Vermorken has lectured extensively in the area of gynecological oncology and head and neck cancer, and currently serves on the editorial boards of several international journals.



LEE S. ROSEN, M.D. is the Director of Developmental Therapeutics for
the Cancer Institute Medical Group, affiliated with the John Wayne Cancer Institute in Santa Monica. He is the former Adjunct Assistant Professor at UCLAs Department of Medicine, Division of Hematology-Oncology and served as Director of
UCLAs Cancer Therapy Development Program from 1996-2002. Dr. Rosen serves as the principal investigator for many Phase I and II clinical trials, focusing on novel agents in general and the angiogenesis inhibitors in particular.



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RISK FACTORS



Statements in this
Annual Report under the captions Business and Managements Discussion and Analysis of Financial Condition and Results of Operations, as well as oral statements that may be made by the Company or by officers, directors or
employees of the Company acting on the Companys behalf, that are not historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any results expressed or implied by such forward-looking statements.
Such factors include, but are not limited to, the risk factors set forth below.



The Company does not intend to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.



We have a history of losses and we anticipate that we will continue to
incur losses in the future.



We have experienced net
losses every year since our inception and, as of December 31, 2003, had an accumulated deficit of $80.0 million. We anticipate incurring substantial additional losses over at least the next several years due to, among other factors, the need to
expend substantial amounts on our continuing clinical trials and anticipated research and development activities and the general and administrative expenses associated with those activities. We have not commercially introduced any product and our
potential products are in varying early stages of development and testing. Our ability to attain profitability will depend upon our ability to develop products that are effective and commercially viable, to obtain regulatory approval for the
manufacture and sale of our products and to license or otherwise market our products successfully. We may never achieve profitability, and even if we do, we may not be able to sustain being profitable.



Our products have not completed clinical trials, and may never demonstrate sufficient
safety and efficacy in order to do so.



Our products
are in an early stage of development. In order to achieve profitable operations, we, alone or in collaboration with others, must successfully develop, manufacture, introduce and market our products. The time frame necessary to achieve market success
for any individual product is long and uncertain. The products currently under development by us will require significant additional research and development and extensive pre-clinical and clinical testing prior to application for commercial use. A
number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in clinical trials, even after showing promising results in early or later stage studies or clinical trials. Although we have obtained some
favorable results to date in pre-clinical studies and clinical trials of certain of our potential products, such results may not be indicative of results that will ultimately be obtained in or throughout such clinical trials, and clinical trials may
not show any of our products to be safe or capable of producing a desired result. Additionally, we may encounter problems in our clinical trials that will cause us to delay, suspend or terminate those clinical trials. Further, our research or
product development efforts or those of our collaborative partners may not be successfully completed, any compounds currently under development by us may not be successfully developed into drugs, any potential products may not receive regulatory
approval on a timely basis, if at all, and competitors may develop and bring to market products or technologies that render our potential products obsolete. If any such problems occur, we would be materially and adversely affected.



We may be required to raise additional funds to finance our operations; we may not be
able to do so when necessary, and/or the terms of any financings may not be advantageous to us.



Our operations to date have consumed substantial amounts of cash. Negative cash flow from our operations is expected to continue over at least the next
several years. We do not currently have any commitments to raise additional capital by selling equity, issuing debt or entering into any collaboration that would provide material funding. Our actual capital requirements will depend on numerous
factors, including: the progress of and results of our pre-clinical testing and clinical trials of our VTAs under development, including CA4P, our lead Combretastatin-based compound; the progress of our research and development programs; the time
and costs expended and required to obtain any necessary or desired regulatory approvals; the resources, if any, that we devote to developing manufacturing methods and advanced technologies; our ability to enter into licensing arrangements, including
any unanticipated licensing arrangements that may be necessary to enable us to continue our development and clinical trial programs; the costs and expenses of filing, prosecuting and, if necessary, enforcing our patent claims, or defending against
possible claims of infringement by us of third party patent or other technology rights; the cost of commercialization activities and arrangements, if any, undertaken by us; and, if and when approved, the demand for our products, which demand depends
in turn on circumstances and uncertainties that cannot be fully known, understood or quantified unless and until the time of approval, including the range of indications for which any product is granted approval.



Under our current operating plan and capital budget, and based on our current
cost expectations and levels of operations, we believe our existing capital as of January 16, 2004 should be sufficient to fund operations for at least the next four years, including substantial advancement of currently ongoing clinical trials
towards FDA



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approval of CA4P, our lead compound, whether or not such approval is ultimately obtained. We cannot predict with any certainty the success of any clinical
trials, whether or not FDA approval will ultimately be obtained, and if obtained, whether such approval will take longer than expected. Due to the numerous risks and uncertainties of the drug development and FDA approval process, we cannot guarantee
that our current cash, cash equivalents and capital will be sufficient to fund operations for the full time period described above. If our existing funds are not sufficient, we would be required to seek additional funding and/or take other measures
to reduce expenses.



In addition, we will likely have to raise
substantial additional funds: (i) if FDA approval is obtained on the CA4P compound, to bring such compound to market, including arranging for or developing manufacturing capabilities and completing marketing and other commercialization activities
related to CA4P; (ii) to complete the development of any additional products other than the development and FDA approval process related to CA4P; and (iii) to bring any other potential product to market. The issuance of additional equity securities
by us, if required to support these or any other purposes, would result in dilution to the existing stockholders. Additional financing may not be available on acceptable terms when needed, if at all. If adequate funds are not available on acceptable
terms when needed, we would be required to delay, scale back or eliminate one or more of our product development programs or seek to obtain funds through arrangements with collaborative partners (or others), which arrangements may include a
requirement that we relinquish rights to certain of our technologies or products or rights related to our technologies or products that we would not otherwise relinquish. Our failure to obtain funding when and in the amounts needed and/or our
acceptance of funding on terms that are not favorable to us or less favorable to us than we would ordinarily desire, would have a material adverse effect on our financial position and results of operations.



We depend, and likely will continue to depend, on others for clinical development and
manufacturing and marketing of our products.



We have
limited experience in drug development, the regulatory approval process, manufacturing and marketing of products. Accordingly, we have depended, and in the future are likely to continue to depend, on others for assistance in many areas, including
research, conducting pre-clinical testing and clinical trials, the regulatory approval process, manufacturing and marketing. Funding requirements, competitive factors or prioritization of other opportunities may lead us to seek additional
arrangements with third parties. While we are likely to continue to explore other licensing and development opportunities for our technologies with other companies, we may not succeed in establishing new collaborative agreements or licensing
arrangements; collaborative partners may pursue alternative technologies or develop alternative compounds either on their own or in collaboration with others, directed at the same diseases as those involved in their collaborative arrangements with
us and thus undermining any collaboration with us; any such collaborative partners may not devote resources to our technologies or compounds on a basis favorable to us; any such arrangements may not be on terms favorable to us; and any future
licensees may not succeed in marketing or commercializing licensed products.



Our products are subject to extensive government regulation, which results in uncertainties and delays in the progress of our products through the clinical trial process.



Our research and development activities, pre-clinical testing and clinical
trials, and the manufacturing and marketing of our products are subject to extensive regulation by numerous governmental authorities in the United States and other countries. Pre-clinical testing and clinical trials and manufacturing and marketing
of our products are and will continue to be subject to the rigorous testing and approval processes of the FDA and other corresponding foreign regulatory authorities. Clinical testing and the regulatory process generally take many years and require
the expenditure of substantial resources. In addition, delays or rejections may be encountered during the period of product development, clinical testing and FDA regulatory review of each submitted application. Similar delays may also be encountered
in foreign countries. Even after such time and expenditures, regulatory approval may not be obtained for any potential products developed by us, and a potential product, if approved in one country, may not be approved in other countries. Moreover,
if regulatory approval of a potential product is granted, such approval may entail significant limitations on the indicated uses for which that product may be marketed. Further, even if such regulatory approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review and periodic inspections, and later discovery of previously unknown problems (such as previously undiscovered side effects) with a product, manufacturer or facility may
result in restrictions on such product, manufacturer or facility, including a possible withdrawal of the product from the market. Failure to comply with the applicable regulatory requirements can, among other things, result in fines, suspensions of
regulatory



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approvals, product recalls, operating restrictions, injunctions and criminal prosecution. Moreover, continued cost control initiatives by health care
maintenance organizations and similar programs may affect the financial ability and willingness of patients and their health care providers to utilize certain therapies which, in turn, could have a material adverse effect on us.



Our industry is highly competitive, and our products may become technologically
obsolete.



We are engaged in a rapidly evolving field.
Competition from other pharmaceutical companies, biotechnology companies and research and academic institutions is intense and expected to increase. Many of those companies and institutions have substantially greater financial, technical and human
resources than we do. Those companies and institutions also have substantially greater experience in developing products, in conducting clinical trials, in obtaining regulatory approval and in manufacturing and marketing pharmaceutical products.
Accordingly, competitors may succeed in obtaining regulatory approval for their products more rapidly than we do. Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for
competitive products. Some of those products may have an entirely different approach or means of accomplishing the desired therapeutic effect than products being developed by us. Our competitors may succeed in developing technologies and products
that are more effective and/or cost competitive than those being developed by us, or that would render our technology and products less competitive or even obsolete. In addition, one or more of our competitors may achieve product commercialization
or patent protection earlier than we do, which could materially adversely affect us.



We depend extensively on our patents and proprietary technology, and we must protect those assets in order to preserve our business.



To date, our principal products have been based on certain previously known compounds. We anticipate that the products we develop in the future may
include or be based on the same or other compounds owned or produced by unaffiliated parties, as well as synthetic compounds we may discover. Although we expect to seek patent protection for any compounds we discover and/or for any specific uses we
discover for new or previously known compounds, any or all of them may not be subject to effective patent protection. Further, the development of regimens for the administration of pharmaceuticals, which generally involve specifications for the
frequency, timing and amount of dosages, has been, and we believe, may continue to be, important to our efforts, although those processes, as such, may not be patentable.



Our success will depend, in part, on our ability to obtain patents, protect our trade secrets and operate without infringing
on the proprietary rights of others. As of March 1, 2004, the Company owns eight granted United States patents, thirteen pending United States patent applications, and granted patents and/or pending applications in several other major markets,
including the European Union (EU), Canada and Japan. The patent position of pharmaceutical and biotechnology firms like us generally is highly uncertain and involves complex legal and factual questions, resulting in both an apparent
inconsistency regarding the breadth of claims allowed in United States patents and general uncertainty as to their legal interpretation and enforceability. Accordingly, patent applications assigned or exclusively licensed to us may not result in
patents being issued, any issued patents assigned or exclusively licensed to us may not provide us with competitive protection or may be challenged by others, and the current or future granted patents of others may have an adverse effect on our
ability to do business and achieve profitability. Moreover, since some of the basic research relating to one or more of our patent applications and/or patents was performed at various universities and/or funded by grants, one or more universities,
employees of such universities and/or grantors could assert that they have certain rights in such research and any resulting products. Further, others may independently develop similar products, may duplicate our products, or may design around our
patent rights. In addition, as a result of the assertion of rights by a third party or otherwise, we may be required to obtain licenses to patents or other proprietary rights of others in or outside of the United States. Any licenses required under
any such patents or proprietary rights may not be made available on terms acceptable to us, if at all. If we do not obtain such licenses, we could encounter delays in product market introductions while we attempt to design around such patents or
could find that the development, manufacture or sale of products requiring such licenses is foreclosed. In addition, we could incur substantial costs in defending ourselves in suits brought against us or in connection with patents to which we hold
licenses or in bringing suit to protect our own patents against infringement.



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We require employees, Scientific Advisory Board members and the institutions that perform our
pre-clinical and clinical tests to enter into confidentiality agreements with us. Those agreements provide that all confidential information developed or made known to the individual during the course of the relationship with us is to be kept
confidential and not to be disclosed to third parties, except in specific circumstances. Any such agreement may not provide meaningful protection for our trade secrets or other confidential information in the event of unauthorized use or disclosure
of such information.



We depend heavily on our executive officers,
directors, and principal consultants, and the loss of their services would materially harm our business.



We believe that our success depends, and will likely continue to depend, upon our ability to retain the services of our current executive officers,
directors, principal consultants and others, particularly Joel-Tomas CitronChairman of the Board, Dr. David ChaplinChief Scientific Officer and Frederick DriscollPresident and Chief Executive Officer. The loss of the services of
any of these individuals could have a material adverse effect on us. In addition, we have established relationships with universities, hospitals and research institutions, which have historically provided, and continue to provide, us with access to
research laboratories, clinical trials, facilities and patients. Additionally, we believe that we may, at any time and from time to time, materially depend on the services of consultants and other unaffiliated third parties.



Our products may result in product liability exposure, and it is uncertain whether our
insurance coverage will suffice to cover any claims.



The use of our potential products in clinical trials and for commercial applications, if any, may expose us to liability claims, in the event such products cause injury or disease, or result in adverse effects. These claims could be made
directly by health care institutions, contract laboratories, patients or others using such products. Although we have obtained liability insurance coverage for our ongoing clinical trials, this coverage may not be in amounts sufficient to protect us
from any product liability claims or product recalls which could have a material adverse effect on the financial condition and prospects of our company. Further, adverse product and similar liability claims could negatively impact our ability to
obtain or maintain regulatory approvals for our technology and products under development.



The price of our common stock is volatile, and is likely to continue to fluctuate due to reasons beyond our control.



The market price of the common stock has been, and likely will continue to be highly volatile. Factors, including our or our
competitors financial results, clinical trial and research development announcements and government regulatory action affecting our potential products in both the United States and foreign countries, have had, and may continue to have, a
significant effect on our results of operations and on the market price of our common stock. We cannot assure you that your initial investment in our common stock will not fluctuate significantly. One or more of these factors could significantly
harm our business and cause a decline in the price of our common stock in the public market. As of December 31, 2003, options to purchase an aggregate of 18,000 shares of its Common Stock to certain consultants who are not employees were outstanding
and unvested. Such options are accounted for at their fair value. The future charge related to these options is also influenced by changes in the market price of the Companys Common Stock. In addition, substantially all of the shares of the
Companys Common Stock issuable upon exercise of outstanding options have been registered for sale and may be sold from time to time hereafter. Such sales, as well as future sales of the Companys Common Stock by existing stockholders, or
the perception that sales could occur, could adversely affect the market price of the Companys Common Stock. The price and liquidity of the Companys Common Stock may also be significantly affected by trading activity and market factors
related to the Nasdaq and Stockholm Stock Exchange markets, which factors and the resulting effects may differ between those markets.



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GLOSSARY OF SCIENTIFIC TERMS



|                   |  |                                                                                                                                                                                                                                                       
|------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Angiogenesis       |  | The creation of new blood vessels.                                                                                                                                                                                                                    
|                   | 
|Chemotherapy       |  | Treatment with drugs whose aim is the mitigation or cure of diseases such as cancer.                                                                                                                                                                  
|                   | 
|DNA                |  | Chemical building blocks of genetic material.                                                                                                                                                                                                         
|                   | 
|Double-blind study |  | A study in which neither the investigators assessing the outcome of the trial nor the patients know whether the patient is receiving the drug being investigated or merely a placebo. The outcome
can only be determined when the results are decoded.
|                   | 
|IND                |  | An Investigational New Drug application filed with the United States Food and Drug Administration that permits the administration of compounds to humans in clinical
trials.                                                                        
|                   | 
|Malignant cell     |  | Cancer cell.                                                                                                                                                                                                                                          
|                   | 
|Metabolic function |  | Living process of growth and reproduction.                                                                                                                                                                                                            
|                   | 
|NDA                |  | A New Drug Application filed with the United States Food and Drug Administration, which, if approved, allows a drug to be marketed in the United States.                                                                                            
|                   | 
|Necrosis           |  | Cell death by decomposition.                                                                                                                                                                                                                          
|                   | 
|Placebo            |  | A non-active substance given to a group of patients in a clinical trial to duplicate the treatment method, but without the administration of the active drug under investigation.                                                                     
|                   | 
|Radiation          |  | Physical energy that splits molecules and induces DNA damage.                                                                                                                                                                                         
|                   | 
|Tubulin            |  | A protein that forms the basic building blocks of microtubules. Microtubules perform many functions inside the cell, including helping to maintain endothelial cell shape.                                                                            



|2. | PROPERTIES
|-- | ----------



In June 2001, the Company moved its corporate headquarters to Watertown, Massachusetts from Stockholm, Sweden. On December 31, 2001, the Company closed
its Stockholm, Sweden office. In September 2003, the Company relocated its corporate headquarters to Waltham, Massachusetts where it leases approximately 4,000 square feet of office space. The term of the lease is five years and three months
commencing on September 1, 2003, with an annual rent of approximately $100,000, expiring on December 15, 2008. The Company does not own or lease any laboratories or other research and development facilities.



|3. | LEGAL PROCEEDINGS
|-- | -----------------



There are no material suits or claims pending in any court or, to the best of the Companys knowledge, threatened against the Company.



|4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|-- | ---------------------------------------------------



No matters were submitted to the vote of security holders of the Company for the fourth quarter of the year ended December
31, 2003.



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PART II



|5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|-- | ---------------------------------------------------------------------



Effective November 19, 1996, the Companys Common Stock commenced trading on the Nasdaq National Market under the
symbol OXGN. Prior thereto, since the completion of the Companys initial public offering in September 1993, the Companys securities had been listed for quotation on the Nasdaq Small-Cap Market. The Companys shares of
Common Stock are also traded on the OM Stockholm Exchange in Sweden under the symbol OXGN. The following table sets forth the high and low sales price per share for the Companys Common Stock on the Nasdaq National Market for each
quarterly period during the two most recent fiscal years.



|               |  |                  |       |                  |   |      |  |     |      |  |   |     
|-------------- |  | ---------------- | ----- | ---------------- | - | ---- |  | --- | ---- |  | - | ----
|               |  | Fiscal Year 2003 |       | Fiscal Year 2002
|               |  | High             |       | Low              |   | High |  | Low
|First Quarter  |  | $                | 2.64  |                  | $ | 1.06 |  | $   | 3.44 |  | $ | 2.11
|Second Quarter |  |                  | 13.80 |                  |   | 1.51 |  |     | 2.25 |  |   | 1.32
|Third Quarter  |  |                  | 12.68 |                  |   | 7.20 |  |     | 1.51 |  |   | .90 
|Fourth Quarter |  | $                | 11.72 |                  | $ | 7.45 |  | $   | 1.45 |  | $ | .84 



On March 5, 2004, the
last sale price of the Common Stock was $9.84.



As of March 5,
2004, there were 90 holders of record of the Companys Common Stock. The Company believes, based on the number of proxy statements and related materials distributed in connection with its 2003 Annual Meeting of Stockholders, that there are
approximately 10,000 beneficial owners of its Common Stock.



The Company has not declared or paid any cash dividends on its Common Stock since its inception in 1988, and does not intend to pay cash dividends in the foreseeable future. The Company presently intends to retain future earnings, if any,
to finance the growth and development of its business.



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|6. | SELECTED FINANCIAL DATA
|-- | -----------------------



SUMMARY FINANCIAL INFORMATION



The
following table sets forth consolidated financial data with respect to the Company for each of the five years in the period ended December 31, 2003. The selected financial data for each of the five years in the period ended December 31, 2003 have
been derived from the audited consolidated financial statements of the Company. The foregoing consolidated financial statements and the report thereon Managements Discussion and Analysis of Financial Condition and Results of
Operations, included in Item 7. are included elsewhere in this Annual Report on Form 10-K. The information below should be read in conjunction with the consolidated financial statements (and notes thereon) and Managements
Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7.



|                                                     |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|---------------------------------------------------- |  | ------------------------------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                     |  | Years ended December 31,                         |        
|                                                     |  | 1999                                             |         |   | 2000 |   |         | 2001 |  |   | 2002    |   |  | 2003 |        
|                                                     |  | (Amounts in thousands, except per share amounts) |        
|STATEMENT OF OPERATIONS DATA:                        |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|License revenues                                     |  | $                                                | 1,272   |   |      | $ | 1,695   |      |  | $ | 8,953   |   |  | $    |        |   |  | $ | 30      |  
|Costs and expenses:                                  |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Costs related to licensing revenue                   |  |                                                  | 1,250   |   |      |   | 1,162   |      |  |   | 1,508   |   |  |      |        |   |  |   |        |  
|General and administrative                           |  |                                                  | 3,336   |   |      |   | 3,160   |      |  |   | 5,447   |   |  |      | 7,438   |   |  |   | 5,282   |  
|Research and development                             |  |                                                  | 8,398   |   |      |   | 8,058   |      |  |   | 6,132   |   |  |      | 5,103   |   |  |   | 3,938   |  
|Amortization of license agreement                    |  |                                                  | 41      |   |      |   | 222     |      |  |   | 298     |   |  |      | 98      |   |  |   | 98      |  
|                                                     |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total costs and expenses                             |  |                                                  | 13,025  |   |      |   | 12,602  |      |  |   | 13,385  |   |  |      | 12,639  |   |  |   | 9,318   |  
|                                                     |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating loss                                       |  |                                                  | (11,753 | ) |      |   | (10,907 | )    |  |   | (4,432  | ) |  |      | (12,639 | ) |  |   | (9,288  | )
|Investment income                                    |  |                                                  | 1,341   |   |      |   | 1,922   |      |  |   | 907     |   |  |      | 335     |   |  |   | 321     |  
|Interest expense                                     |  |                                                  | (37     | ) |      |   | (102    | )    |  |   | (61     | ) |  |      | (53     | ) |  |   | (36     | )
|Other income (expense), net                          |  |                                                  |        |   |      |   |        |      |  |   | (553    | ) |  |      | 1,344   |   |  |   | 635     |  
|                                                     |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net loss                                             |  | $                                                | (10,449 | ) |      | $ | (9,087  | )    |  | $ | (4,139  | ) |  | $    | (11,013 | ) |  | $ | (8,368  | )
|                                                     |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic and diluted net loss per common share          |  | $                                                | (1.02   | ) |      | $ | (0.81   | )    |  | $ | (0.37   | ) |  | $    | (0.88   | ) |  | $ | (0.63   | )
|Weighted average number of common shares outstanding |  |                                                  | 10,274  |   |      |   | 11,181  |      |  |   | 11,282  |   |  |      | 12,514  |   |  |   | 13,184  |  
|                                                     | 
|                                                     |  | Years ended December 31,                         |        
|                                                     |  | 1999                                             |         |   | 2000 |   |         | 2001 |  |   | 2002    |   |  | 2003 |        
|                                                     |  | (Amounts in thousands)                           |        
|BALANCE SHEET DATA:                                  |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash and cash equivalents                            |  | $                                                | 30,448  |   |      | $ | 27,063  |      |  | $ | 19,030  |   |  | $    | 3,752   |   |  | $ | 878     |  
|Available-for-sale securities                        |  |                                                  |        |   |      |   | 549     |      |  |   |        |   |  |      | 8,078   |   |  |   | 17,694  |  
|Working capital                                      |  |                                                  | 38,386  |   |      |   | 26,307  |      |  |   | 16,309  |   |  |      | 8,446   |   |  |   | 15,250  |  
|Total assets                                         |  |                                                  | 42,660  |   |      |   | 31,229  |      |  |   | 22,153  |   |  |      | 13,598  |   |  |   | 20,205  |  
|Total liabilities                                    |  |                                                  | 11,557  |   |      |   | 10,083  |      |  |   | 3,634   |   |  |      | 3,578   |   |  |   | 3,735   |  
|Accumulated deficit                                  |  |                                                  | (47,414 | ) |      |   | (56,502 | )    |  |   | (60,641 | ) |  |      | (71,654 | ) |  |   | (80,022 | )
|Total stockholders equity                           |  | $                                                | 31,103  |   |      | $ | 21,146  |      |  | $ | 18,519  |   |  | $    | 10,020  |   |  | $ | 16,470  |  



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|7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|-- | -------------------------------------------------------------------------------------



OVERVIEW



OXiGENE, Inc. is a
biopharmaceutical company engaged principally in the research and development of products for use in the treatment of cancer and certain ocular diseases. The Companys efforts in oncology are focused on developing products for application as
direct cancer treatment agents, particularly vascular targeting agents, or VTAs. These agents attack a tumors network of existing and emerging blood vessels, which are its main life support system. The Company is also investigating the use of
certain products for other applications in the field of ophthalmology, in particular age-related macular degeneration and myopic macular degeneration. Certain Company activities are conducted with third parties, either through licensing arrangements
or collaborations. Currently, OXiGENE has, in various stages of clinical and pre-clinical development, multiple therapeutic product candidates that were derived from its principal vascular targeting platform.



OXiGENE has devoted substantially all of its efforts and resources to date to
research and development conducted on its own behalf and through strategic collaborations with clinical institutions, universities and other research organizations. Consequently, OXiGENE believes that its research and development expenditures have
been somewhat lower than those of other comparable biopharmaceutical companies. The Companys primary research and development activities relate to its compound CA4P for use in the treatment of various forms of cancer. More recently, the
Company has expanded its research and development activities to include clinical trials of CA4P in ophthalmology. The Company does expect research and development expenditures to increase over the coming year as it expands its clinical trial
activities with respect to CA4P and its other compounds in development.



The Companys failure to successfully complete human clinical trials, develop and market products over the next several years, or to realize product revenues, would materially adversely affect its business, financial condition and
results of operations. Royalties or other revenue generated for the Company from commercial sales of the Companys potential products are not expected for several years, if at all.



OXiGENE has generated a cumulative net loss of $80 million for the period from its inception through December 31, 2003.
OXiGENE expects to incur significant additional operating losses over at least the next several years, principally as a result of its continuing clinical trials and anticipated research and development expenditures. The principal source of
OXiGENEs working capital has been the proceeds of private and public equity financing and the exercise of warrants and stock options; the Company currently has no material amount of licensing or other fee income. As of December 31, 2003,
OXiGENE had no long-term debt or loans payable.



RESULTS OF OPERATIONS



Years ended December 31,
2003 and 2002



Revenues



During the fiscal year ended December 31, 2003, the Company recognized
licensing revenue of approximately $30,000. This amount was received in connection with the license of its nutritional and diagnostic technology. No revenue was recognized under this agreement during the year ended December 31, 2002. Future revenues
from this license agreement are expected to be minimal.



The
Companys future revenues are dependent upon the Companys ability to establish collaborations and generate revenues from products currently under development by the Company. The Company expects that it will not generate meaningful revenue
in fiscal 2004 unless and until the Company enters into new collaborations providing for funding whether through the payment of licensing fees, up-front payments or otherwise.



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Costs and Expenses



Total costs and expenses for the fiscal years ended December 31, 2003 and 2002 amounted to approximately $9.3 million and approximately $12.6 million,
respectively. The decrease of $3.3 million is attributable to reductions in research and development expenses of $1.2 million and general and administrative expenses of $2.1 million.



Research and development expenses decreased to approximately $3.9 million during fiscal 2003 from approximately $5.1 million
for the comparable 2002 period. The decrease of approximately $1.2 million was attributable to continued efforts by the Company to reduce spending on all programs other than those involving its Combretastatin family of VTAs, specifically CA4P in the
area of oncology and more recently ophthalmology. The Company expects research and development expenses to increase in fiscal 2004 and beyond, as it moves further along the development cycle and initiates new studies in the oncology and
ophthalmology areas.



The Company from time to time will grant
non-qualified stock options to certain consultants and advisory board members who are not employees. These grants result in research and development expenses relative to the fair value of the options that vest during the applicable reporting period.
During 2003 and 2002, the Company recorded approximately $178,000 and approximately $25,000, respectively, of research and development expenses related to options issued for services provided by non-employees.



General and administrative expenses for the year ended December 31, 2003
decreased to approximately $5.3 million from approximately $7.4 million for 2002. The decrease of approximately $2.1 million was primarily attributable to reductions in stock-based compensation expenses of $2.6 million, general legal expenses of
$364,000 and cash compensation expenses of $330,000, offset in part by increases in rent expense of $502,000, professional consulting fees of $397,000 and depreciation expense of $326,000. The decrease in compensation expenses is primarily
attributable to the conclusion of an employment agreement with a senior executive of the Company in 2002. The decrease in general legal expenses is primarily attributable to continued efforts by the Company to focus on essential activities only. The
decrease in stock-based compensation expense in 2003 is attributable to the timing of vesting of the restricted stock grants awarded in 2002 and the common stock grants in 2002 that did not recur in 2003. The increases in both rent and depreciation
expense are attributable to relocating the Companys headquarters from Watertown, Massachusetts to Waltham, Massachusetts in 2003. This move resulted in one-time charges related to the difference between future rent obligations on and sublease
income expected from the Watertown property over a five year period as well as the acceleration of depreciation of the property abandoned at the Watertown facility. The base rent at the Waltham location is 67% lower than the base rent at the
Watertown facility as a result of the move. The Company anticipates that general and administrative expenses will increase at an appropriate rate to manage expected increases in development programs and increased regulatory compliance requirements.



Other income and expenses



Investment income decreased approximately $14,000 in 2003 compared to 2002,
primarily due to declining interest rates and returns on investments throughout 2003. The Company believes investment income will increase during fiscal 2004 as a result of the investment of the proceeds of its January 2004 sale of its common stock.



Interest expense for both the year ended December 31, 2003 and
December 31, 2002 represents the interest recognized on the payment obligations to ASU in connection with the license agreement with that organization. The decrease in fiscal 2003 of $17,000 from fiscal 2002 is attributable to decreases in the
obligation to ASU as the scheduled payments have been made.



Other income was approximately $635,000 during fiscal 2003 compared to other income of approximately $1.3 million during fiscal 2002. The other income amount in fiscal 2003 is primarily attributable to the recognition of $600,000 of
previously unrecognized foreign currency translation gain in connection with the completion of the liquidation of the Companys Swedish subsidiary, OXiGENE AB. The other income in fiscal 2002 was a result of a $1.3 million gain associated with
a terminated joint venture.



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Tax matters



As of December 31, 2003, the Company had net operating loss carry forwards of approximately $99 million for U.S. and foreign income tax purposes, of which
approximately $58.7 million expires for U.S. purposes through 2023. Due to the degree of uncertainty related to the ultimate use of these loss carry forwards, the Company has fully reserved this tax benefit. Additionally, the future utilization of
the U.S. net operating loss carry forwards is subject to limitations under the change in stock ownership rules of the Internal Revenue Service. The valuation allowance increased by approximately $3.4 million and approximately $4.2 million for the
years ended December 31, 2003 and 2002, respectively, due primarily to the increase in net operating loss carry forwards.



Years ended December 31, 2002 and 2001



Revenues



During the fiscal year ended December 31, 2002, there was no licensing revenue due to the termination of the Research Collaboration and License Agreement
with BMS on October 24, 2001. During the fiscal year ended December 31, 2001, the Company recognized licensing revenue of approximately $9.0 million in connection with the BMS arrangement.



The Companys future revenue is dependent upon the Companys
ability to establish collaborations and generate revenues from products currently under development by the Company. The Company expects it will not generate meaningful revenue in fiscal 2004 unless and until the Company enters into new
collaborations providing for funding whether through the payment of licensing fees, up-front payments or otherwise.



Costs and Expenses



Total costs and expenses for the fiscal years ended December 31, 2002 and 2001 amounted to approximately $12.6 million and approximately $13.4 million,
respectively. The decrease of $800,000 is attributable to reductions in costs related to licensing revenue of $1.5 million, amortization of license agreement of $200,000 and research and development expenses of $1.0 million, offset by an increase in
general and administrative expenses of $2.0 million.



The
decrease in costs relating to license revenue in fiscal 2002 compared to approximately $1.5 million for the comparable 2001 period was due to the termination of the Research Collaboration and License Agreement with BMS in the latter part of fiscal
2001.



The amortization of license agreement expense in fiscal
2002 represents the amortization of the capitalized license agreement costs associated with an exclusive license of certain patent rights owned by Arizona State University. The capitalized amount is being amortized on a straight-line basis over the
term of the agreement (approximately 15.5 years). The fiscal 2001 amount represents the amortization of both the capitalized license agreement costs associated with ASU as well as the capitalized license agreement costs associated with Peregrine.



Research and development expenses decreased to approximately
$5.1 million during fiscal 2002 from approximately $6.1 million for the comparable 2001 period. The decrease of approximately $1.0 million was attributable to decreased research and development efforts related to the Companys benzamide-based
compound, Declopramide, decreases in costs associated with the development of the Companys lead compound, CA4P, and the significant decrease of approximately $1.2 million in legal and consulting costs associated with a terminated joint
venture.



The Company expects future research and development
expenses to increase in fiscal 2004 and beyond, as it moves further along the development cycle and initiates new studies in the oncology and ophthalmology areas.



During 2002 and 2001, the Company recorded approximately $25,000 and approximately $100,000, respectively, of research and
development expenses related to options issued for services provided by non-employees. Generally, the Companys payments to its clinical investigators include an upfront payment and additional payments upon the completion of milestones as
defined in the agreement.



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General and administrative expenses for the year ended December 31, 2002 increased to approximately $7.4
million from approximately $5.4 million for the comparable 2001 period. The increase of approximately $2.0 million was primarily attributable to a non-cash stock-based compensation charge of $2.4 million, offset by decreases of $400,000 in other
costs primarily legal, travel and outside consultant services. The non-cash stock-based compensation charge was made in connection with common stock grants and the Restricted Stock and Compensation Award Stock Programs adopted in fiscal 2002. The
expense in connection with the Restricted Stock Program, a total of approximately $600,000, will generally be recorded on a straight-line basis through fiscal 2004, the period of vesting of these awards. All of the expense in connection with the
other stock awards made in 2002 were recorded as fiscal 2002 expenses. The decrease in other general and administrative expenses is attributable to efforts to preserve cash and reduce cash flow requirements. The Companys policy has been to
minimize the number of its employees and to use outside consultants to perform services for the Company to the extent practicable.



Other income and expenses



Investment income decreased approximately $600,000 in 2002 compared to 2001, primarily due to the Companys overall cash position decreasing as well
as declining interest rates and returns on investments throughout 2002.



Interest expense for both the year ended December 31, 2002 and December 31, 2001 represents the interest recognized on the payment obligations to ASU in connection with the license agreement with that organization. The decrease in fiscal
2002 of $8,000 from fiscal 2001 is attributable to decreases in the obligation to ASU as the scheduled payments have been made.



Other income was approximately $1.3 million during fiscal 2002 compared to other expense of approximately $553,000 for the comparable 2001 period. The
other income in fiscal 2002 was a result of a $1.3 million gain associated with a terminated joint venture. Other expense in fiscal 2001 is primarily attributable to a loss on sale of available-for-sale securities during that fiscal year.



LIQUIDITY AND CAPITAL RESOURCES



OXiGENE has experienced net losses and negative cash flow from operations each year since its inception, except in fiscal 2000. As of December 31, 2003, the Company had an accumulated deficit of approximately $80 million. The Company
expects to incur additional expenses, resulting in losses, over at least the next several years due to, among other factors, its continuing clinical trials and anticipated research and development activities. To date, the Company has financed its
operations principally through net proceeds it has received from private and public equity financing.



The Company had cash, cash equivalents, available-for-sale securities and restricted cash of approximately $18.9 million at December 31, 2003, compared to
approximately $11.8 million at December 31, 2002. In fiscal 2003, the Company experienced a decrease in cash and cash equivalents of $2.9 million. The decrease in cash and cash equivalents is due to cash used in operating activities of $7.8 million
and cash used in investing activities of $10.1 million, offset in part by cash provided by financing activities of $15.0 million.



Cash used in operating activities of $7.8 million is primarily attributable to the net loss of $8.4 million, the non-cash gain recorded upon the
liquidation of its Swedish subsidiary, OXiGENE AB, of $635,000 and the establishment of a restricted cash account of $364,000, offset by depreciation expense of $478,000, a non-cash compensation expense related to the issuance of warrants, options
and stock appreciation rights of $620,000 and an increase in accounts payable, accrued expenses and other payables of $427,000.



The net cash used in investing activities of $10.1 million is primarily attributable to the purchase of available-for-sale securities of $10.6 million and
payments made in connection with license agreements of $290,000, offset by proceeds from the sale of available-for-sale securities of $798,000.



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The net cash provided by financing activities of $15.0 million is attributable to proceeds from the
issuance of common stock of $14.4 million, of which $14.0 million is attributable to proceeds from the sale of common stock in a private placement in June 2003 and $400,000 is attributable to proceeds from the exercise of options and proceeds from
the receipt of amounts paid on outstanding notes receivable of $569,000.



The Company is a biopharmaceutical company engaged principally in the research and development of products for use in the treatment of cancer and certain ocular diseases. This requires substantial amounts of cash from
product conception to potential commercialization over a number of years. The Company expects to continue to incur significant losses from operations as it attempts to commercialize the technologies and compounds it is currently working on. The
Companys policy is to seek to contain fixed expenditures by maintaining a relatively small number of employees and relying as much as possible on outside services for its research, development, pre-clinical testing and clinical trials.
Generally, the Companys payments to its clinical investigators include an upfront payment and additional payments upon the completion of milestones as defined in the agreement. The Company expects that it will not generate meaningful revenue
in fiscal 2004 and beyond, if at all, unless and until the Company enters into new collaborations providing for funding whether through the payment of licensing fees, up-front payments or otherwise.



In July 2001, the Company concluded the sale of its nutritional and
diagnostic technology, Nicoplex and Thiol, respectively, to CampaMed LLC. Under the terms of the agreement, CampaMed will provide up to approximately $3.3 million in future installment payments based upon sales of any products derived from such
technology. In addition, the Company was granted a 10% equity position in CampaMed. In November 2003, CampaMed completed an Asset Transfer and Exchange Agreement with Optigenex Inc. Under the terms of this agreement, Optigenex is assuming the
obligations of CampaMed as outlined above. No revenue was recognized under this agreement during the year ended December 31, 2002. The Company recognized approximately $30,000 in license revenue during the year ended December 31, 2003. Minimal
revenue is expected in future years under this agreement.



On
August 2, 1999, the Company entered into an exclusive license for the commercial development, use and sale of products or services covered by certain patent rights owned by Arizona State University. The Company paid an initial license fee of
$200,000 and is required to pay additional license fees in ten equal semi-annual installments of $160,000 through June 1, 2004. The license agreement and the related obligation have been recorded at the present value of the amount payable using an
effective rate of 8.7%. The agreement provides for additional payments in connection with the license arrangement upon the initiation of certain clinical trials or the completion of certain regulatory approvals, which payments could be accelerated
upon the achievement of certain financial milestones as defined in the agreement. The license agreement also provides for additional payments upon the election of the Company to develop certain compounds as defined in the agreement. The Company also
is required to pay royalties on future net sales of products associated with these patent rights.



In October 2001, the Company concluded a Research Collaboration and License Agreement established in December 1999 with Bristol-Myers Squibb Company
(BMS) to develop Combretastatin compounds as a new class of anti-cancer agents. The Company recognized approximately $6.9 million of deferred revenue as revenue in the fourth quarter of 2001 as a result of the agreement. In February of
2002, the Company and BMS finalized their Termination Agreement. In September 2002, the Company recorded a liability of $790,000 for the in-license of certain technologies discovered by BMS.



In October 2003, the Company completed the filing of a shelf registration
statement on Form S-3 with the Securities and Exchange Commission, allowing it to sell up to $50 million of its Common Stock, debt securities and/or warrants to purchase its securities. In January 2004, the Company received gross proceeds of
approximately $24.2 million from the sale of 2,755,695 shares of its Common Stock and netted approximately $22.3 million after the deduction of fees and expenses, pursuant to this registration statement. The Company plans to use these proceeds to
accelerate the development of its lead compound, Combretastatin A4 Prodrug (CA4P), in both oncology and ophthalmology. The Company evaluates its need for additional capital on a regular basis in order to continue to advance the development of its
strategic compounds and technologies. Future draws on the potential financing provided by this shelf registration and other potential equity and debt capital financings will depend on the



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Companys assessment of the status of the ongoing development of these compounds and technologies and the requirements going forward.



The Company anticipates that its cash, cash equivalents and
available-for-sale marketable securities, including the $22.3 million in net proceeds from the common stock offering in January 2004, will be sufficient to satisfy the Companys projected cash requirements for approximately the next four years
of operation. The Company has focused and streamlined its research and development programs. However, the Companys cash requirements may vary materially from those now planned for or anticipated by management due to numerous risks and
uncertainties. These risks and uncertainties include, but are not limited to: the progress of and results of its pre-clinical testing and clinical trials of its VTAs under development, including CA4P, its lead Combretastatin based compound; the
progress of the Companys research and development programs; the time and costs expended and required to obtain any necessary or desired regulatory approvals; the resources, if any, that the Company devotes to developing manufacturing methods
and advanced technologies; the ability of the Company to enter into licensing arrangements, including any unanticipated licensing arrangements that may be necessary to enable the Company to continue the Companys development and clinical trial
programs; the costs and expenses of filing, prosecuting and, if necessary, enforcing the Companys patent claims, or defending the Company against possible claims of infringement by the Company of third party patent or other technology rights;
the costs of commercialization activities and arrangements, if any, undertaken by the Company; and, if and when approved, the demand for the Companys products, which demand is dependent in turn on circumstances and uncertainties that cannot be
fully known, understood or quantified unless and until the time of approval, for example the range of indications for which any product is granted approval.



If its existing funds are not sufficient to continue operations, the Company would be required to seek additional funding and/or take other measures. If
additional financing is needed, there can be no assurance that additional financing will be available on acceptable terms when needed, if at all. The Company had no material commitments for capital expenditures as of December 31, 2003.



The following table presents information regarding the Companys
contractual obligations and commercial commitments as of December 31, 2003:



Contractual Obligations



|                                           |  |       |       |                        |   |           |  |           |     |               |   |     |  |   |    
|------------------------------------------ |  | ----- | ----- | ---------------------- | - | --------- |  | --------- | --- | ------------- | - | --- |  | - | ---
|                                           |  |       |       | Payments due by period
|                                           |  | Total |       | Less than1 year        |   | 1-3 years |  | 4-5 years |     | After 5 years
|License Agreement Payable                  |  | $     | 155   |                        | $ | 155       |  | $         |    |               | $ |    |  | $ |   
|Bristol Myers Squibb Termination Agreement |  |       | 790   |                        |   | 790       |  |           |    |               |   |    |  |   |   
|Operating leases                           |  |       | 2,698 |                        |   | 388       |  |           | 823 |               |   | 865 |  |   | 622
|                                           |  |       |       |                        |   |           |  |           |     |               |   |     |  |   |    
|Total contractual cash obligations         |  | $     | 3,643 |                        | $ | 1,333     |  | $         | 823 |               | $ | 865 |  | $ | 622
|                                           |  |       |       |                        |   |           |  |           |     |               |   |     |  |   |    



Related Party Transactions



The Company has had consulting agreements with certain
organizations whose principal stockholders are officers or directors of the Company. Consulting fees paid to such organizations amounted to approximately $200,000 and $300,000 for the years ended December 31, 2001 and 2002, respectively. Such
consulting agreements have concluded and no fees were paid to these organizations for the year ended December 31, 2003.



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During 2001 and 2002, the Company incurred approximately $600,000 and $300,000, respectively, in legal
fees for services provided by a law firm, of which a former member of the Board of Directors is a partner. No such services were provided during the year ended December 31, 2003. On April 10, 2003 the Company entered into a settlement agreement with
this former director for payment of outstanding legal services rendered by his firm. In complete satisfaction and settlement of this liability, the former director agreed to receive a cash payment of $50,000 and common stock with an estimated fair
value of $50,000 at the time of issuance. Approximately $100,000 related to this liability was accrued and expensed during the year ended December 31, 2002. On July 23, 2003, the former director agreed to accept $50,000 in cash in lieu of the
original $50,000 stock issuance in full settlement of the liability.



CRITICAL ACCOUNTING POLICIES



In
December 2001, the SEC requested that all registrants discuss their most critical accounting policies in managements discussion and analysis of financial condition and results of operations. The SEC indicated that a critical
accounting policy is one which is both important to the portrayal of the Companys financial condition and results and requires managements most difficult, subjective or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included in this report, we believe the following accounting
policies to be critical:



Revenue Recognition



The Company believes that one of the more effective ways of working towards
its goal of commercializing its technology is to enter into out-licensing collaborations with third parties. Historically, such collaborations have generally provided for the Companys partners to make up-front payments, make additional
payments upon the achievement of specific research and product development milestones, share in the costs of development and/or pay royalties. Such agreements provided for the development, manufacturing and commercialization responsibilities by the
partner related to the Companys drug candidates. Under these agreements, the Company administered and participated in several aspects of the development of its drug candidate, CA4P.



The Company recognizes revenue in accordance with Staff Accounting Bulletin
(SAB) No. 104 (SAB 104), Revenue Recognition in Financial Statements and EITF 00-21, Revenue Arrangements with Multiple Deliverables. Under this accounting method, the Company recognizes revenue when it is earned, that
is when all of the following have occurred: all obligations of the Company relating to the revenue have been met and the earning process is complete; the monies received or receivable are not refundable irrespective of research results; and there
are neither future obligations nor future milestones to be met by the Company with respect to such revenue. In general, collaboration revenues are earned based upon research expenses incurred and milestones achieved. Non-refundable payments upon
initiation of contracts are deferred and amortized over the period in which the Company is obligated to participate on a continuing and substantial basis in the research and development activities outlined in each contract. The Company continually
reviews these estimates that could result in a change in the deferral period. Amounts received in advance of reimbursable expenses are deferred and only recognized when the related expenses have been incurred. Milestone payments are recognized as
revenue in the period in which the parties agree that the milestone has been achieved and it is deemed that no further obligations exist.



Patent and Acquired License Costs



The Company files applications for patents in connection with technologies being developed. The patent applications and any patents issued as a result of
these applications are important to the protection of the Companys technologies that may result from its research and development efforts. Costs associated with patent applications and maintaining patents are expensed as incurred.



The Company has capitalized the costs of acquiring licenses related to its
exclusive License Agreement for the commercial development, use and sale of products or services covered by patent rights related to Combretastatin owned by ASU. The present value of the amount payable under the License Agreement has been
capitalized and is being amortized over the term of the agreement (approximately 15.5 years). The Company also is required to pay royalties on future net sales of products relating to these patent rights.



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The Company evaluates its intangibles for impairment indicators in accordance with SFAS No. 144.
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), which addresses financial accounting and reporting for the impairment of long-lived assets to be disposed. The Companys sole intangible asset is
the net present value of its license agreement with Arizona State University. Under SFAS 144, the Company routinely conducts impairment analysis of the amount capitalized under this license agreement based upon estimates of the possible future
revenues from the sale of an approved product to treat the various diseases/conditions for which the Company is currently conducting or planning to conduct clinical trials. During the fourth quarter of 2003, the Company performed this impairment
analysis, which indicated that the net cash flow from these revenues, appropriately adjusted for the risks associated with successful commercialization, was found to exceed the current carrying value of the license agreement. Accordingly, the
Company is not aware of any impairment of this asset at December 31, 2003.



Use of Estimates



The Company prepares its
financial statements in accordance with generally accepted accounting principles. These principles require that the Company make estimates and use assumptions that affect the reporting of the Companys assets and the Companys liabilities
as well as the disclosures that the Company makes regarding assets and liabilities and income and expense that are contingent upon uncertain factors as of the reporting date. The Companys actual results, based upon the future resolution of
these uncertainties, could differ from estimates.



R&D DISCLOSURE



Members of the
Companys research and development team typically work on a number of development projects concurrently. Accordingly, the Company does not separately track the costs for each of these research and development projects to enable separate
disclosure of these costs on a project-by-project basis. For 2003 and 2002, however, the Company estimates that the majority of the research and development expense was related to sub-contract clinical expense and employee salaries related to the
research and development of its lead vascular targeting agent compound, Combretastatin and the next generation of VTAs in the oncology and ophthalmology areas. Specific amounts and timelines for the completion of development of its existing
compounds being developed have not been determined. However, the Company expects that it will take several years and several million dollars to continue the development of its existing compounds currently in clinical trials.



|7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|--- | ----------------------------------------------------------



At December 31, 2003, the Company did not hold any derivative financial instruments, commodity-based instruments or other
long-term debt obligations. The Company has adopted an Investment Policy and maintains its investment portfolio in accordance with the Investment Policy. The primary objectives of the Investment Policy are to preserve principal, maintain proper
liquidity to meet operating needs and maximize yields while preserving principal. Although the Companys investments are subject to credit risk, OXiGENE follows procedures to limit the amount of credit exposure in any single issue, issuer or
type of investment. The Companys investments are also subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the conservative nature of the Companys investments and relatively short
duration, OXiGENE believes interest rate risk is mitigated. The Companys cash and cash equivalents are maintained primarily in U.S. dollar accounts and amounts payable for research and development to research organizations are contracted in
U.S. dollars. Accordingly, the Companys exposure to foreign currency risk is limited because its transactions are primarily based in U.S. dollars.



|8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|-- | -------------------------------------------



See Item 15 for a list of the OXiGENE Financial Statements and Schedules and Supplementary Information filed as part of this Annual Report.



|9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|-- | ------------------------------------------------------------------------------------



None.



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|9A. | CONTROLS AND PROCEDURES
|--- | -----------------------



(a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K, have concluded that, based on such evaluation, our disclosure controls and procedures were adequate and effective to ensure that
material information relating to us, including our consolidated subsidiary, was made known to them by others within those entities, particularly during the period in which this Annual Report on Form 10-K was being prepared.



(b) Changes in Internal Controls. The Company evaluated its internal
control over financial reporting as of the end of its fourth fiscal quarter. There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control, that occurred during the
fourth quarter of our last fiscal year and that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART III



|10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|--- | --------------------------------------------------



The response to this item is incorporated by reference from the discussion responsive thereto under the captions
Management, Compliance with Section 16(a) of the Securities Exchange Act of 1934, and Code of Conduct and Ethics in the Companys Proxy Statement for the 2004 Annual Meeting of Stockholders.



|11. | EXECUTIVE COMPENSATION
|--- | ----------------------



The response to this item is incorporated by reference from the discussion responsive thereto under the caption Executive Compensation in the
Companys Proxy Statement for the 2004 Annual Meeting of Stockholders.



|12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|--- | ----------------------------------------------------------------------------------------------



The response to this item is incorporated by reference from the discussion
responsive thereto under the caption Share Ownership in the Companys Proxy Statement for the 2004 Annual Meeting of Stockholders.



|13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|--- | ----------------------------------------------



The response to this item is incorporated by reference from the discussion responsive thereto under the caption Certain Relationships and Related
Transactions and Executive Compensation  Employment Agreements, Termination of Employment and Change of Control Agreements in the Companys Proxy Statement for the 2004 Annual Meeting of Stockholders.



|14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--- | --------------------------------------



The response to this item is incorporated by reference from the discussion responsive thereto under the caption Independent Public Accountants
in the Companys Proxy Statement for the 2004 Annual Meeting of Stockholders.



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PART IV



|15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
|--- | ----------------------------------------------------------------



| | (a) | The following documents are filed as part of this report.
| | --- | ---------------------------------------------------------



| | 1. | Financial Statements
| | -- | --------------------



The financial statements listed in the accompanying List of Financial Statements covered by Report of Independent Auditors.



| | 2. | Financial Statement Schedules
| | -- | -----------------------------



None.



| | 3. | Exhibits
| | -- | --------



The following is a list of exhibits filed as part of this Annual Report on Form 10-K.



|              |  |                                                                                                                                                                               
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                   
|              | 
|3.1           |  | Restated Certificate of Incorporation of the Registrant.*                                                                                                                     
|              | 
|3.2           |  | By-Laws of the Registrant.*                                                                                                                                                   
|              | 
|3.3           |  | Certificates of Amendment of Certificate of Incorporation, dated June 21, 1995 and November 15, 1996.**                                                                       
|              | 
|4.1           |  | Specimen Common Stock Certificate*                                                                                                                                            
|              | 
|10.1          |  | Amended and Restated Stock Incentive Plan of Registrant dated as of May 15, 1993.*@                                                                                           
|              | 
|10.2          |  | Executive Employment Agreement, dated as of October 9, 1993, between Registrant and Bjorn Nordenvall, M.D., Ph.D.+ @                                                          
|              | 
|10.3          |  | Consulting Agreement, dated as of October 9, 1995, between OXiGENE (Europe) AB and B. Omentum Consulting AB. +                                                                
|              | 
|10.4          |  | OXiGENE 1996 Stock Incentive Plan, as amended. ++@                                                                                                                            
|              | 
|10.5          |  | Collaborative Research Agreement, dated as of August 1, 1997, between the Registrant and Boston Medical Center Corporation. ***                                               
|              | 
|10.6          |  | Technology Development Agreement, dated as of May 27, 1997, between the Registrant and the Arizona Board of Regents, acting for and on behalf of Arizona State University. ***
|              | 
|10.7          |  | Office Lease, dated February 28, 2000, between Registrant and Charles River Business Center Associates, L.L.C.###                                                             
|              | 
|10.8          |  | Research Collaboration and License Agreement, dated as of December 15, 1999, between OXiGENE Europe AB and Bristol-Myers Squibb Company. +++                                  
|              | 
|10.9          |  | Employment Agreement with Joel Citron dated as of January 2, 2002. ++++#@                                                                                                     



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##### Table of Contents

|              |  |                                                                                                                                                                                                            
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                                                
|              | 
|10.10         |  | Termination Agreement by and between the Registrant and Bristol-Myers Squibb Company, dated as of February 15, 2002. ++++##                                                                                
|              | 
|10.11         |  | Plan and Agreement of Liquidation of Peregrine Pharmaceuticals, Inc., the Registrant and Arcus Therapeutics LLC, dated as of February 15, 2002.##                                                          
|              | 
|10.12         |  | Employment Agreement, dated as of October 23, 2000, between Registrant and Frederick W. Driscoll. #@                                                                                                       
|              | 
|10.13         |  | Independent Contractor Agreement For Consulting Services, dated as of April 1, 2001, between Registrant and David Chaplin Consultants, Ltd.#@                                                              
|              | 
|10.14         |  | Employment Agreement, dated as of April 1, 2001, between Registrant and Dr. David Chaplin.#@                                                                                                               
|              | 
|10.15         |  | Addendum to Executive Employment Agreement, dated as of April 23, 2002, between Registrant and Bjorn Nordenvall, M.D., Ph.D.#@                                                                             
|              | 
|10.16         |  | Addendum to Consulting Agreement, dated as of April 23, 2002, between Registrant and B. Omentum Consulting AB.#                                                                                            
|              | 
|10.17         |  | Addendum to Executive Employment Agreement, dated as of July 1, 2001, between Registrant and Bjorn Nordenvall, M.D., Ph.D.#@                                                                               
|              | 
|10.18         |  | Amendment to Executive Employment Contract, dated as of July 1, 1999, between Registrant and Bjorn Nordenvall, M.D., Ph.D.#@                                                                               
|              | 
|10.19         |  | Restricted Stock Agreement for Employees, dated as of January 2, 2002, between Registrant and Dr. David Chaplin.#                                                                                          
|              | 
|10.20         |  | Compensation Award Stock Agreement for Non-Employee Directors, dated as of January 2, 2002, between Registrant and Bjorn Nordenvall.#                                                                      
|              | 
|10.21         |  | Restricted Stock Agreement for Employees, dated as of January 2, 2002, between Registrant and Frederick W. Driscoll.#                                                                                      
|              | 
|10.22         |  | Form of Compensation Award Stock Agreement for Non-Employee Directors, dated as of January 2, 2002.#                                                                                                       
|              | 
|10.23         |  | Promissory Note, dated as of January 2, 2002, between Registrant and Bjorn Nordenvall.#                                                                                                                    
|              | 
|10.24         |  | Promissory Notes, dated as of January 2, 2002, between Registrant and David Chaplin.#                                                                                                                      
|              | 
|10.25         |  | Promissory Note, dated as of January 2, 2002, between Registrant and Frederick W. Driscoll.#                                                                                                               
|              | 
|10.26         |  | Amendment and Confirmation of License Agreement No. 206-01.LIC, dated as of June 10, 2002, between the Registrant and the Arizona Board of Regents, acting for and on behalf of Arizona State
University. #
|              | 
|10.27         |  | License Agreement No. 206-01.LIC by and between the Arizona Board of Regents, acting on behalf of and for Arizona State University, and OXiGENE Europe AB, dated August 2,
1999.&                          



33



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##### Table of Contents

|              |  |                                                                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                                               
|              | 
|10.28         |  | Research and License Agreement between the Company and Baylor University, dated June 1, 1999.&                                                                                                            
|              | 
|10.29         |  | Agreement to Amend Research and License Agreement between the Company and Baylor University, dated April 23, 2002.&                                                                                       
|              | 
|10.30         |  | Addendum to Research and License Agreement between the Company and Baylor University, dated April 14, 2003.&                                                                                            
|              | 
|10.31         |  | License Agreement by and between Active Biotech AB (Active) and the Company dated November 16, 2001.&                                                                                                   
|              | 
|10.32         |  | License Agreement by and between Active and the Company dated April 23, 2002.&                                                                                                                            
|              | 
|10.33         |  | Funded Research Agreement by and between the Company and The Foundation Fighting Blindness, effective as of October 30, 2002.&&                                                                           
|              | 
|10.34         |  | Stock Pledge and Loan Agreement, dated as of September 1, 1999, between Registrant and Per-Olof Soderberg.                                                                                                
|              | 
|10.35         |  | Stock Pledge and Loan Agreement, dated as of November 13, 2000, between Registrant and Per-Olof Soderberg.                                                                                                
|              | 
|14            |  | Corporate Code of Conduct and Ethics.####                                                                                                                                                                 
|              | 
|21            |  | Subsidiaries.                                                                                                                                                                                             
|              | 
|23            |  | Consent of Ernst & Young LLP.                                                                                                                                                                             
|              | 
|31.1          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                  
|              | 
|32            |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                  
|              | 
|99.1          |  | U.S. Patent Number 5,204,241, issued April 20, 1994, registered to Ronald W. Pero, regarding glutathione-s-transferase Mu as a measure of drug resistance. ++                                             
|              | 
|99.2          |  | U.S. Patent Number 5,340,565, issued August 23, 1994, registered to Ronald W. Pero, regarding tumor or cancer cell-killing therapy and agents useful therefor. ++                                         
|              | 
|99.3          |  | U.S. Patent Number 5,482,833, issued January 9, 1996, registered to Ronald W. Pero and Daniel G. Miller, regarding a test to determine the predisposition or susceptibility to DNA-associated
diseases. ++
|              | 
|99.4          |  | International Application Published under the Patent Cooperation Treaty (PCT) Number WO96/14565, published May 17, 1996, registered to Ronald W. Pero, regarding a method of testing immune
competency. ++



34



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##### Table of Contents

|              |  |                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                
|              | 
|*             |  | Incorporated by reference to the Registrants Registration Statement on Form S-1 (file no. 33-64968) and any amendments thereto.                                           
|              | 
|**            |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for fiscal year ended December 31, 1996.                                                          
|              | 
|***           |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1997.                                                      
|              | 
|****          |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1999.                                                      
|              | 
|#             |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002.                                                  
|              | 
|##            |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002.                                                 
|              | 
|###           |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2000.                                                      
|              | 
|####          |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002.                                                      
|              | 
|+             |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1995.                                                      
|              | 
|++            |  | Incorporated by reference to the Registrants Registration Statement on Form S-8 (file no. 333-92747) and any amendments thereto.                                          
|              | 
|+++           |  | Incorporated by reference to the Registrants Current Report on Form 8-K, filed on December 28, 1999.                                                                      
|              | 
|&             |  | Incorporated by reference to Amendment No. 3 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002.                                   
|              | 
|&&            |  | Incorporated by reference to Amendment No. 4 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002.                                   
|              | 
|++++          |  | Confidential treatment requested as to certain portions of the document, which portions have been omitted and filed separately with the securities and Exchange Commission.
|              | 
|@             |  | Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report.                        



35



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##### Table of Contents

| | (b) | Reports on Form 8-K
| | --- | -------------------



On November 12, 2003, the registrant furnished a Form 8-K under Item 12, Disclosure of Results of Operations and Financial Condition,
concerning its financial results for the quarter ended September 12, 2003.



36



---

##### Table of Contents

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.



OXiGENE, Inc.By:

/s/ FREDERICK W. DRISCOLLFrederick W. Driscoll President and Chief Executive OfficerMarch 15, 2004




Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                               |  |                                                                                             |  |               
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------
|Signature                                      |  | Title                                                                                       |  | Date          
|                                               |  |                                                                                            
|/s/ JOEL-TOMAS CITRONJoel-Tomas Citron         |  | Chairman of the Board and Director                                                          |  | March 15, 2004
|                                               |  |                                                                                            
|/s/ FREDERICK W. DRISCOLLFrederick W. Driscoll |  | President, Chief Executive Officer and Director (Principal executive and financial officer) |  | March 15, 2004
|                                               |  |                                                                                            
|/s/ ARTHUR B. LAFFERArthur B. Laffer           |  | Director                                                                                    |  | March 15, 2004
|                                               |  |                                                                                            
|/s/ STEN LINDAHLSten Lindahl                   |  | Director                                                                                    |  | March 15, 2004
|                                               |  |                                                                                            
|/s/ WILLIAM N. SHIEBLERWilliam N. Shiebler     |  | Director                                                                                    |  | March 15, 2004
|                                               |  |                                                                                            
|/s/ PER-OLOF SODERBERGPer-Olof Soderberg       |  | Director                                                                                    |  | March 15, 2004



37



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                               
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                   
|              | 
|3.1           |  | Restated Certificate of Incorporation of the Registrant.*                                                                                                                     
|              | 
|3.2           |  | By-Laws of the Registrant.*                                                                                                                                                   
|              | 
|3.3           |  | Certificates of Amendment of Certificate of Incorporation, dated June 21, 1995 and November 15, 1996.**                                                                       
|              | 
|4.1           |  | Specimen Common Stock Certificate*                                                                                                                                            
|              | 
|10.1          |  | Amended and Restated Stock Incentive Plan of Registrant dated as of May 15, 1993.*@                                                                                           
|              | 
|10.2          |  | Executive Employment Agreement, dated as of October 9, 1993, between Registrant and Bjorn Nordenvall, M.D., Ph.D.+ @                                                          
|              | 
|10.3          |  | Consulting Agreement, dated as of October 9, 1995, between OXiGENE (Europe) AB and B. Omentum Consulting AB. +                                                                
|              | 
|10.4          |  | OXiGENE 1996 Stock Incentive Plan, as amended. ++@                                                                                                                            
|              | 
|10.5          |  | Collaborative Research Agreement, dated as of August 1, 1997, between the Registrant and Boston Medical Center Corporation.
***                                               
|              | 
|10.6          |  | Technology Development Agreement, dated as of May 27, 1997, between the Registrant and the Arizona Board of Regents, acting for and on
behalf of Arizona State University. ***
|              | 
|10.7          |  | Office Lease, dated February 28, 2000, between Registrant and Charles River Business Center Associates, L.L.C.###                                                             
|              | 
|10.8          |  | Research Collaboration and License Agreement, dated as of December 15, 1999, between OXiGENE Europe AB and Bristol-Myers Squibb Company.
+++                                  
|              | 
|10.9          |  | Employment Agreement with Joel Citron dated as of January 2, 2002. ++++#@                                                                                                     
|              | 
|10.10         |  | Termination Agreement by and between the Registrant and Bristol-Myers Squibb Company, dated as of February 15, 2002.
++++##                                                   
|              | 
|10.11         |  | Plan and Agreement of Liquidation of Peregrine Pharmaceuticals, Inc., the Registrant and Arcus Therapeutics LLC, dated as of February 15,
2002.##                             
|              | 
|10.12         |  | Employment Agreement, dated as of October 23, 2000, between Registrant and Frederick W. Driscoll. #@                                                                          
|              | 
|10.13         |  | Independent Contractor Agreement For Consulting Services, dated as of April 1, 2001, between Registrant and David Chaplin Consultants,
Ltd.#@                                 
|              | 
|10.14         |  | Employment Agreement, dated as of April 1, 2001, between Registrant and Dr. David Chaplin.#@                                                                                  
|              | 
|10.15         |  | Addendum to Executive Employment Agreement, dated as of April 23, 2002, between Registrant and Bjorn Nordenvall, M.D.,
Ph.D.#@                                                



38



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##### Table of Contents

|              |  |                                                                                                                                                                                                            
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                                                
|              | 
|10.16         |  | Addendum to Consulting Agreement, dated as of April 23, 2002, between Registrant and B. Omentum Consulting AB.#                                                                                            
|              | 
|10.17         |  | Addendum to Executive Employment Agreement, dated as of July 1, 2001, between Registrant and Bjorn Nordenvall, M.D.,
Ph.D.#@                                                                               
|              | 
|10.18         |  | Amendment to Executive Employment Contract, dated as of July 1, 1999, between Registrant and Bjorn Nordenvall, M.D.,
Ph.D.#@                                                                               
|              | 
|10.19         |  | Restricted Stock Agreement for Employees, dated as of January 2, 2002, between Registrant and Dr. David Chaplin.#                                                                                          
|              | 
|10.20         |  | Compensation Award Stock Agreement for Non-Employee Directors, dated as of January 2, 2002, between Registrant and Bjorn
Nordenvall.#                                                                      
|              | 
|10.21         |  | Restricted Stock Agreement for Employees, dated as of January 2, 2002, between Registrant and Frederick W. Driscoll.#                                                                                      
|              | 
|10.22         |  | Form of Compensation Award Stock Agreement for Non-Employee Directors, dated as of January 2, 2002.#                                                                                                       
|              | 
|10.23         |  | Promissory Note, dated as of January 2, 2002, between Registrant and Bjorn Nordenvall.#                                                                                                                    
|              | 
|10.24         |  | Promissory Notes, dated as of January 2, 2002, between Registrant and David Chaplin.#                                                                                                                      
|              | 
|10.25         |  | Promissory Note, dated as of January 2, 2002, between Registrant and Frederick W. Driscoll.#                                                                                                               
|              | 
|10.26         |  | Amendment and Confirmation of License Agreement No. 206-01.LIC, dated as of June 10, 2002, between the Registrant and the Arizona Board of
Regents, acting for and on behalf of Arizona State University. #
|              | 
|10.27         |  | License Agreement No. 206-01.LIC by and between the Arizona Board of Regents, acting on behalf of and for Arizona State University, and
OXiGENE Europe AB, dated August 2, 1999.&                          
|              | 
|10.28         |  | Research and License Agreement between the Company and Baylor University, dated June 1, 1999.&                                                                                                             
|              | 
|10.29         |  | Agreement to Amend Research and License Agreement between the Company and Baylor University, dated April 23,
2002.&                                                                                        
|              | 
|10.30         |  | Addendum to Research and License Agreement between the Company and Baylor University, dated April 14,
2003.&                                                                                             
|              | 
|10.31         |  | License Agreement by and between Active Biotech AB (Active) and the Company dated November 16, 2001.&                                                                                                    
|              | 
|10.32         |  | License Agreement by and between Active and the Company dated April 23, 2002.&                                                                                                                             
|              | 
|10.33         |  | Funded Research Agreement by and between the Company and The Foundation Fighting Blindness, effective as of October 30,
2002.&&                                                                            



39



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##### Table of Contents

|              |  |                                                                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                                               
|              | 
|10.34         |  | Stock Pledge and Loan Agreement, dated as of September 1, 1999, between Registrant and Per-Olof Soderberg                                                                                                 
|              | 
|10.35         |  | Stock Pledge and Loan Agreement, dated as of November 13, 2000, between Registrant and Per-Olof Soderberg.                                                                                                
|              | 
|14            |  | Corporate Code of Conduct and Ethics.####                                                                                                                                                                 
|              | 
|21            |  | Subsidiaries.                                                                                                                                                                                             
|              | 
|23            |  | Consent of Ernst & Young LLP.                                                                                                                                                                             
|              | 
|31.1          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                  
|              | 
|32            |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                  
|              | 
|99.1          |  | U.S. Patent Number 5,204,241, issued April 20, 1994, registered to Ronald W. Pero, regarding glutathione-s-transferase Mu as a measure of
drug resistance. ++                                             
|              | 
|99.2          |  | U.S. Patent Number 5,340,565, issued August 23, 1994, registered to Ronald W. Pero, regarding tumor or cancer cell-killing therapy and
agents useful therefor. ++                                         
|              | 
|99.3          |  | U.S. Patent Number 5,482,833, issued January 9, 1996, registered to Ronald W. Pero and Daniel G. Miller, regarding a test to determine the
predisposition or susceptibility to DNA-associated diseases. ++
|              | 
|99.4          |  | International Application Published under the Patent Cooperation Treaty (PCT) Number WO96/14565, published May 17, 1996, registered to
Ronald W. Pero, regarding a method of testing immune competency. ++
|              | 
|*             |  | Incorporated by reference to the Registrants Registration Statement on Form S-1 (file no. 33-64968) and any amendments
thereto.                                                                          
|              | 
|**            |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for fiscal year ended December 31, 1996.                                                                                         
|              | 
|***           |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1997.                                                                                     
|              | 
|****          |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1999.                                                                                     
|              | 
|#             |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002.                                                                                 



40



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##### Table of Contents

|              |  |                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                
|              | 
|##            |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002.                                                 
|              | 
|###           |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2000.                                                      
|              | 
|####          |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002.                                                      
|              | 
|+             |  | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1995.                                                      
|              | 
|++            |  | Incorporated by reference to the Registrants Registration Statement on Form S-8 (file no. 333-92747) and any amendments thereto.                                          
|              | 
|+++           |  | Incorporated by reference to the Registrants Current Report on Form 8-K, filed on December 28, 1999.                                                                      
|              | 
|&             |  | Incorporated by reference to Amendment No. 3 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002.                                   
|              | 
|&&            |  | Incorporated by reference to Amendment No. 4 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002.                                   
|              | 
|++++          |  | Confidential treatment requested as to certain portions of the document, which portions have been omitted and filed separately with the securities and Exchange Commission.
|              | 
|@             |  | Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report.                        



41



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##### Table of Contents

Form 10-K Item 15(a)(1)



OXiGENE, Inc.



Index to Consolidated Financial Statements



The
following consolidated financial statements of OXiGENE, Inc. are included in Item 8:



|                                                |  |         
|----------------------------------------------- |  | --------
|Report of Independent Auditors                  |  | F-2     
|                                                | 
|Consolidated Balance Sheets                     |  | F-3     
|                                                | 
|Consolidated Statements of Operations           |  | F-4     
|                                                | 
|Consolidated Statements of Stockholders Equity |  | F-5     
|                                                | 
|Consolidated Statements of Cash Flows           |  | F-6     
|                                                | 
|Notes to Consolidated Financial Statements      |  | F-7F-22





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##### Table of Contents

Report of Independent Auditors



The Board of
Directors and Stockholders

OXiGENE, Inc.



We have audited the accompanying consolidated balance sheets of OXiGENE, Inc. (the Company) as of December 31, 2002 and 2003, and the related
consolidated statements of operations, stockholders equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of OXiGENE, Inc. at December 31, 2002 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States.



ERNST &
YOUNG LLP



Boston, Massachusetts

February 6, 2004



F-2



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##### Table of Contents

OXiGENE, Inc.



Consolidated Balance Sheets

(Amounts in thousands, except par value amounts)



|                                                                                                                                |  |                         |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                |  | Year ended December 31, |        
|                                                                                                                                |  | 2002                    |         |   | 2003 |  
|Assets                                                                                                                          |  |                         |         |   |      |   |         |  
|Current assets:                                                                                                                 |  |                         |         |   |      |   |         |  
|Cash and cash equivalents                                                                                                       |  | $                       | 3,752   |   |      | $ | 878     |  
|Available-for-sale securities                                                                                                   |  |                         | 8,078   |   |      |   | 17,694  |  
|Restricted cash                                                                                                                 |  |                         |        |   |      |   | 364     |  
|Prepaid expenses                                                                                                                |  |                         | 16      |   |      |   | 27      |  
|Other                                                                                                                           |  |                         | 24      |   |      |   | 22      |  
|                                                                                                                                |  |                         |         |   |      |   |         |  
|Total current assets                                                                                                            |  |                         | 11,870  |   |      |   | 18,985  |  
|Furniture and fixtures, equipment and leasehold improvements                                                                    |  |                         | 870     |   |      |   | 905     |  
|Accumulated depreciation                                                                                                        |  |                         | (383    | ) |      |   | (861    | )
|                                                                                                                                |  |                         |         |   |      |   |         |  
|                                                                                                                                |  |                         | 487     |   |      |   | 44      |  
|License agreements, net of accumulated amortization of $333 and $430 at December 31, 2002 and 2003, respectively                |  |                         | 1,167   |   |      |   | 1,069   |  
|Deposits                                                                                                                        |  |                         | 74      |   |      |   | 107     |  
|                                                                                                                                |  |                         |         |   |      |   |         |  
|Total assets                                                                                                                    |  | $                       | 13,598  |   |      | $ | 20,205  |  
|                                                                                                                                |  |                         |         |   |      |   |         |  
|Liabilities and stockholders equity                                                                                            |  |                         |         |   |      |   |         |  
|Current liabilities:                                                                                                            |  |                         |         |   |      |   |         |  
|License agreement payablecurrent portion                                                                                       |  | $                       | 290     |   |      | $ | 155     |  
|Accounts payable                                                                                                                |  |                         | 1,417   |   |      |   | 1,546   |  
|Accrued research and development                                                                                                |  |                         | 1,167   |   |      |   | 1,294   |  
|Accrued other                                                                                                                   |  |                         | 550     |   |      |   | 740     |  
|                                                                                                                                |  |                         |         |   |      |   |         |  
|Total current liabilities                                                                                                       |  |                         | 3,424   |   |      |   | 3,735   |  
|License agreement payablenon-current portion                                                                                   |  |                         | 154     |   |      |   |        |  
|Commitments and contingencies                                                                                                   |  |                         |         |   |      |   |         |  
|Stockholders equity:                                                                                                           |  |                         |         |   |      |   |         |  
|Common Stock, $.01 par value, 60,000 shares authorized; 12,677 shares in 2002 and 13,994 shares in 2003, issued and
outstanding |  |                         | 127     |   |      |   | 140     |  
|Additional paid-in capital                                                                                                      |  |                         | 83,465  |   |      |   | 97,674  |  
|Accumulated deficit                                                                                                             |  |                         | (71,654 | ) |      |   | (80,022 | )
|Accumulated other comprehensive income (loss)                                                                                   |  |                         | 637     |   |      |   | (132    | )
|Notes receivable                                                                                                                |  |                         | (2,187  | ) |      |   | (962    | )
|Deferred compensation                                                                                                           |  |                         | (368    | ) |      |   | (228    | )
|                                                                                                                                |  |                         |         |   |      |   |         |  
|Total stockholders equity                                                                                                      |  |                         | 10,020  |   |      |   | 16,470  |  
|                                                                                                                                |  |                         |         |   |      |   |         |  
|Total liabilities and stockholders equity                                                                                      |  | $                       | 13,598  |   |      | $ | 20,205  |  
|                                                                                                                                |  |                         |         |   |      |   |         |  



See accompanying notes.



F-3



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##### Table of Contents

OXiGENE, Inc.



Consolidated Statements of Operations

(All amounts in thousands, except per share amounts)



|                                                                                                                                |  |                         |        |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                                                |  | Year ended December 31, |       
|                                                                                                                                |  | 2001                    |        |   | 2002 |   |         | 2003 | 
|License revenue                                                                                                                 |  | $                       | 8,953  |   |      | $ |        |      |  | $ | 30     |  
|Operating costs and expenses:                                                                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|Costs relating to license revenue                                                                                               |  |                         | 1,508  |   |      |   |        |      |  |   |       |  
|General and administrative (including related party transactions of approximately $775 and $618 in 2001 and 2002,
respectively) |  |                         | 5,447  |   |      |   | 7,438   |      |  |   | 5,282  |  
|Research and development                                                                                                        |  |                         | 6,132  |   |      |   | 5,103   |      |  |   | 3,938  |  
|Amortization of license agreements                                                                                              |  |                         | 298    |   |      |   | 98      |      |  |   | 98     |  
|                                                                                                                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Total operating costs and expenses                                                                                              |  |                         | 13,385 |   |      |   | 12,639  |      |  |   | 9,318  |  
|                                                                                                                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Operating loss                                                                                                                  |  |                         | (4,432 | ) |      |   | (12,639 | )    |  |   | (9,288 | )
|Investment income                                                                                                               |  |                         | 907    |   |      |   | 335     |      |  |   | 321    |  
|Interest expense                                                                                                                |  |                         | (61    | ) |      |   | (53     | )    |  |   | (36    | )
|Other (expense) income, net                                                                                                     |  |                         | (553   | ) |      |   | 1,344   |      |  |   | 635    |  
|                                                                                                                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Net loss                                                                                                                        |  | $                       | (4,139 | ) |      | $ | (11,013 | )    |  | $ | (8,368 | )
|                                                                                                                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Basic and diluted net loss per common share                                                                                     |  | $                       | (0.37  | ) |      | $ | (0.88   | )    |  | $ | (0.63  | )
|Weighted-average number of common shares outstanding                                                                            |  |                         | 11,282 |   |      |   | 12,514  |      |  |   | 13,184 |  



See accompanying notes.



F-4



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##### Table of Contents

OXiGENE, Inc.



Consolidated Statements of Stockholders Equity

(All amounts in thousands)



|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | -------------------------- | - |  | -------------------- | --- | - | ------------------------ | - | --- | ------------------ |  | - | ------------------------------------------ | - |  | --------------- | ------ | - | -------------------- | - | ------- | ------------------------ |  | - | ----- | - |  | - | ------ | - |  | - | ---- | - |  | - | ------- | -
|                                                                                         |  | Common Stock$.01 Par Value |   |  | Common StockIssuable |     |   | AdditionalPaid-InCapital |   |     | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | NotesReceivable |        |   | DeferredCompensation |   |         | TotalStockholdersEquity | 
|                                                                                         |  | Shares                     |   |  | Amount               |     |   | Shares                   |   |     | Amount             |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |       
|Balance at December 31, 2000                                                             |  | 11,374                     |   |  | $                    | 114 |   |                          | $ | 42  |                    |  | $ | 369                                        |   |  | $               | 81,984 |   |                      | $ | (56,502 | )                        |  | $ | (973  | ) |  | $ | (3,609 | ) |  | $ | (237 | ) |  | $ | 21,146  |  
|Realized loss from available-for-sale security                                           |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   | 1,451 |   |  |   |       |   |  |   |     |   |  |   | 1,451   |  
|Foreign currency translation adjustment                                                  |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   | (17   | ) |  |   |       |   |  |   |     |   |  |   | (17     | )
|Net loss                                                                                 |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   | (4,139  | )                        |  |   |      |   |  |   |       |   |  |   |     |   |  |   | (4,139  | )
|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  
|Comprehensive loss                                                                       |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   |     |   |  |   | (2,705  | )
|Issuance of Common Stock upon exercise of options and warrants                           |  | 58                         |   |  |                      |    |   |                          |   | (42 | )                  |  |   | (369                                       | ) |  |                 | 475    |   |                      |   |        |                          |  |   |      |   |  |   | (106   | ) |  |   |     |   |  |   |        |  
|Cancellation of notes receivable                                                         |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | (139   | ) |                      |   |        |                          |  |   |      |   |  |   | 139    |   |  |   |     |   |  |   |        |  
|Interest on notes receivable                                                             |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | 189    |   |                      |   |        |                          |  |   |      |   |  |   | (189   | ) |  |   |     |   |  |   |        |  
|Options issued for services provided by non-employees                                    |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | (124   | ) |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   | 202  |   |  |   | 78      |  
|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  
|Balance at December 31, 2001                                                             |  | 11,432                     |   |  |                      | 114 |   |                          |   |    |                    |  |   |                                           |   |  |                 | 82,385 |   |                      |   | (60,641 | )                        |  |   | 461   |   |  |   | (3,765 | ) |  |   | (35  | ) |  |   | 18,519  |  
|Unrealized loss from available-for-sale securities                                       |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   | (87   | ) |  |   |       |   |  |   |     |   |  |   | (87     | )
|Foreign currency translation adjustment                                                  |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   | 263   |   |  |   |       |   |  |   |     |   |  |   | 263     |  
|Net loss                                                                                 |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   | (11,013 | )                        |  |   |      |   |  |   |       |   |  |   |     |   |  |   | (11,013 | )
|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  
|Comprehensive loss                                                                       |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   |     |   |  |   | (10,837 | )
|Issuance of common stock                                                                 |  | 215                        |   |  |                      | 2   |   |                          |   |    |                    |  |   |                                           |   |  |                 | 473    |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   |     |   |  |   | 475     |  
|Issuance of restricted stock                                                             |  | 1,030                      |   |  |                      | 11  |   |                          |   |    |                    |  |   |                                           |   |  |                 | 2,811  |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   | (381 | ) |  |   | 2,441   |  
|Issuance of notes receivable                                                             |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | 2      |   |                      |   |        |                          |  |   |      |   |  |   | (636   | ) |  |   |     |   |  |   | (634    | )
|Interest on notes receivable                                                             |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | 175    |   |                      |   |        |                          |  |   |      |   |  |   | (145   | ) |  |   |     |   |  |   | 30      |  
|Cancellation of notes receivable                                                         |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | (2,359 | ) |                      |   |        |                          |  |   |      |   |  |   | 2,359  |   |  |   |     |   |  |   |        |  
|Options issued for services provided by non-employees                                    |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | (22    | ) |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   | 48   |   |  |   | 26      |  
|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  
|Balance at December 31, 2002                                                             |  | 12,677                     |   |  |                      | 127 |   |                          |   |    |                    |  |   |                                           |   |  |                 | 83,465 |   |                      |   | (71,654 | )                        |  |   | 637   |   |  |   | (2,187 | ) |  |   | (368 | ) |  |   | 10,020  |  
|Unrealized loss from available-for-sale securities                                       |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   | (169  | ) |  |   |       |   |  |   |     |   |  |   | (169    | )
|Foreign currency translation adjustment                                                  |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   | (600  | ) |  |   |       |   |  |   |     |   |  |   |        |  
|Net loss                                                                                 |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   | (8,368  | )                        |  |   |      |   |  |   |       |   |  |   |     |   |  |   | (8,368  | )
|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  
|Comprehensive loss                                                                       |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   |     |   |  |   | (9,137  | )
|Issuance of common stock in connection with private financing, net of expenses of $1,102 |  | 1,500                      |   |  |                      | 15  |   |                          |   |    |                    |  |   |                                           |   |  |                 | 13,883 |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   |     |   |  |   | 13,898  |  
|Issuance of common stock upon exercise of options                                        |  | 110                        |   |  |                      | 1   |   |                          |   |    |                    |  |   |                                           |   |  |                 | 499    |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   |     |   |  |   | 500     |  
|Compensation related to restricted stock, options and stock appreciation rights          |  | 5                          |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | 229    |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   | 391  |   |  |   | 620     |  
|Payment of notes receivable                                                              |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 |       |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   |     |   |  |   |        |  
|Interest on notes receivable                                                             |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | 102    |   |                      |   |        |                          |  |   |      |   |  |   | (102   | ) |  |   |     |   |  |   |        |  
|Cancellation of notes receivable                                                         |  | (298                       | ) |  |                      | (3  | ) |                          |   |    |                    |  |   |                                           |   |  |                 | (755   | ) |                      |   |        |                          |  |   |      |   |  |   | 758    |   |  |   |     |   |  |   |        |  
|Options issued for services provided by non-employees                                    |  |                           |   |  |                      |    |   |                          |   |    |                    |  |   |                                           |   |  |                 | 251    |   |                      |   |        |                          |  |   |      |   |  |   |       |   |  |   | (251 | ) |  |   |        |  
|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  
|Balance at December 31, 2003                                                             |  | 13,994                     |   |  | $                    | 140 |   |                          |   |    |                    |  |   |                                           |   |  | $               | 97,674 |   |                      | $ | (80,022 | )                        |  | $ | (132  | ) |  | $ | (962   | ) |  | $ | (228 | ) |  | $ | 16,470  |  
|                                                                                         |  |                            |   |  |                      |     |   |                          |   |     |                    |  |   |                                            |   |  |                 |        |   |                      |   |         |                          |  |   |       |   |  |   |        |   |  |   |      |   |  |   |         |  



See accompanying notes.



F-5



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##### Table of Contents

OXiGENE, Inc.



Consolidated Statements of Cash Flows

(Amounts in thousands)



|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                      |  | Year ended December 31, |       
|                                                                                                      |  | 2001                    |        |   | 2002 |   |         | 2003 | 
|Operating activities:                                                                                 |  |                         |        |   |      |   |         |      |  |   |         |  
|Net loss                                                                                              |  | $                       | (4,139 | ) |      | $ | (11,013 | )    |  | $ | (8,368  | )
|Adjustments to reconcile net loss to net cash used in operating activities:                           |  |                         |        |   |      |   |         |      |  |   |         |  
|Gain on sale of joint venture                                                                         |  |                         |       |   |      |   | (1,325  | )    |  |   |        |  
|Foreign currency translation gain                                                                     |  |                         |       |   |      |   |        |      |  |   | (635    | )
|Loss on sale of available-for-sale securities                                                         |  |                         | 551    |   |      |   |        |      |  |   |        |  
|Depreciation                                                                                          |  |                         | 81     |   |      |   | 145     |      |  |   | 478     |  
|Amortization of deferred license revenue                                                              |  |                         | (7,445 | ) |      |   |        |      |  |   |        |  
|Amortization of license agreements                                                                    |  |                         | 236    |   |      |   | 98      |      |  |   | 98      |  
|Abandonment of furniture, fixtures and equipment                                                      |  |                         | 128    |   |      |   | 11      |      |  |   |        |  
|Compensation related to issuance of warrants, options, stock appreciation rights and restricted stock |  |                         | 78     |   |      |   | 2,941   |      |  |   | 620     |  
|Changes in operating assets and liabilities:                                                          |  |                         |        |   |      |   |         |      |  |   |         |  
|Restricted cash                                                                                       |  |                         |       |   |      |   |        |      |  |   | (364    | )
|Prepaid expenses and other assets                                                                     |  |                         | 159    |   |      |   | 430     |      |  |   | (7      | )
|Accounts payable, accrued expenses and other payables                                                 |  |                         | 1,310  |   |      |   | 212     |      |  |   | 427     |  
|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  
|Net cash used in operating activities                                                                 |  |                         | (9,041 | ) |      |   | (8,501  | )    |  |   | (7,751  | )
|                                                                                                      |  |                         |       
|Investing activities:                                                                                 |  |                         |        |   |      |   |         |      |  |   |         |  
|Purchase of available-for-sale securities                                                             |  |                         |       |   |      |   | (8,164  | )    |  |   | (10,584 | )
|Proceeds from sale of available-for-sale securities                                                   |  |                         | 1,449  |   |      |   |        |      |  |   | 798     |  
|Proceeds from sale of joint venture                                                                   |  |                         |       |   |      |   | 2,000   |      |  |   |        |  
|Amount paid for license agreements                                                                    |  |                         | (285   | ) |      |   | (267    | )    |  |   | (290    | )
|Purchase of furniture, fixtures and equipment                                                         |  |                         | (159   | ) |      |   | (15     | )    |  |   | (35     | )
|Deposits                                                                                              |  |                         |       |   |      |   | 10      |      |  |   | (33     | )
|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  
|Net cash (used in) provided by investing activities                                                   |  |                         | 1,005  |   |      |   | (6,436  | )    |  |   | (10,144 | )
|Financing activities:                                                                                 |  |                         |        |   |      |   |         |      |  |   |         |  
|Proceeds from issuance of common stock                                                                |  |                         |       |   |      |   |        |      |  |   | 14,398  |  
|Payment of notes receivable and related interest                                                      |  |                         |       |   |      |   |        |      |  |   | 569     |  
|Issuance of notes receivable and related interest                                                     |  |                         |       |   |      |   | (634    | )    |  |   |        |  
|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) financing activities                                                   |  |                         |       |   |      |   | (634    | )    |  |   | 14,967  |  
|Effect of exchange rate changes on cash                                                               |  |                         | 3      |   |      |   | 293     |      |  |   | 54      |  
|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  
|Decrease in cash and cash equivalents                                                                 |  |                         | (8,033 | ) |      |   | (15,278 | )    |  |   | (2,874  | )
|Cash and cash equivalents at beginning of year                                                        |  |                         | 27,063 |   |      |   | 19,030  |      |  |   | 3,752   |  
|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of year                                                              |  | $                       | 19,030 |   |      | $ | 3,752   |      |  | $ | 878     |  
|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  
|Supplemental Disclosure                                                                               |  |                         |        |   |      |   |         |      |  |   |         |  
|Interest paid                                                                                         |  | $                       | 74     |   |      | $ | 53      |      |  | $ | 30      |  
|                                                                                                      |  |                         |        |   |      |   |         |      |  |   |         |  



See accompanying notes.



F-6



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##### Table of Contents

OXiGENE, INC.



Notes to Consolidated Financial Statements



December 31, 2003



|1. | Description of Business and Significant Accounting Policies
|-- | -----------------------------------------------------------



Description of Business



OXiGENE, Inc. (the Company), incorporated in 1988 in the state of New York and reincorporated in 1992 in the state of Delaware, is a
biopharmaceutical company engaged principally in research into and the development of products for use in the treatment of cancer and certain ocular diseases. The Companys efforts in oncology are focused on developing products for application
as direct cancer treatment agents, particularly vascular targeting agents (VTAs or VTA). These agents attack a tumors network of existing and emerging blood vessels, which are its main life support system. The Company
is also investigating the use of certain products for other applications in the field of ophthalmology, in particular age-related macular degeneration and myopic macular degeneration. Certain Company activities are conducted with third parties,
either through licensing arrangements or collaborations. Currently, OXiGENE has, in various stages of clinical and pre-clinical development, multiple therapeutic product candidates that were derived from its principal vascular targeting platform.



Principles of Consolidation



The financial statements include the accounts of the Company and its
wholly-owned subsidiary in Sweden, OXiGENE Europe AB, prior to December 31, 2003. All material intercompany balances and transactions have been eliminated in consolidation.



Use of Estimates



The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting
period. Actual results could differ from those estimates.



Concentration of
Credit Risk



Financial instruments, which potentially
subject the Company to concentration of credit risk, consist principally of cash, cash equivalents and available-for-sale securities. The Company places its cash, cash equivalents and available-for-sale securities with a high credit quality
financial institution. At December 31, 2002 and 2003, substantially all cash, cash equivalents and available-for-sale securities were deposited with one financial institution.



Cash and Cash Equivalents



The Company considers all highly liquid financial instruments with maturities of three months or less when purchased to be cash equivalents.



Available-for-Sale Securities



In accordance with the Companys investment policy, surplus cash is
invested in mutual funds and corporate and U.S. Government debt securities. In accordance with Statement of Financial Accounting Standard No. 115 (FAS 115), Accounting for Certain Investments in Debt and Equity Securities, the
Company separately discloses cash and cash equivalents from investments in marketable securities. The Company designates its marketable securities as available-for-sale securities. Available-for-sale securities are carried at fair value with the
unrealized gains and losses, net of tax, if any, reported as accumulated other comprehensive income (loss) in



F-7



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##### Table of Contents

stockholders equity. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in
other expense, net. Interest and dividends on securities classified as available-for-sale are included in investment income.



In accordance with OXiGENEs current investment policy, the Companys investments are rated at a minimum ranking of AAA by at least one
Nationally Recognized Statistical Rating Organization (NRSRO). The Company assesses the market risk of its investments on an ongoing basis so as to avert risk of loss. The Company assesses the market risk of its investments by continuously
monitoring the market prices of its investments and related rates of return, continuously looking for the safest, most risk-averse investments that will yield the highest rates of return in their category.



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##### Table of Contents

OXiGENE, INC.



Notes to Consolidated Financial Statements(continued)



|1. | Description of Business and Significant Accounting Policies (continued)
|-- | -----------------------------------------------------------------------



The following is a summary of the fair values of available-for-sale securities: (Amounts in
thousands)



|                                    |  |              |       |      |   |       
|----------------------------------- |  | ------------ | ----- | ---- | - | ------
|                                    |  | December 31,
|                                    |  | 2002         |       | 2003
|Mutual funds                        |  | $            | 6,829 |      | $ | 11,359
|Certificates of deposit             |  |              | 291   |      |   | 1,161 
|Government bonds                    |  |              |       |      |   |       
|Maturing in less than 2 years       |  |              |      |      |   | 250   
|Maturing in greater than 4 years    |  |              |      |      |   | 1,003 
|                                    |  |              |       |      |   |       
|Subtotal government bonds           |  |              |      |      |   | 1,253 
|                                    |  |              |       |      |   |       
|Corporate bonds                     |  |              |       |      |   |       
|Maturing in less than 2 years       |  |              | 505   |      |   | 705   
|Maturing in 2 to 4 years            |  |              | 453   |      |   | 2,239 
|Maturing in greater than 4 years    |  |              |      |      |   | 977   
|                                    |  |              |       |      |   |       
|Subtotal corporate bonds            |  |              | 958   |      |   | 3,921 
|                                    |  |              |       |      |   |       
|Total available-for-sale securities |  | $            | 8,078 |      | $ | 17,694
|                                    |  |              |       |      |   |       



The following table shows the gross
unrealized gains and losses on available-for-sale securities, aggregated by investment category. All unrealized losses have been in a continuous unrealized loss position for less than a 12-month period as of December 31, 2003. (Amounts in thousands)



|                              |  |              |    |      |   |      |  
|----------------------------- |  | ------------ | -- | ---- | - | ---- | -
|                              |  | December 31, |   
|                              |  | 2002         |    | 2003 |  
|Unrealized Losses             |  |              |    |      |   |      |  
|Mutual Funds                  |  | $            |   |      | $ | (109 | )
|Certificates of Deposit       |  |              |   |      |   | (10  | )
|Government Bonds              |  |              |   |      |   |     |  
|Corporate Bonds               |  |              |   |      |   | (39  | )
|                              |  |              |    |      |   |      |  
|Total gross unrealized losses |  |              |   |      |   | (158 | )
|Unrealized Gains              |  |              |    |      |   |      |  
|Mutual Funds                  |  |              | 29 |      |   | 15   |  
|Certificates of Deposit       |  |              |   |      |   |     |  
|Corporate Bonds               |  |              | 8  |      |   | 8    |  
|Government Bonds              |  |              |   |      |   | 3    |  
|                              |  |              |    |      |   |      |  
|Total gross unrealized gains  |  |              | 37 |      |   | 26   |  
|                              |  |              |    |      |   |      |  
|Total unrealized gain (loss)  |  | $            | 37 |      | $ | (132 | )
|                              |  |              |    |      |   |      |  



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Restricted Cash



In January 2003, the Company established a restricted cash account for a one-year period at the same financial institution that maintains its cash, cash
equivalents and available-for-sale marketable securities so as to ensure the Companys ability to meet previously agreed financial obligations. The restriction expired in January 2004 and the amount has been appropriately included in current
assets at December 31, 2003.



Accrued Research and Development



The Company charges all research and development
expenses, both internal and external costs, to operations as incurred. External costs consist of fees paid to consultants and other outside providers under service contracts. Costs incurred under fixed fee contracts are accrued ratably over the
contract period absent any knowledge that the services will be performed other than ratably. Costs incurred under contracts to perform clinical trials are accrued on a patients-treated basis consistent with the typical terms of reimbursement. Upon
termination of such contracts, the Company is normally only liable for costs incurred to date. As a result, accrued research and development expenses represent the Companys estimated contractual liability to outside service providers at any of
the relevant times.



Income Taxes



The Company accounts for income taxes based upon the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS 109, deferred taxes are recognized using the liability method whereby tax rates are applied to cumulative temporary differences between
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes based on when and how they are expected to affect the tax return.



License Agreement



The present value of the amount payable under the license agreement with Arizona State University (see Note 8) has been capitalized and is being amortized
over the term of the agreement (approximately 15.5 years). Over the next five years, the Company expects to record amortization expense of approximately $98,000 per year or $490,000 over the five-year period related to this license agreement. The
difference between amounts actually paid and the carrying value is charged to interest expense in the accompanying consolidated statements of operations. Under SFAS 144, Company management has conducted an impairment analysis of its long-lived
assets and has concluded that no fair value adjustment was necessary for the year ended December 31, 2003.



Depreciation



Furniture
and fixtures, equipment and leasehold improvements are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which range from three to ten years. At December 31, 2003, the Company
had approximately $9,000, $30,000 and $5,000 in net leasehold improvements, equipment and furniture and fixtures, respectively.



Patents and Patent Applications



The Company has filed applications for patents in connection with technologies being developed. The patent applications and any patents issued as a result
of these applications are important to the protection of the Companys technologies that may result from its research and development efforts. Costs associated with patent applications and maintaining patents are expensed as incurred.



Foreign Currency Translation



Prior to its liquidation in December 2003, assets and liabilities of the
Swedish subsidiary were translated at year-end rates and income and expenses are translated at average exchange rates prevailing during the year. Translation adjustments arising from differences in exchange rates from period to period were reported
as accumulated other comprehensive income in stockholders equity.



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##### Table of Contents

OXiGENE, INC.



Notes to Consolidated Financial Statements(continued)



|1. | Description of Business and Significant Accounting Policies (continued)
|-- | -----------------------------------------------------------------------



Net Loss Per Share



Basic and diluted net loss per share was calculated in accordance with the provisions of Statement of Financial Standards No. 128, Earnings Per Share,
by dividing the net loss per share by the weighted-average number of shares outstanding. Diluted net loss per share includes the effect of all dilutive, potentially issuable common shares using the treasury stock method. All options and unvested
restricted common shares issued by the Company were anti-dilutive due to the Companys net loss for all periods presented and, accordingly, excluded from the calculation of weighted-average shares. Common stock equivalents of 1,427,000, 590,000
and 1,907,000 at December 31, 2001, 2002 and 2003, respectively, were excluded from the calculation of weighted average shares for diluted loss per share.



Stock-Based Compensation



The Company accounts for stock options and stock appreciation rights granted to employees in accordance with APB Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations rather than the alternative fair value accounting provided for under Statement of Financial Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), which requires the use of
option valuation models that were not developed for use in valuing employee stock options. The Company also has issued options to non-employees for services provided to the Company. Such options have been accounted for at fair value in accordance
with the provisions of SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction With Selling Goods or Services. Such
compensation expense is recognized based on the vested portion of the compensation cost at the respective balance sheet dates.



Pro forma information regarding net loss and net loss per share is required by SFAS 123, and has been determined as if the Company had accounted for its
employee stock options and stock appreciation rights under the fair value method of SFAS 123. The fair value for these options and stock appreciation rights was estimated at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 2001, 2002 and 2003:



|                                                                             |  |      |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|Assumption                                                                   |  | 2001 |         |   | 2002 |   |         | 2003 | 
|Risk-free interest rate                                                      |  |      | 4.23    | % |      |   | 4.53    | %    |  |   | 3.16    | %
|Expected life                                                                |  |      | 4 years |   |      |   | 4 years |      |  |   | 4 years |  
|Volatility factor of the expected market price of the Companys Common Stock |  |      | 63      | % |      |   | 79      | %    |  |   | 95      | %
|Dividend yield                                                               |  |      | 0.00    | % |      |   | 0.00    | %    |  |   | 0.00    | %
|Fair value                                                                   |  | $    | 2.33    |   |      | $ | 1.59    |      |  | $ | 5.92    |  



The Black-Scholes
option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Companys employee stock options and stock appreciation rights have characteristics significantly different from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options and stock appreciation rights.



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##### Table of Contents

OXiGENE, INC.



Notes to Consolidated Financial Statements(continued)



|1. | Description of Business and Significant Accounting Policies (continued)
|-- | -----------------------------------------------------------------------



For purposes of pro forma disclosures, the estimated fair value of the options and stock appreciation
rights is amortized to expense over the vesting period of the options and stock appreciation rights. The Companys pro forma information follows: (Amounts in thousands, except per share amounts)



|                                                                                                       |  |                         |        |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                       |  | Year Ended December 31, |       
|                                                                                                       |  | 2001                    |        |   | 2002 |   |         | 2003 | 
|Net loss as reported                                                                                   |  | $                       | (4,139 | ) |      | $ | (11,013 | )    |  | $ | (8,368 | )
|Deduct: Stock-based employee compensation expense included in reported net loss                        |  |                         |       |   |      |   | 2,372   |      |  |   | 112    |  
|Add: Stock-based employee compensation expense determined under fair value based method for all awards |  |                         | (1,361 | ) |      |   | (2,974  | )    |  |   | (909   | )
|                                                                                                       |  |                         |        |   |      |   |         |      |  |   |        |  
|Pro forma net loss                                                                                     |  | $                       | (5,500 | ) |      | $ | (11,615 | )    |  | $ | (9,165 | )
|Basic and diluted net loss per share:                                                                  |  |                         |        |   |      |   |         |      |  |   |        |  
|As reported                                                                                            |  | $                       | (0.37  | ) |      | $ | (0.88   | )    |  | $ | (0.63  | )
|Pro forma                                                                                              |  | $                       | (0.49  | ) |      | $ | (0.93   | )    |  | $ | (0.70  | )



Comprehensive Income (Loss)



Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income (SFAS 130), establishes rules for the reporting and display of comprehensive income (loss) and its components and requires unrealized gains or losses on the Companys available-for-sale
securities and the foreign currency translation adjustments to be included in other comprehensive income (loss). Accumulated other comprehensive income (loss) consists of unrealized gain (loss) on available-for-sale securities and accumulated
foreign currency translation adjustments at December 31, 2002 and 2003.



The components of accumulated other comprehensive income (loss) are as follows: (Amounts in thousands)



|                                                          |  |                         |     |      |   |      |  
|--------------------------------------------------------- |  | ----------------------- | --- | ---- | - | ---- | -
|                                                          |  | Year Ended December 31, |    
|                                                          |  | 2002                    |     | 2003 |  
|Unrealized gain (loss) from available-for-sale securities |  | $                       | 37  |      | $ | (132 | )
|Foreign currency translation adjustment                   |  |                         | 600 |      |   |     |  
|                                                          |  |                         |     |      |   |      |  
|Accumulated other comprehensive income (loss)             |  | $                       | 637 |      | $ | (132 | )



Revenue Recognition



Revenue is deemed earned when all of the following have occurred: all
obligations of the Company relating to the revenue have been met and the earnings process is complete; the monies received or receivable are not refundable irrespective of the research results; and there are neither future obligations nor future
milestones to be met by the Company with respect to such revenue.



Collaboration revenues are earned based upon research expenses incurred and milestones achieved. Non-refundable payments upon initiation of contracts are deferred and amortized over the period in which the Company is obligated



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##### Table of Contents

to participate on a continuing and substantial basis in the research and development activities outlined in each contract. Amounts received in advance of
reimbursable expenses are recorded as deferred revenue until the related expenses are incurred. Milestone payments are recognized as revenue in the period in which the parties agree that the milestone has been achieved and it is deemed no further
obligation exists.



The non-refundable fee received under the
Research Collaboration and License Agreement with Bristol-Myers Squibb Company (BMS) was being recognized as license revenue on a straight-line basis over the term of the Research Collaboration and License Agreement with BMS. During
2001, the Research Collaboration and License agreement was terminated. All unamortized license revenue under the agreement was recognized at December 31, 2001. License revenue for the reimbursement of costs is recognized as costs are incurred.



The Company also earns revenue on royalty agreements, which is
recognized when payments are received due to their uncertainty. Royalty revenue of $30,000 was recognized during fiscal 2003, which was earned as a percentage of sales generated by a third party.



Reclassifications



Certain amounts in the 2001 and 2002 financial statements have been reclassified to conform to the 2003 presentation.



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##### Table of Contents

OXiGENE, INC.



Notes to Consolidated Financial Statements(continued)



|1. | Description of Business and Significant Accounting Policies (continued)
|-- | -----------------------------------------------------------------------



Recent Accounting Pronouncements



In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that
is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS 150 did not have a material effect on the Companys financial statements.



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), and in December 2003 issued a
revised FIN 46 (FIN 46R) which addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. FIN 46 requires consolidation of a variable interest entity if the reporting entity is
subject to a majority of the risk of loss from the variable interest entitys activities or is entitled to receive a majority of the variable interest entitys residual returns or both. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003, and to all other existing structures commonly referred to as special-purpose entities. The consolidation requirements will apply to variable interest entities created prior to
January 31, 2003, other than special-purpose entities, in the first quarter of 2004. The adoption of FIN 46 did not have and the application of the revised FIN 46R is not expected to have a significant impact on the Companys financial position
or results of operations.



|2. | Foreign Operations
|-- | ------------------



Summary financial information for assets and liabilities at December 31, 2001, 2002 and 2003, and expenses and net (loss) income for the years then ended
related to foreign operations are as follows: (Amounts in thousands)



|                  |  |              |        |      |   |        |      |  |   |      |  
|----------------- |  | ------------ | ------ | ---- | - | ------ | ---- |  | - | ---- | -
|                  |  | December 31, |       
|                  |  | 2001         |        | 2002 |   |        | 2003 | 
|Assets            |  | $            | 17,844 |      | $ | 1,206  |      |  | $ |     |  
|Liabilities       |  |              | 368    |      |   | 687    |      |  |   |     |  
|Expenses          |  |              | 3,038  |      |   | 2,371  |      |  |   | 136  |  
|Net (loss) income |  | $            | 5,950  |      | $ | (2,422 | )    |  | $ | (165 | )



Foreign exchange gains
for the years ended December 31, 2001, 2002 and 2003, were not significant. At December 31, 2003, the Company had completed the liquidation of its foreign subsidiary OXiGENE Europe AB.



|3. | Related Party Transactions
|-- | --------------------------



The Company had consulting agreements with certain organizations whose principal stockholders were officers or directors of the Company. Consulting fees
paid to such organizations amounted to approximately $200,000, $300,000 and $0 for the years ended December 31, 2001, 2002 and 2003, respectively. During 2001, 2002 and 2003, the Company incurred approximately $600,000, $300,000 and $0,
respectively, in fees for services provided by a law firm, of which a former member of the Board of Directors is a partner.



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##### Table of Contents

On April 10, 2003 the Company entered into a settlement agreement with such former member of the Board of
Directors for payment of outstanding legal services rendered. In complete satisfaction and settlement of this liability, the Company agreed to make a cash payment of $50,000 and issue common stock with an estimated fair value of $50,000 at the time
of issuance. Approximately $100,000 related to this liability was accrued and expensed during the year ended December 31, 2002. On July 23, 2003, the former member of the Board of Directors agreed to accept $50,000 in cash in lieu of the original
$50,000 stock issuance in full settlement of the liability.



At
December 31, 2003, the Company has approximately $417,000 in outstanding notes receivable from directors and officers, which are included as a component of stockholders equity in the accompanying consolidated balance sheets.



|4. | Joint Venture Agreement
|-- | -----------------------



On May 17, 2000, the Company entered into a joint venture agreement with Peregrine Pharmaceuticals, Inc. (Peregrine) forming Arcus
Therapeutics, LLC (ARCUS) to develop and commercialize certain technologies. Under the terms of the agreement, Peregrine and the Company supplied intellectual property and a license to use certain compounds, respectively, to the joint
venture.



Based on the development success of the joint
venture, the Company was required to fund up to $20.0 million for the development expenses of ARCUS. The partners on an equal basis would share any further funding of the joint venture thereafter. The Company funded approximately $1.3 million and
$0.1 million of the development costs in 2001 and 2002, respectively, which is included in research and development costs.



In addition, the Company paid Peregrine an upfront licensing fee of $1.0 million in cash, which was being amortized on a straight-line basis over 5 years.
The Company also purchased $2.0 million of Peregrines Common Stock at the then fair market value. In June 2001, the Company sold all of Peregrines Common Stock then held by the Company, which resulted in a loss on sale of
available-for-sale securities of approximately $600,000.



On
February 28, 2002, the Company and Peregrine signed a plan and agreement of liquidation to dissolve ARCUS. Under the terms of the agreement, Peregrine paid the Company $2.0 million and both Peregrine and the Company reacquired full rights and
interest to the vascular targeting platforms they had contributed to ARCUS.



|5. | Research Collaboration and License Agreement
|-- | --------------------------------------------



On December 15, 1999, the Company entered into a Research Collaboration and License Agreement with Bristol-Myers Squibb Company (BMS). This
agreement gave BMS world-wide rights to develop Combretastatin compounds, including the Companys lead compound CA4P, as a new class of anti-cancer agents. Pursuant to the terms of the BMS Agreement, BMS paid a non-refundable license fee and
agreed to assume all research, development, commercialization and/or marketing costs of all in-licensed products. In October 2001, the Company announced that it had regained its rights to the Combretastatin anti-tumor compounds licensed to BMS upon
the agreement of the parties to conclude the Research Collaboration and License Agreement. The Company recognized approximately $6.9 million of deferred revenue as revenue in the fourth quarter of 2001 as a result of the agreement. During the year
ended December 31, 2001, revenues from BMS accounted for 100% or $9.0 million of total revenues. As of December 31, 2003, the Company has an accrued liability of $790,000 for the in-license of certain technologies discovered by BMS.



|6. | Stockholders Equity
|-- | --------------------



On June 9, 2003 the Company completed a private placement with three large institutional investors. The investors purchased 1,500,000 shares of the
Companys Common Stock at $10.00 per share, and were issued two-year warrants to purchase up to an aggregate of 375,000 shares of the Companys Common Stock at $15 per share. The Company received approximately $13,898,000 after costs and
expenses of approximately $1,102,000. In addition to the cash offering costs of $1,102,000, the placement agent in the offering was issued five-year warrants to purchase up to an aggregate of 150,000 shares at $12 per share. The warrants issued to
the placement



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##### Table of Contents

agent and the investors were valued at approximately $2,104,000 and approximately $1,385,000, respectively, using the Black-Scholes option-pricing model.



Stock Option Plans



The Stock Incentive Option Plan (the Plan) provided for the
grant of options to purchase up to 1,166,900 shares of Common Stock to any officer, director and employee of the Company upon the terms and conditions (including price, exercise date and number of shares) determined by the Board of Directors or a
committee selected by the Board of Directors to administer the Plan. The Plan also provided for the issuance of stock appreciation rights (SARs).



Under the Plan, the exercise price determined by the Board of Directors or committee must be at least 100% of the fair market value of the Companys
Common Stock as of the date of the grant. Upon termination of employment, any granted option, vested or unvested, shall, to the extent not previously exercised, terminate except under certain conditions as outlined in the Plan. The options granted
under the Plan are generally exercisable at specific dates over a ten-year period.



Under the OXiGENE 1996 Stock Incentive Plan (the 1996 Plan) certain directors, officers and employees of the Company and its subsidiary and consultants and advisors thereto may be granted options to
purchase shares of Common Stock of the Company. Under the terms of the 1996 Plan, incentive stock options (ISOs) within the meaning of Section 422 of the Internal Revenue Code, nonqualified stock options
(NQSOs) and SARs may be granted. A maximum of 1,500,000 shares may be the subject of ISOs, NQSOs and SARs under the 1996 Plan.



On December 14, 1998, the Company repriced certain options issued to employees, directors and members of the Scientific Advisory Board. Pursuant to the
revision, the number of options issued to these employees was reduced by 117,634 options and the exercise price was reduced to $8.93 per share (market value on December 14, 1998) and $10.00 per share. However, the term of the options was not
revised. The Company recorded deferred compensation expense of $1,140,000 related to these options and amortized the expense over the vesting period of the options.



In January 2002, the Company offered to cancel 1,119,071 options outstanding with exercise prices significantly above the
current market value of the Companys common stock. A total of 1,109,571 options were subsequently cancelled. The Company replaced the cancelled options with new shares of stock issued under two restricted stock plans. New shares were issued
under the Compensation Award Stock Program adopted in 2002, where a total of 821,030 shares of Common Stock were issued to directors. In addition, under the Restricted Stock Program adopted in 2002, 208,541 shares of restricted Common Stock were
issued to employees and consultants. The restricted shares are subject to forfeiture and transfer restrictions until they vest, generally over a three-year period. As a result, the Company recognized non-cash compensation expense of $2.9 million, of
which $2.3 million was recognized in the first quarter of 2002 and the remaining $600,000 to be recognized over three years. Approximately $242,000 of compensation expense was recognized in fiscal 2003 relating to this grant. The unamortized
deferred compensation balance of approximately $155,000 at December 31, 2003 is expected to be recognized during the 2004 fiscal year.



In 2001, 2002 and 2003, the Company recorded stock-based compensation expense of approximately $100,000, $25,000 and $178,000, respectively, in connection
with options issued to non-employees.



Stock Appreciation Rights



Stock appreciation rights or SARs, granted to employees
pursuant to the amended and restated Stock Incentive Option Plan entitled the holder to receive the number of shares of Common Stock as is equal to the excess of the fair market value of one share of Common Stock on the effective date of exercise
over the fair market value of one share of Common Stock on the date of grant, divided by the fair market value on the date of exercise, multiplied by the number of SARs exercised. These SARs vest ratably over three years and are exercisable for ten
years.



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##### Table of Contents

The Company recognizes expense for financial reporting purposes when the market value of the Common Stock
exceeds the exercise price of the SARs. The expense is adjusted to reflect subsequent changes in market value. Because stock appreciation rights are satisfied, upon exercise, only by the distribution of shares of Common Stock of the Company, the
compensation expense related to unexercised stock appreciation rights is credited to additional paid-in capital. For the fiscal period ended December 31, 2003, the Company recorded approximately $59,000 in compensation expense in connection with the
exercise of 17,000 SARs, which resulted in the issuance of 5,314 shares of common stock to the holder. As of December 31, 2003, there were no remaining SARs outstanding.



Options and Warrants



The following is a summary of the Companys stock option, warrant and stock appreciation right activity: (Amounts in thousands)



|                             |  |                            |   |  |                       |   |  |                         |   |  |         
|---------------------------- |  | -------------------------- | - |  | --------------------- | - |  | ----------------------- | - |  | --------
|                             |  | Non-qualifiedStock Options |   |  | IncentiveStockOptions |   |  | StockAppreciationRights |   |  | Warrants
|Balance at December 31, 2000 |  | 1,167                      |   |  | 128                   |   |  | 36                      |   |  |        
|Granted                      |  | 249                        |   |  |                      |   |  |                        |   |  |        
|Exercised                    |  | (17                        | ) |  |                      |   |  | (11                     | ) |  |        
|Canceled                     |  | (100                       | ) |  |                      |   |  |                        |   |  |        
|                             |  |                            |   |  |                       |   |  |                         |   |  |         
|Balance at December 31, 2001 |  | 1,299                      |   |  | 128                   |   |  | 25                      |   |  |        
|Granted                      |  | 414                        |   |  |                      |   |  |                        |   |  |        
|Exercised                    |  | (15                        | ) |  |                      |   |  |                        |   |  |        
|Canceled                     |  | (1,108                     | ) |  | (128                  | ) |  |                        |   |  |        
|                             |  |                            |   |  |                       |   |  |                         |   |  |         
|Balance at December 31, 2002 |  | 590                        |   |  |                      |   |  | 25                      |   |  |        
|Granted                      |  | 919                        |   |  |                      |   |  |                        |   |  | 525     
|Exercised                    |  | (98                        | ) |  |                      |   |  | (17                     | ) |  |        
|Canceled                     |  | (29                        | ) |  |                      |   |  | (8                      | ) |  |        
|                             |  |                            |   |  |                       |   |  |                         |   |  |         
|Balance at December 31, 2003 |  | 1,382                      |   |  |                      |   |  |                        |   |  | 525     
|                             |  |                            |   |  |                       |   |  |                         |   |  |         



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##### Table of Contents

OXiGENE, INC.



Notes to Consolidated Financial Statements(continued)



6. Stockholders Equity (continued)



Weighted-Average Exercise Price of Stock Options, Warrants and Stock Appreciation Rights



|                             |  |                            |       |                        |   |                         |  |          |      |  |   |      
|---------------------------- |  | -------------------------- | ----- | ---------------------- | - | ----------------------- |  | -------- | ---- |  | - | -----
|                             |  | Non-qualifiedStock Options |       | IncentiveStock Options |   | StockAppreciationRights |  | Warrants
|Balance at December 31, 2000 |  | $                          | 9.07  |                        | $ | 9.48                    |  | $        | 7.16 |  | $ |     
|Granted                      |  |                            | 4.72  |                        |   |                        |  |          |     |  |   | 13.41
|Exercised                    |  |                            | 6.40  |                        |   |                        |  |          |     |  |   | 13.41
|Canceled                     |  |                            | 11.19 |                        |   |                        |  |          | 6.00 |  |   |     
|Balance at December 31, 2001 |  |                            | 8.11  |                        |   | 9.48                    |  |          | 7.51 |  |   |     
|Granted                      |  |                            | 2.62  |                        |   |                        |  |          |     |  |   |     
|Exercised                    |  |                            | 2.66  |                        |   |                        |  |          |     |  |   |     
|Canceled                     |  |                            | 8.84  |                        |   | 9.48                    |  |          |     |  |   |     
|Balance at December 31, 2002 |  |                            | 3.14  |                        |   |                        |  |          | 7.51 |  |   |     
|Granted                      |  |                            | 8.58  |                        |   |                        |  |          |     |  |   | 14.14
|Exercised                    |  |                            | 3.79  |                        |   |                        |  |          | 7.63 |  |   |     
|Canceled                     |  |                            | 4.07  |                        |   |                        |  |          | 7.25 |  |   |     
|Balance at December 31, 2003 |  | $                          | 6.69  |                        | $ |                        |  | $        |     |  | $ | 14.14



Stock Options,
Warrants and Stock Appreciation Rights Exercisable

(Share amounts in thousands)



|                                |  |                            |      |                        |   |                         |  |          |      |  |   |      
|------------------------------- |  | -------------------------- | ---- | ---------------------- | - | ----------------------- |  | -------- | ---- |  | - | -----
|                                |  | Non-qualifiedStock Options |      | IncentiveStock Options |   | StockAppreciationRights |  | Warrants
|December 31, 2001:              |  |                            |      |                        |   |                         |  |          |      |  |   |      
|Exercisable                     |  |                            | 810  |                        |   | 128                     |  |          | 25   |  |   |     
|Weighted-average exercise price |  | $                          | 8.20 |                        | $ | 9.48                    |  | $        | 7.51 |  | $ |     
|December 31, 2002:              |  |                            |      |                        |   |                         |  |          |      |  |   |      
|Exercisable                     |  |                            | 194  |                        |   |                        |  |          | 25   |  |   |     
|Weighted-average exercise price |  | $                          | 3.96 |                        | $ |                        |  | $        | 7.51 |  | $ |     
|December 31, 2003:              |  |                            |      |                        |   |                         |  |          |      |  |   |      
|Exercisable                     |  |                            | 462  |                        |   |                        |  |          |     |  |   | 525  
|Weighted-average exercise price |  | $                          | 2.96 |                        | $ |                        |  | $        |     |  | $ | 14.14



Stock Options and
Warrants Outstanding

(Share amounts in thousands)



|                                            |  |                            |               |                            |   |                |  |   |                
|------------------------------------------- |  | -------------------------- | ------------- | -------------------------- | - | -------------- |  | - | ---------------
|                                            |  | Non-qualifiedStock Options |               | Non-qualifiedStock Options |   | Warrants      
|December 31, 2003:                          |  |                            |               |                            |   |                |  |   |                
|Exercise prices:                            |  | $                          | 1.06 to $5.00 |                            | $ | 5.01 to $10.35 |  | $ | 12.00 to $15.00
|Outstanding                                 |  |                            | 496           |                            |   | 886            |  |   | 525            
|Weighted-average exercise price-outstanding |  | $                          | 2.69          |                            | $ | 8.93           |  | $ | 14.14          
|Weighted-average remaining contractual life |  |                            | 8.19 years    |                            |   | 9.53 years     |  |   | 2.30 years     
|Exercisable                                 |  |                            | 410           |                            |   | 52             |  |   | 525            
|Weighted-average exercise price-exercisable |  | $                          | 2.68          |                            | $ | 5.12           |  | $ | 14.14          



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##### Table of Contents

Notes Receivable



Certain stock options were exercised with the presentation of non-recourse promissory notes to the Company. The interest rate on the non-recourse
promissory notes is 5.6% with maturity terms of one to three years. As of December 31, 2003, approximately $824,000 of these notes including accrued interest is outstanding of which approximately $312,000 is due from a director of the Company. The
notes become due on various dates from 2004 through 2006. There are 77,800 shares of common stock outstanding in connection with the exercise of these options. The terms of such notes include various forfeiture and restriction provisions on these
shares. Included in the 298,000 common shares reacquired in 2003 in connection with forfeited notes receivable is 219,000 common shares reacquired in prior years but not reflected in such consolidated financial statements.



Under the terms of both the Compensation Award Stock Program and the
Restricted Stock Program, participants were permitted to request a loan from the Company, the proceeds of which were to be used to satisfy any participant tax obligations that arose from the awards. Each of these loans was evidenced by a promissory
note. Principal amounts outstanding under the promissory note accrued interest at a rate of 10% per year, compounded annually. The principal amount, together with accrued interest on the principal amount to be repaid, were scheduled to be repaid in
three equal installments, on the first three anniversary dates of the stock grant date, unless extended by the Company. In January 2003, the Company extended the first repayment date until the second anniversary of the stock grant. Shares of Common
Stock have been pledged to the Company as security for repayment of the obligations under the notes, and the stock certificates representing those shares shall remain in the possession of the Company until the loans are repaid. In the event a
participant fails to pay all amounts due under a promissory note, the number of shares of that participants stock, sufficient to satisfy the unpaid amounts, will be forfeited. In 2002, approximately $604,000 in loans was issued. During 2003,
payments of principal and interest of $528,000 were received, and approximately $31,000 of notes was forfeited. As of December 31, 2003, approximately $138,000 of principal and interest remains outstanding, $105,000 of which is due from directors
and officers of the Company.



Common Stock Reserved for Issuance



As of December 31, 2003, the Company has reserved
approximately 1,993,000 shares of its Common Stock for issuance in connection with stock options and warrants.



|7. | Income Taxes
|-- | ------------



At December 31, 2003, the Company had net operating loss carry-forwards of approximately $99 million for U.S. and foreign income tax purposes,
approximately $58.7 million of which will be expiring for U.S. purposes through 2023. Due to the degree of uncertainty related to the ultimate use of these loss carry-forwards, the Company has fully reserved this tax benefit. Additionally, the
future utilization of the U.S. net operating loss carryforwards are subject to limitations under the change in stock ownership rules of the Internal Revenue Service.



Components of the Companys deferred tax asset at December 31, 2002 and 2003 are as follows: (Amounts in thousands)



|                                                                   |  |      |         |   |      |   |         |  
|------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                   |  | 2002 |         |   | 2003 |  
|Net operating loss carryforwards                                   |  | $    | 37,077  |   |      | $ | 40,234  |  
|Compensatory stock options, warrants and stock appreciation rights |  |      | 1,088   |   |      |   | 1,088   |  
|Other                                                              |  |      |        |   |      |   | 245     |  
|                                                                   |  |      |         |   |      |   |         |  
|Total deferred tax asset                                           |  |      | 38,165  |   |      |   | 41,567  |  
|Valuation allowance                                                |  |      | (38,165 | ) |      |   | (41,567 | )
|                                                                   |  |      |         |   |      |   |         |  
|Net deferred tax asset                                             |  | $    |        |   |      | $ |        |  
|                                                                   |  |      |         |   |      |   |         |  



The valuation
allowance increased by approximately $4.2 million and approximately $3.4 million for the years ended December 31, 2002 and 2003, respectively, due primarily to the increase in net operating loss carryforwards.



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##### Table of Contents

|8. | Commitments and Contingencies
|-- | -----------------------------



Leases



The Company relocated its corporate headquarters in September 2003 from Watertown, Massachusetts to Waltham, Massachusetts. In the process, the Company executed a sublease for the space it is committed to in Watertown
for a period of time that coincides with its commitment of space in Waltham, approximately five years from the date of the move. Rent expense for each of the years ended December 31, 2001 and 2002 was approximately $300,000. For the year ended
December 31, 2003 rent expense was $835,000, which included a one-time charge of approximately $565,000 relating to the difference between the amount owed to the original lessor of the property in Watertown and the sublease income from that same
property, over the five year lease term.



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##### Table of Contents

The minimum annual rent commitment for the above leases are as follows: (Amounts in thousands)



|           |  |                  |       |                      |   |      |                |  |   |      
|---------- |  | ---------------- | ----- | -------------------- | - | ---- | -------------- |  | - | -----
|           |  | Grosscommitments |       | Receiptsfromsublease |   |      | Netcommitments
|2004       |  | $                | 388   |                      | $ | (155 | )              |  | $ | 233  
|2005       |  |                  | 397   |                      |   | (180 | )              |  |   | 217  
|2006       |  |                  | 426   |                      |   | (209 | )              |  |   | 217  
|2007       |  |                  | 430   |                      |   | (211 | )              |  |   | 219  
|2008       |  |                  | 435   |                      |   | (143 | )              |  |   | 292  
|Thereafter |  |                  | 622   |                      |   |     |                |  |   | 622  
|           |  |                  |       |                      |   |      |                |  |   |      
|           |  | $                | 2,698 |                      | $ | (898 | )              |  | $ | 1,800
|           |  |                  |       |                      |   |      |                |  |   |      



License Agreements



On August 2, 1999, the Company entered into an exclusive license for the
commercial development, use and sale of products or services covered by certain patent rights owned by Arizona State University. The Company paid an initial license fee of $200,000 and is required to pay additional license fees in ten equal
semi-annual installments of $160,000 through June 1, 2004. The license agreement and the related obligation have been recorded at the present value of the amount payable using an effective rate of 8.7%. The difference between the amounts being paid
and the present value are being recorded as interest expense in the accompanying consolidated statements of operations. The agreement provides for additional payments in connection with the license arrangement upon the initiation of certain clinical
trials or the completion of certain regulatory approvals which payments could be accelerated upon the achievement of certain financial milestones as defined in the agreement. The license agreement also provides for additional payments upon the
election of the Company to develop certain compounds as defined in the agreement. The Company also is required to pay royalties on future net sales of products associated with these patent rights.



Under another patent license agreement the Company will pay royalties, as
defined, based on revenues received by the Company from the sale of specified products. This license expires in October 2011 and the product has not yet been commercially developed.



On April 14, 2000, the Company entered into an agreement to license certain technology to a pharmaceutical company. The
agreement entitles the Company to share proceeds under subsequent sublicensing and receive royalties, as defined. Under the licensing agreement, the Company is obligated to pay 50% of development costs up to $200,000. On June 30, 2001, the Company
sold its interest in and discharged all liabilities and obligations arising from this license agreement to CampaMed LLC.



In December 1999, the Company entered into a Research Collaboration and License Agreement with a pharmaceutical company. Effective April 2002 this
agreement was terminated in its entirety. In connection with the termination, the Company has recorded a liability of $790,000 which is payable upon the achievement of certain regulatory milestones as defined in the agreement.



Litigation



On November 5, 2003 the Company settled a lawsuit with a former employee regarding issuance of restricted stock. The former
employee was awarded 13,250 shares of common stock. The Company has recorded a non-cash compensation charge of $141,000 in connection with the issuance of the stock, which is included in general and administrative expense on the accompanying
consolidated statements of operations.



From time to time, the
Company may be a party to actions and claims arising from the normal course of its business. The Company will vigorously defend actions and claims against it. To the best of the Companys knowledge, there are no material suits or claims pending
or threatened against the Company.



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##### Table of Contents

|9. | Retirement Savings Plan
|-- | -----------------------



The Company sponsors a savings plan available to all domestic employees, which qualifies under Section 401(k) of the Internal Revenue Code. Employees may
contribute to the plan from 1% to 20% of their pre-tax salary subject to statutory limitations. At the present time, the Company does not provide matching contributions to the plan.



|10. | Subsequent Events
|--- | -----------------



In January 2004, the Company received gross proceeds of approximately $24.2 million from the sale of 2,755,695 shares of its Common Stock and netted
approximately $22.3 million after the deduction of fees and expenses, pursuant to a shelf registration statement on Form S-3 filed with the Securities and Exchange Commission in October 2003, allowing it to sell up to $50 million of its Common
Stock, debt securities and/or warrants to purchase its securities. The Company plans to use these proceeds to accelerate the development of its lead compound, Combretastatin A4 Prodrug (CA4P), in both oncology and ophthalmology.



|11. | Quarterly Results of Operations (Unaudited)
|--- | -------------------------------------------



The following is a summary of the quarterly results of operations for the years ended December 31, 2002 and 2003: (Amounts in thousands)



|                                     |  |                     |        |   |              |   |        |                   |  |   |                  |   |  |   |        |  
|------------------------------------ |  | ------------------- | ------ | - | ------------ | - | ------ | ----------------- |  | - | ---------------- | - |  | - | ------ | -
|                                     |  | Three months ended, |       
|                                     |  | March 31,2002       |        |   | June 30,2002 |   |        | September 30,2002 |  |   | December 31,2002 |  
|License revenue                      |  | $                   |       |   |              | $ |       |                   |  | $ |                 |   |  | $ |       |  
|                                     |  |                     |        |   |              |   |        |                   |  |   |                  |   |  |   |        |  
|Net loss                             |  |                     | (4,171 | ) |              |   | (2,740 | )                 |  |   | (1,664           | ) |  |   | (2,438 | )
|Basic and diluted net loss per share |  | $                   | (0.35  | ) |              | $ | (0.23  | )                 |  | $ | (0.14            | ) |  | $ | (0.19  | )
|                                     | 
|                                     |  | Three months ended, |       
|                                     |  | March 31,2003       |        |   | June 30,2003 |   |        | September 30,2003 |  |   | December 31,2003 |  
|License revenue                      |  | $                   | 20     |   |              | $ |       |                   |  | $ |                 |   |  | $ | 10     |  
|                                     |  |                     |        |   |              |   |        |                   |  |   |                  |   |  |   |        |  
|Net loss                             |  |                     | (1,476 | ) |              |   | (1,849 | )                 |  |   | (3,354           | ) |  |   | (1,689 | )
|Basic and diluted net loss per share |  | $                   | (0.12  | ) |              | $ | (0.15  | )                 |  | $ | (0.24            | ) |  | $ | (0.12  | )





F-22