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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

|                                            |  |                                                                                         
|------------------------------------------- |  | ----------------------------------------------------------------------------------------
|(Mark One)                                  |  |                                                                                         
|[x]                                         |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2002
|                                           
|OR                                         
|                                           
|[  ]                                        |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-22170



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EPOCH BIOSCIENCES, INC.(Exact name of Registrant as Specified in its charter)

|                                                                                       |  |                                               
|-------------------------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(State or other jurisdiction of incorporation or organization)                 |  | 91-1311592(I.R.S. Employer Identification No.)
|21720 23rd Drive SE, #150, Bothell, Washington(Address of principal executive offices) |  | 98021(Zip Code)                               

(425) 482-5555(Issuers telephone number, including area code)

|                                                            |  |                                                            
|----------------------------------------------------------- |  | -----------------------------------------------------------
|Securities registered pursuant to Section 12(g) of the Act: |  | Common Stock
Common Stock Purchase Warrants(Title of class)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 [  ]

Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation SK is not contained in this form, and no disclosure will 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 [x]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). YES [  ] NO [x]

As of June 28, 2002 the aggregate market value of the voting stock held by
non-affiliates, computed by reference to the price at which the stock was sold
on such date, was approximately $46,693,405.

25,751,884 shares of Common Stock were outstanding at March 11, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Information required under Items 10, 11, 12, and 13 of Part III hereof are
incorporated by reference to portions of the registrants definitive Proxy
Statement to be filed in connection with the solicitation of proxies for its
Annual Meeting of Stockholders to be held May 22, 2003.





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TABLE OF CONTENTS



|                |                                                                                               |  |  |  |  |  |  | 
|--------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I         
|                | ITEM 1. Business                                                                             
|                | ITEM 2. Properties                                                                           
|                | ITEM 3. Legal Proceedings                                                                    
|                | ITEM 4. Submission of Matters to a Vote of Security Holders                                  
|PART II        
|                | ITEM 5. Market for Common Equity and Related Stockholder Matters                             
|                | ITEM 6. Selected Financial Data                                                              
|                | ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                | ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|                | ITEM 8. Financial Statements and Supplementary Data                                          
|                | ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III       
|                | ITEM 10. Directors and Executive Officers of Epoch.                                          
|                | ITEM 11. Executive Compensation                                                              
|                | ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Matters  
|                | ITEM 13. Certain Relationships and Related Transactions                                      
|                | ITEM 14. Controls and Procedures Report                                                      
|PART IV        
|                | ITEM 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K                   
|Signatures     
|Certifications 
|EXHIBIT INDEX  
|EXHIBIT 10.24.1
|EXHIBIT 10.34  
|EXHIBIT 23.1   
|EXHIBIT 99.1   
|EXHIBIT 99.2   



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INTRODUCTORY NOTE

This Annual Report on Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and we intend that these
forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements include, without limitation, the development
and commercialization of the companys technology.

The forward-looking statements included in this document are based on
current expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that Epochs technology
will continue to be developed, and will not be replaced by new technology, that
we will retain key technical and management personnel, and that there will be
no material adverse change in our operations or business. Assumptions relating
to the foregoing involve judgments with respect to, among other things, future
technology, economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our control. Although we believe that the assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking statements will be realized.
In addition, our business and operations are subject to substantial risks which
increase the uncertainty inherent in these forward-looking statements. Epoch
undertakes no obligation to revise or publicly release the results of any
revision to these forward-looking statements. In light of the significant
uncertainties inherent in the forward-looking information included in this
document, the inclusion of information should not be regarded as a
representation by us or any other person that the objectives or plans of Epoch
will be achieved. Readers should carefully review the risk factors described
in this document as well as in other documents the company files from time to
time with the Securities and Exchange Commission, including the Quarterly
Reports on Form 10-Q to be filed by the company in fiscal year 2003.





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PART I




ITEM 1. Business

The Company

Epoch Biosciences, Inc. is a biotechnology company developing technologies
and products to help scientists around the world perform genetic research to
improve our lives and our environment. Genetic analysis has become a pervasive
activity in academic, biopharmaceutical, clinical, agricultural, veterinary and
forensic laboratories. Our technologies facilitate rapid, accurate and
cost-effective genetic analysis at the scale necessary to generate the massive
amounts of genetic information being studied today.

As the human genome and other animal and plant genomes are sequenced, the
task of understanding the structure and function of genes lies before us
(genomics). Researchers want to know when and why a gene switches on and
begins producing its protein (gene expression) and what the genes protein does
in the body (proteomics). Finally, researchers want to know what peoples
genetic differences mean for their health and susceptibility to disease. For
example, single nucleotide polymorphisms, or SNPs, are tiny differences in our
DNA that make humans different from one another. SNPs have been linked to
susceptibility to diseases, and to peoples response to medications.

Because of the implications of understanding gene function on human health
and disease, companies have moved quickly to design and manufacture automated
genetic analysis systems. We develop patented technologies that improve the
output of these systems and that are compatible with many of the genetic
analysis systems currently in use or in development. Just as microprocessors
are found in essentially all electronic appliances, our chemistries and
technologies have the potential to be incorporated in nearly all genetic
analysis systems.

Our technologies are useful in genetic research, diagnostics, drug
development, infectious disease detection, prenatal testing, and population
screening to assess our risk of disease or to predict our response to drugs.
Epochs products also have application in forensics, food testing, and
environmental testing, including bio-warfare and bioterrorism.

We earn revenues through a variety of sources. We sell our products to
end-users, both through our direct sales force and through distributors that
provide worldwide reach. We license our technology for incorporation into
other companies products and earn license fees and royalties from those
companies and generate product revenue from sales of our chemistries to them.
We also earn revenues through contract research activities, whereby third party
companies pay for specific research and development activities carried out by
our scientists.

The following table summarizes our revenues by major category, for the
last three years ($ in thousands):

|                                |               |   |      |       |      |  |      |     |   |   |       |       |   |  |    |     |   |   |       |        |  |  |    |     |  
|------------------------------- | ------------- | - | ---- | ----- | ---- |  | ---- | --- | - | - | ----- | ----- | - |  | -- | --- | - | - | ----- | ------ |  |  | -- | --- | -
|                                |               |   | 2000 |       | 2001 |  | 2002
|                                |               |   |      |       |      |  |     
|                                |               |   | $    |       | %    |  | $    |     | % |   | $     |       | %
|                                |               |   |      |       |      |  |      |     |   |   |       |       |  
|Product sales                   |               | $ | 923  |       |      |  | 68   | %   |   | $ | 4,461 |       |   |  | 59 | %   |   | $ | 6,662 |        |  |  | 59 | %  
|License fees and royalty income |               |   | 74   |       |      |  | 5    | %   |   |   | 936   |       |   |  | 13 | %   |   |   | 2,694 |        |  |  | 24 | %  
|Contract research revenue       |               |   | 370  |       |      |  | 27   | %   |   |   | 2,124 |       |   |  | 28 | %   |   |   | 1,870 |        |  |  | 17 | %  
|                                |               |   |      |       |      |  |      |     |   |   |       |       |   |  |    |     |   |   |       |        |  |  |    |    
|                                | Total revenue |   | $    | 1,367 |      |  |      | 100 | % |   | $     | 7,521 |   |  |    | 100 | % |   | $     | 11,226 |  |  |    | 100 | %
|                                |               |   |      |       |      |  |      |     |   |   |       |       |   |  |    |     |   |   |       |        |  |  |    |    

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We incorporated in Delaware on August 14, 1985, under the name MicroProbe
Corporation. We changed our name to Epoch Pharmaceuticals, Inc. in December
1995, and to Epoch Biosciences, Inc. in August, 2000. Our principal office is
located at 21720 23rd Drive SE, #150, Bothell, Washington, and our telephone
number is (425) 482-5555. Our website address is www.epochbio.com.

Background

Nucleic acids are found in all living organisms and are the sole carriers
of the genetic code that specifies an organisms makeup. There are two types
of closely related nucleic acids: deoxyribonucleic acid, or DNA, and
ribonucleic acid, or RNA. DNA carries the permanent genetic information for
construction of all proteins in higher living organisms, while RNA carries a
temporary copy of this information to direct protein synthesis. Proteins
perform most of the normal physiological functions of living organisms, and
aberrant production or activity of proteins may cause numerous diseases.






Figure 1. Segment of Double-Stranded DNA Showing the Base Pair Relationship

DNA is comprised of two linear strands that are formed in a double helix.
Each strand is a sequential array of four nucleotide bases: adenine (A),
guanine (G), thymine (T) and cytosine (C), which are linked together in DNA by
a sugar and phosphate backbone. Every gene contains a unique sequence of these
bases and it is these unique sequences that constitute the genetic code which
guides all cellular processes. The two chains, or strands, normally comprising
DNA are held together by chemical attractions between opposing paired bases
according to the following rules: A always pairs with T, G always pairs with C.
Figure 1 is a schematic diagram of double-stranded DNA showing this highly
specific interaction between the bases in the two strands. This process of
base pairing, called hybridization, can occur between DNA strands of any size,
as long as the paired segments are matched correctly.

RNA occurs in several forms in cells, and each of these forms has a
different function. Messenger RNA, or mRNA, is copied from the gene and
carries the genetic code which is translated into the proteins synthesized by
the cell. This process is called gene expression.

Synthetic DNA strands, or probes, can be designed to bind selectively to
unique sequences of bases in a sample of DNA from an individual. If the probe
binds to its target sequence a signal is generated. This method of genetic
analysis is widely employed to measure the activity of genes, to identify
infectious organisms, or to identify genetic differences between species or
individuals. Our expertise in the chemistry, design and synthesis of synthetic
DNA forms the basis of our research and development activities on compounds and
techniques for genetic analysis.

Overview

Genetic analysis has become the most important laboratory technique in the
life sciences. The massive effort to sequence the human genome is paralleled
by projects to sequence the genomes of infectious organisms, research animals
including fruit flies, worms and rats, and important food crops. It is
estimated that over $3.5 billion was spent worldwide in 2001 on industrial and
academic research to

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understand human gene function and that the worldwide market for genomic
analysis products, which consists of reagents, assays and other consumables,
was $1 billion in 2001. This research effort is revolutionizing the
pharmaceutical and diagnostic industries, as well as the fields of crop
science, animal breeding and veterinary medicine. In the area of human health,
genetic analysis promises to identify the mutations that cause hereditary
diseases, to elucidate the genetic events that lead to cancer and determine the
relative malignancy of tumors, to identify our individual risk for developing
chronic illnesses like heart disease and arthritis, and to predict our response
to medications.

The promise of genetic analysis and a rapid surge in research activity has
created a demand for new technologies and systems to accelerate the pace and
accuracy of genetic research. Techniques to study gene expression levels and
detect differences in gene sequences are rapidly evolving. As the amount of
data being generated grows, the demand for simple, accurate, high throughput
formats is increasing. New technologies are generating great interest, such as
TaqMan® MGB systems from Applied Biosystems, Primer Extension, a DNA analysis
system developed by Orchid BioSciences, Sequenom and others, the Invader®
operating system from Third Wave Technologies, microarray technologies being
developed by Affymetrix and others, and microfluidic platforms under
development at Caliper Technologies and others.

Today, genetic analysis is primarily a research activity carried out in
thousands of academic, industrial, and government laboratories. Within a few
years, we believe these analyses will be used not only in research, but also in
doctors offices and clinics, on farms and ranches, at food-processing plants,
in factories, at crime scenes, and on the battlefield. We believe that simple,
inexpensive DNA tests have a future in almost every aspect of everyday life.

We have developed chemical compounds that broadly facilitate genetic
analysis. Our chemistries include minor groove binders, modified bases, novel
fluorescent molecules and non-fluorescent quenchers, and a unique chemistry to
attach synthetic DNA strands to solid surfaces. When these chemical compounds
are attached to or incorporated into DNA probes, they enhance methods to
measure gene expression and to detect a difference of a single base in the DNA
of different individuals, called a single nucleotide polymorphism, or SNP. Our
compounds are compatible with multiple technologies, including polymerase chain
reaction, or PCR, and alternative nucleic acid amplification technologies. Our
technologies are used in multiple formats, including high throughput systems
and microtiter plate formats, and they can be used in solution or on solid
surfaces, including microarrays.

The commercialization of our technologies has led to development of our
current proprietary products which include the MGB Eclipse Probe System.

We are collaborating with companies that are interested in improving the
speed, accuracy, and simplicity of their tests and applications by using our
proprietary chemistries. We have a strategic partnership with Applied
Biosystems, where our technology is incorporated into all their TaqMan®
real-time PCR systems. We have licensed our technology to Third Wave
Technologies for use in their Invader® operating system. We are also entering
into agreements with companies with worldwide reach to market our products.
Weve named Amersham Biosciences a marketing and sales partner for our MGB
Eclipse Probe Systems, and have licensed our MGB Eclipse Probe System
technology to QIAGEN for incorporation into its gene expression product line.
We anticipate forming business relationships with other companies to distribute
our products and/or incorporate our technologies in their genetic analysis
products.

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Genetic analysis

As of June 2000, the Human Genome Project and Celera announced that they
had sequenced the entire human genome of over 3 billion base pairs. At the
same time, Incyte Genomics and Human Genome Sciences had identified partial
sequences for the majority of human genes.

Sequencing the human genome has been likened to the discovery of the
elements and their arrangement in the periodic table: it only reveals the
underlying structure and order of the system. With the human genome completely
sequenced, we know approximately how many genes our chromosomes contain and
where the genes are located on the chromosomes. However, that information
generates many more questions than it answers. Searching for the answers to
those questions will result in a rapid growth in the field of genetic analysis,
with a parallel growth in technologies and products that facilitate that
effort.

Among the most important issues that genetic research will address in the
future are:



| |  |  | How does our genetic diversity  the differences in the
sequence of the four bases that make up our DNA  affect our
response to drugs, and contribute to our susceptibility to chronic
diseases, including cancer and cardiovascular disease?
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | How do differences in the expression of genes in our various
tissues affect development and contribute to health and illness?                                                                                                                 

SNP detection

The sequence of the four nucleotides (A,G,T,C) in our DNA determines our
genetic makeup. Differences in this sequence, in large part, determine the
uniqueness of each individual. Sites in the sequence which differ due to
inheritance are called polymorphisms. One type of polymorphism is due to a
change in a single base in the genetic DNA sequence. These single base
polymorphisms, or SNPs, occur frequently enough along our DNA so that they can
be used as markers on a map of the genome. Such a map can be used to
localize traits such as hypertension, diabetes or sensitivity to therapeutic
drugs by identifying SNPs that occur at a higher frequency in individuals with
the trait than those without the trait. Knowing where the SNPs associated with
the trait occur, one can look for nearby genes responsible for the trait, thus
leading to a genetic understanding of the trait and directing efforts for
treatment. Some SNPs have been shown to cause disease, or to be associated
with risk for disease or adverse drug response. Presumably, a high proportion
of genetically controlled disease will be caused by or associated with SNPs.
Research on SNPs has proceeded in two phases, (1) discovery by comparing DNA
sequences of different individuals and (2) analysis by studying populations
with or without a given trait. The second phase requires testing thousands of
SNPs in hundreds of individuals and requires accurate, high throughput
automated systems. The performance of these systems is enhanced by the
compounds we have developed.

Gene Expression

Scientists study how gene expression affects development and contributes
to health and illness by comparing the level of expression of genes in
different tissues, in healthy versus diseased tissues, and at different points
in embryonic development. This approach has been accelerated by the
development of DNA microarrays, or biochips, which contain hundreds or
thousands of sites on their surface to which messenger RNAs expressed by
different genes will bind, allowing their relative levels to be tested and
measured.

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Hybridization Tests

Essentially all of the technologies and products useful for genetic
analysis rely on hybridization, a process in which a synthetic DNA strand,
called a probe, binds to a DNA target that is being detected. If the sequences
of the two strands are perfectly complementary, the probe remains bound to its
target at an elevated temperature. If they are not, the probe separates, or
dissociates from its target. A hybridization assay is designed to detect the
presence of the bound, or hybridized, probe to its nucleic acid target.

One of the greatest challenges facing scientists in developing
hybridization tests is that the sequence of the target DNA can complicate the
design of the probe. The process of choosing the optimum region on the target
strand to which to attach the probe can be time-consuming and tedious. In
multiplex formats, where multiple targets are being probed in the same test,
designing probes that bind to their target at similar temperatures can further
complicate the problem.

Our technologies facilitate genetic analysis by making the process of
hybridization more efficient, hybridization tests simpler to design, and
detection of the hybridized product easier.

Oligonucleotide Probes

A DNA probe is synthesized on an automated instrument and is designed to
be complementary to a unique sequence of bases in the DNA of the target cell or
organism. However, short DNA probes do not bind to their target very tightly,
and longer DNA probes bind so tightly that they can hybridize to an incorrect
sequence, or a mismatch. The ability to overcome these problems is the key to
our technology.

We believe that the ability of DNA probes to precisely bind to matching
DNA sequences will have broad use in the developing fields of molecular
diagnostics and the study of genes. Applications that could benefit from
improved hybridization sensitivity include:



| |  |  | Accurate detection of mutations;                                                                                                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Identifying infectious organisms, including measuring the
level of HIV viruses in an individuals bloodstream, and genotyping
the virus to determine its resistance to therapy; and
|
| |  |  | Diagnosing and determining the prognosis of cancers and their
optimum therapies.                                                                                                   

Epoch Technologies

We are an innovative biotechnology company that focuses on the development
and manufacture of unique molecular tools for genetic analysis. Our expertise
in nucleic acid chemistries has led to the development of patented compounds
and methods that make the design, hybridization, and detection of DNA sequences
easier and more accurate. Our technologies enhance the performance of
synthetic DNA probes used extensively in genomic research and fall into the
following categories:

MGB

An MGB is a crescent shaped molecule that we attach to either end of a
synthetic DNA probe. After hybridization, the MGB molecule folds into the
minor groove of the double helix formed by the probe and its target DNA to
stabilize the duplex structure and enable greater flexibility in experimental

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design. The tight-binding MGB probes are especially useful for DNA detection
using real-time PCR assay formats and are one of the important components of
the MGB Eclipse Probe System as well as the Taqman® MGB product line sold by
Applied Biosystems, a leading provider of real-time PCR technology.

Modified Bases

Natures four nucleotide bases  A, G, T, and C  and their sequence
within DNA guide all cellular processes. Unfortunately the A-T and G-C content
of genes can cause problems for genetic analysis. The bond between DNA probes
and A/T rich sequences is inherently unstable, and to study A/T rich regions of
the genome, researchers must use long primers and probes that are less
sensitive to mismatches. G-rich sequences tend to clump together and are
troublesome for scientists to work with. Weve developed modified A, T, and G
bases to solve these inherent problems for researchers, which are marketed
under the brand names Super A, Super T, and Super G.

Fluorescent Dyes and Quencher

To enable detection of DNA probes bound to their intended target, a
variety of fluorescent dyes are used to label probes. Weve developed a
selection of proprietary fluorescent dyes for researchers to choose as labels
for their custom probes, including Redmond Red, Yakima Yellow, and Gig Harbor
Green. In addition, to prevent fluorescence of labeled, but unbound probes,
weve developed the Eclipse Dark Quencher, a proprietary quencher thats
widely used in the commercial marketplace.

Attachment Chemistry

DNA microarrays are another powerful technology platform for genetic
analysis. Arrays of thousands of DNA probes on glass or plastic slides can be
used to measure gene expression on a large scale. Although potentially
powerful, current technology is highly variable and methods for array-making
need improvement. Weve developed attachment chemistry that enhances the
binding of probes on glass or plastic slides and enables higher signal
intensities for gene expression or SNP applications on microarrays.

Design Software

Each of the above technologies impact the performance characteristics of
DNA probes and sophisticated algorithms are needed to drive the design and use
of probes incorporating them. Weve developed and continually enhance
proprietary software to aid customers in the design, ordering, and use of
certain of our products, such as MGB Eclipse Design Software for the online
designing and ordering of custom MGB Eclipse Probe Systems.

Epoch Products

MGB Eclipse Probe Systems

In July 2001, we introduced the MGB Eclipse Probe System that incorporates
the performance advantages of our proprietary technologies, including MGB, the
Eclipse Dark Quencher, modified bases, and MGB Eclipse Design Software. The
MGB Eclipse Probe System is compatible with all currently manufactured
real-time PCR instruments and reagent systems in wide use worldwide, and
provides highly effective and reproducible results for academic, biotech,
diagnostic, and pharmaceutical

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researchers. The MGB Eclipse Probe System is available in custom format
so that researchers can design and order assays specific for their application
and genetic sequence of interest as well as in the following pre-optimized
formats:



| |  |  | MGB Eclipse Probe Systems for Gene Expression, for
determination of relative and absolute expression levels of specific
genes, including detection of differentially spliced gene
transcripts;                  
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | MGB Eclipse Probe Systems for Viral Detection, for
determination of viral titers and detection of variants in a
real-time PCR format; and                                                                       
|
| |  |  | MBG Eclipse Probe Systems for Allelic Discrimination, which
allows the use of short DNA probes to unambiguously discriminate
single nucleotide polymorphisms (SNPs) or mutations with the ease of
real-time PCR.

Custom Oligonucleotides

We manufacture and sell high quality, modified and purified custom
synthetic oligonucleotides, or oligos, from our San Diego facility. We offer
most standard modifications including biotin, fluorescent dyes, amine-linkers
and phosphates. In addition, we offer more specialized modifications such as
AP, HRP, Molecular Beacons, dual-labeled probes, RNA and 2-O-methyl RNA.

Modified Bases, Florescent Dyes and Quencher

Our modified bases are part of the MGB Eclipse Probe System and Super G is
available for sale in small quantities through distributors. Our fluorescent
dyes and quencher are part of the MGB Eclipse Probe System and are also
available for sale in small quantities through distributors and as optional
modifications on our custom oligonucleotides.

Chemical Intermediates

For our collaborative partners, we manufacture chemical intermediates for
incorporation into their products.

Sales and Marketing

We market and sell our products through a combination of direct sales
personnel, worldwide distributors, and through collaborative relationships. To
date, virtually all such efforts have been focused on the research market.

In July 2002, we named Amersham Biosciences our exclusive worldwide sales
and marketing partner of MBG Eclipse Probe Systems to the research field for
SNPs, and the co-exclusive worldwide sales and marketing partner to the
research field for gene expression. Under terms of the distribution agreement,
Amersham promotes and markets co-branded custom and catalogue MGB Eclipse
products as part of its genomics product portfolio to researchers in the life
science industry and to pharmaceutical companies conducting internal research.
In October 2002, we named QIAGEN N.V. a co-exclusive worldwide sales and
marketing partner to the research field for products that incorporate our MGB
Eclipse Probe Systems for gene expression. We supply components to QIAGEN and
QIAGEN will offer custom and catalogue probe systems as part of its gene
expression product offerings to be launched in 2003. Under both agreements,
our MGB Eclipse Design software is available from the partners website

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to enable customers to rapidly design and order MGB Eclipse probes and
primers specifically for a gene of interest.

We also sell our MGB Eclipse Probe Systems through cooperative marketing
and supply programs with partners. As an example, in late 2001 we entered into
an alliance with Incyte Genomics that, among other things, identifies us as
Incytes preferred third party provider of unique, custom oligonucleotide
probes and other proprietary hybridization probes to Incytes database users
and provides for our supply of our MGB Eclipse Probe Systems to Incyte for
Incytes internal development purposes.

We market and sell our specialty oligonucleotides through our small direct
sales force that currently operates in the United States. We have marketed
these products through advertisements in trade journals, direct mail,
participation at industry trade shows, our website, and cooperative marketing
and supply programs with partners.

We sell our fluorescent dyes, quencher, modified bases and other
proprietary technologies worldwide through distributors such as Glen Research
and Takara Bio. Our dyes and quencher are also supplied to Eurogentec S. A.
for incorporation into custom oligonucleotides for sale in Europe through both
its direct sales force and distributors.

We sell our chemical intermediates to collaborative partners for
incorporation in their products pursuant to contractual supply agreements. For
instance, we have granted licenses to use some of our genetic analysis
technology to the Applied Biosystems division of Applera Corporation and Third
Wave Technologies.

We currently have a small sales force and limited experience in marketing
our products. Accordingly, we anticipate that we will enter into further
distribution agreements with current and future product offerings to expand the
geographical availability of our products.

We are currently in discussions with many companies and institutions to
apply our products to their systems and projects. The companies include those
engaged in developing automated research platforms for genetic analysis and
those developing systems to be used in clinical diagnostic laboratories. Our
corporate development personnel target leading pharmaceutical, biotech and
diagnostic companies and research and academic institutions with the objective
of entering into collaborative agreements. There can be no assurance that we
will be able to enter into any additional collaborative arrangements on
favorable terms or at all.

Our three largest customers in 2002 were Applied Biosystems, which
accounted for 52% of our revenues, Amersham Biosciences, which accounted for
11% of our revenue, and Invitrogen, which accounted for 9% of revenues.
Revenues from Invitrogen in 2002 were higher than in prior years because
Invitrogen relocated one of its manufacturing facilities and significantly
increased their orders to us during our second and third fiscal quarters. Late
in 2002, Invitrogen orders slowed, and we currently expect revenues from this
customer in 2003 to be less than in 2002. Our current business plan relies on
the continuation of our relationship with Applied Biosystems and Amersham
Biosciences and our business would be adversely affected if these relationships
did not continue. See Certain factors that may effect our business and future
results and the Notes to Financial Statements for more information about
significant customers.

Currently, sales of our products are primarily to customers in the United
States. As shipments pursuant to our worldwide distribution agreements
increase, international sales can be expected to increase.

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Manufacturing and Supply

We currently manufacture MGB Eclipse Probe Systems, modified bases,
fluorescent dyes, quencher, and chemical intermediate products in our facility
in Bothell, Washington, and produce specialty oligonucleotides at our facility
in San Diego, California. Additionally, we use contract manufacturers to
synthesize component chemical reagents when appropriate.

We purchase raw materials essential to our business in the ordinary course
of business from numerous suppliers. Substantially all the raw materials used
for our commercial manufacturing of oligonucleotides, assay systems and other
reagent products are available from multiple sources; however, other raw
materials for supply contract and OEM manufacturing are proprietary products of
other companies. Raw materials may be rejected if they do not meet
manufacturing specifications, are contaminated and/or have other failures. A
material shortage, contamination, or failure could adversely impact the
commercial manufacturing of our products and related revenues.

We have sufficient manufacturing capacity to meet current customer needs.
Anticipated increases in customer demand over the next year may require us to
expand our manufacturing capacity in Bothell, acquire additional manufacturing
capacity, or utilize costly third-party manufacturing vendors, as necessary.
We are currently negotiating for a relatively small amount of additional space
immediately adjacent to our Bothell facility which would be held as shell space
for future expansion, however we cannot provide assurance that we will be able
to successfully negotiate a lease on that space. We are also exploring
opportunities to consolidate our manufacturing operations in Bothell.

Research and Development

We conduct the majority of our research and development activities through
our own staff and facilities. Our goal is to improve DNA technology thereby
making biotechnology, molecular biology and diagnostics more robust. We have
assembled a scientific staff with a variety of complementary skills in a broad
range of advanced research technologies, representing molecular biology,
biochemistry, physical chemistry, and synthetic chemistry. As of December 31,
2002, we had 27 employees engaged in developing our technology and applying it
to genetic analysis, including 14 with Ph.Ds. Our in-house research and
development efforts are focused primarily on the development of improvements in
DNA synthetic chemistry, hybridization reproducibility and ease of use, and
detection technologies. This research and development focus will further our
efforts to commercialize DNA probes, DNA bases, probe labeling, detection
techniques and reagent chemistries. In addition to our in-house research
programs, we collaborate with academic and research institutions to support
research in areas of interest to us.

Our research and development expenses were $3,468,000 in 2000, $4,834,000
in 2001, and $4,677,000 in 2002.

Patents and Proprietary Technology

As of February 15, 2003, our core technologies were covered by fifteen
issued patents, and we have filed twenty additional patent applications in the
United States. To our knowledge, there are no competing patents on our
technology. The expiration dates of these patents range from January 2010 to
July 2020.

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The patent position of biomedical companies, including our own, is
uncertain and may involve complex legal and factual issues. Consequently, we
do not know whether any of our patent applications will result in the issuance
of any further patents, or whether issued patents will provide significant
proprietary protection or will not be circumvented or invalidated. We cannot
be certain that we were the first creator of inventions covered by pending
patent applications or that we were the first to file patent applications for
such inventions, largely because patent applications in the U.S. are maintained
in secrecy until the patents issue, and because publications of discoveries in
the scientific or patent literature tend to lag behind actual discoveries by
several months. Moreover, we may have to participate in interference
proceedings declared by the U.S. Patent and Trademark Office to determine the
priority of inventions, which could result in substantial costs. We cannot
provide assurance that our patent applications will result in further issued
patents or that our issued patents will offer protection against competitors
with similar technology. Additionally, we cannot provide assurance that any
manufacture, use or sale of our technology or products will not infringe on
patents or proprietary rights of others, and we may be unable to obtain
licenses or other rights to these other technologies that may be required for
the commercialization of our proposed products.

We require our employees, consultants and advisors to execute
confidentiality agreements upon the commencement of an employment or consulting
relationship with us. Each agreement provides that all confidential
information developed or made known to the individual during the course of the
relationship will be kept confidential and not disclosed to third parties
except in specified circumstances. In the case of employees, the agreements
provide that all inventions conceived by an individual shall be our exclusive
property, other than inventions unrelated to our business and developed
entirely on the employees own time. We cannot provide assurance, however,
that these agreements will provide meaningful protection or adequate remedies
for misappropriation of trade secrets in the event of unauthorized use or
disclosure of this information.

Competition

The markets for our technologies and products are very competitive, and we
expect that competition to continue for the foreseeable future. We compete
primarily with other companies that are pursuing technologies and products that
provide alternatives to our technologies and products. In the research market,
there are more than 20 competitors in the development, manufacturing and
marketing of reagents for genetic analysis, including the detection of
infectious diseases using a variety of technologies and specialty
oligonucleotides, most of which are larger than us. There are many
pharmaceutical, diagnostic and biotechnology companies, public and private
universities and research organizations engaged in the research and development
of diagnostic products. Most of these organizations have financial,
manufacturing, marketing and human resources greater than ours.

Regulation

We currently sell our products to researchers or to partners whose end
customers are researchers. As such, our current products are not subject to
regulation by the United States Food and Drug Administration. However, Epoch
is subject to the regulations of various other federal and state agencies. We
believe we are in compliance in all material respects with the regulations
promulgated by the agencies which govern us, and that such compliance has not
had, and is not expected to have, a material adverse effect on our business.

We also believe that our operations comply in all material respects with
applicable environmental laws and regulations. Such compliance has not had,
and is not expected to have, a material adverse effect on our capital
expenditures, results of operations or competitive position.

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Insurance

We carry property and general liability insurance, product liability
insurance, and director and officers liability insurance in amounts and on
terms deemed adequate by management. Future claims could, however, exceed our
applicable insurance coverage.

Employees

As of December 31, 2002, we had 67 full-time employees, of which 23 were
devoted to manufacturing, 27 were devoted to research and development
activities, 5 to sales and marketing, and 12 were devoted to general and
administrative activities. At December 31, 2002, 36 employees worked in our
Bothell facility and 31 worked in our San Diego facility. We believe we have
been successful in attracting skilled employees with experience in the
biomedical industry, but we cannot provide assurance that we will continue to
do so in the future. None of our employees are covered by a collective
bargaining agreement, and management considers relations with its employees to
be good.

Availability of SEC Filings

All reports filed by the Company with the SEC are available free of charge
via EDGAR through the SEC website at www.sec.gov. In addition, the public may
read and copy materials filed by the Company with the SEC at the SECs public
reference room located at 450 Fifth St. N.W., Washington, D.C., 20549.
Information regarding operation of the SECs public reference room can be
obtained by calling the SEC at 1-800-SEC-0330. The Company also provides
copies of its Forms 8-K, 10-K 10-Q, Proxy and Annual Report at no charge to
investors upon request and makes its reports available through its website at
www.epochbio.com, as soon as reasonably practicable after filing such material
with the SEC.

Certain Factors That May Affect Our Business And Future Results

Forward Looking Statements

Some of the information included herein contains forward-looking
statements. These statements can be identified by the use of forward-looking
terms such as may, will, expect, anticipates, estimate, continue,
or other similar words. These statements discuss future expectations,
projections or results of operations or of financial condition or state other
forward-looking information. When considering these forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements we make. These risk factors could cause our actual results to
differ materially from those contained in any forward-looking statement. If
any of the following risks actually occur, our business could be harmed and the
trading price of our common stock could decline.

We may be unable to maintain our listing on Nasdaq, which could cause our stock
price to fall materially and decrease the liquidity of our common stock

Our common stock is currently listed on The Nasdaq SmallCap Market. To
maintain the listing, we must continue to satisfy the ongoing Nasdaq compliance
requirements, including that our common stock have a minimum bid price of $1.00
per share. In the third and fourth quarters of 2002 our stock traded below the
$1 minimum for a few days.

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If our common stock is delisted from trading on The Nasdaq SmallCap Market
and is not relisted thereon we would likely seek listing of our common stock on
the over-the-counter market, which is viewed by many investors as a less liquid
marketplace. As a result, the price per share of our common stock would likely
decrease materially and, the trading market for our common stock, our ability
to issue additional securities and our ability to secure additional financing
would likely be materially and adversely affected.

We have been profitable in only one quarter and anticipate future losses, and
we may require additional capital

Since our formation in 1985, we have generated limited revenues and only
realized one profitable quarter, which was the quarter ended December 31, 2002.
As of December 31, 2002, we had an accumulated deficit of approximately $74
million. While we are commercializing our products and technologies, prior to
adequate revenues being generated from these activities we expect to incur
additional losses as we expand our manufacturing capacity, continue our
research and development activities and fund our product commercialization
efforts. There is no assurance that we will ever become profitable or that we
will sustain profitability if we do become profitable. Should we experience
continued or unforeseen operating losses, our capital requirements would
increase and our stock price would likely decline.

Additionally, as of December 31, 2002 we had approximately $3.5 million in
cash and cash equivalents and have a commitment from a bank for a secured term
loan of $2,500,000 of which $847,000 has been drawn, and also a working capital
line of credit of $750,000 which has not been drawn upon. We currently
anticipate that our current cash balances, cash from operations, and unused
borrowing capacity will be sufficient to meet our cash needs through at least
the next twelve months. However, we may need to seek additional equity and/or
debt capital, and there can be no assurance that such capital will be available
to us on favorable terms, or at all. If additional funds are not available, we
would be required to delay, reduce, or eliminate expenditures for some or all
of our programs or products.

There is a risk that our technology may not be effective or might not work

The science and technology of synthetic DNA-based products is rapidly
evolving. While we are beginning to produce and supply products to customers
for commercial use, the majority of our products and proposed products are in
the discovery or early development stage. The proposed products will require
significant further research, development, and testing. We face the risk that
any or all of our products and proposed products could prove to be ineffective
or unsafe, or be an inferior product to products marketed by others because our
products are based on new and unproven innovative technologies. Some of our
current research and development activities may not result in any commercially
viable products. If we do not have commercially viable products, we will not
be able to sell our products, we will not be able to attract partners, and we
will not be able to generate funds internally to support operations.

We have limited manufacturing experience

While we have experience in researching and developing unique, proprietary
technologies to enhance the study of genes, and in manufacturing
oligonucleotides at relatively small scales, our experience in manufacturing
other chemical reagent products is relatively limited. We have sufficient
manufacturing capacity to meet current customer needs. Anticipated increases
in customer demand over the next year may require us to expand our
manufacturing capacity in Bothell, acquire additional

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manufacturing capacity, or utilize costly third-party manufacturing
vendors, as necessary. Any delay or inability to expand our manufacturing
capacity could materially adversely affect our manufacturing ability.

There is a risk that we do not own exclusive rights to our technology, or that
our competition may have access to our technology which may prevent us from
selling our products

We attempt to protect our proprietary technology by relying on several
methods, including United States patents. We also have international patent
applications that correspond to many of the U.S. patents and patent
applications. The issued patents and pending patent applications cover
inventions relating to the components of our core technologies. The expiration
dates of these patents range from January 2010 to July 2020. We make no
guarantee that any issued patents will provide us with significant proprietary
protection, that pending patents will be issued, or that products incorporating
the technology covered by our issued patents or pending applications will be
free from challenges by competitors. Further, third parties may hold
proprietary rights which precede our claims and could therefore prohibit us
from marketing the proposed products.

Some of our technology might infringe on the rights of others, which may
prevent us from selling our products

There is a great deal of litigation regarding patents and other
intellectual property rights in the biomedical industry. We were defendants in
one action of this kind, which we settled prior to 1997. Although patent and
intellectual property disputes in the biomedical area are sometimes settled
through licensing or similar arrangements, this kind of solution can be
expensive, if a license can be obtained at all. An adverse determination in a
judicial or administrative proceeding or our failure to obtain necessary
licenses could prevent us from manufacturing and selling our products. This
would substantially hurt our business.

We face numerous competitors and changing technologies which could make our
products obsolete

Many companies do research and development and market products designed to
analyze genes and diagnose conditions based on a number of technologies and are
developing additional products. Many of these companies have substantially
greater capital resources, larger research and development and marketing staffs
and facilities and greater experience in developing products than we have.
Furthermore, the specific field in which we operate is subject to significant
and rapid technological change. Even if we successfully introduce our products
or proposed products, our technologies could be replaced by new technologies or
our products or proposed products might be obsolete or non-competitive.

We will be dependent upon our agreement with Applied Biosystems for a
significant portion of our revenues for 2003, and a reduction of sales under or
early termination of this agreement would seriously harm our revenues and
operating results and would likely cause our stock price to decline

In January 1999, Epoch and Applied Biosystems entered into a License and
Supply Agreement pursuant to which we licensed some of our technology to
Applied Biosystems for use in its TaqMan® 5-nuclease real-time PCR assays, or
tests (TaqMan® is a registered trademark of Roche Molecular Systems, Inc.). In
July 1999, we licensed our proprietary software, which speeds the design of
oligonucleotide probes used in the study of genes, to Applied Biosystems. In
August 2000, the agreement was amended to, among other things, provide for
Epoch manufacturing product for Applied Biosystems. In July 2002

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this agreement was further amended to remove the manufacturing rights from the
contract effective October 2002, redefine product categories, increase the
minimum royalties and royalty rates, and establish that minimum royalties are
measured and paid quarterly. We will depend upon product sales and royalties
from Applied Biosystems sales of its TaqMan® assays under this agreement for a
significant portion of our revenues in 2003 and future periods.

Either party may terminate the agreement upon 180 days written notice. In
the event that this agreement is terminated, our revenues, financial condition
and operating results would be adversely affected and our stock price would
likely decline.

We will be dependent on our agreements with Amersham Biosciences and QIAGEN
N.V. for the distribution of our MGB Eclipse products and the resultant
revenues. Lower than expected sales, or early termination of these agreements
would seriously harm our projected revenues and operating results and would
likely cause our stock price to decline.

In July 2002, Epoch and Amersham Biosciences entered into an agreement
under which Amersham became the exclusive worldwide sales, marketing and
distribution partner to the research field of our MGB Eclipse Probe Systems for
SNPs, and the co-exclusive worldwide sales and marketing partner to the
research field for gene expression.

In October 2002, Epoch and QIAGEN entered into a license and supply
agreement under which QIAGEN became the co-exclusive worldwide sales, marketing
and distribution partner to the research field of our MGB Eclipse Probe Systems
for gene expression.

We will depend upon product sales to Amersham and QIAGEN under these
agreements for a significant portion of our revenues in future periods. In the
event that either of these agreements is terminated, or either partner is
unsuccessful at commercializing our technologies, our revenues, financial
condition and operating results would be adversely affected and our stock price
would likely decline.

Some of our customers may experience financial difficulties, which could
adversely impact our collection of accounts receivable

Although historically we have experienced limited credit losses from our
trade receivables, our experience is limited. At December 31, 2002, our
allowance for doubtful accounts was $32,000. We regularly review the
collectibility and credit worthiness of our customers and the receivables to
determine an appropriate allowance for doubtful accounts, however future
uncollectible accounts could exceed our current or future allowances.

The loss of key personnel could adversely affect operations by impairing our
research and our efforts to commercialize and license our products

Our performance is greatly dependent upon our key management, including
our Chief Executive Officer, Dr. William Gerber, and technical personnel and
consultants. Our future success will depend in part upon our ability to retain
these people and to recruit additional qualified personnel. We must compete
with other companies, universities, research entities and other organizations
in order to attract and retain highly qualified personnel. Although we have
entered into agreements with our key executive officers, we make no guarantee
that we will retain these highly qualified personnel or hire additional
qualified personnel. We currently maintain no key man life insurance on any of
our management or technical personnel.

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The value of our common stock could change significantly in a very short time

The market price of our common stock may fluctuate significantly. For
example, in the year 2002 our stock traded as high as $2.72 in January, and as
low as $0.70 in October. The rapid price changes Epoch has experienced
recently, and throughout our history, place your investment in our common stock
at risk of total loss over a short period of time. We are in the biotechnology
industry and the market price of securities of biotechnology companies have
fluctuated significantly and these fluctuations have often been unrelated to
the companies operating performance. Announcements by us or our competitors
concerning technological innovations, new products, proposed governmental
regulations or actions, developments or disputes relating to patents or
proprietary rights, and other factors that affect the market generally could
significantly impact our business and the market price of our securities.

Public opinion regarding ethical issues surrounding the use of genetic
information may adversely affect demand for our products

Public opinion regarding ethical issues related to the confidentiality and
appropriate use of genetic testing results may influence governmental
authorities to call for limits on, or regulation of the use of, genetic
testing. In addition, these authorities could prohibit testing for genetic
predisposition to certain conditions, particularly for those that have no known
cure. Furthermore, adverse publicity of public opinion relating to genetic
research and testing, even in the absence of any governmental regulation, could
harm our business. Any of these scenarios could reduce the potential markets
for our products and technologies, which could materially and adversely affect
our revenues.

Government regulation of genetic research or testing may adversely affect the
demand for our products and impair our business and operations

Federal, state and local governments may adopt regulations relating to the
conduct of genetic research and genetic testing. These regulations could limit
or restrict genetic research activities as well as genetic testing for research
or clinical purposes. In addition, if state and local regulations are adopted,
these regulations may be inconsistent with, or in conflict with, regulations
adopted by other state or local governments. Regulations relating to genetic
research activities could adversely affect our ability to conduct our research
and development activities. Regulations restricting genetic testing could
adversely affect our ability to market and sell our products and our
technologies. Accordingly, any regulations of this nature could harm our
business.

Health care cost containment initiatives could limit the adoption of genetic
testing as a clinical tool, which would harm our revenues and prospects

In recent years, health care payers as well as federal and state
governments have focused on containing or reducing health care costs. We
cannot predict the effect that any of these initiatives may have on our
business, and it is possible that they will adversely affect our business. In
particular, gene-based therapeutics, if successfully developed and
commercialized, are likely to be costly compared to currently available drug
therapies. Health care cost containment initiatives focused either on
gene-based therapeutics or on genetic testing could cause the growth in the
clinical market for genetic testing to be curtailed or slowed. In addition,
health care cost containment initiatives could also cause pharmaceutical
companies to reduce research and development spending. In either case, our
business and our operating results would be harmed.

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ITEM 2. Properties

Our principal administrative office and research laboratories are located
in Bothell, Washington, where we lease and occupy approximately 25,000 square
feet. We also manufacture chemical intermediates and MGB Eclipse Probe Systems
at our Bothell facility. The current lease was initiated in February 2000 when
we entered into a 12-year non-cancelable lease for space within a multi-tenant
property which we initially occupied in November 2000.

Our specialty oligonucleotide manufacturing facility is located in San
Diego, California, where we lease and occupy approximately 8,200 square feet.
The current lease term on this property expires in November 2005, but is
terminable at any time with 90 days written notice.

We are currently exploring opportunities to consolidate our manufacturing
operations in Bothell.




ITEM 3. Legal Proceedings

Mordecai Jofen, as Trustee of the Harbor Trust, f/k/a The Edward Blech
Trust v. Epoch Biosciences, Inc., United States District Court for the Southern
District of New York, Case No. 01 CV 4129

The Harbor Trust (formerly the Edward Blech Trust) filed a complaint
against us, alleging the breach of a 1996 letter agreement between us and David
Blech. Pursuant to the letter agreement, upon payment of a pre-existing debt
owed to us by Blech (the Ribonetics Debt), we were to release to Blech from
escrow warrants to purchase 500,000 shares of our stock. Blech assigned all of
his rights under the letter agreement to the Harbor Trust. The Harbor Trusts
claim is based on our alleged failure to timely register the common stock
underlying the warrants, allegedly resulting in damages to Blech and/or the
Harbor Trust of at least $10 million, based on the peak trading value of our
stock.

We filed a motion to dismiss the complaint based on, among other things,
the positions that: (1) Blech and the Harbor Trust have never had rights to
receive or exercise the warrants because Blech failed to perform a condition
precedent, i.e., payment of the Ribonetics Debt; and (2) we had no obligation
to register the stock unless and until Blech was entitled to the warrants.
Further, the warrants expired pursuant to the letter agreement in June 2000.
The Court granted our motion to dismiss in November 2001, but gave the Harbor
Trust leave to file an amended complaint, which they filed in December 2001.
We filed a motion to dismiss the amended complaint in January 2002. In July
2002, the Court decided in our favor and granted the motion to dismiss without
leave to file an amended complaint.

In August 2002 the Harbor Trust appealed the Courts dismissal of its case
to the United States Court of Appeal for the Second Circuit. The appeal is
likely to be resolved in the second quarter of 2003. While we believe we have
a strong position, it is not possible at this time to state the likelihood of
an unfavorable outcome because of the inherent uncertainties of litigation.




ITEM 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth
quarter of 2002.

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PART II




ITEM 5. Market for Common Equity and Related Stockholder Matters

On February 4, 2003, our common stock began trading on The Nasdaq SmallCap
Market under the symbol EBIO. From May 10, 2000 through February 3, 2003,
our common stock traded on The Nasdaq National Market under the symbol EBIO.
The table below presents information on the high and low trading prices of our
common stock.

|                                               |  |      |      |     |  |   |      | 
|---------------------------------------------- |  | ---- | ---- | --- |  | - | ---- | 
|                                               |  | High |      | Low
|                                               |  |      |      |    
|Fiscal year ended December 31, 2002            |  |      |      |     |  |   |      | 
|Fourth quarter (October 1 through December 31) |  | $    | 1.78 |     |  | $ | 0.70 | 
|Third quarter (July 1 through September 30)    |  |      | 1.85 |     |  |   | 0.74 | 
|Second quarter (April 1 through June 30)       |  |      | 2.05 |     |  |   | 1.51 | 
|First quarter (January 1 through March 31)     |  |      | 2.72 |     |  |   | 1.60 | 

|                                               |  |      |      |     |  |   |      | 
|---------------------------------------------- |  | ---- | ---- | --- |  | - | ---- | 
|                                               |  | High |      | Low
|                                               |  |      |      |    
|Fiscal year ended December 31, 2001            |  |      |      |     |  |   |      | 
|Fourth quarter (October 1 through December 31) |  | $    | 2.80 |     |  | $ | 1.14 | 
|Third quarter (July 1 through September 30)    |  |      | 4.50 |     |  |   | 1.50 | 
|Second quarter (April 1 through June 30)       |  |      | 5.70 |     |  |   | 2.05 | 
|First quarter (January 1 through March 31)     |  |      | 6.75 |     |  |   | 3.00 | 

On March 20, 2003, the last reported sale price for our common stock on
the Nasdaq SmallCap Market was $1.56 per share. As of March 20, 2003, there
were approximately 3,140 stockholders of record of our common stock. We have
not paid any dividends on our common stock since our inception and do not
anticipate paying any dividends in the foreseeable future. Any earnings
generated in the foreseeable future will be used for the further expansion of
the business.

Recent Sales of Unregistered Securities

The following is a summary of our transactions during 2002 involving sales
of our securities that were not registered under the Securities Act. Exemption
from the registration requirements of the Securities Act for the sales of the
securities described below was claimed under Section 4(2) of the Securities
Act, among others, on the basis that such transactions did not involve any
public offering and the purchasers were sophisticated with access to the kind
of information registration would provide. No underwriting or brokers
commissions were paid in connection with the following transaction.

In January 2002, we issued a five-year warrant to purchase 15,000 shares
of our common stock at $2.53 per share to a professional services provider to
the company. The shares vested in equal monthly installments over one year.

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ITEM 6. Selected Financial Data

The information set forth below should be read in conjunction with Item 7
Managements Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements and notes thereto included elsewhere
in this report.

|                              |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |        |        |   |   |        |        |   |   |        |        |  
|----------------------------- | ------------------------------------------------------------- | ------------------------------- | - | ------------------------------------- | ------ | ---- | - | ----- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | -
|                              |                                                               |                                 |   | Years Ended December 31,             
|                              |                                                               |                                 |   | (in thousands, except per share data)
|                              |                                                               |                                 |   | 1998                                  |        | 1999 |   | 2000  |        | 2001 |   | 2002  
|                              |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |       
|Statement of operations data: |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |        |        |   |   |        |        |   |   |       
|                              | Revenue                                                       |                                 | $ | 160                                   |        |      | $ | 181   |        |      | $ | 1,367  |        |   | $ | 7,521  |        |   | $ | 11,226 |       
|                              | Cost of product sales                                         |                                 |   |                                      |        |      |   |      |        |      |   | 317    |        |   |   | 3,092  |        |   |   | 4,144  |       
|                              | Research and development                                      |                                 |   | 3,184                                 |        |      |   | 2,858 |        |      |   | 3,468  |        |   |   | 4,834  |        |   |   | 4,677  |       
|                              | Selling, general and administrative                           |                                 |   | 1,590                                 |        |      |   | 1,102 |        |      |   | 3,390  |        |   |   | 4,601  |        |   |   | 5,723  |       
|                              |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |        |        |   |   |        |        |   |   |       
|                              |                                                               | Operating loss                  |   |                                       | (4,614 | )    |   |       | (3,779 | )    |   |        | (5,808 | ) |   |        | (5,006 | ) |   |        | (3,318 | )
|                              | Interest income (expense), net                                |                                 |   | (622                                  | )      |      |   | (991  | )      |      |   | 913    |        |   |   | 430    |        |   |   | 102    |       
|                              | Other income                                                  |                                 |   | 23                                    |        |      |   |      |        |      |   |       |        |   |   |       |        |   |   |       |       
|                              |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |        |        |   |   |        |        |   |   |       
|                              |                                                               | Loss from continuing operations |   |                                       | (5,213 | )    |   |       | (4,770 | )    |   |        | (4,895 | ) |   |        | (4,576 | ) |   |        | (3,216 | )
|                              | Discontinued operations                                       |                                 |   | 110                                   |        |      |   | 70    |        |      |   |       |        |   |   |       |        |   |   |       |       
|                              |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |        |        |   |   |        |        |   |   |       
|                              |                                                               | Net loss                        |   |                                       | (5,103 | )    |   |       | (4,700 | )    |   |        | (4,895 | ) |   |        | (4,576 | ) |   |        | (3,216 | )
|                              |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |        |        |   |   |        |        |   |   |       
|                              | Loss per share, basic and diluted,
from continuing operations |                                 |   | (0.35                                 | )      |      |   | (0.31 | )      |      |   | (0.20  | )      |   |   | (0.18  | )      |   |   | (0.13  | )     
|                              | Loss per share, basic and diluted                             |                                 |   | (0.34                                 | )      |      |   | (0.30 | )      |      |   | (0.20  | )      |   |   | (0.18  | )      |   |   | (0.13  | )     
|Balance sheet data:           |                                                               |                                 |   |                                       |        |      |   |       |        |      |   |        |        |   |   |        |        |   |   |       
|                              | Cash and cash equivalents                                     |                                 | $ | 658                                   |        |      | $ | 1,772 |        |      | $ | 12,122 |        |   | $ | 7,489  |        |   | $ | 3,508  |       
|                              | Total assets                                                  |                                 |   | 970                                   |        |      |   | 2,266 |        |      |   | 20,935 |        |   |   | 17,306 |        |   |   | 15,056 |       
|                              | Current liabilities                                           |                                 |   | 1,171                                 |        |      |   | 775   |        |      |   | 2,816  |        |   |   | 2,192  |        |   |   | 3,193  |       
|                              | Long-term liabilities                                         |                                 |   | 3,000                                 |        |      |   | 1,316 |        |      |   | 2,059  |        |   |   | 3,174  |        |   |   | 3,082  |       
|                              | Stockholders equity                                          |                                 |   | (3,201                                | )      |      |   | 175   |        |      |   | 16,060 |        |   |   | 11,940 |        |   |   | 8,781  |       




ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and
related notes included elsewhere in this report. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in the forward-looking
statement as a result of factors including, but not limited to, those set forth
in Certain factors that may affect our business and future results and
elsewhere in this report.

Overview

Epoch develops technology and products that enable and accelerate genomic
analysis. The foundation of our business strategy is the continued funding of
innovative research and development and commercialization of the resultant
products through a number of channels.

We earn revenues through a variety of sources. We license our technology
for incorporation into other companies products and generate product revenue
and earn license fees and royalties from those

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companies. We also sell our products to end-users; both through our
direct sales force and through distributors that provide worldwide reach. We
also earn revenues through contract research activities, whereby third party
companies pay for specific research and development activities carried out by
our scientists.

In January 1999, Epoch and Applied Biosystems entered into a License and
Supply Agreement pursuant to which we licensed some of our technology to
Applied Biosystems for use in TaqMan® 5-nuclease real-time PCR assays, or
tests. Under the terms of the agreement, Applied Biosystems made payments to
us of initial fees for licensed technology and proprietary know how, and will
make ongoing payments for purchases of chemical compounds as well as royalties
on sales of product which use the licensed technology, subject to minimums.

In July 1999, we licensed our proprietary software, which speeds the
design of chemical tools used in the study of genes, to Applied Biosystems.
This agreement increased the scope of the licensing agreement entered into in
January 1999 with Applied Biosystems to include software that allows for the
efficient custom design of Taqman® probes, which are chemical compounds which
seek out, or probe for a specific location on a gene, by the end user. The
software is incorporated into Applied Biosystems Primer Express software
which is sold with its 7700 Sequence Detection System. In addition to license
fees, we receive royalties on all products that Applied Biosystems sells which
incorporate the software.

In November 1999, Applied Biosystems converted $1,000,000 of prepayments
made by it pursuant to the License and Supply Agreement into 400,000 shares of
our common stock. In order to secure any unused portion of the purchased
product prepayments (up to $450,000), we continued to grant to Applied
Biosystems a security interest in the patents related to the technology under
the terms of a security agreement. The security interest automatically
terminates when any unused portion of the purchased product prepayments is
$50,000 or less. Although no security interest was granted with respect to the
royalty prepayments, if the royalty payments do not become due under the
agreement, we will also be required to refund any unused prepayments to Applied
Biosystems, which approximates $100,000 at December 31, 2002.

In August 2000, the agreement was amended to include research and
development funding of $1,000,000 per year, subject to adjustment under terms
of the agreement. This portion of the agreement expired in August of 2002, and
we are not currently doing research work for Applied Biosystems.

In October 2001, we further amended our agreement with Applied Biosystems.
Under the terms of this amendment, Applied Biosystems paid us a minimum amount
each quarter for their right to order, and our obligation to manufacture,
probes for them. This amendment was effective from October 2001 through
October 2002. In July 2002, a further amendment removed the manufacturing
rights from the contract effective October 2002, redefined product categories,
increased the minimum royalties and royalty rates, and established that minimum
royalties are measured and paid quarterly.

Under the terms of the agreement, if Applied Biosystems terminates the
agreement upon 180 days written notice to us, or if we terminate the agreement
following a material breach by Applied Biosystems, Applied Biosystems will
release its security interest in the patents and forfeit any unused portion of
the prepayments. However, if we and Applied Biosystems mutually agree to
terminate the agreement, or if Applied Biosystems terminates the agreement as a
result of a material breach by us, then we must reimburse Applied Biosystems
the difference between the unused portion of the purchased product prepayments
and $50,000, which approximates $100,000 at December 31, 2002.

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In October 2000, we entered into a Development, License and Supply
Agreement with Third Wave Technologies whereby we licensed our proprietary
fluorescent dye and quencher technologies to Third Wave. Third Wave also has
the option to license other proprietary chemistries we have, in which case
additional license and royalty fees would be due to us. We received an initial
license fee which is being amortized over the life of the contract and we
receive royalties on sales of Third Wave products which include the licensed
technology. Included in the agreement with Third Wave was a collaborative
research effort to be funded by Third Wave through December 31, 2003. In 2002
Third Wave informed us that it was ceasing funding development with us. We
instituted arbitration proceedings against Third Wave and in March 2003 agreed
that Third Wave would no longer be obligated to fund development. In exchange,
Third Wave agreed to pay us $300,000 of which $85,000 was included in accounts
receivable at December 31, 2002, and Third Wave also agreed to higher annual
minimum royalties under its license from us for dye and quencher technologies.

In November 2000, we acquired some of the assets and liabilities of
Synthetic Genetics, a San Diego, California manufacturer of specialty
oligonucleotides for approximately $3,788,000 including $3,425,000 in cash
paid, the direct costs of the acquisition, and the assumption of liabilities.
The acquisition provided us with manufacturing capacity to meet anticipated
order volumes generated by the Applied Biosystems contract. The acquisition
was accounted for as a purchase of a business and resulted in the recognition
of goodwill of approximately $2,321,000 and other intangibles of approximately
$1,119,000.

In July 2001, we launched our MGB Eclipse Probe System, that incorporates
the performance advantages of our unique MGB and MGB Eclipse Dark Quencher
technologies. MGB Eclipse probe assays are compatible with all currently
manufactured real-time PCR systems, and provide highly effective and
reproducible results for academic, biotech, diagnostic and pharmaceutical
researchers. The initial release consisted of MGB Eclipse probes for gene
expression, viral detection, and allelic discrimination for single nucleotide
polymorphisms (SNPs).

In October 2001, we entered into a license, development, and supply
alliance with Incyte Genomics, Inc. The alliance consists of three elements.
First, we will receive access to the gene sequence content from Incytes
LifeSeq Gold® and ZooSeq® databases for use in the design, manufacture, and
sale of MGB Eclipse probe products. Second, under the alliance we will be
identified as the preferred provider of custom oligonucleotides and other
proprietary hybridization probes to Incytes users of LifeSeq Gold. Third, we
will supply Incyte with MGB Eclipse Probe Systems for their internal
development purposes.

In July 2002, we named Amersham Biosciences our exclusive worldwide sales
and marketing partner of MBG Eclipse Probe Systems to the research field for
SNPs, and the co-exclusive worldwide sales and marketing partner to the
research field for gene expression. Under terms of the distribution agreement,
Amersham promotes and markets co-branded custom and catalogue MGB Eclipse
products as part of its genomics product portfolio to researchers in the life
science industry and to pharmaceutical companies conducting internal research.
In October 2002, we named QIAGEN N.V. a co-exclusive worldwide sales and
marketing partner to the research field for products that incorporate our MGB
Eclipse Probe Systems for gene expression. We supply components to QIAGEN and
QIAGEN will offer custom and catalogue probe systems as part of its gene
expression product offerings to be launched in 2003. Under both agreements,
our MGB Eclipse Design software is available from the partners website to
enable customers to rapidly design and order MGB Eclipse probes and primers
specifically for a gene of interest. Both of these agreements are restricted
to the research field. We retain all other rights to MGB Eclipse Probe Systems
in other fields, including diagnostics, bioterroism, and bio-warfare.

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We expect to incur operating losses for at least the next year as we
continue research and development spending in applying our synthetic DNA-based
technology to genomic analysis to the research and other fields, and incur
costs commercializing the resultant products through various channels.

Critical Accounting Policies

Our accounting policies are more fully described in Note 1 to our
financial statements. However, certain of our accounting policies are
particularly important to the portrayal of our financial position and results
of operations and require the application of significant judgment by our
management. As a result they are subject to an inherent degree of uncertainty.
In applying those policies, our management uses its judgment to determine the
appropriate assumptions to be used in the determination of certain estimates.
Those estimates are based on our historical experience, terms of existing
contracts, our observance of trends in the industry, information provided by
our customers and information available from other outside sources, as
appropriate. Our critical accounting policy is revenue recognition.

Revenue recognition. We earn revenues from product sales of chemical
products and reagents to manufacturers for incorporation into their products,
from the sale of specialty oligonucleotides and value added reagents to end
users and distributors in the research fields of genomics and molecular
diagnostics, from license fees for the use of our proprietary technology and
know-how, and by providing services to third parties for performing research
and development on their behalf. We also have product royalty agreements that
result in royalties to us upon ultimate sales of products by our partners.



| |  |  | Revenues from product sales that require no ongoing
obligations are recognized when shipped to the customer and title
has passed. To the extent that sales are made to distributors and
not sold through to end users our future sales could decline.                                                                                                                                                                                                      
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | License fees are recognized over the term of the agreement to
which the license fees correspond, which may extend to the
expiration of the underlying patents, and based on the terms and
future performance obligations in the underlying agreements. These
upfront fees are generally nonfundable regardless of future
performance. Deferred revenue principally represents these license
fees received in advance and prepayments for product purchases.
|
| |  |  | Contract research revenues are recognized as the research and
development activities are performed under the terms of commercial
collaboration and supply agreements and government grants. Direct
costs related to these contracts and grants are reported as research
and development expenses.                                                                                                                                                          
|
| |  |  | Royalty revenues are recognized when earned under the terms
of the related agreements, which is generally upon sale of products
by our partner containing our component products. To the extent our
partners no longer use our component products or sales of their
products are less than expected, our royalty revenues could decrease
in the future.                                                                                                    
|
| |   |  | 21Table of Contents                                                                                                                                                                                                                                                                                                                                                                                                                                        

Results of Operations

|        |                                     |               |   |                          |        |      |   |       |        |   |   |       |        |  
|------- | ----------------------------------- | ------------- | - | ------------------------ | ------ | ---- | - | ----- | ------ | - | - | ----- | ------ | -
|        |                                     |               |   | Years Ended December 31,
|        |                                     |               |   | (in thousands)          
|        |                                     |               |   | 2000                     |        | 2001 |   | 2002 
|        |                                     |               |   |                          |        |      |   |      
|Revenue |                                     |               |   |                          |        |      |   |       |        |   |   |      
|        | Product sales                       |               | $ | 923                      |        |      | $ | 4,461 |        |   | $ | 6,662 |       
|        | License fees and royalty income     |               |   | 74                       |        |      |   | 936   |        |   |   | 2,694 |       
|        | Contract research revenue           |               |   | 370                      |        |      |   | 2,124 |        |   |   | 1,870 |       
|        |                                     |               |   |                          |        |      |   |       |        |   |   |      
|        |                                     | Total revenue |   |                          | 1,367  |      |   |       | 7,521  |   |   |       | 11,226 |  
|        | Cost of product sales               |               |   | 317                      |        |      |   | 3,092 |        |   |   | 4,144 |       
|        | Research and development            |               |   | 3,468                    |        |      |   | 4,834 |        |   |   | 4,677 |       
|        | Selling, general and administrative |               |   | 3,390                    |        |      |   | 4,601 |        |   |   | 5,723 |       
|        | Interest income, net                |               |   | 913                      |        |      |   | 430   |        |   |   | 102   |       
|        |                                     |               |   |                          |        |      |   |       |        |   |   |      
|        |                                     | Net loss      |   | $                        | (4,895 | )    |   | $     | (4,576 | ) |   | $     | (3,216 | )
|        |                                     |               |   |                          |        |      |   |       |        |   |   |      

2002 vs. 2001

Revenues for the year ended December 31, 2002, increased 49% over 2001,
primarily due to increases in product sales and royalties.

Product Sales. Product sales include sales of specialty oligonucleotides
to end users and our distribution partners in the research market and sales of
chemical intermediates and our dyes, quencher, and modified bases to
collaborative partners and distributors. Product sales increased to $6,662,000
in 2002 from $4,461,000 in 2001, reflecting increased sales of MGB Eclipse
Probe Systems, including initial shipments to worldwide marketing partners
Amersham Biosciences and QIAGEN, and increases in sales of other custom
oligonucleotides and chemical intermediates to corporate partners.

Revenue from the sale of specialty oligonucleotides grew significantly in
2002 for three primary reasons. First, sales of MGB Eclipse Probe Systems
increased due to a full year of shipments to Incyte and initial shipments in
the third and fourth quarters to Amersham and QIAGEN pursuant to our
distribution agreements. In 2001, we had limited revenue from Incyte and no
shipments to Amersham or QIAGEN. Second, one of our major customers for
specialty oligonucleotides relocated one of its manufacturing facilities during
the year and outsourced the work to us during the move. We had sales of
approximately $1,005,000 from this customer in 2002 and we do not currently
expect to receive this level of sales in 2003. Third, revenues from Applied
Biosystems for MGB TaqMan probe manufacturing increased. These manufacturing
rights ceased in September 2002 pursuant to the most recent amendment to that
agreement, with the value of those rights recharacterized as product royalties.

Chemical intermediate revenues represent component chemistries that we
supply on cost-plus terms for incorporation in our partners products and sales
of our dyes, quencher, and modified bases through distributors. These revenues
increased 39% in 2002 as a result of growth in our shipments to Applied
Biosystems in support of their Assays-on-Demand and Assays-by-Design product
launches. Initial shipments of our dyes, quencher, and modified bases to our
new distribution partners also contributed to the increase in these revenues.

License Fees and Royalty Income. License fees reflect the amortization of
initial payments for technology and know-how transfers. These amounts are
amortized over the life of the contract. Royalty

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income represents the royalty amounts under license agreements. License fees
and royalty income increased to $2,694,000 in 2002 from $936,000 in 2001 as the
result of higher product sales by corporate partners and contractual minimums.
In the fourth quarter of 2002, we received the last annual minimum royalty
payment from Applied Biosystems under the agreement in effect through September
30, 2002. Also during that quarter, we accrued the first quarterly minimum
royalty amount pursuant to the amended agreement that became effective October
1, 2002. The resultant recognition of two minimum royalty amounts from Applied
Biosystems in the same quarter is unlikely to recur. While the quarterly
minimum royalty amounts from Applied Biosystems increase modestly quarter over
quarter under the amended agreement, we expect quarterly royalties from Applied
Biosystems in 2003 to be less than we recognized in the fourth quarter of 2002.

Contract Research Revenue. Contract research revenue primarily reflects
payments for contract research and development performed for our corporate
partners. Contract research revenues decreased from $2,124,000 in 2001 to
$1,870,000 in 2002 due to the expiration of the Applied Biosystems research
contract in August 2002 and suspended activity in the Third Wave Technologies
research contract in April 2002, offset by increases in funded research
activities that centered on applications for our MGB Eclipse technologies.

Cost of Product Sales. The cost of product sales represents the
manufacturing costs of material, labor and overhead allocations associated with
product sales. Also included is the cost of outside manufacturers which we use
to produce some of our chemical intermediates. The cost of product sales
increased to $4,144,000 in 2002 compared to $3,092,000 in the prior year.
Costs as a percentage of product sales decreased from 69% in 2001 to 62% for
the current year.

Increases in costs of product sales are generally tied to the increases in
revenues, while the changes in costs as a percentage of product sales are
generally impacted by the product mix and economies of scale resulting from
higher volumes. The selling prices of our chemical intermediates, for example,
are determined by contracts and are tied to fully burdened manufacturing costs,
which means our gross margin is fixed at levels below those generally found in
the commercial marketplace.

The decrease in costs as a percentage of product sales experienced in 2002
is the result of three factors: 1) economies of scale driven by the increase
in product sales; 2) a different product mix, specifically higher MGB Eclipse
revenues; and 3) the impact of changes in manufacturing processes which are
resulting in lower costs.

Research and Development. Research and development costs decreased
$157,000, or 3%, in 2002 compared to 2001. Significant changes in research and
development costs were impacted by:



| |  |  | An increase in payroll expenses of $451,000 which primarily
resulted from the addition of a Senior Vice President of Research
and Development early in 2002, severance payments for staff
reductions late in the year, and higher health insurance and other
employee benefit costs.                                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Reduced expenses of $169,000 incurred for the recruitment and
relocation of senior scientific personnel compared to 2001.                                                                                                                                                                                                                        
|
| |  |  | We utilize our research and development personnel in
manufacturing during periods of high demand. The use of research
and development personnel was $687,000 higher in 2002 over 2001, and
will fluctuate depending on the time and availability of personnel
to conduct research and development activities. This amount was
offset by increased

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| |  |  | purchases of raw materials which were primarily attributable to
chemical intermediate manufacturing.
| |  |  | ----------------------------------------------------------------------------------------------------

Selling, General and Administrative.Selling, general and administrative
expenses increased $1,122,000, or 24%, in 2002 over 2001. The increase in 2002
was primarily the result of:



| |  |  | Selling and marketing expenses increased $704,000 as we
continued our efforts to establish MGB Eclipse Probe Systems and
gain product market share in the specialty oligonculeotide field
through the addition of sales and product marketing personnel and
print advertising programs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Licensing expenses increased $261,000 resulting from our
increased royalty revenues.                                                                                                                                                                                                   
|
| |  |  | Personnel costs increased $139,000 in our San Diego facility
as we changed staffing to meet customer needs, including the
addition of a Vice President of Operations.                                                                                                                  
|
| |  |  | Legal expenses increased $98,000 during the year for various
general corporate matters including the completion of agreements
with Amersham and QIAGEN.                                                                                                                                

Interest Income, net. Interest income, net, in 2002 was lower than 2001
due to reduced cash balances available for investment, lower interest rates,
and higher interest expense as a result of our new term loans to Silicon Valley
Bank in late 2002.

2001 vs. 2000

Product Sales. Product sales began in 2000 and represent the sale of
chemical intermediates and probes, primarily to collaborative partners, and the
sale of specialty oligonucleotides to the research market from our San Diego
facility.

Chemical intermediate revenues, primarily to Applied Biosystems and Third
Wave Technologies, represent component chemistries that we supply on cost-plus
terms for incorporation in our partners products. These revenues increased in
2001 as a result of growth in our shipments to Applied Biosystems, and the
start of shipments to Third Wave.

Revenue growth in our specialty oligonucleotide business grew
significantly in 2001 for two primary reasons. First, revenues from the
TaqMan® MGB probes and other products manufactured for Applied Biosystems
pursuant to our License and Supply Agreement, as amended, began in early 2001.
Second, because of the acquisition of Synthetic Genetics in November 2000,
calendar 2001 results include sales of specialty oligonucleotides for a
complete twelve month year, while 2000 results includes only six weeks
specialty oligonucleotide sales.

License Fees and Royalty Income. License fees reflect the amortization of
initial payments for technology and know-how transfers. These amounts are
amortized over the life of the contract. Royalty income represents the
royalties received under license agreements. Royalties in 2001 increased
significantly over the prior year as a result of increased sales of products
incorporating our technologies by our licensees and receipt of contractual
minimum payments during the year.

Contract Research Revenue. Contract research revenue in 2000 reflects
payments for contract research and development performed under the Applied
Biosystems agreement for four months of the year. In 2001, contract research
revenue primarily reflects contract research under our agreements with Applied
Biosystems and Third Wave Technologies for the full year.

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Cost of Product Sales. The cost of product sales represents the direct
manufacturing costs of material, labor and overhead allocations associated with
product sales. Also included is the cost of outside manufacturers which we use
to produce some of our chemical intermediates. The increased costs in 2001 are
attributable to the increase in product sales and changes in the product mix
due to the addition of our San Diego operations and increased volumes of
chemical intermediates at contractual margins.

Research and Development. Research and development costs increased
$1,366,000, or 39%, in 2001 over 2000. This increase was primarily driven by:



| |  |  | An increase of $476,000 in facility costs as we occupied our
new laboratory space in late 2000.                                                                                                                                                                                                                                                                                                                                                   
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | An increase in payroll expenses of $584,000 which primarily
resulted from increased staffing over 2000 levels.                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Expenses of $171,000 incurred for the recruitment and
relocation of senior scientific personnel.                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | We also incurred an increase of $153,000 in research and
development expenses in our San Diego operation as it was functional
for a full year in 2001 compared to six weeks of the prior year.                                                                                                                                                                                                                                                    
|
| |  |  | We use our research and development personnel in
manufacturing during periods of high demand. The use of research and
development personnel was $680,000 higher in 2001 over 2000, and
will fluctuate depending on the time and availability of personnel
to conduct research and development activities. This amount was
offset by increased purchases of raw materials which were primarily
attributable to chemical intermediate manufacturing.

Selling, General and Administrative.Selling, general and administrative
expenses increased $1,212,000, or 36%, in 2001 over 2000. The increases in
2001 were primarily the result of:



| |  |  | $432,000 in selling and marketing expenses associated with
our entry into the specialty oligonculeotide field and the addition
of sales and marketing personnel.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The addition of a full year of operations in San Diego which
added $600,000 to general and administrative expenses.                                             
|
| |  |  | Approximately $375,000 in compensation expenses related to
additional executive personnel.                                                                      

Interest Income, net. Interest income, net, in 2001 was lower than 2000
due to reduced cash balances available for investment coupled with lower
interest rates in 2001. Interest expense in 2000 and 2001 are minimal and
represent the interest payments under capital leases which were assumed as part
of the Synthetic Genetics acquisition.

Liquidity and Capital Resources

At December 31, 2002 we had operating cash and cash equivalents of
$3,508,000, compared to $7,489,000 at December 31, 2001, a decrease of
$3,982,000.

In 2002, cash used in operations totaled $3,895,000, basically
representing our decrease in cash for the year. Within operations, our net
loss of $3,216,000 and the aggregate change in working capital accounts of
$1,517,000 were the primary components, offset by non-cash expenses such as
depreciation

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and amortization amounting to $1,181,000. During the year, we financed most of
our capital expenditures through a new term loan credit facility with Silicon
Valley Bank. Other sources and uses of cash in 2002 were not significant.

Of the significant use of cash caused by changes in our working capital
accounts, accounts receivable increased $1,678,000, substantially all of which
has been collected, as a result of the timing of product sales in December
2002 and the accrual of contractual minimum royalties due from Applied
Biosystems at December 31, 2002. Inventories increased $304,000 as the result
of our decision to have higher levels of finished chemical intermediates
inventory on hand to meet the needs of our customers. Increases in accounts
payable and accrued liabilities are the result of normal business fluctuations
of a growing company. Deferred revenue, representing up front licensing
payments subject to recognition over the terms of the underlying agreements and
prepayments for royalties and product purchases, also impacts cash flows from
operations. Deferred revenue decreased during 2002, thereby increasing our
cash used in operations, due to normal amortizations and the offset of royalty
and product prepayments by our customers, reduced by the receipt of a portion
of the technology access fee from QIAGEN as part of our license and
distribution agreement.

Cash used in investing activities decreased to $881,000 in 2002 compared
to $2,963,000 in 2001 due primarily to lower levels of capital expenditures and
license rights payments. Cash provided by financing activities increased to
$795,000 in 2002 from $349,000 in 2001 due to proceeds from borrowings from our
new credit facility offset by lower proceeds from the exercise of warrants and
stock options.

In September 2002, we finalized a term loan facility of up to $2,500,000
to finance manufacturing equipment and other assets and a working capital line
of credit of up to $750,000 from a commercial bank. Funds may be drawn on the
equipment facility at any time through June 30, 2003, and on the working
capital line of credit at any time through August 2004. Advances under the
term loan and working capital line of credit are secured by a first position
security interest in our assets excluding intellectual property. Amounts
advanced under term loans are repayable in 36 monthly payments of principal and
interest at the banks prime rate plus 0.5%. On the working capital line of
credit, interest is payable monthly on any unpaid balances at the banks prime
rate plus 0.5%, with principal payable in full in September 2004. As of
December 31, 2002, we have $1,653,000 of available financing under the term
loan and $750,000 available from the working capital line of credit.

In 2001, cash used in operations amounted to $2,019,000. Our net loss of
$4,576,000 was offset by non-cash depreciation and amortization charges of
$1,218,000, and by an increase in deferred revenue caused by receipt of new
license fees and advance payments from customers of $1,268,000. Cash used in
investing activities was $2,963,000 in 2001, consisting of the license rights
of $1,000,000, $1,605,000 in facilities and equipment, including $1,013,000 of
December 2000 purchases, and $358,000 of costs associated with the Synthetic
Genetics acquisition. The increase in accounts receivable balances from 2000
to 2001 is the result of increased product sales in 2001. The reduction in
accounts payable in 2001 is primarily the result of the payout of $1,013,000 in
the equipment and leasehold improvements related to the Synthetic Genetics
acquisition in late 2000. Accrued liabilities increased in 2001 over 2000
primarily as a result of payroll and employee benefit costs, the majority of
which were paid in January and February 2002.

At December 31, 2002, our largest cash commitments are non-cancelable
operating leases for facilities in the amount of $7,360,000 that expire in
2012. In addition, we have commitments to supply products to customers in the
amount of $772,000 which have been paid for in advance.

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Capital expenditures were significantly lower in 2002 than 2001 levels,
however further investments in capital expenditures may be necessary to
facilitate our anticipated growth in operations. We may also require a larger
inventory of raw materials and products to provide better service to our
customers. Any such increases, net of any amounts drawn against available
credit facilities, can be expected to reduce cash and cash equivalents.

We currently anticipate that existing cash balances, projected cash from
operations and unused borrowing capacity under existing bank loans will be
sufficient to meet our anticipated working capital and capital expenditures
through at least 2003. Our future capital requirements depend on numerous
factors, including but not limited to:



| |  |  | magnitude of our future losses;                                                                                                                   
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | timing and terms of new technology licensing agreements or
other strategic relationships that may provide up front license fees
or other payments;
|
| |  |  | resources that we devote to research and development and
sales and marketing in support of our business strategy; and                             
|
| |  |  | capital expenditures necessary to expand manufacturing
capacity.                                                                                  

It is possible that we may need to raise additional capital to fund our
activities and/or to consummate acquisitions of other businesses, products or
technologies. We may be able to raise such funds by selling more stock to the
public or to selected investors, or by borrowing money. In addition, even
though we may not need additional funds, we may still elect to sell additional
equity securities or obtain credit facilities for other reasons. We may not be
able to obtain additional funds on terms that would be favorable to our
shareholders and us, or at all. If we raise additional funds by issuing
additional equity or convertible debt securities, the ownership percentages of
existing shareholders would be reduced. In addition, the equity or debt
securities that we issue may have rights, preferences or privileges senior to
those of the holders of our common stock.

Aggregate Contractual Obligations

In addition to the debt obligations reflected on our balance sheet, we
have commitments associated with operating leases. The following is a summary
of these cash obligations and commitments as of December 31, 2002.

Scheduled payments under contractual obligations (in thousands):

|                      |  |        |     |       |  |       |       |         |  |       |       |  |  |   |       |  |  |   |       | 
|--------------------- |  | ------ | --- | ----- |  | ----- | ----- | ------- |  | ----- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                      |  | Within |     | 2-3   |  | 4-5   |       | After   |  |       |       | 
|                      |  | 1 Year |     | Years |  | Years |       | 5 Years |  | Total
|                      |  |        |     |       |  |       |       |         |  |      
|Long-term obligations |  | $      | 282 |       |  | $     | 512   |         |  | $     | -0-   |  |  | $ | -0-   |  |  | $ | 794   | 
|Operating leases      |  |        | 646 |       |  |       | 1,318 |         |  |       | 1,411 |  |  |   | 3,985 |  |  |   | 7,360 | 
|                      |  |        |     |       |  |       |       |         |  |       |       |  |  |   |       |  |  |   |       | 
|                      |  | $      | 928 |       |  | $     | 1,830 |         |  | $     | 1,411 |  |  | $ | 3,985 |  |  | $ | 8,154 | 
|                      |  |        |     |       |  |       |       |         |  |       |       |  |  |   |       |  |  |   |       | 

Recent Accounting Pronouncements

In July 2001, the FASB issued Statement No. 141, Business Combinations,
and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement 142 requires
that goodwill and

27



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intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually in accordance with the
provisions of Statement 142.

Epoch adopted the provisions of Statement 141 immediately and Statement
142 effective January 1, 2002. As of the date of adoption, Epoch had
unamortized goodwill in the amount of $2,152,000 and unamortized identifiable
intangible assets in the amount of $2,263,000 all of which were subject to the
transition provisions of Statements 141 and 142. Amortization expense related
to goodwill was $15,000 for the year ended December 31, 2000 and $155,000 for
the year ended December 31, 2001.

In November 2002, the Financial Accounting Standards Board Emerging Issues
Task Force issued its consensus concerning Revenue Arrangements with Multiple
Deliverables (EITF 00-21). EITF 00-21 addresses how to determine whether a
revenue arrangement involving multiple deliverables should be divided into
separate units of accounting, and, if separation is appropriate, how the
arrangement consideration should be measured and allocated to the identified
accounting units. The guidance in EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. We
do not anticipate that adoption of EITF 00-21 will have a material impact on
our consolidated financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.This Interpretation clarifies the
requirements for guarantors disclosures in its interim and annual financial
statements about its obligations under certain guarantees that it has issued
and which remain outstanding. The Interpretation also clarifies the
requirements related to the recognition of a liability for the fair value of an
obligation undertaken by the guarantor at the inception of the guarantee,
including its ongoing obligation to stand ready to perform over the term of the
guarantee in the event that the specified triggering events or conditions
occur. The disclosure requirements are currently effective, while the
recognition and initial measurement provisions will apply to guarantees issued
or modified after December 31, 2002. We do not believe that these provisions
will have a material impact on our financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. For public enterprises, such as the Company,
with a variable interest in a variable interest entity created before February
1, 2003, the Interpretation is applied to the enterprise no later than the end
of the first annual reporting period beginning after June 15, 2003. The
application of this Interpretation is not expected to have a material effect on
the Companys financial statements. The Interpretation requires certain
disclosures in financial statements issued after January 31, 2003 if it is
reasonably possible that the Company will consolidate or disclose information
about variable interest entities when the Interpretation becomes effective.




ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments include cash and short-term investment grade
debt securities. We also have term loans on capital equipment through a
commercial bank. At December 31, 2001 and 2002 the carrying values of our
financial instruments approximated their fair values based on current market
prices and rates. We do not believe that fluctuations in interest rates would
have a material impact on us. It is

28



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our policy not to enter into derivative financial instruments. We do not
currently have material foreign currency exposure as our international
transactions are minimal and the majority of our international transactions are
denominated in U.S. currency. Accordingly, we do not have significant exposure
to foreign currency exchange rate risk at December 31, 2002. In the future,
under the terms of the QIAGEN agreement, we will be conducting some of our
business in Euros for QIAGEN sales in Europe and in Yen for QIAGEN sales in
Japan. We do not anticipate that these transactions will create significant
exposure to foreign currency exchange rate risk.




ITEM 8. Financial Statements and Supplementary Data

The financial statements required by this item begin on Page F-1 of this Report.




ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.




PART III




ITEM 10. Directors and Executive Officers of Epoch.

The information required hereunder is incorporated by reference from the
information contained in the sections entitled Directors, Other Executive
Officers and Section 16(a) Beneficial Ownership Reporting Compliance in the
Companys definitive Proxy Statement for its 2003 Annual Meeting of the
Stockholders to be held on May 22, 2003 to be filed with the Securities and
Exchange Commission.




ITEM 11. Executive Compensation

The information required hereunder is incorporated by reference from the
information contained in the sections entitled Compensation of Executive
Officers, Option Matters, Employment and Severance Agreements and
Directors Fees in the Companys definitive Proxy Statement for its 2003
Annual Meeting of the Stockholders to be held on May 22, 2003 to be filed with
the Securities and Exchange Commission.




ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Matters

The information required hereunder is incorporated by reference from the
information contained in the section entitled Security Ownership of Certain
Beneficial Owners and Management, and Equity Compensation Plan Information
in Epochs definitive Proxy Statement for its 2003 Annual Meeting of the
Stockholders to be held on May 22, 2003 to be filed with the Securities and
Exchange Commission.




ITEM 13. Certain Relationships and Related Transactions

The information required hereunder is incorporated by reference from the
information contained in the section entitled Certain Relationships and
Related Transactions in Epochs definitive Proxy Statement for its 2003 Annual
Meeting of the Stockholders to be held on May 22, 2003 to be filed with the
Securities and Exchange Commission.

29



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##### Table of Contents






ITEM 14. Controls and Procedures Report

Evaluation of disclosure controls and procedures

The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Companys reports
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms, and that such information is accumulated and communicated to the
Companys management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.

Within 90 days prior to the date of this report, the Company carried out
an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Companys disclosure controls
and procedures pursuant to Rule 13a-14(c) under the Securities Exchange Act of
1934, as amended. Based on that evaluation, the Companys Chief Executive
Officer and Chief Financial Officer have concluded that as of the date of the
evaluation, the Companys disclosure controls and procedures were adequate to
timely alert them of material information relating to the Company required to
be included in the Companys periodic SEC filings.

Changes In Internal Controls

There were no significant changes in the Companys internal controls, or
to the Companys knowledge, in other factors that could significantly affect
the Companys disclosure controls and procedures subsequent to the date of our
most recent evaluation.




PART IV




ITEM 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K



| |     |  |                                         |  |                                                                                                               
| | --- |  | --------------------------------------- |  | --------------------------------------------------------------------------------------------------------------
| | (a) |  | Documents filed as part of this report:
|
| |     |  | (1)                                     |  | Financial Statements. The financial
statements required to be filed hereunder are listed on
page F-1.         
|
| |     |  | (2)                                     |  | Financial Statement Schedules. Not applicable.                                                                
|
| |     |  | (3)                                     |  | Exhibits. An exhibit index has been
filed as part of this Report and is incorporated herein by this reference.
|
| | (b) |  | Reports on Form 8-K:                   
|
| |     |  | None                                   

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Epoch Biosciences, Inc.
Index to Financial Statements and
Financial Statement Schedules
(Item 14(a)(1) and 14(a)(2)

|                     |                                                                                         |  |        |     | 
|-------------------- | --------------------------------------------------------------------------------------- |  | ------ | --- | 
|                     |                                                                                         |  | Page  
|                     |                                                                                         |  | Number
|                     |                                                                                         |  |       
|Financial Statements |                                                                                         |  |        |    
|                     | Independent Auditors Report                                                            |  |        | F-1 | 
|                     | Balance Sheets as of December 31, 2001 and 2002                                         |  |        | F-2 | 
|                     | Statements of Operations for the years ended December 31, 2000, 2001 and 2002           |  |        | F-3 | 
|                     | Statements of Stockholders Equity for the years ended December 31, 2000, 2001 and 2002 |  |        | F-4 | 
|                     | Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002           |  |        | F-5 | 
|                     | Notes to Financial Statements                                                           |  |        | F-6 | 

31



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Independent Auditors Report

The Board of Directors and Stockholders
Epoch Biosciences, Inc.

We have audited the accompanying balance sheets of Epoch Biosciences, Inc. as
of December 31, 2001 and 2002, and the related statements of operations,
stockholders equity, and cash flows for each of the years in the three-year
period ended December 31, 2002. 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 of America. 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 financial position of Epoch Biosciences, Inc. as of
December 31, 2001 and 2002, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States
of America.

As discussed in Note 1 to the consolidated financial statements, the Company
has adopted the provisions of Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142
provides that beginning in January 2002, Goodwill will no longer be amortized.
It is now subject to testing for impairment at least annually.

/s/KPMG LLP

Seattle, Washington
February 3, 2003

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##### Table of Contents



Epoch Biosciences, Inc.
Balance Sheets

Assets

|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |             |            | 
|------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------------ | ---------- | ------------ | --------- | ----------- | ---------- | 
|                                            |                                                                                                                                                                |                                            |           | December 31, |            | December 31,
|                                            |                                                                                                                                                                |                                            |           | 2001         |            | 2002        
|                                            |                                                                                                                                                                |                                            |           |              |            |             
|Current assets:                             |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            | Cash and cash equivalents                                                                                                                                      |                                            | $         | 7,489,399    |            |              | $         | 3,507,645   |           
|                                            | Restricted cash                                                                                                                                                |                                            |           | 98,891       |            |              |           |            |           
|                                            | Accounts receivable, net of allowance of $19,235 and $32,086                                                                                                   |                                            |           | 353,590      |            |              |           | 2,031,600   |           
|                                            | Inventory                                                                                                                                                      |                                            |           | 157,700      |            |              |           | 461,381     |           
|                                            | Prepaid expenses and other assets                                                                                                                              |                                            |           | 338,288      |            |              |           | 348,778     |           
|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            |                                                                                                                                                                | Total current assets                       |           |              | 8,437,868  |              |           |             | 6,349,404  | 
|Property and equipment, net                 |                                                                                                                                                                |                                            | 3,852,359 |              |            |              | 3,947,995 |            
|Identifiable intangible assets, net         |                                                                                                                                                                |                                            | 2,263,130 |              |            |              | 1,967,632 |            
|Goodwill                                    |                                                                                                                                                                |                                            | 2,151,846 |              |            |              | 2,151,846 |            
|Restricted cash                             |                                                                                                                                                                |                                            | 575,755   |              |            |              | 614,739   |            
|Other assets                                |                                                                                                                                                                |                                            | 25,265    |              |            |              | 24,550    |            
|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            |                                                                                                                                                                | Total assets                               |           | $            | 17,306,223 |              |           | $           | 15,056,166 | 
|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |            
|Liabilities and Stockholders Equity       
|Current liabilities:                        |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            | Current portion of long-term obligations                                                                                                                       |                                            | $         | 12,732       |            |              | $         | 282,451     |           
|                                            | Accounts payable                                                                                                                                               |                                            |           | 226,686      |            |              |           | 348,012     |           
|                                            | Accrued liabilities                                                                                                                                            |                                            |           | 1,332,331    |            |              |           | 1,685,563   |           
|                                            | Deferred revenue  current portion                                                                                                                             |                                            |           | 620,043      |            |              |           | 877,258     |           
|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            |                                                                                                                                                                | Total current liabilities                  |           |              | 2,191,792  |              |           |             | 3,193,284  | 
|Long-term obligations, less current portion |                                                                                                                                                                |                                            | 4,613     |              |            |              | 511,731   |            
|Deferred revenue, less current portion      |                                                                                                                                                                |                                            | 3,026,012 |              |            |              | 2,324,744 |            
|Deferred rent                               |                                                                                                                                                                |                                            | 143,503   |              |            |              | 245,582   |            
|Stockholders equity:                       |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            | Preferred stock, par value $.01; 10,000,000 shares
Authorized; no shares issued and outstanding                                                                |                                            |           |             |            |              |           |            |           
|                                            | Common stock, par value $.01; 50,000,000 shares
Authorized; shares issued and outstanding: 25,651,677 at December 31, 2001 and 25,683,589
at December 31, 2002 |                                            |           | 256,517      |            |              |           | 256,836     |           
|                                            | Additional paid-in capital                                                                                                                                     |                                            |           | 82,687,749   |            |              |           | 82,743,658  |           
|                                            | Accumulated deficit                                                                                                                                            |                                            |           | (71,003,963  | )          |              |           | (74,219,669 | )         
|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            |                                                                                                                                                                | Total stockholders equity                 |           |              | 11,940,303 |              |           |             | 8,780,825  | 
|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |            
|                                            |                                                                                                                                                                | Total liabilities and stockholders equity |           | $            | 17,306,223 |              |           | $           | 15,056,166 | 
|                                            |                                                                                                                                                                |                                            |           |              |            |              |           |            

See accompanying notes to financial statements.

F-2



---



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Epoch Biosciences, Inc.
Statements of Operations

|                                                                       |                                 |                                        |            |                          |            |      |            |           |            |   |            |           |            |  
|---------------------------------------------------------------------- | ------------------------------- | -------------------------------------- | ---------- | ------------------------ | ---------- | ---- | ---------- | --------- | ---------- | - | ---------- | --------- | ---------- | -
|                                                                       |                                 |                                        |            | Years Ended December 31,
|                                                                       |                                 |                                        |            |                         
|                                                                       |                                 |                                        |            | 2000                     |            | 2001 |            | 2002     
|                                                                       |                                 |                                        |            |                          |            |      |            |          
|Revenues:                                                              |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|                                                                       | Product sales                   |                                        | $          | 923,110                  |            |      | $          | 4,461,349 |            |   | $          | 6,661,817 |           
|                                                                       | License fees and royalty income |                                        |            | 73,943                   |            |      |            | 935,768   |            |   |            | 2,693,874 |           
|                                                                       | Contract research revenue       |                                        |            | 370,000                  |            |      |            | 2,123,984 |            |   |            | 1,870,253 |           
|                                                                       |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|                                                                       |                                 | Total revenue                          |            |                          | 1,367,053  |      |            |           | 7,521,101  |   |            |           | 11,225,944 |  
|Operating expenses:                                                    |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|                                                                       | Cost of product sales           |                                        |            | 317,359                  |            |      |            | 3,092,057 |            |   |            | 4,143,924 |           
|                                                                       | Research and development        |                                        |            | 3,467,502                |            |      |            | 4,833,926 |            |   |            | 4,677,306 |           
|                                                                       | Sales and marketing             |                                        |            | 20,204                   |            |      |            | 451,968   |            |   |            | 1,156,373 |           
|                                                                       | General and administrative      |                                        |            | 3,369,727                |            |      |            | 4,149,649 |            |   |            | 4,566,246 |           
|                                                                       |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|                                                                       |                                 | Total operating expenses               |            |                          | 7,174,792  |      |            |           | 12,527,600 |   |            |           | 14,543,849 |  
|                                                                       |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|                                                                       |                                 | Operating loss                         |            |                          | (5,807,739 | )    |            |           | (5,006,499 | ) |            |           | (3,317,905 | )
|Interest income, net                                                   |                                 |                                        | 912,696    |                          |            |      | 430,350    |           |            |   | 102,199    |          
|                                                                       |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|                                                                       |                                 | Net loss                               |            | $                        | (4,895,043 | )    |            | $         | (4,576,149 | ) |            | $         | (3,215,706 | )
|                                                                       |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|                                                                       |                                 | Net loss per share  basic and diluted |            | $                        | (0.20      | )    |            | $         | (0.18      | ) |            | $         | (0.13      | )
|                                                                       |                                 |                                        |            |                          |            |      |            |           |            |   |            |          
|Weighted average number of common shares
outstanding basic and diluted |                                 |                                        | 24,037,130 |                          |            |      | 25,588,856 |           |            |   | 25,663,171 |          

See accompanying notes to financial statements.

F-3



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Epoch Biosciences, Inc.
Statements of Stockholders' Equity

|                                      |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  |             |   |  |       |            |  
|------------------------------------- |  | ------------ | ---------- | ---------- |  | --------------- | ------- | ------------ |  | ------------- | ---------- | ------ |  |  | -------- | - |  |  | ----------- | - |  | ----- | ---------- | -
|                                      |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  |             |   |  | Total
|                                      |  | Common Stock |            | Additional |  | Deferred        |         | Accumulated  |  | Stockholders'
|                                      |  | Shares       |            | Amount     |  | Paid-In Capital |         | Compensation |  | Deficit       |            | Equity
|                                      |  |              |            |            |  |                 |         |              |  |               |            |       
|Balance at December 31, 1999          |  |              | 19,382,410 |            |  | $               | 193,824 |              |  |               | 61,625,990 |        |  |  | (111,874 | ) |  |  | (61,532,771 | ) |  |       | 175,169    |  
|Exercise of stock options             |  |              | 91,120     |            |  |                 | 911     |              |  |               | 57,121     |        |  |  |          |   |  |  |             |   |  |       | 58,032     |  
|Exercise of warrants                  |  |              | 4,017,011  |            |  |                 | 40,170  |              |  |               | 9,565,860  |        |  |  |          |   |  |  |             |   |  |       | 9,606,030  |  
|Private placement of stock            |  |              | 1,428,577  |            |  |                 | 14,286  |              |  |               | 9,985,753  |        |  |  |          |   |  |  |             |   |  |       | 10,000,039 |  
|Issuance of stock for license rights  |  |              | 50,000     |            |  |                 | 500     |              |  |               | 305,750    |        |  |  |          |   |  |  |             |   |  |       | 306,250    |  
|Issuance of warrant in lieu of fees   |  |              |            |            |  |                 |         |              |  |               | 760,581    |        |  |  |          |   |  |  |             |   |  |       | 760,581    |  
|Issuance of warrant to consultant     |  |              |            |            |  |                 |         |              |  |               | 1,393      |        |  |  |          |   |  |  |             |   |  |       | 1,393      |  
|Amortization of deferred compensation |  |              |            |            |  |                 |         |              |  |               |            |        |  |  | 47,952   |   |  |  |             |   |  |       | 47,952     |  
|Net loss                              |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  | (4,895,043  | ) |  |       | (4,895,043 | )
|                                      |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  |             |   |  |       |            |  
|Balance at December 31, 2000          |  |              | 24,969,118 |            |  | $               | 249,691 |              |  |               | 82,302,448 |        |  |  | (63,922  | ) |  |  | (66,427,814 | ) |  |       | 16,060,403 |  
|Exercise of stock options             |  |              | 51,143     |            |  |                 | 512     |              |  |               | 50,381     |        |  |  |          |   |  |  |             |   |  |       | 50,893     |  
|Exercise of warrants                  |  |              | 631,416    |            |  |                 | 6,314   |              |  |               | 326,061    |        |  |  |          |   |  |  |             |   |  |       | 332,375    |  
|Issuance of warrant to consultant     |  |              |            |            |  |                 |         |              |  |               | 8,859      |        |  |  |          |   |  |  |             |   |  |       | 8,859      |  
|Amortization of deferred compensation |  |              |            |            |  |                 |         |              |  |               |            |        |  |  | 63,922   |   |  |  |             |   |  |       | 63,922     |  
|Net loss                              |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  | (4,576,149  | ) |  |       | (4,576,149 | )
|                                      |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  |             |   |  |       |            |  
|Balance at December 31, 2001          |  |              | 25,651,677 |            |  | $               | 256,517 |              |  |               | 82,687,749 |        |  |  |         |   |  |  | (71,003,963 | ) |  |       | 11,940,303 |  
|Exercise of stock options             |  |              | 31,912     |            |  |                 | 319     |              |  |               | 17,825     |        |  |  |          |   |  |  |             |   |  |       | 18,144     |  
|Issuance of warrant to consultant     |  |              |            |            |  |                 |         |              |  |               | 38,084     |        |  |  |          |   |  |  |             |   |  |       | 38,084     |  
|Net loss                              |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  | (3,215,706  | ) |  |       | (3,215,706 | )
|                                      |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  |             |   |  |       |            |  
|Balance at December 31, 2002          |  |              | 25,683,589 |            |  | $               | 256,836 |              |  |               | 82,743,658 |        |  |  |         |   |  |  | (74,219,669 | ) |  |       | 8,780,825  |  
|                                      |  |              |            |            |  |                 |         |              |  |               |            |        |  |  |          |   |  |  |             |   |  |       |            |  

See accompanying notes to financial statements.

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Epoch Biosciences, Inc.
Statements of Cash Flows

|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ---------- | ------------------------ | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | -
|                                      |                                                                                                            |                                                                         |                                           |                                           |            | Years Ended December 31,
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                         
|                                      |                                                                                                            |                                                                         |                                           |                                           |            | 2000                     |            | 2001       |            | 2002      
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |           
|Cash flows from operating activities: |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |           
|                                      | Net loss                                                                                                   |                                                                         | $                                         | (4,895,043                                | )          |                          | $          | (4,576,149 | )          |            | $          | (3,215,706 | )         
|                                      | Adjustments to reconcile net loss to net
cash used in operating activities:                                |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |           
|                                      |                                                                                                            | Depreciation and amortization:                                          |                                           |                                           |            |                          |            |            |            |            |            |            |            |           
|                                      |                                                                                                            |                                                                         | Property and equipment                    |                                           |            | 239,129                  |            |            |            | 694,761    |            |            |            | 885,715    |           
|                                      |                                                                                                            |                                                                         | Intangible assets                         |                                           |            | 57,760                   |            |            |            | 523,477    |            |            |            | 295,498    |           
|                                      |                                                                                                            |                                                                         | Deferred stock compensation               |                                           |            | 47,952                   |            |            |            | 63,922     |            |            |            |           |           
|                                      |                                                                                                            | Issuance of common stock warrants for services                          |                                           |                                           | 761,974    |                          |            |            | 8,859      |            |            |            | 38,084     |           
|                                      |                                                                                                            | Interest accrued on restricted cash                                     |                                           |                                           | (36,729    | )                        |            |            | (45,024    | )          |            |            | (40,093    | )         
|                                      |                                                                                                            | Deferred revenue                                                        |                                           |                                           | 784,318    |                          |            |            | 1,267,866  |            |            |            | (444,053   | )         
|                                      |                                                                                                            | Deferred rent                                                           |                                           |                                           |           |                          |            |            | 143,503    |            |            |            | 102,079    |           
|                                      |                                                                                                            | Changes in operating assets and liabilities, net
of acquisition:        |                                           |                                           |            |                          |            |            |            |            |            |            |            |           
|                                      |                                                                                                            |                                                                         | Accounts receivable                       |                                           |            | (7,935                   | )          |            |            | (155,904   | )          |            |            | (1,678,010 | )         
|                                      |                                                                                                            |                                                                         | Inventory                                 |                                           |            | (37,547                  | )          |            |            | (80,499    | )          |            |            | (303,681   | )         
|                                      |                                                                                                            |                                                                         | Prepaid expenses and other assets         |                                           |            | (276,673                 | )          |            |            | 9,134      |            |            |            | (9,775     | )         
|                                      |                                                                                                            |                                                                         | Accounts payable                          |                                           |            | 320,512                  |            |            |            | (412,116   | )          |            |            | 121,326    |           
|                                      |                                                                                                            |                                                                         | Accrued liabilities                       |                                           |            | 392,211                  |            |            |            | 538,825    |            |            |            | 353,232    |           
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      |                                                                                                            |                                                                         |                                           | Net cash used in operating activities     |            |                          | (2,650,071 | )          |            |            | (2,019,345 | )          |            |            | (3,895,384 | )
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      |                                                                                                            | Cash flows from investing activities:                                   |                                           |                                           |            |                          |            |            |            |            |            |            |            |           
|                                      |                                                                                                            |                                                                         | Release of security deposit on facilities |                                           |            |                         |            |            |            |           |            |            |            | 100,000    |           
|                                      |                                                                                                            |                                                                         | Security deposit on new facilities        |                                           |            | (592,893                 | )          |            |            |           |            |            |            |           |           
|                                      |                                                                                                            |                                                                         | Investment in license rights              |                                           |            | (250,000                 | )          |            |            | (1,000,000 | )          |            |            |           |           
|                                      |                                                                                                            |                                                                         | Acquisition of property and equipment     |                                           |            | (2,307,288               | )          |            |            | (1,605,147 | )          |            |            | (981,351   | )         
|                                      |                                                                                                            |                                                                         | Acquisition of Synthetic Genetics         |                                           |            | (3,424,874               | )          |            |            | (357,692   | )          |            |            |           |           
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      |                                                                                                            |                                                                         |                                           | Net cash used in investing activities     |            |                          | (6,575,055 | )          |            |            | (2,962,839 | )          |            |            | (881,351   | )
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      |                                                                                                            | Cash flows from financing activities:                                   |                                           |                                           |            |                          |            |            |            |            |            |            |            |           
|                                      |                                                                                                            |                                                                         | Repayment of long-term obligations        |                                           |            | (88,788                  | )          |            |            | (34,146    | )          |            |            | (70,515    | )         
|                                      |                                                                                                            |                                                                         | Proceeds from bank loan                   |                                           |            |                         |            |            |            |           |            |            |            | 847,352    |           
|                                      |                                                                                                            |                                                                         | Proceeds from sale of common stock        |                                           |            | 10,000,039               |            |            |            |           |            |            |            |           |           
|                                      |                                                                                                            |                                                                         | Proceeds from exercise of warrants        |                                           |            | 9,606,030                |            |            |            | 332,375    |            |            |            |           |           
|                                      |                                                                                                            |                                                                         | Proceeds from exercise of stock options   |                                           |            | 58,032                   |            |            |            | 50,893     |            |            |            | 18,144     |           
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      |                                                                                                            |                                                                         |                                           | Net cash provided by financing activities |            |                          | 19,575,313 |            |            |            | 349,122    |            |            |            | 794,981    |  
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      |                                                                                                            | Net increase (decrease) in cash and cash equivalents                    |                                           |                                           | 10,350,187 |                          |            |            | (4,633,062 | )          |            |            | (3,981,754 | )         
|                                      |                                                                                                            | Cash and cash equivalents at beginning of year                          |                                           |                                           | 1,772,274  |                          |            |            | 12,122,461 |            |            |            | 7,489,399  |           
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      |                                                                                                            | Cash and cash equivalents at end of year                                |                                           | $                                         | 12,122,461 |                          |            | $          | 7,489,399  |            |            | $          | 3,507,645  |           
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  
|                                      | Supplemental disclosure of cash flow information -
Issuance of common stock in exchange for license
rights |                                                                         | $                                         | 306,250                                   |            |                          | $          |           |            |            | $          |           |           
|                                      |                                                                                                            | Interest payments                                                       |                                           | $                                         | 153        |                          |            | $          | 9,156      |            |            | $          | 7,918      |           
|                                      |                                                                                                            | Supplemental disclosure of non-cash investing and
financing activities: |                                           |                                           |            |                          |            |            |            |            |            |            |            |           
|                                      |                                                                                                            | Acquisition of property and equipment financed
through accounts payable |                                           | $                                         | 1,012,371  |                          |            | $          |           |            |            | $          |           |           
|                                      |                                                                                                            | Acquisition of Synthetic Genetics financed through
accounts payable     |                                           | $                                         | 357,694    |                          |            | $          |           |            |            | $          |           |           
|                                      |                                                                                                            |                                                                         |                                           |                                           |            |                          |            |            |            |            |            |            |            |            |            |  

See accompanying notes to financial statements.

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Epoch Biosciences, Inc.
Notes To Financial Statements

December 31, 2002

(1) Nature of Business and Summary of Significant Accounting Policies

Nature of Business

Epoch Biosciences, Inc. develops technologies and products to help
scientists around the world perform genetic research to improve our lives and
our environment. Genetic analysis has become a pervasive activity in academic,
biopharmaceutical, clinical, agricultural, veterinary and forensic
laboratories. Our technologies facilitate rapid, accurate and cost-effective
genetic analysis at the scale necessary to generate the massive amounts of
genetic information being studied today.

As the human genome and other animal and plant genomes are sequenced, the
task of understanding the structure and function of genes lies before us
(genomics). Researchers want to know when and why a gene switches on and
begins producing its protein (gene expression) and what the genes protein does
in the body (proteomics). Finally, researchers want to know what peoples
genetic similarities and differences mean for their health and susceptibility
to disease. For example, single nucleotide polymorphisms, or SNPs, are tiny
differences in our DNA that make humans different from one another. SNPs have
been linked to good and bad traits, including hereditary and acquired diseases,
and to peoples response to medications.

Because of the implications of understanding gene function on human health
and disease, institutions have moved quickly to design and manufacture
automated genetic analysis systems. We develop patented technologies that
improve the output of these systems and that are compatible with many of the
genetic analysis systems currently in use or in development.

Our technologies are useful in genetic research, diagnostics, drug
development, infectious disease detection, prenatal testing, and population
screening to assess our risk of disease or to predict our response to drugs.
Epochs products also have application in forensics, food testing, and
environmental testing, including bio-warfare and bioterrorism.

We currently anticipate that existing cash balances, projected cash from
operations and unused borrowing capacity under existing bank loans will be
sufficient to meet our anticipated working capital and capital expenditures
through at least 2003. It is possible that we may need to raise additional
capital to fund our activities and/or to consummate acquisitions of other
businesses, products or technologies. We may be able to raise such funds by
selling more stock to the public or to selected investors, or by borrowing
money. In addition, even though we may not need additional funds, we may still
elect to sell additional equity securities or obtain credit facilities for
other reasons. We may not be able to obtain additional funds on terms that
would be favorable to our shareholders and us, or at all.

Use of Estimates

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

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Cash Equivalents

All highly liquid investments with a maturity of three months or less at
the date of purchase are considered to be cash equivalents. Cash equivalents
consist of money market accounts and treasury bills.

Financial Instruments and Concentrations of Credit Risk

The Companys financial instruments consist of cash, cash equivalents,
accounts receivable, accounts payable and accrued liabilities and equipment
loans from a commercial bank. The fair value of these instruments approximates
their financial statement carrying amounts due to their short maturities or
floating interest rates.

Credit is extended based on an evaluation of a customers financial
condition and collateral is generally not required. The majority of revenues
are derived from private and public companies and public enterprises in the
research market in the United States.

The table below summarizes the revenue and accounts receivable of our
customers where our risk is significantly concentrated.

|         |  |                          |    |                     |  |      |    |      |  |      |    |   |  |   |        |  |  |   |         | 
|-------- |  | ------------------------ | -- | ------------------- |  | ---- | -- | ---- |  | ---- | -- | - |  | - | ------ |  |  | - | ------- | 
|         |  | Percent of Revenues      |    | Accounts Receivable
|Customer |  | Years Ended December 31, |    | At December 31,    
|         |  |                          |    |                    
|         |  | 2000                     |    | 2001                |  | 2002 |    | 2001 |  | 2002
|         |  |                          |    |                     |  |      |    |      |  |     
|A        |  |                          | 85 | %                   |  |      | 56 | %    |  |      | 52 | % |  | $ |       |  |  | $ | 875,000 | 
|B        |  |                          | 0  | %                   |  |      | 0  | %    |  |      | 11 | % |  |   |       |  |  |   | 795,000 | 
|C        |  |                          | 6  | %                   |  |      | 4  | %    |  |      | 9  | % |  |   | 28,000 |  |  |   | 11,000  | 
|D        |  |                          | 0  | %                   |  |      | 18 | %    |  |      | 4  | % |  |   | 46,000 |  |  |   | 85,000  | 

We have one active grant from the Federal Government which was awarded in
2001. We recognized $114,000 and $380,000 in grant revenue in 2001, and 2002,
respectively. As of December 31, 2002, we had one open grant with
approximately $234,000 remaining to be earned.

Inventory

Inventories are stated at the lower of cost, measured by the first-in and
first-out method, or market value, as follows:.

|                         |                 |   |              |         |      |   |         |         | 
|------------------------ | --------------- | - | ------------ | ------- | ---- | - | ------- | ------- | 
|                         |                 |   | December 31,
|                         |                 |   |             
|                         |                 |   | 2001         |         | 2002
|                         |                 |   |              |         |     
|Raw materials inventory  |                 | $ | 46,321       |         |      | $ | 125,582 |        
|Finished goods inventory |                 |   | 111,379      |         |      |   | 335,799 |        
|                         |                 |   |              |         |      |   |         |        
|                         | Total inventory |   | $            | 157,700 |      |   | $       | 461,381 | 
|                         |                 |   |              |         |      |   |         |        

Property and Equipment

Property and equipment are stated at cost. Depreciation of equipment is
provided on the straight-line method over the assets estimated useful lives,
generally three to five years. Amortization of leasehold improvements and
capital leases is provided on the straight-line method over the lesser of the
estimated useful life or the term of the lease.

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Intangible Assets

Intangible assets are stated at cost. Amortization of intangible assets
is provided on the straight-line method over the life of the asset. The
non-compete agreement has a term of five years. License rights are tied to the
expiration date of the underlying patent which generally results in a life of
15 to 17 years.

The excess of the aggregate purchase price over the fair value of the net
tangible and specifically identifiable intangible assets of businesses acquired
in purchase transactions is recorded as goodwill. Through December 31, 2001,
goodwill was amortized over 15 years using the straight-line method. Business
acquisition costs allocated to covenants not to compete are amortized over the
terms of the agreement, five years, using the straight-line method.

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets. Under SFAS No. 142, goodwill and other indefinite-lived
intangible assets, including any such intangibles recorded in past business
combinations, are no longer amortized beginning January 1, 2002. SFAS No. 142
specifies that no amortization is recorded for goodwill and other
indefinite-lived intangible assets resulting from business combinations
completed during the last six months of 2001. SFAS No. 142 also requires the
assets to be written down with a goodwill impairment charge against current
earnings whenever the recorded values exceed their fair values. If this
standard had been implemented as of January 1, 2000, amortization expense would
have been reduced by $14,704 in 2000 which would have had no impact on earnings
per share, and amortization expense would have been reduced by $154,797 in
2001, and earnings per share would have been increased by $0.01.

Impairment of Long-Lived Assets

For long-lived assets, including property and equipment and intangible
assets other than goodwill, we evaluate the carrying value of the assets by
comparing the estimated undiscounted future cash flows generated from the use
of the assets and their eventual disposition with the assets reported net book
value. If assets are impaired, we write them down to their fair market values.
The carrying value of assets are evaluated for impairment when events or
changes in circumstances occur which may indicate the carrying amount of the
asset may not be recoverable.

Restricted Cash

Restricted cash represents long-term certificates of deposit pledged under
a security agreement, in lieu of a cash deposit, on a facility subject to an
operating lease.

Revenue Recognition

We earn revenues from product sales of chemical products and reagents to
manufacturers for incorporation into their products, from the sale of specialty
oligonucleotides to distributors and end users in the research fields of
genomics and molecular diagnostics, from license fees for the use of our
proprietary technology and know-how, and by providing services to third parties
for performing research and development on their behalf. We also have product
royalty agreements that result in royalties to us upon ultimate sales of
products by our partners.

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Revenues from product sales to customers and distributors that require no
ongoing obligations are recognized when shipped to the customer and title has
passed.

License fees are recognized over the term of the agreement to which the
license fees correspond, which may extend to the expiration of the underlying
patents, and based on the terms and future performance obligations in the
underlying agreements.

Deferred revenue principally represents license fees received in advance
and prepayments for product purchases.

Contract research revenues are recognized as the research and development
activities are performed under the terms of commercial collaboration and supply
agreements and government grants. Direct costs related to these contracts and
grants are reported as research and development expenses.

Royalty revenues are recognized when earned under the terms of the related
agreements, which is generally upon sale by our partner of products containing
our component products.

Income Taxes

Deferred income taxes are provided based on the estimated future tax
effects of carryforwards and temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those carryforwards and temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the period that includes the enactment date. A
valuation allowance is recorded for deferred tax assets when it is more likely
than not that such deferred tax assets will not be realized.

Research and Development Costs

Research and development costs are expensed as incurred.

Stock-Based Compensation

Epoch applies APB Opinion No. 25, Accounting for Stock Issued to Employees
and related interpretations in measuring compensation costs for its employee
stock option plans. We disclose proforma net loss and net loss per share as if
compensation cost had been determined consistent with Statement of Financial
Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation.
Stock options and warrants issued to non-employees are accounted for using the
fair value method prescribed by SFAS 123 and Emerging Issues Task Force 96-18.

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Had we determined compensation cost based on the fair value of our stock
options on the grant date under SFAS 123, our net loss and net loss per share
would have been the pro forma amounts indicated below:

|                                        |                                                                                                   |  |                         |            |      |  |      |            |   |  |   |            |  
|--------------------------------------- | ------------------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|                                        |                                                                                                   |  | Year ended December 31,
|                                        |                                                                                                   |  |                        
|                                        |                                                                                                   |  | 2000                    |            | 2001 |  | 2002
|                                        |                                                                                                   |  |                         |            |      |  |     
|Net loss:                               |                                                                                                   |  |                         |            |      |  |      |            |   |  |   |           
|                                        | As reported                                                                                       |  | $                       | (4,895,043 | )    |  | $    | (4,576,149 | ) |  | $ | (3,215,706 | )
|                                        | Add: Stock-based employee
compensation expense included in
reported, net loss                     |  |                         |           |      |  |      |           |   |  |   |           |  
|                                        | Deduct: Stock-based employee
compensation determined under
fair value based method for all
awards |  |                         | (1,425,456 | )    |  |      | (1,615,505 | ) |  |   | (1,314,802 | )
|                                        |                                                                                                   |  |                         |            |      |  |      |            |   |  |   |           
|                                        | Pro forma                                                                                         |  | $                       | (6,320,499 | )    |  | $    | (6,191,654 | ) |  | $ | (4,530,508 | )
|Net loss per share  basic and diluted: |                                                                                                   |  |                         |            |      |  |      |            |   |  |   |           
|                                        |                                                                                                   |  |                         |            |      |  |      |            |   |  |   |           
|                                        | As reported                                                                                       |  | $                       | (0.20      | )    |  | $    | (0.18      | ) |  | $ | (0.13      | )
|                                        |                                                                                                   |  |                         |            |      |  |      |            |   |  |   |           
|                                        | Pro forma                                                                                         |  | $                       | (0.26      | )    |  | $    | (0.24      | ) |  | $ | (0.18      | )
|                                        |                                                                                                   |  |                         |            |      |  |      |            |   |  |   |           

The per share weighted-average fair value of stock options granted during
2000, 2001 and 2002, was $8.02, $4.25 and $1.67, respectively, on the grant
date using the Black-Scholes option pricing model with the following
assumptions:

|                        |  |                         |      |      |  |      |      |   |  |  |      |  
|----------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                        |  | Year ended December 31,
|                        |  |                        
|                        |  | 2000                    |      | 2001 |  | 2002
|                        |  |                         |      |      |  |     
|Expected dividend yield |  |                         | 0.0  | %    |  |      | 0.0  | % |  |  | 0.0  | %
|Risk-free interest rate |  |                         | 5.58 | %    |  |      | 4.72 | % |  |  | 3.78 | %
|Expected volatility     |  |                         | 143  | %    |  |      | 182  | % |  |  | 128  | %
|Expected life in years  |  |                         | 5    |      |  |      | 5    |   |  |  | 5    |  

Net Loss Per Share

Basic loss per share is computed based on weighted average shares
outstanding during the reporting period and excludes any potential dilution.
Diluted per share amounts reflect potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock. Our capital structure includes common stock options and common
stock warrants, all of which have been excluded from net loss per share
calculations as they are antidilutive, as follows:

|                     |  |                 |           |      |  |  |           | 
|-------------------- |  | --------------- | --------- | ---- |  |  | --------- | 
|                     |  | At December 31,
|                     |  |                
|                     |  | 2001            |           | 2002
|                     |  |                 |           |     
|Outstanding options  |  |                 | 2,388,509 |      |  |  | 2,764,033 | 
|Outstanding warrants |  |                 | 383,333   |      |  |  | 398,333   | 

Reclassifications

Certain 2000 and 2001 balances have been reclassified to conform to the
2002 presentation.

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Recent Accounting Pronouncements.

In November 2002, the Financial Accounting Standards Board Emerging Issues
Task Force issued its consensus concerning Revenue Arrangements with Multiple
Deliverables (EITF 00-21). EITF 00-21 addresses how to determine whether a
revenue arrangement involving multiple deliverables should be divided into
separate units of accounting, and, if separation is appropriate, how the
arrangement consideration should be measured and allocated to the identified
accounting units. The guidance in EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. We
do not anticipate that adoption of EITF 00-21 will have a material impact on
our consolidated financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.This Interpretation clarifies the
requirements for guarantors disclosures in its interim and annual financial
statements about its obligations under certain guarantees that it has issued
and which remain outstanding. The Interpretation also clarifies the
requirements related to the recognition of a liability for the fair value of an
obligation undertaken by the guarantor at the inception of the guarantee,
including its ongoing obligation to stand ready to perform over the term of the
guarantee in the event that the specified triggering events or conditions
occur. The disclosure requirements are currently effective, while the
recognition and initial measurement provisions will apply to guarantees issued
or modified after December 31, 2002. We do not believe that these provisions
will have a material impact on our financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. For public enterprises, such as the Company,
with a variable interest in a variable interest entity created before February
1, 2003, the Interpretation is applied to the enterprise no later than the end
of the first annual reporting period beginning after June 15, 2003. The
application of this Interpretation is not expected to have a material effect on
the Companys financial statements. The Interpretation requires certain
disclosures in financial statements issued after January 31, 2003 if it is
reasonably possible that the Company will consolidate or disclose information
about variable interest entities when the Interpretation becomes effective. We
do not believe we have any variable interest entities at this time.

(2) Synthetic Genetics Acquisition

The Company acquired some of the assets and liabilities of Synthetic
Genetics, a provider of specialty oligonucleotides in San Diego California, on
November 15, 2000 in a transaction accounted for as a purchase business
combination. Accordingly, the assets and liabilities of Synthetic Genetics
recorded at their estimated fair values at the acquisition date, and the
results of Synthetic Genetics operations included in the Companys results from
the acquisition date. The purchase consideration consisted of the following:

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##### Table of Contents



|                                                     |       |   |            |           | 
|---------------------------------------------------- | ----- | - | ---------- | --------- | 
|Cash paid to seller                                  |       |   | $3,067,180 |          
|Direct costs of acquisition                          |       |   | 357,694    |          
|Assumption of obligations under capital leases       |       |   | 55,691     |          
|Assumption of note payable                           |       |   | 84,588     |          
|Other liabilities assumed                            |       |   | 223,041    |          
|                                                     |       |   |            |           | 
|                                                     | Total |   | $          | 3,788,194 | 
|                                                     |       |   |            |           | 
|The purchase consideration was allocated as follows: |       |   |            |          
|Accounts receivable                                  |       | $ | 169,678    |          
|Other current assets                                 |       |   | 62,136     |          
|Property and equipment                               |       |   | 116,417    |          
|Goodwill                                             |       |   | 2,321,347  |          
|Non-compete agreement                                |       |   | 1,000,000  |          
|Trademarks and patents                               |       |   | 118,616    |          
|                                                     |       |   |            |           | 
|                                                     | Total |   | $          | 3,788,194 | 
|                                                     |       |   |            |           | 

Goodwill represents the excess of the purchase consideration over the fair
value of identifiable tangible and intangible assets acquired and liabilities
assumed, and was being amortized over 15 years. In compliance with SFAS No.
142, effective January 1, 2002, we no longer amortize goodwill, see note (1).
Amounts allocated to the non-compete agreement are being amortized over its
term of 5 years.

Direct acquisition costs incurred in the Synthetic Genetics acquisition
include $250,000 cash paid to Bay City Capital for investment banking services.
Bay City Capital, a merchant banking partnership that was formed by The Craves
Group and The Pritzker Family business interests, has a 14% equity interest in
Epoch at December 31, 2002. The Chairman of Epochs Board of Directors, Fred
Craves, Ph.D., is a founding partner of The Craves Group, and is the Chairman
and a Manager of Bay City Capital, LLC. Sanford S. Zweifach, a member of
Epochs Board of Directors, was a Managing Director and Chief Financial Officer
of Bay City Capital, LLC., at the time of the transaction.

The following unaudited summary, prepared on a pro forma basis presents
the combined results of operations as if the acquisition had been consummated
as of January 1, 2000, after including the impact of certain adjustments such
as depreciation and amortization on assets acquired.

|                   |  |   |            |   | 
|------------------ |  | - | ---------- | - | 
|                   |  |   | 2000      
|                   |  |   |           
|Revenues           |  | $ | 2,729,073  |  
|Net loss           |  | $ | (5,032,880 | )
|Net loss per share |  | $ | (0.21      | )

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##### Table of Contents



(3) Property and Equipment

Property and equipment consists of the following as of December 31:

|                              |      |           |      |  |   |           |  | 
|----------------------------- | ---- | --------- | ---- |  | - | --------- |  | 
|                              | 2001 |           | 2002
|                              |      |           |     
|Machinery and equipment       | $    | 3,904,579 |      |  | $ | 4,829,389 | 
|Furniture and fixtures        |      | 242,332   |      |  |   | 242,332   | 
|Leasehold improvements        |      | 2,057,228 |      |  |   | 2,057,228 | 
|                              |      |           |      |  |   |           | 
|                              | $    | 6,204,139 |      |  | $ | 7,128,949 | 
|                             
|Less accumulated depreciation |      | 2,351,780 |      |  |   | 3,180,954 | 
|                              |      |           |      |  |   |           | 
|Property and equipment, net   | $    | 3,852,359 |      |  | $ | 3,947,995 | 
|                              |      |           |      |  |   |           | 

Assets under capital leases, included above:

|                         |  |      |        |      |  |   |     | 
|------------------------ |  | ---- | ------ | ---- |  | - | --- | 
|                         |  | 2001 |        | 2002
|                         |  |      |        |     
|Machinery and equipment  |  | $    | 32,055 |      |  | $ | -0- | 
|Accumulated depreciation |  | $    | 14,710 |      |  | $ | -0- | 

(4) Identifiable Intangible Assets

Identifiable intangible assets consist of the following as of December 31:

|                                    |  |      |           |      |  |   |           | 
|----------------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                                    |  | 2001 |           | 2002
|                                    |  |      |           |     
|Non-compete agreement               |  | $    | 1,000,000 |      |  | $ | 1,000,000 | 
|License rights                      |  |      | 1,556,250 |      |  |   | 1,556,250 | 
|                                    |  |      |           |      |  |   |           | 
|                                    |  | $    | 2,556,250 |      |  | $ | 2,556,250 | 
|                                   
|Less accumulated amortization       |  |      | 293,120   |      |  |   | 588,618   | 
|                                    |  |      |           |      |  |   |           | 
|Identifiable intangible assets, net |  | $    | 2,263,130 |      |  | $ | 1,967,632 | 
|                                    |  |      |           |      |  |   |           | 

Scheduled amortization charges from identifiable intangible assets as of
December 31, 2002 are as follows:

|           |      |  |                       |         |                |  |         |        | 
|---------- | ---- |  | --------------------- | ------- | -------------- |  | ------- | ------ | 
|           | Year |  | Non-compete Agreement |         | License Rights
|           |      |  |                       |        
|           | 2003 |  | $                     | 200,000 |                |  | $       | 95,499 | 
|           | 2004 |  |                       | 200,000 |                |  |         | 95,499 | 
|           | 2005 |  |                       | 179,657 |                |  |         | 95,499 | 
|           | 2006 |  |                       |        |                |  |         | 95,499 | 
|           | 2006 |  |                       |        |                |  |         | 95,499 | 
|Thereafter |      |  |                      |         |                |  | 910,480 |       

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##### Table of Contents



(5) Long-Term Obligations

Long-term obligations consist of the following as of December 31:

|                                                                                                                |  |      |        |      |  |   |         | 
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------- | 
|                                                                                                                |  | 2001 |        | 2002
|                                                                                                                |  |      |        |     
|Term
loans, payable in monthly payments of principal and interest at prime
rate plus 0.5% through December 2005 |  | $    |       |      |  | $ | 794,182 | 
|                                                                                                                |  |      |        |      |  |   |        
|Obligations under capital leases                                                                                |  |      | 17,345 |      |  |   |        | 
|                                                                                                                |  |      |        |      |  |   |        
|                                                                                                                |  | $    | 17,345 |      |  | $ | 794,182 | 
|Less current portion                                                                                            |  |      | 12,732 |      |  |   | 282,451 | 
|                                                                                                                |  |      |        |      |  |   |        
|Long-term obligations, less current portion                                                                     |  | $    | 4,613  |      |  | $ | 511,731 | 
|                                                                                                                |  |      |        |      |  |   |        

A loan agreement with a commercial bank provides for term loans of up to
$2,500,000 to finance manufacturing equipment and other assets and a working
capital line of credit of up to $750,000. Funds may be drawn on the equipment
facility at any time through June 30, 2003, and on the working capital line of
credit at any time through August 2004, provided that we are in compliance with
the following financial covenants:

| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Adjusted Quick Ratio of 1.3:1. Adjusted Quick Ratio is
defined as the sum of unrestricted cash and cash equivalents and
trade accounts receivable divided by the sum of current liabilities,
excluding current deferred revenues, and bank debt.

| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Minimum Tangible Net Worth of $1,500,000. Minimum Tangible
Net Worth is defined as total equity in accordance with generally
accepted accounting principles less intangible assets.

We are currently in compliance with each of these covenants. Advances
under term loans and the working capital line of credit are secured by a first
position security interest in our assets excluding intellectual property.
Amounts advanced under term loans are repayable in 36 monthly payments of
principal and interest at the banks prime rate plus 0.5%. On the working
capital line of credit, interest is payable monthly on any unpaid balances at
the banks prime rate plus 0.5%, with principal payable in full in September
2004. The banks prime rate on March 11, 2003 was 4.25%. As of December 31,
2002, we have drawn $847,352 against the term loan. No amounts were drawn on
the working capital line of credit.

The aggregate amount of long-term obligations at December 31, 2002
maturing by calendar year is as follows:

|     |  |             |         | 
|---- |  | ----------- | ------- | 
|     |  | Obligations
|     |  |            
|2003 |  | $           | 282,451 | 
|2004 |  |             | 282,451 | 
|2005 |  |             | 229,280 | 

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##### Table of Contents



(6) Accrued Liabilities

Accrued liabilities consist of the following as of December 31:

|                              |  |      |           |      |  |   |           | 
|----------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                              |  | 2001 |           | 2002
|                              |  |      |           |     
|Payroll and employee benefits |  | $    | 705,145   |      |  | $ | 949,177   | 
|License fees                  |  |      | 29,583    |      |  |   | 232,675   | 
|Other                         |  |      | 597,603   |      |  |   | 503,711   | 
|Total accrued liabilities     |  | $    | 1,332,331 |      |  | $ | 1,685,563 | 

(7) Retirement Savings Plan

Epoch has a profit sharing plan which is qualified under Section 401(k) of
the United States Internal Revenue Code. The plan allows eligible employees to
contribute up to 20% of their salary. The Company, at its discretion, makes
matching contributions to the plan. No matching contributions were made to the
plan in 2000, 2001 or 2002.

(8) Equity

Options to Purchase Common Stock

Epoch has two stock option plans (Stock Option Plans) pursuant to which
an aggregate of 3,660,068 shares of common stock have been reserved for grants.
The Stock Option Plans provide for incentive stock options and non-qualified
options to be granted to employees, directors, and other non-employee
individuals responsible for the management, growth, and financial success of
the Company. The option price is determined by the Board of Directors at the
time the option is granted, and, in the case of incentive options, must be at
least equal to the fair market value of the common stock at the time of the
grant. Options granted to employees generally vest over a 4-year period of
continuous employment while options granted to non-employee members of the
Board of Directors vest over one year.

A summary of the stock option plans follows.

|                                      |  |        |           |       |  |           |      |       |  |        |           |           |  |   |      |  |  |           |           |   |  |   |      | 
|------------------------------------- |  | ------ | --------- | ----- |  | --------- | ---- | ----- |  | ------ | --------- | --------- |  | - | ---- |  |  | --------- | --------- | - |  | - | ---- | 
|                                      |  | 2000   |           | 2001  |  | 2002     
|                                      |  |        |           |       |  |          
|                                      |  |        |           |       |  | Weighted- |      |       |  |        |           | Weighted- |  |   |      |  |  | Weighted-
|                                      |  |        |           |       |  | Average   |      |       |  |        |           | Average   |  |   |      |  |  | Average  
|                                      |  |        |           |       |  | Exercise  |      |       |  |        |           | Exercise  |  |   |      |  |  | Exercise 
|                                      |  | Shares |           | Price |  | Shares    |      | Price |  | Shares |           | Price    
|                                      |  |        |           |       |  |           |      |       |  |        |           |          
|Outstanding at beginning of year      |  |        | 1,635,370 |       |  | $         | 2.14 |       |  |        | 1,887,777 |           |  | $ | 3.44 |  |  |           | 2,388,509 |   |  | $ | 3.59 | 
|Granted                               |  |        | 351,527   |       |  |           | 8.77 |       |  |        | 637,000   |           |  |   | 4.38 |  |  |           | 568,667   |   |  |   | 1.90 | 
|Exercised                             |  |        | (91,120   | )     |  |           | 0.64 |       |  |        | (51,143   | )         |  |   | 3.41 |  |  |           | (31,912   | ) |  |   | 0.57 | 
|Forfeited or cancelled                |  |        | (8,000    | )     |  |           | 3.77 |       |  |        | (85,125   | )         |  |   | 7.58 |  |  |           | (161,231  | ) |  |   | 5.21 | 
|                                      |  |        |           |       |  |           |      |       |  |        |           |           |  |   |      |  |  |           |           |   |  |   |      | 
|Outstanding at end of year            |  |        | 1,887,777 |       |  | $         | 3.44 |       |  |        | 2,388,509 |           |  | $ | 3.59 |  |  |           | 2,764,033 |   |  | $ | 3.17 | 
|                                      |  |        |           |       |  |           |      |       |  |        |           |           |  |   |      |  |  |           |           |   |  |   |      | 
|Options exercisable at year end       |  |        | 1,241,386 |       |  | $         | 2.65 |       |  |        | 1,481,166 |           |  | $ | 3.13 |  |  |           | 1,854,633 |   |  | $ | 3.26 | 
|Average fair value of options granted |  |        |           |       |  | $         | 8.02 |       |  |        |           |           |  | $ | 4.25 |  |  |           |           |   |  | $ | 1.67 | 

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##### Table of Contents



The following table summarizes information about stock options at December
31, 2002:

|                |              |             |                     |                  |                     |                |          |             |        |                |           |       |  |  |  |           |  |  |   |       | 
|--------------- | ------------ | ----------- | ------------------- | ---------------- | ------------------- | -------------- | -------- | ----------- | ------ | -------------- | --------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                |              |             | Options Outstanding |                  | Options Exercisable
|                |              |             |                     |                  |                    
|                |              |             | Number              |                  | Weighted-Average    |                | Weighted |             | Number |                | Weighted-
|Range of        |              | outstanding |                     | Remaining Years  |                     | Average        |          | Exercisable |        | Average       
|Exercise Prices |              | at 12/31/02 |                     | Contractual Life |                     | Exercise Price |          | at 12/31/02 |        | Exercise Price
|                |              |             |                     |                  |                     |                |          |             |        |               
|$               | 0.30 - 1.00  |             |                     | 301,116          |                     |                |          | 3.48        |        |                | $         | 0.61  |  |  |  | 297,616   |  |  | $ | 0.60  | 
|                | 1.05 - 1.96  |             |                     | 957,266          |                     |                |          | 7.59        |        |                |           | 1.68  |  |  |  | 537,958   |  |  |   | 1.71  | 
|                | 2.00 - 3.88  |             |                     | 537,000          |                     |                |          | 6.59        |        |                |           | 2.76  |  |  |  | 305,988   |  |  |   | 3.00  | 
|                | 4.00 - 4.69  |             |                     | 520,000          |                     |                |          | 3.70        |        |                |           | 4.39  |  |  |  | 409,583   |  |  |   | 4.31  | 
|                | 5.00 - 5.88  |             |                     | 198,124          |                     |                |          | 7.61        |        |                |           | 5.41  |  |  |  | 97,663    |  |  |   | 5.46  | 
|                | 6.25 - 8.81  |             |                     | 202,027          |                     |                |          | 7.53        |        |                |           | 7.56  |  |  |  | 173,306   |  |  |   | 7.58  | 
|                | 9.50 - 14.63 |             |                     | 48,500           |                     |                |          | 7.46        |        |                |           | 12.64 |  |  |  | 32,519    |  |  |   | 12.63 | 
|                |              |             |                     |                  |                     |                |          |             |        |                |           |       |  |  |  |           |  |  |   |      
|                | 0.30 - 14.63 |             |                     | 2,764,033        |                     |                |          | 6.21        |        |                | $         | 3.17  |  |  |  | 1,854,633 |  |  | $ | 3.26  | 
|                |              |             |                     |                  |                     |                |          |             |        |                |           |       |  |  |  |           |  |  |   |      

Warrants to Purchase Common Stock

In February 2000, Epoch exercised the redemption provision on certain
warrants, representing 3,801,812 shares of common stock. Warrants representing
3,798,762 shares of common stock were exercised generating $9,497,000 in cash.
In addition to the warrant redemption, 218,249 other warrants were exercised in
2000 generating $109,030 in cash.

In May 2000, we issued three year fully vested warrants to purchase 25,000
shares of our common stock for public relations services. The warrants have
strike prices of $8.00 for 5,000 shares, $10.00 for 5,000 shares, $12.00 for
5,000 shares, $14.00 for 5,000 shares, and $16.00 for 5,000 shares. This
warrant was valued using the Black Scholes option pricing model.

In September 2000, we issued five year fully vested warrants to purchase
25,000 shares of common stock at $7.00 per share for consulting services
related to the private placement and warrant call. This warrant was valued
using the Black Scholes option pricing model.

In November 2000, we issued five year fully vested warrants to purchase
40,000 shares of common stock at $10.19 per share to a Bay City Capital entity
managed by Bay City Capital, LLC in lieu of cash fees for investment banking
and consulting services. Bay City Capital, a merchant banking partnership that
was formed by The Craves Group and The Pritzker Family business interests, has
a 14% equity interest in Epoch at December 31, 2002. The Chairman of Epochs
Board of Directors, Fred Craves, Ph.D., is a founding partner of The Craves
Group, and is the Chairman and Managing Director of Bay City Capital, LLC.
Sanford S. Zweifach, a member of Epochs Board of Directors was a Managing
Director and Chief Financial Officer of Bay City Capital, LLC at the time of
the transaction. This warrant was valued using the Black Scholes option
pricing model.

In December 2000, we issued a five-year warrant to purchase 10,000 shares
of common stock at $6.69 per share to a consultant to the company. The shares
vest monthly over four years. This warrant is variable and is being valued
using the Black Scholes option pricing model.

In January 2002, we issued a five year warrant to purchase 15,000 shares
of common stock at $2.53 per share for investor relations services. The shares
vested in equal monthly installments over one year. The warrant was valued
using the Black Scholes option pricing model.

F-16



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##### Table of Contents



A summary of our outstanding warrants follows.

|                                 |  |        |            |             |  |          |            |             |  |        |           |             |  |   |            |  |  |          |         |  |  |   |            | 
|-------------------------------- |  | ------ | ---------- | ----------- |  | -------- | ---------- | ----------- |  | ------ | --------- | ----------- |  | - | ---------- |  |  | -------- | ------- |  |  | - | ---------- | 
|                                 |  | 2000   |            | 2001        |  | 2002    
|                                 |  |        |            |             |  |         
|                                 |  |        |            |             |  | Exercise |            |             |  |        |           | Exercise    |  |   |            |  |  | Exercise
|                                 |  | Shares |            | Price Range |  | Shares   |            | Price Range |  | Shares |           | Price Range
|                                 |  |        |            |             |  |          |            |             |  |        |           |            
|Outstanding at beginning of year |  |        | 5,434,910  |             |  | $        | 0.50-2.50  |             |  |        | 1,514,749 |             |  | $ | 0.50-16.00 |  |  |          | 383,333 |  |  | $ | 0.75-16.00 | 
|Granted                          |  |        | 100,000    |             |  |          | 6.69-16.00 |             |  |        |          |             |  |   | 0.00-0.00  |  |  |          | 15,000  |  |  |   | 2.53-2.53  | 
|Exercised                        |  |        | (4,017,011 | )           |  |          | 0.50-2.50  |             |  |        | (631,416  | )           |  |   | 0.50-0.75  |  |  |          |        |  |  |   | 0.00-0.00  | 
|Expired                          |  |        | (3,150     | )           |  |          | 2.50-2.50  |             |  |        | (500,000  | )           |  |   | 1.00-1.00  |  |  |          |        |  |  |   | 0.00-0.00  | 
|                                 |  |        |            |             |  |          |            |             |  |        |           |             |  |   |            |  |  |          |         |  |  |   |            | 
|Outstanding at end of year       |  |        | 1,514,749  |             |  | $        | 0.50-16.00 |             |  |        | 383,333   |             |  | $ | 0.75-16.00 |  |  |          | 398,333 |  |  | $ | 0.75-16.00 | 
|                                 |  |        |            |             |  |          |            |             |  |        |           |             |  |   |            |  |  |          |         |  |  |   |            | 
|Warrants exercisable at year end |  |        | 1,410,644  |             |  | $        | 0.50-16.00 |             |  |        | 376,021   |             |  | $ | 0.75-16.00 |  |  |          | 393,709 |  |  | $ | 0.75-16.00 | 
|Weighted average exercise price  |  |        |            |             |  | $        | 1.32       |             |  |        |           |             |  | $ | 3.03       |  |  |          |         |  |  | $ | 3.01       | 

Our warrants have expiration dates that range to 2007 and all warrants are
fully vested at December 31, 2002 with the exception of 4,624 warrants issued
to consultants that vest monthly through 2004. Non-cash expenses resulting
from the issuance of warrants was $761,974 in 2000, $8,859 in 2001, and $38,084
in 2002.

(9) Income Taxes

There was no income tax benefit recognized for our net losses in 2000,
2001, and 2002. The difference between taxes computed by applying the U.S.
Federal corporate tax rate of 34% and the actual income tax provision in 2000,
2001 and 2002 is primarily the result of limitations on utilizing net operating
losses.

The tax effects of temporary differences and carryforwards that give rise
to significant portions of the deferred tax assets at December 31, 2001 and
2002 are presented below:

|                                              |  |      |            |      |  |   |            | 
|--------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|                                              |  | 2001 |            | 2002
|                                              |  |      |            |     
|Net operating loss carryforwards              |  | $    | 16,070,180 |      |  | $ | 16,236,671 | 
|Research and development credit
carryforwards |  |      | 2,317,433  |      |  |   | 2,328,070  | 
|Capitalized research and development          |  |      | 4,012,125  |      |  |   | 4,844,200  | 
|Bad debt write-off                            |  |      | 1,117,270  |      |  |   | 1,117,270  | 
|Deferred revenue                              |  |      | 945,972    |      |  |   | 1,088,681  | 
|Other                                         |  |      | 1,239,665  |      |  |   | 1,386,905  | 
|                                              |  |      |            |      |  |   |            | 
|Total gross deferred tax assets               |  |      | 25,702,645 |      |  |   | 27,001,797 | 
|Less deferred tax asset valuation allowance   |  |      | 25,702,645 |      |  |   | 27,001,797 | 
|                                              |  |      |            |      |  |   |            | 
|Net deferred tax assets                       |  | $    |           |      |  | $ |           | 
|                                              |  |      |            |      |  |   |            | 

The net change in the valuation allowance for 2000, 2001, and 2002 was an
increase of approximately $1,805,000, $1,898,000, and $1,299,000, respectively,
due primarily to doubt as to our ability to utilize net operating losses and
research and development credits.

At December 31, 2002, we had net operating loss carryforwards for income
tax purposes of approximately $47,755,000 and unused research and development
tax credits of approximately $2,328,000 available to offset future taxable
income and income taxes, respectively, expiring through 2020. Our ability to
utilize net operating loss and credit carryforwards is limited pursuant to the
Tax Reform Act of 1986, due to cumulative changes in stock ownership in excess
of 50%.

F-17



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(10) Leases

In February of 2000, we entered into a 12-year non-cancelable operating
lease for 25,000 square feet of office and laboratory space in Bothell,
Washington, which we occupied in November 2000. We also lease office and
manufacturing space in San Diego under an operating lease that expires in
November 2005. This lease can be terminated upon 90 days written notice.

Future minimum cash payments under non-cancelable operating leases are as
follows:

|                              |            |      |           |           |         | 
|----------------------------- | ---------- | ---- | --------- | --------- | ------- | 
|Year ending December 31,
2003 |            | $    | 645,689   |          
|                              |            | 2004 |           |           | 647,553 | 
|                              |            | 2005 |           |           | 670,217 | 
|                              |            | 2006 |           |           | 693,674 | 
|                              |            | 2007 |           |           | 717,953 | 
|                              | Thereafter |      |           | 3,984,746 |        
|                              |            |      |           |          
|                              |            | $    | 7,359,832 |          
|                              |            |      |           |          

Rent expense is recognized on the straight-line method over the term of
the leases. Rent expense on operating leases was $377,153 in 2000, $793,019 in
2001, and $781,667 in 2002.

(11) Legal Proceedings

Mordecai Jofen, as Trustee of the Harbor Trust, f/k/a The Edward Blech
Trust v. Epoch Biosciences, Inc., United States District Court for the Southern
District of New York, Case No. 01 CV 4129

The Harbor Trust (formerly the Edward Blech Trust) filed a complaint
against us, alleging the breach of a 1996 letter agreement between us and David
Blech. Pursuant to the letter agreement, upon payment of a pre-existing debt
owed to us by Blech (the Ribonetics Debt), we were to release to Blech from
escrow warrants to purchase 500,000 shares of our stock. Blech assigned all of
his rights under the letter agreement to the Harbor Trust. The Harbor Trusts
claim is based on our alleged failure to timely register the common stock
underlying the warrants, allegedly resulting in damages to Blech and/or the
Trust of at least $10 million, based on the peak trading value of our stock.

We filed a motion to dismiss the complaint based on, among other things,
the positions that: (1) Blech and the Harbor Trust have never had rights to
receive or exercise the warrants because Blech failed to perform a condition
precedent, i.e., payment of the Ribonetics Debt; and (2) we had no obligation
to register the stock unless and until Blech was entitled to the warrants.
Further, the warrants expired pursuant to the letter agreement in June 2000.
The Court granted our motion to dismiss in November 2001, but gave the Harbor
Trust leave to file an amended complaint, which they filed in December 2001.
We filed a motion to dismiss the amended complaint in January 2002. In July
2002, the Court decided in our favor and granted the motion to dismiss without
leave to file an amended complaint.

In August 2002 the Harbor Trust appealed the Courts dismissal of its case
to the United States Court of Appeal for the Second Circuit. The appeal is
likely to be resolved in the second quarter of 2003. While we believe we have
a strong position, it is not possible at this time to state the likelihood of
an unfavorable outcome because of the inherent uncertainties of litigation.

F-18



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##### Table of Contents



(12) Selected Quarterly Financial Data (unaudited)

Summary unaudited quarterly financial data for 2001 and 2002 is as
follows:

|                                       |  |          |            |         |  |              |            |             |  |   |            |   |  |   |           |  
|-------------------------------------- |  | -------- | ---------- | ------- |  | ------------ | ---------- | ----------- |  | - | ---------- | - |  | - | --------- | -
|                                       |  | 2001    
|                                       |  |         
|                                       |  | March 31 |            | June 30 |  | September 30 |            | December 31
|                                       |  |          |            |         |  |              |            |            
|Total revenue                          |  | $        | 1,549,395  |         |  | $            | 1,769,481  |             |  | $ | 1,949,065  |   |  | $ | 2,253,160 |  
|Net loss                               |  | $        | (1,305,163 | )       |  | $            | (1,190,259 | )           |  | $ | (1,146,924 | ) |  | $ | (933,803  | )
|Net loss per share
 basic and diluted |  | $        | (0.05      | )       |  | $            | (0.05      | )           |  | $ | (0.04      | ) |  | $ | (0.04     | )

|                                       |  |          |            |         |  |              |            |             |  |   |           |   |  |   |           | 
|-------------------------------------- |  | -------- | ---------- | ------- |  | ------------ | ---------- | ----------- |  | - | --------- | - |  | - | --------- | 
|                                       |  | 2002    
|                                       |  |         
|                                       |  | March 31 |            | June 30 |  | September 30 |            | December 31
|                                       |  |          |            |         |  |              |            |            
|Total revenue                          |  | $        | 2,281,956  |         |  | $            | 2,488,063  |             |  | $ | 2,658,863 |   |  | $ | 3,797,062 | 
|Net income (loss)                      |  | $        | (1,216,752 | )       |  | $            | (1,201,584 | )           |  | $ | (860,983  | ) |  | $ | 63,613    | 
|Net loss per share
 basic and diluted |  | $        | (0.05      | )       |  | $            | (0.05      | )           |  | $ | (0.03     | ) |  | $ | 0.00      | 

F-19



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##### Table of Contents



Power Of Attorney

Each person whose signature appears below hereby authorizes Bert W. Hogue
and/or William G. Gerber, as attorney-in-fact, to sign in his behalf and in
each capacity stated below, and to file, all amendments and/or supplements to
this Annual Report on Form 10-K.




Signatures

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

|                      |  |                                      |  |                                                                                               
|--------------------- |  | ------------------------------------ |  | ----------------------------------------------------------------------------------------------
|Dated: March 26, 2003 |  | EPOCH BIOSCIENCES, INC.
(Registrant)
|                      |  | By:                                  |  | /s/ Bert W. Hogue
        Bert W. Hogue
Vice President, Secretary, and Chief
Financial Officer

In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons of the registrant in the capacities
and on the dates indicated.

|                                                    |  |                                                  |  |               
|--------------------------------------------------- |  | ------------------------------------------------ |  | --------------
|Signature                                           |  | Title                                            |  | Date          
|                                                    |  |                                                  |  |               
|                                                   
|/s/ Frederick B. Craves

Frederick B. Craves, Ph.D. |  | Chairman of the Board of Directors               |  | March 25, 2003
|                                                   
|/s/ William G. Gerber

William G. Gerber, M.D.      |  | Chief Executive Officer, President,
and Director |  | March 26, 2003
|                                                   
|/s/ Sanford S. Zweifach

Sanford S. Zweifach        |  | Director                                         |  | March 21, 2003
|                                                   
|/s/ Richard L. Dunning

Richard L. Dunning          |  | Director                                         |  | March 21, 2003





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##### Table of Contents



|
|
|
|
|
|
|
|
|
|





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##### Table of Contents






Certifications

I, William G. Gerber, President and Chief Executive Officer of Epoch
Biosciences, Inc. (the Company), certify that:



|1. |  | I have reviewed this Annual Report on Form 10-K of the Company;                                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 of the Exchange Act) for the registrant
and we have:                                                                                         



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |     |  |                                                                                      
|-------------------- |  | --- |  | -------------------------------------------------------------------------------------
|Date: March 26, 2003 |  | By: |  | /s/ William G. Gerber
        William G. Gerber
President and Chief Executive Officer





---



##### Table of Contents



I, Bert W. Hogue, Chief Financial Officer of Epoch Biosciences, Inc. (the
Company), certify that:



|1. |  | I have reviewed this Annual Report on Form 10-K of the Company;                                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 of the Exchange Act) for the registrant
and we have:                                                                                         



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |     |  |                                                                                   
|-------------------- |  | --- |  | ----------------------------------------------------------------------------------
|Date: March 26, 2003 |  | By: |  | /s/ Bert W. Hogue
        Bert W. Hogue
Vice President and Chief Financial Officer





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##### Table of Contents






EXHIBIT INDEX

|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit # |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  | 
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3.1       |  | Amended and Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3 of Epochs quarterly report on Form 10-QSB for the quarter ended June 30,
1998)                                                                                                                                                                                                                                                                                                                                                 
|         
|3.2*      |  | Bylaws of Epoch, as currently in effect.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         
|10.1*     |  | Epoch Biosciences Incentive Stock Option, Nonqualified Stock Option And Restricted
Stock Purchase Plan-1991, as amended.                                                                                                                                                                                                                                                                                                                                                                                                  
|         
|10.2*     |  | Form of Indemnification Agreement entered into with officers and directors of Epoch.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         
|10.7      |  | Form of Registration Agreement, dated February 12, 1993 among Epoch and the
investors set forth in the agreement (incorporated by reference to Exhibit 10.30 of
Epochs Registration Statement on Form SB-2, Registration No. 33-66742, effective
on September 29, 1993)                                                                                                                                                                                                                                                  
|         
|10.8      |  | Epoch Biosciences Incentive Stock Option, Nonqualified Stock Option and Restricted
Stock Purchase Plan-1993 (incorporated by reference to Exhibit 10.39 of Epochs
Registration Statement on Form SB-2, Registration No. 33-66742, effective on
September 29, 1993)                                                                                                                                                                                                                                                       
|         
|10.19     |  | Bridge Financing Agreement dated as of February 25, 1998, with form of note and
warrant, between Epoch and Bay City Capital, LLC (incorporated by reference to
Exhibit 10.69 of Epochs Annual Report on Form 10-KSB for the year ended December
31, 1997)                                                                                                                                                                                                                                                                
|         
|10.21.1   |  | Second Amended and Restated Collaboration, License and Supply Agreement between
Epoch and Applera Corporation (formerly PE Corporation) dated August 17, 2000.
(Incorporated by reference to exhibit 10.21.1 of Epochs Annual Report on Form 10-K
for the year ended December 31, 2001). (Portions of this exhibit are omitted and
were filed separately with the Secretary of the SEC pursuant to the Registrants
application requesting confidential treatment under Rule 406 of the Securities
Act)                  
|         
|10.21.2   |  | First Side Agreement dated October 31, 2001 by and between Epoch and Applera
Corporation (formerly PE Corporation). (Incorporated by reference to exhibit
10.21.2 of Epochs Annual Report on Form 10-K for the year ended December 31,
2001). (Portions of this Exhibit are omitted and were filed separately with the
SEC pursuant to Rule 406 of the Securities Act)                                                                                                                                                   
|         
|10.21.3   |  | Amendment No. 1 to Second Amended and Restated Collaboration, License and Supply
Agreement between Epoch and Applera Corporation (formerly PE Corporation) dated
July 26, 2002 (incorporated by reference to Exhibit 10.21.3 of Epochs quarterly
report on form 10-Q for the period ending June 30, 2002). (Portions of this
exhibit are omitted and were filed separately with the Secretary of the SEC
pursuant to the Registrants application requesting confidential treatment under
Rule 406 of the Securities Act)
|         
|10.22     |  | Stock Purchase Agreement dated November 1, 1999 by and between Epoch and the
purchasers named in the agreement (incorporated by reference to Exhibit 10.22 of
Epochs Annual Report on Form 10-KSB for the year ended December 31, 1999)                                                                                                                                                                                                                                                                                  
|         
|10.24     |  | Second Amended and Restated Employment Agreement dated January 10, 2002 by and
between Epoch and William G. Gerber, M.D. (Incorporated by reference to exhibit
10.24 of Epochs Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                                                                                                                                                                                          
|         
|10.24.1   |  | First Amendment to Second Amended and Restated Employment Agreement dated February
28, 2003 by and between Epoch and William G. Gerber, M.D.                                                                                                                                                                                                                                                                                                                                                                              
|         
|10.25     |  | Lease Agreement dated February 2000, by and between Epoch Biosciences and Nexus
Canyon Park LLC (incorporated by reference to Exhibit 10.1 of Epochs quarterly
report on form 10-QSB for the period ending September 30, 2000)                                                                                                                                                                                                                                                                                           





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##### Table of Contents



|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit # |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.26     |  | Letter Agreement dated November 7, 2000 between Epoch Biosciences and Bay City
Capital BD LLC (incorporated by reference to Exhibit 10.26 of Epochs Annual Report
on Form 10-KSB for the year ended December 31, 2001). (Portions of this Exhibit
are omitted and were filed separately with the SEC pursuant to Rule 406 of the
Securities Act)                                                                                                            
|         
|10.26.1   |  | Extension of Letter Agreement dated November 13, 2001, between Epoch Biosciences
and Bay City Capital BD LLC. (Incorporated by reference to exhibit 10.26.1 of
Epochs Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                                                                                                                                      
|         
|10.27     |  | Employment Agreement dated March 8, 2001 by and between Epoch and Merl F. Hoekstra
(incorporated by reference to Exhibit 10.27 of Epochs quarterly report on form
10-Q for the period ending June 30, 2001)                                                                                                                                                                                                                                                 
|         
|10.27.1   |  | First Amendment to Employment Agreement dated February 12, 2002, by and between
Epoch and Merl F. Hoekstra. (Incorporated by reference to exhibit 10.27.1 of
Epochs Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                                                                                                                                        
|         
|10.28     |  | Employment Agreement dated February 28, 2001 by and between Epoch and Bert W. Hogue
(incorporated by reference to Exhibit 10.28 of Epochs quarterly report on form
10-Q for the period ending June 30, 2001)                                                                                                                                                                                                                                                
|         
|10.28.1   |  | First Amendment to Employment Agreement dated February 12, 2002, by and between
Epoch and Bert W. Hogue (incorporated by reference to Exhibit 10.28.1 of Epochs
Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                                                                                                                                            
|         
|10.29     |  | Employment Agreement dated January 7, 2002 by and between Epoch and Walter Mahoney
(incorporated by reference to Exhibit 10.29 of Epochs Annual Report on Form 10-K
for the year ended December 31, 2001)                                                                                                                                                                                                                                                   
|         
|10.30     |  | Employment Agreement dated May 13, 2002 by and between Epoch and Cirilo Cabradilla
(incorporated by reference to Exhibit 10.30 of Epochs quarterly report on Form
10-Q for the period ending June 30, 2002)                                                                                                                                                                                                                                                 
|         
|10.31     |  | Letter Agreement dated June 10, 2002 between Epoch Biosciences and Bay City Capital
BD LLC (incorporated by reference to Exhibit 10.31 of Epochs quarterly report on
Form 10-Q for the period ending June 30, 2002). (Portions of this Exhibit are
omitted and were filed separately with the SEC pursuant to Rule 406 of the
Securities Act)                                                                                                               
|         
|10.32     |  | Loan and Security Agreement between Epoch and Silicon Valley Bank, dated September
17, 2002 (incorporated by reference to Exhibit 10.32 of Epochs quarterly report on
Form 10-Q for the period ending September 30, 2002)                                                                                                                                                                                                                                   
|         
|10.33     |  | Exclusive Distribution and License Agreement between Epoch and Amersham Biosciences
Corp., dated July 25, 2002 (incorporated by reference to Exhibit 10.33 of Epochs
quarterly report on Form 10-Q for the period ending September 30, 2002). (Portions
of this exhibit are omitted and were filed separately with the Secretary of the SEC
pursuant to the Registrants application requesting confidential treatment under
Rule 406 of the Securities Act)
|         
|10.34     |  | Co-Exclusive License and Supply Agreement between Epoch Biosciences, Inc. and
QIAGEN NV, dated November 4, 2002. (Portions of this exhibit are omitted and were
filed separately with the Secretary of the SEC pursuant to the Registrants
application requesting confidential treatment under Rule 406 of the Securities
Act.)                                                                                                                             
|         
|23.1      |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         
|24.1      |  | Power of Attorney (included on the signature page)                                                                                                                                                                                                                                                                                                                                                                                                           
|         
|99.1      |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                           
|         
|99.2      |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                           



---

|* |  | Incorporated by reference to the same numbered exhibit of Epochs registration statement on
Form SB-2, No. 33-667742, effective on September 19, 1993.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------